GEICO
GEICO is Berkshire Hathaway's insurance subsidiary that generates $12 billion annually - yet receives only $2 billion back for reinvestment.
GEICO is Berkshire Hathaway's insurance subsidiary that generates $12 billion annually - yet receives only $2 billion back for reinvestment. The other $10 billion flows to wherever Berkshire finds higher returns: renewable energy, stock buybacks, acquisitions. This is allocation discipline in its purest form.
Berkshire acquired its first stake in GEICO in 1976 (20%) and completed full ownership in 1996. Since then, GEICO has operated with complete autonomy - no forced integration, no 'One Berkshire' mandates, no corporate overhead. It demonstrates Berkshire's decentralized radiation model: subsidiaries evolve independently in their own markets, connected only through capital allocation.
The lesson: legacy status and historical contribution don't protect capital allocation. GEICO built Berkshire's insurance empire, generating massive float for decades. But that history buys it nothing. Returns matter more than sentiment. When a business matures and can't deploy capital at high returns, the capital migrates - even if that business is profitable, even if it's the favorite child.
GEICO Appears in 3 Chapters
GEICO operates as an independent Berkshire subsidiary with complete operational autonomy, exemplifying decentralized radiation in action.
How GEICO demonstrates adaptive radiation →Acquired in stages (1976-1996), GEICO became part of Berkshire's insurance trunk generating massive float for capital allocation.
GEICO's role in Berkshire's branching strategy →GEICO generates $12B annually but receives only $2B allocation back - demonstrating that returns matter more than sentiment or legacy.
How Berkshire allocates GEICO's capital →