Key Takeaways
1. Family wealth requires a unique mindset and long-term perspective
"Old Money families are very different from regular families. And they are not at all what most people think they are."
Time horizon matters. Successful multigenerational families think in terms of decades or even centuries, not just years. This long-term perspective influences every decision, from investment strategies to family governance. They focus on steady, sustainable growth rather than quick gains.
Delayed gratification is key. Old Money families understand the power of compound growth and are willing to sacrifice short-term pleasures for long-term gains. They instill this mindset in younger generations, teaching them to think beyond their immediate needs and wants.
Outsider mentality. Wealthy families often cultivate an "outsider" perspective, remaining somewhat detached from mainstream culture and societal trends. This allows them to:
- Make independent decisions
- Avoid following the crowd in investments or lifestyle choices
- Maintain a unique family identity and culture
2. Family money is different from personal money and requires special structures
"Family money is very different from the cash that individuals have in the bank. Members of successful Old Money families think of themselves as stewards, not owners, of their financial capital."
Stewardship mindset. Family members view themselves as caretakers of wealth for future generations, not as owners with unlimited personal access. This shift in perspective is crucial for long-term preservation and growth.
Institutional approach. Family money requires structures and systems similar to those used by endowments or foundations:
- Formal governance structures
- Investment committees
- Clear policies for distributions and use of funds
Balancing act. Successful families find ways to support individual members while preserving the core capital. This often involves:
- Education and career support
- Seed funding for business ventures
- Emergency assistance
- Strict rules against lifestyle funding or unproductive spending
3. Business ownership is the best foundation for multigenerational wealth
"The best way to begin is simply to begin. But it's tempting to not begin at all. It's much easier to get a job. Let someone else do the thinking; you just do what you are told to do."
Entrepreneurial spirit. Building and maintaining a successful family business provides:
- A source of ongoing income and wealth creation
- Opportunities for family members to develop skills and contribute
- A shared purpose that can unite generations
Key business principles for family wealth:
- Focus on niche markets or unsexy industries with high barriers to entry
- Prioritize steady, long-term growth over rapid expansion
- Reinvest profits to compound growth over time
- Develop unique skills or knowledge that can be passed down
Succession planning. Successful family businesses have clear plans for transitioning leadership and ownership between generations. This often involves:
- Early involvement of younger family members
- Formal training and mentorship programs
- Gradual transfer of responsibilities and ownership stakes
4. Investing for family wealth focuses on beta, not alpha
"Instead of chasing alpha, successful multigenerational investors go after 'beta.'"
Beta over alpha. Rather than trying to beat the market through stock picking (alpha), family wealth focuses on:
- Asset allocation (beta)
- Long-term trends and macroeconomic shifts
- Patience and discipline in investment decisions
Key investment principles:
- Diversification across asset classes and geographies
- Focus on value and income-producing assets
- Willingness to hold investments for very long periods (decades)
- Avoiding unnecessary fees and transaction costs
Investment committee. Successful families often establish formal structures for managing investments:
- Regular meetings to review and adjust strategy
- Education of younger generations on investment principles
- Clear decision-making processes and risk management policies
5. Tax planning and trusts are crucial for preserving family fortunes
"The typical lifetime budget of the typical household shows the accumulation of wealth until age 65 . . . and then the wealth declines as it is consumed in retirement. Fair enough. Nothing wrong with that. But in our experience, as limited as it is, both families and retirees gain when old folks, as well as young folks, continue working toward common family goals, including capital formation and preservation."
Tax-efficient structures. Families must use legal tools to minimize tax burdens across generations:
- Trusts (especially dynasty or perpetual trusts)
- Family limited partnerships
- Strategic use of charitable foundations
International planning. Considering global options can provide advantages:
- Establishing residency in low-tax jurisdictions
- Utilizing offshore trusts and investment vehicles
- Diversifying across multiple legal and tax systems
Continuous adaptation. Tax laws change frequently, requiring ongoing vigilance and adjustment of strategies. Families must:
- Stay informed about legal and regulatory changes
- Work with skilled advisors to optimize structures
- Be willing to make changes as needed to preserve wealth
6. Soft structures like Family Councils are essential for family governance
"The Family Council is a group of family members who make executive decisions for the family as a whole. The Family Council determines the success or failure of your legacy over time."
Family Council. This governing body is crucial for:
- Making key decisions about family wealth and direction
- Resolving conflicts between family members
- Ensuring clear communication across generations
Key elements of family governance:
- Family constitution outlining values, goals, and decision-making processes
- Regular family meetings and clear communication channels
- Policies for inclusion of spouses and in-laws
- Conflict resolution mechanisms
Balancing act. Effective governance must balance:
- Individual autonomy with family unity
- Tradition with adaptation to changing circumstances
- Fairness across family branches with meritocracy in decision-making
7. Education and preparation of future generations is key to wealth preservation
"You give them a baseline education in personal finance and investing through courses, books, and web sites. You give them responsibility, such as a role in the family office or as a member of the investment committee. You bring them into the picture of family finances—as early as possible."
Early involvement. Successful families begin educating children about wealth from a young age:
- Age-appropriate discussions about money and responsibility
- Gradual introduction to family business and investments
- Hands-on experience managing small amounts of money
Formal education programs. Many families create structured learning opportunities:
- Family-specific curricula on finance, business, and wealth management
- Internships within family businesses or with trusted partners
- Mentoring relationships with older family members or advisors
Balancing support and self-reliance. The goal is to create capable, motivated individuals:
- Encourage education and career development
- Provide opportunities, not handouts
- Teach the responsibilities that come with wealth, not just the privileges
8. Family culture and shared values are the glue that holds wealth together
"Family money depends on family culture. And family culture depends on family members, old and young."
Defining family identity. Successful families consciously cultivate:
- Shared history and origin stories
- Core values and ethical principles
- Sense of purpose beyond wealth accumulation
Rituals and traditions. Regular practices reinforce family bonds:
- Annual family gatherings or retreats
- Rites of passage for younger generations
- Shared philanthropic activities
Adaptability. While rooted in tradition, family culture must evolve:
- Incorporate diverse perspectives as family grows
- Remain relevant to changing societal norms
- Balance individual pursuits with family unity
9. Avoid common pitfalls that destroy family fortunes
"Ninety percent of family-owned businesses do not last past three generations of ownership."
Common destroyers of family wealth:
- Lack of communication and trust between family members
- Failure to prepare the next generation
- Overreliance on a single business or investment
- Lifestyle inflation and conspicuous consumption
- Family conflicts and legal battles
Preventative measures:
- Establish clear governance and conflict resolution processes
- Prioritize education and gradual involvement of younger generations
- Diversify investments and income sources
- Maintain financial discipline across generations
- Foster open communication and address issues early
Learn from others. Study both successful and failed family legacies to:
- Identify potential pitfalls
- Adopt best practices
- Remain vigilant against complacency
Last updated:
FAQ
What's Family Fortunes about?
- Focus on Family Wealth: Family Fortunes by Bill Bonner and Will Bonner explores strategies for building and maintaining family wealth across generations, emphasizing a long-term perspective.
- Cultural and Historical Context: The book discusses how certain families have successfully preserved their fortunes over time, highlighting cultural values and practices that contribute to wealth longevity.
- Practical Strategies: It provides practical advice on managing family finances, including establishing family offices, investment strategies, and fostering a strong family culture.
Why should I read Family Fortunes?
- Long-Term Wealth Preservation: The book offers insights into thinking long-term about wealth, crucial for families aiming to maintain their financial legacy.
- Avoid Common Pitfalls: It outlines common pitfalls wealthy families face and offers strategies to avoid them, helping families navigate wealth management complexities.
- Cultural Insights: Emphasizing the importance of family culture in wealth preservation, the book encourages developing a strong family identity that supports financial goals.
What are the key takeaways of Family Fortunes?
- Importance of Family Structure: A strong family structure is essential for wealth preservation, built on solid relationships and shared values.
- Delayed Gratification: The concept of delayed gratification is crucial for long-term success, advocating for forgoing immediate rewards for longer-term goals.
- Investment in Human Capital: Investing in the education and development of family members is vital, as the family's most valuable resource is its human capital.
What are the best quotes from Family Fortunes and what do they mean?
- "Behind every great fortune there is a crime.": Reflects the historical context of wealth accumulation, suggesting ethical considerations in wealth.
- "It takes teamwork.": Emphasizes collaboration within families to build and maintain wealth, leveraging each member's strengths.
- "You can’t have family money by accident.": Highlights the need for intentionality and planning in creating and sustaining family wealth.
How do I accumulate a family fortune according to Family Fortunes?
- Start with a Business: Most family fortunes are created through successful businesses rather than salaries or investments.
- Focus on Long-Term Growth: Accumulating wealth requires a long-term perspective, investing in businesses that can grow over time.
- Avoid Quick Gains: The book warns against seeking wealth too quickly, as it often leads to loss.
What is the role of the matriarch in family wealth according to Family Fortunes?
- Emotional Leadership: The matriarch maintains family harmony and emotional well-being, acting as the "chief emotional officer."
- Cultural Preservation: She instills family values and culture, essential for long-term wealth preservation.
- Conflict Resolution: Responsible for mediating disputes and ensuring family unity, preventing wealth transfer failures.
What are the common pitfalls for wealthy families mentioned in Family Fortunes?
- Lack of Communication: Failure to communicate openly about wealth and responsibilities can lead to misunderstandings.
- Division Among Heirs: Sibling rivalries and divisions can lead to the downfall of family wealth.
- Overemphasis on Competition: Excessive competition among family members can be destructive, encouraging collaboration instead.
How does Family Fortunes define family money?
- Different from Personal Money: Family money is meant to be preserved and passed down through generations, unlike personal money.
- Long-Term Focus: Requires a long-term perspective, focusing on growth and sustainability rather than immediate consumption.
- Investment in Family Values: Should be invested in ways that align with the family's values and culture.
What investment strategies are recommended in Family Fortunes?
- Focus on Illiquid Assets: Investing in illiquid assets like real estate or family businesses, which are less likely to be squandered.
- Avoiding Public Markets: Cautions against relying heavily on public market investments due to volatility.
- Long-Term Growth Investments: Advocates for investments with potential for long-term growth, emphasizing patience and strategic planning.
How can families develop a strong family culture according to Family Fortunes?
- Shared Values and Identity: Developing a shared family culture with common values and a sense of identity is crucial.
- Regular Family Engagement: Engaging in regular activities and traditions that reinforce culture and bonds.
- Education and Communication: Open communication and education about family wealth and responsibilities ensure understanding and preservation.
What is the significance of delayed gratification in Family Fortunes?
- Key to Long-Term Success: Delayed gratification is crucial for building and maintaining family wealth.
- Cultural Value: Presented as a cultural value that families should instill in their members.
- Generational Mathematics: Essential to teach younger generations the importance of saving and investing for the future.
How do hard structures and soft structures differ in Family Fortunes?
- Definition of Hard Structures: Legal entities like trusts, wills, and estate plans that manage and protect wealth.
- Definition of Soft Structures: Informal agreements and governance systems like family councils and mission statements.
- Importance of Both: Both are essential for long-term wealth preservation, protecting against external threats and ensuring internal harmony.
Review Summary
Family Fortunes received mixed reviews. Some praised its long-term perspective on wealth building and family legacy, while others criticized its lack of concrete data and perceived biases. Positive reviewers found value in its contrarian views and focus on family culture. Critics felt it was poorly researched, sexist, and based too heavily on speculation. Many noted the authors' lack of personal experience with multi-generational wealth. Overall, readers appreciated the book's unique approach but were divided on its practical usefulness and ideological stance.
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