Mate Selection and Family Business Success

Kenneth Kaye, Ph.D. (reprint of an invited article in Family Business Review, 1999)

Abstract. An index of a family's success is the caliber of talent it manages to attract and retain through marriage. This fundamental fact in sociology, anthropology, and history has received little attention in the family business field. Parents in Western societies have two windows of opportunity to enhance long-term family success through marriage: first, before their children reach puberty; and later, after they choose spouses for themselves.

Case 1. A son of an entrepreneurial family, who had low self esteem and only two years of college, married someone he had known since their childhood religious camp. They cared for and respected each other; it seemed a marriage likely to last. His parents, whose litmus test was religious denomination, were pleased.

Case 2. A daughter of an extremely dominant entrepreneur found a husband who did her thinking for her, as her father had. He accepted a job with the family business, and immediately became inordinately interested in salary, perquisites, and what he called "our" expected inheritance. Her parents were disappointed, wondering why their daughter had made such a poor choice and saddled their business with an ungrateful dependent.

Case 3. A son married a woman whose master's degree in accounting outshone the educational level of everyone in his family. Far from being threatened by her, they were delighted.

Case 4. A daughter with no interest in her family business went to graduate school in an esoteric field, which her parents considered a dead end. She married and moved with her husband to the opposite end of the country, where their academic jobs eventually brought them a secure though limited income, great benefits including subsidized private education for their children, and long vacations. Her father kept hinting that his son-in-law could "make real money" whenever they were ready to move back to Indiana.

This article discusses a frequent, long-standing source of conflict between the generations in wealthy families. In fact, it arises in most middle-class families as well, whether or not they own a business; and it is a universal theme in world literature: Who is a suitable mate for one's child? And who gets to decide that? If it's a society where parents arrange marriages, how can they prevent rebellion like that of Shakespeare's Juliet? In a world where parents are barely consulted, how can they influence their children's matrimonial choices, and how can children marry for both love and their parents' approval?

My thesis is that the two generations share a goal, which is rarely made explicit, to build the family's human and intellectual capital. There are consistent mistakes that lead families into conflict over mate selection; but on the other hand, consistent principles characterize families like number (3), in which both generations feel successful. I think we can define family success in mate selection; and I shall propose that even in our individualistic, anti-authoritarian society, parents have considerable influence upon it.

Preserving or dissipating wealth

In a recent speech to stewards of large family fortunes, the CEO of a 5th-generation firm with more than 40 shareholders and beneficiaries referred to "The Four Evils." Enemies of all who would pass wealth to descendants, he said, are Inflation, Taxation, Consumption, and Overprocreation. (He assumed that preserving family wealth is desirable.) His audience well knew how those four inexorable factors mathematically erode and dissipate financial capital.

Those four "evils" are only part of the story, as financial capital is only part of it. With the best financial planning in the world, a family's human and intellectual capital can wither, frustrating its progenitors' dreams. And by that I mean all the progenitors. Individuals who inherit financial wealth typically trace it back to the success of one couple, encouraging the conceit that the family's identity and heritage derive only from those "founders". Hence the genealogical inverted tree structure. But intellectual and human capital flow from all four grandparents, all eight great-grandparents, etc. For someone to fancy herself "a Rockefeller" (for example) gives undue status to a small fraction of her ancestry—based on money, not necessarily brains or character.

Of course, the "founders" who started with little or no financial capital were using their human resources to create wealth. As the U.S. has proved in the last 50 years, economic growth in a free market society enriches entrepreneurs far more than it does the already wealthy. That fact alone speaks to the significance of human and intellectual capital.

The rich get richer, for about one generation. After that, it is the smart, the hard-working, and the dedicated who get richer at the expense of families who are complacent. Therefore, although parents throughout history have worried about who enters the family through marriage, it is especially significant in a class-permeable society. Mate selection is a fifth "evil" for financially successful families to worry about—but it can also present opportunity for securing a family's advantages.

Family business success equals increase in children's advantage

Entrepreneurs and investors often measure success and failure in terms of net worth: How much have we increased it? Are we continuing to move up the scale from "shirtsleeves" to tailored suits, from rice paddy to palace (Hughes, 1997), or are we regressing back to the middle class—or worse? (As the CEO speaker suggested, fecundity puts enormous pressures on wealth-building requirements just to stay level, let alone move up the scale.)

A measure of parents' success is the extent to which they create opportunities for their children, enabling the next generation to start their adult lives with an advantage over other young adults in the same society. More precisely, the measure of how well parents have done is how much they have increased their children's competitive advantages, relative to wherever they themselves started two or three decades earlier.

Successful parents may provide opportunities in the form of a healthy business, a professional degree, investment capital, a strong network of personal connections, or what the child carries inside: mental health, sound principles, and positive self-esteem. Most of us try to give our children as many of those competitive advantages as we can (and parents in many cultures actively arrange or restrict marriages in hopes of securing family advancement or at least preventing a backslide down the slippery socioeconomic slope). We do that because the drive to create advantages for offspring is a biological instinct.

Quantitatively, parental success can be defined as the value added to next-generation opportunity. Such a definition would embrace those who don't enter the business as well as those who do. It refers to the average opportunity per child across the whole family; both genders; brilliant children as well as dull ones, regardless of their proclivities and gifts.

Family success has nothing to do with retaining ownership of a business. In fact, entrepreneurially created opportunities take many different forms, most of which are better accessed with cash (for postgraduate tuition, travel, investment, politics, philanthropy, financial independence, etc.) than with the inside track to a job in a parent's company.

The value added to all siblings' head starts in life by their parents' enterprise is a nice theoretical quantification of success, but hard to measure in practice. Mate selection, though only a component of the value-adding or -detracting process, has for centuries served as a rough practical index of family success. Probably this is because people have seen that the ability to help children "marry well" distinguishes families who continue to create opportunities from those who ultimately don't.

Open systems

The connection between family business success and marriage is an essential feature of family systems theory.

The laws of thermodynamics hold—and they hold quite well—that all systems, from atoms to stars, eventually lose energy and disintegrate. (This is called entropy). Plants and animals die, decay, and their amino acid molecules break down into elemental atoms. Even inorganic structures like mountains and pyramids eventually crumble. The works of man and the works of nature, while they live, don't disprove the laws of thermodynamics but they do manage to postpone that inevitable dissipation, sometimes for a very long time. Groves of aspen in the Rocky Mountains are single organisms (each "tree" is only a shoot), which are believed to be as old as 10,000 years. Coral reefs are adaptive structures that defy the erosive action of waves for hundreds of thousands of years.

Entropy is the inevitable breakdown of structure. Nothing defeats entropy, but living systems are remarkably good at resisting it for periods of time ranging from minutes to aeons. Because they maintain their structure, complexity, and energy by interacting with their environments, organisms, families, and organizations are called open systems. The earth's atmosphere has been in equilibrium, resisting entropy and maintaining a 21 per cent oxygen content for the benefit of life as we know it, for more than three billion of the planet's four and a half billion years (Lovelock, 1979). Gaia has achieved that world record by exchanging elements through chemical reactions with the sea, with terrestrial organisms, rocks, and outer space.

Some ecosystems have life spans of millions of years. Individual organisms have life spans ranging from thousands of years to only a few minutes, yet all are achieved by self-regulatory exchange processes that are equally remarkable in defying entropy. All open systems use self-regulatory processes to speed up or slow down, grow larger or downsize, increase or decrease their materials purchasing, stockpile or use up inventories, eliminate more or less waste, ship more or less of their products, all in the service of maintaining the necessary equilibrium for long-term survival of their genes (Dawkins, 1989). If the open system we are talking about is a closely held business, it does those things for long-term survival of the family's identity, values, heritage—the social equivalent of its genes—as well as for the owners' actual genes.

Consider the defining characteristics of open systems:

they import energy (find and exploit external resources)

they eliminate waste products

they create information (organization, as opposed to randomness)

they perpetuate themselves

if they can, they grow; but if growth endangers their perpetuation, they "downsize"

if they become closed systems (shut off from external resources or from ways of shedding material they cannot use), they die

In short, the key to all open systems is finding, exploiting, and organizing external resources. That is why a system like a family-owned business, one of whose goals is to increase the opportunity advantages of its owners' children, must reach out beyond its boundaries for educational and technological resources to put at the service of the family members. For example, their business must employ the most talented non-family members they can recruit. Otherwise, it is a closed—doomed—system.

Exogamous tribes

That point about non-family executives has often been said before. But there are two ways a family manages to attract outside talent: (a) through the recruitment of non-family executives to run its enterprises, and (b) through marriage. If (a) and (b) are accomplished together, either because someone enters the family through marriage who turns out to be a valuable business recruit or because a great executive turns up in the business and later marries into the family, so much the better. But essentially there are two kinds of search, executive and marital. The latter consumes enormous personal attention, for good reason—and it deserves more of our professional attention as well.

In marriage choices as in executive recruitment, success requires what anthropologists call exogamy (Greek roots meaning out-marrying): reaching beyond the tribe for new genetic, cultural, or technological resources. In business terms, exogamy simply means filling a position through an outside search, acquiring intellectual, social, and managerial assets for the family through marriage—not settling for the boy or girl next door. The marriages children make can produce enormous gains for a business family, not only in financial capital but emotional and intellectual capital: in education, experience, and technological resources. Or they can drag the family backward. They can be a means of recruiting great business managers into a family, or a harbinger of business suicide. But they are important even when neither spouse works in the business, because every marriage choice has profound implications for the gene pool and for the psychological health of the following generation.

Of course, openness to new kinds of people isn't the first instinct of a parent or of a business owner. Their first instinct is to look within their own social group. Openness is risky. Just as recruiting talented managers, or a CEO, or board members requires a thoughtful balance between the need for "new blood" and the importance of a good fit with elements of the corporate culture that are working well, similarly the search for a mate involves balancing novelty with comfort. Spouses should share a language, fundamental values, and a set of expectations about roles and mutual reliance. But they also need to surprise, delight, and challenge each other.

For parents, there is an issue of trust every time children marry outside the tribe. We trust others in proportion to how well we think we know them. When a potential son- or daughter-in-law's background is very different from one's own, trust may take a little longer to establish. It is human to be more comfortable, initially, with someone who has all the right credentials on paper: plays golf or tennis, belongs to the right church or synagogue, attended the right schools, and has the right season tickets. However, such trust can be misplaced. Someone with the right credentials can turn out to be a wastrel or a scoundrel, or simply an airhead.

Should matchmaking be a new family business consulting specialty?

When I work with a family whose younger generation has already married, I often feel that those decisions and actions already taken will have greater effect on their fortunes than anything I can help them with. How the next generation of parents raise their children is more significant for their long-term chances of preserving family wealth than what they do in their business.

With young adults who are still single, the kind of people they are likely to marry was probably determined years ago. Their range of marriage opportunities, as well as the choices they will make within that range, were shaped in childhood and adolescence.

Although I don't plan to add a matchmaking page to my website, I do sometimes offer a word of counsel on this subject to the older or younger generations:

Advice to parents:

The lesson from happy families—and it is consistent with everything we know about developmental psychology—is that our only chance to influence their choice of mate successfully is by preparing children early to make good choices when the time comes. Recognizing that our children are going to choose for themselves (for better or worse), we need to begin doing the things listed in Table 1 when our children are young. If the list falls into three pairs of do's and don'ts, it is because the parental art is a balancing act.

Your own marriage is the best model your children will have as they envision what it would be like to marry a particular individual. No marriage is perfect, so be sure they know what the strengths of your marriage are, or were. (They probably have a fine sense of its weak points.)

Table 1. How to maximize descendants' competitive advantages: advice to parents of young children and adolescents

Raise their sights Develop each child's fullest potential in the fields of his or her strength, even if those have nothing to do with the family business. The more accomplished they are, the more talented, accomplished, and healthy will be the people they attract as mates;

yet build self-esteem that is independent of prizes and external accolades. (Individuals who feel intrinsically good about themselves will be attractive to, and attracted to, more talented people as mates.)

Prime the pump Create economic opportunities, through the business or through prudent wealth management, and make children aware that doors will thereby open for them;

on the other hand, beware of creating false entitlement, the attitude that "worth" is the same as "net worth," or that money buys happiness.

Remove blinders Encourage the choice of a mate based on diverse qualities, rather than narrow prejudice;

on the other hand, frankly discourage "marrying down." While it is stupid to label a marriage prospect unworthy because he or she comes from a family with no money, or with a different hue, other criteria are meaningful. If one's teenager is dating a boy or girl who seems less than bright, lazy, irresponsible, or mistreats him or her, it would be a disservice to withhold that observation. One should express one's concern. (Above all, children must be taught not to marry anyone under the delusion that they'll change.)

Unfortunately, most parents wait until their son or daughter has fallen in love with someone, and then they either breathe a sigh of relief or try to pose objections: She is not Jewish, or he is not Catholic, or not Italian, or not from "a good family." That is a sure formula for family conflict. If they break up, your child may blame you. If they marry anyway, your new in-law comes into the family as an opponent. Therefore, by early adulthood or even adolescence, the more directly you attempt to influence a child's marriage choices, the more spectacularly you will fail. The best practice is to accept the fact that there is no way to interfere with a child's poor marriage choice without making the situation worse.

After accepting a new family member, there are many things you can do to bring out the best in that person. The chief point, indicated throughout Table 2, is to concentrate on strengths. How can family resources be used to enhance the gifts he or she brings, from experience as well as from nature? What can you do to support the young couple's sense of full responsibility for the family's future? And if you do have serious reservations about the individual—for example, stupidity, laziness, addiction, or irresponsibility—all you can do is avoid feeding the problem: don't protect the in-law from accountability. But any active judgmental position is unlikely to help and very likely to undermine your own goals.

Table 2. How to maximize descendants' competitive advantages: advice to parents-in-law

Work with the strengths What positive traits (education, intelligence, moral character, creativity, artistic talent, energy, social network, etc.) does your new daughter- or son-in-law offer the family?

Which family resources can be used, without making him or her uncomfortable, to leverage those strengths as much as possible? (e.g, tuition to pursue more education; or a responsibility in the family or the business that can provide a showcase, training, exposure to broader horizons, etc.)

Don't fuel a problem If we have reservations about the habits and expectations this individual came to us with, is there anything we should stop doing, that has been maintaining or exacerbating those counter-cultural norms or destructive behaviors?

Not "How can we (or our son/daughter) fix the problem?"—because that usually makes it worse.

Full membership Are we treating this individual as a full-fledged family member? This does not mean equal salary, or even equal inheritance, necessarily; it does mean equal opportunity to use family resources in ways that build human, intellectual, and financial capital for future generations.

You don't have to employ him or her. The temptation and external pressure to do so may be greater, the less productively employable the individual is; but the long-term consequences of yielding to that temptation warrant careful thought, case by case.

Finally, prenuptial agreements are infinitely less effective than having trained your child to choose a mate wisely. At best, a prenuptial contract protects financial capital. It takes great sensitivity to do the latter without damaging the human capital.

Advice to young people:

Before committing yourself to marriage—if you intend to produce children—ask whether this is the person you would want raising them if you were to die before they were grown.

Don't marry anyone to spite your parents, or just because he or she contrasts with them. With all their faults, don't your parents possess some qualities that you would need in a spouse?

Most importantly, understand the valid reasons for their concern about who you bring into the family. Even if you discount their opinions about your happiness and well-being, consider their thinking about the three kinds of family wealth. Their criteria may be crazy, and their methods repulsive, and their timing ten or twenty years too late—but they are correct in thinking that this decision has enormous ramifications for the continued building (or rapid squandering) of everything they have worked for.

Advice to consultants:

The examples in the opening section of this article come from the author's own practice. The first young man married down, in that his wife didn't seem to have the intelligence (of any kind) to hold her own with his family. She lacked sophistication, ambition, and talent. Fortunately, his parents were so pleased with the young couple's religious fealty that they failed to realize their good daughter-in-law represented a potentially significant hindrance to their family's continued upward mobility. (No, I didn't tell them. I do recognize that my definition of long-term family success-enhancement of opportunity—ignored such trivialities as love and happiness. All four of the couples in my examples married for love, and are happy together.)

In example (2), the parents wondered why their daughter saddled both herself and their business with an ungrateful dependent. They didn't see that both of those problems were of their own making. They should have given her more respect for herself, of course; but even after she married the mooch, they didn't have to give him a job for which he was unqualified and a salary he didn't earn. It is a consultant's job to raise that issue.

The third example was one of improving the family through marriage. The young man's parents described their accountant daughter-in-law as a "prize", regardless whether she worked in the business or (as happened) chose to stay at home while her children were young.

In example (4), neither the daughter nor her husband worked in the business. Nonetheless her exogamous marriage is an index of the family business's success. Why? Because it was the income from that business that gave her the opportunity to pursue a satisfying career, and marry someone with his own satisfying career. Philosophy had not been a vocational option for either of her parents. Furthermore, when, in a couple of decades, the daughter's children become beneficiaries of the generation-skipping trusts her parents created, they are likely to be well equipped both intellectually and emotionally to manage that substantial wealth sensibly.

If, as outside consultants, we share this perspective about the importance of children's education, self-esteem, values, and attracting new blood, should we and can we sell that perspective to our clients? I think we can, somewhat, sometimes.

In the United States, our present-day culture increases the challenge for advisors. Parents play such limited roles in mate selection; why even bring the subject up? We don't live in a world of arranged marriages. However, parents do inculcate snobbery and prejudices in their children, and discourage contact with people whom they assume to be inferiors. A sociobiologist might say that such prejudices serve the same function in narrowing a child's search criteria as they would in an arranged marriage culture.

The notion of "marrying up" or "marrying down" may sound like something out of a nineteenth-century novel: worrying about what society will say. But that is absolutely not what I mean. Our definition of family success refers to actual competitive advantage, avoiding the prejudicial errors of one's community. Parents' initial assessment of the candidate's human capital is often based on the wrong criteria: inadequate litmus tests such as race, religion, and class. Nor am I referring to the prospective mate's family's money. Of course, a family may acquire financial capital through marriage; but that is rarely as significant as what it acquires or fails to acquire in human capital.

Perhaps our most constructive role is to challenge members of both generations to think about the actual qualities of individuals who may be candidates to join the family, wherever they come from. And we can push parents to see how their long-term goals for their families depend upon the quality of relationships they build with sons- and daughters-in-law.

Among business-owning families, we encounter all four types of "in-law" situations exemplified above: those that enhance the family in some way (3 and 4) and those that don't (1 and 2); and in either case, parents who realize the fact (2 and 3) and those who don't (1 and 4). Would it be useful for a consultant to advise an entrepreneur whose business seems to be declining and whose sons and daughters are models of mediocrity, "Try to get your kids to marry people more capable and self-confident than themselves?" Obviously not—it would be too late. The time for them to receive the advice in Table 1 would have been many years before they engaged us as advisors.

Nor would we say to the client described in example (1), above, "You're foolish to feel so complacent about your son's marriage. Your daughter-in-law may be easy for you to relate to because she shares so many of your convictions, but she brings nothing to your family other than below-average I.Q., a lack of imagination, spinelessness (which you like, as she doesn't challenge you) and dull-witted grandchildren."

On the other hand, what about the daughter and son-in-law described in example (4)? Her parents appreciated my pointing out that their business success had allowed her to enjoy an academic life without worrying about accumulating wealth.

Finally, in example (2), the parents are justifiably concerned about the impact of their son-in-law on both the business and the family. They may need the consultant's help in building appropriate safeguards into the governance structure and succession processes; as well as assertiveness about such touchy matters as prenuptial agreements and restrictive trusts.

A needed dissertation

What we are discussing is no less than a theory about mate selection and successful families. It raises the possibility of observing one of the ways a family business system succeeds or fails to use external resources for its own advantage. If we're right in calling our client families "systems", we should be able to make some long-term predictions about their viability. Of course, we won't confuse family success with keeping the business in the family (Kaye, 1996).

I would suggest that anyone who hopes to assess the strength of a family enterprise, or of any fortunate family, might derive an index of success more parsimoniously from the quality of people who marry members of that family than from any complex and elusive set of measures on the members themselves.

How could this theory be tested? Find 50 families whose fortunes over a couple of generations clearly moved in the positive direction. Compare them with 50 families whose fortunes declined relative to the society as a whole. If I am right in postulating mate selection as an index of the families' success, then the average educational level and/or occupational index of spouses who married into those families during the two previous generations will differ significantly between the upwardly and downwardly mobile samples.

Hughes (1997) advocates measuring a family's human and intellectual capital, and tracking it over time. I'm saying that such an assessment would need to include the family members who enter by attachment, not only by birth; and in fact the relative talents of those people alone might prove a good index of the whole family's success.

Supposing that some data could be found to test this hypothesis, and that the results supported the theory, processes of cause and effect would still remain to be studied. My theory is that the long-term progress of family fortunes (opportunity advantages for descendants, relative to their cohorts) is the outcome of behavior listed in Table 1. The importance of self esteem in child development suggests that those recommendations are the best way to help one's children attract the most promising family wealth enhancers.

Conclusion

Research in evolutionary biology confirms Darwin's observation that diversity is a key to adaptation (Weiner, 1994). It follows that too little diversity and too much mediocrity in marriage partners pose long-term threats to family systems' competitive advantages.

We do our clients a disservice if we facilitate their succession and estate planning, focusing on the problem of preserving their financial capital, without equal or greater emphasis on their human and intellectual capital. As Jay Hughes puts it,

Financial capital alone cannot provide long-term wealth preservation. What a family's financial capital can provide is a powerful tool to promote the growth of its human and intellectual capital. After all, without human capital there are no family assets; there is no family! Without intellectual capital, under-educated family members with all the money in the world will not make enough good decisions over a long period of time to outnumber their bad decisions. Successful long-term wealth preservation lies in understanding that it is the growth of a family's human and intellectual capital that determines its success, and that the growth of its financial capital provides a powerful tool to achieve this success. (Hughes, 1997, pp. 21-22)

Of the ways parents can influence all three kinds of capital, their ability to influence children's mate selection is among the least direct ways. It happens, at best, through indirect influence (role modeling, inculcating values, self-esteem) and only over the whole course of childhood, adolescence, and early adulthood. Yet the effect of those marriage choices on subsequent generations' opportunities is greater than any of those factors a parent can influence more directly. It may be as great as all the direct factors combined.

As for parents whose children have chosen unwisely, the best advice is to ask not what you can do to weaken the relationship, but whether a more strategic and judicious use of family resources can leverage that individual's strengths while avoiding the perpetuation of problems.

Dawkins, Richard, The Selfish Gene. Oxford: Oxford University Press, 1989.

Hughes, Jay, Family Wealth: Keeping It in the Family. NY: James E. Hughes, Jr., 1997.

Kaye, Kenneth, "When the family business is a sickness." Family Business Review, 1996, IX (4), 347-368.

Weiner, Jonathan. The Beak of the Finch. NY: Knopf, 1994.

[This article "Mate Selection and Family Business Success" was published in Family Business Review, summer 1999.]