Friends hi-fi system not very good, what do you do or say?

I think you should appreciate it from their perspective.  After all, they're sharing something they're proud of.  You could ask, how long have you had it, how did you determine their choices, what do they like about it, what would they change if they had the opportunity or money?  At that point some good talking points might come up where you could share your ideas, modestly of course. They might get inspired to come here yours, or they might ask some inside questions, or they may clam up, at which time you know to just sit back and enjoy your visit with your friend.

But what if it is really a high quality system with expensive components that the owner is extremely proud of, others have said they like, and you just can't stomach?

Maybe open backs just aren't my thing.

https://youtu.be/K5xmzXp1cE4

Nothing wrong with a relative statement.  If the gear sounds as it should relative to what it is, then it sounds good, for what it is, and there's no reason you would need to say otherwise.  If you ever have this person to your house and they discover the next level of sonic excellence, their realization of better gear may prompt a more honest conversation about how your experience may help them.  On the other hand, a Lambo driver you may never understand the joy of a Miata.......

Depends. Are they wealthy, poor, in the middle? Do they care about their system? 

I am a cheap person with $1000 amplification and $700 preamp/dac. 

When I sold my late mother's house I dropped $15K on speakers. Same gear. 

Audio holds different places in peoples' minds. Life is expensive. 

Stay positive unless you know them well. 

@quickjack1234 

So this answers my question about whether I should spend money on audio equipment or a really nice car.

Of course what comes with buying a really nice car is a very expensive Insurance plan every year versus audio equipment which is covered by my homeowners policy, ie. Not much to insure.  My guess is that repair bills to maintain an older Ferrari are a lot more than maintaining audio audio system.

Clearly you said FU to all the above. And now you're enjoying your life when you're away from your home driving a really nice car.  And when you're with your friends there's no way on this planet they would say anything negative about your car, except for the crappy audio system installed in the car which is very odd they’d do that.  I would be listening to the car and probably not turn on the audio system when I'm driving it.  But then maybe your friends always wanna drive your car and then what do you do. I wouldn't want anybody driving my Ferrari, not even my twin brother if I had a twin.

Just for your information, I don't own a car right now and should I ever be in a position to buy one again I will be buying an Audi.