“The only question with wealth is, what do you do with it?”
– John D. Rockefeller
The topic of wealth preservation has not been more relevant than it is today. With the global economy being decimated for reasons known and unknown, it remains to be seen how families around the world will cope with the fact that their fortunes, often hard-earned across generations, may soon vanish. Is there a way to prevent it from happening?
Economy in Dire Straits
The state of the world economy is clear to an attentive observer. Sovereign debt is through the roof, the printing press is operating at capacities never seen before, illiquid assets such as real estate are in trouble and liquid assets like stocks are being artificially inflated with easy money. Meanwhile, a restaurant owner is struggling to keep his business alive.
The idea of “cash is trash” is no longer a catchphrase popularized by Ray Dalio, but a reality faced by every single individual, family offices, fund managers, endowments and pension funds. Whether the easy money flows into stocks, bonds, private equity, real estate, art or bitcoin, everyone is looking for an ultimate store of value.
Besides, the political response to the spread of a mild coronavirus has been truly blown out of proportion — to put it mildly. The severity of the impact on every country’s economic performance cannot be overstated. Combined with the fact that outright socialist moods and ideas are propagating throughout the Western world, the question arises whether any of this is coincidental at all. Will these become a threat to a family’s hard-earned wealth?
It is our belief that we must remain optimistic about the future. Blind optimism, however, never served anyone well. Worst-case scenarios may realize, and it would be prudent to be prepared for them. When it comes to wealth preservation, what can wealthy families do to keep their fortune intact so that it can be passed onto future generations?
Society’s Building Blocks
Throughout history, the institute of family has played a major role in establishing lasting civilizations. Atomic individualism was rarely considered positive, while tribalism, in a good sense of the word, was the preferred method of living together. Having a band of people who share values, rites and traditions provided a sense of belonging and responsibility. Society scaled down to its nucleus necessarily leads to family which acts like a cell in an organism. Families then unite into villages, villages into towns, towns grow into cities and cities create alliances to form whole countries. Thinking from first principles, it is quite logical to want to protect the most important building block of the body of our society. There is an unproclaimed war on the institute of nuclear family — if it is lost, our whole civilization dies.
It is, thus, imperative that wealthy individuals focus their attention on what matters the most — kin. When one wants to secure the wealth accumulated through a lifetime of hard work, there must be willingness to shape the immediate environment so that it becomes conducive to long-term fortune preservation. The most important part of such an undertaking is establishing a strong, loyal family. For, when the time comes, there is no better person to take care of a family estate than an actual heir. An heir, educated about the family business, the importance of long-term thinking and the lasting power of close familial ties. A successor to the empire of his parents who will, in due time, pass the reigns to his children, and so on.
A child’s mind is the perfect material to mold to your liking — whatever it absorbs at a young age will likely affect his whole life. Therefore, if you plan on bringing up a new generation that is loyal to your family rather than to the apparatus of the State, it would be wise to supplant your children’s education with private instruction or withdraw them from public schools altogether. At the end of the day, the future of your wealth is in the hands of your offspring. When it comes to preserving and growing fortunes, the odds are in your favour if your heirs are instructed by you.
Traditionally, when it comes to wealth management, families have focused on growing their fortunes. When passing his fortune to his heirs, the head of the estate usually expected them to continue building the family empire. What could be worse than having spoiled squanderers for children? But today, things are different. Simply preserving one’s wealth is becoming problematic. The future is so unpredictable that even the most popular types of assets are far from being a guarantee against financial and geopolitical threats. The problem is that traditional assets like stocks, bonds, real estate and commodities are all correlated and built upon the same financial system. Is there a way out?
The Bitcoin Generation
Our prospects would be a lot darker today if we did not have certain tools at our disposal, the most important of which is bitcoin. What can be better at instilling long-term thinking than a currency designed to store wealth and preserve its value perpetually? Satoshi Nakamoto’s decision to put a hard cap, 21 million total, on the issuance of new coins was, perhaps, the most important act of this century — it led to the creation of the soundest money humanity had ever known. Coupled with censorship resistance, a property that makes bitcoin virtually unconfiscatable, we now have a way to preserve wealth across generations. It is, therefore, our conviction that any family inheritance plan must include bitcoin as a hedge against the uncertainties of the world and ever inflating fiat currencies.
Bitcoin is the remedy to the printing press operated by ambitious individuals who think they can exchange “money” created out of thin air into real assets until the whole planet belongs to them. By storing value in a first-of-its kind digital currency secured by pure mathematics — an incorruptible force of Nature — you deny them access to the fruits of your labor and ensure that your heirs will have a better chance at safeguarding as well as growing the family fortune. This is why today’s most prudent parents fill the gap in public education by instructing their next generation on how money actually works, followed by an introduction to the best money of all — bitcoin. Can they be blamed for wanting to secure their children’s future? Hardly so.
Generational wealth and bitcoin go hand in hand. A future heir must acquire a lot of theoretical knowledge to be prepared for the life ahead. But it is practice that makes one truly educated. What better practice is there than being your own bank in a world in which autonomy and self-reliance are no longer commended? We believe that, in the decades to come, individual sovereignty may become a luxury. There will not be a lot of ways to claim it. Bitcoin is likely to become a tool that allows you to keep what is truly yours. Perhaps, it will be the only one. And, if so, can your family afford to ignore this asset any longer?