The Gold Wager: Precious Metals, Asteroid Mining, and Societal Collapse

the gold wager

Posted on September 29, 2021


The collector’s craze

When I was a kid, I got into coin collecting. My mom would take me to Gary’s Coins in downtown Wisconsin Rapids. I would deliberate for a while, consider my options, and ultimately purchase some not-very-rare coin that had some feature I liked. I didn’t stick with the hobby long enough to develop an impressive knowledge base (or a notable collection), but dabbling in it at a young age inspired a collector’s mindset that I can still see traces of today.

Quite recently, this collector’s mindset returned: I was overcome with a sudden craze to purchase gold.

I was abruptly obsessed. I spent hours perusing precious metal forums and marketplaces. I don’t know why the craze came on or why it hit me so hard. All I knew is that I wanted to purchase some gold (or some silver).

However, an ounce of gold is quite expensive. Luckily for me, this price was high enough to deter my initial craze and stop me from launching a disproportionate amount of my net worth into a controversial asset. But the allure stuck with me. It mystified me, consumed my mind, and left me wondering… should I get some gold?

Should I purchase gold?

Is gold a good investment?

Compared to most modern financial instruments, gold is a pretty bad investment.

Gold Price vs Stock Market

Blue = growth of the Dow Jones Industrial Average
Orange = growth in price of an ounce of gold

Over the course of modern history, it has made much more sense to invest in the stock market instead of gold in terms of financial gain. Cryptocurrency presents another suitable investment alternative with high potential upsides.

Even after seeing this, though, I wasn’t deterred. I still wanted some gold – investment returns have never been a primary reason to purchase it. Gold works much better as a store of value than as an investment.

What good is gold?

Things have value for a couple reasons:

  1. The things are useful tools for an individual’s survival and wellbeing,
  2. Other people think the things have value.

As René Girard says, “Man is the creature who does not know what to desire, and he turns to others in order to make up his mind. We desire what others desire because we imitate their desires.” Because gold isn’t a useful tool for an individual’s wellbeing, it’s only good to have gold if other people think that having gold is a good thing. However, people will only think gold is a good thing if they don’t have access to the modern investments I mentioned above. And what’s the most likely reason people won’t have access to these attractive alternatives? Say it with me: societal collapse.

Defining a “suitable collapse”

As I see it, gold’s greatest use comes as a store of value after a collapse of society as we know it. I am not interested in the causes of societal collapse; the list of things that could cause a collapse is really long and completely biased by my current situation. Instead, we need to consider the effects of a societal collapse.

A collapse suitable for justifying the purchase of gold would mean that other alternative currencies and investments aren’t accessible or valuable. Governments would have to have no control over the value of their currencies. The internet would have to be defunct, because otherwise cryptocurrencies would be functional.

I will define a “suitable collapse” as a societal collapse in which:

  1. the authority of government dissolves, and
  2. the internet is incapacitated.

In order to continue, I have to assume that our society can’t be so collapsed that everybody is scrambling for survival for the next three generations. In a situation where survival is the question, food and water will always be valued above gold. However, humans are quite inventive; given the amount of technology that exists in the world (even if it is rendered somewhat useless by a cataclysm), at least some people will probably be able to scrape together a living that consists of more than just survival. This should be accounted for in my definition of “suitable collapse”, so I will add:

  1. Humanity can continue to survive (and maybe thrive).

From here, we have two paths: the first explores what would happen if society does collapse. The second explores what would happen if it doesn’t. From this, we will derive the Gold Wager.

Note: the rest of the discussion assumes this definition of societal collapse. If you disagree with this, then the remaining analysis has no basis.

If society collapses, will gold & silver have value?

This question is difficult to answer, because we don’t know what would cause our suitable collapse and what the world would be like afterwards. We do know that, as I’ve defined it, humans will continue to survive (and potentially thrive). In this case, humans will need something to store their value and use as a currency.

I asked my followers on twitter a leading question and elicited 10 responses. This is an extremely “selected” sample, but it does give us a data point.

thanks to my followers, but I disagree

The majority of my participating followers would want to barter and trade only. I think this works well until the economy gets a little more advanced – you’re going to have a hard time bartering and trading for literally everything, especially if society starts ramping back up (which I think it probably would eventually, even after a suitable collapse).

However, there’s nothing stopping us from adopting a currency other than precious metals (such as seashells, tin animals, or really big stones). Gold is nice because it’s durable, extremely portable, meltable, immediately recognizable, and fungible, but its use and value will depend on your local culture.

This article from the Los Angeles Times states that around 10% of Americans currently own gold. Other articles circulating around the internet estimate similar percentages, but it’s difficult to pin down an actual number due to sample selection bias and fraudulent / incomplete responses. If very few people actually own gold at the time of collapse, it could have a difficult time becoming a widespread medium of exchange. This won’t stop gold from having some value, but if cigarettes or seashells emerge as a leading contender, those who hold a lot of gold could be left with nothing more than a bunch of shiny metal. However, 10% of the population isn’t anything to sneeze at – there would still definitely be people out there who could (and would probably want to) use gold as a currency because they already have some, and usage could spread from there.

Gold and silver have historically been used as a display of wealth and power, and there is a current cultural understanding that it does have value. In a post-collapse society where status and political showmanship take a turn for the barbaric, having some precious metal might be a benefit after the survival scramble is over.

If society doesn’t collapse, will gold and silver have value?

Gold and silver have held “some value” over the course of history, although these values have fluctuated intensely in modern times. Even so, demand stemming from various industrial and commercial uses has perpetuated the markets for precious metals. In the short-term “foreseeable” future (meaning the next couple years, or months), it’s reasonable to assume that gold and silver won’t lose all of their value, although further fluctuations are never out of the question.

However, there is an existential threat to holding gold in the long term: asteroid mining could cause an extreme influx of supply.

Gold, silver, and asteroid mining

Although currently hypothetical, asteroid mining could potentially obliterate the markets for any precious metals by increasing the supply so much that any existing reserves become worthless. 

Currently, asteroid mining isn’t “feasible”. There are many physical barriers to actually mining an asteroid:

  • They’re very far away
  • They’re in space
  • They move quickly

Technological development is advancing at an exponential pace. Humanity is constantly investing in the development of space-faring technologies, and some of the world’s smartest people have been working on making space more accessible. If society doesn’t collapse, it’s only a matter of time before asteroid mining becomes a possibility (and soon after, a reality). If you have doubts on this, check out this dope 8-minute Kurzgesagt video that explains it way better than I ever could (only 4 minutes long if you watch at 2x speed). If society doesn’t collapse, we will eventually mine asteroids.

The Gold Wager

Herein lies the burning question, the final “should I?”, the ultimate inquiry I call the Gold Wager (although it also applies to the purchase of other precious metals too). It all depends on if we gain the ability to mine asteroids first, or if our society collapses first.

IF SOCIETY COLLAPSES FIRST:

  • If you bought gold – you might be post-apocalypse rich! If people accept gold as a currency or a thing of value (a nested if-statement), you might have a good time if society collapses, assuming you also bought a gun to defend your gold with.
  • If you didn’t buy gold – you might be post-apocalypse poor. If you have a bunch of investments that aren’t worth much after the apocalypse (like Alibaba stock in your Robinhood account or bitcoin if the internet crashes), then you may be left goldless and worthless just like the rest of us.
  • Either way – if you’re actually worried about the apocalypse, just buy a gun! It’s not dangerous to own one if you take basic safety precautions and do some learning on the internet (or through an in-person safety course if your state prefers that). If an apocalypse occurs, a gun would provide you with the ability to hunt, defend yourself and your family, and steal other people’s gold through threats and murder (this is not recommended – threats and murder is bad).

IF WE MINE AN ASTEROID FIRST:

  • If you bought gold – that sucks! Wow now everyone has a shit ton of gold, and you could’ve bought Alibaba stock or a bunch of bitcoin instead. You’re such a trash investor, have fun with your worthless metal.
  • If you didn’t buy gold – ok, no worries, here have some gold it’s quite plentiful.
  • Either way – asteroid mining may take so long that you personally won’t have to worry about it. Even considering exponentially-accelerating technological development, things in space take a long time to happen, and you and I may be dead before the penny (or zinc-filled asteroid) drops. That doesn’t mean we can’t try and make good investment decisions and have assets to pass down to our kids, though.

At the end of the day, the wager depends on two educated guesses:

  1. When do YOU think society will collapse?
  2. When do YOU think we will be able to mine an asteroid?

Which do you think will happen first? How will you address the Gold Wager?

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PS:

  • People online say asteroid mining might decimate the world economy, but if we have the ability to mine an asteroid, then maybe the “economy” will be so advanced that we won’t have to worry about that any more. Also, it’s not like we won’t know that a massive rush of precious metals is coming – prices would reflect our collective sentiment towards the value of an object, and they would adjust accordingly as the situation develops.
  • If it is possible, someone will do it. I truly believe this statement, in general. Even without profitability, if something is physically possible, one of the 7+ billion apes on this Earth will give it a shot just for the hell of it. As technology advances, the capital requirements / profitability barrier to mining asteroids will shrink, and it will become easier for anyone to just try it for the sake of trying it, for the sake of making history, for the sake of giving humanity more gold than our greed could ever crave.
  • I might just want to buy gold because I was obsessed with dragons as a kid, and dragons hoard gold coins.

so cool


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