McKinsey & Co. is the world’s leading consulting company. But it does a lot of work that’s, well, pretty downright sinister, and it’s very secretive about that work. In the book When McKinsey Comes To Town: The Hidden Influence of the World’s Most Powerful Consulting Firm, Walt Bogdanich and Michael Forsythe of the New York Times expose the hidden hand of McKinsey across the world. McKinsey has assisted opioid manufacturers, tobacco companies, fossil fuel companies, Immigration and Customs Enforcement (ICE), and authoritarian governments around the world, and in each case has covered up its footprints. Again and again, McKinsey has come to town and left people worse off.
Bogdanich and Forsythe show that many of the worst problems we face today have had McKinsey’s hand in them. The firm often advises both the companies that create problems and the governments that are trying to solve them, “playing both sides” and making a tidy sum in the process.
Bogdanich and Forsythe came on the Current Affairs podcast to talk to editor-in-chief Nathan J. Robinson about McKinsey’s work and its impact on some of the most pressing issues facing the world today, from climate to wages to industry safety. This transcript has been lightly edited for grammar and clarity.
Nathan J. Robinson
The world has many thousands of corporations and consulting firms. Why, of all the consulting firms in the world, did you choose to write a book about McKinsey & Company?
Walt Bogdanich
Why McKinsey? Because it’s the biggest, most powerful, influential, and frankly, secretive company out there. I can’t think of a company more secretive. In fact, that’s its business model. It never discloses who its clients are, or how much they’re paid. They advise autocrats, democratic regimes, and opioid makers, in addition to the major corporations in the world. They charge a lot of money, and say they’re the best and the brightest, and apparently, a lot of people believe that. I’m not sure if they will after reading our book, but I guess time will tell.
Robinson
You describe this secretiveness in the book. Most companies that produce a product or a service might want to brag about what they do and post big lists of all of their prominent clients, so they can show off just how successful they have been. But, as you mentioned, in the case of McKinsey, the opposite is really true. This is not conspiratorial; it’s literally that McKinsey even won’t put its name on the slides and documents. They really do make an effort to make sure that the hand of McKinsey is kept hidden from public view, and I assume it took a lot of work on your part to penetrate and report on this.
Bogdanich
Yes. They prefer the shadows rather than sunlight, and our job was to bring the sunlight. That was difficult. Their consultants sign nondisclosure agreements, and it’s pounded into their heads from the first day they walk into the office to never disclose their business—who they work for, how much they’re paid. When you do finally pierce that corporate veil, you find out why they don’t like publicity. Many of their clients are deeply embarrassing, at least to people working for normal companies or normal citizens, because there’s a lot that they’ve done that they have to account for. And, frankly, the reason they’re finally accounting for it is the media called them on it.
Michael Forsythe
There’s another reason for the secrecy. When you look at the clients, oftentimes, you’ll see that they are both advising for regulated companies, like pharmaceutical companies, and also the regulator, like the FDA. There have been times in McKinsey’s history when a competitor will find out that McKinsey is advising one of their competitors, for example, Ford or GM—McKinsey would advise both. And there have been times with banks, like Citibank, and also with tobacco companies, where the CEOs of the companies get very upset when they find out that McKinsey is advising their competitor. So, when you disclose all the names, all the dirty laundry comes out.
Bogdanich
To fully disclose here, they also advise the New York Times and the Washington Post, and what they do is tell one company how to beat the other company, and then they tell the other company how to beat the first company. It’s just nutty. I think it’s a conflict of interest that most rational people can understand.
Robinson
You mentioned that some of the clients are embarrassing, and a large part of your book consists of showing the work that they’ve done for highly questionable clients, from the governments of Saudi Arabia and China, to the tobacco industry. But it is also the case that they advise plenty of organizations and companies that we might think of as pretty neutral, or even that we might like. But, advising those companies often has results that we might not like. The book begins with some stories of how they have advised companies to increase profits in ways that have compromised public safety. Even when the client’s mission—such as Disney running a theme park or U.S. Steel producing steel—might not be something objectionable, what McKinsey actually does and advises can have really terrible human consequences. Could you talk about that?
Bogdanich
Yes. Maintenance is an important part of any operation, particularly when lives are at stake. And believe me, lives are at stake in a steel mill and on these crazy rides in Disneyland and Disney World. Safety should be paramount. But the company is cutting maintenance over the objections of the workers, who have said that this is dangerous. The unions have said it was dangerous at U.S. Steel. And I worked at U.S. steel and have seen what happens. One of my co-workers was burned alive when a hot ingot was dropped on him. So, it’s dangerous, and McKinsey was advising, “cut, cut, cut,” and the results were unfortunate.
Robinson
It seems there’s this commonality to the kinds of stories that come up. You look at McKinsey’s hand in lots of different issues, from the financial crisis to tobacco sales to the opioid epidemic, and it does seem that something that comes up over and over is this approach of being willing to find ways for a corporation to maximize profits, even at the expense of certain important social or human values.
Bogdanich
Yes, that’s correct. The easiest way to boost profits and the bottom line is to cut expenses. It’s much more difficult to actually produce a better product or invent something—that’s on the revenue side. That takes work, creativity, and skill. It doesn’t take any damn skill to lop off a quarter of the workforce and say, “good luck,” or to offshore those jobs, as they [have] over and over again. They were one of the biggest cheerleaders of offshoring, and that obviously has an effect on the families of these people who lost their jobs, but also on the communities in which they live. So, they have had a hugely negative impact in many communities in this country.
Forsythe
Right, and why do they do this time and time again, all over the world? One of the reasons is that McKinsey has a set of values. A lot of companies do, and just pay it lip service. McKinsey actually purports to take these values seriously. Number one on that list is to put the client’s interests above the firm’s. The client’s interests come first, and when they want something, McKinsey does it. If that client is a malign actor—if they’re trying to sell more opioids, more painkillers, more tobacco, or they’re an authoritarian country—it doesn’t matter. Often, these consultants will work so hard they seem to lose sight of the societal picture, the bigger picture, of what they might be doing and that it might be harming people, because of their laser focus on doing whatever the client wants them to do.
Robinson
Yes. It sounds like a value when you’re quoting the client’s interests above the firm’s interest, but when you actually think about what that means in practice, it raises huge questions. If you were called upon to optimize Auschwitz, would you put the client’s interests above the firm’s interests? You point out they have this phrase, “We do execution, not policy,” where the firm has explicitly said, “We don’t get involved in the political questions. We’re just neutral optimizers.”
Forsythe
Yes. It’s very convenient to say that. That quote came from a senior partner overseeing McKinsey’s work with ICE [Immigration and Customs Enforcement], speaking to these young consultants after the work they were doing [for ICE] under Obama suddenly became work under President Trump, who had a very different vision for what ICE should be doing. There was a lot of dissension, and this guy said, “We’re not doing policy. Just do your jobs, young associates. We just do execution, we don’t do policy.” But the truth is—one place to look at this is in Saudi Arabia—when you ask McKinsey, “Why are you in Saudi Arabia? Why do you stay there?” they’ll tell you, “We should be there, because if we weren’t there, that place would go to hell. You don’t want to have a revolution in Saudi Arabia.” [This is] a very political answer [and] justification for their work there, which goes against the whole idea of them just doing execution and not policy.
Robinson
Yes. You point out in the Saudi Arabia section that there was dissent within the firm. People did start questioning this, because there is this realization that some of the work being done helps to legitimize and shore up the regime. If you are helping the regime to function [and] monitor dissent, there’s no way to do that neutrally. As you mentioned, that is inherently political.
Bogdanich
It is.
Robinson
Discuss one of the specific examples of how McKinsey has advised a corporation in ways we talked about—this common technique of boosting profits through “cutting, cutting, cutting?” Maybe you could take one of the examples, whether it’s what they did in the insurance industry or turbocharging opioid sales, and describe how it worked in a particular case?
Forsythe
Yes. I’ll talk a little bit about Allstate, for example. It’s quite a parable. Allstate was a very boring insurance company owned by Sears, Roebuck and Company for many decades and had a fairly good reputation. They had this slogan for the last 70 years or so, [“You’re in good hands”], and were known throughout the United States and around the world as this respectable insurance company. But then with the financialization in the ’80s, you saw all these spinoffs of companies, and Sears sold off its insurance industry, including Allstate, in the early ’90s. The new management at Allstate wanted to boost their profits and had McKinsey come in.
People always wonder, “What do consultants do, actually?” There are a lot of jokes about it: They’ll ask for your watch, and then tell you the time. Little jokes that belittle their work. But in fact, we wouldn’t have written the book unless we thought that McKinsey had a real big impact. And, yes, they do a lot of laughable things and [make] silly PowerPoint slides that really don’t tell you anything, but they also do things that really make a difference, and sometimes that’s a very malign difference.
With Allstate, they advised them on how to weaponize their legal department, and streamline their claims process to get most people through the process very quickly. But, if anybody tried to dispute a claim, then they would throw the book at them—the idea being to scare lawyers into ever even contemplating suing Allstate on behalf of a plaintiff. So, what we learned is that McKinsey tried to turn the claim center of Allstate into a profit center, and indeed, Allstate’s profits did soar and its expenses—the claims payouts—did fall in the period after McKinsey came in. And of course, who gets hurt by that? Mostly it’s Allstate policyholders—maybe they have an auto insurance policy and are not the most educated, and get pushed through to make a quickie settlement without getting the full amount that they might deserve.
Bogdanich
One thing that I found most shocking in our research was the fact that this reputable company that advises the best companies and governments around the world would turn selling addictive products into a profit center. And that’s what they did: advise the opioid makers, tobacco makers, and vaping companies. McKinsey doesn’t hire stupid people; they hire the very best that go to the best schools. These aren’t dumb people. They knew what they were doing. They knew that cigarettes were lethal, and they knew that vaping was problematic, because non-smoking teenagers were using it. And certainly, they knew about opioids, and that led them, in the middle of the opioid epidemic, to advise turbocharging sales of opioids. They knew this, and yet they continued to serve these entities.
Robinson
Almost at the same time as your book was released, two of your colleagues at the New York Times, [Jessica Silver-Greenberg and Katie Thomas], published a really excellent story on the nonprofit hospital chain Providence Hospital. This hospital chain had been trying to bill poor patients for as much money as possible, and sure enough, halfway through the article, it reports the plan was engineered by McKinsey who came up with this new thing called “Rev-Up”—to rev the revenue by making sure that poor people didn’t know that they were eligible for free health care.
Bogdanich
Health care is a major profit center for them as well, which is kind of ironic when you’re selling cigarettes, opioids, and vaping. But they advise all the major hospital chains, the biggest medical centers and training hospitals, and almost all the pharmaceutical companies around the world, and make tens of millions of dollars in profits at the same time they’re also advising the Food and Drug Administration, which is supposed to be regulating them. Healthcare is a major area of focus for them, and, as the Times reporters showed, the result of that isn’t always good.
Forsythe
It fits in perfectly with what we were writing about in the book. It’s the same pattern, to the extent that even McKinsey—if you read the articles that he was talking about—devise how to answer and talk to these poor people on the phone and maximize the ability to extract money from them. That’s exactly what was happening at Allstate. They also came up with these phone conversations that you could have with claimants. So, it definitely fits the pattern.
Bogdanich
We mentioned Disneyland earlier and how they advise them. We describe the advice they were giving to the workers there and to the company. They were polling them, going around talking to the employees, saying, “We have this scientific method of analyzing maintenance. There might be too much time being spent on certain maintenance and too little time on other maintenance, and we’ve got to figure out the right proportion.” And they said, “For instance, we looked at the lap bars on all the rides, and they never fail. So, why are you checking him every day?” And the employees responded, “They don’t fail because we check them every day.”
Robinson
I thought you said they hired the best and brightest?
Bogdanich
Well, the best and brightest will sometimes do anything for money. And McKinsey is a perfect example of it.
Robinson
You report that the consequences of cutting maintenance were horrific and led to a few really terrible accidents. But, it’s phenomenal for a business if you can advise people on how to create problems, and then advise the healthcare providers who have to clean up the mess afterward. Your book has a chapter titled “Playing Both Sides” about how it amounts to really helping people more efficiently create problems and then trying to stop the problems that the first set of clients has caused.
Bogdanich
That’s not a bad way to summarize it. Actually, I wish I thought of that when we wrote that chapter.
Robinson
Well, that seems to be the case in advising fossil fuel companies.
Bogdanich
They certainly are.
Forsythe
That’s right. They also have a big business advising companies on sustainability. So do they play both sides? Definitely. McKinsey publicly talks about how they’re a green company committed to saving the planet. That’s their public face. If you go to their website, you’ll see it right away. They bombard people with emails on how green they are. But when you look at it, they’re advising some of the world’s biggest polluters. If they were advising them on how to cut their carbon emissions, that would be fine. But what we found is, in many cases, they were advising them how to dig more coal out of the ground, and more efficiently produce and pump more oil. When you have a few McKinsey consultants doing that, that makes each one of them responsible for megatons more carbon going into the atmosphere.
Bogdanich
And it’s ironic. They recruit the best and the brightest, the most idealistic, by talking about things like climate change and inequality. They use that as a selling point. And when these people get their jobs and discover there’s this great space between what they were told and McKinsey’s actions, they become unhappy and angry. And fortunately, they have our phone number, and give us a call.
Robinson
They want to talk to the New York Times!
Bogdanich
Who doesn’t, right?
Robinson
Yes. I was trained as a lawyer. Big law firms will say you’re going to work in civil rights law, but what they don’t tell you is you’re going to be working on the employer side quashing claims, but still get to say you work in civil rights law or labor law. I wanted to address the fact that they recruit, in many cases, idealists. Pete Buttigieg, in his memoirs, says he went to McKinsey because he wanted to make change in the world. This is the pitch that they give, and many of the people they recruit genuinely believe they’re going to make the world a better place.
Forsythe
It’s a very attractive pitch that they give. They need to differentiate themselves from the Goldman Sachs and Blackstones of the world. If you want to make the world a better place, those people offer pretty thin gruel. But McKinsey says you can make an impact: “We work on very laudable topics, such as vaccine distribution in Africa, working with nonprofits helping to clean up the climate.” And that’s all true. But the bread and butter work of McKinsey is not that kind of work, and so people do get disillusioned.
But for poor old Pete Buttigieg, he couldn’t help but know about McKinsey—when you go to Harvard for four years you hear about McKinsey, unlike somebody who might go to a state school in Nebraska or something. He was a Rhodes Scholar, and McKinsey has a special program just to recruit Rhodes Scholars. I started making a spreadsheet of Rhodes Scholars who went to McKinsey, and I had to stop at a few dozen. The current head of McKinsey was a Rhodes Scholar, the one or two before him were also Rhodes Scholars. Pete Buttigieg was one, too, and sure enough, after a while, he found himself in an office park in Toronto working on a spreadsheet on a laptop he called Bertha, and wondered what the heck he was doing there. So, Pete Buttigieg left, and I think he gets a lot of flack from people because of his McKinsey background. But the fact is, he was only there a few years and left.
Robinson
We’ve discussed work for dubious clients, and we’ve also discussed dubious work for neutral or good clients. Is there another category of work that McKinsey does, which we might call the useless siphoning of money? I know that a lot of money has been spent on McKinsey by governments around the world. Is everyone who hires McKinsey getting value for their money, or are there cases in which they are being paid a lot of money to not do that much?
Bogdanich
I’ve talked to McKinsey clients, who’ve told me that they discovered that McKinsey was recycling information from one client to another. The way they sell themselves is, “We’re giving you the best that we can give you, and not something recycled from somebody else.” So, one of the big issues with McKinsey’s work for the government is the outsourcing of government work. That’s dangerous. Government is supposed to be accountable to the taxpayers, and private companies are not. It’s much easier to hire McKinsey to do certain things that maybe government workers wouldn’t want to do or have on their shoulders. So, it’s convenient to hire McKinsey, but it’s dangerous to outsource all that important government work where there is no accountability. And I keep coming back to the accountability. When you get huge concentration of power and secrecy with no accountability, that is not a good formula.
Forsythe
And as far as getting value for your money, one of the classic examples we talked about in the book is South Africa.
Bogdanich
Yes. South Africa has some of the worst income inequality in the world. McKinsey initially went in with the best of intentions after apartheid ended, and there was a rush of enthusiasm. “We’re going to help make this new democracy and help sustain it.” And so there were a lot of McKinsey people who wanted to go down there, and they discovered also that it was an easy way to make a lot of money working for government agencies. That ultimately has gotten them in a lot of trouble, because they weren’t very careful.
For management consultants that are supposedly the best in the world to not do proper risk analysis of their partners and government contracts boggles the mind—and they didn’t do that. Ultimately, what was shown to happen is that there was all this government money that was being sent through shell companies to politically connected individuals. That led to McKinsey agreeing to give back more than $100 million without admitting any wrongdoing. There’s a point I want to make about that: They also paid more than $600 million to settle government investigations into their opioid consulting. Somebody should explain to me how you end up paying $600 million in the United States or $100 million in South Africa to settle investigations and say you did nothing wrong. That doesn’t make sense. Clearly, something was wrong, and that’s why they paid the money.
Robinson
Your book is not just an exposé of McKinsey as a company that does wrong and needs exposing. You connect McKinsey to many of our wider social, economic, and political crises. Chapter two of your book is called “Winners and Losers: The Inequality Machine,” and you write about how this company has played a major role in helping to create the kind of economic inequality that people are upset about today. Of course, we discussed the opioid crisis and the climate crisis. I take it the reason that this company matters is that they have had a hand in so many of the things that are so frustratingly difficult to solve in the world today.
Forsythe
Absolutely. It goes back to 1950. I think Walt can tell this story much better than I can about Arch Patton, and the work he did for General Motors.
Bogdanich
Yes, in 1950, [Arch Patton, a partner at General Motors], approached McKinsey and wanted to know whether workers’ incomes were catching up to the executives’ incomes. They should have spent more time worrying about building better cars, but they were worried about workers getting too much. So, they started doing these studies for other companies, and in surveying them all they concluded that, yes, the gap was narrowing. To deal with that, McKinsey has spent decades advising executives how to increase their wealth and income through various stock deals and whatnot that don’t necessarily benefit the corporation or the people who work there. So, yes, inequality is one of the most divisive issues in America today, and McKinsey has played a significant role in helping to make that worse than it should be.
Forsythe
Yes, absolutely. It was almost a race to the top. McKinsey started publishing information on CEO incomes, and then people at other companies will say, “Wait a minute, I’m not making that much money. This is humiliating.” So, it created a not so virtuous cycle. And it’s not just CEO pay, of course. When McKinsey latches onto a big idea, it spreads and people get very enthusiastic, like it’s the flavor of the month. Outsourcing and offshoring was something that McKinsey proselytized—”Spread the good news!”—in the 1990s to all sorts of companies, from US companies to closely working with some big Indian outsourcers. McKinsey’s scholars at the McKinsey Global Institute, their think tank, were writing all sorts of books about globalization and the benefits of outsourcing. These were going into the PowerPoint decks for McKinsey clients, all sorts of them. Even for a tobacco company, there was a slide stuck in a company presentation on how they could save money if they outsource: “Look, this tool company went to China and they saved all this money! Why not you?” So McKinsey, by dint of the fact that it advises all these companies, has an outsized influence on spreading ideas that have fostered inequality.
Bogdanich
Let me point out one other thing. According to McKinsey, they put out a release at one point saying that modest profits were no longer acceptable. To create an outstanding corporation, managers had to keep their stock price high, and cutting costs by layoffs was usually easier and quicker than boosting revenue. In their view, an average corporation that’s just keeping families fed and making products that are used and appreciated is not good enough. You got to make extraordinary profits, and that’s what they help corporations do. And they charge a lot of money for it.
Robinson
The book is rich with revelations. There are jaw-dropping anecdotes on every page. We haven’t even discussed the stories of the NHS and Enron. There’s so much in here that you have both found. One final question: You’re both very experienced investigative reporters, and some of our listeners might be aspiring reporters, so how did you manage to bust open one of the most secretive corporations in the world? I know there are many different aspects to that, but what’s the secret to have finally gotten through?
Bogdanich
One of the secrets is to work with a great partner like Mike Forsythe. The standard way is you find one person who’s upset, and they’ll turn you on to another person, to another person, and another person, but we approached it far more methodically than that.
Forsythe
One of the reasons that we were lucky is because of the disappointment that so many outstanding young McKinsey associates had when they learned that their promises to change the world wasn’t the reality, and so they came to us. But even before then, there were a lot of ways to do it. We had to develop sources at the beginning before we published our first story and before we had people coming to us. One of the ways we did it was very mundane, to become trolls on LinkedIn, for example, and build sources that way. We reached out to every McKinsey person, every former McKinsey person, on LinkedIn. So for South Africa, for example, we reached out to many people who had been working there—that was successful. There are all sorts of techniques, but really once the story started flowing, then we started getting more tips and thinking about where we wanted to go next. One story begat another story begat another story.
Hear more great conversations on the Current Affairs podcast.
Transcript edited by Patrick Farnsworth.
