I just finished "The Box," which is a history of container shipping. Never has any book I have read elicited so many laughs from my family. Nothing says "geek" like reading a book about shipping containers.
But, for those of you who might similarly be turned off by the subject matter as unpromising, I can say this is easily one of the most interesting business books I have ever read. It is fascinating to see how the entire economics of an industry can be changed not by some arcane advance in silicon, but by a metal box. In a period of about 20 years, the entire merchandise shipping business, which had remained virtually unchanged for thousands of years, was completely reinvented. Every ship and every port had to be replaced. Moreover, these changes resonated far beyond shipping, as they enabled much of the global manufacturing revolution of the last generation.
Because pre-container shipping and transport were so highly regulated, the book provides a great window on how regulation affects innovation, and vice versa. It also focuses quite a bit on how unions and in particular union work rules affected industry economics, and how these unions reacted to change in the industry.
And of course, the book allows us to look at any number of interesting business strategy issues:
- Is being a first mover an advantage, or a disadvantage? Sea-Land reaped a number of first mover advantages, but it also got hurt badly when a number of the earlier investment choices they made turned out to be wrong. Several late movers, who invested after ship designs had been through two or three generations, did quite well. Others did not.
- Who makes money investing into this kind of change? A few early SeaLand investors made out well, the equivalent of angel investors, but later investors did poorly. And it is not at all clear that anyone making massive, billion dollar investments ever really made great returns. Like the airline industry, the industry quickly hit over-capacity and prices dropped. It is clear shippers won big, but did it really make sense for anyone to invest in this business? The best strategy I can come up with was followed by Maersk, which basically sat out until late and then bought up assets on the cheap out of bankruptcy from early participants.
This situation was reminiscent of a business case I had at HBS about the beginnings of the high fructose corn syrup (HFCS) market. It was run as a computer simulation among teams. Basically, almost not matter what everyone did, the industry ended up in over-capacity and everyone lost money. The only successful strategy was the Wargames approach ("the only winning move is not to play').