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TAMPA, FL - JANUARY 24: Republican presidential candidate and former Massachusetts Gov. Mitt Romney greets supporters and gives autographs after a speech at the National Gypsum Company January 24, 2012 in Tampa, Florida. Romney's speech was billed as a "prebuttal" to tonight's State of the Union speech by President Barack Obama (Photo by Chip Somodevilla/Getty Images)
That's what Michael Keating, formerly of the Boston Consulting Group, thinks. A president who comes from the brutal world of private equity? Terrifying. Keating outlines the fear in the LA Times:
Private equity consultants are not real business people, if real business people can be defined as entrepreneurs who want to build something of lasting value that can employ members of their community and make profits for their shareholders, whether public or private. A private equity consultant is more like an Excel spreadsheet with legs that looks at the "target" company through the lens of return-on-investment and cutting costs to the bone. If those costs are people, well, that's just capitalism in action. If an opportunity exists to expand a product line and it becomes necessary to hire some engineers and sales people, then welcome aboard. It's all a very finely tuned calculation that has nothing to do with what most people recognize as doing business. It is an abstract exercise, at best, that most of these ladies and gentleman have learned at places like the Harvard Business School, the University of Pennsylvania's Wharton School or wherever business is taught as warfare rather than as a contributor to the social good.
In his analysis, Keating is absolutely right. In fact, I'm surprised that more people haven't highlighted this inaccuracy: private-equity guys aren't "businessmen," in the commonly understood sense of the word. And yet, on the stump, the refugees from the financier class who are running for office often claim that it's their background in business that sets them apart from a field of out-of-touch politicians (They've never made a payroll!). We've certainly seen Romney do it. In Los Angeles, we're also now seeing mayoral candidate Austin Beutner do it (although Beutner spent time in non-private-equity kinds of finance).
Business as it's practiced on the ground is anything but abstract. In fact, this may be why some very smart people go into private equity or other types of financial capitalism that don't involve the grubby day-to-day of developing products and services, bringing them to market, and staying competitive over the long haul. The private-equity types don't mind blood on their hands as long as they don't get those hands dirty.
This is all well and good. You can't tell people what to do with their lives anymore than you can prevent them from borrowing tons of money against distresses assets and trying to make enormous profits. However, what we're learning about private equity right now through Romney should provoke more questions, along the lines of what Keating offers. Businesspeople don't participate in capitalism so they can wind up rich, with much of their income sheltered from taxation. They participate in capitalism because they believe it's the best way to make stuff — from oil-drilling rigs to iPhones — that will improve people's lives.