The Law of Diminishing Returns is a commonly held belief that says spending increasingly more for something results in less and less return in performance for that increasing expenditure. To use audio as an example, if you buy a system for $900 versus $1000, the quality difference that last $100 buys you is less than the quality increase when going from an $800 system to a $900 system. And the performance benefit that $100 buys you is less than the $100 difference between a $700 system and an $800 system. Similarly, with a million-dollar system, the last $100k gets you very little sonic improvement, according to the conventional wisdom.
The Law of Diminishing Returns seems perfectly rational, and certainly applies to many fields. And yet to someone trying to assemble the best-sounding audio system for a given budget, The Law of Diminishing Returns can also be a fallacy. In fact, one could make the case that an audio system follows what I’ll call The Law of Accelerating Returns—that the additional money spent provides a disproportionate amount of the system’s overall performance.
There are two reasons why I believe that, in a carefully chosen audio system, The Law of Accelerating Returns applies. The first is that every genuine upgrade of one component allows each of the other components to perform better. For example, if you have a power amplifier that is extremely transparent and dimensional yet feed it from a source that lacks the amplifier’s level of transparency and dimensionality, you’ll never realize the benefits of the amplifier’s quality. The last $500, or $5000, or $50,000 you spend on your system’s source not only buys you a better source, but also unlocks the previously unrealized potential of your other components.
Secondly, music lovers don’t respond to better sound in a predictable and linear fashion. Instead, we sometimes find musical meaning in what are objectively “small” differences in sound quality. Let’s say that you have a $10k system and spend an additional $2000 upgrading the DAC. The Law of Diminishing Returns would say that this last $2k spent is the least significant contributor to the system performance. Let’s also say that the DAC better resolves dynamic inflection and transient speed, revealing “subtle” dynamic gradations and accents by a drummer in your favorite music. You suddenly have a newfound awareness of the drummer’s artistry, along with a deeper perception of the music’s rhythm. You may discover a profound aspect to the music’s beauty that you hadn’t heard before. Far from offering only incremental improvement, the expenditure for the DAC transforms the system and elevates your musical experience to a new level. This is just one of countless ways in which, given the right improvement to the system, we don’t experience sound quality differences along a linear continuum. There is often a “step function” in which a “small” difference pushes the listening experience over some threshold into the transcendental.
In an interview I conducted many years ago with Meridian Audio’s Bob Stuart, he introduced a concept he called “the increasing importance of the smaller difference.” Bob noted that humans are highly attuned to discriminating small differences between similar things. He pointed out that in dog shows, we don’t compare different breeds to other breeds; rather, we discern exceedingly fine variations between individuals of the same breed. It’s those fine variations that separate the champion from the also-ran.
I experience The Law of Accelerating Returns in my audio system on a regular basis. Just the other day I replaced a 1.5m interconnect between the phonostage and linestage with a more expensive model. According to The Law of Diminishing Returns, this additional expenditure should have bought me only a marginal improvement at best. But replacing that interconnect vaulted the system’s sound to a new level. Far from a diminishing return, the interconnect provided perhaps the greatest performance-improvement-per-dollar of any component in my system.
The Law of Diminishing Returns is often used to dismiss the highest of high-end gear—it costs so much more but the performance gains are marginal at best. But in my experience, when it comes to audio systems and our perception of reproduced music, it’s The Law of Accelerating Returns that prevails.
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