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The 3 Generation Trope

By Family OfficeAugust, 2021March 18th, 20242 min read
3 generation trope

It’s a most quoted statistic – “just 13% of family businesses survive the third generation” – and it has finally been challenged. It comes from a single study of US manufacturing companies in the 1980s, and for some reason it has stuck and become almost axiomatic.

But it is deeply flawed. Most importantly, it never compared family businesses to non-family businesses (family businesses on average do last longer), and it also never considered the reasons why those businesses did not continue. Besides, not all businesses are meant to last that long – among other things it’s a function of their industry and their ability to do regular strategic renewal (and for some family business, the latter is a huge challenge).

The other issue is the conflation of this trope with the well-known “shirtsleeves to shirtsleeves” proverb. Enduring family business is not the same as enduring family wealth. Plenty of families have been able to parlay an operating business (which is usually how the wealth was created) into a healthy mix of diversified assets that can support the family for decades.

So forget blanket generalisations about family businesses and focus on their unique attributes that are a mix of strengths and weaknesses.

And view the proverb as a statement about the culture of wealth and how it affects those who created it, those born into it, and those well removed from its creation.

Consider This: How do attitudes to wealth in your family differ between generations? How long do you think your business (or any business) ought to last?

Further reading: 

Here is more on reading on family office(s).

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