Looking back on the past can inspire us to find formulas for the future. A good example of this are the so-called “tontinas”, a financial instrument born in the seventeenth century in which many see the seed of today’s pension plans, the essence of which could be used to redesign this type of product.
The longer you live, the more you make
A little historical background: Lorenzo de Tonti was an Italian banker who, after taking part in a revolt against Spain, fled to France in search of political asylum. At that time, the coffers of Louis XIV were practically empty due to the 30-year war. So, in 1653, Tonti suggested an original savings formula: a group of people would make a series of cash contributions to a fund. This fund could be invested in such a way that participants would receive the corresponding profits or interest payments. If any of the members died, their contribution would be distributed among the rest of the survivors. And so on. The person who lived the longest earned the most. This was the birth of the “tontinas”.
Dying of success
At first, Tonti’s original proposal was not very successful in France. What’s more, the Italian banker fell from grace – we don’t know why – being imprisoned in the Bastille and dying on the guillotine in 1684. Fortuitously, the Netherlands – the birthplace of great financiers – took note of Tonti’s idea and popularized it. However, the large sums of money raised by the “tontinas” managed to distort the original idea: doctors were consulted in search of families with a history of longevity to select members of the “tontina”; many of them gave rise to corruption, speculation and even murder among members to speed up the disbursement of funds.
The origin of Wall Street
In the end, the “tontinas” were banned in 1906. But thanks to them the first mortality records were created, as the way the system operated required the deceased person to be very well documented. The “tontinas” were used to finance wars, but they also contributed to the construction of iconic cities and venues: in 1794, the Tontine Coffee House became a meeting place for insurance agents, stockbrokers, politicians, etc. and was the seed of the current New York Stock Exchange.
As you can see, Tonti was ahead of his time. In fact, some experts are not ruling out the possibility of this formula being resumed in a modern version. What is clear to us is that, both now and in the seventeenth century, to resist is to win!