Aspen current thinking column


Spring 2013

July Current Thinking Column

Friday, July 31, 2015

Family Businesses and Cultural Evolution

by Joe Paul

The Engles’ family business enjoyed great success throughout its career in the marketplace. As they neared retirement, Charles and Virginia, parents and founders of Engles Imports, turned their attention to philanthropy. However, a unifying concept failed to govern their generosity, and their money mostly went to charitable requests. The Engles’ will stipulated that their four children could spearhead the family’s philanthropy, requiring the siblings to meet and discuss the charitable giving.

Upon gathering, the children struggled to determine not only a process to evaluate gifting, but also a specific field to channel their philanthropy. The youngest sibling, Jane, had an epiphany.  In going through the history of their parents' gifting, she began to see a pattern. More and more, her parents donated to two areas: medicine and design. The first because of their own aging, and the latter because Virginia never fulfilled her desire to pursue interior design. In a blinding flash, Jane realized they could offer scholarships to graduate students who developed innovative design solutions to medical challenges. 

Although the grant has only existed for 5 years, the competition is high. The grant has already funded the development of orthopedic implants and a new kind of apparatus for patients with sleep apnea. The four siblings managed to honor the desires of their parents’ philanthropy, yet still adapt to the demands of the social and cultural ecology.

"Cultural evolution is the idea that human cultural change––that is, changes in socially transmitted beliefs, knowledge, customs, skills, attitudes, languages, and so on––can be described as a Darwinian evolutionary process that is similar in key respects (but not identical) to biological/genetic evolution. More specifically, just as Darwin described biological/genetic evolution as comprising three key components––variation, competition (or selection), and inheritance––cultural change also comprises these same phenomena." –Dr. Alex Mesoudi, Cultural Evolution

The processes of succession and inheritance are replete with beliefs, knowledge, customs, etc., that organize this transfer and perpetuation of the tangible and intangible assets among the family business stakeholders.  Thus, when an elder begins to contemplate their estate plan, or an advisor begins to create such a plan for their client, they are acting (usually unconsciously) as an agent of cultural evolution.  In the estate planning process, western or civil rules allow that we can give an inheritance to anyone that we wish, be it a family member, an outsider, or even a pet. The civil law recognizes such desires and upholds these wishes despite depriving the natural heirs of, often, millions of dollars. It can be considered an injustice to the heirs, but they are helpless. Even when challenging the legitimacy of such wills, the civil courts tend to recognize and uphold these wills to be valid. In contrast, Sharia law, derived from the Quran, stipulates in great detail whom can inherit what. Here is a sample of Islamic estate planning taken from the Quran:

"Allah enjoins you concerning your children: the male shall have the equal of the portion of two females; if there are more than two females, they shall have two-thirds of what he has left, and if there is one, she shall have the half; and as for his parents, each of them shall have the sixth of what he has left if he has a child: but if he has no child and only his two parents inherit from him, then his mother shall have the third; but if he has brothers, his mother shall have the sixth after the payment of any bequest he may have bequeathed or a debt. You know not whether your parents or your children are nearest to you in benefit. These are settled portions ordained by Allah and Allah is All-Knowing, All-Wise” (4:11)

In contrast to western civil law, Sharia treats individual rights and women's rights as unnecessary threats to the collective. It is based on divine injunctions rather than legislation. Thus, Islamic rules of inheritance do not allow any variation from the very specific, pre-determined rules about whom gets what from the estate of the deceased. 

Western and Sharia legal systems have evolved over centuries. New concepts challenged old ones as both legal systems adapted to many variables.  We can see from the contrast of two cultures' rules of inheritance that the survival of new ideas depend on their fit in a given culture. Not so long ago Western cultures persecuted women and allowed slavery. While both legal systems have been changed by new liberal ideas, the pace of assimilation has differed.

When we delineate an estate plan, we are weaving the beliefs, knowledge, customs, skills, attitudes, languages, wisdom, etc. into an evolutionary package that will either sink or swim in the surrounding social ecology, which includes family dynamics. In this process, each estate plan becomes an experiment that may or may not give the family an evolutionary advantage. Family patterns of behavior and a business system’s accountability are also factors that may give a family/business advantages in the world. The fact that one decade's competitive advantage is the next decade's liability speaks to the evolutionary importance of the ability to change the allocation of assets in anticipation of fluctuations in the marketplace.  Families that are still wealthy benefactors into the 5th generation usually have the ability to change, yet remain the same. Or, as Victor Hugo said, "Change your leaves but keep your roots intact."

We live different lives when we know what those roots are.



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