At The Money: Who Is Wealthy in America, and How Did They Get Rich?

SPEAKER_1 (0:02)

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Barry Ritholtz (0:28)

We know America is a rich nation, but do you know exactly how rich? Who holds all of that wealth?

To help us unpack this and what it might mean for your prosperity, let's bring in Owen Zidar and Eric Zwick. They are 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. So guys, I'm fascinated not only by all the data and the information in the book, but how the book came about. You were effectively hired by the IRS and Treasury to do a data analytics. Tell us a little bit about that.

Owen Zidar (1:12)

So right out of, thanks for having us, Barry. It's great to be here. Right out of grad school, we were PhD economists. We were brought in to work with folks at the Treasury and the Office of Tax Analysis to work on a project linking businesses to their owners and workers.

This pass-through business sector had grown dramatically over the prior 40 years, and it was difficult for folks to basically estimate how much tax those businesses were paying because the businesses don't pay tax themselves. You have to link them back to their owners to figure out the individual owner's tax position. So this was a project that was really important for tax policy, and it turned out to be a lever for us to learn about much more than tax policy, income, wealth, and prosperity in the country.

Barry Ritholtz (1:57)

Almost accidental that you guys created this massive database of those tax records.

What was in that data that all of the other surveys and data we see from Commerce or the Federal Reserve, I'm a fan of the Survey of Consumer Finances. What did you guys find in this database you created that those surveys miss?

Eric Zwick (2:20)

So the Federal Reserve Survey of Consumer Finance is fantastic. We don't want to say anything bad about it. It's a big effort to collect it, but it's fundamentally much less rich than the data we put together. So the data we put together is a panel. So you can do things like study every business that was created and trace how well they're doing and what allows them to succeed. A second dimension is that you can see much more granular information about industries and geographies to learn about where wealth and opportunity are in this country.

Barry Ritholtz (2:53)

So that raises really a fascinating question. What did you find in your data analytics that's in the book, The Everywhere Millionaire, that was a key misconception that the very broad, non-granular Federal Reserve surveys just don't have access to?

What misconception did the data force you to abandon?

Owen Zidar (3:17)

I think we call it the Everywhere Millionaire because what we learned was that top wealth and income and just this wealth is like much more abundant and also closer to home for more people than we previously thought. So if you thought all the wealth was on the coasts, that misconception we basically upended because we put our Everywhere Millionaires on a map and the whole country lights up. If you thought it was just in tech and finance, which maybe was a bit more our prior going into this work, turns out it's all across lots of industries, including many unglamorous sort of more blue collar industries that we hadn't really thought about as paths to wealth at the top. And if you thought it was just the Forbes 400 billionaires that were getting extremely rich and driving inequality statistics, well, no, that's not true either because we're talking about millions of people. So we have three million Everywhere Millionaires. We say have net worth of at least five million dollars that are private business owners. And that's just they collectively have more than 10 times the wealth of the Forbes 400 combined. So again, just like this much broader picture of wealth than we thought we had going in.

Barry Ritholtz (4:26)

So let's talk about all those unglamorous businesses. You write about auto dealers, HVAC companies, medical or dental practices, restaurants, distributors, sanitation. Like these aren't remotely sexy.

I have to ask the question, they may not be sexy, but they're obviously very lucrative. Why has this group been so consistently underestimated?

Eric Zwick (4:57)

It's fun to talk to people, even NBA players like Russell Westbrook, when they're trying to make money. We have this quote in the beginning of one of the chapters that's like, unsexy is sexy to me, because he went and bought some of these types of businesses. I think one reason why they're consistently underestimated is it's very hard to know who's rich.