Buffett Explains the "Cardinal Sin" Munger Called "Thumb-Sucking"

Warren Buffett described what he called the "cardinal sin" of managing a business in his 2024 Berkshire Hathaway shareholder letter — delaying the correction of mistakes, a habit his late partner Charlie Munger called "thumb-sucking." Buffett wrote: "Problems... cannot be wished away. They require action, however uncomfortable that may be."
Berkshire's own Alphabet ($GOOGL) position illustrates the pattern. Buffett and Munger acknowledged missing Google as their worst tech mistake at Berkshire's 2017 annual meeting, and Buffett later called Google "an extraordinary business" with "some aspects of a natural monopoly" on CNBC. Berkshire still didn't open a position for another eight years, finally buying 17.85 million shares worth about $4.3 billion in Q3 2025. By its Q2 2026 13F filed August 14, 2026, the stake had grown to roughly 106 million shares, making Alphabet Berkshire's third-largest holding.
The SEC's Office of Investor Education and Advocacy calls this tendency the "disposition effect" — holding losing investments too long while selling winners too soon, based on a 2010 Library of Congress report. A 1998 Journal of Finance study by Terrance Odean, using 10,000 brokerage accounts, found investors were roughly 1.5 times more likely to sell winning positions than losing ones, and that the winning stocks they sold outperformed the losers they kept by 3.4 percentage points over the following year.
A reframing test popularized by fund manager Peter Lynch suggests asking whether you would buy the same stock today at its current price with idle cash — a "no" signals a reassessment worth taking seriously, though tax treatment and time horizon still shape the decision, according to Certified Financial Planner Board guidance.