Diminishing Returns: The Optimal Budget

You've heard of the phrase 'diminishing returns'. You've probably come across the 80/20 rule in some form. You may have doubled pennies on the squares of a chess board. You may know what an exponential or logarithmic curve looks like. But do you apply the principle to an audio system purchase? Unless you're in the minority of 'final 20% explorers' to whom money is no object, maybe you should.

Most hi-fi equipment is sold to buyers with itchy feet: endlessly lured by the promise of the latest 'system-transforming' component raved about by some hyperbolic reviewer or forum member; tantalised by the prospect of the removal of apparently ever-thinner 'veils' from the music. Resolutions about how much money you're prepared to spend on a given bit of kit tend to weaken over time, but where will it all end?

At the risk of going all 'Open University', let's take a sobering look at a (roughly) exponential curve on which we might plot every hi-fi component in a perfect world, according to how good it is, and how much it costs:

The maximum value on the horizontal axis would be that indistinguishable from live performance. The curve here stretches infinitely, and infinitessimally closer to a point limited by current technology, but in truth never really gets very close to the real thing. Fascinatingly, mathematically and economically, there is no limit to the cost someone can charge – for instance, for an interconnect!

Note that the line between point A and point B – the shoulder of the curve – is close to linear (straight): more money spent will translate fairly directly into better performance, though with less of a return the more you spend. However, from B to C the trend reverses: vastly more needs to be spent to improve the performance of a component by 10% above B than below.

The sweet spot (B) represents a point 80% along the performance axis and only 20% along the vertical (price) axis. In other words, picking an amplifier costing 20% of the most expensive available is generally likely to give you 80% of its performance. If you were very mindful of value, you might conclude that spending up to this figure is worthwhile, and that spending more is not.

Between A and B, you will be tempted by the knowledge that real improvements are available in rough proportion to the cost. Beyond B, you have to shut your ears to the fact that you're burning money for tiny gains. If you're either very a) dedicated, b) wealthy, or c) stupid (commonly two out of three) this will not matter to you.

Being a reflection of human (organic) values, money (economics) follows logarithmic trends with crushingly boring predictability. However, we try to offer products that buck this trend and/or offer excellent value up to the point where it stops making sense (B). This is explored more specifically in a second article discussing system budgets. Don't forget that buying used is a great way to cheat the graph, with certain equipment-specific caveats.