Speaker 1: Hey, folks, I want to take a minute to ask
Speaker 1: for your help. This show is a labor of love
Speaker 1: for all of us here on the team at calling BS.
Speaker 1: We debate which organizations to investigate. We carefully consider how
Speaker 1: to best tell these stories. Our goal is to create
Speaker 1: a show that exposes purpose washing and the real harm
Speaker 1: it does in the world. But we also want to
Speaker 1: create a show that's fun to listen to and serves
Speaker 1: as a practical guide for entrepreneurs and leadership teams about
Speaker 1: how to do purpose right. We're really proud of what
Speaker 1: we've made so far, and we're super excited about getting
Speaker 1: season three into production so we can share it with
Speaker 1: all of you now to the help we need. So far,
Speaker 1: we are self funded. We need a sponsor or sponsors
Speaker 1: to help us with the cost of production. But, and
Speaker 1: this is important, we feel like it would be disingenuous
Speaker 1: given the theme of the show to accept money from
Speaker 1: just anybody. It's important to us that the sponsors of
Speaker 1: this show shared of shows values. We're looking for partners
Speaker 1: who are purpose lead themselves, Companies or organizations that truly
Speaker 1: walk their talk. Companies who understand the harm that purpose
Speaker 1: washing does and who understand how important it is for
Speaker 1: all of us that more companies embrace the path to purpose.
Speaker 1: If you're a part of an organization like that, or
Speaker 1: you know one that seems like a good fit, don't
Speaker 1: hesitate to drop us a line. You can reach me
Speaker 1: directly at Team Montague at Calling Bullshit podcast dot com.
Speaker 1: Thanks for listening, and let's get on with the show.
Speaker 1: McKenzie the enigmatic global consulting firm. Their influence unrivaled, their
Speaker 1: talent extraordinary, their allure irresistible, their bullshit undetected until now.
Speaker 1: Welcome to Calling Bullshit, the podcast about purpose washing, the
Speaker 1: gap between what an organization says they stand for and
Speaker 1: what they actually do and what they would need to
Speaker 1: change to practice what they preach. I'm your host, Time
Speaker 1: Montog You and I've spent over a decade helping organizations
Speaker 1: define what they stand for, their purpose and then help
Speaker 1: them to use that purpose to drive transformation throughout their business. Unfortunately,
Speaker 1: at a lot of institutions today, there's still a pretty
Speaker 1: wide gap between word and deed. That gap has a name, bullshit. But,
Speaker 1: and this is important, we believe that bullshit is a
Speaker 1: treatable condition. So when our bullshit detector lights up. We're
Speaker 1: going to explore rethink the organization should do to fix it.
Speaker 1: The campaign that Purdue launched when it put oxy content
Speaker 1: on the market was designed to make doctors I think
Speaker 1: that hoping it's rarely cause addiction. Now dozens of states
Speaker 1: and cities to filed lawsuits accusing Purdue of helping fuel
Speaker 1: the current health crisis with misleading marketing. I can't remember
Speaker 1: last time the FDA was a friend or or the
Speaker 1: spark for a rally for some of the tobacco stocks,
Speaker 1: But that's what we saw yesterday and Run ultimately filed
Speaker 1: for bankruptcy. Approximately twenty jobs and two billion dollars in
Speaker 1: employee retirement funds were lost. Many executives were brought to justice,
Speaker 1: and some of them ultimately ended up receiving prison sentences.
Speaker 1: Many Americans are struggling and barely getting by, but not everyone.
Speaker 1: Into the Economic Policy Institute, American CEOs were paid three
Speaker 1: hundred and fifty one times as much as a typical worker.
Speaker 1: The Department of Homeland Security has redirected hundreds of millions
Speaker 1: of dollars to immigration enforcement, growing the size and scope
Speaker 1: of ICE. The government has pulled money that was supposed
Speaker 1: to be spent on the Coast Guard, on t s
Speaker 1: A aviation security, and on FEMA hurricane relief. The U
Speaker 1: S Intelligence report has concluded that Saudi Crown Prince Mohammed
Speaker 1: bin Salmon personally approved the murder of the exiled journalist
Speaker 1: Jamaica and Ron, the Immigration and Customs Enforcement Agency a
Speaker 1: k a ICE, Big Tobacco, the f d A, Perdue Pharma,
Speaker 1: Big oil, and the Saudi Arabian government. What's the thread
Speaker 1: that connects all of these controversial organizations, governments and industries.
Speaker 1: They have all been clients of Mackenzie. Coincidence, bad luck,
Speaker 1: or is there something about Mackenzie that draws them into
Speaker 1: these dark corners of capitalism? The story of McKenzie and
Speaker 1: the story of global capitalism are inextricably linked. The firm
Speaker 1: consults with heads of state, boards of directors, and CEOs
Speaker 1: of most, if not all, of the most powerful corporations
Speaker 1: and countries on the planet. You'd be forgiven for not
Speaker 1: knowing much about Mackenzie. Secrecy is a precious organizational currency.
Speaker 1: Few people outside the firm have a clear idea of
Speaker 1: the full scope of their activities. Few people inside the
Speaker 1: firm know the full scope either. What is common knowledge
Speaker 1: is that for the past hundred years, McKenzie recruits elite
Speaker 1: talent from only the top tier universities. Mackenzie also sells
Speaker 1: these recruits. It's on the idea of wealth without guilt.
Speaker 1: To the young, gifted, and ambitious, a job at McKenzie
Speaker 1: is the ultimate initiation into success, with alumni currently holding
Speaker 1: high positions in government, as well as running companies like Google,
Speaker 1: Morgan Stanley, JP, Morgan Chase, IBM, Disney, and Boeing, to
Speaker 1: name just a few. They claim to be a values
Speaker 1: driven firm. Values like practicing high ethical standards, having an
Speaker 1: obligation to dissent, maintaining an independent perspective, and above all,
Speaker 1: serving the client first. If you were to visit their website,
Speaker 1: you'd see they claim to be a purpose led company.
Speaker 1: Their purpose to create positive, lasting change in the world,
Speaker 1: although that purpose is a little vague. As you listen
Speaker 1: to this story on old you'll begin to realize as
Speaker 1: I did, that because of their power to accelerate the
Speaker 1: adoption of new ideas across their client base, there is
Speaker 1: no company better positioned to create positive, lasting change to
Speaker 1: the system of capitalism than McKenzie. So do their deeds
Speaker 1: back up their words. Does their value of serving the
Speaker 1: client first mean that every other value comes second? Can
Speaker 1: we trust any company to be purpose led when they
Speaker 1: operate in almost total secrecy? Flip on your BS detectors, folks,
Speaker 1: and join me as I talk with three people who
Speaker 1: are deeply qualified to help us discover the truth behind
Speaker 1: these questions and more. A New York Times investigative journalist
Speaker 1: and co author of the new book When McKinsey Comes
Speaker 1: to Town, followed by two former McKinsey consultants who have
Speaker 1: worked inside the belly of the beast. Folks, I am
Speaker 1: very excited to welcome New York Times journalist and author
Speaker 1: Mike Forsyth. Mike, thank you for being here today, and
Speaker 1: welcome to calling bullshit. I'm so happy to be here. Ti. So,
Speaker 1: you and your co author, Wolf Buck Danich have written
Speaker 1: a fascinating book about Mackenzie, which I found both fascinating
Speaker 1: and honestly a little bit scary. What what moved you
Speaker 1: to write about this topic? So all credit goes to
Speaker 1: uh my co author Wald Buck dani He started looking
Speaker 1: at Mackenzie back in because he saw that Mackenzie's work
Speaker 1: was contributing to inequality and was it was such a
Speaker 1: powerful secretive firm. So he was pitching two editors back then,
Speaker 1: let's write about this firm. Our first bite of the
Speaker 1: apple in was about mackenzie's work in South Africa. But
Speaker 1: in that story we also mentioned a little bit about
Speaker 1: McKenzie's work with ice. That led to, you know, another
Speaker 1: chain of events, and we just kept writing and writing,
Speaker 1: and we just kept writing. How would you describe what
Speaker 1: McKenzie does. So they're a management consulting company, so more
Speaker 1: than thirty thousand people started in the US, but actually
Speaker 1: most of their employees are outside of the US. Now,
Speaker 1: when you say a management consulting company, they work for
Speaker 1: the C suite, the CEO, CFOs, CEOs, and a lot
Speaker 1: of the time their work is garden variety cost cutting recommendations.
Speaker 1: That's what they're known for, probably the best. You know,
Speaker 1: they're the people you fear when they come in and
Speaker 1: they figure out where jobs need to be cut, you know.
Speaker 1: So there's the efficiency experts, the efficiency experts, and they
Speaker 1: have been for they've been around for nearly a hundred
Speaker 1: years and they've always been the efficiency experts. But they
Speaker 1: do a lot more than that, uh, you know, they
Speaker 1: they help with refocusing companies focusing on new lines of business.
Speaker 1: They help governments reorganized departments such as the FDA for example.
Speaker 1: Uh And they also, I think, and this is really important.
Speaker 1: Over the decades, and especially since the nineteen eighties, they
Speaker 1: have been big propagators of ideas around the world, diffusers
Speaker 1: of knowledge, so they are very powerful propagators of information. Yeah,
Speaker 1: they're almost like the global nervous system for the business community,
Speaker 1: right like they are the behind the scenes transmitter of
Speaker 1: vital information. McKenzie is an almost mythic brand in consulting.
Speaker 1: They have a reputation for being incredibly smart, extremely effective,
Speaker 1: and intensely secretive. My first question here really is how
Speaker 1: did you get the access that you needed to even
Speaker 1: tell this story. There's a lot of ways we did it.
Speaker 1: One thing that surprised us early on was people coming
Speaker 1: to us working at McKinsey or had just left McKinsey
Speaker 1: to tell their stories. And it took a while, but
Speaker 1: we realized why because mackenzie is such a different company
Speaker 1: from like say Goldman Sachs or some private equity company,
Speaker 1: where you know, there's no pretense when you work there,
Speaker 1: You're there to earn money, you're there to be part
Speaker 1: of unfettered capitalism if you're at Goldman Sachs, right. But
Speaker 1: at Mackenzie, they lure very idealistic, very intelligent people into
Speaker 1: the company. Their recruiting pitch is all about making a difference,
Speaker 1: and they talk inevitably in their recruiting pitches talking about
Speaker 1: things you could do to make the world better, you know,
Speaker 1: with climate or you know, with health, things like that.
Speaker 1: And it's because of that that people when they got there,
Speaker 1: realized they've been sold a bill of goods, and they
Speaker 1: came to us, and some of them came with some
Speaker 1: extraordinary information. And this didn't surprise me, to be honest,
Speaker 1: because Mackenzie does use that technique of trying to trying
Speaker 1: to rude people who really want to make a positive
Speaker 1: impact on the world, and they recruit from some of
Speaker 1: the best schools around the world. A large group of
Speaker 1: people both inside the company today and also people who
Speaker 1: have left the company who feel some loyalty to it,
Speaker 1: right they joined it for the right reason. They want
Speaker 1: to kind of protect it. You know. The impression I
Speaker 1: get from your book is many of them hate seeing
Speaker 1: when the company gets involved in unsavory things or things
Speaker 1: that are, you know, they know are going to damage
Speaker 1: the brand. It almost feels like they come to McKenzie's
Speaker 1: defense sometimes some people. The more senior the people are,
Speaker 1: the more they come to mckensey's defense, it seems. Uh.
Speaker 1: And it's the younger people that you know, haven't spent
Speaker 1: their whole lives there are that the prime of their
Speaker 1: lives there who can move on and do other things
Speaker 1: that are more likely to come to us. So it's true.
Speaker 1: I think the majority of the whistleblowers we had are
Speaker 1: the really good sources we had were on the younger side. Yeah,
Speaker 1: And it was over and over again in the book
Speaker 1: that the young can Sultan's kind of rose up when
Speaker 1: there was, you know, malfeasance of of one kind or another.
Speaker 1: It's it's good to see that there are internal checks
Speaker 1: and balances as well. So you touched on this, but
Speaker 1: I want to dig a little bit deeper. The company
Speaker 1: also claims to be purpose let itself and they say
Speaker 1: their purpose is to create positive, enduring change in the world.
Speaker 1: And so right out of the gate, what do you
Speaker 1: think about that purpose? Having written that this book, I
Speaker 1: think it's a very noble purpose. Agree, The whole point
Speaker 1: of the book is that they don't live up to
Speaker 1: that purpose in many important ways, and some of the
Speaker 1: work that they do does real harm to the world.
Speaker 1: But you know, they also have values, and that's the
Speaker 1: crux of the problem is that their number one value,
Speaker 1: you know, over the decades, has been to serve the
Speaker 1: client first. So, um, let's get into some of the
Speaker 1: things that really opened my eyes in this book. One
Speaker 1: of the many unexpected things that I got from it
Speaker 1: is mackenzie's role in a number of aspects of let's
Speaker 1: call it lead stage capitalism. So, for instance, income inequality.
Speaker 1: I never thought about McKenzie when it came to that topic.
Speaker 1: Can you talk about how the firm had a role
Speaker 1: in the you know now vast and growing divide between
Speaker 1: workers and managers. There are so many ways that mckensey's
Speaker 1: had a big role in this. But it started in
Speaker 1: nineteen fifty and McKinsey had been hired by General Motors
Speaker 1: to do a study about a compensation for its executives
Speaker 1: and and mckensey looked at compensation at many companies and
Speaker 1: it was this hot shot partner, young guy named Arch
Speaker 1: Patton back in nineteen and he made an amazing discovery.
Speaker 1: He discovered that workers pay was catching up to executive pay,
Speaker 1: or was growing faster than executive pay. So the game
Speaker 1: between executives and workers was narrowing. Well wasn't big enough.
Speaker 1: And you know, and this was a time when labor
Speaker 1: unions were strong. There had been you know, something called
Speaker 1: the Treaty of Detroit, where you know, workers got all
Speaker 1: sorts of benefits, you know, so that they wouldn't strike.
Speaker 1: So this got spread around from company to company, and
Speaker 1: some companies executives didn't like the fact that they were
Speaker 1: ranked lower than other ones, and it started this race
Speaker 1: to the top where the companies would raise pay for
Speaker 1: their executives based on these McKenzie studies. That happened year
Speaker 1: after year after year, and this guy arch Patton would
Speaker 1: publish these unfortunate he published these in the Harvard Business Review.
Speaker 1: So company executives started knowing what people in other industries
Speaker 1: were making. They didn't want to be behind. Stock options
Speaker 1: started becoming in vogue. Mckensey did these compensation studies, you know,
Speaker 1: for for individual companies and became a very big part
Speaker 1: of the firm's work. And this guy alone was billion
Speaker 1: about ten of all revenue at mckinn z at the time. Yeah,
Speaker 1: so he built a huge practice and you could you
Speaker 1: kind of go, let's see, let's who are you going
Speaker 1: to call if you want to get a get a
Speaker 1: raise and you're a CEO, call call our chip McKenzie,
Speaker 1: right right. Yeah. Simultaneously though, McKenzie is as the efficiency
Speaker 1: expert showing some of those same companies how to cut
Speaker 1: costs by downsizing and then ultimately offshoring talent to other
Speaker 1: countries to drive compensation of workers lower. That's right. So
Speaker 1: offshoring was all the vogue at McKinsey in the nineties.
Speaker 1: There were mckensey partners writing books about the benefits of
Speaker 1: off shoring globalization. You know, McKenzie would just talk about
Speaker 1: this with endless companies and they would put slides in
Speaker 1: slide decks about the benefits of globalization, that benefits of
Speaker 1: moving your work to China from the United States. And
Speaker 1: so because of their reach and all these corporate ward rooms,
Speaker 1: they were able to spread this gospel about the benefits
Speaker 1: of off shorey. So just to unpack this, McKenzie profits
Speaker 1: by helping shareholders profit by firing American workers on mass
Speaker 1: in some cases, or firing them and moving their jobs overseas.
Speaker 1: And then they also profit by helping management profit by
Speaker 1: starting an executive pay practice that drives CEO pay into
Speaker 1: the stratosphere. That's quite clever, and it leads to a
Speaker 1: second eye opening aspect of the book. I learned that
Speaker 1: in multiple industries and engagements, mackenzie often profits from working
Speaker 1: for both sides of an issue. I was really struck
Speaker 1: by their relationship with not only Big Tobacco, who they
Speaker 1: worked with for years, but also their relationship with the
Speaker 1: FDA Center for Tobacco Products, which is responsible for regulating
Speaker 1: Big tobacco, and they worked with those entities, as I
Speaker 1: understand it, simultaneously, they also consulted with Jewel, which at
Speaker 1: the time claimed to be a smoking cessation product, as
Speaker 1: Jewel wound up marketing their product to teens and thereby
Speaker 1: addicting an entirely new generation to nicotine. And this strategy
Speaker 1: of working multiple size of the problem has has netted
Speaker 1: the company massive fees over the years, has it not?
Speaker 1: It really has. Almost since the beginning of McKenzie, they've
Speaker 1: been happy, and they've they've made it clear that they
Speaker 1: work for multiple companies in the same industry, so for example,
Speaker 1: they could work for four GM and Chrysler at the
Speaker 1: same time. But but what you said is on a
Speaker 1: different level entirely when McKenzie is working for both the regulator,
Speaker 1: with the FDA being the poster child, and then the
Speaker 1: companies that are actually regulated. And as you pointed out,
Speaker 1: the the idea that McKinsey was working um for big
Speaker 1: tobacco and they only stopped working for big Tobacco in
Speaker 1: one Yeah, and I guess somehow this is all legal
Speaker 1: question mark, So that is a question. It appears to
Speaker 1: be legal. You know, McKenzie had to pay more than
Speaker 1: six hundred million dollars are settled with these states attorneys
Speaker 1: general investigations last year into their work with opioid makers.
Speaker 1: They write Perdue and oh Melon crossed several of the
Speaker 1: opioid makers Jay and Jay that that they admitted no wrongdoing.
Speaker 1: And that's a constant theme. And you know, the certainly
Speaker 1: the Congress has been really looking into this conflict as well.
Speaker 1: There were some very testy hearing back in April when
Speaker 1: members of Congress were asking the head of mackenzie, this
Speaker 1: guy named Bob stirred Fell's point, like, you know, how
Speaker 1: can you work for the f d A and uh,
Speaker 1: the regulated companies like Perdue at the same time. Now,
Speaker 1: of course he would say, well, the work we did
Speaker 1: for the f d A wasn't specific to any of
Speaker 1: these companies, so there was no conflict, right, yeah, so
Speaker 1: legal or potentially legal? Would you consider that to be ethical? No? No,
Speaker 1: straight up no, yeah, you know, and neither right. And
Speaker 1: one thing we discovered is we talked to some people
Speaker 1: at the FDA or former people, senior people. Hey, did
Speaker 1: you know that McKenzie was also advising these drug makers,
Speaker 1: these tobacco makers at the same time they were advising you,
Speaker 1: And they didn't know it was. They were surprised, which
Speaker 1: is terrible. It's right, you know. And I've always thought
Speaker 1: mackenzie's secrecy is a little bit of just a kind
Speaker 1: of marketing ploy to create mystique, but it does seem
Speaker 1: like it's it's actually a really important part of their
Speaker 1: business model, because if you have total secrecy on everything
Speaker 1: that you're working for, both internally and externally, you can
Speaker 1: get away with stuff like that. That's right. We only
Speaker 1: know what we've uncovered, but you know, there's lots more
Speaker 1: secrets out there, I'm sure. Uh, And You can do
Speaker 1: a lot of things if no one knows what you're doing. Right.
Speaker 1: There was another story that you told in the book
Speaker 1: that I don't know whether this is working two sides
Speaker 1: of an issue, but I did find it cynical. You
Speaker 1: tell the story of Dixon Pinner, who is or was
Speaker 1: Mackensey's head of sustainability at the Aspen Ideas Festival, talking
Speaker 1: about the pressing need for corporations to take quick and
Speaker 1: dramatic action on climate change. That's great at the Aspen
Speaker 1: Ideas Festival. But this is a company that worked for
Speaker 1: years and continues to work with some of the biggest
Speaker 1: fossil fuel companies in the world. Right, So we called
Speaker 1: McKenzie out on this in a story in The New
Speaker 1: York Times a year ago, and it's a you know,
Speaker 1: it's a big chapter in our book. Again. If mackenzie
Speaker 1: was working with big oil, you know, the gas companies,
Speaker 1: the coal miners, to reduce their carbon emissions, that would
Speaker 1: be laudable. And Dick and Penner, he's like, he's head
Speaker 1: of the sustainability for them. He he knows about climate change.
Speaker 1: He he can really do a great presentation showing how
Speaker 1: urgent the problem is. And he's done lots of great
Speaker 1: report The problem is, I tell you, we did this
Speaker 1: story a year ago, and McKenzie is unapologetic about its
Speaker 1: work with these companies. What we tried to do, and
Speaker 1: it's in the book, is to show that a lot
Speaker 1: of their work with these companies has nothing to do
Speaker 1: with cutting their carbon emissions. It has everything to do
Speaker 1: with making them a more profitable and more productive coal
Speaker 1: mining company or oil company or gas company. In on
Speaker 1: their website, there all these studies of McKenzie is doing
Speaker 1: all this, these words about, you know, committed to protecting
Speaker 1: the planet, committed to reducing emissions, and yet at the
Speaker 1: same time, these big clients that they're working for are are,
Speaker 1: you know, some of the world's biggest polluters. Yeah, some
Speaker 1: of the data that you have in the book is incredible.
Speaker 1: Let me just read a bit. Is a note I
Speaker 1: wrote here for myself for a firm committed to protecting
Speaker 1: the planet. McKenzie counts seventeen mining and fossil fuel companies
Speaker 1: among its biggest clients. Collectively, those clients have earned McKenzie
Speaker 1: hundreds of millions of dollars in recent years. Since two
Speaker 1: thousand and ten, McKenzie has worked with forty three of
Speaker 1: the hundred companies that have pumped the most carbon dioxide
Speaker 1: into the atmosphere since nineteen sixty five. These forty three
Speaker 1: companies were responsible for thirty eight percent of the entire
Speaker 1: planets carbon dioxide output in and Chevron number three on
Speaker 1: the list, paid McKenzie fifty million dollars in fees in
Speaker 1: So they're hardly not in the carbon business and for
Speaker 1: them to make any claims about being pro sustainability seems
Speaker 1: ridiculous to me and a little dangerous. It does. And
Speaker 1: I tell you, you know, they were apologetic about their
Speaker 1: work with opioid makers, they were apologetic about their work
Speaker 1: in South Africa, but they are not apologetic about their
Speaker 1: work with these carbon emeters. And that's not to say
Speaker 1: that mckenzy doesn't do good work, you know, on sustainability.
Speaker 1: They do some and uh and they do work with
Speaker 1: some great green companies and and that's a fact, but
Speaker 1: they also do you know what we outline that these
Speaker 1: work with these big polluters. You know, one of the
Speaker 1: things that you point out in the book is that
Speaker 1: McKenzie is really good at spreading ideas and they've done
Speaker 1: it many times over their history, and we're now feeling
Speaker 1: what I hope is a new day dawning in capitalism,
Speaker 1: and mackenzie could be tremendously powerful if they decided to
Speaker 1: really get behind, for instance, conscious capitalism. I couldn't agree more.
Speaker 1: One of the things McKenzie does really well is higher
Speaker 1: really smart people who will work their butts off. And
Speaker 1: if those people can be harnessed to consistently do things
Speaker 1: that are good and will make the world more sustainable
Speaker 1: and more equitable, you know, all within the free market framework,
Speaker 1: which is not a contradiction, then hats off to them
Speaker 1: if they can do that. Let's touch on another topic
Speaker 1: that is contained in the book which I did not realize,
Speaker 1: which is McKenzie's were with authoritarian governments. You tell two
Speaker 1: stories about this, McKenzie's work with the Chinese government and
Speaker 1: their work with the Saudi Arabian government, and it just
Speaker 1: struck me that mackenzie is is very good at finding
Speaker 1: growth industries and attaching themselves to them, and authoritarianism seems
Speaker 1: to be spreading around the globe. Is this the new
Speaker 1: growth industry for mackenzie? So um, After we wrote about
Speaker 1: their work in China, after we wrote about their work
Speaker 1: in Saudi Arabia. McKenzie did say that they've changed the
Speaker 1: way they select clients and now they say they will
Speaker 1: not work for the defense ministries, justice ministries, lease interior
Speaker 1: ministries of authoritarian countries. Um. But a lot of the
Speaker 1: harm and a lot of the power in authoritarian countries
Speaker 1: is not in those ministries. It's in the ministry of economy.
Speaker 1: For example. If you're working to make an authoritarian country
Speaker 1: like Saudi Arabia more robust that the theocratic autocratic House
Speaker 1: of Saoud, you know, more sustainable, you do, You're doing
Speaker 1: that through the Ministry of Economy. And that's what we've
Speaker 1: found that that work is still continuing McKenzie still in
Speaker 1: Saudi Arabia and in China. We also discovered that McKenzie
Speaker 1: for a time was a real champion of some of
Speaker 1: these marquee Chinese policies that were meant to burnish Chinese
Speaker 1: power throughout the world. They have come out publicly and
Speaker 1: said they've changed their ways with regard to, for instance,
Speaker 1: the Chinese government. Are they explicitly not working with Chinese
Speaker 1: government owned or run companies. No, no, no, they have
Speaker 1: not said that at all, So they they are still
Speaker 1: working with some of the biggest Chinese state owned companies.
Speaker 1: What we looked at in our book is the nineties
Speaker 1: six Chinese companies, which are the centrally managed state owned
Speaker 1: companies that they're called the John Young Ta. These are
Speaker 1: the companies that are the basis for Chinese state power.
Speaker 1: And so there are many of these companies that mckensey
Speaker 1: works for. In fact, we never found them really working
Speaker 1: for the you know, the interior ministries the defense ministries
Speaker 1: in these countries, but they don't have to work with
Speaker 1: those ministries necessarily to be engaged in work that's in
Speaker 1: direct opposition to, for instance, the interests of the United States,
Speaker 1: that's right. So you know, one of the areas we
Speaker 1: we looked at was their work for a company called
Speaker 1: China Communications Construction Company, which builds those artificial islands in
Speaker 1: the South China Sea that some people fear will turn
Speaker 1: that area into just a big Chinese lake. We know
Speaker 1: that the Pentagon is really concerned about this, and McKinsey
Speaker 1: obviously works for the Pentagon as well, And so there's
Speaker 1: another contradiction there. Yeah, it's it's odd and I guess
Speaker 1: you know this has to do with the perspective that
Speaker 1: you take my guests would be and and you keep
Speaker 1: me honest here. The way they defend that is to say,
Speaker 1: we're a global company, We're not a US come I.
Speaker 1: We don't have anybody's particular interests in mind. We want
Speaker 1: to help the people who pay us to advance their
Speaker 1: their agenda, whatever that agenda is. That maybe so, but
Speaker 1: I'm sorry. You know, if you're working for one client
Speaker 1: and the interests are opposed to another client, especially if
Speaker 1: that clients, you know, the US government, and if the
Speaker 1: work in Mackenzie's doing is in contradiction to national security,
Speaker 1: I think that's something that they called out. Okay, so
Speaker 1: other shocking stories, and we'll just touch on these. Mackenzie's
Speaker 1: role in securitized debt. You know, this idea of turning
Speaker 1: debt into essentially a stock that other people can buy
Speaker 1: or a security that other people can buy to get
Speaker 1: debt off your books, which in many ways lead directly
Speaker 1: to the housing collapse and bankrupting at least tens, if
Speaker 1: not hundreds of thousands of Americans. They did of work
Speaker 1: at Purdue literally using the word turbo charging sales of
Speaker 1: OxyContin in the middle of the opioid pandemic. It was
Speaker 1: obviously already clear that this was a problem when McKenzie
Speaker 1: stepped in and tried to help produce pharmacs sell more
Speaker 1: of this stuff. Which leads to the question that I
Speaker 1: have about this company, which is, is there a client
Speaker 1: you think they would not take on? Um? I am
Speaker 1: sure there are clients they would not take on. And
Speaker 1: you know, we don't hear about the clients they reject.
Speaker 1: McKenzie says, they actually turned down a lot of work.
Speaker 1: I don't know what that work is specifically. Yeah, okay,
Speaker 1: So just to to round this up a little bit,
Speaker 1: I found myself as I read the book and listen
Speaker 1: to all these stories, having a lot of thoughts about this. Mackenzie,
Speaker 1: in one way or another, has been at the scene
Speaker 1: of some of the most egregious examples of capitalism run
Speaker 1: a muck, and throughout the book you pointed out that
Speaker 1: in many cases the strongest criticism can from within, most
Speaker 1: often from young consultants who joined to make a positive
Speaker 1: and lasting change on the world, Like the Sign says,
Speaker 1: and we're shocked by what they discovered when they got
Speaker 1: in there. And you know, this is part of a
Speaker 1: broader movement among young people who are demanding change. And
Speaker 1: I guess my question is, how do you think mackenzie
Speaker 1: stays relevant in that changing landscape and continues to win
Speaker 1: with talent. If you look at the mckensey website, you
Speaker 1: could be forgiven for thinking that they are the poster
Speaker 1: child for responsible capitalism, for ethical capitalism. It's all about
Speaker 1: doing good, it's all about saving the planet. So on
Speaker 1: the surface, they seem like a very ethical company, but again,
Speaker 1: the work that makes them a lot of money oftentimes
Speaker 1: is in contradiction to their stated values as a company. Well,
Speaker 1: in addition to claiming to be purpose led themselves, they
Speaker 1: also claim to be helping clients make the transition to
Speaker 1: being purpose led today. It's a big way to make money,
Speaker 1: it's it is. Yeah, I just question their credentials. We
Speaker 1: certainly do. But you know they can make a lot
Speaker 1: of money helping companies with their environmental these e s
Speaker 1: G goals or you know that that's that's a big
Speaker 1: way to make money. And so advises on this. Yeah,
Speaker 1: one other quick um area that I wanted to delve into.
Speaker 1: His values. They have numerous values and they all sound
Speaker 1: as values tend to really really great, But there are
Speaker 1: three that I wanted to probe on. The first is
Speaker 1: preserving client confidences. You know, their renowned for secrecy. They
Speaker 1: claim that it's for their clients. But the other revealing
Speaker 1: thing about your book is that this policy of total
Speaker 1: secrecy has been incredibly profitable for them, and I guess
Speaker 1: my question is do you think that can endure? You know,
Speaker 1: secrets are just harder to keep these days, so do
Speaker 1: you think that policy is going to change. I don't
Speaker 1: think it's going to change. I think it's baked into mckenzy.
Speaker 1: And some of that is legitimate tie because, for example,
Speaker 1: if they have trade secrets that they learned from a company,
Speaker 1: they can't reveal that, so they have to be trusted
Speaker 1: to keep those secrets. But it is becoming easier in
Speaker 1: some ways, you know, through lawsuits, through whistleblowers, through very
Speaker 1: idealistic young people who just they're not going to take
Speaker 1: it anymore and they want to work for an ethical company.
Speaker 1: So I do believe in you know that it does
Speaker 1: depend though on continued attention by journalists. If there's not
Speaker 1: attention paid to these companies, then I think that secrecy
Speaker 1: and especially the malign aspects of that secrecy will continue.
Speaker 1: Another value observe high ethical standards. How are they doing here? Yeah,
Speaker 1: well I think, uh, you know, there's some there's some
Speaker 1: issues there. I guess the real question is one happens
Speaker 1: when this value contradicts either the secrecy value or the
Speaker 1: firm's profitability. You know, lots of companies have values and
Speaker 1: mission statements, and usually they they're really meaningless, right. I
Speaker 1: do think mckensey is different. Um, they really take this
Speaker 1: stuff seriously. They you know that people are always talking
Speaker 1: about values at McKinsey. They have a Values Day, you know,
Speaker 1: they stand down and talk about values every year, and
Speaker 1: you see it an email after email after email. The
Speaker 1: another value I'll have to say is that the right
Speaker 1: to dissent, the obligation to dissent if you see something wrong,
Speaker 1: you say something, and that that is a value that's
Speaker 1: invoked a lot, and that's helped us write our book
Speaker 1: because of these incredible emails that these young mckensey associates
Speaker 1: are writing, for example about their work with ICE, uh,
Speaker 1: you know, immigration and customs enforcement. And so there's that value.
Speaker 1: But you know, kind of like with Lord of the Rings,
Speaker 1: where there's one ring, you know, that rules them all,
Speaker 1: one ring that binds them the the one value that
Speaker 1: is above all the other values is the client interests
Speaker 1: come first. Client interests come first. And but that's a
Speaker 1: If your client is a bad actor and you're working
Speaker 1: unstoppably to help, what is your responsibility then in the world,
Speaker 1: right do you have none? I mean so so yes? Um.
Speaker 1: The obligation to keep your client confidences and to put
Speaker 1: the clients interests above the firms can lead you to
Speaker 1: basically doing things that, from a societal point of view,
Speaker 1: are just unethical. Yeah. Um, okay, here's a here's a
Speaker 1: really self serving question for you, Mike. You know, you're
Speaker 1: obviously a professional journalist, and we're obviously amateurs at calling bullshit.
Speaker 1: We just follow our nose, and so far, our nose
Speaker 1: has led us to do individual episodes on Jewel, BP, Course, Civic,
Speaker 1: all of whom are mentioned in the book, and the
Speaker 1: FDA also in the book. And I was just blown
Speaker 1: away to discover that the common denominator between all of
Speaker 1: those entities is mckensey. What do you make of that?
Speaker 1: They're everywhere, They're they're absolutely everywhere. They work for all
Speaker 1: these companies, and they work for all these government agencies.
Speaker 1: So if you scratch the surface at a lot of companies,
Speaker 1: you know, you'll discover mackensey. Was there another thing that
Speaker 1: I found myself thinking over and over again, how little
Speaker 1: I understood about the ways in which the world that
Speaker 1: we all live in today has been shaped by this
Speaker 1: one firm. And it's easy to really make up a
Speaker 1: fairly scary story about their impact by connecting a few dots.
Speaker 1: If I told you the story, it would go kind
Speaker 1: of like, well, the relentless focus on helping corporations externalized
Speaker 1: cost like pollution, and also by downsizing and all shoring
Speaker 1: talent and advocating for executive pay has led to the
Speaker 1: climate crisis and also income inequality, as well as the
Speaker 1: destruction of the middle class, which leads to depression and
Speaker 1: anxiety in in the devastated middle class, and political polarization,
Speaker 1: which leads to the opioid crisis and the rise of authoritarianism.
Speaker 1: So we can't blame McKenzie for this whole mess, of course,
Speaker 1: But maybe we got started on this because of the
Speaker 1: feeling that that McKenzie, you know, had a role in this.
Speaker 1: What so many McKenzie consultants and former consultants say, is
Speaker 1: that McKenzie is an accelerant. Several people who used that word,
Speaker 1: they're an accelerant. They didn't invent assets securitization, but they
Speaker 1: spread the gospel. They didn't invent offshoring, but they spread
Speaker 1: the gospel. They didn't invent shareholder capitalism, but they spread
Speaker 1: the gospel. Yeah, I think that's that's a great point,
Speaker 1: and it's a great way to think about them, you know,
Speaker 1: for for better or worse. Okay, So just a reminder,
Speaker 1: mackenzie's purpose is to help create positive, enduring change in
Speaker 1: the world. And so Mike, if you you know, we're
Speaker 1: able to give them advice on how they could change
Speaker 1: to better live that purpose, what would you tell them?
Speaker 1: You know, I'm not a philosopher and I don't play
Speaker 1: one on TV. But when you see unethical behavior, you
Speaker 1: know it. It doesn't take a genius to know that
Speaker 1: you shouldn't be working for a hospital to extract money
Speaker 1: out of poor people. You shouldn't be pushing opioids. You
Speaker 1: shouldn't be working for big tobacco. You shouldn't be working
Speaker 1: for the Saudi government to make them more sustainable, or
Speaker 1: with Chinese government ministries. It doesn't take a genius. There
Speaker 1: are gray areas, of course, but they need to have
Speaker 1: a lot more of and I don't use this word
Speaker 1: a lot, but a lot more EQ a lot more
Speaker 1: emotional quote that they don't have that now. They're so
Speaker 1: focused on their spreadsheets and their slide decks than in
Speaker 1: so many cases they lose sight of the big picture
Speaker 1: and that's the purpose of their work and the ethics
Speaker 1: of their work. So they need to be much more
Speaker 1: conscious about that. Mike, last question on this show. We
Speaker 1: have a tool, or to use a McKinsey ism, a
Speaker 1: technology called the B S scale to measure the gap
Speaker 1: between word. Indeed, it goes from zero to one hundred,
Speaker 1: zero being the best zero b s and one hundred
Speaker 1: being the worst total bs. So on that scale, how
Speaker 1: would you rate mckensey. So this goes against all the
Speaker 1: instincts as a journalist to give you this number, but
Speaker 1: but I'm gonna do it. I would have to give
Speaker 1: them a ninety. So they're they're way up there on
Speaker 1: the BS. And you know, I think our whole book
Speaker 1: has been calling out the b s at mckensey. They
Speaker 1: do lots of great work, they have lots of great people.
Speaker 1: So many people at McKenzie I am their friends. I
Speaker 1: would you know. They're great people, but on such important,
Speaker 1: big issues around the world, they really fall short and
Speaker 1: it clashes so much with what they say in public
Speaker 1: on their website. Mike, thank you so much for being
Speaker 1: here today. This was an awesome conversation and thank you
Speaker 1: for the work that you're doing. Please keep it up.
Speaker 1: Thank you very much. Time. It was a real pleasure, folks.
Speaker 1: It is time to make the call. Is mackenzie really
Speaker 1: creating positive and lasting change in the world? Based on
Speaker 1: what I've heard so far, I gotta call bullshit. If
Speaker 1: your purpose is to create positive, lasting change, then you
Speaker 1: have to help the world think long term rather than
Speaker 1: continuing the fixation with the latest quarterly results. If you're
Speaker 1: going to create positive, lasting change in the world, you
Speaker 1: have to decide that there are good client dollars and
Speaker 1: there are bad client dollars, and you have to learn
Speaker 1: to say no to the bad client dollars. And if
Speaker 1: you want to create positive, lasting change, you have to
Speaker 1: have the courage to take a stand on issues that
Speaker 1: matter to the next generation of McKinsey consultants and McKenzie clients.
Speaker 1: McKenzie has had multiple chances over the years, especially lately,
Speaker 1: to make some of these changes. So far they have
Speaker 1: completely failed. But as you know, we believe that bullshit
Speaker 1: is a treatable condition. So right after the break, we're
Speaker 1: going to talk with two x McKinsey consultants about actions
Speaker 1: the firm could take to turn things around. Stick with us,
Speaker 1: all right, folks. I am very excited to introduce today's experts,
Speaker 1: both ex mckensey consultants, Rizwan Nave and Eric Edgstrom. We're
Speaker 1: going to help us help McKenzie to better live their
Speaker 1: stated purpose. Welcome to calling bullshit. Pleasure to be here.
Speaker 1: It's great to be here. So Rizonant, please tell us
Speaker 1: a little bit about your background, about your work at
Speaker 1: McKenzie and and also what made you decide to to
Speaker 1: leave the firm. I'm a professional with about a decade
Speaker 1: of experience in the broader natural resources space. About half
Speaker 1: of that or five years at McKinsey, where I was
Speaker 1: a consultant and then an engagement manager in our Electric,
Speaker 1: Power and Natural Gas practice, which is a subgroup of
Speaker 1: our broader global energy and Materials group. My job at
Speaker 1: McKenzie as an engagement manager was to lead teams and
Speaker 1: work with the senior sea level leadership and board level
Speaker 1: clients and the power and sustainability space. I've worked on
Speaker 1: both highly emitting and decarbonizing clients, but the latter part
Speaker 1: of my career I would say was almost exclusively focused
Speaker 1: on energy transition topics. At this point, maybe it's worth
Speaker 1: talking a little bit about the context around in my departure.
Speaker 1: For myself, I try to work within paras line trajectory
Speaker 1: to articulate a different way to help these clients decarbonized
Speaker 1: into articulate that the firm should measure, disclose set and
Speaker 1: aspiration for reducing its client emissions and take steps gradually
Speaker 1: over time to calibrate such that it's edging this portfolio
Speaker 1: towards a Paris and line trajectory. I couldn't fully explain
Speaker 1: why we were running into leadership not giving us time
Speaker 1: or not fully engaging or various explanations as to why
Speaker 1: this is complex and needs a second look. And after
Speaker 1: sort of months of being stuck in this, myself and
Speaker 1: a few other colleagues were quite motivated articulated in a
Speaker 1: letter to senior leadership that we need to do more
Speaker 1: on our client emissions that we carry immense risk as
Speaker 1: our clients irrevocably alter the Earth's environment with their emissions,
Speaker 1: and we, you know, open this to an audience inside
Speaker 1: the firm globally, We've got eleven signatures within a week,
Speaker 1: I believe, and then suddenly the same folks who couldn't
Speaker 1: give us as much time were very attentive. Yeah, that's
Speaker 1: a huge number of people. Just contextually how many people
Speaker 1: work at Mackenzie I would say around thirty. That letter,
Speaker 1: in functional terms also went nowhere. After months of this,
Speaker 1: you know, having seen the frankly very uninspirational response, I
Speaker 1: resigned and articulated in an email to senior leadership, copying
Speaker 1: the majority of our sustainability practice globally, where by I
Speaker 1: essentially laid out the case that we do have some responsibility.
Speaker 1: If we take credit for our impact, we are also
Speaker 1: associated with the negative externalities of that impact, and we
Speaker 1: cannot profess to the world and shout to the rooftops
Speaker 1: that we are the greatest private sector catalyst for decarbonization
Speaker 1: globally while continuing to serve easily the worst polluters on
Speaker 1: the planet that are not on even on a trajectory
Speaker 1: and essentially resisting or I'll try refusing to institute even
Speaker 1: the most basic modicum off measurement, disclosure, targets, setting and policies. Right,
Speaker 1: I think that context will be very helpful for people,
Speaker 1: and it's it's hard to argue with your logic. So, Eric,
Speaker 1: just as Raiswana has done, can you tell us a
Speaker 1: little bit about yourself and also the situation that you
Speaker 1: found yourself in that caused you decide to move on
Speaker 1: from the firm. So I grew up in Massachusetts and
Speaker 1: my first career was in the military. I attended West
Speaker 1: Point and deployed to Direct Combat where I led troops
Speaker 1: in Kanadahar Province, Afghanistan, and after that was part of
Speaker 1: the Honor Guard, where I was the Presidential Escort platoon
Speaker 1: leader during the Obama administration. From I realized that the
Speaker 1: military was not sort of the public service good, especially
Speaker 1: that particular mission, the War on Terror, since military service
Speaker 1: is not an absolute good, that I wanted to find
Speaker 1: a different way to apply myself to the you know,
Speaker 1: my my vocation in the world. And so I attended
Speaker 1: Oxford and did a dual degree, doing an MBA in
Speaker 1: a Master science studying climate change, and I moved to Australia,
Speaker 1: so I joined McKenzie in and while I was there,
Speaker 1: I found that the projects that were available were not
Speaker 1: anything like what we're advertised, and rather than what you
Speaker 1: might see on a mckensey website which talks about vaccine,
Speaker 1: cold storage or renewable energy, that in practice is far
Speaker 1: and few in between. The difference, of course, between sort
Speaker 1: of puffery of any business where they try to make
Speaker 1: themselves look like number one and we have the best
Speaker 1: flavor was very different with mckensey. You're you're actively saying
Speaker 1: that we're taking a very positive role and that they're
Speaker 1: hanging their hat on the notion that this is going
Speaker 1: to be something that we're going to work on. And
Speaker 1: to set the stage, you know, we went on a
Speaker 1: firm off site to Port Douglas in the Great Barrier
Speaker 1: Reef and the consultants would go out for a day
Speaker 1: trip and go snorkeling to look at the coral reefs
Speaker 1: which were actively dying, and then they would return back
Speaker 1: to work where they would help increase extraction at a
Speaker 1: thermal coal site. And I remember hearing people say stuff
Speaker 1: like well, at least you know, we got a chance
Speaker 1: to see it before it died out, and it was
Speaker 1: basically through our own work or the firm zone work
Speaker 1: rather that it was making the likelihood of a sustainable
Speaker 1: future ever harder to achieve. So that's sort of some
Speaker 1: of the stuff that I was passionate about, and you know,
Speaker 1: it was more than just the work and acknowledging that
Speaker 1: Mackenzie is an a moral institution. They're only doing what
Speaker 1: earns the dollars. That's not necessarily a bad thing if
Speaker 1: they advertise themselves as such. Yeah, exactly. That's that's a
Speaker 1: key belief that we have on the show is it
Speaker 1: just needs to do what it says on the label, right,
Speaker 1: and and if you're transparent about just wanting to make money,
Speaker 1: we're fine with it. But it's when you say that
Speaker 1: your purpose is to help create positive, enduring change in
Speaker 1: the world, and then your activities belie another agenda. Absolutely.
Speaker 1: So the apex of the experience of sort of descent
Speaker 1: within Mackenzie to try to realign the values of the firm.
Speaker 1: We're at Values Day in twenty nineteen, and so every
Speaker 1: year Mackenzie gets together to take you know, a hot wash,
Speaker 1: look at their values and say did we live them?
Speaker 1: This last year, where did we fall down, where did
Speaker 1: we come short? And what might we do to improve
Speaker 1: our values as a company, which is a great thing.
Speaker 1: I was in the audience and the senior partner responsible
Speaker 1: for the Asia PAC practice for Australia New Zealand came
Speaker 1: up to the microphone and said, like, our values need
Speaker 1: to continue to evolve as the sort of atmosphere and
Speaker 1: what society expects of us continues to evolve. And he
Speaker 1: said something to the effect of we should no longer
Speaker 1: be serving clients that kill people or cheat their customers.
Speaker 1: And I raised my hand and amongst an audience of
Speaker 1: five people, was like, how do you reconcile this with
Speaker 1: what we're doing with, for instance, the military, that these
Speaker 1: actions would be considered state terrorism. We're not legally at
Speaker 1: war with these countries that were actively bombing, and you know,
Speaker 1: I continue to serve these clients, and so I also
Speaker 1: you know that that didn't get me a lot of
Speaker 1: UM positive attention, UM. And in my leaving email, I
Speaker 1: articulated these same arguments, not really seeing any client names,
Speaker 1: as I have not mentioned any client names in this discussion,
Speaker 1: and I was banned from the McKenzie Alumni network so
Speaker 1: this is a an act that I think has only
Speaker 1: happened to other people that were insider trading, for instance.
Speaker 1: So I had the same level of response for challenging
Speaker 1: McKenzie's client service record as would an insider trader, and
Speaker 1: that seems counter to McKenzie's culture. I mean, my culture.
Speaker 1: Can I hop in there real quick? Of course, it's
Speaker 1: not discounter to the culture. The firm has a stated
Speaker 1: policy two policies. One is the obligation to dissent, this
Speaker 1: notion that if you are a dissenter, you're not only
Speaker 1: should feel supported to speak up, but you have an
Speaker 1: obligation to speak up, which I presume Eric felt. And
Speaker 1: then the second policy is, you know, this policy of
Speaker 1: non retaliation, which also was not applied. And I think
Speaker 1: it's important to read the intentions in terms of the
Speaker 1: actions and entity takes and not in terms of what
Speaker 1: it says. In this case and in this case, uh,
Speaker 1: one can derive from the actions that you know the
Speaker 1: firm is not open to certain types of descent and
Speaker 1: does not see certain types of retaliation as inappropriate. That
Speaker 1: that tells you a lot about the actual culture of
Speaker 1: the company. I appreciate both of those stories. A great deal,
Speaker 1: and our our take on on that kind of thing
Speaker 1: we call it bullshit, a gap between word indeed, and
Speaker 1: we also believe that that bullshit is a treatable condition,
Speaker 1: but it has to be addressed through action. And so
Speaker 1: that's what we heard it really today to talk about
Speaker 1: UM is to get into some ideas to bring mckensey's
Speaker 1: actions more closely in line with its stated purpose. So
Speaker 1: I wonder if I could ask you, riz want to
Speaker 1: lead us off in in a couple of minutes or less,
Speaker 1: you know, what would you tell mckensey Global man partner
Speaker 1: Bob stern Fells or or other McKenzie leaders to change
Speaker 1: at McKenzie to better live their purpose, which is just
Speaker 1: to remind folks to help create positive, enduring change in
Speaker 1: the world. In my opinion, asking Bob, hey, you know
Speaker 1: you should do these things, we already did that. So
Speaker 1: in my opinion, the question to ask really is what
Speaker 1: will society do? What will states and regulators do? Is
Speaker 1: just trust us going to cut it? Should privately own
Speaker 1: professional services firms be exempt from emissions measurement and disclosure
Speaker 1: just because of their choice of financing? The question is
Speaker 1: what will climate focused organizations do from the UN Climate
Speaker 1: Compact and nonprofits? Are they willing to continue to engage
Speaker 1: the services of firms knowing full well that they have
Speaker 1: these contradictions and conflicts of interest in their portfolio? What
Speaker 1: will governments do? What will new hires do? So to Bob,
Speaker 1: I would say what market signals as you're waiting for
Speaker 1: what's more, surveys that show that this is the number
Speaker 1: one concern across alumni, current students, current employees with regards
Speaker 1: to client emissions? Is he waiting for a lawsuit? Will
Speaker 1: that be too late? Like I would ask those questions
Speaker 1: because in my opinion, society needs to subject the firm
Speaker 1: to material consequences and disclosure and then the firm will
Speaker 1: be incentivized to act. So, to paraphrase, you were reply
Speaker 1: to this question, McKenzie isn't or can't fix itself and
Speaker 1: so others must fix it? Is that fair? I mean
Speaker 1: we can simply derive that from the actions they have
Speaker 1: taken thus far. Right. Okay, Um, that's bleak, But I
Speaker 1: understand why you would take that position given the story
Speaker 1: that you've just told us. So fair enough, Eric, any
Speaker 1: thoughts about that? I mean, I think riz one is
Speaker 1: spot on that the firm is going to respond to
Speaker 1: the environment in which it exists. If it's no longer
Speaker 1: a profitable with the calculus that they do to continue
Speaker 1: serving these clients, they will stop doing it. And what
Speaker 1: are the costs? Well, the firm doesn't manufacture anything. Mackenzie
Speaker 1: doesn't produce any hardware. They rely on people to do
Speaker 1: the work. If people stop showing up to apply to
Speaker 1: mckenzy and say, like, I want to work at a
Speaker 1: top tier consulting firm that isn't turbo charging the climate crisis,
Speaker 1: Bob will get the message right now. The the book
Speaker 1: that was released by the two New York Times reporters
Speaker 1: is effectively a reputational hand grenade, and they pulled the
Speaker 1: pin and they handed it back to Bob. He has
Speaker 1: decided to sit on it um. The question, now that
Speaker 1: the world knows some of the negative externalities that they multiply,
Speaker 1: is what are they going to do about it. One
Speaker 1: of the quotes in the book from a former senior
Speaker 1: partner talked about it effectively being long term stupid to
Speaker 1: continue these practices. I mean, this is the thing. Mckensey
Speaker 1: is a business consultancy and it says it's looking to
Speaker 1: make enduring change in the world. So it has this
Speaker 1: long term view, but it's it's it's giving clients bad advice.
Speaker 1: And when you're talking about being a great place to
Speaker 1: retain exceptional talent um if you ask any gen z R.
Speaker 1: Do you want to work at a company that knowingly
Speaker 1: is making the most important issue facing the planet worse?
Speaker 1: What are they going to do? So I I, you know,
Speaker 1: hope that this gets out to all those undergrads at
Speaker 1: Princeton and m I T and cal Tech and University
Speaker 1: of Michigan and Georgia Tech. And when they're thinking about
Speaker 1: what they want to do, are they in the interview
Speaker 1: room going to ask that associate partner what are you
Speaker 1: guys doing about this? And are you continuing to serve
Speaker 1: these clients? They will get the message and they will change. Yeah,
Speaker 1: I agree, thank you for that. And Eric, just directly,
Speaker 1: would you do to fix mackenzie? What they will do
Speaker 1: is respond to market forces. What I hope they do
Speaker 1: would be to fix themselves as you might um hope
Speaker 1: for as well, independently and separate for starters in a
Speaker 1: first responder sense, stop the bleeding, So stop serving clients
Speaker 1: on topics and This is the big distinction. It is
Speaker 1: not an objection to serving fossil fuels and coal companies.
Speaker 1: It is serving fossil fuels and coal companies on things
Speaker 1: that will make climate change worse. And that is the
Speaker 1: distinction that needs to be pulled out. Of Bob's straw
Speaker 1: man fallacy that he published in the Wall Street Journal,
Speaker 1: premise which no journalist has the courage to look at,
Speaker 1: is that in his comment, the snug premise is like,
Speaker 1: we go to the extractive industries because that's where the
Speaker 1: benefits could be. The question within that is when you
Speaker 1: go to those science, what are you doing? And the
Speaker 1: answer to that question is very unsavory. And so that
Speaker 1: is what needs to be pulled out. So stop the
Speaker 1: bleeding in the sense of stop serving clients that are,
Speaker 1: we know, on a four degree trajectory. Stop serving them
Speaker 1: on either a business as usual projects to help them
Speaker 1: enable that four degree strategy, or worse um have them
Speaker 1: do basically work that is turbo charging the problem and
Speaker 1: making it worse. I also want to make clear it's
Speaker 1: not that forces within the firm are not trying to
Speaker 1: drive the change. There are many many people who struggle
Speaker 1: with this, who are advocating for the firm to do
Speaker 1: more on this. So I am hopeful that this disclosure,
Speaker 1: this attention provides them the fact base that they need
Speaker 1: to sort of progress things. Mckinseie does incredible mark helping
Speaker 1: clients de carbonize. We are I would say the sustainability
Speaker 1: practice quite specialized in that the question is can we
Speaker 1: can we continue to be able to do that with
Speaker 1: knowing what we know? As reported in the Times, The
Speaker 1: points that riz One and I are making, if I
Speaker 1: can put words in his mouth, is that mckensey does
Speaker 1: a lot of good and there is a lot of
Speaker 1: stuff that is not inherently immoral. You know, if you
Speaker 1: look at if if you look at the portfolio of
Speaker 1: clients and the type of work that I would see
Speaker 1: coming across for projects, a lot of it is pretty
Speaker 1: hum drum corporate stuff. How do you improve second line
Speaker 1: risk at a health insurance company? How do you offshore
Speaker 1: pet food to another country so they don't have to
Speaker 1: pay high taxes in this country. So there's a lot
Speaker 1: in the middle that's just this is just business work.
Speaker 1: But it is in some instances, whether we're talking about
Speaker 1: opioid makers, whether we're talking about turbo charging the climate
Speaker 1: crisis or helping the defense industry at times when the
Speaker 1: wars in which they are fighting are indefensible. Uh, those
Speaker 1: are the topics that they should take a harder look at.
Speaker 1: So this isn't a wholesale you know, the consulting industry
Speaker 1: is broken completely, but there are aspects that are broken
Speaker 1: and it leads to really horrendous and dreadful second and
Speaker 1: third order consequences. All right, my turn, from the naive
Speaker 1: perspective of not having been in the belly of the beast,
Speaker 1: I I truly believe this that we are at an
Speaker 1: inflection point in capitalism. And I think that the form
Speaker 1: of capitalism that we have practiced for you know, the
Speaker 1: last I don't know, five decades, I call predatory capitalism,
Speaker 1: but a gentler name for it would be shareholder capitalism.
Speaker 1: You know, this idea that the sole purpose of an
Speaker 1: organization is to enrich shareholders. That idea needs to go.
Speaker 1: And I believe in a new form of capitalism that's
Speaker 1: now referred to sometimes as stakeholder capitalism, that acknowledges that,
Speaker 1: instead of existing exclusively to enriched shareholders, corporations actually exist
Speaker 1: to serve multiple stakeholders. Their employees, other members of their
Speaker 1: supply chain, the communities that they do business in, um
Speaker 1: as well as the planet and and I. It is
Speaker 1: just a fact that there is no company better position
Speaker 1: to lead capitalism in this direction than McKenzie. Taking an
Speaker 1: optimistic point of view here, McKenzie has the biggest opportunity
Speaker 1: of the firm's existence sitting right in front of it
Speaker 1: to truly live its purpose and help all companies everywhere
Speaker 1: see that we are, like really at a turning point
Speaker 1: for humanity, and the challenges that corporations face today to
Speaker 1: make the changes needed to save all of us are
Speaker 1: really complicated and really difficult. Take for example, s an ability.
Speaker 1: Just the task of remaking global supply chains to achieve
Speaker 1: a truly circular economy is work that no single company
Speaker 1: could possibly take on alone. No client can do that alone.
Speaker 1: So who would you call to do that work? Only
Speaker 1: a company like McKenzie could help its clients, you know,
Speaker 1: truly collaborate to take that on. And so let's imagine
Speaker 1: for a second world in which in which McKenzie pivots
Speaker 1: to taking responsibility for helping all companies everywhere actually make
Speaker 1: this shift. That would be positive. It would certainly be enduring,
Speaker 1: and as both of you have pointed out right in
Speaker 1: the War for talent, Mackenzie would win hands down with
Speaker 1: that strategy. And the alternative is for Mackenzie to cynically
Speaker 1: continue to mouth the words about purpose and being purpose
Speaker 1: led while just continuing business as usual, helping companies maximize
Speaker 1: short term profitability. And that's definitely not positive and I
Speaker 1: honestly don't think it's going to endure either. Thoughts on that, So,
Speaker 1: t I appreciate the framework, and I would say you're
Speaker 1: you're totally right right the sort of freedmanesque neoliberal era
Speaker 1: that we have lived through that has wrought the things
Speaker 1: that we see today. You know, I don't talk to
Speaker 1: many people who don't think that, you know, things are
Speaker 1: working really well and like, you know, stuff is awesome, everything,
Speaker 1: everything is awesome. And I don't talk to a lot
Speaker 1: of people like that. I think the vast majority of
Speaker 1: people I speak to, you know, more or less understand
Speaker 1: that this this sort of system of incentives is not working.
Speaker 1: It leads to a lot of the externalities you've spoken
Speaker 1: about in this conversation, and you know, there's an awareness
Speaker 1: that is changing that said, I I take issue it's
Speaker 1: sort of adding prefixes to the word capitalism as that
Speaker 1: changing sort of the core structure of how we organize
Speaker 1: our society. Right, capitalism is capitalism. It operates under a
Speaker 1: system of incentives. Until you ascribe the incentive is it
Speaker 1: cannot function. So to me, the question is what will
Speaker 1: create the structural incentives. I'll give it a specific example.
Speaker 1: There's quite a lot of bluster with regards to climate
Speaker 1: and sustainability. You've talked sensibly on your show about greenwashing.
Speaker 1: If you take, for example, the list of entities that
Speaker 1: have committed to a science based target, just count the
Speaker 1: amount of fossil fuel companies. I think you wouldn't even
Speaker 1: get to ten. The vast pority of those companies are food,
Speaker 1: beverage and consumer companies. Why because consumers are far more
Speaker 1: aware and are creating the consequence where they're desiring this change.
Speaker 1: I think such consequences do not yet exist in a
Speaker 1: material fashion for fossil fuel industries. If, in fact, we
Speaker 1: see the opposite. You see the Ukraine War, you see Germany,
Speaker 1: that sunset, it's nuclear plants in after for Kushima now
Speaker 1: repowering coal plants. You see, you know, record profits being
Speaker 1: posted by all and gas companies. In fact, I would
Speaker 1: say we're going in the opposite direction. Do we really
Speaker 1: expect a private sector professional services firm to go to
Speaker 1: the sea levels of hydrocarbon entities and to inform them
Speaker 1: that they should decarbonized when they are posting record profits?
Speaker 1: Do not see all the prices going down? And McKenzie
Speaker 1: or others entities like it, you know, have the chance
Speaker 1: of making exceptional amounts of feast from such work. You're saying,
Speaker 1: my ideas is naive, and I acknowledge that. However, would
Speaker 1: you acknowledge that if McKenzie is in the business of
Speaker 1: trying to help actually save the oil companies and the
Speaker 1: coal companies that they are consulting for, that it would
Speaker 1: be better advice to begin a transition away from fossil
Speaker 1: fuels as fast as they possibly can, because it will
Speaker 1: take them a long time to get there, and we
Speaker 1: don't have a long time. And the alternative is that
Speaker 1: government steps in and buys them, you know, essentially turns
Speaker 1: them into government utilities and then shut them down, right
Speaker 1: like or or do you think we're just going to
Speaker 1: spin off the edge of the cliff with capitalism running
Speaker 1: at full speed? Like what what is the alternative. I
Speaker 1: do believe that a combination is needed. Um. I think
Speaker 1: the private sector needs to see that eventually there are
Speaker 1: things that they will have to contend with. So what
Speaker 1: position would they like to be in after those consequences
Speaker 1: have occurred, and after there is some level of accountability held,
Speaker 1: what side of the house would they like to be in.
Speaker 1: I am hopeful that with increased awareness there is some accountability,
Speaker 1: but in my opinion that accountability is highly unlikely to
Speaker 1: come from actors at the top that profit the most
Speaker 1: from the status quo. I think that accountability is far
Speaker 1: more likely to come through the bottom, through employees sort
Speaker 1: of holding their leader's accountables, through public sector entities, through states,
Speaker 1: attorneys generals hold identities they work with accountable, through regulators,
Speaker 1: so on and so forth. I would also disagree in
Speaker 1: part with the framework that we should put the onus
Speaker 1: on business to make the changes that we need in
Speaker 1: the world. They're not going to. And if you think
Speaker 1: about businesses as a bell curve of adoption, where there
Speaker 1: are some the frontier, you know, five percent of the
Speaker 1: company's let's just say, you know, the Patagonias of the world,
Speaker 1: they are actively making it part of their business model.
Speaker 1: It's also a type of good that is very visual
Speaker 1: and that people want to present to the world as
Speaker 1: I'm going to signal to you that this is what
Speaker 1: I care about, therefore I buy this. Now, does that
Speaker 1: same person think about the installation that's in their home?
Speaker 1: You know, all of the other sort of hum drum
Speaker 1: goods that you're buying. Are those looked at with the
Speaker 1: same level of scrutiny and the answers not. And therefore
Speaker 1: those businesses and those industries are not incentivized to change
Speaker 1: as quickly as those that are more susceptible to not
Speaker 1: being purchased because of the way that things are made.
Speaker 1: So in the bell curve of adoption, you will get
Speaker 1: the front runners who will change on their own. There
Speaker 1: will be others that will, you know, receive pressure because
Speaker 1: employees won't want to work for them because they care
Speaker 1: about these issues. But that's still probably isn't the majority,
Speaker 1: at least not now, and so if you're trying to
Speaker 1: rely on that framework to get the change that we
Speaker 1: need in the world, it's going to fail. So, I mean,
Speaker 1: my perspective is that this is not a referendum on capitalism,
Speaker 1: and that McKenzie shouldn't be held up as it is
Speaker 1: good or bad, because whether or not we like Milton
Speaker 1: Friedman or not, it is that capitalism today does not
Speaker 1: accept and acknowledge negative externalities and those need to be
Speaker 1: priced in in order to achieve wholesale change. So that
Speaker 1: is the carbon tax. You know, businesses that operates by
Speaker 1: omitting a lot of cars are been and don't want
Speaker 1: to spend the capex to completely overhaul their business are
Speaker 1: not incentivized to push that. And that's exactly what Rizwan
Speaker 1: was talking about. If you get in the room with
Speaker 1: someone who is not incentivized to make that change, will
Speaker 1: be very difficult to change them from the outside as
Speaker 1: a third party advisor. And so I mean, the the
Speaker 1: onus I believe is uh, you know, on government to
Speaker 1: change the policies. If if McKenzie was as fearful of
Speaker 1: getting sued by Maura Healey and the Massachusetts State Attorney
Speaker 1: General as they as they were from the opioid crisis
Speaker 1: and paying over six million dollars for turbocharging opioid sales,
Speaker 1: if that same risk applied for climate change, they would
Speaker 1: change very quickly. So, in a long answer, the market
Speaker 1: does what the rules of the game allow them to
Speaker 1: do so. If you change the rules of the game,
Speaker 1: the companies that are playing in the game will also
Speaker 1: change their behaviors. There are so many things I would
Speaker 1: love to ask you and continue this conversation. Has been
Speaker 1: a fantastic conversation, but I have to wrap up with
Speaker 1: one last question for both of you. Mackenzie says that
Speaker 1: its purpose is to help create positive, enduring change in
Speaker 1: the world. And we have a tool on this show
Speaker 1: called the BS Index. It goes from zero to a hundred, right,
Speaker 1: zero being the best, zero bs being the worst. Total BS.
Speaker 1: What score would each of you give Mackenzie, Eric, I'm
Speaker 1: gonna ask you to go first. Well, I mean, Mackenzie
Speaker 1: loves a good twenty, so I'd give them an eight
Speaker 1: on this one. And the reason I would provide a
Speaker 1: score of eighty is the asymmetry of the damage. It
Speaker 1: is again not denying that there is a tremendous amount
Speaker 1: of positive good that they have done and continue to do,
Speaker 1: but on these this particular topic where they've been serving
Speaker 1: the fossil fuel industry for reported seventy years, the magnitude
Speaker 1: of that damage far outweighs and outpaces the benefits that
Speaker 1: are provided to your local health insurance company or another
Speaker 1: financial institution. So to say that that is long term
Speaker 1: positive um is hard to believe. Fair enough, thank you
Speaker 1: for that, Eric riz One. Well, if you read my email,
Speaker 1: you probably know the math. It's pretty similar to Eric's
Speaker 1: with regards to emissions. It's quite simple math. The six
Speaker 1: hundred sustainability projects that Bob coded in his Wall Street
Speaker 1: Journal article. If you put those on one side, and
Speaker 1: the emissions they abated, and if you put the emissions
Speaker 1: that we have served even on the same time horizon,
Speaker 1: if we were to be charitable and then put the
Speaker 1: outlook forward looking for those entities and continue to serve them.
Speaker 1: And however many projects m cain see holds and sustainability,
Speaker 1: I would suspect any reasonable approach, any reasonable even the
Speaker 1: most charitable one, would show you the same outcome, probably
Speaker 1: significantly worse. So what score does that lead to in
Speaker 1: your mind? I would love for the firm to do
Speaker 1: that accounting and tell the world what the score is
Speaker 1: and be honest about it here too. Here I'm unfortunately
Speaker 1: unable to say because I know exactly what that score is, right,
Speaker 1: But I mean, I'm asking you for a BS score
Speaker 1: for mckensey, like how big a bullshit or is mackensey
Speaker 1: when they say that they're out to create positive, enduring
Speaker 1: change in the world. With all the due respect to
Speaker 1: my colleagues, particularly in the sustainability practice, who would like
Speaker 1: to see that, I would suspect that many of them
Speaker 1: in private would agree that it's a t percent bullshit.
Speaker 1: I'm very inspired by both of you and and I
Speaker 1: very much appreciate your coming on the show today. So
Speaker 1: thank you both for being here. Thank you Ti, Thank
Speaker 1: you Ty. I'd like to end the show by giving
Speaker 1: mackenzie an official bullshit score. McKenzie is saying their purpose
Speaker 1: led and clearly are not. That's bad. They also claim
Speaker 1: to be in the business of helping other companies become
Speaker 1: purpose led. That's even worse because they're getting purpose so wrong,
Speaker 1: and because if they decided to get it right, they
Speaker 1: could do so much good. I'm giving mackenzie an that's
Speaker 1: the highest score we've given to date. To weigh in
Speaker 1: with your own score, visit our website Calling Bullshit podcast
Speaker 1: dot com. We'll track McKenzie's behavior over time to see
Speaker 1: if they decide to bring that score down you'll also
Speaker 1: be able to see where Mackensey ranks on BS compared
Speaker 1: to the other companies and organizations we featured on the
Speaker 1: show and to global managing partner Bob Sternfeld's if you
Speaker 1: heard anything on this episode that you'd like to discuss further,
Speaker 1: you have an open invitation if you are starting a
Speaker 1: purpose led business or thinking of beginning the journey of
Speaker 1: transformation to become one. Here are three things that you
Speaker 1: can take away from this episode. One, purpose matters. It's
Speaker 1: not marketing, it's not fluff. It's not a cynical way
Speaker 1: to trick young people into joining your business. Purpose is
Speaker 1: a key ingredient in driving a transition to a new
Speaker 1: and more sustainable global economy. It honestly hurts my heart
Speaker 1: that a company like Mackenzie is using the term so cynically.
Speaker 1: Do not emulate them. Two, A principle isn't a principle
Speaker 1: until it costs you money, and being purpose led means
Speaker 1: you don't take money if it doesn't align with your purpose.
Speaker 1: Mackenzie has not gotten that memo, have you? And Three
Speaker 1: yeah worth repeating, don't talk it until you're willing to
Speaker 1: walk it. This is literally why we started this show
Speaker 1: saying it is so much easier than doing it, but
Speaker 1: saying it and not doing it is toxic to your
Speaker 1: business and to the world. Don't do it. If this
Speaker 1: episode inspired you to create positive, lasting change in the world,
Speaker 1: subscribe to the Calling Bullshit Podcast on the I Heart
Speaker 1: Radio app, Apple Podcasts, or wherever you listen to people
Speaker 1: speak into your ears and friends. I'd like to ask
Speaker 1: for your help. If you enjoy the Calling Bullshit Podcast,
Speaker 1: please take a second to rate us on Apple Podcasts
Speaker 1: or on your preferred platform. It helps more people find
Speaker 1: the show and thanks to our guests today New York
Speaker 1: Times journalist and co author of the new book When
Speaker 1: McKinsey Comes to Town, Mike Forsyth, and former McKinsey consultants
Speaker 1: Rizwan Navid and Eric Edstrom. Learn more about them and
Speaker 1: get links to their work in our show notes or
Speaker 1: at our webs right Calling Bullshit Podcast dot com. And
Speaker 1: thanks to our production team Hannah Beale, Amanda Ginsburg, d
Speaker 1: s Moss Hailey, Pascalites, and Parker Silzer. Calling Bullshit was
Speaker 1: created by co Collective and it's hosted by me Ti
Speaker 1: Mounting You. Thanks for listening