Warren Buffett’s ‘most gruesome mistake’ was buying Dexter Shoe. Here’s the story of his US$9 billion error
- Famed investor bought a US shoe company, paid for with 25,203 Class A shares worth about US$8.7 billion today
- ‘As a financial disaster, this one deserves a spot in the Guinness Book of World Records’
Warren Buffett’s “most gruesome mistake” was buying Dexter Shoe in 1993. The Maine shoemaker quickly became worthless; the Berkshire Hathaway shares he swapped for it are worth about US$8.7 billion today.
The so-called Oracle of Omaha acquired Dexter for 25,203 Class A shares, worth US$433 million at the time.
“Dexter, I can assure you, needs no fixing: It is one of the best-managed companies Charlie and I have seen in our business lifetimes,” Buffett said in his 1993 letter to shareholders. Dexter was a “business jewel,” he gushed, adding that it was a “sound decision” to pay for it with Berkshire stock.
While Buffett was wildly wrong about Dexter’s prospects, he did recognise the threat that would soon sink the company: cheap, imported shoes from low-wage countries. However, he joked that “someone forgot to tell” Dexter’s managers and workers about that challenge, as their factory was “highly competitive against all comers”.
The famed investor cheerily predicted that Dexter and H.H. Brown, Berkshire’s other shoe business, would rack up more than US$85 million in pre-tax earnings in 1994. “I sing ‘There’s No Business Like Shoe Business’ as I drive to work,” Buffett told his investors.