Warren Buffett: 9 Mistakes Every Investor Makes

TL;DR

Warren Buffett says investors should buy understandable businesses with predictable economics, hold great companies for the long term, and remain objective during market swings. He describes missed opportunities worth perhaps $10 billion as mistakes of omission and says successful investing depends more on temperament than brilliance. Read on for his examples involving Wrigley, See's Candy, U.S. Air, and Kansas City Life.

Transcript

warren buffett is without a doubt the most well-known and highly respected investor on the planet he bought his first stock at just 11 years old and now at 91 years old that means he has been investing for 80 years during that time buffett has made his fair share of mistakes that he openly talks about even more importantly he has learned from the f... Read More

Key Insights

• "the biggest mistakes are the ones that actually don't show up they're the mistakes of omission rather than commission" (1:51)
• "we have missed profits of as much as you know maybe 10 billion dollars in things that i knew enough to do and i didn't do it" (2:04)
• "by definition a great company is one that's going to remain great for 30 years" (2:24)
• "it doesn't take brains it takes temperament" (5:06)

Questions & Answers

Q: What does Warren Buffett mean by investing within your circle of competence?

It means understanding the business's economics, competitive position, and how those economics are likely to look 10 or 20 years from now. Buffett says merely understanding what a product does is not enough.

Q: Why does Warren Buffett use Wrigley chewing gum as an investment example?

Buffett says the internet will not change how people chew gum or which gum they choose. He cannot predict Wrigley's exact future numbers, but he believes its brands and economics are understandable enough that his estimate would not be far off.

Q: What does Warren Buffett consider his biggest investment mistakes?

His biggest mistakes are omissions, meaning opportunities he understood well enough but failed to pursue. He estimates that these missed profits may have reached $10 billion.

Q: How does Warren Buffett define a great company?

He says a great company must be able to remain great for 30 years. A business that will be great for only three years does not meet that standard.

Q: Should investors trade great businesses or continue owning them?

Buffett says it is better simply to own fine businesses because they are too difficult to find. He says that if you understand and like the business, like the person presenting it, and consider the price reasonable, you should take the opportunity without worrying about near-term quotations.

Q: When did Warren Buffett find See's Candy?

Buffett says he found See's Candy in 1972. He cites it while explaining that opportunities to acquire fine businesses appear only here and there.

Q: What happened after Warren Buffett bought U.S. Air preferred stock?

Buffett bought U.S. Air preferred stock in 1989. As soon as his check cleared, the company went into the red and, according to him, never got out.

Q: What matters more than intelligence during major market swings?

Buffett says temperament is more important than exceptional brains. An investor who stays objective and detaches temperamentally from the crowd during huge market waves can become very rich, in his view.

Summary & Key Takeaways

• Warren Buffett is a well-known and respected investor who has been investing for 80 years.

• He emphasizes the importance of investing in businesses that you understand and whose economics you can predict.

• Buffett discusses the mistakes of omission, where he missed out on profitable opportunities due to not taking action.