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May 19, 2016
In a GOLD rush, sell spades, shovels or donkeys but don't search for gold
San Francisco in 1850
On May 12, 1848, a store owner named Sam Brannan held a “one-man parade” to announce the start of the San Francisco Gold Rush.
“Gold! Gold from the American River!” Brannan shouted up and down Market Street in San Francisco. He held his hat in one hand and waved a bottle of gold dust in the other. San Franciscans had received false news of gold before. But by all accounts, Brannan’s performance sent residents running in search of riches.
Brannan had a good reason for spreading the news rather than panning for gold himself. The canny entrepreneur owned a general store that served the workers at Sutter’s Mill, the site where gold was discovered. And in the week between learning about the discovery and yelling about it in San Francisco, he’d bought all the picks and shovels in the city.
Brannan’s announcement helped spur a seminal event in California’s history. As Brannan raked in money selling mining supplies, his actions also, years later, led to the coining of a famous maxim: During a gold rush, sell shovels.
It’s true that most miners fared poorly during the Gold Rush. But the men and women who prospered the most tended to ignore gold in favor of another resource: the hundreds of thousands of new arrivals who transformed an isolated frontier into a prosperous and industrialized population center in less than a decade.
“California needed everything and had nothing,” Edward Dolnick writes of the gold rush economy in his book The Rush. Businessmen and women who grasped this profited enormously from trade and the flow of goods and people to the new promised land.
Rather than advising someone to sell shovels and pick axes during a gold rush, better advice from the San Francisco Gold Rush might be to trade shovels. Or speculate in real estate. Or paint houses. Really anything other than mine for gold.