Joel Greenblatt about his most disastrous investment | Summary and Q&A

TL;DR

Warren Buffett shares his experience with a disastrous investment and emphasizes the importance of being willing to make mistakes and learn from them.

Key Insights

• 🙃 Warren Buffett's worst investment was in a spin-off company that owned a trade show, which suffered significant losses after September 11, 2001.
• 👨‍💼 The trade show business seemed promising due to its operating dynamics, but it ultimately failed due to financial leverage and the impact of external events.
• ❓ Buffett emphasizes the importance of being willing to make mistakes and continually learn from them as part of the investment journey.
• ❓ Dare to be great and differ from the common course to achieve exceptional investment performance.
• 🈺 The lesson of not falling in love with a business and being open to reevaluating investments is crucial.
• 😀 Buffett's discussion highlights the challenges faced by those in industries where they can be fired for making mistakes, and the importance of standing behind ideas with the potential for being wrong.
• 🥡 The investment world does not offer sure things, and taking calculated risks is necessary for success.

Transcript

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Questions & Answers

Q: What was Warren Buffett's most disastrous investment?

Warren Buffett's most disastrous investment was in a spin-off company that owned a computer trade show, which resulted in significant losses.

Q: What attracted Warren Buffett to the trade show business?

Warren Buffett was attracted to the trade show business because of its operating dynamics, particularly the ability to rent trade space in Las Vegas at a low cost and re-rent it at a much higher price.

Q: What is operating leverage?

Operating leverage refers to the additional profits a company can generate when its sales increase, as associated costs do not increase at the same rate. However, when sales decline, profits also decrease substantially due to the fixed costs.

Q: What lessons did Warren Buffett learn from this investment?

Warren Buffett learned lessons in concentration, operating leverage, and the importance of not falling in love with a business. He emphasized the significance of making mistakes, learning from them, and daring to be different as an investor.

Summary & Key Takeaways

• Warren Buffett and his partner made a disastrous investment in a spin-off company that owned a computer trade show.

• They fell in love with the business and the potential for profit due to the operating dynamics.

• However, after the events of September 11, 2001, the trade shows declined and their investment resulted in significant losses.