Traceable to 《战国策·齐策一》, the famous Zou Ji 邹忌 episode: comparing himself to the handsome Mr. Xu 徐公, Zou Ji concludes '自以为不如' — 'I myself feel I do not match up'. The phrase crystallized into 自愧不如, today's standard expression of admiring concession.
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Polite, slightly self-deprecating — used to praise someone else by lowering yourself. Avoid in contexts where humility could be mistaken for false modesty (job interviews, performance reviews) unless you really do mean it.
