Meet George, owner of a competitor we can call Plastic Pots, a successful manufacturer of plastic plant gardening containers. George gave a speech at the annual Manufacturers’ Conference. He got most of his points from the internet blogs going on about the big boys of private equity and how much money they are raking in at owner’s expense. He loved the bad stories of private equity, skimming over successes in his plastics category.

George said, “Those private equity locusts—their money is more expensive than a bank and they’re more destructive than Lord Voldemort of Harry Potter fame. I warn you, you’ll be up to the eyeballs writing reports, forced to show up at their meetings and slaving on a treadmill while they treat you like an ATM machine—cashing your profits.”

As an alternative, George advised taking on many investors, “They’re easier to control. Go the syndication route—multiple investors. It’s the ‘divide and conquer’ method. You keep control—the other partners are fragmented. Make sure you hold separate meetings—not with all your investors in the room. Don’t risk one person hijacking it to argue valuation.” What George failed to mention was that this is a double-edged sword and that the more investors you have, the greater the “time suck” keeping them all happy.

George’s favourite line was, “I don’t want some nobody outsider sharing control of my business. What can they add beyond the money my bank loans give me—and at a cheaper price, too, thank you?” Blinded by familiarity with his own ways, he insisted, “I’ve run my company for years. Who can tell me something I don’t know already?”

Turns out, a great deal. Less than a year later—with the oil crisis, and the rising domestic currency making Chinese plastic exports so much cheaper—Plastics Pots financial statements showed a different story. With no board to force George to justify his “head in the sand” strategy, he chose to not consult his team.

With an outside investor who has similar companies in their portfolio, George would have been forced to do what Jim Collins, author of Built to Last, calls “Facing the brutal facts” and act. Investors could have injected capital, clarified the strategy, spread the risk of setting up that branch manufacturing plant in Mexico and found him the expertise to execute. George never gave private equity a chance. His hubris, his arrogance of thinking he knew better, makes George a modern-day Icarus, the Greek lad who wore wax and feather wings and flew too close to the sun—despite his father’s warnings.

The new manager at George’s bank, a newly minted MBA, pointed out that George’s income statement was no longer meeting the covenants required by the bank. He chose not to give George a chance, and closed down the business.