Admit Mistakes - AI Analysis Prompt
Analyze any company through Warren Buffett's principle of "Admit Mistakes." This AI prompt applies this specific investment wisdom to evaluate companies systematically.
Full Prompt
You are an investment analyst trained in Warren Buffett's principle of "Admit Mistakes." Your core philosophy: value investing, economic moats, long-term compounding. Your task is to analyze {Company Name} through the specific lens of this principle.
## Context
Warren Buffett teaches: "Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."
## Analysis Framework
### 1. Principle Application Assessment
- How does this principle specifically apply to {Company Name}?
- What aspects of the company are most relevant to "Admit Mistakes"?
- Rate the company's alignment with this principle: Strong / Moderate / Weak
- What would Warren Buffett focus on first when evaluating this company?
### 2. Quantitative Evidence
- Identify 3-5 key financial metrics most relevant to this principle
- Analyze these metrics over the past 5-10 years for {Company Name}
- Compare with industry peers and historical benchmarks
- Are the numbers improving, stable, or deteriorating?
- What story do the numbers tell through the lens of "Admit Mistakes"?
### 3. Qualitative Deep Dive
- Evaluate the non-quantifiable factors Warren Buffett would examine
- Management quality and alignment with this principle
- Industry dynamics and competitive position
- Business model sustainability viewed through this specific lens
- What would Warren Buffett want to know that isn't in the financial statements?
### 4. Risk Assessment Through This Lens
- What risks does this principle specifically highlight for {Company Name}?
- What could go wrong that this principle is designed to protect against?
- Are there warning signs that Warren Buffett would flag?
- Stress-test: How would this company perform under adverse conditions?
- What is the worst-case scenario from this principle's perspective?
### 5. Opportunity Identification
- What opportunities does analyzing through this lens reveal?
- Are there hidden strengths the market may be undervaluing?
- How does this company compare to Warren Buffett's ideal investment?
- What catalysts could unlock value related to this principle?
### 6. Buffett Verdict
- Summarize: Does {Company Name} pass the "Admit Mistakes" test?
- Rate the investment opportunity: 1-10 from this principle's perspective
- Clear recommendation: Buy / Hold / Avoid (based on this principle alone)
- What conditions would change your assessment?
- One-paragraph summary capturing Warren Buffett's likely assessment
## Output Format
Present your analysis with specific data points in each section. Use Warren Buffett's analytical style: fundamental analysis with focus on business quality and intrinsic value. End with a decisive verdict.Basic Questions
What major investment mistakes has Buffett made and how did he handle failure?
❌ Classic mistakes:
1. Buying Berkshire Hathaway itself — a declining textile mill
2. Missing Amazon and Google — outside his circle of competence
3. Investing in Dexter Shoes — paid with Berkshire stock, losing billions
✅ His approach:
- Publicly admits mistakes in annual shareholder letters
- Analyzes root causes (rather than making excuses)
- Turns every mistake into a decision framework improvement
Usage Tips
Is the AI's 1-10 rating reliable?
How to interpret:
- **8-10 (thesis strong)**: Original buy rationale largely intact — don't panic over short-term fluctuations, continue holding
- **5-7 (cracks appearing)**: Some buy reasons shaken — seriously examine the specific issues AI identified, consider reducing position
- **1-4 (thesis collapsed)**: Original investment logic severely undermined — seriously consider cutting losses
Buffett's wisdom: Selling a mistaken investment isn't admitting defeat — it's freeing capital for better opportunities. Don't let ego block rational decisions.
More Rule Prompts
Explore other investment principles from this master.
Never Lose Money
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
→When to Sell
When the facts change, I change my mind. What do you do, sir?
→Wonderful Company at Fair Price
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
→Greedy When Others Fearful
Be fearful when others are greedy and greedy when others are fearful.
→Courage to Act
Have the courage to act when opportunity presents itself. Hesitation leads to missed opportunities.
→Circle of Competence
Know your circle of competence and stay within it. The size of that circle is not very important; knowing its boundaries, however, is vital.
→Gradual Position Building
I never try to buy at the bottom and I always buy too early. But that doesn't matter because I have long-term goals.
→Insist on Margin of Safety
Never pay more than a business is worth. Wait for prices that provide a significant margin of safety. Being patient for the right price is more important than finding great businesses.
→Dollar Cost Averaging
If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds.
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