I ran into a remarkable bit of trouble trying to explain to people that I, now finally finished with the first round of new hire training, was “on the beach.” More than a few of my friends (even some new hire consultants! — they were of course, at rival firms) thought the phrase was meant literally. So, for the record:
Being “on the beach” means that one is in between cases — i.e. one has not been assigned work yet. This isn’t quite the same as being on vacation; I was still expected to be “on call” and I even went into the office to do some things that training prevented me from being able to do (i.e. setup voicemail, fill out time and expense sheets, install printers, play around with some of the stuff my firm gave me, mess around with the laptop they gave me, etc.).
While messing around with said laptop while on the beach (hopefully by now, the attentive non-short-term-memory-defective reader realizes that it doesn’t mean I was physically on a beach), I stumbled on a very funny story (from the business blog the Cenek Report) which is sadly based on two real companies. The story illustrates, in a very Dilbert-esque fashion, some of the pitfalls of what I can only call ”American management culture” and also demonstrates why the best consulting firms attempt to be very discriminating in their selection of client:
A Japanese company ( Toyota ) and an American company (General Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race. On the big day, the Japanese won by a mile.
The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team composed of senior management was formed to investigate and recommend appropriate action. Their conclusion: The Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.
Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion. They advised, of course, that too many people were steering the boat, while not enough people were rowing.
Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team’s management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager.
They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the ‘Rowing Team Quality First Program,’ with meetings, dinners and free pens for the rower. The new change initiative also included plans for getting new paddles, canoes and other equipment, plus extra vacation days for practices and bonuses.
The next year the Japanese won by two miles.
Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the senior executives as bonuses and the next year’s racing team was outsourced to India.
While management consulting has pioneered many advances in business management, the industry is responsible for perpetuating many, of what I consider to be, horrific business sins. One of the most egregious and widespread of management consulting offenses is the practice of slide-umentation, a term I first heard while conversing with Eric, which refers to the use of Microsoft PowerPoint as the dominant form of documentation.
Slide-umentation is horrible for the following five reasons:
It’s a shame that I’m such a big fan of design and presentation improvement blog Presentation Zen (which recently put up a very fascinating piece on the impact of the now 20-years-old PowerPoint) and the work of design guru Edward Tufte — both big and vocal advocates against the use of PowerPoint. The career choice I’ve made seems to work against my learned revulsion to PowerPoint presentations.
But, in the hopes that one day I might actually have some say or that some management consultant with clout actually reads this, my own two cents on how consultants ought to use PowerPoint and present findings to their clients:
How should a company choose what to invest in?
The most logical means of evaluating an investment would be to perform a basic cost-benefit analysis on each investment relative to the others. This is no small task, as with each investment, there is always an element of risk that is difficult to gauge (i.e. maybe sales will jump by 100%, or maybe they’ll tank). There are also more strategic and less concrete benefits and costs which are difficult to assess the value of (i.e. Public Relations, worker morale, etc.)
But let’s say we knew exactly what the benefits in each year would be (i.e. investment A will pay off $10M in two years, $4M in three years, $100M in four years, etc.). How does one know these things? Usually you don’t – you just taking a look at the possible best, worse, and average case scenarios to get a sense of what the investments might be worth. So, how do you then evaluate the business?
What an economist or a financial accountant will probably tell you is to use some form of Time Value of Money/Discounted Cash Flow analysis to assess the value of each benefit and compare it to the value of the associated costs. That may sound like gobbly-gook, but, the principle of Time Value of Money refers to the fact that a dollar today is worth more than a dollar tomorrow, because that dollar today can be put in a bank or some other type of investment vehicle and be worth more than a dollar tomorrow. So, Discounted Cash Flow analysis really is just converting all the costs and benefits to “today dollars” so that we can actually add them up and compare them (in much the same way you can’t compare apples and oranges, you can’t compare today dollars with tomorrow dollars because they’re not the same).
This analysis explains why a company that can always deliver $100 of profit year after year isn’t necessarily worth an infinite amount of money (because next year’s $100 isn’t worth as much as this year’s, and the following year’s is worth even less, and so on and so on) and is, to my understanding, the dominant form of analysis used by consultants and accountants in assessing the value of business propositions.
A variation of this analysis used by Private Equity groups and Investment Banks is called the Internal Rate of Return (IRR), which performs the exact same Discounted Cash Flow analysis above but summarizes it up in one value which is basically the interest rate a bank would have to be willing to pay in order to make the costs and the benefits exactly the same. So, a good investment will have a higher IRR because it takes a much higher interest rate at a bank to make someone not want to invest in the opportunity.
To my surprise, however, I learned in training that there are whole groups of firms who do not use either method in evaluating business/investment prospects, but use the much more crude and less technically valid Cash Payback Period. The Cash Payback Period makes no specific allowances for the Time Value of Money (the idea that the value of a dollar tomorrow is less by a factor related to bank interest rates) and is simply the period of time required for a firm to earn enough revenue to pay back the initial investment. This technique thus biases the firm towards investments which provide a quick and high cashflow and away from potentially more profitable investments which are slow to return cash (i.e. most Research & Development ventures).
So, big question, why would anybody use this? One possible reason is that smaller firms may value early cash flow a great deal. But, a caveat to this benefit is that the Time Value of Money analysis factors in a “penalty” for future cash flows. In today’s world, certainly no bank or venture capitalist is going to begrudge you a few extra years to earn a much higher return, right?
The more “accepted” reason, however, seems to be that Cash Payback Period is much easier to calculate and understand. Never mind that it is less accurate (and in some cases not accurate at all), it’s much easier to explain how “in four years, we recoup all costs” than it is to explain “if we discount future cash streams at an annual rate of 12% then the present discounted value of the investment becomes…”
What this means is that for any professional involved in a consultant role (i.e. doctors, lawyers, wedding planners, etc.), being correct is not enough. You also have to communicate your results in terms that the client can understand. This certainly applies as well to doctors and brokers (no matter how cool Dr. Gregory House’s character on House MD is, seriously people, the vast majority of people aren’t smart enough to be able to treat people like that) and politicians (who are particularly good at this), simple seemingly “commonsense” reasons oftentimes win out over more correct rationales which are unclear and appear overly technical.
So, where does that leave the consultant? The consultant will have to politely and clearly inform the client why Cash Payback Period is not a good metric and explain what, without getting boggled down by technical detail, the discounted cash flow analysis says about the investment choices.
Signaling is a concept from economics which makes the vast majority of higher schooling seem irrelevant. Why else do financial services firms oftentimes seek physics and math students (often with negligible background in business or finance)? Why else are pre-medical students required to endure class after class of essentially zero relevance to their profession of choice? Economists would argue that such “illogical” market behaviors are due to firms recognizing that not only are the most useful skills taught on-the-job or in job-specific training by firms and specialized professional schools (i.e. medical school’s latter clinical years), but that the best indicator of future success and productivity comes from demonstration of intelligence and perseverance in the face of mental adversity.
Whether or not this is socially useful or even true is another question, but signaling seems to help explain the widespread prevalence and demand for individuals with M.B.A’s. Today’s corporate boardrooms are full of proud MBA-holding executives. Promotions, at a wide range of firms including (surprise surprise) consulting firms, are usually contingent on earning an MBA. Yet, the training involved seems to be widely disparaged as holding very little real utility – at a training session today about core business frameworks, the manager leading the session even made a joke about how the new staff ought to ignore those silly b-school interns “who think they know everything when they really don’t know anything.”
While the statement was certainly made in jest (the business school interns were all from very top MBA programs and, applying the signaling concept, were also from top undergraduate schools and had very impressive professional backgrounds), it appears to be a widespread idea — yes, those individuals who had little financial background will learn some things like financial accounting and coursework touches on some business basics like benchmarking strategies and cost accounting, and yes, they will try to teach you about ”management” (although this blogger humbly proposes that management skills are learned through experience and probably not through schooling) but it’s widely perceived that an MBA only gives you two things:
Make no mistake — the benefit from #2 can be quite substantial and quite relevant. But, its hard to believe that the value of the MBA comes from the coursework or even the networking. Instead, it’s much more logical that, like one’s choice of college, the real value in the MBA comes from the signal: the difficulty of getting in (especially when the school is a well-regarded business school), the likelihood that one has had previous experience in business, and the fact that one is dedicated (b-school is expensive and time-consuming).
And that’s why there’s a big chance that I’ll start looking at GMAT books at some point.
Consulting firms pride themselves on their people “assets.” Their recruiting brochures (and I would imagine, their marketing literature as well) are full of words describing their employees more like demi-gods than real people: “the best and the brightest”, “those with the intelligence and the passion to make a difference”, “our people are our brand”, etc. Knowing that I’ve been hired by one of these firms, it almost makes me feel like I really can do anything I set my mind to. I can almost feel like Leonardo DiCaprio’s character on Titanic: “I’m the King of the WOOORLDD!”
And yet, here I am. Sitting. Watching a video online. Instructing me in the mystical secrets of the apparently very difficult “Save As…” command in Microsoft Excel. Judging from the video, it would appear that my coding math models in MATLAB is orders of magnitude simpler than learning how to enter formulas and resize cells.
Anybody else notice a strange discrepancy here?
If you had told me four years ago that I would be working in consulting, I would have responded with a question:
“What’s consulting? And, why am I doing it?”
As recent as a year ago, I was positive that I would be pursuing a PhD in Systems Biology (or, as it is sometimes referred to, Computational Biology or Mathematical Biology) after college. The field was vast and exciting to me. It was (and still is) full of untapped potential. I spoke eagerly with professors Erin O’Shea and Michael Brenner about how I could prepare myself and what I could study. Having worked in the lab of professor Tom Maniatis for almost two years at that point, and being exposed constantly to the joys and tribulations of postdoctoral fellows and graduate students, I was fairly certain that being a graduate student doing research full-time was what I wanted.
With almost a sense of smugness, I looked down at the more “business-y types”. I thought what they were doing lacked rigor, and it was hence not worthy of my time. I believed it was mere mental child’s play compared to the rigor and intellectual excitement of trying to decode complex gene networks and how invisible molecules could determine whether we were healthy or sick.
I would like to say that the reason I’m doing management consulting now is because I’ve gotten over such prejudices. If I were to be perfectly honest, though, I would have to admit that I haven’t. An Ivy League education teaches you that you’re not the smartest person in the world, but, at least in my case, it doesn’t teach you to show humility about the field you’re most interested in.
So what did happen? Well, I can think of four main reasons. The first and most immediate was that I was part of the organizing committee behind the 2006 Harvard College Asian Business Forum, which was the HPAIR (Harvard Project for Asian and International Relations) business conference. The experience was very rewarding and eye-opening, but more than that, it was an impetus to follow the paths of the many excited delegates, most of whom were early professionals or about to be, who were hoping to be future business leaders.
The second factor was a growing awareness of what life in academia meant. Yes, I was well aware of the struggles that graduate students and postdocs and, to a lesser extent, assistant professors had to go through on their way towards tenured professor (which, I still think, is the coolest job ever) when I decided I wanted to be a graduate student, and those were, in my mind, fair sacrifices to pursue what I was interested in. But at the same time, towards the end of the summer, with my experiments facing multiple setbacks, the doubts in my mind over my competence and my ability to be a good grad student, making me look to other alternatives.
The third consideration stems from the fact that I have always been interested in application. My approach towards science has always been rooted in searching for possible applications, whether commercial or for public interest. Even the reason that I chose to specialize in Systems Biology stems from a belief that traditional molecular and cellular techniques will soon face sharply diminishing marginal returns with regards to elucidating the causes and cures for diseases. Having lived from almost all of my pre-college life in the Silicon Valley, it is no wonder that I am accustomed to and would like to see more of science being moved from “bench to bedside” and would love to manage a successful transition from brilliant idea to profitable one.
The final factor is of course that it’s always exciting to try something new, especially something competitive – and even though I cursed recruiting at times, it was kind of like a fun competition. Although I did not expect to receive a job offer from any firm that I would consider, I actually did reasonably well in the interview process and did indeed receive an offer which I simply could not turn down.
All roads, at least for me, led to consulting.
On June 7, 2007, I (and about 1600 other members of the Harvard College Class of 2007) participated in the 356th commencement at Harvard University. When someone asked me about it, the best way I could explain how I felt was that it was “simultaneously overwhelming and underwhelming.” How can that be? It was overwhelming in that all around me, I was surrounded by pomp and circumstance — dignitaries, professors, alumni from classes ranging including a huge turnout by members of the Harvard Class of 1957 for their 50th reunion. I watched as Bill Gates and John Kerry and Larry Summers walked by me — they too seemed a little overwhelmed by the spectacle of masses of graduates from all the schools of Harvard dressed physically in their graduation-wear and spiritually by years and years of ceremony and tradition.
But it was still underwhelming, because how can you manage to sum up four formative years — four years of friends, of heartbreak, of love, of toil, of interesting things, of interesting people, of work, of brilliant insights, of stupid mistakes, of amazing experiences — in a ceremony, no matter how wonderful, of several hours and a few (albeit, impressive) pieces of paper?
You can’t. And in the same way, my EightYears plan not only failed in the sense that I couldn’t keep up a daily posting schedule but in the sense that even had I posted two entries a day from when I concocted the idea, there was no way I could summarize eight years of experiences into a small blog series.
In fact, there are still so many things I wish I had posted on — debate, the NASA Asgard project, the HIR, HPAIR trip to India, tutoring at Giraffe, the classes I took in college which have shaped me intellectually — alas, they will have to be post-graduation amendments to the EightYears series.
So, having established that it is impossible to sum up my college experiences into a single blog post, I will now ignore everything I just said and try to anyway:
I did not go to Harvard thinking that it would make me a better person. I did not go to Harvard thinking that I would experience anything special or that I would make wonderful and impressive friends. I did not go to Harvard thinking that I would miss it once it was over. On the contrary, I had my eyes set on Stanford in high school; I sometimes wistfully wished I had gone to Berkeley even while at Harvard; and I certainly have cursed and hated the toil, blood, sweat, tears, sleep, sanity, and sense of personal connection that I’ve had to give up during my four years here — but it was all worth it. Looking back, I did all the things that I did not think I would do at Harvard. I have made wonderful friends with brilliant people. I have learned new ways of thinking and approaching problems. I have expanded my intellectual and artistic horizons. I have experienced things that I never would have at another school.
And, to gloat (although I promise to keep this brief) — I have a job at a top consulting firm which I’m very excited to join. I have made amazingly brilliant friends most of whom will be doing amazing things. I’ve received honors from Harvard which I’m very proud of. And, of course, I can claim to be alum to one of the world’s finest educational institutions.
Fair Harvard, we join in thy Jubilee throng. . .
And, now, onto the next chapter of my life!
Eight Years
Date: (Spring 2005)
There was a semester where I considered going into organic chemistry. Why not? I had liked the orgo classes I had taken. The subject matter, at least from textbooks, seemed fascinating to me — using the properties of Carbon, Oxygen, Nitrogen, and my other friends from the periodic table to either construct or understand molecules of industrial and biological importance — and it seemed so much more creative-driven and less luck-driven than the molecular biology stuff that I was beginning to become disillusioned with. I mean, my roommate seemed pretty content with his Chemistry major (at the time).
So, I took Chem135 — Experimental Synthetic Chemistry, a much more advanced and realistic look at synthetic organic chemistry compared with the intro/premed lab course in organic chem. All excited, I dove straight into synthesis — my two projects being the synthesis of Aspartame (aka NutraSweet) which was, incidentally, discovered by a guy doing random amino acid-like fragment coupling who just happened to lick his hands (which were not washed), and the Wieland-Miescher Ketone which is an interesting chemical structure which is used to artificially produce taxol (a potent anti-cancer drug) and various hormones.
Given that I’m not currently a synthetic organic chemist, one can tell that the experience showed me that I didn’t want to go down the organic chemistry route. Let’s just say that I was not a good experimentalist when it came to synthetic chemistry. A good illustrative example of this was during the Aspartame synthesis project. In the middle of that project was a step which required azeotroping. Azeotroping is described in more detail by wikipedia, but long story short, the reaction mixture contained Acetic Acid (vinegar) and we needed to get rid of it. Acetic acid does not boil off or evaporate readily, but heptane (C7H16) does and because heptane is known to azeotrope well with acetic acid, as in a mixture of acetic acid and heptane will boil/evaporate together well, one can eliminate the acetic acid by adding heptane.
I, the brilliant and attentive budding scholar that I was, made the mistake of adding HEXANE (not heptane) C6H14. And, while in principle hexane and heptane ought to be good replacements of one another, it experimentally did not work quite as well as one would hope — necessitating me to evaporate off an extra four equivalents of heptane. D. Zhao, wonderful friend that he is, hence dubbed me Mr. Hexane — and from that day forth, I labeled all of my tubes and flasks and vials “Mr. Hexane”.
And I never lost or misplaced another flask.