11/24/2023 0 Comments Law of diminishing returnsIf you put a few hours of effort into knowing more about any given investment, you'll get massive knowledge benefits from it. This means that just a bit of effort can already take you a long way. Recognizing this, you can already see how it can have a substantial impact on your investing prowess. As much as you get lower and lower returns for additional effort when you are already proficient, you get much higher returns from your initial efforts. There's also another angle to the law of diminishing returns. Were you to reach the state of the art, and you'd have to advance it yourself - which would be an even slower process. But as you get closer and closer to the state of the art in that field, your knowledge will increase ever slower. If you make an effort to learn something, you will get a return from it. But at some point, adding more training will just lead to small improvements, no improvements at all, or even regression in your ability.Īnother such setting is the acquisition of knowledge in any given field. For instance, it happens when you add more and more fertilizer in agriculture.īut the interesting thing is that the law does not confine itself to just economics or industrial production. There are lots of things where production can be increased by adding more of a given ingredient, but eventually you hit diminishing returns/productivity. This is seen over and over in economic activity. … 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. This law states ( Source: Encyclopaedia Britannica): If you've ever gone through an economics course, or read some kind of book on economics, you've probably already been exposed to the "law of diminishing returns".
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