Congrats to Scotty McLennan

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We're thrilled that our colleague and friend Scotty McLennan was honored recently by the Hotchkiss School with its 2017-2018 Alumni Award, the school's highest award for an alum. Scotty graduated from Hotchkiss in 1966. He is former dean of religious life at Stanford University, Unitarian minister, poverty lawyer, and is currently a lecturer at the Stanford Graduate School of Business as well as member of Wise Counsel Research Associates. In accepting the award Scotty movingly described his own personal transformation while at Hotchkiss, in particular as he witnessed the unfolding civil rights movement and listened to, read, and reflected on the words of Martin Luther King, Jr.

The Journey of Complete Family Wealth

Understanding family wealth is a journey. In this post, we have condensed the three main stages in the composition of our most recent book, Complete Family Wealth (Bloomberg, 2018), capturing its main themes and those of its predecessor volumes (all written with our dear colleague, Jay Hughes). We close with nine lessons that we have learned from consulting with many families over many years. Our hope is that the insights we’ve gained can make others’ journeys all the more fulfilling.

We began on the path of writing together by reflecting on the power that giving plays within families with significant wealth. Whether annual exclusion gifts or larger gifts, we saw that often these gifts left recipients feeling unsure about the “strings attached” or the giver’s expectations, and that often givers themselves felt anxious and even remorseful about their giving.

We also knew that giving can be done well and as a result can strengthen family relationships. We captured some of the ways of giving well in our first book, Cycle of the Gift, and then again in Complete Family Wealth. The key considerations in giving wisely are

  • Who is doing the giving? What do you seek to achieve with this gift? Does it fit your values? Does making this gift give you joy?
  • Who are the recipients? Where are they in their lives’ development? What are their characters? Are they ready to receive well?
  • How will you communicate the gift? No gift speaks for itself. Communicate more rather than less, earlier rather than later.
  • Can you let go? None of us can control the future. So many gifts are marred by giver’s desire to control. If you follow the steps above, then you will more likely feel you have done what you can do and can let go.

We wrote Cycle of the Gift from the perspective of the giver. After it was published, many readers told us that, in reading it, they felt that for the first time they also got to look at giving through the eyes of recipients. That insight led us to write our second book, Voice of the Rising Generation, the main lessons from which also appear in Complete Family Wealth. They include

  • How important it is to think of every generation as having a capacity to rise, to grow, to find its own path, and to flourish. That is why we use the term “rising” rather than “next,” which has the potential to make later generations feel inferior to the “founders.”
  • For rising generation family members, “Pray that the road be long, full of adventures, full of knowledge.” We underscore the importance of finding your way, your work, and your relationships. Very often these discoveries come through spending some time away from the family enterprise.
  • For parents of rising generation family members, we believe that staying centered and affirming them contributes deeply to their flourishing. Remember your younger self and what you needed to rise. Tell rising generation members stories about your journey.

By focusing on giving and receiving, it did not escape our notice that for many families these activities take place through the intermediation of trusts. By the third generation, most of the families we have worked with hold over 90% of their financial assets in trust. And yet, because trusts are usually opaque, and most family members shy away from talking about them, many beneficiaries find their trusts to be a troublesome complication in their lives. This is not a good combination. To address this challenge we wrote Family Trusts (with co-author Hartley Goldstone), the core lessons of which appear in the chapter on Trustees and Beneficiaries in Complete Family Wealth:

  • The primary work is to make a trust a human rather than merely legal relationship. Or in other language we often use, to turn the trust from a transfer (a legal transaction) into a gift with spirit.
  • For grantors, you can communicate your intent by writing a Letter of Wishes for each trust. Or add these two lines to the beginning of each trust: “This trust is a gift of love. Its purpose is to enhance the lives of the beneficiary.”
  • For beneficiaries and trustees, read your trusts. Make plans to meet at least annually. Seek to understand each other: the trustee should understand the beneficiary’s life, dreams, and needs, while the beneficiary should understand the trustee’s duties.

Based on speaking with many families about these practices, it is our firm belief that if families pay attention to giving wisely, receiving well, and making trusts gifts with spirit, many of the negative consequences that attend significant wealth can be avoided and great benefits, to individuals and families, can be gained.

As we mentioned, we include these practices from our prior books in Complete Family Wealth. We want to close with nine more lessons that also found their way into this book and that go beyond the points we have made thus far.

  1. The work of living well with wealth is every day and lifelong. It is about character. Character shapes how we treat others and how we treat ourselves. To this point, we quote a proverb in Complete Family Wealth: “If you’re planning for the year, plant rice. If you’re planning for the decade, plant trees. If you’re planning for the century, grow men and women.”
  2. Families are made up of individuals, and our first task is to know ourselves. Only if you know who you are can you begin to contribute effectively to the happiness of those around you. To this end the book includes various reflective exercises.
  3. Many people we meet are focused on preserving financial wealth. They have heard the proverb “Shirtsleeves to shirtsleeves in three generations.” But this proverb isn’t exactly accurate. If structured well, money can linger in families for a long time. But those families do not necessarily flourish. To achieve that end requires focusing on, preserving, and growing the family’s non-financial resources, its human, intellectual, social, and spiritual capitals. That is why we developed the Family Balance SheetTM.
  4. No community lasts unless the greater part of its members want it to last. Families who last have members who affirm each other and enjoy spending time together. Whatever their financial wealth or estate plans, such families have the motivation to succeed within themselves. That is why we spend a great deal of time, in print and in practice, focused on the design of true family meetings, where family members can come together to get work done but also to learn about and enjoy each other.
  5. What makes a family? At the end of the day, it is not just law nor biology. It is the presence of shared stories. Stories give a family a home—and furnish it. To this end, we encourage families to use their family meetings to share stories—about their ancestors, about their successes and failures, about their individual lives’ journeys—and to adopt rituals (such as welcoming new family members or remembering those who have passed) that give shape to their shared journey.
  6. If stories are a family’s lifeblood, then communication is its circulatory system. The greatest obstacle to communication is assuming that it has taken place. This assumption happens all the time in families, especially around difficult topics. Most of our time with families is spent helping communication happen. To that end, to hold effective family meetings, we encourage families to establish ground rules, so that everyone feels he or she has a chance to speak. We also help couples and other family members go through the “Three-Step Process” to make sure that they have 1) clarified their own views, 2) truly listen to each other, and 3) look for common ground. And in family meetings we often facilitate what we call the “Intergenerational Dialogue,” in which each generation has a chance to tell the other 1) what they would most like to share and 2) what they would most like to learn. Just think of how healthy that circulation would be if you could communicate like this on a daily basis!
  7. Conflict is natural to families, and the potential for conflict grows with the presence of significant financial assets or an operating business. We have found that a great resource in resolving conflict is the famous “Three-Circle Model,” by which family members can clarify when they are acting as managers of the enterprise, or owners of shared assets, or members of the family. While these three areas inevitably overlap, each comes with its own skills and responsibilities.
  8. The number one question family members ask us is, “How do we begin?” Oftentimes the beginning is the hardest step. That’s because this work involves parents and children speaking with each other about difficult topics: money, death, control, conflict, hopes and disappointments. And that is why we developed the Family Executive SummaryTM process. In it we interview each family member to understand his or her goals, strengths, and areas of concern. We then share a thematic summary of what we’ve learned back with the family along with recommendations on how to proceed, often towards a family meeting. This process helps the family feel they have the important topics “on the table” and that they have made a practical step forward. They have begun.
  9. We have seen families do magnificent things with money—in business, philanthropy, and public policy. We have also seen the work of managing family money take over people’s lives, leaving them poorer, in a spiritual sense, than they would have been without it. This is perhaps the greatest tragedy of this field: that some could have so much and yet so little. That is why for the families we work with we focus on the true keys to living well that go far beyond money.

(c) Susan Massenzio and Keith Whitaker

Light in Darkness

 Gary Oldman as Winston Churchill (Focus Features)

Gary Oldman as Winston Churchill (Focus Features)

On the winter solstice, the shortest day of the year, it seems fitting to comment on the new film, The Darkest Hour. Gary Oldman delivers a terrific performance as Winston Churchill, called to serve as Prime Minister in 1939 in the face of Nazi aggression abroad and political backstabbing at home.

But the film offers even more than great acting. In a time when people assume that politicians are sexters, butt-grabbers, or worse--puny men who cannot control their own lowest passions, much less the destiny of nations--the great virtue of the Darkest Hour is that it shows Winston Churchill as an undoubtedly higher human type, elite. This is no hagiography. He is not depicted as a perfect. But neither is it a "psychological" explorations of a "great" man's flaws. Churchill is smarter than others. He is braver than others. And he can drink more than others. Nor does he make any passes at his secretary.

The true statesman (like the true economist) must be able to not just to see, but to foresee, the true good, the natural conditions on that good, as well as what seems good to most people--and the distance among the true good, the possible good, and the seeming good. This films shows Churchill seeing these complexities far more clearly and far earlier than his compatriots. Also, it does what is almost impossible for films, which specialize in the depiction of deeds: it does justice to Churchill's greatest actions--his words, his speeches.

Finally, by showing how clear-sighted Churchill was in the face of tyranny--"You don't negotiate with a tiger when your head is in his mouth!"--it reminds us today, when glibness is honored, of something Churchill never forgot: while words are indispensable, they have their limits in politics. Eloquence is no substitute for strength. 

Houses of Gold: Family Book Club

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Want to avoid the shirt sleeves to shirt sleeves proverb? Consider starting your own “book club” and having everyone in your family read and then discuss thoughtful books as a way of ensuring that there is a shared vocabulary of basic concepts important for the long-term preservation of family wealth.
This article by Christian Stewart in the April 2017 Offshore Investment Magazine highlights some key practices advocated in the books Family Wealth, Keeping it in the Family and Family, the Compact among Generations, by Wise Counsel’s James E. Hughes Jr., as well as Family Trusts, A Guide for Beneficiaries, Trustees, Trust Protectors and Trust Creators 1 by Hughes and Wise Counsel Associates Hartley Goldstone and Keith Whitaker.
It is written in the context of family offices in Hong Kong but the suggestions made are applicable anywhere. It concludes that the single-family office of the future will have evolved so that family Human and Intellectual Capital – the qualitative issues - are being addressed in a professional, systematic manner and the family office has its own Chief Learning Officer, alongside the more traditional management of Financial Capital and Social Capital.

A New Day for Pride?

Summer Solstice

On the summer solstice, I like to reflect on Plato’s longest dialogue, the Laws, which Plato set on this very day. This year's solstice, I am struck more than ever by the book's relevance. For I believe that it suggests a remedy to our rancorous, even violent, politics: the rehabilitation of the often-maligned quality of pride.

The dialogue—among three old men, a Cretan, a Spartan, and an Athenian—would take 16 hours to read out loud. Its goal is to come up with the laws for a new city. It takes up the most important political matters: freedom of speech, the point of education, criteria for rulers, punishment of crime, and even sexual regulation—all matters ripe for heated debate.

The three speakers are very different from one another: the Spartan comes from a deeply conservative regime; the Cretan, from a city even older than Sparta; and the Athenian, from a city known for its liberal, expansionist views.

Can we imagine a traditional conservative, a neo-con, and a contemporary liberal keeping up such a discussion for more than a few minutes?

But these three talk for the longest day of the year. They talk while walking uphill under the Greek sun, a condition likely to shorten tempers. What allows them to do so?

Early in the conversation they almost descend into name-calling, something quite familiar today. There is no “Little Marco” or “Deplorables.” But when the Athenian implies that the Spartans may have a penchant for homosexuality, the Spartan angrily replies that the Athenians are all drunks.

Still, they are able to stand down from this momentary hotspot. Perhaps the fact that the conversation starts with the word “God” and the goal of their trek is the “cave and temple of Zeus” unites them? This belief that God watches over politics is not necessarily shared today. But the presence of religion in politics can as easily divide as unite speakers, then as now. The reason for their perseverance appears to lie elsewhere.

If I were to isolate one quality that allows these three very different speakers to maintain this extraordinary conversation, I would call it pride—a quality almost begging for cultivation today.

Pride in their own communities allows the Cretan and the Spartan to push back when the Athenian questions the goodness of their regimes. They don’t just roll over. Nor do they take the easy way out and reply that, “Everyone has his or her own values.” Because they have pride in their way of life, they seek to defend it.

At the same time, because they have pride in their way of life, they want to understand it, warts and all. They don’t just reject, evade, or refuse to answer the Athenian’s questions. Nor do they fall back on claims of authority: “Our god or our law says so.” They are proud enough in themselves not to be slavish adherents to their own ways.

This pride is rooted in their sense of themselves, as the Cretan and Spartan might put it, as “real men.” They don’t whine about the Athenian’s questions. They are not looking for some cheap advantage. They don’t expect political matters to be easy. They stick with the conversation and their trek even though it is tough—perhaps because it is tough.

They also suggest that they are proud of themselves as Greeks. As we would put it today (if we were proud enough to use the word), they take pride in being “civilized.” Unlike barbarians, they settle their differences with reasoned speeches—not blows, much less bullets.

Plato’s Laws thus dramatizes the centrality to political dialogue of pride. It is more fundamental even than the qualities most often praised today, such as civility, tolerance, diversity, and the like. As such the dialogue serves as a powerful teaching tool.

It can also prevent us from two common ways of misunderstanding pride.

First, while pride may form a basis for nationalism, it is not the same as xenophobia, much less racism—the term most often used to silence debate today. Pride does involve a commitment to “our own.” But true pride never forgets that “our ways” and the “right way” are not necessarily one and the same. For these very reasons, pride seeks to understand and to improve our own community.

Second, pride is not the same as arrogance. This is a vice much in the news lately. (And yet those who accuse others of arrogance often do so with great arrogance—and no irony.) Arrogance sees nothing as higher than oneself. Because that is such an unreasonable position, it also usually involves building yourself up by tearing others down.

The very setting of the Laws gives the lie to arrogance or "hubris," to use the relevant Greek word. The summer solstice portends that the days of the year will now be getting shorter—just as the days of our lives are always waning. The three characters are old men, who several times comment on their own mortality. The Spartan and Cretan look up to divine law as their guide in life. Even the “liberal” Athenian says at one point that, “looking away to the god,” human beings seem like the gods' playthings. That earns him a rebuke from the Spartan, who complains that he is running down the human race. Pride means taking things seriously, including ourselves, while also remembering that we are not the highest things in the universe.

Every healthy political community fosters pride. While multiple motivations no doubt have been at play in Brexit, or the election of President Trump, the desire to feel proud of one’s own community—as distinct from a far-off national or international order ruled by others—seems unmistakable. This desire is one worth cultivating rather than condemning. Pride is not the same as hate or fear. It is not merely parochial, petty, or prejudiced. It provides the foundation for making ourselves at home and for taking care of our home. The reminder of the goodness of pride is just one of the many gifts that Plato’s Laws continues to give.

Leading Advisor: Christian Stewart

Christian Stewart Award

Wise Counsel Research is proud to announce that Christian Stewart has been named "Leading Individual Advisor" by Wealth Briefing Asia.

In naming Christian, Wealth Briefing Asia explained, "Christian originally focused on tax and estate duty issues, but since establishing Family Legacy Asia in 2008 he has specialized in all aspects of family governance.  He is widely regarded by his peers globally as one of Asia’s leading experts in the field, and has a client base of families and private client intermediary clients spread throughout the region."

Congratulations Christian!

Family Governance White Paper

Wise Counsel Research's Dennis Jaffe has published a new installment in the 100-Year Families Study. Governing the Family Enterprise: the Evolution of Family Councils, Assemblies, and Constitutions offers specific strategies and stories from the over 80 families who have contributed to the project. These are rare families who have successfully transitioned a major family enterprise through at least two generations. This white paper includes samples of actual family's governance structures, along with descriptions of how they deliberated about, enacted, and in many cases have amended these structures in order to promote their families' flourishing. It is a tremendous resource for enterprising families and their advisors.

Lifetime Achievement

Wise Counsel Research's Jay Hughes has been honored with the Lifetime Achievement award by Family Wealth Report.

"This award recognizes Jay's immeasurable contributions to the field of family wealth," observed Wise Counsel Research's President, Keith Whitaker. From his first book, the classic Family Wealth, to his recent books The Cycle of the Gift and Voice of the Rising Generation, and in his countless consultations to families around the world, Jay has spread the word to help families face and beat the proverb of "shirtsleeves to shirtsleeves in three generations." In his acceptance speech, Jay encouraged his colleagues gathered in the audience in their own journeys of service and commitment. 

Thought Leader of the Year

Wise Counsel Research is thrilled to have been named the "outstanding contributor to wealth management thought leadership" by Family Wealth Report.

One of five firms to be shortlisted in the thought leadership category, this recognition is another milestone in Wise Counsel's drive for recognition as one of the pre-eminent players in the competitive wealth management space.

Publisher of Family Wealth Report,  Stephen Harris, was first to extend his congratulations to all the winners.  He said: "These awards were judged solely on the basis of entrants’ submissions and their response to a number of specific questions, which had to be answered focusing on the client experience, not quantitative performance metrics.  That is a unique, and I believe, compelling feature.  These awards recognize the very best operators in the private client industry, with ‘independence’, ‘integrity’ and ‘genuine insight’ the watchwords of the judging process - such that the awards truly reflect excellence in wealth management."

Family Wealth Report Awards

Wise Counsel Research is honored to be a finalist for Family Wealth Report's award for Outstanding Contributor to Wealth Management Thought Leadership. "Family Wealth Report is a leader in identifying high-quality advisors and institutions," says WCR President Dr. Keith Whitaker, "and we are proud to be numbered among other excellent finalists. We are particularly gratified to receive this recognition as a non-profit organization that shares thoughtful research as broadly as possible."

Prenuptial Agreements

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Whether you're planning to get married, or have a child who is, bringing up a prenuptial agreement is a delicate matter. It can easily cause hurt feelings and anger. Still, prenups have legitimate uses, and talking about one in a thoughtful way can actually strengthen marriages and families. That's the claim made by this new white paper, which reviews

·       What a prenup is--the major parts and requirements

·       How prospective spouses can best approach the prenup conversation

·       How parents of a prospective spouse can approach prenups.

Money and marriage are challenging topics; we hope that this white paper gives you helpful guidance in navigating the prenup process.

 

Raising the Rising Gen

Dennis Jaffe has published this new piece on steps that families can take to raise a flourishing "rising generation." Dennis discusses family activities (such as good parenting and family meetings), business activities (such as sharing important business information and educating rising gen members on understanding the family's affairs), and important individual considerations for rising gen (such as ways to build an identity separate from wealth). For more stories on how actual families have successfully prepared their rising gen members, check out our recent report on the topic and our book, The Voice of the Rising Generation

Magnificence

Many philanthropists know Andrew Carnegie’s warning that giving money away wisely is much harder than making it. Few know that Carnegie was paraphrasing Aristotle. And fewer still know that Aristotle argued that there is a specific virtue, not just of giving, but of giving away great sums of money, a virtue he calls “magnificence.” It’s a virtue whose study could help philanthropists meet Carnegie’s challenge.

Virtue is the habit of doing what’s right. We speak in terms of virtues all the time, even when we don’t recognize that we’re doing so. For example, if you believe that giving should be effective, efficient, and strategic, then you imply that effectiveness, efficiency, and strategic thinking are virtues. The same if you criticize a certain expenditure as wasteful: that’s the language of vice.

In essence, Aristotle asks us, “Do effectiveness, efficiency, and even strategy exhaust what you mean by giving well? Or is there something more to it?” He would say that these qualities set the bar too low. We need to raise our eyes to magnificence, the virtue of making “great” expenditures.

Aiming at magnificence may make some people uncomfortable, especially in a democratic age. In what follows I voice some common objections to magnificence, explain its qualities, and offer thoughts on how, if one has the resources, to begin to give magnificently.

Results-Oriented

Is magnificence just about spending? Doesn’t it matter where you got the money from? And doesn’t it matter whether you give it away versus spend it on yourself?

These objections reflect the usual way we think about philanthropy today. Ideally, it should proceed from hard-earned funds, generously set aside by the wealth-creator, and directed to public not private benefit.

Magnificence confounds these distinctions. It covers more than giving. Aristotle’s examples of magnificence include financing weddings, public celebrations, warships, and temples. These examples suggest that magnificent expenditures could aim at private ends as well as public, civic as well as religious. It rejects the black-and-white distinction of self-interest versus altruism. Magnificent spending could go to build a private company, a civic center, or a church. For magnificence is about results, not the source of funds. Such spending could come out of your own earnings, from an inheritance, from a charitable foundation, or from public funds.

Though surprising, the rejection of these distinctions shouldn’t sound altogether strange. Magnificence anticipates current moves towards socially-responsible investing, multiple bottom lines, “B-Corps,” and public-private partnerships. It certainly demands asking more than, “Does this expenditure qualify for the charitable deduction?”

Big

But why should giving a lot of money involve its own special virtue? Does quality really depend on quantity? Or is Aristotle just flattering the rich?

At first glance, magnificence does seem to depend on size, as those examples of weddings, ships, and temples suggest. But magnificence is not only about size. It must also

·      Fit the person doing it. Aristotle says that the doer should be great—and great does not equal rich. Depending on their characters, the rich are more likely to spend vulgarly or stingely than magnificently.

·      Fit the recipient. As a gift to a child a beautiful toy may be magnificent. A new Ferrari would be absurd.

·      Fit the occasion. Spending the same amount on your own dinner as for a wedding is ugly, not beautiful.

As the example of the child’s toy reveals, magnificence need not even cost a lot. The magnificent person makes even a smallish expenditure come off grand. Magnificence has more to do with the quality of the result than the quantity of dollars spent.

At the same time, magnificence is also about the doer. It means asking yourself, “Does this expenditure fit me—and do I fit it?” You don’t need to be a great wealth-creator. But you must be great in some respect. As with any virtue, magnificence is less about what you have than about who you are.

Wonderful

How does magnificence’s big spending differ from conspicuous consumption, which seems more a vice than a virtue?

Aristotle compares magnificence with the vice of vulgarity or, as he also calls it, “lack of experience in the beautiful.” A vulgar person spends “not for the sake of the beautiful, but to make a show of his wealth and so to make himself wondered at.” In contrast, by spending on public celebrations, public defense, or temples, the magnificent person spends not for himself but for “the things of the gods and the things valued in common.”

To pursue magnificence, then, ask yourself, “Will my spending evoke wonder—at it, not at me? Will it direct our gaze to what is above us and to which we aspire?” Also, have you developed your own experience in what’s beautiful, what we might call “high culture”? Beauty is the guide to magnificence. For example, Aristotle says that the magnificent person’s house should be beautiful, not to brag about, but because “a house too is an adornament” of the city. This result is moral, not just aesthetic. Whatever magnificence spends on, it looks to the beautiful and the common good.

Cosmic

Isn’t what I consider beautiful just a matter of personal taste?

“Magnificence” is a compound word in Greek, megaloprepes. The first part, megalo-, means great. The second part, prepes, can mean both conspicuous and fitting. This ambiguity reflects the complexity of the virtue. Magnificence must be not only greatly conspicuous but also greatly fitting, in several ways:

·      As we’ve seen, the magnificent gift fits its giver, its recipient or recipients, and its context.

·      It also fits with “the common things.” It aims at our community’s health, common defense, public education, and so on.

·      Further, Aristotle says, a magnificent expenditure is a kosmos, in Greek, an “ordered whole.” Naturally, this word reminds us of the larger kosmos, the ordered whole in which we live. The magnificent gift fits together the way that the cosmos fits together. Its beauty resides less in its size than its reflection of the order of the world. This beauty is not just a matter of personal taste.

This quality also makes magnificence about much more than effectiveness, efficiency, or even strategy, which are all tied to specific ends. It should lead us to ask ourselves, “Is my giving partial? Why does it aim at these ends? Does it reflect a vision of the world, this cosmos?” Magnificence no doubt requires focus at times. But focus (not to mention money) can never substitute for vision.

Wise

So is magnificence more about dazzling others than truly benefiting them?

Aristotle also says that “The magnificent person resembles the knower, for he or she can contemplate what’s fitting and spend great amounts harmoniously.” The magnificent person is not just a doer but also, in a way, a thinker. As a result, magnificent expenditures achieve two other ends:

·      They inspire hope. Aristotle says that they resemble “offerings to the gods.” Such offerings assume that God cares about us. In the same way, magnificence reflects a view that this world makes sense and that our actions within it can make a positive difference.

·      They inspire not only wonder but also reflection. The magnificent person’s contemplation, expressed in spending, inspires others who gaze upon his or her works. It inspires their reflection on the nature of our community and the nature of our world.

The last is perhaps magnificence’s greatest public service. It both makes and reflects a beautiful order. It embodies vision, public-spirit, and experience in beauty. It thereby opens the door, conspicuously, to reflection by others, who may or may not have money. It prompts an activity that is truly common and costs nothing: reflection on this wonderful world and our own wondering place within it.

Cross Cultures--Review by Christian Stewart

Imagine an ethnic Chinese business founder who arrives in Indonesia with nothing but the “shirt on his back”, who through hard work, intuition and street smarts builds a successful business empire in South East Asia. While the founder had no formal education, as his wealth grew, he invested in the best western educations available for his children, who were encouraged upon graduation to find work in the US. His eldest son finds a job in an investment bank and starts to rise quickly up the ranks. After the son has worked in New York for 5 years, one day he gets the call from his father to return home to Jakarta and help him to run the family conglomerate.

The son hesitates. He knows his father is authoritarian and that the family conglomerate, while successful, is not professionalized and that it will be a long time before the son could put his own mark on the group. To return home will involve giving up the successful career he has started to build. Yet if he refuses his father’s call, he will be disloyal and betraying his proper role in the family. If you were an advisor to the patriarch, what would you do to help in this situation?

Cross Cultures suggest that there is a cultural lens that can be applied to help families like this. The three major cultures around the world today are labeled as Individualist (Western, Anglo-Saxon countries); Collective Harmony (derived from Confucianism); and Honor (found in places as diverse as Latin America, India, the Middle East and Southern Europe) cultures. The book also points out that wealthy successful families also have an economic culture; the origin might be a culture of poverty or middle class wealth, but as the founder becomes successful the family “immigrate” to the economic culture of wealth. The next generation, if born after the family has already successful completed the economic migration are, “Natives to the land of wealth”.

The approach for an advisor in the example is first consider your own national or ethnic culture of origin and whether you bring any of your own biases to the situation. Second, consider the culture of the patriarch – likely Collective Harmony. The dimensions of culture described in the book can be explained to the patriarch and the patriarch can be asked to rate himself so that his own unique culture map can be created. Then what about the culture of the son? Has he picked up elements of Western Individualist culture? If so, then the potential conflict described between father and son can be reframed as a cultural conflict and not as a result of the personalities involved. The role of the advisor is to respectfully point out to the patriarch that the son is thinking and acting in a way consistent with the first class western education and work experience that his father provided for him; that the son has a legitimate perspective. If the advisor is able, his or her role then becomes that of a cultural mediator, helping father and son explore whether there are solutions that can be negotiated that satisfy both the needs of the patriarch and the family orientation, with the individual needs of the son. The book outlines the steps in this negotiation process and the role of cultural mediator.

Cross Cultures is written primarily for advisors (including bankers, trustees and family office executives) working with families from a different culture, or helping families where the family itself is facing strains as a result of being exposed to a new culture (most likely Individualistic). Advisors are asked to go further than just promote communication within families; advisors must be either willing to step up to help in the cross cultural negotiation required – or encourage the engagement of other advisors who can play that role. Advisors are warned against taking the approach of failing to respectfully pointing out to the patriarch the legitimate interests of the next generation of the family.

The co-authors conclude the key to long term success as a family enterprise is adaptation. In terms of economic culture this means consciously deciding which aspects of the family’s economic culture of origin to retain, and which aspects of the culture of wealth need to be adopted. Likewise in terms of ethnic culture, successful families from all three of the main cultures are facing scenarios like that described above or are otherwise being exposed to the other cultures as the world becomes more global, including through the widespread use of Western Individualistic practices in business. Cross Cultures predicts that successful families will also be required to select which aspects of their ethnic culture they will retain and which aspects of Individualist (or other) culture they should choose to adopt. They point to a global cultural convergence – to “ambiculturalism”. Cross Cultures provides both the vocabulary and the process for a family to make such conscious choices. 

Cross Cultures: How Global Families Negotiate Change Across Generations is written by Dennis T. Jaffe Phd and James Grubman Phd.

This review was originally published online at Tharawat Magazine