Inefficiency Yields Opportunity

The world is filled with inefficiencies, large and small. I just called my credit card company to activate a new credit card and had to sit through a 90-second prerecorded message about the recent Target data breach and how it might affect me. I had to listen to the entire recording to get to the card activation menu, which was a waste of time because the Target issue has zero impact on me. (Since the new card has never been used, there's no chance that it would've been in Target's compromised database.)

Wasting a minute and a half is not a huge deal, but it really adds up when you consider all of the credit card company's customers. If the company forces one million people to listen to that message, that sums to 3 man-years of time. It's a sad fact to ponder: because someone decided to play a useless recording for every card activation, 3 years of productive time were taken away from the world. Many companies use these types of prerecorded messages: hospitals announce flu shot updates before letting you schedule an appointment, movie theaters advertise upcoming movies before letting you hear their hours of operation, and credit card companies tell you your balance and due date before offering you billing options.

Google offers a more dramatic example of this type of calculation. I just timed a few searches from my laptop and found that search results are displayed after about 0.4 seconds. What if each search took 0.5 seconds? A tenth of a second is not a big deal, right? Well, Google handles 12 billion searches per month, so if every search took a mere 0.1 seconds longer, Google would be generating almost 500 man-years of wasted time each year — the equivalent of six human lifetimes.

These are two instances of small things that add up to a lot, but the same math applies to larger examples of waste. The epitome of inefficiency is the DMV. A few web searches suggest that the DMV handles about 200 million in-person visits every year, and the average waiting time per visit is about 30 minutes. That means that each calendar year, Americans spend an aggregate of over ten thousand years waiting at the DMV! If you could somehow eliminate DMV wait times and give those hours back to the people, you could increase the work output of the United States by 0.05% — a significant amount considering the size of the GDP. 

The point here is not to criticize organizations but to show the significance of inefficiencies that are repeated over and over. People spend too much time waiting in lines, waiting in cars, waiting at their computers. They also spend large sums of money on transaction brokers, information brokers, commission fees, and transaction fees. Many of these inefficiencies could be reduced or even eliminated. If you have an entrepreneurial mindset, then every inefficiency presents a promising business opportunity. Do you think people spend too much time navigating automated phone systems? Build GetHuman. Are you a restaurant owner who's frustrated that working with food suppliers requires voicemails, faxes, and paper forms? Build Sourcery. Do you wish that USPS could delivery packages more quickly? Build Fedex. The list of opportunities is endless.

When venture capitalists research a startup, they want to know that it's doing something valuable. Often, "something valuable" translates to helping people save time or money (or both), and many huge companies were built around these principles (Walmart, Intuit, Travelocity, et cetera). If you're looking for business ideas, find a place where resources are squandered and fix it.

Analyzing inefficiencies is also useful if you have an existing business. You already have customers using your products, so think about how you can save them even more time and money.* Even simple things like remembering that someone is logged in or adding shortcut links for the most common actions can have a big impact when summed across all of your customers. Furthermore, just like saving five minutes per customer is significant to your company when you have 1000 customers, saving five seconds per task is very valuable to a customer who has to perform 1000 tasks. If you allow people to be more efficient, whether in terms of time or in terms of money, they will love your product and help you stay in business. If you don't concern yourself with eliminating inefficiencies, you're giving your competitors a wide opening.

* Saving people money can lead to them spending more with you. See Walmart, Amazon, and subscription services such as Spotify that charge a little bit per month instead of a lot up front.

Bonus section

3 specific things that I think are inefficient right now:

  • Startups often reinvent the wheel when it comes to designing interview processes, performance reviews, salary levels, etc. Why isn't there a global repository of best practices, common legal documents and contracts, and so on?
  • I can't pay for someone's expertise by the minute. Most consulting services charge by the hour or the day, but there are many times where I just need a few minutes of advice. If I need 10 minutes of help, then I'd much rather pay for 10 minutes at a $200/hour rate than for 60 minutes at a $100/hour rate.
  • There are tons of great business books out there, and several professional book summary services (e.g. and Why isn't there a crowdsourced summary service where people can summarize small chunks of books and get access to all existing book summaries? For most books, I'd much rather read a 5-page summary and get 80% of a book's value than read the entire 300-page book.

(Caveat: I search the web for solutions to these problems every year or two and haven't found anything yet, but it's possible that something relevant has popped up since the last time that I looked.)