New York’s docks were handling half as much domestic cargo in the early 1950s as they had been in the depressed 1930s.
In thirty years, no one had invested significant money in coastal shipping.
In 1937, a trucker got frustrated waiting for his cargo to be unloaded. He later sold his company for $1.1 billion.
Here’s the story of how Malcom McLean made a billion dollars and which startup could be following in his footsteps. (Inspired by our episode with @laurabehrenswu)
New York’s docks were handling half as much domestic cargo in the early 1950s as they had been in the depressed 1930s.
In thirty years, no one had invested significant money in coastal shipping.
As McLean found out, loading ships was difficult and slow.
A truck or train would deliver items to the port. Each item was unloaded separately, recorded, and carried to storage.
When a ship was ready, each item was taken from storage, counted again, and hauled on-board.
“A four-thousand-mile voyage for a shipment might consume 50 percent of its costs in covering just the two ten-mile movements through two ports.”
Foreigners were barred from operating domestically. Cartels ran international routes. And gov. subsidies eased the pain of labor costs.
Reshaping the industry needed an outsider.
Enter Malcolm McLean.
But he worried that domestic shipping lines would undercut his business. Highway traffic was getting worse and shipping costs were falling as the government gave away war-surplus ships for next to nothing.
Why not bypass traffic by driving truck trailers onto ships?
Ships would then move trailers between North Carolina, New York City, and Rhode Island, circumventing traffic jams at a time when expressways were few and far between.
The wheels beneath each trailer would waste precious space. Pondering that problem, McLean came up with a more radical idea.
Leave the wheels and chassis, load the container. That would reduce the space each trailer needed by one-third.
The Interstate Commission said no. He couldn't own both a shipping and trucking company.
McLean chose shipping.
In 1955, he made $6 million ($60m today) on the sale of McLean Trucking.
On April 26, 1956, 100 dignitaries watched a purpose-built crane place a container on the Ideal-X every seven minutes. The ship was loaded in less than eight hours and set sail the same day.
Loading loose cargo on a medium-size cargo ship cost $5.83 per ton in 1956. McLean’s experts pegged the cost of loading the Ideal-X at $0.15 per ton.
With numbers like that, the container had a future.
McLean wasn’t the first to suggest containerization. But he was the first to understand that the future of shipping required not just a metal box but an entirely new way of handling freight.
Today, the US shipping industry alone is worth $700bn.
Laura Behrens Wu, this week’s FFG guest, is doing the same. She’s making shipping easier in the internet age.
McLean 2.0? Listen to find out:
https://t.co/vP8POjAEfb
If you’re struggling for business ideas, what problem do you face that you’re sure other people struggle with too?
Start there. Solve that problem. As Laura shows, you may find it’s a huge market.
It pairs well with @patrick_oshag and @LauraBehrensWu's conversation about Shippo and how to build a digital business in the physical world of shipping.
https://t.co/zCZWTiFOsj
