Philosophical question: When does hi-fi investment give you diminishing returns?

[yasirk]

A philosophical question: At what price point do we get diminishing gains from a hi-fi setup? When should the investment end, if ever??

Now let me qualify the question: A few years ago, I bought by first 5.1 system which was a denon AVR 1905 and definitive speakers. It was light years away from what i had grown up on which was essentially a DVD player with 5 speakers attached to it and placed around the room. I thought i had found the ultimate sound system in my denon purchase. Then, i happened to stagger into a hi-fi store in toronto (yorkville audio, if you must know) and my life changed. I heard a musical fidelity 2 channgel stereo system and heard instruments and notes on pink floyds' money i had never heard before. I now have cyrus kit which is a bit over $10,000 (including speakers and periphals). The change in quality, dynamics and the overall emotion of music was light years away from the Denon AVR setup (understandably so).

The other day i heard a $200K system (Krell and Dynaudio's Evidence) and have also auditoned Linn's fully active system. I then got to thinking-well, this is amazing, what dynamics, what sound stage--but this is not the same impact i had when i first head the musical fidelity system and my introduction to hi-fi. I got to thinking that my 'impact of hifi' curve is flattening out. At some point, for every dollar i spend, the impact of increase in quality must diminish. The curve must flatten out--and the question arose, what is that inflexion point expressed in dollar value?

Any thoughts?

 

[idc]

Hi, yasirk. A monetary answer to your philosophical question; on individual separates £500 or Canadian $884 and for the likes of stands, cables and other ancilliaries £100 or Canadian $177. Beyond that there will be continual improvement, but diminishing returns will have kicked in. I have picked those price points because from my experience a hifi system made up of £500 separates with good cables etc can sound absolutely amazing.

But do not get me wrong, if I win the lottery or the pending bank job comes off (the delay is due to trying to find a bank with any money left) then I will go mad and buy this............................................

.................just because I can.

 

[Alec]

"cables and other ancilliaries £100"

£100 for what, exactly? Presumably not 1 metre of speaker cable...ahem.

Please foirgive, im in a picky mood

 

[Anonymous]

When one starts paying more attention to the "sound" instead of the "music".

Most people start this road because they like music, many of them stop after a certain distance when they are content with their music over their hi fi equipment, some carry on to find nirvana - "perfect balance between sound and music", a few go on to find the ultimate "sound" and they keep looking for it... and looking and spending and looking and spending.....

 

[idc]

al7478:

"cables and other ancilliaries £100"

£100 for what, exactly? Presumably not 1 metre of speaker cable...ahem.

Please foirgive, im in a picky mood

You are forgiven, even the shocking typo! £100 per ancilliary, so that is the total for speaker cable, interconnect etc. I think that this is a generous budget as most of the time I bought stuff much cheaper.

Originally I planned to go on and on, but I stopped. that was because at the time I was reading articles by the master hifi tweeker Jimmy Hughes. Whilst all of his upgrades sounded fun it seemed that he would never reach that point where he would be satisfied with the sound.

 

[up the music]

In straight bang for the buck terms diminishing returns do set in quite early. Probably at or before what many would regard as mid fi.

If like idc you've developed an addiction to gambling or are are risking jail through bank jobs, it's probably time to rethink your priorities.
The extra pleasure gained in having a better system is probably not worth the costs associated with it's acquisition.

Many with upgraditis will always tell you diminishing returns sets in after the next upgrade or two.

 

[Anonymous]

idc:
Hi, yasirk. A monetary answer to your philosophical question; on individual separates £500 or Canadian $884 and for the likes of stands, cables and other ancilliaries £100 or Canadian $177. Beyond that there will be continual improvement, but diminishing returns will have kicked in. I have picked those price points because from my experience a hifi system made up of £500 separates with good cables etc can sound absolutely amazing.

That's severely off base. Even the most baldly measurement-led curmudgeons at Audio Precision raise the game way beyond that. In Thomas Kite's Debunking Audio Myths lecture in 2001, he felt that loudspeakers showed noticeable improvements up to $1,500. And this from an engineer who thinks CD players and amps should be bought on specifications alone and everything else in audio is bunkum. A £500 loudspeaker will demonstrate some fundamental, demonstrable and clearly identifiable limitations, born out of the compromises made to produce a loudspeaker at that price point (you can get a loudspeaker that produces deep bass at the expense of clarity, or clarity at the expense of bass at this level). Once you get near to that $1,500 mark, those limitations begin to dissolve; or at least the designer's priorities can shine through without the constraints of budget.

I would go further, and say there might not be diminishing returns at all. Just a series of different set of priorities that you either like or dislike. Thing is, if you don't like the sound of the £1,000 version, chances are you'll like the £2,000 version even less and the £10,000 model even less, but put this dislike down to this so-called law of diminishing returns. On the other hand, if you like the sound of - say - a Creek Evo CD player and amp with a pair of Shahinian Super Elf (about £2,000 worth of equipment, I believe), you will love the sound of a Plinus CD-101, 9200 integrated amp and a pair of Diapasons (which costs more than ten times as much)... and you will get considerably more out of it too, if the room is big and good enough. I could apply the same upgrade path to dozens of different system solutions.

 

[Anonymous]

As an economist by training, I'll say that it all depends on your opportunity cost - ie what else you can do with your money that you derive utility (satisfaction) from. Basically it comes down to your priorities, and not so much how flat the curve gets.

Another way to look at things is what each pound is worth to you (same opportunity cost in different terms). As each pound is worth less to you (perhaps you have a lot of them!) then your personal curve will be a lot steeper than it is for somebody who values his pound more (higher opportunity cost).

Hope that's not confusing.

EDIT: Implication is that each of has their own diminishing returns curve. On the X-axis we have £££ and on Y-axis we have sound quality improvement, but since latter is subjective, it is all dependent on what our utility is from incremental sound quality improvement is. In the world of endless ££££, the curve is very steep up until you get to 200,000 or so (my guess).

 

[Anonymous]

Ahh utilitarianism and economics, I didn't expect to see those two come up in this question

 

[Alec]

hi fi newbie:

Ahh utilitarianism and economics, I didn't expect to see those two come up in this question

Oh aye, its high-brow here, y' know!

 

[idc]

Alan Sircom:idc:

Hi, yasirk. A monetary answer to your philosophical question; on individual separates £500 or Canadian $884 and for the likes of stands, cables and other ancilliaries £100 or Canadian $177. Beyond that there will be continual improvement, but diminishing returns will have kicked in. I have picked those price points because from my experience a hifi system made up of £500 separates with good cables etc can sound absolutely amazing.

That's severely off base. Even the most baldly measurement-led curmudgeons at Audio Precision raise the game way beyond that. In Thomas Kite's Debunking Audio Myths lecture in 2001, he felt that loudspeakers showed noticeable improvements up to $1,500. And this from an engineer who thinks CD players and amps should be bought on specifications alone and everything else in audio is bunkum.

I would go further, and say there might not be diminishing returns at all. Just a series of different set of priorities that you either like or dislike. .........

Hi Alan, you have quoted someone else who disagrees with me and puts diminishing returns kicking in at about twice the price I guestimated. I am happy to be disagreed with, but not to be accused of being wildly inaccurate as in 'off base'. This is opinion and cannot be proved.

Your last sentance is contradictory. You say there are maybe no diminishing returns and then you describe what diminishing returns involve i.e marginal utility. So there are diminishing returns then!

 

[topbloke55]

I think it all depends on how much you can afford and the benefit you get.

If an upgrade is £5,000 and you think it sounds better and you can afford it then you may see that as worth while.

However, others may see £100 as too much for an upgrade as the value of £100 is greater to them.

It's personal!ÿ

 

[Gusboll]

topbloke55:

I think it all depends on how much you can afford and the benefit you get.

If an upgrade is £5,000 and you think it sounds better and you can afford it then you may see that as worth while.

However, others may see £100 as too much for an upgrade as the value of £100 is greater to them.

It's personal!

Agree with that - I'm sure my g/f's returns diminished years ago!

 

[matthewpiano]

To me, the law of diminishing returns sets in quite early, not because I can't hear any difference as you go up the ladder, but rather because I simply don't have the money to keep upgrading my hi-fi AND buying new music. My extensive trialling and listening leads me to believe that I would find it hard to make worthwhile improvements to my present system unless I suddenly had £800-£1000 per component to spend. As I don't, I'll be sticking with what I've got and buying new music instead (and preparing myself financially for buying a new car either later this year or early next year).

 

[JoelSim]

Diminishing returns starts at 1p...

But is it a diminishing return if what you value is sound quality?

That extra £100k spent on hifi may have £200k's worth of value to someone in which case it's money very well spent.

Conversely if you are used to, and happy with listening to an iPod then spending £150 on an upgrade to sound quality probably won't be appreciated, in which case it's not value.

 

[Anonymous]

idc:
Hi Alan, you have quoted someone else who disagrees with me and puts diminishing returns kicking in at about twice the price I guestimated. I am happy to be disagreed with, but not to be accused of being wildly inaccurate as in 'off base'. This is opinion and cannot be proved.

Your last sentance is contradictory. You say there are maybe no diminishing returns and then you describe what diminishing returns involve i.e marginal utility. So there are diminishing returns then!

The person I cited is one of those Audio Engineering Society types that has a nasty habit of backing up what they say with evidence. So, not even an ipsie dixit, then. There are well-documented reasons that a £500 loudspeaker (specifically) lacks features that can be a function of a loudspeaker costing about £1,500. Beyond that, the word 'may' kicks in; a £3,000 loudspeaker 'may' sound better than a £1,500 loudspeaker, where a £1,500 speaker will sound better than a £500 one (a ceteris paribus clause regarding commonality of design criteria applies here - a well made £500 loudspeaker may very well outperform an ill-conceived £5,000 folly).

I'm not even talking about mild subjective differences, here. There are objective limitations in the performance of a loudspeaker (or the loudspeaker relative to the output of the amplifier) that cannot be designed out at £500 that disappear when the same designer has more money to spend on the component parts in the project. Limitations like the trade-offs in the bass performance between cabinet size, driver size, port size and loudspeaker sensitivity, the fidelity of frequency response due to the cost of overcoming internal standing waves within the cabinet itself, and accuracy in pair-matching because of the lack of time allocated in the build to accurately tailor the crossover network to the drive units. You can even take a £500 loudspeaker, 'blueprint' it (using tighter-tolerance drive units, a crossover that better reflects those higher tolerances and a better braced cabinet) and end up with a £1,500 loudspeaker that was both measurably and audibly better than the £500 original (many companies have done just this).

I disagree with the contradictory nature of my second sentence, too. Differences in taste do not represent marginal utility.

 

[yasirk]

Alans' approach with numbers makes sense to me. I think the question fundamentally does not allow the inclusion of variables such as personal income. Furthermore, i think that personal tastes may warrant deviations from the exact price point, but there must exist some range--$5-$8K for example after which the majority of people will agree that they are getting serious diminishing returns.

So, if i were to structure the question a little more precisely, what would the forum vote on as ranges where diminishing returns begin to kick in strong way.

For those out there who want a definition of 'strong', a point of reference could be the "price of the total equipment they heard which had a deep and significant impact on their hi-fi experience" (please dont ask for a definition of 'deep and significant' let common sense prevail there)

Ranges:

1) $1K - 3K

2) $3K-$5K

3) $5K-$10K

4) $10K-$20K

5) $ 20K and above

 

[up the music]

Here's a little food for thought on annual costs and a simple opportunity cost example for the non economists.

----

So far we've all been talking about ticket price as the one that matters.

If you think in terms of annual cost we may see a different set of 'good value' products.

Eg A 2nd hand uber amp may cost £3000 today and be worth £2000 in 5 years time. = £200pa
A new AV amp may be worth £1000 today yet be worth £250 in 3 years. = £250pa.

The uber amp in this light may not be such an esoteric luxury as it appears at first. There you go, use that explanation on the missus to justify your dream purchase.

----

The marginal utility argument certainly holds. If the billionaire didn't buy the £200K hifi that money might be used for a new swimming pool in his fifth house. The hifi begins to look like a bargain. The billionaire only has frivilous things to spend money on. To the rest of us that sort of money would be better spent elsewhere. We have more important needs to satisfy first.

-----

 

[Hi Fi Decision]

Serious investment in hi fi = strong increase in expectations. As soon as expectations are dramatically raised, like anything in life, improvements in performance will appear tiny.

 

[Alec]

Hi Fi Decision:Serious investment in hi fi = strong increase in expectations. As soon as expectations are dramatically raised, like anything in life, improvements in performance will appear tiny.

And a pessimist is never dissappointed...

 

[nads]

How can you put numbers on it?

If you dont smile then it was not worth it.

Says a Man who has just gone moblie with his music for the first time since the ï80's

Makes waiting in Ques fun. Might have to get a small Pod for activity time.

 

[JoelSim]

Alan Sircom:idc:

Hi Alan, you have quoted someone else who disagrees with me and puts diminishing returns kicking in at about twice the price I guestimated. I am happy to be disagreed with, but not to be accused of being wildly inaccurate as in 'off base'. This is opinion and cannot be proved.

Your last sentance is contradictory. You say there are maybe no diminishing returns and then you describe what diminishing returns involve i.e marginal utility. So there are diminishing returns then!

The person I cited is one of those Audio Engineering Society types that has a nasty habit of backing up what they say with evidence. So, not even an ipsie dixit, then. There are well-documented reasons that a £500 loudspeaker (specifically) lacks features that can be a function of a loudspeaker costing about £1,500. Beyond that, the word 'may' kicks in; a £3,000 loudspeaker 'may' sound better than a £1,500 loudspeaker, where a £1,500 speaker will sound better than a £500 one (a ceteris paribus clause regarding commonality of design criteria applies here - a well made £500 loudspeaker may very well outperform an ill-conceived £5,000 folly).

I'm not even talking about mild subjective differences, here. There are objective limitations in the performance of a loudspeaker (or the loudspeaker relative to the output of the amplifier) that cannot be designed out at £500 that disappear when the same designer has more money to spend on the component parts in the project. Limitations like the trade-offs in the bass performance between cabinet size, driver size, port size and loudspeaker sensitivity, the fidelity of frequency response due to the cost of overcoming internal standing waves within the cabinet itself, and accuracy in pair-matching because of the lack of time allocated in the build to accurately tailor the crossover network to the drive units. You can even take a £500 loudspeaker, 'blueprint' it (using tighter-tolerance drive units, a crossover that better reflects those higher tolerances and a better braced cabinet) and end up with a £1,500 loudspeaker that was both measurably and audibly better than the £500 original (many companies have done just this).

I disagree with the contradictory nature of my second sentence, too. Differences in taste do not represent marginal utility.

I hope one of the first jobs you do Mr Sircom will be to fix the website of your new magazine as it's rubbish and often the links published in the mag aren't even there on the website.

 

[idc]

Alan Sircom:I would go further, and say there might not be diminishing returns at all. Just a series of different set of priorities that you either like or dislike. Thing is, if you don't like the sound of the £1,000 version, chances are you'll like the £2,000 version even less and the £10,000 model even less, but put this dislike down to this so-called law of diminishing returns. On the other hand, if you like the sound of - say - a Creek Evo CD player and amp with a pair of Shahinian Super Elf (about £2,000 worth of equipment, I believe), you will love the sound of a Plinus CD-101, 9200 integrated amp and a pair of Diapasons (which costs more than ten times as much)... and you will get considerably more out of it too, if the room is big and good enough. I could apply the same upgrade path to dozens of different system solutions.

Now I know that Alan is a professional Hifi Choice writer/reviewer/editor that explains the very knowledgeable responses. I agree with the OP and others that the 'so called law of diminishing returns' is very real and applies to hifi. I disagree with your example of if you don't like the £1000 version that you will like the more expensive versions even less. I have bought a more expensive 4 star rated amp over its little brother, the less expensive 5 star rated one. OK so if you like the Creek/Shahinian you will love the Plinus/Diapasons but ten times more so, that appears as a further example of diminishing returns.

I still think that diminishing returns will start to kick in around the £500 with the rate of incline decreasing and even more so after £1000. But hopefully, especially for those of you who have spent £10,000 plus, that rate of incline only ever continues to decrease, rather than turn back on itself. I think the law of diminishing returns applies to hifi like it applies to cars and many other consumer goods. I am also averaging out all hifi kit and thinking of a graph like this; (imagine armour as cost and damage as improved sound!)...............

 

[Anonymous]

JoelSim:
I hope one of the first jobs you do Mr Sircom will be to fix the website of your new magazine as it's rubbish and often the links published in the mag aren't even there on the website.

This is seriously not the place to discuss the nature of a 'rival' publication... but it's on the map.

 

[Anonymous]

I can't believe you chaps were unaware of Sir Alan. He's a HiFi god. I like him as one of the more forward-thinking reviewers around.