Ask HN: What are some examples of 'sell shovels in a gold rush'?
In continuation of the title, what would you foresee in 2019 as the moments of 'selling shovels in a gold rush'.
In the Blockchain hype era for example building KYC tools, social media marketing consulting for Crypto or coinmarketcap and so on, as others have suggested would have worked well.
You will generally want to provide a service that people would pay for in order to build their "great scheme masterplan", meanwhile others will try to do as well and eat their market, becoming your customers as well. While they race to the bottom in pricing and become unicorns, you take their money and grow your business silently.
Instead of making a brewing company in a city where there is a lot of hype, consider owning stocks of the local water/wheat etc provider, because the beer hype will drive up prices of other things as when people compete, they take investment and try to grow fast in the promise of huge returns, meanwhile you sell those to everyone that bought the hype with less investment and if there is a champion on this battle, you can sell as well your business to the winner. Looks like a decent strategy if you ask me.
For now, to be honest, we are more like heading to recession so I would rather look into servicing people in debt or looking for ways to save money, avoid losing too much in the crisis and so on. More like selling wipers to the people who are crying in a time of crisis than shovels in a gold rush.
- Crypto trading
- Keto/Intermittent Fasting
- Dropshipping on Amazon/Shopify
- "Booty guides", namely Word docs converted to PDF w/ fitness routines and nutritional information sold by influencers/fitness models
- Data Science/ML/AI ("skills of the future")
- Learn to code-style courses ("Become a Web Developer 2019 Ultimate Package" and the like)
And that's not a knock against the courses. Stephen Grider, for example, sells some very excellent shovels.
(btw, a little bit OT: I always wonder why people don't cap their projects to avoid scaling from a few 100 units (or whatever is managable by packaging the stuff at home for a week or two) to the 10,000s (for which you'll want some more advanced logistics); I can always run a second campaign after I delivered a great, first iteration of the product...)
If I only knew, I wouldn't tell you. I think what makes sense is to check out what thing was already growing in 2018 and will still be growing in 2019, but entry is relatively easy. Also if there is a possibility that this thing is gonna be talked about a lot in upcoming months, you've found yourself a market that you can sell your shovels to. Now, quick, find out what people may need and make it before someone else will and you got yourself a shovel.
Gold rush: phone apps. Shovel sellers: AppAnnie, Braze, etc.
Basically, finding a trend people are chasing in hopes of making money, and selling them tooling to facilitate their business - in such a way that you make money whether they succeed or fail.
If you’re looking for the next digital gold rush to sell shovels for, machine learning and IoT don’t seem to have any clear market leaders for tooling yet.
If you can predict what comes next after that, there may be even better ways to take advantage of that than selling shovels.
In 2019: look for something that disintermediates supply and demand (or, much rarer and harder, something wholly new that nobody can supply yet and which has vast potential demand).
There had been pretty much no killer apps on FB Messenger or Slack (yes there are a few profitable ones and some businesses built on them, but nothing like the mobile app stores from back in the days). If you were in the "bots communities" (on various social networks) like I was, you'd see that most entrepreneurs simply try to profit off of the rush by building "easily build a bot" services. (e.g. the Chatfuels of the world) I think it's an example where more people try to sell shovels than actually mine for gold.
The hottest example lately is cloud hosting providers who don't have to invent software (which is hard) but simply stick on a server (which is relatively easy).
- data proliferation -> data centers (both hardware and software) -> Dell Technologies/VMWare
- 5G roll-out -> Skyworks
Trends exist for years....
Early bitcoin mining would be (almost literally) the "gold rush" in this metaphor, so early mining would be just the first people to get to the valley. They got their gold while there was no competition for it and it was easy/plentiful.
So yes, they got rich, but it's hard to predict these events. Even though most bitcoin miners like to claim they knew that bitcoin would be worth $20K a piece, this is not true. Bitcoin was being traded and used back then for fractions of a penny. This was a hobby that unexpectedly turned into something profitable a decade later.
These gold rushes are once-in-a-lifetime opportunities that are hard to reproduce. By the time word gets out that these are great opportunities, bunches of people jump on it and the value is immediately diminished by over-competition.
So the saying "during a gold rush, sell shovels" is a metaphor that suggests that when you recognize a gold rush is happening, don't try to be the 1,000,001st person to mine for gold, because you will probably fail. Instead sell something that all the millions of gold miners need, like shovels and get rich from selling prospectors shovels.
You can strategize around this and plan for it, instead of testing your luck hoping to strike gold. Now you make money off all the other people that are jumping on the bandwagon for the gold rush, instead of competiting for limited resources for them.
Someone who sells shovels during a gold rush will make far more money than someone who goes out and mines for gold. There might be a few early people that got lucky by getting in early, but if you aren't getting in early, then selling shovels is a great way to take advantage of the excitement without the risk of mining for gold yourself.
So, in your example of bitcoin mining, the bitcoin miners themself were just like the miners in the gold rush. The people selling shovels were NVIDIA, AMD, and all the upstarts that sold bitcoin mining ASICs to mine with. These are literally the "shovels" of the bitcoin gold rush. These companies all got rich by selling everyone the equipment to go out and mine. Most of those people bought the cards and computers from these people and never made a return on their investment. So it is better to be selling shovels than mining for gold. Because everyone comes to you with the idea that they will get rich, you get your money early, and they might never even make that much money back in return.
This happened in the real life gold rush, and we saw it happen with bitcoin mining as well. Another example is the startup rush that has been happening, and companies like AWS and Microsoft Azure have profited by selling them compute resources to run their startup. 95% of those startups fail, but Amazon and Microsoft got their paycheck every month from these companies by selling them the resources needed to fulfill their failed dream.