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The Rich Really Are Different

12:00 AM, Jan 24, 2012 • By JONATHAN V. LAST
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It’s not clear, however, that Romney’s defense of Bain really gets to the heart of the matter as voters see it. Even if you stipulate that (1) Romney never acted improperly at Bain and (2) However unpleasant outsourcing, layoffs, and debt leveraging are, it was all to the creatively destructive good—you’re still left with two uncomfortable questions for which the candidate has no answer.

First, there’s the notion of how Romney has sold himself: as an entrepreneur who took risks to create success. This vision is true, to a point. Romney did run a company, Bain Capital. But he achieved executive status via a highly unusual pathway. The idea for Bain Capital was not Romney’s (it was the brainchild of Bill Bain). And the startup money behind Bain Capital was not Romney’s (it came from Bill Bain and other partners in his consulting firm). Romney was an employee of Mr. Bain—an incredibly talented and valued employee. And Mr. Bain asked him to run this new venture with an explicit guarantee that if the job didn’t work out he could always have his old position back—and that if he failed, Mr. Bain would be sure to cover up the failure. Here’s how Michael Kranish and Scott Helman tell the story in Vanity Fair:

And so [Bill] Bain made his pitch: Up to that point, Bain & Company could watch its clients prosper only from a distance, taking handsome fees but not directly sharing in profits. Bain’s epiphany was that he would create a new enterprise that would invest in companies and share in their growth, rather than just advise them.

Starting almost immediately, Bain proposed, Romney would become the head of a new company to be called Bain Capital. With seed money from Bill Bain and other partners at the consulting firm, Bain Capital would raise tens of millions of dollars, invest in start-ups and troubled businesses, apply Bain’s brand of management advice, and then resell the revitalized companies or sell their shares to the public at a profit. It sounded exciting, daring, new. It would be Romney’s first chance to run his own firm and, potentially, to make a killing. It was an offer few young men in a hurry could refuse.

Yet Romney stunned his boss by doing just that. He explained to Bain that he didn’t want to risk his position, earnings, and reputation on an experiment. He found the offer appealing but didn’t want to make the decision in a “light or flippant manner.” So Bain sweetened the pot. He guaranteed that if the experiment failed Romney would get his old job and salary back, plus any raises he would have earned during his absence. Still, Romney worried about the impact on his reputation if he proved unable to do the job. Again the pot was sweetened. Bain promised that, if necessary, he would craft a cover story saying that Romney’s return to Bain & Company was needed due to his value as a consultant. “So,” Bain explained, “there was no professional or financial risk.” This time Romney said yes.

There are two readings of this story. One is that Romney is a shrewd, skilled negotiator who thinks deliberately and strategically. This would be an excellent quality in a president. The other is that Romney is uncomfortable risking his own personal capital and will only go so far as he can under the cover provided by others. This would be a less desirable quality in a commander-in-chief.

The second question about Romney’s Bain years is the extent to which he can reasonably be thought of as a “job creator.” Romney’s own count of the jobs he created at Bain keeps growing. In Iowa it was 100,000; by South Carolina the total was up to 120,000. Whatever the number, the vast majority of jobs he takes credit for building come from a single source: Staples Inc.

Romney’s association with Staples is worth examining in some detail. Not because anything in it reflects badly on Romney—quite the contrary. The locution he personally uses is usually that he “helped create” 89,000 jobs at Staples. But his campaign is occasionally less careful. Last weekend, for instance, Chris Christie, his most energetic surrogate, said of Staples and another company (Sports Authority) Romney was involved with, “Anyone who goes to work at those places today has Mitt Romney to thank for it.”

Staples was the brainchild of two Boston-area retail rivals, Tom Stemberg and Leo Kahn. Their stories are inspiring. A middle-class kid, Stemberg attended Harvard College on a full scholarship and did well enough there to advance straight to Harvard Business School. After getting his MBA, he went to work for the grocery chain Star Market. There, he learned how to do every job in the store—from cashier to meat cutter—as he worked his way up the company ladder. In 1975, he did something at Star no one had ever tried: Offering store-branded generic products. It revolutionized the grocery business.

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