Fracking, Bubbles, and the American Dream

As I sit here reading the Economist, a story about hydralic fracturing prompted my interest. In the story, it compared modern day "fracking" and the gold rush of California. And the parallels are there: the rush towards a previously frontier land, the excessive number of men in such areas, and the overall rowdiness that such environments draw up.

More importantly, the comparison goes further, that it transforms the perception of the American dream. Whereas the Puritans accumulated wealth in a step-by-step gradual manner, the gold rush miners dreamed of striking it rich instantly, "won in a twinkling by audacity and good luck". Failure in the Puritans view "connoted weakness of will or defect of soul". The loss of capital was seen as a moral defect and the accumulation of wealth by thrift and hard work was seen as godly. The gold rush instead taught the lesson that it was "expected to gamble, and to fail, and to gamble again".

Likewise, the start-up technology bubble at the turn of the century gave rise to such an environment as well. Silicon valley at the time created a rush towards any company with Internet in its business plan and companies were not content with anything less than making instantly millionaires. This was exacerbated by the increasing instant awareness brought on by the fledging Internet news sites.

Fast-forward a couple of years, past the dot-com boom and bust and the great recession, and here we are again. Since the IPO of Facebook, the buying of Instagram and Tumblr, more and more companies are aiming for instant wealth. The strategy of failing is again in full force, with Internet tech news sites such as TechCrunch, AllThingsD and Hackernews publishing the successes to spur on wannabe entrepreneurs to aim big or go home. Very rarely does any company grow organically more serving a niche audience before moving to the mainstream. Like the gold rush, only a few companies eventually survive and prosper; the majority of companies barely make ends meet, if they make ends meet at all. The start-up industry, as with the gold rush, becomes little more than a casino of sorts.

What is the takeaway from this comparison? In the story, it remarks that the California Gold Rush is what spurred the technological domination of Silicon Valley. Leland Stanford grew rich off the gold rush by creating the railroads, who then founded Stanford. This led to the engineers who started tech firms in Silicon Valley and its subsequent rise of technological and economical superiority. Likewise, North Dakota may also follow this path in the future.

Unlike the found wealth of primary resources like gold and oil, the start-up bubble is not tied to a geographical location. The main "geographical location" to benefit is the Internet, where supporting industries such as virtualized cloud hosting have sprung up to take advantage of this boom. Rather than a steady industry which may profit and grow individual communities, the start-up culture has become a casino where fortunes may be made or lost in a very short amount of time. Easy come, easy go.