Magazine

It Runs In The Family


DYNASTIES

Fortunes and Misfortunes of the

World's Great Family BusinessesBy David S. Landes

Viking -- 380pp -- $25.95

(Readers'

Reviews below)

Editor's Review

The Good Dishy stories and elegant writing make it often fascinating.

The Bad Fails to go beyond the juicy anecdote to offer a compelling analysis.

The Bottom Line An intriguing read, even though it begs for a better overview.

The appointment of an outsider to succeed William "Bill" Clay Ford Jr. as chief executive officer at Ford Motor (F) might have gone differently if Uncle Henry Ford II were still alive. Back in the 1970s, things got ugly between Henry and his ambitious, hard-charging No. 2, Lee Iacocca. Ford hired investigators to discredit Iacocca, to no avail. Iacocca, a favorite of the board for such successes as the Mustang, in turn gathered dirt on Ford's womanizing and tried to convince directors he was senile. At that point, Ford gave the board an ultimatum: "It's me or Iacocca." Ford quickly axed his colleague, a humiliation Iacocca avenged by landing atop rival Chrysler as chairman.

Iacocca's problem may have been insoluble -- and may be something new CEO Alan R. Mulally will one day face. "He was not family," historian David S. Landes says in Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses. "When he became too powerful, he had to be forced out."

Ah, the travails of the family-controlled businesses. Given Ford's woes lately, one can only wonder whether it would be in better shape now if Iacocca had stayed put. True, Ford didn't sell out to foreigners as Chrysler did, but it is slipping fast as rival Toyota Motor (TM) charges ahead. Landes, whose tales of Ford end in about 2002, didn't foresee Mulally or Bill Jr.'s plan to stay on as chairman over him, but the news certainly fits. As Landes suggests, "Founder Henry must be spinning in his grave."

Such dishy stuff and Landes' elegant touch make Dynasties fascinating. John D. Rockefeller Jr., we are told, grew up in such a tightwad family that he was made to wear his older sisters dresses as a child, a torture his father also had to endure as a boy. Occasionally the book is even scandalous: We learn that Virginia Bourbon del Monte, the half-American widow of Eduardo Agnelli, heir to the Fiat fortune, died in the 1940s in a car crash with a male friend. As Landes delicately puts it, she was "amusing the trouser-less driver, who lost control in the wrong place and at the wrong time." Unfortunately, Landes fails to go beyond such juicy anecdotes to offer a compelling analysis of family-dominated enterprises. Are they the true creative forces in business? Are there ways to avoid management grief when the bloodlines thin in later generations? Landes doesn't come to grips with such issues as he moves from tale to tale.

To be sure, there's plenty of grist for both inspiration and distress. The Rothschilds, the famed bankers, sprang from a ghetto in Frankfurt that was a "barren, stinking cage." There they learned to rely on family, but over time they proved so insular that in the 1800s they encouraged marriages between uncles and nieces or first cousins. "Only a Rothschild was good enough for a Rothschild," snipes Landes. Likewise, the Toyoda family in World War II was pressed to skimp on civilian work to push Japan's military effort, so it churned out Toyota trucks with single headlights, brakes only on rear wheels, and wooden bumpers -- "downright dangerous modifications, but in the middle of a brutal war, accidents with automobiles were only one of many ways to die." Later, we learn, the Toyodas were saved by U.S. Korean War spending on trucks. Landes offers scores of grace notes about commercial families. French automaker Robert Peugeot, fretting over family control, insisted that shares in the family company never pass to daughters or sons-in-law, a practice that drove one daughter into a 16-year court fight for her legacy; she would end up leaving France. And we learn that even though Guggenheim males, heirs to a mining fortune, were "not particularly attractive," they married "women who could hold their own in a beauty contest."

Regrettably, such notes do not add up to a symphony. Landes, a professor emeritus at Harvard University who wrote brilliantly in 1998 about uneven economic development in The Wealth and Poverty of Nations, doesn't get top grades for this book because he has failed to make clear points that build into coherent arguments. Family businesses are in no way "obsolete and inconsequential," as some champions of "professional" -- i.e., nonfamily -- management would have it, he says. But he doesn't mine the data to prove, say, that such outfits are wellsprings of innovation. Nor does he spell out why some families rebound from adversity while others fail.

Still, today's family business leaders will want to pore over the pages to glean lessons. Even though the book begs for a better look at the forest, the many trees Landes describes -- the fascinating family trees -- make for an intriguing read.

By Joseph Weber


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