Archive for December, 2004

December 26, 2004

Book Review: They Made America

Harold Evans

Rating: 4 Stars

You probably learned in school that Robert Fulton invented the steamboat. They probably didn’t tell you, though, that Fulton lived in a menage a trois while he was in Paris. (And he didn’t really invent the steamboat, though he made important improvements to it.)

This book is subtitled Two Centuries of Innovators. The category “innovators” includes, but is not restricted to, the classic inventor/entrepreneur. Along with people like Fulton, Edison, Ford, and George Eastman, the book profiles A P Giannini, founder of the Bank of America, Georges Doriot, who established the first true venture capital firm, Martha Matilda Harper, creator of the first retail franchise network, and Walt Disney. They Made America will be good reading for anyone who is interested in the history of technology and/or the history of business (and in my view, any practicing businessperson or serious investor would do well to become a student of business history.)

A couple of interesting tidbits:

*Elisha Otis, creator of the Otis Safety Elevator, wasn’t initially trying to create a product at all. He had taken on the job of converting an old sawmill into a bedstead factory, and he knew that the 3-story building would need some kind of hoist. He also knew that there had been many serious accidents involving such machinery. So he designed an arrangement whereby any loss of tension on the hoist rope would engage a latch mechanism which would stop the carrying platform. It worked, and that was it as far as he was concerned–a single job well-done. But customers started coming to him and asking him to install his safety elevator in their facilities. With orders in hand, Otis opened a small elevator factory. His big break came at the World’s Fair of 1854. With the assistance of P T Barnum, Otis arranged for his elevator to be a major attraction of the show. Hundreds of people watched as Otis was lifted up in a hoist–then cut the ropes with a saber. The crowds gasped and screamed as the elevator fell–but it fell only briefly before the latch engaged and brought it safely to a standstill. Otis repeated this stunt every hour of every day of the fair.

*For centuries, great efforts had been made to improve the speed and carrying capacity of ocean-going ships. The process of loading and unloading those ships, however, had remained pretty much unchanged…until Malcom McLean. At the age of 24, McLean loaded his truck with cotton bales and drove to a pier at Hoboken, New Jersey, where the cotton was to be loaded onto a ship. He had to sit around most of the day on the dockside waiting his turn. Individual crates and bundles were unloaded from trucks, and placed onto slings that would lift them into the hold of the ship. “With much yelling and arm waving,” the slings were then individually unloaded by the stevedores and put into their proper positions in the hold. McLean: “Suddenly the thought occurred to me. What a waste of time and money! Wouldn’t it be great if my trailoer could simploy be lifted up and placed on the ship without its contents being touched?”

McLean wasn’t in a position to do anything about his idea until he was 40, by which time he had built his trucking business (which started with a single pickup truck) into one of the biggest in America, with 1700 trucks and 32 terminals. He observed that oil tankers travelling from Houston to the northeastern U.S. usually carried nothing on deck, and noting at all (except ballast) on the return voyage. Why not use the deck space to carry trailers? He bought a small tanker line and got to work. The first container ship, the Ideal X, sailed on April 26, 1956, with 58 containers on board. McLean built his small shipping line into a substantial company known as Sea-Land, which he eventually sold to RJ Reynolds for $500 million. He got a $160 million personally along with a seat on the Reynolds board. He hated it. “I am a builder and they are runners (managers),” he said. “You cannot put a builder in with a bunch of runners. You just throw them out of kilter.

Prior to McLean’s innovation, transportation charges often amounted to half the eventual cost of the good; with containerization, they fell to more like 10%..sometimes even less. In 1988, the cost of sending a $200 VCR from Japan to the US was only around $2.

As much as any other individual, Malcom McLean can be said to have unleashed the era of globalization.

Recommended.