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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 to get granular as to exactly how rich, who 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. They're 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 1,000 to 1 ratio, private owners versus public CEOs. For every wealthy CEO, there are more than 1,000 private business owners worth at least $ 25 million in net worth. That blew my mind. 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 income and the growth of pass-throughs. Let's add up all the income for top 1% pass-through 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 ExecuComp dataset, 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 in size by the pass-through income flows for the pass-through business owners because there are just way more of them. And they're all across the industry, all across the country. We're talking about 1,500 CEOs plus another 1,000 CFOs or top execs. And we're talking about over 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 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. You 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.

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Speaker 3: 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 a monopoly on attention on a very small handful of people. And we want to broaden the aperture to say, look, like there's a lot of money in America. It's a very rich place with a lot of opportunity. And it's not just a Forbes 400. We need to broaden it when we're thinking about opportunity, 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.

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Speaker 1: So I want to really get granular with the data and just reveal how far off the narrative is. Five million households have over $ 5 million. 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 2 million Americans worth million or more. And then the number that I think could be the most shocking number in the entire book, if you ask people how many people are worth 100 million or more in America, I don't know, they'd say a few hundred, a few thousand. 65,000 Americans are Santa millionaires worth more than $ 100 million. I think that was the most shocking number in the entire book.

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Speaker 2: It'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 1,500 people or 2,000 people. 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 of three, $ 4 million houses, but there are a lot of like 10, $ 20 million houses. That's why like Aspen, 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 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.

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Speaker 1: 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 shocking how many 30, 40, $ 50 million houses, like hundreds transact every summer. It blows my mind. Here's another data point that I'm kind of starting to intuit having plowed through the book. Half of Americans were worth $ 5 million or more own 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.

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Speaker 3: That's absolutely right. One of the things that really jumped out to us when we were looking at pass-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.

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Speaker 1: And again, more confirmation bias for me. I'm fond of saying the only reason any family should ever pay estate 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 transfers tax-free every year Only 0.1% of all US estates pay any estate tax. That's down. I did an analysis on that 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.

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Speaker 3: And it's quite striking. I mean, one of the reasons why I think it's fallen is that the threshold has moved from in 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 in the first Trump administration said only morons pay the 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 if you look at what happened to the estate tax, a lot of it was basically sold on, oh, 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, the great wealth transfer, I think it's high time to revisit that. the estate and inheritance tax regime, because it's really amazing how little we collect in estate taxes.

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Speaker 1: I want to talk about something that's sort of contra to 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-competes that are out there. I had no idea it was $ 300 billion annually. Some states allow it. Some states like California do not. If we were to get rid of all these non-competes, and I'm not talking about where there are very specific trade secrets in businesses, just run-of-the-mill non-competes 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-competes.

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Speaker 2: 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 at 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-competes are really broad and have expanded. You see in Jimmy John's or Jersey Mike's applying non-competes 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 on inequality and unnecessary, I think, when you think about, 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 you guys looked at wealth to see how overrepresented wealthy congressmen are versus the general public, the numbers are kind of shocking. So the deca millionaires, people worth $ 10 million are 10x as likely to sit in Congress, 10 times as likely to sit 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 centimillionaires, 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?

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Speaker 3: Yeah, it's really quite striking. Like if you go to their grocery store, one out of every 33 people you meet are 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 who is the senator or who's playing golf with the senator, it's a lot of these folks. And the consequences are really quite striking in terms of thinking about who represents us when you're making decisions about the deficit or debt and 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.

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Speaker 1: To wrap up, if you are interested in either understanding wealth in America or becoming wealthy in America, the Everywhere Millionaire website Who is Really Rich in America and How They Got There by Owen Zedar and Eric Zwick is the book for you. I found it fascinating and I think you will also. I'm Barry Ritholtz. You're listening to Bloomberg's At The Money.