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At the Money: The Data Behind America's Wealthy · Masters in Business

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  Speaker 1: Bloomberg Audio Studios.
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  Speaker 2: Podcasts.
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  Speaker 1: Radio. News. America is a rich nation, but I want
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  Speaker 1: to get granular as to exactly how rich, who is rich,
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  Speaker 1: and how they got that way. The data is astounding.
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  Speaker 1: To help us unpack all of this and what it
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  Speaker 1: might mean for your personal prosperity, let's bring in Owen
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  Speaker 1: Zidar and Eric Zwick. They're professors at Princeton and the
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  Speaker 1: University of Chicago, respectively, and they are the authors of
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  Speaker 1: a fascinating new book, The Everywhere Millionaire, Who is Really
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  Speaker 1: Rich in America and How They Got There. And if
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  Speaker 1: you're listening to this, be sure and check out part one,
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  Speaker 1: where we discuss a lot of the findings in the book. Today,
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  Speaker 1: I really want to talk about the data. which really
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  Speaker 1: is very mind-blowing. Let's start out with the 1,000 to
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  Speaker 1: 1 ratio, private owners versus public CEOs. For every wealthy CEO,
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  Speaker 1: there are more than 1,000 private business owners worth at
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  Speaker 1: least $ 25 million in net worth. That blew my mind.
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  Speaker 1: Tell me a little bit about that.
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  Speaker 2: Yes.
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  Speaker 1: It's a great statistic.
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  Speaker 2: It started out when we were thinking about the pass-through
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  Speaker 2: income and the growth of pass-throughs. Let's add up all
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  Speaker 2: the income for top 1% pass-through business owners. And what's
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  Speaker 2: a good reference for that to make the point that
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  Speaker 2: this is a huge, surprisingly huge group? Well, let's look
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  Speaker 2: at CEOs in the ExecuComp dataset, which is roughly the
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  Speaker 2: S & P 1500. And it takes the CEOs, the CFOs,
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  Speaker 2: and adds up their salary plus at-the-market values of their options.
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  Speaker 2: And you say, okay, add that up. And it turns out,
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  Speaker 2: They're just swamped in size by the pass-through income flows
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  Speaker 2: for the pass-through business owners because there are just way
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  Speaker 2: more of them. And they're all across the industry, all
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  Speaker 2: across the country. We're talking about 1,500 CEOs plus another
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  Speaker 2: 1,000 CFOs or top execs. And we're talking about over
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  Speaker 2: a million of these top 1% to 0.5% business owners.
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  Speaker 1: A million and a half people worth $ 25 million or
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  Speaker 1: more who are not running public companies.
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  Speaker 3: It's amazing.
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  Speaker 1: Let's talk about something even more finite, the Forbes 400.
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  Speaker 1: You guys explain how much Main Street swamps the 400.
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  Speaker 1: The Forbes 400 list receives 50% of all news coverage
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  Speaker 1: on wealth. Its members hold only 3% of total US
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  Speaker 1: household wealth. Meanwhile, Main Street millionaires are worth 13 times
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  Speaker 1: more the total combined wealth of the Forbes 400 accounting
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  Speaker 1: for 40% of all household wealth. That data is just mind-blowing,
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  Speaker 1: especially how lopsided the media coverage is on the billionaires
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  Speaker 1: in the Forbes 400.
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  Speaker 3: To us, that's one of the main points of the book.
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  Speaker 3: When you think about how to get rich or the
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  Speaker 3: influence of the rich in America, there's just such a
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  Speaker 3: monopoly on attention on a very small handful of people.
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  Speaker 3: And we want to broaden the aperture to say, look,
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  Speaker 3: like there's a lot of money in America. It's a
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  Speaker 3: very rich place with a lot of opportunity. And it's
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  Speaker 3: not just a Forbes 400. We need to broaden it
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  Speaker 3: when we're thinking about opportunity, tax policy, and, you know,
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  Speaker 3: just a huge range of issues that people care about.
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  Speaker 3: And we really think the narrative needs to be reset.
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  Speaker 1: So I want to really get granular with the data
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  Speaker 1: and just reveal how far off the narrative is. Five
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  Speaker 1: million households have over $ 5 million. That's the top 4%.
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  Speaker 1: And if you've followed the Fidelity 401k millionaire data, that
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  Speaker 1: really shouldn't be a terrible surprise. But then there are
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  Speaker 1: 2 million Americans worth million or more. And then the
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  Speaker 1: number that I think could be the most shocking number
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  Speaker 1: in the entire book, if you ask people how many
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  Speaker 1: people are worth 100 million or more in America, I
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  Speaker 1: don't know, they'd say a few hundred, a few thousand.
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  Speaker 1: 65,000 Americans are Santa millionaires worth more than $ 100 million.
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  Speaker 1: I think that was the most shocking number in the
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  Speaker 1: entire book.
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  Speaker 2: It's a huge group of people. So Forbes 400 is
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  Speaker 2: 400 people. You add like all the people in their families,
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  Speaker 2: their kids, maybe it's like 1,500 people or 2,000 people.
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  Speaker 2: Not 65,000?
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  Speaker 3: Not 65,000, right.
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  Speaker 2: So we're talking.
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  Speaker 1: About like 30 to 50 times the number of people here.
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  Speaker 2: That is why not only say there are a lot
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  Speaker 2: of three, $ 4 million houses, but there are a lot
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  Speaker 2: of like 10, $ 20 million houses. That's why like Aspen,
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  Speaker 2: the average house price.
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  Speaker 1: Is so high.
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  Speaker 2: It's not just like some tech people from Silicon Valley
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  Speaker 2: buying those houses. It's like car dealers and people running
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  Speaker 2: like manufacturing businesses, making inputs into production for construction and
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  Speaker 2: so on. And they've accumulated like really screw you money.
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  Speaker 1: And it's amazing. Yeah. I always say, if you want
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  Speaker 1: to feel really bad about yourself, go to Zillow, set
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  Speaker 1: it to see sold houses and look at a wealthy
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  Speaker 1: part of America out in the Hamptons, it's genuinely shocking
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  Speaker 1: how many 30, 40, $ 50 million houses, like hundreds transact
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  Speaker 1: every summer. It blows my mind. Here's another data point
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  Speaker 1: that I'm kind of starting to intuit having plowed through
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  Speaker 1: the book. Half of Americans were worth $ 5 million or
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  Speaker 1: more own a private business. That really seems to be
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  Speaker 1: the data point that is the core theme here, that
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  Speaker 1: if you want to accumulate that sort of wealth or
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  Speaker 1: you want to understand where that wealth is in America,
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  Speaker 1: you have to look at business owners.
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  Speaker 3: That's absolutely right. One of the things that really jumped
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  Speaker 3: out to us when we were looking at pass-through businesses
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  Speaker 3: is that 70 cents of every dollar of income of
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  Speaker 3: these entities went to the top 1%. So this is
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  Speaker 3: really much more concentrated than public equity ownership and other
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  Speaker 3: forms of wealth. And it's just very prevalent as you
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  Speaker 3: go up further and further into the wealth distribution.
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  Speaker 1: And again, more confirmation bias for me. I'm fond of
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  Speaker 1: saying the only reason any family should ever pay estate
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  Speaker 1: tax is on the way to your attorney to sign
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  Speaker 1: the documents, you're hit by a bus. And you guys
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  Speaker 1: confirm that because $ 200 billion transfers tax-free every year Only 0.1%
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  Speaker 1: of all US estates pay any estate tax. That's down.
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  Speaker 1: I did an analysis on that 15 years ago, and
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  Speaker 1: I want to say it was 0.4%. So it's even
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  Speaker 1: less today. Tell us a little bit about hundreds of
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  Speaker 1: billions of dollars transferring tax-free every year.
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  Speaker 3: And it's quite striking. I mean, one of the reasons
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  Speaker 3: why I think it's fallen is that the threshold has
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  Speaker 3: moved from in early 2000s, 1.2 million up to 30
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  Speaker 3: million for married couples. And so we've really decimated it.
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  Speaker 3: There's also a huge range of avoidance schemes. I think
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  Speaker 3: Gary Cohn, who is the NEC chair or NEC director
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  Speaker 3: in the first Trump administration said only morons pay the
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  Speaker 3: estate tax.
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  Speaker 1: It's true. It's really amazing. Go on. Yeah.
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  Speaker 3: So I think, you know, this is one area where
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  Speaker 3: if you look at what happened to the estate tax,
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  Speaker 3: a lot of it was basically sold on, oh, we
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  Speaker 3: need to help the little guy. And there's some really
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  Speaker 3: wealthy business owners who were kind of using that to
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  Speaker 3: decimate it. And given how much wealth is transferring, the
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  Speaker 3: great wealth transfer, I think it's high time to revisit that.
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  Speaker 3: the estate and inheritance tax regime, because it's really amazing
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  Speaker 3: how little we collect in estate taxes.
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  Speaker 1: I want to talk about something that's sort of contra
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  Speaker 1: to the main theme. You discuss some issues that can
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  Speaker 1: address some of that K-shape we talked about, some of
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  Speaker 1: the inequalities that are there. I knew that there was
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  Speaker 1: a labor penalty for all these non-competes that are out there.
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  Speaker 1: I had no idea it was $ 300 billion annually. Some
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  Speaker 1: states allow it. Some states like California do not. If
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  Speaker 1: we were to get rid of all these non-competes, and
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  Speaker 1: I'm not talking about where there are very specific trade
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  Speaker 1: secrets in businesses, just run-of-the-mill non-competes for people who are
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  Speaker 1: just doing their daily jobs and are not senior and
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  Speaker 1: have no access to that. $ 300 billion a year would
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  Speaker 1: go a long way to closing that K a little bit.
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  Speaker 1: Tell us about why we should get rid of all
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  Speaker 1: these non-competes.
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  Speaker 2: So we try and place these everywhere millionaires in the businesses,
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  Speaker 2: they run in this broader conversation about what's going on
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  Speaker 2: with the labor share, like what's going on with the
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  Speaker 2: share of overall economic activity that's going to workers versus
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  Speaker 2: owners and suggest that some of the same factors that
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  Speaker 2: I think have gotten a lot more attention, which is
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  Speaker 2: workers having fewer options in terms of where to go
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  Speaker 2: if they're not being treated well at a given employer. That's,
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  Speaker 2: I think, a story that's been told for large public companies, maybe,
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  Speaker 2: but not so much for these smaller companies. And it
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  Speaker 2: turns out that non-competes are really broad and have expanded.
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  Speaker 2: You see in Jimmy John's or Jersey Mike's applying non-competes
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  Speaker 2: to the sandwich artists. And they, you know, there is
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  Speaker 2: a lot of artistry in making a hoagie and I
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  Speaker 2: have a taste for one as lunch approaches, but like it's,
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  Speaker 2: you shouldn't be restricted from like leaving one Jimmy John's
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  Speaker 2: to go across the street to make sandwiches for somebody else.
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  Speaker 2: And if you scale that up, you know, like the
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  Speaker 2: ability to walk out the door as a worker, there's
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  Speaker 2: a lot of power to get better wages if the
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  Speaker 2: company's doing well. And these things have really proliferated in
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  Speaker 2: a way that seems kind of unhelpful for the conversation
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  Speaker 2: on inequality and unnecessary, I think, when you think about,
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  Speaker 2: you know, protecting the secret to making that perfect sandwich.
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  Speaker 1: Last question, which I guess indirectly relates to that. When
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  Speaker 1: you guys looked at wealth to see how overrepresented wealthy
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  Speaker 1: congressmen are versus the general public, the numbers are kind
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  Speaker 1: of shocking. So the deca millionaires, people worth $ 10 million
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  Speaker 1: are 10x as likely to sit in Congress, 10 times
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  Speaker 1: as likely to sit in Congress as they're found in
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  Speaker 1: the general population. But where this is really egregious is
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  Speaker 1: with the group of people worth 100 million or more,
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  Speaker 1: the centimillionaires, you're 62 times more likely to sit in
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  Speaker 1: Congress as you are to be found in the general population.
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  Speaker 1: Tell us how that came about and what does that
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  Speaker 1: mean for policy and income and wealth inequality?
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  Speaker 3: Yeah, it's really quite striking. Like if you go to
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  Speaker 3: their grocery store, one out of every 33 people you
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  Speaker 3: meet are private business owners. If you go to Congress,
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  Speaker 3: it's one out of four. And I think some of
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  Speaker 3: that is because of the role of wealth and how
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  Speaker 3: hard it is to raise money. And so if you
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  Speaker 3: think about who is the senator or who's playing golf
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  Speaker 3: with the senator, it's a lot of these folks. And
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  Speaker 3: the consequences are really quite striking in terms of thinking
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  Speaker 3: about who represents us when you're making decisions about the
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  Speaker 3: deficit or debt and some of these large tax bills
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  Speaker 3: come through. I think that's one part of the story
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  Speaker 3: for why we've seen such growth in their wealth is
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  Speaker 3: that there are a lot of small loopholes that's kind
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  Speaker 3: of avalanched over time in recent decades as a consequence
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  Speaker 3: of being so well-represented both in terms of people and
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  Speaker 3: in terms of their interests.
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  Speaker 1: To wrap up, if you are interested in either understanding
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  Speaker 1: wealth in America or becoming wealthy in America, the Everywhere
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  Speaker 1: Millionaire website Who is Really Rich in America and How
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  Speaker 1: They Got There by Owen Zedar and Eric Zwick is
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  Speaker 1: the book for you. I found it fascinating and I
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  Speaker 1: think you will also. I'm Barry Ritholtz. You're listening to
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  Speaker 1: Bloomberg's At The Money.