Life would be easier if everything you needed was sent to you in a box. A few months ago, I subscribed to Quinciple, a service that sends me a box of groceries once a week, which I pick up at a store a few blocks from my apartment. It saves me a little time and maybe a little money—but, mostly, it spares me from the so-called paradox of choice, or the paralysis that comes with having too many options while shopping. I have wasted hours of my life reading the fine print on cereal boxes, lipstick boxes, and sneaker boxes. I am forever looking for a reason to choose one loaf of bread or one brand of shampoo over countless others. (There is often no reason.) Once, I went to a grocery store to buy a soda and walked out, empty-handed, fifteen minutes later. Somewhere between the caffeine-free Diet Cherry Coke and the sixth flavor of seltzer, I forgot why I was even there at all.
Over the past three or four years, dozens of “subscription e-commerce” services have cropped up. These companies pick out and package virtually any kind of product imaginable—food, pet toys, clothes, condoms, cosmetics—into boxes that are delivered to hundreds of thousands of American doorsteps on a weekly or monthly basis. With Quinciple, I spend about forty dollars a week and get enough groceries—meat, vegetables, cheese, bread, and so on—to make two or three meals that each feed two people. Blue Apron, one of several larger competitors, sends you all the ingredients you need to make a recipes designed by name-brand chefs, for around ten dollars per meal per person.
The box trend is widely considered to have originated with BirchBox, a company that sends sample-sized cosmetics to women (in perfumed pink boxes) and to men (in odorless blue ones), in the hopes that they will take to the samples and buy full-sized versions through the company’s Web site. There’s also StitchFix, which sends customers an assortment of women’s clothing and accessories, for a “styling fee” of twenty dollars per box; clients pay for what they decide to keep—the average cost of an item is around fifty-five dollars—and return the rest in a pre-stamped package. According to CB Insights, a firm that compiles data about company funding, investors gave a hundred and ninety-five million dollars to these types of startups in 2012. Celebrities have even gotten into it: Ashton Kutcher has “curated” boxes for a site called Fancy, and Jessica Alba co-founded Honest, which sends subscribers packages of “clean-living” items, such as wipes and detergents. It is only a matter of time until Gwyneth Paltrow-branded green juice turns up in Manhattan cubicles.
In one sense, there’s nothing particularly novel about this model; wine-, book-, and fruit-of-the-month clubs have existed for years. But, instead of sending people new varieties of something they already know they like—say, romance novels or peaches—the newer services tend to sell people products that they might not think to buy otherwise, or that they may overlook on the shelf in an indecisive scramble to finish shopping. By effectively outsourcing buying decisions to someone else, these services attempt to help people avoid what Barry Schwartz, a professor of psychology at Swarthmore College, describes as the “misery-inducing tyranny” of the modern American marketplace. Too much choice puts us in a state of mind that’s unpleasant and unhealthy, Schwartz argues in his book “The Paradox of Choice.”
It’s almost surprising that entrepreneurs didn’t pick up on this problem sooner. The idea that too much choice can be dizzying seems so intuitive—in the modern-day United States, at least—that I asked Schwartz if it had been identified by philosophers or theorists of centuries past. “How could they even know? You can’t anticipate this!” he said. “This abundance is still very new. You can’t know its too much choice until it’s there in front of you.” Still, Schwartz said he’d encountered related ideas reading “Escape from Freedom” by the Marxist psychologist Erich Fromm, who, like Sartre and the existentialists, believed that total freedom of choice can make us feel hopeless.
Katrina Lake, the C.E.O. of StitchFix, said she is “obsessed” with “The Paradox of Choice”; it helped shape her idea for her business and was the first book she added to the company’s library in San Francisco. “As a C.E.O., I’m actually very decisive,” Lake said. “But my fiancé and I just bought an unfurnished condo, and I’ve spent hours and hours [thinking], What should this door handle be? What should the rug be? All the choices are just overwhelming.”
When I met Lake in New York in May, she was wearing a multicolored Tracy Reese pencil skirt (“vintage StitchFix, from last year”) and a boxy, black, quilted T-shirt by Alexander Wang top that she picked out herself. StitchFix was inspired in part by her sister’s closet—“she’s a buyer at Pucci and always looks really put together, so I would have her send me links to her outfits,” Lake explained—and as a way to fix some of the problems she ran into when shopping online. “The first version of e-commerce was amazing: You could get anything, even the Dior dress from seven seasons ago on eBay,” Lake told me. But as a result, “I’ll often put things in my [online] cart but so infrequently buy anything. And I think if these items ended up in my house I’d end up buying them.”
Lake conducted several studies to find the magic number that would get “time-starved women”—her target demographic—to want to buy one or two items of clothing without feeling stressed out by too many options (or bad fitting-room lighting). She ended with five items. Barry Schwartz finds this number reasonable: “You can’t send a dozen because you take the nightmare of being in a store into the living room,” he said.
That’s the number BirchBox came up with, too: Katia Beauchamp says that when she and her co-founder Hayley Barna met (also at Harvard Business School), they had discussed the concept of decision-making extensively. “Hayley studied behavioral economics, and we were always talking about the paradox of choice,” Beauchamp told me over the phone. “She’d walk into Sephora and turn around. She’d say, ‘I need a mascara, but I can’t deal with a thousand mascaras.’” And Matt Salzberg, the founder of Blue Apron, said that sending people specific materials to make a dish from scratch, like a recent shipment of blackened drum fish with cheddar cheese grits and a parsley salad, “goes hand in hand with the paradox of choice: there’s so much out there in the world, in terms of information, that people get overwhelmed.”
To be overwhelmed by choice isn’t, of course, the worst problem a person could have; better to have choice than to be too poor to have any choices at all. As Schwartz and his colleague Andrew Ward note, “when people have no choice, life is almost unbearable.” But for those who don’t have big problems to be solved, smaller ones will suffice. Schwartz says he’s not surprised by the existence, or the success, of the BirchBoxes of the world. Yet he has little use for them; he shops “with blinders on”—meaning he buys the same stuff over and over. If he were to choose a type of product to receive in a box every month, he would select electronics, because gadgets change so often that frequent replacements seem worthwhile. Still, he admitted, “I’m enormously resentful every time I get a new gadget, both with the process of figuring out what to get and figuring out how to use it.” Recently, he said, “My old BlackBerry was becoming unreliable, so I got a Samsung Galaxy or something like that. I got it because my wife already had one and could answer some of my questions. And all I wanted was for somebody I knew well to have already suffered so I wouldn’t have to suffer.”
Photograph: © AlexandraDost/Lumi Images/Corbis
Growing up in Illinois and Indiana, I went to Dairy Queen after softball games, choir concerts, and debate tournaments. The luckiest kids got Dairy Queen birthday cakes, with their crunchy middle layer nestled between two bricks of cold, sweet ice cream. Later, I lived in New York City, where the Midwestern soft-serve chain had never ventured. I missed it nearly as much as I missed my parents, or driving through cornfields, or driving at all. When I moved to Iowa three years ago, my first visit to Dairy Queen felt like a religious pilgrimage. My order, these days, is simple: a chocolate-dipped vanilla cone. There is nothing quite like the crust of a DQ dipped cone—the liquid that transforms instantly into a hard shell, snapping when you press your tongue against it, in perfect contrast to the smooth chill of vanilla soft serve. I even appreciate the vaguely chemical scrim that seems to coat the roof of your mouth for hours after you’ve sucked the last morsel from the papery grid at the bottom of the cone.
Dairy Queen’s long and conspicuous absence from Manhattan ended this morning, with the opening of a two-story, twenty-five-hundred-square-foot Dairy Queen Chill & Grill—a version of the restaurant that serves both ice cream treats and food, like burgers and chicken strips—on West Fourteenth Street, near Union Square. (While this is the first DQ in Manhattan, it’s not the first in New York City; a location opened in the Staten Island Ferry Terminal last year.) For transplants, tourists, and, perhaps, native New Yorkers to whom Dairy Queen has long been an exotic unknown (like tuna casserole, or mowing a lawn), the new restaurant may be a welcome development. Still, it’s hard to celebrate, without ambivalence, the arrival of another strip-mall staple in New York City.
The first Dairy Queen opened in Joliet, Illinois, in 1940; by the early fifties, some locations had started serving savory food in addition to frozen treats. DQ franchises have since spread to forty-nine states and more than twenty countries; there are more than six thousand locations worldwide. The company has been a wholly owned subsidiary of Berkshire Hathaway since 1998.
Dean Peters, a spokesman, told me that the chain stayed out of New York for so long because of high costs and other operating challenges. The company finally found a franchisee it thought capable, LSQ Foods, which Peters described as having “the vision,” the “financial resources,” and the “operational resources” not only to successfully manage the new location but to continue to expand in the city.
The spectre of a growing league of New York City Dairy Queens may alarm advocates for local, independent businesses. According to a report by the Center for an Urban Future, a think tank, the number of national retailers in New York City grew each year between 2008, when the study was first conducted, and 2013 (albeit at a slower rate last year than in any previous year). Fifteen retailers had at least a hundred locations in the city last year; Dunkin’ Donuts became the first to surpass five hundred.
Jonathan Bowles, the think tank’s executive director, told me that he doesn’t believe chains are always bad for the city; New Yorkers like choices, including, sometimes, the option to shop at the Gap or Home Depot. But, he said, “there are some neighborhoods in Manhattan where I think we’ve kind of reached a tipping point, where some great New York businesses are either shutting down or they can’t afford to be in those neighborhoods anymore.” Neighborhoods overrun by chains have lost “what’s unique about New York,” he said.
Of course, one Dairy Queen, or even a hundred Dairy Queens, won’t disrupt New York’s economy or reconfigure its character, and part of the city’s identity has always been a tendency to transform. But when businesses belong to absent, anonymous owners instead of local entrepreneurs, those businesses are less invested in and accountable to the community. Several studies have shown that independent businesses offer more benefit to the local economy than national chains. And the question of preserving local character isn’t simply emotional or aesthetic. If wide swaths of New York look like any suburban shopping center, what reason do bright weirdos in small towns have to dream of moving there? If the parts that aren’t a strip mall are a playground for the very rich, can it still function as a laboratory for cultural innovation by people from diverse backgrounds?
Bowles doesn’t count the area around Union Square among the neighborhoods that chains have robbed of their vitality, but it seems reasonable for someone who cares about the economic diversity and distinctive character of New York City to be wary of yet another national business setting up shop—and with plans to expand. (“We’ve heard, like I’ve said, nothing but positive things from people who want a Dairy Queen, who have been asking for a Dairy Queen for so long,” Peters, the Dairy Queen spokesman, told me.)
Years ago, not long after we moved to New York, some high-school friends and I stopped at the Olive Garden in Secaucus, New Jersey, on our way home from IKEA. We would never have gone to the Olive Garden in Times Square. We were busy reinventing ourselves, and a chain restaurant in a tourist trap felt like everything we’d left Indiana to escape, an affront to our new determination to enjoy wine and eat a greater variety of lettuce. But an Olive Garden in a suburb, next to a mall, offered something different: the setting for an exercise in nostalgia. There we’d be far enough from our new lives to safely acknowledge how Midwestern we still were. Even in Secaucus, Olive Garden was a little disappointing, the endless breadsticks less thrilling than we remembered, the entrées not tasty enough to enjoy as kitsch, the idea of eating-as-kitsch difficult to justify now that we lived in a city where eating for actual pleasure was so easy. Still, we loved the familiar comfort it offered. Part of me is pleased that New Yorkers no longer have to live without Reese’s Peanut Butter Cup Blizzards; I have struck an item from the list of cons on my “Should I Move Back to New York?” worksheet. Still, I can’t contemplate a Dairy Queen on Fourteenth Street without wondering if New York could, someday, become a place that feels too much like home.
Photograph by Visions of America/UIG via Getty.
In October, the city council of Portland, Oregon, in between updating the payroll system for the police honor guard and changing the duties of the golf advisory committee, adopted a resolution banning Walmart—and Walmart alone— from the city’s investment portfolio. The resolution, unanimously approved, cited an anonymous executive who was quoted in Charles Fishman’s 2006 book, “The Wal-Mart Effect,” saying, “They have killed free-market capitalism in America.”
Earlier this month, Portland began to cut Walmart out of its investment portfolio. The first of the city’s five Walmart bonds reached maturity and will not be replaced. Portland’s Walmart holdings had represented about three per cent of its portfolio of roughly one billion dollars. In 2016, when the last bond matures, the city council will be rid of Walmart investments entirely.
Portland is the first major U.S. city to formally divest from the retailer, but in Europe institutional investors have been rejecting Walmart for years. Last year, two large Dutch pension funds said that they would no longer invest in Walmart because of its labor practices, especially its fierce opposition to unions. The fund managers also raised concerns about Walmart’s alleged bribery of Mexican officials—a scandal that the company has spent more than four hundred million dollars investigating. Sweden’s pension funds sold their Walmart bonds last fall, and, in 2006, Norway’s Ministry of Finance excluded Walmart from its pension fund, citing alleged human-rights and labor violations.
Divestment campaigns typically have specific pressure points; the best-known effort, in the nineteen-seventies and eighties, was aimed at getting companies to withdraw from South Africa to oppose apartheid. The effects of such campaigns are hard to measure. A 1999 study of the anti-apartheid movement found that the divestment campaign did little harm to the target companies’ stock prices. But if it reinforced the public revulsion to apartheid, the authors suggest, it may have hastened the end of the regime in other ways. In the past few years, students have exhorted universities to divest from companies that profit from coal and other fossil fuels.
In Portland, the city council expressed a diffuse constellation of grievances. Walmart “exerts considerable downward pressure on wages”; it “significantly reduced health insurance benefits for part-time employees” by changing eligibility standards; it “has focused on fast, low-cost production at the expense of basic safety measures for employees.” It isn’t clear what, if anything, the retailer could do to regain favor. Commissioner Steve Novick, who led the push for the do-not-buy list, wrote in a blog post, “You have to start somewhere—and we might as well start with a company that is openly, notoriously and extravagantly bad to the bone.” Others in the city’s investment portfolio might be next, he warned: “General Electric is a poster child for tax evasion. Coca-Cola is practically in the business of increasing the incidence of diabetes.”
Walmart has always been an uneasy fit for the bike-commuting, kitchen-composting, backyard-chicken-raising denizens of Portland. A former mayor, Sam Adams, vociferously opposed Walmart’s expansion in Portland during his tenure as a city commissioner, even hanging a sign from his office window in which the retailer’s smiley-face logo had been recast with a frowning expression and angry eyebrows. But as mayor Adams didn’t try to block a Walmart supercenter that opened in Portland last year, and Charlie Hales, the current mayor, didn’t appear at Novick’s press conference. Residents’ opposition to new Walmarts also seems more muted than it used to be.
Portland isn’t trying to kick out the two Walmart supercenters within city limits, which together employ about five hundred and fifty people, or halt construction on the two suburban supercenters that the retailer plans to open later this year—and for which it will hire another six hundred workers. (In the suburbs, Walmart has five more supercenters and eight “neighborhood markets,” smaller stores that primarily sell groceries.) “Portland is a food city, with the legendary food carts, numerous farmers markets and community gardens,” Walmart posted on its Web site about its business in Oregon. “For families that are unable to access these avocations, Walmart offers many options at affordable prices.”
Living with Walmart is complex—sort of like living with an assertive, charismatic, and powerful family member. Research from Jerry Hausman, an economist at M.I.T., shows that, when Walmart enters a new market, it drives down grocery prices in general; to compete with Walmart’s low prices, other stores lower their own prices. Low-income families benefit most, because they spend a greater proportion of their wages on food. But Walmart’s presence can also hurt those same families, because it tends to reduce overall retail employment—perhaps by driving out smaller stores, which typically employ more workers per dollar of sales. On the one hand, Walmart helps the city, county, and state budgets; it pays various taxes, and its employees pay income tax. (Oregon has no sales tax.) On the other hand, as the nation’s largest private employer, and one that offers mostly low-wage jobs, its workers are prime beneficiaries of food stamps and Medicaid, funded by taxpayer dollars.
It gets more complicated. In Portland, Walmart’s store in the Delta Park neighborhood, which opened last year, houses the city’s largest green roof—forty thousand square feet of vegetation and sediment, which helps to cool the store, reduce storm-water runoff, and convert carbon monoxide to oxygen. Students and faculty at Portland State University’s Green Building Research Laboratory will study the building for the next two years. Jonathan Fink, the university’s vice-president for research and strategic partnerships, said that the research “will contribute to better, more sustainable buildings around the world.”
Two years ago, @WalmartLabs, a technology division of the retailer, purchased Small Society, a highly regarded mobile developer based in Portland that had created apps for Starbucks, Whole Foods, and Zipcar—companies whose culture better matches Portland’s ethos. One of Small Society’s founders had even developed an iPhone app for Obama’s 2008 campaign. Some residents accused Small Society of selling out; after all, even their name seemed opposed to Walmart’s values. Others were pleased that a homegrown business had attracted the attention of a global company. After purchasing Small Society, @WalmartLabs leased nearly nine thousand square feet in downtown Portland and more than doubled the staff.
Last year, Walmart donated nearly five million pounds of food to Oregon’s food banks—enough for more than four million meals. In addition, Walmart and its foundation gave nine and a half million dollars to the state in charitable donations, including thirty-five thousand dollars to Our House of Portland, which used the money to provide nearly three thousand food boxes to people living with H.I.V. and AIDS. Walmart gave nearly twenty-nine thousand dollars to the Portland Rescue Mission, to expand services for homeless men, women, and children, and nearly sixty-three thousand dollars to Portland Adventist Community Services, to pay for a new van for meal delivery and food distribution. Opponents argue that if Walmart didn’t exist overall wages would be higher, so residents wouldn’t need so many services geared toward low-income people. That’s hard to quantify. Walmart hardly has a huge presence in Oregon, and yet poverty and other ills persist.
Walmart provided information about its activities in Oregon, but the company declined to respond to a request for comment about Portland’s divestment. “We wouldn’t comment on anyone’s decision to invest,” a spokeswoman, Delia Garcia, told me.
In the Portland area, Walmart has been both a friend and a foe to small businesses. A 2010 study in the Journal of Urban Economics, which examined more than one thousand openings of big-box stores, found that Walmart and other large chains had a substantial negative impact on both single-unit businesses and smaller chains—but only when the big-box store was in the immediate area and sold the same types of merchandise.
In Cornelius, a half-hour drive from downtown Portland, Grande Foods, an independent grocer, closed shortly after Walmart opened a new store, in 2010, and its owner called the increased competition too much to bear. But Beto Cuellar, who owns another nearby grocer, Super Mercado San Alejandro, told the local paper last year that the closing of Grande Foods and the opening of Walmart combined to increase his sales by thirty per cent. People stocking up at Walmart visit his small store for specialty foods like chayote pear squash, cactus fruit, and sweet concha bread, he said, adding, “Even people who work at Walmart come eat lunch here.”
Fishman studied the rest of the city’s investment portfolio after the decision. “It’s okay to invest in G.E., which destroyed the Hudson River with dioxin, but it’s not okay to invest in Walmart?” he asked me. “J.P. Morgan? There are ten banks on this list that brought down the entire U.S. economy.”
Fishman’s book is frequently critical of Walmart, and he has long called for communities to consider the impact of new businesses. But he says that residents have the most leverage before Walmart opens a store. “I am acutely aware of the long list of ways in which Walmart could be a much better company and a much better corporate citizen,” he said. “But I’m acutely aware of the ways in which McDonald’s and Subway could, too. If you’re buying off the dollar menu, do you think the people handing you the hamburger have really good health insurance?”
In recent years, Fishman noted, Walmart has begun to respond to public displeasure. It discloses more information, particularly about its environmental impacts. And it has added programs that benefit low-income customers, such as its four-dollar prescription drug list. That doesn’t mean he believes that the Walmart effect is entirely good—but it does mean that critics need to be specific about what changes they want. He called the Portland divestment “a little bit theatrical and a little bit cheap.”
Despite its undisputed dominance—Walmart’s sales last year reached nearly five hundred billion dollars—the company is under strain owing to competition from rivals such as Amazon, and because customers are struggling financially. On the same day that Commissioner Steve Novick held a press conference to announce Portland’s divestment, Walmart reported weak quarterly sales and profits.
There’s no guarantee that Walmart will remain a juggernaut. The cautionary tale, of course, is Sears, the world’s largest retailer in the seventies and eighties, which ignored Walmart until it was too late. As much as Portland’s politicians worry about the Walmart effect today, they might consider adopting broader guidelines that would set standards not only for Walmart, but for the upstarts that are fighting to take its place.
Photograph by Alex Milan Tracy/Demotix/Corbis.
Starting in early 2010, a small Canadian company called Elissa Resources spent more than $1.66 million exploring a hilly scrap of desert dotted with cacti, creosote bushes, and Joshua trees, at the southern tip of Nevada. The company was looking for rare earths: obscure metals with magnetic and luminescent properties which are used in such products as high-efficiency light bulbs, smartphones, and TV screens. The metals are also of enormous value to the defense and renewable-energy industries. To find them, Elissa Resources employees mapped the landscape and used special devices to figure out where radiation was unusually high. The firm contracted an aircraft to measure the land’s magnetism, surveyed the area from a helicopter, and drilled twenty-one holes to figure out what was down below. But, in 2013, Elissa Resources halted major work at the site. A slump in the rare-earths market has made it hard to attract the investment needed to continue the investigations.
Most of the world’s rare earths are mined in China. In recent years, amid fears that China’s control of the market could jeopardize Western strategic interests, firms such as Elissa pursued deposits elsewhere—in the United States, Kyrgyzstan, Namibia, Vietnam, Greenland, Australia, and other countries. A boom was on. “A geologist would pick up a rock, lick it, and say, ‘Oh, I’ve got rare earths,’ and suddenly you’ve got a rare-earths company,” Gareth Hatch, a co-founder of the market-intelligence firm Technology Metals Research, said. The industry acquired an air of glamour, thanks to the futuristic uses of the metals, and a moniker suggestive of preciousness.
In fact, the rare earths—there are seventeen, and they have baroque names like dysprosium and gadolinium—are not all that rare. Most are more common in the earth’s crust than gold or silver, and they look like ordinary metals. But unlike gold and silver, they are not readily found in minable concentrations; their name derives from the difficulty of separating them out from one another. Nearly all the rare earths had been discovered by the end of the nineteenth century, but their uses were few. A shift began in 1949, when uranium prospectors carrying a Geiger counter hit upon an unusually radioactive zone in the desert, about sixty miles from Las Vegas. They found thorium, a radioactive metal often contained in rare-earth deposits. In 1950 and 1951, a firm called the Molybdenum Corporation of America (later renamed Molycorp) bought the rights in the area and soon opened a mine called Mountain Pass. In the coming decades, Mountain Pass would provide a significant portion of the rare earths utilized around the world.
With advances in technology, applications for rare earths proliferated. In the sixties, electronics manufacturers discovered that europium and yttrium could produce the red hue in TV sets. The oil industry realized that rare earths could help refine petroleum. Today, magnets that combine neodymium with iron and boron, making them exceptionally strong, are found in wind turbines, electric motors, and headphones. Dysprosium is used in military guidance-and-control systems, and lanthanum in Toyota Prius battery packs.
At Mountain Pass, however, environmental concerns eventually came to the fore. Uranium and thorium are present in nearly all rare-earth deposits, and any high concentrations of these that result from extraction and processing need to be carefully managed. (Nate Lavey, in a recent New Yorker video and infographic project called “The Most Radioactive Place in New York City,” explores the negative consequences of thorium waste.) Other substances that may be found in the deposits or used to process them—heavy metals, acids, sulphides, fluorides, and more—can leach into groundwater or be blown into the atmosphere as dust. Mountain Pass repeatedly leaked wastewater, which led to investigations from state and local regulators and scrutiny from environmentalists (including a group calling itself PARD, or People Against Radioactive Dumping); in 1998, the local water board fined Molycorp more than four hundred thousand dollars. That year, the company stopped its rare-earth separating operations at Mountain Pass to avoid more leaks. Molycorp ceased all mining in 2002, when it took the company longer than anticipated to obtain a new permit to store mining waste on site. By the time the permit was renewed, in 2004, prices for rare earths were too low to justify more digging. Private-equity investors bought Mountain Pass in 2008, with plans to reopen the mine and incorporate technology to recycle effluent; they kept the company name of Molycorp, since it was well known.
The rare-earths industry had changed a great deal while Molycorp was grappling with the problems at Mountain Pass. As the market for the metals grew, it had attracted miners abroad, especially in China. In 1990, China controlled nearly thirty per cent of the world market; by 2008, that figure had grown to more than ninety per cent. (Its mining and processing activities had profound ecological impacts, including the creation of thorium dust that was linked to a spike in lung-cancer mortality rates.)
But, for several years, the Chinese had gradually reduced the quantity of rare earths allocated for export, according to a report by the U.S. Geological Survey. Then, in July of 2010, China announced that it would cut its export quota dramatically, by thirty-seven per cent from the previous year. The U.S.G.S. said that the reduction was meant to help China meet its growing domestic demand. Critics said that the goal may also have been to force foreign companies to bring their manufacturing facilities to China, according to a Congressional Research Service paper. Two months later, the Times and others said that China had cut off rare-earth supplies to Japan over a maritime dispute. (The Chinese government disputed this.) Washington began to feel vulnerable: a Department of Energy report said that the supply of particular rare earths needed for clean-energy technology, such as electric vehicles, was at severe risk of disruption.
Firms tried to insure themselves against a possible shortage by stockpiling the metals; this, along with the reduction in the Chinese export quota, led to dizzying price increases. The value of one type of lanthanum oxide, for instance, jumped from around fifty-five hundred dollars per metric ton, in early 2010, to around a hundred and seventy thousand dollars some eighteen months later, according to Metal-Pages, a Web site that tracks the industry. Nearly two hundred new mining projects were developed between early 2010 and mid-2011, as companies made announcements about deposits around the world. A graduate student at the Arkansas Center for Space and Planetary Sciences speculated online about whether it was worth mining the moon for rare earths. (His conclusion: not really.) In the United States, the new owners of Mountain Pass began raising money to build a new processing plant.
It soon became clear, however, that China was not halting shipments summarily, and that metals were still available. Demand fell as companies became unable to afford them, found substitutes, or lived off their stockpiles. Prices for lanthanum and other rare earths dropped back toward their pre-boom levels. In many cases, it no longer made commercial sense to pursue mining projects. Gareth Hatch, of Technology Metals Research, estimates that, of the four hundred and forty prospective sites on a list he has kept of companies that were investigating and developing deposits over the years, fewer than a hundred are still active.
Christopher Ecclestone, an analyst at the research firm Hallgarten & Company, wrote in a report that the bust was an “apocalyptic event.” It turns out that although rare earths are crucial, they are used in comparatively minuscule amounts. If the supply isn’t being artificially restricted, there should be enough to go around. According to the U.S. Geological Survey, the global production of copper was about eighteen million metric tons in 2013. The global production of rare earths, in contrast—or, technically, of rare-earth oxides, the most common finished form—was around a hundred thousand metric tons.
“Even if China were to stop producing every ton of rare earth tomorrow, to meet world demand for the next ten or twenty years you wouldn’t need more than, say, ten projects,” Hatch said. “And China isn’t going to stop any time soon, so my perspective is that maybe five or six of these projects will be necessary.”
Meanwhile, other developments may make rare-earth mines an uncertain investment. In March, the World Trade Organization found that China had violated trade rules by limiting its exports; China is appealing the ruling. In order to cut U.S. reliance on the metals—and on China—a new Department of Energy initiative, the Critical Materials Institute, is studying ways to replace and recycle them.
Molycorp is struggling to ramp up production at Mountain Pass; the mine produced just over a thousand metric tons of rare earths in the first quarter of 2014, a yield that coincided with disappointing financial results and a plummeting stock price. Also, in April, the Environmental Protection Agency fined the company more than twenty-seven thousand dollars, because inspections in 2012 discovered what the agency described as a leak or spill of a substance that contained lead. (Molycorp said that it has ceased the chemical process that led to the problem.)
For now, China remains the biggest rare-earths miner by far. But with prices for the metals having stabilized, a smaller cadre of mining companies are working to exploit rare-earth deposits in places such as Alaska and Wyoming. While the need for rare earths is predicted to grow, the question is whether it will justify much of an increase in mines. At Elissa Resources, the firm that has stopped its exploration in southern Nevada, Paul McKenzie, the C.E.O., said, “It would be easier to raise money and attract money for gold and other commodities right now than for rare earths.” Luckily for him, his company also owns the rights to mine gold deposits in Nevada and South Dakota.
Photograph by Jacob Kepler/Bloomberg/Getty.
