The Box

The Box

After I'd read The Grid, a few friends mentioned I should check out The Box. It details the history of the container industry, and the winding road that eventually led us to the cheap shipping we enjoy today.

More recent than you might think

I'd always thought of shipping containers as being a relatively well-established piece of technology. But it turns out that wasn't at all the case! The first container company was actually started by a trucking entrepreneur, Malcom McLean in 1950.

McLean intuitively understood that packing items together allowed you to more quickly and efficiently process items. So he secured a bank loan for two WWII tankers.

He was also a wizard of financial engineering, carrying out the first leveraged buy-out process in the US, and also using creative debt financings to continue to re-invest in the business. At a time when hiring processes were very nascent, McLean used to give his employees a Wunderlich-style assessment.

Containers changed the port landscape

Containers led to a huge upheaval in which ports were the go-to shipping areas. New Jersey rapidly replaced NYC because it had the ability to build large crane/container operations, and Oakland did the same thing to SF. LA became the largest shipping port on the west coast, solidifying it ahead of Seattle and San Francisco.

Containers also reduced a key factor for company headquarters. Instead of needing to be located in NYC, companies with large shipping needs could be located anywhere, as the cost of shipping had been reduced to near-zero.

Human labor is the limiting constraint

I hadn't realized this, but most of the cost of shipping items actually comes from loading and unloading. Container ships at sea have a very tiny cost, compared to the gangs of 15-20 longshoremen who would be responsible for loading and unloading ships.

Approximately 10% of the cost of transport actually comes from the fuel required to ship goods. The rest is all labor.

Unions frequently halt progress

A frequent theme throughout the book is how much control and power unions have. The unions could quickly see the "writing on the wall" and would do everything they could to prevent workers from loading items at unregulated times or help keep technology from replacing their jobs.

Step-changes in productivity are huge

Aside from the internet, it's been awhile since we saw a major 'step change' in terms of our ability to produce or transport goods. It's cool to be reminded of just how much early containers dropped the price of transport, from $5/ton to $0.15/ton. When that sort of fundamental shift happens, it's easy to see why there are all sorts of interesting knock-on effects that happen, including mass relocation of factories.

Standardizing is really hard

In the lead-up to widespread container usage, no company could agree on what sorts of containers to use! Each one had slightly different designs; some used wheels, some used rails, and each company used an entirely different variant of 20', 24', 30' and 40' containers.

Eventually the government had to set standards and regulations for container dimensions, no agreement between companies was had!