Aerial view of Apple Park, the corporate headquarters of Apple Inc., based in Cupertino, California. The roof is covered with 17 MWp solar panels, making it one of the largest solar roofs in the world. Photo taken by a Cessna 172M.
Silicon Valley would not exist without mining
We have all heard of Moore's Law: The number of transistors on a silicon chip doubles every two years. But who has heard of Moore's law in mining?
Since 1920, labor productivity in the global mining industry has doubled every 14 year. It may not be quite as exciting as the explosion of the trillion dollar technology industry, but it's much more important.
Mining is the indispensable prerequisite for economic growth; the world simply can not grow without it. In the last 115 years, the correlation between global copper production, steel demand and GDP has almost collapsed following a nearly identical growth rate from 3,1 to 3,3 percent, deviating only from the trend line during financial crises and world wars.
That's hardly surprising. Commodities are the physical instantiation of capital. Mining creates the wealth of the world by supplying its raw materials and integrating them into the global economy.
But large mining companies that produce this wealth are under-valued, while technology and entertainment companies that simply transfer wealth from one pocket to the other are often rewarded.
Rio Tinto is trading at six times earnings and has a value of 113 billion dollars, while Facebook trades in the fifteenth of trading volume and is worth 513 billion dollars. Snap Inc., the company behind Snapchat (a teen messaging service), trades in 26 sales.
This obsession with Moore's Law and the widespread ignorance of Moore's Law in mining means that we as a society are misallocating our resources and investing capital in unproductive areas of the economy. Every billion dollars poured into Facebook and Snap to create entertainment platforms is a billion that could have gone into building houses and bridges to create real wealth for the future. We are eroding unnoticed from the capital base of our economies. It's no wonder millennials will be the first generation to earn less than their parents.
There are no physical limits to growth; There is more than enough capital in the world to shape the future we want. The only limit is our own decision, which results from our decisions about the activities that we prioritize and reward. It is the miscalculation of the world's natural resources that hinders growth.
Investors forget that the modern technology industry is nothing more than a derivative of the extractive industry, a set of increasingly sophisticated methods of transforming, arranging and combining the same silver and copper inputs that we have combined in different ways for centuries. Without the billion dollar industry, the trillion dollar industry is worthless.
ISE - September 2019
