Are family-run businesses a thing of the future or the past?

Some themes are eternal in India. Brothers fighting, mothers mediating. This has been going on from the Ramayan andMahabharat to the Ambanis to the 24-second video of Malvinder Singh showing his bruises to the camera and accusing his brother Shivinder of beating him up.

The shenanigans of the Singh brothers are now so predictable that they may be one of two things that are constant in Delhi, along with air pollution. As old-fashioned and Ambaniesque as the Singh quarrel is, its longevity points to the death of a fallacy of the globalised world – the idea that family-run companies are somehow a thing of the past; that nameless, faceless organisations, run by technocratic boards, are the future.

This is a myth that has been propelled for several decades now and for a time, especially looking at technology businesses, it almost seemed like it might come true (after all, wasn't Steve Jobs thrown out of Apple by the board?).

For a while, we were told that it was futile for entrepreneurs to own their companies – until Google and Facebook came along and proved that with a special class of shares that are weighed far more than the stock owned, the founders could, in fact, almost infinitely, keep raising cash while continuing to control the company.

That’s not all. Consider some data from the research body, the Conway Center for Family Business. Around 64% of U.S. GDP comes from family-businesses which have 62% of the jobs and bring about 78% of all new jobs. Around 35% of Fortune 500 companies are family-owned (think Walmart, Koch Industries, Cargill, Berkshire Hathaway etc). In fact, family firms make up between 80-90% percent of all businesses in North America.

According to E&Y, the top 139 family businesses in North America generate $2,418.4 billion (12.3% of North America’s GDP) in revenue a year, employ 6, 708,107 people (3.8% of North America’s workforce) and have a market capitalisation of $1,488.8 billion.

Meanwhile, in emerging markets, says McKinsey, around 60% private-sector firms with revenues more than $1 billion are family-owned. If you think this is about to change, think again. The consultancy analysed that around 4,000 other family-owned businesses in these markets could hit the $1 billion mark by 2025 and collective, at that time, family-owned businesses would represent 40% of the biggest companies in the world – up from about 15% in 2010.

Which are the three biggest family-owned businesses producing countries in the world? China, the U.S. and India, of course–in that order. China has 159 such firms, according to a Credit Suisse Research Institute report, while the U.S. had 121 and India 111–together these firms have a market capitalisation of $2.8 trillion.

There are a few critical reasons why family-owned companies are back in stark focus. The first, of course, is that the nature of globalisation might be changing and if nations refocus attention on their borders and, in many cases like Brexit, pull up, at least partially, the draw-bridge, then some of the old assumptions of the advantage of wide-and-seamless footprint around the world would have to be re-interrogated. A management problem emerges from this scenario, which McKinsey hinted at–instead of getting smart managers and then training them to ‘think like owners’, might it not be easier and faster to just let the owners take charge of risk and reward?

These questions will become critical in India in the coming years as a next generation in India’s biggest companies look to debut–from Anant, Isha, and Akash Ambani to Anand Piramal, and from Rishad Premji to Roshni Nadar.

We know too little about what these men and women think about India and its future. This is critical because their decisions–of investment, engagement and as flagbearers of India Inc–rest upon their thoughts and opinions about their own country. As a rising power, India needs people who could argue its case in the world–quite like Alibaba’s Jack Ma (now a member of the Communist Party and the owner of the South China Morning Post newspaper whose aims is to tell the China story to a global audience) does for China.

But are they up to the task? Do they know what story to tell? Perhaps but we can’t be sure just yet. While they consider the answer to this question, here is a paper they might want to consider reading. In 1995, the researchers Craig Aronoff and John Ward wrote a paper called Family‐Owned Businesses: A Thing of the Past or a Model for the Future? Two broad takeaways from the paper are worth remembering–that the family “almost universally appears to be society’s fundamental economic unit” and that what was the American Dream for one generation could easily become “the fulfillment of The Next Chapter of the American Dream” for the subsequent generation.

In essence, the dream never dies, or at least does not have to, for families (are Shivinder and Malvinder listening?) or for nations.