Today we visited the Gold Discovery Museum at Coloma County. It was a great experience to learn in-depth about the world famous “Gold Rush” of California. It’s really fascinating to think of that the gold discovery site is literally 20 minutes away from where we stay.
It’s a state park and we took the official tour guide. The guide took us through the important sites in the park and shared interesting facts about the gold rush. I’ll share some of those facts below.
James Marshall & John Sutter
Gold was discovered on 24th January 1848 by James Marshall on the banks of the American river. He was a carpenter who was working on building a saw mill for John Sutter who was Mexican citizen.
Sutter was an ambitious businessman who wanted to build an agriculture empire in California. He had received a land grant from the Mexican government and established Sutter’s Fort in Sacramento.
California belonged to Mexico
When gold was discovered, California was not an American state. In fact, it was still a Mexican territory. The Mexican-American war was on going. Gold was discovered in the last week of January 1848 and just a week later on 2nd February, California was transferred to the US.
When Marshall told Sutter about the discovery of Gold at his saw mill, they both tried to keep it a secret. Sutter tried to secure the rights to the land so that he could then claim the rights to the gold discovered on it. However, he was unsuccessful because within a week of discovery, California no longer belonged to the Mexican government.
The US government honored the Mexican government’s land grant agreement to Sutter however the US law did not automatically include mineral rights as belonging to the land owner.
Sutter had to re-prove his ownership in the US courts after the gold discovery event as many miners and other businessmen challenged his claim.
Eventually, Sutter lost most of his land to the US and he did not own any gold rights. He died poor. James Marshall faced a similar fate and he died penniless too.
Their legacy:
James Marshall: There’s a big bronze statue of Marshall at the discovery site that honors him. That’s it for him. He is mostly a forgotten man.
John Sutter: Sutter Health, a large non-profit hospital network was named in his honor. His name lives on.
As per the US laws, territories needed to have at least 60,000 residents to become a state. The Gold rush accelerated this process as thousands of people came there to find a fortune. Within 2 years of the gold discovery, California became a US state in 1950.
During a Gold rush, sell shovels
I had expected that either Marshall or Sutter would have become filthy rich because they were the ones who had discovered gold! But surprisingly that was not the case at all. In fact, even the early gold miners did not get rich at all.
Instead, the real hero of the Gold Rush was a man named Sammuel Brannon.
He was a businessman and ran his newspaper in San Francisco. Back then San Francisco was called Yerba Buena. It had a population of just around 800 people! He was a classic case of a smart businessman who knows how to seize the opportunity.
When he learnt about the gold discovery in Coloma, he first went around and bought every pan, pick and shovel in San Francisco for around 20 cents a piece. He then setup a shop selling those equipments which were necessary for panning gold from the American river.
Next step, he ran through the streets shouting “Gold! Gold! Gold found in the American river!” He essentially told everyone about the gold discovery and triggered the gold rush! He knew people would then come to his shop to buy the equipments before heading for Coloma county.
California’s first millionaire
He sold those shovels which he had bought at 20 cents a piece for a price of $20 a piece! That’s a mind boggling 1000% markup.
Now even more surprising is the fact that the price of gold during that time was $20/oz! So essentially Brannon was selling all those shovels at the rate of gold!
The man became California’s first ever millionaire, not by mining gold but instead by selling the shovels to the miners.
One more man who followed this strategy was none other than Levi Strauss! He sold his world famous Levi’s jeans to the miners and became very rich and his legacy lives on today.
A big business lesson there! In today’s world, I think of so many similar examples:
- Amazon got so profitable by selling AWS cloud servers while many e-commerce retailers hardly made any profits.
- Zerodha got super profitable by selling stock broking services when India’s retail investors rushed to the stock market during the COVID-19 pandemic.
- Fintwit and course sellers got rich by selling stock market trading strategies during the stock market boom COVID-19 pandemic.
- Apple and Google got super profitable by selling their app store platforms during the apps economy.
- Adobe got super profitable by selling the apps in the creator economy.
- Shopify got super profitable when the drop shipping craze was on.
- Cisco and Intel got rich by selling servers and networking equipment during the dot-com bubble.
Chinese Gold Miners
Another interesting thing that the guide told us was how the Chinese miners were mistreated. After California became a state in 1850, they passed a law called “Foreign Miners Tax” that would charge a tax of $20/month for non-citizen miners. It was targeted towards the Chinese miners.
Interestingly, after the initial rush was done, many miners could hardly mine gold worth $1 a day. That means they could barely make around $30 a month and have to pay $20 towards taxes! The Chinese miners were impacted the most.
Later in 1858, California passed a law that made it illegal for any Chinese person to enter the state. In 1882, US passed the “Chinese Exclusion Act” to stop immigration. The law stayed in place till 1943!
Colonizers fearing colonization
What struck me the most was what the guide told us about the American perspective towards the Chinese miners. Many white Americans felt the Chinese miners were like colonists because they would mine gold in California and then send all their wealth back home to China. In a way, these Chinese miners were mimicking the colonists who plundered the natural resources of the land they invaded.
Ironically, the US had just taken California from Mexico a couple of years back. Most white miners had themselves arrived from the US east coast which was in turn captured by the Europeans during the age of discovery. It was like the Chinese miners were showing them a mirror they didn’t like to see into.
We ended our trip by visiting the Marshall Monument. It’s a statue of James Marshall pointing at the site of the original gold discovery. Overall, it was quite a learning experience.
