CHARLIE ROSE: Frank Sinatra.
WARREN BUFFETT: But it does move 400 — it moves a ton of goods 470 miles on one gallon of diesel. It replaces — a train replaces 280 trucks on the road. It emits far less into the atmosphere that’s damaging than trucking, and it moves— I’m talking about the whole rail industry— it moves 40 percent of the goods.
CHARLIE ROSE: And you have new ports of entry like Houston that are bringing a lot of goods. . .
WARREN BUFFETT: Oh, sure.
CHARLIE ROSE: . . . through the Panama canal.
WARREN BUFFETT: And we’re going to have more people in this country and they’re going to be using more goods over time. And sure, there’s a bad year from time to time. In the next 100 years, there will probably be 15 bad years, and I don’t know what order they’ll appear, but I also know the railroads will be essential to the country.
CHARLIE ROSE: Now, when you called Charlie Munger and said I’m thinking about this, did he say right on, Warren? Or did he say, how about this?
WARREN BUFFETT: Well, if Charlie said “right on, Warren,” I would figure I had the wrong number. No, that would be a wrong number.
CHARLIE ROSE: That’s not the likely reply.
WARREN BUFFETT: That might be my wife or my, you know — but Charlie gave kind of a low-level grumble, and that is a real endorsement from Charlie.
CHARLIE ROSE: But I mean, he also pointed out, it is said, that, you know, there was— this was a regulated industry.
WARREN BUFFETT: Sure.
CHARLIE ROSE: This was an industry that was capital-intensive.
WARREN BUFFETT: Very capital-intensive.
CHARLIE ROSE: This was an industry. . .
WARREN BUFFETT: You spend money. . .
CHARLIE ROSE: That was unionized.
WARREN BUFFETT: It was unionized. You spend money in this business regularly every day. You’re spending a lot of money to repair track, add rolling stock, whatever it may be. So it’s capital-intensive, and it is regulated, and it will continue to be regulated, and it will continue to be capital-intensive.
I think that what the service provided by railroads is so important in many ways. I mean, it’s the right way to move goods around the country to the extent that you can do it. And it’s far, far more attractive in terms of global warming than using trucks, for example. So it will be here, and if we get a reasonable return on the added capital investment— because it will take added capital investment— we’ll do OK.
CHARLIE ROSE: Reasonable return is good enough?
WARREN BUFFETT: Reasonable return is good enough, Charlie. I mean, 50 years ago, I was looking for spectacular returns, but I can’t— I can’t get them. We have— we have eight or $10 billion to invest every year. And we’re in the utility business, and it’s the same thing there. When we build electric generation or something of the sort, we shouldn’t expect a spectacular return. We’re building things that are essential to society, and people need our services. They really don’t have any choice in the case of the electric utilities, for example, and sometimes in case of rail. And we should get a decent return on that. Enough to encourage us to keep putting money into the business, but we’re not entitled to spectacular returns.
CHARLIE ROSE: You carry coal?
WARREN BUFFETT: Well, that’s a big one in terms of tonnage, yes.
CHARLIE ROSE: And if, in fact, we wean ourselves off coal, is that a big problem?
WARREN BUFFETT: Well, we will wean ourselves off coal over time. We can’t change 40 percent of electric generation that goes— that comes from coal. We can’t change that next week or next month or next year, but we will reduce it over times, and we should reduce it over time.
CHARLIE ROSE: And you can add other things to carry and changes will be. . .
WARREN BUFFETT: There will be more grain to move, and there will be more all kinds — chemicals— or whatever it may be. There will be more things moving around this country 10 or 20 or 30 years from now.
CHARLIE ROSE: Knowing your idea about moats, is it a pleasing idea that no one is likely to get into the railroad business?
WARREN BUFFETT: If they wanted to reproduce the Burlington Northern Santa Fe, it might take $100 billion or so.