Title: When McKinsey Comes to Town
Rating: 4 Stars
Looking at their web site, they seem like a company with a strong set of corporate values. They recognize climate change and pledge to become carbon neutral. They have an audit committee that evaluates their potential clients for ethical fitness. Any of one of their employees can opt out of an assignment if it does not live up to their own personal values. In fact, since they primarily recruit from the most elite universities, since said universities, if you believe the angry, anti-woke conservatives, are bastions of liberal snowflake biases, their new employees are often young, idealistic and passionate about wanting to make the world a better place. They really do appear to want to be a good corporate citizen.
And then you read this book.
It’s pretty amazing. Think about the most disturbing patterns of corporate misbehavior that have become commonplace over the last forty years. Think about the worse corporate scandals over that same period. Seemingly all of them have McKinsey either at their root or somewhere on the sidelines providing guidance.
Do you think that I’m joking? Well, here is a partial list of events that McKinsey had a hand in.
Executive pay: A McKinsey partner named Arch Patton wrote the seminal paper describing a new competitive executive compensation model. Executive compensation committees took that paper and used it to build much richer compensation packages. Once one executive got a much larger package, it then became an arms race. Before that paper, executives were content making ten times their employees. Now, they’re making closer to one thousand times their employees.
Outsourcing: More often than not, when McKinsey is brought in to consult, their recommendation is nearly always to reduce cost. Starting in the 1980s, if they were brought into a manufacturing company, their advice pretty much always boiled down to outsourcing. To make it even more profitable for them, McKinsey set up offices in countries like India to facilitate the moving of work.
Opioid epidemic: You guessed it. Purdue Pharma was a major client of theirs. McKinsey was responsible for ideas such as targeting/rewarding physicians that write the most prescriptions and advising to change the bonus system to reward those most effective at pushing pills. At the same time that they were working for Purdue, they were also working for the FDA. In fact, they would send one of their FDA experts to consult with Purdue employees that were working to get drugs approved by the FDA. McKinsey ended up paying a 600 million dollar fine. Perhaps their most shocking recommendation (straight off one of their infamous PowerPoint slides) was, since pharmacies were becoming increasingly reluctant to dispense opioids, to offer pharmacies a rebate plan for each opioid death that one of their prescriptions caused.
Tobacco: Their support for corporations that kill their customers predates the opioid epidemic. They provided guidance to several tobacco companies as they attempted to boost their sales. Even when tobacco fell out of favor, McKinsey continued to provide consulting support to Juul and their vape products. This was during the time when Juul was selling flavors that were clearly skewed to the child market. At the same time as this, the FDA was giving McKinsey eleven million dollars for advice on how to regulate tobacco.
Healthcare: They got into state provided healthcare programs. As you can probably guess by now, they were not interested in providing better service but in reducing costs. Among other things, one approach that was taken to reduce state Medicaid costs was effectively to reduce the patient population. No, it’s not like a lot of people in Missouri all of a sudden got big raises and no longer qualified. They managed to discourage a large number of qualified people to leave the Medicaid rolls.
Enron: Yep, they were involved in probably this century’s biggest corporate scandal. Jeffrey Skilling, the Enron CEO, was an ex McKinsey employee. The whole financial shell game of using shell companies to shield losses and to somehow convert debts into assets via securitization is exactly the kind of ‘creative’ capitalism that comes from the minds of McKinsey.
2008 Financial Collapse: By now, you shouldn’t be surprised. Ex McKinsey employees were all over the leadership of the investment firms that either failed or were taken over to avoid failure. McKinsey was an early, evangelical adopter of the idea of securitization. McKinsey published some of the first, most enthusiastic papers on the subject, including one specifically for investment companies that was essentially a how-to manual. Even now, fifteen years after the meltdown, the original author was defending his work, seemingly oblivious to how clearly his ideas were inevitably bound to lead to disaster.
Oil and Coal: Yes, there are McKinsey people at Davos or at the Aspen Institute giving talks about how important climate change is, that it will be the defining issue of our time, and, while offering themselves up as a shining example, shaming other corporations to do their part. At the same time, McKinsey associates in Australia are working with the largest coal companies to increase their output and their exports to other countries. They are working with oil companies to help increase their yield. Quite literally, one of their PowerPoint presentations was titled “Drill and Blast”.
Saudi Arabia: Remember MBS (Mohammad bin Salman, crown prince of Saudi Arabia)? Among other things, he stands accused of ordering the murdering and dismemberment of the journalist Jamal Khasoggi. No, McKinsey was not in the room on that fateful day. However, they did spearhead the effort to monitor the social network activities of the very online Saudi population. Using this information, the government can identify and crackdown on dissent, and when I mean crackdown, that apparently includes dismemberment.
Houston Astros: Now I know that you did not see this one coming. If you follow baseball at all, you know that the Astros are notorious for having been caught blatantly cheating. As an organization, the Astros had completely moved away from the traditional notions of baseball scouting and were completely devoted to baseball analytics, otherwise known as Moneyball. During the time when they were cheating, the heads of the organization were former McKinsey employees. Their quest to dive as deeply as possible into the data to gain insights led them to actions that were explicitly prohibited by baseball.
See what I mean? Think of every bad thing that has happened to our country in the past forty years, from Oxycontin to CDOs to Enron to somebody banging on a garbage can to signal a changeup and there McKinsey is, collecting their fees and telling everyone how good they are.
I’d kind of like to know where all of the McKinsey associates were when JFK was shot.
dorkenstein 