Warren Buffett on his worst acquisition ever

To borrow a phrase my high school Latin teacher (whom I absolutely loathed) used to toss around, "Even Homer nods." That said, it's rare that an executive will write openly and with a touch of humor about the worst acquisition of his career. Then again, Warren Buffett is a rare executive.

In his latest letter to shareholders (PDF file -- may take awhile to load) of Berkshire Hathaway (NYSE: BRK.A), Buffet wrote about his 1993 purchase of the Dexter Shoe Co.

Finally, I made an even worse mistake when I said "yes" to Dexter, a shoe business I bought in 1993 for $433 million in Berkshire stock (25,203 shares of A). What I had assessed as durable competitive advantage vanished within a few years. But that's just the beginning: By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business -- one now valued at $220 billion -- to buy a worthless business. To date, Dexter is the worst deal that I've made. But I'll make more mistakes in the future -- you can bet on that. A line from Bobby Bare's country song explains what too often happens with acquisitions: "I've never gone to bed with an ugly woman, but I've sure woke up with a few."