The Coordination Tax: Stop Paying, Start Owning
Every growing company pays a "Coordination Tax."
It's the hidden cost of managing complexity: fragmented vendors, redundant spend, and unowned compliance risk.
Most firms try to manage the tax with more software. That's a first-order mistake.
What is the Coordination Tax?
As companies scale, coordination becomes exponentially more expensive:
- Vendor fragmentation: 5-10 independent vendors across communication, data, analytics, compliance
- Integration overhead: Engineering teams spend 30-40% of time on vendor integrations
- Redundant features: Paying for overlapping capabilities across multiple tools
- Unowned compliance risk: Each vendor owns a piece, but no one owns the whole system
- Margin compression: Coordination costs scale faster than revenue
The second-order effect: Unit economics deteriorate over time as integration and operational friction compound.
The First-Order Mistake: More Software
Most companies respond by buying more software:
- Project management tools to coordinate vendors
- Integration platforms to connect systems
- Compliance software to manage risk
- Analytics tools to understand what's happening
The problem: You're still paying the tax. You've just added more vendors to coordinate.
Second-Order Thinking: Own the Infrastructure
Second-order thinking eliminates the tax by owning the infrastructure.
By replacing unpredictable human coordination with automated, governed processes:
Risk is Engineered Out, Not Just "Managed"
When you own the infrastructure layer, you control the entire workflow. Compliance isn't bolted on—it's built in from day one.
Real example: We eliminated the coordination tax for a $10B+ life insurance company, achieving 100% compliance and $30M+ optimization while handling 60M+ monthly interactions.
Zero regulatory incidents. Zero vendor fragmentation. Zero unowned risk.
Compliance Becomes a Return Driver, Not a Cost Center
Most companies treat compliance as overhead. When you engineer it into the infrastructure, it becomes a competitive advantage.
Why? Because competitors can't match your unit economics. They're paying the coordination tax. You're not.
Scale Creates Competitive Advantage Instead of Complexity
For most companies, scale increases coordination costs exponentially. For infrastructure owners, scale decreases unit costs.
The flywheel:
- More scale → Better unit economics
- Better unit economics → More competitive pricing
- More competitive pricing → More market share
- More market share → More scale
Stop Paying the Tax. Start Owning the Layer Where Consequences Compound.
The coordination tax isn't a necessary cost of doing business. It's a strategic choice.
You can either:
- Pay the tax (fragmented vendors, integration overhead, compressed margins)
- Own the infrastructure (controlled workflows, engineered compliance, compounding advantages)
We chose option 2. And we help our portfolio companies do the same.
Calculate your coordination tax: Schedule a conversation