October 10, 2012
Media Watch: Round up of the latest thinking in "the buckets"
In the third installment of our Media Watch series, The Practitioner once again proudly presents another round of cutting edge reports from "the buckets”, or core disciplines, of behavioral science, management science, finance and law.
A new report resulting from a 17-year University of Pennsylvania study of baboons living in the Moremi Game Reserve in Botswana, suggests that robust social networks (rather than "inherited” dominance) plays the most crucial role in survival. According to the study, "when it comes to evolutionary success, the inherited advantage of high rank can’t explain everything.” Dorothy Cheney, one of the lead researchers says, "This belies the idea that everything is competition and conflict.” The study outlines 3 genetic dispositions that predict the likelihood of success. An interesting parallel may be drawn between the Penn study and human beings (as well as family businesses). Could family businesses (and consultants) employing more of the softer side, collaborative approach have increased rates of longevity and success?
Read the study here.
Getting in Under the Wire
While for some of us, it’s in our nature to put things off until the last minute, for wealthy families in the US looking to facilitate a tax-efficient inter-generational business transfer, December 31, 2012 presents a true now-or-never moment. The New Year will also be "ringing in” rising tax rates, which would effectively raise the maximum estate tax from 35% to 55%. But there are preemptive remedies to combat this. One of the most tax-friendly transfer tools is the Intentionally Defective Grantor Trust (IDGT), which allows families to leverage a $10 million gift into an additional $90 million via an intra-family loan. Regular Practitioner readers will remember Randy Waeshe discussing this in his article, "Sharing the Wealth” (available here).
Read the latest on this topic here.
Part of keeping your investment portfolio robust means knowing when and how to mix up your asset allocation. For ultra-high net worth families, this mix is now beginning to include private equity. In fact, "family offices have committed around $8bn to private equity funds since 2009,” according to the article entitled, "Family offices look to private equity” in Financial News. Rick Pitcairn, of Pitcairn and Wigmore Association, discussed this latest vehicle last week with CampdenFB.
Read the Campden article here.
A Body in Motion…
A body in motion tends to stay in motion and will not change its velocity unless an unbalanced force acts upon it. Also known as uniform motion, Newton’s First Law of Motion (one of three physical laws forming the basis for classical mathematics) may also apply to innovation in family businesses. A recent study shows that organizations demonstrating innovative practices tend to make progressively more innovative choices in the future. According to a new article in the Journal of Management, entitled "Strategic Momentum: How Experience Shapes Temporal Consistency of Ongoing Innovation”, this phenomenon is called "temporal consistency”. The article proposes "two different ways in which experience influences an organization’s capability for consistently introducing innovations across time.”
Read the article here.
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Yours in Practice,