Even Buffett Isn’t Perfect

Author Vahan Janjigian claims that even Warren Buffett isn’t perfect in his new book, Even Buffett Isn’t Perfect. David Kansas writes:

And there have been memorable stumbles over the years: A Berkshire Hathaway investment in the retailer Pier I, in 2004, unhappily preceded a big drop in Pier I’s stock; more famously, a stake in Salomon Bros. in the late 1980s and early 1990s, though it eventually made money, caused more headaches than it was worth. (Salomon eventually became part of what is now Citigroup.)
What’s remarkable about Mr. Buffett is that he has made so few mistakes while building Berkshire Hathaway into a stock-market titan. He strongly prefers that the investments of Berkshire Hathaway be referred to as such rather than credited to himself alone. Still, in the popular imagination it would be hard to slide a piece of paper between Mr. Buffett and his company.

Buffett also owned US Air which was a major blunder. To his credit, Buffett has been very candid about his mistakes. This is from his 1996 Chairman’s Letter:

When Richard Branson, the wealthy owner of Virgin Atlantic Airways,
was asked how to become a millionaire, he had a quick answer: “There’s
really nothing to it. Start as a billionaire and then buy an airline.”
Unwilling to accept Branson’s proposition on faith, your Chairman decided
in 1989 to test it by investing $358 million in a 9.25% preferred stock of
USAir.
I liked and admired Ed Colodny, the company’s then-CEO, and I still do. But my analysis of USAir’s business was both superficial and wrong. I was so beguiled by the company’s long history of profitable operations, and by the protection that ownership of a senior security seemingly offered me, that I overlooked the crucial point: USAir’s revenues would increasingly feel the effects of an unregulated, fiercely-competitive market whereas its cost structure was a holdover from the days when regulation protected profits. These costs, if left unchecked, portended disaster, however reassuring the airline’s past record might be. (If history supplied all of the answers, the Forbes 400 would consist of librarians.)

Posted by on April 30th, 2008 at 8:23 am


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