Warren Buffett and the Return of the Railroads

Last Updated Apr 16, 2008 10:08 AM EDT

Warren Buffett And The Return Of The RailroadsSky-high energy prices, increasingly crowded commuter corridors, and worries about the environment are setting the stage for trains to thunder once again across the US moving commerce and people, predicts Harvard University professor John R. Stilgoe.
"Train travel will supplant highway and air travel in the next few decades. Furthermore, electric railroads will increasingly be used to distribute freight items -- such as coal and grain -- as well as mail and express packages."
Sounds romantic. But have you heard of any major infrastructure or rolling stock investments being made by the railroads or government? Where's the proof of a railroad renaissance?

The signs are scattered, Stilgoe says, but they add up to a powerful trend: smart money is chugging toward trains. He provides his insights in this interview with the Harvard University Gazette.

Here are some of the dots he connects.

  • The Buffett Factor. Crazy-successful investor Warren Buffett last year bought 39 million shares, or 11 percent, of Burlington Northern Santa Fe, and the prices of railroad stocks generally are doing well.
  • Property Dealings. Investors are snapping up properties in the Midwest that are adjacent to old railroad lines.
  • Political Pressure. More local governments in auto-intensive cities such as St. Louis and Atlanta are conducting railroad feasibility studies.
  • Improving Technology. Railroading is high-tech industry, Stilgoe says. "We have the technology to revitalize outdated tracks, to turn them into electrified rails that can support high-speed, on-time trains."
Read the article for a more in-depth look at his prediction. Stilgoe also has a new book out,"Train Time: Railroads and the Imminent Reshaping of the United States."

Do you agree that railroads are making a comeback?

(California State Railroad Museum image by Paraflyer, CC 2.0)

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.