Warren Buffett lives my BNSF dream
If I had Bill Gates' billions, I would buy up American railroads, stop ripping up track and do everything possible to reclaim the business taken by trucks and airplanes.
My years-old Gatesian dream arises out being a lifelong railfan. I am hopelessly fascinated by the Homeric task of building railroads and running ground-thumping trains to faraway places. I don't hate trucks. In fact, I love driving them and will shortly get my Commercial Drivers' License.
Warren Buffett and his Berkshire Hathaway are living my dream by acquiring the Burlington Northern Santa Fe whose story is woven into America's history. What today is BNSF were American railroading icons for the century before 1970: Northern Pacific; Great Northern; Chicago, Burlington & Quincy; Atchison, Topeka & Santa Fe and Spokane, Portland & Seattle.
These railroad companies built the west along with the nation's largest railroad, the Union Pacific (UPRR) which over the same time period acquired the Rio Grande (and Southern Pacific in the process); Western Pacific; Missouri Pacific; and the Chicago & Northwestern. American fortunes were made and lost on these all but forgotten companies.
Now Buffett wants to do it over again and rebuild America with railroads. "it’s an all-in wager on the economic future of the United States,” said Buffett. “I love these bets.” It's ironic that BNSF's new Omaha-based owner is down the street from the HQs of its chief rival, UPRR. Buffett is about to turn the railroading industry upside down (BNSF is based in Fort Worth).
These acquired railroads or fallen flags as railfans call them were massive in their own right in both employment and reach. Unfortunately, railroads have been abandoning lines and ripping up track for 50 years as government heavily subsidized motor vehicles , highways and airports. Railroads have been consolidating for a half century and have been going bankrupt since their inception given expensive operation and the need for heavy capitalization.
Sidings that wandered into virtually every urban nook and cranny to deliver a couple of boxcars are long gone. That business is never coming back. Only the biggest factories and warehouses get door-to-door rail deliveries. For about a decade, railroads have been double and triple tracking congested mainlines that 40-50 years ago they slimmed down to single tracks.
Railroading today is highly-automated unit coal and container trains which are not delayed by being split up in a freight yards and then sitting for hours and sometimes, days. Unit trains race across the heartland to their destination where they are emptied, reloaded and shot in a new direction.
Certainly, Buffett knows that there is money to be made in railroading whose resurgence during the past two decades has made America more efficient and secure.
To my mind, Buffett sees more than just money in buying the BNSF. Like President Obama who he supported, Buffett envisions an America whose economic fortunes depend on efficient rail transportation (co-blogger Dana Blankenhorn did a fine post on well-established and understood efficiency of railroads). My expectation is that he will invest heavily in it beyond what he has already.
For the sake of full disclosure, I own a small amount of BNSF stock.
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This post was originally published on Smartplanet.com