Jimmy Buffett, you’ll remember, once ended a song with “And I know it’s my own damn fault.” I doubt Warren Buffett spent a whole lot of time wasting away in Margaritaville, but it’s clear from his letter to Berkshire Hathaway shareholders [pdf] that he knows where the buck stops:
For many years I had struggled to think of side products that we could offer our millions of loyal GEICO customers. Unfortunately, I finally succeeded, coming up with a brilliant insight that we should market our own credit card. I reasoned that GEICO policyholders were likely to be good credit risks and, assuming we offered an attractive card, would likely favor us with their business.
We got business all right but of the wrong type.
Our pre-tax losses from credit-card operations came to about $6.3 million before I finally woke up. We then sold our $98 million portfolio of troubled receivables for 55¢ on the dollar, losing an additional $44 million.
GEICO’s managers, it should be emphasized, were never enthusiastic about my idea. They warned me that instead of getting the cream of GEICO’s customers we would get the well, let’s call it the non-cream. I subtly indicated that I was older and wiser.
I was just older.
During the period of heavy TARPage, in fact, GEICO sent out a letter to policyholders to the effect that inasmuch as the bank they’d hired to manage their MasterCard was busily slicing credit lines left and right, you might want to consider moving to a competitor’s card. (I got this letter; they did not cut my line, but they imposed a stiff annual fee and raised the interest rate a couple of ticks.)
I’ve got to believe that the ability to learn from his mistakes played a major factor in propelling Buffett to Richer Than God status, though how I’d get there, I haven’t a clue.
(Seen at Fritinancy.)