U.S. Secretary of State William Seward negotiated the purchase of Alaska from Russia in 1867. The United States paid $7.2 million in exchange for 586,412 square miles of new land. Opponents of the deal mockingly labeled the transaction “Seward’s Folly” because they believed the newly acquired land was a useless icebox. Did the United States really get a bad deal? If Russia had invested the $7.2 million at 5 percent (tax free), it would now, 155 years later, be worth about $13.9 billion. Today, Alaska, with its wealth of natural resources, is undoubtedly worth much more than $13.9 billion, so at a 5 percent rate of return, the Russians got the worst of the deal. If Russia had instead invested at 10 percent, the amount of money they received would be worth about:

This is a lot of money. In fact, $18.8 trillion is worth almost as much as the estimated combined value of all land in the contiguous United States today. However, note that no one in the history of the world has ever been able to find an investment yielding 10 percent every year for 155 years.

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$7.2(1+r) $7.2 x 1.1155 $18.8 trillion