The 1980s Garfield buyout that changed corporate finance

**Gillian Tett** (0:00)
He sounds like he was quite a strong believer in capitalism and in the profit motive. Dare I say it, almost like a Gordon Gekko character who believed that greed was good.

**Hettie O'Brien** (0:09)
I think he doesn't necessarily believe that it's greed that is good, but rather entrepreneurialism or what he thinks of as being that. He genuinely believes that what needs to happen to America's economy, is it needs somebody to come along and really breathe life into it.

**Robin Wigglesworth** (0:24)
Somebody in government compared them to Genghis Khan at one point, right?

**Hettie O'Brien** (0:27)
Yes, and I think that gives you both a sense of where he's coming from politically, but also a sense of his character.

**Robin Wigglesworth** (0:43)
Today on The Story of Money, we're going to be delving into a story that connects Gordon Gekko with Garfield the Cat.

**Gillian Tett** (0:52)
I love it. I mean, I was a teenager in the 1980s, and they are both icons of the 1980s. Gordon Gekko famously said greed is good, epitomizing the attitude of Wall Street in those days.
And Garfield, well, what can I say? He was a cartoon character famous for loving lasagna.

**Robin Wigglesworth** (1:12)
And believe it or not, that link is relevant.
But there's something else that links them beyond being born in the 80s, and that's the subject of today's episode. And that is the business deal that launched the private equity industry.

**Gillian Tett** (1:27)
And, I mean, let's be honest, it wasn't the first ever private equity deal out there. But the key point is that this was the deal that put private equity on the map.
And back then, in fact, it wasn't actually called private equity.
The key word is the Leveraged Buyout Era of the 1980s.

**Robin Wigglesworth** (1:45)
And that's where Gordon Gekko comes in, of course, because LBOs were all about borrowing up to the hilt, tons and tons of debt, in order to gobble up a stodgy, inefficient company, and then beating it into shape, or breaking it up and selling it off for parts, essentially. And obviously, it's hugely relevant today because private equity now controls a swath of the corporate world. It's one of the biggest alternative asset classes out there in the world. And that means it's still pertinent to ask just how much value this more cutthroat, buccaneering form of capitalism, born in the 1980s, actually adds.

**Gillian Tett** (2:24)
Welcome to The Story of Money from the Financial Times.

**Robin Wigglesworth** (2:28)
I'm Robin Wigglesworth.

**Gillian Tett** (2:29)
And I'm Gillian Tett, child of the 80s.

**Robin Wigglesworth** (2:45)
Okay, so Gillian, I promise we will get to Garfield soon enough. But first of all, we have somebody much more important to introduce, and that's our guest today, Hettie O'Brien. And Hettie is the author of a new book about private equity's influence on the world today. It's called The Asset Class, a killer name. And Hettie is also a fantastic opinion and long read writer at The Guardian. So Hettie, thanks for being here today.

**Hettie O'Brien** (3:08)
Thank you very much for having me.

**Gillian Tett** (3:09)
Now, Hettie, you work for The Guardian, which is not usually a publication that doves into the finer details of financial structures. So tell us, you know, what made you want to write about private equity?

**Hettie O'Brien** (3:23)
Well, I think that's part of the reason is that I kept finding private equity in places you just wouldn't expect it, whether that was in housing or in care homes or in our water system. And it just seemed as though after 2008 in particular, the industry had gone on this incredible spending spree, buying up everyday services and so on.
And it just made me really curious. I was wondering what on earth is private equity and why has it grown seemingly so powerful? But I think the more I looked into it, the more I realized that it goes back way beyond 2008 And there is this fascinating story about this renegade group of financiers in the late 1970s and early 80s, who really see themselves as involved in this kind of revolution that is going to breed life into America's tired economy. And they believe that they've discovered this tool of kind of financial ingenuity that will do so and that will really revive entrepreneurialism. And yet at the same time, now we're seeing all sorts of critiques directed at the industry. And so I think the sense in which it was trying to do something that perhaps it hadn't fully managed to achieve in the present day was just a contradiction that I found very interesting.

**Robin Wigglesworth** (4:34)