“Since 2010, 47 percent of value creation has come from operations, up from 18 percent in the 1980s. Meanwhile, financial engineering’s share has fallen to 25 percent from 51 percent.”Ted Bililies, “Private Equity Needs a New Talent Strategy,” Mondaq Business Review, Oct 26 2023
Over the past year I have become fascinated with the operating-partner model and why it works so well. An operating partner is an executive who takes an equity stake and dives into the trenches to accelerate or even rescue a company. Charlie Munger summed it up perfectly: “Show me the incentives and I will show you the outcomes.” Equity-based incentives can translate into generational wealth when the playbook works.
So why does the idea resonate while traditional consulting often sparks eye-rolling? Talk to almost anyone outside the consulting bubble and you will hear a war story. The Big Four have impressive track records and nobody at a Fortune 100 is fired for hiring them, yet the engagement model feels dated. A team parachutes in, sells time-and-materials knowledge, spends six months building slide decks, starts the meter for follow-up questions, then disappears. It is expensive, transactional, and now that artificial intelligence is mainstream-increasingly fragile because the “knowledge moat” is leaking.
Knowledge has become a commodity. A modern language model can answer detailed questions about markets, processes, or code in seconds. Agent-style tools already handle routine analysis, and GPT-o3 shows early signs of agentic behavior. Unless a firm combines proprietary data or unparalleled distribution with its advice, its economics will be squeezed.
What remains scarce is execution stamina. Businesses need entrepreneurial operators who roll up their sleeves, own outcomes, and stick around. Advice is cheap; delivery is not. Pair a highly incentivized team with rapidly improving AI and you get leverage an hourly-rate model cannot match. Context windows still limit models, so humans with deep product intuition are the bridge between raw capability and real-world results. Eventually, that moat might dry up as well.
The sales landscape tells a similar story. Inboxes overflow, LinkedIn is crowded with bots, and paid ads only get more expensive. What cuts through is performance plus a personal touch. When knowledge is commoditized, commitment becomes the differentiator. Practitioners who embed, share the upside, and make themselves indispensable will thrive. Investors will keep acquiring companies, but the pool of people willing, and able, to do the gritty operational work is shrinking. Those eager to dive in stand to win big.
