City of Gold

LEADER'S FIELD GUIDE

Miners worked for $2 per day, braving cave-ins and explosions. The Gold Rush presents leaders perfect examples of sunk, indirect and opportunity costs.

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The aspen leaves looked like golden flakes of snow as they jettisoned from the black and white bark in the fall wind. These quaking aspens draw visitors to mountain towns from all over the world. My dad and I were no exception. As we meandered along the San Miguel River, the remaining leaves shimmered in the sun like golden pendants. We walked beside the same river the Ute Indians called home during the winter as they hunted and sheltered in the river valley. …The same river where miners started panning for gold, in 1875.¹

What made hundreds of prospectors travel over 2000 miles to Telluride without music playlists, air-conditioned cabins, and electric leather seats? Gold! In fact, so much gold was found, Telluride became known as the City of Gold.² But, miners did pay dearly for the opportunity:

Most [miners] worked ten- to twelve-hour shifts for around $2 per day, braving cave-ins, falls, explosions, sickening air, and other hazards. Many became indebted to company stores, outfits where miners had to purchase necessary goods from the company. ~Colorado Encyclopedia

What can leaders learn about other costs of the Gold Rush? 

1. Sunk Cost: In the late 1800’s, the introduction of the railroad and electricity to the area drove mining costs down and revenues up.³ Investment in narrow gauge rails and hydro-electric power plants became sunk costs; the money was spent and unrecoverable. Leaders don’t let sunk costs of past investments influence future decisions.
2. Indirect Cost: Direct costs are salaries, ore bucket, and pickaxes. Indirect costs cannot be specifically tied to one product or service, for example, accounting or payroll services. Knowing the difference between direct and indirect expenses helps leaders understand how to price competitively and plan for growth.
3. Opportunity Cost: Investopedia suggests, “the formula for calculating an opportunity cost is simply the difference between the expected returns of each option.”⁴ Gold mines considered the return of improving safety measures and the return of not improving safety measures. Leaders evaluate both objective and subjective factors.

According to Western Mining History, San Miguel County produced 3,837,000 ounces of gold between 1875 and 1959.⁵ That’s worth $7.3B in today’s dollars. Telluride’s new golden industry is tourism. During the 2018-2019 ski season, Telluride collected almost $71M in sales tax revenue alone, not including the revenue from summer and fall visitors.⁶ Though the famed Bluegrass Festival was cancelled this year due to COVID-19, the aspens continued into their full gold-leafed glory! The banks of the San Miguel River have seen hunters, miners, and tourists-- like my dad and me. Each evaluating sunk, indirect and opportunity costs near the City of Gold. What impact do these costs have on your business? Your decisions? What information do you still need to make the best decisions?

Sources: For amazing historic videos, check out Western Mining History! ¹ Colorado Encyclopedia: San Miguel County; ² Telluride Tourism Board; ³ Mining History Association: Mining History of Telluride, Colorado; ⁴ Investopedia: Opportunity Cost; ⁵ Mining History Association: San Miguel County Colorado Gold Production; ⁶ The Colorado Sun: Snowy Winter Boosts Colorado Ski Towns to Record-Breaking Sales Tax Revenues.

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by Michelle Sugerman • Leading Synergies, LLC • © All Rights Reserved

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