It’s a startling number. Over the last two decades, the number of public companies in America has declined by nearly 50% from 7,322 in 1996 to about 3,671 in 2016. At the same time, U.S. GDP has nearly doubled.

What’s going on? This subtle but inexorable migration of American business from public to private ownership was the subject of a presentation by iCapital’s co-founder and managing partner Nick Veronis at Financial Advisor’s Inside Alternatives & Asset Allocation conference in Las Vegas in September.

As companies remain private longer, the implications for investors are powerful. Veronis noted that an investor in Amazon’s IPO in 1997 would have seen her investment increase more than 900-fold. Compare that to the 20-fold increase in Google since its 2004 IPO or the quintupling in shares of Facebook since its 2012 IPO.

There are believed to be about 260 so-called unicorn start-ups, venture-backed companies valued at $1 billion or more, according to CB Insights. Veronis suggested that today’s venture capital and private backers are seeking to “extract most of the value out of their portfolio companies” before bringing them public, a marked change from an earlier generation of VC investors.

Other more disturbing trends may also be at work. Since 2000, the share of R&D expenses as a percent of revenue for the 100 largest non-financial companies listed on the Nasdaq has declined from 34.4% to 7.0% in 2017, Veronis said, citing data from Greenspring and Capital IQ.

This dramatic decline in R&D supports the argument of some like GMO’s Jeremy Grantham, who have said that in recent decades America’s largest corporations have become obsessed with maintaining record-high profit margins—some call it rent-seeking—while accepting less growth and innovation. Today’s generation of risk-averse CEOs at public companies favor stock buybacks and dividend increases over major investments requiring up-front losses.

Criticism of corporate America’s current set of priorities, labeled by some as “short-termism,” has also come from leading CEOs considered pillars of capitalism. That list includes Berkshire Hathaway’s Warren Buffett, JP Morgan’s Jamie Dimon, BlackRock’s Larry Fink, PepsiCo’s Indra Nooyi and even President Trump himself. Fink, in particular, has proposed lengthening capital gains holding periods to incentivize CEOs to focus on longer horizons.

Amazon, arguably America’s most successful public company, has treated the quarterly earnings ritual with outright contempt—and the stock market has rewarded it handsomely.

Though no fan of Amazon, the president recently asked SEC chairman Jay Clayton to examine the possibility of requiring public companies to abolish quarterly annual financial reporting in favor of semiannual results.

Not everyone liked the suggestion, and Clayton has said it isn’t happening anytime soon. Retired hedge fund manager and philanthropist Stanley Druckenmiller responded that maybe the president should consider tweeting once every six months. Others argued that semiannual reporting gaps would favor large institutional investors with extensive research networks over individuals. But the conversation isn’t going away.

Governance by boards of directors has been less than stellar, according to consulting giant McKinsey. Board members were often appointed as rewards for past service; poor governance, oversight and groupthink played a pivotal role in the accounting scandals at Enron and WorldCom and in the failure of many giant banks to shield themselves from the 2008 financial crisis.

Other studies have concluded that corporate directors as a group lack a clear grasp on what is involved in creating long-term value for shareholders. In one study of 772 directors of public companies, only 22% said their boards had a clear understanding of how their companies created value and a scant 16% indicated their boards were knowledgeable about the industry’s underlying dynamics.

For his part, Veronis told attendees at the Inside Alternatives event that private equity firms have increased their average holding periods: What was three to five years is now five to seven. That’s a major change from the leveraged buyout (LBO) mentality of the 1980s when many operators looked to make quick killings flipping debt-laden concerns. Equity prices in that era were much cheaper, and corporate cost structures often were bloated, making it easy in many cases to slash nonproductive expense centers.

The big advantage of private equity investors and their newfound buy-and-hold religion is that “they won’t panic and sell at the wrong time,” Veronis continued. Even if they wanted to, the way private markets transact—via extended negotiations and legal agreements with potential buyers—prohibits them from panicking and selling at the click of a mouse.

When confronted with problems and economic downturns, private equity managers are forced to think strategically. That means they are likely to be focused on streamlining costs, consolidating smaller competitors, upgrading management talent and expanding into adjacent markets.

Nearly one decade into one of the longest bull markets for public equities in the last century, institutional investors are looking for better places to generate returns. Veronis cited a December 2017 survey by Preqin of 250 institutional investors, of whom 91% expected their private equity investments to beat their public market portfolios.

But the market for thousands of private companies is far more opaque and fragmented than the stock market. About 200,000 middle-market companies account for one-third of private sector GDP (98% of them are private) and employ nearly 48 million people.

This broad level of dispersion carries over into the arena of private equity performance. Like the children of Lake Wobegon, everyone in the PE locker room is “in the top quartile,” Veronis noted. In reality, performance dispersion is vast. But research by Cambridge Associates has found that private equity has outperformed both the S&P 500 and Russell 2000 over 10-, 15- and 20-year periods.

There are three ways to create value, and Veronis observed that not “all internal rates of returns are created equal.” The first strategy is applying leverage, pure and simple, and not losing one’s equity. Next is multiple expansion, or timing the entry and exit points to the investor’s advantage.

Finally, there is real PE alpha, by firms that manage to enhance cash flow and drive revenue higher while timing their exits propitiously. These are the firms that one wants to invest with. “You can’t just buy the market because the performance dispersion is so wide,” Veronis told attendees.

iCapital and others like Artivest have built platforms for advisors to access the private equity market. But while advisors are tiptoeing into the space, no one expects them to dial up to the 15% to 18% allocations that some pensions and endowments are deploying.

Meanwhile, there are reports that Nasdaq may try to create some kind of liquidity system. It has also been reported that Airbnb is exploring whether it can issue shares to participants in its sprawling hospitality network. Most private equity companies don’t want their secondary share pools trading randomly around the market, Veronis added.

All this means the sharp lines between public and private companies could begin to blur. Moreover, Veronis’s argument that the best values may lie outside public markets has merit, particularly when it comes to large-cap businesses in the S&P 500.

Investment managers specializing in the small-cap universe take issue with the idea that R&D spending in America is in serious decline. “That may be the case in the large-cap world, but we aren’t seeing that so much in the small-cap world where we are focused on companies that have significant R&D spending,” says Randy Gwirtzman, portfolio manager of the Baron Discovery Fund.

Like managers in the private equity and venture capital space, Gwirtzman spends a great deal of time with companies before and after initiating investments. “Not every great idea has been absorbed into the larger companies in this country,” he says, adding that many of his holdings end up being acquired. “It is true that many of our companies are focused on handfuls rather than warehouses full of products. We view that as an advantage—it is easier to track successful market penetration in such instances, and the companies can be more focused.”

On that subject at least, he and Veronis would agree.