Buffett Explains Why Rail Still Wins

At the 2019 Berkshire Hathaway annual meeting, Warren Buffett was asked whether BNSF should electrify its railroads and use its rail corridors for renewable energy. Buffett’s answer came back to the basic economics of freight. Railroads already have a major efficiency advantage in long haul and heavy freight. Buffett explained that railroads move roughly 40 percent of freight by ton miles in the United States, and that BNSF moves more ton miles than any other transportation entity in the country. He also said BNSF can move more than 500 ton miles of freight on one gallon of diesel. But Buffett also explained the other side of the equation. Trucks have flexibility. If freight only needs to move 10, 20, or 30 miles, rail usually is not the answer. That is why this is not simply a rail versus truck story. It is about distance, cost, flexibility, freight type, and customer need. Charlie Munger added the long term view: sooner or later, rail will become more electrified. *Stocks mentioned:* Berkshire Hathaway, Berkshire Hathaway stock, BRK.A, BRK.B, $BRK.A, $BRK.B, BNSF #WarrenBuffett #CharlieMunger #BerkshireHathaway #BNSF #Railroads #Investing