Book summary “When Mckinsey Comes to Town”: summary

Introduction

You live in a world shaped by unseen advisers who direct major corporations and governments behind closed doors. You often wonder how powerful institutions make catastrophic decisions that prioritize extreme short-term profits over human safety and public health. Walt Bogdanich and Michael Forsythe reveal how McKinsey & Company operates as the elite engine of global capitalism. The authors expose how this secretive firm insulates itself from legal accountability while engineering mass layoffs, boosting fossil fuel extraction, and advising both regulators and the industries they oversee. You will discover how elite management consulting influences public policy and corporate ethics through a structured exploration of state contracts, defense strategy, public health, and financial engineering.

• How do management consultants shield themselves from legal liability?
• What mechanisms allow a single firm to advise regulators and regulated entities simultaneously?
• Why do organizational models that promise efficiency so often produce human tragedy?

1. Corporate Restructuring and Operational Hazards

Management consultants legitimize aggressive cost reductions and workforce downsizing that hollow out critical maintenance and safety protocols.

Management consultants protect themselves from legal and public accountability by framing their work strictly as advisory, meaning they take no public blame when their strategies fail. McKinsey operates by giving advice rather than direct orders, allowing the firm to avoid lawsuits or regulatory punishment when its recommendations lead to disaster. Consultants escape the spotlight both when clients succeed and when they crash, acting as the invisible hand behind corporate cost-cutting.

Neither U.S. Steel nor Disneyland held McKinsey legally accountable after fatal accidents occurred following the implementation of McKinsey's maintenance overhauls.

U.S. Steel and the Carnegie Way

At U.S. Steel, McKinsey introduced a transformation plan called the Carnegie Way that prioritized extreme cost reductions, directly gutting critical maintenance and safety protocols. Under CEO Mario Longhi, U.S. Steel hired McKinsey to rescue the struggling manufacturer. The resulting strategy relied on aggressive expense cuts, including freezing parts purchases, creating a control tower to block requisition approvals, and laying off or demoting experienced maintenance staff into unfamiliar roles.

U.S. Steel workers chanted "McKinsey sucks!" and carried protest signs at the main gate in Gary, Indiana, after severe layoffs and deferred maintenance led to worker deaths.

With maintenance departments hollowed out, workers were forced to work grueling hours up to 90 hours a week and jury-rig failing machines. When fatal accidents struck due to live electrical connections not being de-energized, government regulators levied paltry fines that were further negotiated down. Steelworkers Charles Kremke and Jonathan Arrizola were both electrocuted on the job at U.S. Steel plants after staffing cuts and reassignments pushed them into dangerous, unfamiliar tasks. The government issued a $42,000 total fine to U.S. Steel for the electrocution deaths of Kremke and Arrizola, which was reduced to $14,500 through negotiations.

Disneyland and Reliability-Centered Maintenance

At Disneyland, McKinsey applied a methodology called reliability-centered maintenance that was repurposed from aviation into a blunt instrument for slashing park expenses. Brought in by top Disney executive Paul Pressler, McKinsey argued that maintenance should rely on scientific data rather than the intuition of veteran employees. In practice, this meant cutting staff, reducing training, eliminating expert ride leads, and shifting most maintenance workers to the overnight graveyard shift.

• Re-evaluate maintenance based on analysis of maintenance histories, breakdowns, and cost rather than employee judgment
• Transfer most maintenance workers to the overnight graveyard shift
• Establish a small Maintenance Response Team to handle daytime mechanical breakdowns
• Bring in counselors to address sleep, nutrition, and relationship issues for overnight shift workers
• Provide each overnight worker with a one-year subscription to the Working Nights newsletter

Aggressive cost-cutting and reduced training implemented under McKinsey's guidance at Disneyland directly contributed to a series of severe accidents and guest fatalities. By removing higher-paid expert managers, reducing preventive maintenance, and ignoring repeated whistleblower warnings from experienced staff, Disney created an environment where mechanical failures and operational errors led to tragedy. Luan Dawson was killed on the Columbia riverboat when an untrained supervisor tied a substitute rope to a rotted cleat, and Marcelo Torres was killed on Big Thunder Mountain after ignored mechanical warnings led to an axle rod breaking.

2. Values, Recruitment, and Inequality

McKinsey recruits idealistic graduates with promises of prestige and societal impact while propagating executive compensation inflation and mass corporate layoffs.

Marvin Bower shaped McKinsey by insisting that consultants call themselves a firm running a practice. He recruited Harvard Business School Baker scholars, placing roughly five hundred graduates at McKinsey by 2010. The firm targets 200,000 applicants yearly while maintaining a 1 to 2 percent hiring rate. Business school graduates received 195,000 dollars starting pay in their first year including bonuses.

Wealth Without Guilt

The firm appeals to ambitious students concerned about global warming, inequality, and racial justice by pitching change that matters. Recruits like Rogé Karma and Caitlin Rosenthal joined McKinsey because they believed they could improve people's lives. You might decline projects for oil or pharmaceutical companies, yet the firm prioritizes shareholder enrichment above all else. Seth Green and Garrison Lovely found themselves party to authoritarianism and profit-driven goals. Marvin Bower treated commercial like profanity while building an elite professional culture.

Arch Patton launched the modern era of skyrocketing executive pay by conducting studies showing worker wages rising faster than CEO compensation. Patton studied 37 different companies in his original 1950 compensation study. A typical large company CEO made 20 times a production worker's income in 1950, compared to 351 times as much in 2020. Juan Trippe of Pan American World Airways asked Patton to work on stock options. Patton eventually accounted for 10 percent of the firm's billings.

The Inequality Machine

McKinsey steered firms toward workforce reductions as the fastest way to cut costs and boost stock prices. Marshall Field's suffered McKinsey's Purge where nearly 1,200 jobs were eliminated. AT&T eliminated 11,000 jobs in the first six months after the 2017 tax cut. The firm also promoted offshoring, evaluating 28 low-wage countries for infrastructure and labor. Five U.S. companies outsourcing the most jobs to India were McKinsey clients including Ford Motor Company, American Express, Microsoft, General Electric, and Cisco.

Walmart employed 1.5 million Americans while paying an average annual salary of 17,500 dollars in 2005. Susan Chambers wrote a confidential memo to Walmart's board outlining how an associate with seven years of tenure cost nearly 55 percent more than a one-year associate without any difference in productivity. A task force aided by McKinsey designed strategies to manage soaring employee benefit costs.

A McKinsey-backed task force recommended specific operational changes:

• Increase the percentage of part-time workers to lower health-care enrollment
• Consider reducing overall investment in profit sharing and 401(k) programs
• Lower company-paid life insurance coverage
• Move employees to consumer-driven health plans
• Reframe the public debate by suggesting that Medicaid is everyone's problem rather than just Walmart's

3. State Consulting and Federal Conflicts

The firm uses initial pro bono consulting work for state governments to build credibility and learn operational details, later translating that inside knowledge into lucrative, paid consulting contracts.

Medicaid and State Contracts

By volunteering services without charging, you see how the firm bypasses typical vendor scrutiny and avoids initial skepticism. Once the state faces complex expansions or overhauls, such as privatizing Medicaid, McKinsey is uniquely positioned to secure sole-source or preferred paid contracts.

In Illinois in the mid-1990s, former McKinsey partner Gary MacDougal led a pro bono task force to reform welfare. Decades later, McKinsey returned to secure millions in paid contracts for privatizing Medicaid under state officials who knew the firm from its earlier pro bono work. The initial Illinois pro bono welfare study reviewed files for 365 families. The first year after the 1997 Illinois reorganization saw a 22 percent drop in the welfare caseload. In 2017, the state used McKinsey's help to enroll an additional 650,000 people in Medicaid.

McKinsey frequently secures massive state government contracts without competitive bidding and heavily redacts its proposals to prevent public and competitor scrutiny. State officials often award sole-source contracts to McKinsey by arguing that internal government employees lack the necessary expertise. When submitting bids, the firm utilizes extreme redactions, while contracts often feature secrecy clauses prohibiting either party from attributing information to the other.

In Missouri, McKinsey submitted a bid with dozens of entirely blacked-out pages, and the state later de-emphasized cost in its rating system to accommodate McKinsey's high price. Competitors like Navigant protested the lack of transparency. Illinois paid McKinsey $75 million during financial distress and guided the largest procurement in Illinois history totaling $63 billion paid to seven managed care companies. Missouri's contract cost $2.7 million, which was three times higher than the lowest bid, while the state lowered its cost-weighting percentage to 15 percent.

McKinsey maintains extensive financial relationships across the health insurance and managed care sectors while simultaneously advising government agencies that regulate those same industries. The firm generates hundreds of millions of dollars from managed care companies, health systems, and insurers. Because client lists are kept secret, government officials frequently award massive contracts without knowing McKinsey has deep financial ties to the very companies administering the programs.

In Illinois, four of the seven companies awarded parts of the $63 billion Medicaid contract were later acquired by McKinsey clients, and a fifth was McKinsey's landlord in Chicago. McKinsey recently billed managed care companies $200 million, Anthem $90 million since 2018, and Centene $50 million in 2018 and 2019. Private health insurers have directly funneled funds to state governments specifically to secure McKinsey's evaluation services, leading to massive downstream consulting windfalls. Blue Cross Blue Shield offered Arkansas a $1.5 million grant on the condition that it hire McKinsey to evaluate Medicaid, enabling McKinsey to turn that entry point into more than $100 million in state business without competitive bidding through an initial emergency sole-source contract of $3 million.

Federal Regulation and Contracting Abuses

McKinsey simultaneously collects hundreds of millions from pharmaceutical companies and substantial federal contracts from the FDA, creating structural conflicts of interest in drug regulation.

The firm actively recruits former regulatory officials and builds strategies for drugmakers to handle compliance issues and warning letters, while also advising the agency responsible for approving their products. McKinsey billed the FDA $11.6 million for advice on its approval process while simultaneously billing drugmaker Biogen nearly $10 million, later praising Biogen's controversial Alzheimer's drug Aduhelm and assisting with its product launch. During four years under Trump, McKinsey grabbed $77 million in FDA business and held total federal contracts with the FDA worth $130 million. Over a recent three-year period, McKinsey billed at least 19 drug companies and 3 distributors $400 million, while the cost of Aduhelm reached an estimated $56,000 per patient annually.

McKinsey released a highly controversial survey regarding the Affordable Care Act that clashed with independent research and served as a political weapon for opponents of the law. Without disclosing its deep commercial ties to health insurers, McKinsey published a projection that nearly one-third of employers would stop offering health coverage under the ACA. Democratic lawmakers, including House Ways and Means Committee members and Senator Max Baucus, fiercely pressured McKinsey managing partner Dominic Barton to release internal survey metrics after finding contradictions with CBO and RAND Corporation studies. Over a five-year period, McKinsey's healthcare practice conducted 2,500 engagements with systems, insurers, and government payers.

Federal contracting officers have improperly intervened to protect and inflate McKinsey's federal contracts, costing taxpayers tens of millions of dollars through unsupported pricing. When internal audits threatened McKinsey's pre-approved federal contracting vehicle, a GSA division director bypassed audit requirements, removed opposing contracting officers, and unilaterally awarded inflated contracts with unauthorized rate increases. A 2019 report by the GSA inspector general revealed that unjustified price increases and unsupported team-based pricing cost taxpayers an estimated $69 million before the director resigned, with parts of McKinsey's contract exceeding market prices by 193 percent.

During national crises like the COVID-19 pandemic, McKinsey rapidly produces corporate advisory content and secures massive government response contracts focused on business resilience and competitive strategy. The firm leverages crises to stay visible through high-volume position papers and corporate pep talks, securing millions in public consulting funds to advise local, state, and federal agencies on emergency response. Within months of the pandemic, McKinsey amassed over $100 million in government contracts, while high-level federal task forces advised by McKinsey consultants faced severe public criticism over procurement failures for personal protective equipment and ventilators during a crisis that caused 900,000 American deaths by March 2022.

The firm's pandemic response framework relies on distinct phases:

• resolve
• resilience
• return
• reimagination
• reform

4. Immigration Enforcement and Geopolitics

McKinsey advises government agencies on aggressive immigration enforcement and expands its footprint by consulting for Chinese state enterprises and the U.S. military.

ICE and Internal Dissent

McKinsey signed a 20 million dollar contract with ICE to optimize operations under project ERO 2.0. Internal documents and PowerPoint slides showed that consultants recommended speeding up hiring to meet executive orders and slashing operating expenses across private detention centers, which caused profound ethical crises among idealistic employees. McKinsey claimed ICE could achieve 385 million dollars in annual savings by cutting costs. ICE paid CoreCivic 157 million dollars annually to run the Dilley family detention center.

When project leader Richard Elder defended the work by stating that McKinsey did execution rather than policy, a young consultant challenged him by saying that logic could justify working for any despot, including the Nazis.

Prompted by news reports and internal slide decks, associate Scott Elfenbein sent a firm-wide email to about 1,200 colleagues demanding a public apology from McKinsey, a rejection of using legality as an ethical barometer, and a mechanism to return pay derived from ICE work. Hundreds of employees supported the protest.

Scott Elfenbein, inspired by his personal history with an undocumented childhood friend who was deported, sent the viral email after realizing McKinsey's work conflicted with his core values, ultimately leading him to resign in late 2021.

China Expansion and Defense

Following economic growth in the 1990s, McKinsey targeted local state-owned enterprises, known as zhongyang qiye, to secure new revenue streams. The firm advised companies involved in infrastructure, telecommunications, energy, and defense, transferring Western business practices and strategic frameworks that built up China's state sector. McKinsey advised 26 of the 96 central state-owned enterprises while China's GDP grew at a rate of 14.2 percent in 1992.

McKinsey advised China Communications Construction Company, whose subsidiary operated dredging vessels to transform reefs in the South China Sea into militarized artificial islands.

While advising Chinese state-owned companies that advanced Beijing's territorial and military ambitions, McKinsey simultaneously collected hundreds of millions of dollars from the U.S. Defense Department, advising branches like the U.S. Army and the Naval Surface Warfare Center on manufacturing and weapon affordability. In 2019, the U.S. Navy awarded McKinsey a 15.7 million dollar contract for an affordability campaign regarding the F-35 fighter, while the firm concurrently advised strategic Chinese state enterprises.

Managing partners like Dominic Barton publicly praised Beijing's trillion-dollar Belt and Road Initiative at key leadership forums, dismissing Western concerns about geopolitical expansion and debt traps. McKinsey also produced reports and economic feasibility studies for projects tied to the initiative in countries like Malaysia.

McKinsey consultants drafted a feasibility report for a massive Malaysian rail line connecting ports to major cities, explicitly noting in slides that the project would strengthen nation-to-nation ties with China. China Communications Construction won a 13 billion dollar contract to build Malaysia's railroad in 2016.

In September 2018, McKinsey's Greater China team held its annual retreat in Kashgar, featuring celebrations on sand dunes and historic city walls. The event drew intense criticism because it took place in a region where the Chinese government had established mass surveillance and detention camps for approximately one million ethnic Uyghur Muslims and other minorities.

A photograph from the Xinjiang retreat showing consultants celebrating on red carpets and riding camels appeared on the front page of The New York Times in December 2018.

5. Guarding the Gates of Hades: Tobacco and Vaping

Cigarette makers remained exceptionally attractive clients because mountains of cash, low production costs, and high product addictiveness generated massive profits. You find that McKinsey consultants conducted wall-to-wall operational studies, restructured research departments, optimized sales forces, and expanded merchandising programs.

McKinsey secretly advised major tobacco companies for decades to maintain their massive profits while hiding its involvement to protect the firm's reputation.

McKinsey traced its work with Philip Morris back to at least 1956 and later drafted a 38-page confidential memo in 1985 proposing how William Campbell could keep the company competitive. Philip Morris spent 80 million dollars on product displays and shelf space following McKinsey recommendations. McKinsey data showed that cigarette sales accounted for 40 percent of a typical store's profits.

Philip Morris, British American Tobacco, and Japan Tobacco International formed a secret mission to construct a code of conduct called Project Cerberus. McKinsey helped organize strategy sessions and recommended ways competitors could work toward a shared goal.

The Vaping Epidemic and Juul

Juul marketed its devices using lifestyle campaigns and sweet flavors, masking high nicotine content that made addiction nearly impossible to stop for teenagers. You observe that Juul transformed the e-cigarette industry in 2015 and achieved total sales of 1 billion dollars in 2018, leading to an estimated valuation of 38 billion dollars.

McKinsey provided sensitive consulting services to Juul, helping them navigate regulations and flavor strategies even as youth vaping surged.

Juul paid a charter school group $134,000 for a summer camp and offered other schools $10,000 for classroom access to talk to students. Data showed that 20 percent of children under 18 used e-cigarettes compared to less than 3 percent of adults.

Alfonso Pulido confirmed in a deposition that McKinsey helped prepare Juul's response to the FDA, while former executive Siddharth Breja alleged in a lawsuit that McKinsey research confirmed mint pods would sustain sales after other flavors were dropped. Juul paid McKinsey 15 million to 17 million dollars in less than two years of work.

McKinsey also won 11 million dollars in contracts from the FDA since 2009 for tobacco regulation advice while billing 30 million dollars to Altria alone in 2018 and 2019. Former FDA officials like Eric Lindblom and Dr. Lawrence Deyton stated they were startled and unaware that McKinsey was consulting for tobacco interests while advising the agency.

6. Turbocharging Opioid Sales and Legal Fallout

By deploying data-driven sales models to opioid manufacturers, McKinsey accelerated the opioid epidemic before facing massive legal settlements and destruction of records.

Opioid Sales Strategy

Martin Elling authored a 2002 McKinsey thought piece criticizing Big Pharma's sales force management, which caught the attention of Purdue Pharma and led to an 83.7 million dollar consulting contract. McKinsey published an article written by Martin Elling that admonished drug companies for relying on a sales model where representatives bounced randomly between doctors. To fix this equal pay for unequal performance problem, McKinsey proposed matching prescription databases with producer and physician records to target doctors most likely to prescribe more drugs over time.

When regulatory scrutiny tightened and retailers began limiting opioid distribution, McKinsey recommended aggressive strategies to keep the pipeline flowing. This included targeting high-abuse-risk patients, shifting physicians toward stronger formulations, lobbying drugstore chains to loosen restrictions, and creating alternative mail-order delivery systems. Purdue Pharma adopted McKinsey's recommendations to turbocharge its sales engine, utilizing micro-market analysis to identify growth pockets like Fort Wayne, Indiana, where a single doctor wrote 64,000 controlled substance prescriptions in two years.

Legal Fallout and Cover-up

While consulting for opioid manufacturers like Purdue Pharma and Johnson and Johnson, McKinsey simultaneously secured numerous lucrative contracts with the Food and Drug Administration to design internal operating models and track systems, raising concerns among lawmakers about regulatory capture and oversight failures. A bipartisan group of six senators sent a letter to the FDA questioning at least seventeen contracts awarded to McKinsey between 2008 and 2021 worth over 48 million dollars.

When government scrutiny intensified around the opioid epidemic and the consulting firm's role in boosting sales, senior partners discussed purging documentation to ensure the firm could not be implicated if subpoenaed. In July 2018, McKinsey senior partner Martin Elling emailed colleague Arnab Ghatak suggesting a quick conversation with the risk committee to evaluate eliminating all documents and emails before investigators turned their attention to the firm.

McKinsey agreed to pay more than 600 million dollars to settle government investigations without admitting wrongdoing, while Purdue Pharma agreed to an 8 billion dollar bankruptcy settlement and the Sackler family agreed to pay 4.5 billion dollars.

7. Climate Stance and Fossil Fuel Consulting

McKinsey heavily markets itself as a dedicated champion of environmental sustainability and climate action to attract top talent and maintain corporate prestige. The firm deploys internal green teams, calculates its own travel-related carbon footprint, purchases offsets, and floods the market with dozens of urgent reports warning that climate change will have impacts as severe as weapons of mass destruction. Between August 2019 and August 2020, McKinsey published at least fifty-six reports or emails addressing climate change, including titles like Earth to CEO and Sustainability Under the Sea.

While publicly marketing itself as an environmental champion, McKinsey generates hundreds of millions by optimizing extraction processes for the world's largest polluters.

Internal records show that since 2010, McKinsey has consulted for at least forty-three of the top one hundred industrial polluters responsible for massive global greenhouse gas emissions. Chevron generated at least $50 million in consulting fees for McKinsey in 2019 alone, while Saudi Aramco has been a client since at least the 1970s. Rather than forcing polluters to transition, McKinsey often actively optimizes their extraction processes, making fossil fuel and coal companies more profitable and efficient. The firm implements digital roadmaps, drill-and-blast strategies, and coal processing optimizations that extend the operational viability of carbon-heavy assets. An internal promotional video titled Turning a coal mine into a diamond celebrated a McKinsey project that boosted coal production by 26 percent.

Public Stance vs Private Operations

Senior McKinsey leaders seamlessly transition between top firm management and leadership roles within heavy-polluting mining and energy corporations. Dominic Barton, the former global managing partner of McKinsey who frequently touted the firm's green credentials, immediately became the chairman of a major North American metallurgical coal producer upon stepping down from McKinsey. In 2019, after Dominic Barton took the helm as chairman, Teck Resources paid McKinsey about $20 million in consulting fees. Conscientious junior consultants experience severe cognitive dissonance between McKinsey's public ethics and its amoral client selection, often leading to departure or firing when they speak out. Employees who object to fossil fuel assignments or question leadership during corporate values events face reduced career advancement and are eventually counseled to leave. Erik Edstrom, a military veteran and environmental management graduate, sent a scathing farewell email labeling McKinsey an amoral institution before leaving the firm.

Internal Dissent and Executive Defense

Rank-and-file consultants increasingly organize collective resistance, petitioning leadership to align all client work with strict net-zero carbon pathways and demand complete emissions transparency. More than eleven hundred McKinsey employees signed an open letter in 2021 demanding that the firm take responsibility for client emissions and drop non-compliant polluters. McKinsey's executive leadership officially defends its consulting work for heavy polluters by arguing that engagement is necessary to achieve any meaningful transition. Managing partner Bob Sternfels and other senior executives maintained that abandoning polluting companies does not advance global climate goals and that companies cannot transform without getting dirty. Bob Sternfels published a rebuttal in The Wall Street Journal asserting that abandoning those contributing the most to emissions does not advance the cause.

8. Banking, Insurance, and Financial Engineering

McKinsey introduced matrix management and credit securitization to the financial sector while helping insurance companies systematically minimize claim payouts.

Banking and Securitization

In 1967, Citibank hired McKinsey via Peter Drucker's recommendation to reorganize around business sectors rather than geography. This matrix structure was subsequently adopted by other institutions like Continental Illinois and Chase, encouraging aggressive lending and rapid growth that ignored underlying risks. Roger Anderson earned the highest-paid U.S. banker salary in 1980 at 710000 dollars, while Morgan Stanley CEO James P. Gorman and Goldman Sachs CEO David Solomon earned 35 million dollars in 2021.

At Continental Illinois, McKinsey's matrix empowered loan officer John Lytle to oversee massive energy portfolios and partner with the risky Penn Square Bank, culminating in Continental's historic near-collapse and bailout.

Lowell Bryan and McKinsey championed the financial technology of credit securitization, arguing it would free banks from balance sheet constraints by bundling and selling loans to third-party investors. The stock of securitized loans grew from 100 million dollars in 1980 to 1 trillion dollars by 1992, with 27 trillion dollars amount securitized between 2001 and 2008.

Former McKinsey consultant Jeffrey K. Skilling applied these securitization concepts while transforming Enron into an energy trading company before its dramatic bankruptcy.

Insurance Claims Redesign

McKinsey devised a Claims Core Process Redesign strategy to settle 90 percent of claims quickly and cheaply while applying aggressive tactics to the remaining 10 percent of claimants who resisted low offers or hired lawyers. Judge Manners ordered Allstate to pay a 25000 dollars daily fine for refusing to turn over McKinsey slides, contributing to 7 million dollars in total fines accumulated for withholding documents. From 1995 to 2018, an estimated 94 billion dollars transferred from Allstate policyholders to company coffers.

Dale Deer and Jason Aldridge faced severe financial and legal distress when Allstate adjusters delayed or refused standard payouts, prompting protracted litigation.

You can follow Allstate practices designed by McKinsey:

• Settle 90 percent of claims quickly and cheaply using computerized claims systems.
• Apply the boxing gloves treatment to contest claims and wear down claimants or opposing counsel who reject low offers.
• Use scripts to discourage claimants from hiring attorneys by emphasizing attorney fee deductions.

Mark Romano discovered that adjusters were overriding medical diagnoses to lower payouts, leading him to experience severe stress and eventually join consumer advocacy groups. Combined estimated extraction from policyholders across Allstate, State Farm, and other adopting insurers reached 374 billion dollars.

9. Enron, Sports Analytics, and Gambling

Consulting philosophies prioritizing results above all else fostered corporate fraud at Enron, data-driven cheating in baseball, and aggressive expansion in sports gambling.

Enron and Corporate Culture

Columnist Paul Krugman described McKinsey's role at Enron as putting business gurus in charge, creating a company so trendy that investors were dazzled and executives could get away with financial murder. Jeffrey Skilling moved from McKinsey to Enron, inventing the gas bank and spreading McKinsey management philosophies before the company collapsed into the biggest bankruptcy in U.S. history. Enron's Houston office pulled in $10 million in annual fees for McKinsey. The McKinsey Quarterly praised Enron's successes 127 times over a six-year period.

Jeffrey Skilling imported McKinsey's "up or out" philosophy into Enron, renaming it "rank and yank," which validated extreme risk-taking, deal structuring, and financial engineering over operational competence. Enron utilized special purpose vehicles like Cactus and JEDI, engineered by Andrew Fastow, to remove debt from balance sheets and inflate profits. Enron bundled $900 million in loans into a special purpose vehicle called Cactus. Enron's naming rights for the Houston Astros stadium cost $100 million, and Enron stock reached an all-time high of $90.56.

You can apply corporate oversight principles by following this rule:

• Periodically cull the workforce by requiring employees to either advance or leave.

Sports Analytics and Gambling

Former McKinsey consultant Jeff Luhnow was hired as general manager of the Houston Astros to install an aggressive, data-driven system, which eventually fostered an environment where staff utilized illegal electronic sign-stealing. The Houston Astros achieved 101 wins in their 2017 season. The Houston Astros used live video to decode opposing catchers' signs and communicated them to batters by banging on a trash can during the 2017 and 2018 seasons, leading to major suspensions.

Major League Baseball commissioner Rob Manfred commissioned McKinsey to conduct a full-scale review of league structure, leading to structural changes and the elimination of dozens of minor-league teams. Attendance at major-league games fell in six of the last seven pre-COVID years. McKinsey's subsidiary QuantumBlack collected granular biometric and medical data to forecast non-impact muscle injuries, raising ethical questions about whether team medical data serves owners or players. QuantumBlack correctly forecasted 170 out of 184 non-impact muscle injuries in blind historical testing. QuantumBlack took saliva samples and evaluated injury metrics for sports teams, while McKinsey consultants secretly used medical information to predict lower-body injuries during New York Knicks practices.

You can assess athletic performance and operational risks by applying these practices:

• Assess the health of players and identify physical metrics signaling impending injuries using objective medical markers and prior injury data.
• Measure asymmetries in players' bodies to anticipate breakdowns rather than reacting after they happen.
• Monitor opposing teams using video equipment and camera crews to log signs and tactical information from dugouts.

McKinsey capitalized on the popularity of analytics by advising major sports leagues, casinos, and sports books, implementing loyalty programs and incentive structures to induce customers to wager more. McKinsey advised William Hill and Caesars Entertainment, earning tens of millions of dollars while helping them expand mobile betting operations and player loyalty programs. William Hill paid McKinsey $40 million, Caesars Entertainment paid McKinsey $14 million, and attendants could offer players a cash amount of $50 when they were about to walk away.

You can manage high-value clients and casino patrons by executing these steps:

• Use frontline empowerment to allow attendants to offer players cash bonuses when they are about to walk away.
• Provide high-value customers with show tickets and room upgrades while offering low-value customers free airport rides.

10. South Africa State Capture and Saudi Expansion

McKinsey became entangled in corruption scandals in South Africa and embedded itself within the Saudi state, where social media sentiment analysis was weaponized against dissidents.

South Africa Debacle

McKinsey expanded heavily into government consulting in South Africa after apartheid ended, despite the heightened risks of working with an untested legal system and fragile democratic institutions. McKinsey began advising Transnet in 2005, partnering first with Letsema and later with Regiments Capital, which was linked to the politically influential Gupta family and allegedly used as a front for corrupt activities. Chasing massive potential payouts, McKinsey entered into highly controversial, high-risk contracts with South Africa's failing state-owned power company, Eskom. Internal McKinsey calculations estimated the potential value of the Eskom contract at more than 700 million dollars, prompting a sharp divide between partners who saw it as fool's gold and those blinded by the mammoth payout. McKinsey's inadequate due diligence and cover-ups regarding its subcontractor Trillian triggered severe legal scrutiny under anti-corruption laws and independent investigations. Advocate Geoff Budlender led an independent investigation and trapped McKinsey by producing a letter signed by Vikas Sagar that directly contradicted McKinsey's written denials of working alongside Trillian, leaving McKinsey eventually on the hook for 100 million dollars in total refunds.

Serving the Saudi State

McKinsey built a massive consulting operation in Saudi Arabia by hedging between advising state oil giant Aramco and helping the absolute monarchy plan its economic transition away from oil. From only 2 jobs in Saudi Arabia in 2010, McKinsey scaled up to 47 projects the following year, reaching 137 projects by 2016. Breaking with decades of tradition, McKinsey bought a well-connected local consulting firm in Saudi Arabia to act essentially as a temp agency for government ministries. McKinsey announced its purchase of Elixir on April 1, 2017, adding roughly 140 people and increasing its regional staff by almost 50 percent. McKinsey's social media sentiment analysis reports on public reactions to austerity measures were weaponized by the Saudi regime to target and silence political dissidents. A nine-page McKinsey report titled 'Austerity Measures in Saudi Arabia' specifically highlighted YouTube star Omar Abdulaziz for his negative tweets about austerity, preceding a wave of state harassment, phone hacking, and the arrest of his brothers.

1. Demand full transparency when public agencies hire private management consultants for critical social services and regulatory oversight.
2. Scrutinize corporate restructurings for hidden risks to worker safety, product quality, and long-term infrastructure maintenance.
3. Reject the premise that financial metrics and efficiency gains should supersede ethical considerations and public welfare.
4. Advocate for strict legal liability and public disclosure requirements for consultants who advise both government regulators and regulated monopolies.

10 Key Ideas

1. Management consultants protect themselves from legal and public accountability by framing their work strictly as advisory, allowing the firm to avoid lawsuits or regulatory punishment when its recommendations lead to disaster.
2. McKinsey recruits idealistic graduates with promises of prestige and societal impact while propagating executive compensation inflation and mass corporate layoffs.
3. The firm uses initial pro bono consulting work for state governments to build credibility and learn operational details, later translating that inside knowledge into lucrative, paid consulting contracts.
4. McKinsey advises government agencies on aggressive immigration enforcement and expands its footprint by consulting for Chinese state enterprises and the U.S. military.
5. McKinsey secretly advised major tobacco companies for decades to maintain their massive profits while hiding its involvement to protect the firm's reputation.
6. By deploying data-driven sales models to opioid manufacturers, McKinsey accelerated the opioid epidemic before facing massive legal settlements and destruction of records.
7. While publicly marketing itself as an environmental champion, McKinsey generates hundreds of millions by optimizing extraction processes for the world's largest polluters.
8. McKinsey introduced matrix management and credit securitization to the financial sector while helping insurance companies systematically minimize claim payouts.
9. Consulting philosophies prioritizing results above all else fostered corporate fraud at Enron, data-driven cheating in baseball, and aggressive expansion in sports gambling.
10. McKinsey became entangled in corruption scandals in South Africa and embedded itself within the Saudi state, where social media sentiment analysis was weaponized against dissidents.