Intro

Mr. Hughes, a resident of Aspen, Colorado, is the author of Family Wealth: Keeping It in the Family, and of Family – The Compact Among Generations, both published by Bloomberg Press, and is the co–author with Susan Massenzio and Keith Whitaker of The Cycle of the Gift: Family Wealth and Wisdom, The Voice of the Rising Generation, and Complete Faith Wealth, all published by John Wiley & Sons and is a co-author with Hartley Goldstone and Keith Whitaker of Family Trusts: A Guide to Trustees, Beneficiaries, Advisors and Protectors".

In addition, he has written numerous articles on family governance and wealth preservation and a series of Reflections which can be found on his website jamesehughes.com.

He was the founder of a law partnership in New York City specializing in the representation of private clients throughout the world and is now retired from the active practice of law. Mr. Hughes was a partner of the law firms of Coudert Brothers and Jones Day.

Standout Quotes:

• "The first asset a family owns is its spiritual capital; if it doesn't have it, it better develop it" - [Jay Hughes]
• "If we're learning together and we're sharing what we learn, guess what? we're likely to make better joint decisions" - [Jay Hughes]
• "A family that's nothing but quantitative capital is toast" - [Jay Hughes]
• "You don't have entitled children and you will know how much is enough if you're concentrating on growing your qualitative capitals" - [Jay Hughes]
• "The two great obstacles to adjustment for a human being are sex and money; money is the worst of all because no nice person will speak of it" - [Jay Hughes]
• "Every family has ghosts" - [Jay Hughes]
• "Almost always, the plan that they have for transition...is a liability" - [Jay Hughes]
• "Way too much time I think is spent on saying we need to be resilient, that's good but the real question is we need to be enduring" - [Jay Hughes]
• "There's no such thing as financial resources, there are only things that are the representation of someone else's dream; anybody who doesn't get that right just misses the problem of the recipient" - [Jay Hughes]
• "It astonishes me, Mike, that many families with huge resources have never studied the fact that human beings don't learn the same way" - [Jay Hughes]
• "You don't just start; you start by building up those cells are going to make up the team on the journey" - [Jay Hughes]
• "Storytelling is incredibly important to discover our history" - [Jay Hughes]

Key Takeaways:

• Jay's book "Family Wealth" was a huge inspiration over a decade ago for Mike's interest in the concept of Family Business.
• After a major midlife crisis, Jay realized that his work in the law had a major flaw being that he was the only person who could use the structures he was creating for clients. He understood that the responsibility of a professional is to make clients more capable and liberate them but he had made them less capable. He started focusing more on ideas to make families more independent and also shared these ideas. Jay started to shift away from legal structures which were focused more on the 'How?' questions, and move towards the 'Why?' questions which had more impact on families. He also spoke publicly on different platforms about it and the message was well-received, encouraging him to start his book.
• With the clients however this approach was challenging, but Jay understood that if he simply did what clients asked, it would not help them achieve their goals. He learned to wait for clients to gradually open up to the approach. It had also become needful for Jay to have a beginner's mind with this new approach, not assuming he had all the answers as usual but showing concern and the desire to help families.
• Wealth comes from the Anglo-Saxon term "Weol" which means "well-being"; Financial capital is a form of wealth but it is not wealth. In trying to figure out the assets of a family to understand them better, a Balance Sheet has proved to be a humane tool.
• Using this tool, there are 4 qualitative forms of capital; the first is Spiritual Capital. This refers to a common purpose where every member of the family by affinity seeks to enhance the other's journey of happiness. The next is Social Capital; can you make really good joint decisions together over a long period of time? To make good joint decisions, there has to be Intellectual Capital, meaning the family has to be a learning system where what is learned is shared. Another form of capital is Thriving Human Capital which is followed by the only quantitative capital; Financial Capital. Financial capital is the engine that grows the others and does not simply function as accumulated wealth. It is critical to understand that the qualitative forms of capital must always be kept in focus above the financial capital that is meant to support them; a family that simply focuses on putting financial capital into consideration is not likely to succeed together.
• There are now assessment organisms for a family that is thoughtful to annually assess the states of its capital. Sigmond Freud in his work realized that the most adjusted or happiest people were those who learned to love and work as a vocation, not labor. The vocation is often a dream which takes a while to manifest and forms the stories about how the aspiration of that dream inspires people to perspire towards achieving it. When parents ask their children more about their aspiration rather than debunking it, the kids realize how inspiring it is to them and if they can perspire towards it.
• The Ghost Liability on a Family's Balance Sheet: As much as the balance sheet shows the assets, it also shows the liabilities, and one of the liability questions is "What's our big obstacle?". When looking at the internal obstacles, there is a high tendency to assume that the people in the room are the obstacle but it is pivotal to note that these aren't the only people in the room. Every family has ghosts which may be good ones brought up in stories or the "Hungry Ghosts" whose goals were unfulfilled and have lingering problems. Other kinds of ghosts are stories that are untrue but are told as if they are true. Surprisingly, another form of ghost is the plan for the transition itself and preexisting family structures which are often a liability. This is particularly because the transition plan would not have been able to consider people in the future who would later be constrained by it; in other words, usually, the plan is too small. To fix the problem, the old constraining plan must be shed, creating room for fragility and risk to form a new larger plan which will be used until it becomes too small for another generation. The qualitative capitals are groomed and grown in this process such that the new larger plan can accommodate growing those capitals. All the ghosts must be noticed and addressed accordingly so they don't cause problems in family transition.
• Inevitably, beneficiaries will at some point realize that they're playing a role they didn't sign up for, and this will be a huge reveal that will hit them like a meteor. When this happens, parents need to be extremely caring and deeply understanding. The question now becomes "is the meteor a gift or a transfer?"; because a transfer is easy but gifts come with love and are very hard to make. The parents and other professionals have to work hard to ensure this comes across as a gift rather than a meteor of obligations.
• Despite this, the burden that comes with it cannot be ignored and must still be recognized with love. The key is for the kids to understand even from childhood that the purpose is to grow themselves; preparing early for this revelation increases the odds of a successful outcome. It should be noted that it can be very disastrous to justify this burden by saying "By the way, you never have to work" as if it is handled poorly this meteor could lead to some form of post-traumatic shock. Hence the people who do well are those who take time to explore it and grow because what is being received is not just money but the consequences of someone else's dream, and the goal is to use it to aspire to achieve the dreams of the recipient. Again, it is emphasized that this gift should be a consequence of magnanimity given with love to the recipient and the hope that it helps them find their happiness, anything else is a transfer that comes with ambition and expectations which may have a poor outcome.
• A starting point in this approach of a successful family enterprise journey is for families to understand the different ways by which members learn, knowing that a thriving human capital defines Intellectual Capital. This also applies to trustees. Working on this helps the family identify whose skill is needed at different points in time. It also helps to disseminate information for joint decision-making in ways that are best absorbed by individual family members. Another very useful tool is Enneagrams; they help understand how different personality types determine how individual family members view situations or react. The aim of this phase is to properly prepare by equipping the family before starting the journey.
• Storytelling for families isn't simply for the joy of the story; it helps understand time. A good way to foster storytelling is to have reunions where each person is asked "who is the oldest person you knew and what did they tell you about somebody older?". This also applies to those married into the family and helps them weave into the family.
• Jay's letter to his kids; that they are loved and he would ask for their forgiveness.

Episode Timeline:

• [00:51] Meet today's guest, Jay Hughes Jnr.
• [03:10] How Jay's book 'Family Wealth' came about.
• [06:49] How did the families receive your approach of asking the "why?" questions?
• [15:20] Defining Wealth and the different forms of capital.
  
• [23:21] Is there a measuring stick for success in qualitative capital?
• [32:15] The Ghost Liability on a Family's Balance Sheet.
• [43:41] What is the most appropriate way to prepare beneficiaries and include them in the plan?
• [58:10] How does a family start this journey?
• [01:08:20] Jay's View on Generational Story-telling.
• [01:16:44] Jay's letter to his kids

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Special Guest: Jay Hughes.

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Links:

• Wise Counsel Research Inc — Mr. Hughes is a current active Fellow of Wise Counsel Research Foundation a Boston based think tank providing qualitative advice to families who seek to avoid the shirt sleeves proverb and to help their families flourish.
• Families Of Affinity — James (Jay) E. Hughes, Jr. is the author of the acclaimed classic Family Wealth and Family: The Compact Among Generations, and the co-author of The Cycle of the Gift: Family Wealth and Wisdom.
• Family: The Compact Among Generations: James E. Hughes Jr.: 9781576600245: Amazon.com: Books — The successor volume—and intellectual prequel—to Family Wealth Why do some families thrive for generations? What accounts for the sad deterioration that other families experience? This book builds on the now widely accepted practices offered in Hughes's signature work Family Wealth and offers families the professionals who serve them a view of his panoramic insights into what makes families flourish and fail. It lays out the basis for the vision of family governance the author has developed through his work and research. His advice addressed not only what to do but how to think about the complex issues of family governance, growth and stability, and the ongoing challenge of nurturing the happiness of each family member.
• Family Wealth: Keeping It in the Family - How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations: Hughes, James E. — The landmark book that changed the way exceptional families think about their heritage, their wealth, and their legacy to future generations--now revised and expanded.