Speaker

Lou Simpson

Lou Simpson

American investor; head of investments at GEICO (Government Employees Insurance Company) from 1979 to 2010 — 31 years. After GEICO became a Berkshire Hathaway subsidiary, Simpson ran its equity portfolio independently of Buffett, compounding capital at world-class rates over three decades. Warren Buffett called him “one of the investment greats.” Founder of SQ Advisers after retiring from GEICO; closed the firm in 2019. Died 2022.

Simpson was a concentrated, qualitative, patient investor: typically eight to fifteen stocks, minimal trading, deep research, long holding periods. His operating principle: “We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting and not a lot of thinking.”

Investment philosophy

  • All investing is figuring out the future economics of a business. Qualitative factors — management motivation, culture, product quality, customer alignment — are the roots that determine future economics.
  • Humility as the prerequisite for clear perception. Carried himself with little ego; quick to say “I don’t know”; self-deprecating about the portfolio (“maybe it’s a little tired”). His humility was objective rather than performative: it came from genuine awareness of how little any investor controls.
  • Patience through noise. Went to art exhibitions during market downturns rather than staring at screens. Created space for reflection that PIMCO-style intensity forecloses.
  • Longevity as the engine. The number of compounding years matters more than heroic short-term returns.

1987 case study

Moved portfolio to 50% cash in early 1987 (stocks clearly overvalued), sold at the highs, paid taxes. When the crash came, he did not deploy capital fast enough — the market snapped back before he reinvested fully. Net: added some value, but multiple decisions needed to go right simultaneously to fully exploit timing. In retrospect, might have been better to stay fully invested.

Carvana / Alibaba anecdote

On a Zoom call with Charlie Munger discussing an Alibaba purchase: “I just bought it yesterday, so it’s bound to go down 50% immediately.” The stock did decline significantly. Self-deprecating precision — a recognition that even great investors get shaken in volatile positions.

Appearances / references in wiki