WARREN BUFFETT: Well, the mistakes we made,
and we made them — some of them big time —
are of two kinds.
One is when we didn’t invest at all
in something that we understood that was cheap,
maybe because we weren’t even working hard enough at
looking at the whole list, or because,
for one reason or another, we just didn’t — we didn’t take action.
And the second was
starting in on something that could have been a very large investment and
not maximizing it.
Charlie is a huge believer in the idea that you don’t sit around sucking your thumb
when you can — when something comes along that should be done that you
pour into it.
And that’s generally what we’ve tried to do. But
there have been times — and it’s usually happened
when I’ve started buying something at X and it went up to X plus an eighth or some
intolerable amount like that — and I quit or waited for it to come back.
And we’ve missed, in some cases, billions of dollars of profit because
of the fact that I’d gotten anchored, in effect,
to some initial price when I could have paid more subsequently and
it really was inconsequential.
CHARLIE MUNGER: Do you have anything worse to confess than Walmart?
WARREN BUFFETT: No, Walmart — I cost us about — it’s up to 10 billion now.
(Laughter)
I cost us about 10 billion.
I set out to buy 100 million shares of Walmart, pre-split, at about 23.
And
Charlie said it didn’t sound like the worst idea ever came up with,
which is — from him, I mean,
it was just ungodly praise.
(Laughter)
And then, you know, we bought a little and then it moved up a little bit.
And I thought, “Well, you know, maybe it will come back” or what —
Who knows what I thought? I mean, you know, only my psychiatrist can tell me.
And
that thumb sucking, reluctance to pay a little more —
the current cost is in the area of 10 billion.
And there have been other examples, too.
And there will probably be more examples in the future, unfortunately.
But that is — that’s — on the other hand, it doesn’t bother us.
I mean, you know,
it’s maybe instructional to
talk about it just a little and I’m glad to respond to the question.
But in the end, we’re going to make a lot of mistakes at Berkshire.
And we’ve made them in the past, we’ll make them in the future.
You know, if every shot you hit in golf was a hole-in-one, it wouldn’t be — you know,
the game would soon lose interest.
So you have to hit a few in the woods occasionally just to make
it a little more interesting.
We’ll try not to do that too often.
But those will be the kind of mistakes we make.
We probably won’t make the kind of mistakes
— although we have — we made one with Dexter Shoe —
but we probably won’t make the kind that cost us a ton of money.
They’ll be much more of omission than commission, I think, you’ll find in the future.
Charlie, you want to add any more?
CHARLIE MUNGER: Yeah. At least we
are constantly thinking about the past occasions when we blew opportunities.
Since those don’t hit financial reports,
the opportunities you had but didn’t accept,
most people don’t bother thinking about them very much.
At least that is a mistake we don’t make. We rub our own noses
in our mistakes in blowing opportunities, as we just did.
AUDIENCE MEMBER: Peter Kenner from New York City.
Good afternoon, Warren, Charlie.
WARREN BUFFETT: Hi, Peter.
Good to see you. I’d like to ask you what your thought process was when you,
or share with us your thoughts, when you decided to sell McDonald’s.
WARREN BUFFETT: That must have been Charlie’s idea,
Peter. (Laughter)
Peter, incidentally, is in a family that
four generations have essentially invested with us.
And they’re all terrific people, I might add. His dad was a wonderful guy.
The —
you know, I said it was a mistake to sell it, and it was a mistake.
And I just reported that in the interest of candor. And there were some reasons
why I thought it was something we —
I didn’t think it was, obviously, that it was any great short sale, or even a great sale.
But I didn’t think it belonged in the list of eight or 10 of the businesses,
of the very few businesses, that we want to own in the world.
And I would say that
that particular decision has cost you, hmm, in the area of a billion dollars-plus.
Charlie?
CHARLIE MUNGER: You want me to rub your nose in it? You’re doing a —
(Laughter)
You’re doing a pretty good job by yourself.
(Laughter)
By the way, that’s a good practice around Berkshire.
We do rub our own noses in it. We don’t even need the help of the Kenners.
(Laughter)
WARREN BUFFETT: We believe in postmortems at Berkshire.
I mean, we really do believe —
one of the things I used to do when I ran the partnership is
I contrasted all sale decisions versus all purchase decisions.
It wasn’t enough that the purchase decisions worked out well,
they had to work out better than the sale decisions.
And managers tend to be reluctant to look at the results of the capital projects
or the acquisitions that they proposed with great detail
a year or two earlier to a board.
And they don’t want to actually
stick the figures up there as to how the reality worked out against the projections.
And that’s human nature.
But, I think you’re a better
doctor if you drop by the pathology department, occasionally.
And I think you’re a better manager
or investor if you look at every one of the decisions you’ve made,
of importance, and see which ones worked out and which ones didn’t and,
you know, what is your batting average.
And if your batting average gets too bad,
you better hand the decision making over to someone else.
Charlie, want to rub my nose anymore?
CHARLIE MUNGER: No.
WARREN BUFFETT: No, that’s OK. OK. We’re —