Reflections on Value Investing

Steve Jobs: How to live before you die

noreply@blogger.com (Shai Dardashti) — Sun, 03 Jan 2010 18:25:00 +0000

At his Stanford University commencement speech, Steve Jobs, CEO and co-founder of Apple and Pixar, urges us to pursue our dreams and see the opportunities in life's setbacks -- including death itself.

Gotham Capital's Scholarly Investments

noreply@blogger.com (Shai Dardashti) — Thu, 31 Dec 2009 16:42:00 +0000

New York Times - December 4, 2009:

Working the room, the evening’s hosts, John Petry and Joel Greenblatt, who are partners in the hedge fund Gotham Capital, had an agenda: to identify new candidates to join their Success Charter Network, a cause they embrace with all the fervor of social reformers.

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BYD's Smoking Gun(s)?

noreply@blogger.com (Shai Dardashti) — Wed, 30 Dec 2009 19:18:00 +0000

via Distributed Energy: The Trade Journal of Energy Efficiency & Reliability:

Energy storage will increase the value of solar by 50%, if the two technologies are partnered, Smith predicts, and solar’s economic value becomes greater as you get closer to the meter. Furthermore, energy storage adds value when avoiding peak power purchases on the open market.

Smith agrees with EPRI’s Rastler, that energy storage is a natural partner to the smart grid. Its built-in electronic intelligence will be able to interact with the grid to provide frequency regulation, for example. There are very good market opportunities for energy storage, he says.

BYD Company Limited is headquartered in the city of Shenzhen in China and, according to Patrick Duan, BYD America Corp’s regional manager for North America, the company has developed a new iron phosphate battery for both energy storage and electric vehicles.

Duan says the energy density is a bit lower than the traditional lithium ion battery that contains about 30% cobalt. He explains that cobalt in the lithium ion battery can explode if overcharged or is in high temperatures, but the iron phosphate battery has very little cobalt and will not explode. He considers the iron phosphate battery the most advanced in the industry and is now in mass production in BYD’s factory.

BYD built a 2-MW demonstration energy storage system in a 40-foot mobile container for PacifiCorp, in Portland. It also has a 1-MW stationary demonstration storage project in its factory in Shenzhen, that is connected to the grid, and a 200-kW storage unit in a 40-foot container, that features four-hour discharge, as well as a 600-kW 40-foot storage container for 1.5-hour discharge.

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A sign of what's to come? "100 or 200 megawatt storage facility to back up wind"

Put simply, cheap battery storage at scale would address one of the biggest drawbacks to wind and solar energy, which is that, unlike coal or nuclear power, they are unpredictable -- you can only make electricity when the wind is blowing or the sun is shining.

"If you can store electricity when the wind blows, and have it available when you need it, that argument goes away," Sokol says. But he cautions: "There's a fair bit of distance between here and there."

Just a few details: This fall, MidAmerican will build a 2 megawatt storage facility using BYD batteries at an existing substation in Portland, Oregon, where it operates the local utility, Pacific Power. BYD, meanwhile, is building a bigger storage facility in China, and plans to build a third one in a still-undisclosed location on in southern California. That's about all I can tell you because BYD is reluctant to talk about its research.

The 2 megawatts of battery storage in Portland will allow MidAmerican to test BYD batteries to see how well they charge, what control systems are needed to discharge the electricity and to analyze their reliability and cost. "It will let us do a fair amount of testing to understand the economics of a 100 or 200 megawatt storage facility to back up wind," Sokol says.

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Railway Age: Why Buffett is Betting on the Railroads

noreply@blogger.com (Shai Dardashti) — Mon, 28 Dec 2009 22:10:00 +0000

Railway Age Magazine; December 2009, pages 16 - 22.

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Reflections on Walter Schloss.

noreply@blogger.com (Shai Dardashti) — Fri, 11 Dec 2009 00:19:00 +0000

And, an interesting read from 1985.

Historic Index Level Dividend Yields

noreply@blogger.com (Shai Dardashti) — Thu, 10 Dec 2009 02:28:00 +0000

PDF file from Ned Davis Research Inc. on Historic S&P500 Dividend Yields:

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Professor Sanjay Bakshi on Indian Market Dividend Yields:

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Beer as a datapoint...

noreply@blogger.com (Shai Dardashti) — Wed, 09 Dec 2009 19:10:00 +0000

The economy circa October 2008 and March 2009:

Beer CPI Table

The potential of China:

This Bud's For Wu

Brand building:

Page 28

Interesting reports:

Scott Kim takes apart the art of puzzles

noreply@blogger.com (Shai Dardashti) — Wed, 09 Dec 2009 16:00:00 +0000

Via Ted.com:

At the 2008 EG conference, famed puzzle designer Scott Kim takes us inside the puzzle-maker's frame of mind. Sampling his career's work, he introduces a few of the most popular types, and shares the fascinations that inspired some of his best.

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Picking (Up) Winners Without Placing a Bet

noreply@blogger.com (Shai Dardashti) — Wed, 09 Dec 2009 00:01:00 +0000

Berkshire Hathaway Chairman's Letter - 1989:

If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible. I call this the "cigar butt" approach to investing. A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the "bargain purchase" will make that puff all profit.

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New York Times - December 8, 2009:

For the past 10 years, Jesus Leonardo has been cleaning up at an OTB parlor in Midtown Manhattan, cashing in, by his own count, nearly half a million dollars’ worth of winning tickets from wagers on thoroughbred races across the country. During his glorious run, Mr. Leonardo, 57, has not placed a single bet.
“It is literally found money,” he said on a recent night from his private winner’s circle. He spends more than 10 hours a day there, feeding thousands of discarded betting slips through a ticket scanner in a never-ending search for someone else’s lost treasure.
“This has become my job, my life,” he said. “This is how I feed my family.”

Full Story

With much appreciation to Ben Tanen, thank you!

July 1998: Julian Robertson on Charlie Rose

noreply@blogger.com (Shai Dardashti) — Tue, 08 Dec 2009 04:17:00 +0000

Julian Robertson, Chairman of of Tiger Management:

Direct Link to Video

Daniel Hannan: You cannot spend your way out of recession or borrow your way out of debt.

noreply@blogger.com (Shai Dardashti) — Sat, 05 Dec 2009 23:10:00 +0000

Full Transcript

US News & World Report Capital Commerce:

I don't normally delve into the politics of the European Parliament, but this video of Conservative MEP Daniel Hannan stripping the bark off British Prime Minister Gordon Brown is worth noting. Many American politicians might be hearing the same criticisms next year if the U.S. economy is still depressed even as the national debt soars.

Whether justified or not eventually a Senator will quote the line, Quem ad finem sese effrenata iactabit audacia?

Despite Republican criticism concerning record federal deficits, Obama said the U.S. has had to "spend our way out of this recession" with so many people out of work but insisted he was still mindful of a need to confront soaring deficits.

Start-Up Nation: The Story Of Israel's Economic Miracle

noreply@blogger.com (Shai Dardashti) — Fri, 04 Dec 2009 21:10:00 +0000

Introduction

PART I / THE LITTLE NATION THAT COULD
Chapter 1. Persistence
Chapter 2. Battlefield Entrepreneurs
PART II / SEEDING A CULTURE OF INNOVATION
Chapter 3. The People of the Book
Chapter 4. Harvard, Princeton, and Yale
Chapter 5. Where Order Meets Chaos
PART III / BEGINNINGS
Chapter 6. An Industrial Policy That Worked
Chapter 7. Immigration: The Google Guys' Challenge
Chapter 8. The Diaspora: Stealing Airplanes
Chapter 9. The Buffett Test
Chapter 10. Yozma: The Match
PART IV / COUNTRY WITH A MOTIVE
Chapter 11. Betrayal and Opportunity
Chapter 12. From Nose Cones to Geysers
Chapter 13. The Sheikh's Dilemma
Chapter 14. Threats to the Economic Miracle
Conclusion: Farmers of High Tech

Synopsis:

Start-up Nation addresses the trillion dollar question: How is it that Israel-- a country of 7.1 million, only 60 years old, surrounded by enemies, in a constant state of war since its founding, with no natural resources-- produces more start-up companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada and the UK? With the savvy of foreign policy insiders, Senor and Singer examine the lessons of the country's adversity-driven culture, which flattens hierarchy and elevates informality-- all backed up by government policies focused on innovation. In a world where economies as diverse as Ireland , Singapore and Dubai have tried to re-create the " Israel effect", there are entrepreneurial lessons well worth noting. As America reboots its own economy and can-do spirit, there's never been a better time to look at this remarkable and resilient nation for some impressive, surprising clues.

Interview with author, Dan Senor:

Why is Israel so economically successful? Dan Senor and Saul Singer go beyond stereotypes and beyond the continuing Mideast conflict to analyze this question in their new book, Start-up Nation: The Story of Israel’s Economic Miracle. Senor, a former Bush-administration official in Iraq, took questions from National Review Online’s Kathryn Jean Lopez on what Israel’s done right, what stands in her way, and how we can learn a little from our ally.
KATHRYN JEAN LOPEZ: What’s so special about Israel?
DAN SENOR: Israel represents the highest concentration of innovation and entrepreneurship in the world today: the most start-ups per capita; the highest percentage of GDP invested in civilian R&D; more companies on NASDAQ than all of Europe, Korea, Japan, India, and China combined; and the biggest destination for global venture capital per capita. Israel raises 2.5 times as much global venture capital as the U.S., 30 times more than Europe, 80 times more than India, and 350 times more than China — and these numbers are from 2008, when the world was in the midst of an economic meltdown. Israel all but escaped the crisis that ripped through economies everywhere else.
LOPEZ: What makes Israel an economic miracle? What’s most impressive?
DAN SENOR: The jaw-dropping data above would be impressive for any country, but to accomplish all this while under a near-total regional economic boycott, under physical attack, and absorbing millions of refugees in a tiny country with no resources is hard to comprehend.
LOPEZ: What’s the secret of its success?
DAN SENOR: Our book dives into many interacting factors, but one of the most important is the training and battlefield experience that most Israelis receive in the military. The military is where many Israelis learn to lead and manage people, improvise, become mission-oriented, work in teams, and contribute to their country. They tend to come out of their years of service (three for men, two for women) more mature and directed than their peers in other countries. They learn “the value of five minutes,” as one general told us. They even learn something more uniquely Israeli: to speak up — regardless of ranks and hierarchy — if they think things can be done better.

Full Article

A closer looks at Eitan Wertheimer's Atidim:

ATID is the Hebrew word for future. And ATIDIM (futures) is the name of a breakthrough project designed to build a better, stronger Israel by enabling capable and talented young people from underprivileged communities to acquire higher education in order to share in Israel’s growth. Originated as a groundbreaking idea in January 2000 through the Israel Defense Forces, ATIDIM has since become one of Israel’s most valuable educational and social initiatives.
The Israel Defense Forces Academic Reserves is a longtime source of highly educated and motivated IDF officers. Prior to being inducted as officers in the IDF, Academic Reserve candidates are permitted to defer military service to study specific majors in the exact sciences at universities. This enables graduates to enter the IDF with degrees in law, medicine or scientific research, grooming them for a lifetime of personal and professional success. In addition to giving Israel’s military an essential edge, former IDF officers hold prominent leadership positions in the public and private sectors.
When it started, just one percent of the Academic Reserves came from Israel’s disadvantaged communities; In just four short years, ATIDIM students representing Israel’s most disadvantaged areas have come to comprise nearly 40 percent of the IDF Academic Reserves—a spectacular achievement.
The ATIDIM program overcomes the three primarily obstacles to achievement plaguing disadvantaged students: marginalization resulting in low self-confidence; unequal science education opportunities compared with more affluent peers; and lack of funds for educational enrichment needs.

Kol Ha'Kavod!

Lord of the Ants - Documentary on Edward Wilson

noreply@blogger.com (Arpit Ranka) — Fri, 04 Dec 2009 16:24:00 +0000

Thought provoking documentary on Edward Wilson, who is famous for his work on ants, sociobiology, bio-diversity, encyclopedia of life etc.

Piotroski’s F_SCORE in practice

noreply@blogger.com (Shai Dardashti) — Fri, 04 Dec 2009 16:24:00 +0000

Interesting discussion over at Greenbackd.com:

The American Association of Individual Investors website offers various value and growth screens to its membership. Piotroski’s F_SCORE is one such screen. The AAII reports that, of the 56 screens it offers, the only screen that had positive results in 2008 was Piotroski’s F_SCORE (via Forbes):

Believe it or not, the five stocks that AAII bought using Piotroski’s strategy in 2008 gained 32.6% on average through the end of the year. The median performance for all of the AAII strategies last year? -41.7%.

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Potential Successor to Buffett Has Tough Task

noreply@blogger.com (Shai Dardashti) — Fri, 04 Dec 2009 16:15:00 +0000

The New York Times - December 3, 2009:

Mr. Sokol describes his mission succinctly. “We are instilling a culture of cost discipline and planning.”

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Financial Post: Prem Watsa on What Comes Next

noreply@blogger.com (Shai Dardashti) — Fri, 04 Dec 2009 01:10:00 +0000

Diane Francis interviews Prem Watsa:

[Diane Francis]
The market's corrected but is the worst over?
[Prem Watsa]
80% of the economy [the private sector] is de-leveraging. 20% is government stimulus.
Companies are operating at 65% of capacity or utilization rate.

Unemployment is rising. If in six to 12 months' time, the stimulus and bailouts don't work, and we are at zero interest rates, what then?

We had 20 years of good, meaning no recession to speak of, and only one year of bad. We are not worried about inflation, just the opposite. If wages start to go up, there will be inflation. But there is lack of demand.

That's the problem.

Full Interview

In other news...

Irving Fisher

Inflation tomorrow morning?

"Better to be roughly right than precisely wrong."

At 91, the man Warren Buffett famously dubbed a "superinvestor" is still picking unloved stocks.

noreply@blogger.com (Shai Dardashti) — Thu, 03 Dec 2009 17:45:00 +0000

Forbes.com - Februray 11, 2008:

Walter Schloss has lived through 17 recessions, starting with one when Woodrow Wilson was President. This old-school value investor has made money through many of them. What's ahead for the economy? He doesn't worry about it.
A onetime employee of the grand panjandrum of value, Benjamin Graham, and a man his pal Warren Buffett calls a "superinvestor," Schloss at 91 would rather talk about individual bargains he has spotted. Like the struggling car-wheel maker or the moneylosing furniture supplier.
Bushy-eyebrowed and avuncular, Schloss has a laid-back approach that fast-money traders couldn't comprehend. He has never owned a computer and gets his prices from the morning newspaper. A lot of his financial data come from company reports delivered to him by mail, or from hand-me-down copies of Value Line, the stock information service.

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Claire Barnes: Asia’s Investment Prophets

noreply@blogger.com (Shai Dardashti) — Wed, 02 Dec 2009 19:53:00 +0000

Claire Barnes, 27 December 1998:

I recently re-read my book, Asia’s Investment Prophets, to see how it had withstood the passage of time, and whether it might still hold useful insights for a present market participant. The book was written in the second half of 1994, in the aftermath of the tidal wave of new money which descended on Asia in 1993. This torrent magnified and helped to finance tremendous excesses and follies.

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Best advice: Gates on Gates

noreply@blogger.com (Shai Dardashti) — Wed, 25 Nov 2009 18:20:00 +0000

Fortune Magazine report:

The father-and-son duo talk about what it was like growing up Gates as they reflect on the advice that has influenced their careers and their relationship.

Full article

There's something in Guangdong Province water...

noreply@blogger.com (Shai Dardashti) — Tue, 24 Nov 2009 23:27:00 +0000

As published in The Shenzhen Post:

In addition, viewing IT patent applications in every province, Guangdong Province was far ahead of others, whose patent applications reached 116,347 pieces. It also was the only province had more than 100,000 pieces of IT patent applications, almost twice as many as those of Beijing which ranked second with 68,356 pieces.

Full article

Context:

The metro opened on December 28, 2004, making Shenzhen the fifth city in mainland China to have a subway after Beijing, Tianjin, Shanghai and Guangzhou.
The Shenzhen Metro currently has 2 lines, 19 stations, and 21.8 km of total trackage in operation. Both existing lines are undergoing expansion and three new lines are under now construction.
The network will reach a total length of 177 km by 2011.

The Shenzhen Metro

GDP per capita, by city: 2005

Travel Guides: 1, 2, 3

China emerges as world's top car market.

noreply@blogger.com (Shai Dardashti) — Tue, 24 Nov 2009 23:21:00 +0000

As reported by The Yomiuri Shimbun:

Average annual per capita income in urban areas jumped from 9,422 yuan (about 122,000 yen) in 2004 to 15,781 yuan (about 205,000 yen) in 2008. In rural areas, the figure rose from 2,936 yuan (about 38,000 yen) to 4,761 yuan (about 62,000 yen) during the same period. Both figures represent an increase of about 60 percent...China's car diffusion rates are about 150 units per 1,000 people in urban areas, but only about 20 or so in rural areas, indicating huge growth potential.

Full story

Remembering Mendel Kaplan A"H

noreply@blogger.com (Shai Dardashti) — Tue, 24 Nov 2009 20:12:00 +0000

"Few, if any, have done as much to build South African Jewry into the dynamic, vibrant community it is today," said the chairman of the South African Jewish Board of Deputies, Zev Krengel. He said that Kaplan could be called "the father of the South African Jewish community."

Full tribute

There is much to celebrate in his 73 years: Cape Gate has been transformed from a modest business selling products like wrought iron and garden benches into a vast conglomerate producing its own steel; it became one of the largest privately owned companies in South Africa. The expansion was largely orchestrated by Mendel and his brother Robert.

Full tribute

A billionaire and philanthropist, Kaplan made his fortune in the South African steel industry. He was known in the Jewish organizational world as a quiet donor to the poor who did not seek any publicity for his donations.

Full tribute

From shtetl to steelmaking: The story of three immigrant families and a family business

Baruch Dayan Emet.

Los Angeles Times: Bubble bursts on Beanie Babies

noreply@blogger.com (Shai Dardashti) — Tue, 24 Nov 2009 19:07:00 +0000

Originally published August 31, 2004:

It was just an online classified ad, under Collectibles for Sale, but it sounded like a cry from the heart: "I'm tired of these things now. Please save me from them."

Kelly Cabral of Tracy, Calif., placed the ad recently after coming across a box in her garage crammed with dozens and dozens of Beanie Babies, the floppy little stuffed animals that sparked an international trading frenzy in the late 1990s.

Years earlier, there were days when Kelly and her husband, Dan, would join the early morning crowds laying siege to gift shops that were expecting shipments of Beanies.

Now, she says, "My husband's like, 'Where did we get all these?' Then you realize you spent way too much time on this insanity."

...

In many ways, in fact, Beanie Babies mania was the dot-com stock bubble writ small.
[emphasis added]
Both were creatures of a frothy, peacetime economy with low unemployment and towering consumer confidence. Both were abetted by the advent of online trading and the explosive growth of the Internet. Both gave rise to celebrity oracles who seemed able to decode the mysteries of the market. Both spawned fraud and even episodes of violence. And, finally, both flouted all classical notions of investment value. Until they didn't.

...

At its 1998 peak, the magazine was thicker than Glamour or Fortune and was selling 650,000 copies a month at a newsstand price of $5.99. It contained ads from dealers and articles about collectors, but the heart of the magazine was the price survey.

Sobolewski's survey filled the same need for Beanie Babies as "pink sheet" price listings do for obscure over-the-counter stocks: It helped keep the market orderly by giving buyers and sellers at least a reference point for negotiations.

Ty's market maneuverings helped make Beanie mania one of the longest-running toy fads in U.S. history. Still, the fate of a bubble is to burst. In August 1999, Ty shocked the collecting world by announcing that it would stop making Beanie Babies on Dec. 31, 1999.

Full article (Los Angeles Times)

Also:

How I Got Burned by Beanie Babies (Wall Street Journal)

“History doesn't repeat itself - at best it sometimes rhymes” - Mark Twain

Today. Here, and here.

Tomorrow? Here, and here.

Yesterday! An interesting book.

TEDIndia: The Future Beckons.

noreply@blogger.com (Shai Dardashti) — Tue, 17 Nov 2009 04:48:00 +0000

In Bill Gates' own words:

"Well, the best systems are ones where you have good short-term metrics, great accounting, looking at profits, looking at risk and willing to do things long-term. Investing in new research, letting people build new companies. I was a huge beneficiary of this country's unique willingness to take risk on a young person. And, you know, I got to hire people who were older. I got to sell to people who were older. And it was kind of a dream come true. And that kind of thing is -- other countries have seen it and they are trying to create that same dynamic. And that's good for the world. It's excellent that China and India will borrow our ideas about universities, about entrepreneurship, simplification of business. None of us want to borrow this extreme leverage that we got into. But in a sense, that's kind of a -- I don't want to say minor, but it doesn't speak to the heart of why things have worked so well."

TEDIndia - Mysore, Karnataka:

Excerpt: Warren Buffett on Charlie Rose Show

noreply@blogger.com (Shai Dardashti) — Tue, 17 Nov 2009 04:34:00 +0000

November 13, 2009:

WARREN BUFFETT: Well, we may have used most of our powder on that one. (LAUGHTER)

CHARLIE ROSE: You said I stretched to the last nickel for this one.

WARREN BUFFETT: Yes.

CHARLIE ROSE: Why did you do it?

WARREN BUFFETT: Well, I felt it was an opportunity to buy a business that is going to be around for 100 or 200 years, that’s interwoven with the American economy in a way that if the American economy prospers, the business will prosper. It is the most efficient way of moving goods in the country. It is the most environmentally friendly way of moving goods, and both those things are going to be very important. But the biggest thing is the United States is going to do well. I mean, we can’t move the railroad to China or India. They haven’t figured out how to do that. So you know, it’s sort of like if you remember that song about New York-- we have to make it here or we can’t make it anywhere.

CHARLIE ROSE: Frank Sinatra. (LAUGHTER)

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.

CHARLIE ROSE: And 100 billion years.

WARREN BUFFETT: They’d have to be a real sport. (LAUGHTER)

CHARLIE ROSE: And they are also modernized today, are they not?

WARREN BUFFETT: Enormously. Enormously. The railroads-- take a railroad like BNSF. They’re moving far more ton miles of product with less in the way of people, less in the way of fuel. Railroads have become far more efficient over the years. There were a million and a half people employed in the rail industry after World War II. Now there are about-- less than 200,000 in the United States, and they’re moving far more goods. So it’s really become efficient. You watch those 130-unit trains double stacked...

Full Transcript