For two days running, the NYT has given us epic explanations of how the sausage of modern American capitalism is made. First, on Sunday, came Michael Moss’s harrowing tale of where the burger that paralyzed Stephanie Smith came from:
The frozen hamburgers that the Smiths ate, which were made by the food giant Cargill, were labeled “American Chef’s Selection Angus Beef Patties.” Yet confidential grinding logs and other Cargill records show that the hamburgers were made from a mix of slaughterhouse trimmings and a mash-like product derived from scraps that were ground together at a plant in Wisconsin. The ingredients came from slaughterhouses in Nebraska, Texas and Uruguay, and from a South Dakota company that processes fatty trimmings and treats them with ammonia to kill bacteria.
Then, in today’s paper, there’s Julie Creswell’s harrowing tale of how a succession of private equity firms paralyzed Simmons Bedding Company:
Every step along the way, the buyers put Simmons deeper into debt. The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably.
But the load weighed down an otherwise healthy company. Today, Simmons owes $1.3 billion, compared with just $164 million in 1991, when it began to become a Wall Street version of “Flip This House.”
At this point it seems worth pointing out that sausage-making is usually kind of unpleasant (it isn’t always; I went to a sausage-making party at a friend’s house in Brooklyn a couple years ago and that was pretty great), and that—considering how many hamburgers are consumed in the U.S. and how many private-equity takeovers there have been—the fact that sometimes things haven’t worked out so great isn’t proof that either the burger business or private equity is irredeemably nasty.
But in each article, something stood out that struck as especially unpleasant and unwise. In the burger epic, it was that some big meat suppliers have a habit of cutting off customers who demand to test their product for E. coli before accepting it. In the private equity tale, it was the sense that the whole Simmons saga had in the end been about nothing more than sucking wealth out of an organization and concentrating it in fewer and fewer hands. Neither of those seem like sustainable practices.