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Fisher Investments on Materials by Brad Pyles, Andrew Teufel

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A BRIEF HISTORY OF MATERIALS
John Templeton once famously said, “The four most dangerous words in investing are ‘This time it’s different.’ ” History never perfectly repeats, but it does have a habit of turning out similarly—so understanding it can provide key investing context and insights into the future. A history of the Materials sector could go back thousands of years. We could start with Stone Age Neanderthals throwing their first spears! But for the purpose of becoming better Materials investors, we’ll start with the Industrial Revolution, focusing on the metal and chemical industries.

THE INDUSTRIAL REVOLUTION

Henry Bessemer’s creation of high-grade steel in the late 1850s kicked the Industrial Revolution into high gear, changing the world forever. His quest actually began after he invented a new type of artillery shell, but the cast iron guns of the day weren’t strong enough to handle the more powerful ordnance. Changing raw iron ore into strong and malleable steel that could be mass-produced also allowed new inventions like steam engines, railroads, skyscrapers, and assembly-line manufacturing.
Previously, raw iron ore was traditionally melted by burning charcoal. This process produced carbon emissions absorbed by the raw ore to become usable iron. However, charcoal-making was soon deemed unsustainable because of massive deforestation in Britain. Coal appeared the obvious replacement, but its high sulfur content resulted in very brittle metals. In the early 1700s, ...

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