Could You Turn A Joke Into Millions Like Ben Franklin Did? by Forbes – Entrepreneurs

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America owes a debt of gratitude to its Founding Fathers. Their serious contemplation – and physical bravery – forged a new nation unlike the world has ever seen. Even today, nearly a quarter of a millennia since its founding, the ideal of America remains that shining city upon a hill once evoked by John Winthrop prior to embarking to settle Boston in 1630.

Ben Franklin differed in many ways from his fellow Founding Fathers. For one, he was older. And, despite his interest and prominent work in the politics and philosophy of The Revolutionary War, he excelled most in science and innovation. He was also good at turning his ideas into profitable money-making ventures.

Above all, however, he liked to have fun. Sometimes at the expense of others. Following the conclusion of the Constitutional Convention of 1787, a woman asked Franklin what had been wrought. “A republic, if you can keep it,” was his wry response.

His notorious mischief-making wasn’t confined to the shores of America. While spending time in Paris, he combined his well-respected scientific nature with his playful churlishness to debunk the popular Franz Mesmer’s enigmatic cure. None other than the King and Queen of France sought his advice on this matter. His clever blind experiment (literally, he blind-folded the subjects) proved Mesmer was a hoax.

Perhaps this episode motivated French Mathematician Charles-Joseph Mathon de la Cour to spoof Franklin’s Poor Richard’s Almanack with the parody “Fortunate Richard.” Ben Franklin possessed a famous optimism and Mathon de la Cour wanted to make fun of it. He jokingly had Fortunate Richard will a modest sum of money with the instructions not to distribute it for 5 centuries. In that time, Fortunate Richard said it would grow considerably.

Mathon de la Cour may not have fully appreciated the power of compound interest, but Ben Franklin did. In a classic “who gets the last laugh” maneuver, Franklin did precisely what Mathon de la Cour had Fortunate Richard do. He set up trusts in his will for the cities of Boston and Philadelphia that were intended to exist for 200 years.

Now, being the financial genius he was, Franklin set parameters on how the money was to be invested to obtain a 5% annual return. (He wanted it used to help kickstart budding entrepreneurs like himself.) His will even calculated where he expected the trusts to have grown to in 1890 (when the first distribution was to be made) and in 1990 (when the trusts were to be terminated).

Based on the math outlined in his will, Franklin’s initial 1790 bequest of $4,000 (he actually used pounds sterling, not dollars) would have grown to more than $7 million in 1990. In reality, by 1990 the Boston Franklin Trust had grown to $5 million while the Philadelphia Franklin Trust had grown to $2.25 million. Not quite up to Franklin’s expectations, but still sizable.

Ben Franklin’s lesson here clearly shows the reward for long-term planning. It’s important to find a way to use natural inertia to help move you closer to your goals. In the financial world, nothing better defines that natural inertia than compound interest.

Franklin realized this. He wanted others to plainly see it, too. He had hoped his Franklin Trusts would serve as a practical guide to this lesson.

Today, each of us can benefit from the fruit of this lesson. The time frame Franklin used is far greater than that of a single lifespan. It can, however, work for a family. Though a single trust may not be the most practical tool for this, the concept can help build multi-generational wealth. This can be achieved through the creative use of corporate vehicles best aligned with the talents and interests of the family and its progeny.

Still, individuals can at least partially duplicate the rewards of Franklin’s lesson. A good way you can capture this advantage is through saving in a retirement plan. Perhaps the best way is through establishing a Child IRA.

Indeed, if good ol’ Ben Franklin were around today and someone were to ask him what a Child IRA is, he’d likely respond, “A retirement, if you can keep it.”

July 3, 2019 at 10:01AM
https://www.forbes.com/sites/chriscarosa/2019/07/03/could-you-turn-a-joke-into-millions-like-ben-franklin-did/
Forbes – Entrepreneurs
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