Across cultures, families have long warned that prosperity is difficult to carry beyond three generations. In the United States, the saying is “from shirtsleeves to shirtsleeves in three generations.” In China, it is 富不过三代—wealth does not pass three generations.
The most frequently cited figures claim that 70% of wealthy families lose their wealth by the second generation and 90% by the third. Those numbers are repeated by institutions including CFA Institute and ANZ Private. But they should be read with care. CFA Institute also notes that much of the evidence traces to a disputed study and that the so-called curse is not inevitable.
I find the debate useful because it shifts the question. Instead of asking whether a statistic can predict a family’s future, we should ask what families are actually preparing to transfer.
The shares? The company? The founder’s discipline? The ability to create value again? These are different inheritances. A family can transfer ownership carefully and still leave the next generation unprepared for responsibility.
The three-generation pattern
Generation One—the Builder. The founder creates the fortune through work, sacrifice, risk and repeated failure. The value of money is inseparable from the effort required to earn it.
Generation Two—the Maintainer. The children have seen some of the founder’s struggle. They inherit greater comfort, but often retain a living memory of what the family endured to build the enterprise.
Generation Three—the Heir. The grandchildren may know the success without knowing the conditions that produced it. If responsibility has not been taught, comfort can become entitlement and ownership can arrive before judgment.
This is an archetype, not a verdict. Its value is not in blaming the third generation. It is in showing what can disappear when a family transfers assets without transmitting the human capabilities that created them.
Why wealth fades
Communication breaks down. Families avoid difficult conversations about expectations, contribution, ownership and responsibility. Silence is mistaken for harmony until a transition exposes years of unresolved assumptions.
Education begins too late. Heirs may receive financial literacy without learning entrepreneurship, grit, resilience, humility, decision-making or how to recover from failure. These are not simply financial values. They are qualities formed through experience, responsibility and example.
The founder is also unprepared. First-generation entrepreneurs are rarely taught how to preserve what they built or how to educate a successor. The instincts that create wealth—speed, concentrated authority, appetite for risk and relentless forward motion—are not the same disciplines required to share authority, preserve family cohesion and think across generations.
This challenge is especially visible in environments such as Silicon Valley, where sudden change can create wealth quickly. Innovation may reward disruption, but legacy requires grounding: an anchored identity, peer communities that model stewardship, practical methods for transfer and a time horizon longer than the next company or liquidity event.
Capital becomes fragmented. As ownership spreads across descendants, interests, lifestyles and expectations multiply. Without a shared purpose and clear governance, asset dilution can become relationship dilution as well.
Market losses matter, but families often begin weakening long before the portfolio does. The erosion starts when trust, competence, purpose and the ability to work together are not renewed.
I therefore do not regard the three-generation curse as destiny. I regard it as an invitation to examine the education happening between generations.
What my father passed on before there were shares
I am the second generation in my family’s current industrial business and the fourth generation in an entrepreneurial family. Those distinctions matter. Our history contains rebuilding as well as continuity; the same company has not passed intact through four generations.
My father rebuilt the business in Hong Kong in 1982. His education had been interrupted by the political circumstances surrounding our family, but learning remained central to the life he created for his children.
My introduction to the business began in childhood. At sixteen, I was travelling with him to Germany and contributing to the work. Over time, my siblings and I spent time on assembly lines, accompanied him on business trips and took responsibility for different parts of the company.
Looking back, I see an education that was difficult to recognize while it was happening. We were learning what customers expected, how employees understood the business and why a relationship could carry obligations invisible in a contract.
I later studied at UC Berkeley’s Haas School of Business and attended Stanford’s executive education program. That education gave me valuable ways to understand organizations. My early exposure gave those ideas people, products and consequences to attach to.
A classroom could help me analyze a decision. Being present in the business helped me understand who would have to live with it.
Succession training deserves its own place
I distinguish succession planning from succession training.
Planning addresses ownership, governance, roles and timing. Training develops judgment, credibility and the ability to act without having every answer supplied by the founder.
Both deserve attention. Yet a family can spend years discussing the eventual ownership structure while leaving the next generation in a permanent waiting room: invited to meetings, introduced as the future, but unable to make a consequential decision.
Responsibility without authority is a poor classroom. So is authority without accountability.
The successor needs an area of work with a clear purpose, a boundary and consequences they can understand. The founder needs enough visibility to protect the enterprise without taking every decision back. Employees need to know whose instructions count.
That arrangement requires practice. It also takes time for people outside the family to see a successor contribute, keep promises and respond when something goes wrong. A surname can open the door. It cannot complete that work.
The founder has a curriculum, too
We often speak as though the younger generation is the only one who needs preparation.
I believe succession also asks the founder to learn a new discipline: developing another person’s judgment while accepting that it will not be identical to their own.
For someone who has carried the consequences of decisions for decades, that can be demanding. Speed, vigilance and personal control may have helped the business survive. A successor’s slower or unfamiliar approach may feel like an avoidable risk.
But if the founder corrects every difference before it produces a result, nobody learns whether the successor can lead. The organization learns to wait for the founder instead.
One practice I would encourage is to choose a contained decision, agree the financial and ethical boundaries in advance, and let the successor carry it through. Review the reasoning and outcome afterward. Reserve intervention for the boundaries everyone agreed, rather than for every disagreement about method.
Another is to explain a decision before giving the answer: which trade-offs matter, what history informs the choice and what information would change the founder’s mind.
The founder remains a source of experience. The successor begins to develop a mind of their own.
A practical education in four stages
The approach I find useful moves through four stages: exposure, contribution, judgment and stewardship. I offer it as a working framework drawn from my experience, rather than a universal formula.
Exposure Let young people understand the work and the people behind their opportunities. For children, this can mean age-appropriate visits and conversations, with room for curiosity. They should encounter the dignity of work without becoming responsible for an adult’s commercial or emotional burdens.
Contribution Give a willing participant a real, bounded task. Define what good work looks like and who will provide feedback. Participation should teach respect for competence, including the competence of employees who do not share the family name.
Judgment Gradually share decisions. Ask the successor to explain options, consequences and uncertainties. Increase authority as capability develops. External work experience and mentors can help the person test their strengths beyond the family’s expectations.
Stewardship Teach the responsibilities that accompany ownership, including financial literacy, governance, accountability and the effects of decisions on others. A family member who never manages the company may still become a thoughtful owner. A capable manager may come from outside the family.
These stages need not follow a fixed age or a single career path. Their purpose is to make development intentional and responsibility earned.
A child must be free to choose
Early succession education can easily be misunderstood as deciding a child’s future early.
That is a concern I take seriously. My own experience has made me value preparation, but it has also made me question how much of one generation’s life another should be expected to repeat.
A child may understand the family business deeply and still choose a different profession. They may contribute through ownership, philanthropy, investing or a venture of their own. They may decide that they want no operating role at all.
That choice should not become a test of whether they love the family.
Families need honest conversations about interest and ability, including the possibility that outside management is best for the enterprise. The business deserves competent leadership. The next generation deserves a life they can choose.
Education is valuable even when it does not produce the next chief executive. Understanding money, work, obligations and enterprise can help someone become a responsible adult in many settings.
Preserve the reasoning, then practise using it
There is also a place for technology in this education.
A founder can record the context behind important decisions: why a product failed, how a supplier earned trust or what an earlier expansion taught the company. With appropriate permission and care for confidential information, those records can become a resource for future leaders.
AI may help organize and retrieve that material. It cannot establish that the founder’s recollection is complete, or that yesterday’s answer fits tomorrow’s conditions. Accounts need context, review and the ability to question them.
The educational value lies in giving another person enough understanding to examine the reasoning and make their own decision. A searchable archive supports that work; practice gives it meaning.
What I would ask instead
When I hear 富不过三代 today, I think less about predicting which generation will lose the wealth and more about the responsibilities of the generation doing the teaching.
Have we explained how value is created? Have we allowed real responsibility? Have we made room for disagreement, different talents and independent lives? Have we prepared ourselves to share authority?
The original company may grow, transform, change ownership or eventually close. Its future also depends on markets and circumstances a family cannot fully control.
What we can work on is the education we give one another: the ability to exercise judgment, respect people, adapt and create value again.
That is the inheritance I want our family to keep developing.