By Julia Flynn Siler
By his late 40s, Bill Harlan had a rich life. Co-founder of a prominent California real-estate firm, he was a wealthy man whose wife had just given birth to their second child.
Yet Mr. Harlan couldn’t shake the feeling that his hard work wasn’t building an enterprise to last. What could he do, he kept asking himself, to bequeath to his loved ones more than material riches?
His answer: Create a family dynasty. He would move with his wife and children to a Napa Valley vineyard. Working together, they would build the winery into a legacy that each Harlan generation could pass to the next.
Today, the 65-year-old Mr. Harlan has a business to be proud of. His Harlan Estate wines, at $265 a bottle, have won perfect 100-point ratings from Robert Parker’s Wine Advocate newsletter. Oenophiles add their names to multiyear waiting lists and snap up the wines at auction.
But Mr. Harlan’s broader passion is what he calls his “200-year plan.” Crafted over several decades and consisting of handwritten notes on hundreds of legal pads, the plan analyzes Europe’s venerable wine families in an attempt to distill the secrets of dynastic longevity.
There are notes from weeks he spent at the Rothschild family’s vineyards in France, jottings from his time with the Frescobaldi family that has produced wine in Italy for 700 years and musings from visits to the aristocratic Antinoris, an Italian family whose wine business spans six centuries.
Other yellow pads contain lessons from what he considers dynastic failures, including the Robert Mondavi family’s sudden loss of control over its wine empire. “I think of them as notes to my grandchildren,” he says.
But before he can communicate his wishes to any future heirs, Mr. Harlan must win over his own children, both teenagers setting out to pursue their own dreams.
The eldest, H. William Harlan III, has just finished his freshman year at Duke University. The 18-year-old grew up helping tend the Harlan vineyards and sitting through his father’s lectures on family-legacy-building.
Though Will, as he’s known, says he is “very interested” in the wine industry, he also acknowledges “that’s not exactly where the young people are.” He says he’d like to try some different things before he joins the family business. “Yeah, yeah, I’ll come back,” he says. “But I’m going to spend a lot of time away, first.”
His sister, Amanda, meanwhile, is a competitive equestrian. For now, the 16-year old is focusing on her riding skills. “We’re just kids who say, ‘Whatever, Dad,'” she says.
Deborah Harlan, the vintner’s 53-year-old wife, supports her husband’s quest and says the plan influences much of what he does. “He’s always questioning, very careful, and taking in as much as he can,” she says.
“Once I saw these family businesses that had been around for generations, I realized there was a whole different way of looking at things,” says Mr. Harlan, an intense man with blue eyes and a grey, close-trimmed Don-Quixote-like beard. He prefers to describe his efforts as building a legacy, not a dynasty — a term he says sounds grandiose.
Precedent suggests the odds are stacked against Mr. Harlan. In the midst of rapid consolidation and increasing competition, only two of the U.S. industry’s big wine companies are family business dynasties. The privately-held E&J Gallo Winery, based in Modesto, Calif., is run by three generations of Gallo family members. And the Fairport, N.Y.-based Constellation Brands Inc., listed on the New York Stock Exchange, is headed by the brothers Richard and Robert Sands, third-generation family members to work in the wine business.
Other well-known American wine empires have stumbled. In 2004, for example, the Mondavi family lost control of its global wine empire, selling out to Constellation.
Some 70% of family businesses in the U.S. don’t make it past the second generation, estimates John A. Davis, chairman of Harvard Business School’s Families in Business program. Most are doomed by poor succession planning, squabbling heirs or bad luck, he says.
The Baroness Philippine de Rothschild, the owner of Bordeaux’s famed Mouton Rothschild and the fifth generation of Rothschild family members to oversee it, doubts that a founder can set out to design a family dynasty from the first generation. “You cannot create it,” she said in an interview. “It creates itself.” Although she has met Mr. Harlan socially, she does not know him well enough to comment on his plans.
H. William Harlan II was born in 1940 in Pico, Calif., to a meatpacker father and a homemaker mother. He graduated from the University of California at Berkeley in 1963 with a degree in communications and public policy. To his parents’ dismay, he spent almost a year hitchhiking around Africa and several more years living in a casino hotel partly supporting himself playing poker. He raced motorcycles, joined the U.S. Merchant Marine, drove a truck and sold insurance.
In 1973, he began investing in Lake Tahoe real estate and soon joined a competitor, Peter C. Stocker, to found a company they called Pacific Union. It developed property and converted apartments to condominium ownership, moving to big projects such as San Francisco’s $100 million Opera Plaza condo complex. In 1979, Mr. Harlan and his partners bought a run-down Napa Valley country club and turned it into a wine-country resort named Meadowood.
A year later, Mr. Harlan joined a group of Napa vintners for a five-week visit to great wine estates in Europe, including France’s Mouton Rothschild. There, he saw the wisdom of wine families tending to their legacies by grounding their wealth in the land, minimizing debt, reinvesting profits and putting the business’s needs above all else. He was struck by the contrast to his short-term world as a real-estate developer, which had him jumping from project to project. And it began to dawn on him, he says, that his bachelor life was hollow compared with the lives of his hosts.
Inspired by what he saw in Europe, he began scouting for prime vineyard land in Napa Valley. In 1983, he began his first wine venture with several partners, buying one of the area’s most historic wineries, called Merryvale Vineyards.
A year later, he bought for himself 240 acres situated on an oak-studded hillside overlooking the verdant floor of the Napa Valley. His crews began terracing the land and planting vineyards, and he hired a winemaker.
On a 1985 blind date he met Deborah Beck, a spokeswoman in TV commercials. They married the following year in a 12th century building in Verona, Italy. Will was born in 1987 and Amanda two years later.
In 1990, a helicopter crash killed his partner, Mr. Stocker. Mr. Harlan says the death forced him to question as never before the purpose of his buying and selling properties when “I knew I could die in a crash at any time.”
He continued making regular visits to France and Italy, seeking to build friendships with members of Europe’s great wine clans. He concluded that he had to build a Harlan-family culture vital enough to withstand changing social customs. Rituals, he decided, were part of the answer — everything from eating together to harvest celebrations and scheduled family meetings.
And like the storied European wine families, Mr. Harlan introduced his children to the business early on. He began peppering Will with lessons from his notebooks when his son was a preteen. His father would usually catch him at meals and say: “Hey, Will, hold on for a second” or “Will, sit down for a second, I’ve been thinking of a few things that might be good for our family.”
Even games provided lessons in strategy. Mr. Harlan urged his son and daughter to think many steps ahead as they played chess, Chinese checkers and poker together. He’d ask, “What do you think will happen next” and “What do you think I will do?”
At one point, Mr. Harlan floated the idea — unsuccessfully — to have his family adopt a constitution outlining family members’ rights and responsibilities to the enterprise.
By 2000, Mr. Harlan’s interests had almost wholly shifted to Napa Valley. He and his partners sold the mortgage and brokerage arm of their privately-held Pacific Union, to General Motors Corp.’s GMAC Home Services for an undisclosed sum that a person familiar with the deal estimates at $40 million. The majority of Mr. Harlan’s assets remained in real estate, although his focus was shifting to winegrowing. (Mr. Harlan, who still serves as a managing partner of several Pacific Union projects, declines to discuss his finances further.)
Visiting with the Italian Antinori family during the 2004 harvest, he gathered clues as to how families can sustain their legacies during difficult times. The Antinoris had gone through a period, for example, when they sold part of their wine business to a large British brewer. Mr. Antinori made the decision because he thought his three young daughters would not be interested in joining it. Ultimately, the Antinoris bought back the stake. The tale “reconfirmed how important it is for things to say within the family,” says Mr. Harlan.
“We transfer certain values generation after generation,” says Mr. Antinori.
In addition to obvious chores, like having Will help work the vineyards, Mr. Harlan began to establish for him a network of ties that he hoped would forge relationships with the world’s famous wine families.
First, Will spent part of the summer of 2004 in Bordeaux with the famed wine consultant Michel Rolland, who had worked with Harlan Estate over the years. He was surprised to see how several generations of Rollands lived under the same roof — an environment he says he enjoyed. Then in the fall of 2005, the Harlan family hosted a dinner for the visiting Antinori patriarch and his daughter Albiera. The Harlans made sure to seat Will next to the young heir apparent, since she had recently overcome her doubts and decided to join the family business.
“It was good to see young, with-it people doing things,” says Will, who doesn’t remember much else about the dinner.
In the early years, Mr. Harlan’s two high-end boutique wineries, Harlan Estate and Bond, did not make money, but they are now profitable, he says. Together they produce and sell about 3,400 cases a year. Mr. Harlan, who devotes about half his time to the wineries, says keeping them in family hands would protect their quality. Harlan Estate, known for its famous reds, alone could be valued at anywhere from $25 million to $100 million, estimates Vic Motto, a wine-industry investment banker.
To help assure family control of the wineries, Mr. Harlan is considering a so-called dynasty trust, an irrevocable trust whose goal is to shield assets from taxes for generations. He’s also thinking of letting the children cash out of the family business if they wish. But they’d get a substantially lower value than if they had stayed in.
A possible compromise: If his children don’t want to run the business, they could leave the management duties to professionals. “If it came down to keeping this for generations or the kids finding their passion and becoming what they have to become, I’d go for the latter,” says Mr. Harlan.
He took that idea from his European role-models. Vittorio Frescobaldi, who heads the family’s centuries-old wine business, says his decision to hire an outside managing director, Giovanni Geddes da Filicaja, was “one of the best things I ever did.”
Like the Antinori family, the Frescobaldis had adopted in recent years a system of outside managers. While family members still honed their strategic skills and served as stewards for the family brands, they came to rely on experienced managers for day-to-day operations. “We are not the owners,” says Mr. Frescobaldi, speaking metaphorically. “We are just taking care of it for the next generation.”
Last Christmas, Mr. Harlan began again to try to share the ideas he has committed to his legal pads. “Oh my God, he has his stacks, and stacks, and stacks!” says Will.
Though Will says he loves and admires his dad, he tires of the repeated lectures. One of his father’s favorite is on the importance of hiring good people; Will estimates he has heard that one 20 times.
He’s come to dread the two-hour car rides to San Francisco to attend business meetings with his father. Invariably, he must listen to familiar homilies about maintaining family control. “You never want to be put in a position where you could lose your money or your land,” Will says, mimicking his father’s voice.
And yet something has clearly rubbed off. Tossing off terms like capitalization and return on assets, Will talks insightfully about the overreaching that forced the Mondavi family to sell. Mr. Harlan first brought up the Mondavi story with his son during a 2004 car ride. Using the Socratic method, Mr. Harlan led Will through a tutorial on the risks of growing too fast.
But for now, Will’s burning passion is his black 1969 Cougar convertible, which he is restoring. His mother is encouraged by her son’s willingness to stand up to his powerful father.
“He can push back,” she says. “He knows his dad pushed back and went his own way and that’s given him the confidence to do the same.”