The creation of Staples was a “microcosm” of how Romney’s Bain Capital did business, according to Robert F. White, a friend of Mitt Romney and fellow Bain Capital founder.
As Bain Capital has become the focus of controversy in the race for the White House, the company and its partners have declined all requests for interviews by the media.
But in a previously unpublished 2006 interview, White told Newsmax just how Bain Capital operated with Romney as its chief.
In 1984, Romney and his colleagues founded Bain Capital as a venture capital firm and raised their first investment fund totaling $37 million.
|Mitt Romney then and now.
White remembers when Tom Stemberg, the founder of Staples, came to Bain with the idea of revolutionizing the office supply industry by starting a chain of discount office supply stores.
At the time, office supplies were sold by small stores, and the stationery business was fragmented. The personal computer was a novelty, and self-employment was not common.
“Stemberg said office supplies were being delivered very inefficiently,” White said. “Small businesses were getting their office supplies through a distribution network that was very, very costly, and therefore the supplies had to be marked up two, three, four times.”
“Stemberg told Bain, ‘If I could create a mega-store of office supplies, and I could get small business owners to drive to the store, we could substantially reduce the costs, and I could sell the office supplies at half price,’” White recalled.
“Tom felt that small business owners would actually get in a car and drive to buy their office supplies because the savings would be so great,” White added.
Many companies laughed at the idea of driving to a store to buy office supplies. But Stemberg told the future Republican presidential contender that businesses didn’t realize how much they spend on office supplies. He said the growing number of self-employed people who work at home would patronize a discount stationery store.
To test his theory, Romney had Bain conduct research.
“Before we put money in any company, we try to validate the business premise,” White said. Bain associates called small businesses to determine how much they spent on office supplies and asked if they would drive to a retail store if they could save money.
Companies would generally cite a low figure for what they thought were their office supply purchases and would say they would not drive to a store to buy office supplies. Stemberg suggested that Bain dig deeper and ask to check their invoices.
When Bain did so, most of the companies were surprised to find that they were spending many times more than what they thought they were spending. Learning that, they agreed that they would drive to a store if they could save up to half their expenditures on office supplies.
“The investment in Staples was a contrarian one, because you had to believe that small businesses would change their consumer behavior and would actually drive to a store to purchase their supplies,” White said.
“We kept pushing and pushing and pushing. Several of the partners, including me, thought it was hard to get people to change their consumer behavior like that. Mitt was pushing back, and there were good debates about whether it would happen. But as opposed to just having opinions about it, we went and got the information by doing the analysis and research,” White said.
Romney agreed to put about $1 million of Bain Capital money into the new venture. Bain employees actually helped stock Staples’ first store in Brighton, Mass., in 1986.
“He [Romney] made eight times his money in three years,” Stemberg says.
The Romney campaign has said that Bain helped create 100,000 jobs while Romney was at its helm. That is clearly a gross underestimate. Today, Staples alone employs 90,000 people and has 2,000 stores. Over the years, that means more than a million people have had jobs because of Staples alone.
Bain Capital went on to help launch or acquire more than 100 companies, including Domino’s Pizza, Sealy, Brookstone, The Sports Authority, Burger King, Burlington Coat Factory, Dunkin’ Donuts, and Toys "R" Us.
Bain also looked for troubled companies that had good potential if the strategy were changed and management was improved.
In a handful of cases, Bain bet wrong, and the companies had to declare bankruptcy. But because of Staples and other successful investments, Bain Capital now manages $66 billion in assets.
As noted in my story "Media Ignore Romney’s Success at Creating Jobs
," the press has focused on the failures — even looking at companies’ prospects years after Bain sold its interest — and ignored the successes.
At the same time, says Dave Keene, former chairman of the American Conservative Union, “We see Republican candidates turning into quasi-Marxists by attacking Romney’s free-enterprise approach.” He calls that “outrageous.”
The ACU runs the annual Conservative Political Action Conference (CPAC) and publishes an annual “Rating of Congress,” the gold standard for assessing the ideology of members of Congress.
“Staples is a microcosm of how we did business,” said White, who gave the 2006 interview for the Newsmax magazine story "Romney to the Rescue
" and is now helping Romney with his presidential campaign.
“We met with managers to understand their businesses, assessed the potential risks and competitive challenges, and identified opportunities to help their companies grow,” White said.
Each time Romney looked into an opportunity, he submerged himself in data, analyzed the business, and then was willing to take risks if his instincts told him growth opportunities existed, White said.
“The first thing Mitt recognizes, and has always recognized, is that it’s all about the people, it’s all about the team,” White said. “So he is very good at selecting and recruiting really talented people.”
Second, White added, “He’s not intimidated by having very, very smart people with strong opinions around him. And he creates an atmosphere that encourages debate. It’s how we worked together every day at Bain Capital. You get the data and then after you hear all the varying views, you make a decision.”
Ronald Kessler is chief Washington correspondent of Newsmax.com. He is a New York Times best-selling author of books on the Secret Service, FBI, and CIA. His latest, "The Secrets of the FBI," has just been published. View his previous reports and get his dispatches sent to you free via email. Go Here Now.
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