Few investors are as candid about their own missteps as Warren Buffett, and even fewer can turn a self‑described blunder into one of the most successful corporate transformations in history. As the Berkshire Hathaway CEO prepares to step down, Buffett has once again revisited the deal he calls "the dumbest stock I ever bought"—the purchase of Berkshire itself.
It’s a remarkable admission. Berkshire Hathaway is now a trillion‑dollar conglomerate, home to insurance giants, railroads, utilities, consumer brands, and a stock portfolio that moves markets. Buffett’s personal net worth sits around $151 billion, almost entirely tied to Berkshire’s Class A shares. Yet he insists the original acquisition was a mistake—one that cost him decades of opportunity and, by his own estimate, hundreds of billions of dollars in compounded value.
But it was also the mistake that changed everything.
A Trillion‑Dollar Empire Born From a One‑Eighth‑Dollar Slight
The story begins in the early 1960s, when Buffett was running a small investment partnership. Berkshire Hathaway, then a struggling New England textile mill, was liquidating assets and buying back shares. Buffett saw a classic Benjamin Graham‑style bargain: a company trading below its working capital value.
In 1964, Berkshire’s management offered to buy Buffett’s shares for $11.50. He agreed. But when the official paperwork arrived, the price had been quietly lowered to $11⅜—an eighth of a dollar less.
That tiny slight infuriated him.
Instead of selling, Buffett did the opposite: he bought more. He accumulated enough shares to seize control of the company and promptly fired the managers who had tried to shave the offer price.
It was a victory driven by emotion, not analysis—and Buffett has spent decades calling it a "20‑year mistake."
The Burden of a Bad Business
Once he controlled Berkshire, Buffett inherited a problem: the textile business was structurally doomed. No amount of managerial skill could overcome foreign competition, rising costs, and shrinking margins.
For two decades, Berkshire’s textile division consumed capital and delivered little in return. Buffett later admitted that if he had simply walked away and started fresh in insurance—rather than acquiring insurers through Berkshire—his empire would be "at least twice its size."
The lesson was painful but pivotal: A great manager cannot fix a fundamentally bad business.
This realization became the foundation of Buffett’s later philosophy: Buy wonderful companies at fair prices, not fair companies at wonderful prices.
From Value Hunter to Quality Investor
Buffett’s early training under Benjamin Graham taught him to hunt for bargains—companies trading below intrinsic value, even if their business prospects were mediocre. Berkshire forced him to rethink that approach.
He has since summarized the shift in one of his most quoted lines: "It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
The Berkshire experience also inspired another Buffett classic: "When a great manager tackles a bad business, it’s usually the business that keeps its reputation."
The textile mill that once weighed down Berkshire ultimately became the shell through which Buffett built a modern conglomerate. But the cost of carrying that shell for 20 years shaped his discipline for the rest of his career.
The Olympic Diving Rule: No Points for Difficulty
Buffett often uses simple analogies to explain complex ideas, and his reflection on Berkshire is no exception. He compares investing to Olympic diving—except without the difficulty bonus.
In business, he says, you don’t get extra credit for doing something hard. There’s no reward for turning around a failing enterprise simply because it’s challenging. Investors are better off stepping over "one‑foot hurdles" than attempting "seven‑foot bars."
Berkshire was his seven‑foot bar. And it taught him to avoid them.
The Philanthropy That Reshaped His Net Worth
Buffett’s fortune today—roughly $151 billion—is staggering, but it could have been far larger. Since 2006, he has donated hundreds of thousands of Berkshire Class B shares, now worth more than $200 billion, to philanthropic causes. Without those donations, his theoretical net worth would approach $359 billion, placing him second globally.
He plans to continue giving away the majority of his wealth, reinforcing his long‑held view that society benefits more from philanthropy than from dynastic inheritance.
Berkshire’s "Mistake" That Built a Legacy
Despite calling Berkshire his worst stock purchase, Buffett acknowledges that the experience reshaped his investment identity. It pushed him away from cigar‑butt investing and toward durable, high‑quality businesses—Coca‑Cola, American Express, Apple, and others that now define Berkshire’s portfolio.
It also taught him to avoid letting emotion drive capital allocation. His anger over an eighth of a dollar led him to buy a company he never intended to own. The consequences lasted decades.
Yet without that mistake, the Berkshire we know today might not exist.
A Final Lesson as Buffett Prepares to Step Down
As Buffett transitions out of the CEO role, his reflections carry extra weight. Investors often look to his successes for guidance, but Buffett insists that his most important lessons came from failure.
The Berkshire acquisition was costly, frustrating, and—by his own admission—avoidable. But it forced him to evolve. It pushed him toward a philosophy that has compounded shareholder wealth for nearly 60 years.
In the end, the "dumbest stock" he ever bought became the foundation of one of the greatest investment stories of all time.
And perhaps that is Buffett’s final reminder to the next generation of investors: Your biggest mistakes may become your most valuable teachers—if you’re willing to learn from them.