Warren Buffett to buy Burlington Northern Santa Fe Corp.

NYT: Awesome Train Set, Mr. Buffett


For $50 or so, you can buy a Thomas the Tank Engine train set and feel as powerful as Sir Topham Hatt, the somewhat wooden overseer of the mythical North Western Railway Company. Or, if you are the investor Warren E. Buffett, you can purchase the complete set of the Burlington Northern Santa Fe Corporation, for $26 billion or so.

Comes with 40,000 employees, 6,700 locomotives, and access to hundreds of thousands of freight cars. Some assembly required.

In announcing his plans last week to buy Burlington Northern, Mr. Buffett explained that good old trains are the future: an efficient and relatively green way to ship coal, grain and just about everything else that makes this country run. Another reason for his purchase, he joked, was that “my father didn’t buy me a train set as a kid.”

Although Mr. Buffett’s plans are rooted in the cool calculation of good returns on an investment, his throwaway line taps into the romantic distinction of his latest acquisition. He is not buying just anything. He is buying trains — and thus the rapt attention of the societal subset known as railfans. A quarter-million strong, by their estimates, they are deeply knowledgeable, a little prickly about being dismissed as nerds, and so enthusiastic that Mr. Buffett’s following of devoted investors will seem disengaged by comparison.

Knowing all the lyrics to “Orange Blossom Special” does not make you a railfan. To join this crowded club car, you must be train-obsessed, and possess a profound appreciation for the conquest of challenging landscape by powerful machinery moving ever forward. If you cannot muster this level of passion, you can get off at the next stop.

You’re a railfan if you have waited in the chill of early morning to watch a freight train pass through Horseshoe Curve in Altoona, Pa. You’re a railfan if you live for a serendipitous “meet” — when, with camera in hand, you witness the point at which trains traveling in opposite directions pass each other.

“There’s also the sound,” explained Steve Barry, the managing editor of Railfan & Railroad magazine, circulation 40,000. “The sound of a train as it works up the grade is just awesome.”

When asked to elaborate, Mr. Barry paused for several seconds, as if to conjure in his mind the humming of the steel wheels on steel rails, the banging of the couplers connecting cars.

“Wow,” he said, finally. “Thundering, but unlike thunder. It lasts a lot longer. It is machinery at work — at its best.”

Mr. Barry said that many railfans dedicate themselves to preserving the historical record. One Web site,, features more than 271,000 photographs of trains, with updates of the most popular from the last year, the last week, the last 24 hours. “Eastbound KJRY train of empty coal hoppers leaves Iowa for Illinois,” reads a typical caption, accompanied by date (April 24, 2009) and location (Keokuk, Iowa).

Other fans focus on timetables, standing beside the track in, say, Yazoo City, Miss., to chronicle what time the City of New Orleans passes through. But this is “more of a British thing,” Mr. Barry said. “Americans are more apt to photograph.”

You are also a railfan if you collect “railroadiana,” the memorabilia of trains: dining car china, or steam locomotive whistles, or railroad uniform buttons, or brass rail locks from the Baltimore & Ohio Railroad. Steve Glischinski, the author of several books about trains, says a friend of his has a caboose in his backyard.

Both Mr. Barry and Mr. Glischinski acknowledged that railroad employees long ago christened railfans as “foamers,” though they differ in their understanding of the term’s origin. Mr. Barry said it derives from Foamite, which stands for “Far Out and Mentally Incompetent Train Enthusiasts”; Mr. Glischinski said it comes from the notion of foaming-at-the-mouth craziness.

Mr. Barry said that some railfans now proudly declare themselves foamers to deny the term its derogatory intent. Even so, Mr. Glischinski doesn’t care for enthusiasts who say “I went foaming today.”

“I find that weird,” he said. “I am just a railroad fan.”

He also noted that railroad employees who dismiss enthusiasts as foamers and worse — one acronym uses a very, very bad word — often will come back a decade later, after they’ve retired, and ask, “Say, you wouldn’t happen to have a picture of that train I used to work on, would you?”

To which Mr. Glischinski says he often answers: “Yes. I do.”

Since we’re talking about terminology, Mr. Glischinski said, how about you reporters? “Every train is ‘chugging’ into town,” he said. “Steam locomotives are long, long, long gone.”

Another thing. What is so nerdy about a hobby that encourages you to travel this country — to see trains passing through Altoona, or climbing the swirl of California’s Tehachapi Loop, or rumbling along the Wyoming flatness of a nowhere place called Bill?

Just the other day, Mr. Glischinski saw a “meet” in the central Illinois town of Monica. On the Warren E. Buffett line, as a matter of fact: the Burlington Northern.

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SOM: Now why does a man like Warren Buffet buy a giant railroad company such as Burlington Northern Santa Fe Corp.?
Is he simply assuming that ecars will take longer than expected to become the standard mode of travelling? How should this investment – or bet if you want – pay off?
Several reasons could be possible. He could expect more and more people to make use of trains. Trains become more attractive i.e. more affordable, more convenient and especially cheaper. But how should this happen? Energy prices are on the rise, Americans in particular depend on their own vehicle(s), America’s Wal-Marts are not connected to the train system, and how in God’s name should trains be the future??
Then again the question, where does Buffett see the future of trains?

Convenience and speed
There is one thing I can think of, based on my personal travelling experience in Germany. A country in which I dare to say, trains are more accepted and used than in the U.S. They easily connect metropolitan areas, they are fast, convenient and in terms of price almost a alternative to the car. I do have a „Bahncard“ which offers me discount prices on the tickets and makes use of special offers, but still, in the past half year I usually took the car. What then could the Deutsche Bahn do to convince me? Price: this may be one of the major issues. Most people still argue the tickets are too expensive compared to taking the car. Convenience is okay I would say, given you spend the few bucks for a reservation. The major advantage of taking the train is twofold: You can work or you can relax. These are two arguments your car can’t beat. And on heavy traffic commuting days the train is usually faster than the car. This should more or less also apply to metropolitan America (especially with the low driving speed on American highways).

The digital age phenomenon:
If this is what Buffett had in mind, I must admit his excellence in investing. The internet and all the possibilities it offers us – be it in terms of making a living, in the form of entertainment or simply communication turned us into digital addicts. Internet usage is constantly increasing, many of us are online 24/7. The ever growing amount of information simply calls for it. 1 hour a day is often not enough for phenomena like web 2.0., managing your finances online, online shopping…. The result: The internet enters more and more areas of our life as we call for it. At first only used in the businesses and offices, then adapted by our kids, wives, grand-parents, relatives,… it is growing to become the most important medium of communication. And with this ever-growing usage the amount of available information grows. There are two ways to cope with this information overload: We either optimize the usage of the web or we sacrifice more time. The first can be accomplished by social bookmarking, recommendations by friends or experts or new software to organize the web. The latter requires a change of our daily routine and brings up the question: Where can I save time to go online? The answer: mobile internet! On our way to work, at lunch, all the daily minutes we spend waiting for something – all of these moments can be used to quickly access the web via the cell phone. We can check our private mails, we can chat with our family, manage our finances, purchase stuff at amazon or recommend a good restaurant. You name it.
Now let’s get back to Warren Buffett and the trains. If you have the choice between taking the jammed highway or a fast train where you can relax or work AND have fast internet access ideally for free, at an attractive ticket price, what would you choose?
Never having taken a U.S train (only D.C. and New York metro) I can only assume the similarities. But if here in Germany Deutsche Bahn would offer fast internet for free in all of its IC and ICE that is its fast long-distance trains, you can be sure I would take the train. Just imagine what I could do in those say three hours!! Work online with access to the files in my office, surf the web, chat with my friends, collaborate only with my colleagues, book a holiday, find a new apartment – all the web offers.
That the Deutsche Bahn today only rarely offers this and then also charges too much for it, is the wrong solution. Do it the Google way. Give away internet and the time to surf for free and sell the train tickets and food and drinks. That way you’ll win the hearts. Or collaborate with online shopping platforms. Give a 10% discount at amazon for all you order during the ride. Allow passengers to already book the next trip, add a reservation, offer them discounts on upgrades to 1st class if the current usage is suboptimal. There are a thousand business models hidden behind the availability of free fast internet on trains. And just think of the purchasing power of the hundreds of thousands of business travellers and first class passengers….

From this point of view, the trains might be able to offer what the car barely can do today: time slots in our busy lives to go online when before it was only possible with UMTS cell phones and UMTS sticks. The internet may have the desirability the trains themselves cannot come up with! Just like people go to Verizon not for the brand (what does Verizon stand for????) but for the attractive mobile phones it offers (see the article on the new Moto Droid).

Mr. Buffett if this is the future, then your investment might indeed pay off!

Motorola Droid: Resurrection or last breath of a former giant

Motorola used to be a major player in the telecommunications market. But for quite some time, the phones have been way off from competition such as the iPhones, LGs, Samsungs, Nokias and Blackberrys. Gone are the days, when the RAZR was state of the art in mobile phones business. Motorola harvested the RAZR trend as long as possible with similar models such as the RAZR V3 V3i, the KRZR, or the ROKR. But the market went a different direction. Today, Motorola is heavily loosing ground in the mobile device market. And as it is the devices and not the carriers who attract new customers or or maintain customer retention, Motorola phones have become fairly unattractive for the AT&Ts, Verizons, T-Mobiles and Vodafones.
Many experts already see Motorola devices dying out. But Moto returned, with the Droid.

Motoroal Droid open

Motoroal Droid open

With what today almost seems like a joker: Google Android. When your phones simply does not have what it takes anymore, you still have the opportunity to switch to a phone OS that has all it takes to become attractive: innovativeness, sympathy, performance, and so on. Google Android offers all that and in many eyes easily passed Microsoft’s Windows Mobile: it simply isn’t sexy.
But let’s get back to the Droid. According to industry experts, the Droid aims to be another iPhone-Killer. IT has the innovative Android OS, it looks good and it is backed by an obviously successful marketing campaign. The result could be seen in people lining up Thursday midnight in Manhattan to be among the first to get the new Moto. Verizon the carrier of the new Moto opened its Manhattan store from midnight till 2 a.m. for the earyl innovators eager to purchse the phone a little before the other potential buyers. So far this was a success. According to CNET news, more than a hundred people lined up in the middle of the night in front of the store opposite of Macy’s.
Well thats the usual procedure we know from the Sony PS3, the X-Box and so on. But what is the phone really capable of? This will decided about its long-term success in this tough market. And this has also been what made the iPhone so successfull: design, image and performance. Moto lacks the image or the strong brand if you want, may not be as stylish as the iPhone (Apple-mania) but may be performant due to the Android OS.

Here are some expert voices:

Engadget: “The DROID is an excellent smartphone with many (if not all) of the features that a modern user would expect, and if you’re a Verizon customer, there probably isn’t a more action packed device on the network.”

Boy Genius Report: “We absolutely love the Motorola DROID. It’s a perfect storm between awesome hardware, great software, and a great network. That’s not to say it’s for everyone. It isn’t the most consumer-friendly device off the bat and it’s going to take some time and a whole bunch of improvements before we think Android (Android) can totally compete in the consumer space like others can.”

Gizmodo: “It’s this simple: If you don’t buy an iPhone, buy a Droid. It’s the best phone on Verizon, and with Android 2.0, the second best smartphone you can buy, period. It’s flawed, deeply in some ways. But it’s the second best phone around, on the best network around.”

David Pogue (The New York Times): “Since Verizon seems to want a Droid-iPhone faceoff, here it is: the Droid wins on phone network, customizability, GPS navigation, speaker, physical keyboard, removable battery and openness (free operating system, mostly uncensored app store). The iPhone wins on simplicity, refinement, thinness, design, Web browsing, music/video synching with your computer, accessory ecosystem and quality/quantity of the app store.”

Walt Mossberg (The Wall Street Journal): “The Droid is potentially a big win for Verizon, Motorola and Google (Google), as well as for loyal Verizon customers.”

CNet: “Some minor design issues and multimedia quibbles aside, the Motorola Droid is the most powerful and fastest Google Android device to date. It fully embraces the openness of the Android platform and offers Verizon customers a smartphone that certainly rivals the other touch-screen devices on the market.”

LA Times: “We’re getting this out of the way now: Motorola’s Droid is the best Google phone on the market. Here’s another one: Droid is the best phone on Verizon.”

(Source: )

But aside of all expert voices, what counts is sales. Let’s wait and see if former mobiel giant Motorola will find back to old strengths or whether it will die a quick death in this highly competitive and fast changing market.