If you could build a time machine and drop in on Benjamin Franklin, what would he make of modern markets and regulations that grant some investors broad access to risk, diversification, and upside while restricting others from participating?
That was essentially the premise of a recent Capital Ideas conversation with economist and author Mark Skousen.
This podcast may be the next best thing to having a time machine – offering a glimpse into how Franklin’s financial innovations helped shape the foundations of modern capital markets.
As America approaches its 250th anniversary, attention naturally turns to the Founding Fathers and the principles that shaped the nation.
Less attention is paid to the financial and institutional foundations that transformed a young agricultural society into the world’s leading economic superpower.
Benjamin Franklin helped build both.
That was the central theme of a recent Capital Ideas conversation with economist and author Mark Skousen, whose book The Greatest American: Benjamin Franklin, The World’s Most Versatile Genius argues that Benjamin Franklin may have been less a traditional statesman and more one of history’s earliest architects of modern capital formation.
Skousen – who is also a direct descendant of Franklin – offered a surprisingly contemporary interpretation of America’s most versatile Founder: Franklin as entrepreneur, defender of commerce, monetary innovator, investor, and institution builder.
A Founder Who Defended Commercial Society
Skousen began by noting that before financial infrastructure could exist, a society needed a culture that tolerated risk-taking and entrepreneurship, and in the 18th century, that culture was rare. Most philosophical traditions, at the time, treated commerce and speculation with suspicion. Franklin broke from that. Skousen pointed out that Franklin is one of the few figures included in The 101 Greatest Philosophers in History specifically because he defended commercial society at a time when saving, investing, and speculating were widely viewed as morally suspect.
Franklin envisioned a dynamic, stable commercial society – one that could occasionally get carried away (Franklin himself lost money speculating on Ohio Valley land, as did George Washington), but which Skousen called the most modern outlook of any Founding Father.
Printing Money – and Inventing the Tools to Protect It
The conversation’s first deep dive centered on currency. Colonial America faced a genuine liquidity crisis: Britain restricted the flow of gold and silver coins, choking off the money supply needed for trade to expand. As a successful printer in Philadelphia – successful enough to retire at 42 – Franklin published a pamphlet advocating paper currency, then secured the contract to print it himself.
But printing paper money created a problem: counterfeiting, punishable by death because it was so easy to do. Franklin’s solution was technological. He developed a technique pressing actual leaves onto printing plates, producing patterns impossible to replicate since no two leaves are identical. He’s also credited with designing one of the first American coins, a bronze piece inscribed “mind your business.”
Skousen connected this to the “real bills doctrine” – the idea that the money supply should expand only in proportion to trade growth. Franklin supported this for most of his life, though he later acknowledged, after living through the inflation that nearly bankrupted the Revolution, that paper money could be dangerously overused.
The 200-Year Endowment
Perhaps the most striking example of Franklin’s forward-looking financial mind appeared in his will.
Skousen explained that Franklin left £1,000 each to Boston and Philadelphia with instructions that, for the first century, the funds be loaned to young artisans at 5% interest and then directed toward public improvements.
Franklin’s purpose, according to Skousen, was to demonstrate the power of compounding.
The original £1,000 ultimately grew into millions of dollars and helped support institutions including the Franklin Institute.
Skousen tied this philosophy to three principles Franklin repeatedly emphasized: Industry. Thrift. Prudence.
Franklin also believed strongly in diversification.
He spread assets across multiple banks and later credited that decision with helping him avoid financial distress that devastated others.
Today, that sounds remarkably familiar.
The Building Block of Modern Portfolio Theory
The third pillar of Skousen’s case is insurance – an area he said deserves to be added to Franklin’s long list of careers. Fire was an omnipresent danger in colonial Philadelphia, and Franklin attacked the problem from multiple angles, improving the efficiency of home heating with the Franklin stove and inventing the lightning rod through his electricity experiments.
In 1752, Franklin helped found the Philadelphia Contributionship, built around pooling capital to manage fire risk collectively. Crucially, the Contributionship didn’t insure every property automatically – it assessed risk first, evaluating construction materials and protective measures, and priced policies accordingly. In Skousen’s framing, this underwriting model is a conceptual building block of modern portfolio theory and the broader insurance industry, which today ranks among the largest institutional investors in global markets.
Franklin in the Age of SpaceX
Asked how Franklin might view today’s markets, Skousen suggested he would likely be fascinated by ventures like SpaceX given his documented enthusiasm for space and technological progress.
At the same time, Franklin’s broader philosophy raises a question that feels increasingly relevant: Who gets access to innovation?
Skousen argued Franklin – who may have informally reviewed drafts of Adam Smith’s Wealth of Nations while both were in London – would likely favor clear rules and broad participation over complexity and unnecessary barriers.
Franklin, he noted, was a committed free trader who believed no nation was ever ruined by trade.
Franklin’s Lasting Lesson
Franklin may not be credited with inventing modern markets. But many of the principles that underpin them – trusted money, compounding, diversification, and systems for pricing risk – bear his fingerprints.
Perhaps that is why, 250 years later, his ideas still feel unexpectedly relevant in an era debating private markets, investor access, digital assets, and the future of capital formation.
Nick Morgan is President and Founder of ICAN, the Investor Choice Advocates Network, a nonprofit public interest litigation organization dedicated to serving as a legal advocate and voice for everyday investors and entrepreneurs. He was previously a partner in the Investigations and White Collar Defense Group at Paul Hastings law firm. Morgan previously served as Senior Trial Counsel in the SEC’s Division of Enforcement. Capital Ideas is a series created by Morgan and Dara Albright.