False Economy - Alan Beattie [105]
The modern equivalent of the carrier pigeon and the Rothschild network is the mobile phone, whose cheapness makes it a far more democratic medium, and one more likely to create an efficient market than to entrench one participant in a monopoly. For years, development economists and World Bank officials had been coming back from Africa and India with starry-eyed tales about cell phones delivering efficiency gains by allowing farmers and fishermen to check on the prices at various markets before they sold their produce. Finally, someone actually went and collected data from the coastal fish markets in Kerala, in southwestern India—and pleasingly, the anecdotes turned out to be accurate.
Before mobile phones, the prices Keralan fishermen could get at markets within fifteen kilometers of one another varied from zero (that is, when no one was there to buy at any price) to 9.9 rupees per kilo. Mobile phones came to Kerala in 1997, and within four years most fishing boats had one (the base towers were planted so that mobile phone coverage extended 20 to 25 kilometers out to sea). Prices between markets rapidly converged. Previously, any given price had been on average 60 percent higher or lower than the average of all prices. After mobiles, that disparity declined to 15 percent. Previously, 5 to 8 percent of each day's catch was dumped because there was no one to buy it; that figure fell to almost zero. The price of fish to customers fell, on average, by 4 percent; fishermen's profits went up by 8 percent. To indulge a ghastly cliche, the introduction of mobile phones was a win-win situation. Finally the familiar rhetorical question had an answer: This technology had a lot to do with the price of fish.
The Internet has proved to be an even more powerful tool for matching buyers and sellers across the world and enabling trade links to be established. But the invention of a new technology does not automatically mean it is going to be used. There are frequently entrenched interests to be overcome before a new tool to streamline and shorten supply chains is accepted, and it often takes an entrepreneur with an unusual degree of vision and persistence to overcome them.
The story of how the PC manufacturer Dell used the Internet to create worldwide supply chains that could react so quickly to demand that each computer is assembled to individual order has formed the basis of a best-selling treatise on the so-called flatness of the world. But more than a century earlier, another pioneering American company showed how a new technology needs imagination and entrepreneurial drive to transform a supply chain.
The railways and the telegraph, as we have seen, opened up the American Midwest and West, making its vast plains and prairies the source of grain and meat for America's industrialized East Coast and, later, for the huge markets across the Atlantic. But for one particular comestible, fresh beef, it took a remarkable company to exploit those new technologies and turn them into a supply chain that could feed one of the biggest agglomerations of urbanized workers in the world.
G. F. Swift, once a minor-league Boston wholesale butchering company, built a continental economic empire by vertically integrating the entire supply chain, from field to fork. It not only shortened and regularized the time it took beef to travel but enormously accelerated the speed and quality of the information being passed the other way. The technologies that G. F. Swift exploited were complementary: transport and telecommunications. The telegraph and the railroad developed together, the lines running alongside one another. In 1849, the New York and Erie Rail Road pioneered the use of the telegraph to control running operations. Five years later it was standard practice among the railroad companies.
These twin technologies, incidentally, helped establish their own standardization, including one of the most fundamental of all measurements: