Why buying Berkshire was Warren Buffett’s biggest mistake

📅 Last updated: December 27, 2025

As Warren Buffett prepares to pass the torch after decades at the helm of Berkshire Hathaway, a resurfaced clip from a 2010 CNBC interview offers a stunning confession. With characteristic candor, the Oracle of Omaha reflected on the pivotal decision that shaped his career, not as his crowning achievement, but as his “biggest mistake.” The subject of this regret? The very acquisition that defined his legacy: the purchase of Berkshire Hathaway itself.

The Fateful Decision

This admission is more than a humblebrag; it’s a masterclass in opportunity cost, a concept every investor understands but few feel as acutely as Buffett. To understand the weight of this mistake, we must travel back to 1962. Buffett, then a young, value-oriented partnership manager, began buying shares of Berkshire Hathaway, a struggling New England textile manufacturer. He saw a classic “cigar butt” investment—a company with just one or two puffs of value left in it, trading far below its net working capital. His plan was simple: buy cheap, realize the latent value, and move on.

The fateful turn came in 1964. After a handshake deal on a buyback price with Berkshire’s management, Buffett felt shortchanged when the formal offer arrived slightly lower. Instead of walking away, his pride intervened. In what he has since called a decision fueled by “anger,” he scrapped the exit plan and bought enough stock to take control of the company. He then proceeded to pour more capital into the failing textile mills for two decades, fighting a relentless economic tide. It was, by his own account, a “sinking ship.”

The Staggering Cost of a Textile Mill

So why was this his greatest error? The answer lies not in the modest losses from the textile business, but in the monumental *alternative future* it foreclosed. The capital and, more critically, the time and intellectual energy Buffett spent nursing Berkshire’s textile operations were resources diverted from his true genius: identifying phenomenal businesses at good prices.

• The Insurance What-If: Shortly after the Berkshire acquisition, Buffett began investing in and eventually purchasing National Indemnity Company in 1967. This move unlocked the “float”—premiums paid upfront and held before claims are paid—providing him with a massive, low-cost capital engine to invest. Insurance, not textiles, became the foundation of Berkshire’s empire.
• The Quantified Blunder: Buffett has quantified his blunder with devastating clarity. He estimated that the decade-long diversion into textiles likely cost him $200 billion in compounded returns over his lifetime. Every dollar and every hour spent trying to salvage looms in New England was a dollar and an hour not invested earlier in what would become his legendary holdings: See’s Candies, Coca-Cola, American Express, or Geico. The compounding magic he so famously champions was working in reverse against him.

The capital and, more critically, the time and intellectual energy Buffett spent nursing Berkshire’s textile operations were resources diverted from his true genius.

The Unlikely Silver Lining: A Vehicle for Genius

Yet, herein lies the profound paradox. This “mistake” provided the very vehicle for his success. Had Buffett simply sold Berkshire and taken his profits, he would have remained a successful partnership manager. Instead, he was left with a corporate shell. That shell, however inefficiently acquired, became the canvas for his masterpiece. The stubborn textile experience forged a critical investment principle: it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Key Takeaways

• Opportunity Cost is Paramount: The true cost of any investment is what you give up by not deploying that capital, time, and effort elsewhere.
• Emotion is the Investor’s Enemy: Buffett’s decision was driven by pride and anger, not rational analysis, leading to a decades-long diversion.
• Quality Over “Cigar Butts”: The experience cemented Buffett’s shift from seeking cheap, struggling businesses to seeking wonderful businesses with durable competitive advantages.
• Structure Enables Scale: While acquired poorly, the Berkshire corporate structure ultimately provided the permanent capital base needed to build an empire, unlike a time-limited investment partnership.