Berkshire Hathaway 1999 Annual Meeting Audience Question # 58

Warren admits he made a mistake selling McDonalds

Warren Buffett:

OK. Zone 7.

Audience Member:

Peter Kenner from New York City. Good afternoon, Warren, Charlie.

Warren Buffett:

Hi, Peter.

Audience Member:

Good to see you. I’d like to ask you what your thought process was when you, or share with us your thoughts, when you decided to sell McDonald’s.

Warren Buffett:

That must have been Charlie’s idea, Peter.

Peter, incidentally, is in a family that four generations have essentially invested with us. And they’re all terrific people, I might add. His dad was a wonderful guy.

The… you know, I said it was a mistake to sell it, and it was a mistake. And I just reported that in the interest of candor. And there were some reasons why I thought it was something we… I didn’t think it was, obviously, that it was any great short sale, or even a great sale.

But I didn’t think it belonged in the list of eight or 10 of the businesses, of the very few businesses, that we want to own in the world. And I would say that that particular decision has cost you, hmm, in the area of a billion dollars-plus.


Charlie Munger:

You want me to rub your nose in it? You’re doing a…

You’re doing a pretty good job by yourself.

By the way, that’s a good practice around Berkshire. We do rub our own noses in it. We don’t even need the help of the Kenners.

Warren Buffett:

We believe in postmortems at Berkshire. I mean, we really do believe… one of the things I used to do when I ran the partnership is I contrasted all sale decisions versus all purchase decisions.

It wasn’t enough that the purchase decisions worked out well, they had to work out better than the sale decisions. And managers tend to be reluctant to look at the results of the capital projects or the acquisitions that they proposed with great detail a year or two earlier to a board.

And they don’t want to actually stick the figures up there as to how the reality worked out against the projections. And that’s human nature.

But, I think you’re a better doctor if you drop by the pathology department, occasionally. And I think you’re a better manager or investor if you look at every one of the decisions you’ve made, of importance, and see which ones worked out and which ones didn’t and, you know, what is your batting average.

And if your batting average gets too bad, you better hand the decision making over to someone else.

Charlie, want to rub my nose anymore?

Charlie Munger:


Warren Buffett:

No, that’s OK. OK. We’re…

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