Although the great investor Warren Buffett said that it’s better to “learn from the other guys’ mistakes” rather than make his own, the co-founder, chairman and CEO of Berkshire Hathaway has made his fair share of financial blunders over the years.
At 94, Buffett has always been humble and graceful when admitting his misfires — buying Waumbec Mills, buying Dexter Shoe, not investing in Google, not investing in Amazon — but “the dumbest stock” he ever bought will leave followers of the Oracle of Omaha scratching their heads.
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Talking to CNBC’s Becky Quick in 2010, Buffett recounted his years spent buying up shares of Berkshire Hathaway before eventually assuming control of the failing textile business. Although he built Berkshire into one of the biggest conglomerates and holding companies in the world, Buffett felt that owning an “anchor” in an industry he knew little about was a huge mistake.
A $200 Billion Mistake?
Buffett was well on his way to a successful investment career when he began buying shares in Berkshire Hathaway. In 1962, while running his own fund company, Buffett Partnership, he began buying up cheap Berkshire Hathaway stock with the goal of selling the shares as the company liquidated textile mills.
In 1964, Buffett agreed to sell his shares back to owner Seabury Stanton for $11.50 each. However, upon receiving the offer letter from Berkshire, the number had changed to 11 3/8, or about $11.375. Buffett felt “chiseled,” and instead of tendering his stock, he bought more shares, took over the company and fired Stanton.
After years spent trying to grow the textile holding, Buffett admitted he made a mistake, which he estimated cost him $200 billion at the time.
“The truth is I had now committed a major amount of money to a terrible business,” he told Quick. If he had sold his shares in 1964 — and didn’t waste time and money watching Berkshire “earning nothing, year after year after year” — Buffett could have used the funds to invest in insurance, which has been a key factor in his company’s expansion since 1967.
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Future Success
Of course, things worked out nicely for Buffett and Berkshire shareholders. According to The New York Times, Berkshire Hathaway joined the elite club of companies with a $1 trillion market valuation, reaching that milestone on Aug. 28, 2024.
While the financial flub cost him, he said it taught him a valuable lesson to not let your emotions — in Buffett’s case, anger — dictate your actions.
At least he’s playful about the investment after all these years. “And, so there you have it,” Buffett told Quick way back in 2010. “Incidentally, if you come back in 10 years, I may have one that’s even worse.”
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This article originally appeared on GOBankingRates.com: How Warren Buffett’s $200 Billion Investing ‘Mistake’ Paid Off Big-Time
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