A reader who we’ll call “Tatang” writes: Most of the family businesses who manage to escape the three-generation curse seem to be cut from the same mold. Hard-working and frugal, they pass on hard core values to their (mostly) sons, who in turn try their best to raise their children to be capable successors.
I take off my hat to them, but at 70 years of age, I know that I have not been the best parent. My wife passed away early, and I was too busy with work to devote time to my three children. They should have been better trained, but they are all married now, though one is separated from his wife, and another child has vices. None are really qualified to succeed me.
Are there wealthy families who are still thriving today despite the less desirable traits of the younger generation? Is it possible for family businesses to succeed, and even to grow, despite the shortcomings of younger generations?
My Reply
I am sorry to hear about your sentiments regarding your children. Parenting is a tough job, and when done well, it can be fruitful for everyone. But when children come of age, they are influenced as much by peers and other factors.
Tatang, don’t give up hope. It was not easy to find a family dynasty that meets your criteria: having gone beyond three generations, but still doing very well today, despite problems with the younger generation.
However, take Matthew Mellon, 54, chair of New York Republican Party’s Finance Committee and a sixth-generation descendant of Judge Thomas Mellon, founder of the Mellon Bank (now Bank of New York Mellon). On his mother’s side, Matthew’s lineage is as storied: a fifth-generation descendant of Anthony Joseph Drexel, founder of Drexel-Burnham-Lambert. Both sides of the family have founded universities: Drexel University and the world-famous Carnegie Mellon.
Most of the US dynasties, even the Astors and the Vanderbilts, have fallen, and only the Dupont clan, with stellar governance, has been going strong. The Mellons are another, with a $12-billion estimated fortune, more than the Rockefellers and Kennedys put together, despite heirs like Matthew, who can be the black sheep of traditional families.
Matthew is a private-equity investor known for his taste in luxury (private jets, name brands, you name it). He is also an entrepreneur. With ex-wife Tamara, he has made Jimmy Choo shoes a must-have for fashionistas worldwide.
Mathew works with Essex, a family office in New York with wealthy clients around the globe.
Matthew is not your ordinary straitlaced financier. His father committed suicide, and his mother remarried. He met Tamara at a Narcotics Anonymous meeting, but despite having a daughter together, his battles with drugs proved too much for the couple to handle. Tabloids had a field day when Tamara graciously attended her ex-husband’s second wedding to designer Nicole Hanley, with whom he has two children, but this second union also went kaput last year.
Smart tricks
How do the Mellon family businesses manage to stay strong, despite everything? Forbes Asia reports while there was “tacit understanding that while spending was acceptable … it came with the expectation that each generation pushes forward a bigger pile than he or she was given.”
The first secret: smart asset management.
“While all the branches [of Mellon conglomerate] operate independently, they’ve almost universally employed smart tricks that minimize taxes, including generation-skipping trusts and making charitable contributions in stock.
“More critically, Thomas Mellon expected his progeny to be entrepreneurial, with the anticipated corollary that the process would fuel the American economic machine.”
The second secret: entrepreneurship.
For all his faults, Matthew is willing to risk and fail and rise again. Jimmy Choo is still going strong.
Matthew has also absorbed some of his forebears’ smarts in investing.
“You never touch the principal,” he told Forbes. “Try to spend 1% of your income that comes in. There are always surprises. Always emergencies. Always charities [and] you end up spending 20% of your income.”
At this point, seek help from professional financiers who have a good track record to help you manage assets move forward. Encourage your kids to be investment-savvy (they can start by participating in investment seminars, or take classes on the web).
Urge them to be entrepreneurial. Talk to them, discover what they really want to do. Many young people turn to vice because they are bored or find no purpose in life. If they still are not qualified successors to your business, help them find their way. God bless.
Queena N. Lee-Chua is on the board of directors of Ateneo de Manila University’s Family Business Development Center. Get her book “Successful Family Businesses” at the University Press (e-mail msanagustin@ateneo.edu). E-mail the author at blessbook.chua@gmail.com.