Summary

The article satirically presents the perspective of a private equity managing partner who revels in job cuts, exploiting the less affluent, and capitalizing on the present moment for financial gain, all while justifying these actions under the guise of fiscal efficiency and personal enrichment.

Abstract

The author of the piece, a soon-to-be-retired managing partner at a private equity firm, shares their passion for wealth and the private equity industry, which they claim is misunderstood and not solely about downsizing. They take pride in their ability to lay off employees, particularly in large companies, and view it as a key strategy for cost-cutting and personal gain. The article also delves into the author's enjoyment of extracting money from the less fortunate, such as residents of trailer parks, by implementing complex leases, additional fees for essential services, and significant rent increases. They rationalize these actions by suggesting that water is not a human right and by exploiting the sunk cost fallacy to ensure residents prioritize rent over other expenses. The author concludes by mentioning their commitment to philanthropy through the Giving Pledge, ensuring their legacy is preserved through family-managed charitable contributions, which are conveniently tax-deductible.

Opinions

The author enjoys the act of firing people as part of their role in private equity, considering it a necessary and rewarding aspect of the job.
They believe in the challenge of making profits from those with less financial means, finding it more satisfying than profiting from the wealthy.
The author advocates for making tenants pay for previously included services and for water, aligning with the view that water should be treated as a commodity with a market value.
They take advantage of the sunk cost fallacy to justify significant rent increases in trailer parks, knowing that residents are unlikely to move due to the high cost involved.
The author sees their philanthropic efforts as a counterbalance to any negative impacts their business practices may have, while also benefiting from the tax deductions associated with charitable giving.

The 3 Reasons Why I Love to Work for Private Equity

It’s not only about firing people, but it counts

For as long as I remember, I’ve been in love with money.

I remember browsing Investopedia in first grade and being caught off guard by this beautiful sentence; pure poetry.

“Managing partners at the largest private equity firms can bring in hundreds of millions of dollars.”

That day, becoming a big shot for a private equity firm became a life goal, second only to my love for dough.

And now that I’m a soon-to-be-retired managing partner, I want to share with you the three simple truths that made me love private equity (almost) as much as money.

#1 — I love firing people

I know; people usually think I’m joking. They believe private equity creates jobs.

Nope.

In the words of Mayra Rodriguez Valladares, a senior contributor at Forbes:

“Private-equity backed companies buy out companies with existing employees. Private equity companies are not job creators.”

At the beginning of my career, I was average, firing something like 4% of the employees in the first two years following the buyout.

But now that I gained seniority (and bonus size), I focus on larger companies.

The bigger the companies, the more people to fire there’s, and the better it’s for me.

When it comes to large publicly traded companies, I manage to fire 13% of the employees in the first two years on average. And that’s only average. I won’t tell you my best score; I’m not here to brag (but it’s writ much larger).

Lord! I love cost-cutting. But only if it’s about firing people. I can’t work without fine dining — I’ve got a sensitive stomach. Same for my buttocks, they’re delicate, that’s why I always travel in business class — at least.

#2 — I love making poor people pay

Let’s be serious, what’s the challenge in making rich people pay? They’ve got loads of cash; it’s too easy. Poor people are the ones you should go after. If you enjoy challenges, that is (I love challenges, not as much as long greens, though.)

Recently I discovered trailer parks. Oh my! You wouldn’t believe what I’m about to tell you if The New Yorker hadn’t written about it. Anytime I feel down, I read it. Sheelah Kolhatkar is so talented; she perfectly rendered the fun strategies I use to take advantage of poor people.

I can’t resist; I’ve got to share them with you. Don’t hesitate to use (and abuse) them.

First, you make things complicated.

My colleagues at RV Horizons are beginners, but they get the idea.

“RV Horizons had sent all the residents a new lease, forty-seven pages long and full of addenda.”

The problem is, at forty-seven pages, you still have some of the residents reading the whole thing and willing to argue. That’s boring (and costly). Let me share a secret with you, I did some experiments and found that eighty-eight pages are the right amount.

Then you make people pay for everything.

It’s simple. Just take out anything previously included in the rent and make people pay for it. For example, “water and trash removal.”

Some people think access to water is a human right.

I say no.

As Peter Brabeck, one of my heroes and former Nestlé CEO, said, “that’s an extreme solution.” I share his view that “water is a foodstuff like any other, and like any other foodstuff it should have a market value.”

To make people understand the importance of water, I usually install new digital water meters on each property to measure consumption. Of course, I bill residents five dollars a month for the meters.

There’s no such thing as a free lunch in this world (but it can be tax deductible if you know your stuff like my tax lawyers do.)

Finally, you keep on raising the prices.

Anybody can raise the prices, but it takes a private equity genius like me to find a fair amount. By fair amount, I mean the maximum amount people can pay. It’s fair to me.

Not to go into legal details, in trailer parks, people own their homes but not the land. The catch is it’s pretty costly to move these homes, if even possible. So, you can quietly raise the rent. The sky’s the limit. People won’t move.

As Jim Baker said, “there is such a strong incentive to pay because are you going to walk away from this home that you put your retirement into?”

Well said, Jim! There’s a bit of sunk cost fallacy at play here. I love cognitive biases — especially when they bring me bigger bonuses.

#3 — I love to help people live in the present moment

As my mentor likes to say, it’s only when caught between a rock and a hard place that you understand life is all about the present moment.

Here’s an example from this beautiful article in The New Yorker: “one resident, a retiree who was undergoing treatment for cancer, told that the rising costs had forced him to choose between buying medication and paying his rent.”

He didn’t have to thank me for this one; it’s in the rent.

Final words

Some say I’m destroying lives and the planet with my business.

That’s an extreme position.

But let’s assume it’s true for a minute. Even then, everything’s all right. Not because I don’t care (I don’t), but because I took Warren’s giving pledge.

I pledged 99% of my wealth to charity. And you can trust me on this: it’s family managed — my family, and it’s tax-deductible.

Smillew is a soon-to-be-retired managing partner at Satiricalstone.

His love story with money always was an inspiration for his colleagues, from the toddler daycare center to this day.

As a baby, he only wanted to wear frog suit onesies. “Look how much he loves his frogskins,” used to say his parents. In his preschool, he was the only one to eat cabbage and clams. Rhinos were his favorite animals in first grade. Soon enough, dosh, dough, and moola became his best friends.

And the rest is history.

This article is satirical. Thanks for reading. Read the New Yorker article. It’s edifying. Here’s the link again.

With thanks to Sarah Cords and her (serious) piece for the inspiration.