From Shipping Things to Spreading Ideas (unboxing global trade with Marc Levinson)

Hey Paul. How's it going?

Hey, not bad.

Okay, I'm wondering if you remember one meme in particular. Now, visuals are hard to do, so let me describe it. The container ship, the giant container ship that famously blocked the Suez Canal in 2021. It was named Ever Given, if that helps you, if it jogs your memory. The meme was the very kind of bottom of the ship, and this little tiny excavator just trying to dig it out without much success. I think we've all felt like we're the excavator at some point, but it was sort of such a moment like that energy of trying to make a dent or a difference when the odds are against you. Do you remember that?

I totally remember it, yeah, and now I remember the excavator as well, but the reason I remember it so clearly is I was on the Suez Canal a couple of years before that in one of these small little boats that go out to kind of investigate what's going on. It was super cool, and these monster freighters are coming by literally very quite close together, just constantly coming through, and they're just so huge. You're looking up at them. They're as long as... You can't even see the end of them.

They're like 1300 feet or 400 meters long, and they're just so large, but I was imagining that just suddenly stopping and how big a deal that would be for the ships on-site. When you think about how much these hold, like 20,000 of those small containers in the biggest of the freighters, suddenly global trade is disrupted within hours, like massively, and so I was kind of thinking of all that, and that meme was pretty cool with the little excavator.

You know what? It totally freaks me out. I was looking at the boats on TikTok, on YouTube, trying to remind myself of kind of the scale and what it feels like to look at them. I realized that I've allowed myself to kind of block out or I've stopped thinking about where the things that we purchase come from, whether it's online and a little bit of that magic of getting to my front door or even on a shelf at the store. There's kind of a very dangerous element of magic to shopping, sharpened right now due to tariffs, of course, but it does feel like there's this whole universe kind of at our fingertips, but we forget about the physical and digital infrastructures that we need to kind of move things around the world.

Yeah, so today, we're unpacking that quiet revolution, that device that changed everything, as you say, from where stuff is made to how cities grow, and we're doing that with somebody who literally wrote the book on it.

I think he wrote two books about it, and he has more books than that.

Yeah, several editions, too.

Right. Marc Levinson is an economist, historian, and he's the author of The Box. How the Shipping Container Made the World Smaller and the World Economy Bigger. He's also the author of a followup to that, Outside the Box: How Globalization Changed From Moving Stuff to Spreading Ideas. His work is all about transformative technology, yes, but it's also about deregulation, global capitalism, and that invisible infrastructure that moves the modern world.

Right, so we'll talk about the ripple effects, no pun necessarily intended, about containerization and how it transformed ports into these modern data hubs and other cutting-edge technology places and what it means for sustainability in an era of climate risk and trade disruption. We're going to go all the way from port cities to planetary supply chains, and Marc Levinson's going to help us see the world a little bit differently.

Marc, welcome to Policy Prompt.

Well, thank you for inviting me to join you.

Great to have you, Marc. Let's start off with something that I know we both really appreciated about the book and The Box, and that is how you bring life to something that we don't really mostly have very much line of sight on, how stuff gets around the world. Maybe to contextualize it, could you paint a bit of a picture of what a port used to look like, even for centuries before containerization happened, and then a little bit of what they look like now?

Sure. Ports in the pre-container days used to be located mainly in cities, not outside cities, but in cities because, A, you needed a lot of labor to handle the vessels, and B, you needed to be able to get the cargo, whether it was for retailers or for factories or for whoever was to receive it, to organizations or individuals who lived close at hand. The port was right there in the center of town, and there were a lot of people involved because loading and unloading cargo was a very labor-intensive business.

In the early 1950s, just to give you an example, there were about 50,000 dock workers in London. There were about 50,000 dock workers in New York during the same period. These people didn't work all the time. They worked when there were a lot of ships in port and a lot of labor was needed, and they typically lived in locations close to the port because they needed to go and try to find work every single day. The way that ships were loaded back then was what was known as a brake bulk cargo handling, brake bulk shipping. Brake bulk means that you had the little pieces, literally the bulk, whatever it was, was broken up.

You might have a wooden create, a bale of cotton, a barrel of nails, whatever the item might be, all of these individual items ended up being loaded above aboard a ship. They all had to be handled one by one. Typically, they were stored in a warehouse near the dock. They were brought out onto the dock one by one to put onto a wooden pallet. The pallet was lifted into the hold of the ship, and then they were taken off the pallet one by one and stowed away. There was just a lot of work putting individual items into the vessel, and then at the other end of the voyage, taking each of these individual items out of the vessel and getting it where it needed to go. That's what shipping was like before the container.

Right, and those old photos like Manhattan is very striking where you'd see hundreds of vessels side by side right Downtown, right in the city, as you say. You don't go somewhere else. The port is there.

The port was right there, and that was actually very important for the way that ship owners thought about their industry because they could go out and see their vessels every day. They were right outside their offices. They could literally go and pat the ship on the nose if they wanted to, so it was a very personalized industry because it was visible to everybody and it was right there in front of you.

Yeah.

Mm-hmm.

Kind of tangible and in your face. I want to switch gears for a second, and I'd love to speak a little bit about the inventor or person who helped to standardize the shipping container, this thing we take for granted, Malcolm. Not that I'm on a first name basis with him by any means, but it strikes me that Malcolm McLean is sort of a forgotten American innovator. The standardized container was an absolute revolution. Maybe we could just speak a little bit about what did Malcolm see that others missed? Was he a logistics genius or just somebody who naturally kind of right place, right time, post-war, economic conditions, and deregulation? Such a huge question to talk about Malcolm, but I'd love to bring him forward now.

Okay, we're talking about Malcolm McLean. Let me make clear at the start that Malcolm McLean was not the inventor of the shipping container.

Okay.

The shipping container was not a new idea. Since at least the 1700s, people had been very clear that if you could take a bunch of small items and put them into a bigger box, it would be more efficient to ship them, so that was old news. Different companies had tried this over the years, both in Europe and in North America. Your Canadian listeners will probably have heard of the White Pass and Yukon Railroad, which had a single ship that carried small containers from Vancouver up to, I believe, it was Skagway, and then sent them off into the Yukon. There were railroads in the United States that used a version of containers in the 1920s and 1930s and railroads in Europe, so the container itself was really an old idea.

These containers, though, had never paid off financially. They had no broader consequence, and one of the reasons for that, I think, is that all of the companies engaged in freight transportation were concerned about protecting their own businesses. They wanted to have a container that would help them get a little more profit on their railroad or on their ship. They really were not thinking about the system, and Malcolm McLean's great insight was that this wasn't really about the container. It was really about a new system of transporting goods. He didn't just have a ship that carried containers on it. He saw a need for a whole lot of new technologies that developed over time and really a new way of handling cargo.

He came out of the trucking industry in the United States, and part of one of his important insights perhaps was that the customer, the shipper, which is the cargo owner, usually, didn't care about how the cargo got where it was going. It was not interested in anybody's ship. The shipper was concerned about getting the cargo to its destination cheaply and reliably. That's really very different from the way that many people in the regulated world of transportation thought about their business. You remember the ship lines were mostly privately owned by families. They had an emotional attachment to their businesses. They wanted to promote their businesses.

McLean had none of that. He was saying, "What can we do here that's going to be interesting to shippers and make us some money?" The insight that your business is not shipping, it's freight transportation doesn't seem like much today, but that was really an enormous insight because that's not the way the world worked in the 1950s. Countries had a regulator for shipping. They had a regulator for railroads. They had a regulator for trucking. These were separate industries. They were not supposed to compete very much with one another because the system was supposed to be stable. There was a very restrained amount of competition, and there was not very much innovation, and really that's what Malcolm McLean brought to the party.

One other thing that I thought was fascinating about the discussion of McLean in the book was that, two things. One, the rule of standardization that comes up time and time again about technologies and about impacts, just how big a deal that was. Then, the other thing was that he had his own company at one point. He was a leading thinker and doer in this space, but he ultimately failed, which is also often the case for people that are at the forefront of these new technologies. Is there anything else that's worth talking about about his own life of why did he fail? He clearly had a good vision, but he ultimately failed, did he not, in his own enterprise?

Well, he was involved over his lifetime in several enterprises. He'd started as a trucker back during the Great Depression with a single truck and built it into one of the largest trucking companies in the United States. Then, he had to get out of that business when he wanted to get into the shipping business. Regulators would not allow him to be in the U.S. domestic shipping business and have a truck line, and so he sold his truck line and bet everything basically on this unproven technology. This man was a serial entrepreneur and he believed that you had to be committed. He put all of his wealth into the ship line. He borrowed a lot of money, took a very highly leveraged position because he knew that was essential for his success. His attitude was you've got to be all in or you're not going to make it.

He built one ship line, which became known as Sea-Land. It was for a while the largest container ship line in the world and was eventually sold off for a good deal of money. Its remains are now owned by the Danish company, Maersk. He had a lot of money. He served on some boards. Was kind of bored with that, wanted to get back in the game. Bought another ship line, bought United States Lines, which was then the biggest ship line of all sorts in the United States. Made some bets on container shipping, and his bets turned out to be wrong in this case. The timing was bad. He got the wrong ships at the wrong time, and U.S. Lines ended up in bankruptcy.

Overall right, wrong on the timing. I mean, with entrepreneurs throughout history, this is it, right? You're all in and you get lucky. Sometimes you get the right picks at the right time, but sometimes you fail. Sometimes you don't even get credit.

Well, in the early days of container shipping, there were a lot of failures because companies were placing huge bets. One of the odd characteristics of this industry is that just when business is lousy, you've got to make gigantic investments because the business is highly cyclical. It's going to start to grow at some point, and if you don't have ships, you can't profit from the upturn. People are betting everything and they're betting on what the technology is going to be five, 10, 15 years from now. Do we want to buy the fastest ships possible? Do we want to buy the most energy-efficient ships possible? Do we want to buy big ships, medium-sized ships, smaller ships? All of these are choices that once you've made, you're kind of stuck with, and so it really is a bet-the-company sort of industry.

Right. You know what they say about turning around a supertanker.

I was feeling like another area going forward related to sort of shipping and ports that we see people making, maybe not bets, but predictions around is how human labor will be reoriented or reaugmented. I think you bring forward the kind of human costs or disruptions of the standardization of the container and what it did to ports, the dislocation of longshoremen, the reshaping of dock work, both in terms of geography, but also just function. Maybe we could touch on what kinds of jobs disappeared and what kinds were created as we kind of leap forward to today's more automated smart port where there are similarly winners and losers in terms of employment and efficiency gains.

The work on the waterfront has never been steady. Most of the people who work on the waterfront work there when there are ships in port, and when there are not ships in port, there's a lot less work. That's true whether you're a dock worker or a truck driver or a customs broker and you don't have goods to process. Everything is really tied up in how much cargo is coming in or going out, and that was the case in the pre-container era as well. That's why you had the ports in the big cities because there was this great need for contingent labor. By contingent, I mean labor that could be available if it was needed.

Yeah, sitting in taverns and pubs and things like that nearby.

Doing other jobs.

Yeah, doing other jobs.

Typically, you had dock work, which paid reasonably well, but it wasn't there every day, and so often the dock workers had to go somewhere first thing in the morning. Check in, see if there was going to be work available for them, and if not, they could go somewhere else and try to find a different job for the day. This was perhaps the preferred work for many of them, but it was not steady work. It had a lot of ups and downs. This business has been totally transformed by containerization and technology in a number of ways. I'll just give you a few examples. There used to be an important job on the docks, which was called a checker. The checker walked around on the dock with a clipboard, and literally it was his job to make sure that this piece of cargo was here, check it off, make sure it was loaded, check it off, and you had checkers all over the docks keeping track of cargo.

Well, we have computers doing that kind of job today. You don't have too many people walking around with clipboards in modern container terminals. Of course, you had the people who were handling the cargo, either on the dock or in the hold of the ship. There's still people on the wharf, but they're typically not handling the cargo at all. They may be needing to touch the containers. Depending on the port, they may be driving vehicles that take the containers to and from storage areas. They may be helping lash containers together on the deck of the ship before the ship sets sail, but they're not handling individual items of cargo. That doesn't happen anymore.

These kinds of jobs really vanished. On the other hand, you've got some jobs that didn't exist before, and the people who continue to work on the docks tend to be very highly skilled and very highly paid. For example, the operators of container cranes are some of the best paid people in the industry, at least in the United States. Sometimes sitting 150 feet above the ground in a cabin trying to lift an individual container from a ship and putting it onto a vehicle to take it to storage, or lifting it from the vehicle and loading it on the ship. Some of that work is now done from an office with computers and cameras rather than in the crane, but nonetheless, it's highly skilled work and it's well-paid, but it doesn't require nearly as many people as you used to have on the dock.

Maybe just drilling into that modern port a little bit more that you often hear about just how high-tech it is to know which container goes where, and as you say, to optimize. It's competitive between ports and it really matters where you place the containers and which ones need access first. Could you say something about that? Are these computer algorithms that are determining the exact placement of things in the optimization?

You've got computers that are controlling this process. If a container comes in to be sent out on the next boat, a truck driver brings in a container. In some ports, there's a computer which says where that container should be put in the stacks, so it'll be most efficient to take it a day or two later and put it on board a ship. The degree of computerization varies greatly from port to port. Similarly, the process of loading the vessel, there are a bunch of considerations.

Where is the refrigerated cargo going to go on the vessel? There has to be power outlets. Is there hazardous cargo? That has to be loaded in special locations. What about the overall weight of the vessel? You can't load it in such a way that it's going to tip over in one direction, so you have to know how much each container weighs and make sure that the vessel is properly loaded. Well, vessel loading is another job that used to be done by dock workers on the dock. They had a lot of knowledge of the ships. They knew where it was the smartest to stow this item or that item. That kind of expertise is no longer valued. Those decisions now are made by a computer back at the office.

Yeah.

Hmm. We were also wondering about maybe some of the spin-off from containerization and containers themselves. They're sometimes now used for tiny homes. They can be self-contained hydroponic operations with electric lighting in remote areas like Canada's North. They have a lot of very kind of cool secondary uses, or they're sort of reclaimed sometimes.

They're iconic.

Iconic, yes. What happens to old discarded containers? Is there a formal kind of system of recycled use? Or are they really just so durable that they kind of live on?

Well, containers are property. They're owned by somebody. Most frequently, they're owned by a leasing company. Sometimes a manufacturer or retailer may own its own containers. Sometimes a ship line will own its own containers, and so the conditions under which the container is being used may vary a lot. For example, a company might lease a container for three months, and that could involve three or four trips across the Atlantic and back. Others might lease a container for one month or for a single voyage, so it really depends on how the business is arranged.

Of course, containers get damaged. They're being treated fairly roughly. They're being lifted by cranes. They may be banging into things. They're on trucks that are going over rough roads, so there may be dents in the container after a while or other kinds of issues. How they're reused really depends on the situation. It's become chic to build with containers, but actually people don't want to build with a dirty, dented, badly painted container.

Probably not.

No. There's an ethic that, "Well, it's nice to reuse containers for this purpose," but the people who do that would like to reuse a container that perhaps has made one trip so they can say it's being reused, but it really hasn't been beaten up too much. What happens to beaten up containers? They can be repaired. There are companies in most major ports that do that. They will bang out the dents. They will fill any holes and weld any places that need to be welded, put in a new floor, repaint the container, make it look good as new. There are also containers that are abandoned. They're so badly damaged perhaps that the owner doesn't really want to pay the money to have them repaired, so they may simply be left somewhere out in a field. At certain ports you can see stacks of abandoned containers, and there's a legal process for taking these over and getting rid of them.

The local government has to find out who owns the container, has to publish notice that it plans to condemn this container, and wait for the owner not to respond. Then, it can pick up the container and take it and recycle the metal if it wants or get rid of it in some other ways. There's a lot of variety here. There's a pretty good market in used, either new or lightly used containers. You can find a lot of sellers and buy the container that best fits your needs for your house or your storeroom or whatever purpose.

Updating our Facebook Marketplace searches, I guess. Yeah, another way they become more visible, I guess, but outside of their primary use.

I got to say two things here. I mean, one is I assumed there was something that was maybe a little bit more centralized around container recycling, but what you described makes sense that it's not. There is no common approach to it. It's in contrast to what happens to a freighter when it's dies. I don't know if you've ever seen these where they run them aground in India and then 10,000 people take it apart for scrap. It's literally it is one of the most incredible things you've ever seen. That's part of this whole system as well that where freighters go to die is a pretty big deal.

Containers sound like they're dispersed around a lot more, and I've seen some of the ones that are in Houston, Canada's North as these self-contained greenhouses of a sort with electric lighting and self-contained everything. They're really quite remarkable. That is an interesting spin-off that has actually had like a real value for people just because they're relatively cheap for what it can deliver in those circumstances, right? They're pretty durable.

People have invented interesting uses. When I originally wrote The Box, I was not focused on this at all and was quite surprised. One of my first speaking engagements was on a program along with two architects who specialized in building container buildings, which was something that I wasn't familiar with, but turns out to be a growing industry. There are a lot of companies that do that. They're not looking to use recycled containers. That really gets in the way of their efficiency. They're buying purpose-built containers to build their buildings. That's fairly common now.

They're fairly cheap because they're made in such mass number now that for what you get, it's a relatively cheap product.

Policy Prompt is produced by The Center for International Governance Innovation. CIGI is a nonpartisan think tank based in Waterloo, Canada, with an international network of fellows, experts, and contributors. CIGI tackles the governance challenges and opportunities of data and digital technologies, including AI and their impact on the economy, security, democracy, and ultimately our societies. Learn more at cigionline.org.

One thing that we wanted to note was that back in 2008 that BBC launched something called The Box Project, I believe, which looked to track a shipping container's journey around the world. There was a fascination about just like, what happens? Where do these go? What does international trade look like? What does globalization look like? They did that in 2008. We're here almost 20 years later. How different do you think that journey is now compared to 2008? Or is it relatively the same thing? What would your sense be of that journey and how it's evolving?

Well, I worked with the BBC on that project, and they ran into a few problems that were not really anticipated. Some of them have been resolved now, some of them not. They painted a container a bright red, said BBC on it. It turned out that not every ship line was eager to have that container on its deck because it thought it might make it a target, so that was an issue. The BBC's original idea was to trace the movement of this container around the world, and, well, for a while that was fine because the container was on a ship. Then, the container got to China and then it disappeared because when it's not filled with cargo, a container is usually sitting in a container yard. It's not doing anything exciting. There's nothing to show on your map.

They had this container and it was sitting for a couple of weeks waiting for someone else to use it for another shipment. The story of this container being in constant motion wasn't working out well because that's not how containers are, and that's still a circumstance today that the container will arrive at Vancouver and it may be then shipped onward to Calgary and the contents unloaded. Then, it has to be made available to somebody who has something to ship out of Calgary, and that may take a while to find someone else to use the container. Until that happens, it's just going to sit there.

Then, the BBC had a bit of a problem when the container was stowed under decks. Back in those days, it's not that long ago, the communication technology wasn't so good. They had the idea that they were going to have satellite communication with this container, and that worked when the container was stowed on the deck, but when it was stowed inside the vessel underneath a whole bunch of other containers, the communication didn't work out very well. That situation, by my understanding, has been somewhat improved today, but it is still a challenge for cargo owners. They would like to know exactly what's going on with their container every minute of the day in some cases, and often that's possible, but not always.

I like the idea of the containers being rogue, subverting the system.

Off the grid. Yeah, I mean, I think in people's heads there was this perfect container that's always fully utilized at every point in time, and there's an efficiency question there for sure, but that's kind of the point is that there will be a container when you need it, but you're not necessarily using it all the time. That makes sense to me, and they're not that expensive to kind of leave idle. There's not a high cost of keeping them empty. Fast forwarding to today, we went through the COVID period where suddenly shipping containers were you'd know how much they went up in price, but it was astronomical. Now, we're in a tariff world where, once again, containers have a central role here. Are we likely to seek skyrocketing costs again just because of the market disruption that is happening for container costs? Are they likely to shoot to the moon again?

Well, the cost of shipping a container has been higher than it would otherwise be, mostly because of issues in the Gulf of Aden and the Red Sea. You're aware of the Houthis shooting at some ships going through there, and as a result, many container ship lines and lines owning other sorts of vessels have gone around Africa on the way between Asia and Europe. That adds at least a couple of weeks to the voyage, and so it basically takes capacity out of a market. A ship can't make as many voyages over the course of a year when each voyage is several weeks longer, and so that has been what's been supporting freight rates where suddenly the Suez Canal to be widely used again, were shippers to be confident that it would be safe to send their cargo there, then freight rates would drop quite substantially.

It's quite possible that the tariff wars that are going on now will lead to a reduction in the total amount of cargo shipped, and also perhaps over time to a change in the way in which cargo is shipped or the routes. For example, we've seen much more rapid growth of trade within Asia, especially East Asia and Southeast Asia, than across the Pacific or across the Atlantic. Well, it takes several weeks to get a ship across the Pacific. It may just take several days to get a ship from somewhere in China to somewhere in Vietnam, so there's more capacity. Again, the ships can make more voyages over the course of a year, and that would tend to drive freight rates down.

Hmm. We shall see, and of course, the story on tariffs changes within 24-hour periods, so I guess we'll know what we're up again in tomorrow's news.

This has consequences for ship lines and for ports.

Yeah.

Mm-hmm.

One of the choices that ship lines have to make when they're ordering new vessels is, what size should the vessel be? They devote a lot of attention to this because they're purchasing vessels usually with a specific route in mind. They think that there's going to be a market for a service that originates at this port, stops at these seven ports, and then terminates at some other port, and then maybe reverses the route or takes a different route back to the point of origin. They estimate what the need is going to be in a couple of constraints. First off, container shipping almost always occurs on a regular schedule. There is a similar ship that leaves this port every Tuesday and follows this itinerary and arrives at this other port 13 days later, okay?

Mm-hmm.

You don't get into the business by building one ship. If you want to serve that route, you're going to need to purchase five or six or seven identical ships, so there's a very large investment to do that. Also, if the world economy changes, you may have the wrong ship. If for example, you've purchased one of these gigantic ships, the kind that are carrying more than 20,000 20-foot containers, and perhaps there's less demand for imports from East Asia in Europe, which is where these ships mostly sail, now, you've got to take that giant ship and find another route to put it on, but it's too big for a lot of ports. You may not have as much flexibility to move it around, so you've got a problem. These are the sorts of choices that the ship lines have to make when they order container ships.

Totally, and right now, the chaos of kind of off again, on again tariffs I can imagine is crazy for these logistics.

Why don't we at this point shift a little bit to your second book that we're talking about here? Again, the inside the box to the outside the box is awesome. You talk about globalization, entering that new age of what we often refer to as intangibles, like the tangibles have gone to the intangibles, so moving stuff is less central than moving services, information, and ideas. As global trade relationships are being recalibrated right now, how is this flow going to shift the change in services and information and ideas? What does it mean for the physical system we have in place right now, that trade level of goods is going down relative to services? Is that going to be a sharp trend downwards? Or is it going to maintain what it's doing and this other, the services is kind of added onto it? How do you see that evolving?

Well, what we've seen is that trade in goods as a share of the world economy peaked actually in 2008 as the time of the financial crisis and has not recovered since then. It's gone up and down over the years, but there was a period of time between the late 1980s and 2008 when international trade in goods grew twice as fast as the world economy. Those days are really long gone, and at this point, the world economy in most years is growing than international trade in goods. It's not like all of this stuff is going away and we're not going to need container ships anymore, but this is not driving the world economy to the extent that it used to. There's a lot more exchange of services and ideas and intangibles, and it's really hard to measure it, so it's much tougher to talk about.

With goods, every good that's traded internationally goes through a customers service, and the customs service wants to know what the value of that good is, and that's how the trade data are compiled. Right now, okay, we're doing a podcast and the podcast is in Canada, but maybe someone in another country is listening to this podcast. Well, that's international trade, but it's not going to figure in anybody's trade statistics. We don't really have a clue as to how much of this kind of trade is occurring.

One thing in your book that I thought was very interesting because we think about these things a lot, I've been working on these things of the phases of globalization, one major transformation to another. You talk about four phases in this book, and I think if I read it correctly, the third phase was relatively short. It was kind of like almost peak globalization and trade of physical goods, as you were just describing, and we're now into this fourth phase, but you don't describe it in a lot of detail because you think it's still very nascent. What is that fourth phase? Where are we starting to head into?

The fourth phase is difficult because it's very hard to understand or measure, and there's some real conceptual issues that will likely keep us from measuring it forever. Think about the case of a company that has research operations in different countries, and its researchers are sending emails back and forth to one another. They're getting together a couple of times a year to share what they're finding in their work. That's trade, that's a valuable commodity, this information about their products and so forth, but how do you value that as a traded commodity? We perhaps know the company perhaps knows how much money it spends on its research laboratory in Brazil, but what is the value of whatever moves from its Brazilian research lab to its main lab in France?

Right, and who controls that value?

This is information that, in fact, is not really important for companies to know, and they're not going to go to any great trouble to compile it, and so it doesn't show up in any data. Eventually, it will be incorporated into the company's earnings, and so will show up in the profit data, but we can't put a finger on it and say, "This research conducted here contributed so much to profits." It's a very different situation than with goods trade, and that makes it hard to talk about. You can see headlines about whether we have a deficit of a merchandise trade, but you can't see headlines about whether we have a deficit of trade and ideas because frankly we don't know.

Do you see that as something that needs maybe more kind of standardization or quantification or more of a language around it? It sort of strikes us that you've described container ships as the workhorses of globalization, a hallmark of recent decades. It sounds like it could be sort of chaotic or disorienting if there's no new framework in the way that the standardization of the container itself helped find alignment and agreement across modes of transportation and kind of different jurisdictions. I guess it's a long way of asking you like, yeah, how do we start to build that language and that thinking?

Well, it's a truism in business that if you can't put a number on it, it doesn't matter. Unfortunately, that's the situation here just because of the nature of this sort of trade. I used to work for a bank in New York, and from time to time, I would talk with some of my counterparts in London and we'd exchange ideas, and hopefully for my counterparts in London, they would take some of my ideas and work with their European clients and the bank would make some money off that. My communication with these people in London was not international trade as registered by anyone.

Where do you go? Well, hopefully our London operation was making a profit, and my communication contributed a little bit to the profits, so it shows up in an entirely different part of the national accounting system. It doesn't show up in trade data at all, and there's not really an easy way around this. Just think about what happens when you go onto your computer, and I imagine most of your listeners are on their computers right now. Maybe you are checking out your Facebook page and maybe you're looking to see what the score is of last night's ball game.

Hockey game, hockey match, the hockey playoffs here.

You're doing this maybe in the process of what you're doing, you're sending digits across borders. Some of the things that you're seeing in your Facebook page in Canada may actually reside on servers in the United States or in some other country, but we have no way of measuring that. Is there value being created? Well, yes, you are providing value to the company that owns that page because it's getting information that it used to sell advertising. You can think of the information that it has about about you as a valuable commodity. It doesn't have a price attached.

The paradigms are really challenging right now for governments and others that are trying to define, "Okay, what are the best things we can do to increase productivity, to target growth, et cetera?" It goes back to this famous economist comment by Robert Solow who said in the '80s about computers, he's like, "The computer age is everywhere except in the productivity." Statistics was like a famous thing, and so there's this lag question of it happens. There's growth going on, there's impact, but you can't measure it well.

Then, you don't really see it until you see it in the company revenue. You've seen that to some degree in the FAANG, and the big tech companies have had huge, huge growth, partly because of these decentralized models. Countries are struggling to figure out what the right framework is to capture more of that and to push it. Your point, Vass, about what are the rules around it, what are the standards, and it's a huge struggle. That is the big thing right now.

You've even seen international organizations like UNCTAD and the World Trade Organization devote some serious thinking to this. They've published papers on how one should try to account for this kind of intangible trade, but the reality, and they readily acknowledge it themselves, the reality is that you can't put hard numbers or anything close to hard numbers on this sort of trade. That just makes it totally different from a merchandise trade and makes it very hard to focus policymakers on intangibles.

I've got to share an anecdote here because you mentioned UNCTAD, which most people don't know what it is. It's the United Nations Conference for Trade and Development, and I did an internship there in the 1990s as part as a graduate student, and I was in the Maritime Shipping Division. That was the group that I was in that no longer exists there. It got folded into I think the technology group, but we were looking at the core of maritime shipping being the center of the economy right at that point, and so I had to share that since you said UNCTAD because not many people know what it is. Interesting times that we're in that one of the things that we're seeing going on right now with the Trump Administration is an attempted separation between goods and intangibles. In a way, like the way that the tariff war has been launched is it's targeting trade imbalances in goods.

It's certainly ignoring IP, intellectual property, and a lot of the rents that are being extracted, and it's kind of pushing countries to say, "Hey, well, your goods imbalance with us is X and we're going after that." There's no discussion of services. U.S. is leading in services and has a positive surplus with most countries, including Canada, on the services side. Is there a way that this interdependence is going to kind of settle out and help some things? Or is this really kind of a winner takes most and it's hard to kind of negotiate deals the way we did with tangible goods in the past? It feels like a tougher game.

You're absolutely right. Really, the only thing that's happened on the intangible side in terms of trade barriers that I can think of right at the moment is in the auto area where the United States has said that a Canadian, excuse me, a Chinese software cannot be used to power autonomous vehicles. There's this idea that somehow China would be able to control all these vehicles from some office in Beijing and potentially shut down U.S. automobiles. Here's a case where this really came to the fore, but in many other areas it would be very difficult to do, and it would be quite counterproductive.

Many, many companies now have research in a variety of countries. In part, they've got consumers in different countries, and so need to know what's going on there, but also, they're looking to identify individuals who have expertise in a particular area. They're not going to find them all in Toronto or Chicago or whatever. They need to be in different countries where those individuals are available, where that skilled labor forces can be found, and so they need to be able to communicate their work back and forth freely. If governments start interfering with this, it's going to be very destructive to productivity.

You communicate freely through your texts and other work, and as we round out, I don't know if The Box Series is going to become a trilogy or whether we're going to be half in The Box or half out. I'm sure you hate hearing all The Box puns that people toss your way, but we'd love to hear a little bit about something cool that you're working on now or noodling on that we can keep our eyes out for in the future.

Well, I've been noodling on a lot having to do with logistics. It's been fascinating to see how much money has flowed into the logistics industry. A lot of people with a Silicon Valley background have looked at this industry and they've said, "Oh, this is really inefficient," because there are a lot of inefficiencies in supply chain. They've said, "Well, we do software. We can make some software that will deal with all these inefficiencies and make these companies run better and make supply chains run better.: There have literally been hundreds of companies founded to try and squeeze these inefficiencies out of supply chains and improve the logistical system.

Well, many of those folks haven't done very well. The supply chains are quite complicated. Logistics is quite complicated, and it turns out that it's not a simple matter of coming up with better software. There are peculiarities of different parts of supply chains. There are peculiarities in shipping and in other related industries that are there for a reason in many cases, and so it's really fascinating to see how many very smart business people and smart computer people have struggled to bring new technology to bear in squeezing out the inefficiencies of the logistical system.

That's cool because in a way that the shipping industry is so big and so complex that's it's a bit of a microcosm of the global economy as a whole just with, as you say, all the features. The tech people tend to think, "We've got a solution for you because our algorithms will be really smart and they'll find efficiencies," but that prize is actually much more elusive in some areas than they think. This strikes me as one of them, as you were saying, so it would probably make some gains eventually, but it's not an easy system to kind of unpack and frame with a smart algorithm.

I think that's right, and the people who actually participate in supply chains, the shippers, the ship lines, the ports, the terminal operators, the freight forwarders, customs brokers, all those people, they have to be flexible because circumstances change and they change quickly. All of a sudden, this cargo that you have ready to go can't go from here to there because there's been a change in regulation, or it can't follow this route because a hurricane is coming, or it's not available because a factory caught fire. Then, what do you do? This is an industry where people have to be very adept at dealing with unanticipated change, and that doesn't always lend itself to fixing with an algorithm.

Be flexible, stay flexible, but also trying to eliminate that slack as much as possible. That's a fascinating kind of tension to hold forward as we think about how this economy's going to continue to evolve. Marc, thank you. So fun to talk to you.

Been great to talk with you.

Well, there was so much to unpack in that episode. What a lovely conversation that I think you and I still have some questions in our notebooks and swirling on our minds.

Yeah, my head's still spinning just of the size that we're talking about here and the scale of operations globally and everything. It's one of those areas that when something happens to shipping, it has huge implications globally, whether the Suez Canal we talked about, but just any kind of disruption or any kind of technological change, you've suddenly got global implications, good or bad, so it's a really big deal. We didn't get into all the issues. We could have covered a lot more things just at the end there as we kind of ended the conversation. He's like, "Well, you could have talked about global climate change and bunker fuels and things like that, " and we could have absolutely, and so maybe we need to do some kind of further conversation about not so much containers and their role as a transformative technology, but just shipping and its role in everything from climate change to keeping borders smoothly open and all of that. There's been a lot of governance issues.

I feel like I'm still making a lot of puns, but the shipping industry is a vehicle for so many other technologies that we have to pay attention to. We got into a little bit around the automation and kind of increasing sophistication of ports or even something as mundane, but magical, too, of being able to track where each box that you own or leases around the world at one period of time, but yeah, what's the future? Who are the winners going to be and who's kind of innovating there? Again, it goes back to maybe invisibility, and I think when you and I, when anyone talks about transformative technology, I think we expect it to be so concrete or visible, but these are, again, tangible, but feels like an invisible force remaking and shaping the economy, so I'm so glad we got to talk to him.

Yeah, they're kind of like high-tech dashboards now when you go to a port and there's the command center. There aren't as many people scurrying around with machines and things. A lot of it's automated for sure, but it's so critical. It is critical to the economy, it's critical to the safety. We didn't get into issues around smuggling and things, but obviously that weighs very, very heavily in all ports about the ports are the entry and exit point for a lot of smuggling activities. That is a huge topic unto itself.

Well, we're just two excavators digging, digging at the side of this story, doing our best.

Policy Prompt is produced by me, Vass Bednar, and Paul Sampson. Tim Lewis and Mel Weersma are our technical producers. Background research is contributed by Reanne Cayenne, brand design by Abhilasha Dewan, and creative direction from Som Tsoi. The original theme music is by Josh Snethlage, and special thanks to Creative Consultant Ken Ogasawara. Please subscribe and rate Policy Prompt wherever you listen to podcasts and stay tuned for future episodes.