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(erielack) RE: Railroad profits, was Meat reefers

Schuyler and listers:

SGL wrote (or more appropriately, typed, I guess in digi-speak):

>>But the real point I wanted to make here is that the big change which made
>>it possible for railroads to "make pricing and operating decisions that
>>made it more profitable" was the Staggers Act.  The changes in the
>>regulatory environment permitted railroads to charge rates that made sense
>>for them, regardless of what some other mode might be charging.  It didn't
>>matter any more what the barge rate was, which used to influence the rates
>>that the ICC would allow the RR to charge, nor the trucker's rates.

>>Very simple access to digital information about that time may have made a
>>difference, but it wasn't the watershed.

>>SGL

As to the impact of the Staggers Act, I agree wholeheartedly.  The ICC's
regulatory model up to the Act was kaput in that the fundamentals of how the
industry priced it's services was under an obsolete method that was designed
for when the RR's were quasi-monopolies and had far greater power over
marketplace dynamics than the shippers did.  When you look at the abuses the
RR's had in pricing their services in the late 1800's and early 1900's, you
can see why the ICC had to regulate them to give the shippers some
protection (even with a flawed and somewhat bizarre system, like most gov't
imposed regulatory structures was also politically influenced).  But by the
60's and even possibly the late 50's, it was obvious that the ICC's
regulatory framework was woefully obsolete.

The reasons why the fortunes of the RR's reached their nadir in the 60's /
70's are extremely varied and complex.  They involve actions /decisions by
management, labor, government, the shipper community, etc.  No one was
completely the villain, nor was anyone an angel throughout the deterioration
of the industry starting just after WWII.  Obviously, this is a topic that
is far beyond the scope of this list and certainly you and I could talk
about it for hours on end.  I wrote short (>60 pages! LOL!) paper on this
topic for a business strategy class I took in college and received a A++ on
it from my prof. (shameless plug)!!  I argued that the RR's had effective
competition and advocated fair market pricing with the right of the roads to
eliminate unprofitable routes and services, along with reform of labor rules
and staffing.

My blurb was not to say that the fortunes of the RR industry would have been
different if the IT resources we have today would have been available to the
managements of the Erie, DL&W or the EL (and others).  My point was, that
due to limitations of the resources (both human and technological) available
to the RR's at the time, my sense was (and still is) that there would not be
as much data in various reports and other analytical tools employed at the
time in question.  Put it another way, as we look at the forthcoming 30th
anniversary of the demise of EL, if we were jump ahead to 2036 and look back
30 years at the financial and operational metrics and analytical tools used
today, there will likely be less information today available to RR
management as there will be in 2036.

What I was alluding to, is that the amount of data available from, say the
40's through the 70's probably wasn't as voluminous and probably didn't have
the as great an analytical component as the RR's didn't (like most
businesses of the time) the computing power that we have today and even with
relative armies for accounting and finance departments, they couldn't do as
much as we can today.  Most financial operations were consumed with just
basic transaction processing and consummation and what little resources and
time were left could be spent on analytics (with most being somewhat
elementary or not as comprehensive as we can accomplish today).  In the > 20
years that I've been a CPA, I'm amazed at how much data is available to
management to run their businesses (and sometimes that's not so good as you
can over analyze your operations or get 'analysis paralysis').

Oh well.  At this point you can see why my paper was > 60 pages.  I need to
rest...

Regards,

Chris
 

> -----Original Message-----
> From: Schuyler Larrabee [mailto:schuyler.larrabee_@_verizon.net]
> Sent: Friday, January 06, 2006 10:21 PM
> To: 'Christopher Thurner'; 'Mailgroup'
> Subject: Railroad profits, was Meat reefers
> 
>  > Christopher Thurner:
> >
> > I also realize that the amount and quality of information
> > going back to the EL and Erie / DL&W days is not as abundant
> > as it is today with businesses having, what seems at least,
> > almost limitless computing power with massive amounts of IT
> > resources at their disposal.  It makes me think about
> > something I read, in either one of the Trains issues, or on a
> > list like this about someone commenting about during the
> > 60's, the sales forces at many RR's had no idea what the true
> > costs of intermodal (specifically piggyback) were and how to
> > price the service accordingly.  They went on to say that in
> > 80's and 90's, with the massive amounts of IT power at hand,
> > they had a much better handle on what their costs were and
> > could make pricing and operating decisions that made it more
> > profitable.  They also lamented on how they during the 60's
> > and 70's, in many cases, had decimated profitable boxcar
> > business to migrate it to less profitable or even
> > unprofitable TOFC business.
> 
> Chris, I won't argue that the simplicity of getting analysis is probably
> easier in the digital age.
> But there were armies of accountants working for the railroads in the
> earlier days you are
> referencing here.  And they were using computers - yes, with punch cards,
> but computers.   All the
> rate divisions were enough to keep legions of men busy.  I suspect that
> they had a pretty good idea
> of what services made money, and how much.  But I agree that it probably
> isn't very available
> information.
> 
> But the real point I wanted to make here is that the big change which made
> it possible for railroads
> to "make pricing and operating decisions that made it more profitable" was
> the Staggers Act.  The
> changes in the regulatory environment permitted railroads to charge rates
> that made sense for them,
> regardless of what some other mode might be charging.  It didn't matter
> any more what the barge rate
> was, which used to influence the rates that the ICC would allow the RR to
> charge, nor the trucker's
> rates.
> 
> Very simple access to digital information about that time may have made a
> difference, but it wasn't
> the watershed.
> 
> SGL


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