Tags: business | owner | wealth | savings | ingenuity

How to Build Intergenerational Wealth that Lasts

How to Build Intergenerational Wealth that Lasts
The Rockefeller brothers, from left: David, president of Chase Manhattan Bank; Winthrop, governor of Arkansas; John D. III, chairman of the Rockefeller Foundation; Nelson, governor of New York; and Laurance, head of LBJ's Citizen's Advisory Committee on Recreation and Natural Beauty, pictured at the National Institute of Social Sciences awards dinner in New York, Nov. 28, 1967. (AP)

By    |   Friday, 03 May 2024 12:59 PM EDT

When I was a child, I remember so many of my teachers telling us “Those who forget history are doomed to repeat it,” and at the time, like most kids at that age, it didn’t mean much to me.

But as I grew older, I began to see the profound wisdom in that seemingly simple statement.

Just knowing something doesn’t help us very much though, because despite another common statement we’ve grown up hearing, knowledge, in and of itself, is not power. Power comes from taking the correct action with that knowledge.

So in this article, I’m going to analyze the actions of some of the most successful families in history, breaking down what they did right and what they did wrong, along with my insight into what’s different in today’s economy that will force you to modify the strategies and tactics they used to become so successful and build generational wealth.

In the midst of ever-growing inflation and economic uncertainty, more people than ever before are looking for ways to build (and hold onto) generational wealth. In the United States, 80% of all businesses are closely held - and most either fail or are sold before the second generation takes over. Only 10% function as privately held by the third generation.

So let’s look at three of the world’s most successful family dynasties and the lessons we can learn from them to break generational curses and keep our own businesses flourishing.

Examples of successful families
 

The Rockefellers

John D. Rockefeller may not be a name you know much about, but as the founder of the Standard Oil Company, he accumulated so much wealth he became the world’s first billionaire. In fact, if he were still alive today, he’d be on the Forbes 400 list of the Wealthiest Americans, alongside names like Bill Gates, Jeff Bezos, and Mark Zuckerberg.

Outliers author Malcolm Gladwell estimates Rockefeller would be worth around $318.3 billion adjusted for inflation, making him worth more than Elon Musk and Jeff Bezos combined in 2021.

Rockefeller found ways to use oil byproducts to grow his business rather than simply disposing of them as waste like his competitors did. This allowed him to expand product offerings to include gasoline, petroleum jelly, tar, and lubricating oil, to name a few.

They didn’t just continue to amass wealth without giving back to the community. John Rockefeller started the Rockefeller Foundation in 1913 with a mission statement “to promote the well-being of humanity throughout the world.” That statement remains the same today.

By temporarily reducing oil prices, competitors who had not planned for the same couldn’t keep up. Because of this, most in the industry sold to Rockefeller and went on to other business ventures. By 1880, Standard Oil Company was refining around 90% of the oil in the United States. They had control of all the refining processes and marketing.

The lower prices attract more customers, which allows them to build a stronger customer base. Though the lower prices did nothing but reduce the profit margin - Rockefeller was more interested in monopolizing the market.

Because of Rockefeller and businesses like his, monopolies are now illegal, though it is worth noting that a true monopoly is difficult to achieve without extensive government support. But that’s a topic for another day.

While you can’t run around buying up all of your competitors and sliding into related industries without regulatory factors to keep the market free, you can:

  • Integrate strategies to reduce waste to save money and pass the savings to your customers.
  • Actively seek philanthropic opportunities to support your community.
  • Remain humble as you succeed - don’t let your ego and emotions rule.
     

The Vanderbilts

Cornelius Vanderbilt and his son William Henry were famous for building a transportation empire in the railroad and steamship industries. Together, they amassed over $200 million in wealth in the monopolies they built.

Vanderbilt knew how important it was to have reliable service to earn customer loyalty. When he slashed prices to win business, he reinvested in comfort and speed to make his company more desirable. He also invested extensive time to plan and analyze deals before entering them.

Unfortunately, William Henry’s sons failed to keep up with changing transportation needs, which caused them to lose market share. This, combined with their extravagant lifestyles, quickly led to wealth depletion. Cornelius’s grandson George Vanderbilt, built the largest privately owned home in America - the Biltmore Estate. At over four acres of floor space, the 250-room home, still owned and maintained by the family today, is a testament to how extravagantly the family lived.

Many of the business tactics Vanderbilt used to amass wealth were far from ethical. You won’t get very far physically assaulting the competition today, nor should you want to. And you can’t just continuously undercut your competitors to drive them out of business until you have a monopoly. But what can you do to operate like the Vanderbilts in an ethical way? You can:

  • Consistently invest in product/service improvement.
  • Stay abreast of industry trends and adapt to changing market conditions.
  • Carefully plan and analyze opportunities before making moves.
  • Live within your means - don’t flaunt or spend your money just because it’s there.
     

The Robbies

Joe Robbie, an attorney and politician, was perhaps best known as the principal founder of the Miami Dolphins and owner of several other sports teams. In 1966, he purchased the expansion franchise with his business partner, comedian Danny Thomas, for $7.5 million.

Robbie was known for upsetting people, berating employees, and returning checks presented to him for signature with notes to negotiate better terms. But, by hiring the right people, he was able to rocket the Miami Dolphins to fame. He continually reinvested his earnings until he eventually became sole owner of the franchise. He used the concept of luxury suites with 10-year contracts to secure the funding he needed to build a new stadium, with the promise of access to a Dolphins Superbowl. The stadium opened in 1987. Robbie passed away in 1990.

The Robbie family had to sell the team after his death because of a $47 million tax bill due nine months later. Since most of Robbie’s wealth was in the team and its stadium, and the family lacked the cash flow to keep things running, the assets had to be sold to meet the tax liability, destroying the Robbie family legacy in the process.

To avoid the same fate, you can:

  • Focus on effective estate planning to keep assets from being liquidated.
  • Take care of employees to keep them loyal to you and your company.
  • Strengthen negotiation skills to ensure you get the best terms possible.

What’s different now?

Today’s landscape is wildly different—not just because of technological advancements and legal and regulatory compliance issues but also because, societally, we’ve lost our focus on family. And government spending has destroyed our economy through inflation and debt.

Social media and technology make it easier than ever to start a business, but it also means more competition. It means finding more ways to differentiate yourself and stand out through your product, mission, or other means. It means providing more value to your customers. And it means building a strong and resilient business.

Let’s not forget government overreach, either. The Corporate Transparency Act (CTA) went into effect in January 2024. It was supposedly aimed at combating illicit activities such as tax fraud, terrorism financing, and money laundering, but that’s not reality because it exempts all businesses with more than 20 employees.

Under the new law, small businesses must submit a Beneficial Ownership Information (BOI) report to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to provide details identifying people associated with the business. Failure to do so can result in outrageous fines and even time in prison.

Owning and operating a business is intricate and risky, and enduring the ebb and flow of changing economic conditions for generations is a massive undertaking, but it’s essential to building financial freedom.

Learning from these well-known business moguls will better position you to beat the odds.
_______________

Dr. David Phelps created Freedom Founders to help its members achieve the freedom they wanted in their lives by building the necessary financial foundation. He is a noted financial expert who is regularly cited by the media, and recently helped the FL Dept. of Education develop its new financial literacy curriculum.

© 2024 Newsmax Finance. All rights reserved.


StreetTalk
When I was a child, I remember so many of my teachers telling us "Those who forget history are doomed to repeat it," and at the time, like most kids at that age, it didn't mean much to me. But as I grew older, I began to see the profound wisdom in that seemingly simple...
business, owner, wealth, savings, ingenuity
1399
2024-59-03
Friday, 03 May 2024 12:59 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
 
Get Newsmax Text Alerts
TOP

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved
NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved