This time of year my thoughts seem to be less focused on investing, saving, and blogging than they probably should be. Admittedly, I’m spending a lot less time on the computer these days, and a lot more time outside!
When the weather is nice here in the Pacific Northwest, the Tako family gets outside as much as we can!
Hiking happens to be one of our favorite activities here when the weather is nice. Not only is it a very affordable activity, but with the mountains, lakes, rivers and oceans so close to our backyard, it’s actually really easy to find countless hiking trails nearby.
Our hiking adventure this week was a bit unusual, and I thought readers might enjoy a quick look at what we’ve been up to. You might even find it educational.
Interestingly, we hiked a trail that was created, engineered, built, and finally failed because of capitalism. Of course, it didn’t start out as a hiking trail, it started out as a railroad.
Yep, I’m talking about one of the many railroads that were once built across the United States, that are now public trails and parks. In this case, it’s the Chicago, Milwaukee, St. Paul and Pacific railroad (now bankrupt), which became Iron Horse State Park here in Washington.
These railroads were once built to cross river valleys, and tunnel through tall mountain ranges in order to cross this vast country. They were incredible engineering marvels back in the day. Hundreds of millions of dollars were invested into building these railroads, and yet most of them don’t exist as operating businesses today.
This particular rail trail features a 2.3 mile tunnel through the Cascade mountains. That might not sound too impressive, until you consider that the tunnel was built in 1912-1914. It’s over 100 years old!
The tunnel was originally built to ferry both goods and passengers across the steep Cascade mountains, through Snoqualmie Pass. These mountains get a TON of snow in the winter, and a long tunnel was the only way the railroad could reliably ensure freight and passengers could get to Seattle during the long winter months.
It’s appropriate then, that our hike through the tunnel begins at the old Hyak passenger train station… which has now become the state park bathrooms.
A short hike from the parking lot is the start of the old Snoqualmie Tunnel. Did I mention this tunnel is over 100 years old and it would take us nearly 1 hour to walk through in complete darkness? Fun stuff!
At first, the kids thought it was too scary inside the tunnel, but they got used to it eventually. Fortunately, there’s always a light at the end of the tunnel.
After about an hour of walking , we emerged safely on the other side (which had this very cool double-arched entryway).
After that, we had a quick bite to eat, and walked back to the start (another hour of walking in the dark).
It was definitely a fun hike for the whole family, but it got me wondering — What was it that finally killed this railroad, and left the tunnel for me to hike through 100 years later?
After some internet research, I determined the Chicago, Milwaukee, St. Paul and Pacific Railroad failed because of too much debt, along with tough competition from other railroads like the Burlington Northern.
Impressive civil engineering projects during “boom times” (like the Snoqualmie Tunnel) caused the railroad to rack up huge debts that couldn’t be re-payed as traffic levels dwindled during recessions (and the Great Depression).
Unfortunately these same failure conditions are not unusual in modern times. I can point to dozens of public companies today that mirror many of these same attributes, as companies try to take advantage of today’s bull market. Many have big debts, plenty of competition, and poor returns on assets. It can’t bode well for the future..
The moral of the story here isn’t that capitalism leads to competition, excess, and waste. That’s simply part of the boom and bust cycle of capitalism.
As investors, we should learn an important lesson from this tunnel — Part of the investing game isn’t always about trying to pick the winners, it’s also about trying to pick the survivors. Avoiding obvious trip-ups like high debt levels, and tough competition seem like easy investing mistakes to avoid, but hindsight is always 20/20.
Can we safely avoid the same mistakes that tripped-up investors in this railroad a century ago?
Sometimes investing is exactly like walking through a dark tunnel — It’s easy to get tripped-up! Keep your flashlight handy, and be careful where you step!
Thanks for reading!!