Wall Street secrets Unlocked.

## The Original Sin In 1965, Warren Buffett cemented what he would later call "the dumbest stock I ever bought." The irony is that the stock was Berkshire Hathaway. In a 2010 CNBC interview with Becky Quick, he confirmed the purchase of the New England textile mill was a colossal error, born not of analysis but of anger. The business itself was already a statistical curiosity. Buffett began acquiring shares in 1962 around $7.50 when he calculated the company's working capital alone was worth over $11 per share. This was a classic Benjamin Graham "cigar butt" investment: a dying business with one last free puff of value left in it. Buffett intended to do what he always did with these assets—wait for management to close more mills, generate cash, and tender for shares at a small profit. In 1964, CEO Seabury Stanton made a verbal offer to buy back Buffett's stake for $11.50 per share. Buffett agreed. When the formal written offer arrived, it was for $11.375. The eighth-of-a-dollar slight was a personal offense. Instead of selling, a spiteful Buffett went on the offensive, buying up shares in the open market until he had controlling interest. He then fired Stanton. This emotional decision tied Buffett and his partners' capital to a technologically obsolete, capital-intensive, low-margin American textile business fighting a losing war against foreign competition. For the next two decades, Buffett poured capital into a terminally declining industry, finally closing the last textile operations in 1985. The money spent propping up looms in Massachusetts could have been compounding in a great business. In his 2014 shareholder letter, he estimated this single unforced error cost his partnership at least $200 billion in untaxed opportunity cost. It was a multi-decade object lesson in the difference between cheap assets and quality businesses. ## From Cigar Butts to Compounding Machines