Now anyone who has even so much as scanned the 40 years of collected letters on Berkshire’s website (you can read them at www.berkshirehathaway.com/letters/letters.html) will know that Mr Buffett has regularly fessed up to bad investing decisions. Most familiar to UK investors will be his $444m loss on Tesco, over which he admitted to “dawdling” and not selling soon enough as the grocer’s problems became apparent. But none seems to have invoked the regret he and right-hand man Charlie Munger expressed over the mistake in question: missing out on the rise of technology stocks. Google (now Alphabet), Amazon and, until recently, Apple all evaded Mr Buffett’s watchful eye, and, by implication, cost Berkshire billions in returns.
To be fair to Mr Buffett, the dot-com hangover perhaps prompted an unwarranted degree of caution towards tech stocks, of which having lived it as a tech analyst I suffered, too – I became, for a while, blinkered by pessimism and, like Buffett, wrongly dismissive of tech business models. But what other lessons can more average Joes like us learn from Buffett’s admission? Most obviously is that everyone makes investing mistakes, even sages. But making mistakes is fine, as long as we learn from them and try not to make them again. Taking responsibility for those mistakes is also important; if we blame someone else for investments that go wrong, then we run the risk of never learning anything.
Mr Buffett’s failure to invest in Google also highlights the issue that it is sometimes hard to see the wood for the trees – the investment potential of Google, he says, was staring him in the face in the way he bought advertising for his companies and the way he did his research, but he simply “missed it”. The same is true of Apple, of which Berkshire now owns nearly $3bn-worth of shares. I got there ahead of Buffett, tipping the shares in 2011 long before he piled in, on the basis that – as Buffett also eventually concluded – iPhones were such an irresistible product; they’ve tripled since and at $800bn Apple is now the world’s largest company.
The final lesson – to which I must give a nod to an article written by US share expert Jim Cramer on Buffett’s error – is that investing in shares is difficult. Remember, with every share you are trying to make sense of a huge amount of information, and in the context of a future that you cannot possibly know. And in this respect, a sense of humility – being able to eat humble pie – is the ultimate trait of the world’s greatest investor that we should try to emulate.
