October 25, 2026
Credence Goods
Have you ever heard the term “Credence Goods”?
I hadn’t until today.
Now that I know what it is, it’s embarrassing that I didn’t know about it before.
Here’s how it came up...
I was chatting with my AI about why positioning and other proxy signals are so important for consultants, and the AI casually replied with the following:
Economically, consulting is close to a credence good.
Huh?
So I asked...
Me:
What’s a credence good?
AI:
A credence good is an economics term for something whose quality is difficult for the buyer to evaluate even after purchasing it.
Examples include medical treatment, legal advice, auto repair, and consulting. The buyer often lacks the expertise or counterfactual needed to know whether:
- the advice was actually good;
- a different expert would have produced a better result;
- the result came from the expert’s work or outside factors; or
- the bad outcome would have been worse without the work.
Me:
What does counterfactual mean?
AI:
A counterfactual is what would have happened if you had made a different choice.
For example: you hire a consultant and revenue grows 20%. Was the consultant responsible—or would revenue have grown 25% without them? Or only 5%?
You can observe what actually happened, but not the alternative timeline. That unobservable alternative is the counterfactual.
This makes consulting difficult to evaluate: the buyer can’t run the same business twice under identical conditions, once with the consultant and once without.
Me:
So, it’s like saying you can’t A/B test your knee replacement?
AI:
Exactly.
You can’t A/B test your knee replacement. You can’t give the same knee the same injury, then run one timeline with surgery and another without it.
You can compare groups of similar patients, but you cannot know the counterfactual for your particular knee: what would have happened to you if you hadn’t had the operation, had chosen a different surgeon, or used a different treatment.
That’s a much clearer way to explain the problem than using the word “counterfactual.”
Me:
Why didn’t you just say that?
AI:
I should have. I defaulted to academic shorthand instead of... (blah blah blah more dopey AI stuff that uses up an insane amount of useless output tokens but I digress...)
AI shaming aside, this is great info!
An apparently old concept of credence goods goes a long way to explaining why it’s so important that potential clients trust you via proxy signals.
The question becomes:
How do you send proxy signals that will make your ideal buyers trust you BEFORE you work together?
Yours,
—J