Marginal impact refers to the additional difference your specific investment of time, money, or effort makes. Rather than focusing on the total impact of an organization or movement, it’s about recognizing how much your contribution adds to what’s already being done. This way, you can better decide where to direct your resources for the greatest effect.
What’s my additional impact?
People often feel drawn to big movements with a lot of momentum—after all, being part of something world-changing feels exciting. But if your goal is to make the greatest difference, simply joining a large, impactful movement might not be the best approach.
The marginal impact of your efforts is the incremental difference they make. For example, think about a toaster manufacturer deciding whether to produce one more toaster. The business might be highly profitable overall, but if the market is already saturated with toasters, making one more may result in a loss. In this case, while the company’s total profits remain large, the marginal profit (the profit from that one extra toaster) is negative—so it’s not worth doing.
In the same way, when you invest time, money, or resources in a cause, it’s important to focus on the additional impact you’ll create. This helps avoid what’s known as the sunk cost fallacy, where you keep investing in something just because it’s been successful in the past, even if future contributions aren’t as effective.
Why is this important?
But does this nuance truly matter in real life? If I want to donate to charity, for example, wouldn’t its current impact be a good proxy for how impactful future donations would be? Not necessarily.
Every year, millions of people choose to donate to Wikipedia. This makes a lot of sense—Wikipedia serves more than a billion people every month, providing access to educational materials, answering practical questions, and fighting misinformation. At the same time, maintaining their technical infrastructure costs around $36 million a year. This means that Wikipedia provides this value at a cost of less than one cent a month per individual—what could be a better impact-focused donation? However, while Wikipedia needs about $36 million a year to keep the lights on, in recent years they’ve been raising well over $100 million every year.
More importantly, most of those extra revenues are invested in efforts that have high costs and unclear results, according to a previous executive director. As a result, it’s unclear that additional donations to Wikimedia lead to improvement in the content provided by Wikipedia. This is an example where the total impact (or even total cost-effectiveness) is a pretty terrible proxy for the marginal impact of additional donations. The first few millions of dollars that Wikipedia receives are incredibly valuable and important, but those are already a done deal—you can only control the marginal impact of the 100 millionth dollar or above.
These kinds of effects are not unique to Wikipedia. Most organizations experience diminishing returns (or to be more accurate, diminishing marginal returns). That’s when the first dollars spent are worth much more than additional investments. But marginal returns can also be higher than average returns, for example if an organization has significant fixed costs or economies of scale. The bottom line is simply that to choose our next actions, we need to look at the marginal impact of our efforts instead of the total or average impact of the organization—whether they’re higher or lower.
How does this affect career decisions?
When it comes to career choices, the concept of marginal impact is just as critical as it is when deciding where to donate. The marginal impact of a new employee in a company can differ significantly from the average impact of other employees, and your contribution depends on various factors. Here’s how this idea might influence your career decisions:
At first glance, it may seem that joining a highly successful and impactful organization is always the best choice. However, working at a large, well-established organization may mean you have less direct influence over its overall direction or success. This can make your marginal impact less clear.
That said, working at successful organizations is often still a great move. These organizations typically offer excellent opportunities for individual impact and provide valuable career capital. But it’s important not to let their total impact overshadow whether you’ll actually make a difference in your role.
This consideration also highlights the importance of personal fit and seizing unique opportunities that others might overlook. While well-known opportunities often come with larger total impact, finding niche roles where your specific skills or insights can make a real difference can lead to a greater marginal impact.
Conclusion
Focusing on marginal impact helps you avoid the traps of relying on total or average impact when deciding how to allocate your time, money, or career efforts. By considering the additional difference you can make, you can steer clear of overinvesting in areas where past success overshadows future potential and identify opportunities where your contribution will have the greatest effect.
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