Quotes – Foundations of Friendship

The best friendships are based on mutual interest and common plans for the future.

~Maurice Druon

Why I Am Not Doing My Annual Review/Planning Session This Year

Although I have never been a resolution-maker (phony!), I have long-been an annual planner, and since 2014 my efforts have taken an explicitly formal yet evolving shape. Depending on my other priorities and distractions, I typically begin reflecting on my year-past in late December and finish up writing out some thoughts and expectations for the year-coming by mid-January; I then set a calendar reminder to circle back mid-year in June to see how I am doing and recalibrate if necessary. In this way, I have generally made steady progress on a number of annual and life goals over the last three years.

The heart of the process involves the following steps:

1. Flick through my calendar for the year-past and review major activities logged therein
2. Sit in quiet and dig into memories of significant experiences and other events not captured on the calendar
3. Write out an essay-form reflection on these accomplishments and the thoughts and emotions they evoke
4. Lay out a new set of goals or achievements to be accomplished in the coming year as a list
5. Write a brief summary of the anticipated path to achieving these goals via specific behaviors, processes and routines in the coming year

To this I added last year the “mind-mapping” practice suggested by a friend, wherein one gets out a blank sheet of paper, writes some words for major categories of life activities (I used Relationships, Career, Wealth, Mind/Body (Health) and Travel/Lifestyle) which are encircled and then additional related words are “bubbled” out from each category in a randomized chain of thought. It creates a neat visual representation of your ideas, especially if you use size to emphasize weight of concern, or can find ways to draw linkages between related ideas on disparate categories. It’s also a lot quicker to scan for meaning than an essay. I found combining this practice with my essay writing practice gave me a more complete picture of my yearly accomplishments.

I found listing out what I had done to be therapeutic. One thing I struggle with is giving myself credit for what I accomplish. I always want more and want to do more, and so it’s easy for me to convince myself I haven’t done enough, even when I have done everything on an arbitrary list! Writing it all down creates a volume of evidence that is hard to ignore: all the trips, all the interactions with friends and family, all the meals planned, the workouts at the gym, the money saved and invested, the skills developed, etc. It’s harder to look at that list and conclude “I didn’t get anything done last year!”

Another interesting aspect of this practice is I have a record I can look back on and see:

• how long did it take me to accomplish a particular goal?
• did I remain persistent if I didn’t get it done when I first wanted to?
• did I decide to give up on a goal and if so, why? (did I realize it wasn’t important?)
• what themes exist that are consistent across time with regards to goals I have set?
• how am I “different” or “the same” in what I am trying to accomplish from year to year?

There are some things I have failed to achieve for several years now but which I still desire. There are other things I thought I wanted but decided weren’t important or worth prioritizing at some point along and consciously let them go in order to simplify my life. And there are some things I have been so stupendously efficient with that I’ve made progress each year on another “tier” of related achievements such that I am much farther along in the space of a few years than I would’ve thought when setting out on my first related activity some years ago.

Another reflection and motivation process I considered doing this year was suggested by another friend. Basically, I was to write myself a letter, dated January 1, 2018, which outlined all the different goals I had achieved throughout 2017 with explanations of the processes or routines I used to achieve them. For example, I accomplished X by spending Y minutes every week on Z. The idea is that one can not only consciously envision these tasks as already completed (so you get the sense they can be done) but you have also given yourself the how-to manual you can use to achieve them. It’s like having a crystal ball you didn’t realize you programmed. I really liked this idea and was prepared to implement it.

Somewhere along the line between early December, when I first started outlining my annual review process, and today, nearly at the end of the first month of 2017, I seem to have completely lost my motivation to get any of this done and so I have essentially given up on it!

I have a lot of friends who excel at personal organization, motivation and self-development. Most of these friends now have children of their own, and their reports have been consistent: children will dramatically change your personal productivity. I have to admit I discounted these reports quite a bit. I thought I was even better organized, even more productive, so it wouldn’t affect me, or at least as much or in the ways it affected them.

Simply put, I was wrong. Being extra sleep-deprived has sapped my drive. It’s required me to take more down-time where I do nothing too intense so I can mentally, emotionally and physically recover. Being on-call for my Little Lion has made it harder to focus on activities which require dedicated focus to make progress. In fact, it’s often impossible to even imagine starting such activities lest I get immediately interrupted and feel frustrated in the process. And now and for the foreseeable future, pitching in on tasks the Wolf could normally handle by herself means I divert a significant fraction of “me” time each week toward things other than me. So I am not superman, and my experience here has been quite similar to my friends just as they predicted or said to expect.

But having my Little Lion has also been incredibly motivating in the sense that it’s given me a new, concrete purpose to pursue various activities, from the minute daily upkeep stuff to the big life-planning stuff. And it’s definitely made me more resilient and less prone to complaining or feeling bad for myself; where I couldn’t always see it before, it is now abundantly obvious to me that “no one is coming to the rescue”, and if I don’t do what I have to do, it doesn’t get done and he, the Wolf and myself all suffer for it.

So I don’t think that is what is going on here, though it makes for a convenient and wildly coincidental excuse!

I am still thinking about this so I can’t say anything for sure, but I will take a stab at what I think is going on. I think what’s going on is that I have built a process here that is almost an end unto itself in terms of the energy and investment required to make use of it. It takes too long. It requires too much thought. It encompasses too much potential behavior and activity in the future. It seems to leave little room for spontaneity. It takes away from too much of the “living of life” I’d like to be doing right this very moment. It is, in a word, overwhelming.

This will seem like a tangent but here goes: recently the same friend who was proposing the letter-writing exercise (which is, ironically, probably a dramatic step towards simplifying this process if I did JUST that, rather than adding it to my existing process…) was talking about how he heard Tim Ferriss on one of his podcasts make some remark about how he has kept a nutrition and workout log for himself every single day of his life since he was 16 (or something, I don’t remember… it was a long amount of time). Essentially, Ferriss could pick any day since he was 16 (or whenever!) and tell you exactly what he ate and what workout he did and what weight he managed to lift, if you asked. My friend thought this was an incredible example of discipline, organization and data-gathering.

And truly, it is. But what of it? How is this valuable? What on Earth could Ferriss do with this data besides impress someone like my friend, or scratch some strange “autistic” itch of his with regards to data-fying his own life? How much healthier, more fit, etc., is he than the average health nut or fitness buff because of this practice?

There is a difference between exhaustive and exhausting. I would say this is exhausting. I would say my annual review process has become exhausting. So I can look back at how my goals have changed since 2014. Why besides personal vanity do I think this is valuable? “Oh look at who I was and what I am now!” Some self-help gurus say you should stop comparing yourself to others and only compare yourself to yourself. “Transcend yourself.” If you want to compete, compete against your personal best.

No matter how many times you transcend yourself, you’re still you. You’re still here. Whichever version of yourself you are this very moment, that’s the one you’ve got to work with. You got a leg up on You-Of-A-Year-Ago. Congratulations. One should HOPE one has a leg-up on someone who is a full year behind! What have you done for yourself lately?

I’ve been fighting this battle for a few years now, mostly with myself, and on a number of fronts, this battle of telling myself I should be doing certain things to accomplish certain goals. I tell myself I want to be a “highly productive person”, and I look around and imagine that all HPP have goals, do annual planning routines, etc. Worked fairly well for me up to this point doing it the way I had done it, and I can see people who seem to accomplish even more than I, and I can imagine they’re even more intense about it. So I tell myself to do a little bit more, push a little harder, be a little more consistent. But each effort in that direction seems to be pushing up against my Diminishing Marginal Return boundary, because I am becoming less and less a HPP and more and more a Person-Striving-To-Be-A-HPP in the process.

I’ve been doing this with writing for the last ten years, blogging in particular. I used to write/blog A LOT when I was younger. I felt like I had a lot to say. I really enjoyed hearing myself think. I’d go back and re-read my own material and get a chuckle. Oh, it was good! Then, something happened. I realized a lot of what I was saying had been said before. I realized I wasn’t a professional writer so I was mostly writing for my own amusement. I realized, I had a lot of other stuff I wanted to do besides write my thoughts down somewhere! Writing and blogging slowly became not something I did because I felt motivated and passionate about my writing subject, but a habit I stuck to because I convinced myself it was some integral part of my identity.

My annual planning has taken a similar turn. It is mostly something I am keeping up with to convince myself I am that HPP I think I want to be and can become if only I do things like this. It is not so easy to sit down and do it. It isn’t coming naturally to me. Yes, I am tired right now, but no, I still get a lot of other stuff done despite that, because I want to do those things.

Instead of doing my annual planning process this year, I have decided to write about why I am not doing it. I felt like I needed to give myself permission to let it go, and this is how I chose to do that.

Review – Family Fortunes

Family Fortunes: How to Build Family Wealth and Hold on to It for 100 Years

by Bill Bonner, Will Bonner, published 2012

What kind of habits and modes of thought separate Old Money families from everyone else? How do you build a family fortune? How do you get a family to work together toward a single purpose as the “core” is continually invaded by new spouses and children? How do you invest your prodigious wealth at high rates of return? How do you hold on to your family fortune for 100 years? Why does 100 years seem like a long time when it’s really only 3-4 generations of people?

Frustratingly (maddeningly?), the answer most often given in this book to questions like these is, “We don’t know, but here’s our guess.”

What I didn’t get from this book, then, were many specific, useful ideas for implementing with my own family enterprise– or family-as-enterprise. What I did get, and what will be the focus of this review, are a lot of questions, principles to ponder, and general strategic problems in need of robust solutions. This is not a how-to manual for putting together the essential structure of long-lived family institutions such as tax and estate planning, family organization and branding, household management.

Most people will not have a family fortune to contend with. It is not something that can be acquired through a known formula, but rather it is the outcome of an entrepreneurial process that is, epistemologically speaking, random. Just as one can not predictably create a family fortune, one can not predictably control the size or scope of the family fortune, within certain bounds. In other words, your family may have the good fortune to stumble upon a business opportunity with a significant market capitalization. That’s the first hurdle, and there’s no formula for getting there. Then, that fortune might turn out to be worth $50M, $100M, or $5B. That’s another hurdle, and there’s no formula. Failing to seize every opportunity you are presented with might limit your total fortune, and being eager and observant for those opportunities might extend the limit. But there is no recipe for turning something that is worth $50M into $5B unless it was the kind of opportunity that can scale that big in the first place.

Some market opportunities are worth a lot to one person who owns them (“he made a fortune!”), but they’re still not worth a lot to the market or economy as a whole (limited scale). This is an important point because of the gilded cage nature of family fortunes– once you have one, you’re kind of stuck with it, but it’s really tempting to think you have a lot more control over it than you do, or that it’s a lot more durable than it might be.

Imagine you’re the guy with the $50M fortune. You’re pretty happy with your luck, assuming everything else is right in your life, but you’re aware of people with $5B fortunes. If you can generate a $50M fortune, why can’t you generate a $5B fortune? Are those people smarter? Better connected? More productive? What’s the difference?

Luck, and leverage, but using leverage without blowing up is really just a residue of luck.

So you’ve got this $50M fortune. What can you do with it? If you have it invested in the business that created it, you enjoy a nice income stream from it each year (maybe that’s worth $2.5M, maybe it’s worth $5M if you’re really lucky) and you reinvest where and when you can. If your business doesn’t scale easily though, you can’t put it back in and make more. You’re stuck at $50M. What if you take the $50M out by selling the business? Now you have $50M in cash with no annual return and an investment problem. Where are you going to put $50M to work such that you can, say, spend $5M per year and still have $50M left over to do it again next year? Know any hot stocks? You didn’t make your fortune in investing the first time around, what makes you think you’re going to make it there the second time around just because you have $50M now? (Note: you are statistically and logically unlikely to achieve this outcome if you so desire it.) Know any good businesses for sale? Oh, that’s right, you just sold one!

That’s the gilded cage. You’re stuck with a $50M fortune. It’s a nice problem to have, but it’s still a problem. And nothing changes at scale besides the difficulty of the problem. It isn’t easier but actually harder to achieve yield at higher increments of invested capital due to the economic phenomenon of diminishing marginal returns (if this were not the case, you could infinitely scale things by always adding more resources to every project; DMR ensures that the more you add over time, the less incremental gain you get to the point that you get no return or a negative return, ie, waste). If you had $5B, you’d have even fewer places to put it and you’d have given up an even rarer business opportunity in selling.

Unless your business value is about to become permanently impaired and you can see the writing on the wall when no one else can — technological change, regulatory change, some kind of disastrous political or economic event — your business will never be as valuable to you on the market as it is under your ownership, assuming you’re a competent operator. I’m not going to explore what you do if you’re incompetent because that’s a special case, although it follows the same general logic and leads to the same general investment problems.

I think what this means is that the primary challenge for a family with a fortune in terms of managing their business is to be sensitive to the innovation required over time to maintain the economic value of the assets, to manage the capital structure of their business intelligently (ie, not too much debt) so they don’t lose control because of the volatility of the business cycle, and to build cash up and keep their eyes peeled for a truly unique investment opportunity, the kind that made the first family fortune possible. That means it’s more important to avoid doing the wrong things than it is to try to be finding the right things to do. It also means it requires great patience. If we’re talking about building multi-generational wealth, patience is implied in the premise, but it’s still worth repeating. Bonner emphasizes this frequently– find ways to let time work for you, not against you. He believes luck, advantages and businesses all tend to grow over time so the idea is to set things up so those advantages will accumulate in your favor.

Smart investing is not the way to build a fortune. Some people will build a fortune building an investment business (ie, a wealth manager), but it will not be the investing itself that makes them rich but the operational leverage they gain through their fee structure. Because Bonner is a skeptic of “investing” as a tool for wealth building, he would land squarely on my side of the skeptic’s divide about the value public capital markets play in economic growth. Why should a person find it necessary or valuable to contribute capital to a company building things in other people’s towns instead of investing in opportunities in their own town, right “down the street”? Profit signals and differing equity returns will attract capital from disparate areas and thereby indicate relative value across an economy, but I am skeptical that this process and the capital markets in general would be as big a part of the economy overall as they are presently if we were in anything more closely approximating free market conditions without crony capitalist interventions.

So, you may get lucky and find yourself with a fortune, small or large, from a family business. If you do, hold on to it, appreciate it, care for it, tend to it responsibly and hope you or one of your descendants has an opportunity to take another swing at an uncertain point in the future. But don’t try to force it, and don’t think there’s anything you can do to greatly enhance your opportunity beyond what it is. And understand that it will never be as valuable to you as a pile of cash as it is invested in your business.

The other big topic in the book is building the institutional framework of a long-lived family that can participate in this family business over the generations and can also be “true” to the family culture and values. Family planning is an idea that attracts me, and I have spent considerable time on my own with the concept of creating a family brand (what the ancients’ termed a coat of arms) to identify the family and its enterprises.

The trouble I have with family planning is the same trouble I have with all planning, particularly that of the central variety– what if the individual members of your family don’t really find value in your plan? Obviously, raising them with certain values and viewpoints creates a better chance for a kind of coalescing around this identity and direction. But is that how I want to raise my children, by telling them what is important? I think they can figure that kind of stuff out on their own, just as I did. Hopefully I can lead by example, and provide a demonstration of the virtue of the family virtue. But I think a potentially frustrating consequence of putting this emphasis on building multi-generational institutions together is you might find out your family just doesn’t see the use in them. That’s kind of worse case, though, and doesn’t necessarily argue against the project in general.

Yet, what if you’re successful at this? Building a business and building wealth is a coordination problem resolved by growing trust. Who can you trust more than members of your own family? Creating a family organization based on shared values and common identity and linking that organization to a business entity could allow for a uniquely successful competitive strategy and management continuity over a significantly longer timeline than the average public or private competitor– in other words, huge competitive advantages over time. Simultaneously, this arrangement could solve one of the common problems of families and their constituent members, that being how each as an individual and the family as a whole can achieve security, success and satisfaction with one’s productive efforts and life. As I’ve argued in the past, I believe the family is the best institution for accomplishing this task and it is certainly far superior to the currently dominant model of public corporations (for-profit and nation-states/institutional gangsterism).

Notes On The Family As Long-Lived Institution

I’ve been doing some thinking about the family as an institution, especially from the standpoints of ideal strategy for a person planning a family and as a social cure to the economic and cultural problems we witness today. I wanted a place to put my notes as I think through these things. This post, or at least the ideas, is by no means complete or comprehensive on the subject and it only captures some of my thinking as it stands right now.

The Family As Brand

A family is a brand and historically it may have been the first brand concept in existence. Families have names and reputations. They have traditions and certain values that are esteemed or deplored and transmitted through space and time across generations. The members of a family may specialize economically, socially or intellectually and develop a reputation for this specialization. The reputation of the family helps to reduce uncertainty for other individuals, families or institutions interacting with the family in knowing what to expect (of course, this reputation could become a weight around the neck of a genetic or otherwise outlier family member who doesn’t fit the mould).

Old families, especially noble or aristocratic families, took the concept of family branding in an explicit direction by adopting a logo, or symbol, of the house, by adopting familiars or animal associations which connoted the spirit or key characteristics of the house (ie, the lion as a symbol of courage or adventure), certain colors and even words or mottos which might today be thought of as the “brand promise”. Certain families which were especially grand came to be known not by their name, but by their property, or by an assumed name that better represented their stature and ambitions.

Rational Family Planning Strategy

Family planning can be done rationally and purposefully, or it can be done irrationally or at random. A rational, purposeful family plan starts with a goal for the family and the goal is associated with a long-term vision or plan. An irrational, at random family plan adopts an attitude of mystery and powerlessness in the face of fate and lets the chips fall where they may. The family isn’t going anywhere necessarily and no special effort is put in place to help direct the family and its energies as a result.

The family plan could be malevolent, but I will excuse that possibility here and focus on a beneficial arrangement. The family plan must include peaceful parenting as part of the framework for developing a long-term cooperative effort. What is peaceful parenting? One way to think of it is parenting without any behaviors you would find would be ridiculous, illegal or mean-spirited when used with an adult– no hitting or physical intimidation, no badmouthing or emotional manipulation, no threats or use of coercion of any kind. In positive terms, it is an approach based on negotiation, empathy, respect for differing needs, communication around means and ends and a willingness to hear and be heard. A peaceful parent models the values of the family plan so they can “be the change” they want to see in their child and in the world; they get buy-in and cooperation on the shared goals of the family plan by explaining their merits and value to all, rather than creating arbitrary strictures and enforcing them with overwhelming parental control.

I’ve outlined our parenting philosophy in an earlier post: to help our children achieve physical, emotional, intellectual and financial independence and to model the value of interdependence. A friend who also blogs about parenting is quick to warn of the “bird parent phenomenon”– prepare kids for life, then push them out of the nest and hope they can fly on their own. As she says, we’re not birds, we’re apes, and apes live in connected troops that are typically multi-generational. And this is true, too. That is the interdependence idea, with luck we will have provided compelling reasons for our children to remain close or even continue to live life together with us as they grow older and even have their own family. Pure independence would be bird parenting, which is not ideal but does contain the merit of giving our children what they need to soar on their own, should they choose to do so. What we definitely don’t want to do is develop a dependence model– bee parenting, where the children are mindless drones for the queen parent(s) and live to serve them and, if not them, than someone else, but never themselves.

What then is the role and purpose of education within this family framework? A great deal of it is still about classic learning such as reading, writing and arithmetic, the simple tools that people need to be able to think for themselves and be self-directed learners capable of researching ideas that interest them as deeply as they would like. Another part of it, missing from public education in this country in large part (and for good reason, at least as far as that system is concerned) is self-knowledge, thinking about things like “Who am I?” “What do I want? What is important to me?” and “What do I want to do with my life?” Ideally, this all happens within the meaningful context of the family, which means that an even bigger part of education is about the family, its values, its legacy and history and its assets and accumulated wealth and the opportunities that come with them. A family education involves “coming along to life”, learning what the family does and how it does it and why it does it to provide itself with the things it has. At age/development appropriate times, it will include “job shadowing” and then apprenticeship within family economic activities. It also involves a specific approach for parents and other elders or existing family members in how they structure their time and responsibilities so they can be around children and share with them about what is going on!

Assuming a family is functional and manages to acquire assets over time through low time preference and thrift, the succeeding generations of the family will have to contend with a growing inheritance. This means they’ll have to learn specific habits and ways of life and acquire certain knowledge and responsibilities that those before them didn’t need and had no reason to think about. This means the family needs a meta-process for contending with the inheritance and learning to manage it through increasing size and complexity, especially as the potential number of inheritors grows over time as well! Children in each new generation of the family will need to receive instruction, from a very young age, about the family assets, how to grow them and how to manage them as well as ways to benefit from and enjoy their ownership.

And assets must be managed and controlled by someone, so while the children are immature and learning the ropes it is up to the adults to take care of these things. But in time, the adults become the elders, the children become the adults and the next generation of children arrives. A rational family plan accepts this cycle as a necessary part of family life and makes arrangements ahead of time to effect smooth transitions in the ownership and control of family assets from generation to generation. I’m not talking about tax planning here (which I believe in some ways is a futile exercise with no free lunch), but rather the idea of allowing for a financially secure retirement for the elders, complete with a transition in their identity and personal activities which is not disruptive to their enjoyment and fulfillment in life, combined with a “rising” of the next generation to true adult responsibility in having primary control and influence over the next stage in the family’s wealth plan. This next generation might continue the existing growth strategy, or transform the assets by selling them and then buying into a new concern (or starting one up)– these decisions are context dependent.

Here are some other long-term family planning considerations: marriage, genetic optimization, nutrition and fitness, generation of intellectual/human capital

Role of the Family As An Economic Unit

If we think of a family as an economic unit, we can draw parallels in the “life cycle” of the family economically that is similar to that of business organizations. Business organizations experience predictable stages of growth and decline– start-up, high growth phase, slow growth phase, plateau and decline (or, for the more agile, transformative innovation, which is the transition between decline and start-up that skips the end point of death). A family’s economic legacy has similar stages– pioneering, empire building, consolidation and reinvention. The pioneers are the early ancestors who first take a gamble on an interesting economic opportunity with long-run potential and begin accumulating assets. The next generation, if properly instructed, can take the seeds of this early effort and expand it rapidly as they build out an empire and come to dominate an industry or economic niche. The subsequent generation inherits substantial wealth and also substantial risk, namely, has the empire-building generation been successful in instructing them in the ways and means of managing this empire so that they’re up to the task? There usually is not a lot of low-hanging fruit available to continue the growth strategy, the name of the game at this point is consolidating gains and holding on to them. By the fourth generation, risk must be transformed. The growth that can be had, has been had, and the horizon is sloping downward, perhaps rapidly. It’s time for the family to make the hard decision of divesting themselves from the economic circumstances that initially founded their fortune to “go mobile” and pioneer once more by transforming their assets into a different industry or start-up venture. The difference this time is that these pioneers have three to four generations of know-how and human capital behind them that their earlier ancestors did not, which will hopefully prove to be an impressive competitive advantage.

The key concept for the family to master at each stage and through each generation is the discipline of accumulating savings by living below one’s means. For the pioneers, this is obvious, as there is no back-up plan and no rainy day fund save what they can provide for themselves, and being a new risk they must provide their own capital to grow as they will have trouble convincing third parties to participate. For the empire builders, a new risk presents itself, that of the temptation to live flashily and show off, but being so proximate to the pioneers it is likely they will have a deep and fond respect for the frugal habits of their forebears. In the consolidation phase, savings and capital seem so hyperabundant it can be difficult for this generation to understand the meaning and importance of continuing to save. Any time the family entity has required capital to operate, there has been plenty, so why worry too much about this? The innovative generation must be intimately aware of the importance of safeguarding capital and the productive value of its assets, as they won’t be worth anything when they hope to sell them if they’re not careful, and they learn a new appreciation for cash and the optionality it allows in planning family economic strategy into the future.

Within this inter-generational framework of family asset management we can see a unique opportunity for family members to participate as meaningful apprenticeships as they transition from dependent children to independent or interdependent adults contributing to the growth of family assets. The need or desire to gain formal educations and interview for skill-building career opportunities in outside organizations is minimized; the family can be not only a high-quality hiring pool for workers and managers in the family business, but also a source of that training opportunity.

And over time, the close alignment of multiple generations of the family with a particular enterprise and its needed specializations in thinking and experience mean that the business will leave its mark on the family and vice versa. Just as the family might develop a reputation for certain virtues such as “truth” or “loyalty” or “consistency”, it might also develop a reputation for industrial or professional excellence, “the best factory managers there are”, “strategic thinkers without comparison”, “the most knowledgeable people in the food service business”. Reciprocally, the industry might leave an imprint on the family name, “When you see ‘Jones’ on the building, you know they’re developing quality inside.”

Some fear to admit this, but all businesses are like families. In fact, many careerists expect that in giving to their company, their company will give back to them, much like a family, by being concerned for their well-being, providing benefits if they get sick or fall on hard times, and by allowing them interesting new opportunities as they gain in experience and skill over time. The difference is that some businesses pretend at being a family while remaining “faceless corporations” with fairly anonymous employees and rotating, mercenary managers who run the company, while other businesses really are families because they’re owned and operated (and in part, staffed) by them. Many are not fortunate enough to have a family in business, so they’re forced to go looking for another “family” to join when their career starts. Wouldn’t it be better if you could save yourself the trouble and get working where your family is?

In fact, a family running a high-quality, growing organization is going to attract to it just those kinds of people who really want a “home” and a family to be a part of and this is where the idea of a lieutenant, or adopted family member, comes into play. With trust and special contribution, business families might find some people in their organizations growing so close that they come to be seen as junior-family members– they may not be blood, but the level of concern for their comfort and well-being is nearly identical. There are some real benefits to be had, especially with regards to counteracting the mercenary mindset. If a person can achieve junior-family member status, they have a strong incentive to align their actions and conceptions of well-being with that of the family in a mutually beneficial arrangement.

This is probably one of the primary reasons why corporate governance would be expected to be superior under family owner-operators versus a diversified base of small shareholders with an elected board of representatives to oversee professional managers. There are deep-rooted agency problems with the traditional public company governance model, where shareholders don’t have a meaningful stake in the company to have any control or influence over its management, nor real concern for its long-run prospects. It’s always easier to sell and pass the problem off to someone else than to take an organized stand, similar to the problems of democratic political systems. The boards become captured by the managers, just like governments become captured by special interests. The end result is chaos, short-termism and relative instability and insecurity for all involved. Family-based owner-operator management can remedy all of this: concentrated ownership creates unity of strategic vision and needs, especially within the framework of multi-generational planning; the unification of owner demands and management representation ensure the vision will be clearly articulated and enforced, with severe consequences for managers who go rogue; and the lieutenant network or junior-family member approach increases the likelihood that managers can better align their sense of well-being with the family’s and by extension, the company’s.

Revival of the Family as an Alternative to Failed State Institutions

It’s obvious to any objective observer that the modern state has failed in virtually every arena it is presently engaged. Of particular concern to those without security are the failures of the modern state in providing welfare and what is termed the “social safety net” to those who are needy. The revival of the family as an alternative to these failed institutions is not only a perfect answer, it’s the only answer. The State can not provide individuals with comfort and security without first taking it from other individuals, particularly individuals composed as families (for example, the inheritance tax). The charity which the State might provide is derived from the family in the first place. Family should care for its own and must care for its own instead of placing this burden upon “society” with all the terrible social engineering temptations that come with it once politicians get involved in these schemes. And to be in a position to provide these welfare benefits to its members, families must rediscover the art of purposeful planning of their activities and legacies.

We hear of scions of old who were the institutional members of their communities: the Carnegies, the Rockefellers, the Mellons and so on. Families must reclaim this institutional identity and seek to be the pillars of their own communities. They must build the resources and create the organizations needed to address the challenges specific to the places they live. Families should provide education to their members and the people in their communities, not the State. When there is a social problem, families should get involved to address it, rather than calling for a new law or government program which inevitably they will finance but they will not control. Families, as owners of land and other local resources, should determine land use patterns, not government bureaucracies. And families should be developing the skills and experiences amongst their members necessary to build and develop local businesses and economic entities, rather than raising their children up just to send them away to join somebody else’s. Families can even be in the business of arbitration and peacefully resolving disputes which might arise in the community. This is another way in which reputations and specializations within families can be instrumental in adding value to communities.

Avoiding Common Family Problems

In the future, it will be useful to explore some common social risks associated with families and family management of social institutions, such as:

• The risk of nepotism
• The risk of degeneracy
• The risk of mutual hatred
• The risk of incompetence/disability