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The problems with picks and shovels business models (2022)
- ggm 3y ago"if there's gold in the hills why not dig gold" .. well because the market in jeans, and picks and shovels is a certainty: you have miners, they need these inputs. but the gold, is uncertain. its higher risk/return. Therefore the thesis argues "why are you risk averse" and my answer is "because historically for the last 250 years the rate of return has been 6-7% and so your arguing against the mean" -but certainly that mean is informed both by stupid people who take risks and stupid people who over-hedge against risk. Mining has a rate of cost and return too. They spend big on the cost side to predict the oz/Tonne return rate. Now ask yourself: did those miners have access to the information BHP or Rio-Tinto do? The thing is. Levi-Strauss was investing. He found a predictable, reliable, growing income. Gold rush miners are speculating. Gold Mine owners are hedging, investing and speculating at the same time.