The Law of Diminishing Returns

Estimated Lesson Time: 3 minutes

The law of diminishing returns simply states that at some point the same effort yields less favorable results. This law can be adapted to many areas of life. Understanding and recognition of this law play an important part in success.

If you have a gallon of your favorite ice cream and start to eat it, the first bite may bring you to your knees while groaning “ummmmm.” The next few bites will be good as well but may not have the same effect. By the time you are halfway through the gallon, you may be feeling like dropping to your knees, but for a completely different reason. Perhaps this law is the reason for the popularity of the banana split—lots of ice cream, but one scoop of vanilla, one of chocolate, and one of strawberry. With each change, your stomach may be just as full, but your mind has a new experience and the point of diminishing return shifts. This is the law of diminishing returns in action, and it applies to all foods as well.

In business, recognition of this law and its presence is vital. In the business world, this law is often referred to as “spinning your wheels,” that is, putting forth much effort with little return. However, it is harder to recognize when your actions produce great results at the onset and then diminish. Very often, people become stubborn and proceed with the same action without change. Learn to recognize the point where it is time to move on to something else.

When I started Archieboy, we built web hosting companies. With our first web host, we reached a point where no matter how much additional effort we put into marketing and promotion of the company, we would see the same general results. This is the point of diminishing return. We then proceeded to create new hosting companies where our efforts would produce much greater returns. This strategy is commonly used in business and referred to at times as line extension.

The inventor of the banana split knew how to sell more ice cream and counter the law of diminishing returns by subjecting the customer to change. This is a very powerful technique used by those in marketing. For example, I have much information to get across in this book. Instead of grouping the days by general topics (motivation, time management, communication, etc.), I mix up the topics almost daily. Each time the reader comes to a new topic, the interest is restored, and the point of diminishing returns is pushed back. Eventually, however, the point will be reached despite the number of changes.

Recognize this law in your personal life as well. For example, in study you may find that when you read for 30 minutes at a time you retain most of the information and maintain interest, but if you push that 30 minutes to one hour, the second 30 minutes you find yourself drifting and retain almost nothing. At the 30-minute mark, the law of diminishing returns has kicked into effect.

Understanding this law will have a significant effect on your productivity and time management. As we have seen, it can also be applied to other areas of our lives as well. Learn to recognize when you are “spinning your wheels,” and change your actions or behaviors to become more productive in all areas of your life.

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 Some discussion questions (some may not apply to this lesson):

• Have you implemented this idea in your life? How has it been working for you?
• Do you have any interesting stories related to this lesson? Do tell!
• What do you admire most about this person? (success biography days)