In 2011, in the heart of the Great Recession, Warren Buffett had the bold idea to make a $5 billion investment in Bank of America at a time when investing in banks looked extraordinarily risky. Buffett admits it was a moment of inspiration that came to him while he was sitting in his bathtub. Over the years, his Bank of America investment paid off handsomely, bringing him over $22 billion. However, Buffett is quick to note that it’s not the bathtub that is the key factor. It was the decades of knowledge he accumulated on the banking industry that enabled a moment of inspiration.
“It was mentioned how I got the idea about buying the Bank of America, or making an offer to Bank of America on a preferred stock, when I was in the bathtub, which is true. But the bathtub really was not the key factor,” Warren Buffett said at the 2013 Berkshire Hathaway Annual Meeting. “The truth is I read a book more than 50 years ago called Biography of a Bank. It was a great book, about A.P. Giannini and the history of the bank. And I have followed the Bank of America, and I’ve followed other banks, you know, for 50 years.”
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© 2021 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.