Surely, getting as much work done as possible for each unit of time, effort, and capital you put into a project is a good thing.
While on the surface this statement seems like a no-brainer, it carries a false premise. Yes, for highly predictable systems, efficiency is highly beneficial. The concept comes from engineering, so it is not surprising that it is directly applicable to repetitive, mechanical tasks, or to projects that live in a very stable environment.
However, a startup by definition is innovative, which means it inhabits an environment that is the opposite of predictable.
Consequently, rather than thinking of a startup project as a machine, it is more fitting to think of startups as biological organisms searching for a niche in a volatile ecosystem.
Efficiency Vs Spare Capacity
Unlike a machine, most organisms aren’t designed to be highly efficient. Usually, they have a lot of spare capacity.
For example, it would be more efficient if people were not warm-blooded. Lacking an internal system for maintaining a constant body temperature would allow us to run on fewer resources (i.e. we would have to eat less). This would be perfectly fine if the outside temperature was constant. However, since the weather is somewhat volatile, being warm-blooded more than pays for itself.
Most of the time you are not using your thermal regulation system at full capacity, but occasionally, having sufficient spare capacity is a matter of life and death.
This is true for almost all other capabilities of your body. The fact that most of the time you are walking doesn’t mean that you wouldn’t desperately need the capacity to sprint every once in a while.
Efficiency = Fragility
Perfectly efficient systems are fragile – since they don’t have spare capacity, they are unable to handle outside stress well.
For instance, if you are splitting the minute in the name of productivity and efficiency and your calendar is full with one meeting after another, then one thing not going as planned could cause a chain reaction and a system failure.
The same is true for your startup project as a whole. Trying to split every penny in search of efficiency would leave you with very little wiggle room when the environment presents you with an opportunity or a problem.
Having spare capacity and resources to deal with unforeseen circumstances is absolutely crucial for startups because when you are walking an unbeaten path (i.e. when you are innovating) most circumstances are unforeseen.
Of course, spare capacity doesn’t come free. The opportunity costs in startups are high, which means that you need to find the right balance between efficient use of resources and spare capacity.
In the case of biological organisms, this balance has been fine-tuned by evolution.
In the case of startup projects, you are the one that needs to find the sweet spot. Too much efficiency wouldn’t allow you to handle volatility in the environment (both opportunities and problems), and too little would prevent you from having the required work output to be competitive.
A good rule of thumb is to err on the side of spare capacity when swimming in uncharted waters (e.g. when running validation experiments), and on the side of efficiency when doing tasks you are familiar with.