IN China, there is a saying that “a family’s wealth stops at the third generation”. There are, of course, some exceptions to this Chinese view of the impermanence of family wealth and power. The House of Medici, the standard-bearer of the Renaissance, lasted for several centuries and the Rothschild family has enjoyed wealth for many generations and continues to prosper. Many large Japanese trading houses are also family firms that are still a dominant force in the country’s economy.

So, why is it said in China that a family’s wealth stops at the third generation? I believe the wisdom, abilities and personalities of the next generation of a family are given to them at birth, and cannot be fashioned according to one’s own desires. After three generations, a family becomes an extremely complex entity, one in which there are disparate characters and everyone has their own preferences and intentions. It becomes very difficult to unify.

Much, however, can be learnt from Japan’s family trading houses. These family firms separate ownership rights and management rights, with companies taken public so that they become autonomous legal entities that are independent from the family. Only the most capable and intelligent family members are allowed to participate in managing these companies, and as this pattern is repeated down the generations, the trading houses achieve long-lasting success.

For a company to thrive from generation to generation, it must be exceptional. In this, the strengths and weaknesses of national enterprises are intimately connected to the rise and fall of a country. A government’s coffers are filled by the taxes paid by the nation’s companies; the more companies there are, and the more profitable they are, the greater a country’s tax revenue. The more wealth in the national treasury, the more a country can provide for its people’s welfare and put basic infrastructure in place.

To put it another way, the government is analogous to a special shareholder in all the companies in the country. It shares in the profits without making any investment, and if there are losses, it accepts no responsibility. As a result, it is the responsibility of business owners to ensure that their companies are viable over the longer term.

How should one handle the relationship between a company and the family so that there is a separation of ownership and management but each is also present in the other? How should one give a company the right level of independence from the family? How should one nurture the next generation of management into one in which there is both a high level of ability and continuity? This is the responsibility of the first generation of business owners.

With regard to the separation of ownership and management rights of family firms, the Japanese and US models are entirely different. If the Japanese trading houses are publicly listed, their management will be promoted from within following a rigorous process of assessment and elimination. As such, there is a strong emphasis on long-term strategic objectives.

Publicly listed companies in the US, meanwhile, are directed by a large body of shareholders who stress returns on their investments. They are simultaneously concerned with the real and the imaginary, and are often short-sighted, seeking profits by any means. This places a tremendous amount of pressure on management, which has to be flexible and ready to make frequent tactical shifts. Such companies are highly competitive and innovative, but they often ignore their long-term interests.

Each of the management models described above has its pros and cons. In each, there are things to be emulated and others to be avoided. My observations tell me that we should adopt the organisational structure of a Japanese trading house, but also incorporate an American approach to talent in which we seek out the best at all times to help drive innovation. This should be the way Lippo Group is run: we should constantly nurture new talent.

Earlier, I mentioned my fascination with a television programme about eagles teaching their young to fly. It was a great inspiration for me. I tried the same approach with James and Stephen, forcing them to fly at an early age. They endured many failures. But from this, they gained experience, and their success today is the product of those failures. I hope that everyone at Lippo will give the next generation the chance to fail while learning to fly. This is the Lippo model.

I have mentioned the responsibilities of a company several times, but have said nothing of how they are connected to a person’s identity. Every person has several identities, and the number of identities increases as you get older.

For example, when I was born, I had only one identity: I was my father’s son. The following year, when my mother gave birth to a daughter, I gained another identity: I was both a son and brother. Before long, I began school, where I gained another identity as a teacher’s student. When I graduated, I became an alumnus of the school. And when I started work, I became the employee of a company and a subordinate of my supervisor.

After getting married another identity was added: I was someone’s husband. Not long after, we had a child and I assumed a new identity as a father. When my son had a child, I became a grandfather, and now I am a grandfather many times over. I am also the chairman of many companies, the head of the board of trustees of many universities and, more importantly, I am a citizen of the Republic of Indonesia.

However, many people overlook the importance of their identity. Even worse, they do not know what responsibilities are a part of their identities.

Identities come with a certain amount of authority, but they also come with responsibilities. As a child, you must do well by your parents; as a parent, you take responsibility for the education of your children and you must make sure they too have the necessary preparation to become good parents. If this is passed on from one generation to the next, a family will prosper. When the whole country is made up of good fathers, good sons, good mothers and good daughters, then the country and its people will thrive.

I turned 87 this year and my hope is that I can set a good example for my grandchildren and say that I contributed to the betterment of Indonesia.

Reproduced with the permission of John Wiley & Sons

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