A recent University of Pittsburgh, University of Kentucky, and Vanderbilt University study found that lottery winners are twice as likely as the general population to go bankrupt. There are unsubstantiated estimates that as many as 70% of lottery winners squander their winnings. Although there are no conclusive studies on this subject, the common theory is that lottery winners don’t know how to manage wealth; they don’t know how to think about wealth and they can’t control their behavior in a way that supports the preservation of their winnings.
What does this have to do with family businesses? I have a theory – one that I can’t prove but that seems to make sense to me. That is, that the grandchildren of successful family business owners are in similar situations to lottery winners. How? Lottery winners don’t have to work to earn the money they receive. They don’t have to:
- spend time, effort, and money to accomplish business success,
- learn how to get things done with limited resources,
- overcome obstacles,
- create solutions,
- continue to dream in the face of disappointment
I believe that because the grandchildren of self-made, successful business owners typically do not have role models, mentors, or teachers (i.e., their parents often manage wealth that they themselves did not create), they are in situations that are very similar to lottery winners. The statistics tend to support my theory. According to the Family Firm Institute, on average only 30% of family wealth reaches the third generation after the self-made wealth creator succeeds (i.e., the grandchildren). Only 12% reaches the next generation and 3% reaches the generation after that.
What’s the solution? How can the “Family Business Lottery Winner” syndrome be broken? I believe that if entrepreneurial mindsets, habits, and systems can be instilled in families, wealth can be sustained over many generations. How can these mindsets, habits, and systems be instilled? Through a transformation of family businesses to business families; through the development of business-like principles, concepts, and tools within families. And, of course, I’m biased because I believe that the Empowered Wealth Pillars of Sustainable Prosperity model is the missing structure that can guide this process, especially guiding family leaders as they move forward, breaking the pattern of the “Family Business Lottery Winner”.