How McKinsey Lies to Clients By Producing Deliberately Inaccurate and Corrupt Forecasts
Executive Summary
- McKinsey is one of the most powerful consulting companies globally and is instrumental in getting governments to privatize infrastructure to corrupt private entities.
Introduction
McKinsey is critical in providing authoritative but financially biased and corrupt advice, which is always about promoting privatization and to enrich McKinsey and entities connected to McKinsey. McKinsey and similar law firms bill enormous sums of money to governments for fraudulent advice. This quotation is a good example. This included a critical report by PriceWaterhouseCoopers, which was unreliable and wildly inaccurate.
“As the partnership [Metronet] was being put together, PWC predicted that the private sector could extract savings of up to 30 per cent, a figure that informed the entire project. But the consultancy published no adequate evidential basis for that figure. McKinsey published a 2007 report which claimed that the private sector could provide over half of the $30 billion investment needed to develop healthcare in Africa over the next 10 years. This was used to justify IFIs and donors financing private equity funds, rather than public sector healthcare, but by 2012 it had resulted in almost no private finance at all.” – Why PPPs Don’t Not Work
McKinsey is part of a complex of corrupt consulting firms that produce deliberately false forecasts to promote PPP projects, explained in the following quotation.
“A global study found that in 90 per cent of road and rail projects, the actual costs end up much higher than forecast in the original bids, and actual demand is lower than forecast. The error is always in the same direction, so it cannot be the result of chance – it can only be the result of systematic misrepresentation – i.e., lying. The authors concluded, “The problem of misinformation is an issue of power and profit and must be dealt with as such, using the mechanisms of transparency and accountability. Road traffic forecasts for toll road PPPs are systematically exaggerated everywhere. In Australia, every toll road constructed since 2005 has had less traffic and less toll revenue than the forecasts. In Central and Eastern Europe the experience has been the same. ” – Why PPPs Don’t Not Work. The constant feature of McKinsey is that they use consultants that are both dishonest and that do not have the experience in public works or infrastructure projects, outside of having falsified numbers on previous advisory projects. A good example of how everything McKinsey touches turns to waste is found in the following quote. “FDR, however, actually built things, whereas Obama’s stimulus money for, say, California’s high-speed rail, evaporated into a cloud of consultants. (A particularly mean joke was that FDR won WWII in less time than it took Obama to build Obamacare web sites that didn’t work.) When I was a Senate staffer, one of the worst pieces of legislation I worked on was called PROMESA. It was June of 2016, and Puerto Rico was having trouble paying back $70B+ of its state debt. There are no bankruptcy provisions for U.S. territories, so Congress stepped in and appointed a control board of bankers and technocrats to govern the island, the idea being that the democratically elected government had been fiscally reckless, and the Federal government should step in.
The control board hired McKinsey, the management consulting firm, as the island’s ‘strategic consultant,’ with the goal of getting Puerto Rico back to fiscal solvency. A little over a year after Congress passed PROMESA, hurricane Maria hit. Puerto Rico’s water, health and electric systems were weak, which the hurricane exposed by ripping through the island’s physical plant.
For the last five years, McKinsey has detailed highly paid consultants to help the control board both renegotiate debt and oversee infrastructure spending. Has the rebuild gone well? In short, no. The unelected control board has allowed the awarding of electric grid contracts to corrupt insiders, so power outages are still common. Mass protests forced the governor’s resignation in 2019. And schools are closing even as the government continues to pay government salaries to people who don’t work for the government.
So what has McKinsey been doing, if it hasn’t been running Puerto Rico? The answer is, McKinsey has been looking out for McKinsey. It has ensured that Puerto Rico will spend the mind-bogglingly large sum of $1.5 billion on professional services, meaning lawyers, bankers, and consultants (including McKinsey), which is five times what Detroit paid in services for its bankruptcy. McKinsey structured France’s terrible coronavirus response, and that of New York state. McKinsey is so brazen that it was caught by the GSA Inspector General for cheating the government out of $65 million. It didn’t seem to matter. In 2019, McKinsey worked for more than 15 federal agencies and departments, and 25 states. This broad range of clients gives McKinsey a cartel-like relationships with the circle of law firms, investment banks, and fellow professional services firms involved in bankruptcies, infrastructure spending, and other specialized institutional work.” – Matt Stoller
McKinsey’s Fake Forecasts
A primary strategy of McKinsey is to produce fake forecasts. McKinsey figures out what their clients want to hear and then present a fake forecast that has nothing behind it. This is explained in their forecast to CNN, who they were advising on their rollout of CNN + an all-streaming service.
The point is that these forecasts are not inaccurate based upon McKinsey producing a forecast based upon anything real, and McKinsey relies on its brand to have forecasts accepted.
No Measurement of Forecast Error
No one seems to ever measure McKinsey’s forecast error. However, they routinely product highly inaccurate forecasts.
Amazingly, McKinsey positions itself as an expert in forecasting. Here is a quote from an article on forecasting on their website.
Are we measuring effectiveness at a fine-grained level? Once the forecast incorporates a range of internal and external inputs, CFOs can test the accuracy of each input, as well as the accuracy of aggregate estimates. By monitoring detailed measures, such as labor productivity, on-time delivery, and other metrics associated with costs and revenues, business leaders will be able to spot the “softer” KPIs that are being overlooked in light of temporarily strong bottom-line performance. They can then react accordingly. – McKinsey
The question that should be asked is whether McKinsey’s forecast accuracy is measured at all — which apparently isn’t as people keep hiring McKinsey.
Source: Matt Stoller
https://mattstoller.substack.com/p/keep-mckinsey-away-from-bidens-infrastructure