Saturday, September 11, 2010

Mining the Miners

When I was a little kid growing up in California I recall my father referring to me as a “49er”. Puzzled, my father explained that the “49ers” were the men who had come to California seeking riches mining for gold – the California Gold Rush. My dad was, of course, teasing me – I had been born in 1949, a century late for the Gold Rush.

The California Gold Rush is one of those stellar periods in western history, conjuring up all the values associated with the quintessential American individual; full of pluck and ambition, self reliance, rugged determination, entrepreneurship. How we love those stories of self-made men and women who grab opportunity by the horns and make their mark.

I can say now, though, that after residing just over half-century on the planet, this “49er” has become skeptical of buying into this mostly a great American myth.

The historical truth is that not one single millionaire was ever unearthed from the Gold Rush. Instead, the men who came to California to "strike it rich" more often fell into poverty; owning worthless claims and suffering fruitless labor. But three men did become very wealthy during those times: Leland Stanford, Mark Hopkins and Collis P. Huntington. These men came to California with a more shrewd plan – they became millionaires by “mining the miners”.

These businessmen, who would later join with Charles Crocker (“The Big Four”) and invest in the Central Pacific railroad, instead made their initial fortunes through selling picks, shovels, provisions and equipment to the gold miners. The real gold was to be found in the pockets of the eager “49ers”.

My wife and I have long understood the concept of “mining the miners” over our careers. For example, we encountered it during Nancy’s brief foray into real estate sales. As an agent, she was constantly presented with opportunities to part with her money. There were (required) regional, municipal and professional association licensing and membership fees. There were companies hawking customer management software and marketing gimmicks such as personalized pens, magnets, and sign riders. She was constantly bombarded by someone pitching a device, tool or fool-proof marketing system. Real estate agents were exposed to perpetual shake-downs; and she bought a lot of this stuff.

I was exposed to marketing hype as well as a filmmaker. I began searching for a distribution channel after my documentary was completed. Film festivals are often to most accessible venues for emerging filmmakers. Submitting a film to the Sundance Film Festival costs $75. But Sundance is only one festival; there are hundreds of them, each requiring a separate submission fee and one or more copies of your film. For the privilege of sending your money and free films, scant few festivals even bother to e-mail you that your film was rejected. From most, you hear nothing. There is even a company that will broker this shakedown for you – pay by credit card and enter as many festivals as you like. Oddly the two festivals my film was selected for contacted me, requesting me to submit my film.

On the other hand, we have successfully played the “mine the miners” game ourselves. During the High Tech Boom, back when everyone was going to get rich investing in web sites, we took a queue from “The Big Four” and invested instead in companies that supplied the infrastructure; the picks and shovels, for the emerging Internet. Sun Microsystems and CISCO Systems made the servers and routers on which these ethereal web sites would pay to exist. For a short time, at least, we enjoyed feeling a little smug about our nice returns.

Still our society is awash with “mine the miners” schemes; multi-level marketing, online investment opportunities, franchises, work-at-home schemes, “natural” products with miracle health properties. Attend the free seminar and learn how to become independently wealthy without leaving your home. The pitch usually focuses on getting you to imagine how you will spend your newly acquired wealth. Yeah, there is wealth there to be had – by selling these schemes to others.

Success stories are the darlings of the media, and there seems to be on end to them. What you never hear are the stories of the majority who tried, failed and went broke or quit. Whenever we see these stories about some entrepreneur who plied their great idea into a successful business, we often wonder; what part of the story are they leaving out? The secret truth is often a bit more arcane; how the individual had an inside track to the people who could facilitate the idea, or the vague source of adequate capital backing by the unseen investor. Sure it has probably happened where someone has gone from “rags to riches”, but dig deeply enough and more likely you will find an unseen hand and/or luck were involved.

The “49’ers” often sold their only possessions to book passage to California; most left family behind, or hauled them across the plains at great cost and personal sacrifice. I recently read an article that sadly revealed today many low-income people actually purchase lottery tickets in a servile attempt at retirement planning. I guess desperation makes the odds appear better than they are.

Still, in America, “there’s gold in them thar hills!!” – the trick, it seems, is knowing whether you should be the one buying, or selling, the shovel.


Elisabeth said...

Most of us are lured by the fantasy of getting something for nothing, but I'd say that as a general rule, you give nothing, you get nothing. Thanks for this, My husband, it seems from what you write here, is also a 49er. Some coincidence.

Gorilla Bananas said...

Yes, the miners should have realised you don't make a fortune doing the same thing everyone else is. If I lived in America I would try marketing "discover your inner gorilla" courses. I might offer scholarships to promising students of limited means.

The Mother said...

The prostitution industry has always known this.

DJan said...

There are some really good books that cover the Gold Rush years. I read a few years ago, and I found it very depressing to discover how many lives were lost because of Gold Fever taking over the hearts of so many men in those years.

As you point out, the "retirement planning" of lottery tickets is the sad remnant of that same fever. At least most are able to buy their lottery tickets without selling everything they own and going West. Thoughtful post.

secret agent woman said...

You left "greed" out of the list of characteristics of the American individual. I distrust efforts to get rich since most (all?) truly rich people make their money on the backs of others. What would happen if everyone decided to have enough, even if there was some variance in what constituted enough, and stopped trying to strike it rich?

Robert the Skeptic said...

Elisabeth Sadly often hard work and doing the right thing brings little reward or achievement. I am amazed at how much of the time dumb luck is involved in success or failure.

Bananas Finding one's "inner gorilla" would probably go over very well here; although unfortunately Americans already have a reputation for chest-thumping.

Dr. Mom Oh yes, and prostitution was the other significant way of mining (or milking) the miners. The boom towns frequently had a substantial number of brothels.

DJan My all time favorite book is "Roughing It" by Mark Twain. Written about his experiences as a journalist in Virginia City during the mining boom. He even tried his hand at mining, funny story.

SecretAgent I once saw a TV program where some rich bastard was being interviewed on he yacht. When asked why he needed to keep pursuing wealth even though he had more money than he could spend, he spoke for all of them when he said: "It's how we keep score." I think that says it all; it's not the money, its the ego.

Nance said...

Excellent! Well-stated, good examples, and full of truth.

I recently saw something, somewhere in a news item (I say that sort of thing a lot now because I'm a '48er) that said we are a two class system: the rich and the "middle class," defined as those making less than $250,000 a year. Yes, the number is correct. The author thought he was making a joke in referring calling the rest of us middle class, because his point was that there is no middle class anymore.

Shows how out of it I am; I had always thought that people who made $200,000 a year were rich. Where the hell have I been?

Anonymous said...

Ah, capitalism.

Marylinn Kelly said...

First, off topic, thank you for your posting about Stephen Hawking's new book. LA Times review last week gave additional info...feeding my time/mystery hunger.

The Mother Lode country in the Sierra Foothills is one of my favorite parts of the state. Like Civil War battlefields in other regions of the country, its history is in the very ground. For me it is always a struggle to find the balance between allowing the dreamer and being in the moment, grateful and practical. They are still selling the illusion here, probably elsewhere as well.

Robert the Skeptic said...

Nance There is the middle class, but also a growing "under class". These are the people who can never hope to play in the "market" that the Conservatives and Libertarians talk about. Oddly though, as you point out, many people in error think, when we talk about "the rich", we are talking about them.

BackRow Capitalism can be mutually beneficial... when it's not perverted by greed.

Marylinn I grew up in California and loved California history. We had friends who lived in Murphys, near Angel's Camp. We used to explore the old mines before they filled a lot of them in.

Yes I was pretty excited about Hawking's book, though the news is not new, he has a way of demystifying the complex that I admire. What a time to be living on this planet!!1

Murr Brewster said...

When I was in the post office--a place where one could earn an honest living and, after being judicious about one's earnings, hope to retire--an enormous number of my co-workers invested in the lottery, Texas Hold 'Em and what-have-you. They chatted about what they'd do when they hit it big. The scenario varied, but I'm here to say most of them would have been back at the post office after a couple years, starting over.

I still think people who chase riches are excruciatingly dull.

Robert the Skeptic said...

Murr I heard a story about the Somali pirates who get millions in ransom from capturing a freighter. In no time at all their money is gone; they have no experience with money so then end up pissing it all away. Ah a pirates life for me, Yo Ho.

Mary Witzl said...

Some of my ancestors went west and baked for the miners. I've always been rather proud of that: dull, yes, but so useful. Just about everybody needs bread.

I'm with Murr: people who talk of nothing but get-rich-quick schemes bore me to tears. When those schemes actually work, they're almost worse off than before. And they invariably miss out on the fun of developing their characters.