25.3.10

WARREN'S WORKING ON THE RAILROAD. Anticipating the next century of progress, in fact.

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?"

Yes, dear reader, when you hear somebody going on about crumbling infrastructure, it's somebody who is not railroad aware.

And the railroads are ready. The [Association of American Railroads] member railroads have poured more than $440 billion, better than 40% of their combined revenues, between deregulation in 1980 and 2008 into new locomotives and technologies to improve hauling capabilities and lower costs. They've laid double, triple, quadruple tracks in heavily traveled rail corridors to relieve costly shipping bottlenecks. They've opened new and enlarged existing rail yards and intermodal shipping sites, where ocean shipping containers and de-coupled highway truck trailers can be stacked on flat cars for long-haul shipping, to make lines more accessible.

Meanwhile, inflation-adjusted average shipping rates, excluding fuel and other surcharges, fell 49% over that same 28-year period, according to AAR data. And the same economics of scale that help make rails the lowest-cost option for transporting heavy loads long distances also happen to make them relatively "green" in an era when that increasingly matters.

This infrastructure is not necessarily the kind of trackage the advocates of those fast passenger trains want. On the other hand, there are gains from trade between the passenger operators and the freight railroads in improving the rights of way, particularly at junctions.

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