Diminishing Returns
This is a preview of a concept contained in The Personal MBA by Josh Kaufman, a book that will help you master the fundamentals of business, hone your business instincts, and save a fortune in tuition. The Personal MBA distills the most powerful principles of business and delivers them quickly and concisely. Order your copy now…
What does “Diminishing Returns” mean?
“The last 10 percent of performance generates one-third of the cost and two-thirds of the problems.” — Norman R. Augustine, aerospace executive and former U.S. under secretary of the Army
Key Points:
- Something suffers Diminishing Returns: when, after a certain point, having more of it becomes detrimental.
- Optimizing everything to perfection is almost impossible. After picking the “low hanging fruit”, further optimization can cost more than the returns you’ll reap.
- Optimize until reaching the point of Diminishing Returns, then focus on something else.
Questions for Consideration:
- How can you identify the point of diminishing returns?
- How much optimization is enough before you decide to focus on improving something else?
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