House of Lies

by Martin Kihn

  … Fortune is a woman, and if you wish to keep her under it is necessary to beat and ill-use her; and it is seen that she allows herself to be mastered by the adventurous rather than by those who go to work more coldly. She is, therefore, always, woman-like, a lover of young men, because they are less cautious, more violent, and with more audacity command her.

  —MACHIAVELLI, The Prince

  It’s hard to combine being a consultant with being a mother.

  —MCKINSEY MANAGING PARTNER, RAJAT GUPTA (2002)

  You are not a young man when you interview with McKinsey. You are thirty-five, an age when Machiavelli himself was on the verge of leading his own small army on a successful campaign into Pisa. Your only armies are the foot soldiers of doubt parading through your brain. You are an artist, not a player; you are entering a world of players. It was always quite clear to you that you would never work at McKinsey. Yet still you endure the ego-deflating gut punch of an interview in their New York offices.

  It is a truth universally known that every man and woman of ambition who applies to business school applies to Harvard Business School. Likewise, every MBA candidate of ambition who wants to go into consulting applies to work at McKinsey & Company. Both truths are universally known, but they are never admitted. In a business school environment with minimal laws of decorum and scant emotional sense, there exist two inviolable rules:

  If someone is not attending Harvard, do not ask the person if she applied to Harvard.

  If someone is not working at McKinsey, do not ask the person if she interviewed at McKinsey.

  These rules stem not from some atypical fear for another person’s “feelings,” of course. Nobody cares about those. No—these rules are in place for the entirely pragmatic reason that the answers are known a priori.

  There is cruel logic at work here. The personalities you meet in the halls of business schools are not racked with self-doubt. These are not people who wonder “Does he really love me?” or “Do I have what it takes?” They have their moments, of course, but those come later; they are hardly concurrent with the business school experience. For two years, B-school bodies are inviolable; while attending, they are transcendent; and when applying, they are superbly confident. Who is Harvard to tell her she is not good enough? Who is McKinsey?

  And although business is in many real ways the most democratic of our institutions, at the level of higher education and hiring it is so elitist as to become a parody of old England.

  So you apply to Harvard—though you will never admit it—and do not get in. You interview at McKinsey.

  Your first encounter with the Machiavelli of consulting firms is in the course of a group “information session” on the second floor of Uris Hall at Columbia Business School. These sessions, much beloved during the dot-com era, are supposed to be a way for students to gain information about the host company from a regular employee or two—sometimes the marketing companies might send an HR rep, but that’s why nobody wanted to work at a marketing company. Eight or ten first- or second-year students will sign up and gather in a room with the one or two regular employees and ask questions, the sole purpose of which is to impress. The employees take notes. Even they don’t listen to their answers. There is nothing outrageous about a large firm one cannot learn from a few moments with their annual report, a visit to their Web site. There is nothing an employee can say that will alter a single student’s desire or lack of desire to work there.

  No—the unstated but overt purpose of these sessions is to give you a chance to ask such a great question that you are catapulted onto the “closed list,”18 given an offer and granted the luxury of refusing it.

  McKinsey has always seemed to have a halfhearted attitude toward your school. Until the dot-com era inaugurated years of high turnover and a pressing need for fresh blood, some years they didn’t come to campus at all. Columbia students could get a job there, but McKinsey didn’t make it easy. This year, they’re on campus. But barely.

  The guy they send—not two employees this time, just one—is a young person, certainly much younger than you. Perhaps twenty-five. A new associate, a slick and small person originally from South Africa. He talks about himself with such precision you can see right away it is his favorite topic.

  “I’ve been on the beach all week,” he says. “I haven’t done anything. So I called down to recruiting and said, ‘Hey, put me on something.’ They sent me down here. I’ve never been to Columbia before. When I was growing up, I don’t think I ever heard of it. The only school we really heard about down there was Harvard.”

  “Where did you go to school?”

  “In Cambridge.”

  “You went to Cambridge?”

  “No—in Cambridge. Allston.”

  “You went to Allston?”

  “No—Harvard.”

  “Oh. Undergrad or business school?”

  This is a moment he loves. He pauses—to savor it—then inhales just a wisp, just a sip of this glorious earth. “Both—actually.”

  “I went to Yale,” you say.

  “I hear their business school is improving.”

  Harvard Boy doesn’t bother to take notes; you feel that for a kid who’s been asleep all week, he surely seems tired. He tells you about his own experience interviewing with McKinsey.

  “I just looked at this partner who’s across from me and I said, ‘This is what I want to do. If you gave me an offer right now I’d take and run with it.’ There’s no reason for me to mess around. I—I want to do this thing, and if you’re going to do something you should start at the top. McKinsey is an international brand. It’s the best way for me to see what I have to do to get where I wanna go. I don’t know if I’m gonna stay in consulting forever… who does? What I do know is wherever I’m going the only path I can see to get there—the only way there is through, through here…”

  Even he loses interest in what he’s saying. He turns to the most attractive women in the group. “So—what’s your background?”

  His business card is strange. There is a standard business card size, and it’s widely accepted throughout the United States, Europe, and Asia. It fits in a wallet. This size is apparently not useful to McKinsey: The card this kid tosses your way while he’s getting the attractive girl’s phone number (for “follow-up questions”) is quite long, and quite narrow. It’s plain and black and white and won’t fit in any wallet.

  McKinsey & Company, it says. And: Throw me away.

  Your next encounter with the firm is at their official presentation to the student body. Again, there is a distinctly secondary flavor to it: as though they left their real presentation somewhere else. Most firms trot out the most senior management they can find who attended your school, and these men and women scroll through a prewrapped PowerPoint slide show assembled by somebody else, somebody they barely know—you can tell this by the twitch of pain that crosses their faces as they parrot out what’s on the screen. Putting people first… Diversity is our priority… We challenge you to challenge yourself… Hiring the best to be the best…

  You will learn much later that presentations put together by consultants, as opposed to people in MBA-recruiting departments, do not read like this. For one thing, there would be numbers on each page; there would be lots of numbers, and a graph. These placid bullet points do not inspire.

  Presenting for McKinsey is a ruffled European with a brush of five o’clock shadow. From yesterday at five o’clock. He’s wearing a gray outfit that needs a breath freshener and his hair is steely and vivid, as though startled from a nap. He did not attend Columbia Business School—he does not say where he went to business school. He does not need to say.

  And from the beginning, there is something very wrong.

  “Thank you for coming tonight,” he whispers. “My name is Steffan Ribbletropp [or something like this, he’s slurring]. I’m an engagement manager with McKinsey and Company based in New York. I work mainly in financial services, though I have…” [four
-second pause] “… done work in other areas. I was originally based out of…” [three seconds] “… Munich, Ch-Ch-Chermany. I transferred to the States last year and…” [five seconds] “… have been here since. My background before that… I was a banker. I have, we, I think we have some…” [four seconds] “… slides. For you.”

  He indicates to dim the lights. They do not dim. For a moment, there is awkwardness in every corner of the room, but not from Steffan Ribbletropp. He’s utterly still, in a cone of silent beauty. He stares at the presentation room door, on the fifteenth floor of the tallest building at Columbia University, the School of International and Public Affairs. You wish he would exit through it.

  “We’ll try to put this th-thing together,” he seems to say. His lips move, but he’s still very, very quiet.

  It’s almost disappointing when he gets the slide show going. The slides are not important; you have seen them before. Everyone in the room—everyone has seen them before. The drama is in Ribbletropp.

  “We put people first… at McKinsey,” he says. “I’m not sure what that means. Let’s hope it is a good thing, eh?”

  He’s getting giddy. You wonder if you have ever seen anyone so tired. He’s so tired, Mr. Ribbletropp, that’s he’s shot out the other side of tiredness into a land of strange objects. Like slides.

  “We hire the best at McKinsey… like me. That was a joke.” [five seconds] “We… we hire the best and we expect the best from them. There is an ‘up or out policy,’ and it is enforced. There is no… what you would call here ‘wiggle room.’ You understand what I am saying? But it’s a very coll-ee-gee-uhl culture. We get along ferry well.” [three seconds] “My colleagues are ferry impressive pee-pull. They are—we are by far the least impressive people you will find among of them.”

  There are perhaps two hundred people in this room. Every single member of your class who wants to go into consulting is there. The other big-money option—investment banking—draws larger crowds: This is New York. But no consulting presentation draws as many hopefuls as McKinsey’s.

  You turn to your friend and say, “I have to go.”

  “Not yet.”

  “I have to get out of here.”

  “But you haven’t seen The Slide yet.”

  “I don’t want to see it. I don’t care about it.”

  “You,” he says, “don’t know what you’re saying. Sit down.”

  Ten minutes later, Steffan puts up [their growth Slide]. There is collective relief, a dissipation of a fume. For once The Slide goes up, the presentation’s winding down. There’s not much one can say beyond The Slide. Like the mandala, it is an end within itself; an end, and the beginning of the end.

  “Now this slide shows… quite fifidly, I think…” [three seconds] “… it shows we have been growing quite a lot in the past few years. And we expect to keep this up for quite a while. There is a shtrong market for the kind of work we do… and this is due to fundamental…” [cough] “… changes in the structure of managerial practice. You can see here…”

  The Slide is deceptively simple. You and your classmates have something of a McKinsey fetish, and you are expecting it.

  “… you can see here the extra-ordinary growth we have been acheeffing over the past five years. Both in terms of billings and the number of professional client staff we have been…” [four seconds] “… been. On staff.”

  The Slide is simply a curve showing 20 percent annual growth. That’s 20 percent compound annual growth over the past decade in both revenues and in the size of McKinsey’s staff. What people do not understand is just how astronomically high 20 percent compound annual growth is. If you made $1.00 last year, you made $1.20 this year. Next year you will make $1.44… then $1.73… then $2.08. You’ll note that the dollar growth each year is getting bigger, from 20¢ to 24¢ to 29¢ to 35¢, as growth rates apply to previous growth. Compounding is not unlike magic. And since consulting professional staff size is highly correlated with revenues, for reasons discussed later, this means the staff has also been growing at about 20 percent per year. If last year there were 100 McKinsey consultants, this year there are 120; next year there will be 144, then 173, then 208, and so on. You have more than doubled your staff in four years. Not only is the real number of McKinsey consultants getting larger each year, it’s getting larger at a faster and faster rate.

  You know enough calculus at this point to get scared. With such a high first derivative, or rate of change, the implications are alarming.

  To put it bluntly, The Slide implies that McKinsey is on a path toward total world domination.

  This is not a figurative statement. It is quite literal. (See the figure below.)

  Steffan has admitted more than he meant to. A secret has emerged from the House of Lies. “We expect to keep this up for quite a while…” Do you see? He admits what so many have tried so hard to conceal: At 20 percent growth per year, starting at its current base of about ten thousand consultants, McKinsey will employ every single man, woman, and child in America as soon as May 2060. Fifteen years later, the firm will have to look to other planets for its customers, for every person on Earth will be a McKinseyite.

  If you don’t get a job with them this time around, you can always wait. You’ll be very old in May 2060—but it won’t really matter. They’ll have to hire you. (See below.)

  Source: McKinsey & Co. Author analysis

  Is there another option to this scenario? In the dot-com years, there didn’t seem to be. Twenty percent growth was kind of lame, to tell the truth; business plans were regularly predicting 50 or 60 percent. People who went into consulting were pitied by many. They would never make real money.

  It turns out, of course, there is an alternative to 20 percent compound annual growth. It looks like this:

  Number of McKinsey consultants in 1999: 10,000

  Number in 2000: 12,000

  Number in 2001: 7,20019

  We had no professional layoffs other than our traditional “up-or-out” stuff.

  —MCKINSEY MANAGING PARTNER RAJAT GUPTA (2002)20

  Your firm is less traditional, unfortunately. Within six months of the Rainmaker’s departure, as the long cold winter of 2001 approaches, the winds of optimism have fled. Where you started in May with 250 colleagues, reduced to 200 by July, as your annual Seasonal Affective Disorder sets in during early September you’ll see the ranks of your workmates cut again. You can hardly work for all the chainsawing going on around you; you can hardly work, because there is no work.

  You’re very busy, of course. It’s just that the work isn’t billable. From the firm’s point of view, work that isn’t billable is like money set on fire. More charitably, it’s an investment in human capital and knowledge building, a time for promising and experienced staffers to hone their skills and lay the groundwork for big sales to come. But work that is unbillable is literally work for which the firm cannot submit a bill. No one has hired you. You are working, and drawing a paycheck from the firm; but the firm isn’t drawing a paycheck for you.

  Consulting firms always operate at less than 100 percent billability,21 even during good times. Projects start and stop frequently and there is always some downtime between assignments. There are proposals to be written “on spec,” and assignments that require more work and more people than the client agreed to pay for. There are always some people not billing. It’s just that, during the lean years of 2001 and 2002, not billing became for a time more common than billing. Even at McKinsey. In June 2002, McKinsey’s utilization was about 50 percent—meaning half of its dwindling supply of consultants were working for free. This was the lowest level of busy-ness in thirty-two years.

  At your firm, the number is closer to 30 percent. It is an odd time, that winter of 2001. A time of great rumor.

  “They’re cutting muscle now,” you hear.

  “We’re looking for a merger—maybe with BCG,” they say.

  “Bain is going bankrupt.”

  “There’s a capi
tal call at McKinsey.”

  “AT Kearney’s going bankrupt.”

  “Arthur D. Little’s going out of business.”

  “They’re talking about ‘resizing the New York office.’ ”

  “How can they resize it any more?”

  “Make it more like Cleveland.” The Cleveland office, you know, has thirty people.

  It’s a time of great rumors—some of which are true. But you’re very, very busy.

  The reason, oddly enough, is September 11.

  Following that date, consulting firms are asked by a nonprofit development group called the New York City Partnership if they wouldn’t mind donating some time and expertise to productive work—the only kind they can really contribute. Namely, research and speculation. The result is a massive multifirm effort to analyze in rather minute detail the effects of the attacks on the economy of greater New York. It is also thought the firms might make suggestions for how the city could rebuild itself more quickly. Seven major consulting firms agree to donate their staff and resources, and each is assigned a particular area of the economy to examine: real estate, insurance, financial services, health care, media, and so on. The output of the effort is to be a report presented directly to people in a position to act, like the deputy mayor and Senator Hillary Clinton. Mayor Rudy Giuliani is reported to be all ears.

  The firm selected to head up this effort is, of course, McKinsey.

  You are assigned to a subteam examining retailing. It’s a pretty good assignment, actually, and for six weeks you experience the placid flow of a life where you don’t mind getting up in the morning. You do your light treatment for Seasonal Affective Disorder, go to the gym, feel like a man. Your wife loves you. You’re not so very old, not really. You still have most of your hair, and your subscription to the New York City Ballet. Life is good.