Franklin’s Will: A Tale of Two Cities

Benjamin Franklin had a lot of innovative ideas. One of his thoughts about government was that public servants should not be paid. He felt we would get a better class of people in Government that way. I am not sure I agree, but I’m not Ben Franklin.

Franklin served as the 6th President of Pennsylvania from 1785–1788. For that service he was paid the sum of several thousand English pounds. Franklin intended to return the money, but then a novel idea came into his head and in his Will he made other arrangements.

Franklin was troubled by what to do with his money when he died. Normally, he would have left the bulk of his estate to his son William. But William had served as the Tory Governor of New Jersey during the Revolution and remained largely estranged from his famous father as a result. Not surprisingly, Ben was unhappy his son had “turned-coat” and worked against him on behalf of the King of England.

Franklin’s last will and testament is a fascinating work. He left 1000 Pounds each to his two favorite cities, Boston and Philadelphia, in Trust for a period of 200 years. The terms were that the money was to be lent “at five per cent, per annum, to such young married artificers, under the age of twenty-five years, as have served an apprenticeship” so that young tradesmen setting out on a career could borrow money to start their businesses.

Under the terms of the will, the two cities could withdraw 2/3 of the money at the end of the first 100 years and spend it on public works. “At the end of this second term if no unfortunate accident has prevented the operation, the sum will be four millions and sixty one thousand pounds sterling, of which I leave [one-third] to the disposition of the inhabitants of the town of Boston, and [two-thirds] to the disposition of the government of the state, not presuming to carry my views farther.”

It is clear that Franklin was interested in using his money for civic good, particularly the money he had earned as a public servant. In another section of the will Franklin left another 2000 pounds that he had earned in government “to be employed for making the river Schuylkill navigable.” But he also had another motive behind the two-hundred year trusts. There were no millionaires in America in the late 18th Century. By Ben’s calculations his plan would create two multi-million dollar portfolios.

The idea, unlike so many others, was not original to Franklin. Ben borrowed the idea from a French mathematician named Charles-Joseph Mathon de la Cour. De la Cour wrote a parody of Poor Richard’s Almanac called ‘Fortunate Richard.’ In it, the main character leaves small amounts of money in trust for periods of 100–500 years to accumulate; the resulting astronomical amounts to be used for utopian projects. Franklin wrote to De la Cour thanking him for the excellent idea.

Shortly into the experiment there was a change in America that affected the will. There were no longer young artisans to loan the money to. The apprentice system, so strong during Franklin’s life, died quickly in the next century. After the first 100 years, the City of Philadelphia used its money to build the Franklin Institute. Boston used its money to build the Franklin Union, a trade school, now called the Franklin Institute of Technology.

One of the curious turns of the history of the trusts occurs largely during the second hundred years. As I already mentioned, the apprentice system as a method of training artisans and masters largely died during the 19th century. As a result, the trustees of both the Boston and Philadelphia Trusts had to go to court to change the terms in order to keep investing the money, there being no apprentices to lend the money to.

Philadelphia attempted to adhere to Franklin’s original concept and used the money to make mortgage loans to young tradesman, under the age of 25 years of age. Boston, on the other hand, invested the money as one would a Trust today. They hired professional portfolio managers to invest the assets in a portfolio of stocks and bonds. Both trusts were worth about the same amount of money in 1890, 100 years after Franklin’s death. But, by 1990, the Boston portfolio invested in stocks had grown to over $5,000,000. The Philadelphia trust which had been lent as mortgages was worth notably less, just over $2,000,000. In a time when the stock market appears to be stuck, it is good to remember that over the long run stocks WIN!