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The Dumb Tax Is Real. Here’s How to Make It Deductible.
Early in my career, I made a classic mistake.
A coworker and I shared a stakeholder that was on the spacey side with a leisurely response time. We’d also share some stories and laughs related to this individual’s atypical antics.
There was this one time that I got a reply from said stakeholder to an email I’d nearly forgotten sending. A reply which arrived almost a full month later.
Naturally, I went to forward it to my colleague with a note: “Would you look at this. I thought a typical LOS (level of service) is 24 hours, but apparently it’s 24 days.”
Smirking while hitting send, I’d expected to get a laugh from a few cubicles over.
Instead, an email notification with that stakeholders name appeared on my screen and my stomach sank.
I hadn’t forwarded it for a little fun. I’d directly replied and looked dumb
The stakeholder’s response? “At least I replied.”
Deadpan. Devastating. Deserved.
As it happened, I had a meeting with this individual later in the day. I tried playing it off by sending back: “Just giving you a hard time. See you this afternoon!”
Some face saved, but the dumb tax was still due in full.
What Is the Dumb Tax?
The dumb tax is the price you pay for a blindspot or something overlooked. Like most taxes, everyone’s bound to pay it at some point. The question is whether you get a return on it.
There is a framework related to this called the Four Stages of Competence. It maps how we grow:
- Unconscious Incompetence — You don’t know what you don’t know.
- Conscious Incompetence — You now know what you don’t know. Uncomfortable, but this is where learning begins.
- Conscious Competence — You know what you know, and you apply it deliberately.
- Unconscious Competence — Mastery. Right intuition, right action, without thinking about it.
When I hit reply instead of forward, I was firmly in stage one. The tax got my attention. It moved me to stage two fast.
That’s the small version. The dumb tax on my missent email was cheap, relatively speaking.
For pro serv firms and their leaders, the real bill is typically much bigger.
The Pro Serv Version Costs More
When I joined AgileSherpas as Head of Training Delivery, I brought nearly 13 years from Target and several more from Thomson Reuters. Strong background in business agility and transformation. Deep experience in the corporate world.
What I lacked was fluency in professional services operations. Specifically, utilization.
A former colleague gave me a heads-up early on. He told me that knowing and understanding utilization would be important. I heard him. But with everything I was absorbing and building, it didn’t fully land.
That’s the thing about the dumb tax. You don’t always ignore the warning. Sometimes you just can’t absorb it yet. That’s stage two and conscious incompetence.
In my early days leading the team, I leaned on good instincts. Meet the client where they are. Over-index on what’s right for them. Put the team first. These were not wrong instincts. But they lacked balance.
We managed utilization by feel. By team input and gut read rather than benchmarks and data. Collective 54 was instrumental in bringing this into focus — the learning blocks, the benchmarks, the calculations that turn a gut feeling into a business decision.
When we look back, it hurts. The utilization gap cost us profitability. And it cost us people.
Good people.
The Return on the Tax You’ve Already Paid
Here is what I did not expect but was pleasantly surprised by. While the dumb tax has a real cost, it comes with a return when paid in full.
The people who left did not disappear. We stayed connected. Some of them came back as contractors when business picked up — a vetted talent pipeline built from a painful chapter. We still gather today, a mix of current and former team members, because the relationships held even when the org chart changed.
The business results followed. Getting serious about utilization — with the right benchmarks, the right tools, and the right discipline — moved the needle on gross margin in a meaningful way. We went from 52% gross margin in January 2025 to 69% in January 2026, and we are on track for a 75% average across 2026. That kind of improvement does not happen by feel. It happens when you stop paying the dumb tax and start investing the return.
The experience also forced a reframe. I moved from good instincts to a more intentional set of healthy tensions balanced by what I call our Value Delivery Polarities. These guide how I think about the push and pull between client and firm, between care and sustainability:
- Meet individuals, teams, and organizations where they are — while taking them where they need to be.
- Provide exceptional service and care — while setting expectations for a healthy and sustainable relationship.
- Learn with each experience — while teaching others through the learnings.
- Bring diverse thinking and perspectives — while committing to a mission and purpose higher than ourselves.
This thinking eventually shaped the case I made to our CEO for a new role: Chief Value Officer. The dumb tax funded the thinking that earned the title.
Not a bad return.
Make It Deductible
The dumb tax is not avoidable. Every leader pays it. The difference is what you do with it.
Three ways to make the tax work for you:
- Name it. When you pay the tax, say so. To yourself, to your team. Naming it creates the shift from unconscious to conscious.
- Learn from it before moving on. The instinct is to move fast and forget. Slow down long enough to feel the hurt so that lessons are extracted. Better to be once burned, twice learned than the other way around.
- Invest the return. What you learned has value. Build it into how you lead, how you price, how you hire, how you show up.
The IRS will not give you a deduction for it. But your business will. Which brings to mind add-backs, but that’s a topic for another day.
Want to keep learning alongside leaders navigating the same terrain?