Millionaire Tip: You may not get rich searching for the gold itself, but you can certainly get rich selling the mining equipment to the prospectors during a gold rush!
Today I enjoyed a nice hike with my family along the South Fork American River up in El Dorado County, California. The natural beauty of the hills is unmatched this time of year and it was a very therapeutic and relaxing way to get some good exercise!
California gold country is so rich with an important era of US history that it is absolutely fascinating. As we walked along the trail (only a few miles down stream from Coloma, CA, which is where gold was discovered in 1848) I couldn’t help but think of the old California gold rush days.
Growing up in California (especially in the Sacramento area), students learn throughout elementary and middle schools about California history. When we were just kids we took field trips and learned all about the gold rush, the era that drove thousands of people from all over the world to come to California to stake their claim and get rich gold prospecting! Learning about all of this is probably why my brothers and I picked up the hobby of gold prospecting when we were young (and we still go out every now and then to find us a nugget or two!).
(small nugget we found in the river about 2 weeks ago)
(a little gold in the pan… we always find at least this much when we go out)
(teaching my 1 year old son how to pan for gold, a new family tradition)
Today California is the most populated state, with almost 40 million people, and it wouldn’t be anything near that if it weren’t for the 1849 gold rush of the Sierra Nevada foothills (aka The Motherlode) that really boosted the population of the region.
Back in the year 1848, John Sutter was a pioneer to California and settled in modern day Sacramento (Sutter’s Fort today lies in Midtown Sacramento and is a State Park) where the American River meets the Sacramento River (this is why Sacramento is often referred to as River City). Sutter was an entrepreneur and owned a saw mill called Sutter’s Mill. It was located in Coloma, CA along the American River in the Sierra Nevada Foothills just 46 miles north east of Sutter’s Fort in Sacramento.
(Sutter’s Fort, midtown Sacramento)
One of Sutter’s employees was a man named James Marshall who worked at Sutter’s Mill. Marshall was the first person to discover gold in the American River while living and working at Sutter’s Mill. Long story short, when word got out that gold was discovered in the American River, it did not take long before thousands and thousands of people from all over the world were rushing to California to strike it rich!
(Sutter’s Mill in Coloma, CA)
So how does all of this have anything to do with you making your first million? Well, the story is about to get exciting and will become very relevant to how you can make your own fortune.
There is another man who is important in this story named Samuel Brannan. Brannan was also an entrepreneur and a journalist. After settling out west in California before it became a state, he founded The California Star which was the first newspaper in San Francisco, CA.
Brannan also owned a general store between San Francisco and Sacramento. When gold was discovered in the hills just east of Sacramento, most of the prospectors rushed in from San Francisco towards Sacramento. Rather than rushing up to the hills following the crowd to search for the gold himself, Brannan capitalized on the rush and stocked his store full of mining equipment such as gold pans, picks, shovels, sluice boxes and the like.
(Samuel Brannon’s store where he made his fortune selling mining supplies)
Brannan had found a perfect opportunity where there was a very limited supply and an enormous demand for mining equipment. He realized that he would not have to go out to find the gold- he already had. He found thousands of people who had gold fever and desperately needed mining equipment.
It is said that Brannan was paying just $0.20 each for gold pans and selling them in his store to the prospectors on their way to the Motherlode for $15.00 each! The history books say that he made over $36,000 in the first 9 weeks of the gold rush. Remember, this is $36,000 in 1849 dollars… quite a bit more than $36,000 in today’s value.
Samuel Brannan became famous for becoming California’s first millionaire. He made his first million (pun intended) during the gold rush without mining a single ounce of gold himself.
So the point of this article is this: Don’t always follow the crowd. Watch what the crowd is doing and find a way to capitalize on the supply and demand factor.
One example I noticed in the past few years here in California is the marijuana industry. For a while, everyone was growing “medical” marijuana and trying to sell it in big loads to the “medical marijuana” stores. While some people did make a lot of money doing this, some also ended up in federal prison for trafficking a Schedule 1 controlled substance. Even some of the “legal” marijuana stores were shut down by the federal government and many of the owners were prosecuted from time to time (at the time, medical marijuana was legal in the State of California but it was still against federal law).
What I noticed was that there were a few very smart entrepreneurs who knew they could take advantage of this “green gold rush” without having to actually do anything illegal. They started legitimate businesses that did not sell marijuana. I started to see “hydroponic” stores popping up around town. Basically they were gardening stores for growing marijuana. Some of these stores made an absolute killing as all of these people started growing marijuana and needed to buy all of the gardening supplies: grow lights, chemicals, soils, fertilizers, pesticides, and everything else. All legal, legitimate products. These entrepreneurs took the Samuel Brannan approach and I’m sure many of them struck it rich!
So here is how you can strike it rich: Find the next rush, whatever it may be. Instead of joining the crowd and rushing in with them, find out what they demand to join the rush and supply it to them!
***COOL FACT ABOUT GOLD IN THE CALIFORNIA MOTHERLODE:
It is estimated that nearly 750,000 pounds of gold were extracted from the Motherlode region of California during the 1849 gold rush era. 750,000 pounds makes up about 11 million troy ounces of gold! At today’s gold price of $1,230/oz, that is about $13.5 billion worth of gold!
The funny part is that geologists who specialize in the Sierra Nevada region estimate that only about 5% of the total gold deposits have been mined since 1849, meaning that 95% of the Motherlode’s gold is still there in the ground! So if we know that the 5% of gold that was extracted is worth $13.5 billion, then the other 95% of gold that is still there represents about $270 billion! Who wants to learn how to become a gold prospector?