The greatest people in history
have been failures. Certainly, we remember these individuals as successes,
success stories, and we treat those stories as legends and those individuals as
gods. But each of them failed apically and repeatedly, more so than the
combined successes of all of humanity.
Failure should not be
overlooked in anyone, especially not those we admire. It is through failure
that these individuals were able to learn, grow and ultimately succeed. We know
this about ourselves but even as we learn to accept our own failures, sometimes
we don’t recognize that the most successful people in the world have had an
abundance of failure.
Our heroes need to be held to
the same standard as the ancient Greek gods: awesome but not infallible.
Failure is a humbling exercise, both for the observer and the observed. But
learning is a humbling process. Once we realize that our heroes are just like
us, we can examine how failure drives success. So I’ve started collecting
stories about the failures of successful people, as a reminder that if you’re making
mistakes and learning from them, you’re actually on the path to success.
When you think of Warren Buffett, chances are the words
“successful” and “rich” come to mind. Look no further than Wikipedia, which
highlights Buffett as being “widely considered the most successful investor of
the 20 century.” (Wikipedia may not always be the beacon of truth, but it is
nonetheless accurate in this case.) Buffett is also known for his wisdom and
patience, earning him saint-like nicknames such as “Oracle” and “Sage.” People
make annual pilgrimages to Omaha just to hear him speak. But what many people
don’t know is that his purchase of Berkshire Hathaway—his crowning achievement
now worth over $300 billion—was an epic failure, driven by hubris and
immaturity. Buffett once declared “I would have been better off if I’d never
heard of Berkshire Hathaway.”
Buffett’s involvement in Berkshire Hathaway started in 1962 as
an investment similar to his other purchases. Analysts calculated the stock was
worth $19.46 a share, but it could be bought for a mere $7.50, so Buffett
bought some “cheap” stock, planning to sell it back to the company when the
price rose. After a time, Berkshire’s President—Seabury Stanton—got wind of
Buffett’s stock accumulation and called him to his Massachusetts office for a
meeting. He asked at what price Buffett would be willing to sell, and Buffett
said he’d sell for $11.50 a share if there was a tender offer.
Shortly thereafter, Stanton issued a tender offer of $11.37 and
a half cents per share. The young Buffett was livid; he felt that Stanton was
trying to pull one over on him. Instead of renegotiating or holding his stock
until a better offer came around, he started looking for more stock to buy. He
vowed to buy a controlling interest in the company just so he could fire
Seabury Stanton.
Berkshire Hathaway in the 1960s was nothing like the powerful
conglomerate it is today. It was a lowly textile company that imported raw
cotton from the South and turned it into cloth. Before air conditioning was invented,
Berkshire addressed an important need as mills had to be located far away from
southern heat and humidity. But by the 1960s air conditioning was commonplace,
labor was cheap in the South, and both labor and raw materials were even
cheaper overseas. So by the time Buffett started buying stocks, New England
textile mills were in dire straits, including Berkshire Hathaway.
Yet Buffett was determined to own the company, driven by his
disdain of Seabury Stanton. He convinced others to sell him their stock until
he had collected enough to control the Board. Seabury, seeing the writing on
the wall, resigned, and Buffett was elected Chairman of the Board and hired
Seabury’s replacement. Despite new management, the textile mill continued to
disintegrate. Buffett first poured money into it and ultimately tried to sell
it, but no one would buy it. It ultimately shut down.
Of course, by then Buffett had
diversified its holdings, acquiring companies in different industries to keep
Berkshire Hathaway afloat. But the original Berkshire Hathaway textile company
was a huge mistake. In his biography, The Snowball, he put
it this way:
“You walk down the street and you see a cigar butt, and it’s
kind of soggy and disgusting and repels you, but it’s free…and there may be one
puff left in it. Berkshire didn’t have any more puffs. So all you had was a
soggy cigar butt in your mouth. That was Berkshire Hathaway in 1965. I had a
lot of money tied up in the cigar butt….I would have been better off if I’d
never heard of Berkshire Hathaway.”
Buffett made a series of poor decisions which forced him to
fight his way through a hard lesson learned. He was stubbornly persistent, and
rather than giving up and allowing Berkshire Hathaway to fail, he diversified
the business into one of the greatest success stories in investor lore. What’s
more, Buffett didn’t hide from this huge failure. To the contrary, he wore it
as a badge of honor. He kept what is arguably a horrible brand name and it’s a
reminder of his failure each and every day for the rest of his life. Buffett
owned that failure, internalized it, and let it become a defining
characteristic of the now supremely successful Berkshire Hathaway.
