Turn 'Whom to Pass It To' into 'Whom to Entrust It To'

A family’s most unshakable rule is sometimes the very rule that kills it.

In 1901, the Rothschilds’ bank in Frankfurt closed its doors. It had not been beaten by any rival. This was the dynasty’s founding house — the point of origin from which, nearly a century earlier, five sons had fanned out to five capitals of Europe. The reason for the closing is the kind you read twice: the family had run out of sons.

Wilhelm Carl, the last head of the Frankfurt house, died that year without a male heir. The cousins in London, Paris, and Vienna had no interest in moving back to a city whose glory had passed. And under the iron rule the family had kept for nearly a hundred years, the bank could not go to a daughter, could not go to a son-in-law, and could certainly not go to an outsider. Which left exactly one road.

Better to shut the bank down than to let a son-in-law or a stranger take it over.

The founding house presided over its own funeral.

A wall written into a will

The wall had been built by old Mayer Amschel himself.

September 1812, in the Judengasse — the Jewish lane of Frankfurt. Mayer Amschel Rothschild had fasted through the whole of Yom Kippur; an old ailment flared, and on his sickbed he drew up the will that would set the family’s course for the next two hundred years. Three days later he was dead.

The will was a piece of fine craftsmanship. The whole of his shares and property was “sold” to his five sons for a nominal 190,000 gulden — a fraction of its true worth — a device that hid the fortune from the authorities and, at the same stroke, cut the daughters cleanly out. Daughters, sons-in-law, and all their descendants were shut outside the business, without so much as a right to be informed of its affairs. Partnership passed through the male line only. Any member who dragged a family quarrel into court paid a fine before anything else. And anyone who broke the rules or deliberately walked away could claim no more than the statutory minimum — calculated, of course, on that artificially deflated number.

At the time, the wall made sense. In the early nineteenth century there was no such thing as an enforceable cross-border contract; the telegraph had not been invented; a letter took days to travel from London to Frankfurt. A position of a million pounds — into whose hands would you dare place it? A brother’s, and no one else’s. Five brothers held five capitals, wrote to one another in cipher built on Hebrew letters, and ran couriers faster than any government’s. For the two decades after the Napoleonic wars, when the powers of Europe issued sovereign debt, more often than not it passed through their hands. In 1822 the Austrian emperor made all five of them hereditary barons. On the coat of arms he granted, a fist grips five arrows.

Inside the wall, life blazed. In 1836 the five banks’ combined capital stood at 5.91 million pounds — and Nathan’s single share in London was nearly double the entire capital of the old rival Barings. In 1875, over the course of one dinner, the London Rothschilds committed four million pounds so that the British government could buy the Suez Canal shares. And to keep the fortune from leaking through the wall, the family married inside it: of the fifty-eight marriages among old Mayer’s descendants, half joined cousin to cousin.

No sixth arrow

As the nineteenth century wore on, the center of world finance shifted, inch by inch, toward New York. The Rothschilds saw this as clearly as anyone alive.

With their resources, opening a branch in New York was no great feat. The hard part was deciding whom to send. The five brothers of the second generation had produced twelve sons among them. The able ones were barely enough to hold the five banks in Europe. Of the rest, one loathed the counting-house, another wanted nothing more than the life of a country squire, another buried himself in the scriptures of Orthodox Judaism. Nathan’s widow, Hannah, was adamant besides that her young sons not be posted abroad. A family of that size looked itself over, man by man, and could not point to one for New York.

They settled for second best: a salaried agent, August Belmont. The agent was capable — and the agent had a mind of his own. With every decision he made on his own account, he drifted a little further from being the Rothschilds’ man and a little closer to his own interests. During the Civil War he leaned toward a negotiated peace with the South, and the family’s name turned black in the North. The historian Niall Ferguson would later put his finger on it: this family’s most fatal misstep was its failure to plant a branch of its own in America. How far the business could reach depended entirely on how many qualified, willing men the household could count. Five arrows had pierced Europe. A sixth was not to be drawn from the quiver.

Nor was territory the only thing the wall shut in. Miriam Rothschild, a daughter of the family, taught herself into a Fellowship of the Royal Society and became the world’s leading authority on fleas. For a mind like that, the counting-house door never opened so much as a crack. The wall that kept outsiders out had locked half the family’s brains outside with them.

The stronger the wall, the fewer the people within it. The old house in Frankfurt merely carried that arithmetic to its final line.

In Bombay, one family worked out a different answer to the same problem.

The heir from the orphanage

The Tatas were looking for a child.

It was 1918, in Bombay. The family had just come from a funeral: the founder’s second son, Sir Ratan, had died far from home in England, forty-seven and childless. At the family council, someone remembered a boy from a distant branch of the clan — fatherless at four, raised with his brother in a Parsi orphanage, thirteen or fourteen by now. Dorabji, the head of the family, met the boy, liked him on sight, and led him to see Sir Ratan’s widow. Adoption; formal installation as heir. The boy, named Naval, was received into the founder’s own line.

He remembered that day all his life, and described it like a fairy tale: “It was as if a fairy had waved her wand.”

There is an oddity about the Tatas: the family scarcely produces heirs. After the founder, his elder son Dorabji died childless; his second son, Sir Ratan, died childless; JRD, who came next, had no children; and Ratan Tata, in the generation after, never married — “I came close to getting married four times,” he said, “and each time I backed off.” His own younger brother never married either. And this family, which could barely produce an heir, has handed its enterprise down for six generations.

On what? On entrustment.

Naval, out of the orphanage, was one act of entrustment; his son was Ratan Tata. JRD was another: the son of a distant cousin of the founder, born in Paris, French his mother tongue, head of the house of Tata at thirty-four. Asked what had qualified him, he answered: “Perhaps, because I was willing to work hard.” That French-speaking son of a far branch held the chair for fifty-three years.

The furthest entrustment of all came in 2017, when the business passed into the hands of Chandrasekaran: the son of a farmer in Tamil Nadu, who had walked into Tata’s software company as an intern in 1987 and in thirty years never once changed employers. For the first time in a hundred and fifty years, the man in that seat neither bore the name Tata nor belonged to the Parsi community. The year he took over, the group’s listed companies were worth some 8.6 trillion rupees. Seven years later, 30 trillion.

There was one entrustment along the way that miscarried. A man from outside the family once held the chair — behind him stood a family holding eighteen percent of Tata’s equity — and in under four years it ended in a bitter parting. It was the farmer’s son, who arrived holding nothing, who has worked steadily in the seat to this day.

What the Tatas hand down comes to exactly two things: a surname, and an eye for choosing people.

Sons cannot be chosen; sons-in-law can

Japanese merchant houses have a saying several centuries old: you cannot choose your sons, but you can choose your sons-in-law.

The son you are born with, you take as he comes. A son-in-law can be picked from all the young men under heaven. Once chosen, he marries the daughter, enters the family register, takes the family name, and completes a formal act of adoption. From that day he is son-in-law and son at once, and he inherits everything — the business, the surname, the ancestral tablets. The Japanese call the arrangement mukoyoshi, the adopted son-in-law. To this day Japan records on the order of eighty thousand adoptions a year, and most of the adopted are not infants but grown men. Osamu Suzuki, who steered Suzuki Motor for more than forty years, was born a Matsuda; he married into the Suzuki family, changed his name, and took over the business.

Kikkoman, which has brewed soy sauce for three hundred and sixty years, used the method to mend a gap in its line. Eight founding families govern the company together, under a rule that each branch may send exactly one member per generation into the firm. But across a century and more, no branch can guarantee that every generation will happen to yield one suitable son. In 1962 the Mogi Shichizaemon branch could find no fit heir of its own blood, and its head, following the old mukoyoshi practice, formally adopted a young man of twenty-four. From that day forward, his name was Kenzaburo Mogi.

The adopted son skipped not a single step of the road. He put in two years at the Bank of Tokyo, entered Kikkoman, spent nine full years in unglamorous posts, and only then was sent to study at Harvard. Many years later, there was a place for him at the company’s most important table.

Scholars of Japanese family business eventually ran the numbers: firms handed to adopted sons perform no worse than firms handed to sons by blood. Some perform better.

The bloodline may break. The name need not.

The Agnelli who was not an Agnelli

Early morning, November 15, 2000. The Fossano viaduct, outside Turin.

A car stood in the middle of the bridge, engine running, door open, no one inside. On the riverbed eighty meters below lay the sole male heir of the Fiat empire: Edoardo Agnelli, forty-six. The police did not move the body. They were waiting for an old man driving in from fifty miles away. Gianni Agnelli, nearly eighty, arrived, looked once, turned in silence, got into his car, and disappeared into the morning fog.

It was not the first time this family’s line had snapped. The heir Gianni had originally chosen — his nephew Giovanni Alberto — had died three years earlier of a rare cancer, at thirty-three. Within a few years, two prepared roads had broken off, one after the other. Gianni himself had lost his father at fourteen, in a seaplane accident; after his grandfather’s death, the business was held for twenty years by a regent — a professional manager — before it came back into family hands. No family knew the word “interruption” more intimately than this one.

In 1997, not long after the nephew’s death, the seventy-six-year-old Gianni announced his decision: the heir would be his grandson John Elkann — his daughter’s son by her first husband, barely into his twenties, half American, and not an Agnelli by name. The newspapers buzzed; someone asked in print whether, in a dynasty where the princes usually accede in middle age, so young a king was realistic. Gianni did not argue. The grandson’s schooling had in fact begun long before: sent, in his university years, to apprentice in a Turin factory, starting on the assembly line; then dispatched under a concealed name to work at companies outside the group; then walked, department by department, through the whole of the group itself. By the time he was pushed to the front of the stage, the grinding had gone on for nearly ten years.

In January 2003, Gianni died. In May 2004, his brother Umberto followed. Two heads of the house gone in a year and a half. Elkann took over at twenty-eight, at a company that had burned through four chief executives in two years and was losing money at a rate that had all of Turin saying Fiat was about to be sold. He passed over every senior executive in the building and named a little-known director as CEO: Marchionne — an Italian-Canadian in a black sweater who had never worked a day in the car business.

The following year, Marchionne seized on an option contract with General Motors and forced the Detroit giant to pay two billion dollars to walk away from it; by year’s end, Fiat was back in the black. Later, with hardly any cash changing hands, they picked up Chrysler and merged their way into the world’s fourth-largest automobile group. Through all of it, the division of labor never once blurred: how to do it was Marchionne’s call; whether to do it, and where to head, was the family’s.

Today the Agnelli family holds less than fifteen percent of the shares and sits, entirely secure, at the top of the empire. And the person in the topmost chair is still the grandson who does not carry the Agnelli name.

The one who pushed the wall open

Back to the Rothschilds.

In 2021, one branch of the family installed a new head: Ariane. She had married into the family; when her husband died, she took over the bank. For the first time in more than two centuries, a bank flying the Rothschild flag had passed into the hands of a woman — a woman without one drop of Rothschild blood in her. The wall old Mayer had raised from his sickbed in 1812 was pushed open, two hundred and nine years later, from the inside.

The old house in Frankfurt never lived to see it. The roster of heirs it kept was complete on the day each child was born; it could only ever grow shorter, never longer. The family guarded that roster until 1901, and what the guarding earned was a deed of liquidation.

The houses that entrusted their business outward, meanwhile, all measured with the same yardstick — not nearness of blood, but whether a person could endure the hardest posting and come out proven. The boy led out of an orphanage. The adopted son-in-law who sat nine years on the cold bench. The grandson who turned screws on an assembly line. The farmer’s son who did not change employers for thirty years. Not one of them dropped out of the sky.

Naval never forgot the day he was led out of the orphanage. “It was as if a fairy had waved her wand.”

There was no fairy. There was only a family that, on that day, gently set down the question of whom to pass it to — and asked another instead: whom to entrust it to.

---

Further reading

• Niall Ferguson, The House of Rothschild: Money’s Prophets (1998)
• Vikas Mehrotra, Randall Morck, Jungwook Shim, and Yupana Wiwattanakantang, “Adoptive Expectations: Rising Sons in Japanese Family Firms,” Journal of Financial Economics (2013)
• Dennis T. Jaffe, Borrowed from Your Grandchildren: The Evolution of 100-Year Family Enterprises (2020)