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January 14, 2012

A Democrat's Defense of Romney

I am a card-carrying Democrat and supporter of President Obama.  I will vote for him again in November.

But the attacks against Mitt Romney's record at Bain Capital - by both his Republican brethren and Democrats - and the demonization of the private equity industry are really starting to annoy me.  I won't vote for him for president based on his policies and the policies of the party he represents, but I believe Mitt Romney's business track record at Bain Capital, and the private equity industry as a whole, is deserving of a full-throated defense.

First, Bain Capital is a great firm.  I have co-invested with them and some of my closest friends are managing directors there and you will not find a smarter, higher integrity, harder working group of professionals.  They have also been incredibly generous with their success and become philanthropic leaders, both in the Boston community and beyond.  If you are going to pick on a private equity firm for bad behavior and hubris (of which there is plenty), they are the last ones to select.

Second, the work of private equity is a healthy part of our capitalist system.  Damning private equity as a maket force is absurd in a free market economy.  Should bad, poorly managed companies be allowed to destroy value?  Should fast-growing, innovative businesses receive capital and support to accelerate their growth?  And should hard-working pensioners and retirees be allowed to invest their svaings in an asset class that outperforms nearly every other one available?  Private equity has an important role and should be lauded, not lambasted.  The WSJ does a nice job of making this case here.  

I'm not saying Romney, Bain Capital or private equity are perfect.  I'm sure there were bad bets made or cases or situations where Bain Capital was overly aggressive in pulling out fees and, as a result, bankrupted the businesses they invested in, such as GS Industries.  And Romney, as much good as Bain Capital does for investors, entrepreneurs and businesses, is a bit fast and loose with his soundbite claim of creating 100,000 net jobs at Bain Capital.  Dan Primack of Fortune does a nice job of running through the fact and fiction behind the various claims here.

But the fact that Bain Capital has amassed over $60 billion in investor capital, and the fact that there are over 2,300 private equity firms managing $2.4 trillion, suggests that this is a massive force in our global economy that attracts the best talent, capital and companies for a good reason. 

I am tired of seeing politicians from both sides of the aisle talk out of both sides of their mouth.  Capitalism is a force for good and we are counting on the capitalism system to enable us to grow our way out of this economic malaise by creating wealth and jobs, expanding free trade and innovation.  So let's stop this name-calling nonsense (is Warren Buffet a corporate raider?) and instead focus on the important policy issues surrounding the economy, health care, foreign policy and social policies.

That's why I'll vote for Obama for President again in 2012.  Not because Mitt Romney is anything but a spectacular entrepreneur and business executive. 

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Hey Jeff. Glad to catch this on a quick Sat afternoon pass through Twitter.

These attacks are funny, and maddening.

Funny b/c they're so baldly of the classic both-sides-of-the-mouth variety. The same people who would harangue Obama today for "sitting on his hands" as a "conflict averse consensus builder" will tomorrow call him a "radical socialist with an agenda"; these same noisemakers will call for a business-minded president today and then harangue a dollars-and-sense business-builder for making executive business decisions that have real implications.

And it's maddening b/c it's all just so friggin weak; so clearly evidence of noisemakers succumbing to what's most convenient. It's also maddening b/c contradictions like these are really only apparent to the people who are paying the closest attention, who often aren't the ones making the most noise.

Back to it.

Maddening is the right word for it.

Our national conversation about private equity (how often can you say that?!) reminds me of the dueling Gregory Peck/Danny DeVito speeches from Other People's Money: http://www.youtube.com/watch?feature=player_detailpage&v=p7rvupKipmY#t=414s. Not sure how many other card carrying, bleeding heart liberals find themselves cheering "Larry the Liquidator" but I always found his argument the compelling one. But there is an emotional component to a presidential election and this is perhaps where Mitt (and Larry) fail--if we only saw them show more empathy for the people losing their jobs and if we only saw them better acknowledge the roles that luck and good fortune has played in their success then perhaps we wouldn't judge them so harshly. Still wouldn't vote for the guy but I'd certainly like him more.

Very well said Jeff, I feel exactly the same way. I recalled reading an article in the Journal last week where they were talking about how such a high percentage of Bain's businesses failed, and that they made astounding returns on the back of only 20% of the companies they invested in. My jaw hit the floor that the WSJ (of all papers) was not explaining that this is EXACTLY how risk capital works!

Having said that, I won't vote for Romney either, but this issue isn't even close to being a reason not to vote for him. I'm really getting disgusted with what campaigning has turned into - it was bad enough that it seems there is very little substance, but sadly these days now there is very little style either - so there isn't anything inspiring going on with our political leaders.

The issue is not with Bain. I am an investor and it's great. The issue is the representation as pro jobs. We all know many of the investment thesis include agreesive cost reduction and that means jobs. It's good business but will ultimately be bad politics.

Yes, the likability issue appears to be a tough obstacle for Romney to overcome as he has been tagged as wooden and an analytical automaton partially true, perhaps, but likely simply a part of the whole narrative that folks are creating. Meanwhile, I watched President Obama's speech to the URJ this weekend where he is so likable and authentic: http://www.youtube.com/watch?v=HMZ210czvTo

You echo my sentiments exactly.

No it just makes you a decent person with a sense of right and wrong.

Jeffrey,

One of the real disappointments I have with the media is how little conversation is raised around issues like the one you've highlighted with this post.

Why, indeed, do the media let the candidates (or the President for that matter) demonize a whole class of firms without initiating a nuanced discussion of what role they have to play in the economy and whether their role is ethical, valid, and/or necessary?

I understand that nuance has less of a place in the agenda of the modern politicians, but what stops the media?

The "dumbification of America" is a phrase that recurs in my mind when I think about things like this.

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