Entrepreneurs (and some very senior corporate executives) face a unique set of circumstances that can put their families and their personal wealth at more risk than they might have imagined.
Three factors can exacerbate this management risk. First, behavioral psychology tells us that entrepreneurs and corporate CEOs (particularly men) have an independent streak that helped create their success. At the same time, however, they are subject to feeling overly confident that they can manage anything (“If I could manage my business successfully, why shouldn’t I be able to manage the financial wealth?”) But financial wealth is a different animal than an operating business, and it requires a different set of skills. It also requires at least the same level of attention that the business did. It can be learned, but it takes diligence, effort and time to do well and to stay current with new developments.
Respected wealth psychologists Dr. James Grubman and Dr. Dennis Jaffe have an interesting take on the relationships between the first-generation wealth creators and the next generation. In their excellent paper entitled ‘Immigrants and Natives to Wealth’*, they liken becoming wealthy to a move from one country and culture to a new and very different country. The ‘immigrants’ to wealth have left their proverbial ‘home country’ (i.e. a more modest socio-economic status) and through a business or corporate success have moved into the new ‘land of wealth.’ Not surprisingly, they don’t always feel completely comfortable in the new land and still carry with them many of the values of the old culture. Contrast this with their children, who are typically ‘natives’ in this new land of wealth, having been born and grown up in it with little or no knowledge of the old country or its values. You can imagine (or may have experienced) this culture clash, either from the perspective of an immigrant or a native.
Reprint from Ivey Business Journal
[© Reprinted and used by permission of the Ivey Business School]