Warren Buffett's biggest investment mistake: How a shoe deal cost him Rs 2 lakh crore in potential gains

Warren Buffett, one of the world’s most successful investors, has built his reputation on identifying valuable businesses and holding them for the long term. But even the legendary investor has made costly mistakes, and one of his most painful acquisitions involved an American footwear manufacturer called Dexter Shoe Company.

In 1993, Buffett’s Berkshire Hathaway acquired Dexter Shoe for $433 million, or roughly Rs 4,132 crore at the current exchange rate. The business appeared attractive, with a strong operating record and an established position in the American footwear market.

However, the acquisition eventually became a cautionary tale about competitive advantages, acquisition pricing and the hidden cost of using shares to buy another business.

The most striking part of the story is what Berkshire gave up to complete the deal. Instead of paying cash, Buffett used 25,203 Berkshire Hathaway Class A shares. At the company’s latest available closing price of $8,13,595 on October 23, 2026, those shares would be worth approximately $20.51 billion, or around Rs 1.96 lakh crore.

That is a hypothetical present-day value of the shares surrendered in the transaction, not a cash loss that Berkshire Hathaway actually incurred. Nevertheless, the comparison shows why Buffett came to regard Dexter as one of the most expensive mistakes of his investing career.

Why did Warren Buffett buy Dexter Shoe?

Founded in 1956 by Harold Alfond, Dexter Shoe had established itself as a successful footwear manufacturer in the United States. The company produced shoes for the domestic market and had developed a reputation for quality and competent management.

Buffett was impressed by its business and management. In his 1993 shareholder letter, he explained that Dexter had a strong record and appeared to possess durable competitive advantages.

Read Also: From selling hair dye to Rs 2,000-crore ‘Aachi Masala’ brand: How Padmasingh Isaac took a family recipe from Chennai to the world

The acquisition also fitted Berkshire Hathaway’s existing footwear operations, which included businesses such as H.H. Brown and Lowell Shoe.

At the time, Dexter seemed to offer an opportunity to acquire a well-run manufacturer with an established customer base and a profitable business model.

But Buffett underestimated a fundamental change taking place in the footwear industry.

Dexter’s manufacturing model relied heavily on its American production operations. However, the industry was increasingly exposed to competition from overseas manufacturers that could produce comparable footwear at lower costs.

As lower-cost imports gained ground, Dexter found it increasingly difficult to maintain its competitive position.

The company’s previous strengths were no longer sufficient to protect its economics. Berkshire’s footwear operations faced mounting pressure, and Dexter eventually lost the competitive advantages that had attracted Buffett in the first place.

In his 2014 shareholder letter, Buffett acknowledged that Dexter’s competitive strengths had evaporated because of foreign competition, adding that he had failed to anticipate the change.

He also explained that Dexter’s value had effectively fallen to zero for Berkshire.

The original acquisition price was $433 million. But the transaction’s true cost to Berkshire shareholders went far beyond that amount. Berkshire issued 25,203 of its Class A shares to Dexter’s sellers rather than paying cash.

That decision meant the sellers received ownership in Berkshire Hathaway, a company whose value increased substantially over the following decades.

In his 2007 shareholder letter, Buffett estimated the cost of the mistake at approximately $3.5 billion when measured against the value of the Berkshire shares surrendered.

By 2014, he put the value of those shares at approximately $5.7 billion.

The value has grown much further since then. Based on Berkshire Hathaway’s October 23, 2026 closing share price, the same number of shares would be worth approximately $20.51 billion, equivalent to around Rs 1.96 lakh crore at an exchange rate of Rs 95.416 per dollar.

The Rs 1.96 lakh crore figure should not be interpreted as money Buffett personally lost or as the amount Berkshire paid for Dexter. It represents the hypothetical current value of the shares surrendered in the acquisition.

Nevertheless, the comparison captures why Buffett considered the acquisition such a financial disaster.