A few weeks back I was deeply involved in a conversation with a colleague. I don’t really remember where the conversation started or what’s its ultimate purpose was meant to be but it was one of those beautiful conversations that starts in one place, generates many connections and tangents and ends somewhere completely unrelated. I love those conversations as they spark so many new connections and different angles to explore. In the middle of this particular conversation one of us and I’m not sure who said something to the effect of “you know what this digital thing is kind of like the 21st century version of a gold rush.”
This was simply one of the many tangential comments made in the conversation but this one was not really picked up and pursued, it was simply made and the conversation moved on. As I was thinking about this later, however, this phrase kept coming back to me. I don’t know a whole lot about the gold rush but two things I thought I did know was that gold rushes were fueled by greed and secondly while everyone wanted to get rich quick not many miners actually got rich. In fact, from the little I have heard about gold rushes the ones that got rich were the merchants. The most famous of which was Levi Strauss, whose clothing business empire got it’s start in the California mines.
The analogy seemed to have some potential. Today’s merchants in the rush to digital are certainly getting rich. You just need to look at the rich lists and most valuable companies lists to see this. They are full of the recently wealthy technology driven rich. You can also see the underlying effect of greed pushing the digital revolution. Everyday people are opening up new technology businesses and trying to strike it rich as a technology entrepreneur. These adventuresome entrepreneurs are ably supported by the venture capitalists, angel investors and hedge funds who are more than willing to back them in the hope of a big payoff.
That said the analogy isn’t perfect as this gold rush wasn’t all about greed. There is also a large dosage of fear, particularly within large incumbent companies, usually born predigital, who are forever looking over their shoulder to see who was coming after them. As the saying goes, they don’t want to be Uber’ed.
Sufficiently intrigued I did some research to learn a bit more about the gold rush. Specifically the California gold rush as there was a lot of easy to find information on the California gold rush. As it turns out there are a lot of parallels between the California gold rush and what is going on today in the rush to Digital. I have listed some of them below.
|The Gold Rush||The Technology Rush|
The gold rush was a massive expression of greed. Men (and some women) from around the globe flocked to the gold fields for their chance to get rich quick.
Greed is certainly driving the technology industry however there is also a large element of fear in the digital rush, particularly for the incumbent companies.
Fear may have been there for gold rush incumbents (see later point about Sutter and the Native Americans) but it doesn’t seem to be as prominent.
Less than half of the miners who came to the gold fields made money and of those who did, it was modest and often lost to gambling, alcohol and prostitution.
It is likely that the majority of businesses that turn to technology as the answer to their business prosperity will make at best modest gains. Those that do make some gains need to ensure they don’t fritter those gains away or perhaps over invest (gambling, alcohol and prostitution aren’t big problems in modern organisations).
|Two types of miners seem to fare the best. ||If you want to maximise your chances of success you either need to be one of the first in or take an approach that others struggle to replicate. |
If you haven’t moved by now you’re probably too late to be a first mover because Amazon, eBay, Google, Apple, etc have already beaten you.
To be successful you most likely need to take a different approach than most. In today’s world it may not be about scale per se. Most literature I read suggests it’s more likely to be about building brilliant end to end technology management skills and building a tribe of advocates for your brand / services.
While not all merchants made money (the rules of business still applied) the merchants did indeed make most of the money. Whether they sold basic necessities, luxuries or other services the goods were almost always over priced and merchants did very well thank you.
If you are a merchant make your money while you can. When the initial rush is over prices and therefore your margins and profitability will return to normal.
If you are a “miner” expect to live through a period of time where much needed technology is likely to be over priced. Plan for it and pick your time to invest.
Those who resisted the gold rush were crushed. This is particularly true of John Sutter whose land the gold was found on. Sutter, and a number of other ranchers just wanted to keep on doing what they knew, they hated the gold rush for making their life difficult.
This revolution is happening. You can try and ignore it if you want but you will most likely get run down. This will define the future so, even if you don’t like it you need to get on board if you want to thrive or maybe just to survive.
Unless you work for a company that sells technology, if your organisation was born before about 1999 then at best your company is a miner. There is cause for you to be fearful because there is a chance you will become disenfranchised like John Sutter and the other ranchers. Even if you participate in the digital gold rush you are unlikely to be among the first miners to arrive at your digital gold field. This means that statistically you are very unlikely to “strike it rich” from digital, particularly if all you do is the same thing as most of your competitors. The average miner used a shovel, a pan and a sluice and made no or only modest amounts of money. If you use the same digital tools and same approach as everyone else you are unlikely to make any money.
It is not all gloom however. There is a chance that you can succeed if you take a different more value adding approach than most of your competitors. In mining this was partnering together and “industrialising” mining. In digital, well, that’s a topic for another blog.
This article is based on an excerpt from Owen’s upcoming book, Digital Gold Rush.