There’s a lot of great books you can read if you’d like a history of how the Internet has changed the world of communications. If you’d like to know how a much more significant revolution transformed how we move atoms around the world, your options are much more limited. Frankly, shipping containers just aren’t as sexy as TCP/IP packets, though they’re lots more important. The internet may be changing how we work and play, but the rise of container shipping has changed the balance of world trade, rewritten the rules of modern manufacturing and transformed port and manufacturing cities around the world.
Marc Levinson, with his book “The Box“, is an awfully good guide to this transformation. An economist and former finance editor of The Economist, Levinson understands that a story about metal boxes, standardization and labor unions needs a character for the reader to follow. Fortunately, Malcolm McLean, the father of container shipping, was a character.
McLean was a trucker, a self-made magnate who turned a single gas station into a fleet of hundreds of trucks hauling cigarettes and textiles from North Carolina to the northeast. MacLean had a gift for making money in highly regulated commodity industries, as trucking was immediately post-WWII. He bought or leased routes from other truckers, switched his fleet from gasoline to diesel, negotiated fuel discounts with stations along their routes. He cut costs relentlessly, massively leveraged his assets and built a remarkable company by the mid-1950s.
The key to McLean’s success was his ability to think in terms of large systems – he wasn’t concerned with making trucking more profitable, he was focused on the whole world of shipping. McLean saw an opportunity to purchase war-surplus cargo ships from the US government and undercut railroad prices with a combination of trucking and shipping between Houston and Atlantic coast ports. Cutting costs as always, McLean realized that the wheels on his truck trailers were wasted space, so he hired a leading truck trailer engineer to build stackable containers which could be efficiently packed onto ships and placed onto truck chassis.
Levinson weaves the story of McLean’s creativity with the recalcitrance of the shipping industry, and especially of longshoremen’s unions. Longshoremen had one of the most flexible – and most dangerous – jobs in the world at the end of WWII. In the world of “breakbulk” shipping, they had a critical and highly skilled job, fitting various commodities into the hulls of ships for safe transport. The unions recognized that containers were a threat, but it would have been hard for them to understand just how profound the transformation would be. Unions negotiated compensation for handling containers, and makework jobs, ensuring that 22 men would work a hatch of a ship, despite the fact that only eight were required to load and unload containers.
The struggles over the size of work gangs hid a much larger truth: containerization was making old ports like New York and San Francisco obsolete. Huge warehouses for goods weren’t neccesary – storing goods in sealed containers was safer than stashing them in warehouses, and shippers discovered that pilferage of their goods went down when they moved to using containers. But new ports needed huge amounts of space for trucks to load these containers, and expensive investments in cranes to load containers efficiently. The ports that made these investments – Oakland, Newark/Elizabeth, Charleston, Felixtowe – stole traffic from cities that weren’t wise enough to make these investments.
Levinson is especially gifted in helping readers see the ripple effects of these changes. The overall reduction in shipping costs reduces the competitive advantage factories located near ports historically had – as container ships began calling at Newark instead of at New York City’s crowded docks, the waterfront factories were suddenly at a disadvantage, which helped quickly transform the industrial character of the city. Once containerships became predictable enough that factories could expect shipments to arrive within 24 hours of their promised date, they were able to adopt the “just in time” techniques used by companies like Toyota, keeping a very light inventory and relying on suppliers to deliver components days before the final product was assembled. Levinson points out that 75% of the cargo carried in containers today isn’t finished products, but are “intermediate goods”, produced by one factory as an input for another factory.
This development in turn has rocked the world of manufacturing as a whole. Before the dramatic drop in the cost of shipping, it made sense for manufacturers to produce as much of their own components in their own factories, a model referred to as “vertical integration”. Now one factory can produce nothing but hair for Barbie dolls, while another produces skin-colored plastic, another molds the plastic and yet another assembles finished dolls. When McLean’s containers stop moving, so do the factories – in the days after 9/11, when border controls slowed the ports, US auto manufacturers found themselves shutting down production within three days due to lack of components.
Malcolm Gladwell, in reviewing Michael Lewis’s “The Blind Side” – the story of a disadvantaged young athlete taken in by a wealthy family and helped to prepare for a college football career – introduces the idea of “degree of difficulty“. “The Blind Side” isn’t Lewis’s best book, but he gets tremendous credit for telling a story that’s extremely difficult to tell, as it features a main character who’s pathologically unwilling to talk about his past. Levinson deserves similar credit here – it would be a stretch to say that he’s made the Materials Handling Sectional Committee 5′s role in setting common standards for container size a pageturner, but it’s a much better read than you’d expect. And for anyone who’s concerned with how globalization actually works – the nitty-gritty of the systems that have changed how we eat, shop, work and build – “The Box” is a great starting point.