0.5 Business Acumen
Our Guest This Episode: Marc Levinson
Award-winning author, Marc Levinson, joins the cast to discuss his book The Box: How The Shipping Container Made The World Smaller And The Economy Bigger.
Marc is an economist. He’s an expert in international trade and globalization, international finance and finance regulation. He’s written for, among others, Time magazine, Newsweek, Harvard Business Review, the Daily Journal of Commerce in New York, and The Economist in London. He’s advised Congress on transportation and industry issues. He’s a consultant and an author of six books.
In this episode, the team chats about regulatory compliance, strategic planning, analysis and business models.
Favorite Quotes from Our Talk:
" The shipping container seems like a very mundane product. It doesn’t seem like anything that particularly needed to be invented or developed. But in fact, up until the 1950s, it didn’t exist. And there was a prolonged period of developing containerization, developing standards so that a container could be sent around the world, and then of businesses changing their practices so that they could take advantage of the container. So the container had very substantial effects on international trade. It made globalization possible."
"You know, Marc, one of the things that strikes people who study project management is how many innovations in project management, things we use to this day, came out of research done in the 1940s? And it’s interesting because you can see the ’40s were this time when a lot of smart people were turning a lot of attention, just because of world economics, because of World War II, because of some of the technological innovations that were taking place. One of the terms that popped up in the ’40s that has really gotten a lot of attention today is this idea of creative destruction."
"He found other ways that would do something similar. They weren’t quite as good, but they would let him achieve part of his goals. He took what he could get, and he kept on working. And I think that that’s really a very important lesson here. You change. And the perfect can be the enemy of the good."
Tune in to understand why Bill Gates chose The Box as one of his top picks in 2013.
ANDY CROWE ● BILL YATES ● NICK WALKER ● MARC LEVINSON
NICK WALKER: Welcome to Manage This, the podcast by project managers for project managers. This is our roundtable discussion about what matters most to you, whether you’re a professional project manager or working toward being certified. We want to be a spark to light your imaginative fire and give you some perspective and encouragement. And we do that by drawing on the experience of others who are knee deep, and sometimes deeper, in the world of project management.
I’m your host, Nick Walker, and with me are the experts at this table, Andy Crowe and Bill Yates. And Andy, we’re going to hear from a very special guest today.
ANDY CROWE: We’ve got a great guest this morning. Marc Levinson’s joining us. He’s the author of several books, and a really well-known person in the nonfiction world.
NICK WALKER: Dr. Marc Levinson is an economist. He’s an expert in international trade and globalization, international finance and finance regulation. He’s written for, among others, Time magazine, Newsweek, Harvard Business Review, the Daily Journal of Commerce in New York, and The Economist in London. He’s advised Congress on transportation and industry issues. He’s a consultant and an author of six books. Marc, welcome to Manage This.
MARC LEVINSON: Well, thank you very much. I’m delighted to be with you.
NICK WALKER: Now, Marc, we’re here in Georgia. And you have a little bit of a Georgia connection, as well.
MARC LEVINSON: I lived in Atlanta for a number of years in the 1970s and early ’80s. I am a proud alumnus of Georgia State University’s Graduate School. And so, yes, I do have fond memories of Georgia.
ANDY CROWE: Marc, I’ve got to ask – this is Andy. What part of town did you live in?
MARC LEVINSON: I lived for a while in Druid Hills and then in Grant Park.
ANDY CROWE: Excellent, excellent. And my wife also joins you as having done her graduate work at Georgia State. So got a connection there.
NICK WALKER: All right.
MARC LEVINSON: Very good.
NICK WALKER: One of your most fascinating books is titled “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger.” Now, Marc, I have to admit that for years when I lived in Seattle I would drive by the port and see the loading and the unloading of the container ships. But not once did I ever think, how does this method of transporting goods affect me? I think maybe we take for granted something that’s really changed the life of every person who’s bought something manufactured outside this country.
MARC LEVINSON: The shipping container seems like a very mundane product. It doesn’t seem like anything that particularly needed to be invented or developed. But in fact, up until the 1950s, it didn’t exist. And there was a prolonged period of developing containerization, developing standards so that a container could be sent around the world, and then of businesses changing their practices so that they could take advantage of the container. So the container had very substantial effects on international trade. It made globalization possible. And my book is really the story of how this happened.
ANDY CROWE: Marc, this is interesting for me. This is Andy. And as I look at this and think about it, I’ve worked in the supply chain world, supply chain logistics. I’ve done projects, I’ve managed projects for companies that provide this service for large shipping companies. And it is something we take for granted. So project managers have to interface with this kind of world a lot, with cartons and containers, cases – cases in, cartons out, all of it going on shipping containers. Tell us what the world was like before that.
MARC LEVINSON: Sure. Before the shipping container was developed, most goods were shipped internationally in a form that was referred to as “break bulk.” And break bulk is exactly what it sounds like, small pieces of things. If you would go to a dock, would have gone to a dock in the 1950s, you would have seen bags of products, and you would have seen barrels of products, and you would have seen wooden crates, and you would have seen drums, and all kinds of different things. And each of these items separately would have come in on a truck or a train. It would have been put into a warehouse alongside the dock; would have been taken out of the warehouse, brought onto the dock; would have been put with two or three other items onto a pallet. The pallet would have been lifted into the hold of a ship. Each of the items would have been taken off the pallet and stored in the hold of the ship. And then at the other end of the voyage this process would have been repeated.
A typical ship in those days, and those were pretty small ships by modern standards, but a typical ship sailing the Atlantic in those days might have carried 200,000 separate items. And each of those items had to be handled repeatedly. So shipping was a very labor-intensive process. It could take a week or two to unload and reload a ship. A ship spent as much time in port being loaded and unloaded as they did at sea, and a lot of cargo was delayed. So because of this, it was actually impossible to have what we think of as a modern supply chain. You shipped your cargo, and it got to the destination when it got there. You couldn’t plan on it. You couldn’t organize your production around it. And that’s what the container changed.
ANDY CROWE: You know, Marc, when you look at this, and when you think about some of the innovations in supply chain management, Japanese management, which really was coming into fruition around the same time, it’d be interesting to know how they influenced each other. I don’t know if we have a lot of insight into that. But Japanese management came up with this idea of just-in-time, or JIT. And just-in-time management, of course, means the inventory arrives at the last responsible moment.
So you keep very low inventories. They get there right at the last minute. And then it puts a focus on quality because there’s not a lot of parts to waste. There’s not a lot of inventory. If you mess up this particular part, you’re going to have to wait for another one. And it builds, it really focuses on building these close relationships with suppliers. So the interesting thing about this, I feel like just-in-time management really couldn’t have evolved properly without this innovation. Do you agree with that?
MARC LEVINSON: Yes. Now, just-in-time management began in Japan. And it could begin without the container because it involved local shipping, from one nearby plant to another nearby plant. But if you go back to the 1980s, you recall that the Japanese manufacturers, auto manufacturers, extended just-in-time shipping across the Pacific; okay? They were producing parts, engines, transmissions and other components in Japan. And they were delivering them to assembly plants here in the United States on a predictable schedule. That could not have happened without the shipping container.
So the container made what we think of as the modern global supply chains possible. It made it possible to ship in very large volume at low cost. And it made it possible to have a reasonable assurance that what you were shipping would get where it was supposed to be at a particular time. That really was not possible before the container.
BILL YATES: Marc, this is Bill. There are so many concepts that are just intriguing to me as you tell this story in “The Box.” And certainly probably the key character is Malcom McLean. And when I look at – when I’m reading this story about this character and this entrepreneur, one word just keeps popping up to me, and that word is “disruptive.” This, you know, as you describe from the beginning, the box is simple; right? It’s a 40-foot container. It’s a box.
But taking that technology, that simple technology into this industry was so disruptive, you know, I think of the impacts that you talk about in the book to the longshoremen, the governments, the industry and what their expectations were, and even fast-forwarding to the ICC. And I look at this idea of being disruptive, and it’s something that we as project managers have to deal with, with every project that we do. The project creates something new. It’s maybe a new technology or new service. And it’s disruptive.
So I’m just curious what, you know, when you reflect back on the story and the research that you did regarding “The Box,” what advice do you have from either actions that McLean and his team took that we can parlay over to project management as to, you know, how do we handle the disruptive nature of this technology and what we do with it?
MARC LEVINSON: Well, the first thing I would say is that people have attributed a lot of foresight to Malcom McLean retrospectively.
BILL YATES: Right.
MARC LEVINSON: And this is mostly misplaced; okay? Malcom McLean did not set out to create a globalized economy.
BILL YATES: Right.
MARC LEVINSON: Malcom McLean ran a trucking company. And he set out to increase his profits. His concern was that he was running trucks up and down the East Coast, and the highways were getting increasingly congested. This was in the days before interstate highways. And so his original idea was to buy a ship and send trucks up and down the coast on the ship, rather than over the road, in order to avoid highway congestion; okay? That doesn’t sound very dramatic. And then, as this concept developed, he took one action after another, each of them intended to make money in the transportation business. And so the modern intermodal freight transportation industry developed out of this.
But Malcom McLean wasn’t sitting there with a master plan of how he was going to reshape the world economy. He was sitting there with a business that he wanted to develop and trying to eke out a little more profit this week, this month, and find ways to serve more customers. So I think that’s the first thing I really want to point out here, that these great innovations don’t start out necessarily by somebody saying I want to change the world. That’s really quite different from what’s going on today, for example, in the tech industry, where Silicon Valley is full of 22 year olds advertising their innovations and how much their innovations are going to change the world. Malcom McLean’s innovations were designed to make money. And if they changed the world in the process, that was great. But that was not his master plan.
ANDY CROWE: You know what, Marc, as I look at this and think about the work he did, it reminds me of a saying we have in the South that sometimes a blind pig gets an acorn. And I wouldn’t exactly describe him as a blind pig, but he certainly got one heck of an acorn, didn’t he.
MARC LEVINSON: Well, I think he did. And he understood that things change, that businesses change, his customers change, business models change. So he saw that there was, to your question, he saw that there was a lot of opportunity for disruption.
Again, to take people back to the 1950s when Malcom McLean began developing container shipping, truck lines were truck lines; railroads were railroads; ship lines were ship lines. They didn’t really intersect. They were entirely different businesses. And they were all heavily regulated. And so the attitude of the people in the business was not really a very customer-oriented attitude. The rates they charged were approved by the government. The routes they served were approved by the government. And so there was not a market orientation.
And McLean came in and said, wait a minute, you’ve got customers who don’t really care about your beautiful ships, and they don’t care about your trucks. They don’t really – they’re not interested in all that stuff. They just want to get their freight from here to there on a reliable basis. And for the day, that was actually a very revolutionary way of looking at the freight industry.
BILL YATES: That’s an excellent point. Marc, again, this is Bill. One of the things that I think that you hit on, a theme in the book, and you’re hitting it again here, is McLean really didn’t – he didn’t have some master plan, where he looked 20 years into the future and then pictured Nick one day in Seattle seeing all these cargo ships. It wasn’t that at all. He was looking to make money and to prosper.
And through that your point is innovation takes place in fits and starts, again kind of a nice analogy to a train. To get that train started, it’s kind of painful at first. It’s got to pick up momentum and get everything going the right way. So to me that’s a good takeaway to project managers in terms of our need to be flexible and to learn as we go. There are going to be changes in innovation that we’ll be able to take advantage of, but we cannot anticipate or plan that we’re going to know exactly what’s going to play out and how it’s going to play out. We have to be flexible and adaptable as we go.
MARC LEVINSON: I think that’s right. And I think that the other point of this is that nobody is interested in your project.
BILL YATES: Right.
MARC LEVINSON: Your project is there to help someone achieve a business purpose. And the customers, the clients may be interested in achieving a business purpose. The project is of interest only because that may be the most efficient way to do that at this point in time. And so people need to keep their eye on the ball in terms of what the customers’ needs are.
ANDY CROWE: It’s a means to an end. You know, Marc, one of the things that strikes people who study project management is how many innovations in project management, things we use to this day, came out of research done in the 1940s? And it’s interesting because you can see the ’40s were this time when a lot of smart people were turning a lot of attention, just because of world economics, because of World War II, because of some of the technological innovations that were taking place. One of the terms that popped up in the ’40s that has really gotten a lot of attention today is this idea of creative destruction.
And, you know, creative destruction can take on a number of things. But the way we like to look at it is, you know, new products replacing old products. And this is classic creative destruction right here. The thing that strikes me whenever you see creative destruction, or whenever I’ve seen it take place, is that there’s often a lot of resistance. The market forces, government forces, regulation, people making money out there do not like these innovations. Talk to us a little bit about what happened with the shipping container in regards to some of the resistance that it met?
MARC LEVINSON: Well, there’s resistance, certainly, in all kinds of places. And I wouldn’t discount the fact that there’s often resistance among customers. I’ll return to that in a second. But when containerization got started, and again this began domestically in the United States on a pretty small scale in 1956 and was purely domestic until 1966, when the first containers moved across the Atlantic, the dockworkers were very unhappy with this, the dockworkers unions, because they stood to lose thousands and thousands of jobs.
As I described earlier, you had perhaps 200,000 items being loaded onto a typical ship sailing the Atlantic. Well, that’s a lot of time, a lot of labor time spent moving all of those items and lowering them into the hold and pushing them into place in the hold and taking them out of the hold. And the dockworkers were concerned that they were going to lose a lot of jobs. They were right about that. Somewhere on the order of 90 percent or more of longshore jobs in the United States disappeared because of containerization. So it was a major concern.
You had the ports very concerned about containerization. Why? Well, traditionally the major ports were in congested urban areas – Manhattan, Brooklyn, San Francisco, East London. These were places that were not well suited to container shipping because for container shipping you need much larger docks. You need docks that can handle very large and heavy container cranes. You need storage space for the containers near the dock. You need good truck access or rail access to the port. And so it was no longer practical to have a port in Lower Manhattan, for example.
Well, you can imagine that the big port cities were not real excited about this, and they fought off the container. The railroads were not very happy about containerization, either. Why? Well, most of the U.S. carriers made a lot of money putting freight in boxcars. So they wanted their customers to use boxcars. And the idea that they would put a container on a dedicated railcar had not really – didn’t have much traction in the rail industry. Many of the railroads saw no reason at all to do that. So there was a lot of opposition.
But then you have the question of, so, who needs this service? Because Malcom McLean sent the first container ship sailing around from Newark to Houston in 1956. But when he did that, you didn’t have a lot of people in industry saying, oh, wonderful, there’s a container. We’ve been waiting for this. Companies needed to be shown that this could benefit their business, that they could take advantage of this, not only to reduce their cost of shipping goods, but potentially to organize their production in a different way. And this took time.
For example, in the 1950s, many factories were located in urban centers. Brooklyn was one of the great manufacturing centers of the country. Why? Because it was helpful to have your factory near the docks. Well, with a container, you didn’t really need to have factories near the docks. You could put your goods into a container anywhere and ship them to the docks without much difficulty. So many companies in the manufacturing business over time began to relocate their facilities. They didn’t need to be in Brooklyn. They could be in Pennsylvania. Which meant that they didn’t have to have a three-story factory. They could have a one-story factory with a more modern production process. There were a lot of changes that needed to take place here as businesses learned to take advantage of the possibilities that containerization created.
And then the same thing was true in the 1980s when we started to see the growth of international supply chains. This was made possible by the container plus the advent of cheaper telecommunications and computer technology. And it took a while as companies figured out the best way to do this. So there’s a lot of adaptation needed before innovations like this actually have a great economic impact.
BILL YATES: Marc, I get that. And I can agree with that on a personal level. I remember the first time I was able to deposit a check using my phone instead of having to get in my car and drive to a bank in brick and mortar. And I thought, okay, this is pretty neat. But, boy, I’ve got a lot of concerns, you know, how secure is this? Is it really going to show up in my account? It was disruptive technology. But me as the customer, it took me a while to figure out if I really trusted it, and did I want to embrace it.
ANDY CROWE: And what this does, it changes the winners and losers; doesn’t it.
BILL YATES: It does.
ANDY CROWE: Because now there are – you don’t necessarily even need somebody in the U.S. to review that check. You know, physically you might, for regulatory purposes. But you don’t have to have somebody sitting right there doing that. And it changes the whole dynamic.
BILL YATES: Right.
MARC LEVINSON: Sure. One way of thinking about transport costs is that they create a trade barrier.
BILL YATES: Yes.
MARC LEVINSON: Internationally, but also domestically. When transport costs were high, it was possible to have a factory in your town that served your local market. And you didn’t have much competition because other factories in other towns had pretty high costs to ship their products to your town. When containerization came in and lowered freight transport costs pretty dramatically, it opened up competition, but there were a lot of losers because many of these small local companies could no longer survive with greater competition.
NICK WALKER: So, Marc, what do you do if you’re on the losing end? If you’re doing creative destruction, what if your job is being destroyed? What’s the takeaway here that we can apply today?
MARC LEVINSON: Well, first of all, there are winners as well as losers. And that’s true even where there’s a lot of destruction going on. Again, let me draw on the dockworkers. While it’s true that about 90 percent of the dockworker jobs are no more, the dock jobs that remain are now very highly paid, very highly skilled jobs; okay? And no one had ever imagined in the pre-container era that you would have dockworkers earning $150,000 a year in the United States. That’s not uncommon now. They’ve got very difficult jobs. They’ve got very demanding jobs. But they’re very well paid in those jobs. And so you have had people who’ve been able to navigate this system, have come out of it fairly well.
In some cases, there’s no quick answer. Again, talk about the creative destruction in certain cities, if you saw what happened in a place like Brooklyn, where container shipping came in, and the shipping industry basically moved out. It moved from Brooklyn to New Jersey in the 1960s. And thousands upon thousands of jobs were lost. And it took Brooklyn 20 years to recover from that. There was no quick answer.
Brooklyn, the first step was realizing that this isn’t going to come back. We’re not going to be able to turn Brooklyn into a container port, no matter what you’d like to think, because it’s not geographically well suited to that purpose. And so you need to stop dreaming about bringing back the past and instead look for a different future where there might be some advantages. In terms of companies, I think it’s much the same. They need to look at how this technology is going to make a change. And I think many companies navigated it quite successfully.
ANDY CROWE: We’ve seen a lot of that in the project management world. You know, there was a time, if you go back 20 years ago, and let’s just take the information technology world, pre-globalization, pre- some of the friendly treaties, or at least some of those treaties having absorbed their way through the economy, you had teams of developers sitting in a room together, with a project manager a lot of times. And now, with globalization doing what it’s done, there’s a lot of education that’s gone on in the world. There are some incredible software development hotspots – India, China, parts of the Ukraine and Russia – and where you can get labor at a very efficient cost.
A lot of times what the project management world has had to do, they’ve had to develop. They’ve had to adapt. And they’ve had to figure out, okay, we can still manage projects here. We have to figure out how to lead virtual teams and how to do this, operate in a new economy. But the winners and losers, that’s just sort of a part of globalism that we’re having to deal with all the way around; isn’t it.
MARC LEVINSON: I think that’s right.
BILL YATES: Marc, one other question I wanted to ask you about, and I think it’s advice for many of the project managers that are out there, is dealing with regulatory bodies. One of the things that impressed me in the story was the way McLean navigated, worked his way around the ICC, the Interstate Commerce Commission. You know, he took some big, bold, audacious risks, you know, selling one business, selling the trucking business and purchasing the shipping, with the hopes, the intent that he was going to be able to get his way and get approval by the ICC. And that wasn’t just a one-time move. He had to continue to navigate the waters with them, so to speak. What were some of the tricks or tips that you saw as you researched McLean that perhaps some others can take as we figure out how we deal with regulatory bodies?
MARC LEVINSON: Well, I think one of the tips from McLean, certainly, is that, you know, back in grad school, back in my days at Georgia State University, as we discussed, I recall taking a class about optimizing and statistizing. Do you remember learning about that? And there are people who are very concerned about coming up with an ideal solution to problems. Malcom McLean was not one of those people. He dealt the hand he was played, or played the hand he was dealt. He did whatever he could at the time and then tried to improve things later on.
And so I think this is a very important way of thinking about business. He was not concerned about creating the ideal container system. He was not concerned about getting the perfect regulation in place. He was not concerned about making the best possible arrangements for intermodal shipping. He was concerned about doing business and making a profit.
BILL YATES: Got it. Right.
MARC LEVINSON: And if he could do his business today, he would do it, and he would try to improve it tomorrow. And that played into his relations with regulators, as well. There were some things that he very much would have liked to do, like create his own container train service. He couldn’t do it? Okay. He found other ways that would do something similar. They weren’t quite as good, but they would let him achieve part of his goals. He took what he could get, and he kept on working. And I think that that’s really a very important lesson here. You change. And the perfect can be the enemy of the good.
BILL YATES: Right.
ANDY CROWE: This is really about adaptability; isn’t it.
MARC LEVINSON: It really is.
NICK WALKER: “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger.” That’s the title of the book. I guess it’s a good example of something that forced us to think outside the box.
BILL YATES: Absolutely.
NICK WALKER: So you’ve got a new book out, Marc, and we want to give you an opportunity to talk about that a little bit. Tell us about it.
MARC LEVINSON: My new book is called “An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy.” This is a book that takes a look at the history of the postwar half-century, really, in an international perspective. You know there’s been a lot written about the world since World War II. And I’ve felt that it doesn’t adequately capture the very important role that economic change played in this period. We in the United States and in all the wealthy economies went through a period of remarkable economic growth between 1948 and 1973. The world economy grew more rapidly than at any time before or since.
And then, after 1973, all of that sloshed out. Growth slowed down considerably due to a much slower growth in productivity. And my argument in this book is that we came to assume that the very rapid economic growth between ‘48 and ‘73, an era when people often had wages growing 4 or 5 percent a year beyond inflation, we came to assume that this was normal. In fact, it was extraordinary due to some peculiar circumstances at the time, and we’ve moved back into an era that we think of as slower growing, but is actually what normal economies do most of the time.
So my point here in the book is that we’ve really gotten to have unrealistic expectations about economic growth and about governments’ ability to make the economy grow. You still see that, that people glibly say that the economy ought to grow 4 percent, 5 percent, 6 percent. In the recent election campaign, both presidential candidates were saying those sorts of things. And I don’t think it’s really within the power of government to make that sort of thing happen.
The norm around the world throughout history has been that in most times and most places, economies grow slowly, interrupted by periods of very rapid growth due primarily to technological innovation. And I think that’s what we can expect. It’s a book about how the economy has transformed in the postwar period, but also about the limited ability of government to do what we think it ought to do.
ANDY CROWE: Excellent.
NICK WALKER: Well, Marc Levinson, we thank you so much for sharing your insight into an endeavor that really has changed the way the world does business. And we have a container to give you. It’s a gift. It’s a Manage This coffee mug. So we’re going to send that to you just for being our guest, and with our thanks.
MARC LEVINSON: Well, thank you very much. It’s been fun being with you.
NICK WALKER: All right. Thanks so much. And by the way, our listeners can get more information from your website, Marc. It’s MarcLevinson.net. That’s M-A-R-C-L-E-V-I-N-S-O-N dot net, MarcLevinson.net.
That’s it for us here on Manage This. We hope you’ll tune back in on March 7th for our next podcast. In the meantime, you can visit us at Velociteach.com/managethis to subscribe to this podcast, to see a transcript of the show, or to contact us. And tweet us at @manage_this if you have any questions about our podcasts or about project management certifications. We’d love to hear from you.
That’s all for this episode. Thanks for joining us. Until next time, keep calm and Manage This.