Legendary investor Warren Buffett has taken a swipe at corporate culture, criticising large companies for their aversion towards the word “mistake” or “error”. In his latest letter to shareholders, the Berkshire Hathaway chairman highlighted the reluctance of businesses to acknowledge errors, contrasting this with his own transparency.
“During the 2019-23 period, I have used the words ‘mistake’ or ‘error’ 16 times in my letters to you. Many other huge companies have never used either word over that span,” Buffett wrote, emphasizing the importance of transparency in business.
In his trademark honesty, he candidly admitted to mistakes in capital allocation and management decisions at Berkshire Hathaway. “Sometimes I’ve made mistakes in assessing the future economics of a business I’ve purchased for Berkshire,” Buffett wrote, acknowledging misjudgments in both stock investments and full acquisitions.
Buffett emphasized that errors are inevitable in business but delaying corrective action is the real sin. He cited longtime partner Charlie Munger’s philosophy: “Problems cannot be wished away. They require action, however uncomfortable that may be.”
One of the biggest challenges, Buffett admitted, is evaluating the abilities and integrity of the managers Berkshire hires. “The fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage.”
Buffett pointed out that many corporations create an illusion of managerial perfection, avoiding any admission of missteps. “That taboo, implying managerial perfection, always made me nervous,” he remarked, noting how some board meetings and analyst calls forbid words like “mistake” or “wrong.”
This culture of silence, he suggested, can be dangerous for businesses and investors alike. By refusing to acknowledge errors, companies risk repeating them, ultimately harming long-term growth.
Buffett did, however, praise Amazon for breaking this trend. The tech giant was “brutally candid” in its 2021 investor letter, openly discussing its missteps. But he noted that such honesty is rare: “Elsewhere, it has generally been happy talk.”
Buffett believes that admitting mistakes isn’t a sign of weakness—it’s a step toward long-term success.