Mitt Romney's poor private equity memory

The GOP front-runner appears to have forgotten almost all the lessons he learned at Bain Capital.

FORTUNE -- Mitt Romney is straight out of GOP central casting for presidential candidates: a tall, confident family man whose greatest professional accomplishments were in the private sector rather than in government. Too bad he keeps flubbing his lines.

Romney comes from the world of private equity, where investors are expected to develop investment theses -- easily digestible explanations for why a target company is underperforming, the specific steps required to turn it around, and why this particular group of investors is best qualified to do it.

It's messaging that would work well for a political campaign, but Romney has not yet articulated an investment thesis for America. His stump speech is full of reheated Republican boilerplate -- not the sort of "value-add" that helps win deals or board votes -- while his written economic plan is a 160-page odyssey with dozens of charts and footnotes.

Romney also seems to have forgotten his private equity training elsewhere. When criticized for having shut down factories while at Bain Capital, he often shrugs his shoulders and says that "creative destruction" can be a painful process. And then that's it. No redirection about how the bloated federal bureaucracy would be more efficient without departments X, Y, and Z, and how he, Romney, has a long track record of making difficult consolidation decisions that benefit the broader enterprise.

When asked about his wealth, Romney rarely points out that most of Bain's investment profits go to institutions like university endowments and public pension funds. In fact the only thing Romney regularly hypes about his professional past is a job creation "record" that his former Bain Capital colleagues say is impossible to verify.

Mitt Romney's real estate deals

What's really amazing about Romney, however, isn't only that he's eschewed the business lessons that could help him defeat political rivals. It's that he's fully embraced the one private equity attribute that is viewed by voters as an unforgivable liability: excessive flexibility.

To be successful in private equity, an investor must be willing and able to quickly adapt to changing circumstances. Sometimes that means abandoning a deal you've spent eight months working on, because new information comes to light.

Say a private equity firm buys an American television manufacturer that also has a small semiconductor unit. But then China starts massively subsidizing its domestic television industry and increasing exports. One response could be to ramp up semiconductor manufacturing and leave TVs behind. Or perhaps move the TV operations to China. Or cut bait by quickly finding a buyer for the whole company or, if that fails, shutting it down.

The one thing private equity investors don't do is say, "Well, we're standing by those television projections we made last year because we're no flip-floppers."

Romney, of course, has flipped and flopped enough times to make a circus acrobat blush. Not just on major issues like abortion and man-made global warming, but even on something like the "carried interest" tax break for private equity investors. In 2007 he supported the exemption. In January his campaign pointedly refused to take a position one way or the other.

Some of these instances may be reflections of Romney's philosophical evolution, but their scale and regularity suggest something else: Romney is wired to revise his policy positions in line with outside circumstances. If the electorate is liberal Massachusetts, he's "not trying to return to Reagan-Bush." When setting his sights on national office, "Ronald Reagan is one of my heroes."

The GOP has waited decades to run a real-life businessman for President. This probably isn't what they expected.

This article is from the February 27, 2012 issue of Fortune.