2012 Tuesday: Obama wants the election to be about a topic he doesn’t understand

In Chicago yesterday, President Obama described the essence of his campaign against Mitt Romney. Asked during a press conference about his campaign ads criticizing Romney’s record at Bain Capital in the 1980s and ’90s, Obama disagreed with fellow Democrats’ advice to focus on other issues:

[T]his is not a distraction. This is what this campaign is going to be about — is what is a strategy for us to move this country forward in a way where everybody can succeed?

Well, now. That’s just completely different from every other presidential campaign in history…

Some commentary has focused on what Obama said just before that: his description of the job of president vs. the job of a private equity CEO. And with good reason. There is plenty to address: from his assertion that the president should be involved in helping individual communities plan their economic development, to the obvious conclusion that the job, as he’s described it, is not one he’s done particularly well given the persistent sluggishness of the job market and the economy more broadly.

But what interested me was his summary of private equity:

Now, I think my view of private equity is that it is set up to maximize profits. And that’s a healthy part of the free market. That’s part of the role of a lot of business people. That’s not unique to private equity. And as I think my representatives have said repeatedly, and I will say today, I think there are folks who do good work in that area. And there are times where they identify the capacity for the economy to create new jobs or new industries, but understand that their priority is to maximize profits. And that’s not always going to be good for communities or businesses or workers.

Contra Cory Booker, Harold Ford Jr. and Steve Rattner — who are among the Obama supporters who cautioned him against demonizing private equity — the best reason for Obama to avoid the topic is that he sounds wholly uncomfortable on such foreign terrain.

His dissection of the place of profits in an economy supposedly based on free enterprise comes off like the remarks of an anthropologist recently returned from spending a year among some exotic, savage tribe. But profitability is a concept that comes naturally to most Americans because, unlike Obama, most of us have worked for for-profit enterprises.

Instead, Obama says “maximize profits” as if  it’s one element among many when it comes to business (it’s just “part of the role of a lot of business people,” with the others ostensibly at liberty to ignore revenues and expenses), as if he grudgingly acknowledges some possibility that profits can co-exist with a healthy economy.

Wrong. Profits are indispensable to a healthy economy.

If a company is not trying to “maximize profits,” it is not a) trying to satisfy the most customers and thereby earn their business; b) recruiting and retaining the work force needed to deliver appealing products or services; or c) creating or freeing up the capital needed to expand its business.

Oh, and because we know Obama puts a premium on higher tax revenues: “Maximized profits” also mean more earnings for government to tax.

This is the story of America’s economic power. We are not the world’s most important economy, and the most prosperous people, because there are business people for whom “maximizing profits” is not “part of their role.” On the contrary. It’s because the profit motive — and, importantly, the greater freedom from government that our enterprises historically have had to pursue it — has ensured we have gotten the most out of our scarce resources.

Profits are not something to be merely tolerated as long as everything turns out OK for everyone else. They are the best motivation known to man to put as many people and resources as possible to productive work.

And creating new industries, with new jobs, is not incidental to free enterprise. Delivering novel products or services is not the only way to make money, but it is a time-tested way to do so.

This also happens to be the story of Bain Capital. Yes, it invested in businesses that couldn’t be turned around — that is, made profitable — and which had to be closed. But it also found great success in other ventures, some of which still employ tens of thousands of Americans.

Obama wants you to think the exceptions are the rule, at least where Romney and Bain are concerned. In doing so, he betrays his lack of familiarity with the very economy he claims to be trying to shepherd.

– By Kyle Wingfield

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440 comments Add your comment

jefflz

May 22nd, 2012
12:34 pm

The author is very confused about the role of venture capital in American economics. There is a huge difference between those VC’s who take risks funding start-ups in innovative businesses be it in high tech or in the biomedical industry, among others. They funded the creation of Silicon Valley and the biotech industry, two of this country’s most important economic engines. The Romney/Bain Vulture Capitalist model is based on a smash-and-grab strategy that sucks out all the assets of a faltering company, pays huge bonuses to the investors, defunds pension plans at the expense of the tax payer and basically takes no risk with their own money. This business model is exemplary of Romney’s cold corporatist empathy-devoid personality and illustrates why he is unfit to be the leader of this country. These attacks are valid and important sources of information about who Romney really is.

Jefferson

May 22nd, 2012
12:44 pm

He knows a more about politics than you or your heros, Newt and Mitt.

Obama/Biden 2012

May 22nd, 2012
12:47 pm

See here’s what most republicans refuse to acknowledge. The President and Democrats aren’t saying that venture capitalism is wrong. But what is wrong is Mitt Romney running around the country stating that his time at Bain Capital was spent creating jobs. When the FACT is his time at Bain Capital was spent creating millions of dollars of profit to benifit himself and the other investors. How many jobs did Mitt Romney create overseas?

Check out this ad about Mitt Romney and Bain Capital. It seems like Newt, Perry and Palin were right about something.

http://livewire.talkingpointsmemo.com/entries/pro-obama-super-pac-uses-gingrich-perry-to

clyde

May 22nd, 2012
12:48 pm

There are many aspects about Bain Capital that will be bandied about this summer.In the end the average voter will not know if Romney is a vulture or a dove.Nor will they care.

All I need to know about Romney is that he isn’t Obama.

Randy

May 22nd, 2012
12:50 pm

I am currently reading Steve Jobs’ biography and was struck by these comments that maximizing profits is the only element of a successful business. Throughout his career, Jobs made decisions that were driven by a desire (obsession) to produce amazing products. At times, this meant doing things that were more expensive or time-intensive than alternative approaches might have been – thus reducing the potential margin of the product itself. However, he understood that the creation of a unique brand was, in the long run, more important than churning out cheap, poorly-designed, poorly-manufactured devices like several of his competitors. The result, in the end, has been the creation of one of the most valuable companies in the world – despite the fact that profitability was not the primary driving force behind many of his decisions as CEO.

Joe Mama

May 22nd, 2012
12:52 pm

Kyle — “If a company is not trying to “maximize profits,” it is not a) trying to satisfy the most customers and thereby earn their business”

So when BofA, Wells Fargo or some other bank engages in robosigning and misrepresenting the resulting documents to a judge, they’re just trying to “satisfy the most customers?” Come now, Kyle.

MarkV

May 22nd, 2012
12:52 pm

Kyle either quite deliberately distorts Obama’s comments, or simply fails to understand them. Not only there was no “grudging acknowledgment” that profits can co-exist with a healthy economy, it was a clear acknowledgement that they can. But if Kyle disagrees that maximization of profits is only a part of the role of many business people, then we are fortunate that Kyle is a journalist and not a business man. We do not need more businessmen who care nothing about the society in which they live, how their decision will affect them and the employees of their companies. Profits are indispensable to a healthy economy, but they are not the only thing that matters.

Denver

May 22nd, 2012
12:56 pm

jefflz is the one not getting it. The creation of big, sustainable businesses like high tech and biomedial businesses is important. Breaking down and selling off the old stuff that doesn’t work any more is an equally important function. It may not be sexy or as comfortable to the outside observer, but what Mitt did at Bain was helping people hold estate sales….selling off the assets that became non-performing. Sure, the auctioneer at an estate sale has to earn a living, and personally I don’t begrudge Bain’s existence or their profits. It is naive and short-sighted to bemoan the jobs lost when a company is sold, downsized or dismantled. Our economy will continue to work best when every asset, person and piece of land is placed in its highest and best use. Arms length transactions between buyer and seller help that to happen, and it’s time to stop whipping the people who put those deals together.

TruthBe

May 22nd, 2012
12:58 pm

Obama is a fool and doesn’t know one thing about business. Obama is a communist and doesn’t believe in Capitalism or America. Vote this New Black Panther supporter out of office.

commoncents

May 22nd, 2012
1:00 pm

Randy @ 12:50

Steve Jobs also didn’t try to create all these wonderful things while thinking that they’ll be worthless and not innovative. (Innovation creates massive revenues)

iggy

May 22nd, 2012
1:05 pm

Once again the kenyan confirms his stupidity.

MSmith

May 22nd, 2012
1:10 pm

jefflz – Would you describe Obama’s good buddy Warren Buffet and Berkshire Hathaway as Vulture Capitalists? Or is Buffett’s “cold corporatist empathy-devoid personality ” ok with you since he is on your side? It is amazing that the current President who spent all of 6 months of his career in the private sector will lecture us about profits and how business should be run. It is even more amazing that someone with such little experience doing anything other than agitate was elected in the first place.

Cutty

May 22nd, 2012
1:10 pm

Kyle, like most conservative journalists, never gives a reason why one should vote FOR Romney. Only reasons why one SHOULDN’T vote for Obama. But what does he understand, he voted for Newt.

It’s also interesting that he allows the coded racial overtones on his blog.

TruthBe

May 22nd, 2012
1:11 pm

iggy

May 22nd, 2012
1:12 pm

Just a sampling of The Liberal fighting song…Big Brother by David Bowie.

“Please savior, savior, show us
Hear me, I’m graphically yours

Someone to claim us, someone to follow
Someone to shame us, some brave Apollo
Someone to fool us, someone like you

We want you Big Brother, Big Brother”

Substitute Obama for Big Brother…works perfectly.

TruthBe

May 22nd, 2012
1:15 pm

Cutty. Like you . Why would you support Obama and what has Obama did that he deserves a second term? And as for Obama being labelled a radical or a racist, just look at his actions, policies, appointees, history, friends, supporters, the lying mainstreet media covering up for him and giving him a free pass. Need more???

Illegal Alien

May 22nd, 2012
1:16 pm

Which Presidents have been businessmen and how successful were they as President?

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

May 22nd, 2012
1:23 pm

dummycrats slobber and drool over increasing an already confiscatory 35% tax rate and they say who is sucking the life out of American business? Would somebody please pass obozo a mirror?

Oh wait, he’ll only fawn over hisself with it. Nevermind.

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
1:30 pm

“The Romney/Bain Vulture Capitalist model is based on a smash-and-grab strategy that sucks out all the assets of a faltering company,”

Like keeping GST (the first company cited in an Obama video) open and operating for 8 years longer than it should have been (according to the VP who actually knew their financial state), jefflz?

THAT kind of “smash and grab” mentality?

Oh, and closing it TWO YEARS AFTER Mitt Romney left Bain Capital, jefflz?

saywhat?

May 22nd, 2012
1:35 pm

“2012 Everyday: Kyle wants his column to be about a topic he doesn’t understand”

Fixed it for you ;)

And Romney Wants The Election To Be About What He Doesn't Understand (99% Of The PEOPLE)

May 22nd, 2012
1:35 pm

The objective of PRIVATE EQUITY is to increase the value of a company for a fast sale.

PRIVATE EQUITY sheds assets and destroys jobs.

THIS AIN’T ROCKET SCIENCE

iggy

May 22nd, 2012
1:35 pm

Then there is Obamas fine example of what he considers the stalwart of companies, a model to be revered…Solyndra.

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
1:41 pm

What the current Liar-in-Chief and the liberals on this blog don’t understand is that you don’t get to “maximize profits” by closing businesses and selling off assets.

You get them by streamlining their operations and keeping them open, which is what Bain Capital does at a 70% rate of success. And when you keep them open you (at the very least) save the existing jobs of people working at that company, if not hire more people to work.

Again, something Bain Capital does at a 70% success rate.

And yes, when your calculated gamble using your own money doesn’t work, your best bet is to close the business and sell off the assets; something every businessman or woman would do to maximize their return on investment.

It is not surprising that the current Liar-in-Chief and most libs don’t get how a capitalist market works, since they spend so much time trying to destroy it.

saywhat?

May 22nd, 2012
1:48 pm

tib- “It is not surprising that the current Liar-in-Chief and most libs don’t get how a capitalist market works, since they spend so much time trying to destroy it”
____________________________________________________
I guess that explains how the former Incompetent-in-chief and his fellow cons, with their knowledge of how the capitaist market works, were able to destroy it so much more effectively, and had to spend so little time to do so.

Citizen of the World

May 22nd, 2012
1:50 pm

The problem with Romney and the private equity groups like Bain is they want to “maximize profits” and expect the rest of us to be happy if we can “eke out a living.”

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
1:58 pm

“I guess that explains how the former Incompetent-in-chief and his fellow cons, with their knowledge of how the capitaist market works, were able to destroy it so much more effectively, and had to spend so little time to do so.”

Deflection, saywhat.

And incorrect, btw.

redneckbluedog

May 22nd, 2012
1:58 pm

Hate to tell you this…but the President won the election yesterday….WE UNDERSTAND JUST FINE….Private equity has created some jobs…but it has shipped a ton of jobs overseas….

But what has been lost, is AMERICAN PRIDE….People who work at private equity are there to collect a check, because their job may be gone tomorrow…….They show up, do their job, go home, and collect a check on Friday……They don’t care about their private equity employer….because their private equity employer does not care about them…..

Didn’t used to be that way….used to be employees LOVED being a part of a good company….because their employers made them feel that way…..NOT ANY MORE…..

I hate to say this, because I am more of a Republican than a Democrat…but it started with Reagan….

The Republican party…..outsourcing AMERICAN PRIDE since 1980…..!!!!!

redneckbluedog

May 22nd, 2012
2:01 pm

Why would anyone have a since of pride in what their doing when they get paid peanuts and their private equity owners rake it in……!?!? It’s not fair…..the system is no longer fair……

WHAT IS THE POINT IN EVEN TRYING WHEN THE SYSTEM IS SO CORRUPT…!??!! We’re better off sitting it out, collecting off the government, and drinking coffee……that’s better than making some creepy Mormon millionare a few bucks for nothing…….when he’s just going to ship your job to China or Mexico anyway……

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
2:02 pm

“but the President won the election yesterday”

Strange, but I don’t remember voting yesterday. Nor do I know anybody that did.

And you are no more of a Republican than David Axelrod is, redneckbluedog.

redneckbluedog

May 22nd, 2012
2:03 pm

and the problem with Romney is….He doesn’t have the charisma nor the Christian background to make people believe again………..he would be a failure……plus, as a polytheist, he has no moral authority to speak about homosexuality, abortion, NOTHING……

redneckbluedog

May 22nd, 2012
2:05 pm

And you are no more of a Republican than David Axelrod is, redneckbluedog
————————————
YESSIRREEE…….but I”m a working man…..I ain’t no Senator’s son…….and I don’t “invest in private equity”….!!!!! I know what a good job is, and I know what it means to work at a good place….

I also know what small business is….because I manage one……and one day I might sell to private equity….but for now, I care about my people and we all have skin in the game…..

redneckbluedog

May 22nd, 2012
2:06 pm

I take pride in my business and pride in my employees…….

iggy

May 22nd, 2012
2:06 pm

Oh yes…Obama and his “Green Economy” will save the day.

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
2:07 pm

“creepy Mormon millionaire . . .”

Thanks for bringing in your religious bigotry, redneckbluedog.

And if you’re looking for someone else to instill some pride in your work, I wouldn’t want to hire you.

Pride is within you, or not at all.

redneckbluedog

May 22nd, 2012
2:08 pm

AMERICAN PRIDE……American products and American workers……THIS FLAG AIN’T NO RAG, AND WE DON’T WEAR THEM ON OUR HEADS……!!!!!

We don’t ship our jobs overseas to make some panty-waist millionares rich….!!!!!

redneckbluedog

May 22nd, 2012
2:09 pm

Especially some panty-waist millionares who don’t believe in Jesus…..!!!!

redneckbluedog

May 22nd, 2012
2:10 pm

Pride is within you, or not at all.
——————————————–
Pride is within all Americans….until it gets beat out by an unfair system….with no hope of equality…..

redneckbluedog

May 22nd, 2012
2:11 pm

Gotta go “spread the wealth”…..I want my employees to BELIEVE in my company…!!!!!

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
2:12 pm

“I ain’t no Senator’s son”

Facts might help you in trying to debate the merits of Mitt Romney and his record, redneckbluedog.

Please try actual research and see where your above statement is incorrect.

Then try researching Bain Capital (I suggest you don’t do your research on the Obama/Biden or DNC websites) for the REAL story of Mitt Romney’s record of success.

iggy

May 22nd, 2012
2:13 pm

Unfair system? Govt grants, giveaways, Corp scholarships, job programs, job fairs. The system has never been more fair. The issue is those who refuse to work and think they should be paid $75K for their excellent CSR skills.

“Im sorry for the invconvience suh”

iggy

May 22nd, 2012
2:19 pm

Finn is missing. He must be working a shift managing the french fries.

Citizen of the World

May 22nd, 2012
2:27 pm

When I took economics in college, the teacher talked about pure profit as if it were somewhat rare. If you made more than it took you to pay your employees (including yourself) and make/sell your product or service, you were the exception rather than the rule. Sophisticated technology and globalization came along and changed the game, exponentially increasing productivity and profitability. But instead of putting this money back into the economy in the form of higher wages and bigger dividends, the “greed is good” crowd decided they would loan it to us instead, making even more money and creating the illusion through easy credit that the American Dream was alive and well. But we’ve had our rude awakening, now that people work at increasingly low paying jobs and great wealth is amassed in fewer and fewer hands — hands that are out for more and more as if they were beggars on the street.

iggy

May 22nd, 2012
2:37 pm

Kindve like a “Beggars Banquet” of sorts?

JDW

May 22nd, 2012
2:40 pm

@Kyle…being your usual disingenuous self I see. Let’s take a look at what the President said next shall we.

“And the reason this is relevant to the campaign is because my opponent, Governor Romney, his main calling card for why he thinks he should be President is his business expertise. He is not going out there touting his experience in Massachusetts. He is saying, I’m a business guy and I know how to fix it, and this is his business.

And when you’re President, as opposed to the head of a private equity firm, then your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who got laid off and how are we paying for their retraining. Your job is to think about how those communities can start creating new clusters so that they can attract new businesses. Your job as President is to think about how do we set up a equitable tax system so that everybody is paying their fair share that allows us then to invest in science and technology and infrastructure, all of which are going to help us grow.

And so, if your main argument for how to grow the economy is I knew how to make a lot of money for investors, then you’re missing what this job is about. It doesn’t mean you weren’t good at private equity, but that’s not what my job is as President. My job is to take into account everybody, not just some. My job is to make sure that the country is growing not just now, but 10 years from now and 20 years from now.”

Now what part of that do you think shows a lack of comfort with the subject or a lack of respect for profits?

Now for this bit…”Instead, Obama says “maximize profits” as if it’s one element among many when it comes to business (it’s just “part of the role of a lot of business people,” with the others ostensibly at liberty to ignore revenues and expenses), as if he grudgingly acknowledges some possibility that profits can co-exist with a healthy economy.”

I gather they don’t teach strategic planning in Journalism School. There is a very specific time in the lifecycle of a company when strategically it is the goal to maximize profits. Other times in the lifecycle you have radically different goals. To intimate, as you do, that profit maximization should always be the goal of a business is shortsighted, wrong and not at all the way its done.

A couple of very well known models that address this issue are the GE–McKinsey nine-box framework, following on the heels of the Boston Consulting Group’s growth share matrix.

Now you might note that Bain is absent from this list. That’s because they don’t focus on strategically growing companies their entire reason for existing is stated on their website…

“Our mission at Bain Capital is to produce superior investment returns for our investors. ”

Nothing the matter with that, but as the President correctly points out the job of President is much more strategic than that and the skills involved in producing superior investment returns are not the same ones you need to be successful.

iggy

May 22nd, 2012
2:44 pm

“Your job is to figure out how everybody in the country has a fair shot.”

Everyone has a fair shot. For those who refuse to take advantage of the opportunities presented, who are many, then tough noggies. Let them eat from the refuse bin and live under the bridge.

Dusty

May 22nd, 2012
2:48 pm

What ? Run a business without profit? That, to me. is like serving a meal without food. Lotsa plates, glasses and knives and forks but NO FOOD!

You can luv your employess, care about the poor consumer and send Valentines to your mother but your company will not keep running without profit.

I wish someoen had told President Obama all this before he went off looking like a failure in a class on economics. He could have run a lemonade stand and learned something.. You think they might let him run one at the White House? It’s not too late..

iggy

May 22nd, 2012
2:53 pm

The kenyan is kinda like Ted “The Drunkard” Kennedy. I know best so do as I say and NOT as I do because Im above the law. Sorry that you are not.

I demand to see Cheesy Grits Birth Certificate- Long Form Please

May 22nd, 2012
2:56 pm

It’s also interesting that he allows the coded racial overtones on his blog.

I also find that interesting.

We are in the South as you know. This sort of thing is the norm around here.

50 years isn’t that long ago and 50 years ago Obama couldn’t have even used a public bathroom in the south.

Some things are slow to change.

Rafe Hollister

May 22nd, 2012
2:57 pm

What I heard Oblamer say yesterday that struck me the most, was his assertion that he is better qualified than Romney to handle the economy over the next four years. Blatantly untrue by any standard, but he justified this by reaffirming his belief in government control of the economy. He implied that only he could make sure that every American got a “fair shake”, where as Romney just wanted to get the economy roaring again, which he implied might only work for some.

I think he meant that a Romney economy might result in the prepared, hard working, and risk takers being better off, but the unprepared, ill equipped would once again be left at the curb. He seems to base his qualifications as an economic leader on his effort to bring economic benefits to all.

So, he seemed to say to me that he wanted an economy that worked for all, or worked for none of us. The only way to achieve an economy that works for everyone would be a government controlled economy, heavily regulated, heavily taxed, slow to recover, but included a great deal of wealth re-distribution to help the ner do wells.

I think he will continue to play this, his economy that works for all, versus Romney’s economy that works for the “haves”. His appeal is to the “have nots” to vote for him and get even. We all know if elected, he will ditch this and try to get revenues back as close to normal as possible so he can start spending again, and it will be tough luck for the “have nots”. The old,” well I tried, but Bush got us in this mess and the GOP house and Senate just won’t go along, so I gotta do what I gotta do.”

Tiberius - Banned from Bookman's and proud of it!

May 22nd, 2012
2:59 pm

“Nothing the matter with that, but as the President correctly points out the job of President is much more strategic than that and the skills involved in producing superior investment returns are not the same ones you need to be successful.”

You mean like how Obama can “invest” in green companies that go under completely without any return to the investors, JDW?

Or investing in companies like GM who pay back their loans with other government funds? Or screw the ACTUAL investors out of THEIR investments, JDW?

Of course the goal of Bain Capital is to produce superior returns on investment. And they do that by KEEPING companies viable and strong with people employed at a success rate of 70%.

Steve Rattner on Morning Joe this morning told of how the private equity firms are telling the Obama campaign to shut up and get off this strategy. Their campaign contributions are about to dry up and shift to Romney. Cory Booker went off the plantation this Sunday but was dragged back in line with some harsh comments by the Obama/Biden machine following his Meet the Press appearance. He’s toast in the short term, if not the long term in national Democrat politics.

This latest strategy will only work on solidifying the Liar-in-Chief’s base, which has nowhere to go anyway.