Warren Buffett admits to his mistakes at Berkshire Hathaway: ‘Felt pain like that of a failed marriage’

He said he sometimes wrongly assessed the future economics of a business purchased for Berkshire. “Each a case of capital allocation gone wrong. That happens with both judgments about market equities – we view these as partial ownership of businesses – and the 100% acquisitions of companies,” Buffett said.

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He went on to say that he has also made mistakes in assessing the abilities of some of the managers Berkshire hired. “The fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage,” he said.

Pointing to what his long-time business partner late Charlie Munger said about such mistakes, Buffett said, “A decent batting average in personnel decisions in all that can be hoped for…Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be.”

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Buffett also pointed out that between 2019 and 2023, he has used the word ‘mistake’ or ‘error’ 16 times in his annual letter while other “huge companies” have never used either of the two words in that time period.

“Amazon, I should acknowledge, made some brutally candid observations in its 2021 letter. Elsewhere, it has generally been happy talk and pictures,” he said.

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“Mistake” or “wrong” are forbidden words at board meetings or analyst calls of multiple companies Buffett has previously worked at, a “taboo” which made him nervous.

“At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters. Greg shares the Berkshire creed that a “report” is what a Berkshire CEO annually owes to owners. And he also understands that if you start fooling your shareholders, you will soon believe your own baloney and be fooling yourself as well,” Buffett wrote.