Renowned investor and Berkshire Hathaway chairman Warren Buffett openly acknowledged in his annual shareholder letter that he has made mistakes at the company. He also emphasized that making errors should not be seen as taboo.
In his 15-page letter, Buffett mentioned the word "mistake" 13 times in various contexts, stressing that the real problem isn’t making mistakes but failing to correct them promptly.
"Mistakes—yes, we make them at Berkshire," Buffett wrote, adding, "The cardinal sin is delaying the correction of mistakes, or what Charlie Munger called ‘thumb-sucking.’ Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be."
Buffett admitted that he had misjudged the future economic prospects of certain businesses acquired for Berkshire. He described each misstep as a "case of capital allocation gone wrong." Additionally, he acknowledged errors in assessing the abilities and integrity of hiring managers, stating that "fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage."
Between 2019 and 2023, Buffett used the words "mistake" or "error" 16 times in his shareholder letters. He contrasted this with other major corporations, noting that many never use these terms at all.
"Elsewhere, it has generally been happy talk and pictures," he remarked, implying that other executives tend to avoid admitting faults in their reports.
Buffett also criticized corporate culture for discouraging open discussions about mistakes. "I have been a director of large public companies where 'mistake' or 'wrong' were forbidden words at board meetings or analyst calls," he noted. "That taboo, implying managerial perfection, always made me nervous. Of course, legal concerns sometimes necessitate limited discussion, but we live in a very litigious society."
Buffett’s candid approach stands in contrast to the often-polished narratives presented by other corporate leaders, reinforcing his reputation for transparency in business.
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"Mistakes—yes, we make them at Berkshire," Buffett wrote, adding, "The cardinal sin is delaying the correction of mistakes, or what Charlie Munger called ‘thumb-sucking.’ Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be."
Buffett admitted that he had misjudged the future economic prospects of certain businesses acquired for Berkshire. He described each misstep as a "case of capital allocation gone wrong." Additionally, he acknowledged errors in assessing the abilities and integrity of hiring managers, stating that "fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage."
Between 2019 and 2023, Buffett used the words "mistake" or "error" 16 times in his shareholder letters. He contrasted this with other major corporations, noting that many never use these terms at all.
"Elsewhere, it has generally been happy talk and pictures," he remarked, implying that other executives tend to avoid admitting faults in their reports.
Buffett also criticized corporate culture for discouraging open discussions about mistakes. "I have been a director of large public companies where 'mistake' or 'wrong' were forbidden words at board meetings or analyst calls," he noted. "That taboo, implying managerial perfection, always made me nervous. Of course, legal concerns sometimes necessitate limited discussion, but we live in a very litigious society."
Buffett’s candid approach stands in contrast to the often-polished narratives presented by other corporate leaders, reinforcing his reputation for transparency in business.
