WEBVTT - What wealth really looks like, with Eric Zwick 0:00:03.020 --> 0:00:06.550 Welcome to Before Breakfast, a production of iHeartRadio. 0:00:08.789 --> 0:00:09.230 Good morning. 0:00:09.970 --> 0:00:13.610 This is Laura. Welcome to the Before Breakfast podcast. 0:00:14.310 --> 0:00:17.139 Today's episode will be a slightly longer one, part of 0:00:17.180 --> 0:00:19.940 the series where I interview fascinating people about how they 0:00:19.980 --> 0:00:22.520 take their days from great to awesome and any advice 0:00:22.560 --> 0:00:23.000 they have. 0:00:22.900 --> 0:00:23.680 For the rest of us. 0:00:24.360 --> 0:00:26.700 So today I am delighted to welcome Eric Zwick to 0:00:26.760 --> 0:00:30.190 Before Breakfast. Eric is a professor of economics and finance 0:00:30.250 --> 0:00:32.940 at the University of Chicago. He is the co-author of 0:00:32.979 --> 0:00:35.860 the brand new book, The Everywhere Millionaire. So Eric, welcome 0:00:35.880 --> 0:00:36.400 to the show. 0:00:37.000 --> 0:00:38.740 Thanks, Laura, for having me. It's great to be here. 0:00:39.380 --> 0:00:41.100 Yeah, I'm really excited to have you as well. Why 0:00:41.120 --> 0:00:42.940 don't you tell our listeners a little bit about yourself? 0:00:43.820 --> 0:00:47.360 So I am a professor at the University of Chicago. 0:00:47.380 --> 0:00:50.580 I teach business school students and PhD students and some undergrads. 0:00:50.820 --> 0:00:54.200 I teach entrepreneurial finance and private equity. I've been a 0:00:54.410 --> 0:01:00.240 researcher and working on tax policy, entrepreneurship, inequality questions since 0:01:00.240 --> 0:01:05.340 2014 when I graduated from my PhD. And I have 0:01:05.380 --> 0:01:09.340 really enjoyed telling people about the research that I wrote 0:01:09.360 --> 0:01:11.480 that culminated in this book that just came out, The 0:01:11.520 --> 0:01:14.830 Everywhere Millionaire, which is sort of a popular retelling of 0:01:14.890 --> 0:01:16.550 it with a lot of cool stories. And it's been 0:01:16.569 --> 0:01:18.850 fun meeting folks like you to talk about. 0:01:19.290 --> 0:01:22.450 Well, it is fun to get to turn... sometimes some 0:01:22.510 --> 0:01:26.110 complex financial data into something people will actually read. I'm 0:01:26.290 --> 0:01:28.930 always a fan of that. But you got into this 0:01:28.970 --> 0:01:32.220 line of work, the two of you, from studying tax data, correct? 0:01:32.440 --> 0:01:34.860 You did a huge project looking at tax data that 0:01:34.900 --> 0:01:36.920 hadn't been really studied before. 0:01:37.420 --> 0:01:39.860 That's right. We got our start. So this is Owen Zadar, 0:01:39.880 --> 0:01:42.600 my co-author on the book, and a third co-author on 0:01:42.620 --> 0:01:45.170 some of our research papers, Danny Yagan. We were newly 0:01:45.220 --> 0:01:50.190 minted econ PhDs or economists, and we were invited to 0:01:50.210 --> 0:01:52.640 the Treasury for to work with the Office of Tax 0:01:52.670 --> 0:01:56.400 Analysis in D.C., which sounds very glamorous, but it turns 0:01:56.480 --> 0:01:58.380 out we were holed up in a shared office in 0:01:58.400 --> 0:02:01.400 the basement of the Treasury, working on very old computers 0:02:01.440 --> 0:02:04.640 and database systems. And we were working with staff economists 0:02:04.700 --> 0:02:08.360 there to try and help them improve their measurement of 0:02:08.400 --> 0:02:11.519 the effective tax rate that certain types of businesses paid. 0:02:11.580 --> 0:02:15.410 So there's this emerging group of businesses that don't pay 0:02:15.470 --> 0:02:18.690 tax at the business level, but the individual owners pay tax. 0:02:19.250 --> 0:02:20.950 And the Treasury didn't have the data set up in 0:02:20.990 --> 0:02:23.720 a way to be able to systematically analyze these firms. 0:02:23.780 --> 0:02:26.040 And they become very important in the economy, and they 0:02:26.080 --> 0:02:27.860 knew that, but they didn't know that much more than it. 0:02:28.340 --> 0:02:30.339 And so we were working with them on this kind 0:02:30.380 --> 0:02:34.020 of nerdy data build project looking at tax policy questions. 0:02:34.080 --> 0:02:38.180 And that sort of unleashed this much broader story that 0:02:38.220 --> 0:02:38.960 we tell. 0:02:38.860 --> 0:02:39.220 In the book. 0:02:39.580 --> 0:02:41.870 Yeah, well, what is an everywhere millionaire? 0:02:42.610 --> 0:02:48.149 Yeah, so we define an everywhere millionaire as somebody who has... 0:02:48.400 --> 0:02:51.060 a net worth of at least $ 5 million. So we 0:02:51.100 --> 0:02:53.420 think of that as being somebody that's not just rich 0:02:53.460 --> 0:02:56.800 in like the 401k sense of the data or having 0:02:56.820 --> 0:02:57.739 just maybe a house, but. 0:02:57.800 --> 0:02:59.919 Yeah, living in an expensive school district, yes. 0:03:00.300 --> 0:03:03.880 Indeed. And so at least 5 million in net worth, 0:03:04.020 --> 0:03:07.240 and they got there through owning a private business. So 0:03:07.520 --> 0:03:10.800 on average, these folks have about $ 25 million in net worth. 0:03:11.400 --> 0:03:14.120 And then if you move up the wealth distribution to 0:03:14.160 --> 0:03:16.990 look at folks with you know, more than 10, more 0:03:17.030 --> 0:03:20.030 than 50, more than $ 100 million. The role of private 0:03:20.070 --> 0:03:23.890 business is even more important for those people. Collectively, this group, 0:03:24.270 --> 0:03:26.510 we estimate there are about 3 million Americans that fall 0:03:26.550 --> 0:03:29.780 into this group. Individually, they're not as wealthy as the 0:03:29.850 --> 0:03:33.340 Elon Musk, Jeff Bezos tech billionaire set. But if you 0:03:33.400 --> 0:03:36.920 add up all their wealth, they make more in terms 0:03:37.020 --> 0:03:41.200 of their collective resources than the Forbes 400 combined. So 0:03:41.720 --> 0:03:44.960 this is a huge class of people with enormous prosperity, 0:03:45.040 --> 0:03:47.300 and their stories are really interesting to dig into. 0:03:47.820 --> 0:03:50.040 Yeah, I mean, it's somewhat of a misconception of wealth 0:03:50.100 --> 0:03:52.540 in this country that it is all people like Mark 0:03:52.560 --> 0:03:56.100 Zuckerberg or hedge fund titans that you might hear about. 0:03:56.440 --> 0:03:59.840 But why does it matter that it is a mistaken 0:03:59.900 --> 0:04:03.590 impression of where the bulk of wealth actually is? 0:04:04.340 --> 0:04:08.350 So we think it matters in a few ways. One is, 0:04:08.370 --> 0:04:11.710 you know, when you think about like top inequality, what's 0:04:11.750 --> 0:04:14.330 driving it, if the only story you have in mind 0:04:14.390 --> 0:04:16.460 is the Mark Zuckerberg story, which is sort of a 0:04:16.630 --> 0:04:21.040 teenage dropout tech platform billionaire, and maybe you have views 0:04:21.360 --> 0:04:24.840 on that business and the value it does or doesn't create, 0:04:25.640 --> 0:04:28.260 that's one story of inequality. But there are a lot 0:04:28.370 --> 0:04:32.089 more other sort of everywhere millionaire stories, people running businesses 0:04:32.250 --> 0:04:37.370 in much more mundane walks of business in different parts 0:04:37.410 --> 0:04:40.150 of the country, all over the country, in fact. So 0:04:40.180 --> 0:04:42.540 they're sort of far closer to home than a lot 0:04:42.560 --> 0:04:44.930 of people imagine. And the way they got there is 0:04:44.970 --> 0:04:49.830 maybe a little bit less sort of alien than the 0:04:49.910 --> 0:04:53.310 tech billionaire path, which makes it both more kind of 0:04:53.350 --> 0:04:56.070 inspiring for folks that, you know, are thinking about getting 0:04:56.150 --> 0:05:00.250 up there and also maybe demystifies the process of wealth 0:05:00.300 --> 0:05:03.520 accumulation and maybe also tells us something about, you know, 0:05:03.540 --> 0:05:05.860 is the American dream dead or alive if people do 0:05:06.400 --> 0:05:08.589 or don't have the chance to get up there? Maybe 0:05:08.630 --> 0:05:10.710 not to be a hundred billionaire, but to be a 0:05:10.710 --> 0:05:13.870 50 millionaire that there's a lot more paths that way. 0:05:13.890 --> 0:05:17.010 And that's a sort of an interesting sort of frame 0:05:17.110 --> 0:05:19.870 for thinking about what are the opportunities available to everybody? 0:05:20.570 --> 0:05:23.349 Well, I want to talk about that inequality aspect of it, 0:05:23.400 --> 0:05:26.020 because I was fascinated to see the statistic in your 0:05:26.040 --> 0:05:29.040 book that the number of millionaires is increasing. 0:05:30.100 --> 0:05:30.240 And. 0:05:31.420 --> 0:05:34.600 There has been a lot written about sort of wealth inequality, 0:05:34.660 --> 0:05:38.920 income inequality. And if the number of millionaires is sort 0:05:38.940 --> 0:05:42.560 of increasing, does that mean, I mean, that just makes 0:05:42.620 --> 0:05:44.760 it a more nuanced story, right? Like it's not all 0:05:44.820 --> 0:05:47.210 billionaires and people who can't get by. If there's also 0:05:47.250 --> 0:05:50.990 this rising number of people who are reasonably wealthy, what 0:05:51.010 --> 0:05:53.289 does that mean for sort of the income inequality picture? 0:05:54.290 --> 0:05:56.990 That's right. I think it says that. So one way 0:05:57.010 --> 0:05:59.690 to think about, you know, what's going on with top inequality. 0:05:59.710 --> 0:06:02.450 So The top 1% income share is a very popular 0:06:02.830 --> 0:06:07.270 metric of sort of the rich versus everybody else. That 0:06:07.310 --> 0:06:09.909 top 1% is a much broader class of people than 0:06:09.990 --> 0:06:13.390 just the Forbes 400. And if you look at the 0:06:13.450 --> 0:06:16.830 rise in the top 1% income share over time, which 0:06:16.850 --> 0:06:20.010 has been substantial, so going back the last 30, 40 years, 0:06:20.450 --> 0:06:23.170 the top 1% income share has increased substantially. That means 0:06:23.210 --> 0:06:27.470 inequality has increased in that way. What's driving that increase? 0:06:27.529 --> 0:06:29.750 It turns out that it's income flowing from these private 0:06:29.790 --> 0:06:32.890 businesses makes up more than half of that rise. So 0:06:32.920 --> 0:06:37.020 it's a huge category of it. And that income is 0:06:37.080 --> 0:06:40.500 not the income that's flowing from the tech billionaire owned 0:06:40.540 --> 0:06:43.919 companies to those, you know, oligarchs, quote unquote. But it's 0:06:43.960 --> 0:06:47.040 this broader class of people. So it says, okay, inequality 0:06:47.100 --> 0:06:51.000 is this larger group of people, you know, running car 0:06:51.020 --> 0:06:56.240 dealerships or beer distributors or dentist's office. mid-market manufacturers and 0:06:56.320 --> 0:07:00.789 so on, we need to understand how they have gotten 0:07:00.930 --> 0:07:03.550 rich and how they're getting richer today. And maybe that 0:07:03.589 --> 0:07:05.990 story has been quite different than, say, a tech platform 0:07:06.010 --> 0:07:09.890 that's growing exponentially. And so that's like a different story 0:07:09.910 --> 0:07:13.740 of what's going on in the economy and who goes 0:07:13.780 --> 0:07:14.920 from bottom to top also. 0:07:15.300 --> 0:07:18.820 Well, some of this is just sort of based on 0:07:18.840 --> 0:07:23.030 the tax classifications, though, right? I mean, because I mean, 0:07:23.070 --> 0:07:25.810 not to get too into the weeds, but somebody owning 0:07:25.830 --> 0:07:28.810 a business where the money is passing through as income 0:07:28.860 --> 0:07:30.640 to the owner, it's a different sort of thing, even 0:07:30.660 --> 0:07:31.780 though it's a business. 0:07:33.260 --> 0:07:39.120 Sorry, now my listeners are turning off. But this affects everything, right? 0:07:39.140 --> 0:07:40.380 I mean, how it's classified. 0:07:40.760 --> 0:07:45.040 For sure. So there is a tax story here in 0:07:45.060 --> 0:07:47.640 the background, which is to say that over time, the 0:07:47.660 --> 0:07:52.010 tax code has said, we prefer you to make capital 0:07:52.050 --> 0:07:55.510 income or make profits than earn a salary or earn wages. 0:07:56.110 --> 0:07:58.830 And so if you're a business owner, an entrepreneur, you're 0:07:58.850 --> 0:08:02.100 going to try and classify as much of your income. 0:08:02.570 --> 0:08:04.460 You might not change what you were doing, the nature 0:08:04.500 --> 0:08:06.920 of what the work you were doing at all, but 0:08:07.600 --> 0:08:09.980 it's going to look like at the sort of macro 0:08:10.020 --> 0:08:12.320 level or, you know, when you're reporting to the IRS, 0:08:12.760 --> 0:08:15.670 it's all capital income and profits. And that's going to 0:08:15.730 --> 0:08:19.500 feel like sort of, oh, This is somebody who just 0:08:19.550 --> 0:08:21.930 has a portfolio of stocks who's getting a bunch of 0:08:21.970 --> 0:08:26.050 capital income and maybe they inherited it or something like that. 0:08:26.070 --> 0:08:29.030 It's going to have that Monopoly Man, Downton Abbey vibe. 0:08:29.930 --> 0:08:31.730 If you don't look under the hood at what's the 0:08:31.770 --> 0:08:33.610 underlying nature of this activity, you say, oh, it's a 0:08:33.630 --> 0:08:36.429 doctor's office where the doctor's just getting a lot of 0:08:36.470 --> 0:08:39.929 profits through the way they've structured the business. And that 0:08:39.960 --> 0:08:42.920 also changes how you think about, well, who's earning a 0:08:42.940 --> 0:08:46.060 million dollars in income? They're actively working in that business. 0:08:46.820 --> 0:08:49.240 And so it's more like labor income than it is 0:08:49.300 --> 0:08:52.070 like sort of the monopoly man, passive capital income. And 0:08:52.090 --> 0:08:54.790 that changes how you think about taxes and it changes 0:08:54.809 --> 0:08:56.209 how you think about what you need to do to 0:08:56.270 --> 0:08:56.910 get there too. 0:08:57.410 --> 0:08:59.410 Yeah, no, I definitely, people have a different impression. 0:08:59.429 --> 0:09:02.330 If you know that the guy who has, you know, 0:09:02.370 --> 0:09:05.470 the multimillion dollar portfolio is in fact working 50 hours 0:09:05.510 --> 0:09:07.630 a week in the business that's generating it, it does 0:09:07.690 --> 0:09:09.429 kind of have a different vibe to it. 0:09:10.570 --> 0:09:12.790 That is right. So it does change also, right? So 0:09:12.830 --> 0:09:15.530 like the question of, well, Does everybody have a chance 0:09:15.590 --> 0:09:17.829 to get there? Maybe more people do have a chance, 0:09:17.890 --> 0:09:20.109 but fewer people want to, you know, work in the 0:09:20.150 --> 0:09:22.290 way that some of those first generation founders do. 0:09:22.309 --> 0:09:22.929 Yeah. 0:09:22.970 --> 0:09:26.090 Because they're really grinding quite a lot. Now, if you're 0:09:26.110 --> 0:09:30.050 a third generation inheritor of a family business, they're grinding 0:09:30.090 --> 0:09:33.069 less on average. And so, you know, I would, you know, 0:09:33.210 --> 0:09:35.410 be certainly if I were a listener, I'd be like that. 0:09:35.550 --> 0:09:37.030 Sign me up for that if I can get some. 0:09:37.790 --> 0:09:38.850 That's hard to do. Yeah. 0:09:39.090 --> 0:09:40.550 I should have told my grandparents to look into that. 0:09:40.950 --> 0:09:41.130 All right. 0:09:41.150 --> 0:09:42.429 Well, we're going to take a quick ad break and 0:09:42.450 --> 0:09:51.570 then I'll be back with more from Eric Zwick. Well, 0:09:51.650 --> 0:09:53.700 I am back talking with Eric Zwick, who is the 0:09:53.740 --> 0:09:57.120 co-author of the brand new book, The Everywhere Millionaire. So 0:09:57.240 --> 0:09:59.790 if somebody is listening to this and saying, you know, yes, 0:09:59.809 --> 0:10:01.829 I would like to be wealthy, but, you know, I 0:10:01.870 --> 0:10:04.150 didn't go to Princeton or the University of Chicago, you 0:10:04.350 --> 0:10:08.090 and your co-author there, what are the best avenues to 0:10:08.190 --> 0:10:08.689 achieving that? 0:10:09.309 --> 0:10:11.310 Yeah, so one of the lessons from the book, and, 0:10:11.330 --> 0:10:13.230 you know, I think the more aspirational part of it 0:10:13.309 --> 0:10:15.230 is saying, like, the paths to real wealth in America 0:10:15.250 --> 0:10:20.390 are much wider than the standard credentials, labor market, sort 0:10:20.429 --> 0:10:23.240 of get into the best college you can, get the 0:10:23.280 --> 0:10:26.140 highest SAT score you can, and so on. Go work 0:10:26.179 --> 0:10:29.460 at a big blue chip company. It turns out in 0:10:29.520 --> 0:10:33.910 our systematic analysis of all entrepreneurs, people with average SAT 0:10:33.950 --> 0:10:36.870 scores do just about as well in terms of starting 0:10:36.910 --> 0:10:41.829 star businesses as people in the top decile of SAT scores. 0:10:41.850 --> 0:10:46.839 There's a much weaker relationship between scholastic aptitude and being 0:10:46.860 --> 0:10:49.340 a successful entrepreneur because there's lots of other factors that 0:10:49.679 --> 0:10:53.059 end up being quite important for being a successful entrepreneur, 0:10:53.080 --> 0:10:57.460 like figuring out a problem through working in an industry 0:10:57.520 --> 0:11:00.760 and learning a trade, recognizing that problem and like going 0:11:00.830 --> 0:11:02.410 to work, sort of trying to solve it in a 0:11:02.429 --> 0:11:05.590 way that hasn't been available before. That actually takes quite 0:11:05.630 --> 0:11:09.210 a while, takes a lot of persistence, some luck for 0:11:09.290 --> 0:11:12.189 sure as well. These are characteristics that, you know, don't 0:11:12.210 --> 0:11:13.910 necessarily coincide with how well you did in the SATs. 0:11:15.020 --> 0:11:17.300 So I think, you know, that lesson, it's a little 0:11:17.320 --> 0:11:20.440 bit more sort of democratic in terms of its availability. 0:11:21.110 --> 0:11:23.670 I will say that if you're born to a rich family, 0:11:23.730 --> 0:11:25.790 you're much more likely to be a successful founder. So 0:11:25.809 --> 0:11:28.990 there's some factors that, you know, rich kids get access 0:11:29.050 --> 0:11:32.310 to early on. Maybe it's not just, you know, having 0:11:32.330 --> 0:11:34.720 that bank account, but maybe it's having a network that 0:11:34.740 --> 0:11:37.500 they're connected to, that if you don't come from that background, 0:11:37.520 --> 0:11:40.060 you have to kind of get over that obstacle. But 0:11:40.080 --> 0:11:42.199 we've seen so many stories and cases of people who 0:11:42.220 --> 0:11:44.180 have been able to surmount those obstacles in the past. 0:11:44.750 --> 0:11:47.010 And we think that the reasons that they've been successful, 0:11:47.050 --> 0:11:49.150 those are going to continue going forward. And so we're 0:11:49.200 --> 0:11:52.380 optimistic about there at least being opportunities for folks to 0:11:52.400 --> 0:11:55.500 get up there going for the next generation. 0:11:55.980 --> 0:11:57.880 And some of these are, I mean, they're pretty unglamorous 0:11:58.120 --> 0:12:01.940 businesses in some cases. I mean, it's like distributing air 0:12:01.980 --> 0:12:06.860 conditioner parts or some other random thing that you never 0:12:06.920 --> 0:12:08.920 think about, but everyone needs to buy. 0:12:08.950 --> 0:12:11.750 Yeah. So we take a kind of road trip across 0:12:11.790 --> 0:12:14.429 the country and also kind of go into these different tricks. 0:12:14.800 --> 0:12:19.870 for identifying these everywhere millionaires in your everyday life. And 0:12:20.179 --> 0:12:22.230 one is sort of thinking about the supply chain. So 0:12:22.250 --> 0:12:24.829 if you think about a big complex product, like a 0:12:24.890 --> 0:12:28.589 car or a fast food restaurant, then you start to 0:12:28.630 --> 0:12:31.510 think about all of the businesses that sell into the 0:12:31.550 --> 0:12:35.030 production of those. So who makes the bumpers? Who makes 0:12:35.070 --> 0:12:38.370 the door handles? Or who manufactures the buns or makes 0:12:38.410 --> 0:12:42.689 the cheese or distributes the trash bag liners? And it 0:12:42.730 --> 0:12:45.030 turns out behind the answer to all those questions are 0:12:45.429 --> 0:12:48.530 often everywhere millionaires running businesses that in many cases they 0:12:48.550 --> 0:12:51.390 started or bought and grew to be sort of key 0:12:51.429 --> 0:12:56.360 suppliers in a supply chain. And they have loyal customers 0:12:56.420 --> 0:13:00.600 now and pretty good margins and decent scale. And it's 0:13:00.620 --> 0:13:02.640 incredible how much money you can make doing those kinds 0:13:02.700 --> 0:13:04.470 of things. So we do a bit of a kind 0:13:04.500 --> 0:13:07.790 of a roadshow to illustrate all those unglamorous businesses. They're 0:13:07.809 --> 0:13:09.589 not having as much fun during the week as on 0:13:09.610 --> 0:13:13.100 the weekends. Although when you talk to them about running 0:13:13.120 --> 0:13:15.120 the business, they actually quite enjoy it. So there's a 0:13:15.220 --> 0:13:18.739 kind of a passion in, you know, the problems they're 0:13:18.760 --> 0:13:21.760 solving every day. I talked to a garbage truck distributor 0:13:22.559 --> 0:13:26.310 and he described his business as slaying a dragon a day. 0:13:27.250 --> 0:13:29.880 That's sort of like the work ethic he takes to it, 0:13:29.910 --> 0:13:31.930 but it's sort of the little problems he goes to solve. 0:13:32.230 --> 0:13:36.250 In his mind, he's like, you know, medieval knight slaying dragons. 0:13:36.370 --> 0:13:37.450 And I just love that image. 0:13:37.990 --> 0:13:38.540 I love it too. 0:13:38.570 --> 0:13:38.810 I don't know. 0:13:38.830 --> 0:13:40.270 Hey, if you don't want to sit behind a desk 0:13:40.309 --> 0:13:43.449 all day, that might have something going for it. Speaking 0:13:43.470 --> 0:13:46.290 of which, I mean, is it possible to become wealthy 0:13:46.370 --> 0:13:48.570 working a W-2 job or is that really just not 0:13:48.610 --> 0:13:50.170 the path that most people are going to take? 0:13:50.730 --> 0:13:55.230 So the typical top one percenter is earning a lot 0:13:55.250 --> 0:13:58.309 of money through ownership and not just a salary job. 0:13:59.370 --> 0:14:02.839 So It is the case that these folks don't necessarily 0:14:02.900 --> 0:14:05.400 start out as entrepreneurs when they enter the labor market. 0:14:05.500 --> 0:14:07.980 So the median age for a successful founder in our 0:14:08.360 --> 0:14:13.140 systematic data looking at millions of founders is around 40, 0:14:13.140 --> 0:14:15.600 which is to say they've worked 15, 20 years doing 0:14:15.640 --> 0:14:21.160 stuff before then. So a salary job isn't the end 0:14:21.180 --> 0:14:23.160 goal if you want to make especially like 50 million 0:14:23.200 --> 0:14:25.780 bucks or something like that. You need to have an 0:14:26.200 --> 0:14:31.450 ownership upside stake in a reasonably large business. But a 0:14:31.490 --> 0:14:33.670 salary job can put you on a path to learn 0:14:33.710 --> 0:14:36.010 a set of skills, make a set of connections, identify 0:14:36.050 --> 0:14:38.620 problems that then down the road, you start a business 0:14:38.720 --> 0:14:41.340 that is meant to solve those problems. And that's how 0:14:41.360 --> 0:14:43.820 you end up there later in your career. So. 0:14:45.490 --> 0:14:48.370 With these everywhere millionaires sort of spread around the country, 0:14:48.390 --> 0:14:51.670 I mean, not just all being in Manhattan and San Francisco, 0:14:52.410 --> 0:14:55.330 how does their wealth affect these smaller communities? I mean, 0:14:55.450 --> 0:14:57.690 what does this wind up looking like in a small 0:14:57.730 --> 0:15:01.229 town to have somebody who's worth $ 50 million living there? 0:15:01.630 --> 0:15:05.290 Yes. So, right. We actually thought about calling this the 0:15:05.330 --> 0:15:07.970 millionaire map at one point because there was such a 0:15:08.890 --> 0:15:11.630 graphical visual images. We were trying to say, put them 0:15:11.670 --> 0:15:14.840 all on the map instead of like, with the Forbes 400, 0:15:14.840 --> 0:15:17.760 it's just a few cities. If you want to say, 0:15:17.800 --> 0:15:20.880 where did they live? If you put these everywhere millionaires 0:15:20.900 --> 0:15:23.450 in the map, really the whole map lights up. There's 0:15:23.490 --> 0:15:25.690 an everywhere millionaire in every congressional district is one way 0:15:25.730 --> 0:15:27.910 we talk about it when we're talking to like policymakers. 0:15:29.470 --> 0:15:31.930 What do I mean? Like a car dealer, an HVAC 0:15:32.030 --> 0:15:35.310 kind of, you know, empire, a franchise owner who has 0:15:35.310 --> 0:15:39.990 10 McDonald's or Wendy's or something like that. And they... 0:15:40.790 --> 0:15:43.470 Have a lot of impact in their local communities because, 0:15:43.790 --> 0:15:45.650 like you said, they're kind of the big honcho. Their 0:15:45.850 --> 0:15:49.230 tech is very geographically concentrated, right? But these folks are everywhere. 0:15:49.730 --> 0:15:52.750 They have a lot of employees. You know, think about 0:15:52.770 --> 0:15:54.609 the car dealers. They account for a huge chunk of 0:15:54.650 --> 0:15:58.690 sales tax revenue. So they're, you know, supporting local public goods, 0:15:59.320 --> 0:16:03.500 schools and infrastructure and trash pickup and everything through that 0:16:03.540 --> 0:16:06.000 sales tax that they distribute. It means they also have 0:16:06.020 --> 0:16:09.220 a lot of power. And, you know, they're funding the 0:16:09.240 --> 0:16:13.750 Little League team. and they're the donors for those congressional 0:16:13.970 --> 0:16:17.190 districts when folks are running for office, or they themselves 0:16:17.230 --> 0:16:19.210 are running for office. And it turns out when you 0:16:19.230 --> 0:16:21.870 look at elected officials, their backgrounds are much more likely 0:16:21.910 --> 0:16:24.170 to come from this everywhere millionaire class than as a 0:16:24.190 --> 0:16:26.870 share of the population they represent. Yeah, I can imagine. 0:16:26.890 --> 0:16:29.010 I was just thinking of how many Little League jerseys 0:16:29.080 --> 0:16:32.860 I've had over the years, and somebody's multi-location orthodontic firm 0:16:33.100 --> 0:16:35.540 is on the back of it or something like that. 0:16:36.360 --> 0:16:40.160 That's probably exactly who we are talking about. But, you know, 0:16:40.180 --> 0:16:41.360 one of the things I like about the book, I mean, 0:16:41.380 --> 0:16:44.350 you're not aiming to sort of glorify or vilify, I guess, 0:16:44.500 --> 0:16:45.390 is how I would put it. 0:16:45.570 --> 0:16:48.470 And some of the past literature. 0:16:48.070 --> 0:16:49.989 On this, I remember, like, was it The Millionaire Next 0:16:50.030 --> 0:16:52.770 Door that came out many decades ago? It had sort 0:16:52.790 --> 0:16:56.710 of this aw shucks idea, like they're all driving used cars. 0:16:56.890 --> 0:16:58.600 They're not all driving used cars, correct? 0:16:59.010 --> 0:17:01.600 Indeed. So, right. So The Millionaire Next Door is a 0:17:01.620 --> 0:17:04.500 book that I quite enjoy, you know, reading, but also 0:17:05.240 --> 0:17:09.179 presents this picture of them, uh, as being quite frugal, 0:17:09.400 --> 0:17:11.100 like you wouldn't even be able to tell from their 0:17:11.119 --> 0:17:14.340 consumption habits. And it turns out if you focus on 0:17:14.640 --> 0:17:18.850 who's willing to answer a marketing survey, which is sort 0:17:18.869 --> 0:17:21.470 of the source of the data in that book, then 0:17:21.550 --> 0:17:24.170 you might get people talking about their consumption habits a 0:17:24.210 --> 0:17:27.870 little bit more humbly than when you look in other 0:17:27.890 --> 0:17:32.540 data sets, such as we bought yacht and jet registration data. 0:17:32.600 --> 0:17:36.180 And we looked at, you know, vacation homes, like 5,000 0:17:36.180 --> 0:17:39.350 square foot homes in, in, resort towns like Aspen or 0:17:39.390 --> 0:17:41.590 on Lake of the Ozarks. And then you look at 0:17:41.609 --> 0:17:45.010 who owns those assets. And it's a bunch of these 0:17:45.050 --> 0:17:50.220 everywhere millionaires, these awshucks entrepreneurs. And they have certain tastes 0:17:50.340 --> 0:17:53.300 and habits that do, especially early on when they're growing 0:17:53.320 --> 0:17:55.760 the business, I think do look like the millionaire next door. 0:17:55.800 --> 0:17:58.000 They're plowing every last dollar back into the business to 0:17:58.020 --> 0:18:01.170 grow it. But as they get older and the business 0:18:01.190 --> 0:18:05.130 stabilizes and they're just raking it in, Their consumption habits 0:18:05.150 --> 0:18:06.530 start to look a little bit more like I think 0:18:06.590 --> 0:18:10.280 most of the listeners might imagine spending if you had 0:18:10.280 --> 0:18:12.720 $ 150, 000 a month in free cash flow after paying for 0:18:12.760 --> 0:18:15.939 your house to spend on whatever you wanted to. You 0:18:15.960 --> 0:18:21.950 might develop some more conspicuous consumption habits, we should say. So, yeah, 0:18:21.970 --> 0:18:23.510 so it's a little bit more balanced, I think, in 0:18:23.530 --> 0:18:25.590 part because we're looking at a lot of different data 0:18:25.609 --> 0:18:27.830 sources and trying to be a little more comprehensive. Yeah. 0:18:28.250 --> 0:18:31.149 Well, hey, maybe people are, you know, using used yachts. 0:18:31.230 --> 0:18:32.670 I mean, who knows? It could be. 0:18:32.869 --> 0:18:35.340 That's right. I've heard that the best day of somebody's 0:18:35.390 --> 0:18:37.960 life is the day they sell a boat, and the 0:18:38.000 --> 0:18:39.540 second best day is the day they bought it. 0:18:39.580 --> 0:18:40.300 The day they bought it. 0:18:40.340 --> 0:18:40.679 Exactly. 0:18:40.720 --> 0:18:41.540 Yeah, yeah. 0:18:41.880 --> 0:18:43.940 All right, we're going to take one more quick ad break, 0:18:43.960 --> 0:18:53.310 and then I'll be back with more from Eric Zwick. Well, 0:18:53.390 --> 0:18:55.909 I am back talking with Eric Zwick, who is a 0:18:55.970 --> 0:18:59.030 professor of economics and finance at the University of Chicago, 0:18:59.090 --> 0:19:01.910 the co-author of the brand new book, The Everywhere Millionaire. 0:19:02.330 --> 0:19:05.770 So I am curious, you co-authored this book. You guys 0:19:05.790 --> 0:19:07.000 work together quite closely on it. 0:19:07.050 --> 0:19:10.430 How does a co-authorship relationship work in that sort of 0:19:10.540 --> 0:19:12.120 practical day-to-day life? 0:19:12.940 --> 0:19:16.959 So we definitely joke. I've been working with Owen for 0:19:17.720 --> 0:19:20.100 more than a decade now on stuff. And we joke 0:19:20.140 --> 0:19:22.180 that it's sort of like the second marriage that we have. 0:19:23.320 --> 0:19:25.740 And our wives both feel that way a little bit 0:19:25.859 --> 0:19:27.600 when the phone rings and they know who's on the 0:19:27.619 --> 0:19:30.590 other line. Spend a lot of time together, often in 0:19:30.660 --> 0:19:35.930 shared Zoom meetings virtually. And when we're writing, we take 0:19:36.010 --> 0:19:38.189 turns where one is sort of has the keyboard and 0:19:38.230 --> 0:19:41.169 the other is kind of dictating and reading and revising. 0:19:41.869 --> 0:19:44.070 And we have a sort of back and forth iterative 0:19:44.109 --> 0:19:47.330 process there, which I think is useful for especially co-authoring 0:19:47.390 --> 0:19:49.490 a piece. You want to have a unified voice by 0:19:49.510 --> 0:19:51.820 the end of it. it. So we sort of have 0:19:51.840 --> 0:19:55.479 that structured process where, you know, on average, you know, 0:19:55.550 --> 0:19:58.190 one of us might have the last line for polishing 0:19:58.230 --> 0:20:00.409 so that the sentences end up kind of having the 0:20:01.090 --> 0:20:04.709 same flavor. But there's a lot of spending time together, 0:20:04.750 --> 0:20:05.290 no question. 0:20:06.080 --> 0:20:07.659 And is a lot of that virtual? I mean, what 0:20:07.700 --> 0:20:08.979 is sort of the proportion of virtual? 0:20:09.100 --> 0:20:11.010 And I read somewhere that you guys went on sort 0:20:11.030 --> 0:20:14.649