Family offices should brace themselves for the crab effect

For years, family offices have prospered thanks to the bull market.  But now they need to come to terms with crab theory, as voters envious of success turn to populists for some kind of salvation.  

Professors from Harvard University warn that these results from zero-sum thinking are restrictions forced on populations to deal with hard times.

Investors like to talk about the importance of investing for the long term. But this has only developed into a strategy in the postwar years

The wealthy are already seeking safe havens, led by the United Arab Emirates. Gold has hit a record $4,400 an ounce, up 68% during 2025. 

Crab theory relates to the way crabs behave when confined in a bucket. Without fail, when one crab starts to escape, the rest will pull it back down again. And it’s worth noting that the crab’s survival instincts make it one of the world’s longest living species, surviving over 480 million years  

In 1987, Filipino writer Ninotchka Rosca, a human rights activist, said crab theory illustrated how people take revenge on people whose actions produced jealousy, insecurity or fear of being surpassed. Dictators like Stalin and Ferdinand Marcos of the Philippines have been renowned for doing this: “If I can’t have this, neither can you.”

Anthropologist George Foster devoted his life to studying the behaviour of 16th-century Mexican peasants, who discouraged innovation because they were too busy competing for resources.

Investors like to talk about the importance of investing for the long term. But this has only developed into a strategy in the postwar years.

Over the very long term, the going was far tougher. In 1641, philosopher Thomas Hobbes said social strife made life “nasty, brutish and short.” He was a royalist, but supported Oliver Cromwell’s republican government to prevent the entire English nation from falling into a deep, smelly bucket. 

In recent years, economic growth in the West has slowed to a dismal average of 1% per year. Generation-on-generation progress has slowed to a crawl, making it harder for the young to get on the housing ladder without their parents’ help. 

Gains have become increasingly likely to come at the expense of someone else. Jobs have been stolen by technology. Social media can distort thinking.

So we are entering an era of zero-sum politics, where populists are attracting the attention of people who no longer believe that traditional governments can look after their interests. Debt inherited from previous governments, including public sector pensions, has become a burden to voters who are somehow expected to pay for it all. Anger is growing. 

The populist right argues that immigrants succeed at the expense of the native-born. So much for a previous argument that cheap labour boosts Western economies.  

The populist left says the wealthy have gained at the expense of less fortunate workers, so much for policies that deploy their capital to drive industrial growth.  

The referendum, in which 79% of Swiss voters opposed a federal inheritance tax for the wealthy, appears unusual, but it amounts to nothing more than an act of financial self-interest. Switzerland, Italy, Portugal and Greece have been able to capture ultra-high-net-worth and family-office money on the move following visa reforms. 

Analysis by Henley & Partners in June suggests that a record 142,000 millionaires are on the move this year, reflecting their growing determination to shop around for a safe berth.

Following surveys, Harvard economist Stefanie Stantcheva and others say the global view has dramatically changed.

“A more zero-sum mindset is strongly associated with support for redistribution, race and gender-based affirmative action and restrictive immigration policies.” 

Whether you happen to vote for Donald Trump or Zohran Mamdani, the new Mayor of New York, there is a risk that their zero-sum politics will directly or indirectly tax, damage, or steal your wealth. Anxiety will diminish capital available for investment.  

Trump’s Republican Party dithers, unsure how to handle their boss, as do Zohran Mamdani’s Democrats, uncertain whether they can tolerate a socialist future. Europe’s mainstream parties have sought to accommodate extremist policies to remain relevant.

Across the West, populist governments have become increasingly jealous of China and of how its pincers are controlling large sections of the global economy. Trade barriers are rising, which could bring us to a serious flash point in due course. 

It is hard to believe that the big tech stocks will maintain their premium rating, as they take on debt to compete with each other on AI, while also reacting to zero-sum politics.

Strategist Ed Yardeni has been a market bull for 15 years, but he recently said the time has come to buy cheaper quality stocks. He also thinks that gold could hit $10,000 an ounce by 2029. 

Trump’s latest wheeze to get involved in Federal Reserve decisions will add another wild card to future markets. But that’s what you get with populism. It takes no prisoners.