The first tip didn’t sound like that much of a story—they often don’t. “There’s something going on at my friend Alfonso’s building,” an acquaintance told Mother Jones reporter Hannah Levintova about a year ago. “It’s something to do with private equity. You should talk to him.” Hannah was finishing up an MBA program at the time because she wanted to understand the darker corners of the financial industry. As she dug into the saga of 70 Prospect Park West, she found one of those corners.
“This isn’t just a story about housing,” she realized. “It’s about turning social goods, needs, and pleasures into a vehicle for maximizing value for wealthy investors. We should write something big about it.”
That was the start of one of the most sweeping reporting packages Mother Jones has done in some time, a newsroom-wide effort nearly six months in the making, culminating with more than a dozen stories, videos, data visualizations, and a full issue of our print magazine. All to explore what has become one of the most powerful—but mostly hidden—forces in the global economy: private equity.
You can read the entire package here, and I’ll let Hannah take you on a guided tour of the reporting itself. But putting it together also gave us a window into the relationship between journalism and capitalism, and that’s something I wanted to dig into a little. Full disclosure: We also need to close a considerable $225,000 gap in our online fundraising budget by June 30, so I’ll be asking for donations as I go—because Mother Jones is one thing private equity will never own any piece of.
It’s called “private” equity for a reason
Unless you closely read the finance pages, private equity is mostly hidden from view, but its effect on our lives can be more dramatic than what Congress does. Nearly 1 in 14 Americans now works for a company controlled by private equity. PE investors might own the building where you live, the daycare your toddler attends, the nursing home that cares for your mother, the pet store where you pick up kibble. And they are squeezing the lifeblood out of all of them. As Hannah reports,
“In the last decade, private equity has taken control of more than 80 retailers, leading to the loss of 1.3 million jobs. Private equity incursions into real estate have left no form of housing unscathed, driving up the costs of both owning and renting… They’ve bought up for-profit colleges, driving down graduation rates while increasing student debt. They’ve sought gains in the obscure crevices of our existence, from contact lenses to port-a-potties to ketchup. And they’ve enveloped the health care sector, including hospitals, dermatologists, ophthalmologists, veterinarians, hospice care, and nursing homes, often leading to increased medical costs for patients and a drop in the quality of care. A 2021 study found that private equity ownership of nursing homes increased their Medicare billing and upped the mortality of patients by 10 percent—about 20,000 lives across the 12-year period they studied.”
The Bushmaster rifle that a 20-year-old used to murder 20 children and six adults at Sandy Hook Elementary? Brought to you by private equity. Countless familiar names in publishing: Field & Stream, Popular Science, Yahoo News, all owned by private equity; Vox Media, New York magazine, BuzzFeed, HuffPost, all financed in part by venture capital, its close cousin. Lots of local TV stations, the nation’s biggest radio and podcasting company, and (until recently) America’s largest newspaper chain, Gannett? Private equity. Fertility clinics? The Democratic Party’s voter database? Billions propping up oil and gas companies? You guessed it.
They buy up politicians too: A Reagan-era tax loophole for their profits costs taxpayers as much as $18 billion each year. Democrats have promised to eliminate it for decades. Why has it not happened? As MoJo’s Tim Murphy reports,
“Large private equity firms and hedge funds have filled Democrats’ coffers for years and served as a comfy landing pad for ex-politicos. Treasury Secretary Tim Geithner—who once urged Congress to tax private equity ‘the same way we tax the income of teachers and firefighters’—left the Obama administration for a job in PE. Bill Clinton’s first post–White House job was with a PE firm run by a billionaire donor. In 2014, Joe Biden spent Thanksgiving at a 13-acre Nantucket estate belonging to the co-chair of the Carlyle Group, David Rubenstein.”
(Most recently, it was Senator Kyrsten Sinema who killed her Democratic colleagues’ attempt to reform carried interest.)
Republicans, for their part, picked a private equity billionaire as their presidential candidate in 2012; in 2016, Trump bashed private equity moguls for “paying nothing” in taxes (he would know) and then stuffed his administration with them. (Both Trump’s son-in-law, Jared Kushner, and his Treasury Secretary, Stephen Mnuchin, have since launched their very own private equity firms, both funded with billions from the Saudi government.)
Shorter version: Private equity spends a few million dollars on lobbying, keeps its mega-loophole, rinse and repeat. So the next time you see headlines about how the government can’t pay for an ambitious climate program, or fighting COVID, or universal preschool, think of that special tax dodge for private equity executives, whose average earnings run around $1.3 million a year. (And the next time you curse at inflation, save a bit of outrage for “pricing transformation,” which is finance-ese for charging more for something while making the product worse—a key tool for the kinds of investors who look to “extract value” from the companies they buy before discarding them.)
Journalism for fun and profit
“How do we extract the most value from the patient we’re killing?” That seemed to be the key issue for the private-equity backed investment firm that bought the paper where Evan Brandt worked as a reporter. “We were working harder and harder for people who didn’t care who you were, didn’t care what you were doing, didn’t care what you were trying to do for the community,” Brandt told my colleague Noah Lanard. “They were only interested in the number next to your name: your salary.”
The Pottstown (Pennsylvania) Mercury wasn’t the only paper Brandt’s new bosses at Alden Global Capital were squeezing. Back in 2018, Julie Reynolds, a tenacious local reporter in California, revealed that Alden had extracted at least $241 million in profits from Digital First Media, another newspaper chain it bought up. During this time, the company’s then 38-year-old president, Heath Freeman, bought a $4.8-million mansion in East Hampton and proceeded to expand it by a third, because you can’t really spread out in just five bedrooms and five bathrooms.
When Brandt made his way to Freeman’s front door to ask a question (“What value does local news have?” is the one he chose), the boss walked away, Dave Matthews blasting in the background, before Brandt could get a word out. But the one time Freeman gave a newspaper interview, he claimed that Alden’s goal was to be “remembered as the team that saved newspapers” by putting them “on a path to sustainability.”
Let’s take Freeman at his word for a minute, though, because Alden only takes to the extreme an idea that has been pretty pervasive in the news business—so much so that even people who should know better take it for granted: That if news doesn’t maximize profit for investors, it doesn’t deserve to exist.
Follow me for a moment to a recent conference put on by one of the most important journalism funders in America, the Knight Foundation. We’ll tune in at the point where Alberto Ibargüen, its president, is interviewing Jim VandeHei, co-founder of the news sites Politico and Axios. Right out of the gate, VandeHei announces that “I happen to really believe in the animal spirits of capitalism.”
What kind of animal, you might wonder: A vulture like Alden? A predator, like Sinclair Broadcasting, which bought up local television stations and forced anchors to mouth scripted right-wing propaganda? A bottom feeder like the content farms whose gross photos and headlines try to lure you in on nearly every news site? A parasite like the dark money-funded propaganda shops that sling fake headlines all over Facebook?
VandeHei didn’t specify his zoological reference before Ibargüen launched into his next question: What makes his company different from the nonprofit newsrooms springing up in many communities?
“A not-for-profit works beautifully as long as you have a constant flow of money, when you don’t have a profit that can sustain it,” VandeHei said. “But what happens when that money goes away?”
Huh? I’m used to shade from for-profit publishers—MoJo would have a fat endowment if I had a nickel for every time someone equated “nonprofit” with “amateur.” And like everyone trying to sustain an organization, I’m used to worrying about what happens if the money goes away. Like right now, when we’re hoping for $225,000 in support from readers to come in this month so we can stay the course doing the fearless journalism you rely on.
But VandeHei was talking about… something else, though it was hard for me to figure out what exactly. A “profit that can sustain it”? Isn’t a profit what’s left over after you “sustain it”—what you can pay your investors or shareholders, once you’ve paid the bills? The key to a nonprofit enterprise like Mother Jones is that we can put all the revenue into “sustaining it”—the journalism, that is. At a company like Axios, the investors also want to get paid.
“In a clear-eyed business, in a for-profit atmosphere,” VandeHei went on, “I have to make a thing that lasts forever. I have to make every single piece of it both excellent and scaleable. I happen to be of the belief that to get the animal spirits of capitalism unleashed…”
Animal spirits! Drink!
VandeHei is a smart businessman who deserves a ton of credit for building two successful media companies. (Whether they are “things that last forever” we don’t know yet: Politico is 15 years old, Axios 5, compared to 46-year-old Mother Jones.) That’s why he deserves a bit of factchecking.
Fact # 1 almost goes without saying: There’s zero evidence that profit guarantees excellence. When was the last time you looked at your bank or your insurance company and thought “thank you, animal spirits of capitalism, for making every piece of this excellent”?
Fact # 2: Every business, obviously, needs a “constant stream of money”: That’s called revenue, whether it comes from donations, magazine subscriptions, or selling T-shirts, and us nonprofits have to fight for it just like everyone else. We compete for audience, attention, and support, and we hustle like hell. No “constant stream of money” that magically flows in.
Fact #3: Unlike a for-profit startup, a nonprofit generally doesn’t have the option of raising round after round of capital from big-money investors on the promise of turning a profit one day. (And unlike a private for-profit, we have to be accountable by disclosing a thorough set of financials. You can find them here.) We have to balance our budget, year after year, and we can only do it because so many of you invest in our work with a donation.
So here’s the simple answer to Ibargüen’s question: The difference between a for-profit newsroom and a nonprofit one is that a nonprofit has to bring in exactly enough money to do the work. A for-profit has to bring in money to do the work, and generate profit. And when there are choices to be made between journalism and profit, profit often wins.
Which is exactly what we’ve seen play out over and over with the high-flying media startups of the past decade or two. “There was seltzer on tap, an endless enthusiasm for trying new things, and a sense of delight that we were—as many disgruntled commenters noted over the years—getting paid to do this,” BuzzFeed alum Rachel Sanders recalled in The Nation after BuzzFeed announced a round of layoffs this spring. “For a few years, there was a weightless feeling to all of it, as if we could do or be anything, as if we had figured out how to speak a language that no one else in the media business understood.”
That sense—that BuzzFeed (or HuffPost, or Mic, or Vice) had figured out something that no one else could—was prevalent everywhere. Look, I remember being told, how fast they’re growing, how many people they’re hiring, the salaries they’re paying! Why can they make money producing news and you can’t? If some of these investors claiming to know how news can make a profit had chosen to support nonprofit journalism instead, I wouldn’t be on pins and needles about that $225,000 we need in donations this month.
The truth was that no one makes money producing the journalism that a democracy needs to function—and no one ever has. That’s all there is to it.
Every time an American newsroom does quality public service reporting, it is subsidized by something. In the old days the sports and lifestyle sections in your newspaper paid for the it; at BuzzFeed the fun, viral content and the Walmart partnership subsidized the investigative and in-depth work. But as soon as the market gets a little harder edged, the purse string-holders’ first question is: Who needs a newsroom anyway? Don’t get me started on the depressing tale of CNN+, the news subscription service killed off by new CNN owner Discovery Media/Warner Bros. after a $300 million investment and just 32 days online. “Those who like to assail corporate owners that don’t have the backs of their journalists just got a fresh and compelling case in point,” wrote the Washington Post‘s Erik Wemple.
The only surprise, really, is that the animal spirits of capitalism are so gullible.
Over and over again, investor money flows to the same handful of ideas to “save journalism”—millennial audiences! Pivot to video! True-crime podcasts! Substack! The latest flavor is “posh news for posh people,” as one British executive called it. Politico and Axios have their “Pro” versions that cost thousands to access (easy for a lobbyist to expense, less so for us mortals), and a whole string of pluckily named startups (Punchbowl, Grid, Airmail, Protocol, Puck) are similarly taking aim at elite news junkies. Most recently “the Smiths”— former BuzzFeed editor Ben Smith, and former Bloomberg Media CEO Justin Smith—have gotten buzz for their breakthrough idea of news for the “200 million people who are college educated, who read in English, but who no one is really treating like an audience.”
“No one,” except for literally everyone.
On the one hand, of course, this makes sense: News costs money, so you ask people to pay for it, and whom better to ask than those who have the money? According to a 2019 study, more than three-quarters of American newspapers had thrown up a paywall by then, up from 60 percent in 2017, with digital news sites close behind—and that number has only kept rising.
What happens when so much news is only for those who can pay—ideally, pay a lot—while propaganda is plentiful and free? You can bet Fox News, Newsmax, and Breitbart are not putting up paywalls.
There’s another way
At MoJo, you won’t find a paywall keeping you from our reporting, because we believe—and more importantly, you believe—that everyone should have access to the facts and context behind the day’s headlines and the big investigations that are too often overlooked by other outlets. So we hope that instead of locking you out, we can bring you in. Animal spirits of capitalism? I’d rather bet (with all respect for our fellow animals) on the human spirit.
Investigating the “great unelected power wielders of our time,” as one of MoJo’s cofounders, Adam Hochschild, put it a long time ago, is not easy. There’s a reason why business sections often don’t cover corporate corruption until it’s too late. (“How Could 9,000 Business Reporters Blow It?” was the title of the Mother Jones investigation that looked at how the press performed before the 2008 crash.) Former General Electric CEO Jack Welch is still celebrated as a business genius basically for cutting jobs, manipulating financial tools, and cheering on his pal Donald Trump. So is Elon Musk, who has the gall to rail against government after building much of his wealth on tax subsidies, and then—in perfect Jack Welch style—cuts 10 percent of his salaried workforce because he has a “super bad feeling.” (I’ll save my thoughts on Musk’s cat-and-mouse game with Twitter, and his “free speech for me but not for thee” hypocrisy, for another day.)
Investigating companies like GE and CEOs like Musk will often get you get slammed as an “extremist” or a lobbyist, threatened with lawsuits, or swarmed by online mobs (more so if you’re a woman or a journalist of color). It also takes a lot of work: The private equity project we just completed involved some 20 reporters and editors, half a dozen fact-checkers, two video producers, not to mention the art, web, and social media experts who made the reporting sing in our print magazine, and on platforms from Instagram and TikTok to Twitter and YouTube. Ian Gordon, another one of our brilliant editors, describes all that went into it in an epic thread here. I doubt the animal spirits of capitalism would have said, “Yeah, Hannah, we should write something big about this.”
The cost to make all that happen runs into hundreds of thousands of dollars, and you can see the fruits of that investment (and why I hope you’ll support our team’s reporting if you can right now) in Clara’s 29-message Twitter thread, which highlights each of the stories we published. As she writes, “We knew PE was a behemoth, but it wasn’t until we were deep into it that we really understood just how much it was warping…everything.” And if you like your news in moving images, check out our video team’s incredibly on point, hilarious-yet-dystopian, overview:
I’m always a little reluctant to toot our own horn, but we so often hear from folks who want to know what goes into the work we do, and what impact it can have. And I’m just so damn proud of what Clara, Hannah, and the whole team have produced here, and how they took the risk of tackling a big, unsexy, not-in-the-headlines, but critical topic.
The morning we published the project, Hannah shared that she was nervous if anyone would care. But then the responses flooded in. “Mother Jones has been right, and way ahead of the curve, about a lot of stuff exactly like this so imma listen,” one reader tweeted—the highest compliment. Senator Sheldon Whitehouse tweeted the part of the package that focuses on how private equity lets Putin’s cronies hide their wealth and warned that “Wall Street needs to step up and consider national security.” Former Obama speechwriter Jon Lovett called it “really amazing reporting,” that “we should all be talking more about” and hosted Hannah on his Lovett or Leave It podcast. David Cay Johnston, who has covered corporate welfare for the New York Times and others for decades, had this to say:
Stunning @MotherJones expose.
Package shows how private equity is making investors huge profits by ravaging successful businesses, selling enterprises off for parts, leaving wreckage – debt, lost jobs and tax losses. https://t.co/6to5e1mOCg
— David Cay Johnston (@DavidCayJ) May 10, 2022
This is the kind of investment that newsrooms across the country used to make regularly—in-depth reporting that shines a light on who’s pulling levers behind the scenes. Fewer and fewer can do it, because owners are too busy squeezing them for quarterly profits. Mother Jones can, because donations from readers like you fund our work.
“It feels to me like there are no good options in terms of funding journalism,” former BuzzFeed reporter Rosie Gray said after the company announced layoffs this spring. “Because on some level, capitalism and journalism are just always going to have competing interests, always going to be at loggerheads. The need to make money, as a for-profit company, and to please investors and so on and so forth—it just comes directly into conflict with what journalists do.”
Gray is right—except that there is a better option. You are part of it.