The 1st version is rife with hacks and inefficiencies, but it works.
The 2nd version builds upon all the learnings of the first version, but is bloated because every little lesson learned is applied.
The 3rd version is where the experience and data gained from the first two iterations really starts paying off. The code is more efficient and the team knows what is truly important and what isn't.
P.S. Has anyone else heard this anecdote before as well? I've tried tracking down its origin to no avail.