By John Carbutt — U . S . National Archives and Records Administration , Public Domain , https :// commons . wikimedia . org / w / index . php ? curid = 17057717
Directors of the Union Pacific Railroad on the 100th meridian , approximately 250 miles west of Omaha , 1866 .
( italics added ).
In other words , modern railroad share buyback initiatives resulted in a capital loss . Significantly , the UP was profiled in Mintz ’ s study , and it generated a negative 14.8 % buyback return on investment ( ROI ), which contrasts sharply with Gould ’ s 19 % CAGR , especially considering the different macroeconomic and governmental intervention environments the two results were produced in : Gould generated a 19 % CAGR while cleaning up the UP ’ s balance sheet during years of depression and deflation with no governmental support , while the UP ’ s modern negative buyback ROI was generated during a period of easy money , asset inflation and governmental bailouts , which are obviously bullish for equity prices .
One might speculate that if Gould was alive today , he would not have followed the modern share buyback crowd , and the reasons why should by now be obvious . What should also be obvious is the fact that successful executives across history like Gould have not put their firm ’ s balance sheets at risk during booming economies , and as such they neither need — nor plead for — governmental bailouts during periods of financial distress . This is just one of the lessons that could be learned from the history of Gould at the UP . To paraphrase Graham ’ s statement above , at the very least , such lessons should not be rejected until they have been studied and understood .
Joseph Calandro , Jr ., is a Managing Director of a global consulting firm , Fellow of the Gabelli Center of Global Security Analysis at Fordham University and the author of Creating Strategic Value ( Columbia Business School Publishing , 2020 ).
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