This is not a generic "all I-banks or management consultants are evil" - there are still plenty of specialized firms out there without these anti-patterns.
Then if things ever go wrong, you always have the out of "I hired the best, what did you want me to do?"
It's like if you paid someone $50,000 to help you find a good car. Client wants a fast car. Oh you want a fast car? Buy a ferrari they have big engines and can generate tons of horsepower. Job done, can i collect my 50k now?
Mind you this guys linkedIn and resume read like a CEO wet dream. AI and machine learning data science all over...
We spent months dilly dallying with different tech before they just left cold turkey , havent heard from em since. And our 20% complete projects experimenting with all kinds of DB tech have done nothing.
It may very well have simply done research on drugs for Valiant as requested. Valiant was making ultra-risky moves in buying up things it shouldn't have.
Even if there were 'insider moves' in the McKinsey fund (which I doubt but maybe it's true in some indirect way), it's easy to see independant investors somewhere else seeing that Valiant is doing some dumb things.
Goldman was involved in helping the Greek government clean up it's balance sheet in order to get into the Euro. It'd seem that in this case, it was the Greek government that likely hired Goldman due to their very prowess in 'doing whatever it takes' to get the job done. In this particular scenario, my hunch is that Goldman probably told Greek officials that the presentation of the information in such and such a way would likely cause problems, but 'the client' did it anyhow.
Also note that McKinsey in particular is not a highly centralized entity, it's almost like a 'franchise brand' with a lot of fairly independant entities that operate differently. Not exactly Subway sandwiches but it's not like Amazon either.
I'm not really defending GS or McKinsey, it's just that these things aren't black and white.
Maybe it's better to think of them as 'consiglieres' for the powers that be.
Goldman has a history of doing terrifically by their clients. They aren’t the best counterparty to trade against, however, in the same way that one would rather play poker against a bad player than a great one. (McKinsey, on the other hand, is a consistent dumpster fire.)
Here's the delicious summary from Matt Levine's "Money Stuff" Bloomberg column:
> Incentives
All else equal, would you rather hire an evil investment bank to underwrite your stock offering, or a good investment bank? I think there are good arguments both ways. An evil investment bank might do evil things to you, which you won’t like. On the other hand, it might do evil things to investors on your behalf, which you might like; if there is evil in the world, you might as well hire it so it’s on your side. Also an evil investment bank might hang out with all the evil investors, who have a lot of money and will buy your stock, while a good investment bank will only hang out with good investors, who have less money.
Or whatever, I don’t know, it’s a model. More generally, if your model is “the whole financial system is evil,” then evil investment banks should be preferable and more successful, because they will be better plugged in to the (evil) networks of the financial system.
Here’s a fun paper from Thomas Roulet of Cambridge’s Judge Business School, whose model really is kind of “the whole financial system is evil”; as the school’s blog summarizes it:
The study concludes that negative coverage actually helped banks gain IPO business from corporate customers, as those corporates view certain banking practices widely criticised after the financial crisis (such as appetite for risk, short-termism and big bonuses) as consistent with industry norms, thus suggesting quality of service.
“This study shows how divergence in audiences’ perception of typical industry behaviours can make wrongdoing beneficial,” says the paper authored by Dr Thomas Roulet, University Senior Lecturer in Organisation Theory at Cambridge Judge Business School. “Most audiences tend to disapprove of wrongdoings, but specific stakeholders may interpret this disapproval as an indication of the focal organisation’s level of adherence to professional norms.”
The model is roughly that “professional norms,” in business, are evil, and so businesses looking to hire qualified professional investment banks tend to look for the ones who are most evil. And so winning IPO mandates is correlated with negative press coverage. What kind of negative press coverage? These delightfully specific kinds:
The media coverage was evaluated based on a list of 204 words built on a qualitative analysis of a sample of opinion articles. The articles were then coded on the basis of how those words were associated with the banks. The words were grouped into four factors that have been heavily criticised since the financial crisis:
Greed: words such as “obscene”, “excess”, “selfish”, and “shameless”. Violence as in a battleground: “assault”, “frenzy”, “vicious”, “fierce”. Opacity as in fostering secrecy: “covert”, “cryptic”, “dubious”, “hazy”. Risk-taking behaviours: “casino,” “tempt”, “daring”, and “gamble”.
“This study suggests that the coverage of misconduct can actually act as a positive signal providing banks with incentives to engage in what is broadly perceived as professional misconduct.” It is broadly perceived as professional misconduct, but it is narrowly perceived—within the profession, and its target audience of businesses—as proper professional conduct.
Obviously you can tell this story without using the word “evil,” and I am joking at least a little bit when I use it. The work of finance is esoteric, and its norms are specific and contextual; in many cases, those norms look bad to outsiders but are sensible and useful in their context. Trading ahead of a client order for a foreign-exchange fixing can be perfectly appropriate hedging, but looks like bad bad front-running when it is exposed as an FX scandal. Taking large risky positions in derivatives can be a perfectly appropriate way to facilitate clients’ hedges, but looks like bad scary prop trading when it loses money. Pricing and allocating an IPO so it is likely to trade up probably serves the goals of banks and investors and issuers, even though outside commentators regularly describe it as “leaving money on the table” for issuers. Sophisticated clients tend to understand what banks are doing and why, and not to take the criticisms too seriously, although I still find it a bit counterintuitive that they’d think more criticisms would be good.
I used to work at Goldman Sachs Group Inc., including during a period when it was heavily criticized for being, um, “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” We did fine. There was a distinct sense that clients thought we were evil but smart, and that they’d rather have us on their side than against them. Also I would sometimes go pitch oil companies, and they would welcome us warmly and thank us for being so widely hated, because it made them look good by comparison. I suppose this is evidence for the “the whole financial system is evil” view.
[1] https://journals.sagepub.com/doi/abs/10.1177/001872671879940...
While Birnbaum and the other individuals involved in Abacus acted especially douchey in front of Congress, the point that was apparently lost on many people was that when a market maker sells something off their prop books, they are inherently short that thing