How has a failure, or apparent failure, set you up for later success? Do you have a favourite failure?

My first mistake, of course, was in buying control of Berkshire. Though I knew its business - textile manufacturing - to be unpromising, I was enticed to buy because the price looked cheap. Stock purchases of that kind had proved reasonably rewarding in my early years, though by the time Berkshire came along in 1965 I was becoming aware that the strategy was not ideal. If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible. I call this the "cigar butt" approach to investing. A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the "bargain purchase" will make that puff all profit. Unless you are a liquidator, that kind of approach to buying businesses is foolish.

Well yes, but like I said, small mistakes or small failures. We take small failures very often. We have failures in investment. We have failures in operation, but no big mistakes or big failures. How do we take that? Like ordinary business.

But in 2007, the music stopped. We had lost sight of our shared purpose and our guiding principles, in which growth and success began to cover up mistakes and a disease set into Starbucks. That disease, hubris. We lost our way and believe it or not, we almost lost the entire company.