Arnold Kling on Jim Manzi’s new book Uncontrolled: Manzi is a fan of randomized controlled experiments in business and public policy (in the latter, examples include the Rand health care study and the Wisconsin income-maintenance studies). I believe that decision-makers will resist this approach, for the same reason that they resist Robin Hanson’s suggestion to use prediction markets. That is, decisions are not necessarily about achieving results. They are often about establishing the status of the decision-maker. For a decision-maker to conduct experiments or to employ prediction markets is to admit ignorance and doubt, which lowers the decision-maker’s status.
Manzi On Trials is big consulting corporation and that's playing a major role to improve his services. As current situation it's spread his services in more than countries.
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10-15%? Not sure what type of stuff you do, but in my experience, we usually have experts for 25-50% - often very much on the ground, too.
As for the helpless clients - maybe if they were to develop career tracks with less politics then consultants would chose to go industry instead. Having seen politics in your average big company up close times and times again I have fairly limited desire to go there.
My view is that these parts of these industries (e.g., the quant hedge funds in finance, the strategy consulting part of consulting, the very high-growth and high revenue multiple parts of software, etc.) are parts of industries that can use extremely high talent along some ix of dimensions of analytical intelligence, propensity for very long hours of work on a sustained basis, etc. as inputs into producing goods and services they can sell to customers at very high economic profits.
Mark,
I did a very long post on this (that may be the one Robin originally linked to). One of the points I made is that the leading strategy firms recruit at about 40 - 50 universities. So, as a starting point, if you go to say UCLA or Notre Dame or the University of Michigan, get very high grades in a very difficult major and score extremely well on standardized tests, you can go through the recruiting process right on campus. If you go to basically any school and get a 4.0 in math, physics or a similar major and score above 1550 on the SATs, you can likely get an interview by writing to the firm. If you did none of these things, but then get into any one of the top 10 or 15 MBA programs, you can then interview right on campus. It's not prestige per se that matters; it's predictors of job performance. And yes, the firms build prediction models that relate knowable data prior to hiring to subsequent performance.
I think you're dancing around the idea that management consulting firms value the status of their recruits and are willing to pay a premium for acquiring that status. I don't see that you've denied this, but you haven't admitted it either.
But what predicts which parts of any industry will be especially interested in new grads of top schools? It is a small fraction of jobs that are filled by this small fraction of workers, so it must be something very unusual about those jobs.
Rest assured, it was expected return on investment (yes, I did that analysis) rather than lack of ambition that kept me in Iowa. I already had a well-paying job when I decided to go to grad school.
I didn't say these jobs paid more for the same employee features, I suggested that these employers have a much stronger taste for new grads of top schools. That unusual taste is what is in need of explanation.
My point in one of the paragraphs of my comment was that management consulting really isn't that unusual in terms of total first year comp for new graduates.
The average number of competitive job offers for one of our offerees was usually about 3 in most years. Across a portfolio of offerees, this would typically include offers from competing strategy firms, Wall Street jobs and high-end software engineering. In a normal year, the median consulting offeree had at least one higher-paid offer from a non-consulting company.
Wall Street job paid more, initially and over time, but had more risk, worse lifestyle and were less intellectually interesting. Software paid more up-front, less over time, and the relative lifestyle and intellectual appeal depended on the interests of the candidate
The limited number of top school grads must of course be different in some way, and they must go somewhere, and yes they don't all go to the same place. But since they are a small fraction of such jobs, there must be something unusual about those jobs. My suggestion is that such jobs have an especially high gain from status. I was asking for your explanation of what is unusual about management consulting jobs.
If consultants from one company both get farmed out to two competing firms, they can collude to raise prices without a competitive response, making money for both firms and stiffing customers.
Analyses and speculation aside, let me just be perfectly clear: the majority of projects firms like McKinsey and BCG engage their clients on are value-destroying projects. They are value destroying for the following reasons:
A) What little competitive intelligence consulting firms can provide is mitigated in the long-run by the fact that these firms are also gathering intelligence on YOU once you've hired them.
B) These firms have leveraged their business model to the maximum possible limit in order to drive revenues. What I mean is that a project leader - the only consultant with real experience/knowledge - will spend a maximum of 10-15% of his or her work time to any one project. The vast majority of the work is, in fact, done by freshly minted Ivy League undergrads and MBAs.
C) The intellectual horsepower undoubtedly possessed by the folks hired by these consulting companies is mitigated entirely by the very human fact that clients basically just want to confirm their preconceived notions and biases about appropriate 'next steps.'
Point C) implies that consulting firms are not the ones destroying values, but it is actually the decision of value-destroying managers that creates the problem - but nonetheless...
The greatest irony about the consulting phenomenon is that I hear a lot of consultants (I work for McKinsey) talk about how 'stupid' or 'unsophisticated' or 'helpless' their various clients are. The question I beg to them is: what would you expect? All of the smart people in our economy go into management consulting, and none of them go into industry. So you're in effect blaming a client for a problem you yourself have created for client companies (withholding your own skills as a dedicated employee). Just my $0.02.
Mark, I would argue that the value the top schools are adding is partially status, but to a large extent sorting (in their admissions process) and testing. Test scores matter, but people who get through those programs (and a few people do drop out and many end up with less demanding majors) are succeeding *in competition with other very, very strong students*. This was very likely not the case so much for you at Iowa.
Also, much of the recruiting is done on campus. Even though there may be a few hidden gems at each school, and indeed possibly a lot of them scattered around, does it make sense to seek them out at U/Iowa? Probably not.
And this is not to take anything away from you personally, I don't know you, of course. In the abstract it probably says something about someone who goes to an inferior school because it is good enough and happens to be located where he or she already "lived and worked". That suggests less ambition and willingness to sacrifice for excellence. This trait probably worth something.
You're answer doesn't make sense to me. It seems to avoid the question. Please don't mistake me - I'm not trying to imply good, bad, right, or wrong with my line of questioning. "Best and brightest," which I take as a measure of potential job performance in the given field of study, is not the only criteria we use to measure the value of graduates. To throw one example out - a positive attitude can be infectious and may improve performance of others, making that individual more valuable. Back to the question, rephrased yet again but still the question I intended: What value does a high status school add beyond that available in a low status school? (I'm not arguing there is no value - my belief is the value is the status itself and the signal it sends. Signals are highly valuable).
Jeff S -
My line of questioning is based on Jim's final paragraph above, where he states that these people are not necessarily the best and brightest, but have a certain set of characteristics that are valuable right now. I am not arguing these points - I'm asking what these characteristics are, and why high status universities infuse their graduates with those characteristics while low status universities do not. Recruitment costs may be a factor, but does not seem sufficient to explain the difference in value placed on these grads.
As far as where to find these hidden gems? If I could tell you, they wouldn't be hidden. My guess is just about anywhere. My test scores were easily high enough to get me into the most selective schools in the nation. I studied at the University of Iowa because that's where I lived and worked at the time. (I'm not the exception that proves the rule - I'm the exception that proves there are exceptions). High achievers are far more prevalent at more selective schools, but it's likely these hidden gems are scattered all around you.
Perhaps consultancy is about overcoming project design timing issues. Specifically, once a project is announced, the scope for creative design is minimized, because the project definition constrains this.
Bringing in the highly paid consultants gives the excuse required to go "back to the drawing board." The high pay motivates the company to get value for money from the process. The prestigious credentials of the consultants are partly the excuse required for the high pay, but there is also, at the very least, the benefit of a 'second opinion'. So the high pay drives the company, as much as it drives supply.
Manzi On Trials is big consulting corporation and that's playing a major role to improve his services. As current situation it's spread his services in more than countries.
The lavishness will begin do a examine at the same time it absolutely was declared Louis Vuitton was on the most important each and every time and come through the perfect consumer encounter. Louis Vuitton Outlet established and started out this careful household across the 12 months 1921 and possesses grow to be one of several largest and popular brandnames gucci sneakers.?
10-15%? Not sure what type of stuff you do, but in my experience, we usually have experts for 25-50% - often very much on the ground, too.
As for the helpless clients - maybe if they were to develop career tracks with less politics then consultants would chose to go industry instead. Having seen politics in your average big company up close times and times again I have fairly limited desire to go there.
Robin,
My view is that these parts of these industries (e.g., the quant hedge funds in finance, the strategy consulting part of consulting, the very high-growth and high revenue multiple parts of software, etc.) are parts of industries that can use extremely high talent along some ix of dimensions of analytical intelligence, propensity for very long hours of work on a sustained basis, etc. as inputs into producing goods and services they can sell to customers at very high economic profits.
Mark,
I did a very long post on this (that may be the one Robin originally linked to). One of the points I made is that the leading strategy firms recruit at about 40 - 50 universities. So, as a starting point, if you go to say UCLA or Notre Dame or the University of Michigan, get very high grades in a very difficult major and score extremely well on standardized tests, you can go through the recruiting process right on campus. If you go to basically any school and get a 4.0 in math, physics or a similar major and score above 1550 on the SATs, you can likely get an interview by writing to the firm. If you did none of these things, but then get into any one of the top 10 or 15 MBA programs, you can then interview right on campus. It's not prestige per se that matters; it's predictors of job performance. And yes, the firms build prediction models that relate knowable data prior to hiring to subsequent performance.
Jim -
I think you're dancing around the idea that management consulting firms value the status of their recruits and are willing to pay a premium for acquiring that status. I don't see that you've denied this, but you haven't admitted it either.
But what predicts which parts of any industry will be especially interested in new grads of top schools? It is a small fraction of jobs that are filled by this small fraction of workers, so it must be something very unusual about those jobs.
The relevant parts of finance and tech compete aggressively for the same top grads.
Jeff S -
Rest assured, it was expected return on investment (yes, I did that analysis) rather than lack of ambition that kept me in Iowa. I already had a well-paying job when I decided to go to grad school.
I didn't say these jobs paid more for the same employee features, I suggested that these employers have a much stronger taste for new grads of top schools. That unusual taste is what is in need of explanation.
Robin,
My point in one of the paragraphs of my comment was that management consulting really isn't that unusual in terms of total first year comp for new graduates.
The average number of competitive job offers for one of our offerees was usually about 3 in most years. Across a portfolio of offerees, this would typically include offers from competing strategy firms, Wall Street jobs and high-end software engineering. In a normal year, the median consulting offeree had at least one higher-paid offer from a non-consulting company.
Wall Street job paid more, initially and over time, but had more risk, worse lifestyle and were less intellectually interesting. Software paid more up-front, less over time, and the relative lifestyle and intellectual appeal depended on the interests of the candidate
The limited number of top school grads must of course be different in some way, and they must go somewhere, and yes they don't all go to the same place. But since they are a small fraction of such jobs, there must be something unusual about those jobs. My suggestion is that such jobs have an especially high gain from status. I was asking for your explanation of what is unusual about management consulting jobs.
If consultants from one company both get farmed out to two competing firms, they can collude to raise prices without a competitive response, making money for both firms and stiffing customers.
Analyses and speculation aside, let me just be perfectly clear: the majority of projects firms like McKinsey and BCG engage their clients on are value-destroying projects. They are value destroying for the following reasons:
A) What little competitive intelligence consulting firms can provide is mitigated in the long-run by the fact that these firms are also gathering intelligence on YOU once you've hired them.
B) These firms have leveraged their business model to the maximum possible limit in order to drive revenues. What I mean is that a project leader - the only consultant with real experience/knowledge - will spend a maximum of 10-15% of his or her work time to any one project. The vast majority of the work is, in fact, done by freshly minted Ivy League undergrads and MBAs.
C) The intellectual horsepower undoubtedly possessed by the folks hired by these consulting companies is mitigated entirely by the very human fact that clients basically just want to confirm their preconceived notions and biases about appropriate 'next steps.'
Point C) implies that consulting firms are not the ones destroying values, but it is actually the decision of value-destroying managers that creates the problem - but nonetheless...
The greatest irony about the consulting phenomenon is that I hear a lot of consultants (I work for McKinsey) talk about how 'stupid' or 'unsophisticated' or 'helpless' their various clients are. The question I beg to them is: what would you expect? All of the smart people in our economy go into management consulting, and none of them go into industry. So you're in effect blaming a client for a problem you yourself have created for client companies (withholding your own skills as a dedicated employee). Just my $0.02.
Mark, I would argue that the value the top schools are adding is partially status, but to a large extent sorting (in their admissions process) and testing. Test scores matter, but people who get through those programs (and a few people do drop out and many end up with less demanding majors) are succeeding *in competition with other very, very strong students*. This was very likely not the case so much for you at Iowa.
Also, much of the recruiting is done on campus. Even though there may be a few hidden gems at each school, and indeed possibly a lot of them scattered around, does it make sense to seek them out at U/Iowa? Probably not.
And this is not to take anything away from you personally, I don't know you, of course. In the abstract it probably says something about someone who goes to an inferior school because it is good enough and happens to be located where he or she already "lived and worked". That suggests less ambition and willingness to sacrifice for excellence. This trait probably worth something.
Jim -
You're answer doesn't make sense to me. It seems to avoid the question. Please don't mistake me - I'm not trying to imply good, bad, right, or wrong with my line of questioning. "Best and brightest," which I take as a measure of potential job performance in the given field of study, is not the only criteria we use to measure the value of graduates. To throw one example out - a positive attitude can be infectious and may improve performance of others, making that individual more valuable. Back to the question, rephrased yet again but still the question I intended: What value does a high status school add beyond that available in a low status school? (I'm not arguing there is no value - my belief is the value is the status itself and the signal it sends. Signals are highly valuable).
Jeff S -
My line of questioning is based on Jim's final paragraph above, where he states that these people are not necessarily the best and brightest, but have a certain set of characteristics that are valuable right now. I am not arguing these points - I'm asking what these characteristics are, and why high status universities infuse their graduates with those characteristics while low status universities do not. Recruitment costs may be a factor, but does not seem sufficient to explain the difference in value placed on these grads.
As far as where to find these hidden gems? If I could tell you, they wouldn't be hidden. My guess is just about anywhere. My test scores were easily high enough to get me into the most selective schools in the nation. I studied at the University of Iowa because that's where I lived and worked at the time. (I'm not the exception that proves the rule - I'm the exception that proves there are exceptions). High achievers are far more prevalent at more selective schools, but it's likely these hidden gems are scattered all around you.
Perhaps consultancy is about overcoming project design timing issues. Specifically, once a project is announced, the scope for creative design is minimized, because the project definition constrains this.
http://www.jnd.org/dn.mss/w...
Bringing in the highly paid consultants gives the excuse required to go "back to the drawing board." The high pay motivates the company to get value for money from the process. The prestigious credentials of the consultants are partly the excuse required for the high pay, but there is also, at the very least, the benefit of a 'second opinion'. So the high pay drives the company, as much as it drives supply.
Another demand-side fix.