Warren Buffett, billionaire investor and CEO of Berkshire Hathaway, admits that his 1993 acquisition of Dexter Shoe Company was one of his biggest financial mistakes. Ta. Dexter Co., a shoe manufacturer based in Maine, was initially thought to be a thriving company. In a letter to his shareholders in 2014, Buffett said he had made many mistakes, but one was especially bad.
Buffett writes: “Even with Charlie's blueprint, I've made a lot of mistakes since Waumbeck. The scariest was with Dexter Shue. When I bought the company in 1993, it had a great track record. But it never looked like a cigar butt to me.”
But investment deteriorated rapidly as foreign competition reduced Dexter's competitiveness, a factor Buffett said he could not have foreseen.
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By 1999, approximately 93 percent of the shoes purchased in the United States were imported, largely because of lower labor costs overseas. Despite its initial profitability and strong management, Dexter was unable to remain competitive in the face of these market changes. Efforts to revive the company, including increasing shoe sourcing from overseas and closing some U.S. factories, failed. As a result, the company's value fell to zero.
In his letter, Buffett emphasized the gravity of the failure, saying, “As a financial disaster, this deserves to be listed in the Guinness Book of World Records.” Buffett's error was compounded by the fact that the acquisition was made with Berkshire Hathaway stock rather than cash.
“I gave the sellers of Dexter Berkshire stock instead of cash. The stock I used to make the purchase is now worth approximately $5.7 billion,” he wrote. This decision significantly increased the cost of the mistake. As of 2024, the 25,203 shares of Berkshire Hathaway's Class A stock used to acquire Dexter Schuh in 1993 are worth approximately $14.39 billion.
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In a letter to shareholders in 2007, Buffett wrote, “So far, Dexter is the worst deal I've ever made.” Accepting the reality of investment decisions, he also noted his tolerance for future mistakes, saying, “But I'm going to make more mistakes in the future. You can bet on that.” . Buffett humorously compared his experience to a line from a Bobby Bare country song. “I've never slept with an ugly woman, but I've certainly woken up with a few.”
Dexter Shoe's failure not only caused financial loss to Berkshire Hathaway, but also had a significant impact on the local community. Buffett acknowledged the broader impact in his 2015 letter, stating: Many were past the point in their lives when they could learn another profession. We lost all the investments we could afford, but many workers lost irreplaceable livelihoods. ”
Buffett's reminiscences about the Dexter Shue acquisition are a lesson in the risk of overlooking market trends and the importance of assessing a company's intrinsic value. “These kinds of mistakes are fatal,” he said, noting that he made similar mistakes when he used Berkshire stock to buy underperforming companies.
He admits that even though he has a lot of experience, he is not immune to making bad decisions and is sure to make them again. Buffett's attitude towards investment failures is not one of regret, but rather one of valuable learning experiences that contributed to his overall success and investing philosophy.
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This article: Warren Buffett says his 'terrible' investment mistake deserves entry into the Guinness Book of World Records as one of the biggest financial disasters – this bad purchase cost $14.3 billion , originally published on Benzinga.com.
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