My title is a double entendre. I mean to write about family capital, because that’s what I do for a living. But I also mean to write about Family Capital, because that’s the name of my most recent book.(1) And I mean to write about them at the same time.
This post is really just background, for the 7,299,997,014 people in the world who haven’t (yet) bought the book.
Family Capital (the book, not the concept), is structured in a very unusual way. When I sat down to write it, I’d already written two earlier investment books (Creative Capital in 2004 and The Stewardship of Wealth in 2013). I’d also written nearly 50 white papers on various investment topics and I’d written nearly 100 blog posts focused mostly on investment issues. (I’m up to almost 200 blog posts now.) The idea of simply doing more of the same filled me with horror – and I figured my future audience would have the same reaction.
So I asked myself this question: What’s the best way for family members to learn enough about the investment world to become good stewards of their family’s capital? And I answered it this way: By attending meetings between family members (or members of the family’s investment committee) and the family’s investment advisors. Then the only challenge was to write a book that would replicate as closely as possible the experience of attending those meetings.
Here’s how Family Capital works. I first invented an “iconic” American family(2) that readers could follow down through the generations as family members made good and bad decisions about their capital. This family was founded by Italian immigrant Georgio Titano, who landed in America in the early days of the Industrial Revolution. Wanting to be a real American, Georgio soon changed his name to George Titan. Although Georgio – excuse me, George – was poor and unskilled, he worked hard and he made several extremely good decisions. The best of these was to court and marry a pretty Scots-Irish girl named Ellie McCabe (over her parents’ objection, of course.)
George was also lucky. He had settled near Pittsburgh, Pennsylvania only because he had a cousin there. But Pittsburgh was a terrific place to immigrate to during the Industrial Revolution, because it was the Silicon Valley of the nineteenth century. As I wrote in the book:
Pittsburgh … was then the fastest-growing city in America. Between 1870 and 1910, while the population of the United States was more than doubling, Pittsburgh grew six-fold from about 85,000 to over 530,000.
At the peak of the Industrial Revolution, Pittsburgh was America’s Silicon Valley, boasting vast industries in such diversified fields as steel (Carnegie Steel), coal (Consolidation Coal), glass (Pittsburgh Plate Glass), oil and gas (Gulf Oil), electronics (Westinghouse), aluminum (Alcoa), food (Heinz), and so on. During the late nineteenth century and for most of the twentieth century, Pittsburgh boasted more corporate headquarters than any American city except New York and Chicago.(3)
Over the years, George and Ellie’s bricklaying business morphed into a general contracting business called Titan Industries. Another fortunate event occurred in the next generation, when George Titan Jr. sold the company just before the Great Depression. But that sale launched the Titan family into “a strange world for the Titans, being owners of capital rather than owners of an operating business. After two generations of working hard every day to build Titan Industries,”(4) suddenly everybody had a lot of time on their hands.
Eventually, the Titans recognized that they were now in the “business” of managing liquid capital, and they formed a family office, called “Lawburn” (after Ellie McCabe Titan’s ancestral home in Scotland). As the generations progressed, the DNA – and the discipline and independence of mind – that had helped make George and Ellie so successful was passed on to some of their descendants, especially Jake Titan, their grandson, who founded a famously successful law firm. In those days, lawyers made a lot more money investing with their clients than they did by charging fees, and Jake was no exception – when he died, he’d accumulated nearly as much wealth as his grandparents.
But as is the case in virtually every wealthy family, matters didn’t always go smoothly. When George Titan Jr. died his son, George III, became head of that branch of the Titan family. As we’ll see in the next post, George would soon make a catastrophic mistake.
(2) It’s certainly true that when you’ve met one wealthy family you’ve met one wealthy family. On the other hand, the challenges associated with the control of a substantial sum of liquid capital tend to be similar. I never say in the book precisely how much capital the “iconic” family has, but reading between the lines suggests that the number is in the lower nine digits.
(3) Family Capital, p. xix.
(4) Ibid., p. xix.
Next up: On Family Capital, Part 2
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Please note that this post is intended to provide interested persons with an insight on the capital markets and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.