Fuel for Thought
Gold Rush Trucking
On January 24, 1848, James W. Marshall discovered gold on the property of Johann A. Sutter, known as Sutter’s Mill. This discovery sparked the Gold Rush of 1849. Back then, it took a little longer for word to spread, but spread it did. Would-be prospectors from all over the world poured into California with the hopes of striking it rich. Any man, woman or child who could pan a stream, use a shovel or wield a pickaxe had the golden opportunity (pun intended) to become wealthy. And so the mass migration to join the ranks of those striking it rich was in full swing. As more and more people poured into the hills of California, it became apparent that even with all that land, each person’s share of that precious gold laden earth was getting smaller and smaller. People fought for a land claim and encroached on others' claims. With so many people coming into the area, food and supplies became scarce. As a result, the food and supplies that were available now came at a premium price point. Most likely, any little bits of gold found were sold to fund the exorbitant prices for necessities.
Trucking was the current gold rush in 2020-2021. The demand for trucks rose as Covid lockdowns began to wane. Many new entrants paid extremely high amounts for equipment to enter the industry. This trend continued for many months until the supply of trucks and parts to repair them became scarce. Then the entire industry was at the mercy of truck dealers and repair shops to keep their businesses afloat, at exorbitant rates. It has now become apparent to some that this trucking gold rush will only produce fool’s gold. An oversupply of trucks will always cull the weakest. Call it natural selection. Call it market correction. Call it whatever you like, but after 30+ years in the trucking industry, one truth remains, everything runs on cycles. And the cycles always repeat, just not at any certain interval. Some cycles are longer than others, but they always return.
We have all heard about the market downturn as it applies to trucking and rates. Many blame brokers or mega carriers for lowballing lanes to get the loads, thus creating substandard rates for everyone.
As I see it, we were all riding high in the market where the carriers had the upper hand in determining rates required from the customers in order to secure a truck for their load(s). The supply and demand rules always apply. Not enough trucks for all the loads, commands higher rates for those trucks. Now that the demand has slowed, there are more trucks available than there are loads. This creates a customer driven market where they can shop for the lowest rate to move their goods. Those who are over extended in their finances will take subpar loads to “keep the wheels turning”, but it is just prolonging their inevitable demise from trucking.
A few similarities between the 1849 Gold Rush and trucking:
If you have the tools, or can acquire the tools, there is gold for you in far away lands.
If you have a CDL, or can obtain one, there are riches for you as you see far away lands.
If too many prospectors claim the same mountain, there will be less gold for each one.
If too many trucks enter the market, there will be less freight for all.
Not every prospector struck it rich, in fact most did not.
Not every trucker (owner operator) will succeed, most do not.
Everytime there is an increased demand for trucks, there is an influx of new drivers to help curb the demand. There are also plenty of first time owner operators looking to strike it rich with all the talk of extremely high rates. Of course as rates and demand rises, this signals truck related industries to follow suit. Trucks and truck parts will sell well above their normal prices as demand puts pressure on supply. Therefore, new entrants overpay to join the game and then when the market turns, equipment is lost and their businesses fail. The cycle repeats itself.
Fun fact: Who became wealthy because of the 1849 Gold Rush? It was most common to strike it rich by supplying the miners with over-priced goods, food, services or supplies.
As scarce as truth is, the supply has always been in excess of the demand.
- Josh Billings
See you down the road,
Greg