Pick-And-Shovel Play
Categories: Investing
It sounds like a trick play from leather-helmet football days. The ol' pick-and-shovel play...the one that the Decatur Staleys used to beat the St. Paul Irish Drinkers to win the 1923 championship, 7-3.
Actually, it's an investment strategy.
Think back to the old California gold rush days. Prospectors are knee-deep in rivers, sifting dirt. Others chip away at rock formations looking for shiny flecks of gold. Most of them will go broke. A sizable portion won't find anything at all, and those who do will probably end up spending what little gold they dig up on women and whiskey back in San Francisco.
One sure way to make money: sell equipment. Provide the pickaxes and the pans and the overalls (and the women and the whiskey) that the prospectors need. That business plan defines the pick-and-shovel strategy...provide the stuff the people need when they're in the middle of a gold rush.
So...during the dot-com bubble, don't make an Internet company. Instead, sell routers or provide online security software. Biotech getting hot? Don't start looking for a cancer cure. Start selling centrifuges and glass tubes.
