It seems like perhaps the singing Buffet (Jimmy) may have some great material for a new song - a  wistful ballad about a guy named Warren (Buffett), a green gecko, and a loss of over 50 million dollars.

The lesson in humility that Mr. Buffett has recently experienced centers around one of his many companies, Nebraska-based insurance and investment company Berkshire Hathaway. Berkshire has owned Geico, the auto insurance company best known for its advertising campaign(s) involving green geckos and cavemen, since 1996. In a nutshell, the well-known auto insurance company made a recent attempt to release credit cards which turned out to be a “very expensive business fiasco” according to a letter disclosed by Buffett himself.

Buffett’s brainchild was to issue a credit card to loyal Geico policyholders. Despite being advised against this by Geico executives, Buffett released the Geico Platinum MasterCard. His rationale was that he felt policyholders would be loyal due to Geico’s reputation and if they were offered a credit card, they would be more likely to switch to Geico’s services. In his annual investor communication for 2005, he encouraged people to sign up for the credit card stating that ”it was the one he used for all his charging needs”.

Buffett is entitled to take 100% credit (pun intended) for the idea – and he did so this past week in his annual letter to shareholders of Berkshire Hathaway Inc. In his letter, he explained:

“For many years I had struggled to think of side products that we could offer our millions of loyal Geico customers. Unfortunately, I finally succeeded, coming up with a brilliant insight that we should market our own credit card. I reasoned that GEICO policyholders were likely to be good credit risks and, assuming we offered an attractive card, would likely favor us with their business. We got business all right – but of the wrong type,” Buffett said.

Buffett further admitted that his Geico managers warned him they would not get the “cream of Geico’s customers.”, explaining that what they got was, “well, let’s call it the non-cream.”

As an auto insurance company, Geico has been highly successful overall, and it is currently the third largest auto insurance company in the United States. Since 2002, Geico has acquired more than 4 million new policyholders and is one of the top auto insurance companies in many states, including New York.

Alas, we now know that the “great one” of finance is not perfect. Additionally, the investment guru and world’s second richest person is not afraid to admit when he makes a mistake - and he’ll even put it in writing! All things considered, you’ve just got to admire this guy still going strong at 79…. even if the credit business isn’t his bag!

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