Warren Buffett has been buying and selling stocks for decades. From his first stock purchase at the tender age of 11, Buffett has kept an interest in the stock market and the business of investing in businesses and watching his wealth rise higher and higher until he became the second wealthiest man in the world.
But that rise to wealth wasn’t made completely by all the best choices. In fact, Buffett has made quite a few errors, but when asked what his biggest investing mistake was, his response was as immediate as it was surprising: Berkshire Hathaway.
When Warren Buffett purchased shares of Berkshire Hathaway in 1962, the company was in terrible shape. A textile company at the time, it continually closed in the red and was all but hemorrhaging profits trying to match foreign competitors and stay afloat. As the company sold off its textile mills, the profits were used to purchase back shares of the company, sending the prices floating upwards slightly. Buffett, seeing this trend, swooped in and snatched up some shares with the intention of selling them at a profit.
However, when the CEO of Berkshire Hathaway sent Buffett the tender offer for his shares, it was one-eighth of a point lower than what Buffett and he had previously agreed upon. Upset at the personal slight, Buffett held on to his shares and began to slowly purchase more and more until he owned enough of the company to fire the CEO.
But, once the CEO was gone, Buffett found himself at the helm of a sinking ship, and he immediately set about trying to make things work from there by purchasing insurance companies and slowly diversifying. While, obviously, things worked out in the end, Buffett has estimated that he lost around $200 billion by throwing money into Berkshire instead of buying an insurance company from the get-go.
This is particularly interesting because the purchase of Berkshire Hathaway went against everything that Buffett has come to stand for—reasoned investing based on the company quality, holding on to shares to make a profit, and fair and non-hostile takeovers. Obviously we all have to start somewhere, and it is clear that the investing tycoon learned a lot from his rocky launch into the world of business investing.