Tuesday, July 15, 2014


The latest edition of Forbes magazine has an impressive roster of the US' wealthiest families as well as an interesting assortment of articles on how some of these families built their fortunes and how they have sustained them over time.

Forbes lists 179 families some with fortunes dating back to the beginning of the 19th century, with families as large as 3,500 members -- the DuPonts who started in explosives and chemicals, to as few as two -- the Newhouse publishing family. The families on the list command $1.2 trillion or about half the GDP of Africa.

It is hard enough to generate wealth, even harder to have it passed down the generations and harder still to grow it from generation to generation.

Our recent arrival on the monetary scene and the turbulence of the 70s and 80s means we have little intergenerational wealth, real old money. The little "old money" we have has not shown itself able to regenerate itself down the years mainly because it was often just bestowed on its initial members by the colonial administration, they really have no clue how to create wealth.

For lack of a local example there therefore are only a handful of companies that have transcended a generation, where the founders have passed on and the companies have continued to grow and thrive under a new generation.

This is important not only for individual families but for the economy as a whole.

Entrepreneurs generate wealth through the manipulation of land, labour and capital. Successful entrepreneurs create jobs, generate taxes and in many instances improve the welfare of the people around them through charity. Since starting and building businesses is not an easy thing to do, society's wealth finds itself concentrated among a few people, people who have the vision and courage to survive the ups and downs of business.

They often develop this acumen from dealing with personal hardship, which hardships have often forced them to seek an alternative route to the standard template of go to school, get a good job and live happily every after.

The "poorer" people envy these people their wealth because they have no clue how or are unwilling to pay the price, to make it. They often want to reap where they have not sown.

Unfortunately this rich people find that hey need another skill altogether to pass on their businesses or wealth generating machines to their descendants. You know what they say, wealth is built by the first generation, enjoyed by the second and squandered by the third. From grass to grace and back to grass in three generations.

Forbes has an interesting article about the Mellon family, who have not only passed the wealth down the generations but are now wealthier in aggregate than they have ever been in the 150 years of the family's wealth.

The patriarch, Thomas Mellon was a lawyer who set the foundation with real estate before branching into banking in the 19th century. But instead of passing on his wealth to his heirs wholesale, encouraged them to go into business for themselves, seeding their ventures. With the bank as the center of gravity, subsequent generations have invested in oil, manufacturing, railways and everything in between to the point that the family's collective wealth now stands at some $12b.

A friend once said that the problem with Uganda is that it does not have enough wealthy people. I agree with him. But enduring wealth is a function of time, entrepreneurial acumen too but time more than anything. Instantaneous wealth built on a foundation of sand -- read corruption, doesn't last.

There is always a danger that the wealthy will hijack the political processes and rig everything in their favour -- a perennial debate in the more developed economies. But often in lobbying for improved infrastructure and services from government society in general benefits.

It is only people with real tangible interests in society who will move us along. The owners of real wealth should be looked up to and emulated, rather than abhorred and envied, because they hold the key to our development into the future.

The US may not be the economy to look up to in terms of wealth distribution but something can definitely be learnt of how to create an enabling environment for wealth creation.

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