A Quote by James Surowiecki
If private-equity firms are as good at remaking companies as they claim, they don't need tax loopholes to make money.
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We really wake up every day trying to build businesses. That is the goal of private equity. It's a misnomer out there that private equity profits by shrinking companies. In fact, it's just the opposite. Private equity creates value by growing great companies.
Private equity does pay very well, and my counterparts, guys that I grew up with who are still working at a number of firms, all make a lot of money.
Private equity firms aren't necessarily evil by definition. There are many stories of successful turnarounds fueled by private equity, often involving multiple floundering businesses that are rolled into a single entity, eliminating duplicative overhead.
Being a good private equity investor is more complicated than it seems. I would say that there are a few characteristics that are important. If you look at the skill set that you need to ultimately be a successful private equity investor, at least at the senior level, you have to be, in this business, a good investor. You have to be able to help companies perform and you have to have judgment around exiting investments. If you look at the skill sets there, they include some things you can teach and some that you can't.
The private equity world is a relatively small one. There are currently probably a few thousand professional jobs worldwide. In private equity, that's probably about all there is. So in the scheme of things, the firms are all relatively small.
More American companies are getting bought by foreign firms or they`re becoming foreign firms or they`re outsourcing. Right now the tax code says if you want to make something in another country and re-import it back into America, go ahead and do that. We don`t want to incentivize that.
I've probably done more venture capital deals and expansion financings than I have done private equity deals. But both are the same. Private equity companies have also built jobs.
The Korean government is the first to declare that if you replace people with machines you have to pay a tax. It's a tax on robots. They make private companies internalise the social cost of unemployment. Social benefit is not the same as private benefit. We have to realise this.
When giant companies wanted more tax loopholes, Washington got it done. When huge energy companies wanted to tear up our environment, Washington got it done. When enormous Wall Street banks wanted new regulatory loopholes, Washington got it done. No gridlock there!
I do not think we should tax people to a point where they are looking for tax loopholes and getting their money out of the country.
We need to close the tax loopholes that have awarded companies moving out of the country and overseas; we need a government that will keep our country safe from terrorists at home and abroad... and a government that is responsive to the needs of the people.
As president of the International Brotherhood of Teamsters, I have seen private equity firms plunder company after company, taking rich fees for themselves and cutting costs until there's nothing left to cut. Time and again I've seen their reckless behavior drive companies to declare bankruptcy.
I believe we need a balanced, bipartisan approach to debt reduction that includes a combination of spending cuts, investments in economic growth, and simplification of the tax code that closes corporate loopholes that incentivize companies to ship jobs overseas.
Private equity firms working closely with venture capitalists and technologists may be able to unlock assets that others have not leveraged and build technology cultures to iterate on solutions that make these assets more productive.
The role of private equity as fiduciaries is certainly to make money.
Fannie and Freddie made two-thirds of all subprime mortgages. That is not a free market institution. That entity, along with the Fed printing too much money back in '03 and '04, caused the housing collapse. So we need to take free markets seriously. That means we have to put an end to all these tax credits and tax deductions and loopholes.
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