Warren Buffett Reveals Charlie Munger's Key Investment Lesson: Own Mistakes Fast To Prevent Billions In Losses

In his latest shareholder letter, Warren Buffett shared an important lesson from his late partner, Charlie Munger: when you make a mistake, fix it right away instead of putting it off, which Munger referred to as “thumb-sucking.”

Buffett quoted Munger, saying that “the cardinal sin is delaying the correction of mistakes” and that problems “cannot be wished away” and must be addressed, even if it’s uncomfortable.

Buffett’s Track Record: 16 Documented Mistakes Since 2019

From 2019 to 2023, Berkshire Hathaway Inc. BRK BRK CEO used the words “mistake” and “error” 16 times in his annual letters. These mistakes included misjudging candidates, economic trends, and investment opportunities. According to a CNBC report, his biggest regret, however, was missing out on opportunities due to being overly cautious.

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“The cost of that has been many, many billions,” he said at Berkshire’s 1997 conference, acknowledging his reluctance to invest in promising companies with high valuations.

Munger’s Philosophy: Learn Without Dwelling

At a 2016 Wesco Financial meeting, Munger stressed the importance of reflecting on past mistakes without dwelling on them. “Nobody bats a thousand,” he said. “Review your past stupidities so you are less likely to repeat them.”

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Munger’s no-nonsense approach went beyond mistakes; he had previously advocated for taking quick action over seeking approval, often telling associates, “the hell with ’em” in tough situations.

This approach is similar to Amazon AMZN CEO Andy Jassy‘s strategy when presenting flawed data to Jeff Bezos—he quickly acknowledged and corrected the mistake without becoming defensive.

Winners Outweigh Mistakes in Long-Term Portfolio Performance

Despite making mistakes, Buffett’s smart decisions led to massive value creation. Some of his biggest wins included buying GEICO, bringing on insurance executive Ajit Jain, and teaming up with Munger.

“Mistakes fade away; winners can forever blossom,” Buffett concluded, demonstrating how single correct decisions can generate “breathtaking difference over time” in portfolio returns.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.