Warren Buffett bought oil stocks near the peak of an energy boom, declined to spend $35 million on a growing television station and swapped a Berkshire Hathaway Inc. (BRK.A) stake for a shoe company he later said was worthless.
In each case, shareholders of Omaha, Nebraska-based Berkshire were charged or deprived of at least $1 billion. And in each case, Buffett apologized in writing.
“A friend once asked me: If you’re so rich, why aren’t you smart?” Buffett, Berkshire’s chairman, said in a letter accompanying the 1996 annual report. The billionaire, describing a bet on USAir, told readers at the time, “You may conclude he had a point.”
Buffett’s self-criticism is part of a leadership style that has helped him build a company with 270,000 workers and draw crowds of more than 20,000 to hear him speak. Buffett, 81, who’s scheduled to release his annual shareholder letter tomorrow, relies on his public persona as well as his record to set standards for Berkshire staff and retain investors in good years and bad.
“He doesn’t hesitate to point this stuff out, and it’s not just for the shareholders,” said James Armstrong, president of Berkshire investor Henry H. Armstrong Associates. “It’s also for the employees and managers of Berkshire. It’s sending the message: Admit your mistakes, don’t pretend they didn’t happen.”
Buffett, a former hedge-fund manager, boosted Berkshire with stock picks like Coca-Cola Co. (KO) and takeovers including insurer Geico Corp. Berkshire shares soared about 38-fold in the last 24 years and Buffett’s fortune surged to third-biggest in the world. The company trades at about 1.2 times book value, indicating that investors believe the firm is worth more than its net assets.
The Class A shares slipped 4.7 percent last year amid a surge in insurance catastrophe costs and questions about Berkshire’s succession planning. Berkshire’s profit declined 16 percent to $7.2 billion in the nine months ended Sept. 30, and Buffett was criticized in the media for his handling of the resignation of former manager David Sokol.
Buffett claimed responsibility for losses when his bet on oil producer ConocoPhillips contributed to more than $3 billion of impairments in 2009. He blamed himself for decades of missed profits because he refused to pay $35 million for a Dallas-Fort Worth NBC station. The cost of his 1993 purchase of shoemaker Dexter rose to $3.5 billion, Buffett said in 2008, because he paid the $433 million price in Berkshire stock.
‘A Big Mistake’
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