In 1967, Warren Buffett made a colossal mistake that diverted $100 billion from him to a group of strangers
AP Photo/Nati Harnik
In it, Buffett talks about the company's successes, but also its mistakes. (Mistake #1, in fact, was buying Berkshire Hathaway.)
Buffett's next mistake, however, ended up costing him and his partners $100 billion.
Here's the deal:
In 1967, Buffett bought Omaha-based insurer National Indemnity Company for $8.6 million. Except instead of buying this company for Buffett Partnership Ltd., Buffett's investing vehicle through which he was investing at the time and which held most of his personal wealth, he bought this company through recently acquired Berkshire Hathaway.
Buffett knew he wanted to be in the insurance business, and he knew the NICO deal would be a long-term success. But how he executed the deal was a huge mistake.
"Jack Ringwalt, the owner of NICO, was a long-time friend who wanted to sell to me - me, personally," Buffett wrote.
"In no way was his offer intended for Berkshire. So why did I purchase NICO for Berkshire rather than for BPL? I've had 48 years to think about that question, and I've yet to come up with a good answer. I simply made a colossal mistake."
And so because Buffett bought this company through his Berkshire holding, and not BPL, NICO became 39%-owned by Berkshire's legacy shareholders, to whom Buffett says he and his partners had no obligation.
"Despite these facts staring me in the face, I opted to marry 100% of an excellent business (NICO) to a 61%-owned terrible business (Berkshire Hathaway), a decision that eventually diverted $100 billion or so from BPL partners to a collection of strangers."
Even so: Berkshire's return over the last 50 years? 1,826,163%
NOW WATCH: How To Invest Like Warren Buffett
- Colon cancer rates are rising in young people. If you have two symptoms you should get a colonoscopy, a GI oncologist says.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- An Ambani disruption in OTT: At just ₹1 per day, you can now enjoy ad-free content on JioCinema
- In second consecutive week of decline, forex kitty drops $2.28 bn to $640.33 bn
- SBI Life Q4 profit rises 4% to ₹811 crore
- IMD predicts severe heatwave conditions over East, South Peninsular India for next five days
- COVID lockdown-related school disruptions will continue to worsen students’ exam results into the 2030s: study
- India legend Yuvraj Singh named ICC Men's T20 World Cup 2024 ambassador
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market