Buffett regrets buying Berkshire

The investor says that he bought the famous company to get revenge -- and that he could have made a wiser choice.

By Kim Peterson Oct 18, 2010 1:33PM

Credit: (© Paul White/AP)Warren Buffett and Berkshire Hathaway (BRK.A). You can't think of one without the other.

But that's not what Buffett would have preferred. In fact, he told CNBC that Berkshire is the dumbest stock he's ever bought. Buying the company was a $200 billion blunder, he said.

How did Buffett get saddled with one of the biggest mistakes of his life? The story has lessons for any investor -- not just the world's richest. Here's what happened.

 
Back in 1962, Buffett was running a hedge fund worth about $7 million, he told CNBC. He found a small textile company that was going downhill -- closing mills and buying stock with the proceeds.

He bought the stock and decided to tender it to the company for a small profit, eventually agreeing to a sell price of $11.50 a share. But a few weeks later, the company sent documents showing a sell price of $11.375.

That enraged Buffett, who thought the company was trying to pull a fast one on him. Fueled by revenge, he bought enough shares to control the company and fired the manager who had set the price. 


"The truth is I had now committed a major amount of money to a terrible business," he said. "And Berkshire Hathaway became the base for everything pretty much that I've done since."

So Buffett was stuck with a run-down textile company, which he slowly molded into the Berkshire Hathaway that he is known for. But if he had just started out with a regular insurance business, he told CNBC, it would be worth another $200 billion -- twice as much as Berkshire is now.

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47Comments
Oct 18, 2010 6:35PM
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To Buffet Bashing greedier than thou crowd.  Please note that Warren Buffet has pledged to give away 99% of his wealth in his life time.  Probably burns some butts around here that the one of the greatest capitalists is also one of the greatest philanthropists...
Oct 18, 2010 5:45PM
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He is just sharing a lesson here.  Make investments (or do things) for the right reasons.  Because he thought he'd been cheated, he wanted to control the company so that he could get back at one man.  Had he invested base purely on value, growth potential, etc, he would not have invested so heavily and would have made a better investment decision.  Revenge is not a good motive for investing.
Oct 18, 2010 6:58PM
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besides all you folks bashin the old man keep this in mind....THEY ASKED HIM...and contrary to the byline of the article he doesnt say he regretted it...he just said it was a foolish investment and that had he done things differently he wouldve made more money...I did not hear the phrase..."I kick myself everytime I think of it"
Oct 18, 2010 6:52PM
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I do believe what the man is saying is that...1. he bought the company for the wrong reason.  2. mistakes can be turned around n made into successes.  I didnt see him say....I REGRET
Oct 18, 2010 2:07PM
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$200 billion of something is a lot better than nothing.

How investors, small and large, have pass on an investment for another, to have the pass on investment return better than the purchase one? Millions, me included.

What ever the reason for the decision, it is done. We live the moment. If all investors had crystal balls & they shared the information, we would probably never have financial crisis. But reality, investors, big & small, make the decision and the reality follows, good & bad.

The best, even Mr. Buffett, can do, learn from the past and to do a better future. I did after the last real estate crash of 1990 therefore doing better than most.

Hopefully today's investors & people saving for the future have learn something.    
Oct 18, 2010 7:14PM
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Vote Warren Buffett for President 2012!!Smile
Oct 18, 2010 7:26PM
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I am always amazed how many jerks comment about things they know nothing about.  First, JD Wilson is correct, Buffett gave away nearly his entire fortune, not half as has been suggested. 

 

Second, and more important, CNBC is interviewing a different investor every day this week and asking them which investing decision they most regret. This was Buffett's.  Tomorrow it is going to be Bill Gross' turn. If you don't get this, why are you on Money Central???

 

I find that Buffett has always been keenly aware that he was playing with other peoples money - in some cases their entire savings. His annual reports are always insightful, easy to read, and full of mea culpas.

 

I guess you can learn, or you can continue to be a bitter fool.

Oct 18, 2010 7:12PM
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When I saw the video, I better understood Buffett's point. Once he made a major investment in BH, he tried to enhance his ROI by putting more capital in textiles. But, 5 years later, he got into insurance and grew the ROI on capital at a more significant rate. The point is had the textile investment dollars gone into insurance instead of textiles, his performance would have been far superior, a lesson well worth learning and commenting on.
Oct 18, 2010 5:25PM
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I don't think it was a mistake. This company was hit by a fire and he saved all the workers and the town their jobs. I think it just because of the depression that is going on right now and everything is being shipped oversea's because it is cheaper. I think if we start once again maken our own clothes here in the usa and our own steel and etc right here in the usa and the amercian workers need a cost of living raise and etc..To many bad things are being made in china and etc which we should stop and think of bring back the jobs to the usa and I think it is important to remember this and not shipping job oversea where they don't have worry about wages and healthcare and everyone should have this and amercian companies have to stop and think of the amercian people and not the shareholder and board of the trustee and but us and what we can do for the country and everyone should get a great wages so, we can buy food, health insurance, homes and etc...
Oct 18, 2010 5:58PM
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He also owns one of the best direct sales companys.  Kirby vacuum and cutco  knifes.
Oct 18, 2010 6:46PM
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It seems hard to grasp how a multi billionaire could be still upset at himself for a decision he made 40 years ago that cost him billions. People are asking does he really care about the money?  Is he greedy? But if he is why is he going to give half his fortune to charity?   He is obsessed with making money for sure, but not to spend like most of us.  The only time he spends money is to make more money.  The money he makes is his gauge for his successes.   He is also a very competitive person so being ranked the 2nd or 3rd richest man in the world I believe would actually bother him.
Oct 18, 2010 6:22PM
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Warren Buffett is not spiritual.  He was stating he made a poor business decision.
Oct 20, 2010 9:02PM
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I have nothing but complete respect for Warren Buffett. I have watched him through the years, and the mistake he made in buying the company Berkshire, was sad but a lesson was learned. He was man enough to admit it that he made a costly mistake. We would have money, but no one showed us how to invest, except taking care of buring our family, etc. No regrets. I wish Mr. Buffett all the best, and all the luck in the world. I can look at him and see nothing "dumb" about him. I hope he lets go of his so called "dumb" buying, and now enjoys his life.
Oct 19, 2010 8:19PM
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does this mean that the dumb-o-crats wont get as much $$ from him?george sorous will make it up.
Oct 18, 2010 9:23PM
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Rhinodaddy,  yes for sure he lost alot of money for his investors.  Read his books and loved them.  Never really checked his annual reports much, but would be interesting.  Just might do that tonight! 
Oct 19, 2010 9:29AM
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nobody is perfect except Jesus Christ. warren is the most respected man i ever read about. the way he has carried himself is impressive to say the least. GOD Bless him and his family.
Oct 18, 2010 6:56PM
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Weather you are a Warren Buffett or Yaboo Investor falling back on a start up money in the first place  is in the back of your mind , unless a gut feeling that this will show some type of profit down the road the only investment that's right is either thru your gut & solid research,not like I did on Branson, a hunch.. I'm sure he is telling the truth about kicking himself though...
Oct 18, 2010 6:21PM
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Peppy 1

 

He was tendering his shares (selling them back) for $11.50.

Oct 18, 2010 6:13PM
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Peppy1: He had agreed to sell the stock back to the company for $11.50 a share. But the company changed the terms to $11.375. At least that's Warren's side of the story.
Oct 18, 2010 5:17PM
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The real key to investing is never cry over spilt milk. If you made money consider it a victory and make more. The Oracle seems shockingly neglectful of hindsight's value. How does he think he knows that the lessons learned crafting BH from a ill advised investment aren't in fact those that created the success he is today. Bit disappointed that this observation is the best he can do given his experiences.
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