As an estate planning lawyer, I represent a lot of entrepreneurs. Most of them are first generation wealth creators who grew up in modest circumstances. Family advisor Tom Rogerson of GenLegCo. teaches that a modest upbringing provides the conditions to create an “entrepreneurial incubator.” When trying to make ends meet with limited resources, family members not only learn to stretch the dollar, they also become naturally inter-dependent and learn to work together with others. Those skills come in handy in growing a business.
Many first generation (“G-1”) business creators hope G-2 will follow suit, exhibiting the drive to likewise grow into an entrepreneur. Here’s the dilemma. Many of the G-2’s grow up in very different circumstances than G-1. They lack exposure to the struggle that generated G-1’s grit. Rogerson refers to this rise in resources as fostering family independence (as opposed to inter-dependence), creating an “entrepreneurial kill-zone.” Click here for more on this topic in my April 26, 2022 post, “Declaration of INTER-dependence.”
Rogerson illustrates this concept on a graph. The lower left corner, where wealth is low and family interdependence is high, is the “Entrepreneurial Incubator.” As you move to the right (where wealth is higher) and upward (from interdependence to independence), you hit the “Entrepreneurial Kill Zone.” Families in the “kill zone” lose training on how to interact and make decisions as a team, which is a detriment if you are starting and running a business.
My last two posts were devoted to parenting. I described it as the hardest and most important job you’ll ever have. Today, let’s explore what can entrepreneurial parents do to improve the odds of raising entrepreneurial kids?
Family Business magazine addressed this topic in “The Entrepreneur Gene” (Sept. 16, 2024). Entrepreneurs grow up with “an appetite for risk and perseverance through adversity.” But as the business grows and focus shifts to an “emphasis on continuity and legacy preservation, it’s easy to become risk-averse—and that mentality can hinder innovation and evolution.” The next gen’s stewardship of the business is healthy, “but there’s a flipside.” “A fear of failure” can inhibit creative thinking, per Prof. Alisa Jno-Charles of Babson College. A child who is afraid to fail will have challenges growing a business. What can parents do?
Jno-Charles offers a solution. The key is to develop “a very trusting and open familial culture, where children feel like they can come to their parents with anything.” Babson professor Angela Randolph expands this concept: “the key for parents hoping to foster entrepreneurship is turning NextGen’s mistakes into teachable moments. After all, entrepreneurs must be able not only to accept failure, but also to take lessons from it.”
Randolph elaborates that parents can best create an entrepreneurial mindset in two ways: “1) they actively share their goals, values and aspirations with their children and 2) they lead by example.” As I quoted Warren Buffett last week: “Your children are watching you more than they are listening to you.”
I’ll conclude with a powerful example from a family meeting I facilitated. The entrepreneurial patriarch suggested that at the next meeting he would review his many success stories on how he built an empire. The kids had a different agenda in mind. They asked their dad to instead describe the times he failed and what he learned from those failures. At the next family meeting, the kids were all ears. That was the best lesson in entrepreneurship he could ever give.
Marvin and Laurie Blum with Tom Rogerson of GenLegCo., advocating the importance of family INTER-dependence in order to raise entrepreneurial kids.