From the Berkshire Hathaway 2001 annual meeting. Warren Buffett And Charlie Munger talk about the most extreme mistakes in Berkshire’s history.

Buffett And Munger: Extreme Mistakes In Berkshire’s History

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 hedge fund letters, conference, scoops etc

Transcript

This question regards sir mistakes so that being the case it's probably directed to Mr. Munger. Mr. Munger, I know you're fond of evoking humility to promote rational thought. So my question is what's the most recent business mistake that you've made Mr. monger and why did it occur.

I'm going to take notes on this one.

The mistakes that have been most extreme in Berkshire's history are mistakes of omission. They don't show up on our figures. They show up an opportunity costs. In other words we we have opportunities. We almost do it in retrospect we can tell it we were very much mistaken not to do it. In terms of the shareholders those are the ones in our history that it really costs the most. And very few. Managements do much thinking or talking about opportunity costs. But Warren we have blown billions and billions and billions.

I might as well say it right. Right. And we keep doing it.

Some might say we're getting better at it. I don't like mentioning the specific companies because the you know it with we may in due course want to but. Also at our price but practically everywhere in life and in corporate life to.

What really costs in comparison with what easily might have been are the blown opportunities made it just. It's an awesome amount of money. When I was somewhat younger I was offered three hundred shares of beverage oil. And the idiot could have told that there's no possibility of losing money and a large possibility of making money. I bought it. The guy called me back three days later and offered me fifteen hundred more shares but this time I had to sell something to buy the damn beverage oil. That mistake if you trace it through is cost me two hundred million dollars. And. I.

Hope because I had to go to a slight inconvenience and sell something. Richard does that kind of thing too. We never get over it. Now.

I might add that when we speak of errors of omission of which we've had plenty and some very big ones.

We don't mean not buying some stock where we. A friend runs it or we know the name and went from one to one hundred. That doesn't mean a thing. It's only we only regard errors as being things that are within our circle of competence. So if somebody knows how to make money and cocoa beans or they know how money would make money in a software company or anything and we miss that. That is not an error as far as we're concerned what's an error is when it's something we understand. And we stand there and stare at it and we don't do anything or worse yet. What really gets me is when we do something very small with it we do an eye droppers worth of it. When we could do it very big. Charlie. Refers to that elegantly when I do that sort of thing is when I'm sucking my thumb and there really I mean we have where we have been thumb suckers at times. With businesses that we understood well. And. It may have been because we started buying and the price moved up a little. And we waited around hoping we would get more at the price we originally started there could be a lot of things. But those are those are huge mistakes. Conventional accounting of course does not pick those up at all. But but. They're in our score book.