Investing in railroads?

Dollar Train illustration

If the king tells you to “jump!” you say, “how high?” And when Warren Buffett tells you to buy something you say “how much?” So when Buffet, one of the kings of investing, starts putting his money into freight railroads, financial analysts take note. Michael Sivy of CNN Money correctly observes some of the competitive advantages of rail moving forward into an age of high energy costs and the need to reduce emissions and overall consumption:

Railroads are far more energy-efficient than their competition. Locomotives today get 80% more mileage from a gallon of diesel than they did in 1980. As a result, trains consume far less fuel than trucks do to move the same amount of freight. That not only saves on costs, it reduces emissions of greenhouse gases. In fact, the Environmental Protection Agency calculates that for distances of more than 1,000 miles, using trains rather than trucks alone reduces fuel consumption and greenhouse gas emissions by 65%.

This amplifies the trend that the Wall Street Journal covered at length a few weeks ago (covered in this entry) about the increasing use of rail for freight nationally. A downside of more railway freight can be more competition for track space, which is shared with passenger rail in most places.

As airways and airports become more and more congested, with reliable on-time travel becoming a thing of the past, I wonder when we might see the same sort of renaissance of passenger rail. Whether moving goods or moving people, it takes a fraction of the fuel and resulting emissions to move a load of people from D.C. to New York on a train compared with a jetliner.

A respected investor who predicted the internet bubble bursting sees investments in rail to be a smart proposition. Eric Janszen spoke with Wired about transitioning from an economy based on the traditional models of finance, insurance, and real estate — all currently slowing down or crashing in front of our eyes — and into massive investments in “clean tech:”

Janszen: … You could create a process that gradually forced a lot of relatively painless transition without wrecking the economy.

Wired: What types of infrastructure changes would be part of that transition?

Janszen: Transportation. The big capital-intensive effort is high-speed rail. You need government to get its act together to pull something off. I’m also proposing public-private corporations that have the deep pockets of government but the obligations to shareholders of a private corporation. There are going to be market mechanisms, so you don’t end up years late and billions of dollars over budget.