On Friday afternoon, October 26, 2012, the Alexander Hamilton Institute for the Study of Western Civilization (AHI), the AHI’s Entrepreneurship Club, and the Hamilton College Chapter of the Alpha Delta Phi Fraternity co-sponsored a panel discussion on the function of “private equity” in a capitalist economy. Presenting on the panel were Howard D. Morgan, Co-President of Castle Harlan, a private equity investment firm; Bob Hamill, Managing Director, Jefferies & Co., a global securities and investment banking group; and Charles P. (Chad) Graves III, Executive Director, Consulting Group, Morgan Stanley. Mr. Morgan is also a charter member of the AHI’s Board of Directors. AHI Charter Fellow James Bradfield, Elias W. Leavenworth Professor of Economics Emeritus at Hamilton College, moderated the panel. Each panelist was graduated from Hamilton College in 1984; each is a brother of the Alpha Delta Phi Fraternity, and each works in the financial industry in New York. Mr. Graves holds an MBA degree from Columbia University; Mr. Hamill and Mr. Morgan hold MBA degrees from Harvard University. Professor Bradfield is also a brother of the fraternity. He taught economics at Hamilton from 1976 until his retirement in June, 2012.
Professor Bradfield began the panel by proposing a framework for the ensuing discussion. He distinguished among private firms whose securities are not publicly traded (“private firms”), private firms whose securities are publicly traded (“public firms”), and publicly-owned firms (such as AMTRAK). Economists agree that accumulating capital, defined as produced goods used as inputs for further production, is the surest way to raise standards of living and thereby enable freedom and democracy to survive. Citing Hernando de Soto’s book, The Mystery of Capital, Mr. Bradfield explained how private rights to property facilitate the accumulation of capital goods because the owners of the property can issue marketable financial securities against that property.
Messrs. Graves, Hamill, and Morgan then explained how their work affected the processes of raising and managing capital for private equity firms. Central to their comments was the importance of gathering information from primary sources about prospects for specific ventures and about the interests of prospective investors who could finance these ventures, rather than relying on secondary information. Each panelist emphasized the importance of allocating capital out of less profitable uses and into more profitable ones. The three presenters complemented each other both in their preliminary comments and in addressing the many questions posed by members of the audience.
Graves, Hamill, and Morgan specialize in different aspects of raising and managing capital for private equity. None of the panelists offered “tricks” for accumulating wealth quickly, or for “beating the market.” Each panelist did explain, in detail, how the foundation for success in his work was conscientious hard work, both in gathering information, and in developing networks of relationships among persons in industry and finance.
The AHI has as one of its core missions the elevation of economic literacy both on and off campus. Private equity firms have come under considerable scrutiny during this presidential election year as a result of Mitt Romney’s Association with Bain Capital. The AHI thanks the Alpha Delta Phi Fraternity, Professor Bradfield, and Messrs. Hamill, Morgan, and Graves for a lively and searching discussion that educated the audience on private equity companies and various other aspects of the financial industry.
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