private equity is destroying the labors of love
Successful industrialists financial Wall Street bankers whose business practices were often are considered ruthless and unethical, capturing portions of the market, and bleeding it dry. Not much left of the hollowed-out companies other than a name and the empty buildings they once occupied. Good commentary on Simon and Schuster being bought by KKR. Is Robber Barrons still a term in use?
How private equity is destroying the labors of love, substack.com, Robert Reich
Private equity is turning every business into a short-term profit center.
Last week, Paramount announced that it will be selling Simon & Schuster, one of the biggest and most prestigious publishing houses in the United States, to the private-equity firm KKR, for $1.62 billion.
The acquisition vastly increases the influence of financial interests over book publishing.
This worries me because it continues a trend that began years ago — elevating profits above the love of publishing books.
When I published my first book decades ago, the purpose of most publishing houses was to publish books. Publishers made money in order to publish books. They earned enough on their big bestsellers to take chances on unknown authors like me and put out books that delighted small numbers of enthusiastic readers but never showed a profit.
But in more recent years, the major purpose of most book publishers has switched from publishing books to making money.
After KKR takes over Simon & Schuster, this prestigious publishing house won’t be taking risks on unknown authors or putting out wonderful books that appeal to small numbers of enthusiastic readers. It’s going to be a profit center for one of the biggest private equity firms on Wall Street, dedicated exclusively to making money.
The same dynamic has infected other parts of the economy. News organizations once made money in order to report the news. Now, news organizations exist in order to make money.
For years, CBS News was insulated from the commercial side of CBS. This allowed Edward R. Murrow and Walter Cronkite to report what they thought the public needed to know. Today, most network and cable news has to show a profit. It’s been a slippery slope leading to Fox News’s shameless pandering to the lies and bigotry its viewers find entertaining.
Hospitals and health insurers once made money in order to provide health care. Now, hospitals and health insurers provide health care in order to make money.
Blue Cross and Blue Shield began as nonprofits that insured all comers. But as big profit-seeking insurers targeted younger and healthier people, the Blues were left to insure the older and less healthy, which made it impossible for them to continue. They turned to making money. Now, private equity runs hospitals, into the ground.
And so on.
I was reminded of this distinction — between making money in order to provide particular products and services, and providing products or services in order to make money — while watching the magnificent series “The Bear,” now streaming on Hulu.
If you haven’t seen it, I won’t give away the plot except to say that the major characters want to create a great restaurant. Each has a backstory that reveals why this is so important to them.
Making money is the means to achieving their dreams, but they aren’t in it for the money. They’re in it to produce wonderful food, served with perfection. This transcendent goal is central to their own self-worth. It gives each of their lives purpose and meaning.
It’s still possible for businesses to exist in order to produce wonderful goods and services. I know many retailers, small manufacturers, and professionals who do what they do mainly for the love of it. (My father ran a clothing store, and although he worked seven days a week, making money was secondary — enabling him to keep his family afloat and continue to do what he loved.)
But the financialization of the American economy has turned almost all larger businesses into profit centers. Private equity in particular has leached out every other value.
When I ask my former students how they like their work, I often hear the same story. “I like it well enough,” they say, often with a tinge of regret. “But the money people won’t let me do what I’d really love to do.”
Not too sure about the impact of private equity in publishing really if the main complaint is supposedly a contraction of titles with expected small audiences. Simon & Schuster might be pulling back in some segments, but barriers to just get something published are pretty low. My hypothesis is maybe Reich’s observations in publishing reflect a diminishing effectiveness of networking for authors, or at least the style of networking most familiar and comfortable for Reich. I also think there has been a shift in the source of “prestige” in the business. The profits from blockbusters the Reich remembers financing other works with no or negative profit might be more effectively retained by the creators, which is the case with the recorded music business.
Eric
(and anyone else interested in the moral at the end)
you speak (as if) with some authority, but your “take” is, as often, (not necessarily wrong) about the opposite of mine. that worries me. i suspect it is easy enough for a person to grow up in a certain environment (we all do) that colors everything he thinks. but, for my money, the pro-money orientation on everything is dangerous to our mental health and, indeed, prosperity.
that said, i wonder if people notice that the financialization of everything costs them far more money not only than the needed increase in Social Security “tax”, but than the entire cost of Social Security. and (same thing) the idea that we can make our lives better by increasing the retirement age is exactly the opposite of truth. Life is more than money..though, of course, we need some money to live.
AB manger formerly known as Run 7445
the style of burying the author’s name in the body of the post is not what i grew up with so it is hard for me to figure out who exactly is saying what. this may just be another whine of old age, but you might want to give some thought to traditional quotation marks, or/and author’s name prominent on a line of its own just under the headline (which also helps if it is a mini-summary of the post’s message and not an ironic quote (which is not the case here, but which has happened to at least one of my posts, troubling the author’s pride in his own workmanship).
Old age is not an excuse for making silly remarks.
well, apparently it is.
i thought it was a self depreating way to call attention to the dificulty some people…at least this one person…might be having folloiwing new daze ideas of publishing style.
they call it a “by line” for a reason.
turns out it doesn’t matter much.
Private equity is picking over the rubble, it seems. Some of it.
Where were they when Christmas Tree Shops went under?
Christmas Tree Shops
… an American chain of big-box specialty retail stores, headquartered in Middleborough, Massachusetts. At its peak, the chain operated 72 stores in 20 U.S. states, primarily in the Northeast. The company filed for bankruptcy in 2023 and closed all of its stores, the last on August 12, 2023. (Wikipedia)
My very first (summer) job was with a family-owned ‘five & dime’ chain hq’d in Rochester, NY. In their distribution center, with my sister. My father was best friends with the manager.
At its height operated stores & ‘mega-stores; (at least for the ’60s) in a handful of eastern states. (My aunt in FL worked in one also.)
They eventually went under. Were bought by Ames, which was bought out by Bradlees. All eventually went under. From their ashes came Kohl’s, maybe. Which is now owned by Sephora I believe.
Originally, Sephora (a French cosmetics chain) operated ‘inside’ Kohl’s stores.
They also operate(d?) inside JC Penny stores.
Both Kohl’s & Penny’s are now owned by Brookfield Property Partners and Simon Property Group these days, apparently.
We have had LBO’s, vulture capitalists, and now “private equity”. All different ways of extracting the most out of the least. Not all that different from the loan sharks or payday lenders who take someone in a little bit of a bind and make it a bankrupting event for their own profit.
My only personal experience was in the mid-80’s, an LBO. A genuine crook, when he left town he took everything from the property, including leased items that did not belong to him. He assumed (correctly) that the value of the used equipment was not so great the owners would follow him out of state to get their goods back.
The love of money really does form the basis for a lot of evil.
Jane:
Very true, they are there in the beginning and in the end to pick the bones clean of what is left after their malfeasant actions. It is unfortunate there is little repercussions during and afterwards for their actions.