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Comment by senordevnyc | Hacker News Reader

I feel the same, but I do wonder sometimes if that’s true. Are there PE firms out there quietly operating great businesses that they’ve acquired? If not, why not? Surely in the long run that’s a better ROI, and private capital should be able to take a longer view, right?

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For every one public headline failure there are hundreds of profitable executions that never get mentioned.

> profitable executions

I can't tell if that's good or bad /s

I think the general rule is more like they expect only 1 in 4 to work out, but that 1 works out good enough for the rest.

Depends on the firm but even when we say 1 out of 4 it is not the case that the other 3 are wild failures.

> Surely in the long run…

And that's the rub. PE is all about short term ROI at any price. Their business model doesn't take product superiority or brand loyalty into account. If a widget can be made cheaper, you do it, damn the collateral damage.

In reality that absolutely is part of the equation though.

Maybe your equation. Not theirs.

You would be surprised most of PE is not the evil enterprise it is characterized as.

What do we think of Apollo Global Management?

OK, but that doesn't answer why? Why is PE about short term ROI at any price? Is it really true that the maximum long-term ROI is by doing it this way? I'm skeptical, and people's intuitions based on their observations isn't very useful.

Maybe this is like the toupee fallacy, and we only pay attention to the ones with this kind of strip mining approach, and we don't see the majority where they run the businesses to maximize ROI in the long run?

The longer term of continuing to buy businesses, load them with debt, strip them of value, and move on to the next, promises much better ROI than focussing on a single business.

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