Warren Buffett's Farewell: What Investors Can Learn From His Biggest Mistake

Warren Buffett stepped down as chairman of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) last week, taking another step toward retirement from the conglomerate he steered for more than six decades.

Buffett will go down as the greatest investor in history, and that title is well-deserved. Under his stewardship, Berkshire Hathaway nearly doubled the annual return of the S&P 500, a track record that no one comes close to matching for as long a period of time.

Buffett also did so in public with a company anyone could invest in, and set a model for investor dialogue with his annual shareholder meeting that he dubbed "Woodstock for capitalists."

In addition to his investing acumen, Buffett was also known for his folksy wisdom and simple advice like "Be greedy when others are fearful and fearful when they're greedy," and his relatively straightforward approach to investing, valuing companies with economic moats, or durable competitive advantages, trading at reasonable valuations.

That approach made Berkshire a trillion-dollar company and Buffett one of the richest people in the world. Plenty has been written on Buffett-style investing and Berkshire's quarterly trades for investors who want to follow along with the Oracle of Omaha, but what's less discussed are his mistakes, and those can be informative for investors as well.

In his 60-year career, Buffett certainly had his share of swings and misses. Among those are buying ConocoPhillips at the peak of the oil market in 2008, leading to multi-billion-dollar losses, and buying Dexter Shoe Company for $433 million in Berkshire stock instead of cash, shortly before Berkshire stock skyrocketed. In 2007, he called the Dexter Shoe acquisition "the worst dealt that I've made."

However, as many investors have experienced, the ones that got away can be much more costly than a bad investment. After all, a winning stock can make up for several losers.

Along that line of reasoning, I'd argue that Buffett's biggest mistake was not investing in Google early in its history, despite having a clear understanding of the business, its profitability, and its potential.

Image source: The Motley Fool.

What happened with Buffett and Google

Buffett had an opportunity to invest in Google at its IPO, and the designers of Google's prospectus even based it on Berkshire's own owner's manual, traveling to Omaha to show it to Buffett. Berkshire passed on the offering, as Buffett typically avoided early-stage tech IPOs.

However, shortly after Google went public, Buffett noticed that Berkshire subsidiary GEICO was paying roughly $10-$11 per click, which he recognized as nearly all profit for Google and a sign of a wide economic moat from an asset-light business with tremendous pricing power.

Buffett was a longtime investor in the newspaper industry and understood the power of the advertising market. He often referred to newspapers as local monopolies, and though he seemed to recognize that Google had the potential to become a global monopoly by applying the same model, he did not pull the trigger. Later, he expressed regret for the decision, saying he "sucked his thumb" instead of acting on his insight and buying the stock.

Berkshire finally invested in Google in 2025, now Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), with Buffett directing the trade.

What it means for investors

What makes Buffett's initial decision not to buy Google such a big mistake isn't just that the stock soared from its IPO to a market cap above $4 trillion. It's that Buffett had specialized knowledge of the company through GEICO, and recognized its prowess, but failed to act on it.

Peter Lynch, another one of history's greatest investors, encouraged retail investors to buy what they know and to use their everyday lives to gain an advantage in the stock market. In other words, based on where you live, your hobbies, or your job, you might have some special insight into a company that most in the market don't. If you recognize a winner before others do, that can be a ticket to early retirement.

As one example, I went to college in Colorado, where Chipotle started, and invested in Chipotle stock shortly after its IPO, after seeing how popular it was. At that time, many investors probably hadn't been to one of its restaurants, which gave me an advantage. I unfortunately sold most of my holdings in the burrito chain over the years, but the stock is up roughly 4,000% since my purchase.

Buffett's mistake with Google is a good reminder to draw on your own unique observations and insights when the opportunity arises. They may not come up very often, but one smart investment could change your life.

Jeremy Bowman has positions in Chipotle Mexican Grill. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, and Chipotle Mexican Grill. The Motley Fool recommends ConocoPhillips and recommends the following options: short September 2026 $35 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.