Counting mistakes

Warren Buffett! Part 1 of 2.

People ask me sometimes: Why do you write so often about Warren Buffett?

And then I say: Do I?

And then they say: Well, you already wrote about him once this month, that whole thing about falling in a vat of beer.

And then, I'm like: Yeah you're right. Well, I'm going to do it again. And just for asking, there's a good chance we'll do it tomorrow, too.

The reason is that I want to share two things about this year's Berkshire Hathaway shareholder letter.

It ran more than 5,000 words, but right at the start -- today's installment -- Buffett took the time to go back and count how often he’s used the word "mistake" in several of his previous letters.

“During the 2019-23 period,” Buffett wrote, “I have used the words ‘mistake’ or ‘error’ 16 times in my letters to you. Many other huge companies have never used either word over that span.” (emphasis in original)

I love this kind of stuff. And, I recommend reading the whole letter, of course.

The tone is one in which Buffett is both reflective (makes sense; a 94-year-old icon of investing looking back at his career) and forward-looking (makes sense; the CEO of a massive publicly traded company offering guidance and a way forward).

But it's the "mistakes" that got me.

Longtime readers might know that I have a habit of taking things like the Amazon shareholder letters, or the full transcripts of the most popular TED Talks over the years, or even Buffett’s previous letters, and putting them into word cloud generators to find the things that come up over and over again.

• For Amazon, the word that came up over and over, especially in the early years, was “customer.”

• For the TED Talks, the most popular words by far were “laughter” and “applause.” That was a strange insight at first, but I realized that it provided a big clue about the structure of the most popular talks.

• I’ve even made word clouds of previous Berkshire Hathaway letters, although I acknowledge that no great insights came out of the exercise.

But now we have Buffett giving the word-cloud treatment to his own work—and not only citing the number of times he’s mentioned “mistakes” and “errors” in the past but going on to use the word “mistake” another 13 times in this letter as well.

Find me another company where the CEO somewhat gleefully lists some of his big missteps.

Buffett also describes what he’s long-called the biggest mistake he’s ever made in business, which ironically is the fact that he bought Berkshire Hathaway to begin with.

The short version, if you haven’t heard it before, is that he says he bought it out of spite in order to be in a position to fire its CEO.

But that led to his being the owner of a company in the textile mill business in New England. Take a tour of New England today and tell me how many flourishing textile mills you still see.

I think it’s to his credit that Buffett kept the textile business going as long as he did—basically 20 years after he acquired Berkshire—primarily because it employed lots of older workers who didn’t have many other economic opportunities.

But, from a pure business and investing perspective, and with the benefit of hindsight, there are a lot of other things that Buffett could have done with the money.

Buffett writes in the context of investments, of course, but often his insights seem broadly applicable to other parts of business, and even life in general.

Further, he’s at the point where he’s serving as a conduit for the advice that he received from some of his mentors, most of whom lived into their 90s, but are now deceased.

Two examples:

There’s the advice he says his mentor Thomas Murphy (a former Berkshire board member, among many other things, who died in 2022 at age 96) gave him about offering public praise and criticism:

[P]raise by name, criticize by category.

Then there’s the key advice he says his right hand, Berkshire vice chairman Charlie Munger (who died in 2023 at age 99), offered:

The cardinal sin is delaying the correction of mistakes or what [Munger] called ‘thumb-sucking.’ Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be.

As Buffett acknowledges, given his advanced age, “it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters.”

I certainly hope we get more. It’s become an enjoyable annual ritual for me to take a bit of time to read and reflect on Buffett’s latest letter each year.

A wildly successful investor and business owner presides over a company with more than $1 trillion in market capitalization—and takes up valuable real estate in these letters to build a meandering and amusing path through some of his big mistakes.

I’ll try to remember this the next time I mess something up.

Part II tomorrow.

---

---

7 other things worth knowing today

• As Tesla stock has fallen in recent weeks, members of the board and an executive at Elon Musk's company have been selling off millions of dollars in stock, according to filings with the U.S. Securities and Exchange Commission. "Whenever insiders, including directors, are selling shares, it's not a positive signal," said Jay Ritter, a professor of finance at the University of Florida. (ABC News)

• The two U.S. astronauts who had been at the International Space Station for nine months after their faulty Boeing Starliner capsule returned without them are finally back on Earth. NASA astronauts Butch Wilmore and Suni Williams — as well as fellow NASA astronaut Nick Hague and Roscosmos cosmonaut Aleksandr Gorbunov — successfully splashed down in a SpaceX Dragon capsule off the coast of Tallahassee, Florida, at 5:57 p.m. ET. (CNBC)

• President Trump’s administration on Tuesday released what it said were all of the government's classified files on the 1963 assassination of President John F. Kennedy, making tens of thousands of pages of unredacted records available to the public for the first time. The contents of the documents, and whether any previously unreleased information is in them, wasn't immediately clear. Historians quickly said they would need time to assess the flood of files to understand if they were significantly different from previous releases. (USA Today; all the files at the National Archives)

• Want to travel to Thailand for a bit? An increasing number of foreigners there are engaging in illicit jobs or business activities while claiming to be visiting for tourism purposes. So, the country has announced it will halve the number of days foreign tourists can stay in the country without a visa from 60 days to 30. (Euronews)

• China is practicing "dogfighting" in space, the U.S. Space Force says: The capability gap between the U.S. and its competitors has “significantly narrowed.” (Defense One)

• A Minnesota state senator, Justin Eichorn, 40, was arrested, accused of soliciting a minor for prostitution. Eichorn is a Republican who is married with four children, according to his Minnesota State Senate bio. He made headlines earlier this week for being a sponsor of a bill that would declare "Trump derangement syndrome" a mental illness. (Fox 9 Minnesota)

• Why does the U.S. have a big egg shortage right now, while nearby Canada doesn't? The biggest difference is that egg farms in Canada are much smaller, so when one farm does suffer a flu outbreak, the effects are less far-reaching. The typical egg farm in Canada has about 25,000 laying hens, whereas many farms in the U.S. have well over a million. (NPR)

---

Thanks for reading. Photo by Santa Barbara on Unsplash. I wrote about some of this before at Inc.com. See you in the comments!