“His focus on cost, as well as his natural controlling instincts, led him to want to manufacture as many components as possible in-house, rather than buy them from suppliers, which was then the standard practice in the rocket and car industries. At one point SpaceX needed a valve, Mueller recalls, and the supplier said it would cost $250,000. Musk declared that insane and told Mueller they should make it themselves. They were able to do so in months at a fraction of the cost. Another supplier quoted a price of $120,000 for an actuator that would swivel the nozzle of the upper-stage engines. Musk declared it was not more complicated than a garage door opener, and he told one of his engineers to make it for $5,000. Jeremy Hollman, one of the young engineers working for Mueller, discovered that a valve that was used to mix liquids in a car wash system could be modified to work with rocket fuel.” Elon Musk, Walter Isaacson, p.112
Parkinson’s Law is the observation that a person operates within the constraints they are set. If you tell someone to complete a task in 16 hours, they will take the full 16 hours but if you double it to 32 hours, they will take the full 32 hours. The same can be said for the reverse where reducing the constraint to 8 hours will result in a person using those full 8 hours.
This extends not just to time, but budgets, resourcing, and any other constraint on an outcome. It’s important for startups to take this into account when implementing their incentive structure in their company. While giving kudos and congratulating team members is great, it shouldn’t be done for any and every little project. What this does is it calibrates colleagues to what the bar has been set to, and if they’ve been congratulated for mediocre work then they know they won’t need to exceed that effort in order to be in good standing.
Budgets is also where this law comes into play. It’s better to be pragmatic around a company’s burn rate and even have a more pessimistic view. One thing I enjoy advising founders on, is when they create their quarterly roadmap, to assume they only have 3 months of runway left and need to be selective about what they build, the true impact it has to the company’s bottom line, and to be conscious of the added time and monetary cost. For example, integrating with a third-party provider may seem like a good idea, but if this doesn’t move the company’s north star metric, then it isn’t worth the cost in terms of money, team’s headspace and time, ongoing integration upkeep efforts, and the back and forth meetings while a third party provider is integrated.
This simply sends the wrong message to the team — if we’re this loose with how we allocate our time and resourcing, then we don’t rise to the bar we set, we fall to it.