Was selling Manhattan for $24 such a bad idea?

The sale of Manhattan by the natives to Peter Minuit in 1626 often includes a mention of the estimated sale price. The actual exchange was apparently for some trade goods which is estimated to have been worth $24. Often the view that the natives were short-changed is expressed in the same breath. I don’t know what the value of Manhattan would be today, but if we assume that $24 grew at a real rate of return of 5 – 6% (extrapolating the long term rate of return for real estate as sourced from Dr. James DeLisle’s paper: ‘Real Estate: A Distinct Asset Class or an Industry Sector?’, 1995), we might have a better idea…

Pennies.jpg$24 x 5% real rate of return x 382 years = $2.98 Billion
$24 x 6% real rate of return x 382 years = $111.44 Billion

It’s amazing the impact of 1% isn’t it? :)

If we try to figure out what $24 dollars was worth in today’s dollars back in 1626 we just calculate using the long term rate of inflation which most seem to agree on as being roughly 3%. Applying the math, we find that the natives received about $1.9 million in today’s dollars for Manhattan.

But if the natives had taken that money and invested in the stock market (bare with me) and earned a 7% real rate of return, they would have just over $4 trillion. Who’s laughing now! :)

Hey, its RRSP season and I’m losing my mind… give me a break! :) 

Subscribe to the free Email Updates to learn more about personal finance.
If you use a feed reader, you can click here to add my RSS feed.

If you like this blog, you might like my book:
  RRSPs: The Definitive Book on Registered Retirement Savings Plans

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
Related Posts
Showing 6 comments
  • Nick

    Your point is moot, there was no stock to invest in back then.

  • Preet

    Hence the comment, "bare with me". It is a hypothetical concept. However, you could indeed own stock back then – it could’ve been private equity – so the point is not moot.

  • Jim

    I just hear a twist, the Indians that made the trade never one the land anyway.
    the first land swindle in NY. want to buy the Brooklyn bridge?

  • Preet

    Jim: I will give you $24 dollars for it! :)

  • Anonymous

    Nick you’re out in left field.

  • ed-hardy

    Brand designer ChristianAudigier have “KingofJeans” the reputation, previously served as Levi’s and other major brand designer, [url=http://www.ed-hardy.cc]don ed hardy[/url] and later bought the patent rights TATTOO Godfather DonEdHardy creation will DonEdHardy the legend of the tattoo art of the introduction of fashion, [url=http://www.ed-hardy.cc/ed–hardy-denim.html]ed hardy denim[/url] into the retro punk elements and culture of the streets with tattoos tattoo art and fashion.