Save to My Latticework unsave

Law of Diminishing Returns
Law of Diminishing Returns
Law of Diminishing Returns
save0 saved view9.9K views
Share this with your network
Share this with your network
Overview

Think back to the last time you overindulged in a huge, delicious dessert. It’s likely that the first bite was divine, but perhaps ...

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sic exclusis sententiis reliquorum cum praeterea nulla esse possit, haec antiquorum valeat necesse est. Ut placet, inquit, etsi enim illud erat aptius, aequum cuique concedere. Quis suae urbis conservatorem Codrum, quis Erechthei filias non maxime laudat? Videsne, ut haec concinant? Luxuriam non reprehendit, modo sit vacua infinita cupiditate et timore. Duo Reges: constructio interrete. Quorum altera prosunt, nocent altera. Quia, si mala sunt, is, qui erit in iis, beatus non erit. Illud mihi a te nimium festinanter dictum videtur, sapientis omnis esse semper beatos; Ita multo sanguine profuso in laetitia et in victoria est mortuus.

Sint ista Graecorum; Te enim iudicem aequum puto, modo quae dicat ille bene noris. Res tota, Torquate, non doctorum hominum, velle post mortem epulis celebrari memoriam sui nominis. Virtutis, magnitudinis animi, patientiae, fortitudinis fomentis dolor mitigari solet. Suam denique cuique naturam esse ad vivendum ducem. Quam ob rem tandem, inquit, non satisfacit? Confecta res esset. Cum id fugiunt, re eadem defendunt, quae Peripatetici, verba. Polycratem Samium felicem appellabant. Aliter enim explicari, quod quaeritur, non potest.

Stuprata per vim Lucretia a regis filio testata civis se ipsa interemit. Dolor ergo, id est summum malum, metuetur semper, etiamsi non aderit; Et si turpitudinem fugimus in statu et motu corporis, quid est cur pulchritudinem non sequamur? Hos contra singulos dici est melius. Ita cum ea volunt retinere, quae superiori sententiae conveniunt, in Aristonem incidunt; Restant Stoici, qui cum a Peripateticis et Academicis omnia transtulissent, nominibus aliis easdem res secuti sunt. Quid, cum fictas fabulas, e quibus utilitas nulla elici potest, cum voluptate legimus? Nec tamen ullo modo summum pecudis bonum et hominis idem mihi videri potest.

Share this model with your network to be smarter, faster, together!
Actionable Takeaways
  • Find the optimal peak. 

Know that ‘more of a good thing is not always better’ ...

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed erat aequius Triarium aliquid de dissensione nostra iudicare. Tum Triarius: Posthac quidem, inquit, audacius. Quare, quoniam de primis naturae commodis satis dietum est nunc de maioribus consequentibusque videamus. Graecis hoc modicum est: Leonidas, Epaminondas, tres aliqui aut quattuor; Eorum enim est haec querela, qui sibi cari sunt seseque diligunt. Etenim nec iustitia nec amicitia esse omnino poterunt, nisi ipsae per se expetuntur.

Sed non sunt in eo genere tantae commoditates corporis tamque productae temporibus tamque multae. Non risu potius quam oratione eiciendum? Tu autem negas fortem esse quemquam posse, qui dolorem malum putet. Ita ne hoc quidem modo paria peccata sunt. Tubulum fuisse, qua illum, cuius is condemnatus est rogatione, P. Et quidem iure fortasse, sed tamen non gravissimum est testimonium multitudinis. Quid de Platone aut de Democrito loquar? Nam Pyrrho, Aristo, Erillus iam diu abiecti.

Duo Reges: constructio interrete. Mihi quidem Homerus huius modi quiddam vidisse videatur in iis, quae de Sirenum cantibus finxerit. Dicam, inquam, et quidem discendi causa magis, quam quo te aut Epicurum reprehensum velim. Comprehensum, quod cognitum non habet? In his igitur partibus duabus nihil erat, quod Zeno commutare gestiret.

Limitations

The Law of Diminishing Returns is based on a number of assumptions that are not always relevant to real-world situations. These include: 

  • No change in technology

  • A short period of impact

  • Consistent, homogeneous units

  • Measurement of product using tangible units. 

Each of these assumptions might be challenged in the real world. Technology is always progressing, the units of input are likely going to vary (hiring one person compared to another person will have different impacts) and even the questions of measurement will be more complex beyond the narrow assessment of weight or financial value. 

It relies on a static, predictable system which is rarely true or at least has clear limitations when applied to the complexity of reality.  

In Practice

Too Many Cooks. 

A useful example to explain this model is to consider a small food truck that sells doughnuts. If that truck has one cook, they might be able to produce 20 doughnuts every hour. Adding one more cook might increase that output to 40 doughnuts every hour. However, adding a third cook might only allow them to produce 45 doughnuts every hour because of the limited space and resources in the truck, and adding a fourth cook might not add any returns at all.

Build your latticework
This model will help you to:

d

Origins & Resources

The concept of Diminishing Returns has a rich and long history, being traced back to economists such as Adam Smith, Jacques Turgot, and Thomas Mathus. The earliest explicit references to this model were in relation to farming outputs and can be attributed to Thomas Malthus and David Ricardo.

My Notes

    Nothing here yet. Join ModelThinkers and login to be the first to comment.
Already a ModelThinkers member? Please log in here.

Oops, That’s Members’ Only!

Fortunately, it only costs US$5/month to Join ModelThinkers and access everything so that you can rapidly discover, learn, and apply the world’s most powerful ideas.

ModelThinkers membership at a glance:

Small mark
UNLOCK EVERYTHING
Access all mental models and premium content.
Small mark
BUILD YOUR LATTICEWORK
Save models to your personal list.
Small mark
QUICKLY MEMORISE MODELS
Use our Learn function to embed models to memory
Small mark
PERSONALISE MODELS
Add your own notes and reminders.
Small mark
BUILD YOUR ‘EXTERNAL BRAIN’
Discover a new idea? Capture it by adding a new model.
Small mark
JOIN THE MT COMMUNITY
Rate models, comment and access exclusive events.

“Yeah, we hate pop ups too. But we wanted to let you know that, with ModelThinkers, we’re making it easier for you to adapt, innovate and create value. We hope you’ll join us and the growing community of ModelThinkers today.”

Arun Pradhan & Shai Desai
CoFounders, ModelThinkers.

You Might Also Like:

- Actionable summaries of the world's most powerful ideas.