In 1789 Benjamin Franklin left a thousand pounds to two cities and forbade them to spend it for a hundred years, and part of it for two hundred. His arithmetic was perfect; the world didn't follow it. Why money that is safe is almost never standing still, the question about half the adults in a 140-country survey got wrong, and a three-part check you can run on your own savings.
Takeaways
- In 1789 Benjamin Franklin left a thousand pounds each to Boston and Philadelphia, to be lent at five per cent and left to compound for up to two hundred years. His arithmetic was right; the funds grew, but far less than he forecast.
- Money that is safe is rarely standing still: what it earns, minus fees, minus how fast prices rise, is its real rate, and that compounds, up or down. In a 2014 survey in over 140 countries, about half of adults answered a basic inflation question correctly.
- This week: one pot, one date, one real rate.
Chapters
- A thousand pounds, two hundred years0:17
- The number on the screen1:58
- The real rate4:06
- Two safe pots6:57
- Hear it done8:27
- Build yours9:42
- The answer11:31
References
- Franklin, B. — Last Will and Testament, with Codicil of 23 June 1789(1789)
- Yenawine, B. H. — Benjamin Franklin and the Invention of Microfinance(2010)
- Phillips, R. J. — Review of Benjamin Franklin and the Invention of Microfinance
- HistoryNet — Ben Franklin's Gift that Keeps on Giving
- Klapper, L., Lusardi, A., & van Oudheusden, P. — Financial Literacy Around the World: Insights from the Standard & Poor's Ratings Services Global Financial Literacy Survey(2015)
- Shafir, E., Diamond, P., & Tversky, A. — Money illusion(1997)
- Ziano, I., Li, J., Tsun, S. M., Lei, H. C., Kamath, A. A., Cheng, B. L., & Feldman, G. — Revisiting "money illusion": Replication and extension of Shafir, Diamond, and Tversky (1997)(2021)
- de Moraes Ferreira, M., et al. — Replication: The money illusion effect in a Brazilian sample and meta-analyses(2024)
- The Franklin Institute — Benjamin Franklin's donor story