ATOM Award of the Month, May 2017

For May 2017, the award goes in a direction that not many associate with technological disruption.  Remember that the ATOM relates to not merely products that themselves have a rapidly improving cost/benefit profile, but also towards technological improvements in products, processes, and services that themselves may not be high-tech.  

The standard shipping container is just an inert box, and most people rarely ever see one.  It is not improving from one year to the next in any meaningful sense.  The real innovation was in the process technologies enabled through this standardization, and the immense deflation derived through these technologies.  

Malcolm McLean, a trucking tycoon, envisioned the idea of standardized container sizes, and generously decided to give his idea away for free rather than patent it and seek profit.  After the first experiment was a success, rapid adoption and port standardization followed.  

As we can see from the table (click to enlarge), the introduction of the shipping container swiftly led to an almost 20-fold increase in unloading rates from 1965 to 1970, an unusually rapid improvement of any productivity metric for such an early era.  This increased speed led to larger ships, and this in turn led to larger and fewer ports.  From an ATOM perspective, these productivity gains introduced a great deal of deflation in the prices of the goods themselves.  A broader range of goods could be traded internationally, leading to many more countries being able to compete for the same export demand.  New countries could merely join existing supply chains, rather that build entire industries from scratch.  China's entry into international trade could not have been as rapid as it was, without the shipping container, and the advantages it conferred onto large countries over smaller ones, and to low cost production countries over expensive ones.  This advantage is ongoing, as countries poorer than China are still in the process of integrating the low-hanging fruits of benefit that the shipping container provides.  

Despite this introduction having begun almost 50 years ago, the full ATOM effect continues to increase.  The precise logistics of the entire container-shipping ecosystem demands more powerful computation, sensors, and other innovations like RFID tags and GPS tracking.  Furthermore, supply chains transporting trillions of dollars of goods each year generate a huge amount of data, which for the longest time was not even being utilized.  Any large and ever-growing collection of data will attract Artificial Intelligence onto it, and this AI will generate additional productivity gains for participants in the supply chain, and hence price reductions for end-users.  

Since shipping containers are produced in such volume, there are ideas emerging to use them elsewhere, such as a building block for modular construction, or as simple pop-in swimming pool enclosures.  

For this reason, the shipping container, an inert metal box that transformed the entire award, receives the May 2017 ATOM AotM.  

H/T : Geoman 

 

Comments

[fatcat]

It would be interesting to compare the container growth chart with the world GDP. It seems that they will grow together until the economy starts increasingly​ to move to virtual reality and off world

[Kartik Gada]

fatcat,

Yes, that is true. One could contend that the shipping container was just a continuation of an exponential trend that was already underway, but all ATOM disruptions are to varying degrees. The variability is in who benefits, who loses, and which technologies emerge as secondary and tertiary byproducts.

As far as virtual items becoming larger portions of GDP (as well as robotics and cheap natural gas reshoring production to high-wage countries), that could prove that the shipping container era was just another leg of the relay race (like Moore's Law is for computing - computing was rising exponentially before semiconductors, and will after semiconductors).

[Geoman]

Thanks for the hat tip. Most people like to view the world as simply "computers deflate the cost of X." Not realizing that many things have also been deflating the cost of computers.

Computers were used to make shipping boxes cheaper.
Shipping boxes were used to make computers cheaper.
An endless self improvement loop. And naturally reduced shipping costs have led to the price of many additional items being deflated. Just as a side benefit of the cost reduction loop between shipping containers and computers, we also got trillions of $ in savings across entire industries.

[Kartik Gada]

Geoman,

Plus, this has not stopped. Even though lower energy prices and automation will move some manufacturing back to high-wage countries, the sheer volume of goods is still high. BEst of all, this enables every new technology to diffuse to the first 1 billion users ever faster than before.

Many countries are yet to integrate into the shipping container ecosystem to a significant degree.

[Joe T.]

Should we expect shipping systems to shift to smaller, peer-handled packages, analogous to communications networks moving from virtual circuits to packet switching?

[Kartik Gada]

Joe T,

Good question. I don't think the size of containers will change in the foreseeable future, due to a) the cost of the retrofit, and b) the volume of shipped goods not going down..

[fatkca]

I would like to nominate Voice Over IP technologies. VoIP has transformed the long distance calls, and sometimes is replacing cell voice since due to some misguided market partitioning the cost for data in some cases is less than the voice minutes and users are using skype and alternatives on their smartphones. There are companies that try to replace the landlines with skype for business (I find i a bit premature). And even most of the landlines are using some form of voip or digital signal compression.
The cost of long distance calls has tanked. There is a trend to move to away from classic phone numbers to contacts and online handles. In fact, the voice calls can be effectively free. However, the convenience of the legacy phone system still outweighs the online competition.

[A.M.]

Kartik - construction innovation in its infancy, and its not clear it will succeed yet: https://www.wsj.com/articles/why-youd-want-to-build-a-skyscraper-like-an-iphone-1499000401?mod=e2tw

The bit at the end about cities not having enough opportunity is silly - the problem is cities limiting construction, not lack of demand.

[A.M.]

Kartik: explosive growth in bikeshare usage, doubling annually since 2010. The Chinese are already doing ~600x as much as we are. We're on the verge of cheap ubiquitous bikeshare. Starting with Seattle.

https://twitter.com/asymco/status/887202891827744768

[A.M.]

Found the underlying data, bikeshare has increased 25% annually by number of rides for the past two years; this rate may well increase with the rollout of new dockless private bikeshares.

[Lyle]

People who have not see shipping containers must not live near railroads or wait on railroad crossings. One of the big things, in railroading is multimedia (in the sense of water and rail and eventually truck) transport. Container shipping now runs as fast as the old passenger trains used to. In addition due to the surplus of containers in the US (i.e. the US imports goods that need more containers than it exports), a shipping container can be used as an emergency shelter, or even a hunting lodge. Many companies are now providing the conversion. Note that shipping containers are generally water proof and the like. Their sizes are basically limited in width by the highway laws so its 8 foot wide with a height of 8 feet and a length of 20 40 or 53 feet in the US.
Basically one thing the containerization did is to cut the load and unload time of ships from days to less than 1 day. Also moved. Further reduced the number of longshoremen as the cargo is no longer sorted at the port but typically at the warehouse.