Tags: Skapinker | Buffett | mistakes | CEO

FT's Skapinker: CEOs Could Learn From Buffett on How to Acknowledge Mistakes

By    |   Friday, 13 March 2015 08:00 AM

Corporate executives often have trouble owning up to their errors, thereby creating problems for themselves and their companies.
 
CEOs could use Warren Buffett as a guide in this area, says Financial Times columnist Michael Skapinker.
 
"One business leader who has no problem detailing his mistakes is Warren Buffett. He regularly does it in his annual letter to shareholders," Skapinker writes.
 
"This year’s marked the golden anniversary of his and Charlie Munger’s control of Berkshire Hathaway so he dredged up 50 years of mistakes. They included investing in dying textile companies and seeing acquisition 'synergies' evaporate."
 
A recent example is Berkshire's investment in the troubled British grocer Tesco. But Buffett doesn't let himself off the hook, citing "thumb-sucking," "childish behavior," and "I simply was wrong."
 
Acknowledgement of mistakes is important, because it allows executives to reduce them and to make clear that business isn't easy, Skapinker explains.
 
Buffett's performance in his 50 years as CEO of Berkshire has been nothing short of amazing.
 
An investment of $100 in Berkshire shares during 1965 would have turned into a whopping $1,826,163 at the end of 2014, The New York Times reports. That compares with $11,196 for the S&P 500 index, with dividends reinvested.
 
But the numbers for the last six years don't look quite so hot. Statistician Salil Mehta gives The Times an interesting breakdown of Berkshire's returns.
 
During Buffett's first 25 years at the firm, annual returns averaged 30 percent, creaming the S&P 500's 10 percent return. During the final 25 years Berkshire returned 14 percent, compared with 10 percent for the index.
 
But during the last six years, Berkshire lagged the index: 15 percent to 17 percent. "Warren Buffett has been an extraordinary investor. But he hasn’t been doing as well recently," Mehta concludes.
 
And what about the future? Buffett himself advised reining in your expectations. "The numbers have become too big," he wrote in his recent annual letter to shareholders. "I think Berkshire will outperform the average American company, but our advantage, if any, won't be great."

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Corporate executives often have trouble owning up to their errors, thereby creating problems for themselves and their companies.
Skapinker, Buffett, mistakes, CEO
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2015-00-13
Friday, 13 March 2015 08:00 AM
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