A common wealth?
With Baby Boomers about to pass down trillions in assets to Zennials, who really stands to gain? And can intergenerational collaboration reshape capitalism for a better future?
Summary
As younger generations start to inherit trillions from Baby Boomers, banker and author Ken Costa explores the risks and opportunities of this historic wealth handover. He warns of deepening inequality and a clash of values between Boomers and their Millennial and Gen Z heirs, but also sees the chance to reshape capitalism. Advocating for ‘CO’ – a shift from individualism to collaboration – he calls for intergenerational dialogue and inclusion to build a fairer, more sustainable system.
“A generation goes, a generation comes, yet the earth stands firm forever.” So says Ecclesiastes 1:4. And in essentials, this is correct. The fact that my generation, the Baby Boomers – whose youngest members are now in their 60s – are currently ceding our power and influence to those younger than us is nothing new. It is merely the passage of time running its course.
But there is a feature of this particular generational changeover that makes it unique: wealth. Wealth has, of course, always been passed down the generations. But the magnitude of the transfer that is occurring – it has already started in earnest in the form of gifts and house purchases – is unprecedented. In the US alone $84trn is expected to be passed down over the next two decades. That figure in the UK is estimated at between £5.5trn and £7trn.
Generational clash
This is the largest handover of generational capital in human history. The beneficiaries of this ‘Great Wealth Transfer’ (as it has been dubbed) are empowered as never before by technology, and this empowerment is further strengthened by their influence through social media – we could arguably just as well call our current moment the Great Power Transfer or the Great Influence Transfer.
The potential fallout from the transfer could be either catastrophic or magnificent. After this particular coming and going of generations, the earth will hopefully still be standing firm. But the same cannot necessarily be said for global capitalism.
Why? Blame it on the conflicting ideals of the generations passing on the wealth and those receiving it. We are in a distinct period of generational clash. Boomers and their Millennial and Gen Z (taken together, Zennial) heirs do not see eye-to-eye on much, appearing content to stay in their silos and mudsling. Boomers characterise Zennials as a feckless, work-shy and entitled bunch who spend too much money on flat whites and avocados instead of saving for a deposit on a house. Meanwhile, Boomers are ridiculed as an analogue, out-of-touch, emotionally stunted group who have ridden the wave of the low-interest decade and asset inflation, enriching themselves at the expense of the next generation.
This is unsustainable. Not just because it is unpleasant and unfair to all involved. But because the Great Wealth Transfer is a unique opportunity to build a better capitalism, or risk losing it forever.
Capitalism is the best method we have for securing freedom and prosperity for all. But we must ensure that the younger generations want to participate in the market rather than simply burn it to the ground. If they have no money, they can’t buy houses or other assets. You can’t be a capitalist without any capital. Zennials and Boomers must both be included in the development of this better capitalism or else it has no chance of survival. The exclusion of one will, by definition, exclude the other. The hindsight of the Boomers and insight of the Zennials are both essential pieces of the puzzle.
Many Zennials are suspicious of, if not downright hostile towards, the benefits of capitalism and the market economy. This might be expected of younger generations, who throughout history have typically been more liberal politically, slowly becoming more conservative as they get older. But it is worth remembering that the oldest Millennials are now well into their 40s. There is no longer any guarantee that Zennials will ‘grow out’ of their progressive views or their scepticism of capitalism.
“Zennials are a hugely capable, even prophetic generation. What they really want is change”
When it all came down
And they have good reason to be sceptical. For Millennials especially, the spectre of the 2008 global financial crisis looms large. It is their ‘original sin’, which ended the sustained period of unprecedented global economic growth and prosperity they had been raised in just as they were entering the world of work.
The formative years of my and my contemporaries’ lives were, by contrast, shaped by the zeitgeist of the 1960s. The decade which tore up the limitations, borders and perimeters of the old world. Nothing was off limits. A me-first world which proudly proclaimed that all the boundaries had gone. And all this coincided with the exceptional post-war economic boom in the West. In the 1980s, 1990s and 2000s the dominant trend was rising prosperity. At its worst, this became the loads-a-money, Gordon Gekko, Greed-is-Good caricature. It is no wonder the 1980s were termed the ‘Decade of Excess’. Financial markets were deregulated to create greater competition, and monetary policy was eased to levels that led to the current indigestion and danger in the capital markets.
And then it all came crashing down. I can remember the moment exactly. I was in my office when the rumours first started. There had been whispers for months, but there were always whispers. This time, however, it felt terrifyingly real: the most serious financial crisis since 1929’s Wall Street Crash was upon us.
From my office window I could see the City of London as usual – the hushed, almost churchy quiet and the rows of gleaming buildings. It looked horribly like the calm before the storm. Within days, Lehman Brothers would collapse. The image of bankers with their cardboard boxes would fill screens around the world. In turn, that would trigger the meltdown of the financial system on both sides of the Atlantic, undercutting the very foundations of our modern economy. Banks running out of money, employees unable to be paid, families being evicted from their homes. The mechanics of society screeching to a deathly halt. As I saw it all ahead of us that day, I felt a growing sickness.
I was chairman of one of the most prestigious investment banks in the world at the time. When it came to the financial universe, at least, I had reached as far as it was possible to go. But that day was like nothing I’d ever experienced before. There is a tendency in life to imagine that the status quo is permanent, almost a fact of nature. But, as I stared around the magnificent buildings of the City, I knew that the opposite was true. We had made all of this. The banks, the financial system, even the notion of paper money in the first place – all of it was merely a human invention. We had invented the means of our own destruction. Soon there would be panic outside my office door.
But in that moment, there was just a fragile calm. The sense of a world held in suspense, waiting for the axe to fall. Scientifically, we knew more about the world than any generation before us. Technologically, we had created elaborate systems that spanned the globe. Our planet was connected like never before. And now that very connectivity was about to undo us, sending panic ricocheting to all corners of the earth. The system was about to show itself for what it was. Something impermanent. Illusory. Nothing more than elaborate smoke and mirrors. The foundation of our modern society, the rock on which our system was built, trickled away like sand.
And it is in this new world that Zennials started their careers.
Seventeen years on, the effects can still be felt. Recent analysis from the Institute for Fiscal Studies shows the alarming level of stagnation in Britain ever since, with the average working person earning a lower wage in 2022 than the average working person in 2008, when adjusted for inflation.
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Empowered for change
But this suspicion of capitalism, this scepticism, however legitimate it might be, needs to be assuaged or else we will all lose out. Zennials are a hugely capable, even prophetic generation. What they really want is change. Change to a better, more inclusive capitalism is, I believe, the solution that will benefit everyone. But the change needs to happen quickly, and it needs to be effective.
As a generation, Zennials have a firm and explicit agenda for the change about to come. They are significantly empowered, not only by the financial endowment they are about to receive, but by technology, a world in which they are natives, not immigrants.
Like it or not, Zennials will drive the global agenda of the coming decades. The programme will be heavily accented towards wider social concerns, ethics, environmental protection, justice and equality. A new creeping socialism could well be the result of this intergenerational transfer if capitalism itself does not undergo a major change. I believe this is the biggest danger of the Great Wealth Transfer.
Higher taxation and larger government will be seen by many in this cohort as an inevitable consequence, necessary to achieve their overall social objectives. Danger signals should be flashing to those who wish to see a vibrant, incentive-based, risk-rewarded, value-creating capitalism emerge from this moment of great transition. But this is still achievable, through something I like to call CO: the tool via which a socially energised capitalism, which includes rather than excludes, emerges from the Great Wealth Transfer.
In essence, CO is a shift from the radical individualism of post-war generations to a prioritisation of collaboration, compassion, community and collective experience. More succinctly, it’s a shift from me to we. A shift to understanding that what individuals can gain from working together in CO is greater than what they give up in order to participate. It means CO-leading, CO-working and CO-creating. We give up far less than we gain by acting together towards a CO-destiny. And the gains are economic as well as ethical.
Connection at the core
Collaboration will be the key. And conversation. Being aware of each other’s needs, challenges and perspectives – even fears – is the key to unlocking the power of intergenerational collaboration. As mentioned, the exchange of ideas between the generations that we need to preserve and expand capitalism is currently non-existent. If that continues, either capitalism itself could come crashing down altogether, or the inheritocracy that has emerged over the past decade or so becomes more entrenched, further excluding those not set to benefit from the Great Wealth Transfer.
Because that is the outcome if we continue down this path. Our current capitalism is effectively set up to exclude, hence the inequality we see all around us. Left to run its course in this same environment, the Great Wealth Transfer might only serve to make this more acute. The haves will end up with more and the have-nots with less. If you have access to the Bank of Mum and Dad (and Mum and Dad have planned effectively), you’ll be sitting pretty; if not, then good luck. The intergenerational inequality and conflict we have discussed will simply morph into intragenerational inequality and conflict. No matter which side you sit on, that is surely not a desirable outcome for anyone.
“Danger signals should be flashing to those who wish to see a vibrant, incentive-based, risk-rewarded, value-creating capitalism emerge”
But, through intergenerational collaboration, we can change this. We can develop a renewed, invigorated, sustainable, socially energised capital system that leads to the kind of immense prosperity and productivity that benefits all.
Boomers need to step up to ensure that the baby of value-based capitalism is not thrown out with the bathwater of a purely values-driven agenda. We need to reassert the importance of profit but also recognise where it exists alongside the essential driver of a purposeful capitalism. Because Zennials aren’t happy to just do well, they want to do good. And, no matter what level they are at in a company, they want a stake in what the results are and to know that their input is valued.
This flies in the face of our old version of capitalism where ideas come from the top and those further down the ladder do the work to put those ideas into action. But that is hardly the most productive way for an organisation to run, anyway, as it means ignoring ideas that could be valuable. Involving Zennial employees now in the formulation of mission statements gives them a stake in the ethos and purpose of an organisation and also allows for that invaluable combination of insight and hindsight that will be so vital in the coming decades.
In the workplace, this will mean implementing processes like reverse mentoring and ‘feedforward’ – rather than feedback – so that businesses can adapt effectively to a new world in which Zennials predominate. This is how we develop the CO-working environment that will be crucial to the new capitalism. The type of hierarchical structures that have been embedded in the organisations I’ve worked at for the majority of my career are part of the old capitalism that Zennials mistrust. These organisations will need to adapt.
We are at a pivotal point in the emergence of a new way in which capital is earned, invested and deployed. Tension continues to build between Boomers and Zennials. But what we need is reconciliation and understanding so that capitalism can make it through this era of change strengthened, resilient and fit to face the challenges of the next generation.
There is a hopeful outcome to this unprecedented shift of wealth as Zennials inherit the financial world. But it requires a mutuality based on respect for the contributions of the two generations and the elimination of conflict. We disagree but we need to learn to disagree well, for the benefit of all. How Zennials will shape the future of the market economy is not just up to them, but their predecessors, too.
Ken Costa is Chairman of Helios Fairfax Partners, the largest private equity group in Africa, and Emeritus Professor of Commerce at Gresham College. He is also the author of The 100 Trillion Dollar Wealth Transfer: Will the Handover from Boomers to Gen Z Revolutionise Capitalism? A veteran investment banker, he previously chaired UBS Investment Bank for Europe, Middle East and Africa and Lazard International.
Sandra Rilova is a Spain-based illustrator and animator. She has created work for The Folio Society, Penguin Random House and the Havard Business Review. From 2018–2020 she created all the illustrations for the new Hans Christian Andersen Museum in Copenhagen.
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