6 ms·

McKinsey suffers from collective self-delusion

50 points by georgecmu 6y ago

georgecmu 6y ago
https://archive.is/07PIU https://archive.is/07PIU
mlthoughts2018 6y ago
> “ clients do not know what they are getting in advance, because they are looking for knowledge that they themselves lack. They cannot measure the results, either, because outside factors, such as the quality of execution, influence the outcome of the consultant’s recommendations.” There is a ton of this in cloud computing as well, especially in the AI / ML space. It’s marketed as a production-ready, plug-in solution, on the hopes that the customer isn’t smart enough to evaluate what they are getting. It’s sold as a replacement for an earnest need to understand problems and solutions. Just consider how many cloud vendors charge pay-per-usage for things like pre-built ML models. It makes no sense to pay by usage unless you have a very clear understanding of what accuracy and business impact of failures you’ll get at that usage rate (which depends on your product / customers / data, not primarily on the vendor’s managed model). So either you just trust the vendor and you are flying totally blind in terms of the real accuracy or business value you get per dollar, or you have to go ahead and hire expensive ML experts to maintain that vendor integration and understand its business impact. But in no world can you just buy business value direct from the vendor without someone in the loop actually producing clarified understanding. I think it’s the same with big box consulting. The customer wishes to offload political battles and status turf wars to an outside authority that can just tell them the business value answer without anyone in the loop actually achieving understanding or clarity. It’s pure fool’s gold. The corporate equivalent of obsessively visiting psychics or tarot card readers.
- edoceo 6y ago
  Plus you can blame the consultants too if it doesn't work out. The best combination for management: don't have understand the problem or be responsible for the fix. Easy money
sand_castles 6y ago
I have more respect for Afghan Freedom Fighters "Taliban" than McKinsey and their MBA drones. At least the Taliban stand for something and have the courage to put their lives where their mouth is, as Nassim Talib would say - skin in the game.
de6u99er 6y ago
My experience with consulting companies like McKinsey is that they pull things out of thin air when they lack the required knowledge, and use their customers as beta-testers. Due to a lack of knowledge/skills and failure to admit a mistake was made within management on their client's side, those interactions are in most cases wiped under the rug of damage control.
huitzitziltzin 6y ago
The success of this and related firms is really puzzling to me. The legwork (mostly making powerpoints, from what I have heard) is done by bright, recent graduates from top undergrad programs. No doubt they are all intelligent and accomplished, but what value does a 22-year-old Harvard economics grad bring to (e.g.) a pharmaceutical pricing problem? Certainly not relevant experience. Probably not even "business judgment". Teams are led by MBAs and some PhDs, most of whom will not have industry-relevant experience (though some will on certain engagements). I don't have an MBA, but two of my college friends described one top program as "a summer camp where you learn about Excel functions". This makes their advice desirable to large firms?? The breadth of knowledge which would be required of any single consulting firm to advise on the basis of direct experience across the range of industries in which consultants operate is staggering. They don't have it. If what management wants is the consultant's imprimatur on an idea they want to implement anyway, why not either just commit to it without McK's 'approval' and save a few million dollars OR try to get an outside blessing for the idea more cheaply? I get that McK has a "pedigree" and this may be part of what the firm wants, but that's an extraordinarily expensive way to solve the 'problem' of not being willing to take responsibility for your own idea.
- haltingproblem 6y ago
  Well put. This goes to the essential unknowability of causality (Godel incompleteness) and the uncomputability of plans (Turing halting problem). I bet on a stock and it went up, I sold it made money. Just because betting on a stock made me money does not mean that my reasoning was correct. Furthermore, there is no way to really know why the stock went up. Even if I repeat this across many many trials, there is no amount of verification which will prove me right. McKinsey is a real world arbitrage on this but dressed up in expensive ivy league educations, $500/hr consulting fees and fancy gobbledegook which awes management. Munger, FWIW, says they never ever hire management consulting firms.
- deleted 6y ago
  [deleted]
- andi999 6y ago
  I don't know if true, but here I heard rumours it is basically like this: the company needs to restructure, everybody knows it, but there is too much Powerplay inside the company to agree on anything (like the manager doesn't want to tell his team of 200 people that their department is history). So as a compromise it is agreed to hire a consulting firm to reshape the company for the 22nd century, with the agreement to implement their advise. So what the consulting company then does is trying to find out what the stakeholders really want and write it in their recommendation. I dont really know if I shd believe that, but at least it also explains why a consulting firm can recommend one year one thing, and next year the opposite for the same company (interest of stakeholders changed)
jakub_g 6y ago
Relevant read: "How CEOs think" https://blog.erratasec.com/2020/07/how-ceos-think.html https://blog.erratasec.com/2020/07/how-ceos-think.html (written from perspective of security researcher, but the post is pretty general)
junon 6y ago
Anecdotally, a former CEO of a company I worked at was a former McKinsey employee. Out of all of the "talk is cheap" CEOs I've encountered, he was the cheapest and would spare no opportunity to tout how he used to be at McKinsey, as though it was some badge of honor. Unsurprisingly, I consider him one of the least competent bosses I've ever worked for.
aussiegreenie 6y ago
CEOs and executives know exactly what they are getting, political cover to make bad decisions. If the new strategy works, the CEO gets a bonus, if it fails, he can not be fired as he got the best advice.
PlugTunin 6y ago
This podcast was a good listen. One of the authors/hosts, Steven Levitt, worked at a consulting firm when he first got out of school. I don't think anyone would dispute that these firms employ smart and talented people, but that doesn't mean they are worth the amount of money they earn to advise companies that they need do something that is, uh, sort of obvious. The podcast touches on an idea that is mentioned in some of these comments: for political reasons, the advice has to come from the outside. https://freakonomics.com/podcast/i-consult-therefore-i-am-a-new-freakonomics-radio-podcast https://freakonomics.com/podcast/i-consult-therefore-i-am-a-...
N1H1L 6y ago
So from reading the article, what McKinsey needs to now do is to hire McKinsey to make the difficult decisions, and "rightsize" the company.
msolujic 6y ago
There is pretty illustrative TV series for the management consulting, House of Lies [1] Of course there is some comedy and all, but surprisingly solid and realistic picture of that business. [1] https://www.sho.com/house-of-lies https://www.sho.com/house-of-lies

50 points by georgecmu 6y ago

https://archive.is/07PIU https://archive.is/07PIU

mlthoughts2018 6y ago

> “ clients do not know what they are getting in advance, because they are looking for knowledge that they themselves lack. They cannot measure the results, either, because outside factors, such as the quality of execution, influence the outcome of the consultant’s recommendations.” There is a ton of this in cloud computing as well, especially in the AI / ML space. It’s marketed as a production-ready, plug-in solution, on the hopes that the customer isn’t smart enough to evaluate what they are getting. It’s sold as a replacement for an earnest need to understand problems and solutions. Just consider how many cloud vendors charge pay-per-usage for things like pre-built ML models. It makes no sense to pay by usage unless you have a very clear understanding of what accuracy and business impact of failures you’ll get at that usage rate (which depends on your product / customers / data, not primarily on the vendor’s managed model). So either you just trust the vendor and you are flying totally blind in terms of the real accuracy or business value you get per dollar, or you have to go ahead and hire expensive ML experts to maintain that vendor integration and understand its business impact. But in no world can you just buy business value direct from the vendor without someone in the loop actually producing clarified understanding. I think it’s the same with big box consulting. The customer wishes to offload political battles and status turf wars to an outside authority that can just tell them the business value answer without anyone in the loop actually achieving understanding or clarity. It’s pure fool’s gold. The corporate equivalent of obsessively visiting psychics or tarot card readers.

edoceo 6y ago
Plus you can blame the consultants too if it doesn't work out. The best combination for management: don't have understand the problem or be responsible for the fix. Easy money

sand_castles 6y ago

I have more respect for Afghan Freedom Fighters "Taliban" than McKinsey and their MBA drones. At least the Taliban stand for something and have the courage to put their lives where their mouth is, as Nassim Talib would say - skin in the game.

de6u99er 6y ago

My experience with consulting companies like McKinsey is that they pull things out of thin air when they lack the required knowledge, and use their customers as beta-testers. Due to a lack of knowledge/skills and failure to admit a mistake was made within management on their client's side, those interactions are in most cases wiped under the rug of damage control.

huitzitziltzin 6y ago

The success of this and related firms is really puzzling to me. The legwork (mostly making powerpoints, from what I have heard) is done by bright, recent graduates from top undergrad programs. No doubt they are all intelligent and accomplished, but what value does a 22-year-old Harvard economics grad bring to (e.g.) a pharmaceutical pricing problem? Certainly not relevant experience. Probably not even "business judgment". Teams are led by MBAs and some PhDs, most of whom will not have industry-relevant experience (though some will on certain engagements). I don't have an MBA, but two of my college friends described one top program as "a summer camp where you learn about Excel functions". This makes their advice desirable to large firms?? The breadth of knowledge which would be required of any single consulting firm to advise on the basis of direct experience across the range of industries in which consultants operate is staggering. They don't have it. If what management wants is the consultant's imprimatur on an idea they want to implement anyway, why not either just commit to it without McK's 'approval' and save a few million dollars OR try to get an outside blessing for the idea more cheaply? I get that McK has a "pedigree" and this may be part of what the firm wants, but that's an extraordinarily expensive way to solve the 'problem' of not being willing to take responsibility for your own idea.

haltingproblem 6y ago
Well put. This goes to the essential unknowability of causality (Godel incompleteness) and the uncomputability of plans (Turing halting problem). I bet on a stock and it went up, I sold it made money. Just because betting on a stock made me money does not mean that my reasoning was correct. Furthermore, there is no way to really know why the stock went up. Even if I repeat this across many many trials, there is no amount of verification which will prove me right. McKinsey is a real world arbitrage on this but dressed up in expensive ivy league educations, $500/hr consulting fees and fancy gobbledegook which awes management. Munger, FWIW, says they never ever hire management consulting firms.
deleted 6y ago
[deleted]
andi999 6y ago
I don't know if true, but here I heard rumours it is basically like this: the company needs to restructure, everybody knows it, but there is too much Powerplay inside the company to agree on anything (like the manager doesn't want to tell his team of 200 people that their department is history). So as a compromise it is agreed to hire a consulting firm to reshape the company for the 22nd century, with the agreement to implement their advise. So what the consulting company then does is trying to find out what the stakeholders really want and write it in their recommendation. I dont really know if I shd believe that, but at least it also explains why a consulting firm can recommend one year one thing, and next year the opposite for the same company (interest of stakeholders changed)

jakub_g 6y ago

Relevant read: "How CEOs think" https://blog.erratasec.com/2020/07/how-ceos-think.html https://blog.erratasec.com/2020/07/how-ceos-think.html (written from perspective of security researcher, but the post is pretty general)

junon 6y ago

Anecdotally, a former CEO of a company I worked at was a former McKinsey employee. Out of all of the "talk is cheap" CEOs I've encountered, he was the cheapest and would spare no opportunity to tout how he used to be at McKinsey, as though it was some badge of honor. Unsurprisingly, I consider him one of the least competent bosses I've ever worked for.

aussiegreenie 6y ago

CEOs and executives know exactly what they are getting, political cover to make bad decisions. If the new strategy works, the CEO gets a bonus, if it fails, he can not be fired as he got the best advice.

PlugTunin 6y ago

This podcast was a good listen. One of the authors/hosts, Steven Levitt, worked at a consulting firm when he first got out of school. I don't think anyone would dispute that these firms employ smart and talented people, but that doesn't mean they are worth the amount of money they earn to advise companies that they need do something that is, uh, sort of obvious. The podcast touches on an idea that is mentioned in some of these comments: for political reasons, the advice has to come from the outside. https://freakonomics.com/podcast/i-consult-therefore-i-am-a-new-freakonomics-radio-podcast https://freakonomics.com/podcast/i-consult-therefore-i-am-a-...

N1H1L 6y ago

So from reading the article, what McKinsey needs to now do is to hire McKinsey to make the difficult decisions, and "rightsize" the company.

msolujic 6y ago

There is pretty illustrative TV series for the management consulting, House of Lies [1] Of course there is some comedy and all, but surprisingly solid and realistic picture of that business. [1] https://www.sho.com/house-of-lies https://www.sho.com/house-of-lies