Toolkits and Tollgates

for
High Growth Markets

Sidekicks Trump Primos

for Business and Investment
in a Gold Rush of Any Kind

A Market Brief
by

Steven Kim

MintKit Investing
www.mintkit.com

Disclaimer This brief is provided as a resource for information and education.

The contents reflect personal views and should not be construed as
recommendations to any investor in particular. Each investor has to conduct
due diligence and design an agenda tailored to individual circumstances.

2015 MintKit.com

Summary
In the throes of a gold rush, the best strategy for growth whether in terms of business or
investment is to cater to the swashbucklers on the front lines by way of toolkits and
tollgates rather than lead the charge into the unknown. By plying the wildcats in the field
with the essentials they need, the sidekicks at the rear can extract a huge share of the
bounty reaped in the budding terrain.
On one hand, the heap of opportunities in a flowering market has a way of luring myriads
of eager beavers. On the other hand, the mass of firebrands rushing into the wilderness
are for the most part destined to flail and flub then flop and fail. The dire fate of the
hotheads is a natural consequence of the brutal competition in a scramble open to all
comers regardless of germane experience, special savvy, or inborn talent.
By contrast, the context differs entirely for the canny supplier of armaments to the jousters
in the field. The armorer can earn a juicy profit by providing the kit required by the
combatants bent on bashing each other in their frantic quest for lucre. The advantage of
the aide applies to the panoply of domains ranging from mining to farming in the primary
sector; from carving to brewing in the secondary branch; from shipping to banking in the
tertiary patch.
To spotlight the key concepts, we examine a case study in depth along with a medley of
vignettes in brief. The first cameo involves a literal example of a gold rush. A bounteous
lode in California gave rise to a stampede of migrants on a global scale for the first time in
the annals of history.
More recently, a gold rush of a different kind arose with the upgrowth of digital technology.
As usual in a free-for-all, however, the hustlers on the front lines had a rough time trying to
hit the jackpot or even make ends meet.
By comparison, the vendors of tools and services had a field day. Thanks to the toll
positions they staked out, the sidekicks as a group flourished as the markets bloomed. As

a result, the adjuncts in the wings managed to outshine the primos at center stage in the
realms of hardware as well as software.
Granted, the go-getters plunging headlong into a lush tract have a way of attracting the
bulk of the attention and hoopla along with the financing and glory. On the downside,
though, the crunch of competition in a riotous field has a way of quashing most if not all of
the dashers on the front lines. As a result the mass of entrants end up losing their shirts,
and likewise for the patrons who back the upstarts.
In contrast, a sprouting field has plenty to offer the crafty players working behind the
scenes. For this reason, the entrepreneur as well as the investor ought to pay close
attention to toolkits and tollgates as a way to ensure sound growth in a booming market.
* * *
Keywords:
Tool, Toll, Growth, Market, Business, Investment, Strategy, Advantage, Stock, Gold,
Product, Goods, Services, Computer, Emerging, Success, Mining, Hardware, Software
* * *

* * *
To ensure high growth in the rage of a gold rush, the strategy of choice for business and
investment is to set up toolkits and tollgates in order to support the spearheads rather than
lead the charge into the wilderness. By supplying the provisions needed by the outriders
on the front lines, the agents at the rear can extract a plush share of the bounty scooped
up in the trackless scape.
The strategy of leading from behind applies to a gold rush in any domain, be it a concrete
field such as mining or manufacturing, or a virtual patch like software or services.
Whatever the niche, the cool-headed players at the rear can exact a plump toll from the
swarm of upstarts plunging into the unknown.
On one hand, a nascent market has plenty to offer the gutsy players rushing into the wild.
On the other hand, the mass of streakers bound for terra incognita are doomed to flail and
flub then flop and fail. The grody fate of the hotheads is a natural consequence of the
searing competition in a raucous field open to all comers regardless of past experience,
special know-how, or innate talent.
By contrast, the story differs wholesale for the supplier of arms to the sluggers on the front
lines. The demure armorer can earn a handsome profit by providing the kit required by the
combatants bent on whomping each other in their quest for riches.
Admittedly, the toolers toiling in the wings may lack the pizzazz of the primos preening at
center stage. On the bright side, though, the crew of sidekicks can rake in the lions share
of the spoils racked up by the battlers on the warpath.
Examples of this sort are legion in the history of commerce. To highlight the core concepts,
we will examine a case study in depth along with a rundown of shorter vignettes.

Our first cameo involves a literal example of a gold rush. For the first time in the history of
the world, a fertile patch in California attracted a horde of fortune seekers on a global
scale. The glinting metal lured myriads of souls from countries both near and far, ranging
from Brazil and China to Turkey and Germany.
In the digital era, another example of a gold rush cropped up with the upspurt of
information technology. Along with the norm in a scramble, however, the scrappers on the
front lines had to fight tooth and nail to nab a profit of any sort.
On the other hand, the purveyors of tools and services enjoyed a feeding frenzy. The
suppliers as a group flourished in the midst of the melee, despite the inevitable run of
hiccups and setbacks that afflict any type of venture from time to time. Thanks to the toll
positions they staked out, the helpers in the wings managed to outshine the principals at
center stage.
In the financial arena, the mindful investor knows that the stream of profits chalked up by a
company in the past plays only a supporting role in a decision to invest in the business in
the present. Of greater concern is the lineup of prospects for the firm going forward.
Moreover, the outlook for the investor downstream depends mostly on the likely rate of
growth in earnings along with the overall payoff for the shareholder. In this way, the past
and present serve merely as guides for divining the future.
The first cameo below, drawn from the mining industry, spells out the chilling facts behind
the fiery image of the gold rush in California. The case study recounts the events largely
from the viewpoint of an active entrepreneur bent on tapping into the wealth of a booming
market.
Meanwhile the next couple of thumbnails survey a kindred set of issues mostly from the
standpoint of a passive investor grappling with the opportunities in a nascent market from
a financial stance. For this type of actor, the trick is to pick a promising venture that flaunts
hefty odds of surviving and even thriving in a grueling tract where the bulk of the entrants
are destined to keel over and fall by the wayside.

From a larger stance, however, the divergent views of the entrepreneur and investor
comprise two sides of the same coin. Whether a capitalist takes on an active or passive
role, the shared aspect lies in the buildup of a feisty venture along with ample profits to
match. In other words, the merchant and the financier share a common goal in picking the
most promising path to growth in a vibrant market of any sort.

First Gold Rush of Global Scope

A fabulous case of a gold rush popped up in the western foothills of the Sierra Nevada
mountain range in California. In 1848 the glittery metal was found in abundance in and
around a place known as Sutters Mill.
News of the discovery spread like wildfire across the land and beyond the sea. The
resulting onslaught of fortune seekers gave rise to the first stampede in history that shook
the entire planet.
The scope of the bombshell was showcased by the swift transformation of a dinky port by
the seashore into a bustling hub within a couple of years. The upthrow transformed a
backwater named San Francisco into a landmark of the global culture.
In 1846 the sleepy hamlet counted a population of some 300 souls. When news of the
golden lode reached the village, the residents packed up their bags en masse and dashed
off to the hills in search of mint and fame.
Despite the sudden exodus, however, the port of San Francisco did not turn into an empty
lot. On the contrary, the void left by the erstwhile residents was promptly filled and overrun
by fresh waves of newcomers. By 1852 the scrappy outpost morphed into a cosmopolitan
hub boasting a population of 36,000 souls.
The upspurt of San Francisco captured of course only a small fraction of the incoming
horde. The bulk of the migrants numbering around 300,000 over a handful of years
rushed on to the promised land strewn with golden ore. Of this number, roughly half came
by sea the rest by land (Wikipedia, 2015).
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Despite the mad rush, however, the onslaught turned out to be a fleeting surge rather than
a lasting trend. More precisely, the bulk of the gold rush lasted only until 1849.
After the rich veins were picked clean, a dwindling troupe of diehards continued to soldier
on for a few years afterward, scouring the land for the last scraps of metal they could find.
Thanks to the combined exertions of the miners over the years, the haul in toto amounted
to some 12 million ounces by 1853.
How big a deal was the bounty dug out of the dirt? To get a handle on the value of the
booty, we note that the price of gold edged past $1,900 per ounce at the onset of the 21 st
century. If we use the latter price as a point of reference, then the treasure trove was worth
nearly $23 billion at the dawn of the millennium.
In the popular image, the gold bash in California transformed myriads of gaunt stiffs into fat
cats overnight by dint of their digs. Sadly, though, the truth was otherwise. To confound the
observer even more, just about everybody got rich except for the miners.
On one hand, precise estimates of the ghastly rate of failure amongst the diggers are hard
to come by. Based on anecdotal evidence, however, it seems fair to say that 19 out of 20
miners ended up spending more money during their ill-fated quest than the slim pickings
they managed to scrounge up. In this way, the escapade turned out to be worse than
breakeven for the mass of washouts.
As for the rest of the throng, the remaining 5% of the entrants would have been lucky to
recoup their expenses. In that case, the slim earnings garnered by the hopefuls could not
come close to matching the whopping costs entailed by way blood and sweat, pain and
grief.
An example in this vein involved a pandemic of murders amongst the miners as they
fought to the last in staking out the most propitious sites. The plot was similar as the
desperate creatures raided each others camps and plundered the meager caches of gold
tucked away in hidden corners.

Meanwhile the ravages of disease, malnutrition and accidents added to the frightful rate of
mortality. By one estimate, one out of five miners in 1849 died within six months of their
arrival in California. Not surprisingly, the beleaguered firms trafficking in life insurance
refused to write any new policies for the hapless pilgrims headed for the golden hills
(Wiegand, 1998).
The plight of the multitude was exemplified by the fate of the original spotter of the mother
lode: James W. Marshall. Remarkably, neither the trailblazer nor his business partner
Johan (John) Sutter ever made money from their momentous discovery. But it was not
for want of trying.
To bring up an example, Marshall became a partner in a gold mine near Kelsey, California.
Like so many others, however, the site turned out to be a dud. Along with the common fate
of the mases, the band of investors ended up losing their shirts.
Even so, the father of the gold rush continued to persevere during the decades to follow
but to no avail. For all the effort expended, his lot was a life of letdown followed by the woe
of dying in a desolate shack with empty pockets in 1885.
But wait just a sec! If the army of miners failed to get rich, what happened to the mounds
of gold scraped out of the dirt? Surely the hoard didnt just vanish into thin air?
Of course not. The windfall vanished instead into the coffers of the adjuncts working in the
wings. More precisely, the pliers of tools and services made money hand over fist as the
golden craze raged all around them.
A good example was John Studebaker from Ohio who opted to sell wheelbarrows to the
wildcats. With the profits he bagged in the heat of the gold rush, the wheeler-dealer
returned promptly to the Midwest. In 1852 John teamed up with his brothers in Indiana to
build a business trained on the manufacture of wagons.
When the auto industry sputtered to life around half a century later, the selfsame firm
branched out into the production of cars. The automotive business flourished for a couple
of generations before it too began to flame out in the throes of scorching competition.
9

Over the course of the generations, the company lost sight of the key to Johns success
during the gold rush in California. In particular a car in the newborn era was more of an
end product rather than an intermediate tool.
As in the buildout of other markets, the early stages of the automotive industry attracted a
slew of entrepreneurs hoping to make their mark. Not surprisingly, the crush of competition
in the crowded field ground up and spat out the bulk of the entrants within a matter of
years, followed by most of the remnants over the next few decades.
To its credit, though, the Studebaker firm did manage to outlast the vast majority of its
peers. The company survived the early stages of consolidation in the auto industry and
managed to establish itself as leading brand known for the quality and reliability of its
offerings.
Even so, the die-hard succumbed in due course to the fate of the masses. After an
illustrious career, the exhausted firm ran into financial difficulties in the 1950s then finally
gave up the ghost in 1967.
But were getting ahead of ourselves at this stage. We should instead return to the tale of
the lost treasure dug up during the gold rush a century earlier.
When the hullabaloo was in full swing, a gold digger could on average scrape up a
smattering of metal valued at the time at $8 a day. The intake, which amounted to some
$160 in 1997 dollars, came out to eight times the wage earned by a coal miner on the East
Coast. Not a bad gig, or so it would seem.
On the downside, though, the cost of upkeep for the wildcat was humongous. As an
example, a loaf of bread that cost 4 cents in New York sold instead for 75 cents in the
miners camps. Another sample was an egg that fetched $1 to $3 each.
A third exhibit lay in a pair of boots priced at $100 (Wiegand, 1998). According to the
previous tally of inflation, the bloated tab for workaday footwear came out to $2,000 in
1997 dollars.
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Could things get any worse? Yes, they could and did. Upon closer inspection, the
foregoing price turns out to be a gross underestimate of the true state of affairs. The
reason is that the blaze of inflation has in fact raged more fiercely over the course of a
century and a half.
According to the U.S. Bureau of Labor Statistics, a wad of cash valued at $100 in 1914
was worth $2,367 in 2014 (Bureau, 2015). To put things simply, the price level soared by
nearly 24-fold over the span of a single century.
The hardy trend comprised a modest rate of growth amounting to a mite over 3.2 percent a
year on average. Yet there were plenty of stretches throughout this period when the
wildfire of inflation flared at much higher rates. On the flip side, though, there were scacely
any spells in which the cost of living fell by a hefty amount or even remained constant
from one year to the next.
Under the far-fetched assumption that inflation smolded at the modest rate touted by the
government, an article priced at a single dollar in 1914 would still be worth roughly $24 a
century later. And the ramp-up does not even take into account the blowup of prices, along
with an explosion in the cost of living, that must have accompanied the epic transformation
of the U.S. economy from the agrarian society of 1849 to the industrial culture of 1914.
To sum up, the California gold rush serves as an object lesson for an antsy player in a
booming market of any sort. A virgin tract full of promise is bound to attract hordes of
aspirants fired up with fond hopes of making a killing. An opportunity of this kind can crop
in any domain ranging from natural resources to man-made marvels.
On a cheery note, the sprouting market may shower the front-runners as a group with
billions of dollars of newly minted wealth. All too often, though, the bonanza fails to accrue
to the pioneers locked in mortal combat in the thick of the action.
Even in the modern era, a stark example continues to show up in the grisly rate of failure
amongst the prospectors in the mining industry that scour the globe in search of fresh
deposits of gold and silver. Unfortunately, the mass of grassroot projects in virgin terrain
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almost never reach the production stage. According to some estimates, the odds of
success for a greenfield dig lies somewhere between 1 out of 5,000 to 10,000 forays (Red,
2015; Undervalued, 2015).
Despite the long odds, though, the scrabblers in the field are obliged to spend scads of
time and money to pursue their objectives despite the meager returns on offer. Yet the only
players that can rack up profits in a steady fashion take the form of adjuncts that back the
principals on the front lines. In effect, the bounty raked in by the hustling primos flows to
the coy vendors of tools and services working quietly in the shadows.
In this way, the helpers toiling in the wings are wont to trounce the adventurers at center
stage. In a lot of cases, the modest players working behind the scenes take the form of
bantam firms rather than hulking concerns in terms of headcount or revenues; but the net
income as a fraction of gross revenues for the small fry are wont to be higher.

Toolkits and Tollgates for Competitive Advantage

In the popular imagination, a booming market showers the wildcats hustling on the front
lines with mounds of riches. The reality, however, begs to differ from the hype. For one
thing, any paydirt bagged by a maverick is apt to be an exception rather than the rule.
The good news is that the bounty reaped in the verdant tract could amount to billions of
dollars a year. The bad news is that the grinding competition amongst the primos is apt to
be so severe that few if any of the scufflers in the field manage to strike it rich. Rather,
the usual fate of the multitude is to fight hard and live fast, fall quick and die young.
On the bright side, though, a small band of crafty players working on the sidelines can
scoop up the flood of wealth gushing forth from the vernal tract. The go-getters of this
breed ply their trade as the armorers to the jousters while the latter pound each other to a
pulp in the tussle for profits.
The cast of supporting characters prefers instead to traffic in the provisions needed by the
protagonists in the limelight. The products they hawk may take concrete form as in the
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case of tools, materials and facilities; or virtual mode as in the likes of surveying,
transportation and accommodation.
The power of the sidekicks showed up clearly during the gold rush in California, as in so
many other settings. Throughout the frenzy, the players who hit the jackpot were the
sellers of props rather than the diggers of ore. The winners in toll positions ran the gamut
from toolmakers and shopkeepers to hoteliers and restauranteurs.
As a result, the sacks of gold filled up by the miners were handed over to the adjuncts
working behind the scenes. At the end of the escapade, the mass of wildcats toiling in the
hills ended up with nothing to show for the rivers of blood, sweat and tears they shed along
the way assuming that they survived the ordeal at all.
The story has been similar in the modern era. As an example, the advent of personal
computing gave birth not only to a host of brand-new industries but to a novel way of life
for the population at large. With the passage of time, a slew of breakthroughs created a
torrent of profits valued at many billions of bucks a year.
Amid the Internet craze of the late 1990s, for instance, a horde of dreamy ventures popped
up in every major country round the world. Sadly, though, the visions of plenty they fancied
turned out in general into portraits of ruin on a grand scale.
The throng of upstarts struggled mightily to find traction in a slippery tract but fell far short
of their goals in general. Instead of hitting the jackpot, the mass of deadbeats squandered
in short order the seed funding put up at the outset by legions of patrons to the tune of
billions of dollars.
The stakes that went up in smoke ranged from the personal savings of struggling
entrepreneurs to the working capital furnished by heedless financiers. The legions of
benefactors included business angels and venture capitalists working behind closed doors
as well as solo investors and communal pools acting through the stock market.
In almost every case, however, abject failure rather than rousing success was the final
outcome. Such was and will continue to be the end result of a gold rush of any sort.
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Lessons in the Digital Era

A hallmark of a gold rush lies in the dearth of barriers to entry: a void that poses a gift as
well as a curse to the players in the field. Due to the absence of walls, the beguiling patch
attracts all comers regardless of skill or experience.
Due to the rigors of competition, however, just about everyone who enters the fray ends up
as a failure within a few years if not months. As a result, the scads of money and effort
marshalled at the outset by the principals and their patrons go up in flames. Instead of
making a killing, the upstarts get wasted.
In this grim setting, the real winners are the hawkers of proven props rather than the
seekers of elusive riches. This maxim showed up clearly in the vale of personal computing
as in so many other fields.
In the realm of physical goods, the greatest victor of all was a chipmaker named Intel. As a
pioneer in its own right, the crafty firm built the digital gear that served as the brains of the
hardware for the panoply of end products. The goods of this stripe ran the gamut from
capital equipment for producers to electronic gadetry for consumers.
Meanwhile, in the sphere of virtual wares, the juggernaut was a programmer called
Microsoft. The wily coder stitched together the operating systems that served as the heart
of the software for the bulk of the computers deployed throughout the informatic culture in
venues ranging from homes and offices to schools and factories.
The foregoing duo of toolmakers survived the squeeze of competition and even flourished
with the passage of time. In fact, the fireballs in their prime established themselves as
beacons of technology and enterprise in the global marketplace. Remarkably, the aides
working behind the scenes turned into the stars of the business world. In their heyday, the
kingpins holding the high ground had a habit of raking in billions of dollars in net profits
year after year.

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The divergent fortunes of the principals and adjuncts in the world of information technology
jibes with the usual turnout in blooming markets. More generally, the vantage of the
sidekicks over the primos is a standard feature of a gold rush in any domain.

Roundup of Pointers
To wrap up, the hustlers at the frontiers of a pristine tract have a way of attracting the bulk
of the attention and glory along with the funding and hoopla. Sadly, though, the crunch of
competition in a raucous field is sure to maul most if not all of the wildcats on the front
lines. As a result, the mass of entrepreneurs and their benefactors end up losing their
shirts.
On the other hand, a budding domain has plenty to offer the sedate actors working behind
the scenes. In fact, the lions share of the spoils usually goes to the band of upstream
players that provide the tools and services needed by the mob of downstream sluggers
caught in the thick of the action.
The vantage of the sidekicks applies to concrete fields such as mining and manufacturing
as well as virtual turfs like software and services. Given this backdrop, the buildup of
toolkits and tollgates deserves plenty of attention from the entrepreneur as well as the
investor intent on sound growth in a booming market.

References
Bureau of Labor Statistics. CPI Inflation Calculator. http://data.bls.gov/cgi-bin/cpicalc.pl
tapped 2015/2/18.
Red Rock Assets. Mining Business Summary.
https://www.redrockassets.com/disc_mining.php tapped 2015/2/17.

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Undervalued Equity. Mineral Exploration Companies - Greenfield Exploration vs.

Brownfield Exploration. http://www.undervaluedequity.com/Mineral-ExplorationCompanies-Greenfield-Exploration-vs.-Brownfield-Exploration.html tapped 2015/2/17.
Wiegand, S. The California Gold Rush: An Era Remembered. 1998/1/18.
http://www.calgoldrush.com/part1/01overview.html tapped 2015/2/19.
Wikipedia. California Gold Rush. http://en.wikipedia.org/wiki/California_Gold_Rush
tapped 2015/2/18.

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