The New York Times, and post-modern capitalism?

The obituary page of the Economist last week covered the demise of William Safire, a playful connoisseur of the English language who was a columnist at the New York Times. His discussions of the origins and nuanced meanings of English words and phrases was representative of the relatively cerebral nature of the New York Times, a news daily that I am addicted to. To me, the NYT is just as enjoyable to read - even if you are not a New Yorker and you skip the city-centric news - as the Economist. The great columnists at the newspaper include Paul Krugman, whose columns I had been reading religiously (and greedily) for several years before he recently won the Nobel Prize for Economics. When I am not travelling, I read the NYT online (www.nytimes.com allows free access - for now) and when I am on the "road", I pick up free airport lounge copies of the International Herald Tribune, which relies on the NYT for content.

But I am not writing about the NYT because of Safire's death, but because of an article there about how private equity companies have allegedly sucked the blood out of established companies like Simmons and then spat out the remains. The title of the article is "Profit for Buyout Firms as Company Debt Soared" but the title of the accompanying video is better - "FLIPPED: How dealmakers can win while their companies lose" - and the HTML title of the page is best - "At Simmons, Bought, Drained and Sold, then Sent to Bankruptcy".

While I realize that the article may be one-sided, it presents a chilling perspecive of private equity's single-minded focus on profit, even if it means exploiting the gullibility or credulity of financial institutions along the way. In some ways, it is the mirror image of the housing loan collateralization scandal.

One of the prime examples cited is that of the machinations at Simmons of the highly prestigious Thomas H Lee Partners private equity firm of Boston. (William Safire would not have liked the passive voice used in this last sentence!) Now I know a couple of current and former managing directors at THLee who had invested in one of my startups, SupplyChainge Inc. The THL link was through my co-founder John Thorbeck (incidentally, ex-CEO of the Rockport shoe company, ex-President of Bass of Phillips Van Heusen and the first VP Marketing of Timberland!) The THLee folks conducted themselves as SupplyChainge investors with grace and dignity. Yet I have seen enough of other rapacious investors with a God-complex to be able to imagine the worst.

In some ways, such purely financial investors play an important role. As the Economist points out, investors who get very much involved with the operational details of the business may tend to be too risk-averse, as banks are in Europe in their relations with businesses. At the same time, purely numbers-driven financial investors may be dangerous.

I have no issue with the money these investors make from time to time; they also lose large sums of money from time to time. And they work very hard.

I am not so troubled that they have no sense of history (e.g. shuttering a 133 year old company such as Simmons) - capitalism involves creative destruction after all. One person's romantic cry for preservation of a historical company is another's protectionism.

I am somewhat troubled that such investors cannot afford to worry about individual human suffering, when many people are suddenly laid off, for example.

But I am most disturbed that the opacities, inefficiencies and buddy-buddy nature of the financial system are probably often exploited without much fear or shame. Capitalism typically applauds anyone who can make money, regardless of the means employed as long as he can get away with it and not go to jail! It's become a bit like local politics in India.

Perhaps we will evolve a new "post-modern" capitalism. How do you propose we do it? Please offer ideas that will AUTOMATICALLY make a SYSTEMATIC change. If we get a lot of good ideas, perhaps we can try to write an essay for the New York Times, a left leaning intellectual paper and perhaps the best place in the world to publish them!