Was it? Or did Buffett make an "offer they couldn't refuse?"
Either way, it's about time the efficiency of rail got any press. It's too bad so much trackage was torn up during the 70's and 80's. I always figured our future would live to regret it.
Before recession can turn to recovery someone needs to make a big bet and name the new game.
It just happened.
In what may be the climactic move of his long business career Warren Buffett has bet $44 billion on the Burlington Northern Santa Fe railroad and named the new game.
Efficiency.
Efficiency is what I like to call the low-hanging fruit of the War Against Oil.
Most attention here goes to energy production, to solar cells, wind farms and tidal engines. But you get exactly the same bottom-line impact from saving a barrel of oil as from replacing it with wind.
Buffett spent 10 days on this deal, speeding the transition of Berkshire-Hathaway from a mutual fund dependent on its CEO into a conglomerate whose unit managers drive the stock price.
The question a lot of people will be asking, however, is what a 19th century business can possibly teach the 21st century?
A great deal.
- It takes a lot less to move a ton of freight by rail than by truck. The difference grows when you use hybrid or electric engines.
- Railroads can become a lot more flexible with computer controls, picking up loads at large plants and depositing them near central cities.
- America’s renewable energy resources are mismatched to its economy. Most of our geothermal and solar potential is in the West, most people in the East. What’s the best way to move this energy?
- There’s also that mismatch between where we draw our imports, the Pacific, and where we use them, again the East.
- Burlington managers have been effective in using their right-of-way for fiber cable, giving them an Internet footprint.
- Burlington’s right of way can also handle passenger trains. Railroads have the same cost advantages with people as they do with freight, once sunk costs are taken care of.
It’s true this deal has something to say about Berkshire as well as Burlington. Buffett is not just making his company a conglomerate, but one that sells stock at popular prices.
But the smart takeaway here is the new economic game, and the gains we can all generate, on our own bottom lines, by getting more efficient. A penny saved is truly a penny earned.
