Pitcairn Update, January 2017
“Over the years, an entrepreneurial spirit has been baked into the Pitcairn DNA,” declared Leslie Voth, Pitcairn President & Chief Executive Officer, as she opened the 2017 Pitcairn Family Wealth & Investment Forum with a theme of family entrepreneurship. “In the late 1800s, while traveling in Europe, John Pitcairn saw technology for making glass without waves or bubbles and seized an opportunity to bring that technology to the US. In co-founding Pittsburgh Plate Glass, he also inspired an entrepreneurial tradition that still flourishes today. His sons, in addition to the family business, also undertook private equity ventures, philanthropy, and the founding of a family office.” Six decades later, driven by the same entrepreneurial mindset, Pitcairn family leaders took their wealth management expertise to market, creating a multi-family office.
As John Pitcairn did with his sons, every family must eventually pass the family leadership to the next generation. “Successful family transitions are a bit like a relay race,” says Ms. Voth. “Both entail the perilous passing of the baton. Here at Pitcairn, we have a process to help our clients pass the baton successfully.”
- Set a clear goal.
- Practice, practice, practice.
- Run in parallel with the new leaders.
- Make a firm pass of the baton.
- Let go and get out of the way.
Pitcairn Chairman Dirk Jungé points to the value of an entrepreneurial mindset in achieving a successful baton pass. He observed that public and privately-owned family businesses account for almost 60% of US employment, but only 1% of family companies survive through the third generation (Source: Family Firm Institute). As Mr. Jungé explains, this is generally not because of failed business strategy, a bad tax plan or overleveraging. Rather, it is often because families don’t pay enough attention to the human dynamic – the need to inspire communication and openness toward change within families. “We believe the entrepreneurial mindset is a highly effective antidote for the proverbial danger of going from shirtsleeves to shirtsleeves in three generations.”
Embracing Entrepreneurial Thinking
“No matter how well we help manage a family’s financial capital, long-term family success requires thoughtful investment in human capital,” agrees Rebecca Meyer, Managing Director of Family Wealth Strategy at Pitcairn. “Family leaders must ask themselves, ‘How can we best prepare our future generations to carry the baton skillfully? What experiences give them the opportunity to learn to make decisions and manage risk? How do we encourage them to vigorously pursue their passions?’ Families that are successful in developing their human capital make it a priority. They deliberately develop a strategy that will carry their family forward.”
Embracing entrepreneurship helps to strengthen a family’s human capital by fostering strong family relationships. A key benefit of an entrepreneurial mindset, according to Ms. Meyer, is the ability and willingness to see possibilities in each other’s ideas rather than obstacles. “When we are cheerleaders rather than naysayers, we validate the other person and build trust, which brings family members closer.” A second notable benefit of an entrepreneurial mindset is courage in the face of setbacks. “For an entrepreneur, setbacks are simply puzzles to be solved and solving your own problems is a really valuable life skill,” points out Ms. Meyer.
As part of the annual Family Wealth & Investment Forum, Ms. Meyer hosted a roundtable discussion of several leading entrepreneurial thinkers, including Margot Machol Bisnow, author of Raising an Entrepreneur: 10 Rules for Nurturing Risk Takers, Problem Solvers and Change Makers; Ann Dugan, Senior Managing Director at Family Office Exchange; and Edward Glassman, Executive Director of The Sands Center for Entrepreneurial Leadership at Springside Chestnut Hill Academy.
Additionally, Mike Mathile, former Major League Baseball player and Chairman of CYMI Holdings, gave a keynote address on his experience in an entrepreneurial family. The thoughtful comments and personal experiences of these distinguished speakers yielded powerful advice for family leaders seeking to nurture an entrepreneurial mindset within their families.
1. Dream big.
As the child of a successful entrepreneur, Mr. Mathile talked about the importance of letting your children see you dream big dreams. “My mom and dad were farm kids in northern Ohio, but my dad always wanted to own his own business. In 1970, in a station wagon with $500 and three kids, my parents traveled to Dayton to work for IAMSTM, which was then an obscure pet food company with half a million in annual sales. Six years later, my dad bought half the company and in 1981 he bought the rest of it. From 1981 to 1999, he grew IAMSTM to a billion-dollar business. One of the best things my dad did for us was to let us see him pursuing his dreams. We must encourage the next generation to dream about everything and anything.”
2. Broaden the idea of entrepreneurship.
Most people label entrepreneurs by a traditional definition: Start a company, grow the company, run or sell the company. Ms. Dugan, on the other hand, encourages families to expand this definition to encompass the idea of simply being enterprising about everything in our lives. She shared the story of a mother and daughter responsible for guiding their family’s foundation. “The family’s legacy business was agriculture and the daughter saw that the migrant workers on their farm were not getting sufficient health care. So she and her mother stepped outside their own business and created a platform to bring together health care services for these workers. Just as it did for this farm family, entrepreneurship has so much capacity to spark the next generation.”
“There’s something special about taking risks and creating something,” says Mr. Mathile. “Entrepreneurship tests every fiber of your being. It helped me toward my goal of being the best version of myself and I believe it can do the same for future generations. Whether you are a doctor, teacher, pipe fitter, or business owner, we can all be entrepreneurial in whatever we love doing.”
3. Find your passion and encourage others to find theirs.
“Passion, commitment, and intimacy are essential for success,” says Ms. Dugan. “Be passionate about what you do, be committed to the ups and downs of entrepreneurship, and know your specialty or industry intimately.”
Ms. Bisnow, who interviewed over 60 entrepreneurs for her book, found that having a passion was a common denominator among the many successful young people she met. “When you have a passion, you tend to work harder, because you love it. And, when you work really hard, that’s when you acquire the skills you need.”
Ms. Bisnow also notes that having parents who supported their children’s passions was integral to their success. “Most people are afraid that if their children do the things that make their hearts sing, they won’t make a living. The parents of the entrepreneurs I encountered never steered them to something useful. However quirky their passion was, the parents supported it. So notice what gives your child joy and help them do that. Not just as after their homework is done, but as a core part of who they are. Recognize that people have different skills and nurture your children in what gives them joy.”
Mr. Glassman spearheads an entrepreneurial program at a competitive prep school, and finds that his program appeals to kids who have passions that don’t fit into conventional categories of math, science, or humanities. “Even kids who aren’t getting great grades, work tirelessly once they get into our venture incubator program and find their passion. It’s important for parents to help find these opportunities for their sons and daughters.”
4. Reject the myths of the “entrepreneurial gene” and the “lone wolf genius.”
Success stories of entrepreneurs like Bill Gates or Steve Jobs often take on a mythic quality, but Mr. Glassman believes entrepreneurship is a process like the scientific method. “It’s easy to fall into the fallacy that there’s this entrepreneurial gene. Or that one has to be charismatic to be an entrepreneur. These are just not true. Equally false is the myth of the solo entrepreneur. The reality is that it takes a team to do this work. We can teach the mechanics of entrepreneurship. We can train young people to be leaders, to trade ideas, and to collaborate effectively in teams. These are skills for success whether or not someone ever founds a company.”
5. Praise and reward hard work.
“Praise hard work rather than success,” recommends Ms. Bisnow, citing Stanford psychology professor Carol Dweck whose research confirmed that when you praise children for effort, they take on more challenges. Unfortunately, the converse is also true. “When you praise only success, kids won’t take on challenges and that’s a bad way to be.”
“The message I give our students each day is that lack of hard work is the only thing that can’t be excused,” says Mr. Glassman. “Anyone can have bad luck. The market might not respond to your idea, funding might dry up, but at the end of the day, you have to look in the mirror and know you gave it your all.”
6. Seek opportunities.
Ms. Meyer recounted the story of Blake Mycoskie, founder of TOMS shoes. While traveling in Argentina, he noticed people wearing alpargatas, a traditional canvas shoe, and became interested in the possibility of manufacturing them. On the same trip, he met a volunteer for a non-profit that provided shoes to children and learned how disruptive the lack of shoes was in their lives. When Mr. Mycoskie participated in a shoe drop and saw there were still kids without shoes, he felt moved to solve this problem. The result – TOMS, a sustainable shoe business with one pair of shoes donated for every pair sold. “He had no experience in shoes, retail, or manufacturing,” explained Ms. Meyer, “and TOMS has now donated over 60 million pairs of shoes to children all over the world. He transformed the purchase of shoes from a selfish act to a charitable act.”
Blake Mycoskie’s actions are an example of what Mr. Glassman calls the opportunity seeking mentality. “We teach our students to turn their antenna up and any time they run into a frustration or challenge, jot that down. Then consider how wide the impact of that problem is and what are the possible solutions.”
7. Tap family resources.
Each speaker, along with Forum attendees who shared their own experiences, stressed the importance of family support – emotional, financial, and experiential – in an entrepreneur’s ultimate success. Attendees remembered going to work with family members or doing internships that fired up their entrepreneurial spirit. Ms. Dugan sees value in starting early to instill an entrepreneurial attitude in young people. She proposes that families use popular culture, such as the Shark Tank TV show, to help develop entrepreneurial thinking. “We spend so much time talking about sports and entertainment,” she says, “why not critique Shark Tank ideas around the dinner table?” Other opportunities include the Kiva Microfund site, where families can learn about entrepreneurship by making loans as small as $25, and regular family volunteering, which can help young people understand how others live.
Ms. Dugan also discussed use of a family bank, where collective resources are available for grants, loans, or collateral that can help family members open a business or finance other ventures. “I remember how family capital helped my generation as we were starting businesses. However, the payback sometimes took longer than expected or never happened.” She stresses that though the benefits are clear, there has to be an understanding of the risks to the lender and the consequences for the borrower. As an alternative or complement to family capital, attendees suggested the use of crowdfunding, noting that such funding can provide outside validation of an idea.
8. Connect with mentors inside or outside the family.
Several Forum attendees stated that connecting entrepreneurs to a robust network, including potential mentors, is even more important than money and that a family’s senior generation has a responsibility to maintain and expand its network for the benefit of future generations.
“One of the great successes I see,” says Ms. Dugan, “is when a family helps a young entrepreneur put an advisory council in place. This would not be a CPA, attorney, or other advisor, but rather people further along in the chosen industry or with more extensive experience, who can sit around a table in the kitchen or board room and help that young person be successful.”
“My sons each found mentors who were really accomplished in the areas they each cared most about – music and tennis,” recounts Ms. Bisnow. “Having a mentor who is good at what you love and thinks you are fabulous is so valuable to one’s self-esteem.” When initiating a mentor relationship, Ms. Bisnow says it’s critical to ask for advice rather than favors.
Mr. Glassman concurs. “For young people, it’s often just a matter of picking up the phone. Successful entrepreneurs don’t see students as competitors, so they are happy to support them, inspire, and mentor them. We call it a personal learning network and we evaluate our students on the quality of their contacts. Communication and networking are pillars of a successful entrepreneurial venture and valuable skills for students to take into college and their careers.”
9. Call it “feedback,” not “failure,” and embrace it.
“Growing up, I never thought my dad failed,” says Mr. Mathile. “I sometimes wish he had shared his failures so I would have felt less pressure to succeed. I decided early on that my children need to see me fail. Failure teaches us, humbles us, and humanizes us to the next generation. Failure also leads to bigger and better dreams, more creative solutions.”
“My favorite quote about failure is from Billie Jean King,” says Ms. Bisnow. “She said that we should call it feedback, not failure. None of the families of the successful entrepreneurs I met punished their kids for experimenting if they failed. Yes, the kids had to fix it, they had to clean it up, but they were never punished.”
Mr. Glassman noted that with the incredible growth of e-commerce, entrepreneurs can now fail small in ways they couldn’t even a decade ago. “I encourage my students to follow the lean start-up model. Prototype, test with users, get real feedback, and adjust as you go. In life, we have to expect to fail and be prepared to learn lessons from those failures.”
10. Always be willing to redefine/reinvent your dreams.
“When I was a child, Michael Jack Schmidt of the Philadelphia Phillies was my hero and my only dream was to play Major League Baseball,” explained Mr. Mathile, who was lucky to live that dream playing for the Montreal Expos. “But for three years, I was plagued by injuries and was eventually released during Spring Training. At that point, I needed a new dream.” With support from his wife and family, Mr. Mathile became a business owner, private investor, and now leader of his family’s growth capital firm. “My baseball years prepared me for the twists and turns I would experience as an entrepreneur, but my dad provided the inspiration I needed to reinvent my dream. His favorite quote has been with me throughout my life: Dream no little dreams for they have no magic to move men’s souls.”
The Rewards of Entrepreneurial Thinking
We are all inspired by successful entrepreneurs, whether they be technological innovators, social problem solvers like Blake Mycoskie, or even entertainers like YoYo Ma, who redefined the world’s perception of a classical musician. Entrepreneurs are celebrated for universally admired qualities: ingenuity, passion, resilience, and grit. Though few people will equal the success of the world’s most renowned entrepreneurs, everyone can benefit by developing the attributes and mindset of an entrepreneur.
Many families of wealth now have four living generations, all with different perspectives, expectations, and capabilities. Nurturing an entrepreneurial mindset creates a connection across these generations. Entrepreneurship helps families build human capital, strengthen family bonds, and prepare future generations to dream big, to innovate, and to conquer every challenge in their path.