I keep coming across unusual geo-spatial facts about some of today’s most well known business folks. I recently wrote about Elon Musk of Tesla fame and his first venture Zip2, an early internet company that fused business information with maps. Next up Warren Buffett.
Geospatial, Insurance & Warren Buffett
One of Warren Buffett’s very early investments was, you guessed it, in the geospatial world.
In the 1860’s a surveyor named D.A. Sanborn was asked by Aetna Insurance Company to generate a number of maps for the city of Boston. These maps were to be used for fire insurance risk, and proved so successful that Sanborn started his own mapping company: the Sanborn Map Company. By the 1920’s Sanborn led the market for fire insurance mapping.
Sanborn replaced older methods for fire insurance risk assessment. These had been based on surveying buildings individually. By using maps, Sanborn could assess risk by area. Once generated these maps could be sold to any interested insurance company. It was quite common for large buildings to be insured by a number of different insurance companies, to share the risk. Though initial mapping costs were high, once generated Sanborn made a very healthy profit on its map sales.
Sanborn maps included details of streets, buildings, the diameter of buried water mains, number of windows in a building, elevator shafts, construction material etc. Customers purchased Sanborn maps on a subscription basis, this cost included updates. As late as the 1950’s, 95% of Sanborn’s revenue came from 30 insurance companies.
In the 1950’s ‘carding’ (algorithmic calculations) became popular in the insurance industry. This impacted Sanborn’s revenues, and presented a perfect buying opportunity for Warren Buffett. In 1958 Buffett bought a controlling interest in Sanborn, and set about improving operations by refocusing on the ‘neglected core mapping business’*.
Sanborn proved to be a very shrewd and successful investment for Buffett. Sanborn Maps still exists today providing 3-D mapping, aerial photography, field data collection and other services.
- Inside the Investments of Warren Buffett – Yefei Lu
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Author: Matt Sheehan
Matt Sheehan is a Principal at WebMapSolutions. Matt evangelizes GIS and intelligent maps around the world through keynotes, articles, tweets and his books. Follow him on Twitter:
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