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.