essays and articles by david g allen

Geckos?  We Don't Need No Stinking Geckos!


Leo Goodwin had a brilliant idea in 1936. He decided that insuring the personally-owned automobiles of government workers would be a sure-fire success. After all, government workers tend to be responsible people who have stable employment. Leo’s idea became the Government Employees Insurance Company, which you know better by its acronym, GEICO.

GEICO was chartered as a publicly-owned corporation. GEICO was not a New Deal government agency.

GEICO remained a solid performer until the 1970’s when it began writing policies for high-risk customers to achieve growth. The strategy backfired and the company was soon on the ropes. Enter Warren Buffett.

The Sage of Omaha saw an opportunity and his Berkshire Hathaway Co. began acquiring GEICO stock. Warren Buffett understood what Leo Goodwin knew—that government workers, GEICO’s core customers, were good risks. Buffett returned the insurer to its root philosophy and GEICO was soon profitable again.

I suppose GEICO chose the gecko as its marketing mascot because of the similarity of pronunciation. But I wonder sometimes if the firm chose the gecko as a playful jab at Oliver Stone who created Gordon Gecko, the corporate raider in the film "Wall Street." If that’s the case, I am sure that Warren Buffett laughs about it on his way to the bank each morning.

If Leo Goodwin were with us today, he just might be tempted to write health insurance policies for West Virginia government employees. After all, the state-run government insurance monopoly known as PEIA insures one-eighth of the state’s population. Goodwin would realize that a 12.5% market share in such a small state would present an attractive economy of scale. But therein lies the problem—PEIA is a government monopoly.

I cannot predict whether health insurance companies could provide cheaper or better coverage for the state’s employees than what PEIA currently provides. Only the marketplace can do that. But given the fact that some companies currently write group health coverage for private sector employers, it certainly would be worth exploring an open market and allow them to compete for the state’s business. Just as President Roosevelt remarked in his Message to Congress in 1938, we have a situation where the system of free enterprise "has not yet been tried."

A program whose basic thesis is, not that the system of free enterprise for profit has failed in this generation, but that it has not yet been tried.

Franklin D. Roosevelt
Message to Congress on the Concentration of Economic Power, April 29, 1938

The accompanying quote from FDR was selected by F. A. Hayek to introduce "The Abandoned Road", chapter one of "The Road to Serfdom." Hayek and Roosevelt knew that the concentration of economic power in the hands of a few was the surest way to undermine a democracy. As well, they understood that free competition throughout the system was the best way to prevent a handful of elitists from controlling the government. It is, therefore, not an idle coincidence that Hayek and Roosevelt speak to us from the same page.

Should you ask the average West Virginian about FDR’s policies, he or she will probably tell you that FDR was all for government control of every aspect of life. This is a sad misunderstanding but, nevertheless, an accurate appraisal of our folk. Building the Tennessee Valley Authority should not be equated with administering the health insurance claims of WV public employees. But somehow, West Virginians have managed to put these tasks on par with each other—that government must do everything.

The taxpayer is the obvious loser in this equation. The taxpayer has no choice but to pay the monopoly. The real loser, however, is the person who works for government and is insured by PEIA. It is not simply a matter of money to them. It is, after all, their healthcare that is being bandied about. As to why public employees are compelled to shop at the company store in this day and age baffles me.

If PEIA does a cost-effective job at what it does, then the agency should not fear competition from the private sector. But we’ll never know how well (or how poorly) PEIA performs without the opportunity to comparison shop.

FDR also said, "We have nothing to fear but fear itself." He did not fear geckos. Indeed, from his remarks in 1938, we can see that he encouraged the little fellows.


David G. Allen, Clarksburg, WV

"Geckos?" is Part 5 of a continuing series based on "The Road to Serfdom", by F. A. Hayek and appeared in the February 6, 2004 issue of the WV State Journal.




Copyright 1990-2005  David G. Allen