Munger argues that successful businesses sometimes achieve an advantage by pushing a small number of important variables much further than competitors do. Rather than trying to optimise every aspect of an organisation equally, a company may concentrate intensely on factors such as low prices, high inventory turnover, convenience or operating efficiency.

His example of Costco illustrates this approach. The warehouse retailer built its model around limited mark-ups, large-scale purchasing and relatively simple stores, reinforcing a clear promise of value to customers. The effectiveness of the model comes partly from pursuing these priorities consistently rather than treating them as minor adjustments.

More broadly, the quote suggests that distinctive business systems often emerge from deliberate trade-offs. Maximising one variable usually means accepting constraints elsewhere. Munger’s point is that a coherent strategy can become unusually effective when an organisation identifies the few factors that matter most and structures its operations around them.