MUMBAI: Warren Buffett, the celebrated investor and businessman, admits to making mistakes both in buying equities and purchasing businesses. While he insinuates making mistakes is not sin, delaying the correction of mistakes is.
“The cardinal sin is delaying the correction of mistakes or what Charlie Munger called thumb-sucking. Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be,” says Buffett in his latest letter to the shareholders.
Buffett says many large public companies where he has been director ‘forbids’ the word mistake and error at board meetings or analyst calls. He, however, feel ‘nervous’ at the idea of managerial perfection, whereby it is believed managers cannot make mistake.
“That taboo (admitting mistakes), implying managerial perfection, always made me nervous (though, at times, there could be legal issues that make limited discussion advisable. We live in a very litigious society),” he says in his letter, which has by now a Biblical following across the world.
The other piece of investment wisdom that he shared in his letter this time is the futility of holding too much cash.
“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” he says adding that paper money can see its value evaporate if fiscal folly prevails, and that fixed-coupon bonds provide no protection against runaway currency.
Buffett-promoted Berkshire Hathaway and its subsidiaries engage in diverse business activities including insurance and reinsurance, utilities and energy, freight rail transportation, manufacturing, services and retailing.
Reiterating his faith in capitalism, Buffett says capitalism has its faults and abuses, but it also can work wonders unmatched by other economic systems.
He says ‘the sensible – better yet imaginative – deployment of savings by citizens is required to propel an ever-growing societal output of desired goods and services’.
Buffett remains gung-ho about the US economy as he says American process has not always been pretty… but even with such malfeasance, he says remains in full force even today, the savings of Americans has delivered a quantity and quality of output beyond the dreams of any colonist.
Beyond the US, Warren Buffett is increasing his exposure in Japan. Since 2019, Berkshire began purchasing shares in five Japanese companies ‘that very successfully operate in a manner somewhat similar to Berkshire itself’.
“The five are (alphabetically) ITOCHU, Marubeni, Mitsubishi, Mitsui and Sumitomo. Each of these large enterprises, in turn, owns interests in a vast array of businesses, many based in Japan but others that operate throughout the world,” explain Buffett in his letter.