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When will the real Mitt Romney stand up?

During one of his lesser moments in South Carolina, Mitt Romney insisted he would never apologize for his success, "success" being his preferred euphemism for titanic wealth. Surely, he's right. He should no more apologize for being wealthy than we should want him to do so. To a greater degree than most of the world, America does not demonize its millionaires--we celebrate them. And this attitude is part of what makes us exceptional.

But Romney may misunderstand the reluctance of some Republican voters to warm to him. It seems plausible that people who have yet to fully embrace his candidacy may hang back in part because they harbor questions about his professional life. It's not that these voters want Romney to turn his toe in the dirt and say he's sorry for being really, really rich. It's that they're not entirely sure how Romney made his money. It's the same reason voters were anxious to see Romney's tax returns. It's not that Republicans suspect him of being a tax cheat. It's that aspects of a man's financial life can be perfectly above-board, yet also instructive in ways that may or may not be conducive to political success.

For instance, while attempting to explain his tax situation before he released his returns, Romney mentioned that he's taxed mostly at the 15 percent rate because the lion's share of his income is derived from investments. His earned income, he said, came largely from paid speeches, and was "not very much."

It turns out that Romney's speaking fees for the prior year were $374,327. One needn't be envious of Romney's success in the paid-speech world to be curious about who was hiring him to lecture, and what they paid.

For instance, in April 2010, Romney gave a speech at Claremont McKenna College, one of America's great undergraduate institutions. The only item of interest is that Romney accepted payment from them: an $11,475 honorarium. There's nothing wrong with Romney accepting such payment from a non-profit institution, and it was clearly a bargain rate when compared with some of his other gigs. But it makes you wonder why he didn't do it for free. He also accepted payment from the non-profit Quest Educational Foundation. Quest provides tutoring and mentoring to high-school students in Florida and Romney spoke at their annual fundraiser (Gingrich was a speaker at the 1999 event) for a $35,771 fee.

His other engagements were more clearly for-profit. On June 9, 2010, Romney was part of a "Get Motivated Seminar" in Utah. The Get Motivated program tours the country packing arenas with big-name motivational speakers--Zig Ziglar, Brett Favre, Colin Powell, and the like. (Sarah Palin spoke at the Utah event.) It's a quasi-Christian self-help operation and the company makes money both from ticket sales and by letting pitchmen hawk personal improvement and get-rich-quick products during the interludes between the star speakers.

It's not a disreputable program, exactly, but it tends to be the type of work that people do once they've retired from active politics and moved on to the cash-in phase of their careers. Romney was paid $29,750 by Get Motivated, which isn't much by the standards of the genre. But then, Romney didn't actually have to show up at the arena--he gave his speech via satellite link.

He does seem to have shown up to speak for Clark Consulting. Clark is a boutique operation: They consult for large financial institutions who are evaluating their business-owned life insurance programs. For this engagement, Romney was paid $66,000. The oddness of this booking was mirrored in two other speeches he gave. One was to Goldentree Asset Management, a New York hedge fund (they paid $68,000); the other was Barclay's Wealth, an American division of Barclay's Bank which does financial planning for high net-worth individuals and institutions (they paid $42,500).

It's not immediately obvious what a man actively campaigning for the presidency would have to say to any of these groups. Though it is easy to see why they would want to get in a room with him. None of it is improper, of course. Just unusual for a man worth $250 million who is presumably not in need of a spare $60,000.

The Bain legacy

Then there's the lingering issue of Bain Capital. Romney's response to criticism of his tenure at Bain has been to conflate his former company with capitalism itself and insist that any criticism of one is an attack on the other. That's not quite fair to capitalism but, in Romney's defense, many of the attacks on Bain haven't been fair either.

It's not clear, however, that Romney's defense of Bain really gets to the heart of the matter as voters see it. Even if you stipulate that (1) Romney never acted improperly at Bain and (2) However unpleasant outsourcing, layoffs, and debt leveraging are, it was all to the creatively destructive good--you're still left with two uncomfortable questions for which the candidate has no answer.

First, there's the notion of how Romney has sold himself: as an entrepreneur who took risks to create success. This vision is true, to a point. Romney did run a company, Bain Capital. But he achieved executive status via a highly unusual pathway. The idea for Bain Capital was not Romney's (it was the brainchild of Bill Bain). And the startup money behind Bain Capital was not Romney's (it came from Bill Bain and other partners in his consulting firm). Romney was an employee of Mr. Bain--an incredibly talented and valued employee. And Mr. Bain asked him to run this new venture with an explicit guarantee that if the job didn't work out he could always have his old position back--and that if he failed, Mr. Bain would be sure to cover up the failure. Here's how Michael Kranish and Scott Helman tell the story in Vanity Fair:

And so [Bill] Bain made his pitch: Up to that point, Bain & Company could watch its clients prosper only from a distance, taking handsome fees but not directly sharing in profits. Bain's epiphany was that he would create a new enterprise that would invest in companies and share in their growth, rather than just advise them.

Starting almost immediately, Bain proposed, Romney would become the head of a new company to be called Bain Capital. With seed money from Bill Bain and other partners at the consulting firm, Bain Capital would raise tens of millions of dollars, invest in start-ups and troubled businesses, apply Bain's brand of management advice, and then resell the revitalized companies or sell their shares to the public at a profit. It sounded exciting, daring, new. It would be Romney's first chance to run his own firm and, potentially, to make a killing. It was an offer few young men in a hurry could refuse.

Yet Romney stunned his boss by doing just that. He explained to Bain that he didn't want to risk his position, earnings, and reputation on an experiment. He found the offer appealing but didn't want to make the decision in a "light or flippant manner." So Bain sweetened the pot. He guaranteed that if the experiment failed Romney would get his old job and salary back, plus any raises he would have earned during his absence. Still, Romney worried about the impact on his reputation if he proved unable to do the job. Again the pot was sweetened. Bain promised that, if necessary, he would craft a cover story saying that Romney's return to Bain & Company was needed due to his value as a consultant. "So," Bain explained, "there was no professional or financial risk." This time Romney said yes.

There are two readings of this story. One is that Romney is a shrewd, skilled negotiator who thinks deliberately and strategically. This would be an excellent quality in a president. The other is that Romney is uncomfortable risking his own personal capital and will only go so far as he can under the cover provided by others. This would be a less desirable quality in a commander-in-chief.

The second question about Romney's Bain years is the extent to which he can reasonably be thought of as a "job creator." Romney's own count of the jobs he created at Bain keeps growing. In Iowa it was 100,000; by South Carolina the total was up to 120,000. Whatever the number, the vast majority of jobs he takes credit for building come from a single source: Staples Inc.

Romney's association with Staples is worth examining in some detail. Not because anything in it reflects badly on Romney--quite the contrary. The locution he personally uses is usually that he "helped create" 89,000 jobs at Staples. But his campaign is occasionally less careful. Last weekend, for instance, Chris Christie, his most energetic surrogate, said of Staples and another company (Sports Authority) Romney was involved with, "Anyone who goes to work at those places today has Mitt Romney to thank for it."

Staples was the brainchild of two Boston-area retail rivals, Tom Stemberg and Leo Kahn. Their stories are inspiring. A middle-class kid, Stemberg attended Harvard College on a full scholarship and did well enough there to advance straight to Harvard Business School. After getting his MBA, he went to work for the grocery chain Star Market. There, he learned how to do every job in the store--from cashier to meat cutter--as he worked his way up the company ladder. In 1975, he did something at Star no one had ever tried: Offering store-branded generic products. It revolutionized the grocery business.

Kahn came into the supermarket business the old-fashioned way: His parents--a pair of up-by-their-bootstraps Lithuanian immigrants--owned a wholesale grocery operation. After graduating from Harvard in 1937, Kahn took over the family business and turned it into Purity Supreme, a chain of supermarkets which included Heartland Food Warehouse, the first deep-discount supermarket in the country, as well as a successful chain of convenience stores called L'il Peach.

Star Markets and Purity Supreme were competitors, so Kahn and Stemberg knew of each other, but did not meet until 1977, when the two were guests on a local radio show. They became fast friends. Over the years they thought about going into business together and kicked around lots of concepts until, in the mid-1980s, a mutual friend, the Harvard Business School professor Walter Salmon, suggested that they try bringing the supermarket approach to non-food items. Stemberg and Kahn hit on the idea of office supplies.

And that's just what they did. "The structural inefficiency is that the littler customers are serviced by the mom and pops, who buy in small quantities and sell in small quantities," Stemberg explained to the Boston Business Journal before Staples opened its first store. "We're going to buy the way the big guys buy and sell to the little guys. What you do is structure a more efficient system to distribute the goods--as opposed to a little van, you build a supermarket."

When Stemberg and Kahn finally reached the venture capital stage, they toured around the Boston financial world and, by the historical accounts, greatly impressed the money men. In short order they raised $4 million and opened their first store in May 1986. Romney's Bain Capital was one of the early investors. As it happens, Romney did not discover Stemberg and Kahn--a friend at another investment firm introduced him to the duo. And Bain was neither the first investor in Staples, nor the largest--its initial investment was $650,000. (The other initial investors were Fred Adler of Adler & Co., Bessemer Venture Partners, and Hambro Ventures.)

Staples was a brilliant success because of the passion of Stemberg and Kahn. They two men were obsessed with refining their business in the face of competition, and the stories of this obsession are wonderfully wacky. In his book on the history of Staples, Stemberg describes having his mother-in-law order products from Office Depot, and then take them back so he could study their returns process. He had his wife apply for a job at Office Depot's delivery-office center so he could get a peek inside that operation, too. In fact, the entire Stemberg family was enlisted in his spy ring: He would often send his kids into local Office Depots with notepads to tally his competitor's pricing so that he could avoid being undersold.

Job creator?

So how much credit should Mitt Romney get for creating the 89,000 jobs at Staples today? It wouldn't be fair to call Romney and Bain just "dumb money." Romney was in on the ground floor and he sat on the company's board of directors (as did a representative from each of the other investors). And Stemberg has great fondness for Romney, graciously saying he should share credit for Staples' success. In an interview with Parade, Stemberg even told a story about Romney being a source of inspiration for the company:

I'll never forget opening our first Staples store. It was set for May 1, 1986. We were up all night on April 29 to prepare, and during the next day, we realized we needed to [be up all night] again. Mitt showed up and gave an impromptu speech to these weary people facing another all-nighter. He said, "I know you guys are tired, but let me tell you something. If you really want to succeed and be part of retailing history, you'll need to treat every person who walks through that door not as a customer but as a guest in your home." I looked at the crowd--young people just out of college, people much later on in their careers--and they were tearing up. They saw they were doing something more important than just opening a store, and they were inspired to do their best. Mitt can motivate people to greatness.

Yet ultimately, it seems a little strange to credit Romney with being much more than a smart early investor. That's not nothing. Investment and capital are a very large part of entrepreneurial success--which is why investors reap large rewards when a business pans out. But still. A group of investors ponied up the $2.7 million needed to buy a group of restaurants from Richard and Maurice McDonald. Banker Ken Langone led a group of 40 investors to raise $2 million to start the Home Depot. And Mike Markkula gave Apple Computers the $250,000 it needed when it incorporated in 1977.

We don't credit the jobs created by McDonald's, Home Depot, and Apple to the money men. We credit them to Ray Kroc, Bernard Marcus, Arthur Blank, Steve Jobs, and Steve Wozniak. Because those men had the ideas, ran the operations, and assumed most of the risk. It's unclear why we should regard Romney's role with Staples any differently.

This doesn't make Romney a bad guy. It makes him a wise investor--and investors are incredibly important. But the skills of an investor aren't those we think of first when contemplating the presidency. If they were, Warren Buffett would be squaring off against George Soros every four years.

More importantly, Romney's real skills differ in important ways from the ones he's been advertising. Voters may sense this. And it's one more reason why Romney hasn't been able to close the deal with skeptical Republicans.

Bio: Jonathan V. Last is a senior writer at The Weekly Standard. The opinions expressed in this commentary are solely those of the author.

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