The assumption that an investment technique or asset class is fool-proof is often a clear sign that you should be weary of it. There is no venture without risk and there is no investor who is infallible. In fact, the ability to admit that one has made a mistake should be a quality of a good investor.

It is refreshing therefore to see Warren Buffett talk about his heavy investment in airlines having been a mistake. The Oracle of Omaha has liquidated all his company’s holdings of airline stocks as COVID-19 has totally ravaged the airline industry. Buffett’s Berkshire Hathaway had also made a huge investment in Occidental Petroleum in 2019 and the cash-strapped oil company is now paying Berkshire in equity as oil prices have totally collapsed.

This post is not a judgment on Buffett’s investment picks. He is the greatest investor of all time. He has a legendary track record. It could well be that his oil bet will pay off and his dumping of airline stocks will prove to have been premature. The results do not matter for the purpose of this post. What I’m interested in is his willingness to admit mistakes.

Contrast this humility with the aura of infallibility surrounding many trading gurus promising superior returns with their strategies. They brag about their past returns (which is not independently verifiable) and more often than not, they totally ignore when their predictions come out wrong or when clients get burned by following their trading signals.

One could argue that Buffett has more room to be humble because he has already built a reputation while upcoming fund managers could be ruined by admitting errors. But fund managers owe a duty to be honest with clients. Also when you educate clients about the true nature of the market, many of them will understand and be patient.

Sooner or later the market comes for everyone. And we do a disservice to ourselves by not considering the possibility that our strategies could be wrong.