Lessons from The Box by Marc Levinson

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Books / Tuesday

Today’s book is really dense with a lot of takeaways. I’ve narrowed it down to three for today but there is a good chance that I will take this discussion further into next Tuesday. Or I might make this a work-in-progress post where I keep coming back to add ideas. 


The Box: How the shipping container made the world smaller and the world economy bigger by Marc Levinson sounds like the most boring thing ever. At ~400 pages and an additional 100 pages of notes, it’s a real doorstopper. Yet it is one of my favorite reads of the summer.

Why? Because it is that rare book that takes something we take for granted and peels back the layers of complexity behind it. It takes something unsexy and shows how important it is to our modern way of living. Other books in this genre include Debt: The First 5000 Years by David Graeber and Salt: A World History by Mark Kurlansky.

Another question comes to mind – why care about shipping containers at all? It’s literally just a box!

True, but simple ideas can be powerful. The shipping container – by decreasing transportation costs – is one of the key drivers of globalization. It connected the whole world.

And The Box is not just about shipping container, it’s about how ideas become reality. So let’s dive into the lessons:

Ideas are fragile in the beginning

A few days after Steve Job’s death in 2011, Apple organized a memorial service for him open only to Apple employees and special guests. The event was broadcasted on apple.com. During the remembrance, Jony Ive – the brains behind all of Apple’s iconic products – talked about how Jobs was really good at protecting ideas:

Steve used to say to me — and he used to say this a lot — “Hey Jony, here’s a dopey idea.” And sometimes they were. Really dopey. Sometimes they were truly dreadful. But sometimes they took the air from the room and they left us both completely silent. Bold, crazy, magnificent ideas. Or quiet simple ones, which in their subtlety, their detail, they were utterly profound. And just as Steve loved ideas, and loved making stuff, he treated the process of creativity with a rare and a wonderful reverence. You see, I think he better than anyone understood that while ideas ultimately can be so powerful, they begin as fragile, barely formed thoughts, so easily missed, so easily compromised, so easily just squished.

This concept of ideas being fragile reverberates throughout the story of the shipping container.

While the concept of putting smaller items together in a bigger box to make it easier to transport wasn’t new, most attempts were impractical. Margins were slim in the freight business and changing to container shipping required multi-million dollar investments.

So the idea of containers was fragile. At this time, Malcolm McLean nurtured it. He provided the capital, he provided the surrounding infrastructure (more on this below), he worked the labor unions. You need a champion for ideas when they are new. McLean was that champion.

Being a champion of a good idea is of course potentially very lucrative. It was definitely very lucrative for McLean!

Interactions, not actions rule complex systems

When you are dealing with a complex system such as ocean shipping, you need to keep your eyes on the interactions of different variables like labor unions, fuel costs, local politics, technological innovations, etc.

First example: For a container shipping operation to be successful, you need to do things very fast. One of the first bottlenecks for the spread of container shipping was that the existing infrastructure (or the lack of it) could not support the pace necessary for profitability. For that, McLean and his company had to make a completely new type of port. Think of this as a pre-requisite of sorts. You can’t just build a business around a single innovation, you need to make sure that the interactions of the whole system works.

Second example: The interaction of politics and containerization enabled New Jersey to come an outsized hub for shipping from the New York area. Technically, New York (because of it’s overall propensity for scale and general business presence) makes more sense. But the New York Port Authority was rejected from making New York harbors container-ready. So, they chose to modify the ones in New Jersey. This led to a loss of thousands of existing jobs in the New York City port areas and could have been avoided (or at least delayed) if New York City officials had seen the writing on the wall about shipping containers.

Importance of leverage

I am not talking about leverage in the financial sense, but more in the original meaning of the world. A small input that leads to an outsized output.

McLean showed early signs that he understood this better than most. His earliest business was trucking. In a highly regulated industry where trucks from a single company would only be allowed to operate on selected routes, McLean would regularly “lease” routes from other companies to make his overall routes more efficient and in the process offer the lowest rates in the market. For example, if I had to from DC to Atlanta but I didn’t own the operating license for any of the middle states, leasing routes in those states can help me cost down on hundreds of miles and thousands of dollars.

The size of his leverages grew in sync with the size of his company. Once in the shipping business, he used a combination of shadow businesses and high velocity decision making to control shipping to and from Puerto Rico. This was very lucrative and his company had a monopoly in this market because of how quickly he moved in. This was way easier than trying to capture each single state in the US one-by-one. It doesn’t matter how many times you win, what matters is the magnitude of each victory.

 

1 Comment

  1. Pingback: Best of the blog – A Summer of Learning

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