Wednesday, August 8, 2012

Dana Milbank Achieves a New Height of Ridiculosity

It is important that you read this latest piece of trash by Dana Milbank before you continue on with my post.

Go on.  Read it.  I know you don't want to, but for the purposes of this lesson, you need to.

There.  Finished?  Great.  What did we learn.  Well--what we learned from Dana Milbank is that MAKING MONEY IS UNETHICAL.  That's right.  UNETHICAL.

Let's review the bidding, shall we.  Here's the timeline:

1997:  Bain Capital leads a group of investors in buying a majority share of the company newly privatized Italian telephone directory company.  Bain invests 36M Euros out of the total 853M Euros.

2000:  As Milbank reminds us, "during the dot-com bubble" Telecom Italia bought back all the shares of SEAT that it didn't own--for 14.6B Euros.

2003:  SEAT value 3.7B Euros

2012:  SEAT value 57M Euros

That's it folks that's the timeline.  Here are Milbank's thoughts: "More troubling than the Bain windfall were the responses to Bloomberg from Bain and the Romney campaign. Bain noted that it was “in full compliance with all tax and reporting requirements.” A spokeswoman for the Romney campaign argued that Romney and Bain “partnered with a new management team to transform this company, and grow it into a tremendous success.” A tremendous success that quickly toppled, like a child’s tower."

So by my reading--THREE FULL YEARS after selling the company at the height of the dot-com bubble (isn't his what investors would want) and a year after leaving Bain for the Salt Lake Games, the telephone directory company was valued at a quarter of what it sold for--and this is somehow ROMNEY and BAIN's FAULT?  YGTBSM.  Did it ever occur to Milbank that maybe, just maybe at some Bain staff meeting, some young banker poked his head up and said "you know what--the internet and the mobile phone explosion is going to kill the manual phone directory business--we have got to get out of this.  We owe it to our investors"? Let us not forget folks, at the time of the sale, Romney was running the Olympic Games in Salt Lake--not Bain.  But that doesn't matter.  Bain made the right move, and it created value for its investors.  Did Telecom Italia make a bad move?  Of course--but they certainly had their own smart people advising them to PAY 14B Euros.

Milbank goes on to take criticize Bain's and Romney's ethics further, by criticizing them for knowing the tax law and following it in order to limit their exposure.  Again--it would be UNETHICAL to do otherwise, as Bain's ethics were bound up in returning investor value, not paying more taxes than it was legally obligated to do.

Which brings me to my final point--and that is, the inference made in this memorable paragraph: "
Romney almost certainly didn’t break the law by putting his money in Switzerland or the Bahamas, or by paying an income tax rate of 15 percent. He didn’t necessarily break any laws by creating a $100 million 401(k).  The question is whether such things are fair, or whether Romney has exploited a system that allows rich people like him to get richer at the expense of less wealthy taxpayers."

Well Mr. Milbank--is it "fair" for some to take a home mortgage deduction while those without mortgages are unable to do so?  Is it "fair" that certain people get to take the Earned Income Tax Credit while others are denied it?  Of course these things are fair, and one reason they are fair is that they are lawful, and they represent what is permitted under our system.  Romney's tax rate--largely due to investment income--is the result of our system's privileging of investment income as a way of incentivizing more of it.

The only ethically questionable thing about Milbank's column is the impact this ridiculous man will have on an eight year old child. 


NavyAustin said...

What people forget is that telephone directories were CRAZY profitable business back then - the Google of their day. Even in the dot-com bubble of 97-early 2000, the web was horrible for finding reliable local information. Yellow pages advertising was where people went to find local businesses.

Spinning the business out of the phone company was smart. Bain buying it was smart. Bain selling it, and seeing that the web was going to deliver obsolescence to yellow pages, was also smart. The only dumb move here was the Italian phone company buying an asset they had divested from their businesss back, at the top of the bubble.

Maybe the phone company thought there was a strategy to use their brand equity and reputation as a trusted offline reference to become the go-to web resource. Lots of directories tried this route.

Others tried new business models. Remember Citysearch? They tried to be sort of a directory plus Yelp plus news site.

Or maybe the phone company thought the directories were experiencing a new renaissance - envisioning a world where they would continue to be profitable.

Companies can be amazingly oblivious to external trends. I saw Motorola's paging division, which was practically printing money, get completely overtaken by Moto's cell phone market - and then watched Motorola forfeit their 85% market share to Nokia, who saw that digital cell phones would explode the market beyond the mobile executive, doctor and drug dealers. Nokia got buried by cheaper flip phones didn't see texting coming. Then they all got Blackberried, and then iPhoned and Androided.

It's called capitalism. Creative destruction. More value is created, life is improved, better services provided more cheaply.

The state-owned phone monopoly would like to go back to the world of owning the one trusted guide that people paid to advertise in.

Do you want to go back to 1997, when you had a cordless phone at your house and a 5-lb wad of paper to look up phone numbers in?

Or would you rather pull out your smartphone, anywhere in the world, and find local business information, complete with actual customer reviews? It won't come from the phone company's yellow pages. Or Citysearch. And in 5 years, it might not come from Google or Yelp.

Capitalism is how life advances.

The Conservative Wahoo said...

Bravo, NA. Bravo.

Anonymous said...

If only in my younger years I had known how ignorantly foolish one could be and still get a good job writing opinion articles. I guess Dana Millbank got there first.

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