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Photo illustration by 731; Photograph by Jewel Samad/AFP/Getty Images Photo illustration by 731; Photograph by Jewel Samad/AFP/Getty Images

Over the course of four political campaigns, Mitt Romney has inhabited many personas, trying to meet the needs of the time and the race. He was a socially liberal Senate hopeful in an unsuccessful 1994 challenge to Ted Kennedy. Then he was a social conservative running against John McCain for the Republican nomination in 2008. His good fortune in 2012 was that he could run as himself: a businessman so successful even Bill Clinton has lauded his “sterling career.”

The moment calls for a leader who understands the economy, management, and the art of empirical decision-making. In that regard, Romney’s résumé looks tailor-made. His career in strategic consulting and private equity began in the 1970s during a recession that defied the best efforts of politicians and business leaders. It traced the revolution in American corporations that followed in the ’80s and ’90s, a revolution Romney and his peers helped drive, and one that made the U.S. as a nation more competitive. It offers clear lessons about how government can respond to such upheavals and how Romney might use his experience to turn things around.

Yet instead of putting that career at the center of his campaign, Romney has taken pains to avoid it. After an early attempt to portray himself as a “job creator” who put 100,000 people to work, he mostly dropped the subject of his time at Bain Capital. Ceding that story allowed his opponents to frame the race around the most unflattering details of his career—layoffs, plant closings—stripped of their broader context, and to portray Romney as a vulture capitalist. If he loses, that will be why. Even if he wins, his candidacy will have reinforced some of the worst stereotypes the American public has about its business elite.

This could turn out to be one of the great missed opportunities in politics. And it’s one that perplexes many of his supporters. Over the last 18 months, as I’ve covered the presidential race, the same question kept coming up, especially from businesspeople: How did a man they regard as embodying their profession’s finest qualities come to represent the worst? Romney’s achievements should have been a source of strength, an advantage over a president who has disappointed hopes for a faster turnaround. Rather than just attacking Obama, Romney could have met the national anxiety about the economy by explaining how he had helped companies adapt and how he could help the country do the same. The narrative for such a campaign is woven throughout Romney’s career in business and government—but so is the reason that he ultimately chose not to tell it.





Romney graduated valedictorian of his class at Brigham Young University and arrived at Harvard Business School in 1971, a momentous time to be a business student. The American economy had been enjoying an almost uninterrupted boom since World War II, and all at once seemed to collapse. Inflation soared. Oil prices tripled. Cars lined up at the gas pump. Japanese and European companies, rebuilt following World War II, were suddenly trouncing their American competitors. The economy plunged into recession.

For a student at the top business school—a true-believing capitalist fast-tracked for a pivotal position in American industry—there was a further and especially disturbing sign: No one seemed to have any idea what to do. To Romney and his classmates, the surge in corporate conglomeration fueled by the 1960s bull market, and still venerated by their professors, appeared to have produced stolid giants. The challenges facing CEOs were plainly beyond their skill set, and the economic paralysis reached all the way to the top. Richard Nixon—one of their own!—imposed price caps.

To outsiders, including Harvard students preoccupied with the Vietnam War, the aspiring MBAs were consummate organization men, worlds removed from campus radicalism, and none more so than Mitt Romney, with his orderly mien and Republican lineage. Yet this group was consumed with its own radical struggle: They thought they could reinvent American capitalism by rethinking how companies worked.

The intellectual battle pitted academics (including the Harvard Business School faculty) against an emerging band of consultants with new ideas about how businesses should be run. The radicals were led by Bruce Henderson, an engineer who founded the Boston Consulting Group in 1963.

Since its inception in the 1930s, management consulting had focused on organizational structure. The thinking was that while antitrust law kept companies from dominating any one industry, a company could still command the power and leverage that size affords by adding new divisions in similar industries. (Think General Electric.) Henderson’s innovation—to look beyond structure to strategy—seems obvious today but was heretical then.

“At the time, Harvard Business School had a good deal of disdain for the views of Bruce Henderson and the Boston Consulting Group,” Romney told me in a 2007 interview, conducted between campaign stops in New Hampshire. “Bruce would purchase advertisements in the Harvest, the weekly newspaper, that were just his thought pieces, and that’s where I first encountered them. I thought, ‘This guy sounds brilliant. I like this guy, and I like what he’s saying.’ The faculty would make fun of the Boston Consulting Group, but I believed it was right.”

Henderson devised two procedures to steer companies’ behavior that would transform business in the ’70s and ’80s. The “growth-share matrix” provided a blueprint for gauging the strengths and weaknesses of a conglomerate’s various divisions and striking a balance between those with high market share and those with significant growth potential; a healthy company needs both. The “experience curve” demonstrated that early entry into a market increased profitability and the likelihood of establishing dominance. “The students at HBS realized that it wasn’t their teachers but the consultants who were right on the cutting edge,” says Christopher McKenna, a business historian at Oxford University. “So there was this overwhelming sense that if you wanted to be involved in reshaping the entire nature of industry, you should become a consultant in this hot new area of strategy.”

Romney had arrived at Harvard intending to take a traditional job in industry. “I spent a summer at the Chrysler Corporation because I always loved the auto industry and aspired someday to be head of a car company like my dad had done,” Romney said in 2007. (He did not respond to an interview request for this story.) “But there was a paradigm shift going on in the way you thought about managing a business. I wanted to be part of that intellectual process, but I also wanted to be able to make a difference. I realized it would have been years and years before I ever made a difference at Chrysler, whereas in consulting I could use the things I was learning.”

One of the many frustrations of this year’s presidential campaign is that neither candidate has presented a compelling diagnosis of what’s wrong with the economy or plausibly explained how he would actually fix it. This is particularly significant in Romney’s case; his whole career was built on challenging old ways of thinking. The formative decision in his professional life went against the consensus of the experts and professors he’d studied under. Rather than go to Chrysler, he took a job at Boston Consulting Group, joining a movement to renew American capitalism. His ability to analyze and solve problems made him a fortune.





By the time Romney left Harvard in 1975, a wave of entrepreneurialism was changing how businesses were run. Large but poorly performing companies, undervalued by a nervous market, saddled with expansive bureaucracies and expensive labor issues, struggled to compete, and became easy targets for mergers and consolidations. Panicked executives turned to firms like BCG for answers, and Wall Street opened up to new kinds of people.

“It was a time of great foment and thinking about strategy,” says William Sahlman, a classmate of Romney’s and now a Harvard Business School professor. “American business hadn’t really had to compete for a long period of time. That whole period was the origin of the shift in the economy toward knowledge workers and gave rise to a meritocracy where anybody who was really smart could get a job and do well.”

Romney had plenty of connections to the old pedigreed world. But his acumen, more than anything else, brought him success in the new one. Working with CEOs, strategic consultants guided businesses through corporate successions and transitions, focusing them on doing a few core things well. If a company was underperforming, a good consultant could figure out why and advise on which divisions to shed. If a new product was under consideration, he—and it was then almost entirely men—could study the market and the competition to determine how, when, and where to launch it.

To an almost unimaginable degree, given their age and experience, consultants still in their twenties and thirties reset the course of major American businesses (including Chrysler), helping many CEOs twice their age survive by forcing them to confront the realities of a new marketplace. A colleague of Romney’s from this period, seeking to convey the challenge consultants faced, says that Chrysler executives firmly believed people would continue to buy Chryslers because they had always bought Chryslers. Consultants found that this was a common tendency among executives: the belief that past success was a strategy for the future. Romney shone as someone possessed of both the analytical ability to find the right answer and a presence that inspired trust in more experienced executives.

Consulting firms were no less prone to upheaval than any other kind of company. One day in 1973, Bill Bain, a vice president at BCG and Bruce Henderson’s presumptive heir, walked into Henderson’s office to announce that he and a colleague were leaving to start a software company. That evening Henderson flew to Spain, only to discover upon landing that Bain was actually setting up a rival consultancy and raiding his old employer for talent and prized clients, including Black & Decker and Texas Instruments. Bain struck again in 1977, stealing five partners, one of whom was Romney’s mentor. Romney came along, too.

Bill Bain’s primary insight grew out of every consultant’s dilemma: Brilliant advice doesn’t matter if the client won’t act on it. To make sure clients stuck with the plan, Bain & Co. worked side-by-side with CEOs to devise a strategy, then stayed and saw it implemented. In return, Bain promised to work exclusively for one client in any industry.

Such intimate, long-term relationships gave Bain’s people access to sensitive information, which produced better results and ensured a steady stream of fees. In 1987, Romney told Fortune that he thought Bill Bain had attained “a breakthrough conceptual insight,” though not everyone agreed. The article likened the firm’s style to “a tapeworm in the corporate intestine” and its culture to a “Moonie commune run by the ‘Reverend’ Bain.” Even so, Bain became the prestige firm.

Consultants are a data-driven breed, and Bain’s more than most. Within Bain, Romney was the most data-obsessed of all. The answer, he told colleagues, always lay in the numbers. “Mitt is great at pattern recognition: seeing a problem and figuring out a way to solve it,” says Howard Anderson, a venture capitalist who met Romney while he was at Bain. “Those are the analytic skills that made him a terrific consultant”—and that now guide him as a politician. People laughed at his “binders full of women” remark in the second presidential debate, but it reflects Romney’s faith that everything can be catalogued and quantified.

Bain’s reputation grew to a point where soliciting clients became unnecessary. The firm developed a Bain Index that measured its clients’ performance relative to the competition. A 1987 audit by Price Waterhouse showed that the stock market value of Bain-advised companies had increased by 319 percent since 1980, while their competitors rose by 67 percent. This gave rise to a peculiar frustration among Bain’s chieftains. The company was growing, though not nearly as fast as its clients. “Consulting is a good business to get into and a better business to get out of,” says Anderson. “To double your business, you have to double your people.”

Meanwhile, an obscure Labor Department ruling in the late ’70s relaxed investing guidelines known as the Prudent Man Rule, allowing pension funds to invest in high-risk assets. That in turn drove the explosion of venture capital in the ’80s that produced such firms as Genentech, Apple, and many of the decade’s other successes. A few investors began to amass fortunes by buying underperforming companies and breaking out their divisions one by one. Yet Bain, Romney, and their colleagues were stuck billing by the hour like a bunch of i-dotting corporate attorneys. To change this, Bain and his senior partners pooled their money to fund Bain Capital, a new venture that would buy struggling companies and invest in promising new ones. Bain chose Romney to run the company.

On the campaign trail, Romney casts himself as the kind of risk-taking hero-capitalist Republicans admire. Originally, however, he balked at Bain’s offer. At 34, and already the company’s star, he saw too much risk in attaching himself to a fund that might perform poorly or, worse, go bust. Bill Bain later told the Boston Globe it was only after senior managers assured him he could return to his old position and salary if things didn’t pan out—and promised to devise a cover story for any failure—that Romney agreed to take the plunge.





In 1984, Bain Capital opened with $37 million that Romney and his partners planned to divide more or less evenly between venture investments in new companies and leveraged buyouts of troubled older ones. The old conglomerates made attractive targets, and banks competed for the sizable fees to be had from underwriting their purchase, breakup, and resale. The junk-bond raiders of the 1980s were the extreme manifestation of this “strip-and-flip” methodology. The Obama campaign has gone to great lengths to equate Romney with the Gordon Gekkos of the world, but Bain never engaged in hostile takeovers, and Romney was no raider. In fact, he can plausibly claim to have done more to help business than many private equity veterans.

Bain Capital didn’t renounce financial engineering or forgo every questionable practice, but its founders believed that their competitive advantage lay in helping companies operate better by applying the expertise they had gained as consultants. The culture bore no resemblance to the swashbuckling raiders portrayed in movies and books—it was, in the words of one Bain partner who didn’t want to be named, pathologically averse to downside risk.

Romney’s favorite campaign-trail anecdote, a rare allusion to his Bain Capital years, exemplifies this caution, although that isn’t his intent in telling it. In the mid-1980s, Bain invested $600,000 in Staples, a move that eventually returned many millions. Staples was a great move, though not exactly a daring one. Many firms competed for the right to invest. As venture capital investments go, retail is a safe play; the potential returns are nowhere near as high as they can be in sectors like biotech or computers, but neither are the risks. The story of the Staples deal allows Romney to put a nonthreatening gloss on Bain Capital, since it’s an easy-to-grasp parable of investing in a company that grew and thrived. Yet it left out some of the more unsavory general practices of private equity, including the massive incursion of debt and the fees earned from its use, sometimes at the cost of a company’s long-term health. There is a reason, after all, that the “leveraged buyout shops,” as they were then called, rebranded themselves “private equity.”

Yet Romney steered Bain away from even this kind of relatively safe deal and toward buyouts which offered more control and the chance to apply Bain’s management techniques. “If you invest in a biotechnology startup,” says Bob White, a co-founder of Bain Capital and top adviser to Romney’s presidential campaign, “you only have a successful company if the person in the white coat comes out of the laboratory and says, ‘You have a successful product.’ We didn’t know enough about the science to help control that outcome. We would have been just betting.”

Romney’s safer path brought enormous success. Bain Capital grew from $37 million to $14 billion by the time he stepped down to run the Salt Lake City Olympics in 1999. Romney left with around $250 million.

A few years after its founding, when it was clear Bain was a success, its partners commissioned a study to see what they had done right. Two things jumped out. First, applying management expertise really had improved the performance of its portfolio companies. Second, Romney was a classic value investor—large upside, limited downside. Romney knew a company’s management, its product, its balance sheet, its earnings trends, its cash flow—and he also knew the net value of its assets. Bain invested only in situations where, if the worst came to pass and a company failed, its equipment, real estate, and other possessions could be sold off for nearly as much as the original investment.

Avoiding unnecessary risk is the foundation of wise capital allocation, and Romney’s belief in it is evident in the decisions he’s made as a candidate. No one could safely predict how voters would react to a wealthy candidate’s tax returns, detailed economic policies, and an open discussion of Mormonism’s place in America. Safer to make the race about Obama’s record rather than himself.

Today, Romney’s approach of bringing management expertise to buyouts is standard practice. “He invented a new form of private equity,” Anderson says. “The traditional way was to bring a skill set from investment banking: ‘Can I buy it, flip it, add the debt?’ Mitt approached it with a completely different skill set, the analyst’s capability to break apart an industry, figure out what matters, figure out what to sell and what to buy, and come up with an execution strategy that makes it work.” Other firms began to work along similar lines.

That’s had a much broader and more positive effect than anyone learning about private equity from political ads would realize. All buyout firms in Romney’s day believed, correctly, that American companies had lost their edge to foreign competitors due to poor management. Although they were driven by profits, their aggregate effect was to hasten necessary changes in the way companies were run that helped the overall economy. Many of the layoffs and plant closings were inevitable because whole industries were no longer competitive. When I asked Romney in the last race to defend these practices, he wasn’t defensive or evasive. “I saw this as a time not to abandon the principles that had made us the most powerful economy in the world,” he said, “but instead to adjust to the new dynamics of the marketplace.”

Long after Romney graduated, Harvard Business School came around to the virtues of strategic consulting and the discipline private equity could impose on corporate governance. Michael Jensen, an HBS professor often regarded as the father of private equity, laid out these virtues in a famous 1993 speech and paper acclaiming what he called a “third industrial revolution” that would improve U.S. competitiveness. That’s essentially what happened. In a recent interview, Jensen said, “The American economy was losing badly to the Japanese and, as a result of the restructuring in these activities, the whole thing turned around in less than a decade.”





Romney’s candidacy would look much different today had he made this story its centerpiece. He could explain the benefit to the U.S. economy, and a shelf-full of scholarship would back him up. He could say that the last time the country was mired in recession, he’d seen what most others could not—and point to his career and fortune as proof.

He’d still be attacked for the jobs lost when factories shut down. But voters are more willing to show forbearance and grasp difficult truths than politicians give them credit for. Just look at Romney’s current campaign. Despite his best efforts to blame the recession on Obama, polls show that voters still apportion much of the blame to George W. Bush, as they should. Had Romney been forthright about how his skills could apply to the presidency, he might have convinced more people that he’d make a better president than the current one.

His major achievement as Massachusetts governor—his health-care law—is a good example of how government can adapt to a world where people can’t count on lifetime employment and benefits from big corporations. Romney wasn’t always afraid to make this case. The last time he ran for president, I watched him explain persuasively how his Bain experience had yielded historic results when applied to public policy. Speaking to a medical school audience in Iowa, he said that while working in the health-care field as a consultant, his team had discovered huge inefficiencies in the way hospitals were being run. The experience led him, as governor, to assemble his own team to tackle the problem, and they eventually made a conceptual breakthrough that was the key to the Massachusetts law, and later to Obamacare: that money being spent on emergency care could instead be used to buy everyone preventative care.

Anyone who has spoken with Romney about business or consulting knows that these are the subjects about which he’s most impassioned and authentic. He comes alive in a way that would surprise people who’ve only heard him reciting from his briefing book. Had he emphasized his professional life in business, voters would see the real Romney.

The great mystery about Romney is how such a talented executive could run such a listless campaign when so many things—from the weak economy to his own biography—favor him. People who knew Romney at Bain aren’t nearly as surprised. Asked why he thought Romney had buried his greatest strength, one colleague who’s known and admired Romney for decades didn’t hesitate: Having achieved extraordinary success by approaching the world through a set of precise, data-driven concepts, Romney had made the mistake of approaching politics the same way—maximizing data and minimizing risk.

Two years ago, the data would have told a clear story. No president had won reelection with unemployment above 7.2 percent. At the time, it was near 10 percent. The economy was already shaping up to dominate the campaign. This, too, would seem to redound to his benefit. The biggest risk would have been doing anything to upset this order of affairs. So Romney ran a hypercautious campaign that made the case against Obama instead of the case for himself.

What he overlooked is that while the financial crisis has certainly weighed on the president, it has also altered public sentiment in a way that made Romney uniquely vulnerable. “In the 1980s white, blue-collar voters totally focused on race,” says Democratic pollster Stanley Greenberg. “They felt that what was happening with blacks was centrally related to why they were losing income and in trouble. Today race has disappeared, and they’re focused on Wall Street, CEOs, and economic elites as the forces holding the middle class down.” Another Democratic pollster, Peter Hart, distilled this ethos into a word: “predators.”

If Romney didn’t see how damaging this could be, it may be because he had fallen prey to the same habits as his old clients, like Chrysler, putting his faith in what had worked so well for him in the past instead of devising a new strategy for the future. That would be ironic, but not nearly as surprising as it seems. When Romney was running Bain, there was a saying around the office: The best analysts in the world almost always have a blind spot—themselves.