Lou Simpson

Lou Simpson was one of the most successful and least-known investors of his generation. As Chief Investment Officer of GEICO from 1979 to 2010, he managed the insurance subsidiary's investment portfolio with returns that ranked among the best in the investment world—without the public recognition he deserved.

Background

Lou Simpson earned an MBA from the University of Chicago and worked as a security analyst before joining GEICO in 1979 at the invitation of Jack Byrne, GEICO's CEO. He brought a disciplined value investing approach to GEICO's enormous and growing float.

Investment Philosophy

Simpson's approach was deeply influenced by both Graham and Buffett, with a distinctly quality tilt:

Concentrated portfolios: Like Buffett and Munger, Simpson ran highly concentrated portfolios, typically holding fewer than 10 positions.

Long holding periods: Simpson was a patient investor who held positions for many years, allowing compounding to work.

Business quality: While trained in Graham's cigar butt approach, Simpson increasingly focused on high-quality businesses with durable competitive advantages.

Margin of safety: Always insisted on buying at prices that provided adequate downside protection.

The Track Record

Simpson's performance at GEICO was extraordinary:

Over his 30-year tenure, Simpson achieved investment returns averaging approximately 20% annually—comparable to Buffett's own record.

This performance was achieved despite constraints:

• Large capital base that limited the universe of attractive investments
• Regulatory requirements that affected investment choices
• Institutional pressures that Buffett did not face at Berkshire

The Simpson Standard

Buffett has held Lou Simpson up as a model for how institutional investors should operate:

"Lou Simpson is one of the great investors of the modern era. His record speaks for itself."

Buffett has often noted that GEICO's investment returns under Simpson were significantly better than what Berkshire's insurance subsidiaries achieved in the same period—a fact that reflects Simpson's exceptional skill.

Retirement and Legacy

Simpson retired in 2010 and was succeeded by a team of Berkshire managers. He remains one of the great unsung investors—a reminder that extraordinary investment management can occur outside the spotlight.

His legacy is twofold:

1. The extraordinary value he created for Berkshire shareholders through superior investment returns
2. A model for how institutional capital should be managed: with discipline, patience, and concentration