Women’s Role in the Long-Lasting Success of Families, Their Values, and Wealth
It’s an older article that I mentioned in my recent podcast conversation with Byron Tully.
You might think we are only in the business of picking successful investments, but when you really think about it, it is so much more than that. In the same way, there is more behind a stock symbol than meets the eye; there is more behind an account we are tending to. Behind the stock symbol, we’ll find a living, breathing business with assets, people, operations, brands, and consumers. Behind each account, there is a family with its values, traditions, goals, and ambitions, but also worries and challenges. We really need to look deeper to truly understand our role and fulfill the responsibilities we have towards the families we care for.
Through experience and thorough research of successful paths of previous investors, we can distill the winning formula of investing. We concluded that contrarian value investing proves to deliver the most desirable results in the long term, both in terms of expected returns and volatility. We can look back at our own record investing along those lines and the records that many established following the teachings of Benjamin Graham, the father of value investing. He was able to bring reason to investing and turned what many considered gambling activity into a wealth-building pursuit. His disciples, and many inspired by them, continue to apply the same principles today.
In a similar fashion, if we devote ourselves to getting to know the stories of the wealthiest families of the past and learning from our experience working with clients over decades and many generations, we can clearly see patterns, habits, values, and choices that helped some flourish, and last, and some fall behind. Those lessons were so valuable that many families chose to keep them to themselves. I could even think of one story of a prominent family where a written down collection of guidelines was published in a limited edition just for family members and friends, only to be soon bought back and not republished for decades. Those lessons lead not only to the financial success of a family but even more so to its cohesion, unity, and strength, which reinforce and solidify the financial success over many generations. What are those lessons, though? Where do we find them? How do we interpret them? What does it take to truly follow them? How do we apply them to help our clients fulfill their long-term goals?
For over a decade now, I’ve been curiously collecting books about wealthy families around the world. I found countless inspiring stories on all continents. The ones that caught my attention were those that made their strength and success perpetuate over 5-6 and more generations. I was intrigued by how families in such a variety of settings, circumstances, and cultural backgrounds had come to similar conclusions. I found it inspiring how they all attempted to codify them and instill them in the next generations, some with admirable success, so less so.
All those families were up against serious but similar challenges that two titans immortalized in short but poignant quotes. Baron Nathan Rothschild, a member of the famous banking family, told us: “It requires a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it, it requires ten times more wit to keep it.” (2), and Cornelius Vanderbilt, the railroad magnate, reminded us again: “Any fool can make a fortune; it takes a man of brains to hold on to it.” (3)
The wisdom of ages from all around cautions us about the perils awaiting large fortunes and families behind them. A Chinese saying teaches us a similar lesson: “Fu bu guo san dai,” or “Wealth never survives three generations.” America has its own version of this saying: “From shirtsleeves to shirtsleeves in three generations,” or “Clogs to clogs in three generations,” according to the Brits. The Japanese say: “The third generation ruins the house,” and the Italians: “From stables to stars to stables”. The challenge is obvious; it might be insurmountable by many but acknowledged by most.
From my extensive reading, I came away with a long list of valuable lessons, which I would like to share with you over time, but the one I want to start with is probably a little unexpected, maybe even surprising, and it’s the role of women in the long-lasting success of families.
The inspiration came from reading about a number of wealthy families who succeeded over many generations due to the enormous help of wives, mothers, grandmothers, widows, daughters, and sisters, who either stepped in when men were not around or too young or offered advice and wisdom which secured the continuity of the family and its success.
In a wonderful book “Family Capitalism,” Harold James tells us three parallel stories of the Wendels in France, the Haniels in Germany, and the Falcks in Italy, who successfully grew family businesses in Europe over a few centuries. He reminds us that “Families were enormously vulnerable to politics, but also to chance events. Unanticipated death and the devolution of wealth to underage children brought the likelihood of a round of legal disputes between heirs. In this situation, widows played a central role”. He adds: “The French and German business dynasties examined in this book were controlled by powerful widows during upheavals of the 1790s; and the French and Italian ones in the 1870s, again at the moments of great national trauma. He shares with us some examples. Margeurite d’Hausen (1720-1802), also known as Madame de Hayange, the widow of Charles de Wendel and mother of Ignace de Wendel in the late 1700s, successfully remained the manager of ironworks in Hayange supervising the operation of the forges during the French Revolution. Similarly, Aletta Noot Haniel (1742-1815), the widow of Jacob Wilhelm Haniel, managed the family’s trading house for eighteen years while her children were minors.
We can find parallel stories among the female members of the Rothschild banking family. Nathan Mayer, the most successful son of the family’s founder Mayer Amschel, left clear instructions in his will: “My dear wife Hannah (1783–1850) … is to co-operate with my sons on all important occasions and to have a vote upon all consultations. It is my express desire that they shall not embark on any transaction of importance without having previously demanded her motherly advice and that all my children, sons and daughters, are to treat her with true love, kind affection, and every possible respect, which she deserves in the highest degree, having shared with me joy and sorrow during so great a number of years, as a fond, true and affectionate wife.” (1)
In many families, women might not have had the opportunity or the necessity to step into business functions, but still played a key role in maintaining the family’s strength and unity. Abby Aldrich Rockefeller (1874-1948) comes to mind. She was the daughter of influential U.S. Senator Nelson Aldrich and wife of industrialist John D. Rockefeller Jr., In the beautiful book “Abby Aldrich Rockefeller: The Woman in the Family” Bernice Kert tells us a story of the mother of the five famous Rockefeller brothers, the woman who shaped the character and destiny of one of America’s most powerful families.” As Publisher’s Weekly puts it: “Abby Rockefeller emerges as a loveable and intelligent woman who wielded her great privilege to a variety of socially beneficial ends.” New York Times writing in her memory described her as “the spirit that held [the Rockefellers] together” but whose role in the handling of the family wealth was a fortunate thing for society, for this country, and for the world.”(2)
By all means, it’s not a complete list of incredible women who made a lasting mark on some of the most prominent families of the last few centuries, but it offers you a noteworthy testimony of their contribution to the family’s success.
The qualities that women bring to the management of family affairs can also be valued in the management of businesses we find ourselves interested in. Since I spend a fair amount of time researching new investment ideas, I regularly come across a whole variety of managers running companies. I always like to think that when I’m buying shares of the company, the managers become my partners. I ask myself if I can trust them, if they are honest in communicating with shareholders, are they making wise, long-term choices for the business. Do they think about all parties involved? Or do they forget the interests of the shareholders sometimes? There are many examples, but one that struck me recently came from my research of two companies in the furniture industry. There are many players of various sizes in this very fragmented industry. Two stories intrigued me, though. Those were two companies that I have known for years, and both had their stock prices come under pressure. skepticism among investors abounded, and they both might have looked compelling to a contrarian value investor. In many ways, they were alike, but in one specific aspect, they couldn’t be more different. One was managed in a very wise, cautious, conservative way with responsible long-term growth plans, and the other was facing much bigger risks, much more short-term big bets, and confusing communication. Both companies have been around for decades, and both got tested by unpredictable but regular cyclical downturns in the furniture market. Needless to say, the latter handled them poorly on a few occasions and was acting as if its memory wasn’t among its strengths and seemed to be headed poorly equipped for any storm ahead. The first one has a significant female presence in its top ranks, and the second lags in that area.
That reminded me of what I’ve been reading about the very long-term success of not just a single company over one economic cycle but families over multiple generations through revolutions, wars, and other debacles. I saw a parallel there in how women play a role in securing the long-term success of businesses and families.
Since we are talking about women and we came across the furniture industry, it made me think of a famous example and well-known story to all value investors and Buffett’s followers. Rose Blumkin comes to mind. Mrs. Blumkin was born in 1893 in a village near Minsk, one of eight children. She was working at a family store since she was 6. At 20, she married a shoe salesman and moved to the U.S. With four children before the Depression hit the country, she had to care for a growing family. In 1937, she started her own furniture store (Nebraska Furniture Mart in Omaha, Nebraska) with $500 borrowed from her brother. She successfully involved her children in the business, and it grew so big that it caught the eye of Warren Buffett in the early 1980s. He acquired it and praised Mrs. B, as she was known, for her business acumen. Her grandchildren got involved soon after, and she felt left out, so she started a competing store across the street, which turned out to be such a success that Buffett acquired it, too, and the family reconciled. (1) She passed away in 1998 at the age of 104 survived by her son, three daughters, 12 grandchildren, and 21 great-grandchildren. Her personal credo was: her credo: “Sell cheap, tell the truth, don’t cheat nobody.” (2) Is there more to say?
Obviously, after reading about examples from the past and the more recent ones, we all look at our own families. Who is your Madame de Hayange, Hannah, Abby, Mrs. B?
I quickly thought of my grandmother. She is the oldest out of four siblings - very responsible, decisive, yet warm, and caring, always smiling and full of energy. From stories, I can tell that she was mature ahead of her age already as a young woman. She won over the hearts of my great-grandparents and her in-laws, and to this day, she makes sure we all stay abreast of all developments across all sides of the family, including some quite distant cousins, who only she can explain how we are related to. She has always made sure everyone gets along and family values get passed on. Over the years, she imparted to us the importance of family, education, hard work, honesty, frugality, and aversion to debt. By now, in her 80s, she still plays a vital role in the lives of all her kids and grandkids. As an accountant by training, never intimidated by numbers, she regularly and curiously inquires about my work. It resonates with her also because of her long-term career as a manager of a senior citizen home, which she built from scratch and where she cared for many people in their most fragile times. Whenever she praises me, I always have to say, “You are the one who taught me that!”
This brings me back to the role we play in our clients’ lives. We do our best to fulfill their long-term family goals, serve as much more than investment professionals, and be more of a family doctor, a homme d’affaires - as Mr. Sicart often refers to us and our family office mission. I was reminded recently how often we find ourselves talking to the grandmothers, mothers, daughters, and sisters who are now playing a crucial role in maintaining the family’s unity values and securing the future for all involved. It’s important to remember that. We can learn a lot from the past, use it to navigate through present times and shape the future of our families.
Sources:
Abby Aldrich Rockefeller: The Woman in the Family Hardcover – October 12, 1993
by Bernice Kert“The Rothschilds” by Virginia Cowles, 1979
“Fortune’s Children: The Fall of the House of Vanderbilt” – August, 1989
by Arthur T., II Vanderbilt (Author)“Rose Blumkin, Retail Queen, Dies at 104” – New York Times; Barnaby J. Feder; Published: August 13, 1998.
“The Snowball: Warren Buffett and the Business of Life Paperback” – October 27, 2009
by Alice Schroeder“Family Capitalism: Wendels, Haniels, Falcks, and the Continental European Model” – April 30, 2006 by Harold James
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