[JEFF] Okay. So it's Thursday, April twenty-sixth, nineteen fifty-six. Port Newark, New Jersey. Berth twenty-four, at
[JEFF] the foot of Marsh Street. And it's raining. There's a crowd of invited guests in
[JEFF] raincoats standing on the pier, and they're looking at a ship that is... nothing special.
[JEFF] She's an old tanker from the war. Built in nineteen forty-five out in Sausalito, one
[JEFF] of hundreds just like her. She's called the Ideal X.
[CYRUS] [dry] Not a glamorous name.
[JEFF] And the ship isn't much better. But get this. Somebody has welded a steel deck
[JEFF] on top of her, up above the oil tanks. Like a raised porch running the
[JEFF] length of the ship. And sitting on the pier next to her is a row
[JEFF] of aluminum truck trailers. Regular trailers, the kind you'd see behind a rig on the
[JEFF] highway. Except the men on the pier have taken the wheels off. They've unbolted the
[JEFF] bodies from the running gear. And now a crane swings out, picks up one of
[JEFF] those bare trailer bodies, sets it down on the porch... and goes back for the
[JEFF] next one.
[CYRUS] So they're shipping the trailer, minus the part that rolls.
[JEFF] Exactly. One about every seven minutes. Fifty-eight of them. And start to finish, inside a
[JEFF] single working day, she's loaded.
[CYRUS] [skeptical] And what would a ship that size normally take?
[JEFF] The normal way? Something like a week of men loading her by hand. And then
[JEFF] another week at the other end, unloading her. That's what everybody standing in that rain
[JEFF] knows. That's the world they work in.
[CYRUS] So the people on that pier are watching a week turn into a day.
[JEFF] Some of them get that. Some of them get it very clearly. And here's my
[JEFF] favorite detail. One of the people watching is a senior official of the longshoremen's union
[JEFF] — the guys whose entire job is that week of loading. And somebody walks up
[JEFF] to him and asks him what he thinks of the new ship. And the answer
[JEFF] that's been passed down ever since is that he'd like to sink the son of
[JEFF] a bitch.
[CYRUS] Fair enough.
[JEFF] And then the Ideal X casts off, and she heads down the coast for Houston.
[JEFF] And the ship belongs to a trucker. A guy from North Carolina who has just
[JEFF] bought himself a steamship company... which, if you're in the shipping business in nineteen fifty-six,
[JEFF] is already a very strange sentence.
[CYRUS] [curious] Okay, but hold on. Why would a union man want to sink a ship
[CYRUS] full of truck trailers? It's a few dozen boxes on an old tanker. What did
[CYRUS] he see that the guests in the raincoats didn't?
[JEFF] [reflective] I think he saw exactly what was going to happen to his men. And
[JEFF] I think he was right.
[CYRUS] Which is where this whole thing starts, really. Not with the box. With the guy
[CYRUS] who wanted to sink it.
[JEFF] [warmly] This is Backbone. I'm Jeff Keltner, and that's Cyrus Mistry. And this is the
[JEFF] show about the technologies that hold the modern world up — the ones you stop
[JEFF] seeing precisely because they work so well. Last time it was the refrigerator. Today we're
[JEFF] talking about the shipping container. And I think this one might be even more everywhere
[JEFF] than the fridge was.
[CYRUS] [amused] Simple shape. Six sides. Keeps the world going. And the thing that got me,
[CYRUS] reading all of this, is how little of the story is actually about the box.
[CYRUS] Like, the box is the easy part.
[JEFF] Anybody could build a box. What took twenty years was everything else. And to see
[JEFF] why that union man was so sure, you have to see what that ship was
[JEFF] threatening.
[CYRUS] So, there's a study I think is the single best snapshot of the old world.
[CYRUS] In nineteen fifty-four, the National Academy of Sciences followed one ordinary American freighter — a
[CYRUS] ship called the Warrior — from Brooklyn across the Atlantic to Bremerhaven, in Germany. And
[CYRUS] they didn't just weigh the cargo. They counted it. Every single thing that went aboard.
[CYRUS] About five thousand tons, and it came to a hundred and ninety-four thousand, five hundred
[CYRUS] and eighty-two separate pieces. On one ship. Crates, bags, barrels, bales. And every one of
[CYRUS] them got lifted by a person on a pier in Brooklyn, swung into the hold,
[CYRUS] and wedged into place by hand. And then in Germany, a whole different crew did
[CYRUS] the entire thing in reverse. [deliberate] And here's the part that I think is the
[CYRUS] real story. The ship spent about as long sitting in port, getting loaded and unloaded,
[CYRUS] as it did actually crossing the ocean. And when they broke down the cost of
[CYRUS] the whole trip, the sailing part — the crew, the fuel, the North Atlantic —
[CYRUS] was about eleven and a half percent of the bill. Handling the cargo at the
[CYRUS] two ends was almost thirty-seven percent. So loading and unloading cost about three times as
[CYRUS] much as sailing the ship across the Atlantic.
[JEFF] I keep trying to picture that. A hundred and ninety-four thousand things. That's not a
[JEFF] cargo, that's a small city's worth of errands. [reflective] And that's sort of the whole
[JEFF] story of the box, right there. The value of it. It's not the ocean. The
[JEFF] ocean's the cheap part. It's the last little bit at each end. It's like owning
[JEFF] the most expensive truck in the world and leaving it parked in the driveway half
[JEFF] the time while you carry the groceries out one bag at a time.
[CYRUS] [amused] Fifty percent utilization on your most expensive asset. Any CFO would lose his mind.
[CYRUS] And this is the thing every COO of every transportation company on earth knows in
[CYRUS] their bones. Airlines, railroads, trucking, taxis, Uber — the whole game is idle time. An
[CYRUS] airline is one of the most impressive operations in the world precisely because they know
[CYRUS] that every minute a plane sits at a gate, or in a hangar, it's a
[CYRUS] two-hundred-million-dollar machine earning nothing. They want it flying. Same with a semi: the truck only
[CYRUS] makes money when the wheels are turning. And in nineteen fifty-four the shipping industry had
[CYRUS] its most expensive asset tied to a pier half of its life, and everybody in
[CYRUS] the business knew it. There's a line from a Sea-Land marketing executive, Scott Morrison, years
[CYRUS] later in an oral history, that it cost his company more to get cargo from
[CYRUS] the street in front of the pier into the ship's hold than to carry it
[CYRUS] across the ocean. And I totally believe him. The Warrior numbers basically prove him right.
[JEFF] The last few hundred feet cost more than three thousand miles.
[CYRUS] And it wasn't getting better. In the Port of New York, by nineteen fifty-six, it
[CYRUS] was taking almost fifty percent longer to handle a ton of cargo than it had
[CYRUS] six years earlier. Longer, not shorter. And the cargo didn't just wait on the ship,
[CYRUS] either. Outbound freight would often get delivered to the pier days, sometimes weeks, before the
[CYRUS] ship actually sailed. And it just sat there in the shed. Which, as you can
[CYRUS] imagine, is great for damage... and for things wandering off.
[JEFF] [amused] Put a pin in "wandering off." I want to come back to that one.
[CYRUS] Oh, I'm coming back to it. But all of that ends up in the price
[CYRUS] of everything. Moving goods across an ocean often cost fifteen, even twenty percent of what
[CYRUS] the goods were worth.
[JEFF] So the trip itself is basically a tariff. One nobody voted for.
[CYRUS] [deliberate] Exactly. And if the trip eats a fifth of the value, a lot of
[CYRUS] things just aren't worth trading. You make them close to where you sell them. That's
[CYRUS] the world. Most stuff got made near the people who bought it, because distance was
[CYRUS] expensive.
[JEFF] And the other side of that thirty-seven percent is people. Because that number is wages,
[JEFF] and the wages are a whole world. I spent a lot of time with an
[JEFF] oral history from a longshoreman named Donald Barrett — everybody called him Red. Born in
[JEFF] Brooklyn in nineteen thirty-two. He gets out of the Army in nineteen fifty-five, and his
[JEFF] uncle gets him a job on the piers in Hoboken. Which is how you got
[JEFF] the job. Somebody in your family got you in. And the tool of the trade
[JEFF] is the hook. A steel cargo hook. You bought your own — Red got his
[JEFF] at a seamen's outfitter on River Street — and he wore it on his belt
[JEFF] everywhere. Even driving the car. There's a story where a police officer stops him and
[JEFF] takes the hook away. And Red, telling it sixty years later, says what he should
[JEFF] have told the cop was: "You have a gun for work. And that's what I
[JEFF] have. The hook."
[CYRUS] That's a great line.
[JEFF] He's a great character. The whole oral history is like that — no self-pity, just
[JEFF] the facts and a punchline. And the work is gangs. Seven men in a gang,
[JEFF] and he says the hardest work was down in the hold. One day it's copper
[JEFF] ingots, the next it's coffee, rolls of newsprint, bags of mail, Italian marble. And he
[JEFF] has this line about the marble: "If you weren't careful, the marble slabs became marble
[JEFF] chips." Sacks of red peppers where the dust got in your eyes, so the guys
[JEFF] would just nip the bag with the hook and set it down. [deliberate] And it
[JEFF] was dangerous. In nineteen fifty, the government's own numbers had stevedoring at about four times
[JEFF] the injury rate of the average factory job. Eric Hoffer, the famous longshoreman-philosopher out in
[JEFF] San Francisco, lost a thumb on the docks. Red remembers a guy who got caught
[JEFF] by a pallet coming down, and says it took the skin off his leg "like
[JEFF] a knife." And somebody asks Red, years later, what was a good day on the
[JEFF] docks? And he says... "Just to get home."
[CYRUS] And those are just the injuries somebody wrote down. Nobody was keeping a tally of
[CYRUS] the backs. [reflective] You know, my grandmother — she lived to ninety-five — grew up
[CYRUS] in Bombay, and she used to tell me about the dockworkers there. These very thin
[CYRUS] men, working sixteen, eighteen hour shifts. And the only thing they'd eat the whole shift
[CYRUS] was one chapati, the flat bread, and one raw onion, which they'd bite into like
[CYRUS] an apple. That was it. And what stayed with her, her whole life, was what
[CYRUS] they could lift. She'd watch them and she couldn't believe it.
[JEFF] That's the same world. Bombay, Brooklyn, Hoboken. A man and a hook and a sack.
[CYRUS] And the strength of it was just... normal. Nobody thought it was remarkable except her.
[JEFF] And the hiring was its own thing. For most of the century, the way you
[JEFF] got work on a lot of these piers was the shape-up. Men gather at the
[JEFF] head of the pier in the early morning, a lot more men than there are
[JEFF] jobs, and a hiring boss points. You, you, you. Sometimes because you paid him. You
[JEFF] were hired and fired every single day. If any of this sounds familiar, it's because
[JEFF] it's On the Waterfront — the Brando movie. And here's a detail I loved. That
[JEFF] movie was shot in Hoboken, in the winter of nineteen fifty-three, with real longshoremen as
[JEFF] extras. And Red says, "I recognize a lot of the guys that were in that
[JEFF] movie."
[CYRUS] Okay, that's so good. And that brings me back to the cargo wandering off, since
[CYRUS] you wanted that one. Because a lot of cargo just... didn't arrive. People in the
[CYRUS] business had a phrase for pilferage. They called it "the undeclared fringe benefit" of the
[CYRUS] longshoreman.
[JEFF] "Fringe benefit." That is a very polite way to put it.
[CYRUS] It gets better. A longshoreman named Stan Weir wrote about gangs opening up a ship's
[CYRUS] hatch and finding the leftovers of what he called "secret feasts" down in the cargo.
[CYRUS] And Hollywood made a James Cagney waterfront comedy in nineteen fifty-nine called — I'm not
[CYRUS] making this up — Never Steal Anything Small.
[JEFF] The joke being, if you're going to steal, steal big. Which is a great title
[JEFF] and also kind of a business plan.
[CYRUS] [deadpan] It's a mission statement.
[JEFF] Okay, so here's the thing. It depends a lot on who you ask about these
[JEFF] piers. One of the naval architects who'd go on to design container ships looked back
[JEFF] at them and said it was just horrible — hordes of people on these piers,
[JEFF] moving a very modest amount of cargo.
[CYRUS] [dry] Which is the view from the guy designing the replacement.
[JEFF] [reflective] Exactly. And it's really easy to tell this as a den of thieves that
[JEFF] the box came along and cleaned up. That's not fair. Yes, the union leadership in
[JEFF] New York had real mob ties. But the system existed because the cargo demanded it.
[JEFF] Every bale is a different shape. Somebody with real skill has to fit it into
[JEFF] a hold so it doesn't shift in a storm. And these were real neighborhoods. In
[JEFF] the mid-fifties, there were two hundred and eighty-three working piers in Manhattan and Brooklyn alone,
[JEFF] something like fifty thousand dockworkers across the harbor. Irish locals, Italian locals, Black locals. Seamen's
[JEFF] hotels and bars right up against the water. The job went from your uncle to
[JEFF] you, and from you to your son.
[CYRUS] Two hundred and eighty-three. How many of those are working cargo today?
[JEFF] In Manhattan? None. The last one closed in the eighties. Brooklyn has one container terminal
[JEFF] left, in Red Hook, and it's small — about one box in a hundred for
[JEFF] the whole port. Almost everything else is parks, and Chelsea Piers, and apartments. And Red
[JEFF] is not sentimental about it at all. When they tore down the old waterfront bars
[JEFF] and hotels on River Street, his comment was, "There's no tears."
[CYRUS] Which I kind of love. He's not asking anybody to feel sorry for him. He's
[CYRUS] just telling you what it was. So that's what the guy in the rain is
[CYRUS] looking at. A crane, a box every seven minutes... and nobody down in the hold.
[JEFF] Yeah. And that union man was right about almost everything. The only thing he got
[JEFF] wrong was thinking you could sink it. Within thirty years, that box would empty the
[JEFF] docks of New York, and San Francisco, and London... ride a war across the Pacific...
[JEFF] and bankrupt the man who sent it out of Newark.
[CYRUS] That last part is the one I still can't quite get over.
[JEFF] We'll get there. But first you have to understand what kind of person puts a
[JEFF] tanker full of truck trailers to sea in the first place.
[CYRUS] Okay, so who sends a tanker full of truck trailers out of Newark?
[JEFF] To answer that, you have to go back almost twenty years. To a twenty-four-year-old trucker
[JEFF] from North Carolina, a load of cotton bales... and a whole day to kill. And
[JEFF] I'm going to tell it the way he told it. It's Thanksgiving week, nineteen thirty-seven.
[JEFF] His name is Malcom McLean — Malcom, he dropped the second L at some point.
[JEFF] He's got a little trucking outfit, a few years old, and he's hauled a load
[JEFF] of cotton bales up to a pier on the Hudson River. The cotton is going
[JEFF] to Istanbul. And he gets there, and he waits. [deliberate] And he waits. Because the
[JEFF] stevedores are loading the ship one piece at a time. A sling, a net, a
[JEFF] few bales, swing it up, swing it down into the hold, men in the hold
[JEFF] wrestle it into place. Here's how he described it, decades later: "I had to wait
[JEFF] most of the day to deliver the bales, sitting there in my truck, watching stevedores
[JEFF] load other cargo. It struck me that I was looking at a lot of wasted
[JEFF] time and money."
[CYRUS] And I have to say — Marc Levinson, who's basically the historian of the shipping
[CYRUS] container, he wrote the book on it, literally — does not buy that story. He
[CYRUS] calls it a fantastic origin story, and then he says McLean only started telling it
[CYRUS] when he was, quote, "quite advanced in age," and "there's no evidence that it's true."
[JEFF] [amused] Which I kind of love. The best historian of the thing doesn't buy the
[JEFF] founding myth.
[CYRUS] Right. Like, it might have happened. It's also exactly the story you'd tell at the
[CYRUS] end of your life if you'd changed the world and wanted it to have started
[CYRUS] with a moment.
[JEFF] And I think the version where it's true is almost more interesting. Because if it
[JEFF] happened, he sat on it for close to twenty years. Having the idea was the
[JEFF] cheap part. Lots of people on that pier could see it was slow. What matters
[JEFF] is who builds the thing. And who McLean was explains a lot about that. He
[JEFF] grows up in Maxton, North Carolina, in the Depression. Not a family with money. He's
[JEFF] running a gas station, and he figures out he can make five dollars a load
[JEFF] hauling gasoline to his own station if he has a truck. So he buys a
[JEFF] used truck, on credit, paying it off a little every month. And with his brother
[JEFF] Jim and his sister Clara, he turns that one truck into McLean Trucking. By the
[JEFF] early fifties, it's one of the biggest trucking fleets in America — something like seventeen
[JEFF] hundred trucks, three dozen terminals. [deliberate] And the lessons he learned in trucking turn out
[JEFF] to be exactly the ones he needs in shipping. Because trucking in that era is
[JEFF] regulated by the Interstate Commerce Commission. The I-C-C sets what you're allowed to charge. And
[JEFF] if you want to charge less than the other guy, you can't just decide to.
[JEFF] You have to prove to the regulator that your costs went down. So the only
[JEFF] way to win is to be obsessed with cost. McLean has trailers built with these
[JEFF] ridged, crenellated sides because it cuts the wind resistance. That kind of guy. He spends
[JEFF] twenty years thinking about one thing, which is the total cost to the customer. Door
[JEFF] to door. Not the cost of the truck. Not the cost of the driver. The
[JEFF] whole bill. And I think that's why, when he finally looks at shipping, he sees
[JEFF] something the shipping people don't. Levinson says McLean thought the industry was "obsessed with its
[JEFF] ships rather than its potential customers." The way I'd put it is: shipping men loved
[JEFF] ships. McLean loved the customer's invoice. And the customer, by the way, never cared about
[JEFF] the ship.
[CYRUS] That's a very specific kind of guy. And that's a really modern way to think.
[CYRUS] That's a logistics company, not a steamship company. He doesn't care what's carrying the freight,
[CYRUS] as long as the number at the bottom goes down.
[JEFF] And I'll just say it, because I've been thinking it the whole time I've been
[JEFF] reading about him. I think this guy is one of the most underappreciated business figures
[JEFF] in American history. Most people have never heard his name.
[CYRUS] I'll give you underappreciated. But, as we keep seeing with these innovators, he had a
[CYRUS] lot of help. And some of the people who helped are even less known than
[CYRUS] he is.
[JEFF] No argument from me — and the main one shows up in a minute. But
[JEFF] to get to the point where he even needs help, McLean first has to do
[JEFF] something kind of insane. By the early fifties, the highways along the East Coast are
[JEFF] getting jammed, and McLean starts thinking: what if I put my trucks on ships and
[JEFF] ran them up and down the coast by water? And to do that, in nineteen
[JEFF] fifty-five, he buys a little steamship line called Pan-Atlantic. And then its parent company, Waterman
[JEFF] Steamship. And get this — Waterman is the company that ran the Warrior. The freighter
[JEFF] with the hundred and ninety-four thousand pieces.
[CYRUS] [genuinely surprised] Oh, that's good. He buys the poster child for the problem.
[JEFF] Pretty much. And the way he pays for it is, I think, one of the
[JEFF] more audacious deals of the decade. He borrows about forty-two million dollars — call it
[JEFF] half a billion in today's money — raises some more in preferred stock, buys Waterman...
[JEFF] and then uses twenty million dollars of Waterman's own cash to pay back about half
[JEFF] the loan.
[CYRUS] [incredulous] Wait. So he buys the company with borrowed money and then uses the company's
[CYRUS] money to pay off the borrowing.
[JEFF] Yeah.
[CYRUS] That's a leveraged buyout. In nineteen fifty-five.
[JEFF] People call it one of the earliest ones. Decades before anybody was using the phrase.
[JEFF] And then there's a catch. The Interstate Commerce Act says one person can't control two
[JEFF] kinds of carriers in a common interest. A truck line and a ship line. Which
[JEFF] is exactly what he now has. A group of railroads goes to the I-C-C and
[JEFF] says, you can't let him do this. So McLean has to choose. And he sells
[JEFF] McLean Trucking. The company he built from one used truck. He sells it, and puts
[JEFF] everything into ships.
[CYRUS] Did he hedge at all? Keep a piece of it?
[JEFF] Somebody asked him basically that, and his answer was: "You've got to be totally committed."
[CYRUS] [exhales] Okay. That's a great line. And by the way, I think it's important to
[CYRUS] say he wasn't remotely the first person to try this.
[JEFF] Who was before him?
[CYRUS] A long list. I went looking for everybody who put freight in a box before
[CYRUS] McLean. In nineteen seventeen, a guy in Cincinnati named B. F. Fitch is lifting truck
[CYRUS] bodies on and off railcars. By nineteen nineteen he's got over two hundred of them
[CYRUS] running between twenty-one stations. The Pennsylvania Railroad opens what's been called the world's first container
[CYRUS] terminal, in nineteen thirty-two. The Army ships steel boxes it called CONEX boxes to Korea
[CYRUS] in the early fifties, and they almost halve the transit time. And then — this
[CYRUS] is the one that got me — in November nineteen fifty-five, five months before the
[CYRUS] Ideal X, a railroad in the Yukon launches a ship that's often described as the
[CYRUS] first one built specifically to carry containers. The Clifford J. Rodgers. Vancouver to Skagway, Alaska.
[CYRUS] And it works. It runs that route for ten years, until they replace it with
[CYRUS] a bigger one.
[JEFF] [skeptical] Wait, so the Ideal X isn't even the first container ship?
[CYRUS] Depending on how you count, no. It's not the first box, and it's not the
[CYRUS] first ship. Every one of those worked, mechanically. None of them changed anything.
[JEFF] [reflective] Which is the thing I always want to say about "totally committed." It's a
[JEFF] great quote because it worked. Fitch was committed. The Pennsylvania Railroad was committed. The difference
[JEFF] between Cincinnati in nineteen seventeen and Newark in nineteen fifty-six isn't grit. They all had
[JEFF] grit.
[CYRUS] [amused] So then what's the difference?
[JEFF] I think that's THE question. But part of the answer is a guy from Spokane.
[JEFF] McLean needs a box that can come off a truck chassis, get lifted by a
[JEFF] crane, and survive being stacked on a ship in the North Atlantic. And somebody points
[JEFF] him to an engineer at a trailer company in Spokane, Washington, named Keith Tantlinger. And
[JEFF] Tantlinger is a great character. Grew up on an orange grove in Tustin, California. Mechanical
[JEFF] engineering at Berkeley. During the war he's designing tooling for B-seventeen bombers at Douglas Aircraft.
[JEFF] A man who later worked with him called him a "mechanical genius," and also "a
[JEFF] modest man with a sense of humor." Which he's going to need. Because here's the
[JEFF] crazy thing. In nineteen forty-nine, six years before McLean ever calls, Tantlinger has already built
[JEFF] the box. He designs a thirty-foot aluminum container for a barge line running freight from
[JEFF] Seattle up to Alaska. Stackable two high. His company builds two hundred of them. And
[JEFF] then... nothing. No repeat orders. The way he's said to have put it later is
[JEFF] something like, everybody was interested, but nobody wanted to reach for his pocketbook.
[CYRUS] So he's already been through this once.
[JEFF] Exactly. He knows what it looks like when the right box dies. So, summer of
[JEFF] nineteen fifty-five. Tantlinger brings two prototype boxes to the Bethlehem Steel shipyard outside Baltimore, where
[JEFF] McLean's tankers are being converted. And he's planned this whole thing. He's going to meet
[JEFF] McLean and his executives at breakfast, give them a proper engineering presentation, walk them through
[JEFF] the design. He shows up for breakfast... [amused] and they're gone. They've already left for
[JEFF] the yard. So he grabs a cab, chases them out to the shipyard, and when
[JEFF] he gets there, he finds McLean and his executives up on top of his prototypes...
[JEFF] jumping up and down on them.
[CYRUS] To see if it would hold.
[JEFF] Yep. He never gives the presentation. And McLean hires him to run engineering.
[CYRUS] [deadpan] I love that the due diligence was cardio.
[JEFF] That's how you know it's a trucking company.
[CYRUS] But here's the funny part. They were jumping on the one part of the box
[CYRUS] that doesn't matter. The thing they should have been jumping on was the corners. And
[CYRUS] I'll explain that — but let's get the ship to Houston first. Because all of
[CYRUS] that — the money, the sale, the engineer — is how a trucker ends up
[CYRUS] standing in the rain in Newark in April of nineteen fifty-six, watching that crane. And
[CYRUS] less than a week later, the Ideal X ties up in Houston. McLean flies down
[CYRUS] to watch. And waiting on the dock are fifty-eight trucks. The crane lifts each box
[CYRUS] off the ship, they set it on a chassis, hook it to a tractor, and
[CYRUS] drive it away. Straight to wherever it's going. Nobody opens the boxes. No longshoreman touches
[CYRUS] the cargo, from the dock in Newark to the customer in Texas.
[JEFF] Which is what the guy in the rain was afraid of.
[CYRUS] Right. And then McLean's people ran the numbers. In nineteen fifty-six, loading loose cargo onto
[CYRUS] a ship the old way cost about five dollars and eighty-three cents a ton. And
[CYRUS] they figured the Ideal X at under sixteen cents a ton.
[JEFF] [incredulous] That's not a discount. That's a different universe.
[CYRUS] Now — to be fair — that's just the loading. It doesn't count the boxes,
[CYRUS] or the crane, or the money to convert the ship. And it's McLean's own company's
[CYRUS] estimate, so take it with a little salt. But even if you're generous to the
[CYRUS] old way, it's pennies on the dollar for the part of the trip that was
[CYRUS] eating everybody alive on the Warrior.
[JEFF] Five eighty-three down to pennies. Those are the economics that are going to change the
[JEFF] world.
[CYRUS] It's the reason anybody kept going after the first trip.
[CYRUS] Okay. So, the corners. And I think the easiest way to see this is to
[CYRUS] start with the box you pass on the highway today, because it's basically the same
[CYRUS] idea, just grown up. It's eight feet wide. Twenty or forty feet long. The walls
[CYRUS] are corrugated steel about a sixteenth of an inch thick. About as thick as a
[CYRUS] nickel.
[JEFF] [skeptical] Wait — the whole wall?
[CYRUS] Yep. The ridges are what make it stiff. But the walls aren't where the weight
[CYRUS] is. Underneath that skin there's a steel frame — four corner posts, heavy steel rails
[CYRUS] along the top and bottom, steel cross-members under the floor every foot or so, and
[CYRUS] a hardwood floor about an inch thick. Add all of that up and an empty
[CYRUS] twenty-footer weighs around five thousand pounds. A full-size pickup truck. The forty, about two pickups.
[JEFF] Okay, so that's lighter than I'd have guessed for something that gets stacked on a
[JEFF] ship. How does a thing with walls as thin as a nickel hold up eight
[JEFF] more boxes?
[CYRUS] Because the walls aren't holding anything up. That's the trick. The way I think about
[CYRUS] it is Lego. Every Lego brick connects to every other Lego brick, because the studs
[CYRUS] are identical. It doesn't matter what color the brick is, or what you're building. A
[CYRUS] container is the same thing. Standard outside, anything inside... and all the strength and all
[CYRUS] the connections live in eight corners. So, physically: there's a steel post at each of
[CYRUS] the four vertical edges. And at the top and the bottom of every post there's
[CYRUS] a hollow cast-steel block with an oval hole in it. That's a corner casting. The
[CYRUS] weight of the box, and the weight of every box stacked on top of it,
[CYRUS] runs down those four posts, through those blocks, into the box below. The walls are
[CYRUS] basically a skin. They keep the rain and the thieves out. That's it. And the
[CYRUS] roof is a lid. On a modern box, the roof is only rated to hold
[CYRUS] up something like a person or two working on it. Which is why the executives
[CYRUS] jumping on Tantlinger's roof makes me so happy. They were stress-testing the lid.
[JEFF] Okay, so what plugs into the oval hole?
[CYRUS] A twistlock. Picture a little steel cone with a head on it. It drops through
[CYRUS] the oval, and then it rotates ninety degrees, so the head is now sideways and
[CYRUS] can't come back out. And the genius part is that the same eight points do
[CYRUS] everything. The same corner locks the box to the box underneath it on a ship.
[CYRUS] It locks the box to a truck chassis. To a railcar. And it's how the
[CYRUS] crane picks it up.
[JEFF] Wait — so the crane uses the exact same holes? There's no hook on top
[JEFF] of the thing?
[CYRUS] Nope. The crane lowers a steel frame onto the roof — it's called a spreader
[CYRUS] — and there's a twistlock at each of the spreader's four corners. They drop into
[CYRUS] the four top corner castings, the operator flips a switch in the cab, all four
[CYRUS] locks turn at once, and the crane lifts. Nobody climbs up and ties anything. Nobody
[CYRUS] touches what's inside.
[JEFF] Okay. So the lock holds a box to a box. What keeps a stack of
[JEFF] them from sliding around a hold in a storm? Because a crane swinging twenty tons
[JEFF] of steel isn't landing it on the exact inch.
[CYRUS] So this is the part I think is genuinely clever. The Ideal X was really
[CYRUS] a proof of concept. Boxes bolted onto a porch. The real system shows up a
[CYRUS] year and a half later. October fourth, nineteen fifty-seven, a ship called the Gateway City
[CYRUS] sails out of Newark. Old freighter, gutted and rebuilt. And instead of an open hold
[CYRUS] where men stow things by hand, the inside of the hold is a grid of
[CYRUS] vertical steel rails. Cells. Each cell is exactly one box wide. And the rails are
[CYRUS] flared out at the top, like a funnel. So the crane operator only has to
[CYRUS] get close. The box's corners catch the flare and it self-centers and slides straight down
[CYRUS] onto the box below. Like dropping a key into a slot. No laser guidance, no
[CYRUS] stowing, no lashing below deck. Two hundred and twenty-six boxes.
[JEFF] [amused] Wait — October fourth, nineteen fifty-seven. That's the day the Soviets launched Sputnik.
[CYRUS] Same day. Which tells you which one made the front page.
[JEFF] Fair.
[CYRUS] And here's my favorite detail. The Gateway City carried its own cranes. Because there wasn't
[CYRUS] a port in America with a crane that could lift those boxes. So the first
[CYRUS] real container ship has to bring its own crane with it, everywhere it goes. And
[CYRUS] then the last piece: the doors. The box gets packed at the shipper's loading dock,
[CYRUS] the doors get closed and sealed there, and the next person to open them is
[CYRUS] the customer.
[JEFF] [skeptical] Okay, so here's what I don't get. If it's eight steel corners and a
[JEFF] latch — why didn't Tantlinger's Alaska boxes take over the world in nineteen forty-nine? Why
[JEFF] does this one work?
[CYRUS] [deliberate] Because the box was never the invention. Every one of those earlier boxes was
[CYRUS] a box by itself. Fitch's boxes fit Fitch's trucks. The Army's boxes fit the Army.
[CYRUS] Tantlinger's Alaska boxes fit one barge line. Nobody built a ship around them. Nobody built
[CYRUS] a crane around them. Nobody built a terminal, or a truck chassis, or a price
[CYRUS] list around them. McLean's insight wasn't the box. It was redesigning everything — the ship,
[CYRUS] the crane, the truck, the pricing — around one unit. The box is just the
[CYRUS] stud on the Lego.
[JEFF] So it's a system. Not a product.
[CYRUS] Right. And when you get the whole system, the numbers get kind of absurd. Out
[CYRUS] on the West Coast, Matson — the line that runs freight between California and Hawaii
[CYRUS] — put its first dockside crane built specifically for containers into service in Alameda, in
[CYRUS] January nineteen fifty-nine. A longshore gang working the old way — fifteen, twenty men, with
[CYRUS] all the stowing and lashing down in the hold — could move maybe nine tons
[CYRUS] of cargo an hour. That crane was moving something like four hundred. And the time
[CYRUS] a ship spent sitting in port went from about three weeks... to eighteen hours.
[JEFF] Which, if the crane's doing all the work, still sounds like a long day to
[JEFF] me.
[CYRUS] It's a couple of hundred boxes, and the crane does one every three or four
[CYRUS] minutes. So that's most of a day right there. Plus every box on deck is
[CYRUS] locked to the one under it, and somebody has to climb up and unlock every
[CYRUS] one of those by hand before the crane can touch it. But remember, the ship
[CYRUS] is the expensive part. Every day it sits at a pier, it's burning money. Three
[CYRUS] weeks to eighteen hours means it's out earning almost all the time.
[JEFF] Okay. So, it works. And here's what I think is interesting about who fought it.
[JEFF] The customers loved it more or less right away. If you're a company shipping goods
[JEFF] from Newark to Houston, a cheaper, faster, sealed box is just good news. The pushback
[JEFF] doesn't come from the people using it. It comes from everybody next door in the
[JEFF] freight business — the railroads, the longshoremen, the old steamship lines. And the first one
[JEFF] is the railroads. Because the railroads have been hauling freight up and down the East
[JEFF] Coast for a century, and here's a guy who wants to take it by sea,
[JEFF] for less. So the Ideal X sails in April of nineteen fifty-six. [amused] And by
[JEFF] May, seven railroads are in federal court trying to stop it. The Pennsylvania, the B
[JEFF] and O, the Southern, a bunch of others. And it gets weirder. In nineteen fifty-seven,
[JEFF] McLean's company starts publishing rates somewhere around five to seven and a half percent below
[JEFF] what the railroads charge for the same freight. And the I-C-C puts about seven hundred
[JEFF] of his rates under investigation. So the railroads fight back the obvious way: they cut
[JEFF] their own rates. And this is the part I didn't see coming. In nineteen sixty,
[JEFF] the I-C-C cancels the railroads' rate cuts. It basically tells the railroads, you have to
[JEFF] charge more than the ship line.
[CYRUS] [genuinely surprised] Wait. The regulator is protecting McLean now?
[JEFF] The same regulator that made him sell his trucking company is now protecting his ships
[JEFF] from the railroads. And it goes all the way to the Supreme Court, which, in
[JEFF] nineteen sixty-three, says no, you can't hold up one kind of carrier's prices just to
[JEFF] protect another's business. And in the opinion, they quote a congressman who called the I-C-C
[JEFF] a "giant handicapper."
[CYRUS] That's a great phrase. And that's a regulated market in one line. When the government
[CYRUS] sets the prices, the fight isn't really about who's cheaper. It's about who can get
[CYRUS] the regulator on their side.
[JEFF] Yeah. And I want to be fair to the railroads here, and to the I-C-C.
[JEFF] That rule that made McLean sell his truck line exists for a real reason. Somebody
[JEFF] who controls the trucks and the ships and the docks can squeeze everybody. That's what
[JEFF] the rule was there to stop. And the railroads had sunk enormous amounts of money
[JEFF] into track and yards and equipment. Of course they defended it. If you'd been running
[JEFF] a railroad in nineteen fifty-six, you'd have done exactly the same thing. And then there's
[JEFF] the shipping establishment. The old lines, Holland America, Cunard. And their view, as one historian
[JEFF] put it, was that containers were appropriate only for — I love this — "select
[JEFF] domestic niche markets."
[CYRUS] [dry] The niche being the whole world, eventually.
[JEFF] And you can kind of hear the tone. Here's this trucker, and he's not one
[JEFF] of them. When the Wall Street Journal wrote about his venture, the Journal's line was
[JEFF] that "one of the nation's oldest and sickest industries is embarking on a quiet attempt
[JEFF] to cure some of its own ills."
[CYRUS] That's brutal.
[JEFF] Not wrong, though. And the regulators of the ocean weren't thrilled either. The Coast Guard
[JEFF] and the people who certify whether a ship is seaworthy had to be convinced that
[JEFF] a tanker with a deck full of boxes stacked on top wasn't going to roll
[JEFF] over in a storm. Which is a fair thing to worry about.
[CYRUS] And the skeptics I'd have agreed with most were the ones who just looked at
[CYRUS] the money. Because this thing lost money. For years. McLean's operation doesn't turn a real
[CYRUS] profit until around nineteen sixty-one. Five years after the Ideal X. And if you think
[CYRUS] about why, it's kind of obvious. Cranes are expensive. Terminals are expensive. Purpose-built ships are
[CYRUS] expensive. And none of it pays off until there's enough of it. No port wants
[CYRUS] to build a container crane until there are container ships. No line wants to build
[CYRUS] container ships until ports have cranes. So he literally has to put the crane on
[CYRUS] the ship.
[JEFF] So the people saying "this loses money" were right.
[CYRUS] For about five years, they were exactly right. That's what a network looks like from
[CYRUS] the outside before the network exists. It looks like a failure. Standard network effect, the
[CYRUS] cold-start problem. Like the first person to buy a fax machine — who are you
[CYRUS] going to fax? [amused] And then there's the other company doing this, and I love
[CYRUS] this part, because it's the opposite personality. While McLean is improvising — converting old tankers,
[CYRUS] sizing his boxes to his trucks — Matson does it the careful way. In nineteen
[CYRUS] fifty-six they set up what Matson says was the first in-house research department in the
[CYRUS] shipping industry, under a guy named Foster Weldon. And instead of just doing it, they
[CYRUS] study whether to do it at all. They model the whole business, and they pick
[CYRUS] a box size tuned to their trade. Twenty-four feet. They publish the whole analysis in
[CYRUS] an academic journal, Operations Research, in nineteen fifty-eight.
[JEFF] [amused] So McLean is jumping on boxes, and Matson is writing a paper.
[CYRUS] Exactly. And Matson's engineers, a naval architect named Les Harlander and his brother, write the
[CYRUS] requirements for a crane that doesn't exist yet. A crane company in the Bay Area
[CYRUS] builds it. And that's the crane in Alameda I was talking about. Technically, Matson's system
[CYRUS] was probably better engineered. So who wins? [deliberate] Neither of them. McLean's boxes are thirty-five
[CYRUS] feet, because that's what fit his trucks and his roads. Matson's are twenty-four, because that's
[CYRUS] what fit Hawaii. And when the rest of the world finally sits down to agree
[CYRUS] on a box... it doesn't pick either one. We'll get to which size it does
[CYRUS] pick, and why, a little later. But neither pioneer's box survives.
[JEFF] Huh. Okay, there's one more thing I wanted to ask you about. Because when I
[JEFF] was reading about the early routes, the side effects jumped out at me. Shippers start
[JEFF] packing their own boxes at their own loading docks. Theft drops. Damage drops. And my
[JEFF] assumption was that those were happy accidents. Stuff nobody planned that just fell out of
[JEFF] the system.
[CYRUS] So that's what I assumed too, and then I went looking. And it turns out
[CYRUS] that was the pitch. McLean's whole idea, from the beginning, was the truck. Load it
[CYRUS] at the factory, close the doors, open them at the customer. And cutting theft and
[CYRUS] damage was one of the main reasons anybody wanted containers at all. That Warrior study
[CYRUS] was basically a study of how much cargo gets lost and broken in handling.
[JEFF] [reflective] Okay. So they predicted the good stuff. Which makes it a better story. What
[JEFF] didn't they predict?
[CYRUS] Two things I found. One — theft didn't go away, it changed shape. A researcher
[CYRUS] writing in nineteen sixty-nine said containers basically ended the small stuff, but when something did
[CYRUS] get stolen, the losses were bigger. Because now people stole the whole box.
[JEFF] Never steal anything small.
[CYRUS] [amused] Right — they finally took Cagney's advice. And two, the big one: nobody in
[CYRUS] nineteen fifty-six was forecasting what happens when moving things gets this cheap. Where factories go.
[CYRUS] What happens to the port towns. That's the part nobody saw.
[JEFF] So they got the benefits right and missed the scale. I think that's a better
[JEFF] lesson than "nobody saw it coming." They saw the part in front of them.
[CYRUS] So by about nineteen sixty-one, on the routes where it runs, the world has flipped.
[CYRUS] Ships turn around in hours instead of weeks. A box gets packed at a factory
[CYRUS] in New Jersey and opened at a warehouse in Texas or Puerto Rico. And on
[CYRUS] the pier, you don't need a gang of men in the hold. You need a
[CYRUS] crane operator and a couple of guys on the dock. And I think it's worth
[CYRUS] saying how close McLean came to building something completely different. His original idea — the
[CYRUS] plan in his own filings in nineteen fifty-five — was trailerships. You don't lift the
[CYRUS] box off the wheels. You just drive the whole trailer onto the ship, wheels and
[CYRUS] all, and drive it off at the other end. And it's simpler. No cranes. No
[CYRUS] new ports. You just need a ramp.
[JEFF] [skeptical] So why not do that? That sounds like exactly what a trucker would want.
[CYRUS] Because of the wheels. Wheels and chassis take up space and you can't stack them.
[CYRUS] Every trailer on a ship is a box sitting on a bunch of air and
[CYRUS] steel that isn't cargo. And remember, the ship is the expensive part. Whatever lets you
[CYRUS] put the most cargo in the most expensive thing wins. A box with no wheels
[CYRUS] stacks. A trailer doesn't. So what he'd have built is basically a ferry system. That's
[CYRUS] what we'd call roll-on, roll-off today. And it survived for exactly one big thing: cars.
[CYRUS] That's why car carriers look like giant floating parking garages. Cars already have their own
[CYRUS] wheels. Everything else went in the box. If he'd stuck with trailers, you don't get
[CYRUS] stacking, you don't get cells, and you don't get a box that goes from a
[CYRUS] ship to a train to a truck without anybody touching it.
[JEFF] [reflective] So by nineteen sixty-one, it works. McLean's company has renamed itself Sea-Land, it's finally
[JEFF] making money, and Matson's crane is running in Alameda. But it works for one company
[JEFF] on the East Coast with thirty-five-foot boxes, and one company in the Pacific with twenty-four-foot
[JEFF] boxes. And none of it fits together. And on every pier in America, the men
[JEFF] whose work this thing was designed to remove are paying very, very close attention.
[CYRUS] And the guy in the rain in Newark wanted to sink it.
[JEFF] He did. But on the other coast, there was a union leader who'd already decided
[JEFF] you couldn't. And he'd decided it a month before the Ideal X ever sailed.
[JEFF] So while that union official in Newark wants to sink the ship, there's a guy
[JEFF] on the West Coast who's already decided you can't. And he might be my favorite
[JEFF] character in this whole thing. His name is Harry Bridges. Born in Melbourne, Australia, in
[JEFF] nineteen-oh-one, goes to sea at sixteen, lands in the U.S. in nineteen twenty, and ends
[JEFF] up working the San Francisco docks. And in nineteen thirty-four, he leads the West Coast
[JEFF] waterfront strike. It's a huge, violent strike. There's a day in July they still call
[JEFF] Bloody Thursday. It turns into a general strike that shuts down San Francisco. And the
[JEFF] union wins. They get a union-run hiring hall, which means the end of the shape-up
[JEFF] on the West Coast. No more hiring boss pointing at you. So to his guys,
[JEFF] he's a hero. To the federal government, not so much. Because Bridges is a radical,
[JEFF] and the government is convinced he's a Communist, and they spend about fifteen years trying
[JEFF] to deport him. Hearing after hearing. At one point Congress passes a law that was
[JEFF] written, in part, so they could deport him. It goes to the Supreme Court, and
[JEFF] in nineteen forty-five the Court rules for him. He becomes a citizen. [amused] Then they
[JEFF] charge him with lying on his citizenship application. He gets convicted, the Supreme Court overturns
[JEFF] it. They come after him again in civil court, and he wins that too, in
[JEFF] nineteen fifty-five.
[CYRUS] [dry] They really did not want him in the country.
[JEFF] Not even a little. So hold that picture. This is a man who won the
[JEFF] defining labor fight of his generation, by fighting. And the government spent fifteen years trying
[JEFF] to throw him out for it. And then in March of nineteen fifty-six — a
[JEFF] month before the Ideal X sails — he stands up in front of the longshoremen's
[JEFF] local in Seattle and tells them — this is from the meeting minutes — that
[JEFF] the union shouldn't stubbornly fight to keep jobs that have been mechanized. Because machines are
[JEFF] already showing up on the West Coast docks before the box ever gets there. In
[JEFF] sugar, for example, they've gone to bulk handling — they just pour it. A ten-thousand-ton
[JEFF] load of sugar used to take something like sixty-six hundred man-hours to handle. With the
[JEFF] new system, about a thousand. A longshoreman in Hawaii later described the old sugar job
[JEFF] to a labor writer: "When we used to load sugar onto the ships in a
[JEFF] hundred-and-twenty-five-pound sacks, each ship was a seven-day job." Seven days of men carrying sacks. And
[JEFF] then one day it's a chute. So Bridges does the math. And at a union
[JEFF] meeting in Portland in nineteen fifty-seven, he basically puts it to his members as a
[JEFF] choice. Do we keep doing what he called "guerrilla resistance" — all the little work
[JEFF] rules, the slow-downs, the limits on how much you can put in a sling, the
[JEFF] stuff that makes a job last longer? Or do we sell those rules, and get
[JEFF] paid for them? The phrase the men used was getting "a share of the machine."
[CYRUS] [deliberate] I mean, that's a really sophisticated way to think about it. He's basically saying,
[CYRUS] the machine's coming either way. The only question is who captures the savings.
[JEFF] Right. And on October eighteenth, nineteen sixty, they sign it. It's called the Mechanization and
[JEFF] Modernization Agreement. And the deal is this. The employers — the shipping companies and the
[JEFF] stevedoring firms — get the right to bring in any machine they want and change
[JEFF] any work method they want. And in exchange, they put about five million dollars a
[JEFF] year, for five and a half years, into a fund. About twenty-nine million dollars total.
[JEFF] And that money guarantees every fully registered longshoreman at least thirty-five hours of work or
[JEFF] pay a week. And it lets men retire early, at sixty-two, with a pension bridge
[JEFF] until Social Security kicks in. And nobody with full registration gets laid off. If the
[JEFF] work shrinks, it shrinks by people retiring. [reflective] And here's what I love about it.
[JEFF] I think it's a remarkably capitalist answer to a real cost. The automation pays for
[JEFF] its own transition, out of its own savings. Nobody's asking the taxpayer to bail anybody
[JEFF] out. The people who benefit from the machine write the check to the people the
[JEFF] machine displaces. And by one estimate, the employers got something like a hundred and twenty
[JEFF] million dollars of productivity out of it, for twenty-nine.
[CYRUS] Huh. So it's attrition, but funded. Which is a great trade if you're the employer.
[CYRUS] [deliberate] And I'll say it now — that is the first thing I've read in
[CYRUS] a long time that even looks like a possible answer for what AI is about
[CYRUS] to do to office work. Let the machine pay for the people it replaces. It's
[CYRUS] one idea, and I don't want to pretend it's simple — there's a lot you'd
[CYRUS] have to work out to make something like that actually run. But file it away.
[JEFF] For both sides, I'd argue. But not everybody saw it that way. There's an oral
[JEFF] history from a guy named Bill Ward. He was a longshoreman in Los Angeles, a
[JEFF] delegate from his local. And he says nine out of the ten delegates from L.A.
[JEFF] voted against that first deal, him included.
[CYRUS] [skeptical] Against the guy who'd just won them the hiring hall?
[JEFF] Almost the whole delegation. And it wasn't that they hated the idea. It was the
[JEFF] price. All those little work rules had been won over decades, and he says some
[JEFF] people were "leery that there wasn't enough protection in the agreement." Younger guys called it
[JEFF] an old man's contract. Because if you were near retirement, it was a fantastic deal.
[JEFF] If you were twenty-five, you were selling the rules that were supposed to protect you
[JEFF] for the next forty years. And decades later, Ward says, "As it worked out, everyone
[JEFF] was taken care of, and some of those guys are still living on pensions today."
[CYRUS] [skeptical] Okay, but "everyone" is doing a lot of work in that sentence. Because there's
[CYRUS] a structure underneath that deal. The guarantee covers fully registered men. They called them A-men.
[CYRUS] Below them there were B-men, partially registered, and below them, casuals. And the B-men and
[CYRUS] the casuals weren't protected the same way. If the work shrinks, they go first. And
[CYRUS] in some ports, a lot of the B-men were Black. In nineteen sixty-three, as the
[CYRUS] union was moving B-men up to full status, eighty-two of them in San Francisco were
[CYRUS] dropped from the rolls entirely. The union said it was for things like unpaid dues.
[CYRUS] The men said they were being targeted, politically and racially. They fought it in court
[CYRUS] for something like seventeen years, and lost.
[JEFF] Yeah. That's the asterisk on the deal.
[CYRUS] And there's one more voice I found that I think is the counterweight to Bill
[CYRUS] Ward. It's from Hawaii, and it's about mechanization in general, not containers — sugar again.
[CYRUS] A longshoreman in Hilo told a labor writer, years later: "There were three hundred seventy
[CYRUS] longshoremen in the port. Now there are thirty-five." And: "Harry was a good man in
[CYRUS] his time, but look at us now."
[JEFF] [reflective] Both of those things are true. Ward is right that the men inside the
[JEFF] deal were taken care of. And that guy in Hilo is right that the port
[JEFF] he knew just... went away.
[CYRUS] And that's the real math of it. On the West Coast, the number of registered
[CYRUS] longshoremen went from about fourteen and a half thousand in nineteen sixty to about eight
[CYRUS] thousand four hundred in nineteen eighty. So the union shrinks by about four in ten.
[CYRUS] But over that same stretch, the tons of cargo each man moved in an hour
[CYRUS] went up more than sixfold. Fewer men, way more cargo. And the guys who stayed
[CYRUS] got paid really well. And L.A. and Long Beach turned into the biggest container ports
[CYRUS] in the country. That deal is a big part of why.
[JEFF] So that's one way to handle the machine. Sell the rules, get a fund, shrink
[JEFF] by retirement. And depending on who you ask, Bridges was either a sellout or a
[JEFF] visionary for doing it. I think he was a guy who'd won his big fight
[JEFF] by fighting, and was smart enough to know this wasn't that kind of fight.
[CYRUS] But I think the more interesting thing is what happens back in New York. Because
[CYRUS] here's the thing that gets me. Same year, same harbor, two brand-new terminals open. One
[CYRUS] of them is the future... and one of them is obsolete the day it opens.
[CYRUS] August fifteenth, nineteen sixty-two. Across the harbor from Manhattan, in the marshes of Elizabeth, New
[CYRUS] Jersey, the Port Authority opens what it calls the world's first port built for containers.
[CYRUS] A few years earlier they'd dredged a channel through the meadows and used the fill
[CYRUS] to make new land. And the anchor tenant is Sea-Land, McLean's company, with a terminal
[CYRUS] of about ninety acres. And it's basically a parking lot. Ninety acres of flat, open
[CYRUS] pavement, where you can line up thousands of boxes on chassis, and cranes, and trucks
[CYRUS] coming and going. [dry] Ten weeks later. October twenty-fourth, nineteen sixty-two. On the West Side
[CYRUS] of Manhattan, at the foot of West Houston Street, the city opens Pier Forty. A
[CYRUS] terminal for Holland America that cost nearly nineteen million dollars. Fourteen and a half acres.
[CYRUS] Three decks built around a central courtyard, ramps for trucks and cars, thirty-five hundred steel
[CYRUS] piles driven into the Hudson. A beautiful, modern, enormous break-bulk pier. Built for men with
[CYRUS] hooks.
[JEFF] Same fall. Same harbor.
[CYRUS] And just to give you a sense of scale — Sea-Land's terminal alone is something
[CYRUS] like six Pier Forties of open pavement. And that's the structural point, for me. Why
[CYRUS] couldn't the box just come to Manhattan? Because a finger pier is a long, skinny
[CYRUS] shed sticking out into the river. There's nowhere to put the boxes. A container port
[CYRUS] needs acres of flat land to stack and sort boxes, room for trucks to line
[CYRUS] up, rail lines. Manhattan doesn't have that. And new land doesn't just come with space.
[CYRUS] It comes with no workforce, no work rules, no history, no politics. Nobody's uncle has
[CYRUS] a job there.
[JEFF] So the box doesn't beat the union in a fight. It just... moves.
[CYRUS] It moves to empty land. That's how it gets around everybody. And it was already
[CYRUS] happening. By nineteen sixty, before Elizabeth even opens, New Jersey's ports are handling sixty-three percent
[CYRUS] of the region's cargo.
[JEFF] [reflective] And New York wasn't being stupid. Under Mayor Wagner, the city spent heavily rebuilding
[JEFF] its piers. And if you're the mayor of New York in nineteen fifty-eight, what do
[JEFF] you see? You see tens of thousands of dockworkers. You see neighborhoods that exist because
[JEFF] of those piers. You see a tax base. Rebuilding the piers looks prudent. It looks
[JEFF] like protecting your people. I think you or I would've made the same call.
[CYRUS] It's not a dumb decision. It's a decision to invest in the thing you already
[CYRUS] know how to do. Which is the classic incumbent move.
[JEFF] And the agency that went around it was the Port Authority. Which is a strange
[JEFF] animal — it's a bi-state agency, New York and New Jersey together, and for thirty
[JEFF] years it was run by a Brooklyn-born lawyer named Austin Tobin. The same agency that
[JEFF] later builds the World Trade Center. And it could build in New Jersey, where the
[JEFF] city couldn't.
[CYRUS] So the city bets on Manhattan, and the Port Authority bets on the swamp.
[JEFF] And the swamp wins. By nineteen seventy, most of Manhattan's piers, including ones the city
[JEFF] had just rebuilt, are empty, or turned into something else. Holland America leaves Pier Forty
[JEFF] in nineteen seventy-four. And today Pier Forty is a soccer field and a parking garage.
[CYRUS] Of course it is.
[JEFF] And here's the kicker. About ten years ago, its steel piles were rotting, and to
[JEFF] pay for the repairs, the city signed off on selling the pier's air rights —
[JEFF] the right to build tall — to a developer across the street. For about a
[JEFF] hundred million dollars.
[CYRUS] [amused] So the most valuable thing about the pier ended up being the air above
[CYRUS] it.
[JEFF] So that's the geography. But the guys on the East Coast piers still have a
[JEFF] union, and that union has a very different leader. His name is Thomas Gleason. Everybody
[JEFF] called him Teddy. And his backstory explains everything he does. He's born in nineteen hundred
[JEFF] on Manhattan's West Side, the oldest of thirteen kids. His father is an Irish dockworker.
[JEFF] Teddy leaves school after seventh grade and goes to work right beside his father on
[JEFF] the Charles Street Pier. Thirty-five cents an hour. Through the shape-up, with the kickbacks and
[JEFF] everything. In the early thirties he gets blacklisted for union organizing. Can't work the docks.
[JEFF] His family gets evicted. He ends up pushing a hand truck in a sugar factory
[JEFF] in Brooklyn. Then he works his way back, becomes an organizer, and his own union
[JEFF] boss fires him at least three times. And every time, the rank and file protest
[JEFF] until they hire him back. One biography describes him as a "fireplug of a man."
[JEFF] About five foot six.
[CYRUS] [amused] I like him already.
[JEFF] And by the sixties he's running the whole union, the I-L-A, from Maine to Texas.
[JEFF] And I think if you've been blacklisted, evicted, and fired by your own boss, your
[JEFF] instinct is going to be very simple. You want a guaranteed income. Nobody should ever
[JEFF] be able to take the paycheck away again.
[CYRUS] That makes total sense. And the East Coast union had its own version of the
[CYRUS] B-men problem. In Brooklyn, there was a segregated local for Black longshoremen. Local nine sixty-eight.
[CYRUS] And because its members didn't control a pier of their own, they never had steady
[CYRUS] work. They were always out looking for it. So when protections get tied to who's
[CYRUS] already working steadily, you'd expect men like that to be the first ones squeezed out.
[CYRUS] And here's the surprise. One study from the seventies found it partly went the other
[CYRUS] way. When the work moved to New Jersey, it moved to piers where no white
[CYRUS] local controlled the hiring, where more of the workforce was already Black, and where the
[CYRUS] new seniority rules actually protected those men as white longshoremen followed the work across the
[CYRUS] harbor. In Newark, a Black local and a white local split the work about evenly.
[JEFF] Huh. That's not the direction I'd have guessed.
[CYRUS] Me neither. And it's one study, and it's about Newark, not Brooklyn — Local nine
[CYRUS] sixty-eight itself was promised a merger with the big white local in Brooklyn that never
[CYRUS] went through, and it was left leaderless. But it's a real complication to the clean
[CYRUS] story. The box didn't only take. On that one pier, for those men, it also
[CYRUS] opened a door that the old system had kept shut.
[JEFF] So in nineteen sixty-four, Gleason actually negotiates a deal. And here's the part that surprised
[JEFF] me, because I'd always heard this as "the West Coast negotiated and the East Coast
[JEFF] fought." It's not quite that. Gleason agrees to let the employers cut the size of
[JEFF] a work gang from twenty men to seventeen. And in exchange, his men get a
[JEFF] guaranteed annual income. He calls it the best contract in the history of the union.
[JEFF] And his members vote it down.
[CYRUS] [skeptical] Why would they turn down the best contract in the union's history?
[JEFF] Well, put yourself in their boots. Twenty men down to seventeen is three jobs out
[JEFF] of every gang, gone, in exchange for a promise. These guys have watched what the
[JEFF] machines did on the West Coast. They know the box is coming to their pier.
[JEFF] And they've spent their whole working lives in a system where the guy at the
[JEFF] top of the union wasn't always on their side. I don't think you have to
[JEFF] be paranoid to read that deal and think, this is the first step, not the
[JEFF] last one. And on the facts, they were right. The box was going to take
[JEFF] most of the work. The savings were going to go to the shipping companies and
[JEFF] the customers. And the bill was going to land on them and their neighborhoods. All
[JEFF] of that turned out to be true. They just couldn't stop it. So they vote
[JEFF] it down. And walk out. From Maine to Texas. Hundreds of ships sit idle. And
[JEFF] Gleason gives this interview to TIME magazine that I just love, where he says, "The
[JEFF] men in this union fight like hell and walk out at the drop of a
[JEFF] hat." And then: "Nobody understands this union."
[CYRUS] Said by the guy who runs it.
[JEFF] Right? So he goes on the radio, takes questions from his own members who phone
[JEFF] in. He mails every man a pamphlet. And eventually, in February of nineteen sixty-five, they
[JEFF] go back to work on essentially the deal he'd negotiated in the first place. The
[JEFF] guarantee kicks in in nineteen sixty-six: sixteen hundred hours a year, paid whether there's work
[JEFF] or not. And then after another strike, in nineteen sixty-eight and sixty-nine, it goes up
[JEFF] to two thousand eighty hours. That's a full forty-hour week, every week, all year. And
[JEFF] in that same settlement they get something called the fifty-mile rule — which tries to
[JEFF] follow the work wherever the box goes.
[CYRUS] And the wild part is that all through the mid-sixties, the union was still officially
[CYRUS] saying containers hadn't hurt employment yet. While it was bargaining down gang sizes because of
[CYRUS] them. Which is exactly what people say about AI and jobs right now. "Hasn't hurt
[CYRUS] employment yet." Okay, so who's writing the check for this guarantee? Because the employers didn't
[CYRUS] just eat it.
[JEFF] A royalty. In New York it's a fee on every container that comes through the
[JEFF] port. So the box is literally paying the men it put out of work. And
[JEFF] by some accounts, a man on the list could collect even if he simply chose
[JEFF] not to show up.
[CYRUS] [dry] That's a very generous definition of "guaranteed." And I'd bet the shipping companies noticed
[CYRUS] which ports charged that fee and which didn't.
[JEFF] They did. Levinson has argued that the container fees helped push traffic south, toward ports
[JEFF] like Savannah and Charleston and Hampton Roads. So the guarantee protected the men in New
[JEFF] York... and helped send the work somewhere else.
[CYRUS] [deliberate] Look at the difference in incentives, though. On the surface, both coasts did the
[CYRUS] same thing. They both sold work rules for money. But Bridges took a fixed pot
[CYRUS] of money to buy his guys an exit — early retirement, shrink by attrition, done.
[CYRUS] Gleason got an open-ended guarantee to stay. And if you're an employer, and every man
[CYRUS] on that list gets paid forty hours a week whether you use him or not...
[CYRUS] why would you ever add another name?
[JEFF] You wouldn't.
[CYRUS] Exactly. So the list closes. And it did. A New Jersey legislative committee said in
[CYRUS] the late nineties that the longshore register had been closed to new permanent members for
[CYRUS] almost thirty years. New York basically stopped hiring longshoremen for a generation. Paying the men
[CYRUS] you have not to work is a promise. And the next generation pays for it.
[CYRUS] Because the guy who would have gotten that job in nineteen seventy — he doesn't
[CYRUS] get it. Ever.
[JEFF] That's a whole career. And it got expensive. It started at under two million dollars
[JEFF] a year. By nineteen eighty-three, one estimate had it around seventy million a year. An
[JEFF] industry study said it was hurting the port's ability to compete. And Marc Levinson points
[JEFF] out that as late as two thousand five, decades later, there was still a tax
[JEFF] on containers in New York funding payments to longshoremen.
[CYRUS] [incredulous] Wait, still?
[JEFF] Decades later. And I think you can see how a man like Gleason would feel
[JEFF] about that, looking back. He got exactly what a blacklisted kid from Charles Street would
[JEFF] want. Nobody on his list ever lost his income. And the union he loved just...
[JEFF] stopped growing.
[CYRUS] [reflective] Neither man was wrong about his members, is the thing. Bridges got his guys
[CYRUS] a good exit. Gleason got his guys a floor nobody could take away.
[JEFF] It's just that one of those designs was a ramp, and one of them was
[JEFF] a wall. And a wall keeps out the next guy, too.
[CYRUS] And meanwhile, back on the West Coast, there's a smaller version of the New York
[CYRUS] story playing out across San Francisco Bay, in Oakland. So the story goes that at
[CYRUS] a transportation club meeting in San Francisco in nineteen sixty, the head of San Francisco's
[CYRUS] port waved off containers as a passing fad. And Ben Nutter, an engineer at the
[CYRUS] Port of Oakland who'd soon be running it, joked that fine, Oakland would take the
[CYRUS] containers and San Francisco could keep the break-bulk. And San Francisco's guy said, more or
[CYRUS] less, deal.
[JEFF] Oakland took it.
[CYRUS] [amused] Very much so. Nutter goes after Sea-Land, and in nineteen sixty-two Sea-Land picks Oakland.
[CYRUS] He hires a representative in Japan, and in nineteen sixty-eight, six Japanese shipping lines choose
[CYRUS] Oakland over San Francisco.
[JEFF] So San Francisco just blew it.
[CYRUS] [skeptical] See, this is where I'd push back a little. Because I went and looked
[CYRUS] at the longer history, and San Francisco's port was already in trouble before anybody had
[CYRUS] heard of a container. It had been declining since right after the war. Its piers
[CYRUS] were old, with narrow aprons and columns inside the sheds and congested approaches. Oakland had
[CYRUS] flat land and direct rail. Oakland was taking tonnage away from San Francisco before it
[CYRUS] ever built a container terminal. The box sped it up. A lot. San Francisco's port
[CYRUS] went from about five million tons a year in the mid-sixties to under two million
[CYRUS] by the late seventies. But the geography was already shifting. The container just decided how
[CYRUS] fast.
[JEFF] [reflective] I like that, because it's the thing I'm always suspicious of in these stories.
[JEFF] One cause, one villain, one bad decision. Usually there are five things happening at once.
[CYRUS] And there's a piece of this I think complicates something you said earlier. You said
[CYRUS] the customers loved the box, and the fight came from next door. I think that's
[CYRUS] mostly right. But are the longshoremen really next door? If the product is moving stuff
[CYRUS] across an ocean, the men who load the ship are part of the product. They're
[CYRUS] the incumbents. And the big ocean carriers weren't exactly cheering either. They didn't picket. But
[CYRUS] they ran these rate cartels, the shipping conferences, and a study for the federal Maritime
[CYRUS] Administration in nineteen sixty-three basically blamed the conferences' conservatism for slowing containers down. The old
[CYRUS] lines were afraid boxes would push rates down. Levinson points out the North Atlantic conference
[CYRUS] tariffs didn't even have a category for containers. There was no price for a box.
[JEFF] You can't order it if it's not on the menu. Okay, that's fair. So maybe
[JEFF] the better version is: the people who bought the shipping loved the box. The people
[JEFF] who got paid to handle it, or sold a different way to move it, fought
[JEFF] it.
[CYRUS] Yeah. That's the right version.
[JEFF] So what does all of it add up to? On Manhattan's piers, by one count
[JEFF] from Levinson's book, the amount of longshore work fell by something like nine-tenths in about
[JEFF] a dozen years, from the early sixties to the mid-seventies. And I want to add
[JEFF] the thing that I think usually gets left out. The register — the list of
[JEFF] men entitled to work New York's docks — had already been cut roughly in half
[JEFF] before containers mattered. In the fifties and early sixties, the Waterfront Commission — which was
[JEFF] set up to clean the mob out of the docks — went through that list
[JEFF] and purged thousands of part-timers and no-shows. So some of the headcount drop everybody blames
[JEFF] on the box was actually an anti-corruption campaign. Those were names on a list, mostly,
[JEFF] not days of work. The days of work really did collapse, and that was the
[JEFF] box. It's always more than one thing. But by the seventies, the West Side piers
[JEFF] are empty, Red Hook is empty, Hoboken's waterfront is empty. The work went to Elizabeth
[JEFF] and Newark, and to Oakland and Long Beach. And the waterfront stopped being where the
[JEFF] city worked.
[CYRUS] And you have to picture what that looks like, because it's not a statistic, it's
[CYRUS] a place. In London, by nineteen eighty, the last of the old docks on the
[CYRUS] Isle of Dogs close, and it's miles of empty water. The cranes are still standing,
[CYRUS] nothing hanging from them. Warehouses with the windows out. The pubs on the corner, if
[CYRUS] they're open at all, are empty, because the four o'clock shift that used to fill
[CYRUS] them doesn't exist. Liverpool's south docks just silt up. And in Red Hook, the big
[CYRUS] container port the city drew up never gets built, and the western shore just empties
[CYRUS] out. I picture grass coming up through the cobblestones in front of the piers. The
[CYRUS] buildings are all still there. The reason for them is gone. So — did you
[CYRUS] see the British study? Because I think it changes how you think about who actually
[CYRUS] lost.
[JEFF] I saw a reference to it. Walk me through it.
[CYRUS] So two economists, Zouheir El-Sahli and Richard Upward, tracked dockworkers in England and Wales over
[CYRUS] forty years using census data. Britain went through the same thing, containers emptying out the
[CYRUS] old docks in London and Liverpool. And they had a protection scheme for registered dockers
[CYRUS] kind of like ours, that lasted until nineteen eighty-nine. And the question was, what happened
[CYRUS] to those men? And the answer is — the dockworkers themselves did not do worse
[CYRUS] than comparable workers who'd never been on the docks. Their jobs, their earnings, more or
[CYRUS] less fine. Partly because of the protections, partly because the industry mostly shrank by not
[CYRUS] hiring. So who lost? The places. Employment in the port districts was about the same
[CYRUS] as other districts in nineteen seventy-one, maybe a little higher. Twenty years later, it was
[CYRUS] significantly lower. Forty years later, still lower.
[JEFF] Why the places, though, and not the people?
[CYRUS] Partly because of what a gang actually was. There's a San Francisco longshoreman, Herb Mills,
[CYRUS] who wrote about it, and he says men joined a particular gang to "regularly work
[CYRUS] with one or more friends or relatives." So the gang was your brother-in-law and the
[CYRUS] guy from your parish. When the work moves across the harbor to a terminal with
[CYRUS] a crane, that's not just a job leaving. That's the social life of a neighborhood
[CYRUS] leaving.
[JEFF] [reflective] So the cost didn't really fall on the man with the hook. It fell
[JEFF] on his street. And on his son. The kid who would have gotten that job
[JEFF] in nineteen fifty-five, from his uncle, the way Red Barrett did... and in nineteen seventy-five,
[JEFF] there's no job to get. Nobody fired him. He just never got hired.
[CYRUS] Yeah.
[JEFF] And this is the cost. The system worked exactly the way it was designed to.
[JEFF] Cargo got cheaper. Everything in every store got cheaper, for everybody, for decades. That's real,
[JEFF] and it's huge. And a family in Red Hook still lost something that wasn't coming
[JEFF] back. Both things are true. You don't have to pretend the second one away to
[JEFF] believe in the first one.
[CYRUS] And the son doesn't show up in anybody's numbers. That's the hard part. There's no
[CYRUS] statistic for a job that never existed.
[JEFF] Right. So the winners are pretty clear: Elizabeth and Newark, Oakland, Long Beach, the fully
[JEFF] registered men with their pensions, and every customer everywhere. The losers are Manhattan, Brooklyn, Hoboken,
[JEFF] San Francisco's waterfront, the B-men... and the next generation.
[CYRUS] And people do ask whether New York could have kept it. I don't think so.
[CYRUS] Not at scale. If the Port Authority hadn't built in the marshes, the boxes don't
[CYRUS] come to Red Hook. There's no land, the streets are jammed, there's no rail. They
[CYRUS] go to Baltimore, or Norfolk. New York loses the port either way. Just later, and
[CYRUS] to another state. The box didn't decide whether. It decided how fast, and to whom.
[JEFF] And I've wondered the same thing about the two unions. What if Bridges had fought
[JEFF] like Gleason? My guess is the West Coast mechanizes slower, angrier, and ends up in
[JEFF] about the same place. Smaller union, more machines. Just with more scars.
[CYRUS] Probably. Okay, so by the mid-sixties, America has its labor deals and its first container
[CYRUS] ports.
[JEFF] But here's the problem. McLean's boxes are thirty-five feet long. Matson's are twenty-four. Another line,
[JEFF] Grace Line, is using seventeen. None of them fit each other's ships, or each other's
[JEFF] cranes. It's like everybody built their own railroad gauge.
[CYRUS] So the box works... but only inside your own company.
[JEFF] Right. And the one time an American line tried to take a container ship to
[JEFF] a foreign port, the dockworkers there didn't strike, or negotiate. They just refused to touch
[JEFF] it. And they won.
[JEFF] So you'd think, okay, once it works in Newark and Oakland, it just spreads. Everybody
[JEFF] sees the numbers, everybody copies it. And the first time an American line tried it
[JEFF] overseas, it went about as badly as it possibly could. We have to rewind a
[JEFF] little, to before the West Coast deal is even signed. Nineteen sixty. There's an old-line
[JEFF] American shipping company called Grace Line. Very established, very blue-chip, big in the South American
[JEFF] trade. And they decide they're going to containerize their run to Venezuela. They take a
[JEFF] World War Two freighter called the Santa Eliana, they put her in a shipyard in
[JEFF] Baltimore for nine months, and they rebuild her. Cut her in half, add a forty-five-foot
[JEFF] section in the middle, widen her, put three cranes on rails on her deck, fit
[JEFF] her hold with cells for almost five hundred boxes. Three and a half million dollars.
[JEFF] And they order fifteen hundred containers. Their own size. Seventeen feet long.
[CYRUS] [dry] Of course. Everybody gets their own size.
[JEFF] It's a theme. So in January of nineteen sixty she loads up at Port Newark
[JEFF] and heads south. And on February second, she pulls into La Guaira, which is the
[JEFF] port for Caracas. [deliberate] And the Venezuelan dockworkers look at this ship full of sealed
[JEFF] boxes... and they refuse to touch it. Not a strike. They just won't work the
[JEFF] ship. So there's an eighteen-day standoff. And the way it ends is, the cargo finally
[JEFF] comes off, and Grace Line agrees not to use container ships on that route.
[CYRUS] [genuinely surprised] So the dockworkers won.
[JEFF] Completely. And here's the part I didn't know until I dug into it. This wasn't
[JEFF] a local thing. The Venezuelan longshoremen's union — fourteen thousand members, led by two men
[JEFF] named Martín Correa and Crisanto Quintero, who'd both done time in jail and in exile
[JEFF] under the dictatorship there — had a pact with Teddy Gleason's people in New York.
[JEFF] They pledged not to work Grace's container ships until Grace settled with the I-L-A. So
[JEFF] La Guaira and the West Side of Manhattan were one fight. Grace spent two years
[JEFF] trying to get the Venezuelans to accept a crew about a tenth the normal size.
[JEFF] They wouldn't. And when Grace finally restarted the service, in late nineteen sixty-two, it was
[JEFF] on the condition that it hired full longshore gangs anyway. Which means the boxes saved
[JEFF] them nothing. And in nineteen sixty-four, Grace gives up and sells both ships to —
[JEFF] guess who.
[CYRUS] McLean.
[JEFF] Of course. And I think it's worth being fair to those Venezuelan dockworkers, because we
[JEFF] don't have their side of it in their own words, only what American sources say
[JEFF] about them. But their argument was exactly the argument the longshoremen in New York were
[JEFF] making. This box takes our work. And the difference is, they had more leverage. And
[JEFF] they used it. And for a while, they won.
[CYRUS] Which is a reminder that the timing wasn't inevitable, even if the economics were. The
[CYRUS] box was coming. But who got to say when, and on what terms — that
[CYRUS] was up for grabs, port by port.
[JEFF] Right. Anybody who held out forever was going to get cut out of the supply
[JEFF] chain that was forming. But "eventually" can be a long time if you're the guy
[JEFF] on the pier. And the old European and American lines mostly felt the same way,
[JEFF] for different reasons. They had enormous fleets of conventional ships, built and paid for, and
[JEFF] their conferences didn't even have a price for a box. To them, containers were a
[JEFF] domestic novelty.
[CYRUS] [deliberate] Which was a perfectly sound position. Right up until the North Atlantic flipped. If
[CYRUS] your whole balance sheet is break-bulk ships, the box isn't an opportunity. It's a write-off.
[JEFF] Exactly. Which brings up the other problem. Because even at home, nobody's boxes fit together.
[JEFF] McLean's are thirty-five feet. Matson's are twenty-four. Grace has seventeen. And in nineteen fifty-eight, the
[JEFF] U.S. Navy looks at this and gets nervous. Because if there's ever a war, the
[JEFF] Navy might have to use these commercial ships to move supplies. And if every company's
[JEFF] boxes are a different size, with different fittings, you can't mix them, you can't swap
[JEFF] cranes, you can't do anything. So the Navy and the federal Maritime Administration push the
[JEFF] industry to agree on a standard. And a national standards committee gets going.
[CYRUS] Committees. My favorite. [deliberate] And I'll say this, politics aside: this is one more place
[CYRUS] where a standard pushed from the top turned out to be enormously valuable. The interstate
[CYRUS] highways are the same story. America was never the zero-government version of itself that people
[CYRUS] like to imagine. A lot of what worked was partly regulated, partly subsidized, partly standardized
[CYRUS] by somebody in Washington — and then the market ran on top of it.
[JEFF] And this one is a great piece of institutional drama, so stay with me. The
[JEFF] width is easy. It's eight feet, because that's what the highway rules allow. The height
[JEFF] settles at eight feet. Length is the fight. People propose twenty and forty. Twelve and
[JEFF] twenty-four, which is Matson's family. Seventeen and thirty-five, which is McLean's. And where do those
[JEFF] numbers come from? Forty feet was the railroads' number — the classic boxcar length. Thirty-five
[JEFF] was McLean's, because that was the longest trailer legal in every state. [amused] And then
[JEFF] in nineteen fifty-nine, a bunch of states raise their trailer limits to forty feet.
[CYRUS] [exhales] And thirty-five loses its whole reason to exist.
[JEFF] Overnight. So in nineteen sixty-one the committee settles on ten, twenty, thirty, and forty. And
[JEFF] neither pioneer's size is on the list. Sea-Land and Matson together are carrying something like
[JEFF] seventy percent of America's container traffic, and the standard says both of their fleets are
[JEFF] the wrong size. And neither company accepted it. They went to Washington, they lobbied, and
[JEFF] Congress actually changed the law so that the standard sizes wouldn't get preference for government
[JEFF] business. And I think the fair thing is to let the committee speak for itself,
[JEFF] because I don't think they were out to get anybody. The longtime chairman of the
[JEFF] international committee wrote later that the sizes didn't match either company's boxes, and that "this
[JEFF] was not a wilful effort to isolate the two pioneering companies." It was the result
[JEFF] of building something that would have to work everywhere, not just on two routes.
[CYRUS] Right. And you notice who set the numbers. The width came from highways. The length
[CYRUS] came from railroads. The people who actually ran the ships didn't get their size.
[JEFF] Which is the thing I keep noticing in this story. The shipping companies weren't the
[JEFF] ones deciding. The neighbors were — the trucks and the railroads. And I think that's
[JEFF] because you can refit a ship. You can't re-pour every highway bridge in the country,
[JEFF] and you can't rebuild every railcar. The two enormous empires on land set the terms,
[JEFF] and the ships adjusted.
[CYRUS] And one of the old Sea-Land executives said it best. He said, "Twenty and forty
[CYRUS] foot was never the right size."
[JEFF] Which is the most honest thing anyone's ever said about a standard. It doesn't have
[JEFF] to be right. It has to be the same. And then it goes international, and
[JEFF] it's the same fight with more languages. The Europeans wanted a slightly wider box —
[JEFF] two and a half meters, about two and a half inches wider. The Americans, the
[JEFF] British, the Japanese held out for eight feet. And Europe gave in on the width
[JEFF] to keep the forty-foot length, because they thought the forty was indispensable.
[CYRUS] So the box we have is literally a trade.
[JEFF] It's a bargain, not an optimum. But here's the part that really matters. Because the
[JEFF] size is almost the easy part. The part that has to be identical — not
[JEFF] close, identical — is the corner.
[CYRUS] Because every crane, every truck, every twistlock, every cell on every ship grabs the box
[CYRUS] by its corners.
[JEFF] Exactly. Get the corner wrong and nothing fits anything. And by nineteen sixty-two, there are
[JEFF] two designs on the table. One is Tantlinger's corner, from nineteen fifty-five. Which Sea-Land owns
[JEFF] a patent on. The other is from a company called National Castings, and their design
[JEFF] was built, as Tantlinger put it, to skirt around Sea-Land's patent. And here's the twist.
[JEFF] Tantlinger doesn't work for Sea-Land anymore. He left in nineteen fifty-eight for Fruehauf, the big
[JEFF] trailer maker. And he's now chairing the committee's task force on exactly this question —
[JEFF] how you lift and lock a box. And I have to tell you one detail
[JEFF] about him, because I love it. He had a habit of scribbling comments all around
[JEFF] the margins of any report anybody sent him. So many that his colleagues reportedly had
[JEFF] a name for them. Tantograms.
[CYRUS] That's the most engineer thing I've ever heard.
[JEFF] Right? And he later described the whole process as a dog fight. A mix of
[JEFF] proprietary interests and business relationships. Because here's the deadlock. The rival design was rejected because
[JEFF] it wasn't proven and it wasn't cost-competitive. And Sea-Land's design was proven... but it was
[JEFF] patented. And a standards committee basically won't make a patented part the national standard. You
[JEFF] can't make the whole country pay one company a royalty every time it builds a
[JEFF] box.
[CYRUS] So the good design is locked up, and the open design isn't good enough.
[JEFF] That's the deadlock. And so Tantlinger, who no longer works there, goes back to his
[JEFF] old boss. And he asks Malcom McLean to give it away.
[CYRUS] [deliberate] And remember, this is the same committee that just told McLean his thirty-five-foot box
[CYRUS] is non-standard.
[JEFF] Yep. And McLean says yes. There's a letter dated January twenty-ninth, nineteen sixty-three, releasing Sea-Land's
[JEFF] corner fitting and twistlock patents, so the industry could use them and change them. Royalty-free.
[CYRUS] [awed] That's the move. Putting the whole industry ahead of your own slice of it.
[JEFF] Grow the pie instead of guarding the slice. And it still takes years. In nineteen
[JEFF] sixty-four, at the international meeting in Hamburg, the U.S. shows up without even having its
[JEFF] own standard approved at home. And Tantlinger presents the design anyway and hands out half-scale
[JEFF] models of the fitting, so people can see how it works.
[CYRUS] I love that. Show-and-tell. Like, here, hold it.
[JEFF] Here, turn it in your hand. And in nineteen sixty-five, at The Hague, they accept
[JEFF] it unanimously. And then — in real life, when the fittings go into service, they
[JEFF] turn out not to be strong enough. So the committee meets again in Genoa in
[JEFF] nineteen sixty-six and orders thicker, stronger castings. And in June of nineteen sixty-seven, the international
[JEFF] standards body finally approves the corner fitting. The size standard is published the next year.
[CYRUS] So the corner on every box today isn't exactly McLean's corner.
[JEFF] No, and I think that's important. The committee changed it, strengthened it, adjusted it. What
[JEFF] McLean's release did was break the deadlock. It let a proven design become the starting
[JEFF] point. And it wasn't just Sea-Land, either — a few years later another trailer company
[JEFF] released its own twistlock patent. One of the old Sea-Land executives said McLean "decided it
[JEFF] was better to give up those patents and grow the industry rather than keep them
[JEFF] as a proprietary item." And he said he considers giving up those patents the most
[JEFF] important decision ever made in the containerization and intermodal industry.
[CYRUS] Okay, and I want to make the case that this wasn't charity. Because I think
[CYRUS] people hear "he gave it away" and think he was being nice. And maybe he
[CYRUS] was. But it was also the smartest business decision he made. A container is worth
[CYRUS] more the more places it fits. If Sea-Land keeps its corner proprietary, Sea-Land's boxes don't
[CYRUS] fit anybody else's cranes and nobody else's boxes fit Sea-Land's ships. So the whole network
[CYRUS] stays small. Owning the standard means owning a big slice of a very small pie.
[CYRUS] Giving it away means a smaller slice of the biggest pie in the history of
[CYRUS] shipping. One economics firm that studied it put it pretty bluntly: McLean wasn't acting out
[CYRUS] of altruism. He saw that opening up the patent would make the whole market bigger.
[JEFF] [reflective] And this is the thing I learned back at IBM that I think about
[JEFF] all the time. The difference between invention and innovation. Invention is building the new thing.
[JEFF] Innovation is making it scale, making it practical, making it something the whole world can
[JEFF] actually use. The invention here was the box. The innovation that changed the world was
[JEFF] the least patentable part of it... and the guy who owned it gave it away.
[CYRUS] And you see this over and over. USB is the one I always think of.
[CYRUS] A bunch of computer companies that compete with each other all day long get together
[CYRUS] in the nineties and agree on one plug. Because every one of them knew that
[CYRUS] if anybody tried to make real money off the plug itself, it would slow the
[CYRUS] whole thing down, or kill it. And now everything charges off the same cable.
[JEFF] [skeptical] Mostly. But here's the counterexample. Apple ran its own proprietary port on the iPhone
[JEFF] for about a decade. And it made a lot of money doing it — they
[JEFF] controlled who could make accessories. Until the European Union passed a law and made them
[JEFF] switch to USB-C.
[CYRUS] Which is the Navy in nineteen fifty-eight. Sometimes the government has to make everybody agree.
[JEFF] That's fair. And I'll add one more counterweight, because I don't want to make the
[JEFF] committee sound like it was handing out halos. Committees aren't always wise. This one stranded
[JEFF] the two companies that had actually built the thing. Sea-Land and Matson ran non-standard fleets
[JEFF] for years, and Sea-Land eventually had to convert ships to fit the standard everybody else
[JEFF] had agreed to.
[CYRUS] Right. The pioneers paid the switching cost.
[JEFF] They did. So owning the standard can pay, for a while. But the stuff that
[JEFF] becomes infrastructure tends to end up being stuff nobody owns.
[CYRUS] So okay, I want to stop here for a second and actually describe the thing
[CYRUS] they agreed to. Because I went down a rabbit hole on this, and the details
[CYRUS] are genuinely great.
[JEFF] [amused] Of course you did. All right — let's have it.
[CYRUS] So the two sizes everybody actually uses ended up being the twenty and the forty.
[CYRUS] And here's my favorite detail. A twenty-foot container isn't twenty feet long. It's nineteen feet,
[CYRUS] ten and a half inches. Because two twenties, end to end, plus the little gap
[CYRUS] between them when they're stacked, add up to exactly one forty. So in any slot
[CYRUS] on a ship or a chassis built for a forty, you can drop two twenties
[CYRUS] instead. It's the Lego thing again. And here's a weird one: a forty-footer is allowed
[CYRUS] to carry less cargo weight than a twenty. A typical box is rated to a
[CYRUS] bit over thirty tonnes, box plus cargo, and the twenty and the forty are rated
[CYRUS] to roughly the same maximum. So the forty, which weighs more empty, has less left
[CYRUS] over for cargo. A forty runs out of space, and a twenty runs out of
[CYRUS] weight. Which is exactly how U-Haul boxes work. The tiny boxes are for books. The
[CYRUS] giant boxes, they tell you, are for pillows and blankets. Same thing here: tiles, metal,
[CYRUS] paper go in twenties, and the light bulky stuff goes in forties.
[JEFF] Huh. So the small box is the heavy box.
[CYRUS] Every time. And here's the part that answered my own question, because I kept wondering
[CYRUS] why they'd rate a box heavier than anybody can legally drive. The box usually isn't
[CYRUS] the limit. The road is. A truck on an American interstate can weigh eighty thousand
[CYRUS] pounds, total, and there's a federal formula that spreads that weight across the axles, specifically
[CYRUS] to protect bridges. By the time you count the tractor, the chassis, and the empty
[CYRUS] box, you're left with something like forty-four thousand pounds of cargo. So a forty-foot box
[CYRUS] can legally hold about a third more than an American highway will let a truck
[CYRUS] carry in it.
[JEFF] So the box is overbuilt for the road.
[CYRUS] Right — but not for the ocean. At sea, the thing that matters is the
[CYRUS] stack. A standard box is typically rated to hold up something like a hundred and
[CYRUS] ninety tonnes sitting on top of it. That's roughly eight loaded boxes stacked on top
[CYRUS] of it, so nine high. And they test it beyond that, because the ship pitches
[CYRUS] in heavy seas and everything gets heavier for a second. All of it through the
[CYRUS] four corner posts, while the roof can basically hold a guy with a clipboard. Then
[CYRUS] the doors. There are two doors at one end, and each has two vertical steel
[CYRUS] bars with handles. You turn the handle, and cams at the top and bottom of
[CYRUS] each bar wedge into slots on the frame, which squeezes a rubber gasket to make
[CYRUS] it watertight. And there's a rule — you always open the right door first. The
[CYRUS] seals overlap in the middle, and if you open the left one first, they jam.
[JEFF] Wait, so there's an etiquette?
[CYRUS] Oh, it's a whole thing. And the seal — the "sealed at the factory" part
[CYRUS] — is usually a numbered steel bolt that goes through the handle. The shipper puts
[CYRUS] it on. The customer cuts it off. And before you ask — customs, mostly, doesn't
[CYRUS] cut it off either. Customs works from the paperwork. The manifest, who shipped it, where
[CYRUS] it came from, whether that shipper's been trouble before. And it picks a small fraction
[CYRUS] to actually look at. Which is going to matter later in this story. [deliberate] And
[CYRUS] who makes them? China. Almost all of them. As of a few years ago, something
[CYRUS] like ninety-six percent of the regular dry boxes in the world, and essentially all of
[CYRUS] the refrigerated ones. A handful of Chinese companies dominate. And the price for a new
[CYRUS] one is roughly what a cheap used car costs. A few thousand dollars. Which roughly
[CYRUS] doubled during the pandemic crunch, when everybody suddenly needed boxes.
[JEFF] [amused] So the thing that runs global trade costs about as much as an old
[JEFF] used Honda.
[CYRUS] Pretty much. Which is kind of the point. It has to be cheap and dumb.
[CYRUS] All the intelligence is in the agreement.
[JEFF] So now there's a standard. But there's still a problem. Nobody has proven you can
[JEFF] run this thing across the Pacific at scale. And the way it gets proven is,
[JEFF] I think, the single most unexpected turn in the story. Because it's the Vietnam War.
[JEFF] By nineteen sixty-five, the U.S. is pouring men and equipment into South Vietnam. And South
[JEFF] Vietnam has, essentially, two deep-water ports. Saigon and Cam Ranh Bay. And Saigon is completely
[JEFF] overwhelmed. One Army staff officer's report from November of sixty-five describes about a hundred ships
[JEFF] sitting in the harbors or anchored offshore on a given day, with room to unload
[JEFF] maybe forty-five of them at a time. And ships waiting, sometimes, as long as two
[JEFF] months. In a war zone. And the same account has this detail I can't shake.
[JEFF] A freighter carrying thirty thousand bags of cement, being unloaded by a single Army landing
[JEFF] craft that could move three to eight hundred bags a day, depending on the weather.
[CYRUS] [incredulous] So, what — I'm doing the math — five weeks? Three months? For one
[CYRUS] ship?
[JEFF] Somewhere in there. It's the Warrior, but in a war zone.
[CYRUS] [exhales] Every bag lifted by hand.
[JEFF] Yep. So McLean, who by all accounts is kind of obsessed with getting his ships
[JEFF] into Vietnam, goes after the Army. And the person he gets to is a general
[JEFF] named Frank Besson, who runs Army Materiel Command. And Besson is the perfect person for
[JEFF] McLean to land on, because he's a railroad man. In World War Two, he ran
[JEFF] a military railroad in Iran, moving supplies to the Soviets. After the war, during the
[JEFF] occupation, he ran Japan's railroads — which are famous to this day — and rebuilt
[JEFF] them. Later on he'd be one of the founding directors of Amtrak. So he gets
[JEFF] logistics in his bones. He lets McLean study the problem, and in nineteen sixty-six, Sea-Land
[JEFF] gets a military contract to run container ships from Oakland to Okinawa. And in nineteen
[JEFF] sixty-seven, into Vietnam itself. The first Sea-Land container ship pulls into Da Nang in the
[JEFF] summer of sixty-seven. And because the bigger ships don't carry their own cranes, the Army
[JEFF] puts up a huge container crane at Cam Ranh Bay, on one of these prefabricated
[JEFF] steel piers they'd been towing in — a crew of sixteen men could put one
[JEFF] together in about forty-five days. And the logjam starts to clear. After the war, the
[JEFF] Army ran a big review of its logistics — chaired by Besson, actually — and
[JEFF] it found container ships could be unloaded seven to ten times faster than conventional ships,
[JEFF] and that using containers to the max could have saved more than three-quarters of a
[JEFF] billion dollars.
[CYRUS] Okay. But here's the part that I think is the real story, and it's an
[CYRUS] economics story. The military pays Sea-Land for the round trip. Full ships out to Vietnam.
[CYRUS] And then what's on the ship coming back?
[JEFF] Nothing.
[CYRUS] Right. Vietnam isn't exporting anything to California. So you've got these ships going home empty,
[CYRUS] and the trip home is already paid for. An empty return leg that's already covered
[CYRUS] is basically a free option. Any cargo you can put on it is almost pure
[CYRUS] profit. So McLean does the obvious thing. On the way home, he stops in Japan.
[JEFF] [genuinely surprised] Really?
[CYRUS] Really. And he fills the ships with televisions and stereos from companies like Matsushita and
[CYRUS] Pioneer. In nineteen sixty-eight, Sea-Land starts running fully containerized commercial service between Japan and the
[CYRUS] United States, out of Yokohama. Japan had just put up its first container cranes, in
[CYRUS] Tokyo and Kobe, and Sea-Land was building its own terminal — so for once there
[CYRUS] were cranes on both sides of the Pacific. That same year Japan launches its own
[CYRUS] first container ship, and faster ships start cutting the round trip across the Pacific from
[CYRUS] something like eighty days to about thirty. And all of a sudden, Japanese electronics can
[CYRUS] reach American stores at a cost that makes them competitive.
[JEFF] [curious] Why him, though? Why didn't anybody else think of Japan?
[CYRUS] Because to make that trade work, you need container ships already crossing the Pacific, cranes
[CYRUS] on both ends, and a reason to be in Japan anyway. Nobody builds all that
[CYRUS] on spec for televisions. But if the Pentagon has already paid for the ships and
[CYRUS] the route, the televisions are just the gravy. The war covered the fixed cost. The
[CYRUS] electronics were the margin.
[JEFF] That's a very Cyrus way to describe a war.
[CYRUS] [dry] I'm describing the spreadsheet, not the war. And Levinson's phrase is that the U.S.
[CYRUS] trade deficit with Japan "soon became a sensitive diplomatic issue." Which — small personal note
[CYRUS] — in nineteen ninety I gave a high school forensics speech on how and why
[CYRUS] Japanese products were beating American ones. Won an award for it, thank you very much.
[JEFF] Of course you did.
[CYRUS] And I had no idea about the empty ships. It's a great piece of the
[CYRUS] answer. It's not the whole answer — the TVs, and later the cars, were also
[CYRUS] just very good. But the door they came through was a war contract with nothing
[CYRUS] to carry home.
[JEFF] "Sensitive diplomatic issue" is a very polite way to describe the entire seventies and eighties.
[JEFF] But think about that. A war, in Southeast Asia, with nothing to do with trade,
[JEFF] accidentally builds the trade route that ends up carrying a huge share of what Americans
[JEFF] buy. And it goes through a war zone and Yokohama.
[CYRUS] And by the way, I think the general is the perfect detail. The guy who
[CYRUS] rebuilt Japan's railroads after the war ends up helping open the door for Japan's exports.
[CYRUS] Nobody planned that.
[JEFF] Not even a little. And while all of that's happening, there's one more bet worth
[JEFF] a minute, on the other side of Asia. In nineteen sixty-six, Singapore — which is
[JEFF] barely a year old as an independent country — decides to build a container port.
[JEFF] At that point, the only other country in Asia with a container terminal is Japan.
[JEFF] The technology's ten years old. Nobody knows if it's going to be the future or
[JEFF] a fad. And there's no backyard — no hinterland, no farms, no big domestic market.
[JEFF] It's an island at the end of a peninsula. Lee Kuan Yew later called the
[JEFF] port "Singapore's raison d'être." Its whole reason for being. They open their first container terminal
[JEFF] in nineteen seventy-two. It handles about twenty-five thousand boxes' worth that first year. By nineteen
[JEFF] eighty-two, Singapore is the busiest port in the world by shipping tonnage.
[CYRUS] And it's the mirror of New York, right? New York bet on the old way
[CYRUS] and lost the port. Singapore bet on the new way before anyone knew it would
[CYRUS] work. And the reason Singapore works at all is the standard. Singapore's real business is
[CYRUS] transshipment. Boxes come in on one ship and go out on another. A hub like
[CYRUS] that only works if every box fits every crane. That's the corner fitting paying off,
[CYRUS] thousands of miles from that committee room.
[JEFF] So by the late sixties, it's everywhere. In the spring of nineteen sixty-six, Sea-Land starts
[JEFF] the first container service across the Atlantic. A ship called the Fairland pulls into Rotterdam
[JEFF] with a couple of hundred boxes, then Bremen, then Grangemouth in Scotland. And I think
[JEFF] the Europeans on those piers were looking at the same thing the guy in the
[JEFF] rain in Newark was looking at, ten years earlier. The old European lines, who'd been
[JEFF] calling containers a domestic niche, scramble. And within about fifteen years, something like eighty or
[JEFF] ninety percent of the general cargo crossing the North Atlantic is in boxes.
[CYRUS] Levinson says that by the late seventies, the container was almost universal in international trade.
[CYRUS] And by nineteen ninety, something like ninety-eight percent of the dry containers on earth conformed
[CYRUS] to the international size standard. Almost every box on the planet. That's the agreement, working.
[JEFF] [reflective] And it's worth imagining what happens if it doesn't. If Sea-Land keeps its patent,
[JEFF] or the committees never land, you get a world of incompatible regional box systems. Every
[JEFF] port needs three kinds of cranes. A hub like Singapore can't exist. It's like that
[JEFF] drawer in everybody's kitchen full of travel adapters. Except it's the whole world economy.
[CYRUS] The adapter drawer economy.
[JEFF] Okay, and I have to close the loop on one thing. Did you catch what
[JEFF] happened to the Santa Eliana after Grace sold her?
[CYRUS] The Grace Line ship? Sea-Land bought her in sixty-four. That's where I left her.
[JEFF] So Sea-Land refits her and, after a year, renames her. And the name they give
[JEFF] her is the Mayaguez. After a city in Puerto Rico.
[CYRUS] [genuinely surprised] Wait. THE Mayaguez? Nineteen seventy-five?
[JEFF] Yep. May twelfth, two weeks after Saigon falls, she's sailing off the coast of Cambodia,
[JEFF] and a Khmer Rouge gunboat fires on her and seizes her and her crew. And
[JEFF] it turns into the military operation that's often called the last battle of America's war
[JEFF] in Vietnam.
[CYRUS] No way. The same ship.
[JEFF] The same hull. The ship that couldn't get unloaded in Venezuela in nineteen sixty ends
[JEFF] up at the very end of the war that made the container go global.
[CYRUS] That's quite a life for one old freighter.
[JEFF] [reflective] And by then the box doesn't need anybody to champion it anymore. It's everybody's.
[JEFF] It's crossing every ocean. And it doesn't really need Malcom McLean anymore, either. Which is
[JEFF] good timing, because he's just sold Sea-Land to a tobacco company... and talked them into
[JEFF] building the fastest cargo ships the world has ever seen.
[JEFF] So, January of nineteen sixty-nine. Malcom McLean sells Sea-Land. And the buyer is... R.J. Reynolds.
[JEFF] The tobacco company.
[CYRUS] [dry] Naturally.
[JEFF] It's the sixties. Everybody's buying everything. Reynolds pays about five hundred and thirty million dollars
[JEFF] for the company, and McLean personally walks away with something like a hundred and sixty
[JEFF] million and a seat on the board. Well over a billion in today's money. So
[JEFF] the trucker from Maxton is now a very, very rich man.
[CYRUS] And he's, what, mid-fifties?
[JEFF] Fifty-five. And here's the thing about McLean. "Totally committed" doesn't retire. He's still on the
[JEFF] board, he's still pushing, and he has a plan that was already on the drawing
[JEFF] board before the sale. If the box made the ship turn around in hours instead
[JEFF] of days, the next thing to squeeze is the time at sea. Faster ships mean
[JEFF] you need fewer of them to run the same weekly service. So he pushes Reynolds
[JEFF] to pay for the fastest cargo ships in the world. And they do. It's McLean's
[JEFF] vision and Reynolds' money. They're called the S-L-sevens. Eight of them, delivered in nineteen seventy-two
[JEFF] and seventy-three. Each one is almost a thousand feet long, with steam turbines putting out
[JEFF] a hundred and twenty thousand horsepower. They cruise at thirty-three knots. That's close to forty
[JEFF] miles an hour, for a ship carrying about a thousand containers. And in August of
[JEFF] nineteen seventy-three, one of them, the Sea-Land Exchange, crosses the Atlantic at nearly thirty-five knots.
[JEFF] Which puts it within about a knot of the Atlantic record set by the SS
[JEFF] United States, the great American ocean liner.
[CYRUS] [genuinely surprised] A cargo ship, running with the record-holding passenger liner.
[JEFF] A box ship. With TVs in it. [deliberate] And then... two months later.
[CYRUS] [exhales] The oil shock.
[JEFF] October nineteen seventy-three. The oil embargo. These ships had been ordered when oil was about
[JEFF] three dollars a barrel. It quadrupled within months, and by the end of the decade
[JEFF] it was past thirty. And a steam turbine ship running at thirty-three knots drinks fuel
[JEFF] like nothing else on the ocean. And it's not like nobody had thought about fuel.
[JEFF] Reynolds had even bought an oil company in nineteen seventy, partly to keep fuel flowing
[JEFF] to Sea-Land's ships. It didn't matter. The ships were incredibly expensive to run. In the
[JEFF] early eighties, Sea-Land sells them to the Navy — about two hundred million dollars for
[JEFF] the first six. And the Navy loves them, because if you need to get tanks
[JEFF] to the other side of the world in a hurry, nothing's faster. Years later, they
[JEFF] hauled cargo for the first Gulf War. But as a business, for Sea-Land, they were
[JEFF] a disaster.
[CYRUS] [deliberate] And this is a great systems-thinking lesson. McLean's genius, the entire time, was the
[CYRUS] cost to move one box. Not the speed, not the ship. The cost per box.
[CYRUS] And speed is the most expensive way there is to save a day that nobody
[CYRUS] is paying you for. Because the physics are brutal. The power you need to push
[CYRUS] a ship through water goes up roughly with the cube of the speed. So if
[CYRUS] you go ten percent slower, you burn something like a quarter less fuel. Go ten
[CYRUS] percent faster, and you pay through the nose.
[JEFF] So the customer doesn't care enough about one extra day to pay for it.
[CYRUS] Not for a box of sneakers, no. If it matters that much, you put it
[CYRUS] on a plane. The box's whole value is being cheap and reliable. Fast was never
[CYRUS] the point. And if you look at the giant container ships today, they don't sail
[CYRUS] fast. Many of them deliberately sail slow.
[JEFF] Which matters. Because McLean learns that lesson. He just learns it at exactly the wrong
[JEFF] time. He leaves the Reynolds board in nineteen seventy-seven. And in nineteen seventy-eight, he buys
[JEFF] another shipping company, United States Lines. Levinson describes it as "a large but weak competitor."
[JEFF] And he looks at what happened with the S-L-sevens, and he flips the bet completely.
[CYRUS] [curious] Slow.
[JEFF] And absolutely enormous. In nineteen eighty-three, he orders twelve ships from Daewoo, in South Korea,
[JEFF] for five hundred and seventy million dollars. At the time, it was described as the
[JEFF] largest commercial shipbuilding contract ever awarded. And they're the biggest container ships anyone had ever
[JEFF] built. They could carry the equivalent of more than four thousand twenty-foot boxes. One big,
[JEFF] efficient diesel engine. A crew of twenty-one. And they cruise at eighteen knots, when most
[JEFF] ships of the era were doing twenty-two, twenty-four.
[CYRUS] So he's betting the opposite way. Fuel is going to be expensive, so be the
[CYRUS] most fuel-efficient ship on the ocean.
[JEFF] Exactly. They called them Econships. And forecasts at the time widely expected oil to keep
[JEFF] getting more expensive. [amused] And there's a little detail I love. They built them with
[JEFF] stubby smokestacks so the ships would fit under the old bridge in Savannah, Georgia, which
[JEFF] was one of his two big American ports.
[CYRUS] Of course.
[JEFF] They launch an around-the-world service in nineteen eighty-four and eighty-five. And then... nineteen eighty-six.
[CYRUS] [exhales] Oil collapses.
[JEFF] Yep. Saudi Arabia decides to win back market share, and in under a year the
[JEFF] price of crude falls by more than sixty percent, down to around twelve dollars a
[JEFF] barrel. And all of a sudden, a fuel-efficient ship isn't an advantage. Everybody's fuel is
[JEFF] cheap. And U.S. Lines is sitting there with a dozen huge, slow ships, in a
[JEFF] market where freight rates are already weak. Levinson's line is, "Oil prices plunged, leaving United
[JEFF] States Lines with the wrong ships for the times."
[CYRUS] Twice wrong about oil.
[JEFF] Fast when fuel got expensive. Slow when fuel got cheap. And on November twenty-fourth, nineteen
[JEFF] eighty-six, U.S. Lines and McLean's company file for bankruptcy. With more than a billion dollars
[JEFF] of debt. It's one of the biggest bankruptcies in American history up to that point.
[JEFF] The ships get sold off. The biggest container ships in the world, a year or
[JEFF] two old, sold out of a bankruptcy, and somebody else gets to run them on
[JEFF] cheap oil. And the people — thousands of them lose their jobs. And we don't
[JEFF] have a single one of their names. Not a seaman, not a clerk in Savannah
[JEFF] or New York telling us what it was like. What we have is Levinson. He
[JEFF] says the ships were sold off and thousands of workers lost their jobs. And then
[JEFF] he writes that McLean stayed out of public view after that — ashamed of his
[JEFF] role in a failure that cost all those people their jobs, shunning reporters, avoiding anything
[JEFF] public. I think that's the saddest sentence in the whole book.
[CYRUS] [reflective] Yeah. It's the other side of "totally committed." And it's kind of devastating to
[CYRUS] read.
[JEFF] The thing that built Sea-Land is the thing that sank U.S. Lines. He never hedged.
[JEFF] Not in nineteen fifty-five, when he sold his trucking company. Not in nineteen eighty-three, when
[JEFF] he bet a company on the price of oil. It's the same trait. It just
[JEFF] met a different oil market.
[CYRUS] And here's the part that I found kind of haunting. Because you could argue he
[CYRUS] was right. Just early. After two thousand eight, when fuel prices spiked and the industry
[CYRUS] had too many ships, the big carriers started doing something called slow steaming. They deliberately
[CYRUS] slowed down to save fuel. And Maersk, the biggest line in the world, defines slow
[CYRUS] steaming as eighteen knots. McLean's speed. Exactly. And then a few years later, Maersk orders
[CYRUS] a new class of giant ships, designed from the start to sail slower than their
[CYRUS] competitors, explicitly for fuel efficiency. And they're built by Daewoo. The same company that built
[CYRUS] McLean's ships thirty years earlier.
[JEFF] Of course they were.
[CYRUS] I'm not making this up. And there's a line from right before it happened. In
[CYRUS] two thousand eight, the head of one of the big container-ship owners was asked why
[CYRUS] people were nervous about ordering slower ships. And his answer, the way the trade press
[CYRUS] reported it, was that many of them remembered the experience of Malcom McLean.
[JEFF] [reflective] So he became the cautionary tale... and then they did it anyway. I think
[JEFF] you could make the case that he wasn't wrong about the future. He was wrong
[JEFF] about the date.
[CYRUS] I'd add one thing, to be fair to the market. Slow only pays when fuel
[CYRUS] is expensive or when there are too many ships. And after two thousand eight, there
[CYRUS] were too many ships. So part of slow steaming was just soaking up extra capacity.
[CYRUS] McLean was betting on one variable, and the world moved a different one.
[JEFF] That's fair. But it's the weird thing about this kind of story. If oil stays
[JEFF] high after nineteen eighty-six, those Econships are exactly the right ships. And McLean finishes his
[JEFF] career as the guy who saw the future twice. Same man, same judgment, same bet.
[JEFF] Different price of crude.
[CYRUS] So the story of a founder's judgment turns out to be partly a story about
[CYRUS] the weather in the oil market.
[JEFF] And then — this is the part I love — in nineteen ninety-one, at seventy-seven
[JEFF] years old, he starts another company. It's called Trailer Bridge. And what does it do?
[JEFF] It carries truck trailers, on barges, to Puerto Rico.
[CYRUS] [genuinely surprised] Wait. That's his first idea.
[JEFF] The trailership. The idea he'd rejected in the fifties. That's where he ended up.
[CYRUS] [amused] He really couldn't stay away from the water, could he?
[CYRUS] And while all of that is happening to McLean, the box is doing something much
[CYRUS] bigger without him. For one thing, it leaves the water. In nineteen seventy-seven, Sea-Land and
[CYRUS] the Southern Pacific railroad try out a rail car that carries two containers stacked one
[CYRUS] on top of the other. And by nineteen eighty-four, a shipping line called A-P-L runs
[CYRUS] the first train made up entirely of double-stacked cars, from Los Angeles all the way
[CYRUS] to New Jersey.
[JEFF] [curious] Why does stacking two on a train matter so much?
[CYRUS] Because it's half the cars. Half the length of train for the same number of
[CYRUS] boxes. Less locomotive power, less track, fewer crew per box. And the corner castings do
[CYRUS] the work again — the top box locks to the bottom one. Although on the
[CYRUS] very first cars, they had to put walls at each end, to keep the top
[CYRUS] box from blowing off.
[JEFF] That seems important.
[CYRUS] [dry] It's a detail you want to get right. And according to the company's own
[CYRUS] telling, the guy who ran A-P-L's rail operation, Don Orris, wanted to prove the ride
[CYRUS] was smooth enough not to break fragile cargo. So he had a container loaded with
[CYRUS] a fully set dinner table. Crystal, china, silverware. Shipped it across the country by rail.
[CYRUS] And it arrived intact.
[JEFF] That's a great demo. That's the jumping-on-the-box move, but for trains.
[CYRUS] [amused] Same energy. And what it creates is called the landbridge. A box from Asia
[CYRUS] doesn't have to sail all the way around to New York through the Panama Canal
[CYRUS] anymore. It lands in Los Angeles or Long Beach, goes onto a train, and rides
[CYRUS] across the country. And one analysis in the late eighties put that at something like
[CYRUS] ten to fifteen days faster than going all the way by water. By the end
[CYRUS] of the nineties, the large majority of containers from Northeast Asia to the East Coast
[CYRUS] were coming that way — across the land, not through the canal.
[JEFF] Which is a great irony. Go back to the beginning. The railroads were in federal
[JEFF] court trying to stop McLean's ships. A generation later, they're the box's best friend.
[CYRUS] Because now they're not competing with the box. They're carrying it. That's why the West
[CYRUS] Coast ports explode. And that's why boxes end up in places that are nowhere near
[CYRUS] water. And it's why the fight over the box follows it inland.
[JEFF] Right. Because think about what the box did to the actual work. The work of
[JEFF] a longshoreman was handling the cargo. Now the cargo gets packed into a box somewhere
[JEFF] else — they call it "stuffing" and "stripping" — and it can happen anywhere. A
[JEFF] factory, a warehouse in New Jersey, a depot in Ohio. Usually by Teamsters, or non-union
[JEFF] workers, often for less money. So the work isn't disappearing so much as walking off
[JEFF] the pier. And the union tries to follow it. Out of that nineteen sixty-nine settlement,
[JEFF] the I-L-A has what it calls its Rules on Containers, and the headline rule is
[JEFF] the fifty-mile rule. Any container that's packed or unpacked within fifty miles of the port
[JEFF] — unless it's a single company's own full load — has to be stuffed or
[JEFF] stripped by I-L-A longshoremen, at the pier. Break the rule, and it's a thousand dollars
[JEFF] a box.
[CYRUS] [skeptical] Fifty miles from what, exactly?
[JEFF] In New York, from Columbus Circle.
[CYRUS] So the whole thing is measured from a traffic circle in Manhattan.
[JEFF] Yep. And the companies that packed small loads into boxes off the pier sued, and
[JEFF] it goes to the Supreme Court. Twice. And in nineteen eighty-five, the Court upheld the
[JEFF] rules. It said they were a lawful attempt by a union to preserve work its
[JEFF] members had always done. Not a racket. And in the opinion, the Court noted the
[JEFF] union had already given up something like eighty percent of the containerized cargo work.
[CYRUS] Oh, that's a striking number. So they're fighting over the last fifth.
[JEFF] Yep. And then a different agency picks it up. In nineteen eighty-three, the Federal Maritime
[JEFF] Commission goes to court against the rule, and in nineteen eighty-seven it rules that the
[JEFF] fifty-mile rules violate the shipping laws. By the late eighties, between the regulators and the
[JEFF] courts, it's been knocked down. And the West Coast had its own version. On July
[JEFF] first, nineteen seventy-one, about fifteen thousand West Coast longshoremen walk out, up and down the
[JEFF] coast. It's about job security after a decade of Bridges' deal shrinking the workforce, and
[JEFF] a lot of it is about who gets to stuff and strip the boxes —
[JEFF] the longshoremen or the Teamsters. Something like a hundred and thirty-four days, on and off,
[JEFF] the longest strike in that union's history. And Bill Ward — the delegate from Los
[JEFF] Angeles who voted against the first deal — has the bitterest line about it. He
[JEFF] said, "what we had done is go out for one hundred thirty-four days for ten
[JEFF] cents."
[CYRUS] Which tells you the deal was already decided. [deliberate] And that's the structural thing, for
[CYRUS] me. The fight follows the box. Wherever the box goes, the work of handling it
[CYRUS] goes, and whoever used to do that work tries to go with it. And they
[CYRUS] can slow it down. They can't stop it. All the way into the late eighties,
[CYRUS] they couldn't stop it.
[JEFF] And neither side was crazy. The Supreme Court thought the union had a legitimate case.
[JEFF] McLean, for his part, had a pretty clear view of all this. At an industry
[JEFF] dinner in nineteen eighty-four, he said, "Unions can't prosper themselves without an industry."
[CYRUS] Which is true. And also exactly what you'd expect the guy who owns the ships
[CYRUS] to say.
[CYRUS] And the biggest thing the box does without McLean is this. Once it costs almost
[CYRUS] nothing to move a box, a factory doesn't have to be near its customers anymore.
[CYRUS] Then it doesn't have to be near a port. Then it doesn't have to be
[CYRUS] on the same continent. And New York gets it first. Levinson has argued that container
[CYRUS] shipping contributed to the collapse of New York City's industrial base between nineteen sixty-seven and
[CYRUS] seventy-five. Freight got cheap, and manufacturers were free to go wherever land and labor were
[CYRUS] cheaper. First to the South, then overseas. And the scale of the loss was enormous.
[CYRUS] By the mid-seventies, New York had lost more than four hundred thousand manufacturing jobs since
[CYRUS] the late fifties.
[JEFF] [skeptical] I want to push on that a little, though. Because I don't think you
[JEFF] can lay all of that on the box. And Levinson doesn't either — he says
[JEFF] there's no definitive answer, because containerization was only one of many forces hitting manufacturers. You've
[JEFF] got highways, suburbs, the cost of land in the city, city taxes, and then the
[JEFF] fiscal crisis in seventy-five. Here's an example I came across. Schaefer Brewing. Brooklyn beer. They
[JEFF] opened a new brewery near Allentown, Pennsylvania, in nineteen seventy-two, and closed their Brooklyn brewery
[JEFF] in seventy-six. Rheingold closed the same year. And by nineteen seventy-six, Brooklyn — which used
[JEFF] to have dozens of breweries — had lost its last two. And that wasn't the
[JEFF] box, as far as I can find. It was national brands, old city plants, and
[JEFF] cheaper land somewhere else. Which is exactly my point. The box sped up an exodus
[JEFF] that a lot of other things were already pushing. It was a big push. It
[JEFF] wasn't the only one.
[CYRUS] That's fair. I'll take accelerant over cause.
[JEFF] And the politics followed. Remember the Japanese televisions coming home on the Vietnam ships? By
[JEFF] nineteen seventy-seven, the U.S. and Japan sign a deal that caps Japanese color TV shipments
[JEFF] to America at about one point seven five million sets a year. The year before,
[JEFF] they'd shipped more than two and a half million.
[CYRUS] So that "sensitive diplomatic issue" turned into an actual quota.
[JEFF] Yep. And across the Atlantic, it's the same story we told about New York. By
[JEFF] about nineteen eighty-one, London's old upstream docks are all closed, and in nineteen eighty-nine Britain
[JEFF] abolishes the old system that protected registered dockworkers.
[CYRUS] Okay, so here's the big claim, and I want to see what you do with
[CYRUS] it. Because economists have actually tried to measure all of this. A group of them
[CYRUS] looked at trade between countries from the early sixties to nineteen ninety, and asked what
[CYRUS] happened when countries adopted containers. And they found that adopting the container did more to
[CYRUS] grow trade between the rich countries than the trade agreements of that era did. The
[CYRUS] Economist summarized it as the container being more of a driver of globalization than all
[CYRUS] the trade agreements of the past fifty years taken together.
[JEFF] [skeptical] Okay, that's a big claim. And it's exactly the kind of claim I'm suspicious
[JEFF] of, so I went and looked. Two things. Levinson himself — the biggest champion of
[JEFF] the box there is — says that how much the container matters to the world
[JEFF] economy is, quote, "impossible to quantify." And tariffs were falling at the exact same time.
[JEFF] Even The Economist, when it wrote this up, admitted the container boom could have just
[JEFF] been a response to tumbling tariffs. How do you know the box drove the trade,
[JEFF] and not that the trade, freed up by the tariff cuts, drove the box?
[CYRUS] [deliberate] Fair. I'll give you the precision — I wouldn't put a number on it
[CYRUS] on air. But on the direction, I'll hold my ground. The authors actually tested for
[CYRUS] that. They looked for a surge in trade before countries adopted containers, and didn't find
[CYRUS] one. The trade came after the box, not before.
[JEFF] [reflective] I'll grant you it was big. I'm just not sure "bigger than every trade
[JEFF] agreement combined" is something anybody can actually know.
[CYRUS] And I think it was big enough that the exact number doesn't change the story.
[JEFF] We'll leave it there.
[CYRUS] So East Asia's factories win, and the consumer wins, and the West Coast ports win,
[CYRUS] and the railroads, of all people, win. And the one person it really didn't work
[CYRUS] out for is the guy who started it.
[JEFF] Which brings me to the last part of his story. McLean dies in May of
[JEFF] two thousand one, at home in New York. He's eighty-seven years old. And on the
[JEFF] morning of his funeral, at eleven-thirty, container ships around the world — in ports and
[JEFF] out at sea — sound their whistles. The captains had been asked, by fax and
[JEFF] by e-mail. And a lot of them did it. The chairman of his last company
[JEFF] said, "We are touched at this gesture from so many ships." ... And a few
[JEFF] weeks later, a column in the Baltimore Sun ran under the headline: "Shipping Pioneer Largely
[JEFF] Ignored."
[CYRUS] Yeah.
[JEFF] So let's step back for a second. Because I think the distance this story covers
[JEFF] is kind of hard to hold in your head all at once. In nineteen fifty-four,
[JEFF] one ordinary freighter carried those hundred and ninety-four thousand pieces, and every single one was
[JEFF] lifted by a person. The ship spent as long tied to a pier as it
[JEFF] did at sea. And the men who did that work lived in neighborhoods built around
[JEFF] the piers, and got the job from their uncles. Today, a box gets sealed at
[JEFF] a factory in Shenzhen and opened at a store in Ohio, and almost nobody in
[JEFF] between touches what's inside. A crane operator touches a steel box. A truck driver hauls
[JEFF] it. Nobody touches the cargo. And the West Side piers where Red Barrett's world was,
[JEFF] those are parks and soccer fields now. [reflective] And the big change wasn't speed. McLean
[JEFF] proved that himself, the hard way, with the fastest cargo ships ever built. The big
[JEFF] change was the end of handling. That's it. Stop picking things up.
[CYRUS] [amused] Four words. Okay, so let me give you a few numbers for where that
[CYRUS] ended up, because I think they land differently now. The Ideal X carried fifty-eight boxes.
[CYRUS] Today's biggest ships carry about twenty-four thousand. And that's counted in twenty-foot boxes — the
[CYRUS] industry measures everything in what it calls twenty-foot equivalent units. A forty counts as two.
[CYRUS] And the ship itself is about a quarter of a mile long.
[JEFF] [incredulous] That's not a ship, that's a neighborhood that floats.
[CYRUS] Pretty much. And remember the number from the very beginning? That moving goods across an
[CYRUS] ocean ate fifteen, twenty percent of what they were worth?
[JEFF] The tariff nobody voted for.
[CYRUS] For shoes and clothing today, the ocean trip is often less than one percent of
[CYRUS] the value. Which works out to a pair of sneakers crossing the Pacific for well
[CYRUS] under a dollar. Somewhere between a quarter and forty cents, by the usual arithmetic.
[JEFF] [reflective] And that's the number that explains the closet. That's why everything you're wearing came
[JEFF] from somewhere else.
[CYRUS] Although it's not true for everything. For furniture and appliances it can still run up
[CYRUS] to fourteen percent. Which is why a lot of sofas are still made a lot
[CYRUS] closer to home than your sneakers are.
[JEFF] Huh. So the box decides where things get made, product by product.
[CYRUS] Pretty much. And then the one that tells you where the center of gravity went.
[CYRUS] In twenty twenty-five, the port of Shanghai alone handled about fifty-five million of those twenty-foot
[CYRUS] boxes. That's more than every port on Earth combined handled in nineteen eighty.
[JEFF] One port. More than the whole planet, forty-five years ago.
[CYRUS] And the planet was already a couple of decades into containers in nineteen eighty. And
[CYRUS] one more, which I love because it cuts both ways. In twenty twenty-four, about five
[CYRUS] hundred and seventy-six containers fell off ships into the ocean.
[JEFF] [skeptical] That sounds like a lot.
[CYRUS] It does. Out of roughly two hundred and fifty million carried. So, about two in
[CYRUS] a million.
[JEFF] Okay. That's a better safety record than my groceries.
[CYRUS] [deadpan] Low bar.
[JEFF] Okay. So every episode, once we've told the story, we put the thing through the
[JEFF] same five questions. We call it the Backbone Test. Has it gone invisible? What depends
[JEFF] on it? What's the hidden cost? Could we go back? And what's still changing? So
[JEFF] — invisible. And I think the answer is obviously yes. You pass these things on
[JEFF] every highway, you sit next to them at railroad crossings, and you never once think
[JEFF] about what's inside. The man who built the system got whistles from ships and a
[JEFF] "largely ignored" headline from everybody else. And the one time most people actually saw it
[JEFF] was March of twenty twenty-one, when one ship got stuck sideways in the Suez Canal,
[JEFF] and the whole world spent six days watching a little excavator try to dig it
[JEFF] out.
[CYRUS] The excavator was the most relatable thing that happened that year.
[JEFF] Right? And that's what invisible infrastructure is. You only notice it when one piece of
[JEFF] it is lying sideways across a canal.
[CYRUS] And that whole stretch was the first time a lot of people ever said the
[CYRUS] words "supply chain" out loud. Before twenty twenty-one, that was a phrase for consultants.
[JEFF] Now it's a phrase for your mom. And I'll say the McLean part again, because
[JEFF] it still bugs me a little. The guy wasn't completely forgotten. He was in Fortune's
[JEFF] business hall of fame. A couple of years before he died, an industry hall of
[JEFF] fame named him its "Man of the Century." But ask a hundred people on the
[JEFF] street who Malcom McLean was, and I'd bet you get maybe one.
[CYRUS] [dry] And that one works in logistics.
[JEFF] Probably. Which, I think, is the highest compliment you can pay infrastructure. When the thing
[JEFF] works so well that nobody remembers who built it.
[CYRUS] Or the downside of it. Depending on whether you're the guy who built it. [deliberate]
[CYRUS] Okay — what depends on it. And my favorite example is from that same year.
[CYRUS] October twenty-first, twenty twenty-one, at the peak of the pandemic backlog. There are dozens of
[CYRUS] ships anchored off Los Angeles and Long Beach waiting to unload. And the CEO of
[CYRUS] a freight company called Flexport, Ryan Petersen, rents a boat, takes a three-hour tour of
[CYRUS] the port, and the next morning posts a thread saying the bottleneck is something incredibly
[CYRUS] mundane. A city rule says truck yards can only stack empty containers two high. So
[CYRUS] the empties can't be stacked, so they sit on truck chassis. So there are no
[CYRUS] chassis to pick up the full boxes. So the terminals clog. The mayor of Long
[CYRUS] Beach sees it, and the same day, the city raises the limit from two high
[CYRUS] to four, for ninety days. The mayor said, "Within a few hours we had all
[CYRUS] decided that we had to make this change immediately." And for a minute the internet
[CYRUS] said a tweet saved Christmas.
[JEFF] Okay, but did you read what the truckers actually said afterward? Because I don't think
[JEFF] the clean version holds up. The head of the harbor truckers' association said most yards
[JEFF] didn't even have the equipment or trained operators to stack higher, and the real problem
[JEFF] was the ocean carriers not taking their empties back. And my favorite part — Petersen
[JEFF] himself said, "I'm very suspect of everybody who has this clean narrative about how it's
[JEFF] all gonna play out."
[CYRUS] Which is very fair of him. But I think the point survives. The system is
[CYRUS] so tightly coupled that one local rule about how high you can stack empty boxes
[CYRUS] can choke a country's supply chain. And the chain is everything. Almost everything in your
[CYRUS] house that wasn't made within a few hundred miles. A car plant waiting on a
[CYRUS] part that crossed an ocean. And — for anybody who heard our last episode —
[CYRUS] the cold chain crosses oceans in a refrigerated box, too. The reefer.
[JEFF] So the dependency isn't really the ship. It's the chassis, the yard, a city rule
[JEFF] about stacking empties. The bottleneck is usually five miles inland.
[CYRUS] Exactly. And nobody owns the whole chain.
[JEFF] Okay. The hidden cost. And I'll go first, because I've been thinking about this the
[JEFF] whole time. I think this is the core of how capitalist innovation works. It's basically
[JEFF] Jevons' paradox, for shipping. When you make something radically cheaper, you don't just get more
[JEFF] of it — you get so much more of it that the whole industry grows
[JEFF] even while the price per unit collapses. The world's ports handle something like twenty-three times
[JEFF] as many boxes as they did in nineteen eighty. And the jobs that got created
[JEFF] weren't mostly shipping jobs. They were jobs making the things that would go in the
[JEFF] boxes, and moving them, and storing them. American warehouse jobs went from about four hundred
[JEFF] thousand in nineteen ninety to over one point eight million today. Now, a lot of
[JEFF] that recent growth is online shopping, not just the box. But the work that used
[JEFF] to happen on the pier happens in a warehouse an hour inland now, and there's
[JEFF] way more of it.
[CYRUS] But not for the dockworker.
[JEFF] No. It's Jevons for shipping. It's not Jevons for the longshoreman. The labor per box
[JEFF] fell so far that even twenty times the cargo needs way fewer of them. And
[JEFF] that doesn't erase the pain of the people who got disrupted, who were expecting that
[JEFF] job. The streets and the sons we talked about. That's real. And it's a system
[JEFF] that made everything cheaper for basically everybody on Earth. It's creative destruction with a long,
[JEFF] painful middle.
[CYRUS] [deliberate] And I think the cost that matters now is different. It's fragility. Efficiency squeezed
[CYRUS] every bit of slack out of this system. One company, M-S-C, controls more than a
[CYRUS] fifth of all the container-ship capacity on Earth. When the Korean carrier Hanjin went bankrupt
[CYRUS] in twenty sixteen, it had something like fourteen billion dollars of cargo on its ships,
[CYRUS] and ports wouldn't let them dock or unload unless somebody paid up front. One captain
[CYRUS] told reporters he was rationing water. The cargo was just... floating. Nobody's.
[JEFF] [exhales] Floating collateral.
[CYRUS] And then there's the flip side of "nobody touches the cargo." Nobody inspects it, either.
[CYRUS] Remember the seal, and customs working from the paperwork? In two thousand seven, Congress passed
[CYRUS] a law requiring every container headed to the U.S. to be scanned at the foreign
[CYRUS] port by twenty twelve. It never happened. The deadline just kept getting pushed back, two
[CYRUS] years at a time. Almost every box rolls through a radiation detector on its way
[CYRUS] out of the port. But only a small fraction ever get X-rayed or opened. The
[CYRUS] same seal that stops the thief stops the inspector.
[JEFF] That's the title's third meaning, isn't it.
[CYRUS] Yeah. And one more line and I'll stop: shipping is about three percent of the
[CYRUS] world's carbon emissions. And per ton, per mile, it's one of the cleanest ways to
[CYRUS] move anything ever invented. A truck puts out something like five to ten times as
[CYRUS] much. A plane, fifty times or more. Both of those things are true.
[JEFF] [reflective] Okay. I'll give you the fragility. I think that's the real systems problem here,
[JEFF] and nobody voted for it. Nobody decided one company should run a fifth of the
[JEFF] world's shipping capacity. It just happened, one efficiency at a time.
[CYRUS] And I'll give you something back. Did you see the paper from the Bureau of
[CYRUS] Economic Analysis? It found that freight rates didn't actually fall when containers arrived. The drop
[CYRUS] came about a decade later. Partly because the ports had market power, and partly because
[CYRUS] the longshoremen's deals captured a real share of the savings.
[JEFF] [genuinely surprised] Huh. So the bargain actually paid.
[CYRUS] Which is the market handling an automation shock better than most automation stories I know.
[CYRUS] I'm still more worried about the fragility than you are.
[JEFF] And I'm still less worried about it than you are. Which brings me to whether
[JEFF] we could go back. And I don't think we can. And I don't think it's
[JEFF] because of the ships. It's because of where everything gets made. Factories sit where they
[JEFF] sit because distance is cheap. And we actually got a little test of what happens
[JEFF] when it isn't.
[CYRUS] Twenty twenty-one. A forty-foot box from Shanghai to Los Angeles normally ran somewhere under two
[CYRUS] thousand dollars. In September of twenty twenty-one, it cost over twelve thousand. About six times
[CYRUS] as much. And an I-M-F study found that when shipping costs double, inflation goes up
[CYRUS] by something like seven-tenths of a point, about a year later. And here's the part
[CYRUS] that I think proves your point, Jeff. By the next summer, Nike's finance chief was
[CYRUS] saying they were still paying about five times their pre-pandemic rate to move a box.
[CYRUS] One shipping executive's example at the time was fifteen to twenty thousand dollars for a
[CYRUS] forty-foot box full of sneakers. Which works out to a few dollars a pair. At
[CYRUS] the worst moment in modern shipping history, it still cost only a few dollars to
[CYRUS] move a pair of shoes across the Pacific.
[JEFF] [reflective] So even "expensive" distance is cheap. Which is why nobody moved the factories back.
[CYRUS] Right. It was a shock, not a reversal.
[JEFF] But listeners, I think you felt it anyway. Empty shelves, prices going up. That was
[JEFF] one year of distance costing something again. I don't think anybody wants to find out
[JEFF] what ten years of it looks like.
[CYRUS] Okay. What's still changing. And I think you have to start with a bookend.
[JEFF] [reflective] Yeah. October twenty twenty-four. Sixty-eight years after a union official in Newark said he'd
[JEFF] like to sink the Ideal X, the longshoremen's union — the same I-L-A — walks
[JEFF] out at every major port from Maine to Texas. About forty-five thousand workers. Over automation.
[JEFF] Three days. [amused] And they win a sixty-two percent raise over six years, top base
[JEFF] pay going from thirty-nine dollars an hour to sixty-three, and limits on automated equipment. They
[JEFF] ratify it with nearly ninety-nine percent of the vote. And the royalty on every container
[JEFF] that we talked about from the sixties? Still there.
[CYRUS] The fight never ended.
[JEFF] It just got better paid.
[CYRUS] And the funny thing is how slowly automation has actually come. As of twenty twenty-five,
[CYRUS] only about nine percent of the world's main container terminals were fully or semi-automated. Shanghai's
[CYRUS] Yangshan terminal is basically robots end to end, but it's the exception. Seventy years in,
[CYRUS] more than nine in ten still run on people. And the ships have stopped getting
[CYRUS] bigger. Almost all the giants stop at just under four hundred meters long, because over
[CYRUS] that, ports charge higher fees and you need extra tugboats. And how wide they get
[CYRUS] is capped by how far the cranes can reach.
[JEFF] So the ship is limited by the crane. Which is limited by the port.
[CYRUS] The system decides the ship. And here's a thought experiment I keep chewing on. A
[CYRUS] huge part of why the old way cost so much was human labor. So imagine
[CYRUS] a world of humanoid robots, where ten more weeks of work costs you the electricity
[CYRUS] to recharge a battery. Do big standards like the container matter less? Because you could
[CYRUS] just throw armies of robots at the problem. And India works a little like this
[CYRUS] already. A lot of factories there have much less automation than Korea or the U.S.,
[CYRUS] because labor is so cheap that employing ten thousand people instead of a hundred robots
[CYRUS] is seen as a gift.
[JEFF] [skeptical] I think that's a really interesting question. But I'm not sure the box was
[JEFF] ever mostly about wages. Go back to the Warrior. The expensive part wasn't just the
[JEFF] men. It was the ship sitting at the dock for ten days while somebody —
[JEFF] or something — lifted all those pieces one at a time. And the seal, the
[JEFF] theft. Robots don't fix that. And India's own biggest container port moves more than eight
[JEFF] million boxes' worth a year. Even a cheap-labor economy plugs into the box, because the
[JEFF] box has to fit the crane in Rotterdam and the truck in Ohio.
[CYRUS] [deliberate] Okay, that's a good answer. I'm not sure it's the whole answer. But I'll
[CYRUS] take it for now.
[JEFF] That's all I ever get from you.
[CYRUS] So the question I can't shake is this. If the box made distance nearly free,
[CYRUS] what happens to everything we built on that assumption when distance gets expensive again? Fuel,
[CYRUS] carbon prices, tariffs, or a war at a chokepoint. Because we've already seen a preview.
[CYRUS] When ships started getting attacked in the Red Sea in late twenty twenty-three, container crossings
[CYRUS] of the Suez Canal fell by something like ninety percent. Ships went all the way
[CYRUS] around Africa instead.
[JEFF] And I think we're living a version of this right now, outside of shipping. There's
[JEFF] one company in the world, A-S-M-L in the Netherlands, that makes the machines you need
[JEFF] to print the most advanced chips. And most of the world's most advanced chips come
[JEFF] out of one company's factories in Taiwan. Which is a place whose status is... disputed,
[JEFF] let's say.
[CYRUS] [deliberate] And it's the mirror image of this story. The container was a standard nobody
[CYRUS] owned, available to everyone, everywhere. That's what made it resilient. The chip story is a
[CYRUS] capability one company owns, concentrated in one place. Same species of fragility. Just even more
[CYRUS] concentrated.
[JEFF] And the question I keep turning over is the other side of it. Who should
[JEFF] pay for the people a technology makes unnecessary? And here's where I land. I think
[JEFF] society has some responsibility to ease the transition. But not to make the old job
[JEFF] structure permanent. It's not our job to protect the job of a longshoreman forever. It
[JEFF] is our job, maybe, to help the people who had that job, or were training
[JEFF] for it, get from A to B. That's Bridges' ramp, not Gleason's wall. And there's
[JEFF] some evidence it works — the U.S. has run a program for trade-displaced workers since
[JEFF] nineteen sixty-two, and Denmark runs its whole labor market this way. Protect the worker, not
[JEFF] the job.
[CYRUS] [mischievously] Or we're all going to eventually just need U-B-I.
[JEFF] The biggest test of that in this country was paid for by an AI CEO,
[JEFF] and the people who got the money were not dramatically better off at the end.
[JEFF] So I'm not there yet.
[CYRUS] Fine. But I'll be serious for one second, because I said earlier that Bridges' deal
[CYRUS] is the first thing I've read that even looks like a possible answer for what
[CYRUS] AI is about to do to office work. Let the machine pay for the people
[CYRUS] it replaces. I still think it's worth taking seriously, complicated as it would be to
[CYRUS] pull off. What I'm not sure about is the other half. Every story like this
[CYRUS] — the longshoremen, the ice trade from our last episode — the arc bends toward
[CYRUS] more stuff and more jobs somewhere else. I'm not sure that holds for AI. This
[CYRUS] is the first technology that can plausibly replace the dock and the office at the
[CYRUS] same time. I don't know where the "somewhere else" is.
[JEFF] I think that's a fair worry. And I'm wary of leaning on the comparison too
[JEFF] hard. My guess is the same answer applies, ease the transition, don't freeze the old
[JEFF] jobs. Just at a much, much faster pace. Which might be the whole problem.
[CYRUS] [deliberate] Or it's a different problem entirely. I genuinely don't know.
[JEFF] [reflective] And here's the one I genuinely can't answer. Would any of this have happened
[JEFF] if Sea-Land had kept the patents? I think it shows the value of open standards.
[JEFF] I don't think shipping gets nearly this cheap if every company has its own box.
[JEFF] There's an argument that the system would have forced its way there eventually. And there's
[JEFF] some evidence for that — American railroads had a mess of different track widths, and
[JEFF] in eighteen eighty-six, in thirty-six hours, crews moved one rail on more than eleven thousand
[JEFF] miles of Southern track to match the North. But it took decades to get there.
[JEFF] And in Australia, you couldn't take a standard-gauge train from Sydney to Perth until nineteen
[JEFF] seventy.
[CYRUS] So "eventually" can mean a century. And there's a third way it happens that isn't
[CYRUS] a committee and isn't the market quietly converging. Somebody buys somebody. You could imagine ships
[CYRUS] partnering with railroads, three end-to-end systems with three box sizes — and then one of
[CYRUS] them buys the other two and standardizes the fleet. M and A as the standards
[CYRUS] body. It still gets you there. It just gets you there slower, and with a
[CYRUS] lot more scrap steel.
[JEFF] So I'm not sure I believe "eventually." And the live version is happening right now.
[JEFF] Tesla opened up its charging plug in twenty twenty-two, and within a year Ford and
[JEFF] G-M signed on, and now it's an industry standard. Same move as McLean. Give away
[JEFF] the plug, win the network.
[CYRUS] The McLean playbook. Sixty years later.
[JEFF] So, if you've been with us this whole time, here's what I think you carry
[JEFF] out of this. When a technology's value comes from everyone using the same thing, the
[JEFF] invention is the easy part, and the agreement is the whole fight. Anybody could build
[JEFF] the box. People did, for thirty years, and nothing happened. What changed the world was
[JEFF] a system built around it, a labor deal paid for out of the savings, ports
[JEFF] on empty land where there was nobody to fight, and a corner fitting given away
[JEFF] so every box could fit every crane. So the next time you're looking at a
[JEFF] technology that only works if everybody adopts it, don't ask whether it works. Ask who
[JEFF] has to agree, what each of them is giving up... and who's going to give
[JEFF] away the piece nobody can own.
[CYRUS] And you can see those fights happening right now. Charging plugs. Payment systems. How different
[CYRUS] AI systems are going to talk to each other. Somebody in each of those is
[CYRUS] deciding right now whether to own the corner or give it away.
[JEFF] And one more thing. When the agreement finally gets made, the bill doesn't land evenly.
[JEFF] In this story it landed less on the men who had the work than on
[JEFF] their streets and their sons. That's not an argument against the box. It's just what
[JEFF] to look for, the next time.
[CYRUS] [warmly] I'm making my kids listen to this one, by the way. They're going to
[CYRUS] look at every truck on the freeway for a month.
[JEFF] Good. If you enjoyed this one, follow Backbone wherever you're listening, and send it to
[JEFF] the friend who'd love the story of the trucker and the steel box. Everything we
[JEFF] mentioned — the Warrior study, Red Barrett's oral history, the Supreme Court cases, Levinson's book
[JEFF] — is linked in the show notes.
[CYRUS] And the next time you're on the highway and a box goes by on a
[CYRUS] flatbed, think about the guy in the rain in Newark. He was right. He just
[CYRUS] couldn't sink it.
[JEFF] That's it for this episode of Backbone. We'll be back in a few weeks to
[JEFF] dive into another hidden technology that makes the modern world run.
[CYRUS] Until then — stay curious, and mind the backbones.