Current Undercurrents
Positive Supply Shock from Proliferation of Minerals and Advanced Materials
The idea of a total addressable market (TAM)– or any financial instrument –whose underlying assets are insidiously undergoing a gradient descent into minimum energy provides an interesting case study into the rapidly changing tenets of classical resource economics.
I happened to chance on this tweet about asteroid mining, which reminded me of Bobby Axelrod’s ostensibly huge alpha play to corner the rare-minerals market by investing in meteor harvesting. Should this ever be a reality in the rapidly approaching infinite energy future, I would be remiss not to offer a treatment on the nexus of in-situ resource utilization, biotechnology, materials science, and the booming space economy. I happen to ascribe to the philosophy that supply-side shocks arising from the rapid commodification of advanced materials are absolutely necessary to move humanity into a post-scarcity economy predicated on different modes of trade outside of the current paradigm of resource competition. To wit, constitutional undercooling is necessary to precipitate an abundance of nuclei, out of which the kaleidoscopic microstructure of massively parallel manifest destiny forms.
I believe this necessitates a corporate personhood dedicated to realizing this future, exactly like the protomolecule made by the Ring Builders in The Expanse whose function was to use up biomass to eventually create gates that opened up to new worlds. I strongly believe that a new world opens up every time a new material is discovered– in a way that is self-reinforcing. It is our job to make that our cost function, and to maximize it. It is man’s purpose to use his life force to build these gates. But I digress.
The traditional model of natural resource economics, and all the policy arising from these priors, dates back to Harold Hotelling’s paradigm of the inevitable depletion of resources arising from the efficient exploitation of a nonrenewable and non-augmentable resource under stable economic conditions. This mental model, comprising of certain axioms, needs to be updated in two ways:
every natural resource is/has become augmentable, and based on this axiom,
any significant augmentation of natural resources leads to a fundamental shift in economic conditions
taken to its “illogical” conclusion, the rapidly accelerating time compression between augmentation events and the deflationary effects of technology will lead to a permanent state of out-of-equilibrium economic conditions
If you can accept these axioms as true, then it is clear that current policy interest, which has now moved beyond simply the optimal commercial exploitation of the most fundamental environmental resources to encompass management for other objectives, is simply a strange endeavor– akin to the cosplaying of the archetypal hero with a savior complex– because the very definition of initial conditions in such a complex complex becomes fuzzy as time progresses.
Small changes in the proliferation of an advanced material affect the world in very profound ways such that the Lyapunov exponent becomes apparent after sufficient time evolution. Also, the twenty-year time lag between the discovery of an advanced material and its subsequent commercialization is rapidly closing, and more importantly, that period of time has elapsed for a plethora of advanced materials made in the 20th century. We, however, seem to be slaves to one of the oldest, most debunked propositions of resource economics, and it is clouding our collective judgment, leading to the proliferation of fear-based strategies to save our planet purely founded in preference, politics, and ethics, but not in technology.
Since every material is downstream of resource extraction though, let us start the treatment of this topic from there. Typically, the development of a mineral resource occurs in five stages according to Willliam Vogely:
The current operating margin (rate of production) governed by the proportion of the reserve (resource) already depleted.
The intensive development margin governed by the trade-off between the rising necessary investment and quicker realization of revenue.
The extensive development margin in which extraction is begun of known but previously uneconomic deposits.
The exploration margin in which the search for new deposits (resources) is conducted and the cost per unit extracted is highly uncertain with the cost of failure having to be balanced against finding usable resources (deposits) that have marginal costs of extraction no higher than in the first three stages above.
The technology margin which interacts with the first four stages
We do not yet understand how profoundly the fifth stage interacts with the previous four, but we are slowly beginning to see this mental model of the world unravel in the face of new material primitives, shifts in pure science fields such as biology into engineering, synergies with artificial intelligence, and oncoming rapid deflationary effects downstream of energy and automation. Should we accept and embrace this possibility:
materials becoming a new degree of freedom presents a general decay in the variable costs of production, thereby confining the operating margin of businesses dependent on the ever-changing landscape of functional materials to a minimum.
the cheapening of automation and intelligent search of the chemical and materials space results in a precipitous drop in the development margin of raw materials companies (up to and including commodities markets). In addition, the necessary investment to develop mines will decrease in the long run because of intelligent prospecting, extremophile research, and material alternatives from small molecule primitives. The resulting time compression in development (independent of calcification due to unnecessary environmental regulation) makes it economically feasible for new entrants using largely accessible, open-source, high-leverage tools to build vertically-integrated materials companies in a location-agnostic way to quickly realize revenues in existing markets, but also build never-before-seen products, markets, and industries. It is my mission to enable this.
to quote David Brooks and P.W. Andrews on their treatise on mineral resources, economic growth, and world population, there is a strong tendency for many mineral resources to increase in quantity as the quality that can be economically exploited goes down. In other words, the relative and mass abundance of elements qualifies almost every element on earth as a perpetual resource, regardless of the concentration of minerals in specific geographic locations. To put it simply, there are greater volumes of low concentration deposits of a specific mineral than there are high concentration deposits, and man’s ingenuity has been and will be applied to hyper-efficient means of resource extraction and improvement along these lines, leveraging tools of biotechnology and materials science to increase the volume of mineable material by a factor of 100 or 1000, despite growing rates of consumption and population increase. At what rate different sources of supply become economically feasible to recover, all I can say is a rising tide lifts all ships but a tsunami destroys and resilient people rebuild.
Simulation, optimization, and intelligent prospecting are rapidly reducing the cost of exploration where location, grade, quality, and quantity are no longer requirements such that the cost of failure is minimized with each iteration. The oncoming wave of biotechnology and materials science reduces the marginal costs of extraction to the point where not exploiting this opportunity puts the layman at an economic disincentive.
More efficient recovery does lead to a drop in the ore grade needed to extract “critical’ materials but in the face of all these changes on the supply-side of classical raw materials extraction, there is a larger impending supply-side glut in the form of synthesis of advanced designer materials. What makes something a strategic and critical material is when certain global needs create an immediate exhaustibility crisis, like in the case of lithium and cobalt. These short-term views coupled with competing national strategic interests lead to resource wars where states compete for acquisition of seemingly vital resources to extract and place into reserves as a means of leverage. There are many ways to get around such a situation:
relying on stockpiles or trade deals with global allies
relying on current resource extraction and processing stacks to make widely accepted substitutes with minimal upfront capex
eliminating the need for critical material without material substitutes via manufacturing and engineering innovation
recycling scrap waste to reclaim critical materials
creating new substitutes with the same functionality and reliability
The current approach to create a resilient supply chain of raw materials fails to account for the rising insurgence of the latter three points. The widely accepted proposition is that the two major dimensions to the economies of future mineral availability are:
geological extensions of supply through discoveries of new deposits and of new zones in old ones
technological extensions through the ability to work lower quality or less conventional materials
The lesser seen undercurrent that disrupts the unit economics of minerals and resource exploration is, on the demand side, the second-sourcing of custom materials within the same material families coupled with the vertical integration of materials development as a core part of any hardware business. On the supply side, it is the proliferation of material substitutes that erode incumbent markets till perfect competition on the grounds of functionality becomes the new paradigm, in place of commodification on the grounds of material identity. (Coupled with this is the general trend towards economic isolationism resulting from the imposition of realpolitik on the Global South. The resulting solution to this can be an internal focus on in-situ resource utilization but within a state, and not in space.) This supply-side shock that permanently depresses price (regardless of induced artificial scarcity) may be the sparkling keg that lights the fire of new industries achieving three things:
making certain engineering designs economically viable with cheaper advanced materials to satisfy demand pull
creating a technology push by way of materials thrust i.e. finding utility for the excess of cheap advanced materials
restoring products that provide individual and societal utility as the true store of value instead of commodities and the resulting claims on them
I could talk more about what this means about shifts in political power and international relations because of the irregular distribution of mineral resources, but these are thoughts I shall ruminate on some more before crystallizing a coherent idea. The main thesis though (inspired by Brooks and Andrews) is that in a world with increasing rates of mineral production, population growth and monetary income growth lead to demand for natural resources that necessitate their being found and produced regardless of implications. This is sustainable, but alternative paths of growth via microdimensional control should not be overlooked, and an over-dependence on classical mineral resource development may blind us from seeing the bigger picture.
Also, as nations move into a post-industrial phase, or rather to new modes of industry, their intensity of use of commodities plateaus. It is therefore not wise to extrapolate current trends without attempting to do the painstaking, computationally intractable job of accounting for these second to n-th order effects. The better alternative would be to surrender yourself to the serendipity that is overtaking the world with new discoveries of new material classes and families. The trap of looking at resources as a fixed stock instead of a flow– and an exponential increase in the number of different flows fit-for-purpose– generally leads to the idea of managed decline and cowardice as a means to solve problems. There are teething issues such as pollution, extensive land-use change, increased energy consumption, instability in human settlements, and international distribution of income, but all those pale in comparison to the widespread deflationary effects of technology.
The limits-to-growth thesis that mineral resources will sooner or later run out locally and globally, and as such prices for minerals will rise sharply in the future, simply focuses on the wrong issue. Global reserves and currently discovered economically viable deposits do not represent the true abundance of natural resources, and do not account for satisfying economic utility via other means. I argue that there is a point that mineral resources become economically infinite, and that we as an ideally technocratic society need to hedge against the major social and political problems that arise from the transition of minerals and materials from critical resources to abundant resources to perpetual resources to paleoresources. The most entertaining outcome though is that the above transition is not a planned obsolescence pipeline but a living loop, within which each iteration comes with the caveat of increasing microdimensional control.
It is no longer “Pass Go, Collect $200”, but “Pass Go, do more with less”. And I barely even talked about asteroid mining.
