Monday, May 20, 2019

The Box: Internet Alone did not bring Globalization

I do not remember where I read about this book but I do remember adding it to my To-Read list. But when I got to it was worth the recommendation! Wonderful book - which gave me lots of valuable insights and perspective on how the world has not solely been transformed by bits and bytes alone. The book's TL;DR can easily be - Globalization did not happen only cause of the Internet, It was the 
Container which laid the groundwork. If the transportation industry hadn't figured out how to ship products from one corner of the world to other efficiently with lowest costs - no matter how easy was it for two people to talk across the world, higher costs would have deterred any free flow of commerce and trade.

I also understood how seemingly slow changes change the course of society and ultimately transform cities and towns unheard before - changing the fortunes of many overnight.

Some might argue that this book is academic and dry at places but having read it thoroughly I would point that the author did an extremely good job in covering all aspects revolving around the container technology - the shippers, trucker, dockworkers, exporters and regulators who were at the center of it but also the macro effect.

What I wish would have been there was some maps of the shipping routes to help the reader easily visualize the challenges and travails of maritime trade. 

Overall it was a great read - feel like I learnt quite a few things!

The Internet is given a lot of credit for the globalization - how the world came closer and trade between countries far across became possible. But it is containerization that was a major precursor to the internet revolution which made the Internet impact possible.
Containers - “the box” made logistically possible how competition would be right there at the doorstep - forcing almost all industries to innovate and take measures to cut costs to stay in the game. 

Ideal X - First container ship to sail in 1956 from Newark to Houston 

Before containers were a thing - shipping was done in break-bulk ships as in all commodities were stocked in the cargo hold of the ship. (breakbulk - all discrete items had to be handled individually - cement bags next to sugar next to copper wires). There was no pattern in how the items were stored - often it would require that at a port all the items to be unloaded because the cargo meant for the that port was at the bottom under all other cargo. Also, loading & unloading was all done by dock workers and longshoremen which were all unionized. Since it was all manual labor they had very less incentive to be efficient which was in direct contrast to the shippers’ interests.

It is also worth mentioning that the working conditions at the docks were not at all safe. Dock workers had low salaries and they had to literally fight to get a job each day by assembling at the square - waiting for the ship to arrive whenever that maybe. Going to home to grab a quick bite or for other errands even though the ship was scheduled for arrival in the evening - usually meant losing their spot in the queue. All this unorganized system meant that the dockworkers had developed more 
loyalty towards each other than to the company. They formed unions which were interested in drawing up contracts with every minute detail like time to take breaks and how long they would be in.

Another thing that happened was that these unions were strictly against outsiders - with the dockworkers living near the docks - it became a family profession i.e the grandfather got his son his place in the docks when he retired and the son tried to make sure no outsiders came in so as to reserve a place for his son in the future. The dockworkers culture was very insular.

Even after unloading a complicated web of interchanges from the port to trucks, trains, planes and ferries awaited the exporters - which drove up the costs. Freight transportation was ultimately too unpredictable for manufacturer to take risk on delivering on time. Large inventory thus became a need to keep the production lines moving. With all these inefficiencies ships spent more time anchored at the docks than sailing which was what it should be primarily doing. The shipping industry was crying in need of an innovation to fix all these problems.

Malcolm McLean came up with this idea of containers and the first container ship - a refitted oil tanker sailed in 1956. It brought with it these benefits: 

  • all items could be stored without the need to be handled individually,
  • also it stopped cases of thefts - thus driving down insurance costs,
  • The shipping line company over the years made the loading & unloading process more efficient using machinery and custom built cranes - cause of which the longshoremen gangs size constantly dropped from a once all time high of 22. Ultimately all that is needed now is a crane operator who sits many feet above the ground in a crane and picks up the container via the hooks on its corners and places it on a truck (or a flat railway car) and the truck (or the train) drives away to a distribution hub where the container is unloaded - thus reducing the time ship spent waiting for its cargo to unload.
  • Lots of cities which were hesitant to invest or lacked foresight to see the change coming in maritime industry via containers - missed out.
    On the West coast - Los Angeles, Oakland - Alameda (home to Matson), Seattle and on the East coast - New York (after substantial investment), Savannah (late joiner) cashed in as traditional hubs like San Francisco, Portland and in Europe- London, Liverpool and Paris missed out.
    Globally, Rotterdam, Felixstowe and Antwerp in Europe and China with its relentless investments in its shipping ports caught up late but now is the leader with the most busiest and thriving ports.
  • The shipping line companies were earlier organized more as cartels (they were called “conferences”) - they charged for every type of commodity in the cargo which didn’t make sense. And if an exporter ever used any shipping line outside the conference - the next time he tried to use any of the shipping lines of the conference he had to pay fine and pay more over. With the advent of containerships - what was inside a container became immaterial. TEU (20 foot Equivalent Units) became the unit on what was charged. Also, resistance of unions, the proximity of the port to the nearest railroad and trucking routes became super important on where the ships would make a stop. Little known ports benefitted.
  • Some of the shipping lines tried to tap on the containerization- commissioning new ships to be built for different sizes of containers - a capital intensive project. This was before container sizes were standardized. Different sizes was a problem as it meant all container ships couldn’t stop at any ports as often a port wasn’t equipped with containers of various sizes. Many trucking and railroad companies couldn’t handle different container sizes - thus providing an opportunity for a mini-cartel. There was a difference in container sizes in use between Europe and USA causing logistical nightmares. Until after a long drawn process standardized the container-sizes bringing in some semblance of order.
  • The time the first container ship sailed in 1956 is consequential as around the same time lots of ports on the Pacific side lost traffic as lumber moved on to road leaving the huge investments as white elephants. It revived the slowing maritime trade. 

If you look around today you can see the undeniable impact of containers all around us - Amazon and e-commerce websites ship multitude of items to their customers all in a box - inspired by the steel container. At a few places you can see people living out of containers or even hosting creative studios or workshops.

Another interesting observation I had was that Malcolm McLean - the pioneer of this technology was not able to cash in completely on the revolution his brainchild ushered. Read about his struggles to keep his shipping line companies (SeaLand and United States Lines) afloat. There were others who built on top of his vision and made the benefits of this technology more profound. Perhaps, this is what should happen - people build on top of each others ideas and visions to arrive at a magnificent future whose scope is way beyond the original idea. Major reason why competition is a good thing!

Interesting tidbits: 

  • World’s Largest Containership makes its maiden call at a port 

Sunday, March 17, 2019

Standing on a precipice

I recently read a book [Soonish] which talks about the future, and the promising new technologies which are going to change the world for the good or the bad. Couple of them if they were to happen would result in mankind becoming an inter-planetary species. [One of them seemed a bit outlandish - Space Elevators and the other was reusable rockets]. I shared them casually chatting with a friend – who mocked the idea that it was highly morally irresponsible that billions of $$$$ would be spent to bring a sci-fi concept to reality while millions of lives around the world could be made better with that money. My attempts to placate while presenting the argument of balancing long-term v/s short term did not make headway. While explaining I would admit I had a few doubts myself if it actually was the right thing to do.

However, if you look around closely looks like the world does indeed is facing some ginormous dangers which threaten the existence and warrant that some of us do indeed branch out to some other habitable planet. The doomsday clock which is an indicator of dangers to the world - has been moved to 2 minutes closer to mid-night in 2018. But over the years, it’s perception has been cynical and updates related to it are relegated to the back pages of newspapers and it surely doesn’t figure in the prime time news.

The dangers facing us which has resulted in the clock being moved closer to midnight is I think we have been very lucky with Nuclear Fallout. The attempts to disarm have failed and now there are 16000+ warheads across the globe which are of manifold intensity than Hiroshima and Nagasaki. The number of instances where an inadvertent misstep almost happened but for due to moral conscience of some courageous soul or just out of sheer luck – is very fortuitous.  

Even if you go by the ancient myth: cats have only nine lives and even by law of averages some day the coin would not land on heads but teeter and fall over on tails. This is a danger which is going to cause instant decimation and destruction but there is a similar danger which is causing gradual damage as we speak – Climate Change.

It’s beyond understanding how attempts to bring everyone together on this issue have failed. Paris Accord in 2016 was very promising but it has unraveled quickly with the strongest country in the world deserting it. Half of the states sued and the US House refused to support POTUS44’s endorsement of the Paris Accord. No wonder 40-45% of the population feels climate change is a hoax. It’s seemingly implausible for a political candidate to make it their platform. A few of them are trying but we will see how it turns out in 2020. Every day a new study or evidence comes out showing how climate change is causing unheard catastrophes.

And then even if you keep aside these two systemic dangers – you have untenable rising inequality (Capitalism failed?) and unrest. Normally, I am very optimistic but with these looming dangers and the abdication of control by the masses to the “leaders” who have rigged the system for themselves – it looks difficult we will be here for another 2000 years.

So, becoming a space faring specie is a decent option – although it’s obvious that the first tickets will go to the rich as soon as it becomes a reasonable possibility who will then tailor a system there as well. But then I hope that’d be a good-to-have problem in another 50 years?