When Warren Buffett Admitted His 'Big Mistake' That Cost His Firm Berkshire A $10 Billion Loss In 2016

Warren Buffett is one of the most successful and admired investors of all time. Whoever is interested in the world of investing is a keen follower of the billionaire¡¯s moves and advices. While Warren Buffett's investment portfolio and business acumen is admired by many, he too, is a human, and has often admitted his mistakes and shared the lessons he learns.

When Warren Buffett Admitted His Big Mistake

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One such mistake was admitted by Warren Buffett a couple of years ago, which had made his firm Berkshire Hathaway incur a $10 billion loss. In his annual letter to investors in 2021, Buffett admitted he ¡°paid too much¡± when his Berkshire Hathaway spent $32.1 billion in 2016 to buy aircraft and industrial parts maker Precision Castparts Corp.

Berkshire had to write off nearly $10 billion (precisely $9.8 billion) of Precision¡¯s value in August 2020, as the coronavirus pandemic adversely affected demand for air travel and the Portland, Oregon-based unit¡¯s products.

Buffett said he bought ¡°a fine company - the best in its business,¡± and Berkshire was ¡°lucky¡± to have Precision CEO Mark Donegan still in charge, as per Reuters report. But he also admitted that he was ¡°simply too optimistic about PCC¡¯s normalized profit potential.¡± Precision shed more than 13,400 jobs, or 40% of its workforce, in 2020, and had only recently has begun to improve margins, Berkshire said.

¡°I was wrong ... in judging the average amount of future earnings and, consequently, wrong in my calculation of the proper price to pay for the business,¡± Buffett wrote. ¡°PCC is far from my first error of that sort. But it¡¯s a big one.¡±

In the annual letter, Buffett accepted that his purchase of aircraft component maker Precision Castparts in 2016 was a ¡°big¡± mistake. Warren Buffett accepted that he miscalculated its future earnings and paid more than its worth.

Also Read: Who Is Ajit Jain, The Indian-American Warren Buffett Calls As His 'Good Luck Hiring' At Berkshire

Another Big Regret Warren Buffett Once Admitted

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At Berkshire Hathaway¡¯s annual shareholder meeting a few years ago in Omaha, chairman Warren Buffett called his decision to pass on (and not invest in) Amazon and Google a mistake. A shareholder then rose from the audience to ask: If Buffett regrets turning down those companies, does he feel the same way about not investing in Microsoft?

It was a fair question, made only slightly awkward by the fact that Microsoft founder, Berkshire board member, and longtime Buffett pal Bill Gates was seated about 15 feet from the dais where the Oracle of Omaha was holding court.

¡°In the earlier years, it¡¯s very clear¡ªthe answer is stupidity,¡± Buffett said, as per the American news website Quartz's report. Click here to know more about this story.

Also Read: How A Lost iPhone Led To Warren Buffett Investing Billions In Apple