Question
Is consulting a way of outsourcing thinking?
Answer
This is a trite question in a way. All consulting IS some form of thinking-outsourcing.
The reason this is NOT a trite question is that often what is really going on when it looks like the client is trying to outsource thinking is that s/he is trying to outsource risk and make it "go away."
So the real question is: is consulting a way of outsourcing risk-taking?
And the answer there is "not a good way." That's why the word is CONSULTANT. Someone who makes recommendations and lays out the risks/benefits, but leaves the actual key risky decisions to you.
Employment with stock is the right way to outsource significant risk-taking. Trying to outsource risk by pretending to outsource thinking is either a case of being in denial, or an attempt to lowball somebody by getting them to do more expensive work at cheaper prices. One way or another, there is moral hazard or exploitation in one direction or the other.
I am mentioning this, because in the consulting gigs I've refused, this is what some people have tried to do under the pretense of outsourcing thinking (in fact, a couple of leads have lavishly praised my insight/skills etc. and then get upset when they find that they can't really outsource their risk to me by flattering me), without consciously realizing it. Just because somebody is smart or knows a subject area, does not mean they can make a fair coin always turn up heads.
Thinking leads to decisions. Decisions always involve risk.
Some types of thinking lead to fundamentally riskier types of decisions.
Many people try to outsource activities that are outside their risk-tolerance limits and try to get the consultant to commit to a delivery commitment that IS within their risk tolerance limits. Subconsciously they are repressing risk-anxieties.
Simple example: an engineer startup CEO who likes 90%+ success rates is uncomfortable about the much lower success rate (50% or so) for typical marketing decisions, and tries to hire a marketer and demands something like, "well, you're the expert, so I'll expect you to deliver with 90% success rate").
The reason I see this as a major red-flag and a reason to refuse is that the client is only fooling himself/herself. You cannot eliminate fundamental types of risk and information deficit by shuffling work around. Expertise and domain/industry knowledge can mitigate some categories of risk, but not all.
Often, their criticism of the consultant will be that the consultant is committing only to efforts, not to outcomes. This is silly. Most consultants will take a good deal that is a personally worthwhile mix of cash and risk-sharing (example, performance linked bonuses or profit sharing/commissions). The more work you demand, the better the cash+risk package has to be.
The real issue is psychological. There is denial about a class of risk, and consulting is a way to pretend that bringing in "expertise" will eliminate that risk.
That said, there are shyster consultants out there who are not honest about their risk-thinking. A consultant who is willing to work an hour for $100 should also be willing to work for free for that hour given a 50% chance of making $200 in profit sharing.
OR they should be upfront and simply state: I like the odds of this working out, and I think they're about 50%, but I simply am not in a position to take on this risk. I need cash.
Often, a shyster consultant will talk up an activity/probable outcome so it seems like a near dead-certain bet, but when you push them to take the risk, it will become clear that they privately think of it as a much worse bet, and are only sweet-talking the client to get the risk-free cash. A case of parting a fool from his money while encouraging him to take stupid risks.
Another way to think of this is that the shyster consultant sets up a moral hazard to favor himself. Given his guaranteed hourly rate and ability to walk away without consequences after a short-term, he can take risks more carelessly than the person who has to deal with the consequences.
I refuse to do that. If I don't believe something is a good risk, pretending it is simply to make money while doing work I think is doomed anyway... well, might as well be a regular employee. Why become a consultant at all?
There IS however, one rare case where you can outsource risk-taking. When you are so emotionally-invested that you are likely to make bad decisions, it is worth letting somebody else who has no stake, and only a guaranteed payoff, decide. Here moral hazard sort of works in favor of the person doing the outsourcing, because the moral hazard cancels out the effect of the emotional investment. Expectations have to be set though, so the consultant is simply bolder than the client, not more careless.
The reason this is NOT a trite question is that often what is really going on when it looks like the client is trying to outsource thinking is that s/he is trying to outsource risk and make it "go away."
So the real question is: is consulting a way of outsourcing risk-taking?
And the answer there is "not a good way." That's why the word is CONSULTANT. Someone who makes recommendations and lays out the risks/benefits, but leaves the actual key risky decisions to you.
Employment with stock is the right way to outsource significant risk-taking. Trying to outsource risk by pretending to outsource thinking is either a case of being in denial, or an attempt to lowball somebody by getting them to do more expensive work at cheaper prices. One way or another, there is moral hazard or exploitation in one direction or the other.
I am mentioning this, because in the consulting gigs I've refused, this is what some people have tried to do under the pretense of outsourcing thinking (in fact, a couple of leads have lavishly praised my insight/skills etc. and then get upset when they find that they can't really outsource their risk to me by flattering me), without consciously realizing it. Just because somebody is smart or knows a subject area, does not mean they can make a fair coin always turn up heads.
Thinking leads to decisions. Decisions always involve risk.
Some types of thinking lead to fundamentally riskier types of decisions.
Many people try to outsource activities that are outside their risk-tolerance limits and try to get the consultant to commit to a delivery commitment that IS within their risk tolerance limits. Subconsciously they are repressing risk-anxieties.
Simple example: an engineer startup CEO who likes 90%+ success rates is uncomfortable about the much lower success rate (50% or so) for typical marketing decisions, and tries to hire a marketer and demands something like, "well, you're the expert, so I'll expect you to deliver with 90% success rate").
The reason I see this as a major red-flag and a reason to refuse is that the client is only fooling himself/herself. You cannot eliminate fundamental types of risk and information deficit by shuffling work around. Expertise and domain/industry knowledge can mitigate some categories of risk, but not all.
Often, their criticism of the consultant will be that the consultant is committing only to efforts, not to outcomes. This is silly. Most consultants will take a good deal that is a personally worthwhile mix of cash and risk-sharing (example, performance linked bonuses or profit sharing/commissions). The more work you demand, the better the cash+risk package has to be.
The real issue is psychological. There is denial about a class of risk, and consulting is a way to pretend that bringing in "expertise" will eliminate that risk.
That said, there are shyster consultants out there who are not honest about their risk-thinking. A consultant who is willing to work an hour for $100 should also be willing to work for free for that hour given a 50% chance of making $200 in profit sharing.
OR they should be upfront and simply state: I like the odds of this working out, and I think they're about 50%, but I simply am not in a position to take on this risk. I need cash.
Often, a shyster consultant will talk up an activity/probable outcome so it seems like a near dead-certain bet, but when you push them to take the risk, it will become clear that they privately think of it as a much worse bet, and are only sweet-talking the client to get the risk-free cash. A case of parting a fool from his money while encouraging him to take stupid risks.
Another way to think of this is that the shyster consultant sets up a moral hazard to favor himself. Given his guaranteed hourly rate and ability to walk away without consequences after a short-term, he can take risks more carelessly than the person who has to deal with the consequences.
I refuse to do that. If I don't believe something is a good risk, pretending it is simply to make money while doing work I think is doomed anyway... well, might as well be a regular employee. Why become a consultant at all?
There IS however, one rare case where you can outsource risk-taking. When you are so emotionally-invested that you are likely to make bad decisions, it is worth letting somebody else who has no stake, and only a guaranteed payoff, decide. Here moral hazard sort of works in favor of the person doing the outsourcing, because the moral hazard cancels out the effect of the emotional investment. Expectations have to be set though, so the consultant is simply bolder than the client, not more careless.