93-year-old Warren Buffett, the famed co-founder, chairman and CEO of Berkshire Hathaway, has been in the investment game for a very long time. From buying his first stock at age 11 to earning a net worth of $135.1 billion (at last count), the world's seventh-richest person has learned some tough lessons along the way.
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The Oracle of Omaha has rules for building wealth that are infamous among even the greenest inventors. But as we recently learned, it took Buffett years to achieve success, and decades to become one of the most influential business leaders the world has ever seen.
Experience comes from learning from mistakes. Perfection is unattainable, but mistakes can help you grow as a person and improve your performance and career. Mr. Buffett knows this better than anyone. He believes that “it's good to learn from mistakes, but it's better to learn from the mistakes of others.'' He has approached his own career failures with humility and humor.
Most importantly, he quickly moved past his failures and learned from them instead of dwelling on the negative or becoming stagnant due to shame. Here are eight of Buffett's self-admitted financial mistakes and what you can learn from them.
1. Acquisition of Berkshire Hathaway
Crazy, right? As The Motley Fool explains, Buffett bought Berkshire in 1964, when it was a struggling textile company. He kept an eye on stock prices, bought when they were lower than expected, and found himself the owner of a textile company he knew nothing about. He continued to run the textile company until 1985, when Buffett eventually grew the company into the conglomerate it operates today, but this early misstep taught him a valuable lesson. It means researching, not letting your emotions dictate your actions, and being willing to change and adapt your thinking. Regarding investment.
2. Acquisition of Waumbeck Mills
He wisely avoided investing in New England textile companies for almost 50 years, but in 1975 he bought his second textile company after Berkshire at a bargain price. ” projected “Synergies with Berkshire's textile business” did not materialize, and the mill closed several years later.
3. Buy Dexter shoes
Buffett described it as the “most disastrous” mistake he'd made since Waumbeck, saying it was a company that had high hopes when Berkshire bought Dexter Shoe for $433 million in 1993. I couldn't understand how foreign competition could jeopardize Shu's acquisition. The plunge was one thing, but buying Dexter with Berkshire stock instead of cash compounded Buffett's blunder, leading him to declare: Guinness World Records”
4. Don't buy Amazon
In 2017, Buffett admitted that although he had had Amazon in mind for a long time, he never chose to invest in Amazon, neither in 1994, when Amazon launched, nor in 1997, when Amazon went public. It wasn't exactly a mistake, but it was a failure to recognize the possibility, and it could have happened to anyone. “I knew he (founder Jeff Bezos) would do the best he could with any idea. I never thought there was this kind of potential. I blew it,” Buffett said. said. Berkshire now owns Amazon stock, but it's worth only a fraction of what it was then.
5. Don't buy Google
Again, Buffett admired Google stock from afar but never took the plunge. The reason was that high-tech companies and their business models were outside his scope of expertise, which served as a good lesson and a rule for investing. Researching and buying well-run companies is the key to Buffett and Berkshire's success. As for Google, despite the fact that the company has been doing great in advertising and was receiving some of its ads through clicks from his Geico subsidiary, Berkshire is not confident in its long-term growth trajectory. did not. On this rare occasion, Buffett couldn't see the forest for the trees.
6. Don't sell Tesco.
The purchase of the British grocery chain's stock (a total investment of $2.3 billion in 2012) quickly became a headache for Buffett, who began to notice weaknesses in the company. Even though it sold 114 million shares throughout 2013, it took too long to sell. “In the business world, bad news often surfaces in quick succession. There's a cockroach in the kitchen. As the days go by, you meet his relatives.” According to CNBC Make It, his “Wandering” will reportedly cost Berkshire $444 million.
7. Purchase of Energy Future Holdings bonds
Mr. Buffett has been outspoken about purchasing $2 billion in bonds from Energy Future Holdings, which was formed with the $45 billion acquisition of Dallas-based TXU in 2007, but his My biggest regret is that I ignored a decision made by my longtime partner. and Berkshire Vice President Charlie Munger. “Approximately $2 billion of the bonds were purchased by Berkshire following a decision made without consulting Charlie.” Buffett eventually threw in the towel and sold the bonds for just $259 million (to Berkshire). According to Reuters, the company suffered a loss but learned a valuable lesson. If you have a trusted partner, discuss major investment decisions with them.
8. I haven't researched Lubrizol Corp. stock.
In 2011, David Sokol, chairman of many of Berkshire's subsidiaries, pitched Buffett Lubrizol Corporation as a potential acquisition target. However, he did not inform Mr. Buffett that he owned stock in the chemical company. Berkshire faced criticism but ultimately bought the company for $9 billion, and Sokol was sold for a hefty $3 million. lesson? Follow a rigorous due diligence process and don't take someone's word at face value without digging deeper.
Even Warren Buffett doesn't always get things right, but he admits his mistakes like a champ. But for Buffett, mistakes are an opportunity to learn something and approach challenges with an open mind and a new perspective, and that's just another lesson we can learn from great investors.
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This article originally appeared on GOBankingRates.com: How to learn from your financial mistakes like Warren Buffett
