Autonomous Vehicles Hurt Berkshire in Two Ways

Nearly all of my savings are in various index funds, but I do own stock in one, single individual company: Berkshire Hathaway.

It’s mostly for sentimental reasons. I went to Omaha a couple of times during business school: once for the Berkshire annual conference (“Woodstock for Capitalists”) and once to meet the Oracle himself, as part of a school trip.

I’ve known for a while that autonomous vehicles would hurt insurance, which is one big part of Berkshire’s business. The logic is that insurance companies only exist because drivers need to insure themselves against the costs of accidents. If accidents diminish, the need for insurance diminishes.

But a question at this year’s annual meeting pointed out that another big part of Berkshire’s business is highly vulnerable to autonomous vehicles: railroads.

Berkshire purchased the Burlington Northern Santa Fe (BNSF) railroad for $26.5 million in 2010 and it’s been a good investment.

That investment will come under intense pressure from self-driving trucks, however. Once trucks can operate nearly constantly, without the cost or physical limitations of a driver, the cost advantage of transportation by rail will diminish, or maybe even disappear completely.

Here’s Buffett’s exchange on this question, honest as ever.