Evidence over all

This post is inspired by my current classmates, many of whom are applying this year to consulting companies, where they will work over the summer—in firms such as Accenture, Boston Consulting Group or one of the less well known ones.  Consulting agencies drain substantial part of the graduating class of the best universities. For instance, Princeton sends more than 60% of its graduates to investment banks or consulting. These numbers are similar for Harvard. [1] Oxford is in a similar situation and this number would be around 40-67%, depending on definition. [2] Though it is worthwhile to say that data for Princeton and Harvard are for fresh graduates, but Oxford’s statistics are both for fresh and older alumni.

But is this right? At least the academically more capable people push themselves into places, where, barring the massive amounts of time spent working, they do jobs that I have two sorts of issues with.

Of course, consulting has many subgroups that differ quite substantially (everything from IT to strategy), so I would like to focus on the most common one: management consulting and I will speak exclusively about it—i.e. this need not apply to IT and potentially other fields.

1. Significant part of what consultants do probably does not benefit the society at large.
Management consulting is to a large extent about how employees should behave so that they can get more money out of the customer. I do not think this is extremely controversial. But it does not really move society forward. But the same would apply for advertisement as a whole.

Of course, personally, I can emphasize with the choice, but at a society level is this perhaps unsuitable. Consultants would surely object that that this isn’t such a massive part of their jobs and that some of their advice removes pure inefficiencies in the clients’ processes. That is true, but that brings me onto the second point.

2. What consultants do, they do not do as well as they say.
Stanford and Accenture once decided that they will run a randomized controlled trial to figure out how consultants fare when we look at the firms where they have been randomly assigned and firms where no fancily dressed person has been sent. The results are at best neutral and at worst slightly negative for consulting:  consultants do pay for their own fees, but if we take into consideration the fact that the whole experiment was conducted in India, where resources and machines were literally lying around idle. Also, the fact that Accenture was doing its own reviews in this particular case, then it does not sound all that great for consulting. [3] Purposefully, I cite an article that is more positive towards consultants and interprets the results somewhat differently.

One additional reason why I am somewhat skeptical about consultants is simple: in the UK, there is a substantial tradition of people who studied history or philosophy so that they eventually become consultants. Of course, these are frequently intelligent people, but the “interpretation” and “analysis” that they were taught at school is substantially different. (Something that Nassim N. Taleb would call “domain dependence.”) This argument, however, could last ages, because critics would cry “transferrable skills” and I would object that I’ve never read a (decent) study that would support their existence.

But the two main datasets against management consulting come from politics: the author of the first one is Philip Tetlock, who in his book shows that human predictions and estimations in politics are actually worse than long-run averages (In cases such as what is the probability that a revolution will emerge from some protest—his evidence shows that it would be better to just calculate how often has it has happened and has not in similar cases and divide.) and people are no match for the formal models, which are very capable of having some predictive ability even in such erratic environments. [4] And a lot of what consultants do involves some estimation or prediction.

The second dataset comes from the book Rick Perry and His Eggheads, where Sasha Issenberg shows that data-driven campaigns absolutely devastate those that primarily use consultants and other “experts” for decision-making. [5]

So what’s the conclusion? Only one conclusion seems clear to me: it is a pity that consulting devours so many ambitious people. The rest seems less clear and hence I will leave it up to the reader to decide.

[1]http://www.forbes.com/sites/michaelgibson/2014/02/07/the-ivy-league-has-perfected-the-investment-banker-and-management-consultant-replicator/

[2]http://www.careers.ox.ac.uk/wp-content/uploads/2012/05/Summary-of-the-Oxford-University-Alumni-Careers-Survey-v2.pdf

[3]http://www.ft.com/cms/s/2/d5933396-ed2b-11df-8cc9-00144feab49a.html#axzz2sp36zoFH

[4]http://www.amazon.com/Expert-Political-Judgment-Good-Know/dp/0691128715/ref=cm_cr_pr_product_top

[5]http://www.amazon.com/Rick-Perry-His-Eggheads-Brainiest-ebook/dp/B005HE8ED4/ref=sr_1_1?s=books&ie=UTF8&qid=1391953013&sr=1-1&keywords=rick+perry+and+his+eggheads