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In a decades-old video that recently surfaced on social media, a young audience member asks Warren Buffett about his worst investment. Buffett's response is characteristically candid: his biggest mistakes weren't the investments that went wrong, but the opportunities he missed entirely. He estimates missing out on perhaps ten billion dollars in profits from investments he "knew enough to do" but didn't make.
The natural reaction to this confession might be alarm. If the world's greatest investor regularly suffers from what he calls "mistakes of omission," surely the rest of us should work overtime to ensure we don't miss any opportunities? This thinking would be precisely wrong.
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Buffett's admission should actually be deeply reassuring to ordinary investors. Here's a man who has compounded wealth at extraordinary rates for over six decades, yet he freely acknowledges missing enormous opportunities. The crucial insight isn't that we should try harder to catch every wave, but that missing opportunities is an inevitable part of successful investing.
Consider what Buffett and his late partner, Charlie Munger, actually did when they encountered investments they didn't fully understand. For decades, they avoided technology stocks entirely. They famously passed on Google despite witnessing firsthand how transformative the company's advertising platform was for their own insurance operations. As Munger once admitted, "We just sat there sucking our thumbs." They didn't invest in Apple until it had essentially transformed from a technology company into a luxury consumer goods business.
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The conventional interpretation suggests they should have worked harder to understand these sectors earlier. But this misses the fundamental point. By staying within what Munger called their "circle of competence" and avoiding what I've termed in an earlier column on the subject, the "doughnut of incompetence" that surrounds it, they avoided far more costly mistakes than the opportunities they missed.
Think about the technology sector's landscape over the past two decades. For every Google or Apple that delivered spectacular returns, there were dozens of companies that promised revolutionary breakthroughs but delivered only losses. Pets.com, Webvan, WeWork, QuiBi, and countless social media platforms that flickered briefly before vanishing – the technology graveyard is vast and expensive.
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When investors focus obsessively on avoiding mistakes of omission, they inevitably make mistakes of commission instead. They begin investing in sectors they don't understand, companies whose business models confuse them, or trends they can't properly evaluate. The fear of missing out drives them beyond their competence, where losses become far more likely than gains.
This dynamic is particularly dangerous for individual investors who lack the resources and time that professional fund managers possess. When you're managing your own portfolio alongside a day job and family responsibilities, the temptation to chase every opportunity can lead to catastrophic overextension.
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The mathematics of investing also supports this conservative approach. As I've written before, it's generally easier to identify what might go wrong with an investment than to predict what will go spectacularly right. Successful investing often comes from a series of reasonable decisions rather than brilliant predictions about the future.
Buffett's missed opportunities didn't prevent Berkshire Hathaway from becoming one of the world's most valuable companies. His shareholders haven't suffered from his failure to invest in every promising technology stock. Instead, they've benefited enormously from his discipline in staying within areas where he could make informed judgements.
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The lesson for ordinary investors isn't to become more aggressive about seizing opportunities, but to become more comfortable with missing them. Every successful investor has a graveyard of opportunities they didn't pursue. The key is ensuring that your actual investments are made with conviction and understanding, rather than fear of missing out.
This doesn't mean becoming overly conservative or avoiding all risk. It means developing the self-awareness to distinguish between opportunities within your competence and those outside it. When you encounter an investment that seems promising but lies beyond your understanding, the wisest course is often to let it pass.
As Munger once observed, "I try to avoid being stupid rather than trying to be very intelligent." Missing opportunities feels painful, but making investments you don't understand is far more dangerous. Buffett's regrets about omission haven't prevented him from achieving extraordinary success – they're simply the inevitable price of maintaining investment discipline over decades.
The next time you feel tempted to chase an investment trend you don't fully grasp, remember that even Buffett regularly misses opportunities worth billions. The difference between successful and unsuccessful investors isn't perfect foresight – it's the wisdom to stay within one's circle of competence, even when attractive opportunities try to lure you outside the circle.
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