Bi…cameral legislation?

...meaning both houses of Congress.

As opposed to the many famous cases of unicameral American legislation?

Can someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.

I already hear the downsides frequently from someone whose work is directly affected.

The upside is to the folks who sold the businesses they owned.

Should they be outlawed from selling to certain classes of investor? Which?

It should be more about making certain levels of consolidation and deep erosion of local ownership illegal.

We have run this country on an assumption that we must give businesses a high amount of freedom. An argument can be made that businesses have been given too much freedom in our system. We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.

Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.

Can you define profit? Would a doctor be allowed to earn more than $200 per hour? $300 per hour? $400 per hour? Is a doctor allowed to be paid per procedure or time?

How much would you want to sacrifice your 20s and early 30s? How much would you need to work in the middle of nowhere where your kids won’t have the best opportunities?

Should Doctors have a legally enforced max pay? Same with the web devs, max $150K, anything else is just profit driven bullshit right?

Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.

Why stop at healthcare? Why not other essentials of life, like food or toilet paper?

You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.

Many of them already lack profitability without subsidy.

Many agricultural products all pass through the same mega-sized processors and entities. Driscoll’s, Tyson, etc.

We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.

You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.

Like what?

Many of them already lack profitability without subsidy.

That doesn't mean anything without context. How are the non-PE farms doing?

We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.

sanitation: please see https://en.wikipedia.org/wiki/Waste_Management,_Inc.

water, but not power, or natural gas?

Google “taylor farms cyclospora” or “tyson beef prices shortage” for an example of the problems of highly consolidated processing.

I wasn’t talking about private equity farms versus not, I’m generally talking about industry consolidation.

Sanitation includes sewers which are typically municipal.

Power and natural gas are legal monopolies with strict rules on pricing.

There are also public electric utilities such as Cleveland Public Power.

Like what?

https://en.wikipedia.org/wiki/List_of_foodborne_illness_outb...

If a product isn't nationally consolidated, it can't have a national foodborne illness outbreak.

it can't have a national foodborne illness outbreak.

Which is bad for PR and great for clicks, but it's entirely unclear whether we're better off on average. What about all the years where we didn't have a mass outbreak? Would it be better if every state/county had separate food supply chains, and they had the same rate of illness, but it's more randomly dispersed so it doesn't make it to national TV? Think the difference between airplane crash (maybe one incident per year, hundreds of deaths per incident) vs car crashes (40k/year)

"We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form."

Do you realize that when Walmart moves into a community, prices charged for everyday things overall drop significantly, both at Walmart and their competition, which means that poor families are able to buy more with every dollar.

What do you have against poor people?

And the employer with the largest amount of employees using SNAP benefits is…

Walmart is subsidized by the government to the tune of $2,000 per employee due to their low wages: https://rmfu.org/taxpayer-dollars-subsidize-wal-mart/ [1]

They then get to skim the other side of those subsidies, too, since they sell so many items that qualify for SNAP and WIC, as well as being one of the largest if not the largest prescription supplier in the country.

(25% of Walmart employees qualify for Medicaid https://mafainsurance.com/how-many-walmart-employees-are-on-...)

So their employees on SNAP and Medicaid turn right around and spend that money inside Walmart.

both at Walmart and their competition

What competition? When Walmart comes to town, the competition closes.

[1] Probably a lot higher since this article is about 20 years old

And the employer with the largest amount of employees using SNAP benefits is…

Walmart is subsidized by the government to the tune of $2,000 per employee due to their low wages: https://rmfu.org/taxpayer-dollars-subsidize-wal-mart/ [1]

And what happens if walmart closed up shop? Do those employees magically evaporate and not need benefits? Why are we putting the blame on the employee's best employment option?

What competition? When Walmart comes to town, the competition closes.

Why? Because they're sending goon squads to trash all the existing businesses? If walmart replacing "the competition" because they're offering lower prices and consumers are switching, why is this bad?

Walmart is able to offer lower prices because it does not pay its employees enough. The people being hurt is the society at large that has to allocate taxes towards SNAP and other social benefits so that Walmart can continue to underpay people. Those resources could go to other programs. That is why Walmart is bad.

Walmart is paying what people are willing to work for. The "greeter" standing at the door is not creating $25 an hour in economic value. The biggest issue is we as a society have overextended SNAP and social benefits, trying to equalize outcomes, rather than recognize that entitlements should be a last resort and a safety net against things like starvation. Someone should not weigh 275 on SNAP.

As another poster stated, Walmart and other large companies are already violating federal law.

https://en.wikipedia.org/wiki/Robinson%E2%80%93Patman_Act

And what happens if walmart closed up shop

Everything explodes and people die in the streets.... No, other businesses move in to fill the economic needs because there is a profit to be made and provide jobs in doing so.

Because they're sending goon squads to trash

You have a horrifically simplistic world view and can't imagine where goon squads actually are.

There was an article around 2 decades ago on how Walmart manipulates prices at an unimaginable scale via their suppliers. If you supply Walmart they automatically become your biggest customer. Walmart knows this, and has you by the proverbial balls. If you don't meet their demands they drop you in a heartbeat which is a death sentence for any business who's capitalization is not in the 10s of billions. There was a saying in this article I can no longer find but to summarize.

"To compete against Walmart is to invite death. To work with Walmart is to embrace it".

Simply put they are so large they have near monopoly power over a good chunk of manufacturing.

There was an article around 2 decades ago on how Walmart manipulates prices at an unimaginable scale via their suppliers. If you supply Walmart they automatically become your biggest customer. Walmart knows this, and has you by the proverbial balls. If you don't meet their demands they drop you in a heartbeat which is a death sentence for any business who's capitalization is not in the 10s of billions. There was a saying in this article I can no longer find but to summarize.

So what's the complaint here, that walmart negotiates aggressively, passing those better prices to buyers, and that's... bad? Given we're in a thread complaining about healthcare, should walmart do the opposite, instead using the insurance company strategy of encouraging their suppliers to pad their margins, so they can offer "modest" (in % terms, high in absolute terms) markups?

It’s wild to blame Walmart for government subsidies when it’s the government not Walmart who decides who gets benefits.

Is Walmart to blame they hired a single mother of 3 for $20/hr? Would this women be better off if Walmart never existed and she was unemployed?

And then turn around and blame Walmart for selling essential food items for low prices because SNAP can be used to pay for them. Would you rather SNAP beneficiaries pay more for groceries so they have less to eat?

We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.

Unpopular knowledge is that these businesses are generally illegal in their current forms under existing US law. The relevant laws are still in effect, they are just rarely enforced. The scale of the lawbreaking runs to the trillions of dollars annually, and it directly harms every US consumer.

The illegal conduct is so pervasive that even explaining the existing federal law makes one sound ridiculous, because companies have been explicitly advertising illegal behavior for decades. Because there is no sanction.

One of my faves is the notion that $BIG_RETAILER can buy in bulk and get better pricing, which they pass on to the consumer. You may have seen a company advertise something like this. It sounds like smart business! There is an active federal law[1] that explicitly prohibits this arrangement.

Lack of enforcement of that law is a factor in the disappearance of the American "high street" and the demise of many small retailers.

My #1 call for reform in the US is to simply start enforcing laws, even if doing so makes rich people/companies uncomfortable.

1 - https://en.wikipedia.org/wiki/Robinson–Patman_Act

1 - https://en.wikipedia.org/wiki/Robinson–Patman_Act

I'm not a lawyer, but a cursory search shows there's a bunch of carveouts. It's not a straightforward ban on all favorable pricing for big players. For instance, if there's an actual cost justification (eg. bigger buyer = more efficient shipping) that's allowed. Same with offering volume discounts that are available to all buyers. That's not to say everything's above board, but it's not as simple as "wow big box stores get better pricing than mom and pop shops, so there must be federal laws being violated".

If the business is a hospital?

Yes.

If the business is a hospital?

I'd expand that to any type of business that has effectively inelastic demand through the ability to hold people emotionally hostage.

So, for example, in addition to hospitals also include veterinarians, funeral services, family planning, etc.

Soulless PE vultures should be barred from all of this.

  Should they be outlawed from selling to certain classes of investor? Which?

Yes. This is already the case for law firms as they have to be owned and managed by lawyers, in most jurisdictions.

Easy. PE 99% of the time buy businesses that were already failing and provide a lifeline. A failing business can't afford to pay for expensive medical treatments without a loan that a bank will not provide since it is failing.

People who are vehemently against PE generally do not have any idea of how the system works

That's one model of private equity, but PE has also been buying up very successful local businesses in areas like veterinary care. The PE firm keeps the name and branding of the local vet because people have traditionally wanted to take their pet to a trusted local vet, not a big chain.

So this vet practice are now a big chain except for in name only?

Many medical practices (and other businesses) are poorly operated and administered. I think of my dentist: terrible website (even by 1995 standards), awful at follow up, weird insurance coverage (since she doesn't have time to follow up with new plans it seems) and almost no appointment reminders. There are obvious things to do that could drive business for her.

It makes sense to me that someone could come in and say "hey, let me run the business + finance side of the house while you practice medicine" and at least on paper I can see a real world where that works out for everybody.

Of course, soon you end up with dentists pushing unnecessary procedures and more, so it doesn't always works out that way.

In human med, it's a pretty standard practice to offer a management company 10% ownership for them to handle the business shit.

I'm not arguing with you; I'm legitimately curious what happened to that model and why PE has swooped in as more attractive to doctors. Maybe it's the payout and/or the fact that they don't have to handle business owner decisions at _all_ anymore?

PE exists because a lot of companies are poorly managed. It's better for your local hospital to be taken over by a PE firm than to go out of business. You can say that it would be even better if the government ran the hospital, and you would be right, but that would require a radical overhaul of the American healthcare system. Until that happens, PE plays a major role in keeping things working.

PE staff are more intelligent and more shrewd than the people running the businesses they buy. Being a good doctor doesn't make you a good businessman.

I'm not a huge fan of PE but the point of economics to deliver cheap and quality goods to consumers not keep people in a job.

In healthcare in US in particular I think the main thing that capital should be (if regulators allow) boutique / specialists that e.g. are the best in the biz at doing MRI scans, in some states my understanding is that it's literally illegal to start a business aiming to make one small part of the process better.

What does it mean in this context to be more intelligent and shrewd than the existing owners? Delivering better profit margins?

I mean, losing money is not sustainable. If a doctor or physician group isn't business savvy and can't earn a profit they will eventually go under. That's not good for the patient.

OK, but making money, though it may be less than a PE company would, is. Where do most doctor's offices fall?

What does it mean in this context to be more intelligent and shrewd than the existing owners?

Streamlining everything. Sometimes this is done in a bad faith way, but it’s often not difficult to do it in a good faith way.

Some simple examples:

- right-sizing staff (can be reducing, increasing, or changing roles)

- improving marketing (e.g., simple things like customer reactivation, packaging the product/service better, or just plain, ol’ getting the word out better via stuff like before/after pics or success stories)

- improving operations (e.g., better organization, better processes, better communication, better training, better logistics, etc.)

Delivering better profit margins?

Improved profit margins are a byproduct of the things listed above.

What shows that they are more intelligent? They might be better at extracting value from enterprise, but is that generally “more intelligent?”

but is that generally “more intelligent?”

Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1]. For doctors, the comparison with private equity (MBAs?) might be close, but it's not hard to imagine the targets of other PE rollups have owners that are more average in intelligence, think plumbing or roofing.

[1] https://en.wikipedia.org/wiki/G_factor_(psychometrics)

DISREGARD THIS, I CAN'T READ TODAY

Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1].

[1] https://en.wikipedia.org/wiki/G_factor_(psychometrics)

Which section of that very long article are you claiming supports your assertion?

Here's a bit from the start of the "Concept" section:

> In a famous research paper published in 1904,[8] English psychologist Charles Spearman observed that children's performance measures across seemingly unrelated school subjects were positively correlated. The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]

That explicitly contradicts your assertion.

being intelligent in one thing does correlate with being intelligent at other things

vs

The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]

How are they contradictory? Did the first part of my comment make you think there was a negation?

Remove “more intelligent” here and I’ll give you some benefit.

The problem with healthcare “economics” is that providing high quality care is likely not as profitable as middling care, or sub-standard care.

You say that economics is meant to deliver cheap quality goods, but in reality here economics for PE is value extraction and has nothing to do with consumer good at all - unless of course there’s more profit there. Most of the time, there isn’t.

Is Apple Inc run for consumer good or value extraction?

That's really not true. Studies have shown that there's little correlation between care quality and profitability. In some cases non-profit health systems charge high prices and deliver terrible care quality. The reality is that most provider organizations are run by incompetent managers. People used to working in modern tech companies would be shocked to see the waste, inefficiency, and missed opportunities. PE acquisitions may cause some problems but the new managers do at least bring a basic level of discipline and operational competence that was often missing before.

We know how to make MRI cheaper. Put it in a can. MRI suites are built with copper shielding in the walls, and the machines are really heavy, which creates huge capital costs. (Capex is a big problem for medicine.) There's an easy solution: you can just put an MRI machine in a standard tractor-trailer container and bring the patients in. Nothing has to be constructed or installed.

None of the private equity chains with the sans-serif fonts, simplified logos and trisyllabic names are doing this, though. It's bad marketing. Patients don't want to walk outside to an MRI machine in the parking lot. It feels sketchy. Never mind that they score just as well on the ACR image quality tests as the in-room machines. Who the hell knows what that is?

In reality, it's the county hospitals and big universities that use them! Places that have in-house physicists who can argue for what really makes sense in practice. A major problem with healthcare as a business is that the customer does not usually understand the product, but they still need to buy it, and there are time constraints.

Easy to imagine practices where the primary owner is going to retire and looking for an out.

Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.

Many people don't really run businesses efficiently. There was an interesting video I saw recently where a sole doctor practice made a few changes to their workflow that allowed them to hire more doctors and handle 2x as many people - I would expect a PE firm would pursue similar changes that help increase the number of people they can service, increasing competitiveness and lowering prices in the long run.

I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.

A structure to run business efficiently using practiced methods is always a good thing. However from what little I have understood, the goal of Private Equity is to maximize the dollar value on their investment. Somehow they have settled with the playbook that running a business even profitably isn't the best idea. Instead its much more profitable to take over the struggling business at good price, squeeze everything possible from the assets (thats where PE seem to be investing their expertise unfortunately) over duration of time. Update the books in a manner that it saves money on taxes and carry forwards the loss, making money in the process.

Why do you need to sell a private practice? There’s no brand to sell, it’s just you and that will be gone.

PE is scourge in this space. They’ve probably taken over every dental office already and now they push unnecessary procedures and whatever your insurance will bear just because.

They sell because it’s their retirement nest egg.

Most private practices are small groups, not individuals. It absolutely sucks to have to find a new doctor who’s a good fit for you, when you’ve been seeing the same person for years or even decades. Usually when your doctor retires you rely on them to make a recommendation for a replacement. Usually that’s another partner in their same practice. At the very least, you (historically) expect them to sell the practice to someone they think is a worthy successor. Patients are fairly sticky.

And many of these PE sales require the selling partner to stay on for at least a year or two to ease the patients through the transition and so the patients get used to the changes before the doctor actually retires. That way, sticking around after the doctor retires doesn’t feel like such an upheaval.

At the very least, you (historically) expect them to sell the practice to someone they think is a worthy successor.

PE isn’t that.

> Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.

If the practice is to continue, there must still be practitioners working there. Id prefer they buy out the one retiring, but the retiree can sell to whoever they want.

These businesses would simply stop existing if no purchaser came forward. Many first-world economies face a demographic cliff where boomers are retiring and there is nobody in the next generation who can afford to take over the local dentist office, the HVAC company, etc.

Can someone steelman private equity, please?

Step back and look at what it fundamentally is.

Person A has a business they want to sell.

Person B has a pile of money and thinks that that business is (or can be) a good investment.

That's it.

So, what happens if person A is prohibited from selling their business? Are they forced to keep working because they don't have enough other savings to retire on? Do they shut the business down in order to retire? Something else?

.

Calls to ban private equity are attempts to play "shoot the messenger".

May be categorizing the different private equities can be helpful here. A PE interested and invested for growth is always the best outcome. A PE only looking to salvage and squeeze is that gives the bad branding to PE.

It basically comes down to interest rates right? If interest rates are low, the discounted-cash-flows analysis will favor maximizing long-run profitability. If interest rates are high, you can do better by squeezing the business in the short term and placing the money you obtained into some sort of high-yield, low-risk investment vehicle.

The positive argument about PE adding value is around efficiency of processes and scale. Interest rates can make a difference however in reality I doubt that it effects the outcome in most cases. Companies have already invested in staff with certain type of expertise and they are unlikely to change their plans or rehire based on the interest rates in short run.

Why does everything have to be obsessed with growth? Especially with practically every (first world, at least) country having a birth rate well below replacement.

    > A PE interested and invested for growth is always the best outcome.

(Throwaway) I work at a top ~10 PE.

This is what we do. One portfolio company has a product on old tech. We bring in a product team, a CTO, internal tech teams. Help shape a roadmap to tackle the most egregious tech and product debt so teams can move faster. Fix non-existent or outdated pricing strategy that has not evolved with the industry. Fix, grow, or evolve GTM to reach new customers. Help bring fresh leadership resources in when needed.

Industry is typically "boring" and systems are valuable, but aging. We invest, modernize, and try to grow new rev streams, new customers. Portfolio is SaaS focused (can't speak for those that invest in real estate and healthcare).

The employees of the PE also co-invest so everyone is aligned to help the portfolio companies grow and exit. This is a multiyear process.

Naming couple companies that you acquired for whom you changed the trajectory would be a lot stronger signal without revealing your identity.

On side note, its rare to see anyone fixing the old tech, its hard to fix, needs a different kind of talent thats hard to hire for the PE money. The folks who can understand some one else's decade old code and run their imagination through all the possible assumptions or trade off that might have been made in code/system are rare to find.

Finding new customers, finding more things to sell, finding synergies with other items in your portfolio, increasing the price for existing products are more realistic.

I'm going to side-track a bit, but since I'm being courted by PE I thought I'd ask.

> The employees of the PE also co-invest

Is this voluntary, or mandatory?

I ask because I've seen clauses along the lines of "75% of bonuses are paid in shares, not available for sale for 5 years."

Using bonus money to buy shares props up the share price, but delays the employee actually seeing the bonus for 5 years. Seems pretty win-lose to me, and kinda puts me off.

Is this a standard practice you mean by co-invest?

(As an aside, I'm not a fan of buying shares where I work, that's not a good portfolio-diversification model. If the business goes under it's not good to lose both your job, and investments, on the same day.)

So, what happens if person A is prohibited from selling their business?

I actually made that thought experiment. Disallow selling businesses. Disallow selling shares. Disallow stock market. Disallow mergers. The only way to acquire a business is to found it or to inherit it. The only way to quit a business is to shut it all down, with all assets liquidated, all liabilities settled, and all contracts terminated.

The main downside is that it's harder for to make money. Otherwise... I only see positives. And no, it wouldn't kill innovation. The investors would just have to invest the old fashioned way - by founding companies or expanding their existing businesses. As for job security, we already don't have it in the current system.

Private property is theft!

Disallow eyeglasses. Abolish money.

Any other good ideas?

That's such an incredibly shortsighted view of the downsides.

In your model, the only possible business owners would be those with major capital resources to begin with, encouraging the spread of existing businesses into a sprawl: Walmart is now your doctor, pharmacist, and pharma manufacturer. Nobody would start a small business because they'd have to carry all liability, any new ideas are limited to spread at a glacially slow pace, because companies can't be aquired or acqui-hired, but can instead only scale on their own revenues.

It's worse than that. When the owner retires, all staff lose their jobs. That's a fairly big bummer.

I'm currently part of a "small" business/factory (around 50 employees). The owner is nearing retirement. Are all 50 of us gonna hit the streets tomorrow? Should our customers, many longstanding over 20 years get their contracts terminated? Do they get any warning? Can they easily switch to other suppliers? Is our offering somewhat unique?

Frankly, I think the thought-experiment is very incomplete if you can't see major downsides.

OK. Your job is from now is dung transport. Because you inherited it, whether you like it or not.

Sure, you are allowed to start a new business. But where would you get money? You can't sell your dung transport business, and you don't have enough money of your own to just start a new business from scratch.

They can't sell "Xirdus's Dung Service", but they can still sell their assets like the dung cart, shovel, dung pit, etc.

Sell it to whom? Who is going to be buying the assets? And what about employees?

(never mind that "selling assets" is just a workaround for "selling business")

The business itself need not be a sellable thing.

Sell the assets maybe, potentially to somebody who wants to use them to run the same kind of business in the same kind of location with the same employees.

It's hostile to the consumer to call it the same business. A name change gives them the opportunity to decide for themselves whether the new owner is worth supporting. It's similarly hostile to the employees to assume that their loyalties can be bought and sold. Let the new owner of the assets re-hire them for the same position in the same location if he wants to, but lets not have them be for sale.

I think that last point is opposite; it’s seen as heartless when the new owner of a business goes through rehiring existing employees instead of assuring them they still have a job.

Small(er) businesses can be poorly run. In theory private equity takes knowledge already in practise in other locations and shares it with this new location, improving results. Downside of course is that they care a lot less about that specific location than the previous owners would have.

One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.

I’ve literally never seen that happen. what does always happen is cutting ‘non essentials’ that are essential until the company implodes.

That is one of the core strategies in the private equity playbook.

Why would it be profitable for the company they just paid a lot of money to acquire to implode?

They sell off everything of value before it implodes and cash out. THEN they let it implode with nothing but the debt remaining.

Why would banks lend to such an enterprise if they don't expect to get paid back?

I suspect there’s a survival bias at work here. The PE purchased companies that continued to thrive are ones you probably never even knew got bought out.

cites?

Hilton Hotels, Dell, Burger King, Dunkin Donuts? Google works if you use it.

Those are certainly some... examples. Not things I would hold up as a sign that PE is a good thing since all those businesses look like they are perpetually on the edge of collapse around my area. Dilapidated, mostly empty parking lots, poor service from understaffing. I think we would all be better off if those businesses died and left room for others to replace them.

Who’s preventing a competing coffee shop or burger restaurant from opening? If your area is such a prime business market, but these businesses aren’t capitalizing on it, one of your assumptions may be wrong.

One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.

What alternative are you imagining?

That the buying company keeps the debt on their books instead of offloading it onto the company that they bought.

So form a shell buying company A and secure the debt of company A with the assets of the newly purchased company B? Congrats, you added about 5 minutes of paperwork.

How would that be an example of what I described?

If you are putting the debt on a shell company’s books, you aren’t putting debt on the buying companies books.

The buying company is the shell company.

Are you proposing that only an established company can buy another business with profits from their operations or something?

If I start a company with a loan and want to buy 3 HVAC companies in my area, is that allowed under your rule?

Can someone steelman private equity

PE attacks organizational sclerosis, can save companies that otherwise slowly deteriorate, reallocates resources faster, creates an unusually powerful form of corporate governance, Debt can impose useful discipline, can provide capabilities that smaller companies couldn't build themselves.

A society doesn't necessarily benefit from preserving every existing job. It benefits from creating increasingly productive jobs.

increasingly productive jobs.

This needs to be defined a little bit better.

If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.

This is why making a measurement a target can be horrifically destructive and contrary to the actual goal society wants.

The west doesn't seem to believe in the idea of social stability over increased profits which can lead to things like corporations being the social structure that is optimized for rather than the wellbeing of the individuals it contains. Left to run out of control the society can collapse.

If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.

You wouldn't have any business if all, or many, of your patients die.

It seems to me that oligarchies as a whole function a lot like PE's taking over a socially unstable polity.

The west has been an oligarchy for several decades at least, so it's not that people in the west don't believe in social stability, it's that they are living in the hollowed out shell of the former "company" where that doesn't exist. We need to optimize for the people's prosperity and well being.

... several decades at least .... We need to optimize for the people's prosperity and well being.

What statistics are you looking at that makes you draw the conclusion that people are WORSE off today than, say, 20, 30, 40, years ago?

Private equity just means controlling a company outside of the public stock markets, it is incredibly broad, and covers everything from blackrock buying every vets office in an area, to a plumber buying out another plumber when they want to retire.

The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.

What most people are arguing against is a specific kind of PE where an institutional investor will either use aggressive financial engineering to force a profit, even if it kills the business, or when those same investors aggregate market share to the point where it is detrimental to consumers. Sprinkle in a little bit of heartless MBA bullshit, and that is what people specifically don’t like.

A stronger steelman is that it results in resources getting allocated in smarter/healthier ways across society.

If there's some business that's getting by but the land it's on is more valuable (e.g. for housing) than the business, some investors buy the business, sell the land, make the business account for the land value, wind the business down if it can't, and there are apartments there a few years later.

The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.

You're gonna need to steelman that again, because in and of itself that is also not something I see as desirable.

Historically we've seen capitalism be a good thing.

Probably the biggest problem with medical is that it's incredibly regulated for the industry's benefit.

The economist did a piece in defense of private equity a few months ago. Basically boils down to more efficient resource allocation across an entire economy, deep pools of capital to rapidly transform businesses into things people want to buy from.

Gift link: https://www.economist.com/podcasts/2026/02/19/a-love-letter-...

I live in a small midwest market, and all the landscaping companies are locally owned and awful.

PE bought two of them, combined them into one, and now they, at about the same cost, do what they say they are going to do, answer the phone, hire competent people, and do a good job.

Likewise, PE has bought up most of the local plumbing and HVAC, and that's been a bit of a bummer, and gotten more expensive, but if you need someone right now, they are there (and answer the phone, etc), as opposed to the local concern who may be on vacation and can get back to you in 2 weeks.

There are some really good local small businesses/trades people, but like the 1950s, in a lot of aspects they are overly romanticized.

employers expect health care plan costs to rise by an average of 11 percent per worker in 2027, unless benefits are cut

I am sure most workers would prefer to get that extra 11% as a cash raise, but because healthcare costs are out of control the same care costs 11% more.

Certainly some companies will throw up their arms and hire someone overseas instead.

Look up "Medical Loss Ratio" from the ACA if you want to find out where the perverse incentives for health care pricing comes from..

The cap is generous. If an insurance company is hitting it, competition is failing to keep them in check and lifting the cap would just let them gouge deeper. Of course, that doesn't keep them from constantly yapping this talking point, as if it wasn't that way before, as if we don't have evidence that it wouldn't work. "Just lift our profit cap" is self-serving baloney.

That's not the issue, it's because an insurer's absolute profit only grows if the premium base grows. This removes any reason to compete on reduced costs and an incentive to have the costs go up.

Australia is on its way down this path after Brookfield / Healthscope was holding a private hospital hostage against the government and had performance so degraded a child died. Hopefully we (aus) continue down this path of burning off the rot.

https://www.abc.net.au/news/2025-03-27/nsw-government-joes-l...

performance soooo degraded a child died?

when people talk about how healthcare needs to be better and better and more and more, I say "tell me under your plan what diseases/injuries to what extant will not be treated: who do you say "no" to? Every country could spend every collective nickel they have, and some people still would not live to see the next morning, but in a way that's ok because there probably wouldn't be any breakfast either, that money was spent on healthcare.

What exactly are you calling for? I thought millenial and genz home ownership was the problem we need to fix. Are we going to sacrifice hipster housing for healthcare? Since most healthcare today is probably needed by boomers, think carefully about your answer.

Very strange comment. I would encourage you to read the specifics of the actual case. The hospital was severely under resourced resulting in a simple case being neglected and the child dying. The child could have received basic treatment and they would have survived.

Underresourcing the hospital was a deliberate decision by Brookfield to push for a government bail-out. Anyone who made money off this should be in jail.

Absolutely no idea what the rest of your comment is about. Our hospitals should have the resources to treat a sick child. Some might say that's the entire point of society.

That's for hospitals though, in one state.

Approximately 45% of GPs in Australia work in practices owned by private companies

https://www.monash.edu/business/che/impact-and-engagement/re...

You know what american healthcare really needs is more regulation!

Are you saying it needs less? Why do you think that?

yes. It's completely insane that health insurance A) does all price discovery B) is tied to your employer.

Ask an American hospital how much something costs - you will get a completely fake price back, this is a sign of a totally broken market.

I am good with getting rid of B).

A) can probably only be fixed with regulation. Why would hospitals and insurance otherwise make prices transparent? The current state serves them really well.

Because in a fair market they would be competed away - prices of food, computers, bonds, etc are not transparent because of regulation - it's largely because of the tax incentive as far as I've read from healthcare economists.

The 'fake' price is due to the negotiation of reimbursement between major healthcare chains and insurers. The most regulated piece - Medicare - is the only piece where there's fairly transparent pricing.

reimbursement between major healthcare chains and insurers

And why is this so prevalent? It's subject to huge subsidy and regulatory capture

Ask an American hospital how much something costs - you will get a completely fake price back

You think the government tells hospitals to lie to you? The hospitals lie because the government doesn't force them not to. Laissez-faire capitalism causes that. Regulation is needed to fix it.

https://en.wikipedia.org/wiki/Airline_Deregulation_Act

Make it a leverage limit. Otherwise you’ll have other players come in and replicate the playbook.

The short-term fix is banning PE. The long-term one is restricting the leverage these groups can take. Then put limits on upstream leverage. We have these across our economy. We just don’t apply them to this sector.

Medicine is extremely capex intensive and only become more so. Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation. I think we can criticize the often ruthlessness of PE while realizing that limiting medicine's ability to invest would be a huge self-own and only force further centralization into the biggest non-profit centers.

Medicine is already held back enough by the lack of ability to use debt to finance its sales, unlike almost every other industry; you can repossess a car but you can't repo an implant or administered drug, forcing everything to be paid for in cash upfront. Medicine needs as much access to capital as it can get.

Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation.

Injecting PE into healthcare is what made it vastly worse for everyone in the first place. You can't have it both ways.

I'm sorry, compared to what? We're not talking about a routine doctor's office for healthy people. Advanced care is extremely technologically intensive and your local surgeon is not personally buying the $20M in infrastructure required for many modern advanced treatments. Venture capital has been essential for progress in medicine, and many advanced therapies are going to be increasingly delivered vertically integrated for the widest accessibility and best outcomes.

Venture capital has been essential for progress in medicine

VC's can still fund companies that are making expensive new products.

Banks (and PE...) can still underwrite loans for these things.

We have many solutions for capex-intensive businesses and have had these for over four hundred years. LBO-type PE is not even fifty years old yet

agreed but that is not what they are talking about banning -- "PE" is expansive and includes all those other things. If they narrowed this proposal to just what people are thinking of as "PE" here rolling up clinics and gaining local pricing power that would be different and I'd agree with you

I have no words for how completely toxic the surge of PE in healthcare has been. It's driven the degradation of care everywhere I've been. Healthcare chains have no issues with investment (see any annual reporting document to see how much money is sitting in various investments, mostly RE); smaller clinics being eaten up by PE chains is not an answer to centralization, it's just another mechanism of it.

I wonder if ai can help doctors reclaim their practices, as the bureaucracy of dealing with insurance may become easier. Administrative overhead must be cheaper with ai. It was the main reason for consolidation and giving up management to hospitals and private equity.

I think it's more likely AI will cause disruption by ruthlessly optimizing on behalf of individuals.

Private Equity can afford to have people sitting around all day figuring out tricks and optimizations to save a buck here and there, and this is a power imbalance because the plebs care about things like spending time with their family, and they don't spend all their time trying to save a buck.

Maybe one day the AIs will optimize for us while we spend time with our families. And if a new vet opens that costs $15 less, the AI will route customers to the new business, driving prices down, until we reach 0 profit margin across all industries.

There's probably like a 10 trillion dollar incentive to not allow AI to truly work on behalf of individuals though, so we'll see what happens. For instance, just look at the ad industry alone; if AIs are shopping truly on behalf of individuals, and this becomes wide spread, then the ad industry is just gone.

There's a pattern to the kinds of companies PE buys and I think it points to the real problem.

They like companies with some kind of moat that makes it hard to unseat them. Basically, companies where there is no alternative for the consumer. That way, they can inflict abuse but know there will be nowhere to run.

There are two different ways to achieve this. Monopoly and regulation. Hospitals have both government granted locational monopoly and tons of regulations that make it impossible to compete.

Private equity is the symptom, not the disease.

Until we get at the disease, new monsters will be born with different name filling the same ecological niche. It's economic natural selection played out in the environment we created.

The Americans simply will not reject their broken for-profit medical system wholesale. What I see is one more attempt at chipping away at it in hopes that maybe they can succeed piecemeal.

I'm not sure anyone has solved the problem, though.

"For profit" isn't really the problem, fee for service is.

Value based arrangements and capitated payment structures are real improvements.

When you don't have any market forces constraining utilization, you get massive access problems.

The United States has both market forces and massive access problems. I'm not sure you can establish that causal relationship.

The United States has both market forces and massive access problems.

It boggles my mind when I still occasionally hear people speaking out against all forms of single payer healthcare in the US saying they don't want to have to wait weeks/months to see a doctor like they do in Canada/UK/wherever.

If I give them the benefit of the doubt of not being paid lobbyists for the medical insurance industry, I can only surmise these people haven't been to a non-emergency doctor since prior to 2020.

Because even here in the US if you aren't fabulously wealthy with concierge medical you'll be waiting weeks/months to see a 'doctor'. And you'll almost certainly never actually see a doctor, you're going to see an overworked NP (no shade on NPs here, most of whom are great, just establishing how our medical system actually works in 2026).

This is not my family's experience on distinctly not-concierge-medicine Kaiser Permanente in the Bay Area. Always meet with doctors (and NPs), have gotten in quickly when necessary, etc.

California is the only state that regulates wait times for specialists. When you uttered the words "Bay Area" it signaled that you enjoy better service than most Americans. I know people in states very close to yours (as well as my own) who have had extensive wait times.

I don’t remember the last time I had to wait more than a few days to see a GP or more than a week for a specialist on an employer’s PPO insurance plan. I’ve had them at several employers ranging from university to FAANG so it’s not exactly something only fabulously wealthy people have access to.

The problem is there is a huge bathtub curve in insurance quality between employers and the public market. It’s a rude awakening when you can’t afford COBRA rates and have to fall back to a “bronze plan” or whatever is available on the exchanges.

FAANG employee health insurance? Something like 1% of American workers get that, if even that many. Then throw in my oil company friends here in Houston and a few other industries which give premium benefits and you still have a tiny subset of the American workforce getting exceptionally strong benefits. Not at all indicative of the experience of most Americans.

The universities I worked for (both public and private) provided the same level of PPO insurance, as did a random fitness startup, a clinical diagnostics company, and a construction company. I invite you to reread the part where I said “several employers [plural] ranging from university to FAANG”.

Because even here in the US if you aren't fabulously wealthy with concierge medical you'll be waiting weeks/months to see a 'doctor'. And you'll almost certainly never actually see a doctor, you're going to see an overworked NP (no shade on NPs here, most of whom are great, just establishing how our medical system actually works in 2026).

But it's simply not true. my mom broke her back last year and before we realized that her back was broken, we saw an urgent care doctor, same day, within 30mins (I don't recall the exact timescale now, but it was pretty much instant). Who promptly gave my mom an Rx and told us to go to the ER. Personally, urgent care appointments have always been available within 2hrs, and even stuff like an xray (usually in a centralized office, so some travel required) is possible same day. This isn't special treatment.

If someone is waiting long for care, it isn't a problem with the system - and the alternative you speak of isn't going to solve the "I'm not a medical doctor" problem either, which is the main objection to the long wait-times. Minor hypochondriac-ness notwithstanding - nothing will be able to solve that completely - money is the back-pressure mechanism to avoid waste of limited resources. Whether anybody likes it or not, doctors/xray-machines/etc are not infinite (for now heh).

For-profit health-care insurance companies should burn in hell, though.

Urgent care would not be urgent if you had to wait months. Hang out with a few elderly people who actually need to see specialists more than people like me. Over the years, I've heard plenty of stories from people I know waiting multiple months to see specialists.

30 years ago, you’d just call your GPs office and they would have told you to go to the ER. Instead your moms insurer paid $150 for an interaction that likely funneled you their medical networks local hospital and added low value.

Urgent care is a grift to replace a relationship with a doctor or practice with a lower paid, lower skilled NP. It’s more a sales funnel that anything.

relationship with a doctor or practice

What if I don't care about this whatsoever?

Urgent care is not a replacement for a family doctor or internist who can track your health across long periods of time. That's like comparing a substitute teacher to a tutor; a sub might be able to answer your questions, but they cannot track your academic progress over time and help you tackle an extended course.

It boggles my mind when I still occasionally hear people speaking out against all forms of single payer healthcare in the US saying they don't want to have to wait weeks/months to see a doctor like they do in Canada/UK/wherever.

Conversely, people consistently put forth single-payer as a panacea without considering what other differences exist between the systems.

For example, in the US a medical residency is required by law but the number of residency slots is constrained because the AMA wants to reduce supply/competition. Change who pays the premiums and that's still just as much of a problem, and it might even make it worse to give the lobbyists an even deeper pocket to siphon money from.

Another significant source of costs in the US system is that doctors can prescribe much more expensive patented drugs or devices and no part of the system is given the incentive to say no to something which is only slightly or negligibly better but dramatically more expensive. Likewise, many of these patents are obvious (e.g. extended release version of existing drug or combination of two common existing drugs) and shouldn't be granted, but nevertheless are. But if those patents are issued and the system is required to pay for a drug when a doctor prescribes it, the seller has a monopoly for the patent term and can charge the monopoly price. The normal way to solve that is for "customers" to be more exposed to cost differences between treatment options, so that things that are only marginally better can only charge marginally higher prices, which is the opposite of how single-payer works.

"Single payer" is essentially replacing insurance companies with the government, but that doesn't solve any of the problems that exist in the parts of the system that aren't the insurance companies.

It's not worth it to solve any of the problems, let alone the biggest problem, if we can't solve all of the problems immediately, after all.

Is there such a pattern? I'm not aware of any data pointing towards one, and I know lots of businesses with no monopoly or regulatory moat that have been acquired by private equity firms. I think people just don't care when PE buys businesses that don't seem very important.

That’s absolutely not true. Private equity regularly buys small businesses, D2C businesses, retail businesses, failing businesses, software businesses…

Genuine Q: Are they buying failing businesses because they see potential and want to get those on the right track, or are they buying them because their forecast tells them they can still make money, before shutting them down for eternity?

Regulation is usually what you accept in exchange for a monopoly. I would argue a granted monopoly without any regulation is evidence of regulatory capture.

If you want to argue from first principles, and we accept for a moment that granted monopoly is the system we are working in (whether or not you feel it's the optimal regime) then I'd argue there's a clear gap in regulation, as flagrant abuse of the consumer has not been prevented.

Not really. Monopolies are an invitation to competition: Your margin is my opportunity, as it were. They are therefore hard to maintain absent some kind of external force to support it: Regulations (regulatory capture), licensing, explicit grant from the government, intellectual property laws, or some kind of collusion or market manipulation (more leading to oligopolies rather than monopolies).

This is how industrial barons of the early-mid 20th century operated, as an example, with collusion and price fixing type things. Or hospitals and medical facilities today with certificate-of-need laws enforced by the government.

This is inaccurate - natural monopolies are a thing.

Monopolies happen due to barriers to entry, and not all barriers to entry are government-created or illegal: network effects, big upfront costs, economies of scale, control of a scarce resource, etc.

Regulation can produce a monopoly, but lots of regulations also exist to keep natural monopolies in check.

Take garbage hauling. You have five haulers running the exact same routes through town, stopping at different houses. Government is unhappy with the tremendous added wear on the roads from the redundant trucks, and the extra traffic, so it strikes a deal and grants exclusivity to one hauler.

This is a granted monopoly. It has real positives, such as the same service at 5x less road wear. It should also be obvious that to be positive overall the deal needs to prevent abuse of the public.

They like companies with some kind of moat that makes it hard to unseat them.

The biggest moat is capital.

PE is buying up things like medical practices, law firms, vets, etc, where typically there would be an upwards path for one generation to hire new blood to cover their markets and then sell partnership stakes to them when they want to retire. But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?

Consolidation of these kinds of businesses at the hands of PE is endemic of systemic lack of capital acquisition of a generation of people, held down by debt and concerns about practical shit like healthcare.

PE is just a symptom of larger macro economic trends, namely the depletion of the next generation from free cash they could use to become business owners.

These PE-owned companies create market demand by being shitty. Somehow they are able to keep their margins and their market so that their business model makes sense. That's a puzzle, right?

There is no shortage of investment looking for great returns. A market with huge demand not being met adequately is a dream to investors. Even more when you know the competition must continue to fuck their customers because they paid above market rates for the purchase and the business is saddled with debt obligations it must meet (Leveraged buyouts do that).

What could stop new competition from beating them out?

It's not capital.

PE doesn't create anything. They extract from margins.

It only works by having more capital to begin with.

Otherwise you wouldn't see consolidation where it shouldn't exist.

But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?

The better question is, why does a medical practice have a moat? What exactly is the PE firm buying? When the senior doctor retires, what stops the junior one(s) from renting their own offices and taking their patients with them?

The answer is presumably something like, non-compete agreements, or vendor lock-in from EMR systems, or some kind of insurance or regulatory bureaucracy. So then we need to identify what it actually is and do away with it so the next generation's juniors don't have to outbid Wall St to acquire it.

No, it's money. Younger generations have less money. It's not more complicated than that.

I feel like medical practices should be like law firms where effectively non-lawyers can’t own equity and equity owners have to comply with ethics and code of conduct rules…

Most doctors don't want to be business owners. It used to be that they were kind of forced to operate in partnerships but now most choose to become employees. This might be worse for patients but for better or worse there's no going back.

Most doctors don't want to be business owners.

Then they should work for the doctors who do.

Also, I don't think they're particularly opposed to owning their practice. I can understand them not wanting to manage a business. But for that problem, they can hire professional managers. Which is basically how hospitals work; if the doctors all want the CEO replaced, he gets fired. There's a physicians board and the trustees tend to listen to it.

So you're proposing to create a privileged class of investors with MD degrees who are protected from competition and will be able to earn above-market returns on their equity? Why would we want provider organizations to have a higher cost of capital? Makes no sense at all.

It's actually worse with veterinary practices.

Younger veterinarians are drowning in school debt and can't buy the practices from the older folks that are retiring. So, private equity is basically snatching all of them up right now, betting that childless millennials are going to pay tons of money on veterinary care when their pandemic pups begin to reach end-of-life.

They're going to cut wages for all the staff, and hike all the prices, because unlike with human medical care, there's hardly any regulation (yet).

What is so costly about a veterinary practice that new veterinarians can't just start their own? Why would they need to buy one? There is certainly some benefit to working for some one for a while, and maybe eventually buying out an established practice... but if they want too much for it, just start your own?

If you start your own veterinary practice, and eventually build up a steady stream of happy customers, then sooner or later the PE firms will come knocking on your door, too.

Imagine you're drowning in student debt and worrying about keeping your business afloat, when someone offers you $5M, and says you'll still get to work with animals, which you love, while they take care of the financial and business side, which you didn't enjoy. It's a no brainer for most people.

No way. I think most people realize “they are offering me $5M because they know they’ll make a good profit on this business. That means it’s worth more.”

My life goal that I can't work on yet is to run vet clinics as a non-profit in locations where private equity has a monopoly and are in extraction mode. With operational excellence, I think they can be out-competed by running a cost effective practice, so people don't have to decide between putting their pet down prematurely, and spending $5k per night (yes, that happened to my friend in San Francisco. $5k/night is not an exaggeration).

The predatory businesses are able to do the extraction only because of the practical monopoly they have in a neighborhood.

I believe the ops can be open sourced and replicated franchise style. And vets, who originally get into the career because they love animals will be drawn to it, and they have bills to pay, but that can be taken care of with a reasonable payment structure.

I hope someone else does this so I don't have to. But I think I have to at some point. I'd also love to hear if this is a dumb idea.

My main problem with PE is that it is being invested in by things that I do not consider "investors" like retirement funds, teacher's pensions, annuities, etc. Many of these things have sort of implicit guarantees from the State or Federal government. These organizations should be completely banned from investing in PE. PE investments should only be invested in by "investors", and investors understand that their investment may go to zero.