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Jonathan Andrew Wolter

Archive for the ‘economics’ Category

The Management Myth: Management Consulting Past, Present & Largely BogusThe Management Myth: Management Consulting Past, Present & Largely Bogus – Book Review

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Reading time: 5 – 8 minutes

The Management Myth: Management Consulting Past, Present & Largely BogusThe Management Myth: Management Consulting Past, Present & Largely Bogus by Matthew Stewart

My rating: 5 of 5 stars

A highly entertaining read where Matthew Stewart dismantles the Management Consulting industry. For you with experience in consulting, parts of this are hilarious as Stewart chronicles both the imploding of the consultancy he helped create, and the overall history of the industry.

One by one, he tears apart Fredrick Taylor (the father of “scientific management”), Elton Mayo (of the “famous” Hawthorn Effect), Management Consultants, Strategy (as a science), popular Management Gurus, and offers a harsh critique of MBA’s in general. His main premises is that “Management” is not a profession on the level with Medicine or Law, however management education through business schools have attempted to professionalize it. And to that end, they have manufactured “science” (in a very non-rigorous and untestable sense), truisms, frameworks, and case studies.

Here are a few highlights. I didn’t agree with all that he had to say, but I did enjoy reading it. I was laughing out loud towards the end as he details how his fellow partners are embroiled in litigation with him as he tries to sever all ties. Stewart is genuinely funny, giving characters nicknames such as “The Prince of Darkness”, “The Troll,” “Dr. Bob” the corporate shrink, and others.

As for management consultants, he had less-than-flattering quotes:

“[C]onsultants often serve not to provide new knowledge to their clients but merely to communicate ideas already formed. In many instances, our work amounted to harnessing work performed in one part of an organization and then packaging it all as our own work for the benefit of another part of the same organization.”

I can’t speak for all organizations, but I am extraordinarily fortunate to say at ThoughtWorks (my employer) this has never been my case. We are not a traditional management consulting McKinsey style strategy consulting firm, true. However, we do have consulting projects, some the strategic management consulting types. I’ve seen us bring our outside expertise and influence and avoid acting solely as grease in the wheels. Becoming grease may let others bill lots of money, but isn’t very intellectually fulfilling.

Even better, if you have worked in a traditional pyramid style company, (of which ThoughtWorks is very, very, very, very much not) he has this gem to explain it:

“It’s like being stuck in a dungeon with a bunch of rats and a giant block of cheese. All the rats keep climbing the cheese, two years at level one, two years at level two. The threes shit on the twos and the twos shit on the ones, and everyone shits all the time on the rats at the bottom. All they care about is rat-face-time. As in, please-sir-would-you-stick-your-rodent-butt-closer-to-my-face time. You keep going up until one of the other rats bites your ass off.”

Up or out. Several friends of mine elsewhere have shared this is a fairly accurate description.

Strategy. He also tears apart Porter and his Five Forces [3]. Stewart claims all business strategists describe strategy in hindsight (not so useful if you want to implement “strategy” for, you know… the future). I have a little bit of a hard time accepting that all of modern strategy is hogwash, as instead I think while bounded in utility, different frameworks help one to position a problem and look for solutions in diverse ways.

Due to business schools’ roots in Taylor, Mayo and others that he sequentially defuses of all credibility, the author also suggests that the fundamental underpinning of MBA’s are shaky. The academic and scientific rigor is weak, and the content is easily grasped by otherwise intelligent people.

“After 100 years of fruitless attempts to produce such a discipline, it should be clear that [Business Management] does not exist. preparing managers to manage, in fact, is not different from preparing people to live in a civilized world. Managers to not need to be trained; they need to be educated. And for that purpose, although a certain amount of study of business-related subjects may prove useful, the business schools as they are presently constituted are at best superfluous.”

A jaded view? Yes. But also very fun. The best parts is the parallel narrative that progresses through the book about his firm. I don’t want to spoil much, but it is especially fun when his firm’s acquiring company’s CEO steps down because he wishes to promote full time his beliefs in UFO’s and alien-human technology transfer. Serious. [4] This guy had a crazy consulting journey, and has a great style of writing about it.

If you are interested in this book, first read his article on The Atlantic [1], which gives you a taste of the content here. Second, check out the WSJ book review [2], by Philip Broughton, author of a similar book that I recently reviewed. Also check out the New Yorker’s review [5].

[1] http://www.theatlantic.com/magazine/arch…
[2] http://online.wsj.com/article/SB10001424…
[3] Michael Porter, of Harvard. Father of the 5 Forces, which are: (1) the bargaining power of suppliers, (2) the bargaining power of buyers, (3) the rivalry among existing firms, (4) the threat of new entrants, and (5) the threat of substitute products. Extremely influential, he also advocated all strategy aims for a single, measurable goal: excess profits. (Unsurprisingly, Stewart takes criticism of this).
[4] http://articles.sfgate.com/1999-01-09/ne…
[5] http://www.newyorker.com/arts/cri…

And, please share with me your comments.

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Written by Jonathan

October 31st, 2010 at 5:03 am

No-Nonsense Guide to International Development – Book Review

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Reading time: 3 – 4 minutes

No-nonsense Guide to International Development (No-Nonsense Guides)No-nonsense Guide to International Development by Maggie Black

My rating: 4 of 5 stars

A fast read about international development’s history and future. The statistics are staggering. “10 million people a year are displaced due the construction of dams and urban transportation systems. Compare to 12 million annually with wars and other ‘disasters’.” I enjoyed this book, read it in about a week, and recommend it as an introductory text. It discredits the historical Marshall Plan style of development, which attempted to funnel infrastructure investment in a massive global scale. Post-WW2 Europe developed so quickly because of an educated cadre waiting to run it, eager human capital, and an abundant educated workforce. This is not present in the poorest of developing nations. Maggie Black cites an epic failure of mechanizing agriculture in Tanzania, Uganda, and Zambia when tractors suffered from rapid breakdowns, no spare parts, misuse for private purposes, and endless other problems. (Great life lesson: you have to meet people where they are, rather than where your biases initially lead you).

Black covers aid with its many failures, some successes such as smallpox eradication, but overall underwhelming performance in ending poverty. She summarizes aid as generally ineffective: “the machinery of official aid is not designed to address the poverty of people, but the state of nations.” Next she moves to the World Bank/IMF and their program of “structural adjustments,” and the “Washington consensus.” Both were macroeconomic agendas pushing prudent fiscal and monetary policies, inflation control, and free markets. Seemingly wise ideas, but which often resulted in great challenges for the debtor nations: cut services and subsidized foreign commodities competition, and lost local jobs.

- Today a third of the world’s population – about 2 billion people – still remain outside the modern economy or survive at the edges.
- Circa 2007, two thirds of Indians are still involved in agriculture; in China she claims it is 44%.
- In 1960 the income gap between the fifth of the world population in the richest countries and the fifth in the poorest was 30 to one; by 1997 it was 74 to one.
- As of 2004, 1.1 billion people were without a supply of safe water, and 2.6 billion without a proper means of sanitation. And don’t think just digging wells or creating a water utility will solve this.

What is her summary? “Less effort should be put into grand international initiatives – ‘Marshall Plans for Africa’ and achieving the Millennium Development Goals – and more into making things work on the ground.” She goes into detail of successes where local scale efforts have still been able to assist millions of people. These, she posits are the keys to future success in international development, as opposed to the “bigger picture, more western perspective” of macro-economic adjustments.

The book is interesting in the treatment of details, and in the journey it takes the reader on.

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Written by Jonathan

October 20th, 2010 at 1:13 pm

Obsess About Your Time – 3 Economics Books

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Reading time: 3 – 4 minutes

Podcasts are to real-unabridged-books as a raindrop is to a punch in the face. It takes a team of dozens of people to write a really awesome book. And I find them more satisfying and thought provoking than several short podcasts.

There is nothing so precious as your time. I am only more convinced of this every day.

In the last 3 weeks, I listened to:

  • Confessions of an Economic Hitman – even though I don’t agree with his conclusions, it is an excellent memoir. It was personally thought provoking to listen to a man’s entire career life unfold in 5 days on my work commute. Takeaway: life can be very exciting, and some people are very powerful. Move faster, driving for results.
  • Banker to the Poor – fantastic book. If you don’t know about microfinance, this is your introductory course. Imagine in your mind what the marriage of finance and social justice would look like. I read it with friends–which led to great conversation–and scheduled a tentative meeting with the great folks at Kiva.org for my friend with an NGO in India.
  • Travels of a T-Shirt in a Global Economy – So far it’s entertaining. It is a story telling format asking “where did your T-Shirt come from?” And the government-subsidy-enabled-irony of the cotton planted in Texas, woven and sewn in China, and imported back to Florida.

To effective time.

UPDATE (10/26): Listening to more of the last book tonight. Around the 3h 30min mark, I learn the key driver our present industrial economy: the Spinning Jenny. This was a big deal. One person used to have one spinner to make the yarn. In 1764 they suddenly had eight spinners: a tremendous productivity boost in an under supplied marketplace. By 1800, spinning jenny’s had 80 spinners. And by the 1830’s the price was 1/20th of the 1700’s price.

This breakthrough –mechanized yarn production– propelled the world into the industrial age, and brought consumers into expecting constantly improving technology and quality of life. To me the parallels of present day high tech are remarkable, and the “so what” factor noteworthy.

Two “so what” takeaways:

  1. The invention of the spinning jenny came because of great bottlenecks in yarn production. In the 1760’s mostly farmers produced cotton yarn, and this was a cottage industry. When harvest time came the families were far too busy harvesting, and weavers had a great difficulties buying yarn. Often they had to walk six miles each day to gather up enough material for that same day’s weaving. This bottleneck –as all bottlenecks– created a great pressure. A pressure that burst forth in invention, and technological revolution.
  2. In the face of such bottlenecks, Britain sanctioned a contest of which the spinning jenny was an entrant. An example from the past of how using prizes compelled innovation. See the X Prize Foundation for present day contests in medicine, automotive, education, or (Google’s just announced) Lunar X Prize.

Written by Jonathan

October 23rd, 2007 at 3:03 am