Songs of Profit, Song of Loss: Private Equity Investing in New York City
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Songs of Profit, Song of Loss: Private Equity Investing in New York City Daniel Souleles Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy under the Executive Committee of the Graduate School of Arts and Sciences Columbia University 2015 © 2015 Daniel Souleles All rights reserved ABSTRACT Songs of Profit, Songs of Loss: Private Equity Investing in New York City Daniel Souleles This dissertation is an ethnographic description of the process by which private equity investors buy, manage, and sell companies for profit, all while private equity, as an industry, manages around $3.5 trillion of capital. Drawing from data gathered from the summer of 2012 through fall of 2014, this dissertation offers an account of investing that diverges from other ethnographic cases in that it relies on ongoing conversations about value and time that investors have, which seek to justify the decisions investors make. Once I explain how investors find and create value as well as the opportune time to invest, I explain how this negotiation fits into a stereotyped, formalized deal process, which acts like a total social fact in rearranging people and wealth in social life. I ultimately suggest that this approach to explaining the action of private equity investors has a broader use in rendering other financial capitalists ethnographically comparable to private equity investors, as well as in rendering other societal distributions of wealth and poverty comparable to that which exists in the contemporary United States. Table of Contents 1. List of Charts, Graphs, Illustrations ii 2. Acknowledgments v 3. Dedication vii 4. Preface viii 5. Something New 1 6. Methods, or How to Study People Who Do Not Want to Be Studied 36 7. Anthropological Theories of Value and Time 65 8. Finding Value: Secrecy and Private Equity 93 9. Time After Time is Money 114 10. To Buy or Not to Buy 143 11. Managing, For What? 172 12. Conclusions and Comparisons 194 13. References 220 14. Appendix 1: Informants 238 15. Appendix 2: Informant Networks 244 16. Appendix 3: E-Mail Exchange With Venture Partner 260 17. Appendix 4: Value 267 18. Appendix 5: Time 274 19. Appendix 6: Bias and Bios, A Sociological Appendix 283 i List of Charts, Graphs, Illustrations 1. KKR, Houdaille Deal Chart, “The Financing” Facsimile 5-6 2. Source of Informants Table 44-5 3. Colleague Informant Network Table 47 4. New York One Network Table 50 5. Business Institute Informant Network 51 6. Value Comic 93 7. KKR/Jimbo’s Discount Flying Saucer IRR Table 116 8. Loki’s Hope Graph 122 9. Ho’s Investment Banking Process Chart 146 10. Informants Chart 238-243 11. New York One Conference Informant Network 244 12. Newspaper Informant Network 245 13. Cold Calling Informant Network 245 14. University Conference Informant Network 246 15. Flyers at Business School Informant Network 247 16. Business Institute Internship Informant Network 248 17. Class Audit Informant Network 248 18. University Conference Two Informant Network 249 19. University Conference Three Informant Network 249 20. Colleague Informant Network 251 21. Friend Informant Network 251 22. Friend Two Informant Network 251 ii 23. Friend Three Informant Network 252 24. College Friend Informant Network 252 25. Friend Four Informant Network 253 26. Colleague Two Informant Network 253 27. Colleague Three Informant Network 254 28. College Friend Two Informant Network 254 29. Colleague Four Informant Network 255 30. College Friend Three Informant Network 255 31. Family Informant Network 256 32. College Friend Four Informant Network 256 33. College Friend Five Informant Network 257 34. Dad Informant Network 257 35. Colleague Five Informant Network 258 36. Friend Five Informant Network 258 37. Mother of a Former Student Informant Network 259 38. Picture of Rob Morris 286 39. Olympus Partners About us Picture 291 40. Undergraduate Attainment at Olympus Partners 293 41. Undergraduate Distribution in Sample and Comparison 295-302 42. MBA Distribution among non-Junior Staff at Olympus Partners 304 43. MBA Distribution in Sample and Comparison 305 44. Investment Banking Experience at Olympus Partners 308-309 45. Investment Banking Distribution in Sample and Comparison 309-312 iii 46. Pictures of Olympus Senior Investment Professionals 313-314 47. Pictures of Olympus Junior Investment Professionals 314 48. Gender and Racial Makeup of Sample and Comparison 315 iv Acknowledgments The Teachers College, Columbia University Joint Program in Applied Anthropology and Anthropology and Education was kind enough to offer me admission to the PhD program in Applied Anthropology as well as some tuition point scholarships. Teachers College, Columbia University Dean of Admissions, Dr. Thomas Rock helped me by offering me some supplemental tuition point scholarships. Dr. Laura Bear and the London School of Economics Department of Anthropology were kind enough to welcome and supervise me for a semester as a visiting research student during the early stages of this project. Professors H. Russel Bernard, Amber Wutich, Susan Weller, and Jeffrey Johnson were kind enough to admit me to the National Science Foundation’s Summer Institute for Research Design (NSF SIRD) in cultural anthropology. At the SIRD these professors helped me imagine a plausible ethnographic project, studying people who are difficult to access. Professor George Clement Bond is a dearly missed supervisor who, in addition to offering me invaluable mentoring and advising, offered me some tuition point scholarships and the ability to work as a graduate assistant, drawing on resources which came with his endowed chair. Provost Thomas James and the Provost’s Office of Teachers College Columbia University was able to give me a timely dissertation improvement grant in the amount of $10,000 which allowed me to complete field work and begin writing up. Professors Hervé Varenne and Terence D’Altroy were kind enough to step into my dissertation projects as chair and supervisor respectively in the wake of Professor Bond’s passing. Professors Carl Wennerlind, Caitlin Zaloom, and Kathryn Dudley were kind enough to v fill out the rest of my dissertation committee. Taken together, my work is much improved for their criticism and comments. Meghan Chidsey, Chelsea Abbas, Sarah French Brennan, Ann Iwashita, Laura Bunting- Hudson, and Tanya Aydellot are members of my doctoral cohort. Their generosity and kindness are incredible. I struggle to imagine completing doctoral work without them. vi Dedication I dedicate this dissertation to my family: my mom, Sandra Souleles, my dad, Dean Souleles and my brother, Jon Souleles. You turned me into a researcher in more ways than I can count. I have lately realized that it’s unusual for a fifth grader, in a report about a personal hero, to pick Richard Feynman. Thanks for making and then letting me be curious about the world. Thank you for your support and confidence. I can’t imagine making it here, much less anywhere in life, without you. I dedicate this dissertation to my partner, Amanda Shapiro. Thank you for encouragement, support, and listening to me ramble on and on and on about culture. It’s really a beautiful thing that we’ll never have to do this again. I dedicate this dissertation to my best friend, Bryan Haut. Thank you for being proud, supportive, and unfailingly critical. I like to think this project has given you a lot to yell at your millionaire- friends. I dedicate this dissertation to another family, the Hauts: Dr. Judith Haut, Robert Haut, Bryan Haut and Arianna Haut. Thank you for taking me in those years ago. And thank you for continuing to welcome me. I have such joy in being with you. * I love you all. vii Preface My two year study of mostly New York based private equity investors, why and how private equity investors buy manage and sell the companies that they do, and the support industries that surround private equity, was motivated by dissatisfaction with the anthropology of finance. That work is largely exemplified by the one contemporary anthropological study of “Wall Street”, Liquidated by Karen Ho (2009)1. More broadly, I felt a more general dissatisfaction with anthropological theories that over rely on habitus, or, “the harmony of ethos and tastes…sensed in the imperceptible cues of the body” (Bourdieu 1977:82), as an explanation for human action and human lives. While I found that Ho offered an excellent account of recruitment from elite universities into investment banking, as well as the rigor of junior to mid-level work in such banks, I quickly found that my ethnographic work contradicted some of the basic assumptions along which she was able to generalize from her ethnographic findings to make claims for all of Wall Street. Fairly early on, she defines Wall Street as: …the concentration of financial institutions and actor-networks (investment banks, pension and mutual funds, stock exchanges, hedge funds, and private equity firms) that embody a particular financial ethos and set of practices, and act as primary spokespeople for the globalization of U.S. capitalism. [2009:4] Note that private equity firms are specifically included in this conception of Wall Street. Ho continues: The very particular cultural system that Wall Street has constructed and nurtured—one that promotes the volatile combination of unplanned risk-taking with the search for record profits, constant identification with the financial markets and short-term stock 1 To be clear, I am well aware of other ethnographic studies of finance (to take just anthropologists: Hertz 1998 Zaloom 2006, Riles 2005, Fisher 2011, Miyazaki 2012, Ortiz 2013, Orta 2013, Holmes 2014). In the rest of this dissertation I make analogic and theoretical use of these studies. Here, I focus on Ho (2009) because many within and outside of anthropology, insofar as they know about the anthropology of finance, take Ho’s analysis for what anthropologists have to say about Wall Street.