Why Warren Buffett Called This Investment His ‘Most Gruesome’ Mistake — ‘Deserves a Spot in the Guinness Book’

Legendary investor and former Berkshire Hathaway (BRK.A) (BRK.B) Warren Buffett once famously described his Dexter Shoe acquisition as a "gruesome mistake," though not necessarily for the reason most investors might assume.

But for modern CEOs, and the investors who watch their maneuvers, the decision now stands as one of the most instructive lessons in corporate finance history. At its core, the Dexter Shoe acquisition illustrates the catastrophic cost of using an appreciating currency—Berkshire Hathaway stock—to purchase a depreciating asset.

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In 1993, Berkshire acquired Dexter Shoe Company for approximately $433 million, which it paid entirely in stock, roughly 25,203 Class A equivalent shares at the time. The business itself ultimately proved worthless, as cheap foreign imports decimated Dexter's competitive position, rendering the company's domestic manufacturing model obsolete within a decade.

The true magnitude of the error, however, extends far beyond the initial purchase price. Because Buffett paid with Berkshire stock rather than cash, the real cost of the deal compounded relentlessly as Berkshire's share price appreciated over the following decades.