IA WAS A BOLD MOVE FOR A GUY DEFINED BY HIS RISK AVERSION:

By the time Mitt Romney walked into the Faneuil Hall offices of his mentor and boss, Bill Bain, in the spring of 1983, the 36-year-old was already a business-consulting star, coveted by clients for his analytical cool. He was, as people had said of him since childhood, mature beyond his years and organized to a fault. Everything he took on was thought through in advance, down to the smallest detail; he was rarely taken by surprise. This day, however, would be an exception. Bill Bain, the founder of Bain & Company, one of the nation's premier consulting outfits, had a stunning proposition: he was prepared to entrust an entirely new venture to the striking young man seated before him.

From the moment they'd first met, Bill Bain had seen something special, something he knew, in Mitt Romney. Indeed, he had seen someone he knew when he interviewed Romney for a job in 1977: Mitt's father. "I remember [George] as president of American Motors when he was fighting the gas guzzlers and making funny ads So when I saw Mitt, I instantly saw George Romney. He doesn't look exactly like his dad did, but he very strongly resembles his father." Beyond appearances, Mitt had an air of great promise about him. He seemed brilliant but not cocky. All of the partners were impressed, and some were jealous. More than one partner told Bain, "This guy is going to be president of the United States someday."

The Bain Way, as it became known, was intensely analytical and data-driven, a quality it shared with some other firms' methods. But Bill Bain had come up with the idea of working for just one client per industry and devoting Bain & Company entirely to that company, with a strict vow of confidentiality. From the start Romney was perfectly adapted to the Bain Way and became a devoted disciple. Patient analysis and attention to nuance were what drove him. For six years, he delved into numerous unfamiliar companies, learned what made them work, scoped out the competition, and then presented his findings. An increasing number of clients preferred Romney over more senior partners. He was plainly a star, and Bain treated him as a kind of prince regent at the firm, a favored son. Just the man for the big move he now had in mind.

And so 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.

Thus began Romney's 15-year odyssey at Bain Capital. Boasting about those years when running for senator, governor, or president, Romney would usually talk about how he had helped create jobs at new or underperforming companies, and would claim that he had learned how jobs and businesses come and go. He'd typically mention a few well-known companies in which he and his partners had invested, such as Staples. But the full story of his years at Bain Capital is far more complicated and has rarely been closely scrutinized. Romney was involved in about a hundred deals, many of which have received little notice because the companies involved were privately held and not household names. The most thorough analysis of Romney's performance comes from a private solicitation for investment in Bain Capital's funds written by the Wall Street firm Deutsche Bank. The company examined 68 major deals that had taken place on Romney's watch. Of those, Bain had lost money or broken even on 33. Overall, though, the numbers were stunning: Bain was nearly doubling its investors' money annually, giving it one of the best track records in the business.

Romney was, by nature, deeply risk-averse in a business based on risk. He worried about losing the money of his partners and his outside investors--not to mention his own savings. "He was troubled when we didn't invest fast enough; he was troubled when we made an investment," said Bain partner Coleman Andrews. Sorting through possible investments, Romney met weekly with his young partners, pushing them for deeper analysis and more data and giving himself the final vote on whether to go forward. They operated more like a group of bankers carefully guarding their cash than an aggressive firm eager to embrace giant deals. Some partners suspected that Romney always had one eye on his political future. "I always wondered about Mitt, whether he was concerned about the blemishes from a business perspective or from a personal and political perspective," one partner said years later. The partner concluded that it was the latter. Whereas most entrepreneurs accepted failure as an inherent part of the game, the partner said, Romney worried that a single flop would bring disgrace. Every calculation had to be made with care.

Despite some initial struggles, 1986 would prove to be a pivotal year for Romney. It started with a most unlikely deal. A former supermarket executive, Thomas Stemberg, was trying to sell venture capitalists on what seemed like a modest idea: a cheaper way to sell paper clips, pens, and other office supplies. The enterprise that would become the superstore Staples at first met with skepticism. Small and midsize businesses at the time bought most of their supplies from local stationers, often at significant markups. Few people saw the profit-margin potential in selling such homely goods at discount and in massive volume. But Stemberg was convinced and hired an investment banker to help raise money. Romney eventually heard Stemberg's pitch, and he and his partners dug into Stemberg's projections. They called lawyers, accountants, and scores of business owners in the Boston area to query them on how much they spent on supplies and whether they'd be willing to shop at a large new store. The partners initially concluded that Stemberg was overestimating the market. "Look," Stemberg told Romney, "your mistake is that the guys you called think they know what they spend, but they don't." Romney and Bain Capital went back to the businesses and tallied up invoices. Stemberg's assessment that this was a hidden giant of a market seemed right after all.

Romney hadn't stumbled on Staples on his own. A partner at another Boston firm, Bessemer Venture Partners, had invited him to the first meeting with Stemberg. But after that, he took the lead; he finally had his hands on what looked like a promising start-up. Bain Capital invested $650,000 to help Staples open its first store, in Brighton, Massachusetts, in May 1986. In all, it invested about $2.5 million in the company. Three years later, in 1989, Staples sold shares to the public, when it was just barely turning a profit, and Bain reaped more than $13 million. It was a big success at the time. Yet it was very modest compared with later Bain deals that reached into the hundreds of millions of dollars.

For years Romney would cite the Staples investment as proof that he had helped create thousands of jobs. And it is true that his foresight in investing in Staples helped a major enterprise lift off. But neither Romney nor Bain directly ran the business, though Romney was active on its board. At the initial public offering, Staples was a firm of 24 stores and 1,100 full- and part-time jobs. Its boom years were still to come. Romney resigned his seat on the board of directors in 2001 in preparation for his run for governor. A decade later, the company had more than 2,200 stores and 89,000 employees.

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