Mitt Romney was a high school bully. I'm shocked — shocked — to find a frat-boyish bully making his "fortune" as a
vulture venture capitalist. Just because the actual function and methods of venture capital firms are based upon bullying shouldn't have predicted that result, should it?
Venture capital firms — and especially vulture capital firms, like Bain (Romney's firm) — ordinarily function by forcing their preferred operating methods and goals upon other firms seeking financing (or, as for vulture capital firms, which have outrun their existing financing). Sometimes this can be a good thing for all involved. Let's be honest: Despite the emphasis on "entrepreneurship" in American education (and it's no longer confined to the b-schools!), sustaining and growing an operation just isn't studied as much. For example, there is almost no attention devoted to the concept of human/internal control systems interface. It's one thing to say that "any firm that is involved with outside investor money must have a system of internal controls" to support auditing and prevent certain kinds of shrinkage (internally, theft and self-dealing; externally, underdeliveries and misdeliveries). It's entirely another thing to get the right people involved with that system; to get everyone to respect that system, even though it creates paperwork that nobody wants to do and slows down acquisition of resources (this is a particular problem with information systems); and so on. A good venture/vulture capital firm can improve a business's possibility of survival — or even, in exceptional circumstances, profitability — by insisting on matching the right kind of internal controls to a given business.
That's very, very rare. Instead, too many venture/vulture capital firms operate by mandate. "Do this. Do that. No, do this first, then that, even though it'll take a lot longer to do this than that." It's not just the typical tone of communication, either; it's the content and the underlying attitude. The most discouraging bit of bullying from venture/vulture capital firms, though, is about timing. Bluntly, those firms are not in it for the long term; they want high-velocity/turnover use of their money. The rate of return is more important to them than the total return... let alone nonmonetized values. Vulture capital firms (like Bain) are worse than most, especially when (like Bain) their own business model is to make businesses they fund more "efficient" by firing people and contracting expenditures on research, facilities, and equipment — that is, applying private supply-side economics. We all remember how well that worked, don't we? (And some of us nerds know that supply-side economic theory has been refuted with actual data; for example, everyone who actually looks at data laughs at the Laffer Curve.) It's one thing to be prudent; it's entirely another to slash and burn because it's more "efficient," like slashing and burning rainforests.
And as to Romney's apology: It rings hollow not just because it tries to excuse his bullying with the "I was young and stupid" excuse (he's no longer young, anyway), but because he made a business career out of it.
Of course, venture/vulture capital firms are not unique in that respect; it's just that they bully others into following their precepts. The Perfesser offers an extremely useful — and surprisingly readable — summary of how corporations "think". I recommend reading the posts making up the summary in this order:
- Is it useful to think about corporations as having a "purpose"?
- The vacuity of corporate purpose
- Is Dodge v Ford Motor Company a close corporation/controlling shareholder case?
- Case law on the fiduciary duty of directors to maximize the wealth of corporate shareholders
- The shareholder wealth maximization principle versus non-shareholder constituency statutes
- The shareholder wealth maximization norm
- The relationship between the shareholder wealth maximization norm and the business judgment rule
- Bloomberg editors misunderstand the shareholder contract
If you really want to understand what drives corporate decisionmaking — indeed, any non-sole-proprietorship decisionmaking — you really should at least read this. Even if the only thing you want to know is how to interpret a royalty statement, this is important stuff. And don't forget to read the footnotes.
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Departmental convocation is done for the elder remora; graduation is tomorrow. When I was an undergraduate, we did the convocation and graduation together, all at once... but the entire College of Arts and Sciences was not an awful lot larger than just the history and philosophy departments at the U of I. Well, back to dealing with the spillover and getting ready for the morning. And then I'll only have one kid in college.