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Why purchasing Berkshire was Buffett’s largest error
Warren Buffett is entering his final week as CEO of Berkshire Hathaway, the platform he has utilized to create extraordinary wealth for himself, as well as for the company’s devoted longtime investors, over the last sixty years.
Since assuming control in 1965, Buffett has converted a failing textile firm into a colossal conglomerate valued at over $1 trillion.
His Class A shares constitute nearly his entire estimated net worth of $151 billion, placing him in the #10 position of the Bloomberg Billionaires Index.
If he had retained the hundreds of thousands of Berkshire B shares, presently valued at $208 billion, which he has been donating since 2006, with more contributions ahead, he would be No. 22 on that list with approximately $359 billion.
Given the success he has experienced with the firm, it might be startling to hear him label Berkshire as “the dumbest stock I ever purchased,” … a mishap that has cost him hundreds of billions of dollars.
From the extensive archives of CNBC’s Warren Buffett Archive, here’s an exclusive segment of Buffett from 2010 providing a detailed explanation to Becky Quick on why he should never have acquired Berkshire Hathaway and the vital lesson he derived from his expensive error.
BECKY QUICK: Thank you, Warren, for being with us today.
WARREN BUFFETT: Happy to help.
BECKY QUICK: We’re aiming to uncover what was your most regrettable trade and the lessons learned from it?
WARREN BUFFETT: The most foolish thing I’ve ever done? (LAUGHTER)
BECKY QUICK: Yes, the most foolish thing you ever did.
WARREN BUFFETT: The — the most foolish stock I ever acquired — was — drum roll, please — Berkshire Hathaway. And — that might need some clarification. It was early in — 1962, and I was managing a small partnership, around seven million. They’d probably label it a hedge fund now.
Here was this inexpensive stock, inexpensive by working capital metrics or so. But it was a stock in a — in a textile firm that had been declining for years. Originally, it was a massive company, and they kept shutting down one mill after the other. Each time they closed a mill, they would — take the excess funds and repurchase their stock. I assumed they were about to shut down; they only had a few mills remaining, but expected them to close another. I’d purchase the stock, tender it to them, and earn a small gain.
So I began acquiring the stock. By 1964, we held quite a bit. I revisited the management, Mr. (Seabury) Stanton. He looked at me and said, ‘Mr. Buffett. We just sold some mills. We have excess funds. We’re going to initiate a tender offer. At what price will you tender your stock?’
And I replied, ‘11.50.’ He asked, ‘Do you promise to tender at 11.50?’ I assured him, ‘Mr. Stanton, my word is good, if you proceed soon, I will sell my stock at 11.50.’ I returned to Omaha. A few weeks later, I opened the mail —
BECKY QUICK: Oh, you have this?
WARREN BUFFETT: And here’s the tender offer from Berkshire Hathaway — dated 1964. If you look closely, you’ll observe the price is —
BECKY QUICK: 11 and —
WARREN BUFFETT: — 11 and three-eighths. He undercut me by an eighth. Had that letter arrived with 11.5, I would have tendered my stock. But that irritated me. Thus, I went ahead and started to acquire more stock, gained control of the firm, and dismissed Mr. Stanton. (LAUGHTER)
And we proceeded from there.
This may appear as a compelling little morality tale now. However, the reality is I had now committed a significant sum to a dreadful enterprise. Berkshire Hathaway subsequently formed the foundation for nearly everything I’ve done since.
In 1967, when a decent insurance firm presented itself, I acquired it for Berkshire Hathaway. I genuinely should have done so for a new entity.
Because Berkshire Hathaway was burdened with this anchor, all those textile assets. Initially, it consisted entirely of textile assets that were worthless. Over time, we added more ventures to it. Yet, we were perpetually dragging this anchor.
For two decades, I struggled against the textile sector before conceding defeat. Had we invested that money into the insurance sector from the beginning, Berkshire would presently be valued at double its current worth. So —
BECKY QUICK: Twice as much?
WARREN BUFFETT: Indeed. This amounts to $200 billion. You can — you can calculate how that occurs. Because this so-called genius believed he could manage a textile business. (LAUGHTER)
BECKY QUICK: Why $200 billion?
WARREN BUFFETT: Well, because if you consider taking the same capital I invested in the textile business and using it in the insurance field, starting from there, we would have created a company that — since all that money was a hindrance. We had a net worth of $20 million. Berkshire Hathaway was generating nothing, year after year after year.
And — thus concludes the narrative of — a $200 billion —
By the way, if you revisit in ten years, I might have one that’s even worse. (LAUGHTER)
BECKY QUICK: If you had to derive a moral from that tale, would it be that you shouldn’t harm yourself out of spite?
WARREN BUFFETT: I would say — I would assert that regardless of whether you inflict harm out of spite or whatever, if you find yourself in a poor business, get out of it. It was a terrible error, purely because I stumbled into it, in a manner of speaking.
And — and I’ve always expressed that to be recognized as an effective manager, one should invest in a good business. (LAUGHTER)
That’s the ideal approach. When I’m in a commendable business, people think, ‘Wow, that person is sharp.’ And when I’m engaged in a foolish business, like textiles, and am unsure of what I’m doing, or footwear subsequently, or whatever it may be, in instances where you believe you’re a managerial whiz, simply try your hand at a poor business.
BECKY QUICK: Is that the insight you gained from it?
WARREN BUFFETT: Absolutely.
BECKY QUICK: And is that something you’ve actively applied?
WARREN BUFFETT: I’ve included a statement in my annual report many, many, many decades ago, after going through this. I noted, ‘When a manager renowned for intelligence encounters a business with a reputation for poor economics, it is the business’ reputation that remains unscathed.’
BECKY QUICK: (LAUGHTER) So that’s a lesson you’ve retained? Yet, it’s one that you are reminded of every single day. It’s Berkshire Hathaway.
WARREN BUFFETT: Indeed. And occasionally, I find myself tempted. I began with Ben Graham around 1950 or so. His core philosophy was acquiring undervalued assets.
One should not pursue undervalued items. It’s far wiser to buy something of quality at a reasonable price than something that is cheap at a discounted rate.
Initially, I didn’t start off that way. I was taught a different methodology.
But — if I didn’t absorb lessons from Berkshire Hathaway, I’ll never truly learn. (LAUGHTER)
BECKY QUICK: How long did it take you to grasp this lesson? You stated it was —
WARREN BUFFETT: It took me two decades to give up on the textile business. I had a wonderful guy running it after — following Seabury Stanton — a fellow named Ken Chase. He was fantastic. Honest, capable, and diligent. Yet he couldn’t turn it around.
We continued to press on, making attempts — we acquired another textile company named Waumbec Mills in Manchester, New Hampshire. Another blunder.
If you’re going to excel with a poor business, why not shine with a good enterprise?
BECKY QUICK: But honestly, it took 20 years for you to finally surrender. When did you realize, oh, this isn’t working? Was it really 20 years? Or did you kind of recognize —
WARREN BUFFETT: Well, it was — no. I came to terms with it relatively early on. However, I kept thinking I wouldn’t abandon this. We had an excellent workforce. I mean, we were not undermined by anything except competitive pressures. And we’d invest in new machinery, or we would expand — we would add this mill in Manchester, proclaiming, ‘Look at all those synergies,’ and so forth. Nothing proved effective.
I used to have a desk in my drawer. They kept sending me these notes that if we purchased this equipment, we would save 14 jobs. If we bought this machinery, we would save 12 jobs. I kept filing them away. With all those machines, we would save more employees than we initially had. Supposedly, we were operating with zero personnel. But that’s not how it functions.
BECKY QUICK: Were there any ventures you avoided because you thought, wait a minute, I’ve experienced this situation before? Where you felt tempted and then opted against it?
WARREN BUFFETT: I receive inquiries about them quite frequently. You know, I mean, I receive inquiries — not daily. I mean, that’s an exaggeration. But I get approached regularly about businesses that are exceedingly challenging. And — and individuals ask, you know, why not take a chance? You know, you have all these resources now and capable managers.
The intriguing aspect of business is that it is not akin to the Olympics. In the Olympics, if you execute a dive from the — from a high platform and perform several twists — (LAUGHTER) on the descent, and if you enter the water awkwardly, there is a degree of difficulty factor. Therefore, you’ll receive more points than someone who merely executes a straightforward headfirst dive perfectly.
Degree of difficulty matters in the Olympics. It does not apply to business. You receive no extra rewards for undertaking something that is very challenging. Therefore, you may as well leap over one-foot hurdles rather than attempting to vault over seven-foot hurdles.
BECKY QUICK: People may argue, hold on. You’re involved in some enterprises that others have declared dead: the newspaper industry. How does that differ?
WARREN BUFFETT: You are correct. (LAUGHTER) However, we purchased that [The Buffalo Evening News] in 1977. And — and we’ve prospered over the years. Initially, results weren’t strong. Nonetheless, later on, we succeeded remarkably well.
Nevertheless, the newspaper industry of 2010 is not the same as the newspaper industry of 1977. They are fundamentally different. [Berkshire sold the newspaper in 2020.]
It’s accurate, and we indicated in the annual report, that we run Berkshire in a manner not taught in business schools. In business schools, they advise you to divest your mediocre businesses and continually pursue new ventures. I term that gin rummy management.
If I had 50 offspring, you know, and one of them isn’t performing comparably to the others, I wouldn’t consider placing them up for adoption. Unless they pose a permanent financial loss or encounter major labor issues, we retain the businesses that are not as effective as the others.
Thus, if I adhere to that philosophy, I must be exceedingly cautious about my acquisitions, correct?
BECKY QUICK: Absolutely. What about your partner, Charlie Munger? What would he say your most significant blunder is?
WARREN BUFFETT: Well, he would most likely reiterate this. I would assert that I’ve gained much knowledge about what I just discussed — I’ve learned considerably from Charlie.
Charlie conveyed this to me from the moment I met him in 1959. He indicated — he stated precisely — I could have spared myself a lot of difficulties had I simply heeded him. Yet, who knew what Charlie was talking about? (LAUGHTER)
BECKY QUICK: All right. Warren, thank you truly. We sincerely value your time.
WARREN BUFFETT: Thank you. Appreciate the opportunity.
BUFFETT ONLINE
Some links may require a subscription:
- NPR’s The Indicator from Planet Money podcast: The worst year of Warren Buffett’s career
BERKSHIRE STOCK MONITOR
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BERKSHIRE’S PRIMARY EQUITY HOLDINGS – Dec. 24, 2025
Berkshire’s leading holdings of publicly traded stocks in the U.S. and Japan, by market value, based on the most recent closing prices.
Holdings are as of Sept. 30, as reported in Berkshire Hathaway’s 13F filing on November 14, 2025, except for:
- Itochu, as of March 17, 2025, and Mitsubishi, recorded on August 28, 2025. Prices on the Tokyo Stock Exchange are converted to U.S. dollars from Japanese yen.
The complete list of holdings and present market valuations can be found on CNBC.com’s Berkshire Hathaway Portfolio Tracker.
QUESTIONS OR FEEDBACK
Please direct any questions or feedback regarding the newsletter to me at [email protected]. (Apologies, but we do not forward queries or comments to Buffett personally.)
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Additionally, Buffett’s annual letters to shareholders are highly suggested reading. They are compiled here on Berkshire’s site.
— Alex Crippen, Editor, Warren Buffett Watch
