The Man Who Got Rich Off the Gold Rush ... Without the Gold
WHY YOU SHOULD CARE
Because his canny business move has become a maxim of ingenious investing.
By James Watkins
Following a frosty January night in Coloma, in the Sierra Nevada, a lumber mill foreman noticed shining specks among the thinly iced pebbles lining the channel below the water wheel. It was 1848, and the soon-to-be state of California had just months before been returned to American hands after Mexican and a brief period of independent rule. Supervising the mill for Sacramento lumber pioneer John Sutter, James Marshall made a discovery that sparked the legendary California Gold Rush and changed the course of the West’s history.
But neither Sutter nor Marshall became the Gold Rush’s first millionaire. In one of the boldest examples of American entrepreneurialism, Sam Brannan made a fortune by thinking outside the box: He profited from the gold hunters, rather than the gold itself. One of the first to learn about the lucky find, Brannan, who owned a couple of general stores as well as the newspaper in the young city of San Francisco, purchased every pot, pan and shovel in the city before he spread the news that May by running through the streets, screaming, “Gold! Gold in the American River!” (or so the legend goes).
He was a bit of a rascal, I suspect, like most businessmen at the time.
Charles Fracchia, founder and president emeritus, San Francisco Historical Society
Sutter’s tactic had been to try and keep the gold a secret, but for Brannan “publicity was the key deal — it would bring people to California, and bring people to his stores,” says H. W. Brands, author of The Age of Gold: The California Gold Rush and the New American Dream. And bring them it did. Within days of Brannan’s public outcry, the city of San Francisco had basically emptied, with hordes later flocking from across the country and the world.
Brannan struck it rich by profiting from the ensuing mania, which drove local prices for basic supplies from shovels to eggs through the roof. Although most descended on the West Coast hoping to find the shiny stuff themselves, several others would later follow Brannan’s model of indirect profit-making. Many false claims of gold discoveries were made, and each prompted a flurry of activity, from excited miners moving to a new town to wild trades in mining company shares, says Brands. Levi Strauss, of course, made his name by supplying miners with denim clothing.
Originally from Maine, Brannan converted to Mormonism and first settled in New York as a leader in the church. After persecution of the sect ramped up in the 1840s, Brannan was tasked with leading a ship of 200 Mormons fleeing the United States. Sailing via Cape Horn, they finally made it to Northern California, where they were disappointed to see the American flag after having tried to escape it. Brannan’s role in the church left him in charge of the tithes that the faithful had paid, duty bound to send it all to the church’s headquarters — though it seems Brannan’s money never made it to Utah.
Despite a falling out with the church, Brannan continued to collect a percentage of gold findings as tithes from Mormon miners. “Apparently the Mormon faith rested lightly on [his] conscience,” says Brands, “because he decided that his future in California was instead as an entrepreneur.” Indeed, another ranking member of the Latter Day Saints later “disfellowshipped” Brannan from the church on account of a “general unchristianlike conduct, neglect of duty and combining with lawless assemblies to commit murder and other crimes,” referring to his leadership of the early outbreaks of vigilante justice in the lawless and gang-plagued San Francisco of the 1850s, notes historian Will Bagley in A Scoundrel’s Tale: The Samuel Brannan Papers.
In 1851 the San Francisco Vigilance Committee, under Brannan’s leadership, tried, found guilty and hanged a couple of gang members — “they were probably guilty of something, but whether they were guilty of exactly what they were charged with is questionable,” says Brands. But then again, he says, “San Francisco in the 1850s was not a place for the meek, and Brannan was not meek.”
In the early days of the West, violence, threats and the creative interpretation of contracts was just the way of doing business, historians say. “He was a bit of a rascal, I suspect, like most businessmen at the time,” says Charles Fracchia, founder and president emeritus of the San Francisco Historical Society. “He had a sort of twinkle in his eye.” The journey west made the entire population a “self-selected” group of the foolhardy and the entrepreneurial, says Fracchia; that Brannan stood above the rest as the most rambunctious of them all is one hell of an achievement.
As his business empire expanded into hotels, warehouses and stores across the gold fields, as well as international trade networks, land speculation would prove the most profitable: He owned a quarter of Sacramento and a fifth of San Francisco, making him “one of the richest men in the world” in the 1850s, according to a 1936 edition of Mormon magazine The Improvement Era.
But later investments proved less profitable: Brannan plowed thousands into developing the Napa Valley, with little return apart from liquor from his distillery. His wife divorced him and took their three children, and his payments to her drained the last of his wealth. After moving to Mexico with dreams of rebuilding his fortune, he remarried, but alcoholism and depression eventually got the better of him. He died without leaving his widow enough to pay for his burial.