Benjamen Walker's Theory of Everything - The Clouds (part 2 of 3)

Episode Date: April 29, 2013

We continue our journey to the center of the cloud, by way of the earth: Rare Earth. China controls 95% of the market for the 17 Rare Earth elements that power our invisible technologies so your host decides to pay a visit to the Ganzhou region, to see the illegal mines in the with his own eyes. ********Click on the image for the whole story about this week’s installment********

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Episodes every other week at neverpo.st and wherever you find pods. You are listening to Benjamin Walker's Theory of Everything. The following installment is called The Clouds, Part 2. There are two ways you can tell the story of the cloud. The first one's kind of simple. Our files and applications move from the computers on our desks to the servers in the basement, then to co-location facilities,

and finally, to the cloud. It's a boring, innocuous tale. But there's another way to tell the story. And in this story, the cloud changes our relationship with our computers, along with the very infrastructure of the internet. In this story, the cloud even changes what we are capable of doing with our computers. That's the story I'm telling. In part one, we learned all about Amazon's cloud, how it works, what it does, and we

learned that when computational power is offered like a utility, virtually anyone can plug in. But when I tried to get a tour of the cloud itself, I was turned away. The immateriality of the cloud is a trade secret for companies like Amazon, Google, and HP. But it turns out there's another path, another way into the cloud. Over the years, technology has become more and more invisible. But all of that invisible technology is really based upon increasing use of more and more exotic materials, like rare earths. And it's the rare earths that make it all work. Alex King is the director of the Ames Research Lab for Critical Materials.

He works with many of the elements that go into our advanced technologies. And he told me that if I truly wanted to see the infrastructure of the cloud, then I needed to turn my attention to rare earth elements like neodymium. You know, you can break open a computer and find a few grams of neodymium in the hard disk drive. So if we could get into one of those top secret data centers or data farms, we'd find lots of neodymium in the custom-made hard drives. It's used in the data farms that operate in the background, invisibly somewhere in the country.

It takes massive amounts of energy to keep the hard drives in these data farms spinning and to keep the spinning hard drives from overheating. So many companies like Amazon are now installing wind turbines packed with neodymium magnets to power their giant data farms. A wind turbine can have up to 700 pounds of neodymium in it. But even when they're small, neodymium magnets retain their exceptional strength. This is why all of the gadgets that we use to access the cloud have neodymium inside them as well. Our personal computers, our iPhones, our tablets.

Anything that has a strong magnet in it basically uses neodymium these days. And neodymium is just one of 17 magic rare earth elements. Well, I'll start out with scandium. The second one is yttrium. The next element is praseodymium. Cerium, that's one of my favorite elements. Carl G. Schneider is also a research scientist at the Ames Lab. People call him Mr. Rare Earth. I don't mind. You get the sense from Mr. Rare Earth that these elements are like his children.

Promethium, samarium, rhopium, gadolinium, dysprosium, terbium, and homium is the next material. Then there's thulium, erbium, terbium, and the last one is cetaceum. These 17 elements are crucial, not just for the cloud,

but for many of our advanced technologies. Electric cars, flat screen TVs, medical devices, even drones. The way we're making drones today is to have the rare earth magnets for communications. It's also used in lasers. The motors that drive the flaps and the directionality of the thing, they just couldn't fly if they didn't have these rare earths. But as fond as Mr. Rare Earth is of his name,

when it comes to the elements themselves, the term rare earth, he told me, is actually a misnomer. The rare earths are fairly abundant. There's a lot of elements that are rarer than the rare earths, and so in a sense it's incorrect. But when they discovered the rare earths, way back when they were, in a sense, it's incorrect. But, you know, when they discovered the rare Earth, way back when, they were found in unusual minerals, and they weren't very abundant. And so the term used, well, they were rare Earth. The phrase rare Earth was really more an

acknowledgment of how difficult it was to pull these elements out of the ground and isolate them. Some scientists may have spent 50,000 evaporations or crystallizations or precipitations in just trying to get something 99% pure. In recent decades, geologists have located rare earth deposits around the globe, but the processes remain extremely expensive and extremely taxing on the environment. Most countries, including the United States, shut down their rare earth mines around the turn of the century. Today, almost 95% of the world's rare earth supply comes from one place. There is, to a large extent, just a singular supplier of the rare earths, and that's China.

In 2010, China decided to cap its exports of rare earth. They basically said to the rest of the rare earths, and that's China. In 2010, China decided to cap its exports of rare earth. They basically said to the rest of the world, you're welcome to bring your factories here and use our natural resources, but if you want to take these difficult-to-mine, damaging-to-our-environment elements out of China and use them in factories in another country, perhaps one with even cheaper labor costs,

well, then you're going to need to pay more. The rare earth market freaked. If you look at a graph of the price of neodymium or dysprosium over time, you see this huge spike in 2011. Technology companies who depend on rare earth elements for their flat screen and hard drive production lines freaked out too. And then the American government freaked out even more. Because every weapons system that we have in this country depends on rare earths. You know, the magnets, the phosphors, and so forth. So mines are being opened, even as we speak.

The global freakout was an opportunity for international mining conglomerates. In December of 2012, Mollicor successfully brought a rare earth mine online in Mountain Pass, California. And mines are set to open in Malaysia, Australia, and Greenland. But these new ventures will take years to ramp up production. It's a mistake, Alex King says, to credit them for the recent drop in rare earth prices. And it's an even bigger mistake, he insists, to imagine that the rare earth crisis is over. Right now, the price is declining. And we think it'll stabilize very soon and there have been reports in

papers like the wall street journal suggesting that the crisis is all over everybody go back to what you were doing don't worry about it the challenge here is that the underlying cause of the crisis is still there that is that we only have realistically one major supplier of the rare earths and that's still China. The more I learned about rare earth and the role it plays as a critical material in the infrastructure of the cloud, the more and more I became convinced that if I could just see it with my own eyes, hold it in my hands, then all of my issues with the abstract and immaterial nature of the cloud would disappear. Essentially, they're real elements. They're metallic elements.

You can put them in your hand. Okay, maybe I didn't need to go all the way to China. But well, it turns out that it's a lot easier to get into China than it is to get into Amazon's cloud Oh, you can see it right there. We see it right there that that outcropping so that's a mine. Yeah, can we go? You want to walk up there? Yeah, if it's mine, that's what nigga nigga nunchaku What do you think he's saying that there's definitely people know. I just want to show you. Yes, yes, yes. What did he say? He's saying that there's definitely people watching that. So I'm definitely a novelty here. Standing out.

I wouldn't even say that you're a novelty at this point. Here you might be a little bit of a liability. That's me, Phil my fixer, and Mr. Wei our driver. We're in the mountains a few hours west of Guangzhou, and we are looking at a 40 meter hole in the ground. few hours west of Guangzhou, and we are looking at a 40-meter hole in the ground, an illegal rare earth mine. Okay, I should probably back up some. I flew to Beijing last December,

just days before a thick black fog engulfed the entire city. But according to Frank Tang, an analyst at the investment bank NSBO, pollution is exactly why China controls the rare earth market. It has nothing to do with the size of its deposits. It's simply that China is willing to do the dirty work. China is only one of the few countries producing rare earths because of the heavy pollution problems. China can endure those pollution levels.

Even though the prices for rare earth have come down, Frank Tang says China is still in control. We found that China is going to increase their price control capability. The only real challenges to China's export caps and quotas, he told me, have come from within China. In 2011, the amount of rare earth illegally mined and smuggled out of the country exceeded the amount of rare earth China officially exported. Chinese now calculate those major trading partners, their imports from China, which is larger than China's figures, export figures.

That's why they think there is a lot of illegal export. Last year, the Chinese government cracked down on the illegal mines. In the north, in Inner Mongolia, rare earth production is now controlled by one state-owned enterprise, Baotou Steel. I think the Chinese government has realized it's very important to fix those illegal mines because right now the Chinese government

is trying to tighten the market supply, while the illegal ones absolutely make those efforts useless. But in the south, in the Ganzhou region, the red clay is so rich with the rare earth minerals, especially the heavier and more valuable ones like neodymium and dysprosium, the central government has found it difficult to stop the smuggling.

In fact, this might be the reason why prices have come down. I mean, last year, there could be a lot of smuggling because the price is very high. But now in China, the price is comparatively reasonable. It's at low levels, but, you know, there's less reason, you know, to export it. After speaking with Frank Tang, I decide to go to Guangzhou and see the illegal mines with my own eyes.

Now, it's been a few years since my last trip to Beijing. All the shiny new buildings look the same, and the smog doesn't help. But I can still find my way around, and I drop in on a few old friends and contacts. I need to find a fixer, someone who can help me book interviews and translate. Apparently, though, Guangzhou is like the Chinese version of Deadwood. I hear stories about mobsters who force their enemies to drink the toxic sludge from the mines and desperate farmers unable to grow anything because their land has been poisoned.

I'm told it's too dangerous, with or without a fixer. But then, just as I'm about to go on my own, a woman I meet at a photo book store hooks me up with her friend Phil, a 22-year-old American-born Chinese who works in the energy sector in Shanghai. He doesn't know what a fixer is, but, he tells me, he does ride a fixie bike. I take this to mean he's capable of dealing with danger and stupidity, and I buy him a plane ticket, and we meet the following evening at the Gonzo Airport.

We drop our bags off at the hotel, and then we head into town, to the club district. We're pretending to be entrepreneurs, visiting Gonzo in search of a magnet factory for our mail-order DIY drone kit business. Our plan is to meet a gangster or a mine boss who we can convince to help us do some rare earth mine tourism while we are in town. We find this incredibly lavish karaoke bar with portraits of European monarchs hanging from the ceiling.

The stage is like a repurposed boxing ring, but every song is sung by the same guy. Perhaps no one else wants to sing, but this guy doesn't look like he's that into sharing. In between songs, though, all the girls from his entourage climb onto the stage and dance. After a while, one of these girls approaches our table. Phil, like many Americans in China, is famous for his appearances on a popular TV dating show, and she recognizes him, and we're invited to join their party. The singer turns out to be an important man.

Big boss, Phil says, raising his glass. Phil actually doesn't even know the Chinese word for magnet, but still, he manages to get this guy, who is some kind of official or boss, to draw us a map to some mines in the mountains. He even provides us with the address of an agency where we can hire a driver. Of course, once we have our map, Phil and I decide that we are the greatest, most daring,

and handsome foreign correspondents who've ever lived, and we get rip-roaring drunk. The last thing I remember is talking to these two black guys from Detroit at this little dance club filled with Russians. One of them tells me they've been cheated by an agency who had promised them a gig in Beijing. I fear they'll never let us leave, one of them says. The following morning is extremely difficult, but we eventually made our way to the rental agency, and that is where we found Mr. Wei.

This is so awesome. We got really lucky. Can you hit the radio off? According to Mr. Wei, our gangster map only would have taken us to abandoned coal mine sites. In order to see the rare earth mines, we had to drive up into the mountains. None of this would have happened without Mr. Wei.

Mr. Wei explained to us how simple the rare earth mining process is. You dig a 40 meter hole in the ground, fill it with some chemicals, and then, using pipes or hoses you filter in some water and then after a few weeks you pump the toxic waste water out of the hole and voila you have rare earth huh so he's saying that like what they do is they take these like chemicals and they're like very household kind of chemicals yeah Like fertilizer. Right, right. Windex. They're very everyday products. And the piping system is such that you let it sort of, you let the chemical reaction take its place and there's like a piping system which is like constantly pumping water in

there so that it's like diluted enough that you can actually work with it afterwards. Yeah. And then when they, after you sort of spray it into the earth, you get this sort of fine powdery kind of stuff that resembles milk powder. And then from there, they're taken to these treatment sites where they're dried. The government says it's cracking down on these illegal rare earth mines. But on our Saturday morning drive, we saw at least 20 of these holes before we were even awake. It takes about three or four months to excavate and completely drain it before you move on to the next one. According to Mr. Wei, it takes about 20,000 RMB,

about $300 to set up one of these rare earth mines. But thanks to the crisis, a ton of rare earth can yield up to 380,000 RMB. The exchange rate is about... It's a little less than... It's about $60,000. It's not bad. It's not bad. So ask him why he doesn't

have a mine. If Mr. Wei did have a mine of his own, he didn't tell us. But he certainly knew the area. Phil got the sense that during the week he was a driver for someone in the industry, or maybe even knew the area. Phil got the sense that during the week he was a driver for someone in the industry, or maybe even the ministry. He knew where all the rare earth mines were. You see the transfer pipes? Yeah, can I come? Come on, can I walk real quick? Just over

there. You want to walk? Into that. One second. Just to walk. What did he say? He said it would be a very bad idea. Yeah? A couple of times, Mr. Wei had me duck down in the back seat. He told me he was worried people might think that he was a spy. But as frustrating as it was being stuck in the car, Mr. Wei had some amazing stories. What's the story? So he's telling me about a friend who bought a mountain.

Yeah? And he bought it for raising pigs. Yeah? And then after a while, they discovered that it was unbelievably concentrated in rare earths. And so they just stopped raising pigs and started just, you know. So the mountain is depleted. The mountain's empty now. So you're saying within a matter of months,

they've extracted pretty much everything. So you're saying the toxicity really exceeded what the mountain's capacity could do? So you're saying that the runoff water also affected the villages below? At one point, we came upon a giant government billboard towering over a lake filled with toxic chemicals. The red letters from the sign, though, were unable to penetrate the dark and viscous surface of the lake. Phil translated for me, we will mine our treasures responsibly. As much as we want the rare earth story

to be a story about technology, business, or politics, it's a story about the earth itself, something we can see and touch. And even though most China experts take it as an article of faith that one day ordinary people like Mr. Wei will rise up and demand environmental protections from their government, like the kind we have in the West, if you take a tour of the illegal rare earth mines in the mountains of Guangzhou, you'll understand that this is and will always be wishful thinking. So he's saying a lot of times farmers, downstream farmers, there is legal recourse, but it's so easy for these guys just to open up a mine and then once they're done just pack up and leave and there's no trace of them

because the deeds are either faulty or they're written under like 50 people's names in this case like you know like you know now farmers are a little bit more wary of of these kind of things and so either they'll they'll just get like a straight up cash check point was that the checkpoint or we gotta we gotta play it real cool, dude. Should I put my hood up? No, I think that would be even more suspicious. I think so. This is a toilet.

Tell the police. Oh, dude, that's it. That's it. Yeah. That's a truck. That's a truck full of it, dude. Yeah, look. Wow.

Oh, come on. Can we stop? And do what, dude? That guy was already giving us a f***ing look. Oh, he was? You want to go over there and touch a bag? I don't understand. Yeah, that is what I was about to do. I'm going to try to get you back to Beijing with all your fingers. Mr. Wei took us back to our hotel.

And later that night, Phil and I went back out on the town. But this time, we didn't meet any gangsters. The clubs were filled with the same kind of desperate-to-be-happy people you'll find anywhere in the world. On Sunday, we hired Mr. Way again, but when we asked him if he could introduce us to some of his friends in the mining business, like Mr. Pig Farmer,

he just shook his head and dropped us off at an old temple. Phil had to fly back to Shanghai in the afternoon. I spent the night skating down the marble hallways of the deserted hotel in my socks. There was a giant Christmas tree in the lobby, and underneath it, brightly wrapped boxes labeled iPad, iPod, iPhone, iMac. I took out a pen and wrote on one of them,

I was here. On Monday morning, I went to a magnet factory. Oh, wow, these are very powerful, right? Yes, be careful. Yeah, I can help you. Whoa! Even though they are small, these rare earth magnets have exceptional strength. Lin, the young woman who was showing me around, warned me that I could lose a finger.

Lin and her colleague showed me a lock they export to American supermarkets. The product in the supermarket. Ah. To avoid someone to steal it. Yeah, so the locks, the magnetic locks. That's so cool. The crisis has made it harder for companies in Japan and America to get rare earth.

I asked Lin if her factory was also affected by the quotas and caps. I know what you care about. It's not a problem. It's not a problem, yeah. You don't need to care about it. Cool. Her factory was also affected by the quotas and caps. When I asked if I could see some actual raw materials, they said yes, and we set out for the machine shop. This is the rare earth in the machine. Very cool. It needs about four hours to finish this process. Are you still sexy? Not really.

To tell you the truth, I was kind of nervous at the factory, more than I was at the illegal mines. I kept thinking about Mike Daisy, the disgraced American playwright who made up a bunch of stuff about Chinese workers while visiting some factories. I was relieved when Lin explained to me that the bosses and most of the workers were away on holiday. And how many workers do you have normally?

I try to have about 30 people. 30 people. And then there I was, holding rare earth in my hand. Wow, that's it my hand. Wow! That's it? Yeah. Wow! Wow! I want to take a picture.

I was so overwhelmed that I forgot that when I turned my recorder off to take the picture, I lost the sound. But all you're missing is hearing me say, wow, over and over again, like I'm trying to conjure something. But only questions materialize. The landing from the digital into the material is hard. It comes with a cruelty and intensity we haven't even begun to properly understand.

That's Daniel van der Velden, one of the co-founders of Metahaven. And in part three, the conclusion of this series, he will take us into the cloud. We'll also hear from the BBC's economic correspondent, Paul Mason. His novel, Rare Earth, helped me understand what I saw in China. Almost everybody we meet in this novel is a fictionalized and hyper-realistic version of people I have actually met. This episode was produced by myself, Benjamin Walker, with editorial assistance from Karen Frillman. Bill Bowen did the sound design.

Special thanks to Philip Yang and Chris Beam and everyone who helped me in China. And to John Barth of the PRX Global Story Project who made this trip possible. You'll find lots more information and links and images and you can subscribe to the

Theory of Everything podcast at toe.prx.org. You've been listening to Benjamin Walker's Theory of Everything. This installment is called The Clouds, Part 2.