Inverted law of diminishing returns?

[magiccarpetride]

We all know the law of diminishing returns -- after certain level of quality has been reached, further investments in improving the quality will yield lesser and lesser and lesser returns. Until it reaches such plateau where even enormous investment does not make one iota of improvement.

Applied to hi fi, this law holds that once we purchase relatively high quality equipment (decent turntable, arm, cartridge, phono, preamp, amp, speakers, interconnects, power cables, speaker cables etc.), spending more money on any individual component will not bring us as great of an improvement as we've got when we've upgraded from the ho-hum mid-brow equipment to the more advanced equipment.

But I'd be prepared to challenge that thinking. I recently got a hunch that, once we reach certain level of quality in audio equipment, upgrading any component tends to yield much more dramatic improvements than if we were to upgrade that same component back when we had a mediocre, ho-hum system.

For example, after I've built a pretty decent hi fi system, I reached a point where I felt there isn't much more I could do to improve the quality of the sound. Then, for a lark, I ordered Jelco tonearm to replace my Rega RB300 tonearm. I was certain that the differences between Rega and Jelco will be minimal, if not negligible. But much to my pleasant (nay, delirious) surprise, Jelco elevated my entire audio chain to a whole new level. This upgrade (paid double the price of Rega) improved the quality of sound manifold (meaning, much more than double).

So in the end, I'm starting to think that, at this level, the law of diminishing returns becomes inverted, so that the law of increasing returns suddenly comes into effect.

[struth]

Think you have to go up the chain before it clicks in, assuming the expensive gear the person has is any good, and not just bling. Jelco is a big improvement over a rega imo

[southall-1998]

At the end of the day. Trust your ears!

S.

[Barry]

Think you have to go up the chain before it clicks in, assuming the expensive gear the person has is any good, and not just bling. Jelco is a big improvement over a rega imo

Agree!

[Sherwood]

We all know the law of diminishing returns -- after certain level of quality has been reached, further investments in improving the quality will yield lesser and lesser and lesser returns. Until it reaches such plateau where even enormous investment does not make one iota of improvement.

Applied to hi fi, this law holds that once we purchase relatively high quality equipment (decent turntable, arm, cartridge, phono, preamp, amp, speakers, interconnects, power cables, speaker cables etc.), spending more money on any individual component will not bring us as great of an improvement as we've got when we've upgraded from the ho-hum mid-brow equipment to the more advanced equipment.

But I'd be prepared to challenge that thinking. I recently got a hunch that, once we reach certain level of quality in audio equipment, upgrading any component tends to yield much more dramatic improvements than if we were to upgrade that same component back when we had a mediocre, ho-hum system.

For example, after I've built a pretty decent hi fi system, I reached a point where I felt there isn't much more I could do to improve the quality of the sound. Then, for a lark, I ordered Jelco tonearm to replace my Rega RB300 tonearm. I was certain that the differences between Rega and Jelco will be minimal, if not negligible. But much to my pleasant (nay, delirious) surprise, Jelco elevated my entire audio chain to a whole new level. This upgrade (paid double the price of Rega) improved the quality of sound manifold (meaning, much more than double).

So in the end, I'm starting to think that, at this level, the law of diminishing returns becomes inverted, so that the law of increasing returns suddenly comes into effect.

Many people have a general albeit imperfect understanding of the Hypothesis of Diminishing Marginal Returns and its variant forms. Originally developed to describe the relationship between physical inputs and outputs in a production process, it is defined in Encyclopaedia Britannica as follows:

"Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating 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."

The concept is often confused with a related concept of returns to scale which refers to the potential benefits in terms of input/output ratios of scaling up production per se (i.e. increasing all inputs simultaneously). The "diminishing returns" concept has been "borrowed" in recent years and used to evaluate price/performance ratios. The application of the concept assumes that it is possible to arrive at some consensus on performance and to develop reliable and valid measures of performance (e.g. subjective sound quality). To be precise, the concept does not imply that performance does not increase at all with each additional £ spent, only, that after a certain point, that performance does not increase at the same proportionate rate as spending. If it did, the price/performance ratio, when plotted, would be a straight line.

Of course, when applied to hifi systems, we cannot reasonably plot a continuous price/performance curve, but we can plot points on a curve representing particular hifi system combinations. I have made the point on this forum before, but few would seriously argue that a £10k system is twice as good as a £5k system. The issue is whether an individual values the difference in performance as being worth £5k. Your example is misleading and, forgive me, somewhat confused. You are referring to incremental benefits to an existing system whereby the earlier costs are "sunk costs" and therefore no longer relevant. The question that you are asking is whether you can improve an existing system by a modest investment in upgrading an individual component. It has little to do with the general concept of diminishing marginal returns or its (mis)application to price/performance investment choices.

Geoff

[Jazid]

Many people have a general albeit imperfect understanding of the Hypothesis of Diminishing Marginal Returns and its variant forms. Originally developed to describe the relationship between physical inputs and outputs in a production process, it is defined in Encyclopaedia Britannica as follows:

"Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating 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."

The concept is often confused with a related concept of returns to scale which refers to the potential benefits in terms of input/output ratios of scaling up production per se (i.e. increasing all inputs simultaneously). The "diminishing returns" concept has been "borrowed" in recent years and used to evaluate price/performance ratios. The application of the concept assumes that it is possible to arrive at some consensus on performance and to develop reliable and valid measures of performance (e.g. subjective sound quality). To be precise, the concept does not imply that performance does not increase at all with each additional £ spent, only, that after a certain point, that performance does not increase at the same proportionate rate as spending. If it did, the price/performance ratio, when plotted, would be a straight line.

Of course, when applied to hifi systems, we cannot reasonably plot a continuous price/performance curve, but we can plot points on a curve representing particular hifi system combinations. I have made the point on this forum before, but few would seriously argue that a £10k system is twice as good as a £5k system. The issue is whether an individual values the difference in performance as being worth £5k. Your example is misleading and, forgive me, somewhat confused. You are referring to incremental benefits to an existing system whereby the earlier costs are "sunk costs" and therefore no longer relevant. The question that you are asking is whether you can improve an existing system by a modest investment in upgrading an individual component. It has little to do with the general concept of diminishing marginal returns or its (mis)application to price/performance investment choices.

GeoffTLDR

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[Sherwood]

TLDR

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That is why the concept is so frequently misunderstood!

Put more succinctly: concept misunderstood and inappropriately applied! Inverse of diminishing returns is increasing returns to scale but again not relevant to this example!

Geoff

[magiccarpetride]

Many people have a general albeit imperfect understanding of the Hypothesis of Diminishing Marginal Returns and its variant forms. Originally developed to describe the relationship between physical inputs and outputs in a production process, it is defined in Encyclopaedia Britannica as follows:

"Diminishing returns, also called law of diminishing returns or principle of diminishing marginal productivity, economic law stating 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."

The concept is often confused with a related concept of returns to scale which refers to the potential benefits in terms of input/output ratios of scaling up production per se (i.e. increasing all inputs simultaneously). The "diminishing returns" concept has been "borrowed" in recent years and used to evaluate price/performance ratios. The application of the concept assumes that it is possible to arrive at some consensus on performance and to develop reliable and valid measures of performance (e.g. subjective sound quality). To be precise, the concept does not imply that performance does not increase at all with each additional £ spent, only, that after a certain point, that performance does not increase at the same proportionate rate as spending. If it did, the price/performance ratio, when plotted, would be a straight line.

Of course, when applied to hifi systems, we cannot reasonably plot a continuous price/performance curve, but we can plot points on a curve representing particular hifi system combinations. I have made the point on this forum before, but few would seriously argue that a £10k system is twice as good as a £5k system. The issue is whether an individual values the difference in performance as being worth £5k. Your example is misleading and, forgive me, somewhat confused. You are referring to incremental benefits to an existing system whereby the earlier costs are "sunk costs" and therefore no longer relevant. The question that you are asking is whether you can improve an existing system by a modest investment in upgrading an individual component. It has little to do with the general concept of diminishing marginal returns or its (mis)application to price/performance investment choices.

Geoff

My hypothesis is that maybe this principle of reaching diminishing returns is not applicable. When common sense prevails, we usually tend to go with 'good enough'. Why should I pay $3,000 for a turntable when a $300 one is 'good enough'?

The idea behind this line of reasoning is that if I spend ten times more money I will definitely not attain ten times better sound quality.

But I think that line of reasoning is faulty.

[Sherwood]

My hypothesis is that maybe this principle of reaching diminishing returns is not applicable. When common sense prevails, we usually tend to go with 'good enough'. Why should I pay $3,000 for a turntable when a $300 one is 'good enough'?

The idea behind this line of reasoning is that if I spend ten times more money I will definitely not attain ten times better sound quality.

But I think that line of reasoning is faulty.

Although I am an economist I don't feel the need to explain every spending decision in complex economic terms. However, I do feel the need to explain when an economic hypothesis is inappropriately applied.

It may be the case in the example that you cite that an investment in a particular component only makes sense in the context of a better hifi system because in a lesser system the benefits cannot be heard. This is about synergy and the "weakest link" in the chain. However, it is inappropriate to try and frame this in terms of the DMR hypothesis.

A more fundamental problem in analysing input/output relationships in relation to hifi investment decisions is that of getting any consensus on how to measure the output side of the equation (i.e. sound quality). Sound quality is inherently subjective and multifaceted. It may be possible to consistently rank systems in terms of specific aspects of performance (e.g. dynamic range, bass extension etc) on an ordinal scale. However, it is much more difficult to express performance in cardinal terms, let alone as a composite index with the necessary subjective weightings inherent in any index.

Geoff

[jandl100]

TLDR

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Sorry, James - you're a good guy, but that response is just plain rude.
Far too reminiscent of the bully-boy days of a certain other forum.

[George47]

I sort of agree with both guys.

Yes, it is possible that some inexpensive products are made down to a price and sound OK. If more resources are available then the sound quality could increase and spending twice as much money gives you sound quality that is twice as good. Depending on how you value sound quality. However, after that spending more money only results in incremental increases in sound quality. And finally increases in costs only get you a prettier box.

Of course, some hifi has very pretty boxes and basic electronics.

Speakers are a good example. For a few hundred pounds you may get a 5" bass and a basic tweeter. Make it £600-700 and an 8" bass and tweeter become possible and the bass quality (if nothing else) increases significantly.

[Pharos]

Thank you Geoff for your post 5 which is educational.

I do think that diminishing quality improvement with increased expenditure applies to most that we buy, but in the case of Hi-Fi another law, which you allude to may also apply, that of the law of limiting factors.

If we have a very good system, it is reasonable to suppose that much of it is very near impeccable, and hence near perfection. If that is so then it will be more transparent to the tiniest of improvements in any part of the system, and so these are more significant, this improvement being perhaps the removal of a limiting factor.

[Jazid]

Sorry, James - you're a good guy, but that response is just plain rude.
Far too reminiscent of the bully-boy days of a certain other forum.

I'd better explain myself then, I don't want to be accused of being a Trojan Horse from the unspeakable side!

The principle of diminishing returns is not just an economic law but a far more general scientific postulate that is useful because it has such simple explanatory potential. It is not a law, it is fallible, and is based on another principle, that of limiting factors, developed from Liebig's 'Law of the minimum'. The principle is simply that in any complex productive system whatever critical resource is in most limited supply will limit the rate of output of that system. For example in crops where growth is limited by the level of nitrate available to the plant, adding phosphate fertiliser will not increase growth rate as their growth is being 'strangled' by the (lack of) availability of nitrate.

The interest to hifi buffs I humbly suggest is far less in the application of the 'law' but in the reasons behind its failure. It turns out that it is quite common that by 'pushing' a system by adding extra quantities of one resource when its output is limited by a different resource often does lead to unpredicted fractional gains, and the reasons for this often remain obscure. To quote an early research article that tried to separate out various factors affecting one aspect of plant growth:
"...since the whole process consists of a series
of interlinked reactions, the effect which a change in one factor brings
about ... may induce slight modification in others as
well, thus indicating that there cannot be a sharp line of demarcation
between the changes produced by one or the other of the factors."

And to take this explanation into a hifi related context - this is a classic explanation of the unpredictable effect of system synergy. With regard to arms and cartridges the effect is clearly explainable, a different arm has a different mass and resonance, it will react to a cartridge in a different way and the dynamics of this effect will be translated into different output from the coils. As has been said a thousand times on this forum, even with amps and speakers, with sources and pre-amps, with rooms and room treatments the effects of even apparently small changes can be complex and unpredictable, to me this seems to be a 'curved ball' that makes it impossible to attribute any absolute value to a single component as it may be used in so many different systems. If there can be no absolute value attributable to a system component, how can there be a rank of values that such changes can be measured against? Without a rank how can the law of diminishing returns (that this discussion has become about) be employed for explanatory value?

TLDR - The Law of Diminishing Returns, also colloquially expressed as the 80:20 rule. Not a rule but an effective explanatory tool. Eg. 80% of meaning may be communicated in 20% of a sentence.
TLDR - Too long, didn't read. A blunt application of the 80:20 rule, brutal ( maybe to the point of rudeness) because of its economy. In fairness if the acronym meant 'not relevant, didn't read' that would have been more accurate. But Geoff, please don't think that I am not interested in your economic exposition of what is clearly a pervasive principle, I was not even aware of its use in your field and to me it is interesting in its own right.

It's rather just my opinion that this 'law' is the limiting factor in this discussion.

[Sherwood]

I'd better explain myself then, I don't want to be accused of being a Trojan Horse from the unspeakable side!

The principle of diminishing returns is not just an economic law but a far more general scientific postulate that is useful because it has such simple explanatory potential. It is not a law, it is fallible, and is based on another principle, that of limiting factors, developed from Liebig's 'Law of the minimum'. The principle is simply that in any complex productive system whatever critical resource is in most limited supply will limit the rate of output of that system. For example in crops where growth is limited by the level of nitrate available to the plant, adding phosphate fertiliser will not increase growth rate as their growth is being 'strangled' by the (lack of) availability of nitrate.

The interest to hifi buffs I humbly suggest is far less in the application of the 'law' but in the reasons behind its failure. It turns out that it is quite common that by 'pushing' a system by adding extra quantities of one resource when its output is limited by a different resource often does lead to unpredicted fractional gains, and the reasons for this often remain obscure. To quote an early research article that tried to separate out various factors affecting one aspect of plant growth:
"...since the whole process consists of a series
of interlinked reactions, the effect which a change in one factor brings
about ... may induce slight modification in others as
well, thus indicating that there cannot be a sharp line of demarcation
between the changes produced by one or the other of the factors."

And to take this explanation into a hifi related context - this is a classic explanation of the unpredictable effect of system synergy. With regard to arms and cartridges the effect is clearly explainable, a different arm has a different mass and resonance, it will react to a cartridge in a different way and the dynamics of this effect will be translated into different output from the coils. As has been said a thousand times on this forum, even with amps and speakers, with sources and pre-amps, with rooms and room treatments the effects of even apparently small changes can be complex and unpredictable, to me this seems to be a 'curved ball' that makes it impossible to attribute any absolute value to a single component as it may be used in so many different systems. If there can be no absolute value attributable to a system component, how can there be a rank of values that such changes can be measured against? Without a rank how can the law of diminishing returns (that this discussion has become about) be employed for explanatory value?

TLDR - The Law of Diminishing Returns, also colloquially expressed as the 80:20 rule. Not a rule but an effective explanatory tool. Eg. 80% of meaning may be communicated in 20% of a sentence.
TLDR - Too long, didn't read. A blunt application of the 80:20 rule, brutal ( maybe to the point of rudeness) because of its economy. In fairness if the acronym meant 'not relevant, didn't read' that would have been more accurate. But Geoff, please don't think that I am not interested in your economic exposition of what is clearly a pervasive principle, I was not even aware of its use in your field and to me it is interesting in its own right.

It's rather just my opinion that this 'law' is the limiting factor in this discussion.

The concepts you refer to were developed by economists and have a precise meaning to economists. I think you will find that most economists avoid the use of the term "law" and use the term hypothesis. Like all hypotheses, DMR must be tested empirically (i.e. by rigorous measurement). A hypothesis is accepted as "true" only when it hold up to this type of scrutiny and measurement.

The idea of DMR originated amongst economists in 18th century France and was used by the then Minister of Finance to highlight the limitations on agricultural productivity gains. It was taken up in the UK by the economist David Ricardo, and used by his friend Thomas Malthus to warn of the dangers of population growth rates in excess of the carrying capacity of the land. In the 19th century, Francis Edgworth and others developed analytical tools and mathematical methods to explore production processes and the marginal contribution to output of specific inputs. The hypothesis does not relate to the scarcity of a specific input as a constraint on output (i.e. a shortage of fertiliser) but to the physical production process (i.e. the potential for increasing output by using ever increasing quantities of that input). I mention this because the concept, originally developed by economists to describe and explain input/output relationships has been adopted and in many cases mis-applied to other fields on activity, including investment decisions where outputs are not objectively measurable (e.g. hifi).

Perhaps I have not made myself clear: but the hypothesis of DMR is absolutely not appropriate when evaluating individual hifi components. A stronger, but still weak case, can be made for applying the concept to complete systems, and intuitively this is what we all do when we set out to build a hifi system. When I started out I had a friend's system as my reference point for SQ. I then listened to perhaps half a dozen systems at different price points (all far below that of the reference system which was way beyond my means at the time). I ended up spending way more than I had planned to because my preferred system hit the sweet price/performance ratio. In evaluating these systems I did not focus on the marginal contribution of any single component, but on the overall result and the synergy of different arrangements of a number of components, though I did decide early on that a pair of Rogers LS3/5a speakers would feature in the chosen system. The only way in which DMR was relevant to my choice was at the system level and whether I could justify the extra spending over the most basic system in terms of subjective performance gains.

Geoff

BTW: you are confusing DMR with the Pareto Principle (the so called 80:20 rule). Initially, the term was coined by Italian economist Vilfredo Pareto who observed that approximately 80% of the land in Italy was owned by 20% of the population (an observation that was subsequently found to apply to many other countries). The Pareto Principle, like the DMR concept, has subsequently been "borrowed" and modified by management consultants and others, to highlight the most important elements in any process. Again, a case where an economic concept has been misunderstood and often misapplied to other areas of choice

[Jimbo]

Come on guys, less Intellectual willy waving, I think the OP was just using the concept to express his thoughts regarding his arm upgrade - right or wrong.:)

[mikmas]

Come on guys, less Intellectual willy waving ...

If willies were as fascinating as this discussion there might be a point to waving them ...

[Sherwood]

Come on guys, less Intellectual willy waving, I think the OP was just using the concept to express his thoughts regarding his arm upgrade - right or wrong.:)

I do not disagree with the underlying premise. I just object to the misuse of terms and misunderstanding of economic concepts used to explain it. "Willy waving" is a bit harsh, as I am an economist and this is my area of expertise. If somebody on this forum incorrectly quoted an electrical formulae or suggested a factual inaccuracy about a circuit, then are you suggesting it should not be corrected by those who are better informed on the subject?

I have made the point, so hopefully the confusion and misrepresentation is over.

Geoff

[magiccarpetride]

I do not disagree with the underlying premise. I just object to the misuse of terms and misunderstanding of economic concepts used to explain it. "Willy waving" is a bit harsh, as I am an economist and this is my area of expertise. If somebody on this forum incorrectly quoted an electrical formulae or suggested a factual inaccuracy about a circuit, then are you suggesting it should not be corrected by those who are better informed on the subject?

I have made the point, so hopefully the confusion and misrepresentation is over.

Geoff

My motivation for bringing up this (mis)used concept of 'diminishing returns' stems from my repeated experiences with hi fi salespeople. I suspect that when you're in sales, your primary motivation is your commission. So if a customer is asking for a piece of advice, and if there are several components that the sales person might recommend, he will most likely recommend the component where he stands to make the largest commission. Irrespective of the actual quality, or appropriateness of that component to the customer's situation. Sorry to sound so cynical, but such are the harsh realities we live in day in, day out.

So what that means is that if I then ask for a component that maybe is more expensive and why wasn't that one suggested to me as an improvement, I usually get the 'diminishing returns' speech. But I think it's a red herring. I don't really believe there is such thing as 'diminishing returns'.

To me, more expensive usually signals better engineered, with much more stringent (and costly) quality control process. QA costs a lot of money, and the cost must be passed to the consumer. I'd gladly pay more if I can be convinced that the extra cost means quality assurance.

[Sherwood]

I think the concept of diminishing returns may have originated in the field of economics but has now become accepted language in the wider world to mean "pay increasing amounts of money for ever diminishing benefits". In that respect it's similar to the term "critical mass" which originated in the field of nuclear physics but is now a widely used phrase meaning "big enough to become viable" or "big enough to become self-sustaining".
Thanks for explaining the origins of the term diminishing returns - I wasn't aware of them - but language evolves.

Andrew,

You are correct in saying, that DMR, like many technical terms, has entered into common usage, critical mass being a good example. In some cases, the migration is better than others in preserving the original meaning. For example, the term "decimation" is now used to describe a massive reduction in capacity or effectiveness (e.g. the decimation of our fish stocks; the team was decimated by injuries; our industry has been decimated by foreign imports). Originally, the term applied to the symbolic punishment of one in ten soldiers in lieu of punishment of the whole group (hence decimate for one in ten). Nowadays, the term is generally taken to refer to a greater reduction of capacity than a mere 10%. I mention this only because I am a big fan of George Orwell and Ernest Gowers in advocating plain writing. Metaphors and unnecessary jargon are best avoided. In this case, the concept was just not relevant to the situation, even in modern usage.

... and on that note I end my sermon! :goodbye:

Geoff

[magiccarpetride]

It's a matter of opinion, but I disagree. Good design doesn't have to cost any more money poor design, and in my opinion it's easy to spend a lot of money on production costs for no real purpose other than because it looks good, feels heavy etc. Yes, but does it perform any better?

You've managed to ignore one of the most important aspect of good engineering -- quality control. Yes, it is possible to come up with good design with not much more money than bad design, but to implement it properly, you need to pony up some serious cash. And that's where we enter the pricey hi fi territory. Most of us have seen some pretty decent gear that sells for cheap and ships from China, but buying such items is a dicey game -- you may or may not luck out and get a well assembled piece. Or you may get a shoddily assembled piece, which breaks down after few hours/days.

So you basically get what you pay for.

Also, performance is a very broad category. Does it perform any better? Depending on perform what? A mini van performs better than a Ferrari when it comes to transporting a family from one place to another. Ferrari, on the other hand, performs better when it comes to rolling down the street turning heads.

[karma67]

Also, performance is a very broad category. Does it perform any better? Depending on perform what? A mini van performs better than a Ferrari when it comes to transporting a family from one place to another. Ferrari, on the other hand, performs better when it comes to rolling down the street turning heads.

thats as maybe but whats that got to do with hifi? in terms of performance if the upgrade doesn't better your previous tonearm or turntable or amp etc then dont buy it. simple.

[Macca]

So you basically get what you pay for.

.

I'd suggest that of all the things you can buy hi-fi is the area where there is the most chance of not getting what you think you are paying for. There's a lot of very over-priced equipment out there. (In terms of price vs performance).

[paulf-2007]

You've managed to ignore one of the most important aspect of good engineering -- quality control. Yes, it is possible to come up with good design with not much more money than bad design, but to implement it properly, you need to pony up some serious cash. And that's where we enter the pricey hi fi territory. Most of us have seen some pretty decent gear that sells for cheap and ships from China, but buying such items is a dicey game -- you may or may not luck out and get a well assembled piece. Or you may get a shoddily assembled piece, which breaks down after few hours/days.

So you basically get what you pay for.

Also, performance is a very broad category. Does it perform any better? Depending on perform what? A mini van performs better than a Ferrari when it comes to transporting a family from one place to another. Ferrari, on the other hand, performs better when it comes to rolling down the street turning heads.Alex, we could be fit a couple of uk mini vans inside one of your mini vans. I'm off to listen to some music.

[magiccarpetride]

I'd suggest that of all the things you can buy hi-fi is the area where there is the most chance of not getting what you think you are paying for. There's a lot of very over-priced equipment out there. (In terms of price vs performance).

Same is true for cars, and, well, pretty much anything else.

[magiccarpetride]

I did say it's a matter of opinion but I'll give an example to illustrate why I take the stance I do.
There's a well-known audiophile who used to make a very good living from an advert in the magazines that said "new amps for old". Basically, he would take Naim amps and address their design flaws. With just a few resistors and capacitors - and not particularly expensive ones - he would transform the performance of the amps. Of course, it's time-consuming to do those modifications and I don't think he over-charged for the work, but if Naim had implemented those aspects to the design in the first place it wouldn't have made their amps any more expensive at all.
More generally, electronics is a field where a bad circuit is just as expensive to produce as a good circuit - or a good circuit no more expensive than a bad one, if you prefer it that way round. Changing the value of a few resistors can make a huge difference and it doesn't cost anything. You just have to know what you're doing.

Loudspeakers are another example. A box that's the wrong size or a port that's the wrong length isn't any cheaper to produce than correctly sized ones. The performance depends on getting the design right, and the right dimensions cost no more than the wrong ones.

However, I will admit that things like tonearms may be a different matter. Precision engineering aluminium/brass/steel to high tolerances is probably one area where more money spent yields better performance.

That's a very good point. But again, my contention is that it is one thing to tweak and improve a component in one's home, and a completely different thing to mass produce that same component. Mass production is riddled with its own issues, hence the need for stringent quality control. And that process costs a lot of money. The cost is then being passed on to the consumer.

[Pharos]

The supposedly intellectual posts were up to a point very interesting, but I think the English a little clumsy which sabotaged my comprehension. I'll try again tomorrow.

Seems to me that metaphors are an odd animal, and which can take us away from a rigorous understanding; I am dumfounded that looking at different things in a different sphere can apparently further our understanding in the one we are dealing with.

It is vital to ordinate money in design to place it where it is most beneficial to the effectiveness of final result, and possible to waste it on irrelevance. I question Magico's use of airframe tolerances in their speaker cabinets; is that really an appropriate use of technology?

[Macca]

The supposedly intellectual posts were up to a point very interesting, but I think the English a little clumsy which sabotaged my comprehension. I'll try again tomorrow.

Seems to me that metaphors are an odd animal, and which can take us away from a rigorous understanding; I am dumfounded that looking at different things in a different sphere can apparently further our understanding in the one we are dealing with.

It is vital to ordinate money in design to place it where it is most beneficial to the effectiveness of final result, and possible to waste it on irrelevance. I question Magico's use of airframe tolerances in their speaker cabinets; is that really an appropriate use of technology?

This what I was saying. Of course it is not going to make any difference but it looks great in the sales brochure. Hi-fi is full of this sort of thing.

Cars are not so different. One US manufacturer discovered about 20 years ago that it was losing sales to a rival. The reason? The rival had more cup holders, and one of the first questions people would ask when they came to look at the car in the showroom was 'How many cup holders does it have?'

People who buy cars based solely on the driving performance, and people who buy hi-fi purely on the sound quality, are very rare. So rare that the manufacturers have no interest in them as a demographic.

[walpurgis]

There is apparently, a 'law of diminishing interest'.

http://i68.tinypic.com/2d0ck94.png