LESSON 27Don’t Keep Your Family in the Dark

A California wealth research firm followed more than 3,000 wealthy families over the 20-year period between 1975 and 1995. They found that 70 percent of the heirs were unable to pass their wealth on to the third generation.1 Such evidence has nurtured the adage that keeps many members awake at night: “Shirtsleeves to shirtsleeves in three generations.” This saying appears to be well known in many languages across the globe. In Japan the expression is “Rice paddies to rice paddies in three generations.” A Scottish variant is “The father buys, the son builds, the grandchild sells, and his son begs.” An Italian variation is apparently “from stables to stars to stables.” There are many others, but the oldest reference I could find was from Lancashire, which is “clogs to clogs in three generations.”2

It should be no surprise that in a period of time where unprecedented first-generation wealth has been created, where many holders of such wealth have no family experience maintaining it, that the entrepreneurs who have created such vast wealth in the upper reaches of the 1 percent do not have deeply imbedded thoughts about wealth preservation (and if they do, they are often unproven). In a society where so many peers are also first-generation wealth creators, it is hard to be fully confident of the likely multigenerational outcomes of policies and behavior that other similar first-generation wealth creators exhibit.

The main reason for this ...

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