Full Transcript
Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons that you can reflect on in your journal so you can grow yourself physically, mentally, emotionally, and spiritually and have a better career, better relationships, and better personal finances while you enjoy your morning cup of coffee.
I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
In today’s episode, we are going to talk about the law of diminishing returns and how it applies to our lives. My first degree was in Public Health and I thought I wanted to get into Health Care Administration. So my advisor in college told me to go take an economics course because it would help me become a better health care administrator. And once I took that class, I fell in love with economics. If you don’t really know what economics is, it’s the study of scarcity and how resources are allocated.
In my first class, I took microeconomics which is about supply and demand, and how you derive those supply and demand curves. When we were discussing supply, the teacher said that it’s basically a cost curve. The more you produce something, the more costs associated with producing an additional product.
When I explain this to my financial planning clients, I tell them that producing a million apples is going to be more expensive than producing a thousand apples because with a million apples you have to buy more farmland, hire more workers, buy a bigger processing facility, buy more fertilizer, and other costs associated with making more apples. This is where the law of diminishing returns comes in. On an acre of land, there is an optimal amount of apple trees that need to be planted. If you try to plant too many trees in one acre, then too many trees are competing for a limited amount of resources and each tree is going to produce mediocre apples.
In college, we applied this concept to making pizzas. One pizza maker can make 25 pizzas in an hour, and two pizza makers can make 60 pizzas in two hours so 30 pizzas apiece, then if you add three pizza makers to the same size kitchen, then only 72 pizzas can be made, or only 24 pizzas per person. This is because the more pizza makers you add to the same size kitchen, then there are waiting times. One pizza maker might be waiting for the topping station or the oven to open up.
So when this happens, there need to be trade-offs. Do you buy more equipment? If you do this, will the costs be worth it? Do you only three pizza makers and sacrifice efficiency? There needs to be a careful analysis of what’s going on. You just can’t do more of something and continue to receive the same benefit from the beginning, there are going to be diminishing returns.
So if we look at our lives, we can be doing too much of something. We can do too much work, we can have too much leisure. We can be really good at something at work but the fifth hour of doing that thing is probably not that valuable. Buy more gifts for your family is probably not a good strategy for building strong family bonds, it requires other things like quality time, acts of service, and compliments. It’s the mixture of the four that is going to create the strongest bond.
Throwing more money at a problem without any thought is usually not a good strategy because there is going to be a lot of waste. This is not the case in every single scenario but it’s a good rule of thumb. So if you’ve been working for 14 hours straight and still not progressing in life, then it probably means that you need to switch something up. May only do four hours of that thing and then do something else. I don’t know what the right combination is, but that’s where experimenting comes in. So experiment with your life and don’t get caught up in the law of diminishing returns.
And that’s it for today’s episode, to summarize it, don’t have too many people in the kitchen. It’s going to make you less effective and it’s going to cost more money for fewer results. This is known as the law of diminishing returns. We can’t just keep adding stuff to something and expect better results. If you had 25 pizza makers in one kitchen and only two ovens, then there is going to be a lot of idle times. 22 of those pizza makers needs to either find a different kitchen or different career, because if not, then the business is going to go bankrupt anyway because its costs are exceeding its revenue. This can apply to other parts of someone’s life. Going to school for 20 years is probably going to teach you a lot of things, but there is going to come to a point where you have to put your knowledge to use or else you’re going to have a lot of student loan debt. Life is about perfect economy, not doing too much, but also not doing too little. Once you find perfect economy for yourself, then life will be good.
If you would like to get the journal questions for today’s episode, you can sign-up for my monthly journaling subscription newsletter, where you get daily journal questions Monday through Friday, and as a bonus, you will also get my time management course and my personal development cheat sheet. You can get all this for $13/mo, which is less than the cost of an audible subscription and it’s less work to gain more wisdom. You can get this offer at growwithjoe.me/journal
Thanks for listening today! To get a free copy of my Audiobook “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and you can download it right there.
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*Music outro
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