Point of diminishing returns

What does it mean?
It means that once you've spent a certain amount of money on her, spending more money won't mean that you will get lucky more often.

Oops, I got off track.

It means that the marginal utility of the extra musical satisfaction is less than the marginal utility of other uses for your money.
And it's a really tricky concept when it comes to connoisseurs, which we audiophiles are.

Someone might argue that the Zu Definitions at $9,000 are not 3 times better than the Druids at $2800 and continue to say something about diminishing returns. But the Druid doesn't need to be 3x better (whatever that would mean), it just needs to be $6200 better to you, the prospective buyer. Now Zu might come out with a Super Signature Definition Gold, which has upgraded components and wiring and costs $16,000. While the Definitions may have been worth the extra $6200 over the Druids, you may feel that the new Super Signatures have reached that point of diminishing returns for you. But there will be someone out there for whom they will be worth the extra $7K.

We pay a ton for that last bit of refinement or that last half octave of bass. Whether it is worth it is a decision no one can make but each of us.
Excellent answer, Drubin.
I read Drubin's explanation real fast and my head twisted off my shoulders and landed across the room. I went over, picked it up, put it back where it once was and came back to re-read the post slower. I'm still not sure I understand...oh well.

A macroeconomics term. As explained to me in Economics 101 ... once ice cream is great; two ice creams are very good; five ice creams make you sick. In other words, the more you consume, the lesser the incremental utility (enjoyment) you get for your money.

An audio metaphor might be ... a $400 amplifier (think NAD C320BEE) gets you 85% of the utility/enjoyment that an amplifier would give you. A $2000 amplifier (think Creek Destiny) gets you 95% of the utility/enjoyment. That extra 10% utility would cost you $1600, as opposed to the first 85% would cost you (on average) less than $50 for each 10% utility. That's the law of diminishing returns, in a nutshell.

BTW, most things work this way.

REgards, Rich
Mt10425 -- Ha! Yeah, I wasn'r really explaining the term, which Markphd and Rar1 did superbly. I wanted to make a point about the relationship between price and value in our hobby.
Drubin-It sure was fun to read though. ;)
Rar1 -
Is it a Federal Law? Does it apply in all 50 States?
My thoughts on the meaning correspond with your explanation but my eloquence certainly doesn't.
It still seems as vague as Drubin's version, however, because that utility thing is utterly subjective, is it not? I mean it seems to be a criterium that we cannot quantify. The point of diminishing returns is not on a map or a curve anywhere. It's like Pirsig's "quality". We all feel we know what it is until we try to define it.
I hear ya Drubin. Clear as day to this audiophool..
if the value in use equals the value in exchange, there is no point of diminishing returns.

as price increases, there is some point when the value in exchange exceeds the value in use.

another words, someone will continue to pay more and more for a component until he/she perceives that a component is overpriced.

there is no absolute number. for some a $2000 preamp is the point of diminishing returns, while for others it may be $5000. in any case, it is subjective.

for the mathematicians out there when the rate of change of value with respect to the rate of change of price begins to decrease, the point of diminishing returns is reached.

there is no absolute answer.

also, someone may be willing to upgrade , paying 50 % more in price to get a 10 % improvement, because it is worth it to that person.
Mt10425: I so couldn't understand how it was that you couldn't understand Drubin's post, my head twisted off my shoulders and landed across the room. I went over, picked it up, put it back where it once was and came back to re-read your post slower. I'm still not sure I understand...oh well.

(Now *there's* a post that'll really make heads spin ;^)

P.S. -- Any further comment on this will have passed the point of diminishing returns.
Some years ago, I saw a graph on the relationship of dollars spent to sonic improvement in speakers. Every dollar spent yielded a straight vertical improvement in sound, up to $1200.00, where the graph started to curve, showing less and less sonic improvement per dollar spent. You still got improvement, just less and less per dollar.
The point of diminishing returns is just past the amount of money you have spent and justified to yourself as necessary to achieve the sound you want, and just before the amount of money other idiots have spent on their systems for sound refinements that are clearly not worth the money.

It is also right at the point in the price performance curve where component comparisons shift from differences described as KICKS ASS to differences described as "I think I can hear...."
When you wife says "If were ever get a divorce, I'm keeping this stuff" that is the point of diminishing returns.
when your divorce attorney asks to see your financial statements <(:{
In our hobby;it depends where our focus is placed. (Think,OJ trial.)A decent boom-box or 200k in components both play music,with a ka-jillion steps between them. I would guess there are some whom have had the same pieces for 5//7/10 years.Then there's me and many others trading all the time. Speakers are a great example for this 'P of D R' theory___ That is, in someone else's opinion.__ My money, my choices,my enjoyment. That extra 2% is what makes my boat float. Some things are just hard to place that 'P of D R' on. If money is your main focus you will have a different point of reference. I say enjoy what you can afford and expect 'that' should be more important than other opinions.

Most of the responses seem to have addressed the theory of diminishing returns, but you asked about point of diminishing returns. Imagine a plot of goodness as a function of cost. Assuming you have a metric for goodness -- the great devil for audiophilia, at some point the resulting curve will reach asymptot, goodness will cease to rise in direct proportion, or even substantially, with cost. That's the point of diminishing returns. For some audiophiles, cost and the concommitant bragging rights are intertwined, so their sense of goodness rises in lock step with cost. For them, a point of diminishing returns will not exist. Same is true with collecting, where the metric is rarity and rarity usually corresponds to cost.

Most of the threads here are a prime example of this theory at work, in that the effort spent to read post #70 will require the same energy that it took to get 90% of the answer in post #4. And yet, post #70 may provide you with only 2% of additional information. But when it finally clicks, it all gels like magic, right?

That's why that 2% is priceless, IMO.
Hi All,

The "point of diminishing returns" typically describes the amount of performance that is achieved at a particular price point (from a specific product or from a group of products) and how much more money it will take to achieve a significant improvement in performance. If the original price point is sufficient and the product is of good quality it will usually take quite a bit more money to buy a product with significantly higher performance. Of course, when we are discussing audio components it is very subjective but that is the general principle.

For example: a $500.00 high quality pair of loudspeakers has a particular level of performance (usually pretty good in a number of areas). To buy a different speaker that is 50% better in those areas (and possibly better in a few other areas as well) may require spending 100% more money ($1000). The amount of improvement (50%) is not equal to the amount of extra money spent (twice as much). To achieve an even higher improvement (75%) compared to the original speakers may require spending four times the amount of money (400% or $2000). As you can see, as higher and higher levels of performance are desired it requires a progressively disproportional amount of money to be spent. These percentages and amounts are only used here for illustration and may not necessarily coincide with your experience or perception.


we are all forgetting an important consideration, namely priority or valence.

what is the value placed upon listening to music, i.e., how important is it to really enjoy the music in comparison to other activities in life ?

if audio/music is very important improvements in sound will be more highly valued, than, as an example, an improvement in the experience of watching a dvd.

ultimately the point of diminishing returns depends upon the relative importance of an activity and the value placed upon the quality and quantity of an improvement.
Yea Barry. That is the most easy to understand explanation. I knew there was a simpler answer to a complex question. Just as the others, it's not definitive, but a great illustration just the same.
When there are more reasons NOT to buy than TO buy.

Meaning spending more money may yield improvements but there are downsides which outweigh the improvements.
For example, a bigger amp would have more power but sound quality would be worse due to extra gain stages or transistors/ tubes used to achieve the higher power ratings.
When you no longer enjoy listening to music because your system is way too revealing of recording flaws.