Having consulted for a long time, you get a sense of who’s competent and who’s not. Who’s a scammer and who’s trying to do it right – doing it right meaning take care of the client and your people, getting them into a self-sustaining mode, then “get out of Dodge.”
That’s the essence of a sustainable business – one that grows, brings its people along with it, and puts the consultant where she belongs — teacher and advisor – not embedded in the operation.
A good consultant is a trusted advisor. A good company offers mature products that the customer can maintain and adapt to their circumstances. These are core competencies of a sustainable business.
You have to know how to make your own bed. For exmaple, every company needs to reorganize some aspect of its business — if you need McKinsey to tell you how to do it, you’re toast.
When your products require endless support for “customer success”, they are not serving the customer’s needs. Which makes that aspect of their business (and yours) is unsustainable.
When a company is no longer sustainable, put it on your “short” list. Not that you short it immediately — but you will eventually clear your long position and start placing shorts.
Mark Stoller argues McKinsey is an icon for our age with Afghanistan as a poster child: https://mattstoller.substack.com/p/the-war-in-afghanistan-is-what-happens
It may be instructive for us all on how NOT to do something.
The War in Afghanistan Is What Happens When McKinsey Types Run Everything
An Afghan General blames defense contractors for the collapse of the Afghan army. A government inspector blames the “the pervasiveness of overoptimism” by U.S. generals. It’s all that, and more.
I had a piece ready to go on Lina Khan’s attempt to break up Facebook, but I think it’s more important to talk about the competence problems revealed by the war in Afghanistan. There are monopoly elements involved, but there is a more basic question at work that keeps coming up, whether it’s the Boeing 737 Max, opioids, Covid mismanagement, or anything else of social importance. Do we have the competence to govern ourselves anymore? There’s also a follow-on question. Will this loss spur genuine reform of our McKinsey-ified elites who failed so spectacularly?
- Other People’s Money, or why Wall Street itself is getting ripped off by a monopolist that charges 25 cents to send an email to investors.
- Other People’s Money, or why does getting an email of your college transcript cost $9?
- In Texas, hospitals are using Covid to try and suppress nurse wages.
- What happened when the Centers for Disease Control hired Boston Consulting Group to run their vaccine rollout?
- Sony builds an anime monopoly.
This is my first newsletter in three weeks. I was on vacation. I won’t normally have absences like this, but honestly, I was burned out. Don’t worry, I’m refreshed, and I have a good issue queued up for early next week, and some fun ideas going forward.
“The Pervasiveness of Over-Optimism”
In 2017, Netflix put out a satirical movie on the conflict in Afghanistan. It was titled War Machine, and it starred Brad Pitt as an exuberant and deluded U.S. General named Glen McMahon. A fitness fanatic nicknamed ‘the Glanimal’ by his crew of adoring frathouse henchmen, McMahon is modeled on the real-life military leader Stanley McChrystal, who ran the surge in Afghanistan before being fired for saying disparaging things about Obama administration officials (including then VP Biden) on the record to Rolling Stone magazine.
In War Machine, McMahan comes to Afghanistan with a spirited can do attitude and a frat house of hard-partying yes-men, after having ‘kicked Al Qaeda in the sack’ running special operations in Iraq. He is obsessed with inspirational speeches and weird bureaucratic box-ticking, under the amorphous concept of leadership. This kind of leadership, though, isn’t actually working with wisdom and foresight, but is more like management consulting. Prior to arriving in Afghanistan, for instance, McMahan created a system, with the acronym SNORPP to coordinate military assets. At night, he cozies down to read books on management excellence, the kind that Harvard Business Review publishes as sort of Chicken Soup for the Executive’s Soul. He is also the author of a fictional book with the amazing title, “One Leg At a Time: Just Like Everybody Else.”
And yet his mission is unwinnable, which everyone seems to understand except him and his small team. McMahan constantly makes awkward speeches that make no sense, with the tone used by untrusted executives at corporate retreats. “We are here to build, to protect, to support the civilian population,” he told his troops. “To that end, we must avoid killing it at all costs. We cannot help them and kill them at the same time, it just ain’t humanly possible.” His character reflects what the actual government watchdog charged with overseeing the war in Afghanistan called one of the central problems with the U.S. effort, “the pervasiveness of over-optimism:”
If McMahan himself is a naive fool, he is surrounded by cynical bureaucratic opponents. As he seeks support for his new strategy of putting troops in Taliban-held provinces, he is gently ignored by the President of Afghanistan, who is a drug-addicted hypochondriac, and mocked by State Department and national security apparatchiks, who are striving cynics urging McMahon to just falsify numbers to make the war look a little better and not embarrass President Obama. Troops on the ground are demoralized and confused. No one actually believes in the mission, but dammit, McMahon is gonna get it done, whatever ‘it’ is. When McMahon tries to give an inspirational speech to ordinary Afghanis in Taliban-controlled territory about how the U.S. is going to bring them jobs and schools, one responds by saying he like jobs and schools, but please go away so the Taliban won’t retaliate. “The longer you are here the worse for us. Please go.”
It’s a hilarious, and extraordinarily dark movie. It also rang true, because it was based on the work of no-bullshit journalist Michael Hastings, who was perhaps the most honest reporter about the military establishment. And, as life is true to fiction, McChrystal, the general who Hastings profiled in Rolling Stone with an embarrassing story that led to his resignation, is now a management consultant (and board member of defense contractors). He runs inspirational ‘leadership training’ at the McChrystal Group, which is McKinsey with military branding.
In fact, McChrystal and much of our military leadership is tight with consultants like McKinsey, and that whole diseased culture from Harvard Business School of pervasive over-optimism and finance-venture capital monopoly bro-a-thons. McKinsey itself had involvement in Afghanistan, with at least one $18.6 million contract to help the Defense Department define its “strategic focus,” though government watchdogs found that the “only output [they] could find” was a 50-page report about strategic economic development potential in Herat, a province in western Afghanistan.” It turns out that ‘strategic focus’ means an $18.6 million PowerPoint. (There was reporting on this contract because Pete Buttigieg worked on it as a junior analyst at McKinsey, and he has failed upward to run the Transportation Department.)
I bring War Machine up because of today’s debate over Afghanistan. While there is a lot of back and forth about whether intelligence agencies knew that the Taliban would take over, or what would happen if we left, or whether the withdrawal could be done more competently, all you had to do to know that this war was a shitshow based on deception and idiocy at all levels was to turn on Netflix and watch this movie. Or you could read any number of inspector general reports, leaked documents, articles, talk to any number of veterans, or use common sense, which, polling showed, most Americans did. (Marine vet Lucas Kunce gives a nice rundown of the problem in this interview). I mean, it’s not like a major international media outlet printed a multi-part expose, which became a handy book, detailing the fact that everyone running the show knew it was an unwinnable mess nearly a decade ago. Oh, wait
In other words, the war in Afghanistan is like seeing management consultants come to your badly managed software company where everyone knows the problem is the boss’s indecisiveness and cowardice, except it’s violent and people die.
I mean, U.S. military leaders, like bad consultants or executives, lied about Afghanistan to the point it was routine. Here are just a few quotes from generals and DOD spokesmen over the years on the strength of the Afghan military, which collapsed almost instantly after the U.S. left.
In 2011, General David Petraeus stated, “Investments in leader development, literacy, marksmanship and institutions have yielded significant dividends. In fact, in the hard fighting west of Kandahar in late 2010, Afghan forces comprised some 60% of the overall force and they fought with skill and courage.”
In 2015, General John Campbell said that the the Afghan Army had “proven themselves to be increasingly capable,” that they had “grown and matured in less than a decade into a modern, professional force,” and, further, that they had “proven that they can and will take the tactical fight from here.”
In 2017, General John Nicholson stated that Afghan security forces had “prevailed in combat against an externally enabled enemy,” and that the army’s “ability to face simultaneity and complexity on the battlefield signals growth in capability.”
On July 11, 2021, Pentagon press secretary John Kirby said that the Afghan army has “much more capacity than they’ve ever had before, much more capability,” and asserted, “they know how to defend their country.”
Basically, look at this photo below, imagine them in camouflage, and that’s the U.S. military leadership.
The Withdrawal Anger Is *Embarrassment*
There are significant recriminations over the embarrassing media stories on the withdrawal from Afghanistan, tremendous anger that political leaders like Trump and Biden made significant mistakes in how they withdrew U.S. forces. Many of these critiques, coming from Europeans as much as American elites, are in bad faith.
Nonetheless, rather than weighing in on the merits of these arguments, I think it’s better to look at how the establishment observed a stark portrait of Afghanistan before the withdrawal, to show that the current critiques have nothing to do with operational choices.
To that end, let’s look at a review of War Machine in Foreign Policy magazine, written by one of McChrystal’s aides, Whitney Kassel, who now works at private intelligence firm The Arkin Group. In this review, Kassel noted the movie made her so upset that she started cursing, because, while there were of course mistakes, the film was totally unfair to McChrystal and demeaned the entire mission of building a safe Afghanistan. Kassel, like most of these elites, didn’t get the joke, because she is the joke.
I see the discourse on the withdrawal as a super-sized version of this Kassel’s review. The ‘Blob,’ that loose network of diplomats, ex-diplomats, generals, lobbyists, defense contractors, fancy lawyers, famous journalists, and insiders see the obvious desire for withdrawal as similar to how Kassel saw the truth-telling of Hastings and the Netflix movie. They are angry and embarrassed that they can’t hide their failures anymore. Their entire sense of self was bound up in the idea of an illusion of an unbeatable all-powerful America, even when they, like General Glen “the Glanimal” McMahon were the only ones who believed it.
And their embarrassment covers up something even more dangerous. None of these tens of thousands of Ivy league encrusted PR savvy highly credentialed prestigious people actually know how to do anything useful. They can write books on leadership, or do powerpoints, or leak stories, but the hard logistics of actually using resources to achieve something important are foreign to them, masked by unlimited budgets and public relations. It is, as someone told me in 2019 about the consumer goods giant Proctor and Gamble, where “very few white-collar workers at P&G really did anything” except take credit for the work of others.
Defense Monopolies and the Afghan Army
It’s fun to act like it was always thus, that this is how empires behave. But in fact, that’s not true. The current Blob is relatively new. And believe it or not, Western forces used to be able to actually win wars.
Going back to the last significant victory, the allies won World War II in large part for two reasons. First, the Soviet Union sacrificed 27 million people defeating the Nazis, and second, the U.S. military, government, labor, and business leaders were exceptionally good at logistics. The U.S. military had at least a dozen suppliers for each major weapons system, as well as the ability to produce its own weaponry, the government had exceptional insight into the U.S. economy, and New Dealers had destroyed the power of the Andrew Mellon and J.P. Morgan style short-term oriented financiers and monopolists who had controlled the industrial sinews of the country.
Today, this short-termism has taken over everything, including the military, which is now dominated by McKinsey-ified glory hounds without wisdom and defense contractors with market power. And this leadership class hasn’t just eroded our strategic capacity, but the very ability to conduct operations. Two days ago, Afghan General Sami Sadat published a piece in the New York Times describing why his army fell apart so quickly. He went through several important political reasons, but there was an interesting subtext about the operational capacity of a military that is so dependent on contractors for sustainment and repairs. In particular, these lines stuck out.
Contractors maintained our bombers and our attack and transport aircraft throughout the war. By July, most of the 17,000 support contractors had left. A technical issue now meant that aircraft — a Black Hawk helicopter, a C-130 transport, a surveillance drone — would be grounded.
The contractors also took proprietary software and weapons systems with them. They physically removed our helicopter missile-defense system. Access to the software that we relied on to track our vehicles, weapons and personnel also disappeared.
It’s just remarkable that contractors removed software and weapons systems from the Afghan army as they left. Remember, U.S. generals constantly talked about the strength of the Afghan forces, but analysts knew that its air force – on which it depended – would fall apart without contractors. The generals probably hadn’t really thought about the logistical problems of what dependence on contracting means. It’s just stunning that NATO forces would be trying to stand up an independent Afghan army, even as NATO contractors disarmed that army due to contracting arrangements.
I suspect the problem isn’t simply related to Afghanistan, because these kinds of problems are not isolated to the Afghan army. Last month, I noted that American soldiers are constantly complaining that bad contracting terms prevent them from fixing and using their own equipment, just as Apple stops consumers from repairing or tinkering with their iPhones. In 2019, Marine Elle Ekman noted that these problems are pervasive in the U.S. military.
Besides the broken generator in South Korea, I remembered working at a maintenance unit in Okinawa, Japan, watching as engines were packed up and shipped back to contractors in the United States for repairs because “that’s what the contract says.” The process took months.
With every engine sent back, Marines lost the opportunity to practice the skills they might need one day on the battlefield, where contractor support is inordinately expensive, unreliable or nonexistent…
While a broken generator or tactical vehicle may seem like small issues, the implications are much larger when a combat ship or a fighter jet needs to be fixed. What happens when those systems break somewhere with limited communications or transportation? Will the Department of Defense get stuck in the mud because of a warranty?
No one is invading the U.S., so these problems aren’t immediately obvious to most of us. Yet, with the collapse of the Afghan army, now we see an example of what happens when a military is too dependent on contractors, and that support system is removed (which adversaries could do to the U.S. military if they pursue certain strategies.) It turns out that the cost of not being able to repair your own equipment is losing wars.
More fundamentally, the people who are in charge of the governing institutions in our society are simply divorced from the underlying logistics of what makes them work. Everything, from the Boeing 737 Max to the opioid epidemic to the waste inside most big corporations to war, has been McKinsey-ified. And it’s all covered up with moral outrage, partisanship and culture warring, public relations, and management wisdom bullshit.
I’ll finish on a note of optimism. This loss in Afghanistan, while hugely embarrassing, could serve as a wake-up call. After the loss in Vietnam, a group of military officers, led by John Boyd, one of the greatest American military strategists in U.S. history, created a military reform movement, to change the way the Pentagon developed and used weapons, and they made enormous progress in restructuring key parts of the defense establishment. (One of the members of Boyd’s “Fighter Mafia,” Pierre Sprey, the man responsible for the remarkable A-10 Warthog, just passed away.) Similarly, the British, after losing the American Revolution, radically reformed their corrupt and antiquated systems of governance. Losing wars is a great spur to reform. It means that we as a society get to look at ourselves honestly. We may choose not to act on what we see, but we do in fact have the opportunity. And that’s not nothing.
UPDATE: I’d like to apologize to Whitney Kessel. She is no longer at the Arkin Group. After a stint at Palantir, she ended up at Morgan Stanley, where she is now the Head of Cyber Event Management for North America, which is not at all a highly paid fake job full of make work.
Other People’s Money, or Why Wall Street itself is getting ripped off by a monopolist that charges 25 cents to send an email to investors. The Financial Times has a good story on an obscure toll-booth known as Broadridge Financial Solutions, which is the “dominant third-party vendor for distributing prospectuses, shareholder reports and proxy materials on behalf of brokers, handling more than 80 per cent of the business.” There are 140 million accountholders a year, so this is not a small business.
Like a lot of monopolists, Broadridge has market power despite charging high prices for a commodity service because its customers aren’t spending their own money, they are spending Other People’s Money. Stock brokers are the ‘customers,’ but they get to charge funds and firms for the cost, and get a kickback from Broadridge in the process. It’s great to buy something with someone else’s money, there’s no reason to hold prices down. And if you get a share of what you spend, you have an incentive to drive prices higher. Who cares how much the stuff you’re buying costs? You’re spending Other People’s Money!
Read on if you want to know how to fix this problem.
Other People’s Money, or why does getting your college transcript cost $9? : A BIG reader sent me a note on how expensive it is to get emailed a PDF of a transcript from a university. It costs more than $9 apiece. Why? It turns out a firm called Parchment runs this service for a lot of universities, and Parchment is a roll-up of similar firms by private equity of similar firms. This is another example of Other People’s Money – the universities are the ‘customers,’ but the people who pay are the alumni and other stakeholders that need transcripts. I wouldn’t be surprised if there are kickbacks here as well.
CDC Used the “Bob’s” of McKinsey and Boston Consulting Group to Run the Vaccine Campaign: Why have vaccine distributions been so problematic? It turns out many state leaders and the Centers for Disease Control relied on McKinsey and Boston Consulting Group to run their vaccine roll-outs. Predictably, the process has been a total cringe. This nugget is particularly embarrassing.
Instead of the “targeted program management support” promised in the contract, consultants often performed rudimentary services, such as taking notes during calls between states and the CDC, and then organizing that information in PowerPoint slides for presentations, agency officials said.
This violates my recommendation to Biden, which was to keep McKinsey away from government.
UK Competition Regulator to Break Up Facebook?Ars Technica: The Competition and Markets Authority in the UK is thinking of forcing Facebook to spin off its Giphy acquisition. That’s a break-up!
Apple Shuts Down a Developer of a Keyboard for the Blind, Disability rights and monopoly is its own topic, and a fascinating one. This story starts getting into the problem.
Covid is No Reason to Suppress Nurse Wages: It’s hard to hire nurses these days without offering more pay, so hospitals are doing what monopolists like to do. Price-fix! They are trying to get the government to help them collude against workers. “On behalf of hospitals in the state of Texas, having an organized, consistent approach that doesn’t pit hospitals against each other in looking for staffing is what we need,” said Marc Boom, chair of the Texas Hospital Association. In other words, hospital execs want to work together to make sure no nurses get to shop their labor skills around. That would be a straight-up antitrust violation, which is why they are trying to get government approval before doing it.
Shortage Watch: I’m going to start writing about shortages. Send me what you’re seeing. This, for instance, is a pretty simple example.Kalian Osborn @kalianosborn@normonics My 2018 F-150 is currently in the shop in need of chips they cannot procure. It’s basically useless because features I don’t want are broken so the truck won’t move.August 23rd 202113 Retweets62 Likes
Thanks for reading. Send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.
P.S. Don’t worry, I didn’t forget about Sony’s anime monopoly.
Long time reader here, I wanted to bring your attention to a sorta niche monopoly matter. Sony just recently acquired anime streaming service Crunchyroll for 1.2 billion dollars, they also acquired Funimation, another popular U.S. anime distributor, a few years ago. Both Crunchyroll and Funimation are two of the largest, and most accessible, streaming sites for anime. By purchasing Crunchyroll, Sony is essentially building an anime monopoly, something even the DOJ was afraid of despite approving the merger. Anime has grown dramatically in popularity over the past decade or so and Sony has kept pace constantly building and/or acquiring various distribution channels in Japan and around the world. Sony argues the acquisition will help them compete against streaming giants Netflix and Amazon (which are also trying to crack into the anime market), but you can color me skeptical.
Sony has said they’ll consolidate the libraries into one service, but it remains to be seen what that’ll look like. However, both Funimation and Crunchyroll offer a ton of free content, and my hunch is that it was because both services were competing against each other. However, if Sony is going head-to-head with Netflix and Amazon I imagine they’ll cut back the free content and bring prices more in line with those services. Furthermore, with distribution becoming more consolidated, it’ll likely put translators, animators, and studios in a worse bargaining position, which is saying a lot since many of them barely earnenough to survive.
I’ll admit, I’m not an industry insider, I’m just a guy who likes anime and hates monopolies, but I figured the news around the acquisition would catch your attention. If you want to explore this further I’d highly recommend connecting with some folks over at Anime News Network, which has been following the industry since the late 90s.