How Your Classmate Became a Con Artist

THE FIRM. That’s what they call McKinsey & Company, and the leading F in Firm is richly deserved. The consultants are everywhere. Corporations, governments, the most prominent NGOs… Consultants apply their know-how and unimpeachable credentials to the problems of every company with the money to afford their fees. And they do indeed solve problems—they boil the data down to transferrable sets of questions that allow inexperienced recent grads to pretend to make a difference.

At a management consultancy, their questions often lead to recommendations of cutting costs. Costs, over time, tend to overshoot their marks, and consultants, for a price, have a way of leading them back. For their prestige and their “ideas,” consultants are handsomely paid, and when a company pays a consultant, it knows the price it’s charged. But we are also forced to pay, and we have the right to ask:

What is the price?

Historically, consultancies have operated in the shadows of those who require their service and prestige—never taking internal credit, never taking external blame. In a sleight of hand that evenly obscures both failures and successes, the content of consultants’ advice seems to matter less than those who deliver it. This magic trick, repeated a thousandfold, has given the Big Three—McKinsey, Bain, and BCG—the status of corporate oracles, even when their mixed results demand a mixed assessment.

Pete Buttigieg, a former McKinsey consultant himself, recently quoted Graham Greene to describe his former employer: “Innocence is like a dumb leper that has lost his bell, wandering the world, meaning no harm.” He would have us believe that the Firm’s mistakes are the work of “smart, well-intentioned people” led astray by an honest commitment to serving the client’s needs. Yet “client interests ahead of the firm’s” is not a moral principle, a point that even Mayor Buttigieg can publicly concede. Under pressure from the liberal press, even he admitted that “there seems to be a problem there with assessing what [McKinsey wants] to be associated with.”

In a business built on accurate assessment, moral blind spots in the Firm’s self-image should strike us at least as odd. If we accept that consultants are smart, that they’re equipped with the tools to evaluate their clients, they shouldn’t need a journalist’s help to thoroughly evaluate themselves. They may be suffering in part from a broken methodology. At Bain, consultants approach their clients with the mindset of “answer first.” The evidence can be massaged to support the intuition; consulting does not play by the rules of the scientific method. Since the Big Three consulting firms haven’t assessed their business themselves, we offer them our own assessment and ethical answer first:

The firms’ approach is expensive, cynical, and dangerously amoral.

With the verdict tentatively rendered, we can approach the case of consultants in the language they understand best. Below is our assessment, our evidence, and recommendation—delivered for the client in terms of aggregate cost.

I. The Authoritarian Auxiliary

BCG and McKinsey consultants operate much of their business from Riyadh. In the Kingdom of Saudi Arabia, American consultancies have enjoyed their most lucrative decade yet. McKinsey began in 2010 with only two projects in the Kingdom; by 2016, the Firm had amassed a portfolio of nearly six hundred. American consultants are often thought to be most comfortable with private clients, but the Saudi public sector has proven a highly profitable venture. Though the Saudi state has one of the world’s most appalling records on human rights—women only received the freedom to drive in 2018—McKinsey’s relationship with the Prince’s inner circle is unusually and especially deep. The Ministry of Economy and Planning is known as the Saudi “Ministry of McKinsey.”

Defenders of consultants believe that they act as a force for liberalization, but lately, both McKinsey and BCG appear to have aided projects steeped in authoritarian excess.

To the credit of McKinsey, some of its work on the Saudis’ behalf appears to have been by accident. In 2015, the Firm prepared a document on the regime’s most effective critics on Twitter. A spokesman maintained that its “primary audience was internal,” but the report seems to have found a secondary audience in the Saudi secret police. Soon after its (internal) publication, the information appears to have been used to make the arrests of three Saudi dissidents.

McKinsey’s most costly work in the region—of the projects that journalists have uncovered—has assisted the government more directly. Both BCG and McKinsey have proven instrumental in the development of plans for Neom, a Saudi-supported city-state in what is presently a coastal desert. Neom is envisioned as Earth’s most futuristic city, and the Saudis plan for the place to play host to the world’s first human gene-modification project, which promises to increase Neomites’ strength and IQ. In a stark departure from the rest of the Kingdom, there will also be alcohol and glow-in-the-dark sand. To make Neom possible, BCG has recommended relocating twenty thousand indigenous people, given until 2022 to be permanently removed from their land. Those who remain will be massively surveilled. (If anything about the city seems too cartoonishly odd or evil to be true, refer to the original story published in the Wall Street Journal.)

When other firms stepped away from the Saudis in the months after the killing of Jamal Khashoggi—a journalist for the Washington Post whom Saudi agents dismembered alive—American consultancies remained to participate in a conference hosted by the Prince. BCG, seemingly unfazed, led a panel on “intelligence.” It wouldn’t be a stretch to believe that both BCG and the Firm are involved in other troubling facets of the regime that have yet to come to light.

Whatever the project, consultancies lend authoritarians a veneer of respectability. To link one’s regime to a prestigious firm, the only necessity is a pocketbook, and rather than liberalize the Saudi state, the Prince feigns progress by hiring the liberal market’s least democratic fixture: the American corporation. (As promised, a cost accounting of the Big Three’s work in the region thus far: three innocents’ arrests, one tortured employee, twenty thousand prospective relocations, and the continuing legitimization of an authoritarian regime.)

This pattern repeats itself in China and Ukraine. We have fewer details of McKinsey’s work in other authoritarian states, but what we know, given its due, appears to be equally lurid. In 2018, the Firm took its annual retreat to the outskirts of Kashgar, China—only four miles away from internment camps that have forcibly detained, over the last few years, a minimum of one million Uighurs. Unlike the camps, the theme of the retreat was a swanky take on Kashgar’s Silk Road history, featuring carpets, camels, and well-appointed tents. It was a fitting display for a company devoted to the regime’s Belt and Road Initiative.

Managing Partner Dominic Barton—formerly a Rhodes Scholar, now an ambassador—wrote as recently as 2015, “The world is waiting for the ‘One Belt, One Road’ grand blueprint to move from dream to reality.” While the world has been waiting, McKinsey has been taking action. The Firm has already contracted its services to 22 of the one hundred largest state-owned companies in China. Unfortunately, while McKinsey burnishes China’s global reputation, the Uighurs have been denied the resources to hire consultants of their own.

McKinsey’s business in Ukraine has been considerably less substantial, but we can still attach a price to its work in the region, chiefly for its aid to Ukrainian ex-president Viktor Yanukovych. Working alongside Paul Manafort, currently set to be released from prison on Christmas 2024, McKinseyites aided Yanukovych’s campaign by writing a platform for the Ukrainian economy. Despite their free-market bias, the Firm’s proposals received positive reviews and contributed to the president’s reelection.

In communications with American officials, allies of the president made explicit the rationale behind establishing a relationship with McKinsey. One of Ukraine’s richest men called Yanukovych “a strong McKinsey supporter,” using the Firm for legitimacy in the eyes of Western liberal democracies. Within a few years, Ukraine’s economy was in freefall, the people were in revolt, and Yanukovych lived in a palace, gaudily adorned with Slavic antiques and large, flightless birds—all sustained by theft from the Ukrainian taxpayer.

Instances of collaboration with authoritarians are disturbing. Still, the corporate malfeasance detailed so far has been limited to clients over there. Authoritarians aren’t being helped over here—which suggests, maybe, the possibility of an ethical career in consulting in Boston, New York, or San Francisco. But the nature of management consulting precludes a simple division of clients into good, bad, and neutral. The Big Three depend on the anonymized transfer of “best practices” from client to client, the only good of note (apart from cash and prestige) that consultants and their clients exchange. While softening the edge of autocratic clients, they have sharpened the edge on institutions at home, encouraging state violence while doing their best to protect its instigators’ reputations.

On McKinsey’s return from its Eurasian tour, it worked for New York City to reduce violence at Rikers Island, the city’s most populous prison. (They pitched their approach to the corrections commissioner by citing their success in a strip mine.) Consultants algorithmically rated prisoners by their respective propensities for violence, and promised to house them accordingly to minimize contact between violent inmates. After ranking the prisoners from most violent to least, they removed about 250 to a separate, McKinsey-approved complex, where the Firm reported a precipitous decline in interpersonal violence. They declared victory.

Later it emerged that consultants and officials had jointly schemed to stock the complex with Rikers’ most complaisant inmates. In the rest of the prison, ProPublica reported that violence between inmates had sharply risen by almost fifty percent. Meanwhile, McKinseyites made more personal contributions to Rikers’ culture of violence. According to the same report from ProPublica, consultants casually spoke of assaulting the prisoners themselves. After McKinsey’s failure, the people of New York City voted to shut the complex down, but the Firm suggested that the City retain its services—an implicit suggestion to retain the prison, too.

One of the Firm’s most authoritarian recommendations is among those closest to home. It is also the simplest of its stories to relate. McKinsey has a contract with Immigration and Customs Enforcement (ICE), and consultants proposed reducing spending on essential food and medical care for the agency’s detainees. They argued with ICE over a cost-benefit analysis that weighed the potential savings against potential loss of life. Reportedly, even the government was disturbed.

But whether a consultancy succeeds or fails, it brings to an organization the semblance of legitimacy through its employees’ name-brand prestige (Stanford, Wharton, the Fortune 500). Those most desperate for these names’ affirmation—wardens, dictators, oligarchs—are often those with the most to hide.

The consultant has another function that is potentially even more destructive: the amoral dupe. For all the Big Three’s business supporting the interests of authoritarians, this is a role they mastered in the service of democratic and corporate clients. It may be the role that matters most.

(Before we continue, we should tally the Big Three’s contributions to the following: the collapse of an economy in Ukraine, the deaths of prisoners in New York, the dehumanization of migrants on the border, and indifference to repression in China.)

II. Cost Minimization and Profit Maximization

South African politicians were less enamored of consultants than their counterparts in the United States. In a way, they discovered the secret—obscured by scholarships, impressive degrees, etc—of the Big Three’s astonishing claim to universal expertise.

Their expertise was a myth.

A person can only be expert at solving so many types of problems, yet consultants, no matter the problem, always have a solution. Consultants employ a toolkit applicable to every client—a formula applicable to every crisis—that a young associate, playing the expert, can master and deploy. In place of experience and depth of understanding, consultants learn to substitute the logic of Econ 1, and they have managed to do so continually to shockingly great effect. Without the personal knowledge of an organization possessed by its owners and employees, the consultant, freed from any sense of attachment instilled by living with a business, can always point to the balance sheet and find some variation on three basic recommendations: sell more, spend less, damn the consequences.

This is the logic that Jacob Zuma, more than anyone, understood.

Zuma, the former president of South Africa, presided over the most corrupt administration in the country’s post-apartheid era, and consultants could provide the Zuma administration with plausible deniability. Their questions would be shallow, their recommendations would be predictable, and the blame, in the end, would be only theirs to bear. So to evade potential scrutiny, Zuma’s allies hired Bain. The company would lead the restructuring of South Africa’s respected tax agency, but according to the Times, Bain “did not meet with senior officials involved in the tax agency’s modernization. It was ignorant of basic facts about the institution. And it did not even ask why the agency needed restructuring in the first place.”

South African politicians hired Bain not to improve the agency, but to accelerate its destruction. The former head of Bain South Africa claimed that the firm was unwittingly “used.” If we believe him, Zuma’s allies predicted correctly that Bain’s consultants, unrestrained, would cut its costs into oblivion—and the agency, thoroughly hamstrung, would be unable to prevent evasion. Consultants shuttered offices critical to daily operations, and the employees who remained in place lost the public’s faith.

It is difficult to assess the cost, but over the past few years, the country’s tax shortfall has exceeded six billion dollars. For its service to the public sector, Bain billed South African taxpayers only eleven million dollars, but Zuma et al. would apply a similar formula to profit from other public agencies. In a scheme that involved a public utility, an illegal contract, and McKinsey & Company, the latter received a whopping payout of sixty million dollars. An additional forty million were reserved for a firm with ties to the fabulously corrupt Gupta family.

(Though our primary focus is profit and cost, blatant corruption is another theme in the history of American consultancies. See, above all, McKinsey: the Firm represented both sides in a deal between cash-strapped Malaysia and a Chinese SOE; it recommended bribing Indian officials to secure Boeing access to titanium; and together with BCG, it aided Africa’s richest woman in spending millions in embezzled funds. After involvement in one especially corrupt deal, the Firm was unofficially exiled from Mongolia.)

The logic of cost-cutting may have been even more destructive in the US territory of Puerto Rico, which, in spite of its record-breaking bankruptcy, has paid McKinsey more than seventy million dollars in fees. Puerto Rico’s bankruptcy oversight board asked the Firm to help rein in costs, and it approached the territory as a hurricane would—albeit a hurricane educated at Stanford, finished at Harvard Business, and hired by the public sector.

In the case of Puerto Rico, we can directly compare McKinsey’s record, 2016 to 2019, to the effects of Hurricane Maria, September 2017. One of the oversight board’s most impactful cost-cutting measures in Puerto Rico has been its suggested reduction in schools and school personnel. As of April 2019, more than 450 schools were set to be shuttered—a number already had been. Of that number, over 250 damaged by the storm were simply never reopened. The rest were the province of McKinsey and the board.

Unlike a hurricane, the team also recommended shutting down about two-thirds of the territory’s public agencies. And those that remained would make do with less. With rates of violent crime reaching the population’s breaking point—a point reached even faster for the desperation of austerity—they planned to cut the public-safety budget by $153 million. While Maria pushed Puerto Ricans out of their homes, McKinsey pushed the government away from public services.

The Firm does not bear all the blame. They came to Puerto Rico to solve a bankruptcy, and they did; they came to the island to make recommendations, and no one had to agree. Many of the recommendations probably emanated from other sources. But the consultants were thought to be smart and impartial, and the Firm’s own “point man” on the island claimed, “We’re fact finders, we’re analysts, and we’re framers of choices.”

Which was not the entire story. During bankruptcy proceedings, investors typically take what is called a “haircut,” i.e., they agree to receive less than initially promised. A haircut is most crucial when its primary beneficiary is the public, but the scale of the government’s cost-cutting exceeded what many thought possible. In 2019, some creditors were slated to leave Puerto Rico with a haircut of only seven percent. The consultants’ logic of cuts had traded teachers and schools for servicing debts—reducible debts. While the cuts discussed above were well underway, some critics questioned whether McKinsey could accurately be described as an impartial “framer of choices.” In 2018, it emerged that its in-house investment arm had an interest in Puerto Rican debt.

The costs of a “spend less” philosophy are complemented by those of its flipside: “sell more.” Bain took heat (though not too much heat) for its work with Big Tobacco in the nineties, but it continues to apply its work with Philip Morris to emerging markets today. With Senator Mitt Romney at the helm, Bain used sell-more strategies to encourage cigarette makers to aggressively pursue sales to underage smokers. They were successful. In 2020, Bain has turned its expertise to Juul, which is getting its comeuppance in the United States for addicting a generation of teens. To cover for a prospective hit to business at home, Bain is overseeing their pivot to China.

McKinsey was involved in a similar scheme to increase sales of opioids: the Firm helped the notorious Sackler family find new buyers for painkillers. According to court documents, McKinsey drove opioid addiction by promoting opioid savings cards, targeting doctors who overprescribed, increasing sales reps’ quotas by twenty percent, and recommending a “direct-to-patient mail order” approach to bypassing commercial gatekeepers. The Sacklers sold more opioids, and Americans continued to die. (In 2017, at a rate of 130 per day.) Toward the end of its work with the Sacklers, McKinsey prepared a study documenting the crisis it helped to create: “Why we need bolder action to combat the opioid epidemic.”

At this point the costs are so familiar that they should begin to tally themselves. But given only weeks or months to learn a business’ intricacies, could we expect any better from the Big Three?

Instead of selling more drugs and hollowing out Middle America, McKinsey could have streamlined operations, but in a life-or-death business, streamlining takes time. Streamlining takes a depth of understanding that “sell more drugs” does not. In Puerto Rico, McKinsey could have negotiated a better deal for its clients, but deals are hard, and knowing an administrative state, as opposed to gutting it, can take a lifetime. So spend less. As for South Africa, Bain could have done better by saying “no,” but saying “no” requires wisdom and wisdom requires experience—and experience is an asset that consultants are denied.

Fine-tuning a business, or any complex institution, takes time, expertise, and creativity, but these are the luxuries of those on the inside, not the outside. In a well-lit room in a client’s own home, the nuance is obvious; only the space beneath the furniture does not glow, yet consultants claim, at the beginning of a job, that their lights are brighter. They say that only they know better, and we begin to believe, after awhile, that maybe they do. Maybe they carry kliegs.

In reality they never cross the transom—even when they speak as though standing beside us. Consultants are the “dumb lepers” of Pete Buttigieg and Graham Greene, peering through the windows and predictably intoning, “Sell more, spend less, damn the consequences…” And however many slide decks they bring to the morning meeting, when they trade your money for their “best practices,” this is the only practice they proffer.

What else?

III. The Discreet Clout of the PMC

If you choose to work for the Big Three—and it is a choice, it always is—there’s no way out. The consultants could drop their authoritarian clients; they could drop the opioid sellers, the tobacconists, the prisons, and the secret police, but as long as they operate by their present logic, they will still be available as pawns to those with the savvy to abuse the model. Ethics could not have kept Bain from extending a hand to South Africa, and a commitment to do-gooding would have still led McKinsey to seek business in Puerto Rico. The primary problem is not the moral status of American consultancies’ clients. The problem is the consultants themselves.

Over the last decade, the Big Three’s record includes one more failure we have to account. (With a more generous timeframe, we could also throw in pay ratios and Enron.) It’s the story of global public health, a sector that consultants have penetrated fully with the ostensible intent of being helpful. Philanthropic organizations, including the Gates Foundation, tend to attach riders to their gifts that require their recipients to hire consultants. In a field as sensitive as public health, the consultants reportedly seem out of their depth. Vox quoted one global health professional who described an African colleague’s struggles with “‘kids’ with little or no experience [coming] all the time to ‘advise’ her government on what to do about health.” McKinsey and BCG in particular have brought “kids” into the space, and the world’s most vulnerable have paid for their hubris.

The exemplary case is UNITAID’s. The Gates Foundation brought the Firm to UNITAID, which focused on AIDS, malaria, and tuberculosis. A new scheme was proposed for the NGO’s fundraising, and they wanted it tested before it was tried. McKinsey offered to study the idea, and they reported that the strategy would raise one billion dollars per year, a projection so sunny that it justified a significant outlay of cash. Between the consultants, lawyers, and advertisers, McKinsey’s advice led UNITAID to spend eleven million dollars.

The initiative ultimately grossed only fourteen thousand dollars. In sum, a rounding error.

In global health more than any other field, we can translate wasted dollars into an estimate of “wasted” lives. In the case of McKinsey, its failure at UNITAID was roughly equivalent to the cost of deworming—a conservative estimate, the lower bound—about seventeen million children. If we play on UNITAID’s home turf, malaria, we find that eleven million dollars buys about 2.5 million bednets, which could be enough to save 5280 lives. The cost is measurable.

Sometimes the path to Hell is paved with good intentions, but in the case of prestigious consultancies, it seems to be paved with no intentions at all. From the vantage of McKinsey, it may not even be paved. Their callous disregard for the consequences of consulting is the secret to their success and their failure. If they did not know it was wrong, anyone could sell more opioids. Insulated from the consequences, anyone could close a school. The magic of consulting is not the magic of well-bred talent, but the magic of never knowing.

In the private sector, not knowing can turn a profit; in the public sector, not knowing can gut a government. In either, a bright young Stanford grad is liable to do damage, and the pattern shows no sign of stopping. Their costs will become your costs, and you will inevitably add—whether you transgress on behalf of ICE, a corporation, or an NGO—to the list of mistakes enumerated above. And in spite of your mistakes, you will continue to advance. The Big Three will hire you because of your pedigree, not your expertise, and as long as you come with an authentic diploma, they will sell your prestige to those who need it most: authoritarians and unscrupulous profiteers.

But no one is required to work at McKinsey. The Firm is no one’s only option, nor Bain nor BCG. If you can land a job at the world’s most prestigious firms, you can land similarly lucrative jobs at similarly prestigious firms. The Big Three are unique in approach, not in starting salary, and to suggest that McKinsey was your only choice is offensive to its thousands of victims. You do have a choice: they did not.

It’s a choice that’s laden with power. Unlike a bank or a traditional business, consultancies have little capital apart from the graduates they hire. A consultancy is a machine for prestige, and you are the source of their prestige, the smoke that obscures the truth of a business that subsists on the crudity of cutting and selling. They purchased your transcript, and they purchased your diploma, but you have the power to take them away. Without you, a firm has no more weight than the shells through which it is paid.

So withhold your labor, withhold your prestige, and watch as the façade begins tumbling down.

Chapman Caddell

 

Featured image by Chapman Caddell.

 

 

The views expressed in this article only reflect its writer’s—they do not reflect those of the editorial board or the founder of the publication.

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