How Warren Buffett Dealt With a Billion-Dollar Mistake

Dirty Money

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Part of what has made Warren Buffett, chairman and CEO of Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB), such a successful investor is his capacity to recognize and admit to mistakes. In early 2008, he openly criticized himself for a decision to purchase Dexter Shoe Co. for $433 million in Class A Berkshire stock instead of cash. Buffett made the purchase in 1993, and less than 10 years later, the company ended production and was folded into H.H. Brown Shoe Group, another Berkshire unit.

“What I had assessed as durable competitive advantage vanished within a few years,” Buffett wrote at the time. “By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion.”

Buffett characteristically went on to say that the Dexter deal wasn’t the first mistake he had made, and it wouldn’t be the last. In hindsight, his words were particularly prescient. By the end of that same year, Buffett was writing to shareholders in his annual letter about another costly mistake he had made: a $7 billion investment in oil and gas company ConocoPhillips (NYSE:COP).