Merry Christmas and Happy Hanukkah!
We are grateful for our Co/Investor Club community and hope you have a joyous holiday season. Wishing you great success in the year to come!
Mistakes of Omission
“It’s been a long December and there’s reason to believe; Maybe this year will be better than the last.” —Counting Crows (“A Long December”)
So long 2022. As we get ready to leave a year in which stocks and bonds both saw significant declines, we look ahead to 2023. We know we can’t predict what will happen. We know some risks will show up that we didn’t see coming. But we can assess the environment. We can assess valuations. And we can keep moving forward.
There were plenty of mistakes made in 2022. We made our fair share. We invested in things we thought would go up. But many of those things went down. Some of them went down a lot. These mistakes of commission hurt—some more than others.
But the worst mistakes are often the mistakes of omission. As Charlie Munger described them at the 2001 Berkshire Hathaway Annual Meeting:
The mistakes that have been most extreme in Berkshire’s history are mistakes of omission. They don’t show up in our figures. They show up in opportunity costs.
In other words, we have opportunities, we almost do it. In retrospect, we can tell that we were very much mistaken not to do it.
In terms of the shareholders, those are the ones in our history that it really cost the most.
Whatever kind of mistakes you make in 2022, remember that, over time, it’ll be the opportunities you didn’t pursue that end up doing well that you’ll regret the most. So, let’s make 2023 the year where we pursue those prospects and let the mistakes of omission on those opportunities belong to someone else.
“At least we are constantly thinking about the past occasions when we blew opportunities. Since those don’t hit financial reports, the opportunities you had but didn’t accept, most people don’t bother thinking about them very much. At least that is a mistake we don’t make. We rub our own noses in our mistakes.” —Charlie Munger
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