I am very puzzled by negative comment in the media about private equity. Maybe the assumption is that such firms are nasty asset-strippers? What I appreciate about them is what they can teach lazy shareholders. By being proactive about their ownership they are able to drive improved performance, particularly for those companies which have languished in the face of silent shareholders for many generations. It is ironic that the anti-private equity brigade see this as somehow less ‘democratic’ than public share ownership. Indeed, like those firms with a high degree of employee ownership, increasingly the proximity of ownership to performance reaps huge rewards. Perhaps rather than criticising this increasing trend, shareholders should take more of an active interest in their assets?
If one applies market thinking to capitalism, it becomes apparent that capitalism is in danger of becoming a monopoly. This movement towards supremacy appears to lie at the heart of much of its current shortcomings – being the only game in town means that capitalism owns the rules, with the old adage that absolute power corrupts absolutely. What should capitalism do to save itself from the torpor of monopoly? It should cherish its rivals, realising that without them to keep it honest, it will fail. Rather than fighting them, capitalism should take a lesson from Axelrod’s Prisoner’s Dilemma competition and strive to win against itself, rather than by competing head-to-head. And might co-opetition – with apologies to Nash, Axelrod, Nalebuff and Brandenburger, increase the total set of outcomes?
Last week I went to an interesting breakfast forum run by Critical Eye about what the public and private sectors can learn from each other. There was much talk about the ‘vein of gold’ running through the public sector, in the form of the public sector ethos. I am curious about this assumption, for two reasons. One is to do with empirical data about motivation in local government, and the other is the assumption that motivation somehow equates with capability. Read More
