Wealth Never Survives Three Generations. Which Generation Is In Control Now?

Posted on February 9, 2011

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Wealth, it’s said, never survives three generations.

I think the aphorism’s prediction is best explained in this way:

In the beginning, a family or families become wealthy through hard work, ability, and conviction. The wealth is earned.

The second generation is born into wealth, takes it for granted, and receives it only because of their relationship to the first generation. Without a work ethic, ability, or conviction, the wealth is squandered and/or looted.

Every family, organization, and community faces a similar story arc I think.

For example, in the beginning, a business generates wealth through the hard work, abilities, and convictions of its employees and management. As the business expands, more and more people are hired and, at some point, when it comes to the chain of command, ability and talent is trumped by other considerations (seniority, favors, familiarity, experience, etc.).

Eventually, a “second generation” of employees and managers take control of the business for reasons that have nothing to do with their work ethic, abilities, or conviction. The wealth is squandered and/or looted.

Because a business is not necessarily organized in accordance with relationships of direct kinship, it may take much longer for the second generation to take over. Because a business can be bought and sold, it can also happen very quickly. Either way, I predict the second generation eventually always takes over.

Which generation controls your family, business, community, or society?