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I don't see the effect of diminishing return yet. We hear about it every new generations. But I always notice the leap from one gen to the other.

I like to use the grass strands example.
Gen 5: no strands, grass is only a pixelated/muddy texture.
Gen 6: patches of grass or bushes scattered here and there but mostly flat ground with grass texture.
Gen 7: Higher res textures with individual grass strands, but those are big and overgrown.
Gen 8: Smaller individual strands, more realistic for sure, but still bigger than they should. Effect still makes the games look more realistic.
Gen 9: proper sized individual strands, so A LOT more of them are used to cover the actual landscape. Making the games look much more realistic.

Now that's just using grass as an example. But this kind of increase in graphical fidelity is pretty much like that in most if not every aspects of the graphics.

Then you factor in the lighting that keeps on getting better gen over gen. The effect being that graphics are now very, very close to look as good as pre-rendered visuals. I can understand if people don't notice all the details that are improved, or aren't as impressed by them as some others (myself included) are. But there is no denying there's a leap between gen 8 and 9 visuals. The generational gap is clearly there. Sure it's all in the details, but that's always been this way. The details are simply getting smaller than when 3D graphics were still in their infancy. Those tiny details may not be much in isolation, but the screen is filled with those, so to my eyes there's one heck of an improvement over the 8th gen visuals.