Hello the Internet, and welcome to season two ninety three, episode one of Dirdlyshi Guys.
Say, production of My Heart Radio.
This is a podcast where we take a deep dive into america shared consciousness.
And it is Tuesday, June.
Twenty seventh, twenty twenty three, six two seven, twenty twenty three.
You know what it means. Sorry, my computer is crashing. Oh wral doesn't matter. They can't stop us because six twenty seven. Oh you better. I don't even know what I was gonna where I was gonna pivot to, but anyways, National Orange Blossom Day, National Sunglasses Day, International Pineapple Day, National PTSD Awareness Day, Micro Small and Medium Enterprise of Game, National Onion Day, National Atype Testing, and National ice Cream Cake Day. There's a lot of days today. We got them all.
We got two of my favorites fragrances. You know, orange blossom. I've got some orange blossom like candles, life blossom tea, oh honey, and then onion onion tea.
Yeah, Onion's gonna candles that like that onion perfume that you have is right high watering, like you just like get a little misty. Could you imagine if there was a thing where like you were just fucking emitting the ship that makes your eyes water from onions, like, like, Yo, what the fuck is that actually cheering up near you?
Well, my name is Jack O'Brien ak on we on we on we on we I swear to you that I know this word man on we on we on we on we I know how to speak. I promise you I can. That is courtesy of a c w GB O on the discord making fun of me, humiliating me for a mispronouncing on we as ny and you I you I anyway, I I'm thrilled to be joined as always by my co host mister Miles Gray.
Miles prey K.
I'm a bitch, I'm in Orcas thinking y'all just stop my Yorca. I'm a sinner, I'm a well I'm gonna hit you with my tail, Okay. Shout out to Paul Garaventa Peache up in It, who found this on the Twitter.
It's funny. I love when people find things that are like, Yo, listen to AKA, they don't even listen to show. But these people don't know what you wrote is an AKA And that was from Connor Daily on Twitter. But yeah, hell yeah, Connor, aren't they aren't the activities spreading of the Orcas? Yeah, I think there was another one where they were like in like near the British Isles or something there. I called the British Isles like I'm an old explorer. Yeah, I think I read about a new one.
I don't know what it means for how far the message has spread from White Gladys.
Yes, but north of Scotland they say, damn, they say that again, this could be like a slight thing where now like media is like being like this is this is a new thing or attack spreading like wildflyre because I said quote it appears to be leap frogging across oceans. Well, they're fucking have like cell coverage out there. How would it be leap frogging.
They got that five gjack or maybe whales swim that far that fast.
Or maybe orcas just know how to stay on code. Yeah, that's right.
Anyways, Miles, this is a very special episode. Our guest today is an expert author of a book that I will just say explained a lot, explained everything about how modern America operates in a lot of aspects.
And you'll you'll even hear me admit the beginning, I'm like I would, I was going around a lot of my adult life vaguely understanding what we're talking about, and then but hearing it act properly and like reading it, have it be properly articulated by someone who's like looking at it from a legal standpoint, you're like, oh, yeah, yo, that's fucking terrible. I mean, like I knew that broadly, but this is it gives it so much texture in a way that Yeah.
But it might seem at first like a little depressing because it's like it's giving you really good texture on like why things are bad in certain ways. But I think ultimately it's kind of hopeful because it at least gives you an understanding of how things are actually operating. So we're going to talk to our expert guest, Brendan Blue, for a couple acts here for like the next forty minutes. We'll come back and close things out after that. So we will talk to you guys in a bit.
Just a caveat I normally, I just I don't speak to the Feds normally, so please don't. I don't want you guys writing in about how I made Miles do it.
I said, it's a It's always been fine for me. Come along, friend, let's talk to the Fed.
All right, Miles.
We are thrilled to be joined in our third seat by a federal prosecutor who served as special counsel at the Department of Justice. He is the author of the book Plunder, which he is here to talk to us about today. It is a hugely compelling, infuriating read about an industry I knew very little about, so Brendan, first of all, welcome, Thank you for joining us. Thank you
so much for having me. So I just want to I want to go as long as I can talking about this without mentioning the name of the industry that your book is about, just because I feel like when I hear the two words that are the name of the industry, like.
My brain just goes to sleep.
Because it's also like the name that I've heard people who I like went to school with be like, oh, well I do some things and and I'm just like, okay, I don't I don't know what that's cool. It's right, it's so divorced from reality and like anything that makes sense to me, And maybe that's by design. I don't know, but just some facts real quick. So, these companies are
massive and invisible in a lot of cases. You mentioned that they would be two of them would be the third and fourth biggest employers of people in the country behind Amazon and Walmart if they like admitted that they existed.
Or owned these entities, right one.
This industry helps explain why ambulances are aren't free. Ambulances used to be free. Like you have a quote that is very close to some things we've been saying on our show, Like anecdotally, it feels like everything's getting a little worse. Our products are lower equality, our stores are understaffed. And this book, more than anything I've read recently, really helped me make sense of why that is or how
that's happening. And then there's also the list of companies that this industry took over and then those companies declared
bankruptcy that I just want to read through really quickly. Like, so we've got Jay Crew, Neiman, Marcus Toys, r us Sears, twenty four Hour Fitness, Aeropostyle, American Apparel, Brookstone, Player's David's Bridle, dead Spin, Jimberrey Hertz, KB Toys, Linen's and Things, Mattress Firm, nine West, Payless Shoes, Radio shack Shop, co sports authority, true religion, friendlies, friendlies, Yes, And I just so I had just kind of taken it for granted that those places,
along with the like mom and pop stores like just no longer needed to exist because Amazon or something you know like that. It was just like Walmart and Amazon coming in and out dueling the mid size guys with scale. But a lot of those companies still deliver on the central premise of capitalism, of like the delivering value to people's lives and getting paid for it. And like, so this helped me fill in a bank a blank that like a lot of these companies are actually getting killed
off by the science killer that is private equity. Private equity, folks said it all right again, a word that has the magical power to turn my brain off.
But it's one of those words too, like it turns my brain off because it sounds like when I hear it so much that I'm embarrassed to admit how little I know about it. And you're like, yeah, private equity,
I know, like I hear that all the time. And if someone asked me to start explaining it, I would probably start like sounding like some maga Republican trying to explain like how the insurrection was an inside job or like the dog, like, well, the thing you gotta understand is like the Clinton socks case and documents, and you're like, whoa, wait,
huh that I'm that. I think it's also that's sort of like the brilliant part of this industry is that it so many of us are blissfully ignorant of its power while it is able to just run rampant.
Yeah, but let's talk scale first of all, Like these are massive companies, as you mentioned, third and fourth biggest employers in the country.
Yeah, so it's kind of amazing how big private equity firms are. And I should say at the outset, of course, that I'm speaking purely personally and not necessarily reflecting the views of my employer. So let's just talk numbers here. As you mentioned the some leading private equity firms, if they were considered with their portfolio companies, would be the third, fourth, and fifth largest companies in America after just Amazon and Walmart.
In terms of what they're buying. Private equity firms spent a little over trillion dollars buying companies last year and one point two trillion dollars the year before. Just for a sense of perspective, the entire US GDP is about twenty five trillion dollars, so it's not an insubstantial part of the entire US economy. And in terms of where they're spreading out, it's just about every industry you name,
you can think of. You know, you already named, you know, ambulances, you named a lot of retail stores and so forth. But whether we're talking about healthcare, housing, prisons, education, municipal services.
You know.
Literally the font of my book was owned and licensed by a private equity portfolio company, so it really surrounds you.
Yeah, I guess my assumption and maybe maybe the reason that like the the ideas behind private equity like didn't cohere, didn't like stick my brain is that like it doesn't they don't take over, And I guess the premise is right that they take over a company and they figure out ways to make the company better and more profitable, like as this, you know, in and of itself, this company now delivers better value to the customers that serves at a cheaper price, but instead of doing that, they
are really seem to be doing something between that and stripping it for parts and like getting them to pay them fees and putting them out of business in a way that is legally structured so that they don't face any of the consequences.
Yeah, you know, I think, you know, Miles kind of framed it right, because it's something that I felt starting out of this project. Is private equity is a word that or a term that I think we've all heard, but like, if we're honest, like we usually don't actually know what it means. And I'll confess I didn't know what it meant until about a third of the way through this project. So I don't think anybody should feel
embarrassed about that. So just taking a step back, So what is private equity and how does this business model work? So private equity firms take a little bit of their own money, some investor money, and a whole lot of borrowed money to buy up companies, as you were saying, Jack, and then what they do is they sort of enact these operational or financial changes with the aim of selling
it for a profit a few years later. So it's a very simple idea but the problem that we've got is our laws and regulations are structured in a way that really leads to a lot of bad outcomes. So, for instance, private equity firms typically just own companies for a few years, so they have a very short term perspective. And when they own them, they tend to load the companies up with a lot of debt, and they tend
to extract a lot of fees. And then third, and this is the part that interests me the most is a lawyer is they're extremely good at insulating themselves from legal liability for the consequences of their actions. So when you've got those three problems, it leads to all the things that we're talking about here. Short term, a lot of debt, insulation from responsibility. It means that private equity firms often profit, but the companies, the customers, and the employees often don't.
Yeah, and it like how much is that? Because like that that.
Is something even as you are describing it, like just this idea of adding hidden fees to these companies and extracting fees, like using them like atm machines, and like doing things that are just like short term value grabs.
As much as possible or just like money grabs like that seems to be like you talk about how these are the new cool places to work in the finance industry, and it like that logic of like no longer think about long term health and just like kind of cynically like smashing the company until smashing thing you are doing business with until it gives you money. Like that, it feels like that we're seeing that kind of everywhere, like when we talked about like the new HBO Max changing
its name to Max and like that. But like his main insight is like just cut budgets like that. That's the other thing that just keeps coming up over and over again is like their big insight, if you can call it, that is just like cut budgets, don't don't spend any money so that we can turn things around really quickly, and that that ends with them like being
understaffed during like they they cut doctors. Like what one of one of the private equity firms that like bought an ER was in some way in charge of an R was like cutting staff during the COVID pandemic. Like it's just they only have like three answers and they're all just short term value graps.
Right, yeah, well, let me give an example of sort of how this sometimes works, it works in practice, and then maybe I can address I think what your broader point is here. So, you know, one of the examples that I always turned to is Carlisle's acquisition of HCR Manor Care, which was this very large nursing home chain
in the United States. So they bought it up primarily with death, executed a lot of tactics that you were sort of alluding to, like what's called a sale lease back, where they required Manor Care to sell all of its buildings and offices and then lease it back to itself, which kind of gives it a quick hit of cash, but means that now they sort of have a lease on something that they used to own. They extracted transaction fees and management fees, which were essentially fees for the
privilege of being owned by the private equity firm. And you know, understandably, you know, when you start extracting money and disinvesting in the company, health code violet, health code complaints spike. You know, residents start complaining about you know, rodents and roaches and things like that. Eventually somebody dies in one of the nursing homes. But when their family sues for wrongful death, Carlisle's able to get the case against it dismissed by arguing that it is not the
technical owner of the nursing home chain. Instead, it merely advises a series of funds whose limited partners, through several shell companies, own the nursing home chain, and that's enough to get the case against it dismissed. And that's, you know, sort of the a typical example or I shouldn't say typical, but a frequent enough example of how you can have
a bad consequence with this business model. Now, if I can get to it, I think what your broader point is, which is, I think that there's a feeling in this economy that, you know, there's sort of a short term perspective, that there's a sort of idea of extraction rather than investment and all these things. And I think that there are to broad macro things happening in our economy that can account for that, and sort of talking about the rise of the ideology of shareholder supremacy.
And things like that.
But one thing that I always try to hit home is that private equity actually is new and is different, and it's something sort of unique and separate from the rest of the financial industry, which is not to say that the rest of the financial industry is pure and
clean and you know, perfect, but it's something distinct. And I do that because I think if we sort of throw up our hands and say that the entire sort of economy is broken, the nature of capitalism has failed and so forth, it can lead to a certain level of you know, sort of nihilism. Whereas if we say we've got the specific problem with this private equity business model, I think it's something that we can actually fix.
Right.
Yeah, I definitely felt more knowledgeable and therefore hopeful following reading your book than I did before, because, yeah, it doesn't feel necessarily like it is everything having to do with capitalism. It feels like capitalism has this horrible version of like capitalism can sor that is just you know, invading and being able to spread, and it's silent and so and kind of invisible to a lot of people, and so it's kind of out of control.
I think to that point right of being able to diagnose the issues, because I think broadly we see the issues of capitalism in this form of hypercapitalism we're in. But it's one thing to be able to say, okay, now, let's be able to an or be able to diagnose these specific causes because before, like to Jack's point, I was on a like just sort of this ignorant path of being like I don't know, Amazon like ruined all these like small places, and like I don't know, maybe
people aren't buying toys anymore. That's what I Toys r Us went under. And it's like, no, it's because there is a very it's like a very proven method of making money like this, and it's and it's we're incentivizing it because people are also on top of this, Like let's like I don't want to lose sight of the amount of money that these people make sort of at out our own expense, at the spens of these people that are in these you know, nursing homes or in
prison or working for certain countries or certain companies. Sorry, but you're like you appointed to like a really interesting statistic because just to give people an idea of how wealthy the people that are involved in the pe pirate equity or whatever you want to call it, to get people's ears, like up a little bit like what's the like, what's the sort of disparity and how much money these people make versus something like we can wrap our heads
around like you know, like professional athletes. Yeah.
So one of the statistics that really grab my attention is that there are now more private equity managers who make over one hundred million dollars a year than all other financial executives, investment bankers, and professional athletes combined. So this tiny part of the industry is really dominant. I mean, you know, to go back to a point I think you were making earlier jack about how private equity, even though this sort of obscure sounding thing is, is sort
of the hot place to be in finance. The head of Blackstone, which is one of the leading private equity firms, last year made I think ten times as much as the CEO of Goldman's Axe, and I don't think the CEO of Goldman's Axe is terribly underpaid. So, you know, these are areas where you know, literally you have folks whose net worth is the GDP of you know, some small country.
Right, yeah, yeah, you taught you describe some parties that they're throwing in the book, and it's.
And the whole head of Goldman is the DJ. That's how these guys are Like that dude, I have him here to be the DJ, not to be a fun guest.
I think one of the parties Stephen Schwartzman's seventieth birthday, he's that he's one of the heads of Blackstone. Had I think at least one or two Chinese temples built in his honor on his property in Florida, had sort of dancers, hired the cast of Jersey Boys boys brought in and had Gwen Stefani sing him Happy Birthday personally. So you know, these folks have a fair amount of money to work with, and he's got taste.
You know, he's no doubt fan is like I love Tragic Kingdom. How much money do I got to pay for you and Tony to get back together the basis I love that that don't speak video. The other thing too, is like again we talk about because everything is typically that we see, it's always praying on the weakest in our society, whether it's like draconian legislation or like the
kinds of consumers these companies go after. I feel like it's it's like almost guaranteed that the people that are on the shit end of the deal, are working people or people who have no options. Can you talk about like how specifically, like how this works too, because there is a methodology to getting as much money as they can out of this because they know they have a sort of captive consumer base.
Yeah, I think your phrase captive consumer base is exactly right, because you know, when I started out on this project, I sort of assumed that private equity firms would go after industries for wealthy people, because you know, that's where the money is. But I was surprised by how many industries or businesses private equity firms bought up that targeted not the rich, but the poor and working class. You know, whether we're talking about we sort of alluded to this earlier.
You know, prison services, mobile homes, for profit colleges, various parts of the healthcare industry that target sort of lower income and working class families. And I think the reason for that buy and large is working class people have fewer alternatives. So when you're talking about prison services, you can lower the quality of care, or when you're talking about mobile homes, you can raise the cost of the lot.
At least because folks literally don't have an alternative and don't have another option.
Yeah, you taught you mentioned elsewhere in the book about how like why ers are attractive to them, and it's you know, the inelasticity of demand and the fact that nobody really has has much say over where they are when they get shot or have a heart attack, and so they're like, bingo, there's these this consumer base isn't going anywhere, and so we can function up as bad as we want to, essentially, and we'll we'll be able to spend very little and continue extracting money from people.
It kind of just reminds me of just like you were saying, like ambulances used to be free, that to the point now we have like it's now in our consciousness. Oh no, no, no, called ambulance. Yeah, don't do that. Don't do that. And you're like, oh, that's the invisible hand of private equity right there, just putting that into our minds.
It's really interesting, you know, ambulances specifically, I think for folks from our generation, like we didn't even really realize that until pretty recently. You know, ambulances used to be largely owned by municipalities. It wasn't until the nineteen nineties and two thousands that you started having this privatization movement, and private equity firms have gotten very active in ambulances.
One of the really.
Interesting things is it doesn't seem like they've done a terribly great job managing them. There was a really interesting expos in New York Times about them, about how sort of a disproportionate number of ambulance companies owned by pe firms, we're going bankrupt and going out of business and so forth.
But to take one step back, I mean, I think emergency rooms are the really interesting story because two private equity firms own the leading physician staffing companies for emergency rooms, and according to research by some folks at Yale, really the business model of these staffing companies is essentially to staff the doctors at these emergency rooms in a way strategically so that people pay surprise out of network bills.
So you go to a hospital, you think it's in your network for your insurer, but you're actually treated by a doctor who works for a different hospital and as a result, have to paint out of network bill.
So yeah, it's an area, Yeah, go ahead, it's just trick.
It's adding confusion, adding complexity to the system so that they can extract fees without delivering any value whatsoever. Like the really seems to be Sorry, let's take a quick break and I yeah, I want to kind of come back and just look further at the track record because it really, like the number of examples you give really suggests this is the model. Like this is what they do.
They come in, they make it worse. They somehow get so rich that they can build Chinese temples at their birthday party.
With Gwen Stefani.
Yes, with Gwen Stefani, And we're back. So that that story about how their insight into staffing was to trick people into using doctors outside of their network is just one of the stories in your book that is incredibly infuriating. There's also the worst hacking disaster in US history.
Do you want to talk.
About how that came about? In partnershi ship with private equity.
Yeah, so two private equity firms bought up the tech company Solar Winds, which provides a lot of sort of like boring it and security services to companies. Looking through the documents in Solar Winds public filings, it appears that after it was bought by a private equity firm. Staffing f company was cut, and, at least according to their public disclosures, a lot of their engineering work was moved overseas,
including to, among other countries, Belarus, which is great. Yeah in the news recently.
Yeah, oh Lukashenko, great guy.
Yeah yeah yeah. Whether that's causal or not, Ultimately, Solar Winds suffered what one government official called the greatest hack in United States history. I believe the Department of Defense, Treasury, State Justice, and others were all compromised, and at least it appears on sort of initial reporting that the leaders of the private equity firms may have dump stock in advance of the public disclosure of that. Now there's an
investigation going on to that at the SEC. I don't know what the outcome of it was, but it was another example of you know, you have this industry, you know sort of it security that really needs to be thinking in terms of years and really decades for how to make sure that you've got to secure a product when you're working with the government and they're being bought or controlled by private equity firms that are trying to
make a profit. You know, in a matter of months or a manner of years, and it's just a very different perspective for how to run these businesses.
Yeah, yeah, it's right.
The I mean similar to the you know, getting involved in er staffing. They also took over the operation of nine to one one calls at one point, like just all these things that Yeah, it just when you read stories of businesses that become successful over the over a long period of time, like it's really about fixating on like how to do the one thing that they do
for customers, like better than anyone else. And time and time again, it seems like when these private equity firms come in, like it's just like that is the third or fourth thing that they're interested and the most interesting thing is delivering value for themselves and get yeah, financial success.
It's interesting, you know, you look at the biographies of folks that run private equity firms and it's you know, it's not a critique of them, it's not a surprise, but you know, it's generally folks that do not have experience in sales or it or engineering or marketing or logistics.
It's folks with a financial background, and so when they approach these companies, typically you know, not always, but typically, you know, what they're trying to make are essentially sort of financial changes to these businesses that's going to you know, get a fairly quick return.
You know.
You look at the diversity of what some of these private equity firms buy into. You know, it's a plastic logistics company, it's a municipal water service, and it's the dating app bumble, you know, and it's like one person doesn't really have the expertise to run all those different kinds of companies.
Yeah, they just know how to make line go up right, And it's sort of like, oh wait, what does that mean. It's like, well, we're not gonna have enough nurses. I don't know, man. But then when I look at these projections, I like what I'm seeing, let's do that and figuring out afterwards. What's really difficult is like we hear about
all this. It is so apparent to everyone, you know, Like I think at this point even everyone listening is like, right, okay, okay, pirate equity bad or like not not necessarily out here
for everyone's best interest. But then you think about like a lot of the examples that you give in your book, like it's also very very hard to hold these fucking people to account because of the nature of like all of the advantages that these companies have, whether it's through lobbying, whether it's through like a revolving door of entities that have been in government that end up there and then end up lobbying people they already know on the hill
and things like that, or just the amount of complex like like hYP like whack a mole of who owns this thing that all come together because I think a lot of the times, especially when we talk about these issues, like on our show, we're like, well, what's the problem? Why can't it why can't it stop? Right? Like it's we get it. We're seeing it. Like the cost is people losing their lives, the cost is people going bankrupt,
the cost is untold suffering. And then you know, to be real, it's like, hey man, we're looking at you the FEDS. What's going on? Uh? And I know you've said this too, like it's the federal Like the DOJ is not the only entity that can go after this, but like, how how do you explain Like when people talk about the frustration of like well then what like something's out of give where where will it give it will be Yeah.
Yeah, it's a huge issue because you know, as you started off, you know, private equity I think has been uniquely.
Successful in lobbying.
You know, if you look at who private equity firms are hired, its former Secretaries of State, Treasury, Defense, two former Speakers of the House, to a vice president, former chair people of the FCC and SEC. I mean, it's a really deep bench, and that means that they have just been extraordinarily successful at sort of advancing their legislative
and regulatory agenda. I think the other challenge that we've got, and I think you hit on this exactly right, is it's really hard for ordinary people to hold private equity firms accountable. We have this doctrine called corporate veil piercing, which means that it's very hard to hold an investor responsible for the actions of the company that they invest in.
That makes sense for you and me, where we've got our little Vanguard account and have like one share of stock and a company, you know, we don't really have much to say over them. That doctrine doesn't necessarily make sense for a private equity firm that has a controlling stake in these businesses. And can essentially tell them what to do. And then lastly, I mean, I think you hit the point exactly right, which is a lot of times it's just hard to even figure out who owns
what and who to sue. I talked with folks that sue nursing homes on behalf of families whose you know, parents died or were injured or whatever it happens to be, and they're telling me, you know, look, these guys have these really broke organizational structures where there are shifting assets across multiple shell companies and you know, sort of across different shells, and it's really hard to figure out who is responsible and who has the assets to recover. So it's a really tough problem.
Yeah, and something that's becoming normal too, Like other industries are like you know, what kind of works is if you kind of spread it all around and no one knows how to get like seek damages. Right.
Yeah, you tell us one really memorable story about Ashford, which is, you know, a Franciscan University of the Prairies is what it's called, but it's like a really small college run by nuns, and then it gets taken over and turned into Ashford University which becomes this you know, Phoenix University like adjacent thing, and it's really this like
outraging thing. And then you also mentioned that like the private equity firm that now runs it is Warburg Pinkus, which is run by Obama's former Treasury Secrety Secretary Tim Geitner. And it's just like you just see that over and over again, like the amount of people from positions of power who like know how things work better than anybody.
You know, most people listening to this and like know how things really work behind the scenes, are are going into private equity and it just really feels like a eluding, a plundering that's happening.
I yeah, I heard this third hand, so I don't know how true it is. But there was a senior government official who ended up doing some work for a private equity firm, and somebody was chiding them and they said, look, you know, it's not who's working for private equity, it's who isn't working for private equity right now. So it's it's pretty extraordinary the breadth of their success.
Right And just like the greed, how it compounds itself, you know, because now it's like it seems like you're almost incentivized to get into private equity because of how little repercussions people face. And I'm curious, like when you have a case like like the ones we've talked about, when it's like, yeah, man, like they own this company and they basically started throttling back their level of care which led to someone losing their life. Okay, well, then
tell me who owns this and that person's responsible. Like when these cases get like dismissedter things, is that the cynical part of like I think the cynical shorthand version of someone who believes in how like cronyism works and things like that, believe that like, oh, the judges are in on it too. Everybody's in on this, that's why
it's happening. But I think you've also raised the point that it's not necessarily like like there's there's a huge barrier to get over, which is informing people of how this even works too, and like having enough public pressure like around this idea or this industry of private equity that gets people to sort of be on the same page to understand the issues.
Yeah, you know, I think one of the challenges that we've got is exactly what you're saying is education. And that's not just educating you know, sort of your listeners or you know people and you know, you know people that are just generally interested in this topic. It's also informing judges, people in government, you know, what private equity
is and what the practical consequences are. One of the challenges that I think people who are critical of the private equity business model have is, you know, private equity firms have an enormous amount of money to lobby and to litigate their issues, and the other side, you know, just has a fraction to do the same thing. You know, one of the cases was over this obscure sort of retirement law issue, and at stake was like four point five million dollars for the private equity firm. It was
essentially a rounding error. They spent ten years litigating the case in order not to have to pay out because they have the resources to do it, and they wanted to set the precedent that they could. And so, you know, we got to inform people, and we've also got to figure out how to sort of empower activists and folks that want to work on this stuff so that they can do this work for the long.
Term, right, can we can we just list some of the industries where people might have seen their work, because it's just going back to that initial statement about like we have an anecdotally everyone seems to have a feeling that things are getting worse, but you know, it's kind of hard to we don't have much to compare it to.
But they're you know, there's presence in the dental industry, veterinary I think you mentioned grocery stores at one point that yea, you know, they're one of the reasons they're like too grocery stores in the in the country that didn't used to be the case.
Yeah, yeah, So private equity is you know, I don't want to overstate the case, but they they're active in you know, most most every industry that you can think of, whether you're talking about sort of retail things we were talking about toys, r US and stuff earlier, or grocery stores. As you say, when we're talking about healthcare, it's not
just emergency rooms and ambulances. It's ordinary sort of obgyn and urgent care clinics buying up literal insurance companies, you know, life insurance claims, worker compensation companies to things like manufacturing infrastructure. In some places, private equity firms literally bought up the municipal water services that you might use to drink, you know, water from your tap.
How'd that work out for them?
Unfortunately, it didn't work out terribly well. So the private equity firm operated with as a joint venture ultimately dramatically raised the price for users to such an extent that local reporters were saying that people quote unquote became water nazis, would time their family members in the shower and would only buy flowers that didn't require a lot of water. So, unfortunately, that's a contract that those two cities are now going to have to sit with for the next thirty years
or so because of how is how is negotiated. But to the extent you're interested in these things and you're concerned about a business, you know, private equity firms rarely advertise their ownership. So what you should do is google the company name and just add private equity and see what comes up.
Yeah, chances are it's almost like what industries aren't they involved in? It might be an easier question. Yeah, it's like, oh, yeah, they're not behind the push for medicare for all. I'll tell you that they don't have they don't have a dog in that fight unless it's on the other side of it.
Yeah, I don't think they're active on that one.
Yeah. Interesting, how do you talk about it?
Like, I've there's been in a couple of social settings since reading your book and just been like, yeah, it's crazy, but they unable to like really fully you know, put into words because it's the problems like so big and so acute. But like, how do you usually introduce the idea of your book to people, Like when you're just like talking to them at a cocktail party or something.
I always explain the basic business model, and I say that private equity is going to transform the country in this decade the way that big tech did in the last decade and subprime lenders did in the decade before that. Yeah, And I say, what, the three basic problems are short termism, a lot of dead and fees, and insulation from liability. And if we can fix those three things, we can basically solve the problem.
Yeah. And that's kind of another thing I want to solving the problem because again, a lot of the times it's easy to fall into the nihilism of being like, well this is it, Like I don't know, like I don't even know, we don't even know who to sue. You've talked about how like again, activists have helped to like you know, offset or alleviate the cost of like phone calls from prisons, you know, like actually have made
headway there, and like that's a victory. What are some other like is what are some other specific areas where we are seeing some bit of the clwing back of the fuckery as it were.
So I I think the prison area is really encouraging. So, you know, private equity firms bought up prison phone companies, started charging extremely high rates for these short, fifteen minute calls. This was a many year effort to sort of make progress here. Ultimately, you know, they were able. Activists were able to get legislation passed in cities New York and San Francisco capping rates for phone calls, then passed state
legislation in Connecticut, and ultimately pass federal legislation. So they were really really effective working on this specific issue. Beyond that, there's been really good work on For instance, you know, we were talking about nursing homes. There's rulemaking going on right now at the Department of Health and Human Services to try to establish national standards from minimum staffing criteria
for nursing homes, which will be absolutely transformative. So I think when activists have chosen really specific issues where the effect on people is clear, I actually think that they've been really successful. You know, private equity firms have the money, but activists have the people on that, and I think they've shown that they've been actually able to get a lot done.
Right, So rather than being like when you're gonna pass the down with private equity bill, it's like about kind of getting a little more specific in a way that
connects to people. Because again, like like we're saying at the top, just saying the word it becomes nebulous and abstract and I'm like, I don't even know what name, yeah versus shouldn't there be a number, like a minimum number of staff in a nursing home so someone doesn't like like needlessly lose their life and be like yeah, yeah, yeah,
yah yeah yeah. That part But then again is there is there is there a similar thing that gets at the accountability part, because I think that's the part that really like frustrates me is how easily they can walk and hide behind being like I don't know, I don't own it. I just tell these funds what to do in the Malthain that that's that's where it ends. So I don't know where the buck stops. What are is there?
Like where can people put their energy in terms of like finding that part out or at least making that augmenting that movement a bit.
Yeah, No, I think that's a really good question. And you know you're talking about private equity being a boring term, like they're working to make it even more boring. A lot of the leading firms now I don't even call themselves private equity firms anymore. There are alternative asset managers, so be on the lookout for those.
Cool. Yeah, so interesting. So what is it where like it wears flannel and has a nosering and like has Doc Martins Like yeah, like the alternative rock movement, but all.
Asset management actually sort of inheriting a grunge style fund just kind of like being an all band in the nineties.
Exactly, so they you know, in terms of sort of the deeper sort of accountability issues. Obviously, Congress is one sort of avenue, and there's important legislation, you know, sort of being proposed there. But I actually think that there are a lot of levers of power here, whether you're talking about federal regulators like the SEC, Treasury, FED, and
so forth, but also states and localities. You know, we're talking about some of these tactics that I think can be harmful for companies in the long term, you know, sale lease backs, dividend recapitalizations. States could just simply say, you know, we're going to legislate to say, if the company's headquartered in our district, you know, in our jurisdiction, you can't do some of these tactics, or if you do them and the company goes bankrupt, the workers are
going to get paid first. And I actually think that there really is interest at the state level on this. But we've got to you know, folks need to draft up the legislation and there needs to be the push for it. I think that's where the real change is going to happen in the next few years.
Right towards the end of your book, you talk about different scenarios that the country could take, and some people financially think it's like Japan and the eighties and nineties like heading for a financial fall, and some people think it's like whymar Germany, and but you kind of say, there's also this hopeful possibility that it's like America at the turn of the twenty, like nineteen oh three, and you know, emphasize that we and really today don't recognize
how bad it was at that time and how like incremental the changes were. We just see, oh, in the earliest twentieth century, the New Deal happened, so must have been must have been good. There were Gatsby parties, and then the New Deal came through in response to how lavish the Gatsby parties were. But it was generations of people working on very specific changes, right, that got us out out of that very similar situation where it was just unregulated capital running roughshot over the country.
Yeah, the Gilded Age worked wonderfully for a select few people, but was a miserrating for you know, so many. Whether it was the movement to stop the labor movement to use the antixrust laws to actually break up labor unions but protect monopolies, the movement actually to rescind suffrage for working class people in New York and the institution of Jim Crow in the South, that was endorsed by the
New York Times. I think you said, right, yeah, yeah, the New York Times endorsed, yeah, rescinding suffrage for I think working class white men. So but you know, in some ways it was it was a politics or an economy that's very similar to ours. The trusts of the early twentieth century legally are very similar to how private equity firms work. And a century ago we managed to constrain the trust you know, we created the first you know, you know, the most robust anti trust laws. We created
the Federal Trade Commission. We passed labor laws, environmental laws, passed women's suffrage, and so forth. It was a time that was really really transformative for the country and ultimately, you know, sort of set the stage for sort of the greatest moment in American middle class history, you know, the nineteen forties and fifties. And so if we've done it once, we can do it again. We just need to have the patience and the will to do so.
Yeah.
Yeah, And a way to offset all the lobbying efforts, which I'm sure if the states start saying things like yeah, we're thinking about enacting some laws that would really constrain private equity. You're just going to start seeing as like, don't vote for this because we're going to leave your state and you're going to be broke, so don't even
think about it, and then off we go. And I think part of that is for people to really understand the threat that this sort of untethered greed operates and how it affects us in ways that are just so tangible, but yet we think are like again, like for me,
I was like, there's just so nebulous. I'm like, it's just part of this vast thing of all the money moving in one direction versus also very specific groups of people looking at it in this way, and we're just sort of experiencing the lack of investment on the other side. I wonder how many triangle shirtwaist fires it'll take for us to wake up out of this one, because I feel like we're averaging like one a day.
Yeah, it's really interesting. I mean you sort of look at the number of legal tragedies that are happening in private equity portfolio companies, and yet the private equity firms you know, are rarely held to come I will say just you know, as a as a workaday, you know, bureaucrat, I will say that, don't underestimate your power and influence
as a person outside of government. People inside a government listen to complaints, and you know, if you're saying this is a broken system, this is not working, it really empowers people in a bureaucracy to try it, you know, who want to do the right thing, to feel like they've got people on their side. So I felt that personally. I know others people do do too, So I I know that can be a somewhat frustrating thing to hear, but it really does make a difference for folks.
And yeah, just not having it happen quietly and visibly like that when when you just tell this story, it is the sort of story that people respond to. It is an all out war being wage on the lives of people who aren't extremely wealthy by people who are extremely, extremely wealthy. Like it's just it is that simple. It's they they are taking away comforts and you know, things that people rely on and getting rich.
Off of it.
It's pretty pretty straightforward. And I'm glad you told the story in your book. I'm hoping more, more and more people kind of continue to tell it. So and thanks for coming on and talking less about it.
And yeah, I got to say, normally I don't talk to the Feds, but this has been fantastic.
Well, thank you guys so much for the time. I really appreciate it.
Yeah, where can people well you remind us the name of the book and where people can read it and all that good stuff.
It's plunder private equities, plans to pillage America, and you can buy it anywhere you might buy a.
Book, perfect or Barnes and Noble also private equity. I think they might have been. Yeah. Yeah, Brendan Blue, thanks for coming on. Appreciate it, Thank you so much. All Right, that was our interview with Brendan Man. I learned a lot from this book.
I feel like, you know how, when I read a New Yorker article, I'll like reference it at least five times over the course of the next week, like this is its own for for U hos, Like this is all I'm going to be referencing from now on.
Wait, so is this going to push out coal gas study Havan syndrome. So those are just the those are the keepers, Those are the ones that those are like that try you and God of your mind. Yeah exactly, Yeah, those will not be usurped. But yeah, again, I think it's it's so helpful to like be able to be like that's why these certain things got shitty, yeah, you know, or like again like toy store.
The toy store really fucking did it for me.
Man.
That was the one where I was like, oh, yeah, there's no reason there shouldn't be like kids still yeah, I can speak kids really still fucking like toys, I can tell you that much. Now we just have the toy section of Target and there are no toy stores.
And I remember at the end of the Toys r us run, like going to Toys r Us to like for a kid's birthday party, get get a toy, and it was just wildly understaffed, and it looked and like it looked like Sears did when it was going out of business, you know, like they're the floors are kind of torn up, like think they're just like boxes of like palettes laying around because they just are totally understaffed.
And it makes total sense that they just you know, privact that these workers are lazy, right exactly, which is what I was yelling, but you know what, but that is the kind of shit older people was saying. Of course, they're like, I don't know what the hell happened here? These people are so lazy. And then you're like, no, it's being like sucked the life sucked out of it from the inside financially, and what you're seeing is like the husk of a once operating business.
Yeah, and this is the fact that this is like like a an epidemic that is across the entire economy, like more people are being asked to do more work or fewer people are being asked to do more work, like just everywhere, and so yeah, everybody's going to be like immiserated as you know, like I think he used to that word. And really, you know, both on the customer side and on the employee side, these companies absolutely
spread misery as part of their business model. Yeah, and become the billionaires.
That's the wild part too, is like you get you know, we talk about all the time how like human life gets reduced to like a number figure on a spreadsheet, and that's truly how these people are looking at it. When you have only guys who have finance brain being like, yeah, yeah, I can help operate a healthcare provider. Watch this snip snip snip, and then you know, we just continue to talk about the the ongoing movement of privatization and how
that's only going to lead to fucking disaster. Yeah. It also made me realize too, like when I was lobbying for for profit colleges, like how like the for profit college section is really wild. I mean that was the thing that help loosen my brain to be like I don't I can't be doing this, Like I can't be consulting like this at all. But then really, even then, the private equity part was a little bit abstract to me, sure,
like I was only the company levels the company. Yeah, yeah, yeah, anyway, I'm stupid and that's easy to say now.
But we yeah, we're we're all part of this system that has just been attacked invisibly. And this is the first time I've just seen somebody say it out let, you know, in print, just be like, this is the company, this is what they're doing. It is like the most deeply anti I don't know, it's just it's it's so clear cut. It just seems wild that nobody said it out loud, up to this point.
Yeah, people probably have been.
It's wild that I haven't read it to this point, and it's probably because the phrase private equity made my brain go to sleep.
I also blame the New Yorker from not making a cartoon about it, which thank you. Understand. All right, we're gonna take one more break.
We're gonna come back and hear from a reader who has some job experience that is somewhat related to this. It seems like it's operating the same principles.
With one of the industries we're just talking about.
Yeah, we'll be right back, and we're back. And I was talking to a former guest this weekend. I'm not gonna out them, but like when I was taught as I'm actually the two thousand episodes and trying to go back, as I was saying to Brandon, like after reading his book, I've tried to speak to it everywhere because it's like all I can think about. And one of the people
I spoke to was like dental care. That was the one when I was like, it's like this, it's veterinary care, it's nine to one one call centers, it's retirement homes, it's dental care. Like dental care is the one that jumped out. They were like, yeah, you know, I have lived both in the US and in another country, and the US like you would see the dentists like over
and over and over with the same problem. They'd just be like, I don't know, man, like brushmore, you know, and just give you the same solution and just seemed taxed and overwhelmed. And then like when we're able to have this problem fixed and oh, hey.
Use some of a bitch. No, I mean I think, yeah, we can justin you can censor that.
But anyways, so the dental industry, we have a listener who works in billing in the dental industry and also works with insurance companies. Again, this similar logic in that even without even if the listener's company is not owned by private equity, it seems to operate on a similar logic of like making things really profitably for them, unprofitably for the consumer, very complicated, very annoying to deal with.
When it comes to insurance, it's like incentivized bumbling and incentivized miscommunication or non communication. And then be like, oh, you know here from us, well you owe us that. Now we got those interests on top of that, now you owe us more money. But shout out to this listener, and I believe we'll be okay using your name because it is a handle, We'll call this person Pirate Pam. Yeah, which is actually great because I was talking calling it
pirate Equity. But anyway, Pirate Pam has been saying, you know, she's like, you know, I work in dental insurance, and I can tell you a little bit about how like how wacky it is. And when I when we started talking on discord, I was like, oh no, walk me through it a little bit. And I said, when did you realize how fucked up shit was with like in dental insurance and how you work with it? And this is what you said quote. I think it was just
a lot of disbelief. I went to business school black and was taught how important it was to close out your accounts and be efficient the counting. I used to work for a medium large private manufacturing company, and we were all about production efficiency and technology improvement. Then I found out that many times insurance companies will be inefficient with their claims processing as a strategy. Allegedly, Okay, we're putting that there legally, my boss actually told me that
when I started. My boss actually told me that when I started, and I honestly didn't believe him until I saw it for myself. They quote lose our claims all the time and have a terrible back end system for cataloging information. I knew that insurance companies were evil and that they raised rates, refuse to cover procedures, et cetera, but just didn't expect to trickle all the way down to their day to day business off business processes. I have some pretty blatant examples that just boil my blood.
It has really radicalized me even further to the point where I don't even believe people should be able to purchase private insurance on top of universal coverage. They will do anything and everything in their power to squeeze profit out.
Of people in need, so basically not deliver the thing
that it is their job to deliver. Which yes, yeah, that is interesting to hear, because you know, like the whole thing, the whole logic of the universe that is created in this story about private equity in Pirate Pam's story about what it's completely like the central gravitational like force, like the gravitational center of the entire like capitalistic enterprise was supposed to be to deliver value in exchange for money, right, Like that that's what a business is designed to do,
is to solve a problem, address a need something. And the better you are at that, the more likely you are to get repeat customer. Like there's just this very central core gravitational center, like economic like center, central truth that is supposed to be at work. And I think we we've just like crossed over to a place where like that seems even like that seems idealistic for me to even say that at this point.
Right, Or it's kind of like what Brendan said, there's two versions, right, there's the version for working people, right, and you have no alternatives and you're basically checkmated there. And then if you have a little bit more money, then you do have the ability to be like, well, I'm not going to stand for this specific kind of treatment. Yeah, And do you just see how much that chasm just grows more and more and more as the companies that are like quote unquote smarter, like you got to go
after like the working people businesses. Yeah, because if you own every dermatology practice in a county, what are they gonna do leave the county for cheaper rates. No, Now we determine what the market is and it's you know, rinse and repeat.
The whole enterprise on the private equity side, like really
resembles a Ponzi scheme. So like that when I was asking him, like about how this is like the new hot place to work in the world of finance, Like that's It's it's not just that like these are isolated companies doing this, it's also like the like people are seeing that this is a system that works and makes you incredibly wealthy, and like that in that industry is like kind of what is worshiped and held up and you know, pursued by other people who work in that industry.
And then also like on the level of you know, we've talked before about how it seems like we're increasingly interested in scams because it feels like the entire economy has turned into a scam. Like these most successful companies of the past ten years, the ones who have become as you know, big as Amazon and Walmart, suddenly without us ever learning their names, like they are doing it by extracting fees, and you know that that is the mo of the moment, and so of course, like it's
going to trickle down everywhere. Like people aren't stupid, they recognize what's being done to them. They're just without power or without people advocating on their behalf, or without options, right.
And I think that's why we're kind of at the end of that discussion with Brendan. It's like you go from fighting an invisible enemy to now beginning to define at least one very specific kind and seeing how it works. Among many other things that are moving in are like global economy. But I want to add the part where
I asked pirate Pam. I said, can you just talk about like one thing you deal with and you're like, these people are fucking around like that, you know this is bullshit and said quote one instance was when I had to send a bunch of documentation and X rays for a claim that they didn't want to pay the insurance. We got a letter from the insurance company that they had received all of our documentation and that we didn't need to do anything else. I call them out a
month or so later. These appeals can take a while, and they said they had never received any of it from us. We also have a lot where we send it two to three times and they still claim they have never received anything. So again, just part of like the inefficiency, whether it's like you know, intentional or just part and parcel of understaffing, whatever, it tends to benefit you know, them in the LA long term, long term we talket for them to be inefficient. Yeah, and we are. Yeah,
you realize how much you know. There are other examples from that book that are just wild about like, yeah, you buy like a clothing store and then you're like, yeah, I guess what now you're only gonna buy clothes from this other company we own, right, Yeah, yeah, like the Mike Tyson meme with the pigeons saying now kiss. But just like the corporate Raider for like you're like, what, we don't even buy clothes and just like no, no, you do you?
We don't care about you? Yeah yeah, and and then we're just like man, J Crew really lost it.
Huh.
They really got real crappy, got real crappy. All of a sudden, Toys r US just started having palettes of toys half ripped open laying around when you walked in.
That was weird. Yeah, that's a new policy. No, no, you're seeing the you're seeing the thing turned into a ghost in real time.
Yeah, so wild the comparison. Like, I do think a lot about the how the Gilded Age, the last Gilded Age in the US like somehow turned into the New Deal and like they're being actually beneficial to America socialism in a lot of cases. And if we could do that without the racism that the first New Deal had, like incremental utopia jack like just but these those things did happen incrementally, right, But yeah, I mean that's happening.
A lot of work, and I honestly I think that's why we see a lot of emphasis from the powers that be to like try and make younger people as ignorant as possible, or make them like take back their
ability to vote by raising the voting age. There's a lot where I think already I think just existing in the United States is probably one of the most potent radicalizing forces right now for young people merely alive and observing things, and hopefully that manifests into like a huge wave of like you know that the numbers are there to have like bigger changes rather than people that are holding onto the scraps of yesteryear.
Yeah, I would highly recommend people people check out this book if that conversation was interesting to you. Yeah, Miles, I would highly recommend they check out you on social media. Where can we find you?
My goodness to find me on Twitter, Instagram at Miles of Gray. Check out Miles and Jack on our basketball I said, Miles, and I went third person on them. Anyway, find us on our basketball podcast. Miles and Jack got Matt Boosti's And if you're going to be in Las Vegas for NBA con, well, guess what. Guess what will your boys, because we're going to be on there doing
a couple of live shows. And hey, if you got recommendations about Vegas, you want to take us out for a spin in your cool Lamborghini or helicopter ride to the Grand Cable on either of those things. But oh, I'll I'll hop in. I'll hop in a Lambeau with a listener. I don't care. I don't know where that ends up. Finally, after that question, how I get to Yeah, how do I get the Lambeau? I had somebody rent
one in Vegas and we got in it. Uh, And then you can find me on fort with Sophia Alexandra talking non political, non serious stuff like ninety day fiance or blind.
All right, and is there a work a media that you've been enjoying.
Uh, honestly I have. It's probably from Uh. I got a shout out again. We talked about this on the Trending episode yesterday at Underscore ched Earthling erb the Provinciaga who definitely got the Portuguese flag flyne in that Twitter display name put us onto this like TikTok, fucking like just mashup of all these like kids protect like just trying the new Grimace Shake from McDonald's and then just ending up in like the worst horrifying physical positions or situation.
So yeah, shout out to shout out to that video. It's I don't know, I don't know what you search. Just search Grimace Shake causing irreversible damage to society.
Just go look at Miles' likes on Twitter.
You know how about this, Gonna retweet it? There you go, that makes it easy. Boom, check that out. Check that out.
You can find me on Twitter at Jack Underscore O'Brien. A couple of tweets I enjoyed over the weekend picture of George Bush finding out about nine to eleven and somebody saying a second Russia has hit the Russia, which I thought summed it up pretty nicely what it felt like at first. Tarn At Young Titty tweeted, the baby
is kicking. He must like vodka Red bulls. Oh my fascinating, tweeted a picture of the founder of Gucci and said the life of Gucci O Gucci, founder of Gucci, and Zach Raffio retweeted that and said the life of Dunky No Duncan, founder of Duncan, and then Sydney Battle tweeted, whoever came up with the word morsels was correct?
Yeah, perfectly named. Yeah, where'd that come from? Maybe some etymologies in the store? Yeah.
You can find us on Twitter at Daily Zeitgeist. We're at the Daily Zeitgeist on Instagram, we have a Facebook fanpage and a website Daily zeikeys dot com where we posts our episodes and our footnotes. So we take off to the information that we talked about in today's episode as well as a song that we.
Think you might enjoy. That was with the song that people might enjoy, Oh well, guess what You've died and gone to Babe Heaven because that's the name of this West London band, Babe Heaven, really great band. This tracks just like again. It's called make Me Wanna and apparently like this group started off with like two friends who were like really in the groups like Massive Attack and stuff and trip hop and then slowly started getting their band together and y'all are making some good music now.
If you like Massive Attack and stuff like that Cocktat Twins, check this group out. But this is a track make Me wand bye babe Head. All right, well we will link off to that in the footnotes. The Daily Zeitgeist is a production of iHeartRadio. For more podcasts from.
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That's going to do it for us this morning, back this afternoon to tell you what's trending and we'll talk to you all then Bye bye