3 generations and you're out.

[NOTE: This is part 6 of a multi-part post. Click here to go to part 1, click here to go to part 2, click here to go to part 3, click here to go to part 4 click here to go to part 5.]

I have a theory about family-owned companies, and I think it may have some meaning with regard to our economy. I call the theory "three generations and out."

Beginning a business is not easy. It involves lots of planning, market research, financing and work days that far exceed 8 hours. When someone in generation 1 started a business, they probably drafted their kids. (What's not to like about free labor?) The kids (generation 2) probably learned the business from the ground up, helping with any job that required their efforts. Generation 2 saw just how much work was required to run things properly.

Assuming the business did well, one or more members of generation 2 eventually took over from generation 1 and continued to grow the business. Along the way, generation 2 gave birth to generation 3.

Generation 2 had probably grown the business into a money-maker and, as they aged, life grew much more comfortable for generations 2 and 3. In most cases, however, generation 3 saw the business as simply the source of their nice home, cars and gadgets. Unlike generation 2, they were probably not drafted as a source of free labor. Generation 3 may have had little interest in making jam, fixing cars, or whatever the business was about.

In many cases, when control of the family business passed to generation 3, they took executive positions--along with a nice salary--but they lacked the skills or drive to continue growing the company, and it faltered.

Certainly, this is not true of every family-owned business. Some generation 3 members recognized their lack of real interest and sold their companies. Some generation 2 members got their kids to get out of their fancy cars long enough to really learn the business.

In the business that is our economy, I would liken our parents to generation 1. They grew up during the depression and ran smack into World War II.

Having a bad day? Think about them. They were born into a world in financial ruin and grew up just in time to go off to fight in a war. For how long? Well, if you have any of your parent's WWII paperwork, you know that they were in it "for the duration."

We're generation 2. Most of us were born near the end of the war and grew up watching our parents work pretty hard to build a life for their families. We heard the stories of the hardships of the depression and wartime first hand from the folks who lived them. We knew that we would have to work hard if we wanted to get ahead. Many of us were the first in our families to go to college.

And then came generation 3. I first realized I was dealing with generation 3 one day in the early 90's when I was teaching a non-regents physics class. I was talking with the students about how Japanese students were blowing them away in math and science. One girl raised her hand and told me, "But Mr. Steinfeldt, those kids don't have any social life!" And there, in front of me, was generation 3.

To use a sports metaphor, they were born on third base and thought they had hit a triple. But the economy doesn't work that way. At one point in time, America had the best-educated workforce in the world. Not any more.

If you'll allow me just one more sports metaphor, just because you won a few Super Bowls in the 1970's doesn't mean they automatically keep sending you a Super Bowl trophy every year.


Next: We're into the 4th quarter, and we don't even know there's a game going on.