Under construction
“Wealth will not go beyond three generations” is a quaint admonition repeated often by both the rich and the poor in China. The poor people use it to comfort their bruised egos, telling themselves “what goes up will come down.” All they have to do is to wait for their turns. The rich people repeat it to remind their high living offspring the virtue of a frugal lifestyle. “Rice paddy to rice paddy in three generations” should serve as enough warning to anyone who does not want to return to back-breaking toil in a rice field.
Apparently, this proverb must weigh heavily on the mind of Li Ka-shing, Asia’s richest man and the world’s biggest container port operator. Li is seventy-seven years old with an estimated net worth of $12.4 billion (Spaeth, 2004). As he spoke to a group of MBA students at Chinese Hong Kong University in 2001, he reflected specifically on this topic and felt that this saying required a modern revision. Because of contemporary education and management style, he said, “The super rich should be able to maintain their family fortunes for generations to come” (Yang, 2001).
Is Li Ka-shing able to have his wish fulfilled? Are his two sons, Victor and Richard, 41 and 39 respectively, able to run the giant Cheung Kong Holdings, one of Asia’s biggest property developers, and Hutchison Whampoa, Inc., a retailing, telecom and transportation conglomerate that owns container ports in Europe, the Middle-East and the Americas, including those at each end of the Panama Canal?
Of the two brothers, Richard seems to have the entrepreneurial flair of his father. He struck out on his own when he was only 23. He now lives in a multimillion-dollar townhouse near Victoria Peak, owns two 60-foot yachts and keeps the hyperactive Hong Kong tabloids busy with his amorous liaisons. He also founded in 1990 the satellite broadcaster Star TV and sold it later to Rupert Murdoch’s News Corp. for a tidy $725 million profit. But in 2000, envisioning establishing the world’s largest broadband Internet business, Richard bought Hong Kong’s dominant phone company for $28 billion. Its stock toppled 97% from its peak with the bursting of the world-wide tech bubble that followed almost immediately after the purchase. Richard was also embarrassed in 2001 when he was forced to admit that he never graduated from Stanford, as claimed in his company’s press release. His older brother, Victor, however, is a Stanford-trained engineer and has been working under their father as deputy chairman of Cheung Kong Holdings (Spaeth, 2004).
Generational Pattern
Hughes (2004) in his book describes a generational pattern for families with great wealth. Though starting off poor and uneducated, the first generation is able to establish and accumulate great wealth through unique insights and entrepreneurial savvy. The second generation attends university, lives with the superrich in an exclusive enclave, drives fancy cars, owns expensive yachts and enters high society with a vengeance. The second generation does not have the frugal lifestyle of the fathers; the sons also seem to have a psychological need to outdo the fathers in business. As will be seen in the following cases, the second generation is driven to expand the family business, entering unfamiliar territories and taking great risk. Even with great resources and formal education, very few second generation children are able to increase the family fortunes or to improve the family business.
The third generation family members grow up in luxury, have no work experience in general and acquire no interest in the family business in particular. They also have poor role models in the spending of money and tend to compete with the siblings and others to spend what seems to them as easy money. More often than not, the third generation family is no longer involved in the business that brought them the means for high living. The business has either been bankrupted during their life times or been taken over by competitors.
The Case of a Chicago Icon
For more than 150 years, Marshall Field’s Department Store has been the most visible living Chicago icon. When its new parent company, Federated Department Stores, announced at the end of 2005 that it will change its name to Macy’s in 2006, it was like losing a family member for many Chicagoans. There is something about Marshall Field’s, dating back to 1852, that seems to provide a sense of continuity and history to the people of Chicago. Especially in this postmodern era that lacks both continuity and history in our personal and collective life, Marshall Field’s has represented a personalized stability and social connection in this impersonal urban center. There is something very personal about a place that has been there for a long time. The green shopping bags, the Great Clock on the street corner, the Christmas holiday windows, and even the Frango mints all represent something far more than just a department store. Marshall Field’s almost represents a grandfather who pulls individual Chicagoans together, making separate Chicagoans feel connected to one another.
But long before the name change that will take place in 2006, Marshall Field’s has not been a family business. The present Field family members, separate and warring, are still among the richest in Chicago. But they are no longer associated with the institution that created the wealth they now enjoy. Indeed, when thousands mourn the name change in the newly established website (savemarshallfields.com), Marshall Field V said, “I don’t have any feeling about the change one way or another. The family has not been involved with the store for such a long time.”
What are the factors that are responsible for establishing the generational pattern described by Hughes (2004)? Hughes is interested in helping families keep their wealth through legal and financial management and tax restructuring but gives no answers to the questions of the causes of the generational pattern. According to an unauthorized biography (Madsen, 2002), it was not the taxes or mismanagement that eroded family fortunes but multiple marriages. The history of the Marshall Field clan certainly mirrors this pattern.
Marshall Field (1835-1906) whose son, Marshall Field II (1868-1905) might have died of a gun shot wound caused by a chorus girl, wrote a 22,000-word will to protect the family fortunes. The will specified that the family money would go to two underage grandsons when they turned 50. According to Madsen (2002), of the six generations of Marshall Fields, only Marshall Field II and VI had one wife each. Marshall Field III and IV each had three. Marshall Field V was married twice and his half-brother, Ted, was thrice married. The significant part of the family history for this paper is that the original Marshall Field himself was married three times. The family fortunes practically ended as a single entity in 1982 when Ted Field, a former race car driver and now a Hollywood movie producer, demanded his share in Field Enterprises. The department store was hastily sold to BAT Industries of London that year and the daily Chicago Sun Times, founded by Marshall Field III in 1941, was also sold to the international media tycoon Rupert Murdoch in 1983.
In a much smaller scale, forty miles from Chicago and around the same time in 2005 in Elgin, a city of 90,000 people, one of its oldest businesses was also sold to an English company. Seigle’s Inc. is one of the largest manufacturers and distributors of building materials in the Chicago area. It was founded as Elgin Lumber Co. in 1881 and bought in 1942 by Harry Seigle, the father of the brothers who sold it. It was considered a good business decision in selling this family business. The present Seigle family will stay wealthy for a long time. But it will no longer be a part of a local icon that has created the wealth for the family (Sullivan, 2005).
In both of these cases, the Chinese proverb, “Wealth does not go beyond three generations,” seems to apply because wealth within this context means much more than just money. Wealth in this proverb suggests family traditions, social prominence, respected names and public recognition. This proverb has much broader meaning than the common sayings describing the rags-to-riches-to-rags cycle such as “shirtsleeves to shirtsleeves in three generations.” (Hughes, 2004).
There is something very unique about the first generation that establishes the family wealth. Although the succeeding generations could be kept in relative material comfort, the social prominence and contributions that the first generation is able to make seems to disappear. Many well-known examples include Andrew Carnegie (1835-1919), Eleuthere I. du Pont (1771-1834), Jean Paul Getty (1892-1976), John Pierpont Morgan (1837-1913), Cornelius Vanderbilt (1794-1877), Charles R. Walgreen (1873-1939) and many other builders of great family wealth who were also prominent in philanthropies in the United States. In the present-day Europe, Rothschilds’ wineries, mansions and art collections seem to be better known than the financial institutions established by and the philanthropies performed by the patriarch Mayer Amschel Rothschild (1743-1812).
It seems that very few of the great business establishments founded by the icons of American industrial age are still kept within the family.
The twenty-first century has been variously identified as the “Pacific Century.” Indeed, the Inc. Magazine in March, 2005, flatly states that China will change America’s way of doing business, a sort of paradigm shift in process ( Fishman, 2005, March). Newsweek, in a special report in 2005, went so far as to call this “China’s Century” on its cover (Zakaria, May 8, 2005). After centuries of closed door policy of the Qing dynasty, followed by decades of western imperial colonialism, Japanese invasion during World War II, civil war between Nationalists and Communists, the economic mismanagement and the lost years of the Cultural Revolution under the Maoists, it is indeed a miracle of gigantic proportion to witness what China has been able to achieve economically in the last twenty years. Because of the absolute dismantlement of private ownership of property and business under the Communist rule, no private enterprise in China before the 1979 economic reform existed. As a result, many first generation business tycoons started with literally no money and were able to accumulate millions in a very short time. For example, Zhou Zeng-yee was born in Shanghai to a very poor family. But within a few years between 1979 and 2002, through gutsy business “wheeling and dealing,” he became a multibillionaire and was listed as number eleven in Forbes’ List of the richest persons in China (O’Yang, 2004).
However, due to the relatively recent economic developments, the first generation businessmen in China are the only ones to study. In Hong Kong, however, there are many established wealth to study. In this paper, three prominent Chinese families of great wealth in Hong Kong will be examined in light of the personality characteristics of the founding first generation and the succeeding generations. The purpose is to see if a component of this Chinese proverb consisting of family breakup impacts the deterioration of the financial and philanthropic patterns of the family wealth.
The Lam Family
Lam Por-yen was a multibillionaire who made his fortunes in manufacturing “Crocodile” brand shirts in the 1950’s and built his enormous wealth through real estates development, property management, entertainment business and hotel ownership. He had three wives and eight children. (It was legal to have concubines when Hong Kong was a British colony. The British government recognized certain local “customs” under its colonial practices. This practice of having concubines was made illegal in 1997 when Hong Kong was “returned” to China. But those who had concubines before 1997 were able to keep them through a grandfather clause.)
Lam Por-yen favored his second wife, U Po-chu, and her son, Lam Kin-ngok who happens to be a playboy who loves starlets, drives a silver Ferrari 300 Spider F1 that costs $287,500.00, smokes expensive cigars ($625.00 each) and likes to eat exotic food such as rare mushrooms ($2,500.00 a pound). He also fancies himself as a businessman like his successful father. To do that, he foolishly paid $862 million top price to buy the Hotel Furama but had to sell it at $231 million four years later. This and several other failed transactions eventually placed his father’s vast business empire at risk (The Next Weekly, 2002, November).
Lam Kin-ngok is 48 years old. His half brother, Lam Kin-ming, is 20 years older born of their father’s first wife. With his mother, Lam Kin-ming moved out of the family compound in his teens. The father, obviously influenced by the second wife, had never visited the first family although he supported them generously throughout the years. Lam Kin-ming mentioned in an interview that he was very hurt when his father did not even come to his sixtieth birthday dinner. He does not work regularly but spends his time partying, sailing in his 82-foot yacht (his fifth), watching his horses race and collecting swords and pictorials of beautiful Japanese models. He was divorced twice. He had not seen the two former wives at all since divorce but is very close to his four children. One time a reporter asked the sixteen-year daughter about her father’s girlfriends; the daughter responded by saying “Which one since he has so many different ones” (Huang, 1999).
Although he is 20 years older than his brother, his lifestyle is closer to the third generation than his younger brother, according to Hughes’ typology (Hughes, 2004). His younger brother is still trying to outshine their father in business, but he just enjoys spending the father’s money.
Lam Por-yen’s third wife was working in a dance hall when they met. Together they have a forty-four-year old daughter and a thirty-eight-year old son. But the third family has not been living in the family compound for many years. The daughter is a fun-loving, free-spending single woman who was the father’s favorite and who put the father $237 million in debt for over spending in constructing an investment condo building in Shanghai. When her father mentioned the loss in an interview on TV, the daughter sued the father for defamation and refused to talk to him since. The son from this third wife is rather low key compared to his sibling and half siblings. He was involved in trading stocks for their father but somehow was forced by some banks to seek bankruptcy.
The Lams are rich and famous in Hong Kong. They provide a lot of materials for the tabloids. Various factions within the family seemed to be in perfect balance or synergy until the father died at age 96 on February 18, 2005. The second wife was able to enlist the support of the first wife in an attempt to exclude the third family from the funeral. But the third wife, no shrinking violet herself, published a death notice on all Hong Kong newspapers excluding the two families and made a show of force at the funeral staged by the first two families. The third family was dressed in black while the other two families dressed in white. They held separate press conferences and talked about law suits against each other. Father Lam had prepared a burial site for himself in his hometown Shantou, three hundred miles up the coast in China. It was an auspicious site with great “feng shui.” But when the second wife found out the “feng shui” would bring great prosperity to the third son in Lam’s family and the third son happened to be the son from the third wife, the burial was postponed. Now the father’s body was placed in a temporary site in Hong Kong waiting for a different site or a change of “feng shui” in Shantou (Huang, 2005).
Will the Lams be able to turn their family fortune around with better feng shui?
The Tse Family
The Tse Sui Luen Jewellery Company, Ltd., in Hong Kong is the largest and most prosperous jeweler in a culture that is infatuated with silver, gold and precious stones. The founder, Tse Sui Luen, grew up in poverty. His education stopped at second grade in order to help his father collect junk on the street. He finished his apprenticeship in a jewelry factory at age 20 and started his own factory on borrowed funds in 1960. By 1987 when he placed the company in IPO, his personal net worth was over $250 million. He had four children, three from his wife and one daughter from his concubine. In addition, he also had an intimate friend who was not officially a concubine.
Tse Sui Luen is now 70 years old. His 38-year old younger son, Tommy, is a devoted Roman Catholic who for years has been unhappy with his father’s neglect of his mother and his father’s other women, especially the third woman who is younger than Tommy himself. So in 2000, when Tommy had the opportunity to take over the empire, he was able to restructure it in such a way to exclude his father from the board (Huang, 2005, May 1). It was a messy family affair even without the recent news report that both father and son were being investigated by the Hong Kong government for seven counts of financial irregularities, price fixing and unfair business practices. It is doubtful that the wealth of this family will go beyond the second generation. What is the effect of the father having concubines on the family? This case is one of the few where a son went public about his displeasure over a father’s multi-wife lifestyle.
The Tseng Family
When Tseng Ji-wah died in 1997, his personal net worth was over $1,025 million counting only his ownership in the two holding companies alone. He had five children from his wife and two sons from his concubine. He left a relatively small portion of his wealth to his wife and her five children. To the two sons from his concubine, he gave each the complete control over one of the two holding companies. These companies owned prime properties in major cities in China, toll roads in the provinces, ski resorts and container ports. The two sons went into competition against each other by buying and selling properties, playing stock markets, grasping headlines in tabloids through their night life with females other than their spouses. By July, 2001, the capitalization of the two companies was reduced to a mere $33 million through wrong-headed expansions and mismanagement (Lau, 2001).
On the other hand, the five children from Tseng’s wife are a conservative lot who have been taking care of the relatively minor family businesses in the coastal cities and make them profitable. One son continues to run the paper factory in Hong Kong which is the first business established by the father and has been kept in the family for sentimental reasons. A daughter is a dentist by profession. They know they are not their father’s favorites. They basically keep to themselves and have had no interaction with the two half brothers from their father’s concubine.
A concluding thought
This initial reading of several families of great wealth and the great fame achieved by the first generation reveals the relative decline of their wealth and fame in the second and third generations. The Chinese saying, “Wealth does not go beyond three generations,” may be based on centuries of observations. The danger of finding what one is looking for through selective attention is always a concern. But these cases may be offered as initial evidence: that lifestyle of having multiple wives of the first generation patriarchs may have sown the seed of decline and deterioration of the empires they have so skillfully built.
The Christian Bible has a warning issued to people in leadership position. He “must not take many wives or his heart will be led astray (Deuteronomy 17:17). This warning is especially significant in light of the fact that it was given at a time and in a culture when having multiple wives was the norm for the rich and powerful. The story of King David, the founding king of the Kingdom of Israel, is certainly instructive. When King David acquired Bathsheba, he already had seven wives and nineteen children. This famous affair brought immediate disasters to the king’s household (Second Samuel 11-13). His son, King Solomon, expanded greatly the family business through building programs and conquests. King Solomon also acquired “seven hundred wives of royal birth and three hundred concubines” (First Kings 11:3). The result was that the unified kingdom was divided by the third generation (First Kings 12).
To identify the direct effects of father’s multiple wives (or multiple divorces in contemporary American culture) would require in depth studies with better design and control. However, recently one of the most publicized descriptive studies on the long term effects of divorce on children revealed many psychological problems, such as low motivation and difficulties in relationships (Wallerstein, Lewis, and Blakeslee, 2000). In some ways, the cases in this paper certainly reflect similar problems.
References
Fishman, T.C. (2005, March). How China will change your business. Inc., pp. 70-84.
Huang, Li-ching (1999, January 13). Lam Kin-wing’s fate. Next Weekly Hong Kong, pp. 92-96.
Huang, Li-yen (2005, March 13). Siblings feud in Lam’s family. EastWeek Hong Kong, pp. 106-109.
Huang, Li-yen (2005, May 1). The father and son feud in the Jewellery Kingdom. EastWeek Hong Kong, pp. 76-82.
Hughes, James E. (2004). Family wealth—keeping it in the family: How family members and their advisers preserve human, intellectual, and financial assets for generations. New York: Bloomberg Press.
Madsen, Axel (2002). The Marshall Field’s: The evolution of an American business dynasty. New York: Wiley.
O’Yang, I-fei (2004). The number one rich man in Shanghai. Murun Us, Xingjiang: Xingjiang People’s Press.
Spaeth, Anthony (2004, May). The families who own Asia. Time (Bonus Section). Pp. A 11-20.
Sullivan, Mike (2005, February 22). Nationwide chain buys Seigle’s building supply. The (Elgin) Courier News. Pp. B 1-2.
The Next Weekly (2002, November 14). Lam Kin-ngok is close to bankruptcy. The Next Weekly Hong Kong, pp. 46-56.
Wallerstein, Judith; Lewis, Julia; & Balkeslee, Sandra (2000). The unexpected legacy of divorce: A 25-year landmark study. New York: Hyperion.
Yang, Huai-kang (2001, February 22). The rich and their children. The Next Weekly Hong Kong. Pp.134-135.
Zakaria, Fareed (2005, May 8). Does the future belong to China? Newsweek, pp. 26-47.
Off-Print: National Social Science Perspectives Journal, 2006, 32(2), pp. 60-67.
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