The Shadow of Profit: How Private Equity Reshapes the American Dream

By Apirate Monk

On a crisp autumn morning in 2017, Linda Harris stood in the break room of the Emeryville, California, Toys “R” Us, her hands wrapped around a chipped ceramic mug, staring at a memo pinned to the bulletin board. The store was quieter than usual, the aisles of action figures and board games eerily still, as if the toys themselves sensed the end. The memo announced what she’d feared for months: the company, drowning in debt from a 2005 leveraged buyout by private equity firms Bain Capital and KKR, had filed for bankruptcy. By March 2018, all 735 stores would close, leaving Linda and 33,000 colleagues jobless. She’d been a floor supervisor for nearly a decade, her pride etched in the Toys “R” Us logo tattooed on her forearm—a symbol of the best job she’d ever had, now fading like the American dream she thought it represented.

Linda’s story, one of four at the heart of Megan Greenwell’s Bad Company: Private Equity and the Death of the American Dream, is not just a tale of personal loss. It’s a window into a shadowy force reshaping the nation’s economic and social fabric. Private equity, a multitrillion-dollar industry that thrives in obscurity, has quietly infiltrated industries from retail to health care, housing to local news, extracting wealth with surgical precision while leaving workers, communities, and institutions to bear the cost. This is the story of how private equity’s relentless pursuit of profit has hollowed out the pillars of American life—and how those caught in its wake are fighting to reclaim what’s been lost.

The Mechanics of Extraction

Private equity’s business model is deceptively simple, yet devastatingly effective. Unlike venture capital, which bets on startups with potential for exponential growth, private equity targets established companies, often acquiring them through leveraged buyouts. In these deals, firms like KKR, Apollo Global Management, or Cerberus Capital Management pool money from wealthy investors—pension funds, university endowments, high-net-worth individuals—and borrow heavily to buy a company outright. The twist? The debt is placed on the acquired company’s books, not the private equity firm’s. As Greenwell explains, “If I make an offer for your company, and I’m borrowing money to buy it, I’m not responsible for paying that money back; only you are.”

This divorce of incentives lies at the heart of private equity’s impact. Firms profit through management fees—typically 2 percent of assets under management—and by extracting value through tactics like selling off a company’s real estate, then charging it rent on its own former property. A 2020 study by the Center for Economic and Policy Research noted that private equity-owned companies are ten times more likely to go bankrupt than their publicly traded counterparts, with 20 percent entering bankruptcy within a decade of acquisition, compared to just 2 percent for others. The acquired companies, saddled with debt and stripped of assets, often buckle under the pressure, while the private equity firms walk away enriched, regardless of the outcome.

Linda Harris felt this firsthand. Toys “R” Us, once a retail juggernaut, was acquired in 2005 for $6.6 billion, with Bain and KKR contributing just $1.3 billion in cash and borrowing the rest. By 2017, the company was paying $400 million annually in interest on that debt, unable to invest in e-commerce to compete with Amazon or Walmart. When bankruptcy came, it wasn’t just a corporate failure—it was a personal catastrophe for workers like Linda, who lost health insurance, stability, and a job she loved. “I couldn’t find anything else that paid as well, that gave me that sense of purpose,” she told Greenwell, her voice cracking as she recounted the struggle to feed her family.

A Rural Hospital’s Collapse

Halfway across the country, in Riverton, Wyoming, Dr. Thomas Dunaway faced a different kind of loss. A rural physician with decades of experience, he watched helplessly as Apollo Global Management’s 2018 acquisition of LifePoint Health, which owned his hospital, led to a cascade of cuts. The obstetrics unit closed, forcing expectant mothers to drive hours for care. The mental health ward, the only one in Fremont County, was shuttered, leaving psychiatric patients in general wards without proper staff or security. The consequences were catastrophic: in November 2020, a psychiatric patient, left unsupervised in a regular room, attacked an elderly woman, gouging out her eye in an assault that led to her death—a homicide born of cost-cutting.

A 2023 study published in JAMA found that private equity-owned hospitals saw a 25 percent increase in adverse events, like infections or falls, within three years of acquisition, often tied to reduced staffing and resources. In Riverton, the cuts weren’t just numbers—they were lives disrupted, families fractured. Dr. Dunaway, nearing retirement, couldn’t stand by. He began advocating for state-level oversight, joining a growing chorus of health care workers pushing for reforms to curb private equity’s influence. “We’re not just losing services,” he told Greenwell. “We’re losing the trust that holds a community together.”

The Newsroom’s Last Stand

In Virginia, Sarah Miller, a journalist at a Gannett-owned newspaper, saw her newsroom gutted after a brief period under Fortress Investment Group’s influence. Gannett, already struggling with declining ad revenue, merged with a Fortress portfolio company in 2019, leading to layoffs and slashed budgets. Sarah, who led union negotiations to protect her colleagues, described the newsroom as a “skeleton crew” trying to cover a city with dwindling resources. “We were writing about our own communities being hollowed out,” she said, “while our own jobs were on the chopping block.”

The decline of local journalism has broader implications. A 2018 study from the University of North Carolina’s Hussman School of Journalism found that the loss of local newspapers correlates with reduced civic engagement, lower voter turnout, and weaker government accountability. Private equity’s role, while not the sole culprit, exacerbates the crisis by prioritizing short-term profits over long-term sustainability. Sarah’s response was to pivot to nonprofit journalism, helping launch a local news startup to fill the void left by Gannett’s retreat. “If we don’t rebuild,” she told Greenwell, “who’s going to tell our stories?”

Housing and the Profit Motive

In Richmond, Virginia, Maria Gonzalez, an affordable-housing organizer, faced private equity’s impact in her own home. Her apartment complex, acquired by CIM Group, became a nightmare of burst pipes, mold, and unresponsive management. “We were paying rent for a place that was falling apart,” she said. CIM, like many private equity real estate firms, had bought the property to extract value, not to maintain it. A 2021 report by the Private Equity Stakeholder Project highlighted how private equity ownership of multifamily housing often leads to higher rents and worse living conditions, as firms cut maintenance budgets to boost returns.

Maria’s fight was personal but also collective. She organized tenants to demand repairs and lobbied for local regulations to hold landlords accountable. Her work echoed a broader movement: in 2023, Massachusetts passed a bill increasing scrutiny of private equity deals in health care, spurred by hospital closures, and Pennsylvania is considering similar measures. These state-level efforts, Greenwell notes, offer glimmers of hope amid federal inaction, where proposals like Senator Elizabeth Warren’s Stop Wall Street Looting Act have stalled despite bipartisan calls to close tax loopholes favoring private equity.

The Space Dream That Fell to Earth

Perhaps no story illustrates private equity’s transformative power more starkly than Stratolaunch, the aerospace venture founded by Microsoft co-founder Paul Allen. Conceived to launch satellites from the world’s largest airplane, Stratolaunch embodied Allen’s dream of democratizing space. But after his death in 2018, his sister sold the company to Cerberus Capital Management for a fraction of his investment. Cerberus, known for controversial ventures like its failed attempt to consolidate the firearms industry, pivoted Stratolaunch to focus on hypersonic weapons for defense contracts, abandoning its space ambitions.

When WIRED’s Steven Levy visited Stratolaunch’s Mojave Desert hangar in 2018, he marveled at the plane’s 385-foot wingspan, a “breathtaking spectacle” designed to hurl rockets into orbit. By 2021, under Cerberus, it was a defense contractor, its mission tied to hypersonic missiles that could destabilize global security. The shift wasn’t just a business decision; it was a betrayal of a vision that prioritized exploration over profit. As a UN report on hypersonic weapons warned, such technologies could accelerate the nuclear arms race, with defensive measures paradoxically fueling escalation.

The Fight for a New Dream

What unites Linda, Dr. Dunaway, Sarah, and Maria is not just their losses but their defiance. Linda traveled the country, speaking to pension fund boards—whose investments fuel private equity—about the human cost of their decisions. Her testimony, raw and unfiltered, moved board members to reconsider their allocations. Dr. Dunaway’s advocacy helped spark state-level reforms. Sarah’s pivot to nonprofit journalism is part of a broader movement to rebuild local media. Maria’s tenant organizing has pressured landlords to act.

Yet, as Greenwell cautions, private equity didn’t create these industries’ underlying problems. Retail struggled with e-commerce; hospitals faced rural decline; newspapers battled digital disruption; housing grappled with affordability crises. Private equity exploited these vulnerabilities, amplifying the damage. “The problems are so fundamental,” Greenwell writes, “that earlier business decisions… opened the door and invited private equity to walk right in.”

The data backs her up. A 2022 Cambridge Associates report shows private equity consistently outperforms public markets, delivering at least 7 percent annual returns after fees since 2000. But this success often comes at the expense of portfolio companies, which grow revenue faster under private equity but face higher bankruptcy risks. The industry’s defenders argue it brings efficiency, citing examples like KKR’s Pete Stavros, who grants employees partial ownership in buyouts. Critics, however, point to the wreckage—Toys “R” Us, LifePoint, Gannett—as evidence of a model that prioritizes extraction over creation.

A Reckoning on the Horizon?

The Atlantic’s style demands not just critique but reflection. Private equity’s rise reflects a broader cultural shift: a reverence for profit above all else, cloaked in the myth of meritocracy. The industry’s leaders—Henry Kravis, Stephen Feinberg—move through elite circles, their names on hospital wings and museum boards, yet their firms operate in shadows, shielded by shell companies and light regulation. Greenwell’s book, and the stories within it, challenges this opacity, demanding accountability not just from private equity but from a system that enables it.

Hope lies in the small, stubborn acts of resistance. Linda’s pension fund speeches, Dr. Dunaway’s regulatory push, Sarah’s nonprofit venture, Maria’s tenant organizing—these are not panaceas but proofs of concept. They suggest that the American dream, battered by private equity’s profit motive, can be reimagined through collective action. As Greenwell told Vanity Fair, “I didn’t want to write a book that was like: Man, this all sucks.” Instead, she offers a narrative of resilience, a call to rebuild industries and communities from the ground up.

In Emeryville, Linda Harris no longer walks the aisles of Toys “R” Us. But her voice, echoing in pension boardrooms, carries a warning and a promise: the dream isn’t dead, but it’s on life support. The question is whether we—workers, policymakers, citizens—can wrest it back from the shadows of profit.