If you had a $9 billion net worth would you feel secure and set for life? I assume your answer is yes. Here is one family’s story. This article appeared in the July 21, 2014 issues of Forbes Magazine. I have excerpted key passages.
“Bernhard Stroh arrived in Detroit from Germany in 1850 with $150 and a coveted family recipe for beer.” In the 1980s the Stroh’s brewhaus was the third largest brewery in American, behind Anheuser-Busch and Miller. The family net worth then was $700 million, or $9 billion in today’s dollars. Bought any Stroh’s beer lately? You say, “I can’t find it anywhere.” Another family brewery, Coors, is on every grocery shelf in the country.
In 1980 a descendant was at the helm and engaged in an ambitious acquisition growth strategy. “Peter Stroh bet the family business, borrowing $500 million (the book value of the Stroh business was $100 million at the time) to buy Joseph Schlitz Brewing of Milwaukee.” “Saddled with debt, Stroh couldn’t afford to match the ad spending of its bigger rivals.” “Meanwhile, an ambitious family from Colorado began moving into the Stroh markets. It became a competition between Stroh and Coors.” In the 90s, Peter agreed to sell to Coors for $425 million, but Coors backed out. By 1999 the company was sold in pieces to Miller Brewing and Pabst for an estimated $350 million, $250 million paid down debt and $100 million paid employee pension liabilities.
What did the company do for the family? “Eric Stroh, an artist at heart, spent millions buying hundreds of antiques—guns, cameras, guitars—to fill his big house. ‘Saving was not a priority,’ said Frances Stroh. In the 1980s the seven members of the fourth generation got $400,000 a year. (There were another 20 or so shareholders from the third and fifth generations as well, who received differing amounts). That enabled a couple Stroh families to live in stately homes on gated Provencal Road in the tony Detroit suburb of Grosse Pointe Farms, with maids, cooks, country club memberships, boarding school tuition and no need for 9-to-5 jobs. ‘A lot of people were living “High” (my addition) off the family business’, says Greg Stroh.”
“As with too many families with more money than direction, drugs and alcohol followed. Frances Stroh was kicked out of boarding school at Taft after she was caught drinking. Her three brothers also got kicked out of different prep schools. She and her brothers were upstairs snorting cocaine while the rest of the family was downstairs having Christmas dinner. One of her brothers, Charlie, narrowly avoided going to prison for dealing cocaine in college in the early 1980s. His parents forced him to join the Marines, and good behavior in the service was the key to evading a prison sentence. Yet the demon of addiction reappeared two decades later, in 2003, when he fell to his death from a tenth-floor hotel balcony in Texas, as the sheets he tied together to form a rope failed to hold. ‘My generation probably grew up with the illusion that things were going to be pretty good,’ say Greg Stroh.”
The key word in this story is “illusion.” How does a family lose $9 billion of net worth? Certainly, there were bad business decisions, but the more important issue is what wealth did to the family. Lest you think the Stroh family is unusual and does not typify most families, you are wrong. In fact, it is a template of what happens to the majority of wealthy families. Wealth distorts reality. Big homes, fancy cars, servants, club memberships, private schools, and no need to work offers too much time and money to get into trouble and easy access to destructive activities. These things are not necessarily bad, but they often have negative consequences on peoples’ values and lives. More importantly, it creates children who have no worthwhile purpose in life. The illusion that wealth provides security and happiness is a lie. “Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle.” says one Proverb. When everything is easy and possible, there is no need to be creative, to strive, to struggle, to fail, and to succeed.
“A strange species we are. We can stand anything God and nature can throw at us save only plenty. If I wanted to destroy a nation, I would give it too much, and I would have it on its knees, miserable, greedy, sick. –(1959) John Steinbeck to Adlai Stevenson” Miserable, greedy, and sick certainly describes the Stroh family. If you want to destroy a family, give it too much wealth without the proper training, experience, and preparation to managed it judiciously and effectively.
There is also the “forest for the trees” problem. Family members, without objective help, are too close to the issues to see and deal with what wealth is doing to their family. Money almost always has a detrimental impact on family relationships because we are all guilty of thinking we are entitled to more than everyone else for a variety of reasons. The question of what is fair, like beauty, is in the eye of beholder. I suspect the Stroh family had many financial, tax, and legal advisors. What they needed was a family coach that could help them navigate the integrated minefields of people versus money. Oh, by the way; the Coors family used a family coach.
Was $9 billion enough? Wrong question! The amount is not important; how one uses their wealth is the key question. If used only to please self, it will be lost. If used selflessly, it will multiply.
If you would like to find out more about investing, business planning, business and family progression planning, inter-generational wealth transfer, legacy creation, family coaching, family office services, and all the ways you and your children can give, and how effective philanthropy can positively impact your family, you can email me at kkolson@familywealthleadership.comm or visit our website at www.familywealthleadership.comm. Telephone: 949-468-2000
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