1 Big Idea to Think About

  • We can nurture our wealth and resources to create a legacy for those we care about, transforming their lives. 

1 Way You Can Apply This

  • Consider starting a family bank that teaches family members about entrepreneurship and finance. 

1 Question to Ask

  • How do I want to support the dreams and goals of others through the resources I have?

Key Moments From the Show 

  • The story of two billionaires (1:24)
  • Why is generational wealth so quickly and easily consumed? (6:41)
  • The tiny mindset that has a disproportionate impact (8:09)

Links and Resources You’ll Love from the Episode

Greg McKeown:

Welcome everyone. I’m your host, Greg McKeown, and I am here with you on this journey to learn so that we can make our highest contribution now and ongoing into the future. 

Have you ever wondered how America’s wealthiest families manage their fortunes across generations? A lot of people think it’s all about the initial success, the sheer magnitude of the wealth itself, but that is wrong. What we know now is that there is a single rule that makes the difference between intergenerational wealth and being broke. By the end of this episode, you’ll understand the starkly different legacies of the Rockefellers and the Vanderbilts and that one key to generational wealth. Let’s get to it.

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Two of America’s most iconic families, the Rockefellers, and the Vanderbilts, amassed incredible wealth during the Gilded Age. These families, both rooted in immense success, had distinctly different approaches to the management of that wealth, which, as we will see, has had a lasting impact on their legacies. 

First, we have the Vanderbilts. Cornelius Vanderbilt, often dubbed the Commodore, laid the foundation for the Vanderbilt fortune in shipping and later in railroads. By the time of his death in 1877, he was the wealthiest man in America when he died. It’s estimated he was worth a hundred million dollars, which in today’s terms is an extraordinary $200 billion. That was more than the US Treasury held at the time. It’s worth noting that he himself lived quite a modest life and was able to pass to his son 95% of that fortune. 

That son William Henry Vanderbilt did well. He doubled the family fortune before his death, but amazingly, that is the last time the Vanderbilt fortune would grow. The Commodore was known for his frugality, but his descendants passed. His son lived opulent lifestyles, mansions, lavish parties, and extravagant expenditures became synonymous with the Vanderbilts. They built 10 Vanderbilt mansions just in Manhattan, including what is considered the largest private residence ever built. 

But by 1947, according to Garrett Gunderson, all 10 Vanderbilt Manhattan mansions had been torn down. Gundersen explains that according to family lore, Cornelius Vanderbilt’s last words to his family were, “Keep the money together.” 

But if that was, in fact, his last words, it’s hard to think of a family who has more thoroughly failed to act consistently with that dying man’s wish. This massive, unbelievably large fortune was divided among family members, and without proper financial education or a structure to preserve the wealth, the money started to dissipate.

By the time the third generation of Vanderbilts came of age, much of the family fortune was gone. While some of the Vanderbilt mansions and estates remain as historical landmarks or have been donated to institutions, the vast wealth the Cornelius accumulated did not last beyond a few generations. 

Contrast this with the Rockefellers. John D. Rockefeller, born in 1839, was the patriarch of the Rockefeller Dynasty. He founded The Standard Oil Company in 1870, which would become one of the world’s first and largest multinational corporations. 

“At the peak of its power, Standard Oil controlled 90% of the oil in the United States. John D. Rockefeller Senior made millions refining and selling oil that led to a boom in industrial and technological innovation.” I’m quoting here from John Nebeker. He continues. “When he was 18, his father loaned him a thousand dollars at 10% interest to help launch a produce commission, Clark and Rockefeller, which made significant profits by providing food and supplies to soldiers during the Civil War. Later, the commission began investing in oil fields in Pennsylvania and the surrounding states.” 

“Rockefeller founded the standard oil company in 1870 and invested millions in other sectors such as transportation and real estate. He was a famed philanthropist whose donations to a myriad of causes totaled more than $500 million. When he died in 1937, his fortune reportedly reached more than $300 billion in today’s dollars, and he had successfully seized the title of Richest American at the time, a title previously held by Cornelius Vanderbilt.” 

“When the younger John D. Rockefeller Jr. inherited his father’s wealth, he quickly set about establishing trusts and other legal entities to protect and grow his family’s fortune. Perpetually the family emulated their patriarch’s example by establishing traditions of education and training to family members to help them properly manage wealth. They have carried on John Senior’s tradition of philanthropic dedication by donating as much as $50 million every year to charitable causes.”

“All descendants have had access to financial assistance at critical junctures in their lives. The result is that Rockefeller descendants have served as CEOs of major financial institutions, philanthropists, governors of multiple states, United States senators, and even vice president of the United States.” 

“Today, the Rockefeller fortune totals less than its founder’s original bequest but remains intact and growing, estimated at more than $10 billion.” 

Why is generational wealth so quickly and easily consumed, and what lesson lies in the answer for the rest of us? Gundersen puts it this way. “It’s amazing how quickly wealth can disappear when you factor in three forces, division, taxes, and risk.” 

“Imagine two parents with unbelievable wealth, a hundred million dollars in their estate. Let’s say they have four children who each have four children who each again have four children. That’s just the great-grandchildren. Without proper planning and applying just the 40% estate tax to each generation transfer, each great-grandchild will receive just $343,000 out of an original 100 million.”

Now, to be sure, that doesn’t sound like nothing, and these numbers are so massive. It’s hard even to relate to the story, but surely there’s something in the contrasting tales of the Rockefellers and the Vanderbilts. 

For all of us, lessons about wealth management and preservation, the Rockefellers, with their forward-thinking approach, ensured that their wealth would benefit not just their immediate family but also society at large in an ongoing residual way. The Vanderbilt, on the other hand, serve as a cautionary tale about the transient of wealth. Without systems, structures, and education in place, even the greatest fortunes imaginable can diminish rapidly. 

The principle at the center of these contrasts is not about the size of the fortunes. It’s about a mechanism available to everyone, to you, to me, to the whole world. We could think of it like a mindset, and it’s true at the macro level but also at the microloan level. 

In a small village called Jabra in Bangladesh, Dr. Mohamed Eunice, an economist with a keen eye and a compassionate heart, stumbled upon a group of 42 bamboo stool makers struggling under the weight of the local money lenders’ ruthless interest rates. They couldn’t dream of approaching traditional banks, which deemed them unworthy of loans due to their lack of collateral. One day, driven by a simple yet profound act of kindness, Eunice lent them a total of just $27 from his own pocket. This small gesture sparked an idea that would eventually ignite a global revolution in finance. He observed how this meager amount enabled these artisans to buy materials, weave their stools, sell them, and repay him. It wasn’t just about the money. It was about trust, dignity, and potential. 

Emboldened by this success, Eunice founded the Grameen Bank in 1983, choosing to focus primarily on women. He believed in their power to bring about real social change. They were the backbone of families and communities, and by empowering them, a ripple effect was inevitable. Rather than asking for collateral, the bank organized borrowers into groups, fostering a spirit of community and peer accountability. If one member struggled, the others would rally around, ensuring they stayed on track. 

As the years passed, stories of transformation emerged. A woman named Aisha borrowed a small sum to buy a cow. Every day she’d milk it, sell the produce, and slowly expanded her tiny enterprise, eventually sending her children to school. Farida, once a destitute widow, borrowed to weave baskets. Over time, not only did she provide for her family, but she also became a beacon of hope for others. In short, the Grameen model worked wonders from that initial $27 to millions of borrowers and a staggering repayment rate of over 96%. The bank was a testament to the power of trust and the untapped potential of the impoverished.

The world took notice. In 2006, of course, Dr. Eunice and his brainchild, the Grameen Bank, were awarded the Nobel Peace Prize Eunice’s journey, which began in a humble village, and a $27 loan, has rippled across the globe. It’s inspired countless other initiatives, one of which I share in Effortless on page 152, about how this model evolved in the creation of Kiva. But today, I want to invite you to evolve this model further into a microloan mindset for your family to think from now and forever onwards about the creation of a family bank. As it’s proven in the Grameen model or in the Kiva model or in the Unites Model, microloans can still bring about tremendous empowerment and accountability for those that are involved in those arrangements, but surely the same can be applied in small ways within our own families. 

Parents can provide small amounts of money to their children as a microloan to start a mini business. The quintessentially American lemonade stand comes to mind, or a lawn mowing service, or in my own personal experience. In my first entrepreneurial venture at age 10, when my father provided a loan for me to buy car washing supplies to start my business. I repaid him the money, but there was something magic in all of that. I was helped to get going, but I felt the strength and empowerment that comes from paying it back, and the momentum started from there. 

Perhaps this could be extended into other forms of family entrepreneurship. A family member has a promising business idea but lacks capital, the family can collectively provide a microloan to help kickstart the venture. The agreement can be formalized with repayment terms, teaching about financial accountability and the intricacies of lending. Or you could have a microloan for education. Families could set up a microloan system for educational purposes. A family member wants to take a short course or buy books. The family can provide a loan which the individual pays back over time, potentially even reinvesting into the funds for others’ use. 

I’m just trying to illustrate that creating intergenerational wealth isn’t about having massive wealth. It’s about a tiny mindset that has a disproportionate impact. As I wrote in Effortless Reading, a book is among the most high-leverage activities on earth, and that is absolutely true of a book that’s coming out this week called The Family Bank, the Key to Generational Wealth. It’s by John Nebeker. I was happy and honored to write the forward for it because I really do believe that The Family Bank, and particularly the mindset behind it, is an absolute game changer. 

In the great tapestry of American wealth and legacy. The contrasting threads of the Rockefellers and Vanderbilts paint a vivid portrait of choice, foresight, and responsibility. Today, we’ve journeyed through their storied histories. We’ve looked at the dazzling allure of newfound riches and the sobering realities of fleeting fortunes. The key takeaway, it’s not just about amassing wealth but how you nurture it, what you pass on. As we’ve explored, the creation of a family bank and the key mindset behind it can spell the difference between a legacy that endures or one that vanishes within generations. 

Whether your intent is vast or simply that you would like to leave something behind for your loved ones. Remember, it’s the systems, the structures, and the wisdom you put in place that truly matter. And there’s this new book from Nebeker, The Family Bank, suggests you too have the power to shape your financial destiny, and not just yours, but for many, many people beyond you. 

Thank you for joining me for what I hope has been a riveting tale of two billionaires. What is one idea that stood out to you today? What is one thing that you can do differently immediately, and reading The Family Bank might be just that thing, and who is somebody that you can share this episode with so that the conversation continues after this episode has come to an end? Until next time, whether it’s your time or your money, invest wisely and think very, very long term.