Ben Franklin and Long Time Horizons
At the tail end of the nine years I lived in Boston, I had the honor of briefly serving as a deacon at Old South Church. I chose to attend Old South because it was the same denomination as the church I grew up in here in Maine (Congregationalist, a distinctly New England thing), and I was drawn to its immense history (I also liked that they did a Wednesday evening candlelight jazz service).
Among the notable historical anecdotes about Old South Church in Boston are that it was where the colonists gathered on the night of December 16th, 1773 before a rabble of them went to the docks to throw tea into Boston Harbor, thereby changing history forever. Notable congregants of Old South have included Sam Adams, Phyllis Wheatley, and William Dawes. Old South and its pastors and members were early advocates against slavery, helping give momentum to the cause throughout New England and beyond. And on January 17, 1706, Ben Franklin was baptized there - on the very day he was born.
In much more recent times, Old South has become known as the “Church of the Finish Line,” with its pastors offering a blessing to Boston Marathon runners on the Sunday before the subsequent Patriots Day Monday run. The church and its members also cared for injured and stricken runners and spectators following the Boston Marathon bombing in 2013. The church’s front doors are barely 50 yards from the bombing site.
My only regret in becoming a deacon at Old South was that I didn’t get to lean into the work for very long, as I soon moved back to Maine not long after I was installed as a deacon. But one of the particularly cool things about the experience was the connection to Benjamin Franklin.
In the annals of American history, few names command the sort of reverence as Benjamin Franklin’s. The polymath, diplomat, and Founding Father is remembered for many things: his experiments with electricity, the bifocals, and his witty maxims on industry and thrift. But Franklin’s legacy doesn’t just live in books, institutions, or statues. It lives, in a very real way, in two specific places—Boston and Philadelphia—thanks to a bequest he left that stretched far beyond his lifetime.
When Ben Franklin died in 1790, he left two sums of 2,000 Sterling (about $4,400 at the time) to the cities of Boston and Philadelphia. The only catch was that Franklin, ever the scientist and financial strategist, gave the cities explicit instructions that these funds were to be invested with only a portion to be made available after 100 years and the remaining full portion to be available after 200 years. His intent was to use the power of compounding interest as a tool for long-term civic improvement.
At the time, this was a modest fortune, but Franklin was playing the long game. He was fascinated by the power of compounding—a theme we see woven throughout his life, from his investments in knowledge to his moral character. The initial sum, Franklin predicted, would balloon over two centuries into an enormous resource for public works, particularly to help young tradespeople, who, in his mind, were essential to the thriving of any society.
The Power of Compound Interest
Franklin envisioned that the money, once invested and monitored, would grow at a modest rate but start to accumulate at an astonishing pace with the passage of time. By 1890, after a century of growth, the funds had increased significantly. In Boston, the fund had grown to nearly $400,000, while in Philadelphia it had reached about $172,000. While Franklin's projections weren’t quite as rosy as he had hoped (he had imagined the fund reaching millions), this was still no small sum. Each city used part of the funds to support public infrastructure projects like libraries, schools, and hospitals, thereby keeping Franklin’s vision alive. In Boston, funds went to create the Benjamin Franklin Institute of Technology, which still exists to this day.
However, by the early 20th century, both cities faced challenges in adhering to Franklin’s vision strictly. The use of the funds began to shift more toward civic improvements than the direct aid to young tradespeople Franklin originally imagined. But even so, his influence on these cities through his gift remained undeniable.
The Bicentennial Windfall: 1990
As the funds reached their 200-year mark in 1990, the true fruits of Franklin’s patience were finally realized. By that point, the Boston fund had grown to over $5 million, and Philadelphia’s fund had grown to around $2 million. Boston opted to use a portion of its funds for educational scholarships, while Philadelphia divided some of its funds among various local charities, including the Franklin Institute.
Franklin’s remarkable foresight also turned into something of a moral lesson for the cities. His experiment in patience, long-term thinking, and the power of compound interest was more than just a financial gift—it was a reminder of how great legacies are built over time. Two centuries after his death, Franklin’s experiment still serves as a masterclass in the power of foresight. He wasn’t just interested in solving the problems of his day; he was investing in the solutions of tomorrow.
Lessons for Today
Not everyone has 2,000 Sterling to donate, and not everyone actually wants to tuck their money away over such a long-term time horizon. In fact, there is often pressure within non-profit organizations, governmental entities, and even corporations around the question of whether to spend on the needs of today or invest for the needs of tomorrow. Every dollar saved towards an endowment, for example, might become $30 forty years from now, but that is also a dollar that can’t be spent on housing the homeless, feeding the hungry, or investing in the schools of today. I have seen organizations get real pushback form their stakeholders including staff and local community members for stashing too much in reserves for the long-term good instead of more directly addressing the more immediate needs of today.
Setting aside the very real and fair concerns about now versus later, I’ve never seen an organization that regrets that its previous stewards saved for the future. One of my favorite aphorisms is the Chinese proverb, “When is the best time to plant a tree? Answer: 30 years ago. When is the second best time? Today!” So, too, it is with endowments.
The added lesson that I think a lot of non-profit leaders including board members not to mention elected officials or even corporate leaders can take from the Ben Franklin story is the awareness that we are all just short-term caretakers for the causes and organizations that are important to us. We therefore have a responsibility not merely to maximize the utility and success of what we steward during our current time, but for the long-term life and vitality of the things that will live on long after our moment in the sun has passed. In the spirit of Ben Franklin, it’s worth remembering that sometimes the best things we do won’t even pay off in our lifetimes. But that doesn’t make them any less valuable.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.
Weekly Round-Up
Here is a topical Weekly Round-Up this week that includes some more color and spin on today’s article.
Einstein: About 150 years after Ben Franklin died, another of history’s greatest minds and most unique personalities, Albert Einstein, would call compounding interest “the eighth wonder of the world.” I have also seen quotes attributed to him referring to compounding interest as the most powerful force in the universe, which is pretty heady when you consider Einstein’s understanding of theoretical physics.
What are the largest endowments in the world? I assumed they were mostly the endowments of large colleges and universities. But, in fact, three of the four largest endowments are the Norway Global Pension Fund ($1.4 trillion), the Abu Dhabi Investment Authority ($1.2 trillion), and the Kuwait Investment Authority ($800 billion), which are all funded by oil wealth. The fourth of the group is the Chinese Investment Corporation, which is meant to promote the interests of China. Here in the United States, the largest endowments are the Bill and Melinda Gates Foundation ($70+ billion), and the endowments of Harvard, Yale, Stanford, and Princeton (all between $35-$50 billion). The largest public school endowment is that of the University of Texas, clocking in at nearly $43 billion.
There are a handful of 100-year bonds out there, including government bonds from Austria and Mexico. The Austria bonds have traded with yields less than 3.0%, while the Mexican bonds typically trade around 4.5%. Companies like Disney and Coca Cola have also offered 100-year bonds in the past, although information is scant on how to obtain them today.
The oldest bond in the world that is still paying interest was written in 1648. The bond was issued to raise money for infrastructure improvements in The Netherlands. It is a “perpetual bond,” with interest paid out forever. There are thought to be only five of these bonds still in existence, one of which was bought by Yale University in 2003 for the historical significance of it (as opposed to the actual yield).
The oldest continuously operating company in the world (purportedly) is Kongo Gumi, which is a Japanese company founded in 548 A.D. that builds, restore, and repairs shrines and temples.
Quick final note, I’ve referenced this podcast before, but I continue to be enthralled by the Acquired podcast series. Just last week I listened to an episode on Hermès, which is the maker of Birkin gags and other various items. The company and other observers credit much of its success to its long-term strategic time horizon, which traces back to its founding nearly 200 years ago in 1837. You can listen to that particular episode here.
Have a great week, everybody, and keep thinking long-term.