How private equity is destroying the labors of love

Private equity is turning every business into a short-term profit center.

Robert Reich

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.”

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