On a May morning in 1848, a Mormon merchant named Sam Brannan strode through the plaza of the small port town of San Francisco, holding up a bottle of gold dust and bellowing that gold had been found on the American River. What he did not mention was that he had already quietly bought up much of the region's stock of picks, pans and shovels. As the town emptied and thousands stampeded inland, Brannan sold the prospectors their kit at spectacular mark-ups — pans bought for pennies went for many times their cost — and within a few years he was widely reckoned California's first millionaire. He never staked a claim. He never needed to.
The gold itself had been found months earlier, on 24 January 1848, when a carpenter named James Marshall spotted bright flakes in the tailrace of a sawmill he was building for the Swiss-born landowner John Sutter at Coloma. The two men at the centre of the strike illustrate the rush's cruel arithmetic: Sutter's land was overrun, his workers deserted, his empire collapsed, and Marshall died in poverty. The forty-niners who followed — perhaps 300,000 people reached California within a few years — mostly fared little better, sifting icy rivers while the price of everything they needed, from flour to floorboards, soared around them. San Francisco exploded from a village of about a thousand people in 1848 to a city of some 25,000 by 1850, and it was in that inflation, not in the riverbeds, that the durable fortunes were made.
The merchant's playbook
Which brings us to the most famous name in gold-rush commerce — and its most instructive myth. Levi Strauss did not sell blue jeans to the forty-niners. The Bavarian-born merchant did not even reach San Francisco until 1853, when he arrived to open the west-coast branch of his family's New York dry-goods business, wholesaling cloth, clothing and haberdashery to the shops of the mining towns. The riveted denim trousers came two decades later, after a Reno tailor named Jacob Davis, who bought his cloth from Strauss, hit on the idea of strengthening workmen's trousers with copper rivets at the points of strain. Davis needed a partner to fund the paperwork, and on 20 May 1873 the pair received US patent 139,121 — the birth certificate of the blue jean, issued a full quarter-century after the rush began.
The pattern repeats with almost comic regularity. John Studebaker arrived in California in 1853 intending to dig, and was talked out of it by a Placerville blacksmith who needed someone to build wheelbarrows for the miners. Five years of work as 'Wheelbarrow Johnny' earned him roughly $8,000, which he carried home to Indiana and put into his brothers' wagon shop. The Studebaker company grew into the world's largest wagon maker — and later became the only major American wagon firm to make the leap successfully into motor cars.
Henry Wells and William Fargo never went near a sluice at all. Fresh from founding American Express in 1850, the two New York expressmen launched Wells, Fargo & Co. in 1852 to sell the miners what they actually lacked: banking and transport. The firm bought gold dust, sold money drafts, and carried letters, valuables and eventually passengers by stagecoach across the West. Philip Armour did swing a pick for a while, but made his real California money digging ditches and running sluices for other men's claims, then took his savings into the meat trade and built one of the great Chicago packing houses. Domingo Ghirardelli, an Italian-born confectioner, gave up prospecting to sell chocolate and supplies to the camps; the company he founded in San Francisco in 1852 still bears his name.
Modern investors call this the 'picks and shovels' strategy — backing the suppliers of a boom rather than its speculators. A quotation to that effect is often pinned on Mark Twain, though there is no evidence he ever said it; the gold rush generated apocrypha as readily as it generated bankruptcies. What the record does show is a brutal asymmetry. Mining was a lottery in which the average ticket lost, and even the winners tended to hand their winnings straight back — to the bar, the outfitter, the laundry and the bank. The merchants faced no such odds. Every miner, lucky or luckless, needed boots, flour, a wheelbarrow, a stagecoach and somewhere safe to keep whatever he found.
The gold gave out within a few seasons; the customers never did. In 1849 as now, the surest way to profit from a frenzy was to stand just beside it, selling what the frenzied cannot do without.
Quiz nuggets
- James Marshall found gold at John Sutter's sawmill at Coloma on 24 January 1848.
- Sam Brannan publicised the strike after buying up mining supplies, and is often called California's first millionaire.
- Levi Strauss reached San Francisco in 1853 as a dry-goods wholesaler; the riveted blue jean was patented with tailor Jacob Davis on 20 May 1873 as US patent 139,121.
- John 'Wheelbarrow Johnny' Studebaker made wheelbarrows in Placerville before bankrolling the family firm that became the world's largest wagon maker.
- Henry Wells and William Fargo, who had already founded American Express in 1850, launched Wells, Fargo & Co. in 1852.