When More Equals Less – The Law of Diminishing Returns

I found myself running more but running less.

I found myself sleeping more but energised less.

I found myself with more writing time, but writing less.  

I found myself doing more of the “right things”, but instead achieving less. Running slower, feeling more lethargic, delivering less.

What had gone wrong? I soon realised I had stumbled upon the Law of Diminishing Returns.

WHEN RIGHT GOES WRONG -THE LAW OF DIMINISHING RETURNS

Diminishing Returns – increasing units of input generates a lower output rate e.g. 4 chefs are able to produce 92 meals (23 meals each) but 5 chefs only produce 100 meals (20 meals each). Negative Returns – each additional positive input leads to a loss in output e.g. at max. output, 6 chefs produce 108 meals but 10 chefs produce 95 meals, lower than the output of the 5 chefs above.

The Law of Diminishing Returns indicates that there is an optimal point at which more effort no longer delivers greater returns, and in fact leads to lessening returns.

It invalidates our inherent assumption of a continuous linear relationship between putting “more good in” and getting “more good out”.

It illustrates that beyond a certain point, the more we have of something, the less satisfaction we derive from it. A study by Princeton University researchers Daniel Kahnerman and Angus Deaton found that happiness increased with earnings up to a limit of $75,000, beyond which it levelled off. Another study in 2018, showed that happiness levels actually decreased when people earned more than $105,000.

Alike travelling somewhere new for the first time, or having a taste of a treat we’ve denied ourselves for a while – the buzz and excitement of doing so, at first, temporarily raises our gratification levels. But it eventually wears off, particularly once we do it for a second, third and fourth time – once it becomes repeated. We sink back to our happiness setpoint, and look for the next best thing to increase our happiness – a bigger salary, bigger house, higher status position…

The law of diminishing returns explains why sleeping more does not lead to feeling more rested, if those additional hours take you over the amount of sleep needed for optimal rejuvenation. It explains why having more time does not lead to greater productivity. It is our focus that needs to be managed. After all, “work expands so as to fill the time available for its completion”.

Diminishing returns explain why having more choice can lead to less effective decisions – or even no choice due to analysis paralysis.

Its why you can have a room full of intelligent people who are in fact, collectively stupid.

It’s the classic case of working harder rather than smarter.

When did MORE become synonymous with BETTER? What’s the solution?

1. SET LIMITS

To escape the false notion that more always means better, learn to honour and respect the rule of diminished returns, by setting limits. Limit the amount of time available to complete a task to help increase the pressure on you to focus and deliver. Set deadlines and targets e.g. X number of blog posts per month, X number of hours of exercise per week, X number of treats per week. By setting restrictions, you help make it imperative for you to achieve your goals, and avoid the trap of Easy-to do Easy-not-to-do”.

2. FOCUS ON VALUE

Move away from choosing quantity over quality by focusing on things of value.  Being busy does not equate to being productive. What tasks or things do you derive the most value from? Savour and utilise the things that bring you maximum value rather than striving for many things giving you minimal value. Remove those things of lesser priority, that may be distracting you from attending to matters that bring you greater success and fulfilment. As Pareto’s Principle states:

80% of the results come from 20% of the causes. A few things are important; most are not.” (Richard Koch)

Imagine everything you have right now is enough for you to be happy or successful. How and what would you think or do differently? Are you fully maximising the resources you currently have, or constantly thinking you need something more? Are you thinking you need more resources, rather than being resourceful? What could you leverage?

When reading this article, what one thing sticks out to you? Take that one thing and implement it.

“The smallest of implementations is always worth more than the grandest of ideas” (Robin Sharma)

3. TREAT THE OTHER LIMITING FACTORS

The law of diminishing returns is actually an economic concept which states that “if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output”.

Therefore, from a systems point of view, the question to consider is –  if I increase input X, what changes do I need to make to other related inputs to ensure productivity increases as expected? Changing a single factor can actually lead to a lowering of productivity if you haven’t addressed other supporting factors and dependencies. This is about considering the next potential limiting factor in the system, as a result of a change to another factor.

For example, employing more chefs (input) after a certain point does not lead to a linear increase in productivity. During a shift, 1 chef produces 50 meals, 2 chefs produce 100 meals, 4 chefs produce 200 meals, but 5 chefs still only produce 200 meals. Why? Because other factors have not been changed to support the increase of this input – a larger kitchen with more resources is needed to allow the chefs to work effectively and overcome competition between chefs for space to cook (oven space, counter space) and equipment to cook with. These supporting factors have now become the limiting factor in the success of the system, and need to be addressed to allow for an increase in productivity.

Similarly, I found that running more frequently led to diminishing returns. I started to run slower, and found myself unable to complete distances I had previously been more easily able to achieve.  I found that running more frequently led to overuse of the same muscle groups, leading to greater fatigue and therefore worsening results. I hadn’t addressed other supporting factors which would lead to a successful change, such as diversifying my exercise to include strength training, stretching after exercising, and eating a diet to provide greater energy for an increased running schedule.

4. SHARE YOUR GAINS

Numerous studies show that we derive greater happiness through giving to others than in receiving. As we have seen above, there is a limit to which we can derive sustained happiness from earning more money or buying bigger and better material objects.

Therefore, when we surpass the optimal level of satisfaction we can gain from these pursuits, we can instead choose to give our additional gains away, to others. Allow others to share in your wealth. Give to others and gain pleasure from seeing others do something – you have done often – for the first time. Become a philanthropist and see your happiness surpass the optimal level of diminishing returns.

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