You’ll never be able to pay your bills doing that.
How often have you heard that phrase? I used to hear it a lot as a child. It was the standard response my parents had whenever I came up with a new career I wanted to pursue. This included becoming a cowboy, sports commentator, publisher, merchant, or a novelist. I would run to them all excited, pouring my heart out and explaining why this newly found interest was the right thing for my future. And invariably I would get the same answer: this won’t make you money. But as a 10-year old, I wasn’t interested in making money.
Not much has changed since then. While my ambition of chasing cows for a living has died down, I still don’t view money as a priority. It does have its uses, that’s clear. And it’s better to have money than not have it. But I don’t enjoy chasing it. For me, money is a mean to an end — nothing more and nothing less.
Still, ever since the burst of my childhood dreams due to financial unfeasibility, I’ve had one idea I couldn’t let go.
There must be an easy way to make money, regardless of the times you’re living in.
Have you ever wondered how John D. Rockefeller, Jakob Fugger, or Andrew Carnegie became so rich? Or how it is, that during any period of the last 500 years, there have always been people who earned more money than you can dream of? I’m not talking about inheriting riches. I’m talking about people born at the bottom of society, who have managed to climb all the way to the top. No matter how dire the circumstances, or how favorable the global markets, you will always find such people.
What do they have in common? What’s the secret sauce that helped them become so darn rich? If you look close enough at such biographies, you’ll see a pattern. In this article I will show you how they did it, so you can apply it in your own life. And once you understand the pattern, you will start seeing it everywhere.
How to Make Money During a Boom
Can you imagine one man transforming a city like San Francisco into a ghost town? In the summer of 1848, that’s exactly what Sam Brannan did. He was running up and down the streets, waving a small bottle, and screaming like a madman:
Gold! Gold! Gold from the American River!
The bottle in his hand contained proof of his sayings — glittering, clinking pieces of gold. And before you knew it, workers were abandoning their jobs, newspapers were closing, and sailors were jumping from their ships to head north. The gold rush was on.
But who was Sam Brannan? And why was he spreading the news of a newfound gold source? Wouldn’t it have been smarter to keep the secret for himself? If he had, we wouldn’t be talking about him 170 years later.
While more and more people were rushing towards the sawmill where the gold was found, Sam didn’t bother. He had a different idea about making money — one that didn’t involve mining or digging. An idea that would make him the first millionaire of the Californian Gold Rush.
When he heard that “there was more gold than all the people in California could take out in fifty years”, Sam opened a store near the mill where the gold was found. Then he went shopping. He bought all the mining supplies he could find, filling his store with buckets, pans, pickaxes, heavy clothing, food provisions, and everything else miners needed. After that, he filled a bottle with gold flakes and went to San Francisco.
As crowds of miners were gathering along the river, Brannan didn’t spend one minute swinging a pickaxe. But his store was selling goods worth $5,000 (over $120,000 in today’s money) every day. He opened a second store and a third one. Then he started buying buildings in San Francisco and Sacramento. And before you could spell “gold digger”, Sam Brannan became the richest man in California.
During the gold rush, it’s a good time to be in the pick and shovel businessMark Twain
Now before you dismiss this as a one-time tactic, reserved for gold rushes and greedy miners, let me give you a few more examples. The most recent one happened just a few years ago, during a similar craze.
In just 12 months, the digital currency called Bitcoin went from $780 to $19,650. Suddenly the world was full of digital millionaires. As the news spread, more and more people joined the rush for digital gold, trying to mine as much as possible. But during the next 12 months, Bitcoin plummeted from almost $20,000 to $3,200 and people lost money just as fast as they had made it. Except for some.
Even in the digital age, the tactics of Sam Brannan still held true. The ones who profited most from a gold rush weren’t the miners, but the people selling pickaxes.
In this case, the pickaxes were the GPUs — graphics cards used to mine bitcoins. The stock price of nVIDIA, a popular producer of such cards, went from $26 to a staggering $280/share in 2 years. The people who sold mining racks (the computers used by miners) made a ton of money. And they kept it even after the price of Bitcoin went down.
No matter what kind of boom you’re in, the best way to make money is to sell what the miners are using. For fun, let’s see how you could apply this method in your own life.
Scenario #1: You finally get that time machine going. But something goes wrong and, instead of landing in 2400 surrounded by sexy robots, you land in the 1600s. You’re in the middle of the European tulip mania. People around you are going crazy over tulips, paying up to 12 acres of land to buy one bulb. The prices seem to go higher and higher every day. But we both know how this will end. So what would be a smart thing to do? Sell pickaxes, of course. You could sell flower pots, fertilizer, or greenhouses. This way, when the bubble will finally burst, you will still keep all your profits.
Scenario #2: Right now, in 2020, we’re living through an online boom. The number of internet sites, businesses, and apps is constantly growing. More and more people are dreaming of living on a beach in Mali and making money in their sleep. Some of them make it, most don’t. But who do you think is making the most money during such a period? Yep, it’s the people selling pickaxes. Whether it’s online courses telling you how to make money online, or books about creating the next killer app, or webinars teaching you how to become the next megastar influencer. Sell pickaxes and you will surely make money during any boom. And if the whole thing turns out to be a fad, you will still keep your money.
How to Make Money During a Bust
Now you know how to make money when the economy is growing. That’s the easy part. The real challenge is to make money while everybody is panicking and the market is going down.
Let me tell you the story of John Henry Patterson. He was born in Dayton, Ohio, and was 4 when the California gold rush took place. After finishing college, he decided to open a small supply store for coal miners. At the time, this was a profitable business with little competition. There was just one problem.
John’s employees were stealing from him. So despite having solid margins, his store lost $3,000 (about $75,000 in today’s money) in three years. On top of that, Patterson and his business were now in the middle of the third-longest depression in US history. Business activity dropped across the board by a third — even more than during the Great Depression.
So how do you build a money-making machine during such conditions? You sell pickaxes… with a twist.
While searching for a solution to his own problem, Patterson stumbled upon something that would revolutionize shopping forever. It was a new invention called Ritty’s Incorruptible Cashier. But you and I call it a cash register. It was the first machine that could automatically lock the cash and receipts after every transaction. After taking a look at this machine, Patterson bought two of them for $100. And during the next six months, his business went from losing money to making $5,000 in profit (over $100,000 today).
With the profits Patterson bought Ritty’s patent for the machine and, in the middle of the depression, he founded a new company. Patterson knew that if he advertised right, every store owner across the country would want one of these machines. Ten years later, the National Cash Register Company had over a thousand employees. By 1922 it had sold over two million cash registers. And today, the company is worth over 6 billion dollars.
Lucky case? Maybe. Or maybe the principle of selling pickaxes works even during a depression — you just have to apply it right. To set things straight, let’s try and use this method during the mother of all economic shit storms: the Great Depression.
Becoming a Millionaire During the Great Depression
It lasted 10 years, bankrupted nearly half of the US banks, and left 15 million Americans without a job. These are just some facts of the Great Depression. But beneath these numbers lie the lives of real humans. Stories of people hugging on the floor to stay warm at night. Of people with degrees facing eviction, unable to get a job. And of mothers desperately looking for ways to feed their families.
One of the many people who got fired during the Great Depression was Charles Darrow. Like so many around him, Darrow suddenly had a lot of free time. With not enough money to go to the movies or go out for drinks, he was looking for cheap indoor activities. And one day, Darrow an idea — one that would soon make him a millionaire.
How can a former salesman, who got laid off because the whole economy was going down the drain, go from being desperate to earning over a million dollars? By selling pickaxes, of course.
It all started in his kitchen, with Darrow drawing streets on a tablecloth. Using pieces of old material, bits of paint, and wood from local merchants, he created a game. The sort of game that was cheap to produce, fun to play, and would provide something people needed so desperately: an escape from reality. The whole family could play it and imagine going from low-life employer to becoming a real estate magnate. Darrow called his game Monopoly.
The first ones to enjoy playing this new game were Darrow’s friends and family, who used to gather every night around his kitchen table. Then the friends asked for copies so they could play at home. Orders increased and Darrow started offering the game to department stores. Eventually, a copy of the game got into the hands of a Mrs. Barton, who enjoyed the game so much that she swayed her husband into playing it. Her husband the president of Parker Brothers.
Parker Brothers bought the game rights from Darrow, giving him royalties on every set sold. Within a year, in the middle of the Great Depression, 20,000 sets were being produced every week. Monopoly became the best-selling board game in America. And Charles Darrow became the first millionaire game designer in history.
Why? Because Darrow and the Parker Brothers were selling something all the people across America needed so desperately: a cheap, fun, indoor game for the whole family. And, with it, came something everyone needed so badly during the Great Depression: a vision of a better, more prosperous life. They were selling pickaxes.
Turning Pickaxes into Millions
There you have it: a proven way of making money during any period. Is the economy booming? Great, sell pickaxes. Is the economy going down? No problem, sell pickaxes. You don’t need any special talent, training, or degree. Just a keen eye and a drive to make more money.
Here’s the method broken down into 3 quick steps:
- Look around and see what people are going crazy for. Whether it’s mining gold or mining bitcoin, there’s always something that gets people’s blood pumping.
- Find out what those people need. It may be something as mundane as pickaxes, or something as abstract as hope for a better tomorrow. Talk to people and understand their wants.
- Provide them with it. Do your best to help them satisfy their crazes, wants, and burning desires. Help them pursue their dreams and they will repay you gladly.
Pair with How to Get Rich by Being Nice