Buffett: Railroads Are The Future

Buffett chuckles at the suggestion that buying the nation's second-biggest railroad is a sign of senility. He argues that railroads represent the future. They're best-positioned to haul the raw material and finished goods for a nation and economy that he insists are bound to grow. Unlike trucks, trains don't have to compete on congested highways. Nor do railroads depend on strapped governments to maintain infrastructure.
"They don't need the government to build them new highways and airports," he says in an interview with USA TODAY. "They've already invested heavily in their infrastructure and technology, and they plan to invest more to keep up with the growing demand.
"They're the only mode of freight transportation that can handle growth. What's not to like about that?"
Buffett foresees a dynamic and profitable future not just for BNSF but for the nation's rail industry; so much so that he chastises himself for coming to that view, he says, two years late.
"There are just four big railroads in the U.S.," Buffett says. "I know the people who run three of the four, and they're all good people. They will all have similar destinies. They will all do very well, especially Union Pacific and BNSF."
Counting the $8 billion in BNSF shares Berkshire already owned, the $26 billion in cash it paid for the remaining BNSF shares, and the assumption of $10 billion of debt, Buffett has invested $44 billion in the railroad.
Rail also is a capital-intensive industry. Buffett says, "If anything, we'll be investing more" in BNSF in the near term "as we build it for the future."