Warren Buffett says a 12.5-cent snub led to his $200 billion blunder.
The $200 billion is his own 2010 estimate of what Berkshire gave up by starting with a textile mill instead of insurance.
In December 1962 Buffett, 32, began buying Berkshire Hathaway, a shrinking New England textile maker. Each time it closed a mill, it used the money to buy back its own shares. His plan was to sell his shares back at a small profit. His partnership held virtually all of his net worth.
In 1964, Buffett has written, Berkshire's president Seabury Stanton asked at what price he would sell. Buffett said $11.50, and he recalls that Stanton agreed. The tender offer mailed on 6 May 1964 said $11.375, an eighth of a dollar less. On CNBC in 2010, holding that letter, Buffett said: "He chiseled me for an eighth."
He ignored the offer and bought more. At an early-May 1965 board meeting his partnership took control, and Stanton, Buffett wrote, lost his job. Berkshire kept the textile business for about 20 more years. Buffett closed it in 1985, and looms bought for $5,000 in 1981 went for scrap at $26.
If you lead delivery: a quarrel over a small line item can decide which project you end up running for the next 20 years.
AI-generated illustration with narration by an AI voice; sources in the first comment.
What the captions say
- This is how 12.5 cents led Warren Buffett to a mistake he priced at $200 billion in 2010.
- In 1962, Berkshire Hathaway was a dying New England textile maker, buying back its own shares each time it closed a mill.
- Buffett, 32, bought the cheap shares expecting to sell them back at a small profit.
- By May 1964 his partnership owned about 7%, and, he recalls, Berkshire's president Seabury Stanton asked his price.
- $11.50, Buffett told him. Stanton's reply, as Buffett remembers it, was "Fine, we have a deal."
- Weeks later Berkshire's offer arrived in Omaha by mail, and he read the price.
- $11.375. 12.5 cents a share below the price he says they had agreed.
- On CNBC, 46 years later, he held up the 1964 offer: "He chiseled me for an eighth." "But this made me mad."
- So instead of selling, Buffett says, he bought. By early May 1965 the partnership controlled Berkshire, and Stanton, in Buffett's words, "lost his job".
- More than a quarter of the partnership's money was then tied up in what Buffett calls a terrible business. He kept it going for about 20 years.
- In 2010 he put the cost of starting with a mill instead of insurance at $200 billion. His estimate, his words.
- Fifty years on, he wrote one line about Stanton and himself: "What was an eighth of a point to either of us?"
