Union Pacific continues to perform very well based on yesterday’s earnings release with an operating ratio of 59% in Q2. Buffett has said that there’s no reason for BNSF to not perform as well as its competitors but BNSF seems to have a higher structural cost base. I think that Abel will focus BNSF’s attention on narrowing their large performance gap before taking on any potential merger deals.
Hopefully BNSF has taken a step in the right direction operating ratio-wise when we get Q2 results next weekend. I'm really torn on the merger story: So many railroad experts and observers seem to think it's inevitable that BNSF will need CSX to compete with a transcontinental UP/NS network. But it just feels so un-Berkshire-like to be "forced" into a huge acquisition because of the moves of its competitors. And, like you said, BNSF already has its hands full trying to get itself back on track.
CSX was Hunter Harrison's "final act" before his death in 2017. BNSF has long been reluctant to implement Harrison's approach of precision scheduled railroading which all of the other Class 1 rails have embraced. A few years ago I made a chart of the operating ratios for the major railroads. BNSF has been underperforming for a while. I think that Berkshire's "hands off" approach hasn't worked well here and Buffett's comments in recent annual reports admit the problems. If BNSF does merge with CSX, it seems like PSR will have to be fully embraced by BNSF. Here's the chart I made. I should work on updating it: https://rationalwalk.com/wp-content/uploads/2024/03/BNSF-2024-03-1-2048x917.png
I should mention that Hunter Harrison is a fascinating character to study. I got a lot out of reading his biography a few years ago and wrote a summary that might be useful. Jim Vena, UNP's CEO, worked for Harrison at CN. PSR is controversial but it now has a long record of working: https://rationalwalk.com/railroader-the-unfiltered-genius-of-hunter-harrison/
I've had Railroader on my reading list for a while now, but with this whole transcontinental railroad situation (and CSX being from the Hunter Harrison tree) I think I need to move it to the top. It would probably help me learn more about the ins and outs of PSR, too.
Buffett read the book and commented on it at the 2019 annual meeting (Q8). I love Charlie’s comment about no one being interested in “unprecision in railroading”!
Have you read her original 1999 BRK analysis, the one that so Impressed Buffett it led to him asking her to write the book? Lots of great stuff in there including bits and pieces from 80's BRK meetings.
Union Pacific continues to perform very well based on yesterday’s earnings release with an operating ratio of 59% in Q2. Buffett has said that there’s no reason for BNSF to not perform as well as its competitors but BNSF seems to have a higher structural cost base. I think that Abel will focus BNSF’s attention on narrowing their large performance gap before taking on any potential merger deals.
Hopefully BNSF has taken a step in the right direction operating ratio-wise when we get Q2 results next weekend. I'm really torn on the merger story: So many railroad experts and observers seem to think it's inevitable that BNSF will need CSX to compete with a transcontinental UP/NS network. But it just feels so un-Berkshire-like to be "forced" into a huge acquisition because of the moves of its competitors. And, like you said, BNSF already has its hands full trying to get itself back on track.
CSX was Hunter Harrison's "final act" before his death in 2017. BNSF has long been reluctant to implement Harrison's approach of precision scheduled railroading which all of the other Class 1 rails have embraced. A few years ago I made a chart of the operating ratios for the major railroads. BNSF has been underperforming for a while. I think that Berkshire's "hands off" approach hasn't worked well here and Buffett's comments in recent annual reports admit the problems. If BNSF does merge with CSX, it seems like PSR will have to be fully embraced by BNSF. Here's the chart I made. I should work on updating it: https://rationalwalk.com/wp-content/uploads/2024/03/BNSF-2024-03-1-2048x917.png
I should mention that Hunter Harrison is a fascinating character to study. I got a lot out of reading his biography a few years ago and wrote a summary that might be useful. Jim Vena, UNP's CEO, worked for Harrison at CN. PSR is controversial but it now has a long record of working: https://rationalwalk.com/railroader-the-unfiltered-genius-of-hunter-harrison/
I've had Railroader on my reading list for a while now, but with this whole transcontinental railroad situation (and CSX being from the Hunter Harrison tree) I think I need to move it to the top. It would probably help me learn more about the ins and outs of PSR, too.
Buffett read the book and commented on it at the 2019 annual meeting (Q8). I love Charlie’s comment about no one being interested in “unprecision in railroading”!
https://buffett.cnbc.com/video/2019/05/06/morning-session---2019-berkshire-hathaway-annual-meeting.html
🤣🤣🤣
Have you read her original 1999 BRK analysis, the one that so Impressed Buffett it led to him asking her to write the book? Lots of great stuff in there including bits and pieces from 80's BRK meetings.
I haven’t, but I will now! Sounds very interesting.
I think the talk that you transcribed was from 2016 not 2018?
It’s from April 10, 2018, at the University of Mary Washington. https://www.umw.edu/greatlives/lecture/warren-buffett/
Thanks. The most powerful AI's in the world could not find it for me....