One of the most important forms of wealth a family can develop is its human capital. Human capital can be seen as the interior resources of individuals within the family and their abilities to be effective in the world. Such things as education, emotional resilience, physical health, self-esteem and other interior states provide a solid base for people to make their way in the world. People who are successful in their chosen field of endeavor and effective in their personal lives would be considered to have high human capital. A family filled with individuals who have high human capital is much more likely to be a well-adjusted and high functioning family. It is also far more likely to be successful across generations and to maximize the value of inherited wealth.
A pattern we often see is that the first generation has created some degree of wealth through the extraordinary application of human capital. The children of these folks are often reasonably capable themselves, but by the third generation we see patterns of entitlement that drain human capital. Such things as substance abuse, divorce, failure to reach educational potential, and other maladaptive behaviors emerge. There is nothing so damaging to maintaining familial wealth as the failure of successive generations to attain their potential.
Conversely families that are successful in raising well-adjusted and competent people, tend to have families that are close and who are engaged in a wide array of commercial, civic, and philanthropic endeavors. These families decrease the “shirtsleeves to shirtsleeves in three generations” phenomenon dramatically
Questions:
- What do you think are the most important factors in creating fostering the human capital in a family?
- How does diversity of human capital help and hurt a family in fostering inter-generational success?