In his annual letter to shareholders, Berkshire Hathaway CEO Warren Buffett candidly acknowledges his mistakes in capital allocation and hiring decisions, emphasizing that delaying corrections—not making mistakes—is the real failure.
New Delhi, February 23: Renowned investor and Berkshire Hathaway Chairman Warren Buffett has openly admitted to making mistakes in his latest annual letter to shareholders, emphasizing that errors are inevitable in business but ignoring them is the real sin.
“Mistakes? Yes, we make them at Berkshire,” Buffett wrote, using the word “mistake” 13 times throughout his 15-page letter.
Buffett stressed that the biggest failure isn’t making mistakes—but failing to correct them promptly.
“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,” he explained.
“Capital Allocation Gone Wrong”—Buffett Reflects on Past Errors
Buffett acknowledged that his errors in business assessments had cost Berkshire valuable opportunities.
“Each mistake was a case of capital allocation gone wrong,” he admitted, referring to misjudgments in evaluating the long-term economics of acquired businesses.
Additionally, Buffett noted that misjudging the abilities or integrity of key hires had led to significant disappointments—sometimes even more painful than financial losses.
“The fidelity disappointments can hurt beyond their financial impact—a pain that can approach that of a failed marriage,” he wrote.
“Mistake”—A Forbidden Word in Corporate Culture
Buffett pointed out that many large corporations avoid admitting mistakes, contrasting this with his own transparent approach at Berkshire Hathaway.
“During the 2019-23 period, I have used the words ‘mistake’ or ‘error’ 16 times in my letters to shareholders. In contrast, many other huge companies have never used either word over that span,” he observed.
He further criticized boardrooms and analyst calls where “mistake” is a taboo word, saying it creates a false impression of managerial perfection.
“That taboo, implying managerial perfection, always made me nervous. We live in a very litigious society, but avoiding mistakes in discussion does not mean they don’t exist,” Buffett concluded.
With his characteristic humility and wisdom, Buffett’s letter serves as a reminder that even the most successful investors and businesses make mistakes—but what sets them apart is their ability to acknowledge and correct them.
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Warren Buffett, Berkshire Hathaway, business mistakes, investment errors, shareholder letter, capital allocation, corporate leadership, business transparency, Charlie Munger, financial markets, stock market, business ethics, CEO insights