Warren Buffett Bought Berkshire Hathaway Out of Spite — and Called It His Worst Mistake

Berkshire Hathaway in the early 1960s was a struggling New England textile manufacturer formed in 1955 from a merger of two older firms. The company ran 15 plants, employed roughly 12,000 people, and had revenues of about $120 million from a manufacturing economy already starting to migrate to the American South and overseas. Warren Buffett's Buffett Partnership Ltd. began buying its shares in 1962 at around $7.50 each, on the standard mid-1960s value-investing logic that the company was trading at less than the value of its working capital. By 1963, Buffett owned roughly 7 percent.

The break came over a handshake. The company's CEO, Seabury Stanton, met with Buffett in May 1964 and verbally offered to buy back Buffett's shares at $11.50. Stanton then put the formal tender offer in writing at $11.375 — an eighth of a dollar lower. Buffett, in his own later telling, was insulted out of all proportion to the actual difference. He instead bought enough additional shares — at substantially higher prices — to take operating control of Berkshire and forced Stanton out by May 1965.

Buffett spent the next two decades trying to make the textile mills work. He couldn't. They closed for good in 1985. The corporate shell, however, became the chassis on which he built one of the most successful investment vehicles in history — initially through the 1967 acquisition of National Indemnity, an Omaha insurance company, whose float he then deployed across decades of subsequent purchases. Buffett has publicly called the original Berkshire purchase his worst investment decision: by his own estimate, it cost him about $200 billion in compounded returns relative to using the same capital to buy insurance directly. Berkshire's compound annual return from 1965 to 2023 was 19.8 percent.