I couldn’t help but notice the irony of Berkshire Hatthaway’s $34 billion offer to take Burlington Northern Santa Fe railway private. Berkshire Hathaway is the investment arm of financial mogul Warren Buffet, widely regarded as one of the world’s most prescient investors (“The Oracle of Omaha”). Railroads were also the central business of the Taggart family in the famed Ayn Rand novel Atlas Shrugged.
So, is Warren Buffet showing entrepreneurial leadership during a period of increasing government intrusion into the economy? According to the New York Times:
The deal, which will also include the assumption of $10 billion in Burlington Northern debt, represents what Mr. Buffett said was a big bet on the United States. He told CNBC in an interview that railroad operators cannot do well unless American businesses were producing goods and customers were buying them.
“It’s an all-in wager on the economic future of the United States,” he said in a written statement. “I love these bets.”
Only time will tell, but railroads are also slated to be beneficiaries of government largesse as we enter a new era of federal subisidy to support intercity passenger rail (and high-speed rail in particular). Railroads will benefit directly from federal and state taxypayer subidies that upgrade track and operations. So, Buffet’s investment makes sense from the view that paper profits will increase because of these subsidies even as the basic economic viability of the industry deteriorates.
So, we actually may be witnessing the further erosion of private industry via railways similar to the way Rand characterized the process in her novel.