Weekly Meditation 1: The Star Principle of Richard Koch

Title:

The Star Principle, with commentary from Warren Buffet’s Letters to Shareholders.

The first Weekly Meditation is about the Star Principle, which was popularized by Richard Koch in his book titled “The Star Principle”. Among the 100+ business and investing books I have read over the last 10 years, it is remarkably unique. It is highly actionable and relatively easy to implement.

What is the Star Principle?

The Star Principle states (my words) that you can be disproportionately successful if you

• Work for a Star Business

• Invest in a Star Business

• Or create a Star Business

What is a Star Business?

A Star Business is a business that:

1. Is the leader in its market niche

2. Operates in a niche that is growing fast, at least 10% per year

The idea of a Star Business originates from The Boston Box (Growth Share Matrix), which was invented by Bruce Henderson of the Boston Consulting Group.

I encourage all who is interested in business and investing to read the Star Principle!

I highlight 6 short aspects of the Star Principle with the help of quotes from Warren Buffet’s Berkshire Hathaway Letters to Shareholders below. Daily Aspect 1: The Star Principle

The Star Principle emphasizes the business, not the people in it.

Commentary by Buffet (Shareholder Letter 2007):

If the business requires a superstar to produce great results, the business itself cannot be deemed great. Daily Aspect 2: The Star Principle

The Star Principle is industry agnostic.

Commentary by Buffet (Shareholder Letter 1991):

Dollars are dollars whether they are derived from the operation of media properties or of steel mills.

Daily Aspect 3: The Star Principle

The Star Principle considers future growth.

Commentary by Buffet (Shareholder Letter 2004):

It's the windshield through which investors must peer, and that glass is invariably fogged.

Daily Aspect 4: The Star Principle

The Star Principle focuses on the qualitative aspects.

Commentary by Buffet (Shareholder Letter 2010):

Our inability to pinpoint a number doesn’t bother us: We would rather be approximately right than precisely wrong.

Daily Aspect 5: The Star Principle

If it is not a star, find a real star.

Commentary by Buffet (Shareholder Letter 1985):

Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

Daily Aspect 6: The Star Principle

The Star Principle is simple.

Commentary by Buffet (Shareholder Letter 1994):

The truly big investment idea can usually be explained in a short paragraph.

About:

The Weekly Meditation is a series of ideas, strategies and principles from the world’s great doers and thinkers. Each week I post about a subject, which is then followed by 6 daily aspects of the meditation. For more information, read the thread that is pinned to my profile. Follow me on X to get them every week!