My column in the FT this week is on the Sage of Omaha:

In the annals of double-edged compliments, Warren Buffett’s description of his planned $27bn acquisition of Burlington Northern Santa Fe as an “all-in wager on the economic future of the US” ranks highly. If the best expression of the future of the US economy is a railway operator dating back to the mid-1800s, then growth investors might be advised to look instead to China, India or Brazil.

Perhaps to balance his criticism of the US trade deficit and doubts about the dollar, Mr Buffett often eulogises the US economic system. “It has unleashed potential as no other system has and will continue to do so. America’s best days lie ahead,” he wrote in his 2008 letter to
shareholders of Berkshire Hathaway.

Actions, however, speak louder than words. The BNSF deal is the largest acquisition Berkshire Hathaway has made and comes as 79-year-old Mr Buffett has started to identify possible successors. So it may be the ultimate symbol not only of his investment style but of how he sees his country.

“When investing, pessimism is your friend, euphoria the enemy,” he wrote in the letter and, underneath his optimistic gloss, the deal has a downbeat moral for the US. It is a safe, predictable but somewhat dull market for the global investor with a lot of solid but ageing companies.

Please read the rest here and comment below.

For what it is worth, Carly Fiorina always struck me as having more the affect of a politician than a chief executive.

Ms Fiorina, whose troubled leadership of Hewlett-Packard ended in 2005 when she was pushed out by the board, and eventually succeeded by Mark Hurd, today revealed that she plans to run as a Republican for the California Senate seat held by Barbara Boxer.

It may prove good timing, since it comes a day after there was a swing to the right in US elections, with Jon Corzine, a former chief executive of Goldman Sachs, being defeated in his bid for re-election as governor of New Jersey, and a Republican being elected governor of Virginia.

On the other hand, the fact that Mr Corzine was beaten and that Michael Bloomberg was only just re-elected as mayor of New York despite spending extremely heavily on his campaign suggests that former chief executives do not always succeed as in political life.

My memories of Ms Fiorina, even in her time at HP, are of a very polished public performer but not someone who had an impressive grasp of detail. I was struck at how like a politician she seemed at a press briefing in Davos in 2005, just before she was ousted.

She was poised and very articulate but she tended to stick firmly to her talking points and did not seem very comfortable responding to questions. Admittedly, it could be that I simply witnessed her at a particularly stressful moment.

Anyway, those qualities may serve her well in her new venture, for which she prepared by serving as an adviser to John McCain, the Republican presidential nominee, in last year’s campaign.

Perhaps Paul Volcker is not so keen on Glass-Steagall after all.

I listened to the former chairman of the Federal Reserve at a conference in Florida organised by the CME Group today (immediately after he had walked out on an interview with Maria Bartiromo) and thought he might be softening his stance a bit.

Mr Volcker was one of the original voices calling for some division of risky financial activities from commercial banking, a division he himself compared to the 1933 Glass-Steagall Act which split banking from securities underwriting in the US.

However, he emphasised this afternoon that he was “not proposing a return to Glass-Steagall” because he regarded securities underwriting as “a reasonable banking function analogous to lending”. Nor did he want to bar banks from mergers and acquisitions advice.

The only activities he believed should be split out by legislation or regulation from commercial banks were hedge fund and private equity fund management and proprietary trading. Banks should be able to do “whatever Goldman Sachs and Morgan Stanley did in 1980″.

As a matter of history, I am not sure this is accurate since Goldman had an arbitrage trading desk - where Robert Rubin made his name - many years ago.

I also wonder whether allowing the merging of investment banking and commercial banking goes against Mr Volcker’s own analysis of what went wrong. As he put it:

“Commercial banks became much more complicated and adopted lots of functions that sit within capital markets . . . more complex, more complicated, more opaque, more difficult to manage and also bigger.”

Today, Mr Volcker did not sound too much at odds with Tim Geithner, the Treasury Secretary, and the rest of the administration. Indeed, he said he believed the latest version of financial reform put foward by the US Treasury could prevent banks getting too big.

The best moment of Mr Volcker’s talk was when he forgot the name of the Economic Recovery Advisory Board, the body that he chairs. It did not seem to bother him any more than leaving Ms Bartiromo in mid-interview.

While at BMW in Munich, I received an insight into why we should not hold our breath for pure electric cars to replace those with internal combustion engines.

It came from Hans Rathgeber, a BMW executive in charge of developing fuel-efficient technology for the BMW and Mini brands. Mr Rathgeber’s latest project is a BMW concept sports car, unveiled at the Frankfurt motor show, which accelerates to 100 km per hour in 4.8 seconds but is extremely fuel efficient.

BMW has produced the Mini E, an experimental electric car which is being tested by selected drivers (about 450 in the US, for example). It is powered by a lithium ion battery and has a maximum range of about 170 km in normal driving conditions.

However, Mr Rathgeber had doubts about whether battery technology will advance rapidly enough in the next two decades to enable pure electric cars to have sufficient range to challenge hybrids that have both internal combustion engines and electric ones.

The problem of the battery is that it is not an electronic part, it is chemical. In chemistry what you don’t know today you won’t know in 20 years,” he told me.

BMW has been working on improving the fuel efficiency of its entire fleet of cars under a programme known as Efficient Dynamics. Its new cars registered in 2008 had lower carbon dioxide emissions that competitors such as Audi and Volvo.

It sounds absurd to be surprised at how automated the process of car production is these days, but that was my reaction when I toured BMW’s plant making Series 3 cars in Munich today.

It has been more than 10 years since I went round a vehicle plant, so I took the opportunity on a visit to Munich to visit the one that which stands on the site where BMW first made aircraft engines in 1917.

About 9,000 people work at the plant, which only turns out about 900 or so cars a day - these are, after all, premium cars and not volume models - but most of the work is done by robots.

In the body shop, where the stamped metal sheets are welded together into car bodies, for example, about 97 per cent of the task is done by 650 robots. The remaining three percent consists of changing copper welding tips and placing stamped sheets where the robots can pick them up.

BMW does not allow visitors to take photographs inside the plant, which is a pity because I would otherwise have posted a shot of the intricate dance of the robots, which is quite a sight.

The robots, which are made by Kuka and ABB, are painted orange and tilt and twist on several axes as the metal parts are threaded in and out, glued and welded. BMW is proud of a station at which the completed bodies get welded by 12 robots at once, said to be more than its rivals manage.

Even on the assembly line, the powertrains and bodies are brought together (in a process called “marriage”) by robots and human intervention is limited to jobs such as tightening some bolts and threading in the electrics. Humans still make the car seats, although that too is done by robots at other BMW plants.

That accounts for the fact that far fewer people work in vehicle plants than in the past, despite their image of being filled with people. General Motors, for example, now employs only 48,000 US manual workers, down from 114,000 three years ago.

Robots have been in use for about three decades and I recall the 1979 British television advertisement for the Fiat Strada which boasted of them being “hand-built by robots”.

There is a, possibly apocryphal, story that when Hugh Hudson, the director of the Fiat Strada spot, arrived in Turin for the filming, his crew came across a protest by workers at their jobs being taken over by machines. That fight has long been lost.

I reviewed Too Big To Fail - favourably - in the FT today:

For 19 years, the curse of Barbarians at the Gate, Bryan Burrough and John Helyar’s groundbreaking book about the leveraged buy-out of RJR Nabisco, has hung over the publishing industry. Every time there is a tumultuous financial collapse or scandal, journalists scurry to write proposals for books, promising to recount it Barbarians-style.

The finished products are often letdowns, for various reasons. One is that to reproduce the level of human and financial detail in Barbarians – the thoughts that ran through the minds of the executives and bankers as they struggled over the deals, the culture clashes, the petty rivalries – requires an enormous amount of work. When the authors fake it or use shortcuts, it shows.

More important, few stories have the scale and the range of larger-than-life characters – from Henry Kravis of Kohlberg Kravis Roberts to Ross Johnson of RJR Nabisco – of Barbarians. Even events that appear dramatic at the time, such as the collapse of the hedge fund Long-Term Capital Management in 1998, lack an enduring grandeur.

With Too Big to Fail, however, Andrew Ross Sorkin has broken the Barbarians curse. Weighing in at 600 pages (and immediately dubbed by cynics “Too Big to Read” or just “Too Big”), Ross Sorkin’s densely detailed and astonishing narrative of the epic financial crisis of 2008 is an extraordinary achievement that will be hard to surpass as the definitive account.

You can read the rest of the review here.

My FT column this week is about how to restructure banks:

When the history of the global financial crisis is written, it may record that Neelie Kroes, the European Union’s competition commissioner was the only politician willing to respond in a logical manner.

By insisting on the break-up of the ING Group into its banking and insurance divisions – and on it divesting its US direct savings arm – Ms Kroes set a welcome precedent this week. She made a troublesome too-big-to-fail institution shrink.

The US, meanwhile, is joining the UK and others in proceeding in the opposite direction. Rather than making the Citigroups and Deutsche Banks of the world get smaller, they are bolstering them and preparing to deal with them next time they sink.

As Terry Smith, chief executive of the broker Tullett Prebon and a former banking analyst, puts it, this is “like the designer of the Titanic arguing that the provision of extra lifeboats would solve the problem”.Along with Ms Kroes, central bankers including Mervyn King of the Bank of England and Paul Volcker and Alan Greenspan, formerly of the US Federal Reserve, and now, improbably, John Reed, an architect of Citigroup, I prefer the simpler, sterner approach.

My colleague John Kay has described this as splitting banks into utilities and casinos – or deposit-taking banks that need to be backed by governments and investment banks indulging in proprietary trading that do not.

I think a more logical division would be a three-way split into utilities, casinos and people who visit casinos to gamble. That means retail banks, investment banks and asset managers, including private equity and hedge funds.

It may sound like a three-way split rather than a two-way one is a fine distinction. Yet it matters because this mix of businesses is what many too-big-to-fail institutions contain, with all the conflicts of interest and systemic problems it creates.

You can read the rest of the column here and comment below.

I said I would report back on my experience with using a fully-fledged version of Windows 7 on a netbook - an Asus Eee that I bought last week.

To cut a long story short, it has been good so far. The netbook does not appear to have any trouble running Windows 7 Ultimate, of which I was given a review copy last week. Given Windows’ record of demanding ever more sophisticated hardware to work, that is impressive.

The upgrade from Windows 7 Starter, the stripped-down version of the software that Microsoft has licensed to netbook manufacturers, worked smoothly and so I am now being treated to the Aero display features not included in the cheaper version.

That is one piece of good news. The other is that Windows 7 does indeed seem to be a better-looking and more stable piece of software than previous versions (although it is early days).

One of the best things about it is the Aero interface, which beats Apple’s Snow Leopard in terms of the ease with which multiple programs and files can be viewed on the desktop.

Windows 7 also delivers better on past promises on things that matter to users but which Microsoft has been shamefully poor at making work in the past. The machine boots up rapidly and can also come in and out of sleep mode quickly and consistently.

One caveat: I am suspending judgment since Windows has in the past had a tendency to operate rapidly at first and then slow down egregiously the longer it operates. But so far, so good.

Finally, Microsoft seems to have made some strides in making Windows easier and more intuitive to operate, an area in which Apple has been far ahead.

The machine signed on to my home network easily and Windows Media Centre, its program for playing songs and videos - and streaming them on a network - looks good.

Having said this, the netbook suits me just fine (although I am using it in limited ways) and I see no need to spend more money on a more expensive laptop. So Michael Dell and others can hector consumers all they like about netbooks’ shortcomings; I am not convinced.