It’s not often that a book changes how you view the world.
“Material world: The Six Raw Materials that Shape Modern Civilization” by Ed Conway has completely changed the way I see the modern world that we live in.
That’s because this world of ours owes so much to the world of mining, manufacturing and science that it’s impossible to not see things differently after learning about how this clean and magical life of ours is all because of truly radical efforts to provide us with the sand, salt, iron, copper, oil and lithium that makes all of this possible.
And once you start reading the business news with a mind on resources like these six, you start understanding that the struggle over precious resources is a main line through the world events.
Here’s a headline from the Wall Street Journal on June 29th. “The Cutthroat Battle to Become America’s Rare-Earth Champion: A fight between two of the U.S.’s biggest rare-earths companies illustrates the stakes behind the effort to loosen China’s hold on the sector.”
Every day I read the financial news now, I see a headline about a conflict of some kind over materials.
This fighting isn’t anything new. We humans have been battling over materials since the dawn of civilization. There’s been no less than six wars over salt. We’ve lost count at this point in terms of how many wars there have been over oil.
And of course several wars have been decided by who has which materials. During World War One, England ran out of the type of glass that was needed for binoculars, which was such a problem that Germany actually agreed to provide the needed glass (which would be used to kill their own troops) in return for rubber that England had because Germany needed that rubber for tires and engine belts so they could keep their war machine going.
The author of this book does a good job at breaking up the technical portions with tales of going into mines, visiting futuristic factories, salt flats in Chile and steel plants around the world. Without those adventures in the field, this would just be a collection of factoids about random things. (Which my wife has grown very tired of hearing about.)
So let’s dive into some startling facts about these six materials and some investing implications relating to them.
Sand
What’s the importance of sand? It’s everywhere and seemingly endless, right?
Well, you need sand to make glass, which has been directly tied by historians to 16 out of the top 20 inventions of all time since glass helped make microscopes possible and also glass containers that hold things like test samples.
And mirrors (a form of glass) played a major role in the painting boom starting with the Renaissance and glasses helped people with bad eyesight continuing their working lives instead of just retiring due to bad eyesight.
There’s also the role that greenhouses played in allowing Western scientists and botanists to create their own small, glass enclosed environments so they could grow just about any plant without being subject to the outside world.
Sand being turned into glass led to better and better glass and then eventually fiber optic cables, which power all of our communications these days, including you're reading this right now.
But the most important role that sand plays in our modern world is via the silicon dioxide that is used in the semiconductors that power all modern electronics.
Just how sand goes from its original resting place and is made into a semiconductor that powers your cell phone sounds like something out of a cheap sci-fi paperback. Here’s the author explaining just part of the process.
“In a vacuum chamber inside this machine, tin is melted until it becomes a liquid. That molten tin is then dropped down into the chamber in a continuous stream. In the midway point of their cascade, each of these tiny droplets is zapped twice by pulse lasers, provided by German company Trumpf, which are powerful enough to cut through metal. These bursts heat the tin up to a million degrees, transforming it into a kind of plasma that simultaneously creates a burst of EUV light. This pinpoint smashing of molecules happens 50,000 times a second, so fast that the stream of tin droplets and the laser explosions are totally indiscernible. All of this to generate a stream of EUV light whose real task is yet to come, for only then is it bounced out towards our waiting wafer.”
What in the world?!
Salt
Much like sand, the importance of salt today is far more than we realize. Salt is what we need for clean drinking water (because salt is a crucial ingredient in chlorine) and it’s also used to make many important pharmaceutical drugs along with products that help keep germs at bay.
“The availability of cheap soaps and sanitary items arguably helped increase life expectancy more than any other innovation over the past couple of centuries,” Conway writes.
Salt is plentiful and has been used as currency in some parts of human time. It also allowed the preservation of fish and meat and cheese, which let us humans move from being hunters and gatherers to more stable humans who could plan ahead and not have to constantly worry about where our next meal was going to come from.
Salt is so important to us humans that it has been used by governments for centuries as a way to fill empty coffers and raise tax dollars. This over taxation on salt helped ferment the French Revolution and the protests in India that helped Gandhi rise up against the British.
Fun fact: Ghandi actually gave up salt a few years before his famous protest against the British in an attempt to improve his diet.
One more fun fact before we move on: If all the salt in the world's oceans were extracted and spread evenly across all of Earth's landmasses, it would form a layer about 500 feetthick. That is roughly the height of a 40-story building.
Iron (and Steel)
Much the way that salt allowed people to preserve things like cheese and meat, iron and then steel helped us spend less time plowing fields and it helped us make buildings and ships stronger.
Here’s how much time having stronger farm tools saved someone in New England in the 1880s.
“In a typical farm in New England in 1800, with mostly wooden tools, it took just over seven minutes of labor to yield a kilogram of grain. In 1850, with cast iron tools, the same job took just under three minutes. By 1900, with steel tools, it was less than 30 seconds per kilogram,” Conway writes.
Progess!
Just how much steel is in the world? It’s a lot.
“…there is about 32 billion tons of steel out there in the world. This is rather a lot. If you were to forge it into heavy I-beams that go into buildings’ steel frames, you would be able to wrap the world in it 33 times over. You could build seven high-speed rail tracks between the earth and the sun. Or, were you to divide it between every person on the planet, you would end up with about 4 tons per person.”
And it’s not just massive versions of steel/iron that have changed our world. For example, the cost of nails used to be prohibitively high. So much so that the main cost of building a house was in the nails, not the labor. Now it’s the opposite.
“Back in 1810 Americans spent roughly the same proportion of their national income on iron nails as they do today on computers,” Conway writes.
But now, we have gotten so good at refining steel and making it so pure for what we use it for that we have actually have to go underwater to get steel from sunken battle ships. There’s something called low background steel that’s used to make things like Geiger counters (to measure radiation levels) and for medical devices. Ever since the nuclear tests starting around 1945, the planet’s air contains very small particles of nuclear contamination. Low back ground steel contains none of that contamination. But to get that kind of steel you have to harvest it from sunken battle ships that are sitting on the ocean floor. In fact, there’s a busy form of underwater piracy going on since this kind of steel is very in demand but not a very large supply of it.
Fun fact: China currently produces more steel every two years than England produced from today going back to the start of the Industrial Revolution.
Copper
Now we’re getting into more of the dirty (but very essential) work of large-scale mining and that’s where copper comes into view, as well as investing implications.
It’s impossible to overstate the importance of copper. This is because copper makes electricity possible through conducting power from one place to another. And electricity has let us live cleaner and more interesting lives since more light in a home leads to a cleaner home. And we can stay up later and do things like reading at night or going and dancing at a nightclub. Brighter and cleaner schools leads to more learning. Before electricity, people were literally living in the dark.
Pulling copper out of the ground, however, has become more intensive over time. And more profitable. Take a look at this mine in Chile the runs day and night, 365 days a year blasting for the metal.
It takes an hour to drive from the bottom of the open mine to the edge of it.
Or how about this one in Indonesia. It looks like a great place to use as a villain’s lair in a James Bond film.
The price of copper has grown steadily from 30 cents a pound in 1960 to over $6.00 a pound today. The cost of copper relative to hours worked, however, has decreased.
“At the time of the Roman Empire the price of a ton of pure copper was equivalent to roughly 40 years of the average wage. Forty years of work for a ton of copper. By 1800 this had fallen to 6 years a ton. In the following 200 years it dropped to just 0.06 years per ton,” Conways writes. By the way, a ton of copper right now would cost around $12,000 to $13,000 a ton. Not sure where you’d store that, by the way.
But we need copper to run all of our whiz-bang devices and to keep building clean energy strategies like solar panels, wind turbines and electric vehicles. For instance, the average car contains around 50 pounds of copper. Electric vehicles need around 175 pounds of copper.
And that’s one point that the author makes again and again: we as humans need to mine even more than we have been mining in order to build clean energy strategies that will, if all goes well, allow us to do less of the gritty mining that led us into this climate change conundrum.
Oil
“If steel is the skeleton of the modern world and copper its veins, the oil is the food that sustains us,” Conway writes.
And of course the numbers involved with the oil industry are stunning.
One of the largest oil fields in the world, the Ghawar oil field in Saudi Arabia, has already produced 70 billion barrels of oil and has around 50 billion more still available in the ground.
The Permian basin in Texas covers 86,000 square miles. What are some countries that are about that same size? Belarus, Guyana and Oman are all right around that size.
Ever wonder how much oil is in one barrel: A barrel of oil contains 42 gallons of oil. So when you hear $100 a barrel, you’ll now know the math.
Much like how sand is important because of how we need it to make glass, oil is important for how we use it to make plastic, or more precisely polythene. We all know that plastic is everywhere. But did you know we make enough polythene every six seconds to wrap the Eiffel Tower from head to toe? Every six seconds.
Unlike other hard materials, plastic can be molded into just about any shape. And it can be as hard as a bullet proof vest or as soft as a shower curtain.
I could go into the oil market of late, but I think we’ve all had enough news on that topic. So let’s move along to lithium and why this new-to-us material is now one of the most important, if not the most important, at least in terms of cutting edge technology.
Lithium
Known as white gold, lithium was one of the three main elements created in the Big Bang and is excellent for holding energy. It’s also kind of strange: it’s so light that it floats in oil and so soft that you can cut it with a kitchen knife.
But the most important thing that lithium has going for it is how it can store a huge amount of energy in the batteries that power our phones, our cars and smart watches and on and on.
The rise of lithium batteries is the reason why cell phones aren’t still attached to briefcases and why camcorders used to be as big as briefcases -- and are now embedded in Ray Bans.
“The universe hasn’t given us anything better,” says the science writer Seth Fletcher.
Conclusion
As far as we’ve come in our advanced technological world, it’s been enlightening to take a peak behind the curtain to see what is needed by so many smart humans and massive projects in dangerous places to keep all of the plates spinning.
So give some thought to the material world as you drive around and go about your day. Relative to our ancestors, we live in a magical time and for that we should be grateful for these six materials.