McKinsey PST 13: Closing Remarks

This is the final theory session of the Problem Solving Test Course. I do a quick recap of what we have learned in the previous 12 sessions and point at the critical next steps.

00:25 Key takeaways of the Problem Solving Test Theory Course

– 00:30 Session 01 – Generic approach

– 00:57 Session 02 – Premise
– 01:30 Session 03 – Fact
– 02:00 Session 04 – Conclusion
– 02:23 Session 05 – Last 13%

– 03:02 Session 06 – Compounding
– 03:26 Session 07 – Rule of 72
– 04:07 Session 08 – Contribution Margin

– 04:45 Session 09 – Caveats
– 05:12 Session 10 – Necessary and Sufficient Conditions
– 05:48 Session 11 – Box Principle
– 06:15 Session 12 – Euler Diagram

This is the 13th and final theory session of this problem-solving test course.
We will recap what we have learned in the previous 12 sessions and prepare the ground for the test practice which will now become the major part of your preparation.
Let us recall what we have learned in the previous 12 sessions of the course.

Session 1 was devoted to the generic approach to solving the test. We learned, that there are major four types of questions: premise, fact, conclusion and everything else.
And also, there are five major principles of solving the test.
First, understand the questions.
Second, index the data.
Third, pick the best option.
Fourth, track time and fifth, record your answers.

Session 2 was devoted to premise questions. A premise does not have to be true and might not be mentioned in the text but if we assume that is true, it supports, proves or explains the fact. There are three steps in solving a premise question: restate the question fact in your own words, restate the options and use selection criteria.
Figure out what differentiates the options. And the selection criteria include subject predicate, parts of a statement, parts of a formula and value chain or funnel.

Session 3 was about fact questions. A fact is just what we get from the data.
It’s true by definition. We just need to find the right way to establish this fact.
The approach is as follows.
Understand the question.
Get the data from exhibits and text, try to solve the question quickly, if possible and if necessary build a complete solution; defining your strategy first and then carefully executing on it. Session four. Conclusion. A valid conclusion must follow from the fact; however, conclusions might also be false and unknown. We solve the conclusions questions by three steps:
One: understand the question. Two: drill down the options one by one. And three: make a fact-based conclusion. And be sure to be fact-based and skip unnecessary options.

Session 5. Last 13 percent or everything else.
These last 13 percent questions include three subtypes: give a recommendation; build a formula and interpret the words of a client. And remember that a recommendation question is similar to premise with selection criteria of efficiency and risk.
A formulae question is similar to a fact, where we need to build the generic equation and sort the data from the data and pick the best option. And client interpretation is similar to the premise where we need to use parts of the client statement as selection criteria, and we also need to make sure that there is no misinterpretation of the client’s words.

Session 6 was about compounding.
We can express compound growth by simple growth plus a certain number which is called contribution margin.
And this number has two special properties. Properties number one: it’s always positive. And property number two: if X and N are sufficiently small meaning not exceeding 45 in absolute value, the compound margin is also small, not exceeding 10 percentage points.

Session 7 Rule of 72.
The Rule of 72 says, if some quantity grows by X percent for N periods and doubles, then XN approximately equal 72, provided that X is not greater than 20.
We also remember that there are all kinds of similar rules.
Rule of 42, 96, 114 and so on.
And the way you derive these rules is by summing up the anchor numbers and by taking a product of multipliers.
A similar rule for shares says, that if you want to grow the share of a certain object in its base, we need to subtract the growth of the base from its growth and apply the rule of 72 as always.

Session 8 contribution margin. Contribution margin is the revenue minus variable costs over revenue. It is the bridge between incremental revenue and incremental profits.
It is the part of revenue not consumed by variable costs. To apply it in a PST problem, we need to find the share of variable costs in revenue, then fine contribution margin as one minus this share, and then, divide the extra profit needed on the loss, we need to cover, by contribution margin. You will end up with the value for the desired extra revenue.

Section 9 caveats. There are 8 caveats, that you need to remember in PST. One. Whole versus part of whole. Two. Absolute value versus share. Three. Absolute value versus growth rate. Four. Exact value versus average. Five. Median, mode and range. Six. Decile, quintile, quartile. Seven. Simple versus cumulative. And eight. Terms and definitions.

Session 10 was about necessary and sufficient conditions. And necessary condition is a must have for achieving a certain result.
However, it is not enough.
It might not be enough. A sufficient condition is enough for achieving a certain result, however, it is not a must have and it might not be must have. The indicators for necessary condition are: critical, vital, essential, obligatory, indispensable, compulsory and so on. And the indicator words for sufficient condition are: enough, to assure, to ensure, to guarantee, to lead to.

Session 11 was devoted to box principle. The box principle states that if N greater than K items are put into M boxes that at least one box must contain more than K items.
This intuitive result is easily proved by demonstrating a contradiction and the technique of demonstrating a contradiction is useful when you cannot find the falls are a true example in a conclusion question related to the box principle.

And the previous session, session twelve, was devoted to Euler diagram. Euler diagrams are a great tool for visualizing relations among sets and this is very helpful in solving questions about sets.
We need to draw all sets, pay attention to compliments, unions and intersections, we write down the sizes we know and then we start computing the sizes we do not know and the visualization of Euler diagram helps us decide how to do that. Well, that’s the end of the theory part of the course and the beginning of your real preparation work, which will drive the result.
Remember that the practice, not theory is the critical factor which will determine whether or not you pass the test.
You must learn to work hard like a consultant, then you’ll have a chance to get that consulting offer.
And I’ll be happy to support you.
So, see you in the practice sessions of course.
Best of luck.

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