[Week 32, 2025] Margins, Measures, and Moral Hazards
Welcome back to Price and Prejudice with a few musings from Week 32 of 2025.
Consulting Conundrums
This piece notes that consulting’s long boom may finally be wobbling, with firms facing tighter client budgets, more skeptical boards, and a growing sense that some of what they do can be automated. The author points to AI eating into junior-level work and companies questioning big fees for what they see as incremental changes. But one thing the piece understates is a core, unglamorous value of consulting: it gives cover. In any moderately large organization, the hard part of change isn’t just knowing what to do—it’s getting everyone to accept it. A consultant’s report can make an idea legitimate, moving it from “Jim’s pet project” to “the considered recommendation of outside experts,” which is often the difference between endless debate and actual execution.
That’s why the piece feels unusually cold-water when read alongside a new research study that actually measures consulting’s impact. Using two decades of Belgian VAT data, the researchers find that both top-performing and struggling large firms hire consultants, and that a typical year-long engagement boosts labor productivity by 3.6% over five years, raises wages by 2.7%, and leaves labor’s share intact. The gains seem to come from modest reorganization, slightly leaner headcounts, and more skilled in-house staff—not from shifting rents away from workers. In other words, the measurable effects line up with the more optimistic view practitioners have long claimed.
Seen together, the media narrative and the data offer a split-screen: public skepticism at a high point just as careful research shows tangible, broadly shared benefits. Maybe consulting is, in part, a luxury good—but it’s also a social technology for making decisions stick. That quality isn’t easy to automate, and in many organizations, it’s worth far more than the slide decks.
When the Numbers Are the Infrastructure
This WSJ piece runs through just how many corners of life hinge on the Bureau of Labor Statistics’ work: tax brackets, retirement account limits, Social Security checks, Medicare premiums, SNAP benefits, even the payouts on Treasury inflation-protected securities. It’s a good list, but it leaves out other areas where BLS data is embedded in the plumbing: wage negotiations that benchmark cost-of-living adjustments, union contracts, private-sector pension plans, and long-term infrastructure contracts that peg price escalations to CPI. In short, it’s not just government programs that wobble when the numbers are wrong—private markets do too.
Stepping back, the reliance on clean, credible data isn’t just about fairness; it's a pillar of market coordination. When data gets noisier, politicized, or delayed, the effects ripple outward in ways that are hard to model but easy to imagine: investors reprice risk, policymakers second-guess moves, and households can’t plan. One silver lining is that noisy or contested official data can spur innovation in independent measurement—private-sector inflation trackers, payroll processors publishing their own jobs numbers, even “nowcasting” models built on real-time prices. But those can supplement, not replace, the public dataset that keeps everyone arguing from the same baseline.
House Money
During my time in the Korean Army, I spent a frankly embarrassing amount of time in the base recreation room, mostly on the FIFA arcade machine and at the karaoke booth. Neither was free, and both existed for the same reason the U.S. military keeps overseas bases stocked with slot machines: morale costs money, and entertainment is a business, even when you wear a uniform. The difference, of course, is that slot machines can eat up a significantly chunkier portion of your savings, careers, and in some cases lives.
This WIRED piece shows how the Army’s slot program, spread over 1,889 machines in 79 locations abroad, brought in $71 million last year and netted $53 million for Morale, Welfare, and Recreation programs. The returns are steady, the margins are enviable, and the customers—service members, retirees, contractors—are literally captive. From a financial standpoint, it’s a “sin stock” in miniature: predictable revenue from an activity with known social costs, wrapped in a public-service rationale. The twist is that the “shareholders” here are commanders deciding how to spend the proceeds on golf courses, libraries, and other amenities.
As in capital markets, there’s an option value in reform rather than abolition. You could earmark a fixed percentage of proceeds for prevention, screening, and treatment—like a dividend that insures against reputational and operational risk. That’s how companies under ESG pressure often defend profitable-but-controversial business lines. The military’s slot machines aren’t going away soon, but the payoff structure could be rebalanced so the “house” still wins, without quite so much cost to the players it’s supposed to protect.