The Price of Stardust

Platinum is a metallic element with the atomic number 78. Platinum is most commonly used in catalytic converters and jewelry for those that feel gold is too cliché. Due to Platinum’s relatively high density it is one of the rarest elements in the Earth’s crust. That combination of utility, shiny, and scarcity also means platinum goes for over $1400 an oz.

That astronomical price tag is why a dream team of space investors met in late April at Seattle’s Museum of Flight to announce the launch of a firm called Planetary Resources with the stary-eyed goal of mining asteroids, which are theoretically chalk full of platinum and other rare earth elements. The investors include Peter Diamandis, Eric Anderson, Larry Page, Eric Schmidt, Charles Simonyi , and James Cameron; or in terms of their resume: the creator of the X-Prize, the founders of Google, a former Microsoft lead programmer, and the father of the fraking terminator. While their entire business structure rests on still theoretical/fictional technologies, with that much brain and financial power working together I think we should all take this plan seriously.

Not everyone shares my optimism regarding this project. Critics state that if one successfully begins mining asteroids for precious rare-earth elements, these resources will no longer be scarce, thus decreasing their price and ultimately destroying the original motivation for asteroid mining. While this is somewhat true, it’s a bit of an overly simplistic critique.

It is basic economics that in the short-run if one increases supply, the price drops.  I’m not disputing that. However, the real word is not so static. Supply and demand possess a more dynamic relationship then that. When the price of these materials fall, that will spur interest and innovation. Current global production of platinum is only 30 tons a year; palladium 24 tons, rhodium and iridium a mere 3 tons each. A lower price means that more engineers and scientists will have access, enabling them to develop new uses for these materials. Eventually these new uses will result in an increase in demand, gradually pushing the price back up. Thus this is actually a fairly sound business venture.

Economic arguments aside, I think this an amazing idea. Sure it’s crazy, but it’s crazy in that fantastic we-can-do-anything-we-want way that the US used to specialize in. In 1961 Kennedy said we’d go to the moon, 8 years later we did! Somehow over the years we as a nation have lost this brilliant insanity. I think it’s time we took it back and I applaud Planetary Resources for leading the charge. 

Face Palm

I assume the majority of my audience is familiar with the premier social networking site Facebook. If not you should really get out from under that rock, it’s filthy down there and you’ll catch a cold. What my dear readers may be less familiar with is the fabulous debacle that has been the IOP (initial public offering) launch of Facebook as a publicly traded company.

As of May 29th, a mere 11 days after the IOP, the price of FB stock has dropped 24%. On May 29^th specifically there was such a sudden drop in the price that special SEC rules had to be instituted to prevent further drops from predatory short selling. Furthermore, several lawsuits have been filed against FB alleging insider trading. One of the lawsuits claims that FB and its underwriter, Morgan Stanley, failed to properly share negative forecasts with investors prior to the IPO. Since FB profits are down there is probably something to the lawsuit.

While FB misfortunes in the stock market are bad for Mr. Zuckerberg, I love every minute of it. Mostly it’s because I loathe Zuckerberg and think he’s a git, but I have more logical reasons as well.

I would like to draw your memory to the late 90’s and the Dot-Com boom and bust. It was that fun time when everyone thought it was a great idea to invest all their money into companies that didn’t do anything but were on the internet so it all made sense…somehow. Eventually this model imploded in a spectacular fashion and the same thing is happening to FB albeit in a less spectacular fashion. 

FB doesn’t really make or produce anything, instead it gets money through two primary methods: First, it gathers and sells consumer data to advertisers. Anything and everything you’ve ever written or listed on FB has already been sold to some ad man pretending he’s Don Draper. Second, FB gets money when users click those annoying links on the side of the browser and buy something (ads which most of us ignore).

What FB lacks in substance it makes up for it hype, or as least it did. For the last year the rumors of FB going public have been lurking all over the internet, but when it actually happened it was a whole lot of Meh. While I may not have the most stalwart faith in the corrective power of the market, I think this is a case of it working wonderfully.