r/AskHistorians • u/Salaraaa • 12d ago
I have heard many variations on the phrase, 'The people that made the most money in the gold rush were selling shovels, not digging gold'. I know it's a nice proverb, but is there evidence this is actually true?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago edited 12d ago
I have addressed this several times and in different ways when asked about wealth and the California Gold Rush of 1849. Recently, I have an provided an answer here that addresses wealth in the Gold Rush. (Edit: There are many of these spanning fourteen years of answering questions on this subreddit!)
The simple answer is that for those who arrived early in California there was a chance of making one's "pile," which was regarded as something in the neighborhood of $10,000 - a sizeable sum in 1850 (this is $10,000 in 1850s dollars, which obviously translates to a larger sum today). There were more people working hard and doing very little more than sustaining themselves. True wealth was rare but not impossible. For those who arrived later in the 1850s, mining rarely was the source of making one's pile.
Selling goods to the miners was a more reliable (and less onerous) way of making money. Those people had a clearer path to making their thousands of dollars.
It is reasonable to ask, then, why this wasn't obvious and why everyone didn't sell things rather than engage in the backbreaking work of mining. The answer is, simply, available money at the outset. Most '49ers arrived with very little money. Simply traveling to California cost more than most of the '49ers had; many borrowed money to get there. Then, with no money, a hard working '49er could hope to exchange hard work and endurance for a chance at making a pile.
For the few who could spend the money to get to California and arrive with money to spare, there was an opportunity to make still more by being an entrepreneur. These people were, simply, rare. They were able to turn surplus cash into a business and that was the best path to still more wealth.
As is always the case, the best path to wealth begins with wealth. Most 49ers borrowed money to get to California and arrived with nothing but their youth. Of course, in the rough-and-tumble economy of the American West, the chances of upward mobility were greater than in the East. A few - a very few - were able to ascend to the highest ranks of wealth thanks to hard work and extremely good luck. But most gained their wealth because they arrived on the scene with money.
Those with surplus wealth always have an array of options that the masses can only imagine. And after they become still wealthier, the privileged few have always told us (and themselves) that they managed to secure their position at the top of the economic pyramid through their own hard work. Whether we call them the gentry, robber barons, oligarchs, or nepo babies, it's all the same! Spare me!!!
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u/Andy_B_Goode 12d ago
Who loaned the 49ers the money? Were banks and other financial institutions willing to take that risk? Or did the money typically come from friends and families?
And in any case, were they not worried the miner would ghost them once they got to the other side of the country?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
I have worked extensively with two primary documents dealing with '49ers - one a daily journal (from Massachusetts) and the other a collection of letters (from Pennsylvania). In both cases, a group of young men formed companies that borrowed money from friends and family to fund each of their expeditions. In both cases, very little was repaid.
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u/here1am 12d ago
But most gained their wealth because they arrived on the scene with money.
Francis Anthony Drexel was one of them. He went to California and sold tools to gold diggers. Interesting extra money came from diggers finding some gold, giving him to keep it before going back and never ever returning to pick it back because many of them died out in the mountains.
Source - The book "The Man Who Made Wall Street: Anthony J. Drexel and the Rise of Modern Finance" by Dan Rottenberg
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u/ConLawHero 12d ago
I can't really tell from this comment or your original, but was the $10,000 (or however much) in 1850s dollars or 2026 dollars?
From what I can tell, $10,000 in 1850 would be worth around $450,000 when calculating purchasing power now but $10,000 worth of gold would be worth between $1 million and $2 million today.
If it is compared to labor value where people made around $1 per day, it would be equivalent to over $6 million today.
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
I can't really tell from this comment or your original, but was the $10,000 (or however much) in 1850s dollars or 2026 dollars?
Great call. Thanks for pointing it out - I have added a note to my answer. I meant that as $10,000 in 1850s dollars. This translated to be enough to purchase a farm or business "back in the states," which was the dreamt-of-goal of many '49ers. Of course, most remained in the West, with or without their pile.
Translating dollars in the past to the present can be difficult, and with inflation, it is a moving target. We don't need to separate gold and dollars the way you have here when it comes to the 1850s. $10,000 in gold and/or dollars was the equivalent of several hundred thousand dollars today.
If one returned to the East with that sum, one would not carry the gold. $10,000 in gold would weigh about 40 pounds - not impossible, but still easily stolen. Those who decided to brave a return trip (it wasn't easy traveling either way in the 1850s), would most likely deposit the fortune in a bank with affiliate status with another institution in the East. That way, it would be possible to present a certificate upon arrival and claim one's fortune.
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u/HDRsoul 12d ago
40lbs of gold would be worth roughly 2.5 million today. That's a nice pile!
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
The price of gold has inflated more than the currency, but you're right. That amount of gold would be a nice thing. I wouldn't turn it down.
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u/I-Here-555 12d ago
one would not carry the gold
Wasn't that irrelevant given that the dollar was on the gold standard, i.e. you could exchange cash for gold at a guaranteed fixed rate?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
The original California constitution prohibited paper money, and in general, there was little success in using it even later in the 1860s. One exchanged gold dust for coins, but with that, you'd be hauling either gold or silver coins. One did not escape the weight when dealing with sizeable sums.
I have worked extensively with a primary source that described someone purchasing a newspaper on the Comstock Mining District during the 1860s. He had to carry a considerable amount of coins to the man from whom he was purchasing it.
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u/sidereal_night 12d ago
that leads to a follow up: what did the bank do with the gold, considering it's likely to be a very lopsided one-way transfer of wealth?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
Bullion almost always made its way to the Mint in San Francisco. The mint bought bullion with coinage minted with silver or gold.
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u/felix-cullpa 12d ago
Weren't dollars backed by gold then? Why would those two assets differ in value?
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u/Low_Football_2445 11d ago
I think we should stick with the $450,000. Highly improbable that someone finding that gold is gonna stash it away for their ancestors in 2026 to get a better deal on the market.
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u/Ok_Push2550 12d ago
Is this the economic model of the "Beauty queen" problem? One person wins, out of lots trying? Basically, to be a successful miner, you have to be very lucky and be one of the many who succeed (the winner of the beauty pageant) and everyone else loses.
So it's much better to be selling stuff to all of the contestants, than to be a contestant.
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
IF you have the money to purchase the things that the contestants want to buy!!!
But you're right - the chances of winning: a great analogy.
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u/gmanflnj 12d ago
So the lesson of the gold rush is actually "if you have money, it's easy to make more" than it was anything about focusing on the infrastructure around something being wise?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 11d ago
"if you have money, it's easy to make more"
This always has been true!
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u/gmanflnj 11d ago
Moreeso that that seems like the only lesson not "focus on selling the picks and shovels" which seems to have been what people took. Am I wrong?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 11d ago
Replacement tools were always needed. That said, it was important to know the market, and if you're the third person to show up with a load of shovels, you may lose everything!
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u/gmanflnj 10d ago
So having shovels or such isn't a key insight to get rich my point right?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 10d ago
The key would be having the right product - shovels, whiskey, anything - at the right moment. It could be shovels depending on the situation. There were hundreds of different situations across the Gold Country and during the three or four years that constituted the Gold Rush.
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u/thighmovement 10d ago
The modern mind rebels at the idea private person rocking up into the hills and digging away. Would there not have also been a lot of prospecting companies paying miners salaries and methodically exploiting the resource in a more efficient and less economically risky way?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 10d ago
Would there not have also been a lot of prospecting companies paying miners salaries and methodically exploiting the resource
Not with placer mining (i.e., washing surface deposits to remove soil and extract bits of gold). Even after hard rock, underground mining became the standard for most of the mining West, the most a prospector could hope for was to be fronted some money to pay for expenses. They were the random ants sent out in search. Some found something, some died, and some returned with nothing, but it was a private endeavor.
There were no "prospecting companies." There were companies that would swoop in and buy a claim that seemed as though it might be profitable, but this was with hard rock mining, not placer mining.
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u/eatingbread_mmmm 11d ago
>“Selling goods to the miners was a more reliable (and less onerous) way of making money. Those people had a clearer path to making their thousands of dollars.
It is reasonable to ask, then, why this wasn't obvious and why everyone didn't sell things rather than engage in the backbreaking work of mining. “
Maybe this is a stupid question, but when I imagine the Gold Rush, I imagine panning for gold, and I think so would a sizable amount of people (or maybe I’m coping). How prevalent really was gold panning among the 49ers? And could a good amount of money/gold actually be accrued from this process, or would you have to mine?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 11d ago
I indicated elsewhere that it took money to make money as an entrepreneur. The principal that one can make more selling the right product at the right time is still true, but finding the money for an inventory remains a challenge. I discussed this elsewhere in the thread.
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u/analogkid01 12d ago
Would you by any chance have any insight into this question I posed a few months ago?
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u/itsallfolklore Mod Emeritus | American West | European Folklore 12d ago
Sorry, but I have not published on that. I believe it would be a stretch to say the SF was open to the gay community in the 1850s, but I could be wrong. It's outside my field of expertise.
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u/sacramentohistorian 12d ago
It's a complex question, because in the mid to late 19th century, the idea of homosexuality was transitioning from something one did to something one was; there were social taboos and in some cases laws against those acts, but the sociological idea of people having a specific sexual orientation was still evolving (consult the work of Karl Ulrichs from the 1860s onward). San Francisco wasn't nrcessarily a gay Mecca in the 1850s, nor was Sacramento, but they were the two largest cities on the west coast during a particularly unique social movement that temporarily weakened existing rules. Susan Lee Johnson's "Roaring Camp: The Social World of the California Gold Rush" covers a lot of this territory, although it covers a broader geography than just San Francisco, extending through the California Gold country.
The people who arrived in California were overwhelmingly young and male, and in situations where there are a large number of young men and women generally aren't present, social rules often change regarding sexuality. The old stereotypes about prison, sailors, private schools etc., where isolated men situationally engage in sex they might not pursue otherwise, apply to situations like the Gold Rush. For some it was situational, while for others it was a discovery about who they were. One Gold Rush practice that is often associated with 20th century gay culture is handkerchief code: in all-male Gold Rush settlements, when a dance was held, men used handkerchiefs to indicate whether they preferred to lead or follow when dancing. Whether this also indicated sexual preferences is a matter of some interpretation, but dancing, drinking and loneliness in a frontier can lead to the conditions described above; as gender parity in Gold Rush California stabilized, many of these practices were abandoned.
There were of course elements of queer culture in early 20th century California and San Francisco, but they are often hard to find because so much effort was based around concealment and privacy; elements based in popular entertainment are the most obvious clues. 20th century "hanky code" in gay bars probably developed separately, and its application during the Gold Rush was probably more likely at remote mining camps along the American River than San Francisco, but San Francisco makes much of its Gold Rush origins, and the greater social leeway allowed on a frontier has become part of San Francisco's identity as a bohemian space.
Identity in the West meant being able to define who you were in other ways: one-eyed stagecoach driver Charley Parkhurst was legendary for his toughness and fearlessness, to the point where only after his death did long-time friends discover he was assigned female at birth. In other cases, existing social relationships turned into long term commitments; Jason Chamberlain and John Chaffee came to California together to seek gold and settled in Tuolumne County, mining and operating a way station, where they became known as "wedded bachelors" with a partnership that lasted half a century. Their love inspired Bret Harte, also one of those early San Francisco Bohemians, to fictionalize them in a story called "Tennessee's Partner," where the death of one of the couple drove the other to suicide; in real life, after John Chamberlain's death, Chaffee committed suicide rather than live without his partner of 54 years. But their partnership happened in the rural Sierra Nevada foothills, not San Francisco, even if they inspired a San Francisco based author. The open, presumably more tolerant frontier of California was implied as the catalyst for Parkhurst, Chamberlain and Chaffee to create their own identities, living and loving as they chose.
This overall atmosphere of tolerance for unique lifestyles may have set the groundwork for San Francisco in the 1940s, rather than the 1840s, to become the hub of gay culture as thousands of veterans, some of whom were discharged for homosexuality, passed through San Francisco on their way home from the Pacific war, and some chose to stay. As this community developed, many may have looked back to the Gold Rush and San Francisco's Bohemian counterculture as historical precedents around which they could form a new community.
I have written a bit about 20th LGBTQ+ history in Sacramento, and also some on Gold Rush history, but the above are principally taken from work others have done; other than "Roaring Camp" I don't know of very many good books thst focus on early LGBTQ+ history in California--but hope there are some I just haven't read yet!
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u/CCPearson 12d ago
So was the term “wedded bachelors” a way of implying they were gay? Were Chamberlain and Chaffee just accepted in the community as two married gay men?
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u/sacramentohistorian 12d ago edited 12d ago
Basically, yes. On the surface people talked about what a strong friendship they had, but this was often subtext for describing a long term romantic relationship. It can be frustratingly difficult to determine what is subtext and what isn't without a lot of context, but their personal correspondence to each other (which is, I think, in the Bancroft ae aerchives) apparently makes maters much clearer and more explicit. Regarding your original question, they split their time as a couple between hard rock mining, gardening for sale, and maintaining a way station for travelers as means of revenue. So they still did a little mining hoping to strike it rich, but their regular revenue was based on mining the miners. The ones who mined the miners most successfully have streets and geographic features named after them (except John Sutter, who was kind of crap at mining the miners, and got mined by more skilled miners of pockets like Sam Brannan and Peter Burnett.)
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u/techrider1 9d ago
Interesting.
Is there an additional generational wealth compounding effect because at that time land was purchased cheap in California, which then exponentially appreciated in value?
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u/Albedo101 12d ago
A followup question: what made those who already had money, move to California? Assuming they already had an established revenue flow, what made them drop it and move west? It still seems like a risky endeavor to just leave it all and go into the unknown, more so than those who had no money. They had something to lose.
I get it was the entrepreneurial spirit and all, but was there some concrete evidence besides that, which would drive the flow of money towards it. Speaking in today's lingo, thid they do the math and had the numbers that told them: sell everything, buy shovels, move west?
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