What is private equity?

And there’s been a lot of talk in the press these days about private equity and all of the excesses that allegedly . . . In fact, I think a pretty good case could be made that private equity investments contribute importantly to the economy. Let me tell you why. When we buy a business, we don’t buy businesses that are overvalued by definition. We buy businesses that are undervalued. And why are they undervalued? Well technically they haven’t been doing as well as others in the industry have done. So in those cases, we’re very different than many public companies. A public company’s CEO today is under extraordinary short-term pressure. You’ve got the market analysts wanting quarter-by-quarter earnings guidance. And if the poor guy misses his earnings by a few pennies per share, then stock falls. And it creates a kind of a “short-termitis” disease where important decisions for the long term are often set aside in favor of the short term. Well in our business, we’re not terribly interested in the short term. We’re interested in what the businesses are going to be worth four, five, ten years ago when we’re out selling. And the only reason they’re gonna be worth a lot more today is if they’ve been fixed and they’re growing. So if you look at the typical private equity investment we make – and I suspect others are very much like that – to be sure they do some restructuring early on and reduce unnecessary costs. But the vast majority of the time we invest much more in ________ in the future, in development, in research; because what we’re interested in is doing those things that are going to make the companies five years from now go faster so they’ll be worth more than what we paid for them. So I don’t think it’s too fanciful to make the case that many private equity investors improve productivity in this country, improve countries, and provide jobs. Recorded On: 7/26/07

Private equity as a cure for "short-termitis."

LinkedIn meets Tinder in this mindful networking app

Swipe right to make the connections that could change your career.

Getty Images
Sponsored
Swipe right. Match. Meet over coffee or set up a call.

No, we aren't talking about Tinder. Introducing Shapr, a free app that helps people with synergistic professional goals and skill sets easily meet and collaborate.

Keep reading Show less

How KGB founder Iron Felix justified terror and mass executions

The legacy of Felix Dzerzhinsky, who led Soviet secret police in the "Red Terror," still confounds Russia.

Getty Images
Politics & Current Affairs
  • Felix Dzerzhinsky led the Cheka, Soviet Union's first secret police.
  • The Cheka was infamous for executing thousands during the Red Terror of 1918.
  • The Cheka later became the KGB, the spy organization where Russia's President Putin served for years.
Keep reading Show less

A world map of Virgin Mary apparitions

She met mere mortals with and without the Vatican's approval.

Strange Maps
  • For centuries, the Virgin Mary has appeared to the faithful, requesting devotion and promising comfort.
  • These maps show the geography of Marian apparitions – the handful approved by the Vatican, and many others.
  • Historically, Europe is where most apparitions have been reported, but the U.S. is pretty fertile ground too.
Keep reading Show less

Brain study finds circuits that may help you keep your cool

Research by neuroscientists at MIT's Picower Institute for Learning and Memory helps explain how the brain regulates arousal.

Photo by CHARLY TRIBALLEAU / AFP/ Getty Images
Mind & Brain

MIT News

The big day has come: You are taking your road test to get your driver's license. As you start your mom's car with a stern-faced evaluator in the passenger seat, you know you'll need to be alert but not so excited that you make mistakes. Even if you are simultaneously sleep-deprived and full of nervous energy, you need your brain to moderate your level of arousal so that you do your best.

Keep reading Show less