Warren Buffett on His Biggest Investing Mistakes and the Strategies He Uses to Overcome Them

While many on Wall Street love to hype their wins and are conspicuously shy about their losses, Buffett is as open about his misses as his hits.

“I make plenty of mistakes and I’ll make plenty more mistakes, too. That’s part of the game,” he has said. “You’ve just got to make sure that the right things overcome the wrong ones.”

For Buffett, since they’re part of investing, they can be powerful teachers for those who approach stocks with a bit of humility and reflection.

Errors Are Built Into the Game 

Buffett has chronicled more than 30 major blunders over the years, not as a confession, but as a curriculum. “For Buffett, mistakes aren’t buried, they’re dissected,” writes Lawrence A. Cunningham, who has published several books on Buffett and his company, Berkshire Hathaway Inc. (BRK.A, BRK.B).

Mistakes in business and investing are inevitable from time to time: human error, bad timing, and bad judgment.

The real skill is in recognizing them quickly and fixing them, rather than doubling down on a bad bet.

Out in the Open: From Dexter Shoe to Precision Castparts

Perhaps Buffett’s most famous mistake was the 1993 purchase of Dexter Shoe. He paid $433 million—not in cash, but in Berkshire stock. When cheap foreign competition crushed Dexter, the business effectively went to zero. The Berkshire shares he gave away, however, would be worth about $18 billion today. He has called it his “most gruesome mistake” and joked that it belongs in the “Guinness Book of World Records” for financial disasters.

Decades later, he made another mistake with Precision Castparts, a major aerospace-parts maker Berkshire bought for about $35 billion in 2016. When profits disappointed and the pandemic hit air travel, Berkshire took a $10 billion write-down. In his 2020 letter to shareholders, he didn’t blame the economy or managers. He wrote simply, “I paid too much for the company.”

Notice what he also didn’t do:

• He didn’t bury the mistake in footnotes. 
• He didn’t try to minimize the numbers. 
• He took responsibility in widely read shareholder letters.

That radical transparency is rare, but it’s central to Buffett’s thinking about risk: you can’t manage what you refuse to see clearly.

The Worst Mistakes Don’t Appear on the Income Statement

Buffett has often said his biggest mistakes have been ones of omission rather than commission—i.e., the great businesses he didn’t buy or sold too early.

He’s admitted that passing on Amazon and Google early on were major errors, even though both companies were well within his knowledge base (after deriding the dotcom bubble overall as hype).

These missed prospects don’t appear as losses on Berkshire’s financial statements because they’re investments that were never made. Over a long time horizon, the foregone gains from omissions (known in economics as opportunity costs) can dwarf the losses from a few bad picks.

How Buffett Deals With Mistakes (And What You Can Copy)

Buffett’s thinking about mistakes aligns with what other top investors advise. Expect to be wrong some of the time, and size positions so that any single mistake won’t bring you down.

Here’s Buffett’s playbook, in practical terms: 

• Admit problems quickly and specifically. Berkshire’s letters don’t just say “we had a challenging year.” They name decisions (Dexter, Precision Castparts), numbers, and where the analysis failed. Keep your own “mistake log” and jot down why you bought or sold, and revisit the decisions that didn’t go well.
• Examine the process, not just the outcome. With Dexter, Buffett misjudged the company’s competitive advantage and then magnified the damage by paying with undervalued Berkshire stock. With Precision Castparts, he admits his earnings projections were too optimistic.
• Beware of trend-chasing. As Buffett says, “What the wise do in the beginning, fools do in the end”—piling into hot assets after the easy money has been made.
• Stay within one’s “circle of competence.” Buffett has repeatedly warned that straying into businesses you don’t truly understand is a frequent source of costly mistakes, so be honest about what you really know.
• Focus on avoiding big losses over chasing big wins. Trying to avoid damaging losses is often more important than striving for spectacular successes, a view very much in tune with Buffett’s focus on capital preservation.
• Let a few big winners ride. Buffett’s long-term stakes in companies like Coca-Cola Co. (KO) and, more recently, Apple Inc. (AAPL) have produced outsized gains that vastly overshadow even billion-dollar missteps.