Privatisation of capitalism (aka death of the markets)


I can’t claim to know anything about this, but a fascinating blog (via Twitter):

What do you all think?

(Emma) #2

Very interesting.

Capitalism as we have known it so far is ideologically based, and ideology has largely been replaced by populism. Whether that’s a long term thing or not has yet to be seen


Not sure I understand the reasoning behind the author’s insinuation that a move from public equity towards private equity is necessarily a ‘bad’ thing?

(Emma) #4

There’s no trickle down effect, the shares previously available to all are in the hands of the already wealthy


Super interesting. That said, I disagree with quite a lot:

On the idea that public stock markets are shrinking - many stock markets were recently at all time highs (maybe less high than they would be if every large company were public - but still).

“Companies just go public to cash in for private investors, not to raise money and grow”

A lot of this is relevant specifically to the startup/tech sector, where there are a lot of high risk, loss-making companies backed by big money. However, this doesn’t necessarily mean that quality is being kept in private hands. It could just mean the opposite - that there are a lot of big businesses that could only exist in the indulgent environment of private ownership.
Some companies are being kept private because they’re not capable or ready for the scrutiny of public markets. If a company is so broken it can’t grow after an IPO, is the answer really that retail investors should be invested earlier?

Furthermore, on the idea that quality is being taken private, there are a lot of private equity spinoffs that are actually declining (but still cash-producing) parts of public businesses eg Unilever’s margarine biz.

TL;DR: Yes, private equity is growing faster than public equity, but it’s still a fraction of the public markets and that trend is heavily influenced by the Silicon Valley tech sector. The biggest, most dynamic companies in the world are still public ones.

People complaining that public companies have “all the value sucked out of them” don’t really understand the difference between asset classes. It seems like they have VC envy and are confusing public market investing with high-growth, high risk VC or angel investing.

Of course, these are all personal opinions. And everyone should do their own research, consider their own risk appetites and make their own decisions. :pray: