The Strategic Horizon · The generation that never paid for time.

When capital has a price again, a family business finds out whether it knows what to do with it.

There are executives preparing today to run and lead family businesses who formed their investment judgment in a world where money cost almost nothing. Between December 2008 and March 2022, the Federal Reserve kept its policy rate close to zero for nearly nine years. The rest of the time, it moved within a range that, seen with any historical perspective, was an anomaly.

Anyone who started a career in 2010 learned to evaluate projects, acquisitions and dividends against an unspoken benchmark: time was nearly free. Waiting cost nothing. Borrowing to buy out a cousin's stake cost little more. And in many boardrooms, the high-rate episode of 2023 and 2024 was treated as what it appeared to be: an interruption to be endured until money became cheap again.

September suggests it was something else. My thesis will be uncomfortable for a generation that considers itself, rightly, better prepared than the one before: the return of the cost of capital will not primarily test the family business's balance sheet. It will test its governance.

On September 16, the Fed raised its target range by a quarter point, to 3.75%–4.00%. It was the first increase since July 2023, approved unanimously, and the Fed's own projections put the rate at around 4.1% at the end of both 2026 and 2027. A week later, the 10-year Treasury yield rose above 5.05%, its highest level since 2007. Behind it lie an energy shock tied to the war with Iran, inflation that refuses to settle, and growing unease about the US fiscal deficit.

The impact on business families is global. For a Latin American owner, this is not Wall Street news. It is a decision made in Washington that takes a seat at the table without being invited. The cost of money in the region is built on US Treasuries plus a spread, and the transmission has already begun: in late September, Colombia's central bank surprised markets with a 25-basis-point increase, to 12.25%. Europe, meanwhile, saw inflation pick up again in Germany, France and Italy in the month's preliminary readings.

The opposing argument deserves to be taken seriously, because it is a good one. It holds that the family business is the natural winner in this environment. A substantial body of academic evidence suggests that family firms borrow less than their non-family peers; studies of listed companies in France, unlisted SMEs in Spain and Danish firms have documented it. They have long horizons, they do not need to refinance a leveraged buyout every five years, and they do not answer to a fund that must return capital by a fixed date. If anyone suffers from expensive money, the argument goes, it will be the private-equity-backed competitor carrying debt, not the family that has financed itself from retained earnings for three generations.

As far as the balance sheet is concerned, I agree, although the evidence is not uniform: in several Southeast Asian economies the difference largely disappears. The problem is that the argument is looking in the wrong place. It measures the company's debt. It does not measure the family's implicit commitments.

Over a decade of cheap money, many business families accumulated commitments that never appeared as debt. Dividend expectations among shareholders who no longer work in the business and who live, in part, from it. Exits by family branches financed with cheap credit or with the promise of future liquidity. Share valuations for inheritance and gifting calculated with discount rates that now seem to belong to another era.

With US Treasuries yielding above 5%, a shareholder nobody invited appears at the family table: the risk-free rate. A third-generation cousin with no role in the company can now do some very simple arithmetic. If their stake earns less than the Treasury would pay with no risk at all, why keep it? For years that question was not uncomfortable, because the alternative paid almost nothing. Now it is.

When capital costs something again, every dollar or euro the company retains competes openly with every dollar or euro it could distribute. Reinvestment has to clear a hurdle rate that, until recently, nobody demanded out loud. In a listed company, that tension is managed through a dividend policy and an independent board. In a family business, it becomes a negotiation between branches, generations and loyalties. Capital allocation stops being a technical matter and becomes a political one.

This calls for a distinction that free money made invisible. Patient capital waits for a return it has explicitly demanded, with timelines, thresholds and someone accountable for them. Complacent capital also waits, but without ever having asked how much, or for what. For fifteen years the two looked identical, because waiting cost nothing. With the 10-year at 5%, the difference shows up at every board meeting.

What many business families call patience is, quite often, the absence of a question. A very comfortable virtue, as long as nobody sends the bill for time.

There is more here than a financial lesson. Whoever receives capital from the previous generation does not receive it for free. They receive it in trust, with the obligation to hand it on, enlarged, to whoever comes next. In the Hayekian tradition, the interest rate is the signal that coordinates the value of the present against the future. Suppress that signal for a decade, and the judgment of those who decide ends up adjusting to a reality that does not exist.

For boards, the consequence is concrete. Before discussing the 2027 budget, it is worth asking a question few agendas include: which decisions of the last ten years only made sense with free money? Some will be investments. Others will be family agreements, liquidity promises or ownership structures nobody has looked at since they were signed.

For successors, the test is more personal. A brilliant generation, better educated than the previous one in almost every respect, may have one very specific gap: it has never had to defend, before its own family, why capital should stay in the business when it pays more elsewhere. Many founders did, sometimes with double-digit interest rates and without a market inclined to forgive mistakes.

Rates may fall again. What is unlikely to return is the illusion that time has no price. If your successor had to justify to the family tomorrow, with money at market price, every dollar or euro that remains invested in the business, could they do it?