Nobody does dynasty better than the British royal family. The recent days of pomp and circumstance have not only been a celebration of a life well lived. They have been a celebration of the power of the family to transcend death and to link the past to the present and thence to the future. Individual monarchs may die. The institution lives on because of the fusion of biological and social inheritance. The Queen is dead. Long live the King!
It is easy, particularly after watching days of soldiers in red jackets and bearskins, marching bands and union flags, to see the Windsors as an expression of the peculiarities of the British. To a man and a woman, social theorists have predicted that modernity would mean the end of the dynastic principle in the face of democracy and meritocracy. And they have been able to point to the demise of great royal dynasties such as the Romanovs and the Habsburgs. Queen Victoria’s funeral resembled a gathering of crowned heads of state, many of them her relations. At Elizabeth II’s funeral, most of the heads of state were commoners.
Yet dynasty remains a surprisingly powerful force. Dynastic families keep popping up in countries that were founded in revolt against the British monarchy: Think of the Kennedys and the Bushes in America and the Gandhis in India. The Philippines is run by a Marcos and Canada by a Trudeau. The “stans” of Central Asia are virtually family fiefs. China is a land of “princelings,” the children of senior Communist Party leaders, starting with Xi Jinping, who is about to become president for life. North Korea is on its third Kim in a row, with a fourth on the launching pad.
The dynastic principle can be found at its strongest in business. It’s not just that small and medium businesses are family affairs. Giant companies in almost every area of business are either owned or controlled by families: car-making (Ford Motor Co. and BMW AG), media (News Corp. and Bertelsmann SE), tech (Samsung Electronics Co. and Hutchison Whampoa Ltd.), fashion (LVMH and Estee Lauder Cos.), pharmaceuticals (Johnson & Johnson and Merck & Co.) and supermarkets (Walmart Inc and Aldi Stores Ltd). A third of S&P 500 companies and 40% of the 250 largest companies in France and Germany can be defined as family companies in the sense that a family owns a significant share of the company and can influence the appointment of the CEO or chairman.
The dynastic principle injects a collection of problems into the heart of business that are all too familiar from the history of royal dynasties, not least that of the Windsors, or indeed TV soap operas about families. The HBO series “Succession” has rightly won two best-drama Emmys for its portrayal of an aging company founder who refuses to hand over power and plays off his children against each other. Anybody who thinks that this portrait is exaggerated should look at the history of family patriarchs.
Henry Ford terrorized his son and grandson, Edsel and Henry Ford II. Arnold Maersk Mc-Kinney Moeller, the boss of AP Moeller-Maersk, retired at 80 but cast a long shadow over the shipping giant until he died in 2012, aged 98. Sir Run Run Shaw, the chairman of Television Broadcasts Limited, waited until he was 104 to announce his retirement—and then handed his position to his 79-year-old wife. Cyrus Mistry (who tragically died on September 4th in a car accident) found it hard to establish his control over the Tata Group because his predecessor, Ratan Tata, kept second-guessing him and was eventually ousted by the board. Albert Darboven, a coffee tycoon, pushed his son, Arthur, out of J.J. Darboven and tried to adopt a friend as his heir and successor.
Sibling rivalry and family feuds can convulse every family. They are even more poisonous when they are linked to great wealth and great responsibilities. Two of the world’s leading shoe companies, Adidas and Puma, were founded by two warring brothers who set up rival factories in their German hometown of Herzogenaurach. Mukesh and Anil Ambani were at each other’s throats for years after their father, Dhirubhai, died without a will. Koch Industries Inc., the Wichita-based oil, gas and commodities giant, was plagued by a feud between Charles, the CEO and David, his right-hand man, and two other brothers, Bill and Fred, who felt that they were marginalized. If the history of mankind is a history of crimes, follies and misfortunes, as Gibbon said, then the history of family companies is a history of slights, resentments and feuds.
Family feuds are even more poisonous when patriarchs have several wives and/or mistresses. Stanley Ho’s gambling empire in Macao has repeatedly been convulsed by fights over inheritance between the children of his four wives. Mohammed bin Awad bin Laden, the founder of the Saudi Binladin Group and father of Osama bin Laden, had 52 children by 11 wives, turning the family business into a genealogical nightmare. “Dynasty” prepared the way for a follow-up by suggesting that the patriarch was preparing to have more children because he didn’t think the ones he already had were up to it.
Given the tangle of emotional problems that family companies can often entail, their survival might seem to be remarkable. Yet they are not only surviving but thiving. I would venture that in the future, family companies will account for an even bigger proportion of the capitalist system than they do today.
Family companies have all sorts of upsides that make up for their downsides. By their very nature they overcome two of the biggest problems of modern capitalism: the “agency problem” and short-termism. Family members keep a vigilant eye on the performance of professional managers. They also habitually take a longer-term view of the good of the company. What do quarterly results matter if you have been in business since 1385 (like the Antinoris) or 1526 (like the Berettas)? In the rich world, family companies excel at curating high-quality products that require a lot of patience. The world’s best newspapers such as the New York Times and the Wall Street Journal are owned by families. In the emerging world, they excel at making bets on new technologies.