How About We Compare the Investment Records of Bain Capital and the Obama Administration?
Unbelievably, the Obama campaign seems to want to have a debate about which of the two candidates is more qualified to run the world’s largest economy. Writing earlier this year I considered where the campaign seems hell-bent on going. This is a debate that can prove only disastrous for the forces of O.
To repeat what I said then: if Bain Capital buys and fails on any particular investment, the wreckage is contained to the employees of the business that was bought, the investors, and Bain management. It also means that if Bain does it too often they will be unsuccessful in raising the next round of capital.
Conversely, when the government fails, it fails on a far larger scale, particularly if the investing is done via many entities having a similar industry focus. With government investing, we all become venture capitalists, whether or not it fits our individual risk profiles.
Bain diversified itself by risking capital in a variety of industries and not going all in for any one sector. That way, its eggs are not all in one industry basket and it looks more like the overall economy.
In contrast, the administration’s attempts to invest in “green” technology, no matter what one’s views are about the efficacy of “green” technology, are a fool’s bet. Even were it able to discern winners from losers, the inevitability of bad investing in one sector should be apparent to all.
The problems for The One’s are threefold. First, he has made near-universally bad bets. Second, public entity investing possesses fundamental flaws. And third, the opportunity to make investments with politically connected business ventures has led to charges of corruption and cronyism.
Look around. Can anyone name a successful entity in which this administration has risked billions of dollars of taxpayer money? From Solyndra to LightSquared. All taxpayer money, none of it confined to only one failure and in technology whose merits none of us have any interest, expertise, and time to debate, other than for me to make the observation that Steven Chu’s fervent hope and desire that oil prices climbing much, much higher would be the first necessity for this business model to work in the real world without needing to be propped up by the government.
Moreover, the folly associated with public entities investing in established businesses (like, say, General Motors…oops!), let alone technologies best evaluated by trained professionals, is manifest for all to see. A private equity (or even venture) investor is a highly experienced individual who has seen, invested in (and/or rejected investment in) many companies in his or her career. His existence is Darwinistic: if he doesn’t know what he’s doing and makes too many bad bets, he doesn’t get to raise the next round of fund capital and is out seeking a new career by the day after that failure.