How Many Generations Does It Take to Make It?

I've always liked the old truism about generational wealth:

First generation makes it. Second generation maintains it. Third generation loses it.

I'm not sure how true it actually is, but I've always taken a certain amount of comfort from it. Perhaps because it makes wealth seem less permanent than it looks. The family that appears effortlessly wealthy today may only be a few generations removed from someone working extremely hard to create it, and may be a few generations away from losing it again.

But I've always wondered about the other end of the story.

What happens before the first generation makes it?

Because "makes it" makes the whole thing sound rather sudden. Someone starts with nothing, works hard, becomes rich, and hands the money down.

I suspect that for a lot of families it doesn't work like that at all.

There is a generation before the generation that makes it.

That generation struggles.

They work hard, but the important thing isn't necessarily that they become wealthy themselves. It's that some of their effort gets transferred forward. Perhaps they buy a house. Perhaps they move somewhere with better opportunities. Perhaps they insist their children get an education they never had. Perhaps they simply provide enough stability that their children can take risks they couldn't.

Their success is partly measured by what becomes possible for somebody else.

So perhaps:

First generation sacrifices.

Then comes a generation that has something their parents didn't: a platform.

They still have to work. They may not inherit much money. But they inherit stability, expectations, education, knowledge and perhaps the beginnings of a network.

They can become doctors, lawyers, academics, executives, entrepreneurs. They can buy assets rather than merely pay bills. They can start accumulating capital.

Second generation succeeds.

But there is another inheritance that takes longer to acquire than money: belonging.

By the third generation, the family may no longer feel newly arrived.

The children grow up around the institutions their grandparents were trying to gain access to. They know how those institutions work. They know how to speak to the people inside them. Their friends and partners come from similar backgrounds. The unfamiliar becomes ordinary.

Nobody has to explain the rules because they grew up with them.

Third generation belongs.

And perhaps that is the generation from which substantial wealth becomes much easier to create.

Not because they are cleverer or work harder than the people who came before them, but because they begin further up the ladder. They have financial capital, but also cultural and social capital. They can take bigger risks, wait longer for returns and recover from mistakes.

Fourth generation builds it.

So maybe the story of generational wealth begins much earlier than the traditional saying suggests:

First generation sacrifices.
Second generation succeeds.
Third generation belongs.
Fourth generation builds it.

And then, apparently, their grandchildren blow the lot.

Which at least gives everyone something to look forward to.