Episode 44: From Law to Legacy: A Conversation with James E. Hughes Jr.

Speaker A: Hi everyone and welcome to the Dentons Global Family Office podcast where family wealth meets global insight. I'm Henry Brentz Giessen, global co chair of the Dentons Family Office and High net Worth group and I'm delighted to host today's podcast. Today's guest is James E. Hughes, otherwise known as Jay Hughes, a sixth generation lawyer who's now retired and an author and co author of multiple books and influential articles on family governance and wealth preservation. He's renowned for his work in family governance and his free frequently called upon to address international audiences on helping family offices to flourish through the growth of their human, intellectual, spiritual and social and financial capital. So without further ado, I'm going to turn it over to my podcast guest Jay Hughes to introduce himself. Jay, thank you very much for joining us today.

Speaker B: Well Henry, let me say first with the greatest of intention, uh, I am thrilled to be invited to, to speak to you and the Denton's community. Um, I am the sixth generation lawyer in my family. There's a little question about the second. The first was a major in George Washington's army. Uh, that's a long time ago. Um, and my son in law is the seventh, he's a judge. And my new granddaughter who married one of my granddaughters um, is the eighth generation. What's interesting I suppose about that is we've never had any litigators. We've had judges, we've had commercial lawyers, we've had professors, we've had justices of the peace who in the frontier of Kentucky and America after the Revolutionary War were the only uh, law there really. But we don't have litigators. I think that what that represents Henry, is a long history of the law as a social phenomena seeking to help human beings, families and societies flourish. I think that's the purpose of law. That's certainly what my father who was the senior partner of Kudair Brothers for many many years, uh, built that firm from about 15 when he joined to 37517 offices when he retired. Sadly that firm has gone away. But in its day, um, it was doing what I've just said. Um, I have degrees necessary to have a license. I think perhaps one thing that the lawyers would be interested in because um, I am who I am and that's the way it is. Um, one thing I think that might be interesting. Um, I was sitting at a table in the year 2000 having lunch with a man who I did not know very well. And we got talking the way men do at lunch. I guess men and women now do at lunch, um, what do you do? What do you do? And I said, I help families. He didn't say anything. And maybe half an hour later in the lunch, he said, you know, Mr. Hughes, you can't do that ethically. I said, what are you talking about? He said, well, you have to have an individual client. I hadn't thought about that since an ethics course in law school. And I thought, Well, I have 200 member families, and what they want from Jay is representing all of them. So I didn't say anything. But I went back to my office, Henry, and called the attorney for, um, insurance matters. If we'd had a problem, who I'd never talked to before, and I said, I have to ask you a question. And I asked him the question. He said, you can't do that. You're out of your insurance. I said, what? He said, yeah, you can't do that. So a year later, I left the firm I'd created, left it to my partner, because I was putting my employees and my associates and my partner at risk. So I then thought, well, okay, I can't practice law. The law has left me. Isn't that interesting? I didn't leave the law. I still have my license. But I couldn't practice anymore if I wanted to do what my clients wanted me to do. So I spent a year to see if I could make a living with families practicing the philosophy we're going to talk about to see if they would be interested in essentially being guinea pigs. And to my astonishment, half of them I'd never met before. During that year, uh, 11 families said, yes, we would be willing to spend the 10 years with you. I said, 10 years. Fire me anytime that's obviously given, um, to see if this will work. Those are the best years of my career. There's something absolutely fascinating to me about a whole family system that includes all the ghosts. By the way, any of us on the call today who practice private client work know that every case is full of ghosts. So all the ghosts are in those families. Um, and the future generations not born are in all those families because we're writing documents that are going to last 100 or more years, just like the ones we've been administering as young lawyers. So this was an awakening for me, a remarkable requirement. I didn't have any choice. I had kids in college. I need to make a living, um, and bills to pay. So what I would say to all of our friends is, whatever the ethics are in your particular area and where your license is, the law doesn't mean you can't represent a family. You just have to decide how to do it. Because families need representation. Yes, every individual is entitled to representation. Of course, that's a given. But the more important work we're going to be talking about today is how does a whole family, a whole system, reach its fifth generation in good shape and go on from there? That's the goal of what we're going to be talking about today. Fifth generation. Now, Henry, this is a long answer, but I'm going to finish it this way. I love your smile, my friend. Why fifth generation? Okay, well, the second most important thing in my introduction, people are saying, my God, we got to get off this podcast. The man is still introducing himself. This is really incredible. Awful. Second, um, great day in my life was in 1974 in a building in Singapore where a Chinese client looked me in the eye, who invited me, come around the world, didn't tell me why, and said why? We have a Chinese proverb, shirt sleeves to shirt sleeves. In three generations, would you tell me in the west what families do to avoid this? And I said to him, blurted out, well, that happened in my family. And I said, frankly, I have no idea what to, uh, answer your question. But that was the question the universe was bringing me for my whole life. That's the moment I woke up to what my task was. So for six months I spent trying to find the answer. I, um, won't say how many years on, but people can do the math from 74 to 2025. I'm still seeking the answer. But what I do know is that if we recognize Mother m nature's rules about that proverb, we can talk more about it if you want to, about the law of entropy and the questions of fission, fusion and, um, inertia. We know that the three generation proverb says three generations. I said five of my goal now why? Okay, I'm being a lawyer. Four might be luck. Make five. You probably done something intentional, so I don't think for is adequate. It's good, but not but five. I think one can say one has an idea of how to do it. So, Henry, that's the longest introduction I've ever given. I apologize to our listeners, but I thought that those two salient points in my life might be of use to people as they're imagining their careers.

Speaker A: I think they are, Jay. I mean, when you talk about, uh, or relive those experiences, it really resonates with somebody like me who started his career as a lawyer and identified as a trust and Estates lawyer, a tax lawyer. Uh, but now at this stage in my career, I don't do that at all. I mean it's fair to say I still have a large trust and estates and tax practice. But actually the work that I really enjoy, the work that I will be leaning into more and more into the future, is what I now describe as family wealth consulting. It's not law at all, it's consulting. Um, and it's quite a different mindset and methodology and um, delivers I think far better outcomes for our clients than the traditional legal lawyer model. And it's really through, I think, reading, um, your seminal work Jay, um, Family Wealth, Keeping it in the family, that really opened my ideas, opened my eyes, sorry, to these ideas and made me think far more critically about the traditional lawyer led way of doing things. And in your book you talk about the five capitals. So, um, and you introduced some, your philosophy, uh, and I wonder whether you might talk to us a little bit about that, this idea of long term wealth preservation being uh, an outcome of successful family governance.

Speaker B: Henry, you use the word in your practice, uh, of wealth. Let's be sure everyone in the audience knows what you and I mean by the word. It is the Anglo Saxon two words we o wealth. You can hear it, which came into our language in the 6th century when the Germans came to England. And it has only ever meant, Henry, as you and I use it. One thing. Well, being financial capital is something else. The word has been, I hate to say, uh, it's been um, dumbed down for advertising purposes. Uh, most of the firms in the world, I speak very frankly at nearly 83. So what? My life is short. Uh, most of the wealth management firms in the world are masquerading in advertising that using wealth. They don't manage wealth, they manage financial capital. Now there are a, uh, very few firms, including lawyers, doing the work that you do and that I do, who are actually interested in wealth as well being. This is fundamental. It can't be both ways. The word means well being. That's what the dictionary tells us it means. It's what our Anglo Saxon ancestors said it meant. And until about 40 years ago, everybody knew that's what it meant. But then advertising enters the world, words get chopped up. So that's the first thing. Then I'm going to come to the philosophy, but I want to. But I think for everybody listening now, the second thing that Henry didn't say about his practice, but he and I know that he believes us just as fundamentally as I do. My father, whose name I have, who I mentioned before, who led Couder Brothers through all those years, said to me as a very young, um, lawyer, Jay, if you're going to do private client work. By the way, it was just trust in the states, Henry. And in 1972, I invented the term private client because none of my clients were dying. I thought, this term doesn't work anymore. I've got to change it. So I invented that term. Um, dad said to me, jay, if you want to know what a lawyer does, and by the way, a great doctor, a great minister, and a great academician. The four noble professions, including law, he said, you must understand that all four provide their clients with knowledge, and all four provide their clients with courage. It is in the second of these that you earn your living. No one has ever said anything more correct to me about how those of us in the private client work, helping families achieve their fifth generations do our work. Knowledge is fungible. Taxes, states, administration, trust administration, fungible courage. Oh, in short supply. And another way to look at this. And then I'll, uh, move to the capitals in a certain way. This way. Another way to look at it is that there are two other ways of describing what we do. Again, back to what you just said about your work. Their French is better than the English. A, uh, person d'. Affaires. Person of affairs, as the Swiss often call people of affairs, or a person de confiance. Confidence. But more than confidence, the French is a philosophy. Not just the word confidence. It's this word courage. You could say personne. But I think personnel confiance does it better. That's where we earn our bread. Person d' affaires provides knowledge, provides, um, effective counsel in the areas mostly of financial capital, management. Personnel confiance act for a whole system, including the ghosts, to help that system help each individual thrive, the whole family system thrive, and then the society of which that family is a part thrive. So people can ask themselves, who are listening? Who am I? Now, let me be very clear, as Henry said, and I've also would absolutely mirror this. The first 10 to 15 years of a practice are about being affairs. We have to learn the vocabulary. We have to learn the pitfalls. We have to find boundaries. Ah. Uh, and then the question one day is, is it sufficient? And for some of us, the word what do you need? Disappear and replaced in our hearts and our spirits by how can I help? Question mark. And that's the defining moment. Now, Henry asked me about philosophy. So let me say, in looking at the question of getting to the fifth generation in Good shape and going on from there. Let me start by saying something that you all know very well, but you probably haven't thought about in a while. When two people with different names and different DNAs decide to create a family, which must be two or more people, you have a single person household. But Webster says family has to be two or more. They make a commitment to do something really hard, make joint decisions together. Let me remind all of you that with all the books on governance and political philosophy, Aristotle said it best. A family is two or more people who make joint decisions. Nobody said it better. This is the heart of our work. Because if we're going to get to the fifth generation in good shape, think of the thousands of joint decisions that must be made by an ever larger community, including the ghosts, by the way. But, uh, never forget the ghosts. Banko was right. Pay attention to the ghosts. So if we think about this philosophically, the first thing, practical thing, and almost all of you are listening, are very practical people. What you probably haven't thought about in a while is that nothing you do can come to life unless two or more people make a decision to do it. This is governance. It's not boxes. And charters. Never constitutions, by the way. Charters is the right word. Um, that people agree. Or compacts is even a nicer word. What do we. Or covenant. Oh, wow. Covenants are really large agreements, including Noah's with God that we won't have another flood. Um, but the first thing always to remember when you go into a room is the people in that room must make joint decisions. And the quality, not quantity of those decisions determines the fifth generation or not. So this is a very simple piece of work and infinitely difficult. Infinitely difficult. One thing that's very helpful, by the way, for the people making those joint decisions, is that they also have an aspiration to reach their fifth generation. If all they aspire to is to get to the meeting, have a nice meal, have some drinks, and go home. Mother Nature will win in two generations. You don't even have to get to the third. But if they have an aspiration that the fifth generation should have a chance to aspire to be a family, to make decisions together, to have an shared, uh, positive experience, then you have something to work on. Um, one of the ways that I try to help families. Henry, look at this question of purpose is a kind of a Funny Way from Alice in Wonderland, where, if we all remember, the Cheshire Cat is sitting on a branch in the forest. He has a big smile, and Alice comes wandering through the woods and the Cheshire cat says, alice, where are you going? She says, I don't know. And then the Cheshire cat says, you are certain to get there. This is one of the greatest moments in all of literature for families. But of course, Alice is not going to go where she wants, where she thinks she might. Uh, this is. This is very important. Do we have a common purpose? This is the spiritual aspect of the capital. Zen, right? Do we have a shared purpose that our family will have future? And then what's hiding in that shared purpose is that we agree to enhance each other's journeys of happiness. So what's hiding behind that governance decision? Ah, you can see how the argument builds is first, that we have to make joint decisions. Second, that we have an aspiration that there will be a future. And third, we can see that depending on how we make those decisions, we'll make all the difference in the world. The quality of them, not the quantity of them. And here's the core. Do we make them at, uh, those family gatherings thinking, if I do it this way, I enhance everyone else's journey of happiness? I'm terribly selfish. I am selfish. I hope they'll do that for me, but I can't know. That's the existential question. Existential question of the joint decision making. Of course I'm selfish. Of course I want them to enhance my life. But I'm smart. I know it won't happen if I don't first help them. By the way, that's why Godot is such an incredibly hard play to watch. Two and a half hours where nothing happens because there are no joint decisions. Because what do they say to each other sitting on the dunghill? Okay, we're ready to act. Yes, we're going to act. We must wait for Godo. And then they sit again. And, uh, at the end of two and a half hours, we leave the theater furious. Furious. We spent $50 each or more to have this awful experience because there's no enhancement going on. This is reality. So what are we doing when we make the joint decision? I'll say it again. First, we have an aspiration that there'll be a future. And second, that, uh, within those decisions, that's our purpose, our spiritual purpose, spiritual capital. And within that is this proposition that we exist to enhance each other's journeys of happiness toward the whole build, thriving. People say, that's Jay. That's too much philosophy, too many words. I say, okay, here, let's cut it all the way down. You. You come into the room and you say, here's our problem. If we do it this way, some boats sink. We do it this way, all the boats rise. What do we want to do? Cut to the chase. We've been sitting here for three hours. Not today. You and I, uh, talking. Let's cut to the chase. If you do it this way, these boats sink. Oh, okay. If you do it this way, there's a chance that all the boats rise. Decide. Mhm. That's the way it works. Would you agree?

Speaker A: Yeah, I do. Joe. It's interesting, um, just hearing you talking there because one of the challenges or the risks, I think with the sort of work that we do and the way we think is it can also be quite ethereal and I think it needs to have real world applications and has to be able, uh, to be understood easily. And now, and the way I

Speaker B: uh,

Speaker A: boil it all down is before we even get to the question of family governance, we need to. Families need to say or ask themselves a fundamental question. Uh, that question is, do we want to stay together as a family collective down the generations or do we want to break off into autonomous economic units? Now I don't think there's a right or wrong answer to that question because many families won't have the scale or the social cohesion or the opportunity to stay together, um, whereas many others will, um, but for whatever reason they may not want to. But I think the thing that I challenge my families to think um, about is just to be intentional about their very first decision, uh, whether to stay together as a collective or to break off into autonomous units. And um, many families just won't be, it won't be appropriate for them to stay together. But for many, uh, particularly the ones that come to us for advice, they have an amazing opportunity to achieve outsized impact not just within their families, but in the communities in which they live, the economies, uh, in which they participate and pay taxes and employ people. And it's those families that have gone through that process and made that decision and have come to us and said, yep, we want to stay together as a collective. I then say, well, the single most important way of making that work, uh, is governance. And governance not just of the financial capital which we all know and which all the wealth managers will happily sell service.

Speaker B: Financial capital managers.

Speaker A: Yeah, yeah, they will. All the financial capital managers will all help you to service. But actually, you know, the other capitals, the social capital, the spiritual capital, the human capital, intellectual capital, um, and so we need a governance framework around all of that. And to me, governance boils down to three things. It's basically how you make decisions, uh, how you communicate and how you solve problems and all of that. As to how that is then organized and documented is a matter for, ah, a longer discussion, whether it's a charter or a shareholders agreement or whatever it may be. But to me that's the starting point. Asking that fundamental decision about whether to be a collective or an autonomous economic individual unit and then agreeing on how you're going to communicate, solve problems and um, make decisions.

Speaker B: I agree completely. So let me touch it this way. The first thing you know when you do not have a family is when it Hyatt retains you and says it has one name. They are already losing to entropy because half their stories just disappeared. Half their intellectual and human and social capital just went out the window. Now there was Adam and Eve, Henry, I happened to have. Both of my grandfathers had the same name. August Bjorman. They did have different middle names and they were only related to seven generations before that. But they had the same. But there were two names. So my mother's family was a Bjorman Bjorn family. I'm part of the Hughes Bjorman family. But there is the first thing, and this is so profound, is if you don't have two names at the top of your page, rip it up, throw it out, because it's, it is completely false. This has nothing to do with someone taking someone else's name. That's a personal decision. But the two names that every family begin with are critical to understanding the five generations before us that have everything to do with the five generations to come. Now here's the second thing on governance. The first governance decision those two people make when they stand at the altar or they have a commitment ceremony, um, what is it? What do they decide to do? They decide to make joint decisions. Oh, what did he say? Oh, I guess that's right. The birth of a family is the birth of a joint decision making system. Now how do we lose that? And by the way, each of them promises the other to enhance the other's journey of happiness without knowing if the other person will come through. It's exactly the same decision every generation. That very first moment when family two or more get it, is a decision that is profound in the promises that are made and the possibilities that grow from that. Now that's governance. Now let's take the next piece of governance in the beautiful way that you outlined it. I'm going to say something that will shock the, uh, people listening. Family governance begins in the second generation, not the first. I Just said it takes two people making joint decisions to start a family. But now I just said something that I don't believe is contradictory. I believe family decisions, rather than separate decisions of a couple, occur in the second generation. Here's a hint, by the way, at, uh, how it works. If the chosen child in the second generation to be the trustee is the same child chosen to run the business, that family will fail, guaranteed. If you ask the siblings, and let's assume they're two or more so they're siblings, who do we send to mom and dad when we have a message to pass? It's never that person, never that person, never that person. That was another of my father's wisdoms. So if we're looking for leadership of family governance in the second generation and later, we're looking for leaders from behind, not in front. We're looking for qualities that have nothing to do with running a business. M They're qualities that have to do with creating a community. Isn't that fascinating? Now, when you get to the third generation, if the second generation succeeded in making a good joint decision making system, the third generation has something to rise to, Henry, which is to use those rules and to rise into them and modify them as needed. But they have a contract to make themselves, they have a charter to make. One more thing on this, and I know this is somewhat, will be somewhat surprising to people, but I want to say again, uh, in my experience, it's the second generation that decides to be a family. Now, one more thing on this. There's great confusion in our field because the psychologists in our field, many of them, the business consultants in our field, almost all of the business consulting firms, I won't name them, but the four or five largest ones in the world in our field, as opposed to the, uh, Bains and the McKenzie's, we have specific firms, five or six of them in the world. Who are the firms that deal with families of the type that we're talking about? They sell federations, they sell systems that a federal decision that everybody puts everything up to the top and a few people make the decision. The American experience, the Australian experience, I believe the New Zealand experience, certainly the Canadian experience, is that you need two kinds of systems. You need a confederation so that the decisions of each branch are made nearest by. And then you need a federal system for a few things where the safety and long term well being of the family needs to be decided. Henry, I can't tell you how many families I couldn't help because by the time I got in the Federal system had destroyed them. They were pruning even if they hadn't pruned yet because nobody gave them an alternative. Now one more piece of family governance. You see how this is not subtle? The best government is always what devolves. We're lawyers. We understand these words to those closest by the decision who are affected by it. Of course, that's right. And then there are some decisions that are so profound that they need a federal system to organize the branches into the decision making for their common security. Life, liberty, pursuit of happiness. Pledging our honors, our sacred honors, our lives and our liberties is the core of the American experience. There was a confederal system became a federal system as needed to fight a war and then to do certain other things. The problem in our field is the federal systems are sold while confederal systems are human. This is a huge problem. It's an unnecessary problem. Now one more thing. On this family governance and this decisions the beautiful way that you've been talking with me. There's another thing I want to leave with our wonderful Denton's listeners. And that is you've heard me speak of ghosts now five times. M only now once are you going to hear me speak of councils of elders. Let me be very clear to us as lawyers. Where is another place our field has failed? We're very good about creating executive systems and we're very good about creating legislative systems. But how many families have created a judicial branch? Now let me be very clear. I do not mean judicial in the sense of litigation or forcing anything. I mean what human communities that are thousands of years old and they exist all over the world have done for their well beings since they were founded. In the third generation. They grow a council of elders. The elders purpose is to mediate the human experiences of the individuals of the branches and of the whole. When there needs to be a whole decision. Elders never tell anyone what to do. And elders do not decide anything. They observe and they offer wisdom about how it's done in that human community, why it was done that way. What is our sacred and special sauce? Not special in the sense of unique, but different. Why is it we do it that way as opposed to some other way? They are our storytellers. They're our wisdom keepers. Think for a moment, Henry. And all of our wonderful community at Denton's, if every, uh, family you were helping had a council of elders. Now this has one terrible result. When you spoke Henry, earlier about trust and states departments, I spoke about my uh. The law leaving me at the beginning of our Conversation. You spoke of the same issues, but not the same, but similar in your own life. What is one of the things we didn't say? Well, we didn't say that lawyers make great elders. If they're persons de confiance, if it matters to them that they grow into a position of mediation, not big M, little M. That because this is how human communities thrive, they understand that there need to be some people above the fray whose interest is the well being of all and its continuity. If that is what those people in that system want. Just imagine for a moment how difficult this would be for the probate litigation departments that now make up half of the lawyers in our field, if what they were confronted with in each case was a council of elders that had the authority to mediate the process. I wonder how many of those litigations would never happen and how many families would have a chance because they had a human way of dealing with their continuity. So this is the way to build the thoughts the first couple have. Joint decision making system, two names. They bring in the five generations before the ghost elders. Then you have confederation and federation choices devolve the decisions closest to those most, uh, necessarily affected by those questions. And then councils of elders. This is not magic. The fascinating thing about it, Henry, I've not said anything that social anthropology and social psychology and evolutionary psychology have not told us. If we listened. It's all right there. It's just how human beings do it, how homo sapiens sapien does it.

Speaker A: I think what you're saying, Jay, um, whilst it may be, um, reflected in, in anthropology, but what I think you're saying is, or emphasizing is the importance of being intentional about this. Because without intentionality, the system that you described, uh, this governance system, I think, doesn't evolve naturally. Uh, sure. And it's quite interesting your comments around the family governance begins in the second generation. I think that must be right. Even in many of the families, I advise that the wealth is still owned, controlled and directed by the founder.

Speaker B: The financial capital.

Speaker A: The financial capital. Sorry again.

Speaker B: No, don't be sorry, but we want everybody to go away from this call. And when they hear the word wealth, only hear well being. And then say to the client. Oh, excuse me, and I'm interrupting you, but I'm going to interrupt you for one more second. Excuse me, Mr. Client, are you talking about financial capital or wealth? Just tell me. Oh, uh, Mr. Barnes, Gateson M. That's an unfair question. Oh, I'm sorry. You're paying me. I have to know what your purpose is. I'm coming right back to your point. What is your purpose in this conversation? Just tell me. Keep going.

Speaker A: That's right. And so that first generational

Speaker B: governance um,

Speaker A: system is almost always a ah, fairly uh, patriarchal or matriarchal system where moral and legal authority uh, is. Is given in a fairly autocratic way. And I don't mean that in a, in a bad sense or pejorative sense. That's generally what's been the secret source to success. Decisions made quickly and with courage and um, and combined with serendipity and. But of course that, that once that moral and legal authority moves, moves on or becomes incapable, you're then left with this vacuum. And that's where uh, the second generation needs to be intentional. They need to be um, and they need to be well advised and surround themselves with a network of people that can guide them. And you refer to sort of the elders there. Uh and interestingly you talk about the way in which a lawyer can, can fulfill that role. I hadn't thought of it in that way. When you've talked of elders in the past. I've always thought about it. You must mean bloodline or members of the family. But I think I misinterpreted that. Um, judges. Yeah, exactly. Um, and I think so making sure that there's a real intentionality there. Because the risk is I uh, see it all the time. Particularly with family businesses where, where they're operating a business, they're in the business they're operating, they're thinking all about the business. And the management room of the business is generally pretty well organized and functioning really well. But what's neglected is governance within the owner room. If we're going to use the four room model with which many of us are familiar, it's the owner room, um, where governance is often, often lacking. And I think in that owner room, um, you talk there about federations and confederations. Um, it's within there you can have a confederal system I guess if you. For different branches. But then uh, binding those branches together is some sort of federal system of uh, communication, decision making and problem solving.

Speaker B: This, this is the art. Now a few more things because I know we're, we're far into our time. Let me say a couple things that are spiritual and I think very important. Always keeping in mind, I want everyone listening to think about this as the pink elephant in the room. Where is Alice? Where is Alice? Where is she going? Okay, so let's look at the first generation as we define it. That generation, Henry and all of our Listeners does something that should be impossible for human beings. They take energy and turn it into matter. So the first thing we have to understand when we come to the office is we have no normal clients. None. We're dealing with the most abnormal people on the planet. That's the first thing we must never forget what we're, the people we're dealing with have done something impossible. There's only 5% of the whole universe is matter, right? So to take energy, which is the body of the universe that we live in, and turn it into matter should be impossible. I could blaspheme and say it can only be done by the G dash d person, but I won't. But essentially that is an impossibility for him. Uh, therefore, we live in a world of improbability. Why would that person care about how it comes out for biological creations rather than the enterprise? Oh my God. What did he say? Heaven forfend. What did he just say? Why do we know that in almost every case the business is the eldest child? Why do the psychologists spend thousands of the family's dollars dealing with the siblings competing with an eldest child who isn't a human being? Oh my goodness. So it isn't really surprising at all that that generation doesn't really care about the question. In fact, if it was really asked, it would like to not have to come to the meetings. Because what it does at the meetings is Shanghai the meeting. Because that's the only way that person knows how to be. And so nobody wants to come to the meeting. The problem now for the second generation is it does have to make joint decisions. It does. If there's more than one sibling, the sibling marries again, it's a joint decision making. But here's the difference. That business, or whatever the financial capital that it represents for the second generation and every generation is an investment allocation problem, not a creation problem. I'm not diminishing the second generation who makes it, uh, bigger. That's not what I said. What I said is for the second generation and every generation after it, the financial capital that is the creation of generation one is an asset allocation problem, pure and simple. That's the owner's problem. Henry. The owner's problem is strategically, is this the best use of our, uh, financial capital? That's the trustees problem, isn't it? Of course it is. Now, do trustees have a bias to diversify and sell? Probably. Might the family beneficiaries, not owners, but beneficiaries have a different view. Very often they do. So you have a conflict between. But it's an asset allocation problem because the creative acts already occurred. So you can't do it again. You can increase it, you can make new decisions, you can redeploy, but you can't do that which was already done. And if you spend your time trying to, it's a wasted effort. If, on the other hand, you. You see it as an asset allocation modeling problem and you learn how to be a great owner, or even better, a great beneficiary, then you start dealing with the reality of your circumstances. Isn't that amazing? That's the way it is. I've been a trustee for years. I know what it's like. I know exactly what the problem is. I just can't get my colleagues to understand what the problem is. I guess because I understand psychologically and spiritually and consciously what the investment problem is, what the intellectual problem is of my owners and, um, my trust beneficiaries. And they've got to make joint decisions. Now let me go one step further with this recognizing time is now running. The Chinese had a great combat of ideas in the 5th century BC between Confucius and Lao Tzu. Of course the Chinese did. They're the oldest culture on earth. Of course they would have this argument eventually. In fact, it occurs in every society. What was the argument? Well, Confucius said that the great leader is the man, man in front whose virtuous life everyone else emulates. This is the leader from in front. However, anyone who's ever written on leadership reminds us that that is a transactional leader, not a transformational leader. What did Lao Tzu say? He said the greatest leader is the one whose followers say we did it ourselves. Notice leader, greatest leader is the one whose followers say we did it ourselves. Uh, this is Chinese subtlety. It's magnificent. This is the great quiet leader from behind. Oh, this is what creates great families. It's that leader that we're desperate for, isn't it? And, uh, now I'm going to say something to us as lawyers, my dear new friends. Most families, from time to time, because people are too young, they're too old, they're away, uh, for one reason or another. Forget in their practices that interregnums are necessary part of life. We all know that, don't we? The lawyer's task is to stand in as a leader from behind. While the young one grows up, the old one goes away, and the person comes who was away. It is given to us, if we are personnel confiance, to stand in as great number twos, not ones Great number twos for that interregnum. This is what courage is about. This is what we've been talking about today, Henry. This is the lawyer's role. This is when we stand in. We don't tell people what to do. We're not family members, but we are there to hold the space for the family, to have a future when the interregnum, which is normal, occurs. History is such a great teacher of what human communities actually look like, how it works. But we forget that. And I'll put this exclamation point on this point because it might help somebody today, sitting at a desk somewhere in the world. The question I used to ask my first generation financial capital creators when they would come to me for estate planning. I would say, well, the most important problem you have is you have a stroke. I didn't keep these clients very long. Of course I didn't. But of course, that is the great problem. Nothing else, actually. If they die, the system works, Something happens, things take care. The problem is that they're away. Just like Richard the Lionheart was under Leopold when he couldn't get back from the crusade. When he was captured and held for ransom, he was away and England almost failed because of it. Um, these are, These are real factual situations. So how do we perform our function as person de confiance, providing courage when that wealth, creator of financial capital, that creation of energy to matter, is away but not gone? Here is a huge. The important planning matter that's never taken care of. And yet it's when everything is at greatest risk. So can we imagine, again, the natural way of tribes, the natural way of human communities? Where are the real risks that we can plan for? So those are some of the things I've learned

Speaker A: in a practical terms, Jay, what can we do? What to deal with those interregnums we all, uh, know about legal devices, uh, trusts, charters, shareholders agreements, powers of attorney. Those are all things that we use day to day. Um, and are essential building blocks, I think,

Speaker B: and healthcare proxies and.

Speaker A: Yes, yeah, those are bricks in an, in an estate plan. Um, my view is that most people can deal with the bricks they can build. They can. But. But it's bringing those together with mortar that, that is the, the where. Where there's real value. And often that's the step that's often overlooked. Um, well, here's my.

Speaker B: Yeah.

Speaker A: Experience with that.

Speaker B: Well, I'm sorry, I didn't mean to interrupt. Well, here come our elders again. Remember, I didn't say trustees, I didn't say powers of attorney. I said, wise ones. Now, here's a funny story, ironic story, um, again, in my practice when I was dealing with first generation people, um, and I. I had not asked them, what are we going to do if you're away? I came at it more subtly because I thought, well, really, that isn't fair. That's unkind. And I, uh, didn't want to be unkind, even though I felt it was the greatest threat to what they were interested in. So I asked them this question. Did you ever have a mentor? The first answer is no, almost always. And then said, well, it's okay. That's. I understand you didn't have a mentor, but when you were about 25, was there anybody who helped you? Oh, gosh, Joe. Uh, my father's friend. Joe. Oh, my goodness, yes, Jay. I would have made all these wrong steps, but for Joe. Really? Anyone else? Well, yeah, a few years later, um, this banker in the small town I came from, I needed to borrow some money. And the man said, I don't know if I'll lend you the money, but I need to ask you some questions. And I thought he was going to ask me about collateral and my business. No, he asked me about my family, my, uh, virtues. Who am I? And then he said he asked me some really good questions about how I was thinking about things. Oh, I guess I had another mentor. Really? I'm so shocked. Quote, unquote. And you know what happens at the end of that conversation? That person says, my God, I didn't do it myself. I'd forgotten all the steps that made me human. And the mistakes I made, I hid them. We all had our mistakes, but I didn't realize, Jay, that I had people. And by the way, he said, Henry Barents Giessen is doing that for me right now. Said, really? I'm so surprised. Henry said, you have, uh, thought he had a pretty unusual relationship with you. I said, yeah, and he's a very wise man. Has a lot of experience, probably asks you really good questions, some of which you prefer not to answer, some of which make you aggravated. He said, yeah, but I listen. I said, yes, you do. So, Henry, where am I going with this? They're always elders. The question is, do we recognize that? They're what? Execute the bricks? Execute's a lawyer's word, not chopping heads, making something work. So it isn't that the elders are the panacea. Let me say that again. They're not the panacea. It is simply that human communities survive because they concerned with the Decisions that are made when things are disorderly, and they prepare for those decisions, as the French would say. But the French would say, when things are most dynamic, they're most static. And the French would say, when things appear most static, they're like the duck waddling like crazy to get across the pond. Great. Families learn how to choose people for those moments when there will be some level of disorder because of youth, because of age, because of away. Whatever the human experience experiences are. Um, uh, maybe it's a threat from a family across the border. Maybe it's a political issue. The government has its eyes on you. There are all kinds of things that we could imagine if we had time. But the question is, where is the quiet advice that we need from the leader? From behind? That's. And by the way, somebody said the other day, Jay, I never knew such a person. And I said, then they did their jobs very well.

Speaker A: Well, Jay, I think we're about out of time. Uh, it's been a really interesting conversation, and I want to thank you and everybody who's joined us for their time and attention. I'm really grateful for. For those of you joining us on the Denton's Family Office intel podcast, and especially grateful to our guest, Jay. I've, um, really enjoyed the conversation, as I always do, and I'm sure that our audience feels the same way. So with that, Jay, perhaps leave us with some of your final thoughts.

Speaker B: I feel incredibly privileged, Henry, to have been invited. Thank you very, very much. And I might perhaps leave our, uh, wonderful colleagues with this core question that my father raised with me. Do we provide knowledge or do we provide courage? And he said, the lawyer's role is to provide courage. I don't think anyone has ever, for me, so clearly stated. And since families, as Aristotle told us, if they don't flourish, you can't have a flourishing society, and vice versa. You can't have a flourishing society if the families that are its bricks are not flourishing themselves. So the great work I think we do, my dear colleagues and Henry, you particularly, is if we will take on the courage of the hard questions and we can really help a family flourish, then we can selfishly say to our spouses and our children and our grandchildren, we're leaving you a thriving society. That's our big job. So said Aristotle. Not so, said anybody else. Thank you.

Speaker A: Thank you, Jay.