Economics & Markets
The String Quartet in Your Cost Line
It takes four musicians the same half hour to play a quartet as in 1826 — which is why support costs rise.
2026-08-312 min read
Every business contains two halves that obey different physics. One half gets cheaper to run each year, because software and scale keep taking work out of it. The other half does not, because the work is the people doing it and there is no version with fewer of them in it. Economists named this sixty years ago.
William Baumol and William Bowen were trying to explain why orchestras ran chronic deficits while playing to full houses. Their answer, published in 1966, was that a string quartet needs the same four musicians and the same half hour to perform a piece as it did a century earlier. Performance productivity is flat, permanently. But those musicians live in an economy where pay rises with productivity everywhere else, and if quartet players earn far less than their talents would fetch elsewhere, they stop being quartet players. So the cost of an hour of live music must rise relative to everything else, forever, with nobody doing anything wrong. They called it the cost disease, and it appears wherever the unit of output is a person's attention.
Your quartet is whatever work resists being automated out: the support case that needs someone to understand the customer's actual setup, the implementation call, the security questionnaire, the enterprise deal that closes in a room. As the engineering half accelerates, that human half does not merely stay expensive — it becomes a larger share of every dollar, and it looks worse in every review, because it is being judged against a half that keeps improving. The predictable response is to demand efficiency from it, quarter after quarter, and to read the failure as a people problem. It is not a people problem. There are two honest moves: change the product so the task stops existing, or price the line explicitly and stop planning as though it will fall.
Key insights
Some cost lines rise in real terms no matter how well they are run; naming which ones stops you budgeting as though they will fall.
Automation gains in one half of a business make the other half look mismanaged, because it is being measured against a moving baseline.
Why it matters
Treating a structurally rising cost line as a management failure buys you years of efficiency initiatives that were never capable of working.
The half of your business that resists automation gets relatively more expensive exactly when the other half improves, which is the moment you are least likely to have planned for it.
Use this tomorrow
1Split last quarter's operating spend into two columns — work whose cost per unit falls as volume grows, and work whose cost per unit does not — and write down the ratio between them.
2Pick the three support or services tasks your team ran most often last month and count, for each, the minutes a human spent per case; carry those three numbers into next quarter's plan as fixed inputs rather than as reduction targets.
Go deeper
Baumol and Bowen set out the argument in Performing Arts: The Economic Dilemma (1966), written after they were asked why arts organizations ran persistent deficits. The mechanism has two parts: productivity growth is wildly uneven across sectors, but wages are not, because workers can move between them. That forces relative prices up in the sectors where output per hour is effectively fixed. The examples usually cited since — live performance, education, health care, personal care — are all cases where the service is a person's time and cannot be compressed without becoming a different service.
The cost disease has a cheerful half that gets far less attention. Rising relative cost is the arithmetic consequence of the rest of the economy getting richer, not of the stagnant sector getting worse, so a society that can afford proportionally more expensive concerts and nursing is a society that has grown. The same logic holds inside a company: if your services line is a growing share of spend while revenue per employee climbs, that ratio is evidence the product side is working. The error is not the rising line, it is reading the ratio backwards and cutting the half that was never the source of the gain.