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“I’m forcing you to innovate and learn to do more with less blood!” is definitely my favorite line in this strip.
This cartoon was drawn for Dollars and Sense Magazine back in April. I put off posting it because it’s been hard to concentrate on anything but viruses and six feet of social distancing and hospitals and ventilators and flattening curves lately. I’m sure it’s been similar for you.
But life must go on – even if it’s going on almost entirely in the confines of my own house. I’m very lucky, both in that I like my house, but also in that it’s a large house with nine housemates (including myself but excluding the cats). I definitely think the crisis is harder on people who live alone. (Of course, the downside is that I have a slightly higher chance of catching coronovirus compared to if I lived alone).
Anyway, I hope you’re well. I hope you’re healthy, and able to stay that way. And I hope you’re as comfortable as you can be while we move through this crisis.
“Private equity typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded.” But in practice, this means that businesses like Toys R Us can wind up being owned and controlled by people who don’t know anything about the business and aren’t on the hook if the company goes down the toilet.
Markets don’t function if the owners of corporations make a big profit no matter what happens. But as this Vox story notes, private equity means that the new owners make a killing even if they destroy their newly acquired company.
The controversy surrounding private equity is that whatever happens to the company acquired, private equity makes money anyway. Firms generally have a 2-20 fee structure, which means they get a 2 percent management fee from their investors and then a 20 percent performance fee on the money they make from their deals. Basically, if an investment goes well, they get 20 percent of that. But regardless of what happens, they get 2 percent of the money they’re managing altogether, which is a lot. According to data from consultancy firm McKinsey, the global private equity industry’s asset value has grown to nearly $6 trillion.
Moreover, private equity firms can take out additional loans through their leveraged companies to pay dividends to themselves and their investors, and the companies are on the hook for those loans too.
Often, the easiest and most direct route to short-term profit is to load an acquired company with debt. Sure, too much debt can kill a company, but the investors get rich(er).
This is a problem that Congress could certainly address. Again from Vox:
In July, Sen. Elizabeth Warren (D-MA) rolled out a plan and accompanying legislation — the Stop Wall Street Looting Act of 2019 — taking direct aim at the sector. Her proposal would overhaul how private equity collects fees, who’s responsible for an acquired company’s debt, and how stakeholders are paid in the event a company does go bankrupt. It would also close the carried interest loophole that keeps private equity’s taxes so low. While Warren’s bill wouldn’t end private equity, it would change incentives and force firms to have more skin in the game.
Whether or not Congress will actually pass such a law, I don’t know.
My first layout of this cartoon was four panels of middle-ground figures, all drawn the same size, on a generic city sidewalk. Then I realized that this cartoon gave me an excuse to draw a graveyard, and that was a lot more interesting to me. Panel 2, especially, was a chance to draw a panel that’s pretty different from my typical images.
I don’t know if this is the first time I’ve made the white, middle-aged, businessman-looking character the sympathetic character in my cartoon. But it would’t surprise me at all if it were.
TRANSCRIPT OF COMIC:
This comic strip has four panels. All four panels show the same two characters. The first is a balding businessman-looking type, middle-aged, wearing a collared shirt and necktie, and wearing glasses. The second character is a stereotypical male vampire, with pointy ears, pale skin, fangs, and a big black cloak.
All four panels take place at night, in a hilly graveyard.
This panel shows the businessman jumping back in fear as the vampire leans towards him, leering.
BUSINESSMAN: Gasp! A vampire!
VAMPIRE: I’m not a vampire. I’m a private equity firm! I’m here to help you because you’re fragile and weak!
A shot shows weeds and a bare tree and some graves, mostly in silhouette, in the foreground. Far in the background, we can see the businessman being chased by the vampire. There’s a full moon in the sky.
BUSINESSMAN: But I’m actually very healthy!
VAMPIRE: You look healthy. But you need to be owned and monitored by someone who knows literally nothing about your business.
In front of a stone wall with a rickety iron-bar fence, the vampire has caught the businessman, and is leaning the businessman backward while he bends forwards and sucks the blood out of the businessman’s neck. The businessman looks very distressed, understandably; the vampire looks like he’s concentrating on his meal.
BUSINESSMAN: Now you’re just sucking away all my blood for yourself.
VAMPIRE: I’m forcing you to innovate and learn to do more with less blood!
The businessman lies dead on the ground, his glasses having fallen off his face, eyes in the little cartoon “x”s of death. Standing above him, the vampire cheerfully speaks, holding out a hand in an “explaining” gesture.
VAMPIRE: So it seems that without blood, you weren’t nimble enough to adapt to a changing market. I’m sure you would have died sooner if I hadn’t stepped in!