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Building Success, From the Ground Up

Bill Pulte hammered out his out own future -- literally. The founder and chairman of Pulte Homes (PHM) began his career as a carpenter in high school and quickly began to make his mark in the construction field. Today, Pulte operates in 27 states as well as in Mexico and Argentina.

BusinessWeek Senior Correspondent Katie Kerwin recently sat down with the 73-year-old master homebuilder in his Bloomfield Hills (Mich.) office to discuss his entrepreneurial rise, why he took his company public, and the challenges facing those just starting out in the industry today. Edited excerpts of their conversation follow.

Q: What made you decide to become a builder?

A: I bought my first car at age 16 in the spring of 1948. It cost me $75, and I had to put boards on the floor because you could see through it to the road. Then my dad said, "What are you going to do for gas?" I said, "How about giving me a bigger allowance?" He said, "How about getting a job?"

So I went to work as a carpenter between my sophomore and junior years of high school. At the end of the summer, just before Labor Day, the builder I was working for pulled up at the site in a brand new Cadillac with a glass of iced tea on the dashboard. I was impressed as hell. I said, "I'm going to be a builder."

Q: So you started building your first house right after finishing high school?

A: Yes. I was going to be a tradesman builder. It's a centuries-long tradition, where you did part of the work yourself. But, by the time I finished that house, every fingernail on my left hand was black and blue from nailing down the oak floors. After that experience, I decided to have somebody else do the work.

I wanted to be the best custom builder in Detroit -- and I almost made it. I was the low bidder on [auto scion] Benson Ford's new house in Grosse Pointe, but the architect told me, "I can't risk my reputation with the Ford family on a 24-year-old kid." I decided I didn't want architects running my business.

I looked around and said, "I think I should be a general contractor." In my logic at the time, you make more money on a big job. After several big jobs, I realized it wasn't true. General contractors make small margins. And there wasn't the same camaraderie between the electrician, the bricklayer, and the carpenter.

Q: So that's when you started building housing subdivisions in Michigan. How did you end up doing projects in 26 other states?

A: In 1964, I went to Washington, D.C., because I'd heard about guys who were selling 20 houses a month, which was more than I was doing. The Washington housing market was booming, where Detroit was still going up and down with the auto industry.

I said, "We're going into business in this town." Immediately, I started selling twice as many houses in Washington.

I liked the idea of geographic diversification. In 1965, we went to Chicago and, by 1968, we were in Atlanta -- all with the same five houses. They were for homeowners who were making their first move up, moving out to the suburbs with four bedrooms and two-and-a-half baths. Product and geographic diversification are a big reason Pulte stayed alive.

Q: Tell me about the product diversification. You merged with Del Webb in 2001 to get into the booming market for "active senior" housing in places like Las Vegas and Phoenix. But what prompted you to move into the starter-home market a few decades ago?

A: Well, eventually all those buyers of the bungalows I'd built had kids who were growing up and starting to buy houses. I had to get into that business.

We bought a small homebuilding business in Colorado Springs, and moved it into Chicago, Detroit, and Atlanta as a builder of first-time homes.

Q: Why did you decide to take Pulte public?

A: All of my rivals were offering big wages to my guys -- twice what I could pay them, plus stock options. I didn't go public like most companies to raise money to finance the business. I went public in 1969 to keep my people.

I was never afraid to go out and hire people who are better than I am. At 99% of the jobs in the building business, I'm not the best. I went out and hired the best people I could find.

Q: Could a young builder starting out today do what you were able to do 50 years ago?

A: I don't know. It didn't take the amount of money then that it does today. The first piece of property I bought for $10,000 down, and I borrowed that from my father-in-law.

Later on, I always got my money from savings and loans, and I dealt with the same lumberyard and hardware store, and they lent me funds. The masonry business lent me money on my IOU. I never had to put much cash up. I never could have put up the huge bond you need nowadays.

But I would have found some way to get money. Housing costs haven't gone up that much. It's property and land value that have gone up.

The second biggest difference is time, which is also money -- the time it takes to get plans approved and recorded. You could get a project approved in four or five months in those days. In a lot of states now, it takes two to three years. In California, maybe four or five years.

Q: So many big housing companies, like U.S. Home (USHS) and Levitt (LEV), went downhill once the founder retired. Aren't you worried that's what will happen to Pulte?

A: I think Pulte can go on for a long time. The big difference is that most of those guys don't think that knowing the building trade matters. Since the early '90s, real professional managers entered the business. It's a whole different deal from the tradesman/entrepreneur.

I've seen so many MBAs get into the business and fail because they don't know anything about building. Of course, I've seen trades guys fail because they didn't know anything about finance. A good knowledge of the trade is what makes Pulte different. We combine trade and finance equally.

I don't ever want to see a CPA running Pulte. To me, that would be a disaster. There isn't a guy at this company, except our CFO, who hasn't been in the field for at least 10 years.

Our CEO, Richard Dugas, worked in sales at Exxon (XOM) and then operations at PepsiCo. (PEP). He ran Pulte sales operations in the field for almost a decade before he became chief operating officer. He's gotten his boots muddy. Dugas is a leader, and he thinks his way out of the box. That's what it takes today.

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