In this week’s article, Lisa Niemeier examines how families of wealth can continue to prosper over multiple generations. Using the power and energy of different generations, families can create flexible and renewable systems to use currently and for the future.
The Generational Maze: The power grid for procreant wealth
Families of wealth are constantly looking for the secret to proliferating their fortunes over multiple generations. A key element is right before our eyes, the family’s generations. What makes generations such a powerful energy source to families? Why is it so hard for them to access it? Are a family’s generations powerful enough to recharge the family, prudently regulate its energy without suppressing it, manage risk, and bolster it against future shocks?
The short answer is yes, if there is full recognition of the generational power grid and an ongoing commitment to do what is required to keep it charged. An easy comparison is the electrical power grid for a city. No one really notices anything has gone wrong unless there is a blackout, but almost every aspect of life is affected once a blackout occurs.
Take the blackout of New York City on July 13 and 14, 1977. Although there had been other blackouts both before and after—in 1965 and, most notably, in 2003—the 1977 blackout resulted in city-wide mayhem including looting and arson. The 1965 blackout affected the entire northeastern part of the country: more than 30 million people were left without power for up to 13 hours. Although the 2003 blackout saw little looting, the city had become significantly more reliant on an even more fragile electrical system. People got stuck in elevators, computer systems were inoperable, cell phones didn’t work, and practically any business that didn’t sell flashlights, candles, and bottled water completely shut down.
The Comparable Impact
How do we appropriately relate this to families of wealth? How do generations create a power grid for families? And how do we know that a family’s generational forces carry such impact? What about personality and other factors?
Like electrical blackouts, the elements leading up to a full-blown family crisis are rarely recognized until they reach crisis stage.
A family’s web of generations can be thought of as a maze in which each generation has a different entry point, travels concurrently with other generations alive in the family, and finds its own unique path in the process. The maze forms a web of energy that keeps the family going, recharges it when power is low, and ensures there will be enough energy for the future.
Secondly, although “pop psychologists” may have overused generational labels in the past, there are now reams of both theoretical and practical research on generational theory (GT) and its growing importance in understanding our world. Generational labels are thought to be a uniquely American phenomenon, but archetypal generational personas have as great an impact globally as social class or culture.
GT originated with the work of Karl Manheim in the 1920s and 1930s. Mannheim noted that generational imprints are permanent and that even the strongest efforts to counter them throughout one’s life cannot negate the automatic frame of reference embedded during our formative years.
After Mannheim came the work of Margaret Mead, followed by Morris Massey in the 1970s. William Strauss and Neil Howe popularized GT in the 1990s with their seminal writings. The work of Ken Dychtwald and many others on the impact of generational value shifts on societal institutions, government, and almost every aspect of life is authoritative and highly respected.
GT lies at the center of research conducted by the Pew Research Center, “a non-partisan fact tank that informs the public about the issues, attitudes and trends shaping America and the world.” Marketers have been notoriously successful in targeting specific generational cohorts with the greatest buying power by appealing to their generationally-identified spending habits. Today, generational consultants are hired regularly by corporations large and small wishing to improve productivity and satisfaction in their places of work.
What about personality? Imagine two entrepreneurs, one Silent Generation and the other a Gen-Xer. They will have similar personality traits: they will be driven, have great ideas, and networks to attract what is needed to execute them. But the structures of their respective companies will be quite different. One will be hierarchical; the other flat. One will be much slower to adapt to new technologies, if they adapt at all. One will have raised funding through banks or investors; the other through friends or possibly through crowd-sourcing.
So, if generational theory is viewed as central to scientific and academic research on the transfer of societal values, creating greater harmony and productivity in the workplace, and in monitoring societal institutions (a form of larger societal governance), why is so little attention given to the impact of generations within families, particularly regarding family wealth?
The Formation of the Generational Power Grid
What comprises the family’s “power grid?” How can they access it?
Generations occur in families in two ways. One is through chronological proximity to the creation of the wealth—a commonly used tool notated by G1, G2, G3, etc. The other is from the fact that, although families are never large enough to create cohorts, each person is a member of an archetypal cohort in global society.
Each member of a family either subscribes to or deals with the characteristics of their archetypal generational persona and brings those characteristics to bear in interactions with family members. These interactions, integrated with the relationships between family members, comprise what are known as ‘family dynamics’ and play a critical role in decisions made about the family’s wealth.
Family dynamics directly translate into how much money is transitioned to heirs, the way trusts are set up to benefit those heirs, what kind of philanthropic legacy the family creates, whether the family business is handed to the next generation or is sold, how leadership is transitioned, how the family’s governance system is created, who is involved and what roles they play, whether family members work in the family business, in what capacity, and how much they get paid, along with myriad other aspects of family governance and wealth management.
This “set-up” of family dynamics created by a family’s generational biases and world views makes it reasonable to conclude that a family’s generational maze of impact serves as a veritable power grid to energize the family.
It is the fresh ideas of next generations that keep a family business vital and in sync with new technologies and business practices. The wisdom and experience of previous generations balance inexperience and inform next generations’ new ideas so they can flourish. Today, the wisdom from next generations as native members of the digital age and their determination to make a difference in the world can attract the support of current generations to procreate wealth in ways that previously may never have been possible.
Tapping into the Grid, Now and for the Future
Why don’t families take advantage of this incredible power grid? It’s a combination of attitudes present not only in families themselves, but also in the advisors and consultants who work with them.
Generations of old systems, different technologies, and neglect based on “if it’s not broken, why fix it?”; trying to “save money” by doing the minimum to keep things going; or “sticking with what works” create a cumulative effect that eventually grows to crisis level and literally shuts things down. The expense—both in terms of money and harm to relationships—ends up being much greater than if the power grid had been properly maintained all along.
In New York in 2003, it took the formation of a better governance system to eliminate the ability of a power failure in one neighborhood from affecting others. One might say the existing governance of northeastern power grids was thoroughly reviewed and effectively amended.
Families who create governance systems using their Generational Maze as a foundational power grid can experience myriad advantages. Such systems form a flexible, renewable structure through which valuable input from family members is taken to heart, new ideas are properly vetted and/or intelligently put to work, to provide “circuit breakers” so issues are discovered early and can be jointly and satisfactorily addressed. Next generations become apprentices as responsible and dynamic owners who know how to enjoy the gift of wealth in ways that contribute to the world as well as their own lives.
Such systems are much more than a pipe dream. Much like an electrical power grid, they are not perfect—they can and do break. They require consistent monitoring and upkeep. They should be upgraded on a regular basis.
When constructed with input from the entire family, they can render a family impermeable—able to withstand almost any challenge—and provide a renewable source for revitalization when needed.
This type of governance really works because it draws on the innate energy and dynamic resourcefulness of family members. A future with families tapping into their generational power grids would be a hopeful future, indeed.
About the contributor
Lisa Niemeier is founder of graymatter Strategies LLC, a consultancy on generational family governance. She is a family office and family governance consultant with a varied background in the family governance, succession/transition, and family dynamics aspects of family wealth. Her proprietary generational and family dynamics work, family engagement, and trust review processes focus on identifying hidden risks—even in the most loving, well-adjusted families—that impact investment and wealth management decisions, and ultimately family wealth success. Lisa can be reached at [email protected].