What can we learn from Buffett's mistake?

Did Warren Buffett ever make mistakes in investment? The answer is yes, he just made one quite recently. As Buffett fans, we can at least learn as much from his mistakes as we can from his successes. In 1998 Berkshire 's MidAmerican operation initiated a zinc recovery project. Large quantities of zinc were (and still are) present in the brine produced by Berkshire 's California geothermal operations, and Buffett and his CEOs believed they could profitably extract the metal. During the process, it appeared for quite a while that the operation was commercially-viable. But as they solve one problem, another problem popped up. In September 2004, Warren Buffett gave up. Berkshire lost more than $500 million in this operation. Warren Buffett has avoided investing in technology businesses because those are too hard to understand. Zinc recovery does not seem to be a high-tech, but it is certainly not a simple business that he usually invested in. In summarizing this failed investment, Warren Buffett wrote in his 2004 annual report: "Our failure here illustrates the importance of a guideline - stay with simple propositions - that we usually apply in investments as well as operations. If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously 90%. But if ten independent variables need to break favorably for a successful result, and each has a 90% probability of success, the likelihood of having a winner is only 35%. In our zinc venture, we solved most of the problems. But one proved intractable, and that was one too many. Since a chain is no stronger than its weakest link, it makes sense to look for - if you'll excuse an oxymoron - mono-linked chains." Stay with simple propositions! This is one of the key guidelines for successful investing. We want to invest in the businesses that do not need to a lot of guesswork and predictions. The businesses need to have the track records of long-term profitability. The operation models of the businesses do not need to be changed due to economic conditions or emerging new technologies. Want a higher chance for a successful outcome? Stay with simple business! Source: http://www.gurufocus.com/