Selling Off the Family Business
With the recent sale of The Washington Post to Jeff Bezos, the less-recent sale of the Wall Street Journal to Rupert Murdoch’s News Corp., and the N.Y. Times’s exuberant denial that it is for sale, one thing came to mind: family businesses.
Not an obvious common thread, perhaps. But I have long been interested in how family-run businesses succeed or fail — and in fact this week have just re-released an hour-long Freakonomics Radio podcast on the topic, “The Church of ‘Scionology’” (subscribe here). It features stories on a pair of family beer businesses — Anheuser-Busch and Yuengling — as well as the strange tale of adult adoptions in Japan in the service of corporate stability (i.e., if your son or daughter isn’t up for the job of running your company, then you can simply adopt your successor).
The Post and Journal were long-held family businesses, the Post by the Graham family and the Journal by the Bancrofts. The Times, in an ownership structure similar to the Post, is a public company whose voting shares are controlled by the Ochs-Sulzberger family, and Arthur Sulzberger, like his ancestors before him, is the publisher of the newspaper. I haven’t worked at the Times for some time but the feeling then — and I am told that the feeling persists — is that the Sulzberger family has done an extraordinary job of protecting the editorial integrity of the newspaper, as might be expected of a family steward, but has been less competent than one might wish in shepherding its business interests. (This is all speculation, of course, as there is no counterfactual.)
The change in ownership of these and other big newspapers is of course a commentary on the state of the media business. But to me, it’s also a commentary on the state of family ownership of business in general. As the podcast makes clear, family ownership of business seems to have a long and healthy tradition in the U.S., but in fact we are among the world’s laggards when it comes to dynastic business.
And that, economists say, is a good thing: passing on a company to an heir generally hurts a firm. As we also discuss in the podcast, one reason to keep a business in the family is that there is an absence of reliable markets, laws, and corporate-governance codes. That is one reason why you see such high rates of family ownership in other parts of the world, especially Asia and South America.
So if you get a little weepy as you see these great family institutions passing into the hands of strangers, you can at least comfort yourself with the knowledge that our economy and political structure are relatively robust. Personally, I can’t wait to see what Bezos does with the Post. Is he the best person alive to run it? Who knows. But thinking that the best person to run any company is someone who just happens to share DNA with the company’s founder is, to my mind, a much worse bet.