How Not to Raise Billionaire Brats

Image: Michael Prince for Forbes

The Forbes 400 Summit on Philanthropy, held in June at the United Nations

The talk at Forbes’s second annual summit on philanthropy, held in June at the United Nations, was about children. Specifically, how to raise them in a way that encourages them to change their world, rather than obsess over which sports car is in their garage. Warren Buffett, his son Peter, Marilyn Carlson Nelson (former chairperson of the Carlson Companies and her family’s matriarch) and Liesel Pritzker, from the fourth generation of that Chicago dynasty, led a roundtable on the singular circumstances of super-wealthy families and held the audience of 150 billionaires or near-billionaires rapt.

Forbes: Warren, let’s start with you. How do the very affluent raise children to share their values? How did you do this in your family? You’ve successfully raised three children who are very active in philanthropy.

Warren Buffett: Our kids had a very normal growing-up. I mean, they’ve only and I’ve only lived in one primary house that I’ve owned in my life, and I bought that in 1958. So they did not see us moving into progressively fancier houses; they did not ride in private planes. They went to school on the bus. Every member of the Buffett family in Omaha has gone to a public school. They went to the same school that their mother had gone to. They went to the same high school that she’d gone to.

We were living in an area where, in today’s dollars, our neighbours were making maybe $75,000 a year, or something of the sort. So they never really thought that we were economically different.


Forbes: As your wealth grew, did you actively try not to change your lifestyle?
Warren Buffett: No, I just lived the life I wanted to live, and my wife lived the life she wanted to live. And our kids grew up that way.

There wasn’t anything that we wanted that we didn’t have, but we didn’t crave a lot of possessions or anything like that. We were enjoying our life.

Our house was the centre of activity, particularly for my daughter’s friends. And the neighbours didn’t think of us as doing anything special. They kind of wondered what I did, because for six years I didn’t even have an office.

For six years I worked at home out of a room of my bedroom and had no secretary and no bookkeeper. So there was no reason for our kids to develop any unusual feelings about money.


Forbes:  Peter, when you started seeing that your father was on the Forbes list of richest Americans, how did you square that with your father and how he raised you?

Peter Buffett: Well, that would be about the time that we found out how much money we had as a family. I’m not kidding. It was when I was in my 20s that my mom and I talked at some point, because there he was, on this list. And we laughed about it, because we said, “Well, isn’t it funny? You know, we know who we are, but everybody’s treating us differently now.” It was a fascinating switch, although not a huge one because we didn’t live in that world or a cultural framework where there was a lot of wealth being shown. Our friends were as surprised as I was.

Warren Buffett: The kids were formed by that time, and they knew who their friends were, and their friends were their friends because they liked ’em, and not because they were the rich kid on the block or anything of the sort.


Forbes:  Marilyn, you had a slightly different situation. You’re the second generation in the family business. Your dad was building it up as you were growing up. By the time that you were running Carlson, you probably had to deal with: “How do I raise kids in a family that’s fairly affluent?”

Marilyn Carlson Nelson: Unlike the Oracle, sitting next to me, who went into a room upstairs and wove straw into gold, my dad was an entrepreneur who had this vision to build a company. He had a very humble beginning. He was from a Swedish immigrant family. And we’d go out to dinner, and if dessert wasn’t included on the menu, he’d ask us, my sister and me, if we wanted to order dessert. If we said yes, he’d scowl at us and give us a lecture on compound interest. [Laughter.] And we got it over and over again. We had to do the same thing about voting whether we would invest in the company or take a summer vacation. And we got three votes: My mother, my sister, and I, and he had four. So we did sometimes get to take a vacation.

As time went on and the three families—my sister’s family, mine and my dad’s—all lived next door to each other, that same conservatism showed up when he would drive past my home and call me and say, “Are you giving a party?” I’d say, “No, why?” And he’d say, “So many lights on.”

So I think the sense of respect for capital was clearly something that we grew up with. And my children grew up with, very obviously, a grandfather who was entrepreneurial, had a passion for the business.

He made it the most exciting thing on earth every Sunday after church to go stop at one of our properties. And he’d ask the kids questions: What did they notice? Was it clean? Were the people nice? Were they friendly? And, “What a joy it is to be in the service business.” So the family had this purpose.

Image: Glen Davis for Forbes

The Carlson family when Marilyn (girl on left)was eight

He also talked a lot about the best philanthropy being a job. And so every time we’d open a new hotel or a new property, it was important to him to share how many jobs we created. We had a kind of oral history, and he left a credo: “Whatever you do, do with integrity. Wherever you go, go as a leader. Have the courage to lead. Whenever you serve, serve with caring. Whenever you dream, dream with your all. And innovate, and never give up.”

We have only seven in our next generation, so we have more than enough jobs to go around. My daughter’s the new chairman. As much energy as I have, I feel like it’s important to put succession in place and demonstrate trust. And our family members serve both on the board of our company and they are the board of our foundation.

The important thing that we’ve done, I believe, is that our family makes site visits. We get on a bus
and we make site visits together.

And so I have the sense that, between the exposure to the company, they’re watching what it means to us when we open a hotel in Liberia, when we opened some of the new hotels that we’ve opened in Africa, their sense of what we’re doing to contribute gives them a sense of purpose, both in their corporate life and in their philanthropic life.


Forbes:  Liesel, you grew up in the Pritzker family. When you were a teenager, you sued your father and your relatives to figure out what was going on in your trust. This led to some of what you’re doing now. Talk about how you’ve taken your inheritance and used it, and what family values led you to do what you’re doing.

Pritzker: Being an inheritor of wealth, one thing that I knew growing up in Chicago, where my family’s from, is I knew I came from a very philanthropic family.

I remember in third grade going to the Pritzker Gallery at the Art Institute. You just know sort of, growing up, that you come from a family that takes their civic responsibility very seriously. And I’ve seen that pass on through the generations.

One thing that I always knew, being an inheritor of wealth, is: ‘Okay, well, what’s my responsibility to steward this wealth properly? What can I do to help make the world a better place?’ And because I had the ability to start doing that at a young age, I treated it like a job.

I started volunteering. I started interning at microfinance institutions. I started travelling. Then, after meeting and talking with a lot of peers and a lot of very smart philanthropists, I decided to take a portion of my assets and set up a foundation. But I don’t think, at 24, I had the ability to run that foundation, so I put my mother as the president, and I was the vice president. We’ve continued working with that foundation. We do a lot of international education initiatives and partner a lot with the UN, which has been terrific.

But I don’t think that just because I inherited money, that makes me a good philanthropist—or that’s a business necessarily that I should go into.

It’s a skill. It’s something that you have to learn, and learn from other people, and learn by doing. And so I’m glad, just in the years that I’ve been doing what I’ve been doing, seeing the intricacies, seeing programmes start and stop, seeing how good public/ private partnerships can be created, seeing the power of the private sector in leveraging whatever you’re doing philanthropically. I think the benefit of starting that young and being able to learn instead of waiting until I was much older has benefited the work that we’ve been doing.


Forbes: Warren, talk about when you made the decision to give away most of your money, and how you decided how much you wanted your kids to have and why you decided your kids should be running foundations.
Warren Buffett: My wife and I made the decision when we were in our 20s, once we had everything we wanted or needed. I kept telling her that there’d be a lot of money, and she laughed.

The idea always was to give it away. We formed the family foundation back in the 1960s. We also jointly came to the conclusion that, although we might have one big family foundation, that it was important that each of the three children have a separate one.

I’ve seen some foundations that are created where lots of problems have occurred because there’s three or four or five children on the foundation board, and some of them feel that their interests get slighted and so on. And those things tend to grow, and then they start remembering that one of them twisted the tail of the cat back when he was six years old [laughter], and you know, it can accelerate.

So, I guess probably 25 years go, we set a relatively small sum aside that each one would get. But then in the late ’90s, I just formed three dummy corporations. Then, at Christmas, I presented these three corporations to each of the three children. We started them with $10 million each, but we told them there would be more and we would not judge them one against the other. That in philanthropy who knows what activities will pay off when?

So we were going to add to it as we went along, but we would add equally.

I was not on the board of those foundations. My wife was not on the board of the foundations. They were entirely left up to them. We increased those several times, and then last year on my birthday I doubled the amount that goes to each of the foundations. The letters explaining what I expect the kids to do are on BerkshireHathaway.com, and I told them I expected them to fail on some things; if they didn’t fail, they weren’t doing important things. And that I was proud of all three of them, and I knew I’d be proud of what they did with this money. It’s a pretty simple approach.

The Buffet family in Omaha, 1956

Forbes:  Peter, what was it like for you then?
Peter Buffett: My sister called my wife, Jennifer, and me in March of 2006 and said, “Are you near a fax machine?” And so I got near a fax machine. And a fax came through that was essentially saying that my dad was going to do this. We had no prior conversations.

Now, it’s true we had a very small foundation, and then a larger one, starting in ’99. It went from $10 million to about $120 million, I think, over the course of six years or so. And so we certainly learned a lot. I consider that he was priming the pump, sort of, for this big gift, what we call the big bang, in 2006. But there was no real discussion about that. So we had to get our house in order pretty quick.


Forbes: And how was that in terms of figuring out what kinds of things you were interested in funding?
Peter Buffett: That took time. Jennifer and I do it together, which is great, because I had a career. That’s the other thing—I had my life. I had a life I loved. I had things I would do every day. And so to suddenly take this on at that scale alone would have been an extraordinary—I certainly won’t use the word ‘hardship’, but it would have strained where I wanted to put my attention.
We took two years really listening. We were here in New York, and it was like a master class, because we could talk to anybody we wanted to. It’s funny, you know, you have a billion-dollar foundation and your jokes are funnier, you’re better looking, and it’s just—it’s magical.


Forbes: And people will take meetings with you.
Peter Buffett: Right. We’ve really respected people’s time and energy, but took the meetings because we learnt a tonne. And that was priceless, really.


Forbes: And have you been failing, as your dad would like you to do, in terms of taking risks with your philanthropy?
Peter Buffett:Absolutely. I feel like if you’re not on the edge, you’re taking up too much room. We’re out there trying to do things all the time that not only do I hope some of them fail but I also know they’re going [to] take a lot of time. I know it’s going [to] be 10 years, 20 years, generational change we’ll never see. That’s he other thing: Time horizon is a big issue for us, in a good way.

Forbes: How important is it to encourage children to do what they want to do?
Warren Buffett: We never gave any instructions on specifics, but I think they did pick up the values that were meaningful to their mother and to myself. One of the things I’m most grateful to my father for, particularly, was whatever I did he was for. He was not trying to live his life through me. I tried to pass that on to my children.


Forbes: Liesel, how much influence did your family have on your own philanthropic take on the world?
Pritzker: I would say the issues that I’m more passionate about were more influenced by my own travels and my own studies, but the general concept of being philanthropic, that this is expected of you, this is very much a part of the family business.

It is pervasive throughout the family.

One other thing: When I talk with peers of mine who are also inheriting wealth, I think one of the best things that ever happened was Paris Hilton’s shenanigans and the concept of not being a trust fund baby. You do not want that label associated with you, which if you’re an inheritor of wealth [it] naturally comes. But what you can do is turn that into being an influencer, using your social capital, your intellectual capital, your philanthropic capital and your investment capital to help make the world a better place and to encourage other people to do that with you.