1729: Founding vs Inheriting, the article is gold I tell you.
1729 recently published an article “Founding vs. Inheriting”, written by Balajis, who matter of factly claims institutions in the USA, are either inherited or founded. Balajis describes Institutions which are inherited as legacy “East Coast” institutions like Wall St. Banks or political circles. In contrast, “West Coast” institutions are built by Founders. The article further implies “East Coast” or legacy institutions are failing as their value is only upheld through a legacy of nepotism whereas “West Coast” newly founded institutions are winning as they are won by merit of the marketplace. Historically over the long term, values held by way of nepotism often succumb to value of merit, which then implies “East Coast’’ institutions are dying or descending in value and “West Coast” institutions are ascending in value. This article is written in response to Balaji’s claim, however for the framing of this article there is probably not much value added to assess right or wrong of his claim but more value added to discuss if true then what.
If true, it would be reasonable to assume readers of Balaji’s article would probably fall into three viewpoints; inspiring can’t wait, old news (especially to those ensconced into the crypto world), or Fool’s Gold. For a deep response into Balaji’s claim this article is going to focus on Fool’s Gold, specifically the institution of Gold. If true, under Balaji’s position, then the institution of Gold would fall into the descending category. The institution of Gold does not fit into the “West Coast” Founder’s mold and has all the hallmarks of “East Coast” legacy institute. In fact, the institute of Gold needs to continue to descend for the globe to solve climate change. If true, then it’s time to unpack the correlation between the institution of Gold and climate change and specifically the mining of gold.
The institution of Gold has a long history, predating the Old Testament, The King’s gold and eventually gold backed central banks have long played a role in economic systems to date. Today, with the rise of crypto currencies, global printing of money and an increased view of fiat currencies, the institute of Gold has been relatively quiet. Bitcoin as a notion of digital gold has provided more attention to gold than the value of physical gold. Perhaps the relative rise in the value of Bitcoin as digital gold vs. the value of physical gold is a telltale sign for the future of the institution of Gold (Founders vs Inherited?). It is probably a valid claim to state; today more attention is paid to the mining of Bitcoin vs. the mining of physical gold. If true, and the institute of Gold is descending, then we need to look at the connection to climate change and critical metal supply chain and why the institution should continue to descend.
Hidden amongst today’s geo-political debate there is a little known big problem with the global critical metals supply chain. The problem: we can’t find the metal and we need them quickly. The obvious question right now, “what does this have to do with the institution of Gold?”. The answer: everything. The World Bank, USA Defense, and USA Department of Energy have been screaming about the critical metals problem. The geopolitical debate places the blame on China and yes geopolitics are part of the problem. The bigger problem is we spend too much time and energy mining gold when we should be mining for critical metals. In the mentioned World Bank report, to meet COP 15 requirements we need to move our economy towards electrification and decarbonization and to do this we need to find the strategic metals in the list of 35 critical metals. In fact, this issue is so important it has the support of both sides of the US Congress. Accordingly failure to get the economy into the electrification and decarbonization era with the needed critical metals there is a real possibility of realizing 2C, 4C and 6C milestones with global warming.
If true, then the next question is why do we mine for gold instead of critical metals? That answer is embedded in the institution of Gold. Perhaps surprising to some, mining of gold was once illegal in the USA and in fact, at one point the USA used to be a world leader in the mining of critical metals, particularly tungsten from World War II to the near end of the Vietnam War, the USA’s sole primary mining focus was tungsten, it was the primary war metal, everyone in the world wanted tungsten. As the Vietnam War was ending, the USA moved completely off the gold standard and towards fiat currency (quick history here). Over the next decade a few things happened with relation to gold and tungsten. Gold held value as a financial asset and the price of tungsten plummeted. Gold as a financial asset was and is still held by central banks, commercial banks and the LMBA. Nearly concurrently, due the stockpiling by the USA during war era’s, the price of tungsten cratered. As a result gold was the mining commodity of choice and critical metals like tungsten were considered worthless. Throughout late 70’s and into the 1990’s gold production saw the rise of the two mining behemoth’s of Barrick and Newmont, together they have a monopoly on gold production in the USA.
As a result, we saw the rise of the institution of Gold and it became modernized with the support of the LMBA. Whereas, the worthless critical metals become the domain of China. The institute of the Gold supply chain is very centralized and a closed circuit. As an example to sell a gold bar into the financial system, the bar must be certified by the LMBA. As a result anyone can mine gold, but you can only sell it by invitation. The buyers set the rules for mining and the rules are buyers only want gold and by their specification (side note: Artisanal Miners generate 20% of world gold supply and are by far the poorest participants on the institute of Gold supply chain). By extension, critical metals remain the domain of China and near zero mining of critical metals occurs in the USA. If true, then how does this tie into critical metals is the next important question? The answer is surprisingly simple, where there is gold, there are critical metals. If true, how do we know this? This answer once again is very simple, it is in the data.
There is an incorrect assumption that China hosts all the critical metals, in fact the USA could easily be a world leader in critical metal mining. The USA has every critical metal in very reasonable abundance, unfortunately for forty plus years mining exploration has been primarily focused on gold. For many in the mining industry this statement will not be congruent to their world view. Part of the institutionalization of the Gold industry are two very key processes to gold and run contrary to the processing of critical metals; fire assay testing and cyanide heap leach processing, both processes take critical metals out of the outcome. If true, why? Fire assay and cyanide heap leach are the known processes to get pure gold bars which can then be certified by the LMBA. If true, how do you know this? The answer is in the data and first principle thinking or being able to confidently ask dumb questions. Analyzing gold mine tailing ponds and ICP analysis vs. fire assay will get to truth. Or perhaps a more inspiring comment, borrowing from the mine exploration culture of there is gold in them hills — there is critical metals in them tailing ponds.
If true, how do you know? We checked the data, which has led me to co-founding the company https://www.strategic-metals.com/. We have examined and scrapped more than a million points of data to arrive at our conclusion, where there is gold there are a lot of strategic metals nearby. From a mine exploration perspective we can confidently forecast areas where there will be a high probability of success in finding critical metals. We know the USA can be a leader on climate change metals and quickly, we have the data to prove it.
If true, what do we need to do next? We need to move away from the institution of Gold, it is focusing too much energy, resources and capital on the wrong problem. If true, we need to focus on climate change solutions and part of this solution is mining for the metals to move the economy to the electrification and decarbonization era. If true, we need to stop cyanide heap leach processing to more sustainable closed loop systems (there are many marketplace solutions). If true, we need to find a way to harness the brilliant mining minds, the ones with the creator mindset, the one’s with curiosity to solve problems and move them away from centralized stifling supply chains. If true, we need to accept responsible mining, not unfettered mining. If true, we can do this, we can pivot by embracing new techniques and new institutions based on merit rather than legacy.
