Even the greatest money-maker of the modern era can lose billions on an investment. The 9 billion dollar mistake that, according to Warren Buffett, “deserves a spot in the Guinness Book of World Records.”
Known as the ‘’Oracle of Omaha’’ and arguably one of the greatest moneymaking brains and most successful investor of our generation, Warren Buffett is one of the richest individuals in the world but more importantly, has pledged to give away 99% of his entire net worth to charitable acts and foundations.
Buffett’s trading strategies and eye for moneymaking potential is the stuff of legends in the financial sector since he founded the blueprint that many aspiring investors adhere to religiously in a bid to follow in his footsteps.
In the 43 years after founding and owning a controlling stake in his holding company Berkshire Hathaway Inc. in the mid-1960s, Buffett went on to grow it into a multi-billion dollar empire, parenting more than 70 companies and having close to $75 billion of equity investments.
But even the greatest investor in the world can sometimes be dealt a hand he can do little with, regardless of the genius behind his financial strategies.
Such was the case when Buffett managed to convince shareholders of Berkshire Hathaway to acquire Dexter Shoe in 1993, describing it as one of the best-managed companies he had ever seen, and even going so far as to pay for the acquisition using Berkshire stock (for tax reasons, but that’s beside the point, wink wink).
As it turns out, Buffett’s expectations for Dexter’s prospects were woefully unfounded, since he failed to recognize the shifting market trend that would eventually sink the business of tailor-made expensive shoes made by highly skilled craftsmen at the time; cheap shoes imported from low-wage developing countries.
Though Buffett was right in the short term about how lucrative the shoe business could be, since his shoe companies Dexter and H.H Brown made close to $85 million in pre-tax earnings in 1994, the market eventually tanked and profits fell to a measly sum of $17 million by 1999, followed by the final blow in 2001 when the company actually lost $46 million in the shoe business.
Reflecting on his investment in a 2014 letter, Buffett claimed Dexter to be ‘’the most gruesome mistake’’ and a financial disaster worthy of a spot in the Guinness Book of World Records.
The mistake was further compounded by the fact that rather than paying for the acquisition of Dexter in cash ( which would have been close to $433 million at the time), Buffett decided to buy it in return for 25,203 Class A shares of Berkshire stock, which today would be worth a whopping sum of $9 billion!
