3 Warren Buffett Money Moves That Were Highly Criticized
Written by
Andrew Lisa
Edited by
Rebekah Evans
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Warren Buffett is widely considered to be the most successful value investor in history. His knack for identifying stocks selling for less than they’re worth has enabled him to grow his Berkshire Hathaway firm into a $1.1 trillion global conglomerate and amass a personal fortune of about $153 billion. This currently makes him the fifth richest person in the world, slightly behind the likes of Elon Musk, Mark Zuckerberg, Jeff Bezos and Larry Ellison.
As Buffett is set to retire at the end of 2025, it might help to learn from both his victories and his missteps during his illustrious career. Buried among all his celebrated successes are money miscalculations that prove even “The Oracle of Omaha” isn’t immune to earning criticism through business failures, leadership scandals and unwise investments.
He Made a Bad Bet on a Crisis-Causing Company
In 2008, at the height of the Great Recession, the New York Times reflected on a similar Wall Street catastrophe 20 years earlier — and Buffett was at the center of it all.
In 1987, Buffett invested $700 million in a bond-trading powerhouse called Salomon Brothers. A few short weeks later, the firm revealed a shocking $70 million write-down from ill-advised junk-bond trading. Comparing it to the Lehman Brothers collapse in 2008, the Times wrote that the Salomon implosion triggered a domino effect that culminated in the market crash of 1987, which erased one-third of Buffett’s investment.
He Bailed Out a Great Recession Villain With His Clout and Cash
While the Lehman Brothers downfall was the before-and-after moment that defined the economic unraveling of 2008, no firm is more synonymous with the Great Recession than Goldman Sachs.
When it became the corporate face of the crisis, the Wall Street investment bank faced intense criticism from the public and the press for irresponsibly investing in subprime mortgage-backed securities, misleading investors and profiting from the crisis it helped create.
Even so, Buffett backed the bank with his reputation and his wealth, investing $5 billion in Goldman Sachs at the peak of the crisis while largely excusing it for its role in the chaos, according to Goldman Sachs’ website. Unlike the Salomon Brothers affair, the gamble paid off — at least financially.
While CNN reported that Berkshire Hathaway earned $3.7 billion upon redeeming its Goldman shares, outlets like NPR heavily criticized Buffett for defending Goldman and campaigning against rules that would have curtailed its risky derivatives trading.
He Missed the Boat on Amazon and Google
Sometimes, it’s not what you do that garners the most ferocious criticism, but what you don’t do.
Buffett has long advised against investing in things you don’t understand, which has kept him away from many promising tech companies with unfamiliar business models.
However, in 2017, CNBC reported that Buffett finally conceded that he had missed a golden opportunity to invest in two defining giants of the 21st-century economy — and this time, a legitimate fear of the unknown couldn’t justify his failure to buy Amazon and Google early and cheap.
He conceded that he should have understood Google’s business model because his subsidiary companies were directly contributing to its advertising revenue. As for Amazon, he simply underestimated Jeff Bezos’s brilliance and ability to execute.
“That’s cost people a lot of money at Berkshire,” he told CNBC.
Caitlyn Moorhead contributed to the reporting for this article.
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