2004: What are Berkshire Hathaway HomeServices future prospects?

AUDIENCE MEMBER: Good morning. My name is Andy Lewis Charles from Miami. I think I speak for everyone when I wish both of you gentleman continued health. I would wish you continued wealth, but I think you have that covered.

WARREN BUFFETT: We could use more. (Laughter)

Of each.

AUDIENCE MEMBER: Speaking of MidAmerican Energy, a unit company underneath it, HomeServices, I see as a great opportunity. I would love to see and hear your thoughts about the future growth potential for it, especially against large consolidators like Cendant Corporation. Thank you.

WARREN BUFFETT: Yeah, HomeServices will grow. HomeServices, as you know, owns a number — I can’t recall how many, but probably in the area of 15 or 16 maybe — controls a number of local real estate firms. And they retain all of their local identity.

In that way, it’s somewhat akin to the whole Berkshire Hathaway model, where we leave our subsidiary companies quite autonomous and they operate as if they were — the managers operate as if they own them themselves.

Well, HomeServices is somewhat along the same line in that we have no national identity, where Cendant works under a couple of big names.

We’ve acquired one company in North Carolina here in the last month or 6 weeks, Prudential of North Carolina. And we will end up — unquestionably, in my view — we’ll end up buying either a few or a whole lot of additional companies over the next 10 years.

We will — we’ve got great management. We like the business. We hear about opportunities from time to time.

Last year, you know, we participated in roughly $50 billion of transactions. And I think — I’m really vague on this one, but — I better not give you a percentage of the national total that is, but it’s a very small percentage. It’s a lot of transactions, a couple hundred-thousand transactions.

We’re very big in Southern California, for example. We’re very big in Minnesota. We’re very big in Iowa. Very big right here in Omaha and in Lincoln. But there’s an awful lot of places where we aren’t at all.

We like to buy leading firms as we go around. And we sometimes like to buy more than one in a community.

It’s a good business. It’s a very cyclical business. Right now, it’s very good. We will go through periods in the next five years. I’m sure we’ll go through a period where it’s very slow. But we’ll keep buying. We’ll buy when business is slow, we’ll buy when business is good, depending on the price of the institution and the kind of business we’re buying.

I don’t know how big it can become. It will become bigger than it is now. Relative to Berkshire’s total market value, it may not be that — a huge factor. But it’s conceivable as we buy more operations, we’ll find other things to do with them, too.

I mean, the purchase of a home is a big deal to people. You know, often they’re buying furniture at the same time and maybe we can make a suggestion or two.

Charlie?

CHARLIE MUNGER: I’ve got nothing to add about that business.