Duff McDonald > Quotes

“A transformational relationship is where we transform their money into our money.”
― Duff McDonald, The Firm

“Enron followed the unwise practice of paying bonuses based on forecasted profits, not actual cash flows, a system that posed a problem remarkably similar to the R&D issues Gluck and his colleagues had solved at Northern Electric years earlier. In short: You can forecast anything. Delivering actual results is a different story. The emphasis on forecasts also neutralized Enron’s so-called risk-management group, which became a shrinking violet in the face of ever more outrageous estimates.”
― Duff McDonald, The Firm

“What have they fixed?” asked former McKinsey consultant Michael Lanning. “What have they changed? Did they take any voice in the way banking has evolved in the past thirty years? They did study after study at GM, and that place needed the most radical kind of change you can imagine. The place was dead, and it was just going to take a long time for the body to die unless they changed how they operated. McKinsey was in there with huge teams, charging huge fees, for several decades. And look where GM came out.”13 In the end, all the GM work did was provide a revenue stream to enrich a group of McKinsey partners, especially those working with the automaker. The last time McKinsey was influential at Apple Computer was when John Sculley was there, and that’s because he’d had a brand-marketing heritage from Pepsi. And Sculley was a disaster. Did McKinsey do anything to help the great companies of today become what they are? Amazon, Microsoft, Google? In short, no.”
― Duff McDonald, The Firm

“Hiring McKinsey was a sign of affluence.”
― Duff McDonald, The Firm

“Smart clients say that the best way to use McKinsey is not to let them insinuate themselves—to prohibit walking the halls of the client’s offices looking for new business. Jamie Dimon of JPMorgan Chase, for example, will hire McKinsey, but for one-off projects in which the entire body of knowledge generated is transferred to JPMorgan Chase at the end of the project. The firm’s operating committee has to approve any consulting engagement, and the JPMorgan Chase executives don’t take just any consultants; they pick and choose the specific people they want on the project.”
― Duff McDonald, The Firm

“Any chief executive who hires a consultant to give them strategy should be fired.”
― Duff McDonald, The Firm

“Gulf War, BusinessWeek advised readers to skip the book and read the McKinsey Quarterly article by Bose and Sharman instead. The shift to a knowledge culture that had begun”
― Duff McDonald, The Firm

“Nothing happens in Germany without McKinsey being consulted first.”
― Duff McDonald, The Firm

“As in the Jazz Age,” writes Ron Chernow in The House of Morgan, “much of the era’s financial prestidigitation seemed premised on an unspoken assumption of perpetual prosperity, an end to cyclical economic fluctuations, and a curious faith in the Federal Reserve Board’s ability to avert disaster.”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“Run your business knowing it might be sunny, it might be stormy, or in fact it might be a hurricane,” he said. “And be honest about how bad a hurricane might be.” The goal was not only to earn high returns at the top of the cycle but also to avoid giving them back at the bottom.”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“Enron. One: The firm endorsed Enron’s asset-light strategy. In a 1997 edition of the Quarterly, consultants wrote that “Enron was not distinctive at building and operating power stations, but it didn’t matter; these skills could be contracted out. Rather, it was good at negotiating contracts, financing, and government guarantee—precisely the skills that distinguished successful players.” Two: The firm endorsed Enron’s “loose-tight” culture. Or, more precisely, McKinsey endorsed Enron’s use of a term that came straight out of In Search of Excellence. In a 1998 Quarterly, the consultants peripherally praised Enron’s culture of “[allowing executives] to make decisions without seeking constant approval from above; a clear link between daily activities and business results (even if not a P&L); something new to work on as often as possible.” Three: The firm endorsed Enron’s use of off–balance-sheet financing. In that same 1997 Quarterly, the consultants wrote that “the deployment of off–balance-sheet funds using institutional investment money fostered [Enron’s] securitization skills and granted it access to capital at below the hurdle rates of major oil companies.” McKinsey heavyweight Lowell Bryan—godfather of the firm’s financial institutions practice—put it another way: “Securitization’s potential is great because it removes capital and balance sheets as constraints on growth.” Four: The firm endorsed Enron’s approach to “atomization.” In a 2001 Quarterly, the consultants wrote: “Enron has built a reputation as one of the world’s most innovative companies by attacking and atomizing traditional industry structures—first in natural gas and later in such diverse businesses as electric power, Internet bandwidth, and pulp and paper. In each case, Enron focused on the business sliver of intermediation while avoiding the incumbency problems created by a large asset base and vertical integration.”
― Duff McDonald, The Firm

“It says much that Matassoni, who went on to spend five years at BCG after leaving McKinsey, still considers himself a McKinsey man above all else. “BCG asked me how come their alumni aren’t as happy as McKinsey’s,” he said. “I told them it was simple, that when a guy left BCG they shat all over him and considered him a failure. When people leave McKinsey, they are counseled out and are proud of their time there.”10 There is no McKinsey boneyard, in other words; you’re still McKinsey, even after you’ve left. Even”
― Duff McDonald, The Firm: The Story of McKinsey and Its Secret Influence on American Business

“An astute market seer, Jim Grant, describes the Fed’s near-abandon at the printing press: “Frostbite victims tend not to dwell on the summertime perils of heatstroke.”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“(As his predecessor John Pierpont Morgan had said about a banker’s reputation at the Pujo hearings in front of the House Banking and Currency Committee in 1912, “[It] is his most valuable possession; it is the result of years of faith and honorable dealing and, while it may be quickly lost, once lost cannot be restored for a long time, if ever.”)”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“And McKinsey never really left the building. A decade later, when John Birt, then director-general of the BBC, stepped down from his job, McKinsey brought him on as a part-time consultant. In 2005 Birt severed all ties with the firm after critics suggested that working for 10 Downing Street in London and McKinsey posed a conflict of interest—as if hiring him shortly after extracting millions of pounds out of the BBC hadn’t been. Birt’s replacement at the BBC’s helm—Greg Dyke—immediately slashed spending on outside consultants by 75 percent.”
― Duff McDonald, The Firm

“In 1988 two consultants, Jim Rosenthal and Juan Ocampo, wrote Securitization of Credit, a road map that helped Citibank and Chase Manhattan survive the South American debt crisis. The book, the first on a subject that soon washed over the financial world like a tsunami, showed the banks, unable to earn their way out of their bad debt situation, that by securitizing the loans on their books—packaging them up and selling them into the secondary debt markets—they could effectively walk away from the loans, albeit while still taking a hit to their balance sheets.”
― Duff McDonald, The Firm

“It’s like being a doctor. You do the best you can, but if the patient won’t quit smoking, he still dies. This is a problem the world over. Corporate executives are not risk takers. They don’t see trouble clearly until they’re going down the drain.”17”
― Duff McDonald, The Firm

“In organization theory, they call this “mimetic isomorphism”—the tendency to imitate another organization in the belief that, if others are doing something, it must be worthwhile.”
― Duff McDonald, The Firm

“You can forecast anything. Delivering actual results is a different story.”
― Duff McDonald, The Firm

“But that was thirteen years ago. Today, the crème de la crème flock to younger, more vibrant companies, in both entry-level and much higher positions. The brightest students tend to not want to work for large companies anymore, and McKinsey is a large company. In the 1970s every smart student received an offer from Arthur Andersen, then about ten thousand strong. The more adventurous went to McKinsey, which employed a paltry four hundred by comparison. Today Arthur Andersen is gone, and McKinsey has taken its place in the student imagination. It’s for the average Harvard Business School graduate, not the Baker scholars. And, as has always been the case, McKinsey consultants continue to leave for big positions elsewhere. Among others, Facebook chief operating officer Sheryl Sandberg is a McKinsey alumnus, as is Google chief financial officer Patrick Pichette. McKinsey may be a career firm for some, but it tends to lose its best people.”
― Duff McDonald, The Firm

“Ever a student of history, Dimon sent Paulson a note including a citation from a speech Theodore Roosevelt made in Paris in 1910: “It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“We stand for doing what’s right. It gives us a lot of clients and followers and friends. But you know, if you stand for anything, you’re going to have critics.”
― Duff McDonald, The Firm

“There is one financial commandment that cannot be violated: Do not borrow short to invest long—particularly against illiquid, long-term assets.” “You know what sinks companies?” he asked an audience in late 2008. “Financing illiquid assets short.”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“Marvin Bower told his protégés that the secret to success was to act successful.”
― Duff McDonald, The Firm

“McKinsey research correctly predicted that the code would revolutionize the grocery business and improve Americans’ quality of life at the same time. That is exactly what they did, making shops vastly more efficient and dramatically reducing checkout times.”
― Duff McDonald, The Firm

“It’s the only job I can think of where you start in general management, and then, if you’re successful, you end up in sales,”
― Duff McDonald, The Firm

“GE’s Borch, for one, read the profit-and-loss statements of all his departments every year and told them to stop spending on paper clips. Budgeting and control were at least one part of leadership, but such immersion in detail has its obvious limitations.”
― Duff McDonald, The Firm

“I once heard someone respond to the question of how one can be successful by saying, ‘You have to be in the right place at the right time,’” says analyst Mike Mayo, who moved to Calyon Securities in March 2009. “When asked how to do that, the response was ‘You have to be in a lot of places a lot of the time.’ Those two deals are where Jamie’s image—and that of JPMorgan Chase—translated into actual transactions. This is now the go-to bank when regulators pick up the phone. It would not surprise me in this environment if Jamie Dimon gets the first call in the next unusual situation we might find ourselves in.”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“As often occurs with Wall Street alchemy, a good idea started to be misused—and a product initially devised to insulate against risk soon morphed into a device that actually concentrated dangers.” Money was still cheap in”
― Duff McDonald, Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase

“In many important ways the book really was an attack on McKinsey thinking, on the idea that the secrets of success could be found in an analytical framework or in a new corporate structure. It was an attack on the rationalist idea that businesses were machines that could be fine-tuned. The work of Peters and Waterman served to remind managers about first principles in business: If they didn’t listen to their customers or employees, then the rest was irrelevant. If the strategy revolution was forcing companies to look outward more than they ever had before, what Excellence did was force that gaze right back inside again. And it wasn’t talking only about financial management. It was also talking about how you treated the people who worked for you. It was, in short, the first great manifesto of the idea of corporate culture.”
― Duff McDonald, The Firm