The untold story: proud to work in Private Equity?

Private Equity - World Economic Forum Annual M...

Private Equity – World Economic Forum Annual Meeting Davos (Photo credit: World Economic Forum)

As the mortgage crisis of 2008 has shown us, areas of finance such as private equity have often become the scapegoat of a downturning economy. Despite criticisms of the field, however, private equity is often in fact the engine that stabilizes economies by creating an influx of new capital and talent into the private sector. For example, subfields of private equity that include venture capital and ‘angel’ investment have done much to boost social programs and progress: some of the most innovative companies today would not exist without the help that private investment firms have provided through an ability to fund start-up and embryo versions of those companies. 

The irony of an economy that is dependent on private equity yet becomes a target for criticism in times of financial crisis can be seen in the example of companies such as Reddit.com, wherein users criticize the very system that funded social media sites like Reddit to begin with. In a sense, this is because private equity workers hold careers in a paradoxical area of finance, in which the developments such fields provide are praised in boom times and criticized in down times. As in any field where pay is high, private equity workers are often targeted because of jealousy or because of dissatisfaction in other fields: the so-called ‘tall poppy syndrome.’

However, private equity workers should feel proud of their contribution to society; as a field, private equity is one of the most demanding in the world, akin to medical or top-tier law firm work in terms of training and hours spent on the job. Few realise how much venture capital essentially created the concept of what we know now as ‘Silicon Valley’ or ‘Silicon roundabout’ in London, for example, or the help that direct, private investment helped in starting companies such as Apple, Inc. or Facebook.

Such companies would not exist without private equity and nor would their many contributions to a healthy and connected society. This fact should give private investment workers cause for celebration: much of what we regard as indispensable technology was first formulated on the desk of a venture capital firm.

Of course, some private equity firms lead to companies collapsing: they basically inject too much debt into the company structure. In a static world, there is a point that even Modigliani and Miller would reject. And when/if the economy downturns, the leverage (and the so-called stable cash flow, really?!) is not anymore sustainable. And as in every sector, ugly duckling exists. This firm usually disappear with their investment.
So what does this mean for the future of private equity? It can be said with certainty that the truly progressive technological ideas of tomorrow are being funded today by private investors, which means that private equity workers can take pride in knowing that their work provides a massive benefit to the ease and comfort with which all citizens will be able to go about their daily life.

The examples of such benefits are myriad. The advent of inexpensive laptops, for example, initially developed by companies who thrived with private equity investments, is now bringing high-tech communication to all areas of the world regardless of the wealth of the nation to which such technology arrives. The fact that the Federal Government of the United States has turned to private sector technologyto fix its healthcare system initiatives should also be an indication to many of the good fruit private investment can bear.

The future of medical tech also lies with private equity firms. Healthcare technology formulated and funded by the private sector often saves lives and provides many citizens of the world a chance to live a fulfilling life, and as companies who received their start as a result of private funding grow they also donate to worldwide medical relief charities. It is a win-win for all involved.

For these reasons, private equity workers, or those considering a transition into the field, should feel proud of the many contributions the financial sector makes to society. We should ask ourselves when using our computers or when visiting or doctors: where would we be without the start-up capital that enabled the technology we use so much to flourish?

Indeed, without private equity many of the feats of technological genius we rely on to move our lives forward everyday would not exist. This fact should be cause for praise and an acknowledgment of a job well done. Indeed, by letting others know that you are proud of your contributions to private equity, you can do much to change the perception of what these areas can do to help others.

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