Its a real place (part 2 of 5)

The internet is not the first global networked structure built by humans. There is nothing surprising in that statement, although you might be forgiven for thinking so. What is surprising, is that even though we do have relevant experience which we can study, to help us understand how to best proceed with some of the challenges and conflicts arising today, it appears that few people seem to do so. There really are analogue lessons that are relevant to digital situations.

Malcolm Mclean is a man we would all be wise to have a good look at. Known as the father of containerisation, the massive changes he brought to global industry and the way he delivered those changes  make him one of the very few people whose experiences and contributions can be considered relevant to  the particular conundrum of copyright legislation and modern business models.

Mclean was the man who pioneered the modern shipping container industry, and killed the job prospects of 1000’s of dockers on a global basis.

He started in transport as a trucker, originally a driver with his own truck, then slowly building a fleet of trucks, the Mclean Trucking Company. He was a successful man building the company into a comfortable concern. Nonetheless like everyone else he felt the pressures of the 1930’s and returned to driving work himself during this period.

In 1937, waiting dockside for the best part of a day to get his cargo unloaded he had the idea that would eventually lead to the shipping containers we are all so familiar with today. A simple idea really. A container that could be lifted from a truck, into a ship. As strange as it seems, for something now so common, it would still take 19 years before it came to pass.

Mclean went back to building his trucking company until eventually, in the early 1950’s, he had become the largest trucking group in the south and the 5th largest in America. He owned 1776 trucks and had built 37 terminal facilities along the eastern seaboard.

Driven every kind of rig that’s ever been made

Driven the back roads so I wouldn’t get weighed

Willin’ ,  Lowell  George

As the song reminds us, a matter of great concern for the trucking industry in the 50’s was the imposition of weight limits and newly levied fees, posing particularly grave problems for any trucking business crossing multiple state lines. This was the problem that spurred Mclean into dusting off his thoughts about container boxes. He figured that if he could make the process of exchanging cargo between his trucks and some big ships, easy, then he could simply cut out all the weight restrictions and charges being forced on him by each individual state. He would simply go around them, sailing his cargo from Newark to Texas. The enormous time savings delivered dockside, loading and unloading, coupled with the significantly larger loads, enabled great value. It didn’t matter that the relevant industries weren’t all in say Texas, for example, it was still cheaper to send it down by ship and then move it by truck (over many fewer state lines) from there.

It wasn’t the concept of the containers alone that set Mclean apart. He wasn’t even the first with that, the rail industry had been transporting truck trailers, and the shipping industries had played with shipping some railroad boxes. That idea itself wasn’t new. Building a standardised, patented intermodal system that allowed shipping to be 100% dedicated to transporting containers, that was new. And worth a lot of money.

Mclean bought and equipped a ship and the neccersary dockside facilities and got to it. He had no trouble finding customers as he was quite comfortably offering savings of 25% against the alternatives. His main trouble came from his competitors in the transportation game who weren’t satisfied with his legal business arrangements, it being illegal to operate across 2 or more carriers without ICC approval. Mclean, in response sold his trucking concerns and launched the shipping company that would come to be known as SeaLand.

We have the benefit of hindsight, so we know how successful his concepts turned out to be, but all Mclean had to go on was the conviction of his own thinking. Today 90% of all global freight will have spent time inside one of Mclean’s containers, and there are roughly 18 million of them quite literally scattered all across the globe, all small parts of one standardised global intermodal freight transportation system.

And that there is one of the magic keys to all this – standardisation. The business efficiencies were enabled by the adoption of standardised equipment, the containers themselves and the dockside equipment needed to load and unload them. Mclean had to spend significant time persuading port authorities to redesign facilities to accommodate the new system. Slowly the ports adopting containers started to show a distinct health and resurgence. The industry took notice, and adoption grew.

Perversely, even though containers clearly were the death of the docker as an industrial force, many ports were under greater pressure from land based trucking companies. The port authorities began to see containerisation as a lifeline, not a threat.

Mclean had released his patents, and made them available to use under a royalty free lease given to the International Organisation for Standardisation. I’ll say that again. ROYALTY FREE. Furthermore he was vigilant about standardisation, recognising that the growth of his business and his business sector could only be helped, not hurt, by actively managing and aiding standardisation as a business principle.

These were momentous changes and wrought significant upheaval and change in society. The docking industry was dealt a fatal blow and never recovered. There was considerable human cost. Old traditional ports that resisted the change were over taken by new facilities opened in newly feasible locations. Time savings made it possible to relocate ports, decentralising delivery and devaluing incumbency. The savings were too large, the old model was doomed.

Standardisation wasn’t the only magic ingredient. As well as the time savings the containers increased the security of goods in transit. Previously a certain percentage of spoil and theft was a line in the business plan, Mclean’s sealed containers stopped this problem. Which also lead to cheaper insurance premiums.

However, the most significant value in this concept came over time. Mclean’s containers delivered a sealed unit from one commercial entity to another unmolested by the shipping company. As a result the shipper was not responsible for the contents of the container.

“What was new about McLean’s innovation was the idea of using large containers that were never opened in transit between shipper and consignee and that were transferable on an intermodal basis, among trucks, ships and railcars”

Individual governments could, and did, and still do, search containers – but on finding items of an illegal nature the shipping company was not / is not a liable party (unless it’s their container of course).

The alternative would involve the shipper taking on board a very significant business risk. Or, rather they wouldn’t take on the risk, they would police the cargo before carriage.

If business had had to carry these costs then the world would not have been transformed by globalisation. The current global trading landscape is as it is as a consequence (among other things, of course) of the way the laws have  been set, in regard to international shipping, and how liabilities are apportioned for the transit of illegal material has been a surprisingly important part of what happened.

Mclean’s world was an industrial society where global technology flourished in the fields of engineering and the transportation of goods.

Our world today is an information society where global technology flourishes in the fields of communication and information and the availability of therein.

I take 3 big lessons from this.

Firstly, effective standardisation is good for the growth of the ecosystem. It seems harder to consider this a duty between people in the digital realm for some reason. Maybe it is the inherently personal nature of a piece of genius coding, compared to the more generic delivery of a standardised philips screw, but we have to sensibly recognise where innovation needs to be protected as an effective standard. Companies such as Google and Apple are building today’s essential industrial structure. As William Gibson has noted,

Now cyberspace has everted. Turned itself inside out. Colonized the physical. Making Google a central and evolving structural unit not only of the architecture of cyberspace, but of the world. This is the sort of thing that empires and nation-states did, before

In my opinion the new builders of the world should take as much responsibility for what they do and where they take humanity, as the leaders and founders of society are expected to take (I note the differential between expectation and delivery, but will counter that no such obligation whatsoever simply cannot be deemed the safer option just because its business not government) .

Secondly, we shouldn’t demonise all innovative business practices. Mclean looked to break a legal monopoly (the state levies) by slightly glossing over a few irregularities in his business holdings. He eventually got called on it and had to divest. But by then he had received the advantage he needed. I can’t see how containerisation could have been delivered by an outsider.

Thirdly, it’s clear that essential carrier infrastructure shouldn’t have to bear the costs of 3rd party legal breaches, where the carriage in question is a service provided legally and essentially, but abused by 3rd party users.

We don’t lock up ship’s captains for transporting a container full of stolen cars.

Similarly we shouldn’t lock up ISP’s, search providers and content hosts, simply because they make their service available to 3rd parties who may or may not post links to illegal content.

In both situations we should put up with a certain loss (some goods are smuggled, some links point to copyrighted material) to maintain a healthy functioning infrastructure for the rest of us.


One Comment on “Its a real place (part 2 of 5)”

  1. […] Part 2 examined what we can learn from the containerisation of global trade; standardisation, innovation and legal protection for the essential carrier class. […]

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