2021: Why do GEICO and BNSF have lower profit margins than Progressive and Union Pacific?

BECKY QUICK: This question comes from Glenn Greenberg. He says — it’s on the profitability of GEICO and BNSF.

He said, “Why do these companies operate at meaningfully lower profit margins than their main competitors, Progressive and Union Pacific? Can we expect current managements to at least achieve parity?”

WARREN BUFFETT: Was it GEICO and — ?

BECKY QUICK: BNSF.

WARREN BUFFETT: Oh. Actually, if you look at the first quarter figures, you’ll see that the Berkshire Hathaway/Union Pacific comparison has gotten (laughs) quite better.

Katie Farmer’s doing an incredible job at BNSF.

And it’ll be an interesting question, whether five years from now or ten years from now, BNSF or Union Pacific has the higher earnings.

We’ve had higher earnings in the past. Union Pacific passed us.

The first quarter, you can look at, and, you know — they think they’ve got the — a slightly better franchise. We think we’ve got a slightly better franchise.

We know we’re larger than Union Pacific. I mean, we will do more business than they do. And we should make a little more money than they do, but we haven’t in the last few years.

But, it’s quite a railroad. I feel very good about that.

WARREN BUFFETT: I should — I should go back to that previous question.

You know, people talk about the aging management at Berkshire. And I always assume they’re talking about Charlie (laughs) when they say that.

But I would like to point out that in three more years, Charlie will be aging at 1% a year. (Laughter)

And he is the — no one is aging (laughs) less than Charlie.

If you could take (laughs) some of these new companies with 25-year-olds, they’re aging at 4% a year. (Laughs)

So, we will have the slowest-aging management, percentage-wise, by far, than any corporate — any American company has.