Generating Intergenerational Wealth

Generating Intergenerational Wealth

Dear Experimenter,

In conversation with friends the other day, I realized rich families around me became rich and powerful at specific moments in history. Their business income was directly related to the bigger picture and the industry situation at the time. Here are some of the close examples we mentioned.

All our families have something in common: a forefather that was able to create intergenerational wealth.

1) Cinema Owner

My friend’s great-grandfather had a theatre concession at the time where people had no TV’s. With the advent of movies (!), he turned it into a cinema and filled every session with people from the villages around until he had money to open another one, and so on. These were the times when people watched movies standing on the corridors, and staying for 2 or 3 movies in a row was common. There was just little else to do. They still have the piano they played during the movies, who didn’t have sound back then.

→ His family became rich because of a man who opened one of the first cinemas in the ’50s. They rode the wave until the ’70s.

2) Furniture Factory

Another friend’s grandfather had a furniture workshop during the real estate boom in the 60s. People wanted furniture for their new houses, and China wasn’t exporting anything at the time. IKEA didn’t exist either, so he sold all kinds of high-quality furniture by the millions.

→ His family became rich because of a man who had a furniture workshop which then turned into a factory (1960-1970 approximately). 

3) Paper Factory

Yet another friend’s grandfather had a paper factory. With the tourism boom in his country in the ’60s, people were sending more postcards than ever and writing more letters. The guy became a millionaire supplying shops with their products.

→ His family became rich because of postcards (1965-1995, then postcards sales kind of plummeted because of telecommunication and email).

These people were normal men. They were partially educated at most. What they had in common is they spotted a trend and were kind of ready to take advantage of it already. Then they jumped or pivoted their business into a Growth Industry™.

All of them made a fortune when the curve in their respective industries was sky-rocketing, and then either shifted industries, cashed-in or crashed. The market has cycles. Cycles make or break fortunes. It’s important to keep an eye on cycles.

The cinema’s guy rode the wave for less than two decades, then purchased some land and that was it. Then discos appeared and there was TV at home and cinemas became outdated (it is a dying industry as of today). I believe his son sold the business decades ago.

The furniture man kept making furniture despite cheaper importations of bad quality imitations and IKEA. The company went bankrupt a few years ago because they kept doing the same thing when the cycle had clearly shifted.

The paper factory guy had opened some stores to sell their stationary. They started closing in the ’90s. They kept trying to impose their model on the market, despite Chinese cheaper shops and more modern and prepared competitors. His business is as of today extinct.

A few things to draw from this short tale if you are building a business empire and want to create inter-generational wealth:

  1. Spot the trends.
  2. Be business-ready. This means having a sizeable amount of money ready at all times to invest in an industry should the occasion arise.
  3. Perform in a Growth Industry™. You increase the chances of your investment eventually paying off and yielding dividends for life.
  4. Know when the time has passed. It helps to approach business with a dispassionate flair. Pivot into another Growth Industry™ or cash-in. Adapt or die.
  5. Keep doing this until you get tired. Some industrialists create solid businesses with fixed assets (factories) to pass on to their families. Some sell everything and retire.
  6. The internet, but also your real-life connections in several sectors are key to this. Being informed pays off. Having the cash and the patience to wait for the right moment is one of the characteristics of a successful businessman.

That will tell the tale.

GRACIÁN

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