Happy Birthday McKinsey, but, um, excuse me,….you got it wrong

Happy Birthday McKinsey. For a corporation to reach 50 in the modern era is a major achievement.

It is understandable to want to celebrate the birthday by parading your strategic knowledge, which is after all McKinsey’s most recognised strength. To mark the birthday McKinsey released a series of papers, including its report “Management intuition for the next 50 years” that identified three core megatrends that will shape business in the next 50 years; technology, emerging markets and aging.

The reaction to McKinsey’s report has not been kind including FT journalist Lucy Kellaway’s biting assessment that McKinsey are identifying trends of the present. According to Kellaway “if there is one thing that is true of the distant future is that it tends not to be ruled by the same things that rule us now.”

Kellaway argues that the McKinsey report is not a forecast, it is a marketing exercise. Her own forecast is that the future will mean that McKinsey won’t exist as economic growth moves to places where western strategy consultants don’t tend to flourish and executives become much more adept at solving problems without consultants.

The problem with McKinsey’s work is that by reducing a raft of megatrends to an easy list of three, they are discounting the importance of other issues. This is particularly the case with climate change, which science tells us will impact in far less than 50 years. It is true that McKinsey intends to publish a ‘book-length treatment of the issues’ however by down-playing the importance of such an issue they are doing their clients a disservice.

McKinsey would be well advised to re-read Nassim Nicholas Taleb’s classic tome The Black Swan. Taleb’s view on the value of predictions is clear. “I find it scandalous that in spite of the empirical record we continue to project into the future as if we were good at it, using tools and methods that exclude rare events. … we are suckers for those who help us navigate uncertainty.”

Whilst relying on predictions has limited value, Taleb’s cites Pasteur’s motto that ‘chance favours the prepared’. “Knowing that you cannot predict does not mean that you cannot benefit from unpredictability. The bottom line: be prepared. Narrow minded prediction has an analgesic or therapeutic effect. Be prepared for all eventualities,” says Taleb.

From an investment perspective, the raft of global megatrends presents an opportunity. Seizing the opportunity requires a broad understanding of megatrends and a detailed analysis of the companies that are, to use Taleb’s works ‘prepared for all eventualities.’ The future, which will require dealing with a confluence of megatrends, is likely to be one where the quality of a company’s management becomes much more important.