Richard: Every Family Is a Ship on a Long Voyage

There is an old Chinese proverb: “A family that passes down virtue endures ten generations and more; one that passes down diligent farming and study, less; one that passes down poetry and learning, less still; and one that passes down only wealth and rank lasts no more than three generations.”

Many Chinese family enterprises now stand at the threshold of succession. Yet what most people still care about is the transfer of material wealth — how to invest the money they have made for higher returns, and how to keep that wealth safe and secure.

These are the questions that preoccupy so many of the wealthy and high-net-worth individuals and families today, and in answer to them a whole service industry has arisen: private banks, funds and wealth management, trusts and insurance, family offices. But where the succession of family wealth is concerned, all of this belongs merely to the realm of technique — the “how.” The passing on of a family’s wealth calls for reflection at the level of the “Way.”

“The Way that can be spoken is not the eternal Way.” Family wealth, too, means far more than its literal sense of “material wealth.”

What a Family Truly Owns

A family’s true wealth should include the following.

The family story. Every family has its origin and its history, and every family’s story is unique, playing its own part in the unfolding of society. Each family’s story is like a beautiful scroll, opening slowly before us. The choices and decisions of earlier generations bear directly on the lives of those living now. You are the product of their choices, their decisions, their actions. In the same way, your choices, decisions, and actions will shape the generations that follow — for years, for decades, for centuries, and perhaps longer still.

The family’s human capital — the talents, character, and gifts of each of its members. On a family’s “balance sheet,” the most valuable entry is human capital. Every member is an asset (and a liability). Because each person possesses a character all their own, they are a precious source of knowledge, a potential contributor, and a bearer of inherent worth.

The intellectual capital of family members — their mental capacities and their access to education. A prosperous family can offer its members fine educational opportunities, rich life experience, and a certain global outlook, all of which help to build their intellectual capital.

The emotional and adversity capital of family members — their rational thinking, emotional intelligence, and resilience in the face of hardship. A prosperous family has more opportunity to develop its members’ emotional intelligence, capacity for rational thought, and ability to meet adversity, for a simple reason: it can afford the personal coaches, the mental-health services, and the courses and seminars that cultivate these qualities. All of this helps to build their confidence and self-esteem. Wealth cannot buy ability, but wealth can furnish many an opportunity to improve oneself and grow stronger.

The health capital of family members. Professional medical care, a healthy diet and physical exercise, good supplements, a sound sense of well-being — all of these strengthen the health of family members. And the health and vitality of a family’s members are the foundation and safeguard for creating value, both for the family and for society.

The family’s social network and connections. The quality of a family’s social network and relationships can amplify the influence of each member and of the family as a whole. Like gathers with like, and people group according to kind; a network of high quality reflects a family’s worth and its contribution, and provides the support through which the family receives in return.

The family’s material wealth. A family’s wealth begins to be created and accumulated by its enterprising members — the family business, its fixed assets, its financial assets, its alternative assets, and so on. Wealth is a kind of energy, flowing toward what is worth valuing, cherishing, and caring for; acquiring wealth is only a means and a tool, never an end. Once the creators of wealth understand its true value, the wealth they have made begins to serve a higher purpose — no longer merely to provide the family with a good life. The creation of wealth is transformed into the family’s vision and culture, carried down through the generations. Philanthropy becomes a way for the family to give back to society, and the family’s wealth comes to help more individuals and other families besides. It is precisely at this moment that a family begins to consider how to break the curse that “wealth never lasts beyond three generations.”

Every Family Is Like a Ship on a Long Voyage

Every family is like a ship on a long voyage, whether great or small. The family’s material wealth is the cargo aboard that ship; its human capital is the captain and the crew; the intellectual capital and the emotional-and-adversity capital of its members are the ability and experience of that captain and crew; the family story is the ship’s culture and its destination; and the family’s social network and connections are whether or not it has built good relations with the lighthouses, the rescue crews, and all else beyond its hull.

Every family longs to endure and to pass itself on, but what usually comes to mind is how to keep delivering its cargo — the family wealth — to the next port. Yet if the other dimensions of that wealth have not been made ready, the ship is bound to meet with peril. Herein, perhaps, lies the deepest reason that wealth rarely survives three generations.

Perhaps, then, for every family, the first question in planning its succession should not be how to allocate the family’s assets — but rather to begin by talking about the family’s story.

The flowers bloom on the far shore; we set our course and sail on.