From Mark Ford, editor, Creating Wealth: I’d rather sell shovels than dig for gold. And I’d rather run a bordello than sell shovels.

This, I’m sure you agree, needs explanation.

The California Gold Rush (1848-1858) captivated the minds and hearts of a generation of would-be entrepreneurs. Thousands of Americans left their jobs and their families to try to get rich in this amazing, once-in-a-lifetime opportunity.

Nearly all of them took the most obvious path: digging or panning for gold. But at least 95% of them failed.

A smaller group had more modest ambitions. They went to California with the aim of selling picks, shovels, and other supplies to the prospectors. A much greater percentage of those people got rich.

There was an even smaller group of entrepreneurs who went into the service businesses, selling sex, entertainment, or religion (and sometimes all three at the same time). These people had the entrepreneurial advantage of having relatively low capital costs, no inventory, and no accounts receivable.

And if they were run out of one town, they could open up business in another.

I used these examples to help answer one of the questions raised by our Wealth Builders Club members in Mumbai, India. The topic was the Indian government’s plans to build 100 new cities, each of 1 million inhabitants, over the next 10 or 20 years.

The question was: “How would you invest in that?”

One of my co-speakers, the founder of a large investment management company in Mumbai, answered the question by talking about stocks he liked. I listened to what he said and studied the impressive charts and graphs he presented.

But I knew that I wouldn’t be investing in any of those stocks in the near term.

Even if I did, I would consider it a speculative investment, and I would limit my investment according to my rules of asset allocation and position sizing.

When he finished, it was my turn. I began by stating that the obvious play was to buy land in or around the targeted areas and build apartment buildings or walled communities. But considering the size of this project, as well as the expense and the difficulty of real estate in India, I said I would leave that sort of investing to billionaire real estate investors.

I reminded them of what I had already said (in response to an earlier question) about investing in trends: that I recommend investing only after you can see that the trend has already taken off. And I pointed out that this idea—100 cities of 1 million people—was a future trend.

But it wasn’t entirely a future trend, I said. The Indian government had begun building one of those cities. It had received funding and construction was underway. That, I explained, is a current trend, and a big one. I said, if I were an investor in India today, I’d think about heading over to that new city to scout out niche business opportunities that were too small for the government contractors.

That’s when I told them the California Gold Rush story. And so, quite rightly, someone asked, “Would you rather invest in a pick-and-shovel operation in this new city or a service business?”

I said I’d be happy with either. But if I wasn’t already in a pick-and-shovel business, I’d opt for a service business because of the low capital requirements and ease of entry.

“Such as?”

“I don’t know, but I’m pretty sure there are dozens of opportunities. You could start a locksmith business or an apartment cleaning business or a lunch delivery business or a fitness business or a window cleaning business.”

I explained that I normally prefer manufacturing-type businesses to service businesses. However, service businesses allow you to enter very cheaply and to perfect them over time. And once you have a reliably profitable business, you can easily replicate it in other locations.

“So,” I said, “when the government begins city No. 2, you can move some of your top people there, set up shop, and be operating in a week or two.”

Reeves’ Note: Paid Palm Beach subscribers can read Mark’s 14 other rules for business and investment—including what’s even better than selling picks and shovels—in the April issue of Creating Wealth.

Mark accepts a gift from a Wealth Builders Club member at the Mumbai chapter wealth summit, earlier this year.