Perspectives from ISB

As per a new report released by Ahmadoff & Co., titled “A new look at old wealth” family businesses will become the focus in emerging markets. The shift in legacy industrial production to cheaper resource rich markets has created a new breed of billionaires. However Asian families have often failed to keep the wealth in the family, even though their purpose vehicle was a family business. In contrast, Latin American and Middle Eastern families were able to remain in the Forbes Billionaires list in subsequent generations.

The study tracked the wealth and lives of individuals in the Forbes Billionaires list of 1996. The research purpose was to define how billionaires’ wealth is sustained, used, and distributed over a 20-year period, both during their lifetime and after their death, both individually and within their families. After twenty years, the study found that billionaires whose wealth came from technology, the financial sector and natural resources were able to sustain their wealth. Meanwhile diversified groups, agriculture, and the food industry were businesses found most conducive to the successful transfer of wealth through the generations. Interestingly, political involvement played an important role in billionaires whose wealth derived from natural resources, followed by those in diversified groups.

Among the social trends, the study found that, family size of billionaires has decreased from generation to generation, leading to a decrease in wealth dilution in future. However, small families suffered from a lack of choice among heritors. Hence although meritocracy is at risk, it signals the concentration of wealth in fewer hands.