Berkshire Hathaway CEO Warren Buffett isn’t afraid to admit when he, or his company, has messed up.
Mistakes are inevitable — and once you realize you’ve made one, you should own it quickly to prevent additional damage, Buffett wrote in his annual letter to shareholders, published this past weekend. He learned that lesson from his longtime business partner and friend, the late Charlie Munger, he noted.
“The cardinal sin is delaying the correction of mistakes or what Charlie Munger called ‘thumb-sucking,'” wrote Buffett. “Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be.”
Buffett used the words “mistake” and “error” 16 times in his annual letters from 2019 through 2023, he noted in this year’s communication. Those missteps ranged from incorrectly assessing job candidates and economic trends to investing in the wrong companies.
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Most of his errors at Berkshire Hathaway stemmed from reluctance, Buffett said at the company’s annual conference in 1997: He’d missed opportunities to invest in exciting new companies because they’d asked for too much money.
“The cost of that [has been] many, many billions,” said Buffett. And given the company’s cautious investing strategies, “I’ll probably keep making that mistake.”
Munger made his stance on mistake-making clear at a Wesco Financial Corporation meeting in 2016: You shouldn’t dwell on past errors, but you should reflect on them to avoid repeating them.
“Nobody bats a thousand,” Munger said. “I think it’s important to review your past stupidities so you are less likely to repeat them, but I’m not gnashing my teeth over it or suffering or enduring it.”
‘Mistakes fade away; winners can forever blossom’
Fessing up to an error can build trust among colleagues, because it shows emotional intelligence and humility, communication expert Matt Abrahams told CNBC Make It last year. It can make your peers feel more comfortable admitting when they need help too, prompting more teamwork and collaboration.
Early into his career at Amazon, now-CEO Andy Jassy presented a 220-slide PowerPoint on his team’s operating plan to founder Jeff Bezos and other company executives, Jassy said in a video posted online by Amazon last year. Partway through the presentation, Bezos noted that one slide was full of errors.
Jassy decided to show humility rather than defensiveness: He apologized, acknowledged the error, then moved on without dwelling on it. “If you want to earn trust: If you say you’ve got something, deliver it. If you own something and it’s not going well, be self-critical, and fix it,” Jassy said in the video.
The good news for Buffett: His correct decisions over the course of his Berkshire Hathaway tenure seem to have mattered more than his wrong ones, he wrote in this year’s letter.
“Our experience is that a single winning decision can make a breathtaking difference over time,” he wrote, citing Berkshire Hathaway’s purchase of insurance giant Geico, the hiring of vice president of insurance operations Ajit Jain and “my luck in finding Charlie Munger as a one-of-a-kind partner, personal advisor and steadfast friend.”
“Mistakes fade away; winners can forever blossom,” Buffett added.
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