In defense of McKinsey

That is the topic of my latest Bloomberg column, here is the opener:

The latest institution to take a big whack from the media, with its well-known negative bias, is McKinsey & Co. A recent article in The New York Times shows how much the consulting company has worked for authoritarian and autocratic countries, including China, Saudi Arabia and Russia.

I would instead frame this story in a broader and far more positive reality: One of the biggest, most positive (and most neglected) global trends over the last 30 years has been the spread of managerial and technocratic expertise to what used to be called “third world governments.” In most countries, the central banks, the public health authorities, the treasuries and many other public-sector institutions now collect good data, hire Western-educated advisers, and try to implement good solutions.


…when I meet entrepreneurs in poorer parts of the world, I am often struck by the fact that they are highly intelligent and conscientious, but they don’t always understand all of the cultural codes of good management. Advice that might appear stupid or trivial to more experienced observers may actually help to build new cultures of business excellence and economic growth.

There is much more at the link.  Here is a good tweet stream on the company.  Here is the McKinsey response to the NYT article.


Better management of torture sites is what dictatorships really need to become democratic.

Also, the "improvements" that are given from a Western perspective, which is not always what is right or needed. How data is tracked could be missing key information because it is Western-driven.

If only that logic were applied to the social do-gooders like Jeffery Sachs, who inflict as many if not more stupid ideas on developing nations than the likes of McKinsey.

Yup, neo-colonial ideas of "saving" poorer countries are still mainstream for most of the political spectrum in America. It's disgusting.

Sure. This is why central american baby docs used to bring in the the CIA to teach torture. More efficient. Fewer people get hurt. Think how gruesome things could get if you let the local thugs learn best practice in torture on their own.

+1. The Chinese have perfected the managerial techniques necessary to run total surveillance and reeducation camps. Much more efficient than loading people willy nilly on trains to the gulags and death camp or having to rely on networks of informants (sadly prone to human error, thus not optimally rational from an economist's POV). Tyler is euphoric.

Misery in dictatorships is caused by a toxic mixture of malice and incompetence, with incompetence doing most of the work (North Korea, active civil wars, and ethnic cleansings excepted, but then those sorts of places are unlikely to hire consultants)

If improved managerial technique can reduce the level of incompetence, it will improve people's lives, even if it makes the malice more efficient.

If a dictatorship can deliver real improvements in standard-of-living for its population (and if better managerial practice can help with that), I do not see why this is a bad thing.

Backwards dictatorships become advanced democracies by first being advanced dictatorships, not backward democracies. This pattern repeats over and over -- for instance, throughout East Asia. North Korea will likely follow this path too, in time.

Does Russia learn from Facebook or does Facebook learn from Russia? Or do both Facebook and Russia learn from McKinsey? What we have learned in the past several years is that as bad as they may seem, they are actually worse. But I respect Cowen as he tries to put a positive spin on negative information.

A contrarian will find a way.

Looks like the democrats learnt from the Russians

The actual link:

Link to actual Bloomberg article:

So far for "growth+" where the + was supposed to stand for human rights. Once more, Cowen reveals his inconsistency and hypocrisy.

"What has driven this whole process, more than anything else, is the whole idea of incentive compensation. I blame McKinsey for that. When you dangle big bonus awards for meeting certain objectives, people may be less impressed by their company’s statement of ethical practices than the fact that they can make $1 million by engaging in a little questionable behavior, conflicts of interest, overselling products. It became the mantra for businesses consultants. It’s even more powerful than the emphasis on making profits at a company." - Paul Volcker (

I withdrew from the interview process with McKinsey after one introductory interview. Not because they were particularly awful, but because the work they do is not real in any sense. This goes to all management consultancies from McKinsey, Bain and BCG to the Big Four accounting firms, and even the technology focused ones, although the more implementation work one does the more real and accountable your work becomes. The human rights angle doesn't really bother me since my last employer had a huge contract with Qatar to project manage their FIFA bid ( Perhaps my time at Deloitte, where I only spent one year working in consulting, had already numbed me to the fact that much of the purpose of consulting and auditing is reputation laundering and providing office politics mercenaries.

The saddest thing was to watch more than a third of my business school class join one of these consulting firms. I had a classmate who was incredibly passionate about climate change, terribly smart, super hard working and very well read. She rejoined McKinsey to go into their energy practice, and ended up consulting to a midwestern coal power generator. Last I heard, she consoled herself by believing she was learning the industry from the perspective of those she wanted to stop. Sad.

Addendum, I can't help but thing Tyler is being Straussian here. Is his best defense of consulting firms that,

"McKinsey is a large global company, and no doubt it has committed numerous mistakes. But the fiduciary responsibilities of private companies do not always intersect with what is just, or socially best."

Try that phrase with Altria, Enron, WorldCom, United Fruit, etc.

Works pretty well as a defense of the Nabobs and the East India Company too.

How is he being Strassen? Tyler's entire reason to be is to defend elites and elite institutions: Goldman Sachs, McKinsey, Harvard, etc. etc.

"...Strauss indicates that medieval political philosophers, no less than their ancient counterparts, carefully adapted their wording to the dominant moral views of their time, lest their writings be condemned as heretical or unjust, not by 'the many' (who did not read), but by those 'few' whom the many regarded as the most righteous guardians of morality. It was precisely these righteous personalities who would be most inclined to persecute/ostracize anyone who was in the business of exposing the noble or great lie upon which the authority of the few over the many stands or falls.[31]" -

Your point is well taken. GS/McK/HU et al. train today's "righteous personalities" who "would be most inclined to persecute/ostracize anyone who was in the business of exposing the noble or great lie." Yet, Cowen's defense is so lily-livered that it is a more damning condemnation of McKinsey (and managerial feudalism writ large) than the original NYTimes attack itself.

I think Tyler just takes it as self-evident that these companies are great. He's never had a real job in industry, he doesn't really know how any of this stuff really is. He just sees the glossy brochers and snazzy corporate websites.

I also worked at a Big-4 (never at BBM though). The work is pretty pathetic, mostly projects that the clients don't want to be bothered having to do themselves - rarely is it actually difficult stuff that the client would need to bring in special expertise.
Even in the more "implementation" oriented technology practices, most of the software implementation is done in India.
These companies also love to talk about Machine Learning, AI, etc. but they barely have the actual capabilities to do anything meaningful in that space themselves.

It does seem that Tyler is a naif about business, but let's take the charitable view that he's simply doing the best he can within the constraints of what things are acceptable to say. What would he say then? You can't write a Bloomberg column that is just anti-managerial rants.

First, who would read such a thing (Marxists read Jacobin not Bloomberg)? Second, directly attacking people is not a good way to influence them. My take on the Marginal Revolution blog is that it is about making changes in society at the margins.

Tyler, if not Alex, is sympathetic to the Marxists, but does not wish to overthrow the standing order. Therefore, he writes this blog to save the managers and 1%ers from themselves. The history of Marginalism lines up well along these battle lines (

This probably isn't the best medium for explaining these thoughts. If you're interested in speaking more (I am!) please shoot a reply to the email I sent to:

I don't really get how the oblique "But the fiduciary responsibilities of private companies do not always intersect with what is just, or socially best" would really escape detection by the power elite.

is that you Rob V?

Haha, no sadly. This does help confirm David Graeber’s bullshit jobs theory though. Underlings read blogs at work and managers too.

Rob often tells me he has the most fastidious scrupulous and clever boss imaginable!

Rob’s mom

It's MBB, not BBM (but good attempt to troll McKinsey-ites)

Altria(Philip Morris) is a tobacco company. Everyone knows about United Fruit(for over 50 yrs.) and two companies now dead for over 10 yrs). What else is in your "etc"


Americans (IBM) help Nazists organize the Final Solution, gave the Nazis Fanta (Coca Cola) and, through their Japanese Friends, helped the Soviet Union perfect their submarines. Ameirca supported Saddam and Noriega, supported the Mujahideen and, even as we talk, supports Sunni terrorism around the world and supports the Zionist Entity. It is a shame.

Ho Ho! Defense of the elite class from Tyler Cowen what a surprise! How unexpected!

Finally, someone sticking up for poor old McKinsey!

But can McKinsey help the trains run on time?

So we are to admire the excellence of McKinsey's consulting work, totally ignoring the purposes to which its clients put it.

No thanks, Tyler. This one's a dud.

I'm not happy that we live in a world where such an article gets traction.

I blame the universities.

Love that nobody here is engaging with any of the arguments made in this piece! Mood affiliation in full effect?

In an honest attempt to engage with the arguments, I went back and reread Tyler's piece. The problem is there isn't much substance to engage with. The tell is right in the second paragraph, when Tyler reframes the discussion from "McKinsey is terrible" to "managerial expertise is good." Both arguments are red herrings. McKinsey != managerial expertise.

Anybody who has been to business school or reads HBR/The Economist/Any Neoliberal Rag has surely come across this argument before, most likely in the form of the famous study by Business School and the School of International and Public Affairs Professors at Columbia on the Pakistani Soccer ball production paradox (

The problem with this western managerialism save the day story is that it is almost never true. Here's a quote from Columbia Business School about how such an obvious problem could persist:

"Why? Because the workers weren’t incentivized to change, the researchers discovered through follow-up surveys and a second experiment. Paid by the hour, the workers saw no financial benefit in slowing down to learn a new technology so their bosses could save on production costs."

McKinsey is not offering advice like, "pay your workforce with equity, switch from hourly to salaried employees or set up a profit sharing system for laborers." Their clients would not listen, and furthermore, if it was a simple matter of more equitable distribution of profits, McKinsey would not be needed. Managerial expertise is only needed in the case when managers are kept in the dark by the workers, who can always provide much better advice than consultants, but then you'd have to pay them more! Manager/owners (as is usually the case in India) would rather have 99% of 100, than 50% of a 150.

The problem BBM solves is how to grow the pie without management getting a smaller piece, or sometimes, how to help management get a bigger piece, whether the pie grows or not. It's a classic principal-agent problem where management spends the value that could go to shareholders, customers, and employees to enrich themselves.

Rob you make the best case I've seen on this matter. Below the veneer of the Mckinsey prestige, It really does boil down to principal-agent and game theory rather than a blue ribbon commision trying to provide independent and prudent advice that would upset manager/owners.

Thank you. It took me five years of work in a consulting/audit firm and three years of grad school to learn this. Along the way I convinced nearly nobody and drew the ire of my professors.

I dropped the Anti-Money Laundering class in public policy school because the professor (an adjunct who was a manager at EY was offended at the idea that these AML/KYC and other regulations don't catch criminals, but do provide a moat for big banks. This is evidenced by Bill Black's excellent paper on epidemics of control fraud abuse ( Dr. Black quotes the FBI on the fact that 80% of mortgage fraud involves insiders.

I can't wait for Big Business: A Love Letter to an American Anti-Hero to come out. It's a love story for the ages, I'm expecting.

My two favourite McK engagements:

1) AT&T in the '80's: McK 'measured' the market for mobile phones-they said the world market would be for a few hundred thousand globally. AT&T then sold its nascent mobile business [to Craig McCaw]

2) SwissAir: Mck came up with some nutty 'shared service strategy' for its catering business-which wound up cratering the real business [flying passengers in planes from Pt. A -> Pt. B]; SwissAir declared BK

Or, how about the predictions that businesses would have to be large in order to take advantage of expensive computer systems...and then came the desktop computer that performs at the level of an IBM 360.

McK and other consulting firms simply take the latest business school academic research and repackage it, using recent graduates.

But, the names give solace to an executive who has to speak to his board.

The interesting question I have for these consulting firms is this: if you consult for a number of firms in the same industry, and give the same advice knowing what other firms know, are you coordinating an industry ala hub and spoke conspiracy.

I don't have a high opinion of McKinsey, but it's pretty hypocritical for people to criticize emerging market companies for not running according to Western capitalist practices and then criticize consulting firms for teaching those companies how to run according to Western capitalist practices.

China remains one of the world’s two most important countries

What makes a country important? Or unimportant? And to whom? Hungary probably isn't a very important country to an American but it's maybe more important than China to an Austrian or German.

. . . entrepreneurs in poorer parts of the world. . . don’t always understand all of the cultural codes of good management.

I'll bet the cultural codes of good management differ dramatically from one part of the world to another. Evidently the one that applies in the west, particularly in the US, is the "good" one.

". . . entrepreneurs in poorer parts of the world. . . don’t always understand all of the cultural codes of good management."

Enterpreneurs in wealthier parts of the world rarely understand cultural codes of good management either. But they understand how to conceal this lack of morality.
I think McKinsey needs no defense on this: they just play in a dirty business, that's all. Mind though, that the consulting business isn't dirty because of the clients, but because of the consulting companies themselves.

"Important" would in this context be important to the world economy, capacity to effect people in other places. It's not some kind of aesthetic or moral judgement or something like that. If the US economy crashes that has big impacts in a lot of places. Hungary, way less.

China is reaching the point where it parallels the US impact level.


No fair introducing common sense into a comment thread.

I would love to hear some examples of managers not getting the cultural codes. Besides the fact they would be great stories, it's not clear to me whether you mean managers need tips like "don't swear at your employees" or "trying to be the lowest price makes people not respect your offering".


I'm very interested in hearing examples as well.

Wow! I am stunned almost to silence. McKinsey&Co. a force for good??? Nah.

I like the way you engaged with his arguments, rather than engaging in pointless posturing. 10/10, A+, etc. etc.

(Seriously, I'm not 100% sold on Tyler's stuff but please actually try to add to the discussion.)

Well reasoned column -- thanks.

“ 'I love bringing my kids here,' I heard from my Eritrean Uber driver, the first person I’ve met who admits to going. "

-- "admits"?

For a number of years I had a first hand exposure to the consultants working with a government that wanted to become more 'Westernised’. I cannot say that I was impressed with what was happening. Glad that most of the commentators share the critical view.

And it is not just about the reciever of services being autocratic state or similar. In my case, the state was arguably not of that kind. The main issue is that the consultants rarely ever have enough incentives other than providing stock sollutions and recommendations without really tailoring them to the specifics of each individual case. In some instances, these produces some pretty drastic consequences....

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