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Analytics Magazine

Five myths of quant consulting

November/December 2010

Caution before entering: Misconceptions abound in fascinating field.

David LengacherBy David Lengacher

For a lucky few, the field of quantitative consulting provides the type of catalyst-environment that keeps engineers and operations research analysts continually challenged, perpetually seeking a deeper understanding of the their client’s problems and the governing dynamics that created them. However, quant consulting is not just about analytical skill. In addition to conducting statistical analysis, building spreadsheet models and formulating linear programs, “quant-sultants” need to develop soft skills as well, yet many quants believe that solutions sell themselves. This is but one of the many myths surrounding the field, and in this article I hope to dispel most, if not all, of them. Prospective quantitative consultants take heed; you may want to disabuse yourselves of these misconceptions before entering into this fascinating and rewarding field.

Myth No. 1: My solutions and reccommendation will sell themselves.

This myth is painfully familiar to those who transitioned from more qualitative management consulting fields to quantsulting. Oftentimes, the impetus behind the transition is the high level of frustration experienced from long hours developing PowerPoint presentations. Much to their dismay, these transitioning consultants quickly find that quant consulting does not escape this burden. Many converts believe that because their recommendations are now based more on analysis and less on instinct and anecdotal evidence, that the recommended solution is much more obvious, and therefore it will sell itself.

The reality is that the amount of time spent preparing presentations in management consulting is virtually identical to that of quant consulting. Whereas, in the former, hours are spent perfecting bullet points and selling the recommendation, now hours are spent ensuring the statistical analysis and simulation results are cogent, unintimidating and support the recommendation. This is often easier said than done. Many times your client will not care that you have 50 pages of derivations in your appendix. Instead, they will judge you based on your ability to go beyond the equations and provide something more compelling. In the end, your success will depend on your ability to tell a convincing story, using analysis as your megaphone.

Myth No. 2: The hardest part is solving the problem.

New entrants into quant consulting are continually amazed by the fact that their clients cannot tell them what they want to investigate or solve. Oftentimes, the most difficult task is not solving the problem; it’s identifying the problem that needs to be solved. The most intimidating factor for newcomers in this field is the shear variety of client desires. For example, some clients will only care about what caused the problem and will not want you to solve it. Alternatively, some clients will not care about the root cause at all; instead they will only care about solving it as quickly as possible. Lastly, some clients will change their mind in the middle of a project and tell you to stop trying to solve the problem and instead find out why it occurred.

In short, many clients will only tell you that they have a problem and will not be able to articulate it very well. It will be up to you to determine which problems are worth chasing and which are not. To meet this challenge, a good quant-sultant will present his client with a plan of attack in the form of a decision tree with multiple branches: as information is gathered and analyzed and as insights are developed, course corrections can occur because flexibility is designed into the plan from the very start.

Myth No. 3: I don’t need to publish my successes because my track record speaks for itself.

Although a lengthy list of clients and completed projects will go a long way toward establishing your reputation, many clients will want to know if your most successful projects have ever been published. In other words, they will want to know the degree to which your peers respect your portfolio of work up to this point. Why would they care about this? Because it’s one thing to tout success in the bullet points of your resume, but it’s quite another thing for a journal to consider your projects and ideas worthy of sharing with thousands of their readers. Also, getting published can expose you to more potential clients than any other form of marketing. For example, meeting prospects one-on-one is not always an effective use of your time. It takes you away from servicing your clients and allows you to promote yourself to only one individual at a time.

In comparison, publications can make you highly visible to thousands of people. From a small newsletter with a readership starting in the dozens to a niche publication with a readership of more than 50,000, publications can let prospective clients see what you think, what you did and how you did it. These are things that cannot be achieved via advertising; ads cannot explain the details of your expertise. In contrast, publications can build credibility and recognition as an expert in your field. Having work published can pay dividends for years, if not decades, to come.

Myth No. 4: I don’t need more education or training; my advanced degree is enough.

After borrowing tens of thousands of dollars in student loans, it is no wonder why many consultants do not entertain the idea of further education and training. However, to succeed in this fast-paced industry, quant consultants have to master an ever-increasing amount of skills and techniques. More importantly, they continuously have to cultivate those skill sets, learn new technologies and software, and stay abreast of emerging best practices as they are discovered. Thus, continuing education is a must for today’s quant consultants.

Luckily, they can choose from a host of educational opportunities. From college courses to certifications, consultants are presented with limitless options with which to advance their expertise.

Myth No. 5: I will get rich in consulting.

Undoubtedly, when it comes to career choices, quant consulting is above average in terms of compensation and flexibility. However, if you have fantasies of buying a new Mercedes convertible and a country club membership after joining this field, you will be sorely disappointed. Although the compensation can be very good, many quant consultants end up spending much of their own money purchasing specialized software for independent research and analysis.

Although these out-of-pocket expenses can seem like a prohibitive hurdle that may scare of some, these types of expenditures are more like a labor of love and less like a burdensome expense for many in the field. It is not uncommon for quant consultants to spend much of their free time running experiments on software they purchased with their own money. To them, this is no different than purchasing home theater equipment in the sense that both can provide hours of entertainment per week. In the end, the lifestyle of a quant consultant can be very comfortable, intellectually rewarding, and for many, the only type of work that is truly fulfilling.

David Lengacher (lengachd@ctc.com) is a principal operations research consultant and Six Sigma master black belt with 10 years of consulting experience spanning both the commercial and government sectors. He is also an adjunct faculty member at the University of Maryland. He holds an MBA from Purdue University and an MS in operations research from the University of Maryland.

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