At the Money: The Data Behind America's Wealthy

0:00at Brookfield. We invest in the thing behind the thing, behind the next big thing. Our focus across infrastructure, energy, real estate, private equity and credit is helping to build the backbone of the global economy. We combine deep operational expertise with discipline long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com slash own. This is not an offer to sell or investment advice, investing in vols risks, including loss of capital. Some people treat Chachypt like some kind of smart search engine, and some use it to get work done. Chachypt work is a new way of working in Chachypt that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful

1:02can just become something useful. Put Chachypt to work on your most ambitious ideas and projects. Get started at chachypt.com by selecting Work Mode, available on plus and pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner you started with a dream, to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where MasterCard can help, with access to tools that help identify cyber threats to better protect your business. Building a dream business, priceless. For Cybersecurity in a changing world, there's MasterCard. Learn more at mastercard.com slash small business. America is a rich nation, but I want to get granular as to exactly how rich,

2:06who is rich and how they got that way. The data is astounding. To help us unpack all of this and what it might mean for your personal prosperity, let's bring in Owen Zidar and Eric Zwick, their professors at Princeton and the University of Chicago respectively. And they are the authors of a fascinating new book, the Everywhere Millionaire, who is really rich in America and how they got there. And if you're listening to this, be sure and check out part one where we discuss a lot of the findings in the book. Today, I really want to talk about the data, which really is very mind blowing. Let's start out with the 1000 to one ratio, private owners versus public CEOs. For every wealthy CEO, there are more than a thousand private business owners worth at least 25 million dollars in net worth. That blew my mind. Tell me a little bit about that. Yes, so it's a great statistic. It started

3:07out when we were thinking about the past through income and like the growth of pastures, let's add up all the income for top 1% past their business owners. And what's a good reference for that to make the point that this is a huge, surprisingly huge group. Well, let's look at CEOs in the executive comp data set, which is roughly the S&P 1500. And it takes the CEOs, the CFOs and adds up their salary plus at the market values of their options. And you say, okay, add that up. And it turns out they're just swamped and sized by the past through income flows for the past through business owners because they're just way more of them. And they're all across the industry, all across the country. You know, we're talking about 1500 CEOs plus another thousand CFOs are like top execs. And we're talking about like over a million of these top one to 0.5% business owners. A million and a half people worth 25 million dollars or more who are not running public companies. It's amazing. Let's talk about something even more finite. The Forbes 400.

4:14You guys explain how much Main Street swamps the 400. The Forbes 400 list receives 50% of all news coverage on wealth. Its members hold only 3% of total US household wealth. Meanwhile, Main Street millionaires are worth 13 times more. The total combined wealth of the Forbes 400 accounting for 40% of all household wealth. That data is just mind blowing, especially how lopsided the media coverage is on the billionaires in the Forbes 400. To us, that's one of the main points of the book. When you think about how to get rich or the influence of the rich in America, there's just such monopoly of an attention on a very small handful of people. And we want to broaden the aperture to say, look, there's a lot of money in America. It's a very rich place. A lot of opportunity. And it's not just the Forbes 400. We need to broaden it when we're thinking about

5:17opportunity tax policy. And you know, just a huge range of issues that people care about. And we really think the narrative needs to be reset. So I want to really get granular with the data and just reveal how far off the narrative is. Five million households have over five million dollars. That's the top 4%. And if you've followed the fidelity 401k millionaire data, that really shouldn't be a terrible surprise. But then there are two million Americans worth 10 million dollars or more. And then the number that I think could be the most shocking number in the entire book. Well, if you ask people, how many people worth 100 million or more in America? I know they'd say a few hundred, a few thousand, 65,000 Americans are sent to millionaires worth more than a hundred million dollars. I think that was the most shocking number in the entire book.

6:22It's a huge group of people. So Forbes 400 is 400 people. You add like all the people in their families, their kids. Maybe it's like 1500 people or 2000 people. Not 65,000. Not 65,000. Right. So we're talking about like 30 to 50 times the number of people here. That is why not only say there are a lot of three four million dollar houses, but there are a lot of like 10, 20 million dollar houses. That's why I like Aspen. The average house price is so high. It's not just like some tech people from Silicon Valley buying those houses. It's like car dealers and people running like manufacturing businesses, making inputs into production for construction and so on. And they've accumulated like really screw you money. And it's amazing. Yeah, I always say if you want to feel really bad about yourself, go to Zillow, set it to see sold houses and look at a wealthy part of America. Out in the Hamptons, it's genuinely

7:23shocking how many 30, 40, 50 million dollar houses, like hundreds transact every summer. It blows my mind. Here's another data point that I'm kind of starting to intuit having ploughed through the book. Half of Americans will worth five million dollars or more on a private business. That really seems to be the data point that is the core theme here that if you want to accumulate that sort of wealth or you want to understand where that wealth is in America, you have to look at business owners. That's absolutely right. One of the things that really jumped out to us when we're looking at past through businesses is that 70 cents of every dollar of income of these entities went to the top 1%. So this is really much more concentrated than public equity ownership and other forms of wealth. And it's just very prevalent as you go up further and further into the wealth distribution. And again, more confirmation bias for me, I'm fond of saying the only reason any family should

8:28ever pay a state tax is on the way to your attorney to sign the documents you're hit by a bus. And you guys confirm that because 200 billion dollars transfers tax free every year, only 0.1% of all U.S. estates paint any estate tax. That's down. I did a read or an analysis on that about 15 years ago. And I want to say it was 0.4%. So it's even less today. Tell us a little bit about hundreds of billions of dollars transferring tax free every year. And it's quite striking. I mean, one of the reasons why I think it's fallen is that the threshold has moved from an early 2000s 1.2 million up to 30 million for married couples. And so we've really decimated it. There's also a huge range of avoidance schemes. I think Gary Cohn, who is the NEC chair or NEC director and the first Trump administration said only more on

9:30pay the estate tax. It's true. It's really it's really amazing. Go on. Yeah. So I think, you know, this is one area where if you look at what happened to the estate tax, a lot of it was basically sold. I know we need to help the little guy and there's some really wealthy business owners who were kind of using that to decimate it. And given how much wealth is transferring with the great wealth transfer, I think it's high time to revisit the estate and inherited tax regime because it's really amazing how little we collect in a state taxes. I want to talk about something that's sort of contraught in the main theme. You discuss some issues that can address some of that K shape we talked about, some of the inequalities that are there. I knew that there was a labor penalty for all these non-compeats that are out there. I had no idea it was $300 billion annually. Some states allow it. Some states like California

10:37do not. If we were to get rid of all these non-compeats. And I'm not talking about where there are very specific trade secrets and businesses, just run of the mill non-compeats for people who are just doing their daily jobs and are not senior and have no access to that. $300 billion a year would go a long way to closing that K a little bit. Tell us about why we should get rid of all these non-compeats. So we try and place these everywhere millionaires in the businesses they run in this broader conversation about what's going on with the labor share, like what's going on with the share of overall economic activity that's going to workers versus owners. And suggest that some of the same factors that I think have gotten a lot more attention, which is workers having fewer options in terms of where to go if they're not being treated well as a given employer. That's I think a story that's been told for large public companies maybe, but not so much for these smaller companies. And it turns out that non-compeats are really broad

11:40and have expanded. You see in Jimmy John's or Jersey Mike's applying non-compeats to the sandwich artists. And they, you know, there is a lot of artistry in making a hoagie and I have a taste for one as lunch approaches, but like it's you shouldn't be restricted from like leaving one Jimmy John's to go across the street to make sandwiches for somebody else. And if you scale that up, you know, like the ability to walk out the door as a worker, there's a lot of power to get better wages if the company's doing well. And these things have really proliferated in a way that seems kind of unhelpful for the conversation and inequality. And unnecessary, I think, we think about, you know, protecting the secret to making that perfect sandwich. Last question, which I guess indirectly relates to that, when you guys looked at wealth to see how overrepresented, wealthy, congressmen are versus the general public, the numbers are kind of shocking.

12:44So the Deca Millionaires, people worth $10 million or 10 access likely to sit in Congress, 10 times like us in Congress, as they're found in the general population, but where this is really egregious is with the group of people worth $100 million or more the Santa Millionaires, you're 62 times more likely to sit in Congress as you are to be found in the general population. Tell us how that came about and what does that mean for policy and income and wealth inequality? Yeah, it's really quite striking. Like if you go to the grocery store, one out of every 33 people you meet or private business owners, if you go to Congress, it's one out of four. And I think some of that is because of the role of wealth and how hard it is to raise money. And so if you think about like who is the senator or who's playing golf with the senator, you know, it's a lot of these folks. And the consequences are really quite striking in terms of thinking about who represents us

13:47when you're making decisions about the deficit or debt and, you know, some of these large tax bills come through. I think that's one part of the story for why we've seen such growth in their wealth is that there are a lot of small loopholes that's kind of avalanched over time in recent decades as a consequence of being so well represented both in terms of people and in terms of their interests. To wrap up, if you are interested in either understanding wealth in America or becoming wealthy in America, the everywhere millionaire who is really rich in America and how they got there by Owen Zedard and Eric's WIC is the book for you. I found it fascinating and I think you will also, I'm Barry Rittles, you're listening to Bloomberg's at the money.

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