Capital has become commoditized with thousands of PE firms competing. The old model of buying low and selling high with minor tweaks no longer works. True value creation has shifted to hands-on operational improvements that drive long-term growth, a skill many investors lack.

Saks' downfall wasn't due to poor retail sales alone, but a failed, debt-fueled acquisition of rival Neiman Marcus, driven by the desire to own prime real estate. This reveals their core business model had shifted from selling clothes to controlling valuable property, and they failed on a real estate play.

When private equity firms begin marketing to retail investors, it's less about sharing wealth and more a sign of distress. This pivot often occurs when institutional backers demand returns and raising new capital becomes difficult, forcing firms to tap the public for liquidity.

The term 'private equity' replaced 'leveraged buyout' (LBO) after the LBO boom of the 1980s ended in a wave of high-profile bankruptcies. Howard Marks notes this name change was a deliberate marketing move to shed negative connotations and attract fresh capital to a reinvented industry.

Contrary to the narrative that PE firms create leaner, more efficient companies, the data reveals a starkly different reality. The debt-loading and cost-cutting tactics inherent in the PE model dramatically increase a portfolio company's risk of failure.

Unlike venture capital, which invests in founders to create new products, private equity acquires existing companies to extract value through financial tactics. The goal is making money from money, not necessarily improving the core business.

The system often blamed as capitalism is distorted. True capitalism requires the risk of failure as a clearing mechanism. Today's system is closer to cronyism, where government interventions like bailouts and regulatory capture protect established players from failure.

When a company's stock trades at a significant discount to tangible assets, the market signals that every new dollar invested is immediately devalued. The correct capital allocation is returning capital to shareholders via buybacks or dividends, not pursuing growth projects that the market refuses to credit.

Chip Wilson's critique of Lululemon provides a playbook for brand decline. It starts when a founder leaves, and a finance-focused board prioritizes quarterly projections. This leads merchants to double down on past winners, killing risk-taking and innovation. Top creative talent leaves, competitors seize the opportunity, and the brand slowly dies while harvesting short-term gains.