{"id":1659,"date":"2022-03-07T23:55:00","date_gmt":"2022-03-07T15:55:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=1659"},"modified":"2025-07-19T14:15:32","modified_gmt":"2025-07-19T06:15:32","slug":"mistakes-of-omission","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/","title":{"rendered":"Mistakes of omission and mistakes of commission"},"content":{"rendered":"\n<p>Investors should try best to avoid of The mistakes of omission.<\/p>\n\n\n\n<p>In my book &#8220;The Rules of Super Growth Stocks Investingock Investing Rules&#8221; Chapter 5,  5-2, I mentioned Buffett&#8217;s admission of the biggest investing mistake he has made in recent years. And also in 5-2, one of Buffett&#8217;s stubborn and undeserved mistake that cost him $10 billion. He&#8217;s willing to admit mistakes and review them, which is what makes Buffett great.<\/p>\n\n\n\n<p>For Buffett&#8217;s most worthy investors to learn, I suggest you refer to my other blog article &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/07\/why-buffett-deserves-further-study\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why Buffett deserves further study?<\/a> &#8220;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/#Mistakes_of_omission\" >Mistakes of omission<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/#Mistakes_of_commission\" >Mistakes of commission<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/#Avoid_mistake_of_omission_to_regret\" >Avoid mistake of omission to regret<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/#The_most_egregious_mistakes\" >The most egregious mistakes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/#Interpretation_by_Charlie_Munger\" >Interpretation by Charlie Munger<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/07\/mistakes-of-omission\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mistakes_of_omission\"><\/span><strong>Mistakes of omission<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In 1998 at the University of Washington Business School, Buffett was with Bill Gates, and explained &#8220;I&#8217;ve made all kinds of bad decisions that have cost us billions of dollars. <strong>They&#8217;ve been mistakes of omission rather than commission<\/strong>. I don&#8217;t worry about not buying Microsoft (ticker: MSFT), though, because I didn&#8217;t understand that business. And I didn&#8217;t understand Intel (ticker: INTC). <\/p>\n\n\n\n<p>But there are businesses that I did understand&#8211;Fannie Mae was one that was within my circle of competence. I made a decision to buy it, and I just didn&#8217;t execute. We would&#8217;ve made many billions of dollars. But we didn&#8217;t do it.&#8221;<\/p>\n\n\n\n<p>In <a href=\"https:\/\/berkshirehathaway.com\/letters\/1991.html\" target=\"_blank\" rel=\"noreferrer noopener\">Berkshire&#8217;s shareholder letter in 1991<\/a>, Buffett wrote: &#8220;In early 1988, we decided to buy 30 million shares. After we bought about 7 million shares, the price began to climb. In frustration, I stopped buying (a mistake that, thankfully, I did not repeat when Coca-Cola stock rose similarly during our purchase program). In an even sillier move, I surrendered to my distaste for holding small positions and sold the 7 million shares we owned.<\/p>\n\n\n\n<p>I wish I could give you a halfway rational explanation for my amateurish behavior vis-a-vis Fannie Mae. But there isn&#8217;t one. What I can give you is an estimate as of yearend 1991 of the approximate gain that Berkshire didn&#8217;t make because of your Chairman&#8217;s mistake: about $1.4 billion.&#8221;<\/p>\n\n\n\n<p>Buffett did not invest in WalMart (ticker: WMT) is just one example of a mistake of omission. <a href=\"https:\/\/finance.yahoo.com\/news\/learn-warren-buffetts-two-10-162631854.html\" target=\"_blank\" rel=\"noreferrer noopener\">Buffett has admitted that just this one mistake with WalMart cost them $10 billion.<\/a>&nbsp; In 1973 Tom Murphy offered to sell some television stations to Berkshire for $35 million and Buffett declined.&nbsp;&#8220;That was a huge mistake of omission,&#8221; Buffett has admitted. <\/p>\n\n\n\n<p>Warren Buffett&#8217;s biggest mistake of omission  might be dumping Disney (ticker: DIS)\u2014 twice. Buffett had held combined 8.6% stake in Disney. He bought 5% stake from Walt Disney in 1966, received a 3.6% stake after Disney bought Capital Cities\/ABC 30 years later. However, Buffett swiftly sold his Disney shares on both occasions, potentially leaving US $25 billion on the table.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mistakes_of_commission\"><\/span><strong>Mistakes of commission<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A mistake of omission is you&nbsp;<em>fail to act<\/em>&nbsp;on good information. You don\u2019t do something you should have done.  A mistake of commission is the opposite. You&nbsp;<em>act<\/em>&nbsp;on information. You do something you shouldn\u2019t have done. You do something wrong.<\/p>\n\n\n\n<p>A mistake of commission is easy to point to and see an error, especially in terms of investing. You can point to a bad investment and actually calculate the loss.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Avoid_mistake_of_omission_to_regret\"><\/span><strong>Avoid mistake of omission to regret<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A mistake of omission is far more difficult to observe, specially in terms of investing, because there might be no investment loss, since there was never an investment in the first place. Buffett has admitted how his&nbsp;mistakes of omission&nbsp;have actually been far greater ( cost to Berkshire Hathaway shareholders) than his&nbsp;mistakes of commission&nbsp;over the years. Because mistakes of omission is in his circle of competence, he should not make such mistake at all.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2022\/09\/RODNAE-Productions-1600x1200-1.jpg\" alt=\"Mistakes of omission\" class=\"wp-image-13849\"\/><figcaption class=\"wp-element-caption\">credit: RODNAE Productions<\/figcaption><\/figure>\n\n\n\n<p>What Buffett once said&#8211;the missed opportunities I said are related to the scope of my ability, that is, things that I can understand, fully understand, but do not spend the least amount of time. I just stood still, this is the real mistake. He himself admitted: Even though we knew it was cheap, we didn&#8217;t invest early and missed the opportunity to get paid. As far as investment in the technology industry is concerned, he did not act early to invest, such targets include Amazon (ticker: AMZN) and Alphabet (ticker: GOOGL and GOOG), especially Alphabet because GEICO uses Google online advertise to lower cost. He should know it&#8217;s should be a good deal to invest Alphabet.<\/p>\n\n\n\n<p>In short, like Buffet said, investors should focus on never miss opportunity in your circle of competence, or you will regret and lose huge.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_most_egregious_mistakes\"><\/span>The most egregious mistakes<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In <a href=\"https:\/\/berkshirehathaway.com\/letters\/1991.html\" target=\"_blank\" rel=\"noreferrer noopener\">Berkshire&#8217;s shareholder letter in 1991<\/a>, Buffett again examined one of the most significant types of mistakes he had ever made. The original text is as follows.<\/p>\n\n\n\n<p>Typically, our most egregious mistakes fall in the omission, rather than the commission, category. That may spare Charlie and me some embarrassment, since you don&#8217;t see these errors; but their invisibility does not reduce their cost. In this mea culpa, I am not talking about missing out on some company that depends upon an esoteric invention (such as Xerox), high-technology (Apple), or even brilliant merchandising (Wal-Mart). We will never develop the competence to spot such businesses early. Instead I refer to business situations that Charlie and I can understand and that seem clearly attractive &#8211; but in which we nevertheless end up sucking our thumbs rather than buying.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Interpretation_by_Charlie_Munger\"><\/span>Interpretation by Charlie Munger<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Charlie Munger further said in his usual forthright speech, &#8220;There are two kinds of mistakes: first, do nothing (see the opportunity but put it on the shelf), Buffett calls this &#8220;finger-sucking mistake&#8221;; second, we only buy the amount of potion bottles when we are supposed to buy things in piles.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/07\/why-buffett-deserves-further-study\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why Buffett deserves further study?<\/a> &#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/07\/18\/learning-to-avoid-failure\/\">Learning to avoid failure<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/27\/imitating-fastest-effective\/\">Imitating great investors is the fastest and most effective way<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/29\/price-and-value\/\" target=\"_blank\" rel=\"noreferrer noopener\">Misunderstanding of price and value<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/27\/survivorship-bias\/\" target=\"_blank\" rel=\"noreferrer noopener\">People believe successful investors are survivorship bias cannot succeed<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/07\/10\/sustained-investor\/\">A investor can be sustained or not? how to verify?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/19\/investing-has-no-formula\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing has no formulas, but there are ways to invest successfully<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/02\/28\/factor-luck\/\">How big a factor does luck play in investment success?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/19\/successful-investors\/\" target=\"_blank\" rel=\"noreferrer noopener\">The main investment principles of successful investors are similar<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/06\/chance-of-making-mistakes\/\" target=\"_blank\" rel=\"noreferrer noopener\">Invest success depends on less chance of making mistakes<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/mistakes-of-omission-and-mistakes-of-commission\/\" target=\"_blank\" rel=\"noreferrer noopener\">Mistakes of omission and mistakes of commission<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/\" target=\"_blank\" rel=\"noreferrer noopener\">The uncertainty in investment<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Buffett explained &#8220;I&#8217;ve made all kinds of bad decisions that have cost us billions of dollars. They&#8217;ve been mistakes of omission and mistakes of commission. <\/p>\n","protected":false},"author":1,"featured_media":13883,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13,392,14,11],"tags":[2,227,197,97,95,41,3,219,353],"class_list":["post-1659","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-behavior","category-circle-of-competence","category-investing-concept","category-buffett","tag-aapl","tag-amzn","tag-dis","tag-goog","tag-googl","tag-intc","tag-msft","tag-wmt","tag-xrx"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/1659","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=1659"}],"version-history":[{"count":32,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/1659\/revisions"}],"predecessor-version":[{"id":37399,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/1659\/revisions\/37399"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/13883"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=1659"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=1659"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=1659"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}