Warren Buffett’s Worst Deal Ever Cost $17.87B—Here’s What You Can Learn From It | Global News Avenue

Warren Buffett has repeatedly called a deal his worst investment ever over the years: Berkshire Hathaway Inc, which was worth $443 million in 1993.brk.a) in stock. As of February 12, 2025, the same stock was worth $17.87 billion, and Buffett said it was “worth it in Guinness World Records. ”

Although Berkshire Hathaway’s stock value has soared over the past three decades, Dexter Shoe’s stock has collapsed, not only is it a bad investment, but what Buffett is talking about is a deal The structure of “commemorative stupid decision”. Below, we will take you to understand why.

What’s wrong with Dexter shoes

When Buffett (Buffett) Value Investors Look for: It’s profitable, well managed, and seems to have what Buffett said”moat“has a sustainable advantage over competitors. Shoes made in the United States, especially Dexter’s high-quality casual and dressing footwear, also received premium prices at the time and were customer loyalty.

Error 1: Misreading the competitive landscape

Buffett Missed a key shift in the industry. Foreign factories, especially in China, are rapidly improving their quality while keeping labor costs much lower than their U.S. counterparts. In just a few years, overseas competitors began to flood the U.S. market with much lower prices.

“I evaluated the lasting competitive advantage to disappear within a few years,” Buffett wrote in a 2007 letter to shareholders. By 2001, Dexter closed its last Maine factory, and the brand was eventually folded into another Berkshire-owned footwear company, HH Brown.

Error 2: Payment with Berkshire Stock

Making a acquisition is only half the problem. Buffett’s bigger mistake was to pay Dexter with Berkshire Hathaway instead of cash. The 25,203 shares he used to buy Dexter were worth $433 million in 1993 (or about $949.2 million today), but those shares are worth $17.87 billion today.

Lessons learned from this? “The CEO often cannot see the basic reality: Intrinsic value “The stock you provide in the acquisition must not exceed the intrinsic value of the business you receive,” Buffett said.

Bottom line

Warren Buffett said he violated two of his core principles in the Dexter Shoe Agreement: Never pay with undervalued stocks and always ensure a sustainable competitive advantage for the business. Although Berkshire Hathaway’s subsequent success made this mistake look much worse, BRK.A’s share price is only today’s share price, as Buffett is buying at fair price at fair price What he calls excellent business, not fair business, not buying what he calls excellent business at a good price. “The best thing that happens to us is when a great company is in temporary trouble,” Buffett repeated.