An otherwise abysmal year for the U.S. economy closes on a very high note for the logistics sector. For that, we can thank none other than the country's second wealthiest and most successful businessman, Warren Buffett, chairman of the investment firm Berkshire Hathaway.
Four weeks ago, in what he described as an "all-in wager" on the U.S. economy, Buffett put $26.3 billion on the table to secure the 77 percent ownership interest in the Burlington Northern Santa Fe (BNSF) Railway that his firm didn't already own.
If you know much about the "Oracle of Omaha" and his philosophy on investing, you know the move is vintage Buffett. Although he undoubtedly has armies of analysts in his employ to sift through mountains of financial data, the Oracle is known for his common-sense approach to investing. He often urges others to choose investments as he himself does: based on what he sees, what he knows, and what makes logical sense. For example, when the market crashed in 2008 and others went running for cover, Buffett invested heavily in venerable "household name" companies like General Electric. That move has paid off handsomely.
It appears that he now sees a similar growth opportunity in the BNSF. Buffett is known to be a close observer of the U.S. rail industry, which he considers a key indicator of the country's economic health. The timing of his purchase suggests that Buffett believes the economic tide is turning and a freight recovery is about to begin.
Buffett's move is more than just a show of faith in the U.S. economy, however. It's also a bet on the long-term future of the rails.
There's every indication that for the railroads, it's full steam ahead. And it's not just because a freight rebound may be in the offing. Environmental considerations come into play as well. Compared to their long-distance trucking rivals, the rails are both cleaner and more energy-efficient. For example, trains generate just a third of the volume of greenhouse gases that trucks produce, according to the Association of American Railroads. Not only that, says the AAR, but a train can haul a ton of freight 436 miles on a single gallon of fuel, nearly four times farther than a truck can. These eco-advantages make the rails uniquely positioned to ride the green wave that's sweeping across American business.
Rails also have the edge over trucks when it comes to mobility. Rising traffic volumes and the deteriorating condition of the nation's roads have combined to create unprecedented highway congestion, resulting in wasted fuel and delivery delays. For freight that's not particularly time sensitive, the rails offer an attractive alternative.
While Buffett's move has obvious advantages for the BNSF, the entire logistics community stands to benefit as well. His involvement in the logistics business has the potential to raise the visibility of a sector that accounts for as much as 18 percent of the country's GDP, but still remains largely invisible to the American public. Now that he has billions of dollars at stake in freight transportation, Buffett is sure to become a high-profile advocate for logistics interests. In the months ahead, we can expect him to speak out about the need for government investment in the nation's freight transportation infrastructure, including rail track and bridges.
All good things for logistics. All good things for the broader U.S. economy. And, of course, all good things for Berkshire Hathaway shareholders. In fact, it might be time to give Buffett a new nickname. He's already known as the "Oracle of Omaha." But given the present he has delivered to our profession this holiday season, perhaps we should be calling him Santa as well.