6 Things I Learned From the Book "Family Fortunes"

By Markets Fool.com

I read the book Family Fortunes by Bill and Will Bonner.

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Bonner is a successful businessman and a witty financial writer, creating a fun book that looks at how families build -- and keep -- dynastic wealth.

Here are six things I learned.

1. A lot of wealth is caused by accident. Family money is not:

As we say elsewhere in the book, you can have money by accident. You can have a family by accident . But you can't have family money by accident. That's why people who win the lottery, for example, are usually broke within 48 months. And why major sports stars and Hollywood celebrities, who earn millions during a few short years, often end their lives in complete poverty.

2. Money takes on a new meaning when you have more of it:

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The rich are often accused of being overly concerned with money. In our experience, it's the poor who spend the most time thinking about it. When we were poor, we had to think about how we could afford to get the radiator fixed in our old truck or how we might make ends meet if we lost our job. When we built our first house, we scrounged materials in junkyards because we didn't have the cash to buy them new. We studied the classifieds to find old cars. We saved coupons, and we knew exactly how much was in our wallet and how much gas we could buy when we stopped at a filling station. Later in life, we became much less interested in money. We thought about it less. We knew we had plenty. We turned our attentions from our standard of living, measured in dollars, to the quality of our lives, which we couldn't measure at all.

3. Family money resides in ugly places:

As a general rule that applies to businesses as well as real estate, the less desirable the property, the more profitable it is on an annual basis. Slum real estate and parking lots produce decent yields. Horse farms produce less income than soybean farms. Pawnshops are more profitable than art galleries. You can easily see why this is. People want to own art galleries. They only own slum apartment buildings for the money. So the money has to be good in the slums. It doesn't have to be good in art galleries. As they say, an art gallery is a good way to make a small fortune out of a big one.

4. There is a big difference between having money and owning a business:

  • Money is quiet. A business talks back to you.
  • Money is anonymous. A business has a distinct personality.
  • Money does what it's told. A business has a mind of its own.
  • Money is fickle and runs around. A business is steadfast and loyal.
  • Money is easy come, easy go. A business drags its feet in coming and digs in its heels when it is time to go home.
  • Money is easy. A business is tough.
  • Remember our general rule: The harder it is, ceteris paribus, the better it is. The longer it takes to make money, the longer it is likely to stick around.
  • The harder it is to make, the less likely you are to lose it.

5. Old money is usually slow money:

A few entrepreneurs were able to cash out and walk away with millions. But after the wash-out in 2000, most ended up with nothing. Either way, they were not building family wealth, at least not the way we recommend. They were making fast money -- a big score. We don't recommend that approach for two reasons. The first reason is obvious: It usually doesn't work. It's hard to make fast money. In fact, the fastest way to make money is to make it slowly. You can try to make it fast forever and never get anywhere. But try to make it slowly . . . keep at it . . . and you'll probably end up with at least something -- eventually. The other reason is that when you build your business fortune slowly, it is much more likely to last. Because you're not just trying to take advantage of dimwitted investors. You're actually trying to build a successful business.

6. None of this is easy:

There is no secret to success. Successful people just put in more hours than other people.

Go buy the book here. It's great.

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The article 6 Things I Learned From the Book "Family Fortunes" originally appeared on Fool.com.

Contact Morgan Housel at mhousel@fool.com. The Motley Fool has a disclosure policy.