A review of Songs of Profit, Song of Loss: Private Equity Investing in New York City, by Daniel Souleles
Daniel Souleles’ ethnographic study of American private equity offers critical insight into this rarefied world. Faced with the methodological challenge of studying those who do not want to be studied, Souleles presses on in this engagingly written dissertation to show both how private equity works and the people who make these deals. The dissertation challenges reductionism in the analysis of finance and financial actors. Through interviews with investors, attendance at industry conferences, and analysis of financial reports and documents, it unveils the way that individuals in the world of private equity understand and legitimate their own social worlds, and in so doing, shape an emergent form of capitalist accumulation. Weaving together the technical workings of a complex financial world with theoretical insights of anthropology, this project contributes not only to the emergent scholarship on the anthropology of finance, but also longstanding anthropological questions about value, time, and social organization.
In the “Preface,” Souleles draws both inspiration from and flags concerns about Karen Ho’s influential work in the anthropology of finance. Critiquing generalizations of the varied practices of finance being lumped into the singular category of “Wall Street,” Souleles argues that private equity practices challenge some of the accepted norms of finance. Moreover, challenging the habitus framework of analysing those who work in finance, following Maurice Bloch, he offers a “long conversation” (p. xiv) with private equity investors to understand their social world.
In the introductory chapter “Something New,” Souleles traces the history of private equity as an novel way of getting rich. Analyzing the case of Kohlberg, Kravis and Roberts (KKR)’s purchase of a manufacturing conglomerate, Houdaille—the original private equity deal—Souleles walks the reader through the basics and innovations of private equity. As a paradigm shift, private equity opens up a new form of investing; namely, of buying with other people’s money (i.e., through debt). Being and becoming investors in this emergent world of private equity are tied up with notions of value that the rest of the dissertation unpacks.
In the second chapter, “Methods, or How to Study People Who Do Not Want to Be Studied,” Souleles raises fundamental questions about ethnographic theory and methods. Faced with the challenge of trying to study those who do not want to be studied, Souleles lays out his various innovative strategies to finding informants. The in depth discussion of methodology not only offers strategies to conduct research, but also offers a meditation on practices of studying up. In particular, where secrecy is at the heart of private equity, theory and methodology are wrapped into each other.
In noting how people value time and money is central to the process of investing, Souleles offers in the chapter titled “Anthropological theories of Value and Time” an “inventory” (p. 66) of the largely anthropological literature on the two concepts. On value, the chapter offers overviews of both theories of economic value, from the more Marxist traditions of Karl Marx and David Harvey, as well the ethical and symbolic dimensions of value, including classic anthropological work from Marcel Mauss to more recent literature from David Graeber. In relation to time, Souleles draws on works that show how time and temporality are socially constructed in a variety of ways, drawing again from classic work such as E.E. Evans-Pritchard on the Nuer to Maurice Bloch and Alfred Gell. These theories of value and time help to frame the ethnographic chapters that follow.
In the fourth chapter, “Finding Value: Secrecy and Private Equity,” Souleles turns to the question of how private equity investors both understand value, and transform abstract notions of value into money, or “accountable value” (p. 100). Such abstractions on value hinge not only evaluating financial values, but also on deciding “among possible future worlds which ones are worth spending time on” (p. 94). Success in private equity, Souleles finds depends on investors being able to identify value “that no one else could see” (p. 95). The example of Alvin, who unlocks the hidden value of a seemingly boring warehouse business, highlights the quest of private equity investors to locate unseen value. What Soulales highlights in this chapter is that speculative world of private equity, is less a casino, and more of an excavation in the attempt to unearth unseen value.
How is time valued? In the chapter, “Time after Time is Money,” Souleles examines how the search for value is constrained by time. Time, then, is another vector through which value is understood and unearthed by PE investors. First, the chapter unpacks the ways in which ideas about time and money go from abstract or aesthetic judgments as to when and why something is valuable to the concrete formula that makes a value claim (p. 117). To understand these translations, Souleles examines the limited partner agreements that set the terms, particularly the time horizon, between the large pools of money invested in private equity (e.g., pension funds) and the financial professionals that manage them. Private equity’s task, Souleles argues, is to predict the future so that “one can know how much time one needs to spend in order to make money” (p. 120). The sense of time is that “of how and when one can move between various possible worlds” (p. 123). Second, drawing on an extended analysis of a private equity investment in one company, Moonbeam, the chapter explores the ways in which investors understand time both in terms of predictive qualities, and of time as scarce resource, whose value must be carefully managed.
In “To Buy or Not to Buy,” Souleles turns to the question of how PE firms select their investments, particularly through practices of due diligence. This chapter raises the interesting quandary of how, despite being avowed market capitalists, private equity investors contend with poor-information environments to find their investments, particularly where—as explore earlier—value is locked in secrecy. Beyond quantitative speculation, Souleles relates the work of private equity to Clifford Geertz’s notion of the bazaar, and the search for accurate information about price. Through a series of cases, Souleles shows how investors and consultants find non-quantitative forms of assessment to understand these values, from interaction between people to debates with consultants.
The seventh chapter, “Managing for What?” turns to the impact PE has on reordering the companies it invests in, and the social worlds of people who work in these companies. The chapter shows how the PE deals bring together different systems of value—that of the investors, and that of the companies and communities reshaped by private equity. The deal—or the entirety of the process from diligence, purchase, to management—Souleles argues, drawing on Marcel Mauss, is a total social fact that brings together and rearranges various pieces of the social world, so that it can extract capital.
The concluding chapter draws together the critical theoretical arguments of the dissertation on time and value. Souleles then uses the theoretical and methodological insights that arise from private equity to compare it to the world of venture capital. Finally, the dissertation turns to the ways in which the work of private equity, as a part of the larger process of financialization, comes to shape social organization and new forms of accumulation. As the dissertation demonstrates, this process is not simply of the cultivation of a particular disposition, but rather, intimately connected in the ways that financial actors understand social and ethical forms of valuation.
Once published, this work will enliven the current literature on the anthropology of finance, by providing a richly and often humorously detailed examination of private equity as distinct from other forms of financial work. Moreover, as anthropology turns increasingly to studying up in places with lesser access, the discussion on methodology will provide key insights into these practices.
Department of International Development
London School of Economics and Political Science
Interviews and communications with private equity investors
Private equity conferences
Limited Partner agreements
Student/campus activities relating to private equity investing
Columbia University. 2015. 337 pp. Primary Advisor: Terence D’Altroy.
Image: Les Affiches de mai 68 ou l’Imagination graphique, Exhibition at Bibliothèque nationale de France, http://gallica.bnf.fr/ark:/12148/bpt6k6532558s/f10.image.