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Mitt Romney’s real business problem

Is Mitt Romney still too much of a businessman for politics?

Someone close to Bain Capital recently suggested to me that Mitt Romney’s greatest business attribute might also be his greatest political liability. And, upon reflection, I tend to agree.

Here’s what he meant: Successful private equity investors must be flexible enough to quickly adapt to changing outside circumstance. The ability to make hard pivots. For simplistic example, imagine you own an American sundress maker that also has a small steel-fencing division. But then the Chinese government begins subsidizing its own sundress industry. Maybe the best response is to ramp up your steel-fencing production and leave the sundresses behind. Or maybe you move your own operations to China.

More generally, private equity deals usually take a long time. It’s not at all uncommon to spend six or seven months on a deal, and then completely drop it due to either a new discovery or unanticipated macro event. What you loved yesterday may be dumped in the trash today.

Romney was good at making those sorts of choices. It’s one of the reasons that he made millions of dollars for himself and helped generate billions of dollars for Bain Capital’s investors.

In politics, however, such reactionary flexibility in a liability – and perhaps is why Romney has been all over so many important issues. Just yesterday, his campaign could no longer say whether or not he still believes that carried interest should be treated by the IRS as capital gains. Maybe what changed between 2007 and 2012 is that the average voter is now learning what carried interest actually is, and that development represents a material change in Romney’s mental calculus.

Last night I discussed this theory with Scott Helman, a Boston Globe reporter who recently co-authored a biography titled The Real Romney (we were both in a local TV green room). He found it interesting, and suggested that Romney’s habit of adapting to outside circumstance may actually go back to his Mormon missionary days, where such flexibility was part of the job requirement.

Romney’s been in politics for a while now, but maybe there are certain personal attributes that get hard-wired through experience by the time you’re in your 50s…

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