The fact that you are never quite as safe as you should be is one of the facts of contemporary American life, although the nature of that hazard varies from one American to the next. An unreasoning horror at and fear of the unknown is at the heart of the nation's dominant political movement, and while much of that is bullshit—think of the seething, car-brained fear of The Cities And Their Crime that animates so much conservative media and agitates so many conservatives into full-spectrum derangement—there is also some truth to all that perceived hazard. That social anxiety generally tends to be directed towards big, cinematic threats, both because that sort of thing makes for better TV and because the actual forces that make American life precarious do that work much more quietly.
Few of those forces have done more damage, in relative secret, than private equity. The firms that have spent the last few decades busily buying up and chewing through various American industries are kind of abstract in comparison to the traditional villains of the news discourse, but they are much more ubiquitous and destructive. What private equity has done, and what it does as a matter of course, is plenty brutal. It just isn't quite violent enough to rate.
That is, until you find yourself actually having to deal with private equity in your own life. As private equity has spread from retail to media to housing to medicine to public services, it has become harder to find any aspect of public life that is not suffering under the influence of this uniquely rapacious and self-serving industry. It's that story, more than her own personal experience with private equity, that Megan Greenwell tells in her new book Bad Company.
That formative private-equity experience, which many of us at Defector shared with Megan back when she was our editor-in-chief during the last days of Deadspin, certainly informed the book, but Bad Company centers on the stories of people who have found themselves fighting against private equity's singular sociopathy in a rural hospital in Wyoming, and the newsroom of a mid-sized newspaper, and on the floor of a Toys R' Us. The book is not a primer on what private equity is, as Megan noted below, although it works well as a thumbnail history of an industry that is still less well-understood than it should be. Bad Company is more about what private equity does, and the various ways in which people whose lives and workplaces have been cheapened and worsened by private equity predation have fought back against it, and worked to chart a different and more humane alternative.
The interview has been edited and condensed for clarity; Bad Company is out today.
Your relationship with private equity begins right around when mine does, which is more or less when private equity made it impossible for us to keep doing the work we were doing together. We were working at a place that got bought by a private equity concern, and when they started messing with our shit we tried to reason with them through numbers and evidence and what seemed like basic capitalist logic, rather poignantly in retrospect, and they were just not having it. They were on their own journey. What, if anything, do you remember feeling when you learned that we'd been bought by a private equity group and what did you think private equity was then?
I think I had some vague sense that private equity was powerful and, like, had some bad effects. But honestly, and I say this in the introduction to the book and maybe it makes me look like an idiot, but when we first got bought by Great Hill Partners, I did not think that was the worst-case scenario, because some of the other names that were getting floated were companies that were known to run a lot of really bad media properties that they had just driven into the ground. And Great Hill Partners owned Bombas who, like, make good socks. I also honestly thought we had some degree of insulation, because, by any measure, Deadspin was doing well. And so we were like, Oh, great, some business geniuses are gonna come in and figure out how to better monetize our good content that has a large, growing, very loyal readership. I'm on board with that.
And I think when it all started to go to hell, my primary feeling was like true bafflement. Don't you want to take a thing that is doing well and make it do more well? And it just seemed like that wasn't at all what they wanted, which was hard to wrap my simple brain around, because I am not a private equity genius.
And you know, it became clear that essentially their only version of success for a sports website was ESPN, and so their goal for us was make us ESPN, which didn't make sense on several levels.
Especially when you consider that part of their method of doing that was: first we institute a hiring freeze, then we turn you into the fucking worldwide leader in sports.
And you know, one of the first things they really wanted to do, and they felt so strongly about this, was to put scorebugs at the top of the website. And I was just trying to figure out how to explain to them that not a single person on earth has ever come to Deadspin.com to figure out what happened in the games last night. That's not a thing. And then, literally, I had conversations with their executives where they would be like, “we need to be like ESPN” and I would say, OK, but ESPN has broadcast rights for, like, major American professional sports.
And it was, I swear to God, as if that had never occurred to them, the idea that ESPN was bigger, because ESPN was broadcasting the NBA and we were not broadcasting the NBA, and so maybe our business strategy would be a little bit different. So it really did feel like banging my head against the wall, just on the level of like, I feel like I'm bringing logic here, what exactly is this thing that you're bringing?
That rhymes with my memory of it for sure, just this sense of “I don't know what you want.” Which, to that, what does private equity want when it takes control of an organization? Obviously it’s not a monolith, but what is the private equity method and what is the goal?
The goal is to make money for private equity. And that is different in a lot of cases, perhaps even most cases, from making money for the company. And I think that's what really confused me as I started getting deeper into the research for this book, is that you often end up with a situation where the incentives are divorced, and what is good for the firm in charge is very often the opposite of what is good for the portfolio company that they own. So like when you do a leveraged buyout, you take out these absolutely massive loans, but the private equity firm that has taken them out is not responsible for paying those loans back—only their portfolio company is. So you load down the company with all this debt, and then you don't have to pay any of it back yourself. So it's like I as the private equity firm am making out great, but I'm screwing over the actual company that I own. And so … I don’t even fucking remember what your question was.
It was more or less “what does private equity want,” but I can see the logic for the firms insofar as it’s like “we need nutrients, and your blood and flesh are nutrients to us, and therefore we’re going to drink you.”
The goal is to make money for the firm. And we live in an economy where everything is financialization. You don't make money primarily off providing goods and services. You make money off of selling real estate and doing dividend recapitalizations and, you know, all of these like little tricks that have become the backbone of not only like all of Wall Street, but so many companies that are ostensibly providing our goods and services. And so, yeah, you end up in this backward kind of world where what might be most profitable is very often not benefiting your company at all.
As your book demonstrates, private equity is in more or less every line of business, including a number of businesses you’d think of as the worst places for it to be. The supermarket in my neighborhood that I go to was bought by private equity and made worse by it. You write in the book that they've been gobbling up rural hospitals. They're in the ambulance business. Everywhere you don't want to be. How would you describe the role that private equity plays in American life at this moment? And where might you see it or not see it? Do you feel like you’ve got the They Live glasses on now and so you can see the imprint of private equity everywhere?
Yeah, totally, and it's horrifying. Somebody asked me, like, you know, “How concerned do I need to be about this? Because, like, private equity is not in my life.” And I was sort of like, are you sure? Because they may not own your employer, but I think it would be very hard to find an American resident these days that doesn't have some sort of private equity in their lives. They’re so big in hospitals, big in nursing homes, big in daycares. So if you have either aging parents or young children or both, it's hard to avoid private equity altogether. They’re huge in vets, so if you have pets. They’re big in dentists. But also now they're getting into, like, public utilities.
That's good, though. That sounds good.
Yeah, that's good. I want private equity running my roads.
Can you explain how you get “big in dentists?” Is it the sort of thing where there's, like, chains of practices that they spin up?
Yeah, but not only chains of practices. They will, and I've heard this again and again from doctors and dentists in private practice, that they will get unsolicited offers regularly from private equity to buy their practice and turn them into a chain. So, yeah, they're really everywhere, and they're becoming more everywhere, more everywhere all the time.
And private equity has a real interest in making sure people don't know all of the things that they're involved in. And one thing I heard over and over from workers is that, until everything went to hell, they had no idea private equity even owned their company. Because the name on their paycheck was the company's name, not the private equity firm's name, and several layers of bosses above them all worked for the company itself. And so it tends to be that you only find out how deeply private equity is involved in your life when something goes catastrophically wrong. But that doesn't mean it's not there.
So private equity is in everything, in all these different industries, and yet there's also this sense in which it's never really in it, because it doesn't necessarily care about the outcome of any of that, or the health of the business. Which, considering some of these businesses, makes me wonder, if you were to talk to a private equity person and be like, why are you Big In Dentists, what would they say? Would they say “we're making the business more efficient?”
So I'm going to answer a slightly different question than what you asked, which is what they say they do versus what they think they do. They position themselves as—the analogy I like to draw is as if they are advanced medical specialists, right? Like you have some very, very rare disease, and these are the guys who can come in and save your life, same thing, but applied to companies that might be struggling for one or another reason. And it’s we're the only guys who can swoop in and save you.
But they're not actually specialists in whatever the industry is. They are specialists in finance, so they're very good at making money, but they are not necessarily good at the fundamentals of that business, nor do they really care about the fundamentals of that business, because improving a business is like long, slow, difficult work, and private equity is, by definition, a short-term game. The idea is to stay in for a few years and then sell it for a massive profit. Even if you don't sell it for a massive profit, you'll come out OK, if you're the firm. But that is the narrative, that these highly trained specialists are the only ones who can save a company that would otherwise die.
An appropriately self-serving and abstracted answer for the industry that we're talking about!
And also one contradicted by the facts, because 10 times as many companies owned by private equity declare bankruptcy as other types of companies. So like, if that's their claim, it just doesn't work.
But what if it does work, Megan? Sadly we’re just going to have to leave that one there, because I am going to talk about the book now. The origin of this, to some extent, is the last blog you wrote for Deadspin, an all-time classic, “The Adults In The Room.” The blog goes super big. Your agent messages you, “This is a book.” And Bad Company is the book that came out of it, and it is very different. How did you get from that to this?
So when my agent emailed me “this is a book” and honestly I was like “no, it's not.” Or at least it was not a book for me, for a couple of reasons. One, I don't really do personal writing in general, like it is just not a thing that I am good at or particularly interested in. I love when other people do it, it is just, like, not the kind of writer I am. So [that blog] was a departure for me, because it was like just narrating my own experience. I was so not interested in turning my own experience into a book, like wildly uninterested. I also did not want to write a book about the media industry, because while I think the media industry is really important, and I would like it to continue to survive, I was not convinced very many people care enough about the economics of the media industry to pay $30 for a book about it. So originally, I was like, nope, not a book, disagree. Bye.
And then I just kind of stayed obsessed with private equity. Like maybe it was spite, or maybe it was journalistic curiosity or whatever, but I just couldn't stop reading about it, and I became really obsessed with other industries, because, look, Deadspin was very much my dream job. Loved working with all of you absolute idiots an awful lot. But, like, we weren't curing cancer there, right?
Maybe you weren’t.
But the more I started reading about, like, oh, it's in literal hospitals, right? Yeah, the actual places where cancer is being treated, like, as opposed to places like our experience, that seems really bad. And then I think it's one of those things where, like, private equity doesn't want people to understand the basics of how it works. And I think a lot of that is because once you start understanding the basics of how it works, like I'm talking about the fact that you take out these loans and then assign them to the company that you're purchasing, not to yourself—it's just one of those things that burrows deep into your brain and is super annoying. I had toyed around with other book ideas in the past, but I had never hit on anything that compelled me for longer than, like, a couple of months or whatever, which was like a very good sign to me that I should not write a book about it. And this one I just couldn't get rid of.
And so I decided that the way to do it was A) not write about my own experience and B) not write about media, or at least not exclusively about media. One of the big things for me was I realized that there are other good books about private equity out there. There are not a lot of narrative books about private equity. Barbarians At The Gate is a masterpiece, but it was published in 1989. And narrative journalism is the thing I love most. So I was sort of like, OK, what if somebody did a version of this that was just telling actual human stories, because it’s a subject that—people understand that it's important, but also nobody wants to sit down and read a primer on it, right? I didn't want to sit down and read a primer on it. So eventually it came to me that a person could do a storytelling approach to this, but it did take me a while to get there.
The people whose stories you tell in the book all fight back against private equity in various ways and in various sectors, and in some cases, win some real victories. Obviously, stipulating that only a pretty sick society could ever have produced an industry like private equity in the first place, let alone be consumed by it in the way that we have, how do you imagine that people might go about fixing any of this, or just fighting it?
The protagonists in my book all fight back in different ways, which was really interesting to me. Some are out there lobbying for actual legislation on the federal level, and that's pretty unlikely right now. But there is some interesting stuff happening on the state level.
Some of them are out speaking in front of public pension fund boards saying, “Hey, don't invest in these companies if they treat workers badly.” That has had some interesting effects. Some are just confronting the firms directly and trying to, like, essentially irritate them into submission, which in some cases has genuinely worked. And, interestingly, some of them are more engaged in trying to reinvent industries from the ground up, which I think is super interesting and important work.
One thing that I think about a lot is, private equity did not create the problems in any of these industries. There are deep root causes that make healthcare an economically precarious business. Or media, we all know that there were decades of catastrophically bad decisions from media executives. I graduated college into a newspaper job in 2006 and everybody was putting all their stuff online, for free, and then was surprised when the number of print subscribers was declining, right? So private equity came in and took advantage of that state of affairs, but it did not create that state of affairs.
This makes sense to me. Like if you had a bunch of really bad habits, you'd be more likely to get sick. And in this case you're already sick, so the thing that is going to kill you, which to be clear is private equity in this metaphor, is going to find you a much more hospitable host.
Exactly. And so a lot of the work that was most interesting to me was actually not the efforts toward regulation, but these efforts to recreate the industries. So I focus in the media section primarily on like this wave of nonprofit local news startups, which are doing really well—out there doing incredible investigative journalism, you know, taking down Brett Favre and also becoming economically sustainable. Also, I don't know if you've ever heard of this, but there are some publications that are actually worker-owned.
That’s stupid. Not going to work.
I agree. But it's cool that there are people out there trying this stuff, and I do think that it's easy to overlook that stuff and just feel hopeless about the fact that, like, yes, Elizabeth Warren's Stop Wall Street Looting Act is not going to pass.
Last question: Where do you think the conflict between private equity and like the rest of society is? Not just in terms of who's winning, but how well understood is the threat, and how far along is it, and what kind of hope do you have for the future of that fight?
It's very poorly understood, by design. I think that is starting to change, because it's getting directly involved in more people's lives, and so more people are finding reason to get upset about it. But I think the stories of the book show that there really is some reason for optimism, and that this system is not an inevitability. I did not want to write a prescriptive book where I'm like, here are the solutions to this problem, A) because that’s not my job, and B) because I don't know.
But what was interesting to me was seeing people trying a bunch of different things and experimenting and seeing what it all adds up to. And that genuinely does make me kind of hopeful. I mean, the hospital section in the book is the one that ends on the most dramatic note, and I will not spoil it because I want people to buy the fucking book. But the solution that those folks in rural Wyoming came up with is like crazy audacious, and I think the vast majority of reasonable-minded people, myself included, would have said there was no way that would ever work. And the thing's working.
So, yeah, look: private equity is huge and getting huger. That's just the reality of the world in which we live. And there's no appetite on Capitol Hill to do anything about that, because 88 percent of members of Congress in the Senate take money from private equity.
Is that high? In layman’s terms, 88 out of what?
Out of 100.
Oh so that's pretty close to 100. Not an A, but like a solid B-plus.
So you know I am not an overly optimistic person. Nobody has accused me ever of being too rosy about things. This is the reality of the situation in which we live. But also, if you look, there are things happening. And if people feel motivated to get involved in some of those, whether because private equity has come into their own life and they want to fight back to help their own circumstances, or maybe because they've read a terrific forthcoming book about this subject, and just feel galvanized, then that’s something.
Actual last question: Who is your second-favorite Oakland Athletics infielder?
Current, I can't name.
No, like all-time.
Eric Chavez.
