Every institution this series has read, from El Pomar's orchard to the Smithsonian's red castle, rests on a single idea: that money can outlive the person who made it and keep working. The purest statement of that idea was written into a will in 1789 by the man who practically invented American thrift. In a codicil added near the end of his life, Benjamin Franklin left one thousand pounds each to Boston and Philadelphia, with instructions not to spend it but to lend it, at interest, and let it compound for two hundred years. He did the arithmetic himself and predicted the two funds would grow into millions. Then he died, and the wager sat on the books of two cities for two centuries, not to be settled until 1991. It is the founding experiment of deathless money, run in public, with a receipt at the end. This post reads that receipt.
The bet, in Franklin's own hand
Franklin signed his will on July 17, 1788, and added the codicil that mattered on June 23, 1789. Both were proved in Philadelphia on April 23, 1790, a week after he died on April 17 (City of Boston Archives; the codicil text). The gift was two thousand pounds sterling, "of which I give one thousand thereof to the inhabitants of the town of Boston, in Massachusetts, and the other thousand to the inhabitants of the city of Philadelphia," each held in trust (Franklin's will and codicil).
He said plainly why. "Having myself been bred to a manual art, printing, in my native town, and afterwards assisted to set up my business in Philadelphia by kind loans of money from two friends there, which was the foundation of my fortune," he wrote, "I wish to be useful even after my death, if possible, in forming and advancing other young men, that may be serviceable to their country" (the codicil). A printer who had been staked by friends wanted to stake the next printer, forever. The often-repeated story that a 1785 French parody, the "Testament de Monsieur Fortuné Ricard," which imagined small sums compounding for centuries into fortunes, first put the idea in Franklin's head is a plausible spark and is widely cited, but the documentary link is thin, and Franklin's own explanation is his apprenticeship (Mathon de la Cour; the scholarly account).
The mechanism was a revolving loan fund. The money was to be lent "upon interest, at five per cent, per annum, to such young married artificers, under the age of twenty-five years, as have served an apprenticeship" in the town, each borrower first obtaining "a good moral character from at least two respectable citizens, who are willing to become their sureties." No loan could "exceed sixty pounds sterling to one person, nor to be less than fifteen pounds," and each borrower would repay, every year, the interest plus "one tenth part of the principal," which "shall be again let out to fresh borrowers" (the codicil; Wikisource). It was, three centuries before the word existed, a microfinance fund with a two-hundred-year horizon.
And Franklin ran the numbers. If the plan "is executed, and succeeds as projected without interruption for one hundred years," he wrote, "the sum will then be one hundred and thirty-one thousand pounds," of which the town should spend one hundred thousand on public works and lend the remaining thirty-one thousand out for a second century. At the end of two hundred years, he calculated, "the sum will be four millions and sixty one thousand pounds sterling," to be split between the town and the state (the codicil). The math is sound and it is the entire lesson: a thousand pounds at five percent, compounded and relent, multiplies about a hundred and thirty times in a century, so the two-stage structure, spend most at the hundred-year mark and let the small remainder run, is what turns one thousand pounds into four million rather than seventeen. Franklin was teaching compound interest with his own estate as the chalkboard.
What Boston actually collected
Two hundred years is a long time to hold a plan, and the plan did not hold. The engine was the loans, and the loans failed, because the world Franklin knew was ending even as he wrote. The Industrial Revolution dissolved the path from apprentice to journeyman to master that produced the "young married artificers" the fund was built to serve, and by the middle of the next century the demand for those small loans "had all but disappeared" (Appalachian State history). With no borrowers, the managers did the only thing left: they invested the money in ordinary securities at ordinary rates, and ordinary rates do not compound like Franklin's five percent.
So Boston fell short of the projection. At the hundred-year mark its fund held about $391,000, not the pounds-equivalent of £131,000 Franklin had drawn (the 1891 centennial account). In 1894 the managers paid $329,300.48 toward a building, and the first-century money became a school (City of Boston Archives). Here the story turns, because a second fortune walked in. Andrew Carnegie, told of the bequest, offered to match it. His October 1904 letter proposed "to duplicate the Franklin Fund of Four Hundred and Eight Thousand, Three Hundred Ninety-six Dollars Forty-eight Cents," and he was as good as his word, sending $408,000 in bonds and a check for the odd $396.48 (Franklin Foundation v. Boston, 336 Mass. 39). "I'll match Ben Franklin," he is said to have put it. The combined money built the Franklin Union, opened in 1908, which became the Franklin Institute of Boston and is today the Benjamin Franklin Cummings Institute of Technology (City of Boston Archives; the school's history).
The second century ran to June 30, 1991, and the receipt is in the Massachusetts court record. At termination the Boston fund held exactly $4,646,613.48, made up of "$89,688.49 in cash, $1,052,459.74 in treasury bills, and $3,504,465.25 in loans receivable" (Franklin Foundation v. Attorney General, 416 Mass. 483). The popular telling rounds it to four and a half million and says the school got it all, but the court actually ordered the money split the way the codicil demanded, roughly a quarter to the city and three quarters to the Commonwealth, with the state's share directed by a 1958 statute to the foundation that runs the school (416 Mass. 483). Even that ending took a fight. The heirs had sued to break the trust as early as 1891, and in 1960 the court refused to end it early even after conceding that no qualifying young artificer could be found to borrow from it (Franklin Foundation v. Attorney General, 340 Mass. 197). Franklin's instructions outlived the economy that made sense of them, and the courts made everyone honor them anyway.
What Philadelphia actually collected
Philadelphia is the cautionary half of the experiment. Its managers were looser with the money, diverting sums to cover the city's debts and pet public works, and its loan program decayed even faster than Boston's; a committee reported as early as 1873 that the loans were "little used, because the sum of $300, as indicated by the will, is found to be too small" (Appalachian State). The result showed in the numbers. At the hundred-year point in 1887, Philadelphia's fund had grown to only $70,800 while Boston's stood at $327,799.45, the same bequest a decade apart producing four and a half times the difference (Mental Floss).
When Philadelphia's trust came due it held $2,256,952.05, distributed under an Orphans' Court decree to help graduates of the city's high schools train for trades, crafts, and applied sciences, administered through community foundations that still carry "Ben Franklin Trust" funds on their books today (Appalachian State; Chester County Community Foundation). The gap between the two cities became a matter of civic pride and shame. As a Philadelphia paper put it at the settlement, "Boston has always prided itself that it compounded the money wisely. Philadelphia has always had an inferiority complex because it didn't" (Appalachian State). The historian Michael Meyer, who wrote the definitive account of the two funds, listed what had eaten Franklin's projection over two centuries: "Incompetence, inefficiency, lack of interest, defaults, incomplete records, and plain old graft," and concluded that his growth calculations had "proved wildly optimistic" (Christian Science Monitor).
Add the two cities together and the experiment produced about $6.5 million in 1991, against the roughly $36 million Franklin's own figures projected (Yenawine, Syracuse). It grew, enormously, from four thousand dollars of 1790 money into millions. But it came in at less than a fifth of the forecast, and the reason is the one lesson compounding never stops teaching: the rate is everything. Franklin assumed five percent, maintained without interruption, forever. The moment the loan market died and the trustees settled for treasury-bill yields, the curve flattened, and two hundred years of flattening is the whole difference between four million and thirty-six.
The others who tried to run it longer
Franklin's two centuries were modest next to what some tried, and the fate of the others is why his kind of trust is nearly impossible to write today. The great cautionary case is English. In 1797 the London banker Peter Thellusson left an estate of more than six hundred thousand pounds to accumulate at compound interest across the lives of all his living descendants, passing only to a distant unborn heir at the end. Contemporaries did Franklin's math and panicked, projecting the fund might reach fourteen million pounds, or nineteen, or in the wildest estimate a hundred and forty, and "the will was regarded by some as a peril to the country" (DNB, Peter Thellusson; Thellusson v Woodford). Parliament responded in 1800 with the Accumulations Act, still called the Thellusson Act, which for the first time capped how long a trust could hoard its income. The government's own explanation of the law names the fear precisely: "it was feared that the ability to accumulate income indefinitely could result in such a concentration of wealth in private hands that it might compromise the economic independence of the nation" (UK legislation notes; Accumulations Act 1800). The irony is total. When Thellusson's trust finally unwound in 1859, "the amount inherited was not much larger than that originally bequeathed," because mismanagement and generations of litigation had devoured the gains, the same lawsuit-swallowed-the-estate spectacle that is said to have given Dickens the endless case at the heart of Bleak House (Thellusson v Woodford).
The American version was stranger. In the mid-twentieth century a New York lawyer named Jonathan Holdeen created a web of trusts designed to accumulate for five hundred to a thousand years, on the theory that the eventual sums, which an actuary testified would run to figures with no ordinary name, could one day fund the entire government of Pennsylvania and abolish taxation (Holdeen v. Ratterree, 270 F.2d 701; Seattle Times). The Internal Revenue Service taxed the income to Holdeen himself, and Pennsylvania's courts finished the job, ruling the scheme "so visionary, unreasonable and socially and economically unsound" that it was "charitably purposeless, contrary to public policy and hence void," and redirecting the money to present charity rather than letting it compound (Seattle Times). Between them, Thellusson and Holdeen show the only two ways a centuries-long accumulation actually ends: friction eats it, or a court kills it.
Why no one can write Franklin's will today
Three separate walls now stand where Franklin's codicil once had open road. The first is the old common-law rule against perpetuities, which forbids an interest that might vest more than twenty-one years after some life alive when the trust was made (Cornell Law). The second is the rule against accumulations that Thellusson's will provoked. And the third is the one this series has already traced in the tax code: the Tax Reform Act of 1969 requires a private foundation to pay out about five percent of its assets every year or face a penalty tax, a rule set precisely to stop a charitable fortune from doing what Franklin's did, sitting and compounding while giving little away in the meantime (IRS on the payout rule). A modern Franklin who tried to lock two thousand dollars away to compound untouched for two hundred years would run into all three. The instrument that founded the Franklin Institute is now, for a charity, close to illegal.
The founding ledger
Read against everything else in this series, Franklin's codicil is the ancestor of all of it. The HHMI endowment compounding for decades, the El Pomar orchard paying Colorado a dividend ninety years on, the Smithson bequest grown from half a million dollars to six billion, all of them are running the experiment Franklin wrote out longhand in 1789: money set to work in the markets everyone shares, outliving the person who set it. What makes the codicil the honest founding document is that it also shows the catch, in Franklin's own numbers against the court's. Compounding is real, and two thousand dollars really did become nine million across the two cities and two centuries. But it needs a rate that holds and hands that are careful, and Franklin's experiment got neither perfectly, so it came in at a fraction of the promise and needed judges to drag it across the finish line intact. The corpus outlives you. Only discipline makes it grow. Franklin bet on both, won the first half, and left the second half as a two-hundred-year lesson for anyone willing to read the receipt.
Related reading
- The Orphan's Dividend: Stephen Girard's bequest, another founder's fortune built to outlive him.
- The Stranger's Gift: James Smithson's founding bequest, grown across two centuries into the Smithsonian.
- The Rules Beneath the Endowment: the 1969 payout rule that would forbid Franklin's compounding trust today.
- The Ledger Lessons: the recurring laws of money that outlives its owner.
Fact-check notes and sources
- The dates and the bequest (the will dated July 17, 1788, the codicil June 23, 1789, both proved April 23, 1790, Franklin's death April 17, 1790; and the gift of one thousand pounds sterling each to Boston and Philadelphia in trust): from the text of Franklin's will and codicil at constitution.org and Wikisource, and the City of Boston Archives finding aid.
- The loan terms and Franklin's projections (five percent interest to married artificers under twenty-five who had served an apprenticeship, with two sureties; loans of fifteen to sixty pounds; repayment of interest plus a tenth of principal, relent to fresh borrowers; the one-hundred-year figure of £131,000 and the two-hundred-year figure of £4,061,000; and Franklin's stated motivation): quoted from the codicil at constitution.org and Wikisource. The "Fortunate Richard" parody by Charles-Joseph Mathon de la Cour is a widely cited but not firmly documented spark (Wikipedia; Cambridge).
- The Boston fund (about $391,000 at its 1891 centennial; the 1894 payment toward a building; Andrew Carnegie's matching gift of $408,396.48 via his October 1904 letter, sent as $408,000 in bonds and a $396.48 check; the Franklin Union of 1908, later the Franklin Institute of Boston and today the Benjamin Franklin Cummings Institute of Technology; the 1960 refusal to terminate the trust early; and the final value of $4,646,613.48 at termination on June 30, 1991, split per the codicil between the city and the Commonwealth): from the Massachusetts Supreme Judicial Court opinions 336 Mass. 39 (1957), 340 Mass. 197 (1960), and 416 Mass. 483 (1993), the City of Boston Archives, and the school's history. The $391,000 and centennial detail are from the Appalachian State compilation.
- The Philadelphia fund (only $70,800 at the 1887 hundred-year mark against Boston's $327,799.45; the early decay of its loan program; the final value of $2,256,952.05 distributed to trade and applied-science training through community foundations; and the "inferiority complex" quotation): from the Philadelphia Inquirer account via Appalachian State, Mental Floss, and the Chester County Community Foundation. The roughly $6.5 million combined total against a roughly $36 million projection, and Michael Meyer's assessment, are from Yenawine's Syracuse dissertation and the Christian Science Monitor review of "Benjamin Franklin's Last Bet".
- Peter Thellusson and the Accumulations Act (the 1797 will directing accumulation across his descendants' lives, the speculative fourteen-to-one-hundred-forty-million-pound projections, the 1800 Thellusson Act and its stated rationale, and the ironic near-zero net gain by 1859): DNB, Thellusson v Woodford, Accumulations Act 1800, and UK legislation explanatory notes.
- Jonathan Holdeen's trusts (the five-hundred-to-one-thousand-year accumulation scheme to abolish Pennsylvania taxation, the IRS taxing the income to Holdeen, and the courts voiding the plan as contrary to public policy): Holdeen v. Ratterree, 270 F.2d 701 and the Seattle Times narrative.
- The modern limits (the rule against perpetuities, and the Tax Reform Act of 1969's roughly five percent private-foundation payout requirement): Cornell Law on the rule against perpetuities and the IRS on the section 4942 payout.
This post is informational and historical, not financial or legal advice. All figures are reproduced from the cited court records, archives, and histories. Individuals are discussed from the public record as nominative fair use, with no affiliation implied.
