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 celebrity” Krish 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.