Editor's Note: We're sharing this Labor Day Private Briefing with you because the American Society of Engineers recently gave the United States a "D+" grade for its crucial infrastructure and called for some $3.6 trillion to be invested by 2020 to repair it. This is a textbook unstoppable trend – one that's given Bill's paid-up readers some nice gains already, like 142% on Pentair Plc. (NYSE: PNR) and 84% on Blackstone Group LP (NYSE: BX). Here's Bill with a bit more on why this trend has been so profitable for such a long time…
To try and offer some perspective between the demand for public works projects in ancient times and for infrastructure projects of today, I set out to see if there was any way of creating a cost comparison.
It's not a simple exercise. But it is kind of a fun one…
Let me demonstrate.
In the Private Briefing report – as part of a story talking about new profit opportunities with infrastructure investments – we told you about the proliferation of state-funded aqueducts in Ancient Rome, a building program that began about 312 B.C.E.
By the end of that stretch, 11 state-funded water systems had been built. But one offers us a fun exercise in project cost comparisons across the centuries.
By 145 B.C.E, two of those 11 aqueducts had been built. But the city of Rome was once again demanding more water than was being supplied.
After those two conduits were built, they were used so heavily and tapped into (often illegally) at so many points that they began to degrade and desperately needed restoration. Praetor Quintus Marcius Rex ordered that those earlier aqueducts be overhauled… and a new one built.
This third one – provider of a "more wholesome" supply of water – was known as the Aqua Marcia. It was the longest of ancient Rome's 11 aqueducts and was high enough to supply Capitoline Hill – one of the Seven Hills of Rome and the one that served as the citadel of the earliest Romans. Known for water that was both cold and pure, Aqua Marcia was a key catalyst for Rome's becoming an imperial city, historians say.
Indeed, by the time Sextus Julius Frontinus – the legendary senator known today for his technical treatises – measured and recorded the performance of the city's aqueducts in roughly 97 A.D., Aqua Marcia had been expanded and was able to supply nearly 50 million gallons of water a day to the city. That made it the second-greatest source of Rome's water.
Aqua Marcia took two years to build and was largely financed using the spoils of the Roman conquests of Corinth and the destruction of Carthage – both of which had concluded the year before, in 146 B.C.E. The water source was near the modern towns of Arsoli and Agosta in the Anio Valley – about 56 miles away.
Its cost at the time: 180 million Roman sestertii.
But its cost in U.S. dollars will surprise you…
The "Wealth" of Rome
It is nearly impossible to compare the value of money spent during ancient times to cash values today.
I ran into this problem when I was writing about the Tulpengekte, or Tulip Mania, when I was trying to calculate how many Dutch florins folks were spending during a speculative frenzy devoted to… tulip bulbs.
And I suspected I would have the same challenge here trying to express the cost of the 180 million sestertii aqueduct project in dollars.
But here it goes.
In Ancient Rome, the total money supply was between 7 billion sestertii (3 billion in silver coins, or 2,895 tons of silver, and 4 billion in gold coins, or 3,096 tons of gold) and roughly 20 billion sesterces (5,766 tons of silver and 880 tons of gold), according to historians such as R.P. Duncan-Jones.
Experts have tried to use metals prices and estimates of an economic measure known as purchasing power parity (PPP) to give some comparisons.
To create that calculation, historians used all sorts of data points – including donkey prices, wage rates, metals prices from then and now, the money supply, food prices, and even the prices that "ladies of the evening" charged their clients.
And they've come up with a range of estimates – from a low of $1 per sesterce to a high of about $50, says GlobalSecurity.org.
With this number, we can have some fun – starting with the Bill Gates or Warren Buffett of ancient Rome.
Marcus Licinius Crassus (115 B.C.E-53 B.C.E.) was a Roman general and politician who was a major force in the transformation of the Roman Republic into the Roman Empire. You may remember him as the character played by Charles Laughton in the movie Spartacus.
But historians remember him for the insane fortune he amassed during his life – a fortune that made him one of the richest men of his time. His wealth was said to total 200 million sestertii.
At $1 per sesterce, Crassus would be worth an "unremarkable $200 million," GlobalSecurity.org says.
At $10 per sesterce, Crassus would be worth $2 billion – not bad.
Indeed, this year Forbes estimated that Gates, the former Microsoft Corp. (Nasdaq: MSFT) CEO, had a net worth of $79.2 billion, making him the richest man on Earth (Buffett was third-richest at $72.3 billion).
The $2 billion estimate would rank Crassus No. 949 on the list, tied with a bunch of other folks, including brothers Edward and Lee Bass.
But… at $50 per sesterce, Crassus would be worth $10 billion. Impressive for the time, perhaps, but no match for the fortunes of Gates or Buffett.
And what of our aqueduct project – the one that cost 180 million sestertii?
At $1 per sesterce, we're talking about $180 million – certainly consistent with some of the highway, waterway, and sports stadium public-works projects of today.
At the other end of the estimate spectrum, we're talking about $9 billion – making it one of the most expensive public works projects of any era.
I'll try to remember that the next time I read about a highway project sparking a property-tax increase here at home.
And we'll all remember that as we search for infrastructure-related profit plays.
Have a great holiday!
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.