Warren Buffett's Worst-Ever Deal Benefits This Place the Most -- Barrons.com

By Andy Serwer

Few business leaders obsess over failure more than Warren Buffett. Though the former Berkshire Hathaway CEO's record makes him a shoo-in for the investor hall of fame, Buffett often prefers talking about his misses more than his hits. One flub in particular seems to gall him, that being his 1993 purchase of Dexter Shoe. "The worst deal that I've made," he described it, noting that "as a financial disaster, this one deserves a spot in the Guinness Book of World Records."

What happened was that after Berkshire bought Dexter in 1993, cheap, imported shoes flooded into the U.S., decimating Dexter's operations. But even worse, much worse, is that Buffett paid for the $433 million acquisition with Berkshire stock -- 25,203 shares of Berkshire A shares, to be precise. "By using Berkshire stock, I compounded this error hugely, " Buffett wrote in 2007. "That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business -- one now valued at $220 billion -- to buy a worthless business."

That was almost 20 years ago. Today, 25,203 shares of Berkshire would be worth some $19.3 billion. What happened to all that money?

If you happen to be in Maine this summer, you might see where some of it has ended up: MaineGeneral Health hospital near the state capital of Augusta; a revitalized city of Waterville, home of Colby College; and an eye-popping new campus under construction for the Roux Institute of Northeastern University, on the site of the old B&M baked beans factory on the Portland waterfront. All endeavors were funded from the coffers of the man who sold Dexter to Buffett, Harold Alfond, who died in 2007, and whose charitable work is now carried on by his descendants.

The flip side of Warren Buffett's "worst deal" has become one of the best things that has ever happened to the Pine Tree State.

"I don't think you can overstate it," says Barry Mills, former president of Bowdoin College and board member of the Harold Alfond Foundation. "If you look at economic development, community development, healthcare, and the arts, the Alfonds are the driving philanthropic force of the state, setting ambitions and aspirations for the state with their own. There's just not that much money in Maine, and to have the Alfonds supporting these institutions is incredible."

The focus of the foundation is simply to spur the economy and boost education and healthcare in the state of Maine, mostly in concentrated giving, whenever possible by working with partners who have skin in the game. No politics whatsoever. There are other stories of Berkshire billionaires and their good works, but it's hard to think of another instance where an entire state has benefited, as from the Alfonds.

A cherubic-looking man with an accent that betrayed his upbringing in Swampscott, Mass., and his subsequent life in Maine, Harold Alfond was the son of Russian immigrants who went to work after high school in a Maine shoe mill with his father. The pair later bought a shoe factory, turned it around, and sold it for a tidy profit.

In 1958, the younger Alfond founded Dexter Shoe in Dexter, Maine, located on the east branch of the Sebasticook River, 30-odd miles northwest of Bangor. Dexter thrived, and Alfond is said to have created the first factory outlet store, selling his shoes in scores of log-cabin-style retail outlets. Invariably, suitors came calling, and ultimately Alfond went with Berkshire. Some eight years later, with the business tanking, Buffett folded Dexter into his H.H. Brown shoe company. It still sells shoes under the brand name.

Berkshire stock has been distributed throughout the Alfond family, which now numbers nearly four dozen. A nephew of Alfond's, Peter Lunder, and his family also own some Berkshire, as Lunder was president and board co-chair of Dexter and was the company's point person with Buffett. Lunder, 92, and his wife, Paula, who have their own foundation (which distributed $21 million last year), are avid art collectors and benefactors of the Colby Art museum.

The Alfond and Lunder families' holdings reside in various family office accounts, trusts, and foundations, of which the Harold Alfond Foundation is the largest. Its board includes two of Harold's sons, Theodore and William, four grandchildren, and Peter Lunder.

Charitable distributions from the foundation come from either gifts of Berkshire stock, mostly A shares but some converted to B, given directly to nonprofits (that option being the most tax-efficient) or sometimes through the sale of Berkshire shares, which, if large enough, have been bought back directly by Berkshire. "Buffett's written to me saying, 'If you want to sell a bunch of stock, let me know,' " says Greg Powell, 71, a Portland lawyer and board chair of the foundation.

Last year, the foundation gave away $104.5 million, with some 99% of grant dollars awarded to Maine institutions or projects. The foundation has assets of $1.69 billion, with nearly $570 million in binding grant commitments payable to charitable institutions in future years. Overall, the foundation has given away some $1 billion in the state.

How many shares of Berkshire do the Alfonds/Lunders still own? It's unclear, but one clue comes from the foundation's 2025 report, which notes that the foundation's portfolio has a 17% allocation to Berkshire Hathaway. Powell says it's actually a bit higher than that, so let's say 20% of $1.7 billion, which is $340 million. Divide that by $768,000 (the recent price of Berkshire A stock), and you get some 442 shares.

The foundation focuses on youth and community development, education, and healthcare, the last of which includes MaineGeneral, that hospital near Augusta, which garnered some singular funding of the Berkshire variety 15 years ago. The Alfond Foundation put up $55.25 million, and the hospital sold $276 million of tax-exempt bonds, but the project still needed a debt-service reserve fund to protect bondholders. "The bankers all wanted us to put up $20-plus million in cash," recalls Powell. "We thought, 'What if we got a surety bond for the bondholders from an unquestionably credit-worthy source like Berkshire Hathaway?' "

The foundation asked the Berkshire Hathaway Assurance Corp. to provide the bond, which Berkshire agreed to do if the foundation would put assets in an account for collateral. And guess which assets were used? Some $23 million of Berkshire stock.

As for higher education, the Alfonds have supported schools, colleges, and programs across the state, including a unique endeavor created by private-equity investor Dave Roux, who wanted to build a graduate science program to jump-start the technology side of Maine's economy. "When I started, I talked to a dozen folks around the state. All of them pretty much thought I was crazy. But Greg, to his credit, said, 'Gee, that's really provocative.' " Roux partnered with Northeastern University, a leader in flexible learning, and with his wife, Barb, has put in over $100 million to start up the Roux Institute.

When Roux presented his fully formed plan to the Alfond board, there was "a lot of enthusiasm," Roux recalls. Shortly thereafter, the Alfonds committed more than $100 million, as well. "They've been a great partner, " Roux says about the Alfonds. "Good advice. Very thoughtful. They're conservative investors, but they're bold in their thinking about putting the money to work philanthropically."

In a more traditional vein, the Alfond Foundation has donated $320 million to the University of Maine system, expanding and improving areas like engineering and computer programs and modernizing UMaine athletic facilities. For context, the annual budget for the University of Maine system is some $718 million. (A sports nut, Harold Alfond and the foundation have paid for rinks, gyms, and facilities across the state. Alfond's two sons, Ted and Bill, are minority owners of the Boston Red Sox.)

The Alfond Foundation has also given some $100 million to Maine's seven community colleges through the Harold Alfond Center for the Advancement of Maine's Workforce, which provides short-term job training programs and credentials, now with an artificial-intelligence focus, in partnership with over 2,000 Maine employers. "Community colleges came to the foundation a few years ago, and had this idea of helping employees of welding companies, electricians, plumbers, engineers, get trained up to the next level," says Mills. "It's thousands of people and has been fabulously successful."

Then there's the Harold Alfond College Challenge, which gives a $500 scholarship grant to every child born in Maine, an idea that sounds very much like those Trump accounts, except that Alfond and Powell pioneered the concept back in 2008. Last year, the foundation made college challenge grants totaling $5,844,500 to 11,689 newborns. Through the end of 2025, the foundation has given $87 million to 175,952 Maine children, which with investment returns now totals $177 million. Families, state matches, and other contributions, plus returns, have grown this pot of money to over $805 million.

"The story of the kids from Maine should be told," Buffett wrote to Powell in 2023. "They have received not only a significant sum but also have learned about compound interest and savings. I made a bad deal for Berkshire -- but a lot of good came out of it, as well." (Buffett and the Alfond family declined to comment for this column.) For the first time this fall -- 18 years since their inception -- students will tap into these funds.

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July 31, 2026 02:00 ET (06:00 GMT)