2015: What was Buffett's most memorable failure and how did he deal with it?

AUDIENCE MEMBER: Hello. I’m Linen Cygaloski (PH). I’m from Chicago, Illinois, and Berkeley, California.

I’d like to thank you for giving the opportunity to ask this question. This is my first meeting. I plan to attend once every 50 years. (Laughter)

And also, for your essay on the — both of your essays — on the past, present, and future of Berkshire.

As we reflect on the last 50 years, I’d like to ask you this question: what was your most memorable failure and how did you deal with it? Thank you.

WARREN BUFFETT: Yeah. Well, we’ve discussed Dexter many times in the annual report, where I — back in the mid-1990s — I looked at a shoe business in Dexter, Maine, and decided to pay 400-or-so million dollars for something that was destined to go to zero in a few years, and I didn’t figure that out.

And then on top of that, I gave the purchase price in stock, and I guess that stock would be worth, I don’t know, maybe 6 or 7 billion now. It makes me feel better when the stock goes down because the stupidity gets reduced. (Laughter)

Nobody misled me on that, in any way. I just looked at it and came up with the wrong answer. But I would say almost any time we’ve issued shares, it’s been a mistake. Wouldn’t you say that, Charlie?

CHARLIE MUNGER: Of course.

WARREN BUFFETT: Yeah. (Laughter)

CHARLIE MUNGER: We don’t do it much anymore.

WARREN BUFFETT: No.

We probably could have pushed harder, particularly in the earlier years.

We’ve always been — well, we’ve had all of our own net worth in the company, we’ve had all our family’s net worth, and we’ve had all these friends that came out of our partnership, many of whom put half or more of their net worth with us, so we’ve been very, very, very cautious in what we’ve done.

And there probably were times when we could have stretched it a little and pulled off something quite large, that we made a mistake, looking back.

But, I wouldn’t want to take a 1 percent chance, you know, of wiping out my Aunt Katie’s net worth or something. It’s just not something in life that I could live with.

So I would rather be, you know, a hundred times too cautious than 1 percent too incautious, and that will continue as long as I’m around.

But people looking at our past would say that we missed some big opportunities that we understood, and could have swung, if we wanted to go out and borrow more money.

Charlie?

CHARLIE MUNGER: Well, it’s obviously true. If we had used the leverage that a lot of successful operators did, Berkshire would be a lot bigger.

WARREN BUFFETT: A lot bigger.

CHARLIE MUNGER: A lot bigger.

And — but we would have been sweating at night. It’s crazy to sweat at night. (Laughter)

WARREN BUFFETT: Over financial things.

CHARLIE MUNGER: Over financial things, yes. (Laughter and applause)

WARREN BUFFETT: Well, we won’t pursue that.