These reduced the costs of copper production incredibly, to such an extent, it happens that copper and gold and silver tend to co-occur, and sometimes in the early times you didn't know if you had a copper mine, or a gold mine, or a silver mine. But the amount of copper and silver is very much less plentiful than is the amount of the gold and silver, but it is usually there, so the copper companies are also in the gold and silver business, and so Phelps Dodge had a very important gold business, and they found that at the time of W.W.I, I say, then found the cost of production had been so low by electrolytic of refining and by flotation, that what the Phelps Dodge, and the other company big copper companies were getting for gold as they sold it to the government for mints. The price of the gold paid for the complete mining and refining of copper. So they wouldn't take it out of the ground unless they were going to get a lot of money for it. This was absolutely free to take it out, refine it and sell it. Boy, this is a great one to find. That relatively small amount, so they kept taking the gold out and have your copper is there, but take your copper out when you're going to make money. And war time is when you make money. So when that war did come on they really did want to take it out, and they could, as I said, because they had these new production capabilities. But, the copper companies like everybody else, had also made a few types of parts that is wire, pipe and so forth, and they sold and sheet and they sold to fabricators. So that the big sales of copper in America also involved the people who fabricated it into the real use forms of society.

Copper companies like really to just sell wire bar, and they bought the wire bar and made the wire out of it and so forth, so that, in order to step up their production so that they can keep up with incredible sales that the government then gave them, the enormous, demand to run that kind of a war the copper companies found that they couldn't meet the demand unless, so they bought in all their customers who have all this sheet and all the metal workers of wire bar, Habershire Wire, and many very famous names, they were all bought up by the main copper companies, became branches of the big copper companies so that they could control the production tools and get the stuff out.

With this then, in order to make such a big deal in such a hurry, they had to make a good deal for the President of the fabricator who they were buying up, so they said, I'm going to keep you on, you can be an officer of the company, big salary, just fine, o.k. So you will just be in the sales department. Well, we had, I have given you then, also up to the Great Crash which I have talked to you about, and then the laying down of the hands of the banks finally they just simply had been loaning people's deposits, they didn't have it wasn't their money at all. We also then find the great power of J.P. Morgan. And J.P. Morgan had, and everything that was really big in America, there were all the prime contracts of every kind, like whether it was General Motors or U.S. Steel, they had two or three members on the Board and they were absolutely able to control all of those companies. They ran the whole thing as one great big show. This was very much interrupted by SEC and so the banking monies could not go in, as I said all kinds of those divisions were made.

But, then it meant then, that at the time I came into Phelps Dodge, this was in 1936, and it was three years after the New Deal is going, and things are now in a different kind of a stage here, so that I found that the Phelps Dodge copper products which then represented all the amalgamation of the manufacturers who they bought in. They ran it separately from their mining company. Phelps Dodge Mining and Phelps Dodge Copper Products. And the salesmen-managers of that company, now you were in the Depression and one of the big things was to sell copper, so the salesman found that it was his market, and the President of the company was a mining man, a mining engineer, very fine man incidentally, and Louis Case, and he is the one who had the Research Department take me on to make studies make forward studies of the industrialization of the World to see what part that copper would be playing in the future years. Because they decided I had that kind of capability.

And, we have then, what I began to see were some very fascinating things because I went really plunged into the history of copper. Went back to every monograph The Bureau of Mines anything I could find out, the whole history of copper. I found historically how there had been a time when Spain was the greatest copper miner and so forth, and it played a great deal in the fastenings of their ships and whatever it might be, and how all the copper that had ever been produced by man, it was expensive, it was used functionally because it was plentiful enough to be used functionally; but the minute they could get a substitute for it they always put it in, if something could cost less. So they began to learn then to get steel, that is a use a any kind of steel fastener where you could find some way to keep it from rusting, then it would take the place of the copper. So I found that copper had been in ships of the early great big ships, that were really able to go around the world, copper played a very big part, and as fast as they could get less expensive metals to put in they continually took out the copper. Copper was used, because you could also melt it up under the annealing condition I spoke to you about was, it had all kinds of uses, and countries that were going to go to war always found they needed copper. And one of the great tricks historically, of copper was to put copper into bronze great statues of the heroes, and the kings. This was a way in which a country could start importing copper without anyone really realizing it. They were just putting up statues of famous people. So it was part of the great war strategy game to have a lot of statues that could be melted up when the war came.

Now, the, what I found was, in Phelps Dodge, the Sales Department beginning to annoying the mining group, and they were sort of taking things over because they needed to make sales, and sales were being very difficult because something was happening that bothered everybody and it had never been in the copper industry before. There was scrap copper around, obviously there was enormous production in W.W.I, you should expect some scrap around, but it had always been assumed that scrap was something that you just had for a little while, and then you used it up, and that was the end of that. There was very much the attitude there was in the Club of Rome Report, the Meadows Report on the limits of growth and so forth a couple of years ago, where I found that the economists who did that report were not metallurgists, they didn't know anything about their mining world or production engineering, and they were assuming that the metals were something that gets consumed, just like strawberries. And if you had taken it out of the mines, that is all there is now, it's just disappeared. They looked at things in just that kind of way.

I found that wasn't what went on at all. These metals do get melted out and recirculated, melt it all down and recirculate it. So even the time that I was in there, I suddenly found that 84% of all the copper in the world that had ever been mined was still in use, we knew where it was, it had been melted out time and again from this use and put into another. And it had drifted from making possible the Marine building, it had drifted out of there and then got into the railroading, because there were a lot of things, you didn't want anything to rust, it would be very dangerous, the coupling of those cars and so forth, so a great deal was done in brass. Then as fast as they could afford to they substituted steel, and the copper was melted out of there, and then it came into this extraordinary new telephone game in electronics in a very big way. And so, it was majoring in the electrical world.

Anyway, the conditions I have said, scrap was beginning to bother the and so the people who owned mines and were only going to take copper out of the mines when they could make money out of it, found that people were selling scrap out there instead. So they no longer they didn't monopolize the copper market at all, so their monopoly was broken, and this was very, of great concern to them. So everybody is worried about scrap I found, and nobody seemed to know what to say about it, so I made some studies for them, and I really went exhaustively into what I am saying, because what I did, then, because I am a mechanic I really got into the different classes of manufacture different classes of goods altogether, and I found And incidentally, the metals records, I assure you are very extraordinary. There is so much money is involved, that the numbers of agencies that are reporting accurately on metals down in Wall Street are incredible. And so there are a number of associations, and so what is it, The Iron-Steel Institute or whatever it may be, superb reporting. So I got into all that alright, and I was able then to get into something I could speak about as lags.

There is, then, a lag gestation rate, you're familiar with that in human beings, there is no instant baby, so it is nine months for human beings to make a baby. I found that in the electronics world, there was approximately a two-year lag between invention and use. That in the airplane world there is a five-year lag. In the electronics it runs only two years because it was sub-visible, and it was only carried on, you could find out what was better mathematically, and with the mathematics you didn't doubt it at all you'd put in a better way. That was one of those again the way things move in that invisible world. So the, they have in the airplane, you need it very badly because they are very dangerous art, but you don't put it in until you're really sure it works so there is a five year lag. I found there was a ten-year lag in automobiles between a good invention and it's being used by industry. It turned out to be a fifteen year lag in railroading, it turned out to be a twenty-five year lag in relation to big buildings in the city, and about a forty-five year to fifty year lag in single-family dwelling.

To give you a little idea in the building industry of the very slowness, the part of the development of production steel, was then you had to have a lot of blast furnaces, you had to have all kinds of ceramics, and Portland Cement, the production of Portland Cement became a by-product of producing steel, using some of the by-products. So that we have the Atlas Portland Cement and these things starting, all along side of the steel companies. It was an amazing thing it was fifty years excuse me forty-five years between the steel company making Portland Cement and a piece of steel dropping into the cement, and using reinforced concrete! That is typical of how long you can avoid the obvious in an art. This is the building world. Everybody knew all the building codes were just compression and all of this, and nobody understood how that reinforcing worked until the days the Harvard Stadium is the first big building built with reinforced concrete. It is a very new art. It didn't come into small buildings and dwellings until I brought it in with that stockade system that I talked to you about in 1922 when I was introducing reinforced concrete columns and so forth into small buildings. It just was not in there at all.

Now, I just want to understand lags. I took the different lags of the different basic manufacturings of the world. Then I went into the records to find out how much copper is really in the building industry? Enormous amounts used to be in it, and they still are, if you'll look at the old buildings you'll see those green roofs on the buildings around here. That is bronze roofing, because they really, while building it, if they built it right, and this is not going to rust. So there are enormous amounts of bronze, and the well-built building had brass and copper plumbing and so forth, so I got into exactly how much of copper was in buildings. How much copper was in automobiles. At that time 30 pounds per automobile. It was so expensive they kept down every ounce of it they could. And, so I had all the copper in all the different arts, and how much was out on the ships and so forth. I did find that, in taking this lag, I was able then to find out, where copper really is on inventory, and how long it was going to be before it came out. What I did was to consolidate all of those, integrate the total inventory of all copper and different lags that it was going to come out, and found the average would be, the largest tonnage would come out every 22 years 22 l/2 years, so with that key, I then began looking at the amount of scrap that was beginning to show up in the '30's. Which was really a very new thing on the which nobody knew how to explain, but I found also in keeping track of production of copper, they keep very carefully, scrap is a very secondary metal, very carefully scrapped away from new, newly mined. You knew just what you have.

I found then that newly mined copper of 22 l/2 years ago, it was exactly the height of my scrap, and there was enough of those to say that it looks like it is really so. This is in l936 at Phelps Dodge, and I said to Phelps Dodge, I'm quite certain I have a finding here, and W.W.I was l9l7. We have on the chart of copper production, historically, nothing like this a cliff going up like that. So I'm going to add 22 l/2 years to 1917 and I get July of l939. So in 1936 I said that in July of 1939, you're going to be overwhelmed by scrap. By that time, I left Phelps Dodge in 1938 and went to FORTUNE, so I was on in July of l939 the Director of Research at Phelps Dodge called me up and said "Bucky, you are absolutely on, it's happened!" And the, at that time if you went in New York, or if you'd have been even in Philadelphia here where there are docks, and docks where shipping was very much more of a matter than it is today, the docks of New York, great docks there were ships, but there were enormous filled with "lighters" that were going to load the ships, and all these great enormous wood "lighters" and steel "lighters" were just piled high with scrap. Every dock in New York was lighters full of scrap, because not only does copper do this, but steel follows the pattern of copper, so your copper is the bell weather, they say, you find out where the copper is going to go and the steel will go that way and so forth. The steel scrap was there in equal quantities.