AUDIENCE MEMBER 00:09
Hi, my name is Scott Rudd from Evening Prairie, Minnesota.
And my question is this: ten years from now — and I’m referring to Borsheims as the retail part of it to the consumer, not so much the corporate division — ten years from now, what would be the three things that you would expect to change on a day-to-day operating basis, to change the most and affect your ability to be dominant in that area.
WARREN BUFFETT 00:43
Well, I think — are you talking about Borsheims specifically?
AUDIENCE MEMBER 00:45
WARREN BUFFETT 00:46
Yeah, I think Borsheims — I won’t have three things — but Borsheims may be one of a couple of our companies where the internet could be a huge — have a huge potential for us.
I don’t know if that’ll happen, but there’s no question that we operate — and I’ve got a message on the internet — at considerably — very considerably — lower gross margins than does a Tiffany or publicly-held jewelry operations.
We are giving customers considerably more for their money. We’ve got way lower operating costs than the public companies.
And I say on the internet, our operating costs are 15 to 20 percentage points, and even more in some cases, less than publicly-owned competitors. So we’ve got a lot to offer.
Now, the big question people always have with jewelers is, “How do you know who to trust?” I mean, you know, it is an article that most people feel very uncomfortable buying.
And I think that the Berkshire Hathaway identification can help people feel comfortable on it. I think that the experience of customers around the country as they see it.
And I don’t think that — I think it’s a product — it’s a high-ticket item, so saving money gets to be really important. Just like auto insurance, saving money gets to be really important.
So I think that the internet could be of significant assistance to Borsheims in terms of spreading and facilitating its nationwide reputation. So Borsheims could have a lot of growth and the internet could be a big part of it.
Our job is to get the message to people around the country that they can literally, you know, have us send a half a dozen items to them, that they can look at with no high-pressure salesmanship at all or anything of the sort, and look at the prices, decide what they want in their own homes, and they will do very well with us.
And we have a lot of people taking advantage of that now. But we could have 10, or 20, or 50 times that number as the years go by. And I think we should work very hard on that.
GEICO has possibilities through the internet, obviously, also.
Anything where you’re offering a terrific deal to the consumer, but one of the problems has been how do you talk to that consumer, you know, the internet offers possibilities (inaudible). The thing is that everybody in the world is going to be there, and why should they click on you instead of somebody else?
Actually, the Berkshire Hathaway name may help a little bit on that, although GEICO’s name is extremely well known. GEICO is — I said in the annual report we were going to spend a hundred million dollars in — basically in promotion this year. We’ll spend more money than that.
The brand potential in GEICO is very, very big. And we intend to push and push and push on that.
CHARLIE MUNGER 03:57
Well all that said, if the internet helps some of our business, why certainly the CD-ROM and the personal computer combined to clobber World Book for us.
WARREN BUFFETT 04:10
Yeah, we paid our entry fee.
CHARLIE MUNGER 04:11
Yeah, we — (laughter) — it’s not all plus.
WARREN BUFFETT 04:14
No. Area 3.
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