Artifact Four: When Mitt Romney Bet on Staples (Video)

In the lead-up to The Choice 2012, FRONTLINE’s hotly anticipated dual biography of Barack Obama and Mitt Romney, we’re publishing “The Artifacts of Character,” a series of rarely seen objects that elucidate key moments and experiences in the candidates’ lives. Each Monday and Thursday for the next three weeks, we’ll publish a new artifact for each candidate. Check back on Monday for our next pair of artifacts.

In 1986, Mitt Romney was two years into his tenure at Bain Capital and starting to feel the pressure. His partners had invested millions to help launch the firm, and while Bain had made a few modest deals, it had yet to hit its stride.

That all changed when Tom Stemberg went to Romney with a pitch for an office supplies chain called Staples. It sounded promising, but the data-driven Romney needed more details. He had Bain survey businesses about what they thought their supplies were costing them, and then compared the results with their actual invoices. The results were telling.

“They didn’t realize how much money it was costing them,” Stemberg told FRONTLINE. “And in Mitt’s case, [because] he is so cheap, the idea immediately resonated with him.”

The night before the first store opened, Romney surprised the Staples staff with pizza. He told them a favorite joke about a Texan and a polar bear, and then explained why he felt the chain was worth putting his firm’s “heart and soul into, or money.” In the end, Romney said, “We all should get a very handsome return on it, and we also should have a great time doing it.”

His bet paid off. Bain invested $2 million in Staples, ultimately selling its stake for nearly seven times as much. It was a critical deal, but for the risk-averse Romney, it was also a reminder that venture capitalism left too many decisions beyond his control. Looking for more say over Bain’s investments, Romney would steer the firm towards leveraged buyouts of other companies. His reputation as a turnaround artist was about to launch.