Thursday, 20 December 2007

Private equity ‘a force for good’. Repeat.

Don’t worry, this isn’t going to be a long rambling post debating the positives and negatives of private equity. Rather I want to draw attention to the number of times that the private equity industry and its supporters seem to use the term ‘a force for good’.

Just a few examples from a quick Google search:

Stephen Schwarzman of Blackstone:
"Private equity is here to stay as a significant force and as a force for good within much of the world economy."

Dominic Murphy of KKR:
"We are a force for good."

Wol Kolade of the BVCA:
"I believe passionately that private equity is a force for good in the UK."

Jonathan Russell, 3i
"A force for good"

Jonathan Feuer, CVC
"We are a force for good transformation."

And that’s without bothering to repeat some of the more gushing commentary from the business pages (The Telegraph being particularly guilty).

What’s my point? Well, I am wary of how easily we get taken in by the emotional pull of language. You might think ‘a force for good’ sounds like simplistic propaganda (even a bit Star Wars?) but I wonder whether it actually might work quite well on a subconscious level. The word ‘force’ lends the phrase a bit of dynamism, and the whole thing probably sparks a bit of a positive emotional reaction within us. And this reaction is being tied to the activities of the private equity industry.

Maybe I’m making a mountain out of a molehill, but the more I read about our behavioural quirks and cognitive blind-spots the more I think we get taken in by ‘directions’, whether these are intentional or not. In the case of this phrase there is clearly intentional direction. A good example of non-intentional direction is the effect the result a random spin of a roulette wheel has on our estimation of another, completely unrelated, number. See this account for example.

It’s understandable that we fall prey to these kinds of things as we are constantly struggling to make sense of a complex world. Sometimes (most of the time?) it is simply easier to take your ‘understanding’ of a given issue from someone else. So it also bothers me that this simple mantra might become stock phrase for people to pull up when they can’t be bothered to think through what private equity is really about.

I don’t think this is an evil corporate plot by the way. I always tend to boring explanations of why things happen, rather than conspiracy theories, hence I doubt very much that the private equity industry and its cheerleaders have decided to use the same slogan. It is possible that a PR firm may have encouraged the BVCA to use it, as a quick skim of Wol Kolade’s interviews reveals that he has used it a lot. But then Digby Jones always used to bang on about ‘responsible wealth creation’ didn’t he? More likely people recognise, consciously or otherwise, that the phrase has a bit of emotional power and have decided to nick it for themselves.

This is a complex area, and many of the union criticisms of the private equity industry are well-grounded. One cannot blithely assert, as much as many financial journalists like to, that it is a purely positive economic force. Therefore when you read/hear someone telling you that the industry is simply ‘a force for good’ it should set of an alarm bell that they are trying to sell you a simple narrative.

2 comments:

Charlie Marks said...

There is a relgious quality to the phrase. It's used by zealots of British and American military power. Didn't David Miliband use it of the EU?

Perhaps the labour movement needs a slogan and a conspiracy to use it at all times.

Whenever a trade union leader appears on radio or TV they must use the phrase "we're the people who brought you the weekend, we're a force for good in the world."

Tom P said...

I think it's a good idea to be honest. I think we get fooled pretty easily, and clearly salespeople (commercial or political!) use these techniques on us. So it makes sense to at least include them in our armoury.

I think we could also use some sales techniques in order to bolster TU folks in positions of influence. I've been thinking particularly of pension fund trustees but it could be applied much more widely.