If something is good, then more of it is even better – right? Wrong!
When studying economics or production theories in business, students will learn about the law of diminishing returns.
It’s a simple concept – Adding more input will only provide a positive benefit to a certain point, then additional input will begin to have a negative effect.
In other words, more is not always better. When you start to add too much of something, you begin to cause more harm than good. You’ll begin to receive less return from each incremental investment.
In business, we consider the law of diminishing returns when we are doing things like determining how many people to assign to a task, or how much money to invest in a campaign.
There are some obvious examples in everyday life too. One or two cups of coffee is great. But how about six?
Then there are some less obvious examples of diminishing returns in our life. Things that seem like adding more will always better, but are actually not.
Examples of Diminishing Returns in Our Life
Clothing – More clothing means more to choose from! We can be more fashionable! Except at a certain point, your closet becomes cluttered, and you can’t find the shirt you are looking for. Suddenly, the volume of clothing you own begins to become a burden.
Luxury Items – A little bit of luxury allows you to enjoy some of the finer things in life. Luxury is great in small quantities in areas that matter to you most. But as you increase the amount of luxury you have, you begin to need luxury in your life (instead of enjoy it), and the cost of your lifestyle inflates.
Technology – Adding some technology products in your life can help improve your productivity, and help simplify by doing more with less. But at a certain point, when everything you own is “smart”, it becomes a burden to manage.
House Size – A lot of people dream of having a larger home. But like everything else, there is a point where adding more square feet stops benefiting you. With larger mortgage debt and more to maintain, a bigger home is not always better.
Where The Benefit Ends
If you find yourself in a situation where you want more of something, stop and consider if it will actually benefit you. Are you at the point of diminishing returns?
Asking this question can be one method of determining when you have “enough” of something.