The Box: A review

So over the weekend I started and finished reading “The Box: How the shipping container made the world smaller and the world economy bigger” by Mark Levinson. It’s a fascinating book, and one that I had been intending to read for a very long time. Somehow it always kept slipping my mind whenever I wondered what book to buy next, and I’d pushed buying it for a long time now.

Finally, a few days back, when “unknown twitter celebrityKrish Ashok asked his followers to send him reading recommendations, and when he published the list, and I saw this book on the list, and I saw that the book was available on Kindle for Rs. 175, I just bought it. This is the first book in a very long time that I’ve bought “straight” off the Kindle Store, not bothering with a sample.

It’s a fascinating book, as it takes us through the 50-odd years of history of the shipping box. And on the way, it gives us insights into the development of the world economy through the 50s and 60s, and factors that led to the logistic revolution ushered in by the box.

We think of post world war America as this capitalist haven, where markets were free, and you could get jailed for communist leanings. We tend to think about this time as one of innovation and freedom of business, leading to high economic growth.

This wasn’t the case, though. While the US was nominally capitalist and markets were supposedly free, this was a time of heavy regulations, and the presence of cartels. International shipping rates, for example, till the mid-1970s, were set by “conferences” (basically cartels), after which the cartels broke down. It was not possible for a carrier to quote an integrated source-to-destination rate, and rates had to be quoted by leg. Someone who wanted to start a new train route had to prove to the regulators that it would not harm existing players!

And then there were the unions. Levinson devotes an entire chapter to how the unions were managed. Basically containerisation meant greater mechanisation and a reduction in demand for labour. And this was obviously not acceptable to the dockworker unions, and led to protracted battles which needed to be resolved before containerisation could take off. The most interesting story came from the UK, where unions in most established ports (primarily London and Liverpool) blocked containerisation, and went on strike in the specially developed container port at Tilbury. Felixstowe, which had hitherto been too obscure a port to attract unions’ attention, now unencumbered by unions, jumped on to the container business and is now by far the UK’s biggest port.

Levinson also pays much attention to how the container shaped economies in general. Prior to containerisation, the cost of changing mode of transport was very high, since individual items needed to be unloaded from one means of transport and loaded to another. Industries were usually located based on access to port, and ports came up to service nearby industries. Containerisation changed all that. Now that it was easy to transport using a series of different means of transport, the location advantage of being close to port was lost. And this had massive effects on the economy of regions.

Massive effects on economies also happened due to the scale factor that containerisation brought in. Small ports didn’t make any sense any more, since the transaction cost of berthing was too high. And so small ports started dying, with business being soncolidated into a few larger ports. The game changed into a winner take all mechanism.

In the 1950s and 60s, before the coming of the container, shipping was a low-capex high-opex (operational expenditure) business. Most ships were old and cheap, but costs in terms of labour and other things was high. With the coming of the containership, the cost structure inverted, with the capital expenditure now being extremely high, but opex being quite low. This led to “revenue management”, and a drop in prices, and ultimately the breaking of the cartels.

The book is full of insights, and chapters are organised by subject rather than in chronological order. It gets a little repetitive at times, but is mostly crisp (I read it in a weekend), and the insights mentioned above are only a sample. And it tells us not only the story of the box (which it does) but also the story of the world economy, and regulation, and competition, and unionisation and economies of scale. Highly recommended.


How 2ab explains net neutrality

I’ve temporarily resurrected my blog on the Indian National Interest, and this post is mirrored from there. This is a serious argument, btw. After a prolonged discussion at Takshashila this morning, I convinced myself that net neutrality is a good idea.

So Prime Minister Narendra Modi has set off this little storm on Twitter by talking about the relationship between India and Canada being similar to the “2ab term” in the expansion of (a+b)^2 .

Essentially, Modi was trying to communicate that the whole of the relationship between India and Canada is greater than the sum of parts, and it can be argued that the lack of a “cos \theta” term there implies that he thinks India and Canada’s interests are perfectly aligned (assuming a vector sum).

But that is for another day, for this post is about net neutrality. So how does 2ab explain net neutrality? The fundamental principle of the utility of the Internet is Metcalfe’s law which states that the value of a telecommunications network is proportional to the square of the number of entities in the network. In other words, if a network has n entities, the value of these n entities being connected is given by the formula k n^2 . We can choose the unit in which we express utility such that we can set k = 1, which means that the value of the network is n^2.

Now, the problem with not having net neutrality is that it can divide the internet into a set of “walled gardens”. If your internet service provider charges you differentially to access different sites, then you are likely to use more of the sites that are cheaper and less of the more expensive sites. Now, if different internet service providers will charge different websites and apps differently, then it is reasonable assume that the sites that customers of different internet services access are going to be different?

Let us take this to an extreme, and to the hypothetical case where there are two internet service providers, and they are not compatible with each other, in that the network that you can access through one of these providers is completely disjoint from the network that you can access through the other provider (this is a thought experiment and an extreme hypothetical case). Effectively, we can think of them as being two “separate internets” (since they don’t “talk to” each other at all).

Now, let us assume that there are a users on the first internet, and b users on the second (this is bad nomenclature according to mathematical convention, where a and b are not used for integer variables, but there is a specific purpose here, as we can see). What is the total value of the internet(s)?

Based on the formula described earlier in the post, given that these two internets are independent, the total value is a^2 + b^2. Now, if we were to tear down the walls, and combine the two internets into one, what will be the total value? Now that we have one network of (a+b) users, the value of the network is (a+b)^2 or a^2 + 2 ab + b^2 . So what is the additional benefit that we can get by imposing net neutrality, which means that we will have one internet? 2 ab, of course!

In other words, while allowing internet service providers to charge users based on specific services might lead to additional private benefits to both the providers (higher fees) and users (higher quality of service), it results in turning the internet into some kind of a walled garden, where the aggregate value of the internet itself is diminished, as explained above. Hence, while differential pricing (based on service) might be locally optimal (at the level of the individual user or internet service provider), it is suboptimal at the aggregate level, and has significant negative externalities.

#thatswhy we need net neutrality.

Why Google, Facebook, etc. are against Net Neutrality in India

I’ve been out of country for close to a month now, so haven’t really been following India news too closely (apart from via social media). But from my (biased :) ) sources I understand that TRAI has put out a discussion paper in which they want to permit telecom companies to charge you based on the service that you use, thus violating Net Neutrality.

Now I’m yet to take a stand on this (this argument by Tim Harford against Net Neutrality is rather compelling, making me believe that well implemented competition regulations can mean we can make do without Net Neutrality, but I haven’t given it too much thought yet), but I have an idea as to why the likes of Google and Facebook, which in the past and in other geographies have come out strongly in favour of Net Neutrality, are okay with Net Neutrality violation in India.

The basic issue in India is with “over the top” services such as WhatsApp and Viber which the likes of Airtel and Vodafone see as a threat for it competes with their rather lucrative voice and SMS business. I’ve mentioned in the past that there’s a quality issue here which the telecom companies can differentiate on (packet switching doesn’t work that well for voice), but given costs it is hard to make a compelling case for using circuit switching for international calls.

So the likes of Airtel and Vodafone are threatened by such services and want to charge users more for using WhatsApp and Viber compared to other applications. Net Neutrality supporters, who argue that internet infrastructure should just be a set of neutral pipes (rather than a “two-sided platform”, as Harford argues), argue that this is unfair, and that Airtel and Vodafone are exploiting their positions as gatekeepers (literally) to defend their own related business.

Coming to the point of this post, entities such as Google and Facebook are coming out on the “wrong” side of the net neutrality debate here in India, arguing that internet companies should be looked at as two-sided platform markets rather than neutral pipes (resisted the urge to use the phrase “information superhighway” there!). Considering that they’re proponents of Net Neutrality elsewhere, why are they taking this stance in India?

Assuming that final regulations come out in favour of net neutrality (treating internet as infrastructure, and not a platform), how should the likes of Airtel and Vodafone react? Clearly their data business is cannibalising their voice business, so they should logically increase their prices for data plans (no brainer). Given that they will not be allowed (in this situation) to charge differential rates based on the service, they will have to uniformly jack up data rates.

This can be troublesome for Google and Facebook on two counts. Firstly, the telecom providers may not get their pricing right, and rather than having a ramp (charging heavy users heavily, since only such people will be using WhatsApp or Viber), they might increase data rates across the board. This will result in a drop in mobile internet penetration (one reason it’s so high now is that it’s cheap), and considering that Google and Facebook are services that pretty much every who uses the internet in India uses, it will result in loss of user base, traffic and revenue (possibly) for them.

The second problem is that even if telecom operators get their pricing right (maintain current pricing for basic plans, but jack up rates for high data usage) it spells trouble for Google and Facebook. One of Google’s widely used services is the video streaming application Youtube, and Youtube consumes high bandwidth. Facebook is getting into native video in a big way, and it is estimated that it might be more successful than Youtube in terms of advertising. And with correct internet pricing under net neutrality, demand for services such as Youtube and Facebook Video will go down significantly, which is not good for those services.

So the simple answer is that the reason Google and Facebook are coming out against Net Neutrality is that they are coming out on the right side of the new proposed (anti neutrality) regulations. Like WhatsApp and Viber, they too are high bandwidth applications, but unlike WhatsApp or Viber they don’t compete directly with the owners of the pipes. Thus, they want providers to have the ability to impose differential pricing, since that will mean that subscribers can access their content for cheaper, and this allows them to make more advertising revenues.

In my view (again note that I’m yet to take a stand on this net neutrality business), this move by Google and Facebook to support the anti-neutrality regulations is extremely short-sighted since it can hit them back at a later point in time. There is no guarantee that in the long term their services will not compete with that of telecom providers (Hangouts? Facebook voice calling?) and the regulations that they are currently supporting can come back to hit them at a later point in time.

It seems that Google and Facebook are working on an assumption that there will not be other high-bandwidth applications that will compete less with pipe-owners (telecom operators) than them (Google & Facebook). They are very likely to be in for a surprise, and end up as the cranes in this Panchatantra story.

Lizsting it in an airport warehouse

I had a rather bizarre experience at the Lizst Ferenc Airport in Budapest last evening. I boarded the plane from a warehouse. Really.

When it was announced at 7:25 pm that our 8:15 RyanAir to Barcelona would board from gate A18, we walked expectantly to the A side of the terminal, hoping to find our gate. All we found was this gate that said “A12-A18″, before accessing which there was boarding pass control. It seemed bizarre, but we assumed that we would be taking a bus to another terminal to board, got our passes scanned and walked on.

There was going to be no bus. There was another terminal to board from, however, but it was a warehouse. Literally. Here’s what it looked like (pictures from wife’s iPhone):

IMG_0298 IMG_0299


That’s right. We were indeed in a large warehouse-like temporary structure constructed out of tin or asbestos or some such material. A rather ingenious way to extend the airport.

This warehouse had eight marked entrances (A12 to A19) and eight marked exits (respectively). At the entrance of each entrance there was another level of boarding pass checking (along with passport), after which we were let in to the queue to board. And this was where RyanAir separated out its “regular” customers from those that had paid for priority boarding (who were put in another “bin” (no better word for that) ).

Ours was not the only flight boarding at that time (though you can see that one side of the warehouse – A12 to A17 was completely empty). A Hungarian low-cost carrier called WizzAir was boarding its flight to Milan from A19 at the same time. And it again looked like a bus stand. Long snaking lines of passengers who had gone past the boarding pass check waiting to board.

Low cost airlines sometimes try to save on airport costs by using secondary airports in several cities. For example, in London, they use airports such as Stansted and Luton, and in Paris they use Orly. But some cities don’t have a well functioning secondary airport so even low-cost airlines are forced to use the primary airport. This “extension” of the Budapest airport as used by the likes of RyanAir and WizzAir is simply bizarre, though!

Anyway, presently a stewardess appeared and opened the exit door for A18 (this was after A19 had been opened and the Milan passengers sent on their way). We walked out through carefully marked barricades, and saw a RyanAir plane in front of us. And we walked through the barricades until we were stopped a few metres before the plane (the line had been orderly so far, and would remain so).

We remained there for a few minutes as they presumably cleaned up the aircraft in that time. I think the reason we had been moved from the warehouse to this queue was so that more space could be created in the warehouse so that boarding passes of all passengers could be checked in this time. The use of so many “buffers” (or “chambers” if you were to draw a sewerage analogy) was quite interesting in terms of RyanAir’s queue management (the wife has promised a more technical blog post on this). Anyway, here’s what this queue looked like after we had exited the warehouse:

IMG_0301 IMG_0300

Soon the final barricades opened and we were allowed to board the aircraft (both doors of the aircraft were open). There was a bit of inefficiency here since people approaching the wrong door ended up slowing the boarding process (there were some people in rows 31 and 32 who boarded from front creating a massive traffic jam), but the boarding was concluded soon enough (all previous bottlenecks having been removed, and the flight took off on time!

It was a rather bizarre experience, and the first time I had boarded in such a large airport without using either an aerobridge or a bus. And I don’t know if this is a temporary arrangement in Budapest as they either expand the airport or reopen Terminal 1, or if this is how things are supposed to be in the long term. And I’m amazed that this kind of jugaad was first implemented in Europe rather than in India.


Apartments and mixed zoning

So, as Udupa put it, I went to Barcelona “on a study trip like a corporator”, came back and wrote one piece on urban planning in Barcelona and what India can learn about it. The piece is in Pragati. An excerpt:

That said, there are important lessons to be learnt for India from E’ixample. Most current models for urban development take after the sprawl-heavy automobile-intensive US model. What is important to make the new “smart cities” effective is to move away from this model to a more dense public transport focussed “European model”. And from this perspective, the new cities could do worse than looking to Barcelona’s E’ixample for inspiration.

Read the whole thing. Anyway, so I talk about two features of E’ixample (the district in Barcelona where the wife lives, and hence where I spent most time during my trip last October) in the Pragati piece, and mention that they’re useful concepts that India should adapt for its “smart cities” program – mixed zoning and apartments.

The former, I argue, ensures that there are “eyes on the street” at different points in time. This helps keep the crime rate low (deserted streets and lack of pedestrian movement usually make it more conducive for criminals), and provides a safe atmosphere. The latter ensures good efficient land use and allows for provision for large roads and open spaces without compromising on total density. And as I realised this evening, the two concepts (apartments and mixed zoning) are not independent.

One of the reasons that people offer for strict zoning (keeping residential and business areas disjoint) is that they don’t want random people hanging out in front of their residences. Random people hanging out in front of your house makes you feel unsafe, and a bit weird, and if there is a shop or a restaurant next door, the chances of this happening are rather high. For example, recently the Bangalore Mirror wrote about a “controversy” regarding the opening of a cafe in a residential area in Koramangala. Neighbours don’t like such cafes as it will lead to people hanging out in front of their homes, and that gives a sense of violation of space.

So what makes apartments and mixed zoning go together? When you live “high up” in a mid or high-rise building which you share with many other people, your sense of ownership of the space in front of your house is lower. If someone is “loitering” in front of your house, you are less concerned because 1. you are farther away from the “action” and 2. you don’t feel a sense of violation of your space. Thus, being in an apartment makes it more palatable for you that there are shops and restaurants and offices close to your house.

Now, everyone likes shops and restaurants close to home, but in case of single-unit homes, people are likely to adopt a “NIMFY” (not in my front yard) attitude towards these – for they might violate your space. Apartments help address this conflict!

Hence apartments and mixed zoning go hand in hand, and both need to be encouraged. Note, however, that I’m not proposing Brigade Gateway as the ideal model for urban development!

Bangalore airport has become horrible


Flying domestic after a really long time. The last time I did was back in august. And the Bangalore airport seems to have become horrible in the meantime.

Check out the picture. Gates so close together and hardly any seats for passengers to wait on. Now it’s well known that most domestic flights have 150-180 seats. How hard is it to design waiting areas to seat so many people per flight?

And the Bangalore airport has just been expanded and it’s so congested. Talk about continuing to underestimate growth!

The only hope is that this is a temporary arrangement and once the expansion is complete we’ll have better waiting space.

Red bus

No, not that red bus. I’m talking about the red BMTC buses in Bangalore. They used to be red till 1998 or 1999, and then the government of the day decided that the buses were due an image change (red being danger and all that). This coincided with the spinning off of the BMTC from the erstwhile BTS (which was part of the Karnataka State Road Transport Corporation). The buses were all painted blue.

Over the years, new kinds of services have been launched. There was the Pushpak – coloured beige. Then there was the slightly premium Suvarna, coloured a very light purple. And then there were the pass-only green buses, women only pink buses (yes, really) and the red Volvos. For some reason, red buses have started making a comeback to mainline BMTC routes, though I don’t quite know the reason for the reintroduction of the colour, or if they are any different from the blue and white buses.

So for the first time in fifteen years or so, I rode a “normal” red BMTC bus today (in the intervening period I either rode “normal” blue and white buses or premium Volvo red buses). Some pertinent observations from this rather momentous (!!) journey.

I was close to Shivajinagar, and had to come home to Jayanagar. Considering that it’s a pain haggling with auto rickshaw drivers in that area, I decided to take a bus (especially since I was coming from a place really close to the bus stand). I quickly walked up to the Shivajinagar TTMC (“travel and transit management centre” or something). The footpath on the St Marks Road extension on which I walked was quite poor – I hope the TenderSure project that is rebuilding roads and footpaths in the middle of the city reaches there soon.

Even navigation within the TTMC is quite bad – it’s badly designed in the sense that there’s no space to walk where you have no chance of being hit by one of the hundreds of buses there. A helpful official told me where I would get the bus to Jayanagar, but to get there (walking fast) was quite a challenge. Finally I got there and found a red 27E (going to JP Nagar) and hopped on.

The BMTC is definitely not cheap – the journey set me back by 19 rupees (to put that in context, I had traveled there in the morning by auto rickshaw and paid Rs 86). It’s definitely been a long time since I’ve traveled by bus as I handed the conductor a ten rupee note and looked expectedly for change. I had to shell out another ten bucks.

I didn’t get a seat but found a comfortable place for myself to stand (right at the back of the bus). The concept of having the door in the middle of the bus rather than at the fag end is a good one – it allows you to go deep into the bus and find good places to stand. Also, you are looking ahead while standing and can look out for any shuffling in the seats which might potentially get empty!

What I noticed during my journey (which took 25 minutes which is not bad at all for that time of the day) is that each of these longish distance buses actually serve several small markets – if we can figure out a metric for how many times the passengers in the bus “churn”  (it’s not too hard, just feeling lazy right now) it might help us plan routes better in terms of multiple short routes rather than a few long routes (that can help cut down uncertainty in timings, etc.).

So the bus for example completely emptied itself out at the Shantinagar TTMC (which is a very good TTMC IMHO, since no buses terminate there), and then got refilled a couple of stops later in Wilson Garden. Earlier, there had been massive churn near Richmond Circle. And so on.

This is perhaps related to the cost but there seemed to be a very different demographic that populated the bus (based on looks – I’m being judgmental and all that, I know) compared to the type 15 years back. In terms of social strata the bus seemed much less diverse today than 15 years back, and it worked both ways. It seemed like most bus travellers today could be broadly defined as being lower middle class – I hardly saw any labourer types (might be a function of the route also) or too many upper middle class types in the bus. It is interesting how these things change!