Friday’s column calculated the annualized capital growth on Peter Minuit’s $24 purchase of Manhattan as 6.7%. Total return, which includes the effect of income along with capital growth, is the better investment measure, but we cannot compute Manhattan’s total return. We do not know what profits the island’s properties have generated for owners over the past four centuries.
That 6.7% figure seems low. After all, U.S. stocks routinely post such gains, and more. But we live in extraordinary times. The S&P 500’s annualized capital growth for the trailing decade has been 14%. Forget about earning anything like that for the truly long haul. In 1819, many American companies were worth more than $1,000. However, none today are worth anywhere near $240 trillion, which is the value of $1,000 compounded at 14% for 200 years. The feat has never been done.