The future is rail

Monitor} The future is rail “railroads are the rembrandts of investment,” observed the coal baron Henry Clay frick at the height of the 19th-Century American rail boom. He was echoing the widely held view that the value of railways, like that of Old Masters, always went up. Of course, he turned out to be wrong. following a series of market crashes, US rail stocks came to epitomise risky investments. now, however, interest in rail is resurging, with thousands of miles of new track being laid around the world. Several factors have converged to create this boom: the rising price of oil, which has made rail’s comparative fuel-efficiency more attractive than ever; advances in high-speed rail technology; and the increased willingness of governments to allow cross-border network expansion. Indeed, the popularity of rail has grown so rapidly in recent years that demand is outstripping supply in parts of the industry. rail operators in europe, for example, are reporting a shortage of rolling stock, following the eU’s decision to make rail-freight corridors a transport priority. They are currently facing an 18-month waiting list for rail wagons. Unsurprisingly, investors are piling in to the sector. for example, this year the investment arm of US conglomerate Berkshire Hathaway shelled out US$5.7bn (£3.2bn, €4.06bn) for a stake in the US rail company Burlington northern Santa fe, which is helping to develop a major high-speed system linking cities throughout California. And in Asia the activity is even more frenetic. China is building a national high-speed network to remove the need for air travel between many of its major cities. India, too, has set itself the ambitious deadline of 2012 to complete a US$100bn network upgrade. Most exciting of all is the planned development of an ‘Iron Silk road’ that will link europe to China via central Asia. The first rail-freight service ran from Berlin to Beijing earlier this year – an experiment carried out by an international consortium of railway operators including Germany’s Deutsche Bahn and the russian and Chinese state need to know railway companies. By 2009, it will be a regular shuttle. And this is just one of several trans-Asian railway projects now under way, with branches running deep into the Arabian Gulf and the states of South-east Asia. Ultimately, the Iron Silk road may come to emulate its ancient predecessor, which was never just one road but a series of trade routes stretching across Asia and beyond. The impact of the Iron Silk road on international trade flows will be significant. At present, most freight travels between europe and Asia by ship – the Asian Development Bank estimates less than one per cent goes by land. A transcontinental railway service would halve coast-to-coast shipment times to around 17 days. Such a railway would also bring new prosperity to the towns and cities it connects. for example, the city of Madinat Al Hareer (Silk City) is being constructed in Kuwait’s northern desert at a cost of US$132bn with the specific intention of becoming a major hub for the trans-Asian line, as well as a new architectural wonder of the world.= A century after the first railway boom ended, new tracks are being laid worldwide, opening up trade routes and investment opportunities madinat al hareer, kuwait the 250 square kilometre city being constructed on the iron Silk road will include the Burj mubarak al-kabir. at three times the height of the empire State Building, it will be the world’s tallest structure illustrations: p8, Eric R. Kuhne & Associates; p9, Getty Images 6 YearS’ GrOwth InDOneSIA 5 minutes: the time for which Volkswagen was the world’s biggest company on 28 October. Its market value hit The secrets of long-term business success Companies must be prepared to evolve, diversify and admit mistakes if they are to survive In 2006, after an astonishing 1,428-year run, the world’s oldest continuously operating company, Kongo Gumi, finally closed its doors. The Japanese temple-building firm was a one-off. But its demise highlighted a broader trend: the rapidly shortening lifespan of companies. In a 10-year study concluded this year, UK consulting firm AM Azure found that only 60 per cent of its sample companies had survived in their original form and only 25 per cent were still ‘succeeding’. There is a variety of reasons why some companies thrive for centuries (Barclays, for instance, can trace its roots back to 1690) while others fade away. But one key factor, according to AM Azure’s Andrew Munro, is succession management. “Organisations lacking effective succession management were five times more likely to disappear than those that had robust practices.” Arie de Geus’s 1997 inquiry into long-lived organisations, The Living Company (which put the average life expectancy of multinationals at 40-50 years) concluded that the Darwinian message was “evolve or die”. His four key qualities for survival were: sensitivity to environment, cohesive identity, tolerance of experimentation and financial prudence. A 2007 study by Christian Stadler of the Innsbruck University School of Management stressed the need for slow-cooked change. Great companies, he concluded, “emphasise exploiting existing assets and capabilities over exploring for new ones” and “seldom make radical changes”. But they know when to diversify – and they remember their mistakes. “Great companies tell and retell stories of past failures to guard against repeating them.” US$370bn as short-sellers misjudged the amount of equity available on the open market, and rushed to close their positions. Source: Washington Post 09 T 5 op 2 University of Pennsylvania 6 YearS’ GrOwth AMerICAS BUSIneSS SCHOOlS, By THe AverAGe eArnInGS Of THeIr GrADUATeS In COnSUlTInG Also produces the world’s highest-earning MBAs in finance. long-renowned for its management programme. With strong ties to Wall Street, Columbia is still seen as a standard-bearer for analytical skills. Attracts many applicants from abroad. Its graduates’ highest salaries are paid not in the US or europe, but in India, russia and China. Consistently strong across the board. Source: Financial Times Surveys 6 YearS’ GrOwth nOrTHern eUrOPe 1 Indian School of Business, Hyderabad 3 Columbia Business School, New York City 4 University of Chicago ‘‘ The Scandinavians grow trees for their grandchildren and the Americans grow trees for their children. In Indonesia, you grow trees for yourself Sukanto Tanoto, head of RGM, a leading producer of wood pulp, claims he can grow trees in six years in Indonesia that would take 30 years to mature in the Americas and 60 in Northern Europe. 5 Harvard Business School ’’