Tonhis thoughts Wealthy dynasties can span three generations, as has happened throughout history and around the world. The English poet John Dryden, who died in 1700, mused, “Few three bloodlines last forever.” turned into a shirt sleeve”. A Chinese proverb, three generations (Wealth does not pass down three generations) captures the same sentiment.
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As more and more of the world’s ultra-wealthy come from emerging markets, the third-generation hypothesis is being tested again — especially in developing Asia. Between 2011 and 2021, Asians are helping to increase the number of individuals with wealth above $500 million, from 2,700 to nearly 7,100, according to Credit Suisse. Over the past decade, tycoons on the continent have done more than those in Africa or Latin America, boosting the developing world’s share from 37% to 52%. According to researchers at the University of St. Gallen in Switzerland, some 80 of the continent’s 500 largest family businesses with such problems had combined revenues of more than $1 trillion last year (see chart 1).
Overall, the results of the three-generation testing so far look encouraging for older Asian patriarchs (mostly male) as they look for a safe pair of hands to entrust their inheritance. The grandson of the area’s founder tycoon is likely to be wearing a shirt, but it’s a matter of attire choice rather than necessity. More sophisticated than their elders, they built their fortunes on local businesses that thrived during periods of rapid economic development, such as construction or natural resources. They often combine the needs of the family business with personal preferences.
At the same time, they are acutely aware of their responsibility to avoid falling into the trap of the loser. When they take charge of their businesses, the onus is on them to prove that, in the words of one Asian heir, “you can institutionalize” and, like “some kind of Rothschilds,” continue to build wealth over centuries . (Members of the Rothschild family are shareholders economistparent company. )
To understand what makes these Rothschild admirers successful, start with education. Most attended college abroad, usually in the United States. Zheng Zhigang, the grandson of Hong Kong real estate tycoon Zheng Yutong, studied at Harvard University.John Riady, born in New York, scion of an Indonesian business dynasty, won MBA Earned law degrees from the Wharton School of the University of Pennsylvania and Columbia University. Mukesh Ambani’s daughter, Isha Ambani, graduated from Yale and Stanford Graduate School of Business in 2018.
A foreign education separates the new generation of tycoons from their grandparents, many of whom never completed college. What sets them apart from their parents is their career path into the family business. Like their father, Mr Zheng, Mr Riyadi and Ms Ambani now work for these companies. Mr Cheng runs the family’s property arm, New World Development; Mr Riady is CEO of the family empire’s real estate developer, Lippo Karawaci; and Ms Ambani runs Reliance’s retail business. But, like many of their peers, they took a roundabout route to get there.
For many, this means working in finance or professional services for a while.Mr Cheng started his career in investment banking, including Swiss bank, a Swiss bank. Ms. Ambani is a consultant at McKinsey. Mr. Riady has worked in private equity firms. For others, the bridge is the world of venture capital and tech startups. Korawad Chearavanont, great-grandson of the founder CP Group, Thailand’s largest private company, has launched a tech startup that provides social media functionality to apps.Run by Kuo Mingxiong, grandson of commodities, real estate and logistics billionaire Guo Mingxiong from Malaysia Potassium3 Ventures, a Singapore-based The venture capital company company.
whether in a foreign country The venture capital company Investment in Asia and Asian Investment in Foreign Countries The venture capital company The company, heir’s fluency in English, foreign education, and Western social circles make them ideal conduits.And the traffic is growing: over the past two years The venture capital company Asia invests an average of $150 billion a year, more than half of the roughly $280 billion in the US and up from $11 billion in 2012, when it was a quarter of that.Asian outbound investment The venture capital company Trading volumes also increased (see Figure 2). In the US, Asia’s share has grown from less than 10% a decade ago to about a quarter by 2022, according to data firm Dealroom.
Allowing heirs to pursue careers outside of the family is partly about allowing them to spread their wings. “The first and second generations are very traditional,” said Kevin Au, director of the Family Business Center at the Chinese University of Hong Kong. But, he added, they would be happy to send their children abroad “where the values are different and the business is different”.
Impact investing and sustainability-related roles are popular among millionaire millennials.Instead of joining Hyundai Group, Chung Kyung-sun, the grandson of Hyundai Group founder Chung Ju-young, formed an impact investment firm called Sylvan Group to focus on companies aligned with Hyundai Group United Nations sustainable development goals. In some areas, such as inequality, shifts to more radical views may also be driven by pragmatism. “In a society where economic growth is not shared, and they want to break you up, tax you, regulate you, they will expect the worst,” said one heir.
Giving heirs experiences that go beyond family concerns reflects a more enlightened parenting style. But it is also becoming a business priority for older generations, especially as family businesses diversify into new industries and geographies. Reliance, best known for petrochemicals, is now India’s largest telco and digital platform.Lippo Gains More Access to Young Tech Companies in Southeast Asia Through Its Venturra Capital The venture capital company Subsidiary. Young business successors are more well-connected than their parents, which is useful for their family businesses: brushing shoulders with would-be startup founders, venture capitalists, consultants and bankers can give them the opportunity to Access to interesting investment opportunities.
Last year, consultancy Campden Wealth surveyed 382 global family offices, which are investment vehicles for managing family wealth. The survey found that a majority would prefer that the next generation of owners gain outside work experience before taking the job. Globally, 54% of respondents said they want their heirs to gain at least one year of outside experience. In Asia, the figure is 58%.
Therefore, the more internationalized and liberalized mentality of the young rich is expected to avoid the trap of the three generations. But it’s not without risks. Business empires in many developing countries have been built by combining business acumen and political acumen. In 2001, Raymond Fisman, then at Columbia University, noted that whenever rumors about the ill health of Indonesian dictator Suharto intensified in the mid-1990s, government-linked listings Companies (many of them family-owned) underperform those with less political connections. Similar studies have shown a positive relationship between South Korean firms and political loyalty to the government: firms with ties to the ruling party benefited even after the country’s transition to democracy and economic liberalization in the late 1980s.
Harnessing interest groups and local power brokers remains an important part of doing business in many emerging markets. It can secure preferential treatment, secure state contracts or simply gain a better understanding of often Byzantine bureaucracies. American business schools do not teach such skills to Asia’s young business elite. They also have to learn a thing or two from their elders in order to maintain their family empire. ■
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