At first glance, The Box is the history of the shipping container.
But really, it is a book about technological disruption and how the shipping container and the systems built to service these boxes changed the global economy.
These are my 11 business and investing lessons from The Box.
Lesson 1
The biggest disruption from new technologies is likely to be in industries where business is corrupt, there is heavy government regulation, and labor is inefficient.
I’ll expand on each of these later I the post, but these three factors staunch the advancement of an industry. Until eventually, a frustrated Entrepreneur steamrolls them all.
Lesson 2
If labor is too costly and inefficient, new technologies and improvements in efficiency will make this labor obsolete.
Heavily unionized labor creates inefficient labor and is prime for disruption.
Before bypassing New York City for New Jersey, Sea-Land tried making container shipping work. But the ILA
“it [International Longshoremen’s Association] sought a six hour workday and a requirement that every container, whatever its origin, be “stripped and stuffed” —That is emptied and reloaded—by ILA members on the pier. Stripping and stuffing, of course, were entirely make-work, and would have eliminated any cost savings from containerization.”
Union leaders are inflexible. They don’t care about what the consumer wants. They want to protect the number of current jobs, to keep dues high, and to keep their salaries and benefits high.
The consumer wants lower costs. If a new technology can bypass the higher costs from inefficient labor and supply cheaper goods, the consumer is going to run over stubborn union management.
New York City was a major port with a large longshoreman presence that put up a major barrier to the adoption of Container shipping in New York because it would eliminate existing jobs done by longshoremen, but it failed to see that those lost jobs were frictional and being replaced with new jobs created by the containers.
Ultimately, Malcom Mclean bypassed New York for newer container shipping-friendly ports in New Jersey.
Lesson 3
Heavy government regulation tends to get in the way of new technology. Politicians think short-term. They want to secure votes for their next reelection. If a new technology will put jobs at risk, then they’ll get in its way. The appearance of savings jobs is a sure-fire short-term vote getter. What they can’t see is that those jobs are eventually going away. They can either embrace the new technology and the jobs that it will bring, or have the technology find a friendlier political ally and have those jobs be created there, while you still lose the old jobs you were trying to protect.
Lesson 4
You need an evangelist, a visionary, a Malcolm Mclean.
Every new technology needs its evangelist to champion it. To push it through every barrier from legacy systems.
Lesson 5
If the market is there, keep raising capital to get there first.
Venture capital didn’t exist for Malcolm. At every key inflection point in Sea-Lands’ growth, he took on as much debt as possible to buy more ships, create more container ports, and add more routes. It lowered its operating costs and drove profits higher.
If he had waited until capital built up naturally, he would’ve missed out on his first mover advantage on these lucrative trade routes.
It’s the original Blitzscaling.
Because Malcolm took on debt, he had to worry about profits and the life of his company. But if venture funding existed, I bet Malcolm would’ve raised as much equity capital as possible to grow faster than Sea-Land did.
Lesson 6
You don’t have to have all the answers to all your problems or business. Simply know what the problem is and higher smarter people than you to solve it.
Lesson 7
Experts are poor fortune tellers. They don’t know the future, and they're not the ones trying to build the future.
Many prominent tech writers claimed that the Apple iPhone would be a flop.
Ray, writing for The Register at the time, said the Apple phone will not just fail, but “fail badly.”
“The Apple phone will be exclusive to one of the major networks in each territory and some customers will switch networks just to get it, but not as many as had been hoped. As customers start to realise that the competition offers better functionality at a lower price, by negotiating a better subsidy, sales will stagnate. After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish. The only question remaining is if, when the iPod phone fails, it will take the iPod with it.”
The same was said of container shipping.
“Many experts considered the container a niche technology, useful along the coast and on routes to U.S. island possessions, but impractical for international trade.”
Follow the consumer. They will tell you what they want.
Lesson 8
Cost-cutting must be the focus every day.
With all the debt Sea-Land took on and the increasing competition, Sea-Land needed to reduce costs everywhere it could and increase loading efficiencies.
When a container ship is underway, it is making money. When it is sitting, it’s losing money.
“Weekly reports documented cash flow. And there was an endless stream of demands for better cost control. Shaving 1.6 cents off the cost of handling 100 pounds in Ponce could save $14,300 a year. One more container lift per gang hour would save $180,000. Limiting long-distance phone calls to three minutes would save $65,000.”
Lesson 9
Disruption by new technology takes a lot longer than people expect. The more capital-intensive the technology, the longer it will take.
The benefits and cost savings from container shipping were evident on the maiden voyage of the Ideal-X in 1956 and then even more pronounced the next year when the Gateway City started operations in 1957.
Even with all the time and cost savings, container shipping only accounted for 8 percent of the general cargo moving through the port of New York and only 2% of cargo traffic on the West Coast.
Because other shipping infrastructure had to catch up and invest in container shipping too. New wharves and docks needed to be built to handle the increasing size of container ships. Rails needed to connect to these new ports and docks. And because no railroad spanned the entire length of the U.S., new hubs needed to be built to transfer containers to a new line to finish the journey. Systems needed to be built to load and unload containers from trucks.
And before all this investment could start, standards needed to be set on the size and shape of containers to justify any investment.
The capital investment across the whole transportation system was huge and would take time for everything to come online.
Final Thought
The shipping container’s story teaches us that transformative innovation often faces resistance from entrenched interests, requires visionary leadership, and demands significant capital investment. Success comes from relentless cost optimization, following consumer demands, and having the patience to see systemic change through. While experts may doubt and obstacles may seem insurmountable, history shows that beneficial innovations eventually prevail, reshaping entire industries and economies in their wake.