Health, then values, then wealth. In that order.

Most families have this backwards and it costs them everything they were trying to protect.

Here is how I think about it, and I said this on stage last week almost exactly this way:

"The values are more important than the wealth. Because if you lose the wealth, the values get you the money back. If you have the wealth and not the values, your kids just end up maybe in lawsuits against each other, between their trusts. And the relationships in your family are worth more than the wealth. So you don't want the wealth destroying the relationships. If you had to choose, you'd always choose the relationships. And health is more important than wealth. If you just focus on wealth, you're just going to die early, probably get taxed, and then not have time to transfer those values."

Read that last sentence again, because it is the whole argument.

If you optimize only for wealth, you die earlier than you should, the estate gets taxed, and you run out of time to transfer the one thing that would have protected the money. You lose all three. Not one of them. All three.

Why the order is not sentimental

This is not a nice thing to say about family. It is a sequencing argument and it holds up under pressure.

Values are recoverable wealth. If your kids have judgment, work ethic, and the ability to read people, and the money is gone, they will make it again. It will take them 15 years and it will be painful and they will do it.

Wealth is not recoverable values. If your kids have $40 million and no judgment, there is no mechanism by which the money produces the judgment. The money actively works against it. There is no trust structure, no family constitution, and no advisor that fixes this.

And health is the clock on both. You cannot transfer values from a hospital bed in the last 90 days. Value transfer takes years of ordinary time, and ordinary time is exactly what a health event removes.

What governance actually means, and it is not a binder

Governance sounds like the most boring word in business and it is the reason one family in a thousand makes it 100 years.

In practice it is four questions:

1Who decides what. Not who has the title, who actually decides.

2What happens when two of you disagree. Written down, before it happens.

3Who is allowed to work here and on what terms. A written policy, not a case-by-case conversation.

4What this family believes, before anybody is under pressure.

That is it. If you answer those four in writing, you have governance. If you have a 60 page document and those four are not clearly answered, you do not.

What usually actually happens

1There is no written employment policy, so every conversation about hiring a family member becomes a referendum on the family.

2Disagreements get settled by whoever the parent sides with, which teaches everyone to lobby instead of decide.

3The values exist in the founder's head and die with them.

4The first formal family meeting happens after the first real fight, which is about 10 years too late.

5Billionaires do not do public quarrels. Everybody else does, and it costs them the company.

What I actually do, which is not a framework

We posted our family values on the wall at my house.

It is not a governance system. It is a piece of paper my three daughters walk past every day. It cost nothing and it took an afternoon, and it does more than most family constitutions I have read.

I am not sure there is a right way to do this... but I am fairly sure that starting is worth more than starting correctly. The families who wait until they can do it properly are the ones who never do it.