Warren Buffett’s 8 Biggest Mistakes (And What They Teach Us About Investing)

Warren Buffett is widely considered the greatest investor of all time, but his track record is not without blemishes. What sets him apart from most investors isn’t his perfectionism – it’s his willingness to learn from his own failures and share those lessons with the public.

Over the decades, in Berkshire Hathaway shareholder letters and interviews, Buffett has been brutally candid about what went wrong. These mistakes reveal patterns that any investor can learn from and avoid.

1. Buy a Fair Business Instead of a Great Business

Early in his career, Buffett was heavily influenced by Benjamin Graham’s approach of finding statistically cheap companies, regardless of the quality of the business. He admits this framework caused him to spend years buying mediocre businesses simply because they looked cheap on paper.

Berkshire Hathaway itself is a prime example. He bought it as a cheap textile company, only to watch the company struggle for years as the underlying business deteriorated. As Buffett later noted, “Time is the friend of extraordinary businesses, the enemy of mediocre businesses.” Lesson learned: a good business at a fair price almost always beats a fair business at a great price.

2. Holding Lost Investments for Too Long

Buffett openly admits that one of his most detrimental habits is refusing to sell an investment once it becomes clear that his original thesis no longer applies. He persists out of hope, familiarity, or unwillingness to admit mistakes – and in many cases, time makes things worse, not better.

The Dexter Shoe Company is the most painful example. Buffett not only bought a business that ultimately went to zero, but he also paid for it with Berkshire shares that later became very valuable. The lesson to be learned is: once errors become apparent, the costs of delay add up quickly.

3. Disappearance of Big Combiners

Buffett says his biggest regret isn’t a bad investment — it’s a stock he never bought or bought too late. He had the opportunity to study Amazon and Google when both were still in their relatively early stages of growth, but he passed on both at that time and only bought them much later in their growth cycle.

1. Google (Alphabet)

Buffett has been quite vocal about his regrets about Google. He acknowledged that he was at the forefront of their success but failed to act.

• “Front Row” Seats: Geico (owned by Berkshire Hathaway) was a major early customer of Google’s advertising platform. Buffett saw firsthand how effective the ads were and how much Geico paid for them.

• Regret: In 2017, he told shareholders, “I failed.” He realized too late that Google had a “natural monopoly” on search advertising without the additional costs of scaling it.

• “I wouldn’t mind knowing about Amazon early. The guy (Jeff Bezos) is a miracle worker; it’s very strange. I let myself admit that, but I feel like a stupid horse for not being able to identify Google better. I think Warren feels the same way. We failed.” “Google has a huge new moat. In fact, I’ve probably never seen a moat this wide… Theirs is filled with sharks.” – Charlie Munger

• Berkshire Hathaway now holds a position in Alphabet (Google’s parent company).

2. Amazon

Buffett’s relationship with Amazon follows a similar path of public praise mixed with self-criticism.

• Supervision: Munger called Jeff Bezos a “miracle worker” and admitted he underestimated Bezos’ ability to dominate retail and cloud (AWS) simultaneously.

• Late Entry: Berkshire finally bought Amazon shares in 2019. At that time, Amazon was already a company worth trillions of dollars.

• Round: Buffett noted that the decision to buy Amazon wasn’t actually his—it was made by one of his two investment managers, Todd Combs or Ted Weschler. Buffett gave his blessing, admitting he should have been “smart enough” to do it years earlier.

He acknowledged that failure to run a real, durable business with outsized competitive advantages would likely cost Berkshire more than any investment he actually made. Missing the true compounding machine for years or decades was a much more costly mistake than most investors realized at the time.

4. Deviating Outside the Circle of Competence

One of Buffett’s most consistent principles is to stay within what he calls his “circle of competence.” When he had exited that world, he suffered the consequences. He is candid about the fact that overconfidence in one’s own understanding of a business is a recurring source of mistakes.

His investment in Tesco, a British grocery store chain, is a documented example. He misjudged the competitive dynamics and accounting issues involved, and ultimately sold it at a significant loss. “Risk comes from not knowing what you are doing,” he said – a sentence that reads as much like a personal warning as it does general advice.

5. Paying More Even for Quality

Buffett has made it clear that buying a good business does not automatically make the investment successful. If the price paid is too high, even a great company can produce poor profits for years. Judgment discipline is important regardless of the quality of the business.

This is perhaps his most nuanced lesson, as it goes against the popular simplifications of his philosophy. The full picture is captured in one of his most quoted lines: “Price is what you pay, Value is what you get.” These two things rarely have the same number, and the gap between them determines the outcome.

6. Underestimating Management’s Danger Signs

Buffett has written and spoken at length about the importance of management character. He also admitted that he didn’t always apply those standards rigorously enough when evaluating a business. On more than one occasion, he trusted managers who later proved disappointing in managing capital.

He treats integrity as a non-negotiable in the people he partners with, and he says he tries to assess that integrity first before doing anything else. His regrets in this area have reinforced one consistent rule: no financial metric can compensate for poor character at the top of a business.

7. Letting Inertia Delay Necessary Actions

Sometimes Buffett’s mistakes are not about wrong decisions, but about the right decisions taken too late. He has reflected on situations in which he clearly recognized a problem but let convenience, loyalty, or institutional inertia delay action based on what he already knew.

This pattern applies to the sale of underperforming investments and the reallocation of capital to better opportunities. Emotional attachment to previous decisions or to the people involved can override rational judgment. Buffett’s self-diagnosis in these cases is unflinching: the fault is not ignorance, but rather indecision.

8. Not Betting Big Enough on High-Conviction Ideas

Buffett also acknowledged another side to the size issue. When the odds are truly in your favor, a small position is its own fault. He has described a situation where he identified a great opportunity early but used far less capital than the penalty would have warranted.

Positioning is not just a risk management tool, it is also a profit driver. When you have a real advantage and a long-term future, failure to act aggressively is a form of poor performance. Buffett is known to be highly concentrated when confidence calls for it, and he views excessive caution in high-conviction situations as a costly habit to break.

Conclusion

What makes Buffett’s list of mistakes extraordinary isn’t the mistakes themselves — it’s how clearly he articulates what he learned from each one. Most investors prefer to deal with their mistakes quietly. He turned it into a curriculum.

The pattern has been consistent for decades: prioritize business quality, act quickly on broken theses, don’t miss obvious factors, stay within your competency, pay the right price, demand management integrity, set aside inertia, and scale positions to match beliefs.

The long-term advantage is not always being right. It’s about learning from failure systematically and refusing to repeat the same mistakes on a large scale. That discipline, more than any investment, is the foundation of everything that makes Berkshire thrive.