The incredible story of the shark-tooth scientist
Tom Bulford explains how a shark caught off Italy in the 17th century led to the birth of geology - and how that could pay off for you in 2012.
Today I want to tell you about a remarkable man a Danish scientist who became a bishop, and who made a discovery upon which the whole business of finding natural resources depends.
His name is Nicolas Steno. And last week, to mark his birthday 374 years ago, he received the dubious honour of a 'Google Doodle' a doodle on the Google homepage.
I think Steno would have regarded a Google Doodle as something that he could happily have foregone. Because his calling was to higher things.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Moved by the sight of 240 of his school colleagues dying of the plague, Steno studied medicine in Copenhagen. There he made a number of fantastic discoveries. He was the first scientist to give an accurate account of the secretion of tears. And while working in Amsterdam, he later discovered the 'ductus parotideus Stenonianus' a channel that carries saliva to the mouth. From Amsterdam he moved to Italy, where he demonstrated by using geometry that when a muscle contracts, it changes its shape, but not its volume.
Steno did his bit for medicine. But it's the natural resources industry that is the most grateful for this Danish genius. The story starts with a large female shark caught by two fishermen off the coast of Livorno.
The 'tongue stones' that fell from the sky
In October 1666 two fishermen caught a huge female shark off the Tuscan coastline. The Grand Duke of Tuscany ordered that the head of this shark be sent to Steno, who noticed that its teeth bore a striking resemblance to certain stony objects found within rock formations.
Various theories accounted for the presence of these 'tongue stones', as they were known at the time. Pliny the Elder reckoned that they had fallen from the sky possibly all the way from the moon. While Athanasius Kircher attributed all fossils to a "lapidifying virtue diffused through the whole body of the geocosm". Get that!
But Steno realised that not only did certain fossils look very much like sharks' teeth, but that this was exactly what they must be. Their chemical composition had changed turning them to stone but not their form. The question was: how did they get there?
The three founding principles of geology
In 1669 he published his Dissertationis Prodromus, in which he established the three defining principles of stratigraphy the branch of geology concerned with the layering of rocks.
The first principle, the law of superposition, asserts that "at any time when any given stratum was being formed, all the matter resting upon it was fluid and therefore, at the time when the lower stratum was being formed, none of the upper strata existed".
The second principle was horizontality "strata either perpendicular to the horizon or inclined to the horizon were at one time parallel to the horizon".
The third was the principle of lateral continuity. This stated that "material forming any stratum was continuous over the surface of the earth unless some solid bodies stood in the way" and "if a body or discontinuity cuts across a stratum, it must have formed after that stratum".
Steno saw no difficulty in attributing the formation of most rocks to the flood mentioned in the Bible. He suggested that upper layers had formed in the flood, after the creation of life, while the lower ones had formed before life existed.
You might not quite agree with this, but all the same Steno was the first to understand that a study of geology could distinguish different time periods in the Earth's history and this is of course crucial to today's search for minerals and hydrocarbons.
How Steno's discovery could pay off for you in 2012
Having worked all this out, Steno seems to have tired of geology. He returned to medicine for a while, but then veered towards theology and in 1677 was consecrated as a bishop. In pursuit of divine approval, he took a vow of poverty, lived the life of a pauper 'dressing like a poor man in a cloak and lived four days a week on bread and beer', and died aged 48.
Having been beatified by Pope John Paul II in 1988 he is now Blessed Nicolas Steno and things named after him include schools, the Steno Museum in Denmark, and craters on Mars and the Moon.
For penny share investors though it is his work that led to the development of modern geology that matters. Without that shark's head, who knows where we might be now?
Extraction of valuable resources from the earth has been a keen interest of mine for many years. Readers of my Red Hot Penny Shares letter certainly benefited from a few great mining stocks during the 2010 boom.
A year on and share prices across the sector have fallen and in some cases with quite a bump. With costs rising and mounting political risk, the mining sector has lost its gloss. But I believe there is still serious money to be made from this sector in 2012. It just means we need to be more selective. There are certainly a few 'big projects' kicking off in the mining sector this year that I am watching closely.
As I said in this month's Red Hot, "private consumption of diamonds from China and India is expected to be around 10% leading to total demand growth of 6.6% pa to 2020." And there are some very interesting developments in the pipeline for the two Red Hot Penny Shares diamond stocks.
This article is taken from Tom Bulford's free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by MoneyWeek Ltd.
Red Hot Penny Shares is a regulated product issued by MoneyWeek Ltd. Forecasts are not a reliable indicator of future results. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Penny shares can be volatile, relatively illiquid and hard to trade. There can be a large bid/offer spread so if you need to sell soon after you've bought, you might get less back than you paid. This can make them riskier than other investments. Please seek advice if necessary. 0207 633 3780.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.
-
Is China an undervalued market?
Most funds remain wary of China amid slowing growth. Have they got it wrong?
By Max King Published
-
Can Lebanon's struggling economy survive another war?
Lebanon's economy has been in dire straits for decades, and now it is yet again on the brink of war. Are better times on the horizon?
By Simon Wilson Published
-
Somero: trading this overlooked bargain
Features Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
By Dr Matthew Partridge Published
-
How to find big profits in small companies
Cover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
By Dr Matthew Partridge Published
-
The hidden gems on Aim, London's junior market
Features Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
By Scott Longley Published
-
Is Aim finally coming of age?
Features The Aim market of mostly smaller companies has traditionally been seen as a bit of a backwater. Is it time to change that view? Matthew Partridge talks to Paul Latham and Richard Power of fund management company Octopus.
By Dr Matthew Partridge Published
-
Fetch! The Chinese small-cap stocks to buy in the Year of the Dog
Opinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
By Tiffany Hsio Published
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
By Guy Anderson Published
-
Get cheap, reliable growth from smaller companies
Features One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
By Max King Published
-
Big gains from small caps
Features In an environment of middling inflation and low interest rates, small-cap stocks tend to beat big blue-chips. John Stepek explains why, and how to invest in them.
By John Stepek Published