We've 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 years. It may not be quite as exciting as the explosion of the trillion-dollar technology industry, but it is far more important.
Mining is a sine qua non for economic growth; The world simply cannot grow without it. In the last 115 years, the relationship between global copper production, steel demand and GDP has nearly collapsed after a nearly identical growth rate of 3,1 to 3,3, only deviating from the trend line during financial crises and world wars.
This is hardly surprising. Commodities are the physical instantiation of capital. Mining creates the world's wealth by providing its raw materials and integrating them into the global economy.
But the large mining companies that produce this wealth are underrated, while the technology and entertainment companies that simply move wealth from one pocket to another are often rewarded.
Rio Tinto trades at four times earnings and at $113 billion, while Facebook trades at 15th in trading volume at $513 billion. Snap Inc. , the company behind Snapchat (a teen messaging service), traded in 26 sales.
This obsession with Moore's Law and widespread ignorance of Moore's Law in mining means that we as a society misallocate our resources and invest capital in unproductive areas of the economy. Every billion dollars that are poured into Facebook and Snap to create entertainment platforms is a billion that could have been allocated to building homes and bridges to create real wealth for the future. We are eroding unnoticed from the capitalist base of our economies. 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 decision, which results from our decisions about what activities we prioritize and reward. It is the miscalculation of the world's natural resources that impedes growth.
Investors forget that the modern technology industry is nothing more than a derivative of the extractive industry, a collection of increasingly sophisticated methods of transforming, arranging and combining the same inputs of silver and copper that we have collected in various ways for centuries. Without a billion dollar industry, a trillion dollar industry is worthless.