Monday, December 26, 2016

Dynasties: How to Avoid "Blue Collar to Blue Collar in Three Generations"

I am currently studying family systems, what leads families to stay together, and what tears them apart or encourages their dispersement. Seventy percent of all generational wealth transfers fail. And then there is the proverb that is, statistically speaking, almost always true: "Blue collar to blue collar in three generations." Why?

The story generally goes like this: An ambitious middle class man creates great wealth and starts a family dynasty. His children try not to mess it up, but mostly they are lazy and/or uncreative. The fortune is no long grows, rather, it stagnates. The grandchildren are worse than the children, even less creative, and sometimes despots, and now the fortune decreases. By the time the great-grandkids are grown, there is no fortune. The dynasty is over and the family is back to blue collar work.

I have been coming up with theories about how families can fight the proverb since I began working for families who were dealing with these issues. For a long time my answer has been: Your children are headed toward the mean because you are not raising them – middle class nannies and teachers are. Want your children to have your values, habits, and skills? You need to be the one who raises them.

But recently I have come to a second realization. In some ways, it only appears that the children are "not great" like the parents. And it only appears that the parents are all that great. Because most of the time it takes three generations to make the "great creator." I think the story is six generations long.

Generation 1: The pioneer generation. They struggle for survival in a new ecosystem. A concrete example of this: A young man, raised by an unsuccessful Inn Keeper, decides to be a farmer as there is an opportunity for cheap land out west. He goes there. It is wilderness. It is far from anyone he knows. Though he knows how to run and inn, he does not actually know how to farm. And though his parents weren't ideal, at least he knew people in the town where he grew up. Now he know's no one. But he is hardworking and determined to make something of himself. Survival isn't easy or guaranteed at first, but he plugs away, clearing the land, breaking in the soil, building a tiny cabin, and saving. He marries and works his tail off to feed his offspring. He has to create a new family culture because the only thing he was able to learn from his own parents was what not to do. So he does not turn to drink, does not divorce, does not indulge in overspending, etc, but he is a lot better at knowing what not to do than what to do.

Generation 2: The second generation continues what the pioneers began. With hard work and perseverance they will do well, but they will never make it big. Outlying success will allude this generation. In my concrete example: The children of the pioneer don't need to spend a decade breaking in virgin soil, learning the native plants of this ecosystem, clearing the land, or even figuring our what values lead to success. They inherit this wealth of knowledge, and they improve upon it. They build bigger houses, barns, and better tools. They plant trees for beauty, not just for food. Their father was only ever able to think about the current year. Because they are already on top of that, they plan ten years ahead. They grew up knowing people in the area - small time farmers like themselves, but unlike their father, they have a support network (not to mention the best support network their is, successful family members nearby). They also build on the family culture. Their parents were good parents, but they want to be even better.

Generation 3: The outliers. They can do what their parents and grandparents could not. Biographies will be written about them. They will be heralded as the creators of dynasty. In my concrete example: The grandchildren of the pioneers are born into a family successful enough that they have free time. Their family farm is already productive and beautiful, so they focus on improving it even more, making it not just beautiful but glorious, and making it not just productive but top notch. They grew up watching their parents be alluded by the big leagues, and they know exactly what they need to do to go big. They go to school, and college. They network. They have a support network of a higher caliber than their parents did. Their family has now made it and they are revered for their success.

But their childhoods are not given enough credit. Their parents and their grandparents, keeping it together despite the rigors of pioneering in a new field, are not given enough credit. They don't become part of the family myth. Whether it's Stephen "Wonderboy" Thompson or Beyonce or Gwenyth Paltrow, the third generation outlier becomes this heroic individual who did it with help from his parents, sure, but not to the extent that anyone imagines. And now we get to their children.

Generation 4: How do you follow up a truly incredible parent? Hopefully the Generation 3 Outlier used his success to find the best possible mate he could and then settled into focusing on his own children. More likely, he will be seduced by his own success and not able to give it up. He will spend his life focusing on attaining even higher echelons of success. He will fail to raise his children.

A child of an outlier, say, Beyonce's kids for example, has a choice when it comes to work:
-Don't work and live off the family money
-Try to outdo mother
-Try to do her own thing (i.e. be a pioneer in a new field and/or ecosystem)

Family systems experts generally recommend to heirs that they do their own thing. They inevitably end up not being very impressive. The experts recommend having compassion for them. 

Much of the time, families return to pioneering before the third generation is even reached. Perhaps the family has bought into the cultural myth that everyone must have a One True Passion, and the point of childhood is to find it. Many in academia believe that if all children worked in fields different from their parents, they would not be able to benefit from nepotism, and the playing field would be leveled for all. If everyone was always a pioneer, we would all be equal!

The hard life of a pioneer is also often the end result of twenty-two years in school. Well-meaning parents deprive their children of the wealth of knowledge they would have received from a childhood at their side. So they end up, at twenty-two, starting as a pioneer in his parent's business - a pioneer because even though it is his parents line of work, he has no experience in it.

The fourth generation children, the children of outliers and successful people, will most likely never be that successful, not because they are lazy or losers or less than their parents, but simply because they are pioneering in a new field. They will struggle just to survive in their chosen career in ways that their parents cannot possibly understand.

A second or third generation success cannot fathom what it is like to arrive in the wilderness and learn an entire ecosystem. This is another reason why so many children of successful people choose to be pioneers – because the successful parents advising the children have no idea how hard it is. As a rule, the successful people were not pioneers. They think success is easy and anyone can do it.

In my concrete example, the generation four child of the outlying farmer is told that he can do anything with his life. All he has to do is work hard and he will be a success like his father. So he goes to college and studies film. When he graduates he moves to Los Angeles to be a director. He spends his family's money lavishly and, though he is able to get a foothold, he doesn't find any success in his career. It is so depressing for him, measuring himself up against his father, that he turns to drink. He is a horrible parent to his own children.

Generation 5: Raised by a depressed, alcoholic father who failed to make it as a director, this guy decides that the movie industry is not a safe bet. His family still has enough money for him to go to college. He studies business. He gets a job in Chicago running an inn and, as a pioneer, struggles just to survive. He wasn't raised with any good examples of hard work, rather he grew up learning how to be depressed and drink his problems away. This he does.

Generation 6: The fortune is gone now. The family is now blue collar again. Generation 6 will not be able to afford college. He is raised by an alcoholic failure who runs an Inn. All he knows about his future is that he doesn't want to be like his father.

So I think the proverb should be: "Blue collar to Blue Collar in Six Generation." And I think the problem is a general failure to understand that success takes generations to build.

So what does this mean for you and your family or me and mine? I think it would be helpful for families to place themselves: Are you a pioneer, pioneering in a new line of work that you did not learn from your parents as a kid? Are you second generation, successful and perhaps even very wealthy, but not to the level that biographies will be written about you? Are you third generation, the outlier that most likely your child cannot top? 

If you are a pioneer, you will most likely think your career is a dead end. You will hope your child does something "better." College will fix it! This is your mistake.

I met a guy the other day named Matt. He never went to college. He was raised by a single mother, an immigrant. She worked a minimum wage job and could barely feed him when he was a kid. He quit school at sixteen. He is now forty-years-old and owns thirty two convenience stores. He makes a fantastic living. How did he pull that off?! Hint: He was not the pioneering generation.

His mother worked at a 7-11 for his entire childhood. She couldn't afford daycare, and they didn't know anyone, so he hung out at her 7-11 after school. He knew how to run the place by the time he was twelve. Started working there himself when he was fourteen. Saved up and bought his first 7-11 when he was twenty-five. Killed it. Most people who run 7-11's don't understand how to run them, he told me. He does.

The lesson: If you are a struggling pioneer don't assume your child will struggle as hard as you. You paved the way. Your child has been paying attention. Invite your child to your life. He will do it better. Don't assume your career is a dead end or you life isn't a worthy one to invite your child to join. If you can just keep it together, despite the insane difficulty of your life, your children will do great.

The other lesson: Many people would look at Matt, the guy who owns thirty-two convenience stores, and mistake him for the pioneering generation, after all, his mother never owned any convenience stores. This is not the case. Matt is the second generation in his family to work in the field of convenience stores. Unfortunately, because Matt chose a line of work his childhood had perfectly prepared him for, he thinks that anyone could do what he did, anyone willing to work hard can reach his level of success. That is the mistake the second generation makes.

And one more lesson: If pioneers can just provide their children with basic survival and a good parent-child relationship, the family will rise. But pioneers need to stick to it and not flail about.

Laura Ingles Wilder's story is a good example of pioneers that could have made it, but instead, flailed about, not settling down, not focusing on providing their children with enough nutrition for them to reproduce well. Their children lived to adulthood, so it seemed like they were successful. They probably told themselves that they were fine parents. Three of the daughters married. But there was only one grandchild for Ma and Pa Ingles and she could not have children. There were no great-grand children. The evidence points toward malnutrition related infertility, the physical degeneration Weston A Price writes about. 

If you are second generation, your weakness will be having no idea how hard it is to be a pioneer. Picture Matt's mother and how successful she was, or Pa and Ma Ingles and how successful they were. If you sentence your child to the life of a pioneer, that will likely be that level of success, not yours.

Also, don't assume your kid wants to do his own thing if he knows the true choice. Don't send him down the pioneer track by sending him to a "good school" and being able to afford after school activities or a wife at home that prevents him from hanging out with you at the office all day. Your mistake will be one of ignorance, not appreciating what your parents did that you were able to build on. Be clear with your kids: You can be a pioneer, but you most likely will not find the level of success I have found. If you want to start studying the family business now (at seven years old) you have a chance at becoming an outlier.

The key take away is to be clear with children about the real choice. Hard work is not all it takes to reach a second generation level of success at a reasonable age.

For example, Laura Ingles Wilder found success as a pioneer in the in the field of writing – when she was seventy years old.

If you are adult second-gen who just realized how hard it is going to be to be a pioneer, but its too late to spend your childhood learning the family business, consider accepting your pioneer status and focusing on your children: They can be second generation in whatever field you are pioneering, or, if you raise them at Grandpa's office, they can take your place as the outlying, third generation.

Before I move on to third generation, it should be mentioned that staying at what I am calling second generation levels of success is something a family can actually maintain for many generations. The third generation doesn't have to become outliers. They can build on their family's wealth while focusing on their children. They can grow the company, but not be consumed by it. In fact, in my current studies of the institution of family, the most successful families (in terms of their long term ability to maintain a high level of wealth and stay together as a family) follow this model.

If you are third generation, and people are writing biographies about you, you are in the riskiest spot. If you have made outlying success, you will most likely struggle the most at parenting because your success keeps you stuck in the maiden/squire phase of life and because your children will grow up in your shadow.

You could try to lessen the shadow, toning it down at work. This would happen naturally if you let go of your maiden/squire phase. If your focus becomes your child, and you bring your child to life with you. What happens? You can't do as much. You have to slow down. If you are Beyonce, you do maybe three shows a year, and you prepare for them for months – they take a lot longer to prepare for because your five-year-old is there wanting to learn the dance routine too. You don't make quite as much money because your time is being poured into your child. But in the end, it's wonderful, because you are not a maiden trying to attract the attention of the highest status mate you can anymore. You are a mother now, trying to raise a child who can attract the highest quality mate. You can't buy a good mate for your kid. You can only focus on your child, helping her to become the best potential mate she can be.

That's how I can see a third generation successful family working. It is also currently the only way I can see outlying success work at all in a family that thinks in long-term ways (encourage outlying success in the young as a mating strategy, but once mated, get out of the limelight). Because otherwise, outlying successes are so difficult for the next generation to overcome, that I am not sure a family thinking long-term should even strive for it. In many ways those who choose outlying success for their career might consider forgoing having children as to do so is inconsiderate of them. The outlying success who continues to be so after his children are born is not a good parent, and if he ever does graduate from squire to king, he is the king who cannot give up his throne.

Another option for outlying families would be to take the child destined for a pioneer career, and your fourth generation child isn't going to follow your career, perhaps he can pick something you exposed him to, so he will have a better chance of not being a total pioneer. For example Brad Pitt's kids could consider architecture or directing or working for the UN. In this way maybe they can pull off (almost) second-generation status. Should they choose chemistry, they will be pioneers. It's fine to choose chemistry, but they should be made aware of the reality of the choice they are making.

Another strategy for a third generation parent is to have the child pick something when he is very young. In this way, both child and parent have ten to twenty years to learn about that field, giving the child possible second-generation status by middle age. The danger is that the parent will underestimate the level of involvement needed on his part, thinking that that $150/hr tutor is enough. The tutor is not enough. Every line of work is its own world, it's own ecosystem. If you own a soap business, you can buy your child acting lessons from the best teachers in the world, but if you don't take the time to meet people in the film business, and develop relationships with them, your child will end up a pioneer. 

Anyway, not saying there are not exceptions or that this is The One True Rule. It's just a trend that I have noticed.

You may not understand what I mean when I say "pioneer" unless you have read this post: You may not understand what I mean when I say "maiden" or "squire" later unless you have read this post:


  1. When it comes to most of the readers just by pure statistics I would assume most (myself included) don't come from successful families and more likely have experience of being raised either parents working in blue-color or professional type middle class work. In either case the public school even forces the notion "what you want to become" which reinforces the idea of pursuing road of pioneer. Now, I do agree that some of the skills like entrepreneurship, writing, understanding some market, etc. is very helpful when you have your parents teach you early on as the knowledge becomes engraved by the time a child grows up. Thought, other skills that rely mostly on information and application are a lot more available these days due to internet and information becoming more and more abundant. You could say that that's the biggest advantage human species have, to pass down and improve on the aggregate of knowledge. Then if we look also at the pace of change and some industries that become challenged, few examples traditional retail with amazon, taxi's with uber, hotels with airbnb etc.; you could question if it's even feasible to think that 3 generation long success is possible or necessary in the near future? Maybe some trades like being an actor, singer will be around for long time, but betting on 10 years past success of a taxi company probably is not a viable option anymore, not to mention industries like IT which change every year. Nevertheless, I still agree that having a responsible education by parents will still be beneficial for a long time.
    One note aside, as you mentioned biographies just recently I finished listening to John D Rockefeller life story. He was quite micro manager when it comes to business and his children education as well to a degree of creating a school dedicated for his son alone. Can't say that you would call it successful based on your concepts here, but it left quite a legacy as the family name stands.

    1. Thank you, Evaldas, both good points.

      I don't think having information available makes being a pioneer easier to succeed at, just more tempting.

      If a child is going to head down a pioneer path and can get started on his ten thousand hours at a young age, then the internet is helpful in that way. It's helpful at SKILLS. But skills are only half the battle. What I have noticed is that each industry is a meritocracy of skill (fine for pioneering) *until a certain point.* At a certain point in every industry (wether you are a scientist, an actor, or a candy maker) you reach a ceiling where in order to get to the next level, it's about who you know. The pioneers need to take ten to fifteen years building relationships with those people in their ecosystem that they need to know, whereas the children whose parents were in that ecosystem don't. Let's say your dad makes lollipops and you decide to make gumdrops--you need to know the same people, so the child will not be a pioneer. Let's say your dad is an actor and you decide to be a director. You are pioneering a new skill, but within the same ecosystem of people, so you will have a ten to twenty year head start on other people just as skilled as you.

      I would be very curious to know if you find this to be the case (that there is a ceiling in any career after which you really need to know people) where you live (I don't remember the country you are from, but I know it's not the US). Perhaps this is a US phenomenon?

      On Rockefeller's current standing: Yes, I would not consider theirs a successful dynasty. Most of the people for whom I worked put money above everything else, above their emotional health and their physical health. They were able to make money a lot faster that way, but their families were slowly on the decline, not on the way up. When I look at the Rockefeller family that is what I see: A dynasty on its way out. It can be saved of course, but the Ayn Rand quote, "Money will not serve the mind that cannot match it," applies here. I would say, "Money will destroy the mind that cannot match it." Perhaps not in one generation, but eventually.

    2. Sure, I agree regarding relationships, especially in business that's a factor no matter where you are, outside US as well. Right now I'm based in Dubai, which seems to follow US as their role model probably the most of all middle east with it's own flavors of course.

      One idea I forgot to mention is apprenticeships as alternative to family education. They were quite more popular in the past, but modern education system made it obsolete or at least not seen as a viable alternative anymore.

      I think John D Rockefeller, who started the whole dynasty was a brilliant, in terms of how much he managed to achieve in one lifetime. Thought he was fierce in business, I wouldn't say he neglected his health and family having lived to 97 years and managing to pass down the responsibility of his wealth to junior, but as you say most of his children lived in his shadow and nobody managed surpass that success or even get close enough.

    3. I love the idea of apprenticeships!

      Should I read a book on Rockefeller? I just read one on Vanderbilt. I don't know much about the Rockefeller family. I called his dynasty unsuccessful because when I googled for pictures of the current heirs, they had long narrow faces, which means physical degeneration of genetic stock. If I were starting a dynasty, sheer physical health would be at the very top of my list. Healthy poor heirs can always make money. But you cannot buy good health for sickly heirs.

    4. The book I'm referring to is "Titan: The Life of John D. Rockefeller, Sr." and is really well written as history books go brings back the atmosphere of that time. Though it's not a small one. Personally I found the childhood part most interesting how he was brought up. Vanderbilt family is also referenced in few parts as it was related to the Rockefeller, due to their business partnerships which helped to built the standard oil monopoly.
      I can't say for all the heirs of the family, but one of his grandsons is still alive, lived past 100 years which could indicate some part of health consciousness. Though his daughters did suffer a lot of health issues - even with the vast wealth health is still the matter of personal responsibility.

    5. Sounds awesome, I have added it to my reading list! :)

      So it sounds like that by my definition of success, Rockefeller was personally successful or financially successful, but he failed at family dynasty, as in, his dynasty may still exist, but it is its way down and out, not up.

      Think of it this way: Weston A Price did an experiment on soil and plants. When the soil was not replenished with vitamins and minerals, each successive generation of plants was smaller and weaker than the last. It took seven generations, but eventually plants could not grow in that soil anymore.

      If an animal dies it turns into soil. Humans are walking, talking plots of soil. A human woman can only grow a baby human if her soil is healthy enough. Without replenishment, sure, the family can last a few more generations, but eventually the choice to not focus on the health of their soil catches up with them.

      For a dynasty to be successful for centuries, physical health must be an aspect of the family culture. If it isn't that dynasty will eventually fail to produce viable heirs.

      Doesn't mean that Rockefeller wasn't a hero. But it does mean that he failed to establish physical health as a family value. I think. Like I said, haven't researched their family at all. Just looked at pictures of the current generation. Sounds like the 100-year-old was from the second generation when the family soil was still moderately healthy.