Diminishing returns
When each extra unit of something, such as an hour of work or a bag of fertiliser, adds less than the one before, so the relationship flattens instead of staying a straight line.
In plain English
Many relationships are roughly straight in the normal range and bend at the edges. A rule measured in the middle, such as 'an hour of work gives an hour of output', can badly overestimate what happens at the extreme. Before extending a trend, ask whether there's any data from that far out.
Uncle Gary explains
In First World War munitions factories, weekly output rose roughly in step with hours up to about 49 a week; a 70-hour week produced hardly more than a 56-hour one. Kevin's boss planned 60-hour weeks as if the line stayed straight.
Why it matters for your money
Doubling a position doesn't double the profit if the extra size moves the price, and more hours at the screen don't mean proportionally better decisions.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.