2022: What are Greg and Ajit doing to keep BNSF and GEICO competitive?
BECKY QUICK: This question’s for Ajit and Greg. It comes from Ben Nall (PH), who’s a shareholder of 30 years. He’s a Nebraska native, and he says he’ll be attending the meeting here today.
“BNSF and GEICO appear to be losing ground to their two primary competitors, Union Pacific and Progressive.
“Over the past several years UP’s operating ratio has been about 400 basis points better than BNSF’s.
“And Progressive has grown faster while maintaining a lower combined ratio than GEICO. On an operating basis, UP’s [Union Pacific] precision scheduled railroading and Progressive’s telematics appear to have jumped ahead of the Berkshire businesses.”
He wants to know what Greg and Ajit are doing to address those business challenges.
GREG ABEL: Want me to go first? OK. Thank you, Becky.
Let me just start by saying when we think of BNSF, we have an exceptional franchise here and a great business.
And we do compete with other railways, and we’re very well aware of how they operate, including their operating ratios and the metrics they operate to and precision railroading.
And it’s all part of it. But what I would share with is when I think of BNSF, we start with focusing on our customer, understanding how we can best service them, and, yes, we want to do it in an efficient and effective way that delivers great results back to our shareholders.
And that will continue to be our focus. So, yes, we learn from all the metrics they report and how they operate their rail, and we observe it. But I would put our team up right beside them on any operating day. And we’re going to move our rail cars as well as any other rail company in America. And we’re going to do it on behalf of our customers.
So, we’re very proud, but we’re not ignoring the fact that there’s more to be done, both operationally and for our customers.
So, we’ll continue to see improvement there. We’ve got a great leadership team there. We’ve got a great employee group within BNSF. And what I like is we’re just going to see long-term improvement there.
We have an exceptional inner-modal franchise out of the west. It’s incredibly valuable to our shareholders long term, our partners.
And that’s what our team is focused on, building that franchise out.
So, couldn’t be more proud of where we’re at, but we also know we have a journey ahead of us. And we’re going to continue to get better and better.
CHARLIE MUNGER: Greg, if we were offered the opportunity, would you trade our operation for theirs?
GREG ABEL: Never. Never. And we love our--
CHARLIE MUNGER: He knows a lot about it, Phil. (Laughs)
GREG ABEL: We have a great franchise, and we have a great leadership team running it. So well said, Charlie. Thank you.
WARREN BUFFETT: And just before we go to Ajit — and Greg, you know, was a major partner for 20 years, more or less, a little over that, since we bought the energy company. And his boss was David Sokol. And the two of them, I mean, they knew how to run businesses.
It isn’t like we don’t read what other numbers are and all that. But we’ve got the perfect person running in Katie Farmer. We’ve got the perfect person running BNSF. And, you know, she’ll do a great job.
Changing around a railroad in various ways, you know — if you’ve got 21,000-or-something miles of owned track and all kinds of other — that doesn’t count sidings and double tracking — and you’ve got a lot of things to do from something that they started building a couple of hundred years ago — not quite a couple hundred — and you can’t move things around very (Laughter) easily. And towns grew.
You know, when you came into Omaha in 1862, well, the railroad didn’t even go across the river, I mean, even though we’d become a major rail center for the West, or the opening to the West.
And we’re going to be here a hundred years from now. We will be an important, a really vital, asset of the country. And it will be a very big part — very important part — of Berkshire.
And we will take what is an incredible assemblage, I think, of 300-and-some railroads or something over time.
And, you know, the tracks got laid, and the routes laid out, you know, 150 years ago. The world changes, but we have to adapt to it.
But you don’t put an order out to change a thousand miles of track in hours, or how it’s operated or anything of the sort.
So, we’re running it to have that asset for Berkshire shareholders, and it will redound to the benefit of the country that we do it.
No matter who ran it, it would be important — obviously enormously — to the country. And the UP will be here at that time, too.
And it’ll be a better railroad a hundred years from now than it is now. But I can’t promise you what will happen if we get flooding or something in the next few months.
You know, it can wipe out a lot of the plans you have and disrupt lots of lives and disrupt lots of shipments.
And there are no magic wands in railroading to make great changes. On the other hand, you ought to be working at it every day to make it better.
I forget how many bridges we have, but some years ago we were spending 3 or 4 billion dollars a year on capital expenditures. And [former BNSF CEO] Matt Rose — I said, this is a lot of money to spend, you know, keeping up a railroad. And then he said, well, we’re going to have to do that more, and so on.
And I said, well, I said, I can handle this part. I’m not sure if Charlie can. (Laughs) I have to explain these numbers to him.
So, the next bridge they bought — they built — they called the Charles T. Munger Bridge. So, you can actually (laughter) go see, our railroad has the Charles T. Munger Bridge, because Charlie kind of was asking similar questions 10 years ago.