How to preserve wealth beyond 3 generations

Wealth does not last beyond three generations

As mentioned in the first few pages of “The Leader, The Teacher & You”, “Wealth never lasts 3 generations. The first generation creates wealth, the second generation preserves it, the third generation squanders it.”

The question is why this should be so.

I saw at least one perspective on this in a conversation with a professor in Hong Kong.

He said we have to bear in mind that the second generation comprises siblings. There may be differences of views among the brothers and sisters, but they have been brought up in one household with a more-or-less common set of values and a more-or-less same attitude towards life. Thus the way they look at issues, and the way they go about identifying and solving problems, may be different in emphases but oftentimes they can agree on the outcomes they seek and the approach to take in seeking solutions.

What is critical to note about the third generation is that it is a generation of cousins, brought up in different households, where values and life attitudes are likely to be different.  Coming to decisions therefore become a lot more difficult, when even agreement as to what the problem is may be elusive.

Thus while the idea of wealth never lasting 3 generations may sound simple and empirical, an understanding of the phenomenon leads us to the importance of values and life attitudes. This is the commonality and identity all companies and organisations seek.  It is what defines culture, and what makes for winning organisations.

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