Judy Faulkner

Judy Faulkner is the founder and CEO of Epic Systems, one of the world's largest providers of electronic health records (EHR) software. A computer programmer by trade, Faulkner founded Epic in a Wisconsin basement in 1979 with just $70,000 and has since grown it into a multi-billion dollar behemoth that holds the medical records of a majority of Americans. What makes Faulkner particularly fascinating from an investment perspective is her unwavering commitment to keeping Epic a private company. This has allowed her to build the business on her own terms, free from the quarterly pressures of Wall Street. She is celebrated for her long-term vision, a corporate culture that shuns acquisitions and debt, and her status as one of the wealthiest self-made women in the world. For value investors, Faulkner represents an icon of rational, patient, and focused business building, even if her own company's shares are not available for purchase.

While you can't buy a piece of Epic, studying its success is like attending a masterclass in identifying great businesses. Faulkner has built a fortress that embodies many of the qualities that legendary investors like Warren Buffett seek.

Epic's competitive advantage, or Economic Moat, is colossal. The company's primary defense comes from extremely high Switching Costs. Once a hospital system or clinic invests the hundreds of millions of dollars and countless hours required to integrate Epic's software into its operations, the financial and logistical pain of switching to a competitor is almost unthinkable. This “stickiness” creates a highly predictable and durable business. Doctors, nurses, and administrators are trained on the system, data is deeply embedded, and workflows are built around it. This creates a powerful lock-in effect that competitors find nearly impossible to break, ensuring a steady stream of revenue for decades.

Faulkner’s leadership style is a direct rejection of modern corporate norms. Her focus is relentlessly long-term.

• No Debt, No Acquisitions: Epic has grown organically, without taking on debt or acquiring other companies. Faulkner prefers to build solutions from the ground up, ensuring quality and integration. This is a classic sign of disciplined Capital Allocation.
• Customer and Employee Focus: By remaining private, Faulkner can prioritize R&D and employee welfare over short-term profits. Epic is famous for its sprawling, whimsical campus in Verona, Wisconsin, designed to attract and retain top talent.
• Patience and Principles: She has reportedly turned down buyout offers and resisted the temptation to go public, believing it would corrupt the company's culture and long-term mission.

So, what's the takeaway for an ordinary investor? You can't invest in Epic, but you can invest like Faulkner builds. Her approach provides a powerful checklist for evaluating public companies.

When you're researching potential investments, look for companies that exhibit the traits that have made Epic so successful. Ask yourself if the company you're analyzing has:

• A Visionary Leader: Is the company run by a founder or a CEO with a clear, long-term vision who isn't just managing for the next quarter's earnings call? Do they communicate with the clarity and conviction of someone building for the next generation?
• A Deep Economic Moat: Can customers easily leave for a competitor, or are there powerful switching costs, network effects, or brand loyalties that keep them locked in? A business that's hard to leave is a business that's built to last.
• A Fortress Balance Sheet: Does the company rely on heavy debt to fuel growth, or does it operate with a strong cash position and a prudent financial philosophy? Look for businesses that, like Epic, can weather any storm without relying on outside capital.
• An Owner's Mindset: Does management act like they are owners of the business, reinvesting capital wisely for long-term returns rather than chasing fads or engaging in value-destroying acquisitions?

By using Judy Faulkner and Epic as a mental model, you can better identify the truly exceptional, long-lasting businesses that are capable of compounding your wealth for years to come.