Diminishing Returns
Diminishing returns occur when additional effort or input produces smaller gains. Adaptation can contribute, as in the book’s account of Viking raids becoming more costly as Paris strengthened its defenses, but it is not the only reason returns diminish.
THE IDEA
Additional effort does not always produce the same gain. In the economic law of diminishing marginal returns, increasing one input while holding others fixed eventually adds less output per additional unit. More fertilizer, for example, cannot indefinitely increase the yield of the same field.
Adaptation can also reduce a strategy’s effectiveness over time. A competitor responds, an audience tires of an advertisement, or a defender learns how to resist an attack. These cases are related to diminishing returns, though they do not all involve the same mechanism.
The Viking raids of Paris
The book illustrates the idea with the changing costs of Viking raids. In its account, Charlemagne’s death in 814 left a power vacuum. A small Viking fleet sailed up the Seine in 820; a raid in 841 targeted the wealthy abbey of Saint-Denis, with Asgeir taking hostages for ransom or slavery.
In 845, Reginfred, possibly Ragnar Lodbrok, led 120 ships up the Seine. Charles the Bald divided his forces between the riverbanks, allowing the Vikings to concentrate their attack. They received a ransom of seven thousand pounds of silver and gold and left.
The book reports that between 845 and 926 the Franks paid an estimated 685 pounds of gold and 43,000 pounds of silver. Payments encouraged further raids, while fortifications made them harder. Walls, bridges, and guarded towers forced attackers into lengthy sieges that consumed supplies and weakened their forces.
In the account, a weakened Viking leader in 886 requested sixty pounds of precious metals. In 911, Rollo accepted land, a title, and marriage to Charles the Simple’s daughter in exchange for defending the area against further attacks. The settlement became Normandy.
The Vikings were never defeated; rather they allowed themselves to be assimilated. —Neil Oliver
The main body of Vikings were given lands in the Seine basin in exchange for protecting Paris. They settled into northern France and within a century were speaking a dialect of French and became known as the Normans. —Mark Kurlansky
The useful comparison is between the return on another raid and the cost of mounting it. As defenses improved, an approach that had once paid well became less attractive.
Deciding what to do next
Declining returns invite a comparison, not an automatic decision to quit. Another increment of effort may still be worthwhile. Ask what it is likely to produce, what it costs, and what else the same resources could accomplish. Improving the current approach, changing a limiting input, accepting the present result, and trying another opportunity are all possibilities.
When to use it
Advertising: compare the expected gain from further spending on an established channel with the cost and uncertainty of testing another channel.
Resource allocation: compare the marginal benefit of adding more to an existing investment with the alternatives. Strong past performance alone does not establish diminishing future returns.
Fitness: if progress slows, examine recovery, workload, technique, and goals before deciding whether to change the routine.
Innovation: A technology product initially groundbreaking sees waning demand as the market saturates. Developing new features or entering new markets can sustain growth.
A company spending heavily on improving a mature product sees minimal performance gains; they reallocate R&D budget to new, higher-potential innovations.
A student studying for an exam finds that after 4 hours, additional review yields little retention; they switch to rest or a different subject.
A farmer adding fertilizer to a field: the first application boosts crop yield significantly, but further applications bring smaller increases until they are no longer cost-effective.
FROM THEORY TO EVERYDAY LIFE
In practice
Viking Raids on Paris (845–911)
The book describes a raid in 845 yielding 7,000 pounds of silver and gold. Later fortifications made attacks more costly; in its account, a weakened leader in 886 requested 60 pounds. In 911, Rollo accepted a territorial settlement. The illustration concerns changing rewards and costs, rather than a precise calculation of each raid’s return.
Squeezing a Lemon
The first squeeze yields a lot of juice with little effort, but each subsequent squeeze requires more effort for less juice, illustrating diminishing returns.
Skill Acquisition
Early language study may bring quick gains in basic vocabulary, while later improvements in fluency require more practice and feedback. Smaller visible gains do not necessarily mean that continued study is no longer worthwhile.
A MOMENT TO REFLECT
Put it to work.
When have you persisted in a strategy despite declining results? What could you have done differently?
Identify a current situation where you're seeing diminishing returns. How might you adapt your approach?
Why is it difficult to recognize diminishing returns and change course?
In which areas of your life or work are you experiencing diminishing returns? Are you still investing too much effort for too little gain?
How can you reallocate resources to where they can have a greater impact?
When should you stop optimizing and accept 'good enough'?
CONTINUE THE CONVERSATION
Source texts
- The Great Mental Models Volume 3 Systems and Mathematics
- The Great Mental Models Volume 3 Systems and Mathematics