Gold Rush! When 100,000 People Chased Fortune in California
You know what is funny about the California Gold Rush? The guy who found the gold died broke. The guy who sold shovels became rich. If that does not tell you everything about how money works, I do not know what does.
Chapter 3 of “From Tulips to Bitcoins” by Torsten Dennin takes us to 1848 California. And this story is one of those “the more things change, the more they stay the same” situations.
A Nugget That Changed Everything
Before 1848, California was basically the edge of the world for Americans. It was populated mostly by Mexicans, Spanish descendants, and Native Americans. Very few settlers bothered to go that far west.
One of those who did was John Augustus Sutter, a Swiss-German guy who owned a big piece of land in the Sacramento Valley. He was building a sawmill near a place called Coloma. On January 24, 1848, his carpenter James Wilson Marshall spotted something shiny in the river. A gold nugget.
Sutter and Marshall tried to keep it secret. That plan lasted about five minutes. Their employees started paying for things in town with gold they found on the ground. Hard to keep that quiet.
Then Samuel Brannan happened. He was a shopkeeper in Coloma who also happened to sell prospecting equipment. Think about that for a second. He filled a bottle with gold nuggets, rode into San Francisco, and started shouting “Gold, gold from the American River!” up and down the streets.
This was not some random excited guy. This was a business owner who sold the exact tools people would need to go find gold. Marketing genius in 1848.
The Flood
And people came. Boy, did they come.
In 1848, about 6,000 gold seekers showed up. That was just the warm-up. In 1849, around 100,000 people flooded into California from all over the world. From the east coast, from Europe, from South America, from China. The Chinese called California “Gum San,” which means “mountain of gold.” Pretty accurate name.
The numbers are wild. California had fewer than 15,000 non-native people in 1848. By 1852, the population exploded tenfold. San Francisco went from under 1,000 people to 25,000 in just two years. By 1855, more than 300,000 gold seekers had arrived.
Think about that. An entire state’s population growing ten times in four years. That is not normal immigration. That is a stampede.
The Math of Gold Fever
Why did people drop everything and travel for months to get to California? Because the math was insane.
A successful miner could earn 20 times what a regular worker made on the East Coast in a single day. Six months of gold mining equaled six years of normal work back home. If someone told you that you could earn six years of salary in six months, you would probably start packing too.
Annual gold production hit 77 tons by 1851. Dennin notes this exceeded the total US GDP at the time. The ground was literally producing more value than the entire American economy.
But here is the part people always forget. Prices for everything went through the roof too. Prospecting gear went up 10 times. Food, shelter, tools, all of it got crazy expensive. Getting to California was expensive. Surviving there was expensive. And finding gold was not guaranteed at all.
The Real Winners Were Not Holding Pickaxes
This is my favorite part of the chapter, and honestly, the most useful lesson.
Samuel Brannan, the shovel salesman who started the whole frenzy? His store was making $150,000 a month. In 1848 money. That is millions in today’s dollars. He never had to dig a single hole.
And then there is Levi Strauss. He showed up in San Francisco looking to make money off the gold rush. But instead of mining, he looked around and noticed something. Miners kept ripping their pants. Regular clothes could not handle the work. So he started making pants out of tent fabric. Tough, durable, could take a beating.
That is how jeans were invented. Levi Strauss did not find gold. He found something better. A product that every single gold miner needed every single day.
This pattern shows up constantly in investing and business. During a gold rush, sell shovels. During a crypto boom, sell trading platforms. The people selling the tools almost always do better than the people using them.
The Bust
California became the 31st US state in 1850, basically because of how fast the gold rush grew the population. But the accessible gold did not last forever.
By 1860, the easy gold was gone. And when the gold disappeared, so did the people. Boom towns turned into ghost towns almost overnight. Columbia, one of the biggest mining towns, went from 20,000 people to 500. Imagine a city losing 97.5% of its population. Houses, stores, saloons, all standing empty.
And the pattern repeated. Australia had its own gold rush in 1851, and its population grew tenfold. South Africa had the Witwatersrand gold discovery in 1886. Alaska had the Klondike in 1896. Every single time, the same cycle. Discovery, frenzy, boom, then bust.
What Happened to the People Who Started It All?
Sutter’s settlement became the city of Sacramento, the capital of California. The San Francisco football team is called the 49ers, named after the gold seekers of 1849. The gold rush is literally baked into California’s identity.
But John Augustus Sutter, the guy who owned the land where gold was first discovered? He died in poverty in 1880. His land was overrun by miners. His property was destroyed. He spent years trying to get compensation from the government and never got it.
The man who had gold literally under his feet ended up with nothing. Meanwhile, the guy who sold jeans built an empire that still exists today. If that is not a lesson about how wealth really works, I do not know what is.
Previous: Chapter 2: Dojima Rice Market
Next: Chapter 4: Old Hutch Wheat
This is part of my From Tulips to Bitcoins book retelling series.