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读书笔记 Ten Minutes for Family Fortunes

How come some families stay rich generation after generation, while others never have a nickel?

“Culture,” you will say. “Education,” perhaps. You won’t be wrong. But what, specifically, about culture and education is it that makes such a big difference in outcomes?

The secret is simply this: The rich takes the long view.

Let me ask you something. If you thought you’d live forever, would you do anything differently? Wouldn’t your attitude toward your money change a little? Wouldn’t you slow down, realizing that you’re not in such a hurry to make money? And wouldn’t you reduce your spending, too, knowing that your money would have to last you a long, long time?

If you look carefully, almost all Old Money secrets can be traced to a single source: a longer-term outlook.

Chapter 1: Who Ya Gonna Call?

We are learning the secrets of France’s richest family. At least, they appear to be the richest family in France. They have businesses with annual revenues of about $70 billion—and more than a quarter of a million employees. But we’ll bet you’ve never heard of them. And you’ve almost certainly never seen a picture of them. They are the Mulliez family from the north of France. Discreet. Private. Unostentatious.

The really remarkable thing is the way the Mulliezes have been able to work together as a family, providing all the members—including over 520 in the extended family, not just those who happen to run the businesses—with substantial and enduring wealth. What’s their secret? We don’t know. But we can guess.

First, it helps to have a big family. The disadvantage of a large family is that you have to split up the wealth among more people. But the advantage is that you have more hands to do the work. And the odds are you will have some clever people in the group.

Second, the family decided not to split things up, but to have a system of “everything for everybody,” in which all the children of the founding couple shared equally all the wealth

Women are usually given real estate and men are given businesses (on the theory that they will take the risks and rewards of active enterprise, while women will be happy to have the solidity of real estate).

Third, the family makes a huge effort at affection societies, the conscious reinforcement of the family’s original principles and philosophies.

Fourth, they are careful not to get sidetracked by wealth or fame. They keep out of the public eye.

Sixth, the family requires all shareholders, who are also uncles, cousins, and other relatives, to play a role.

Families receded in importance with the rise of the social welfare nation-state. The promise of modern government was that it would take care of its people. And the illusion was that it didn’t matter what kind of family you came from, that you would be equal to every other citizen. You would have equal access to public transportation, public education, job opportunities, and, ultimately—a good life.

In fact, every study ever done concludes that the family can be far more helpful to an individual than the state. Schools with more parental involvement—in areas with “good” families—produce higher test results. People from successful families earn more money. People whose parents were happily married are more likely to be happily married themselves. Neighborhoods with stable, decent families have lower crime rates. People from good families even live longer.

Governments spend enormous amounts of money. Presumably, this money is intended to help people lead better lives. But there is no evidence that people are any better off. And there is strong reason to suspect that they would be better off if the money spent by the government had been left in the hands of the families it came from.

Now we know something. The political/economic model used by European and American nation-states for the last 150 years is going bust. They can’t continue to pay for lifestyle enhancements with debt. Every major developed country in the world now has total debt-to-GDP of more than 250 percent. Britain and Japan are near 500 percent. You can do a simple calculation to figure out why that level of debt is unsustainable and why, as we write, Europe is on the verge of a crisis. With debt equal to five times GDP, interest payments take up a large part of output. At zero interest rate, the situation is manageable. But when interest rates move up, which they inevitably do, the debtor can’t keep up. Imagine an “ordinary” rate of interest of 5 percent. Five percent of 500 percent is 25 percent.

And the alternative they will find is the one that was there all along—the one that has been the most reliable, from long before any histories were ever written up to the present: the family.

To understand a family’s ability to make and maintain a fortune, you might think in terms of a family balance sheet. Every family has a balance sheet. It has assets and liabilities. There are four primary elements of family wealth: the human, intellectual, organizational, and financial capital that a family possesses.

Chapter 2: The Family

Friends tend to be transitory. Casual relationships, love affairs, and friendships come and go. Family relationships, however, tend to endure—for better or for worse.

Most people do what most people do—they build a family randomly. They go off to school. They meet someone. They end up living somewhere. Then family life starts. They end up in a career. The children go to the local school. They might attend the local church. Then they become entrenched in the local mass culture. They get caught up in social pressure to do the same things that everyone else is doing.

Serious Old Money families do things differently. They create their own culture.

These older members of the family can play the role of elders. They can: Mediate disputes (finding the best, most consensus-building resolution). Enforce the decision-making rules, but not set those rules. Tell the stories and history of the family. Carry on rituals and ceremonies and memorialize them.

Building a fortune requires the vast majority of the husband’s (it could be the wife’s—we don’t care, but we’re going to use husband and wife in their most traditional and stereotypical form) energy. He may not able to attend his children’s sporting events or help them with their homework. Instead, he’s got his own homework to do. It takes an extraordinary effort to produce extraordinary wealth. Ordinary people do ordinary things; they end up with ordinary money. Family money is unusual. It takes unusual efforts to get it and hold on to it. The energy that is put into work is often sacrificed at home.

More often, the husband focuses on the money. The wife focuses on the family. She, too, will have to make an exceptional effort; she, too, must do something extraordinary. This is part of what a great matriarch does. She is to be a counterweight to the lightness of her husband in the home. She bears the responsibility of turning an ordinary family into an Old Money family. How? She shapes the family and nurtures the people in it. She helps create the “shared vision” a family needs to succeed.

In most conventional, nuclear families, especially in the United States, both the husband and the wife work. At first glance, this seems like a shrewd way to build family wealth. With two family members working, you essentially double your household income. Initially. But that’s true in the short run only. Over time, having both husband and wife work could actually make the family poorer.

Two rather ordinary incomes are not enough to produce a family fortune. Two wage earners pay two taxes. With all the expenses of a two-wage family, too, there is not going to be enough money left over to build real family money.

But the even greater failure is on the other side, the family side. The lack of focused involvement on the part of any one single parent can cost a family dearly. No one has the time to make sure the children are emotionally fulfilled. No one can closely monitor if there are subtle conflicts between siblings. No one can instill a sense of duty upon the children. No one has the time to elaborate the family culture: the attitudes, rules, and reflexes needed to sustain an Old Money family.

the logic of our argument suggests that you’re better off educating the children at home. Or at least surveying their education closely. Turn them over to the government, and you’ll have government-formed children. Your human capital is likely to lose value.

Chapter 3: What About the Money?

MOST CHARITY IS A WASTE OF TIME AND MONEY. As for giving the money to charity, good luck with that. It’s hard enough to manage, preserve, and pass along money to your own family. Try doing it for someone else’s family. Most likely, you’ll do more harm than good.

If you give money to charity, how do you know that it is worthwhile? How do you know that you don’t do more harm than good? If your money is merely used up, with no positive outcome, you have done bad. That is, you have wasted precious resources that might have been used to make people’s lives better. But how can you tell when people’s lives are better?

Answer: You don’t know. But if you have done good, it is by accident. Because you don’t have any way of measuring it. And you surely don’t know—by intuition or revelation—what would be good for other people.

Think someone who gives money to the Red Cross or Save the Whales or to fix the cleft palates of poor people must be doing good? Not so. How does anything have value? Things don’t have value in and of themselves. They are given value by willing buyers and sellers. If no one wants a Hula-Hoop, it has no value. None. It has value only when someone has a want or a need for it. Otherwise, it is worth zilch.

You are now replacing the market system, which needs none of these things, with a system of centralized, bureaucratic management. Instead of honest buyers and sellers, now your paid functionaries decide who gets bread and who doesn’t. These management systems divert further resources from providing food to paperwork and administration. Soon, you will have lawyers and auditors on the case, too. And then you will eventually discover that every loaf of bread you distribute free costs you 10 times the previous cost of a loaf of bread. This means that you have destroyed resources equal to nine times the value of the loaf of bread itself in your effort to make the world a better place. In fact, you have done bad.

Most people earn their money from salaries or wages. But this kind of money is unlikely to bring you much in the way of capital. You can’t earn that much. And most, if not all, of what you earn will be taken up with daily expenses and retirement financing.

That’s true for those who have their own businesses, too. If they are selling services that they provide themselves, they face the same limits as a salaried worker. They are selling time. And their time is not that valuable. They are also limited by time itself. You can sell only so many hours per day because there are only so many hours in a day.

F-U money is the amount of money you need to be free. It could be a lot or a little, depending on your ambitions. But it is the money you need so that you can do what you want.

But being financially independent doesn’t mean being antisocial. On the contrary, financial independence frees you to cooperate, create, and collaborate on an equal basis with others. It frees you from dependence on the government or on an employer. You have no reason to give false praise and no reason to pay sycophantic allegiance to any creed or salute any flag—unless you really believe in it. You don’t have to be a “good citizen.” You don’t have to be a “good employee.” You don’t have to be a zombie.

F-U money is liberating.

Chapter 4: Making Your Fortune in Business

Successful businesses are a bit like family fortunes themselves. They are difficult to bring to life. Once you’ve brought them to life, they are even more difficult to keep alive. Especially over more than one generation. Which brings us to a pretty good starting point: The ideal fortune is not money. It is a business. A family business. Fortunes die easily.

Money is easily spent. Easily neglected. Easily wasted. It is not solid enough to hold on to. In today’s world, it is something that usually exists only in our imaginations—or in ghostly electronic form.

A business is different. It is much more real, tangible, in your face, and demanding. It has doors that need to be opened in the morning and lights that need to be turned off at night.

Getting a fortune by running a business is the best and most common way to get and maintain a fortune. Here’s why: It is a more permanent form of wealth than just cash. It usually provides an onward stream of income that can be used to support a family and/or add to its wealth. It is dynamic and alive, not moribund. It requires attention. It causes the family members to work together toward a common goal. It helps family members understand the value of money and how it is earned. Over time, businesses give families a way to leverage their own skills and knowledge.

WHAT KIND OF BUSINESS SHOULD YOU BE IN? The possibilities are too numerous, and our own knowledge is too limited, for us to give much specific guidance. But if you want to make a family fortune, pick a difficult industry, with high barriers to entry, low prestige, and little liquidity. Make it hard to get in—and hard to get out. And make sure it is scalable. You can’t make any real money selling your time, hour by hour. You want a business where you can leverage your time. There is one other thing about family money that makes it different from other kinds of money—and one thing about the kind of business that supports family money that makes it different from other businesses. If you are a typical businessman or investor, you want a business that is as profitable as possible, as soon as possible. You also want one that is as marketable as possible. That is, you want one that is liquid, so you can realize whatever capital accumulation you manage to get. You will also want a business that you can run easily and one that does not require you to remain on the premises. You will generally have an “exit strategy” ready for the day you are ready to get out. A family could benefit from the same kind of business, but with a few differences. It will not be concerned with getting out. In fact, as mentioned earlier, it will benefit from not being able to get out easily. Instead, it should want a business that traps future generations and leaves them without an easy exit. It should trap them close to the family’s wealth, forcing them to remain near the source of their wealth and attentive to it. It is an added plus if the enterprise is remote from major metropolitan areas. What is the ideal family business? Hard to say, but it might be a large, diversified family farm.

We know that wealth is accumulated over many generations. We know that just by looking around. Our generation did not build many of the edifices we see, nor clear the fields where crops are planted, nor invent the automobile, the airplane, the television, or the toaster. We inherited those things and much more besides. There are many things that take longer than a single generation to accomplish.

Chapter 5: Making Your Fortune in Investments

Investment success happens by taking big positions in big trends and leaving them alone for a long time.

Now we’re looking at opportunities we think will pay off over the next 30 years. We’ll tell you more about them in the next chapter. But 30 years is far too long for most people. That’s the difference between serious Old Money and the rest of it. Old Money takes its time. And it uses the short-term, panicky nature of most investors to pick its opportunities.

Since we’re in no hurry, we just wait for the short-termers to give us an irresistible entry price. Why buy at a reasonable price when you can wait for an absurd discount? We’ve seen good stocks sell for as little as two times earnings. Practically a giveaway. At that price, there is little downside risk left—and an upside that should multiply our wealth over the next two decades. That’s an illustration of what we call “beta-plus.” It gives you the benefits of being in the right market at the right time, plus you get the extra gain from buying the best investments at the best time.

Most people think you should invest one way to create a fortune and another way to protect it. That idea is wrong. Time, not the size of your portfolio, is the key variable. If you’re interested in long-term, multigenerational wealth, you should use the same techniques whether you have little money or a lot.

DON’T CHASE ALPHA. “Alpha” is what they call the above-market gains you can get by selecting the right stocks. But the trouble with alpha is that it is unreliable. Of course, if picking stocks that go up were easy, everyone would do it. And if there were some formula that made it possible, everyone would follow it. Instead, the typical experience is mixed. You choose one stock that goes up. Then you choose two that don’t. And then you get a real nightmare stock and you’re wiped out. Over the long run—by definition and observation—most alpha-seeking investors cannot beat the market averages. And as we’ve seen, the market averages are not that high—not in real terms. But what choice do you have? You’re a typical investor. You’ve got 10 years to build up a small pile of savings for a retirement fund. You do your homework. You take your chances. You hope to get lucky. If you did that for a short time, you might come out OK. A serious family, with a serious long-term wealth strategy, on the other hand, can't do that. Instead of chasing alpha, successful multigenerational investors go after “beta.” In the long run, it’s beta that makes fortunes, not alpha.

Instead of trying to beat the market, you make the market your friend. It’s not your enemy. You don’t try to beat it; you just want to join it. And go along with it.

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