For nearly a year the Internet has buzzed with rumors that Warren Buffett, chairman of Berkshire Hathaway, might be ill, talk that turned the collective attention of Wall Street to low-keyed Rancho Santa Fe investment manager Louis Simpson. Late last month the multimillionaire investor was released from the hospital after having a section of his colon with noncancerous polyps removed. And again the eyes of the financial world snapped in Simpson's direction.

Two national business magazines are said to be working on major profiles of Simpson, who for years now has quietly managed billions of dollars out of a small office that looks more like an architect's aerie than a bastion of finance. Simpson, an unassuming man who takes long walks unnoticed in his own neighborhood and through Del Mar, is believed to be Buffett's heir apparent as chairman of one of the world's most remarkable corporations. Buffett has been the most successful long-term investor in the history of the United States, and his corporate vehicle, Berkshire Hathaway, is the highest priced stock on the New York Stock Exchange, trading in the past year at between $60,000 to $90,000 per share.

Simpson first caught the limelight in the 1990s when shareholders pressured Buffett, then in his mid-60s, to reveal his succession plan. Buffett commented somewhat casually that there was plenty of backup if anything happened to him, and mentioned the name of Lou Simpson.

Not only had Simpson long been the co-chairman of GEICO Insurance and the person in charge of the insurance company’s investment float, he has been a trusted member of Buffett's inner circle. He also serves on several influential boards of directors, including that of Media One Inc. Simpson was among the people Buffett and his long-time partner, Los Angeles businessman Charlie Munger, called upon to help when one of their major investments, the investment banking house Salomon Brothers Inc., went sour. In August, 1991, the United States government charged that Salomon had made illegal bids and squeezed competitors in a Treasury bill auction. The Treasury, Federal Reserve Bank of New York and other regulators threatened to take action that might drive Salomon into bankruptcy.

To restore the bank's credibility, Buffett stepped in as chairman and he called upon Simpson to join the 13-member Salomon Board. After a half dozen years and many flights to New York, Salomon was sold to Traveler's Insurance Co. Berkshire had paid $700 million for a 12 percent stake in Salomon in 1987. After the merger, that investment turned into a 3 percent ownership of Travelers worth $1.7 billion. In 1998, Travelers merged with Citicorp, forming the world's largest financial service firm.

"The shareholders came out very well in that situation, better than they had any reason to expect, if they knew the real facts," says Simpson.

Simpson found himself on the opposite side of the table from Buffett in August of 1994. Using $2 billion from the sale of Capital Cities/ABC Inc. to Walt Disney Co., Buffett made a bid for the 50 percent of GEICO it did not already own. Simpson had to resolve several thorny issues, including how to fairly manage a stock swap when GEICO paid a dividend and Berkshire did not.

Negotiations continued for seven months and the New York investment banking firm Morgan Stanley was brought in to help set a fair price. Using cash flow and other yardsticks, Morgan Stanley said one share of GEICO could be valued as low as $50.80 or as high as $73.43. Berkshire paid $2.3 billion to buy the second half of GEICO for $70 per share.

In the deal, Berkshire got Simpson as a full-time employee. The Princeton-educated Simpson continued to manage GEICO's float after the acquisition, with the exception of the fixed-income portfolio, which is now managed from Berkshire headquarters.

Simpson has been beating the market since at least 1980 and boasts an investment record nearly as good as Buffett's. In 1997, 1998 and 1999, however, most value investors fell behind as the bull market reached its apex. Simpson's return failed to match the return on the Standard and Poor's 500, which meant that instead of earning a bonus, Simpson owed money to Berkshire. Simpson's current slump is not surprising, considering that value investors usually have difficulty at the top of a bull market when stocks are believed to be overpriced. After 30 years of being the top-performing investment style, since 1995 value funds have taken second place to growth funds. Even Berkshire Hathaway's stock has been flat for nearly a year.

Although he is considered the front-runner for Buffett's job, Simpson himself does not make that claim. Buffett also remains elusive about who will follow him. Munger says that both he and Buffett have great respect for Simpson, but that Buffett did not mean to promise that Simpson would eventually lead Berkshire. Rather he mentioned Lou's name to show the quality of people who were already in place. "We could have done (the job of naming a replacement) directly and not in some crazy, indirect way," Munger insists.

Simpson, a bachelor, lives in California because he likes it and because his children reside nearby. Considering that Buffett runs Berkshire Hathaway out of a small office suite in Omaha and lives in the first house he ever bought, it is quite possible that no matter what Lou Simpson's future holds, he will remain in San Diego County. We can always hope so anyway.

Janet Lowe's book, "Damn Right: Behind the Scenes with Berkshire Billionaire Charlie Munger," will be published by John Wiley & Sons in November.