The great California gold rush began when sawmill builders found gold in a streambed in 1848.
Headlines in newspapers around the world told tall tales of gold lying on the ground just waiting to be picked up. Hundreds of thousands of gullible fortune seekers came by land and sea in search of easy money. Housing, food, and supplies were in short order, and shrewd purveyors got rich selling overpriced goods to the prospectors, an early example of demand pricing.
Early arrivals picked up nuggets lying in the stream beds everywhere. The biggest ever found is said to have weighed 103 pounds. When the nuggets were gone, prospectors swirled tin pans to separate the small but heavy gold flakes from the gravel and sand. Before long, the streams were “panned out.”
Inventive and industrious prospectors built elaborate sluice boxes to manage the water, sand, and gravel on a larger scale. Soon, flake gold was gone, too, and prospectors were left to search for very small particles of gold dust. This was harder work and produced a much lower return on investment. When the surface gold was gone, the miners took over, following the streams back up into the hills, where they dug for gold by hand.
Forty years later, another gold rush was on. Lured by the promise of easy money, herds of starry-eyed stampeders set out for the Yukon Territory. The trail was treacherously steep, rocky, rugged, and icy. It was so perilous that authorities required fortune-seekers to have a year’s worth of equipment and supplies before they were allowed into Canada, including 1,000 pounds of food. Conditions were so harsh that of the 100,000 who started the trek, more than 70,000 fell by the wayside. The 30,000 that made it to the Klondike found reports of how much gold was just lying around had been greatly exaggerated, and all but a few returned home penniless.
As gold became harder and harder to mine, the extraction process got more complicated and more expensive. Today, the richest gold deposits in the United States require seven tons of rock to produce one ounce of gold. Modern mining operations extract more than 50 million ounces of gold a year, digging 350 million tons of rock to get it.
Information is like gold in that:
- It is a very valuable resource.
- It is harder than you think to find, extract, and refine.
- Small bits that are lying about are easy to find and worth little. Large, rich veins require lots of work and are worth fortunes.
Most research today is conducted by foolish people who believe valuable information is easy to come by. What they find is not gold, but fool’s gold – glittery and valueless. Only behavioral scientists are able to find, extract, and refine information that provides real competitive advantage.