The Future Money Drop Edition

Ben Young (BWAGY) is a Kiwi entrepreneur and media thinker. He is currently tinkering with all things predictive analytics at his company Nudge. 

Ben here. Imagine waking up one day to find out that someone from the past had left you a vast sum of money. Not just the recent past, but hundreds of years ago. Your great great grandparents, say. Now, imagine they left you £1,000 at the time, but because it was compounding, it’s now worth millions. 

That’s what happened to the city of Philadelphia & Boston, two cities that in 1887 both received  the equivalent of millions of dollars today, from none other than the long-deceased Benjamin Franklin. Then, a hundred years later, in 1987, the two cities received an additional $2m and $4.5m respectively.

You see, Benjamin Franklin had declared in his will that a sum of money be left in a trust for 200 years. The resulting funds were only to be used to help out young tradesmen in either city, to help them access initial capital to make their start. After 100 years, the cities were to receive 75% of the funds, with the rest to continue compounding for another 100 years. 

Why is this interesting?

Beyond the obvious—that it’s wild—it also raises the question of why we don’t all drop money into the future. Donate $1,000 to your favorite charity today, and that’s all they can deploy. But if you halved it, gave them $500, and put $500 into a trust, with the trust to give the funds to that charity in 100 years, that could grow to millions! 

Unfortunately, it’s not as simple as that. You need the trust governed for that time. Who are the trustees going to be? How will they govern? What if the parameters of your wishes change. For example, with Benjamin Franklin’s gift, the idea of apprenticeships went away over time, so the cities opened it up to other professions, like nursing. 

What if your charity, knowing this large sum of money was coming, loaned against those future dollars, but then the trust’s investments failed? 

Or what if your heirs decide to take the matter to court, and drag it through the court systems. For 62 years. This is exactly what happened with Peter Thellusson, who left funds to accumulate during his, his children’s, his grandchildren’s, and his great grandchildren’s lifetimes, only to then all go to the generation that followed them. His children, thinking this unfair, challenged the law for 62 years to get it turned around. (They won, but ate up most of the funds in legal fees, and most of their lives had passed by the time the ruling came in their favor.)

These events lead to the Thellusson Act (actual name Accumulations Act) which stops property from being accumulated for any term longer than the grantor's lifetime, and 21 years from their death.

Another tale is of Jonathan Holden, who, inspired by Benjamin Franklin, tried to put away millions in the 1930s, to be held until the 25th century! Such a large amount, compounded over time, would lead to untold sums, which could have an impact on the entire world economy. The courts knocked it down, stating that it “could ultimately shatter the nation’s financial structure,” because having such a large sum requiring a return might in the end have the whole nation’s economy working for the trust. (They forecast that it would grow to $2.5 quadrillion!) Thus, the courts enforced that the trusts he formed must pay out money continuously to avoid this potential catastrophe. I guess Einstein was right when he said compound interest is the eighth wonder of the world. 

That said, there is one not too dissimilar trust hidden in plain sight, which virtually anyone that has a retirement account relies on. That is the SPDR S&P 500 ETF Trust, aka SPY. This trust holds the assets for the S&P 500 index ETF, which earlier this year became the first ETF to surpass $500bn in assets. To comply with the laws in play above, this trust is set up to extend only 20 years beyond the life of a selection of millennials that were identified, most of whom have some connection to the American Stock Exchange) with the expectation that the trust will wind up around 2118. 

For many of us reading this, this *may* not be a problem, but for our kids, judging by health and longevity trends, there’s a fair chance that they will live through this trust’s dissolution and the after effects.  Maybe a changing world means we need to redress this issue, or maybe we simply give the whole $1,000 today to the charity today, and hope they do their best. (BW)

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Thanks for reading,

Noah (NRB) & Colin (CJN)

Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) with editing help from Louis Cheslaw about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing.