While Warren Buffett became the most successful stock investor of all time, he did have one big weakness that needs to be addressed. In this Self - Storage University podcast we’re going to explore Buffett’s one big flaw and how to avoid making the same mistake.
Episode 138: Warren Buffett's Big Weakness Transcript
I have probably read every book out there, every article on Warren Buffett, because back when I was an economics major at Stanford in the early 1980s, Buffett stood alone as the person who had gone through every economic down cycle and came out a winner. And people were obsessed with his theories on investing. People wanted to replicate his success. Everyone in America was absolutely in love with the idea of some guy out in Omaha, Nebraska, that was beating the market year after year in a big way. This is Frank Rolfe with the Self Storage University podcast. We're going to talk about Warren Buffett, but he has one big weakness.
Now, Warren Buffett's weakness doesn't relate to any of his stock investments. He's done great with all of that. He does have a lot of strange issues personally with his personal life. His wife left him, and he married his housekeeper, and the whole story is a little weird if you ever look it up on Wikipedia. So, certainly not someone that we all want to emulate from a personal life perspective. But from a business perspective, Buffett has done, year over year, one of the best jobs of investing in history.
Some people have noticed he's lacking one item in his portfolio. Berkshire Hathaway owns no real estate. Now, Buffett does own some real estate himself. Beyond his private residence, he also owns a whole lot of farmland. And additionally, he owns a shopping center across from New York University. But someone asked him in an interview decades ago, which recently came back to light, why he didn't buy more real estate. Because when you look at other people out there, for example, when you look at Bill Gates, the head of Microsoft, he's one of the largest farmland owners now in the United States. So, many people use real estate as a way to secure their wealth. In fact, more people have become millionaires through real estate than any other method. But in an interview, Buffett said the reason he didn't do real estate is he didn't like to negotiate. He gave the example that when he wants to buy a stock, he just calls up his broker and he buys that stock on the spot, he can do that transaction within five minutes. He said that when you negotiate things, it often takes a long time, and you got to do a lot of back and forth and interaction.
Then I got to thinking, when I've read a lot of these Warren Buffett deals that he has done in the various books, he never negotiates them. He'll literally call somebody up out of nowhere and say, "Hey, I want to buy your company, or I want to invest in your company." And as long as they throw out a price to him that is within the ballpark, he just does it. And we never do that in real estate. In real estate, when someone throws a price out to you, we counter it at a lower price, and then they counter back at a lower price, and we raise ours up a little bit and counter back and forth and back and forth, and that's how American negotiation works. But it's so, Buffett was kind of scared of negotiating, scared of the back and forth, which is part of our national bantering negotiating style. And I think that actually did not work out well for him in that one regard. Now he's been averaging 19.8% per year since inception of Berkshire Hathaway, which in the stock market is spectacular. But in the real estate market is not really that unusual because if you have a three-point spread between the interest rate and the cap rate on your deal, that yields 20% annual there.
So, maybe Buffett should have done a little more real estate personally. Remember that during his era, when he got going in Berkshire Hathaway, he could have bought a lot of stuff back in the 60s and the 70s. That stuff has appreciated a ton. But what held him back, I think, is he just doesn't like to negotiate. So, then how can we all do a better job in that regard? If you join Buffett's concern of not really liking the concept of bantering back and forth on pricing, maybe you need to get more familiar with it. Watch shows like American Pickers or Pawn Stars, which are nothing but exposés of negotiating between two parties. And maybe start experimenting with it a little. Going to venues where negotiation is pretty common. Things like a farmer's market, a garage sale, an estate sale. Places where you can haggle freely without embarrassment, where you can become familiar with the concept of throwing out a price and then flinching when they give you a higher price and then going back in with a lower offer. Maybe that's a skill that Buffett would have been a happier guy if he developed. If you read the early books, in fact, Buffett realized that one key to being a good business person was he would have to do public speaking.
So, he went to Dale Carnegie's course on public speaking. But maybe the same fear, that shyness that caused him to not feel good about speaking, also translated into negotiating. And there's many avenues you can get to break through the ice, to learn how to negotiate in kind of a risk-free setting. And I would urge you in the new year of 2026, just to try it. To get more familiar with the one skill that Buffett lacked and that held him back from real estate investing. To understand just the mechanics of bartering back and forth and back and forth. Because once you unlock that skill, kind of like riding a bicycle, you'll never forget it, and it may help you enormously in all of your deal making. So give it a try in 2026, and I'm sure it will positively impact your year. This is Frank Rolfe with the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.