Remarks at the Association of American Railroads

Wriston, Walter B.

Suppose we could assemble together in one room all the real philosophers who've ever lived and ask them one question. It would not have to be an especially big room; there would probably be space left over to throw in a few historians, some politicians, and maybe two or three economists.

The question we might put to them is this: "In all your experience and ruminations, is there any single idea, any one word, which always applies to this world we live in -- everywhere and all the time?" I think their answer would be: Change. Except for the Greek, Parmenides in about 500 B.C., the existence of change has never been denied -- and Parmenides only managed to do it by saying that everything we see and feel is an illusion that ought to be ignored. That is always a possibility, of course, and every now and then there is somebody who tries it. But the results are usually unsatisfactory.

The Roman Emperor-philosopher Marcus Aurelius would undoubtedly be part of our little group, and he would probably repeat the advice he originally gave us back in the 2nd century: "All these things you see change immediately and will no longer be. Remember how many of these changes you have seen already. The universe is transformation, life is opinion." We have had 18 hundred years to learn that lesson. It would be interesting to hear what the emperor thought of our progress.

What, for example, would he have thought of all those people a hundred years ago who refused to invest in railroads because rails are made of iron, and iron rusts. They kept their money in canal bonds because, after all, what can happen to a canal?

Your industry, which has had such a profound effect on society, has always had a battling tradition, yet you succeeded in cooperating when it was clearly in the interest of each line. But before cooperation, there were early battles, often launched by political entities. In the age-old fight for traffic, the State of Pennsylvania in 1851 adopted a railroad gauge different from that of New York to prevent the Erie Railroad from passing through the State into Ohio. Even cities got into the act with the city of Erie actually tearing up tracks in order to force trains to stop there.

Today the battles of the railways are often fought out in the courtrooms of America and before the ICC. For some reason your industry has always been marked by people of strong opinions. One of the classic battles fought in the days before the lawyers took over the world, was occasioned by the fact that the Kansas Pacific Railway had a monopoly over the cattle trade. Monopoly power created fat pricing; the Kansas Pacific charged $100 per carload from Abilene to St. Louis and $150 to Chicago. When the Santa Fe entered the fray, it cut rates to $30 per car from Wichita to Kansas City and the benefit to the shipper of competition suddenly became clear. Not content with this action, Santa Fe tried to block the Kansas Pacific by moving its cattle terminal further west to Dodge City. Part of the line ran through Raton Pass, a right-of-way claimed at the time by the Denver and Rio Grande. To persuade the DRG about the error of its ways, the Santa Fe did not hire lawyers Joe Flom or Marty Lipton to come up with "poison pills" or two tier takeover offers but, rather, employed Bat Masterson and some three hundred other gunslingers. The DRG countered with a private army of its own led by a local Indian Fighter. Fighting inevitably broke out, but before a decisive battle was joined, the Supreme Court got involved and rendered a decision on the Royal Gorge Case. Bat Masterson returned once more to "keep the peace."

While all these and many more battles were going on, when it came to the importance of creating a system to tie a continent together, cooperation replaced confrontation.

It was not gunmen or lawyers or even the power of government that eventually gave us a standard railroad gauge. It was really the invisible hand of the market. The inefficiency of different gauges was shown up by the logistical problems in the Civil War, and old parochial interests gave way to dreams of transcontinental roads, and visions of new fortunes to be made. On February 2, 1886, private representatives of all the broad gauge lines in the South met in Atlanta and decided to change over to standard gauge by moving one rail inward by three inches. While such collective action might give today's Justice Department fits, and undoubtedly would furnish the modern Congress with years of investigative hearings, June 1, 1886, the day of the changeover, turned into a Dixie Holiday. Thousands of people turned out along the track to celebrate the event, now almost forgotten, but one that profoundly influenced the economic development of our country. Economic interest, rather than coercion, laid the basis for what amounted to, for all practical purposes, the start of an American integrated railway system.

Just as an integrated railroad system had a profound effect on developing, for the first time, a common market for an entire continent, so now we are witness to the building of a new system to bind together the whole world. The system is not built with wooden ties and iron rails, but with computers and telecommunications. The multiple impact of this new global electronic infrastructure is turning the whole planet into a common market for money, ideas and information. Your industry, like all other sectors of our society, is now caught up in this ongoing and rapidly accelerating revolution in technology even though it may seem far removed from your day-to-day work. While the sometimes contentious battles being fought in international meetings over some 15,000 proposals to allocate world radio frequency bands may seen far removed from moving freight, their outcome will impact your life and your business. When a technology impacts society in new and powerful ways, it can cause a revolution. Modern technology has now produced such a state of affairs. Like all revolutions, it upsets people because it calls into question not only old ways of doing things, but destroys old jobs even while creating new ones. Any change, great or small, causes controversy. Experts are called in to assess the future, but they are often about as prescient as the British railroad designer, Thomas Tredgold, who stated with authority in 1835 "that any general system of conveying passengers which would...go at a velocity exceeding ten miles an hour, or thereabouts, is extremely improbable." People with a vested interest in the status quo can always find an "expert" to say new technology will not work. Sometimes the law and the government get involved. When radio pioneer, Lee De Forest, was arrested for fraud, the U.S. District Attorney opined that: "De Forest has said...that it would be possible to transmit the human voice across the Atlantic before many years. Based on these absurd and deliberately misleading statements, the misguided public...has been persuaded to purchase stock in his company."

Your industry became the focus of one of our early examples of the fear engendered by someone predicting that the world is soon to run out of resources. At the turn of the century, America's enormous economic growth required two central ingredients -- wood and iron. As your lines expanded, railroads accounted for 20 to 25 percent of the annual timber consumption in this country. Most of the wood was being used to replace crossties. Everyone knew that you could not run a railroad without wood. In addition to crossties, the railroads used an enormous amount of timber for bridges, piling, car construction, fences, buildings and platforms. It was not unusual that the designers of railroad bridges would just build the span, load a car with heavy material and pull it back and forth across the bridge with increasingly heavy loads until it collapsed. Bridges were then over-designed and over-stressed because wood was cheap. Against this background, the headline in the January 6, 1905 edition of the reading, "Timber Famine Near Says Roosevelt," was not surprising. But Teddy Roosevelt was wrong. As the price of wood increased in the 1890's iron began to replace wood. The market worked. New and innovative ways to preserve ties came into general use. This situation is being repeated today as new plastics, fibers, and ceramics, which are very strong and light, are replacing natural resources. Many of these new products are fundamental to the building of a new infrastructure of the world.

Just as the railroads became the iron strap that bound our continent together, the marriage of computers and telecommunications has, for better or for worse, bound the world together whether we are ready or not. As many people failed to understand the revolutionary effects of tying the American continent together with iron rails, so today there are those who see and use modern technology without connecting it to the fact that it has created a revolutionary new global marketplace. There are now about one million backyard satellite dishes connected to home TV sets. It is hard to understand how men and women can sit in the comfort of their homes and watch astronauts repair a satellite in space and still believe that the world we live in has not changed.

Bat Masterson has hung up his six-shooters, but keeping the pass open to let information flow across sovereign borders becomes a new national challenge. The ownership of one of the 200 slots for satellites in the geosynchronous belt some 22,300 miles in space, and how that ownership is assigned, and by whom, becomes high national policy. The right or denial to connect your own corporate data networks to private switching systems becomes of more than academic interest, because access to information on a timely basis is critical to managing any business or governing any country.

While all this may seem somewhat remote from running the railroads, in truth it impacts us all in many direct and indirect ways. This explosion of technology, which is changing our business and our markets, can be demonstrated by just a few facts: About 90% of all the scientists who have ever lived are now alive, and not surprisingly as many scientific papers have been published since 1950 as were published since the dawn of recorded history. With "knowledge" now doubling every ten years. It is clear no business or person will escape its impact. Old lines are being blurred and we have to invent new definitions to describe a world which only yesterday did not exist.

The train of thought we all go through in the reasoning process is reflected in the words we use to describe the scene as we see it. While it's an ancient question whether or not we can think through a problem without using words, if we accept the thesis that words are at the very least helpful, then the meaning of those words becomes crucial in arriving at a good answer. I would argue that the words we use to describe and measure our economy no longer accurately reflect our society as it exists today.

This is not an argument free of danger. Antoine Lavoisier became known as the father of modern chemistry because, shortly before the French Revolution, he wrote a new dictionary of chemical terminology which revolutionized the science. "After all," he said, "the sciences have made progress because philosophers...have communicated to their language that precision and accuracy which they have employed in their observations. In connecting their language they reason better." The danger I refer to results from the fact that when Lavoisier tried to apply this same philosophy to politics, they cut off his head. In periods of violent change, even lexicography can be a hazardous profession.

Today's new technology combined with yesterday's vocabulary has created an ongoing debate about the relative importance of the manufacturing and service sectors. Often partisans of one side or the other take for a premise the idea that there is a clear distinction between the two. Spokesmen for heavy industry talk about "real" jobs and the manufacture of "things" as an analog for "good." Service jobs are often dismissed by describing them as people washing each other's cars. Just as real men don't eat quiche, so real men produce real things. The trouble with this scenario is that while it may be emotionally satisfying to some C.E.O.s of heavy industry, it does not accurately reflect the world of today. Railroads, with your billions of dollars of rolling stock and facilities, are classified, as you know, in our National Income Accounts as services and the jobs you preform are as vital as any in our society. Modern technology has made our old vocabulary obsolete, since the distinction between service and manufacturing is now becoming so vague as to be almost useless.

As you well know, when World War II started, it took American railroads weeks to find out where the tank cars they owned were located. Clearly, this delay greatly impeded the national mobilization effort. Today, the railroad industry, thanks to computer hardware, software and telecommunications, is able to know almost immediately the location of a car, what is on it, its destination, and when it will arrive. The system that makes this possible cannot fairly be described as washing each other's cars or second-class jobs. It is true that the computer-telecommunications system does not produce a "thing," but it does produce the information essential to move freight and people in an effective way.

The interplay between so-called service and manufacturing is now close to homogenization. From design of new products to their production and delivery, manufacturers who have survived rely on technology in a way never before seen. Computer-aided design is allowing engineers to test their products by watching video screens and if stress develops, to redesign the product without leaving their chairs. Often no prototype has to be built, and weeks and months are saved. Since no company and no nation has a corner on innovation or intelligence, the drive for productivity will go on all over the world. In a world in which technology has now moved to the point where every word of the Encyclopedia Britannica can be transmitted from here to there via a fiber optic cable in about one second, few can any longer pretend that we do not need a new vocabulary to help us think about a new world. Our engineering schools, for example, are not yet turning out engineers with deep understanding of optics as opposed to copper-based electronics, even though many believe this knowledge will be crucial to our nation's future.

While the efficiency of the steel wheel on the steel rail as a way to move men and material has a certain timelessness about it, few would deny that it is the new technology of hardware and software that makes the difference in employing these assets in our competitive world. What I would suggest to you is that the world around us is changing so fast that the profitable and efficient operation of any business will depend more and more on the efficient use of information. While the information intensive society is already upon us, none of us can predict with any certainty the explosive developments just over the horizon. Charles H. Townes, generally credited with the invention of the laser, put it this way: "As it turned out, I was much too conservative; the field has developed far beyond my imagination and along paths I could not have foreseen at the time. Surveyors use the laser to guarantee straight lines; surgeons to weld new corneas into place and burn away blood clots; industry to drill tiny, precise holes; communication engineers to send information in vast quantities through glass fiber pipes."

The industries that embrace change and make it their partner will be the survivors tomorrow, and those that fail to understand the impact of technology on markets will be the losers. The record of the railroads in adapting to change should keep you in the first category.


This document was created from the speech, "Remarks at the Association of American Railroads," written by Walter B. Wriston for the Association of American Railroads on 5 November 1985. The original speech is located in MS134.001.007.00002.

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