The money was to be invested at compound interest for one hundred years, then a portion of the fund was to be used in Boston for a trade school. Upon his death in 1790, Franklin’s will contained a peculiar codicil setting aside £1,000 (about $4,550) each for the cities of Boston and Philadelphia to provide loans for apprentices to start their businesses. The notion of a “Methuselah” trust has a long history-and as with many peculiar notions, Benjamin Franklin got there first. One suspects they’d have rather gotten a new squash court. Because thanks to an eccentric New York lawyer in the 1930s, this college in a corner of the Catskills inherited a thousand-year trust that would not mature until the year 2936: a gift whose accumulated compound interest, the New York Times reported in 1961, “could ultimately shatter the nation’s financial structure.” The mossy stone walls and ivy-covered brickwork of Hartwick College were a ticking time-bomb of compounding interest-a very, very slowly ticking time bomb. Granted, the extra quarter isn’t much mathematically, compound interest is a pretty modest-looking exponential function.
With compound interest, that interest itself get rolled into the principal and earns interest atop interest: with annual compounding, after one year you have $105, after two you have $110.25. A hundred-dollar account at 5 perecent in simple interest doggedly adds five bucks each year: you have $105 after one year, $110 after two, and so on. With bank rates currently bottomed out, it’s hard to imagine compound interest raising anyone much of a fortune these days. But along with charming buildings and a spring-fed lake, the college once possessed a rather more unusual feature: a slumbering giant of compound interest. A small liberal-arts school in the Catskills, Hartwick is the kind of sleepy institution that local worthies were in the habit of founding back in the 1790s it counts a former ambassador to Belize among its more prominent alumni, and placidly reclines in its berth as the number-174-ranked liberal-arts college in the country. Hartwick College didn’t really mean to annihilate the U.S.
Audio brought to you by Curio, a Lapham’s Quarterly partner
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