Why is everyone a consultant?

Summary

This video script delves into the explosive growth of the consulting industry, questioning its value and ethics. It traces the industry's origins to the 1870s, highlighting the shift from expert engineers to business school graduates. The script criticizes the industry's reliance on vague management advice, exemplified by Frederick Taylor's 'Scientific Management.' It also discusses the impact of regulatory changes, cost accounting, and the influence of neoliberal policies on the industry's expansion. The video promises to uncover consulting firms' involvement in scandals, from Enron to the opioid crisis, and their role in perpetuating societal issues through unsustainable practices.

Takeaways

• 📈 The consulting industry has grown over 900% in the last 25 years, outpacing the global economy's growth of 218%.
• 🎓 Consultants are often not real experts but recent university graduates skilled in presentation tools like PowerPoint.
• 🔍 The speaker, a former consultant, delves into the industry's history and criticizes its practices, calling it a 'scam'.
• 👨‍💼 The origin of consulting can be traced back to the 1870s with expert engineers advising on industrial advancements.
• 📚 Frederick Taylor's 'Scientific Management' principles popularized management consulting by advocating for efficient, standardized work processes.
• 🏛️ Post-war capitalism, especially the policies of Margaret Thatcher and Ronald Reagan, fueled the consulting industry's expansion.
• 🌐 Globalization and financialization in the neoliberal era led to a surge in demand for consulting services.
• 🏢 The 'big six' accounting firms transformed into the 'big four', with Enron's collapse contributing to Arthur Anderson's fall.
• 💸 Executive compensation is often tied to stock prices, incentivizing short-term gains over long-term sustainability.
• ♻️ Consulting firms are criticized for recycling the same advice and PowerPoint slides across different clients.

Q & A

What is the growth rate of the consulting industry compared to the global economy over the last 25 years?

The consulting industry has grown by over 900% in the last 25 years, while the global economy only grew by around 218% in the same period.

What does the author claim about consultants in the video?

The author claims that consultants are not real experts but are usually recent university graduates who are good at PowerPoint and other presentation tools.

What is the historical origin of the consulting profession as discussed in the video?

The consulting profession originated in the 1870s during the Second Industrial Revolution, when companies like General Electric and Standard Oil started to employ expert engineers on short-term contracts.

Who is Frederick Taylor and what is his contribution to the consulting industry?

Frederick Taylor is known for publishing the essay 'The Principles of Scientific Management' in 1911, which promoted the idea of standardizing work processes and efficiency, influencing the manufacturing industry and the rise of management consulting.

What is the significance of the rise of cost accounting in the consulting industry?

The rise of cost accounting led to a form of managerial accounting that tracked and analyzed the cost of producing goods or services, helping companies manage expenses and increase profitability, which contributed to the growth of the consulting industry.

How did post-war capitalism shape the consulting industry?

Post-war capitalism led to an increase in the hiring of management consultants by the US government, the globalization of markets, and the merging and remerging of accounting firms, which contributed to the growth of the consulting industry.

What is the role of neoliberalism in the expansion of the consulting industry?

Neoliberalism, with its focus on deregulation, lowering trade barriers, and reducing state influence, created an environment where the private sector, including consulting firms, could expand, leading to an increase in government spending on management consulting.

Why did the consulting industry grow significantly during the era of Margaret Thatcher and Ronald Reagan?

The consulting industry grew significantly during the era of Margaret Thatcher and Ronald Reagan due to their neoliberal policies that favored market-oriented reforms, deregulation, and reduced state expenditure, leading to increased reliance on private sector consulting services.

What is the connection between the Enron scandal and the consulting industry?

The Enron scandal is connected to the consulting industry because Enron's CEO, Jeff Skilling, was a former consultant at McKinsey, and the company used creative accounting and aggressive business practices, which led to its collapse and implicated McKinsey in the scandal.

How does the consulting industry's focus on increasing stock prices relate to executive compensation?

The consulting industry often advises on strategies to increase stock prices, which is tied to executive compensation through performance-based bonuses like cash, shares, or stock options, incentivizing short-term gains over long-term investments.