LESSON 4

Bad Deals at Good Prices Are Still Bad Deals

IN 1962, Warren merged all his partnerships into one, then invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway, that would become his holding company. However, he regards the deal not as a great triumph but perhaps as his biggest deal-making blunder.

Buffett on Bargain Purchase Folly

“You might think this principle is obvious, but I had to learn it the hard way—in fact, I had to learn it several times over,” Buffett wrote in his 1989 letter. “Shortly after purchasing Berkshire, I acquired a Baltimore department store, Hochschild Kohn, buying through a company called Diversified Retailing that later merged with Berkshire. I bought at a substantial discount ...

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