Everyone makes mistakes – including Wall Street’s best and brightest. And given the millions and billions of dollars at stake in their activities, their oops moments tend to get attention. This hedge fund manager just made headlines for losing 99.7% of his clients’ money in a matter of weeks.
But as Bill Ackman says, “experience is making mistakes and learning from them,” even though the lesson is sometimes hard to swallow.
Here are four quotes on mistakes from billionaires – and a look at some of their biggest blunders.
“In this business, if you don’t make mistakes, you’re either a liar or you don’t take many swings at the ball.” Leon Cooperman
Leon Cooperman says his worst investment wasn’t in a stock but instead in an employee. In a 2014 interview, he told Lawrence Delevigne that his biggest mistake was betting on former Omega executive Clayton Lewis, who was aware of a 1998 oil bribery scheme in Azerbaijan.
The matter was resolved years ago – Omega signed a non-prosecution agreement with the Justice Department in 2007 and paid $500,000 to resolve the issue. In 2010, it agreed on a private settlement with Clayton. Nevertheless, Cooperman refers to the events that transpired as “the worst chapter in my life.”
With Omega Advisors recently having been subpoenaed by the U.S. Attorney and SEC, one can’t help but wonder whether Leon Cooperman may be headed toward another bad chapter soon.
“You never make a mistake by seeing people with brains.” Julian Robertson
Robertson missed the boat on tech in the late 1990s – a mistake that, combined with poor stock picking, led to his fund’s demise. His Tiger Management reached its peak at over $20 billion in assets in 1998 but saw that number fall quickly, eventually shutting its doors in 2000. “There is no point in subjecting our investors to risk in a market which I frankly do not understand,” he said at the time.
“The investment business is about being confident enough to know that you’re right and everyone else is wrong. Yet you have to be humble enough that you recognize when you’ve made a mistake. Earlier in my career, I think I had the confidence part pretty solid. But the humbleness part I had to learn.” Bill Ackman
Humility dealt Bill Ackman a big smack in the face with his first hedge fund, Gotham Partners. He launched the firm in 1992, straight out of Harvard Business School, and grew it from $3 million to $300 million in no time. Five years later, things began to go awry. A bad bid on a golf course was the straw that broke the camel’s back, and in 2003, Gotham closed its doors.
But if at first you don’t succeed, try, try again. Bill Ackman certainly has – and the second time has definitely been the charm.
“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.” Warren Buffett
Not even the Oracle of Omaha is immune to the occasional oops. In his latest letter to shareholders, marking his 50th year at the helm of Berkshire Hathaway, he discusses two of his biggest mistakes. The first: buying Berkshire (you can read more about that here). The second, he wrote, is this:
Early in 1967, I had Berkshire pay $8.6 million to buy National Indemnity Company (“NICO”), a small but promising Omaha-based insurer. (A tiny sister company was also included in the deal.) Insurance was in my sweet spot: I understood and liked the industry.
Jack Ringwalt, the owner of NICO, was a long-time friend who wanted to sell to me – me, personally. In no way was his offer intended for Berkshire. So why did I purchase NICO for Berkshire rather than for BPL? I’ve had 48 years to think about that question, and I’ve yet to come up with a good answer. I simply made a colossal mistake.
If BPL had been the purchaser, my partners and I would have owned 100% of a fine business, destined to form the base for building the company Berkshire has become. Moreover, our growth would not have been impeded for nearly two decades by the unproductive funds imprisoned in the textile operation. Finally, our subsequent acquisitions would have been owned in their entirety by my partners and me rather than being 39%-owned by the legacy shareholders of Berkshire, to whom we had no obligation. Despite these facts staring me in the face, I opted to marry 100% of an excellent business (NICO) to a 61%-owned terrible business (Berkshire Hathaway), a decision that eventually diverted $100 billion or so from BPL partners to a collection of strangers.