Wealthy People Are Hiding in Plain Sight (ft. Owen Zidar)

Owen Zidar (0:00)

The way you get rich is by owning, not earning.

We have some of the coolest data that's ever been assembled on the rich in America. She told me, for herself, she said, if I could give my daughter $40 million or zero, I would give her zero.

Benjamin Felix (0:18)

Welcome to episode 428 of The Rational Reminder Podcast. I'm Ben Felix, Chief Investment Officer at PWL Capital.

Cameron Passmore (0:25)

And I'm Cameron Passmore, Chief Executive Officer at PWL Capital. Today, Ben, we were joined by Owen Zidar, Professor of Economics, Financial Researcher, and co-author of the book The Everywhere Millionaire.

Benjamin Felix (0:40)

Owen is a Professor of Economics and Public Affairs at Princeton. In the episode, we talk about the unglamorous industries behind most fortunes, what the inequality debate misses, and how the rich spend their money and their time. Super interesting.

Cameron Passmore (0:54)

Super interesting, and as always, stick around to the end to hear our thoughts about the conversation with Owen. But for now, let's get into the episode.

Benjamin Felix (1:06)

Owen Zidar, welcome to The Rational Reminder Podcast.

Owen Zidar (1:09)

Thanks for having me.

Benjamin Felix (1:10)

Owen, what's wrong with a common perception of what it means to be wealthy?

Owen Zidar (1:14)

Most people think that the way you get rich is to be like Elon Musk or Jamie Dimon or Taylor Swift. When you look in the data, that's just not actually at all who the typical rich person is in America. There are often ordinary business owners who have gotten extraordinarily rich running unglamorous private businesses.

So I have three young kids and so I read a lot of kids' books, and we half-jokingly talked about writing the ABCs of getting rich for the children's market. It's like A for auto dealer, B for beverage distributor, and C for contractor. They're pretty mundane businesses, but when you have the opportunity like us to work with the Treasury to see the full map of wealth in America, it's just very different because people don't answer surveys. Unless you have investigative journalists or a celebrity following, you're just not going to see the vast majority of private companies that don't have to file quarterly to investors.

Benjamin Felix (2:09)

Can you talk about why that's important for people to understand?

Owen Zidar (2:12)

Yes. There are two key reasons. One is if you want to get rich yourself. I think these Everywhere Millionaires provide a road map for success in America.

The second is if you want to understand the economy and influence, these folks are really central characters in the saga of rising inequality in America.

Benjamin Felix (2:31)

So interesting. It makes me think about it. I listened to the podcast a while ago with Mike Rowe. Do you remember the show Dirty Jobs?

Owen Zidar (2:37)

No, but I know the title, but I think that's In the Right Facility.

Benjamin Felix (2:42)

He did the show where he would go and spend the day with people that did really dirty, like people cleaning sewers and stuff like that. He talked about how a ton of those people, you would never know from watching the show, but a ton of those people were very wealthy because they own these types of businesses.

Owen Zidar (2:56)

That's spot on. It's funny. Our neighbor is talking about turning this into a documentary.

He puts the first clip together. One of the things he shows of going from the great Gatsby, Leonardo DiCaprio, and a nice scene from the show Billions. He goes right to Porter Potties. It's just like this guy who owns 100 Porter Potties, and think about all the big events, all the races, Toronto has a big marathon. You name the thing, and someone needs to get Porter Potties there and clean them, and turns out that's a pretty good business if you have it at some scale.

Cameron Passmore (3:28)

Sure is. How was the source of income at the very top changed over the past century?

Owen Zidar (3:33)

It's quite interesting to watch the rise of entrepreneurial income from private business. If you look at top 0.1 percent of income, I'll give you a few numbers. So in 1960, 17 percent of that income came from entrepreneurial income from business owners and almost twice that came from wages. If you go to 2022, 43 percent came from private business and only 35 percent came from wages. And so you've seen this big rise in the share of income, especially at the top, from private business. So that's another reason why I think this is quite important. One way to quantify that is to think about one of the most famous graphs in economics. So Thomas Piketty and Emmanuel Sias had this famous U-shape top 1 percent graph, where over the 20th century, they plod the share of income going to the top 1 percent. And if you do that same plod but hold fixed the contribution of private business, and mid 1980s, you only get half the rise in the top 1 percent. And so that's another way of accounting for how big this is.