Well obviously you have not read the report in details as far as the BNSF results. If you look at the railroad operating costs are lower by $441 m compared to last year. Labor cost are up 4.7% which is likely in line with inflation. It is true that the year before Labor cost were up 11.9% in line with Revenue growth. Overall, in 2023 the lower profitability of the railroad is essentially due to the lower revenues level by $1729 m. You can check the number on page K-43 of the 10-K. I do not want want to speculate here, but from Buffett comments' it seems that BNSF is not as profitable as the average public competitors. The labor cost is not the most significant issue here. To be honest, I was a bit disappointed to read Buffett' comment about labour cost and then look at the numbers that, in my humble opinion, tell another story.
I agree that the railroad had "other problems" in addition to labor (and said so). I disagree that either 4.7% or 11.9% is equal to "projected inflation." Also, though not referenced in my piece, Buffett was quite clear that margins at his RR slipped relative to those at competitors'.
Other railroads have adopted Precision Scheduled Railroading, often to the dismay of their employees and customers, some say. But PSR has helped other railroads’ efficiency ratios. I asked about adoption of PSR at the last couple Berkshire meetings, and didn’t get a direct response. I suspect PSR was avoided during a time of labor negotiations. Maybe BNSF will pick it up now?
Thank you for answering my comment. I am sorry you misunderstood me. I never meant to say that the 2022 increase in labor cost was near or equal inflation. For 2023 things look a bit different. Buffett labor increase was 4.7% and average inflation in US was 4.1% based on CPI. Anyway feel free to disagree, but the comment about the labour cost increase as the main reason for the lower operating income at the RR does not hold water. Even the great WB sometimes can get it wrong.
Who owns these funds with negative alpha? If they are principals and it is really their money I don't care. But if they are in any sense fiduciaries, then they are failing to serve their beneficiaries. Insofar as these funds use conferences in Yellowstone and other perks to bribe the fiduciaries an unprosecuted crime is ocuriing.
To seed, build, and nurture timeless, intangible human capitals — such as resilience, trust, truth, evolution, fulfilment, quality, peace, patience, discipline, relationships and conviction — in order to elevate human judgment, deepen relationships, and restore sacred trusteeship and stewardship of long-term firm value across generations.
A refreshing take on our business world and capitalism.
A reflection on why today’s capital architectures—PE, VC, Hedge funds, SPAC, Alt funds, Rollups—mostly fail to build and nuture what time can trust.
“Built to Be Left.”
A quiet anatomy of extraction, abandonment, and the collapse of stewardship.
"Principal-Agent Risk is not a flaw in the system.
Well obviously you have not read the report in details as far as the BNSF results. If you look at the railroad operating costs are lower by $441 m compared to last year. Labor cost are up 4.7% which is likely in line with inflation. It is true that the year before Labor cost were up 11.9% in line with Revenue growth. Overall, in 2023 the lower profitability of the railroad is essentially due to the lower revenues level by $1729 m. You can check the number on page K-43 of the 10-K. I do not want want to speculate here, but from Buffett comments' it seems that BNSF is not as profitable as the average public competitors. The labor cost is not the most significant issue here. To be honest, I was a bit disappointed to read Buffett' comment about labour cost and then look at the numbers that, in my humble opinion, tell another story.
Dear reader:
I agree that the railroad had "other problems" in addition to labor (and said so). I disagree that either 4.7% or 11.9% is equal to "projected inflation." Also, though not referenced in my piece, Buffett was quite clear that margins at his RR slipped relative to those at competitors'.
thanks for writing.
best
RL
Other railroads have adopted Precision Scheduled Railroading, often to the dismay of their employees and customers, some say. But PSR has helped other railroads’ efficiency ratios. I asked about adoption of PSR at the last couple Berkshire meetings, and didn’t get a direct response. I suspect PSR was avoided during a time of labor negotiations. Maybe BNSF will pick it up now?
Thank you for answering my comment. I am sorry you misunderstood me. I never meant to say that the 2022 increase in labor cost was near or equal inflation. For 2023 things look a bit different. Buffett labor increase was 4.7% and average inflation in US was 4.1% based on CPI. Anyway feel free to disagree, but the comment about the labour cost increase as the main reason for the lower operating income at the RR does not hold water. Even the great WB sometimes can get it wrong.
Regarding the hedge fund managers - “ All animals are equal, but some are more equal than others” -George Orwell
Another great piece, Roger. You are a marvelous and lonely voice of moderation. Just wish you wrote more frequently!
Who owns these funds with negative alpha? If they are principals and it is really their money I don't care. But if they are in any sense fiduciaries, then they are failing to serve their beneficiaries. Insofar as these funds use conferences in Yellowstone and other perks to bribe the fiduciaries an unprosecuted crime is ocuriing.
They are sheep.
Hello there,
Huge Respect for your work!
New here. No huge reader base Yet.
But the work has waited long to be spoken.
Its truths have roots older than this platform.
My Sub-stack Purpose
To seed, build, and nurture timeless, intangible human capitals — such as resilience, trust, truth, evolution, fulfilment, quality, peace, patience, discipline, relationships and conviction — in order to elevate human judgment, deepen relationships, and restore sacred trusteeship and stewardship of long-term firm value across generations.
A refreshing take on our business world and capitalism.
A reflection on why today’s capital architectures—PE, VC, Hedge funds, SPAC, Alt funds, Rollups—mostly fail to build and nuture what time can trust.
“Built to Be Left.”
A quiet anatomy of extraction, abandonment, and the collapse of stewardship.
"Principal-Agent Risk is not a flaw in the system.
It is the system’s operating principle”
Experience first. Return if it speaks to you.
- The Silent Treasury
https://tinyurl.com/48m97w5e
The hf model is becoming increasingly difficult to run. Arguably the Berkshire model is longer lasting and easier to operate.