The Box

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').

  • LoneSnark

    But if everyone took your advice and did not play, then the returns would be astronomical. So, it seems investing turns into a gamble, a bet that no one else is willing to gamble, which your own actions demonstrate is unlikely.

  • http://tjic.com TJIC

    Loved that book!

  • Bob Hawkins

    I was raised on a farm in Ohio, so I'm fascinated by all the leftover containers. They'd make great coon- and possum-proof chicken coops, rat-proof corn cribs, equipment sheds...

    The Air Force uses empty containers like they were giant Legos, to build 1:1 scale models of enemy installations, for bombing practice.

    Empty containers were made into troop housing in Iraq, and there's a college in Europe that made student apartments out of them.

  • happyjuggler0

    The only successful strategy was the Wargames approach (”the only winning move is not to play’).

    Friends don't let friends buy airline stocks. Same reasoning.

  • Sam L.

    Haven't read the book, but what I've heard is that the "first" big advantage of shipping containers was their theft resistance. Nothing could "just fall out of the box".

  • http://www.mementomoron.blogspot.com Boy Named Sous

    There's an architect in Europe who has designed condo complexes out of recycled containers. At their first location, when all the units were sold, they just added another layer of boxes on top. There's also an engineer in Australia who's designed a modified container box that's a self-contained emergency housing unit for disaster relief.

  • feeblemind

    Sounds like a book I would like to read. As for the Maersk strategy of buying assets on the cheap from bankrupts, I wonder how that strategy will play out in the ethanol market? Brand new plants are being resold for 20 cents on the dollar.

  • http://www.azecon.blogspot.com Scott Gustafson

    Loved the book. In addition to changing shipping, it changed cities. It was no longer such an advantage for a manufacturer to be located close to the docks. New York City took a big hit.

  • The other coyote

    Will have to put the book on my to read list. Did it mention that the shipping container industry put the Longshoreman and Harbor Workers union virtually out of business? Don't need hundreds of guys walking up and down the gangplank toting parcels when one guy and a crane can move containers.

    Which is probably how LSHW got into organizing hospitals. The bureaucracy needed to be fed.