The Story of Leo and Lillian Goodwin

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In the mid-1930s, at the height of the Great Depression, there weren’t many people with the foresight and courage to start up a new company. After all, unemployment was at record levels. But that is exactly what Leo and Lillian Goodwin did.

Leo and Lillian lived in Texas during the great depression years of the 1930s. One night, Leo came home from his job as an insurance sales man with the idea of starting his own insurance company. He had this idea that he could create a successful auto insurance business by marketing directly to carefully targeted customer groups,

In the mid-1930s, at the height of the Great Depression, there weren’t many people with the foresight and courage to start up a new company. After all, unemployment was at record levels. Quitting your job to start a company was almost unheard of. Yet Leo and his wife Lillian were up to the challenge.

In 1936, Leo put his plan into action. He started the Government Employees Insurance Company to sell car insurance to federal employees and certain categories of enlisted military officers.

Leo’s wife Lillian did the accounting; she set the rates and the underwriting. She was also the company’s one-person marketing department.  Within a year, Leo and Lillian had written 3,700 insurance policies. Business was good enough to hire twelve staff members.

After world war two came to a close, the Goodwins lost their major investor. Leo and Lillian had a friend, Lorimar. He was an investment banker back in New York. He agreed to join the firm and help them find new investors for their fledgling insurance company. Among those new investors was Benjamin Graham, a business professor at Columbia University in New York.

In 1951, Mr. Graham was talking about the Government Employee Insurance Company with the students of his class. One of those students was so interested in the business concept; he took the train to Washington on a Saturday to learn more, only to find that the office was closed. Fortunately, a janitor let the young man in and directed him to Lorimar’s office.

The two men had an impromptu meeting that would ultimately have a greater impact on the company than either man could have realized at the time. The student returned home to college. But on the train ride back home, he decided to buy some stock in the company.

Over the next 20 years, that initial investment in the company proved to be a wise decision for the young student. The company experienced significant growth and success. But as the 1970s arrived, the company suffered growing pains. Leo and Lillian both passed away.

The young student was now a successful business man with many business interests. He still believed the business plan was solid. He was so confident in the company’s strength; he decided to make his second stock purchase in the company. But this time he bought a million shares of stock.

The prudent underwriting standards prevailed and the company regained it’s growth momentum in the 1980s with innovative ideas like telephone claim service that was open twenty four hours a day seven days a week.

But as the government employee market became saturated, it grew increasingly clear that some day the company would have to expand and start selling insurance to the general public.

I can just imagine that board meeting as the decision to offer car insurance to the general public was made. Somebody in the room must have raised their hand to ask how they were going to open up to the public when their name was the Government Employee Insurance Company.

Well, by now, you probably recognize this company as GEICO and the young college student who first purchased stock in the company as Warren Buffett.

In 1995, Warren Buffet offered to purchase all of the stock in the Government Employee Insurance Company and by 1996, GEICO was a subsidiary of one of the most profitable organizations in the country.

That led to national advertising on an enormous scale. GEICO’s ads and direct mail pieces flooded the airwaves and filled mailboxes around the country and the company’s growth shot upward. The GEICO Gecko made its first appearance during the 2000 television season and quickly became an advertising icon.

Today, GEICO is the largest advertiser on Radio. They choose to dominate Radio because they know that nine of ten people listen to the Radio every week. The average person listens nearly three hours a day. Ninety two percent of the listeners stay tuned in when the commercials come on the air.

GEICO has enough money to dominate TV but they don’t. They have enough money to dominate any medium they choose but they choose to dominate Radio because they can reach virtually every man woman and child in America with their Radio advertising.

GEICO’s advertising isn’t boring. They use humor to attract attention. Who would ever buy insurance from a gecko?

GEICO’s marketing ran into trouble when the tried to show how easy it was to use their web site. They used the marketing slogan, “it’s so easy even a caveman can do it”. This innocent phrase enraged cavemen around the world.

In 2008, the Caveman was voted America’s favorite advertising icon of the year and joined the GEICO Gecko on the Advertising Week Walk of Fame. The Caveman, still perturbed with GEICO for its “So easy, a caveman could do it” slogan, did not attend the award ceremony.

I wonder what Leo and Lillian Goodwin would say today if they knew how successful their little company has become.

Do you think they had any idea the company would grow to serve millions of policy holders?

Maybe they did. Maybe that was their dream all along. Maybe that’s how they made the tough decision to go out on their own that night years ago during the great depression.

It’s hard to say.

But I can tell you this. When things are going well, the people who are doing well try to impose a certain kind of structure, a sort of order that preserves the status quo. They don’t want change because things are going just fine, for them.

When times are uncertain, that structure is weakened. It’s possible for someone with a good idea, someone with motivation to leap frog ahead and make remarkable strides because the others are moping around, waiting for things to get back to normal.

Remember, there is a reason the rear view mirror in your car is only a few inches wide while the windshield is a few feet wide. It is far better to be focused on the road ahead.

GEICO is built on ingenuity, perseverance, innovation, resilience and hard, honest work. From its humble beginnings in the midst of the Great Depression to its current place as one of the most successful companies in the nation, GEICO represents a quintessential American success story.

Today is just as good as any other day to pursue your business dreams. If not now, when?

Spike SanteeThe Story of Leo and Lillian Goodwin

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