A quick take from a Harvard psychologist on how the obscenely rich can think about passing on a work ethic
Larry Stybel strips it down to neglected and seemingly banal details such as the time parents spend in automobiles with kids
Brooke’s Note: Growing up in New England, I had a front-row seat on two types of wealthy families. In one, wealth meant the best private schools leading to Harvard, leading to graduate school, leading to a great job and the cycle of life going from there. Perhaps more often, by design or accident, parents used their wealth to protect their kids from the bumps they had absorbed in youth. Those kids went to good schools, mediocre colleges and then sideways careers — or worse. They were cast into the scrap heap of the “spoiled,” and the kids and the parents were held in an equal estimation of contempt or pity. We have a general sense of where nature or nurture went wrong in these situations when we know the parties involved, but there’s not been much of a systematic way to think about it. In this Q&A by conducted by Angelo Robles, chief executive of the Family Office Association, Larry Stybel delivers thoughts commensurate with this topic’s importance.
Angelo Robles: You say passing on wealth and passing on work ethic are the two critical challenges for families of wealth. Why?
Larry Stybel: There is a mother-father split I see with the families I work with.
Fathers often take a functional perspective and define wealth in terms of tangible assets. A career is an intangible that has more to do with well being than wealth.
Mothers take a systems perspective and look at wealth as both tangible and intangible. As usual, the women get it, and we men are behind the times. There is that cliché in our industry: from shirtsleeves to shirtsleeves in three generations. There is a reason it is a common cliché: Families passed on tangible wealth but failed to pass on the intangible work values. See: RIAs grapple with a rising threat to retirement: Adult kids that move back in with mom and dad.
Mother will be the fire-breathing dragon at the exit door when father wants to move business to a competitor who might add an eighth of a basis point. Help a mother’s son/daughter launch a good career, and she is your champion forever.
AR. Tell me about your research
LS. Ten families of wealth were interviewed, half of whom were proud of having passed on the work ethic and half of whom described their children as lacking sufficient work ethic for successful careers.
Key issues include (1) rethinking the automobile as a vehicle of transportation AND child socialization. (2) parents should seize the opportunity to demonstrate workplace conscientiousness in front of children. (3) just because you have the financial ability to outsource child-rearing responsibilities to others doesn’t mean you should. See: Are ultra-high-net-worth clients really worth it?.
AR. Let’s start with automobile time
LS. The following story illustrates our findings about the role of the automobile:
Leo’s father was a policeman in New York but he managed to get a scholarship to the Massachusetts Institute of Technology. After graduation and work with a well-known software company, he went out to create his own software company.
During the early days of his company, there was a constant time-money struggle between the demands of a growing business and the demands of a growing family. Every weekday morning, Leo would get up early to make son Allen and daughter Betty their breakfast. He would also prepare their lunch and pack it, and drive them to school.
Drive time was the only time Leo had the opportunity to speak with his children, and he kept the radio off. He would not allow them to listen to music on their headphones. He would ask about their upcoming day. And he would tell them about his day, including his frustrations and anger. Sometimes he would give reports about success. And sometimes he would give reports about failure. As the children got older, they would make suggestions to Leo and Leo would listen to their comments. He might never act on their suggestions but he did convey that he respected those.
The company became successful. Leo and his wife divorced. He remarried, and soon he had a second set of children, Charles and Denise.
With more material success, Leo could afford to have a full-time housekeeper make breakfast and lunches for the children. The housekeeper also drove Charles and Denise to school each weekday and picked them up. There was little conversation in the car as the children would listen to their favorite music over headphones.
According to Leo, Allen and Betty have solid careers, and he is proud of them. Betty has become a successful entrepreneur in her own right. But Charles has just floated from one low-paying job to another. And Denise has become an artist who produces little product. And what she produces remains unsold. Both Charles and Denise require Leo to continue to spend money to support them, while Allen and Betty are financially/emotionally independent.
We were impressed with the number of times automobile travel figured into stories about success or failure.
What Leo did correctly with his first family was use himself as a role model to show the drama, excitement, and failure of business. He made his business life something that children could grasp: Sometimes you win and sometimes you lose. And even if you lose, you recover and move on.
These were valuable lessons Allen and Betty learned from their father.
What Leo did incorrectly with his second family was to outsource drive time. In the absence of Leo socializing his children about the fun of business, business work became magic/mystery. They could not grasp it. They could not say, “I can do that.”
Thus one of the lessons learned is the importance of parents talking about their work in a place where children can easily absorb the information and then add their perspectives. In the early 20th century, that might have meant the family dining table. With today’s erratic school and work schedules, in the 21st century it means the time when you drive children from one activity to another. Keep the audio and video off in the car. Use drive time to communicate.
AR. Your second lesson is demonstrating conscientiousness in front of children.
LS. Psychologists have long recognized that there are five core personality factors. Called The Big Five, these traits have been extensively researched and found valid. When companies seek to get independent assessment of leadership potential and person/culture fit, they employ psychological assessments based on the Big Five. See: In what may be a first, an RIA brings on a psychologist as a financial planner.
The biggest of the Big Five is conscientiousness. Research is clear and consistent that having this one trait is a minimum requirement for success at work.
People who score high on this trait are perceived to show self-discipline, act dutifully, aim for achievement; are organized, and are dependable.
We can assume that Leo was conscientiousness in his work life.
What kind of role model was he for his children?
In his behavior towards Allen and Betty, Leo was a role model of conscientiousness by preparing their breakfasts and lunches, and taking them to school each weekday. What did Leo do with Charles and Denise? He outsourced the work and thereby lost the opportunity to be a role model of conscientiousness.
The second lesson learned: just because you can afford to outsource does not mean it is smart to do it!
Just because you can afford it…
I hear so many adults in families of wealth fondly speak about being with father during the summer at the cabin or the ranch. They would do chores together. Sometimes it was the only time the child saw father demonstrating conscientiousness.
This is not to say fathers are not conscientiousness. For children, they react to what they physically see adults do. Preparing breakfast is a powerful message. Ordering breakfast to be delivered is not.
AR. So outsourcing child care has trade-offs for later work ethic socialization?
LS. Like so many things in life, it is a trade-off. Just because you can afford to do it doesn’t mean you should do it.
Larry Stybel, a licensed psychologist with a doctorate from Harvard University, is co-founder of Stybel Peabody, an Arbora Global company. The mission of this 34-year-old company is leadership and career success. Clients include family offices, financial institutions, and 21 of the 100 companies listed by Fortune magazine as “Best Employers in America.” Psychology Today Magazine publishes his monthly column, “Platform for Success. “ Larry is executive in residence in the department of management and entrepreneurship at Suffolk University’s Sawyer Business School. He resides in Boston and Fort Lauderdale, Fla.
Angelo J. Robles is the founder and chief executive of the Greenwich, Conn.-based Family Office Association, a global membership organization that provides private educational and networking forums with top experts, plus thought leadership and proprietary research about and for multiple generations of wealthy families and the professionals who run their single-family offices. Mr. Robles has a long track record of leadership positions at top financial service companies, including UBS. Before launching the association, he engaged in several successful entrepreneurial ventures. Mr. Robles has written several books and articles, and has appeared on Bloomberg Radio & TV and been quoted by Thompson Reuters, Institutional Investor and many others.
I like this topic a lot. I think there needs to be much more discussion of the broader topic of what is wealth and how/why to invest in the non-financial aspects of wealth. Also, there should be more about how to invest financially for greater happiness, which could mean investing to meet goals v. beating the market, and lowering stress, etc.
I also think psychologists can help a lot in this area of wealth management. And I do think it is time that they become a part of wealth management teams.
Even though we raised our kids in Palm Beach, we didn’t “outsource”. We maintained a sit-down dinner together every evening. We were amazed at the number of their classmates who loved the experience and had no idea about “what their father did”. Their parents were “out” at night and they ate in the kitchen with “the Help” or on trays in front of the TV. I feel sorry for many of those children of privilege, as many of them developed substance abuse problems. Fortunately our kids grew up frugal and caring of others.