Workin' Private Equity
Goin' down, down, down.
"Most private-equity firms are about hard work, not just financial engineering."
—David Rubenstein, founding partner of the Carlyle Group, interviewed in the Wall Street Journal, Aug. 24
Whatever possessed me to go into private equity? I was so naive. I thought it was just about financial engineering. That certainly is the impression they give you in the media. But turns out that it's actually about hard work! Who'd a thunk it? Here we are in the last week of summer, and everybody is in the Hamptons or in some villa in Tuscany. Everyone, that is, except for me, Private-Equity Man. I'm working hard. In fact, I'm here in a coal mine. It's about 110 down here, you can't see a darned thing, and everything from my lungs to my blue pinstripe suit is drenched in sweat and covered with coal dust.
People assume that when a private-equity firm like ours buys a coal company, it's just some kind of "tragedy play," and that as soon as people forget about the recent accident and CNN moves on, we can turn around and sell the blasted thing. And OK, sure, that's the strategy. But while we own the company, we've got to keep it running, and that means digging coal. It's a hot, dirty, dangerous job, and damn it, it ought to be well-paid. I worked it out the other day at about $25,000 an hour. Twenty-five thousand an hour! And they call us greedy. I'd like to see some of those critics down here mining coal for just $25,000 an hour.
David Rubenstein, the Carlyle guy, put it so well in that Murdoch rag ... what's it called again? Oh yeah: the Wall Street Journal. He said: Most private-equity firms are about hard work, not just financial engineering.
The days are long gone when you could support a family of four, half a dozen homes, a private jet, a boat or two, and two ex-wives in minimally lavish style with just one $25,000-an-hour paycheck. We all work two or even three of these jobs. When my shift at the coal mine is over, I shower up and head over to Buns, the fast food franchise we acquired the other day. We'll split the company into two companies, one that produces the buns and another that produces the higher-margin patties. Then we'll take both companies public and convert the bun firm into an employee-owned thingy, for the tax break. Finally, we'll re-privatize the patties, then merge the two firms back together and sell the whole thing to the Chinese. We figure we'll be in and out in less than a year. But meanwhile, who is there on the midnight shift flipping burgers (not to mention pouring grease into huge vats, slapping on the "We Do Not Use Trans-Fats" label, and dragging them out back to be recycled)? You got it—Private-Equity Man.
I mean, let's be honest: There are jobs so demeaning that normal Americans just won't do them anymore. If partners in private-equity firms don't do them, who will?
The media all leaped on poor Steve Schwartzman for that birthday party he threw for himself. None of them bothered to report how Steve paid for this party. This guy spent weeks washing dishes at the Waldorf. Not many folks would do that for someone. Steve didn't advertise it. He didn't demand a lot of credit. He's not that kind of guy. Hard work is worth it when you're doing it for someone you love. The guy just loves himself to bits.
So now they want to take away our special tax break and tax our income like everybody else's. Let's get real. Last year I made $300 million and paid 15 percent of that in taxes, leaving me with $255 million. If I had to pay 35 percent like these other suckers, I would only have $195 million when the smoke cleared. If Uncle Sam thinks that I am going to keep spending my weekends emptying bed pans at the nursing home for just $195 million a year, it had better think again.
It's a crime the way private equity is underappreciated in this country. OK, well, maybe it's not a crime. A crime would be insider trading ahead of an IPO announcement. Yes, I was surprised to learn this, too. You could have knocked me over with a feather when they told me. I had no idea. (Can you believe the SEC fell for this line?) But then, I don't know much about financial engineering. My thing is hard work. "Tote that barge! Lift that bale! You gets a little stock tip and you lands in jail. ..." Ain't it the truth.
Michael Kinsley is a columnist for the Washington Post and the founding editor of Slate.
Photograph of coal miner by Getty Images.