Warren Buffett’s Worst Deal Ever Cost $17.87B—Here’s What You Can Learn From It

Over the years, Warren Buffett has repeatedly called one deal his worst investment ever: the 1993 purchase of Dexter Shoe Company for $443 million worth of Berkshire Hathaway Inc. (BRK.A) stock. As of February 12, 2025, those same shares would be worth $17.87 billion—a staggering loss that Buffett has said “deserves a spot in the Guinness Book of World Records.”

While Berkshire Hathaway shares soared in value over the last three decades, those for Dexter Shoe collapsed, making it not only a bad investment but what Buffett says was a “monumentally stupid decision” in how the deal was structured. Below, we take you through why.

Key Takeaways

• Buffett’s Dexter Shoe Company purchase demonstrates how paying with company stock instead of cash can magnify losses dramatically over time—the $443 million in Berkshire stocks he traded in 1993 would be worth about $17.87 billion today.
• The investment failed because Buffett misread Dexter’s competitive advantage, not realizing that overseas competition would quickly erode the company’s market position.
• Ironically, the scale of the loss is measured by Berkshire Hathaway’s incredible success—which was built on Buffett’s general ability to avoid such mistakes and identify those firms with sustainable competitive advantages.

What Went Wrong With Dexter Shoe

When Buffett bought Dexter Shoe Company in 1993, the Maine-based company seemed to have everything the famed value investor looks for: It was profitable, well-managed, and seemed to have what Buffett calls a “moat,” a sustainable advantage over rivals. American-made shoes, particularly Dexter’s high-quality casual and dress footwear, were also getting premium prices and had customer loyalty at the time.

Mistake No. 1: Misreading the Competitive Landscape

Buffett had missed a crucial shift happening in the industry. Foreign factories, particularly in China, were rapidly improving their quality while keeping their labor costs much lower than their American peers. Within just a few years, overseas competitors began flooding the U.S. market with similar shoes at much lower prices.

“What I had assessed as a durable competitive advantage vanished within a few years,” Buffett wrote in his 2007 letter to shareholders. By 2001, Dexter had closed its last Maine factory, and the brand was eventually folded into H.H. Brown, another Berkshire-owned shoe company.

Mistake No. 2: Paying with Berkshire Stock

Making the acquisition was only half the problem. Buffett’s bigger error was paying for Dexter with Berkshire Hathaway stock instead of cash. The 25,203 shares he used to buy Dexter were worth $433 million in 1993 (or about $949.20 million today)—but those same shares would be worth $17.87 billion today.

The lesson to take from this? “Too often CEOs seem blind to an elementary reality: The intrinsic value of the shares you give in an acquisition must not be greater than the intrinsic value of the business you receive,” Buffett said.

Note

In late 2024, the local paper where Dexter Shoe was located caught up with those benefiting from owner Harold Alfond’s sale. Even after splitting her father’s gains from the deal with three brothers, Susan Alfond of Scarborough, Maine, still had enough to make her the wealthiest person in the state, about $3.3 billion, according to Forbes.

The Bottom Line

Warren Buffett says he violated two of his core principles in the Dexter Shoe deal: never pay with undervalued stock and always ensure a business has a sustainable competitive advantage. While Berkshire Hathaway’s subsequent success has made this mistake look far worse in dollar terms, BRK.A’s share price is only what it is today because Buffett has been disciplined in buying what he calls excellent businesses at fair prices, not fair businesses at excellent prices. “The best thing that happens to us is when a great company gets into temporary trouble,” Buffett has said repeatedly.