Eric Zwick: "The Everywhere Millionaire"

0:00Trick or treat! No one's home! I see you inside eating a Reese's! Why do people ignore trick or treaters? Do they not have treats? Or do they not want to share their Reese's? Perhaps it's true, everything happens for a Reese's. Hey, this is Jeff Lewis from Radio Andy. Live and uncensored catch me talking with my friends about my latest obsessions, relationship issues, and bodily ailments. With that kind of drama that seems to follow me, you never know what's going to happen. You can listen to Jeff Lewis Live at home or anywhere you are. Download the Series TexteM app for over 425 channels of ad-free music, sports, entertainment, and more. Subscribe now and get three months free. Offer details apply. Today's poll question at swerkanish.com

1:08has just a tick under 20,000 votes. It was inspired by a book that I've devoured in the last couple of days. The poll question, who really runs the American economy? Is it big tech, big banks, and big oil? I lump them all together or the millionaires on Main Street. You might want to listen to the next conversation before you cast a ballot at swerkanish.com. I remember in the mid 90s, hard to believe it's been 30 years, but there was a book that came out and it was called the Millionaire Next Door. The Millionaire Next Door. The person with money in your neighborhood might not be the lawyer, might not be the doctor, but the person with real money might be that unassuming drywall contractor or rougher or trash hauler or restaurant tour. And when I saw this brand new book, the Everywhere Millionaire, I figured it would be an update three decades on Owen, Zadar, and Eric Zwick.

2:11And it kind of is, but these two economists have taken the research and the insight to a whole new unprecedented level of analysis. Eric Zwick is the Joel F. Jemunder, Professor of Economics and Finance at the University of Chicago, Booth School of Business, year into PhD from Harvard and a bachelor's from Swathmore. Professor Zwick, thank you so much for being here. So the book opens with a story book wedding to the tune of $60 million at the Palace of Versailles. Tell me about the wedding and then tell me who paid for it. Yes, so thank you for having me, Michael. It's great to be here. We open the book as so many books written by economists with a very flashy wedding. We have a $60 million wedding. The family flew the guests on private jet to France. They rented out Versailles, not for the wedding evening, but just for a party.

3:14They dressed in period costume. They had the actual wedding in a different chateau that was designed by the same architect as Versailles. We're Adam Levine of Maroon 5, saying the first dance as the Eiffel Tower gleamed in the distance. And so this $60 million wedding, which cost more at the time than, I think Jeff Bezos' recent wedding to Lauren Sanchez. It was not a tech or finance family that was funding that. It was car dealers, third generation car dealers from Coral Gables from sort of off the term pike in Florida, South Florida. And that's sort of how we open the story because it's a surprising story that by the end is sort of obvious by the time you've read the rest of the story. You and I are having this conversation against a backdrop of a lot of concern about artificial intelligence. The magnificent seven seem to be driving the stock market. Everybody who's listening to us or will watch this interview certainly is aware of the Forbes 400.

4:15But the everywhere millionaire says if you're solely focused on those earners, you're missing a bigger story. Fair? Absolutely. The mental map of American wealth, we call them everywhere millionaires because we want to get that map of the country and people's heads. And if you put the Forbes 400 where they live, those people on the map, it's very coastal. It's increasingly tech focused with the tech billionaires and so on. But the actual map of wealth in America, sort of far more abundant and closer to home for most Americans than people realize. So there's a car dealer or an age back empire, a franchise owner in every congressional district collectively this group, the everywhere millionaires they hold more than 10 times the wealth of the Forbes 400 combined. So in some sense, they're really the real rich in America. The Forbes 400 are important to study and think about. But far from the end of the story and maybe even not even the end of the beginning.

5:16I underscored that in the book. The Main Street Millionaires have more than 13 times the wealth of the Forbes 400 professor define rich as you're using that word and most importantly define Main Street Millionaire. Yes. So our concept of Main Street Millionaire is somebody who has a network of at least $5 million who owns a private business. And there are three million people that we estimate in 2022 have about that level of wealth and that structure as you move further up the wealth. So on average within this broad class, they're at net worth is 25 million you move further up to sort of the deck of millionaires or somebody with 50 million bucks in that word. So the more likely they are to be a private business owner, the more likely they are to resemble this Main Street Millionaire class. And so the same story holds and then there are tens of thousands of people with hundreds of millions of dollars running these mundane businesses all across the country.

6:19You probably know you write you probably know a Main Street Millionaire even if you don't realize it. They're coaching your child soccer teams sitting next to you at community fundraisers chatting with you at neighborhood barbecues. They might be the dentist who expanded his office to a regional network of practices, the commercial HVAC contractor whose trucks you see around town or the owner of that local restaurant chain that keeps opening new locations. They're hiding in plain sight as ordinary people who run businesses woven into the fabric of every day life. And then you say how did we discover them? This begins correct me if I'm wrong in 2014 when the Treasury Department asked you please figure out how much business owners are paying in taxes. True? Yes, so we were newly minted PhDs, Owen from Berkeley, me from Harvard, and we were tax policy nerds, tax policy experts.

7:19And so the Treasury Department wanted to bring some folks in to help them fill gaps in their understanding of the data that they were sitting on so that they could design better tax policy or score proposals that focus on businesses in America. The Treasury folks that we were working with were well aware that this new class of private business owners that emerged over the prior three or four decades, but limitations in the way the data was stored and organized and collected, cumbersome computer systems made it very difficult to get a real picture of it to link. So you could you couldn't answer basic questions like how much tax do these businesses pay effectively because the businesses themselves weren't paying the tax the owners have to pay it. And the Treasury wasn't able to do that they weren't able to score these proposals so we started working with them to assemble the first data that made those links possible and then we rolled that up into the most comprehensive data on income wealth and entrepreneurship in the US economy going back to the US economy.

8:25Going back to the early 2000s in some cases back into the 1990s so we could tell this story and like you said it's the million or next doors story has part of what we're seeing in the data but because you can have a much richer picture. You're not relying on who responded to a marketing survey to find the rich people you're sort of going to where the money is following the money is what word and Bernstein would tell you to do you get an unvarnished view and that's that's kind of the foundation of the story we're telling in the book. There were a lot of impediments right you're dealing with an agronistic computer systems the left hand not speaking with the right hand there was a lot you needed to do literally in the balls of the Treasury building to be able to come to some conclusions. That's right we are in a windowless office the three of a sharing office lot of the time you'd have to go out if you want to work late nights which was the best time to work as the servers were so slow during the day but they they cleared up at night because people normal people would go home to their families but we of course would sort of bring salads or tacos in sneak in before five and then just hang out so pretty late in the hours sort of running code babysitting it.

9:38I went on some field trips so I relied on my background as a software developer to do some of the arcane programming that we needed to do to put these data together but I also had to rely on the expertise that was sort of scattered all across the data infrastructure system going to find the architect of the original electric filing database to ask him. There are cane questions about columns of data like what is this field mean how do I link this data to this data. And so we tell a little bit about that story in the book which I think conveys sort of an a pre-jatchy BT era in an era where you know we rely on computers little hamsters running around inside kind of you know there's a lot of grind going on just to just to see anything at all. Professor Eric Zwick is the co-author of a brand new book it's called the everywhere millionaire. This is Book Club with Michael's Mikanish from Sirius XM. Finding the music you love shouldn't be hard that's why Pandora makes it easy to explore all your favorites and discover new artists in genres you'll love. Enjoy a personalized listening experience simply by selecting any song or album and we'll make a station crafted just for you.

10:43Best of all you can listen for free download Pandora on the Apple App Store or Google Play and start hearing the soundtrack to your life. I'm Galen co-founder of Brooklyn Solar Works with my chase sink business premier card I get unlimited 2.5% cash back on purchases of $5,000 or more. So everything we buy to run our solar business gives us cash back that we put back into the neighborhood donating solar panels to community gardens. Chase Inc. cash back built for every business find the right card at chase.com slash Inc. Real business owner compensated for the participation cards issued by JP Morgan Chase Bank and a member of DECC subject to credit approval terms apply. I'm Livy Dunn all American gymnasts and Vyory athlete. When you travel and train as much as I do you find happiness where you are. On the mat or on the sand movement and comfort are essential. That's why I live in performance sugars by Vyory made from dream net fabric that's made of 89% recycled materials effortlessly soft and made to move as much as I do.

11:46My happiness starts here in the softest doggers on the planet. Get 20% off your first purchase at Vyory.com slash Libby that's V-U-L-R-I dot com slash L-I-V-V-Y. Exclusions apply not only will you receive 20% off your first purchase but enjoy free shipping on US orders over $75 and free returns. Go to Vyory dot com slash Libby and discover the full versatility of Vyory clothing. Exclusions apply visit the website for full terms and conditions. Summer still going strong make a stop at total wine and more for white wines beer and ready to drink cocktails. Just know you're getting the lowest prices keep the summer celebrations going at total wine and more spirits are not sold in Virginia and North Carolina drink responsibly be 21. Michael's Mourconnish program listen weekdays at 9 a.m. East on POTUS Sirius XM channel 124 and anytime on the Sirius XM. Professor Eric Zwick is the co author of a brand new book it's called the everywhere millionaire something else that I underlined in the book that I think brings home the level of your attention and then I'll ask about the conclusions.

12:54You built a novel data set of every owner of a business started since the year 2000 we're talking about 8 million entrepreneurs among the the everywhere or main street millionaires those who've got a wealth of 25 million or they're about dispel some of the myths tell me collectively who are these people. Yes, so this data project which like took a decade to assemble and study these entrepreneurs we wanted to answer like them one of the most basic questions of entrepreneurship which is. You know yeah of course there's success stories where people get fabulously rich starting a business but isn't it really risky don't people fail all the time. I know that I'd be better off if I want to start a business myself and so we're able to use at least these 8 million people that start businesses we can follow them over the following decade and see okay how do they do compared to very similar workers who chose not to start a business.

13:54I think one of the most prominent myths is if you start a business you're likely to fail and then from there it's a little bit murky but people have a view that you kind of fall off the face of the earth. We look at the data and incomes on average including all the failures are about 10% higher per year in the decade after a person starts a new business that means even with the failures people are like going on either back to what they were doing before or they go and start a new business some of the really successful stories we tell in the book our second or third ventures of somebody who learned a lot of lessons from starting something and you know making sure not to do anything illegal but but still not. Fail not succeeding so well as they would have liked and they learn those lessons they go and start something else they saw a better problem they have better networks they find customers more effectively and so on so I think that story about entrepreneurship and it you know maybe it's not so risky as people think. If you want to get in there is a really important lesson I think it teaches us also about kind of the health of the American dream which is another big question on people's minds well let me go there is the American dream alive and well.

15:04We think the American dream is much more alive than people think so I think people run around it's really really hot and conventional narrative the American dream is dad just got to become an influencer or start an app or or you have to be born rich that's the only chance you have. We think there are paths to real well that are far wider than the standard stories of say going to an Ivy League school and then going to get a job in a big company suggest or that you have to be rich to raise to the top. It turns out that people with sort of average test scores are more likely to build the highly successful businesses then earning a comparable fortune as a salary worker so as a path from the bottom to the top those paths are very much open. They're much wider than people realize and I think that's a that's a lesson that we draw from the big data and then we draw from the stories that we tell to. There's such pressure to get into the so called elite schools you took a look at the elite schools and whether they are generating the main street millionaires that you write about what's the answer to that question.

16:09Yeah so if you go to an Ivy League school it's a very small share of the population and if you look at the share of people that achieve the American dreams so people that start out in the bottom 20% tile in terms of where their parents were and then go to maybe the top 20% tile or top quintile of the income distribution by young adults. If you go to an Ivy League school and you want to achieve that American dream as a salary worker it really does increase your chances maybe doubles or triples your chances. If you want to achieve the American dream by being an entrepreneur doesn't have much of an effect and the base rates sort of the share of people that are going on that path much much smaller. So we find between depending on how you define it six to 10% of kids that are born in that bottom quintile rise to the top through entrepreneurship even though the base rate of people who start businesses much lower so it's a path to kind of accelerating the rise to the top that entrepreneurial path is much more common and seems to be much more super powered.

17:13Then the Ivy League school another way of thinking about it is you don't happen to have that top test score. You know there are a lot of chances and opportunities available most folks that start the successful businesses do not come from the top of the SAT distribution that's just just not what the data look like. Okay and something else another myth that I think we can dispense with is the idea that you're born into a family of privilege or maybe this is a dated concept but you're born into some some was family in the United States you're going to have that leg up not for entrepreneurship instead it's children of immigrants first explain what I'm talking about and then tell me why that's the case. Yeah so it is it is definitely the case that if you want to get rich the easiest way to get rich is to be born rich so I recommend that for listeners who can figure out how to do so however most of us can't figure out how to do that and so then the questions if you're not born rich do you still have a chance to become rich and the answers overwhelmingly less.

18:16So there are far more people that rise to the top typically taking this entrepreneurial path outside of the top 1% of family income then from the top 1% you know at the same time the odds are not even with you know kids in the top 1% having a five or six times like as high probability of becoming a star entrepreneur as people in the bottom half. But there are way more kids from the bottom half so when we look at the typical entrepreneurial success story they're coming from the bottom not the top and to your question about immigrants. There's a disproportionate share of immigrants among these sort of rags to riches entrepreneurial success stories so one of the really inspiring stories we tell in the book she he'd con was an immigrant from Pakistan he was at University of Illinois as an engineer then worked kind of manufacturing car bumpers was kind of annoyed with the owner started to get rich. He's his own business to compete building these car bumpers the owner sued him she he'd won she eventually bought that business fast forward a little bit he's making all the bumpers that go into Toyota's and he's so rich that he could buy Jacksonville Jaguars.

19:27So you know there are a lot of data points that you know maybe not quite as extreme as she can story are so quite inspiring that immigrant comes in and starts a business like that but I think that's another version of the American dream that we don't hear as often as maybe we should. Professors Wic you say the best way to to be rich is to be born rich however I learned pardon from you a Scottish proverb which I love the father buys the sun builds the grandchild sells and his son bags explain. Yes so it's unfortunately the case that when you think about what gets inherited what's easy to inherit cash in the bank maybe is easy to inherit maybe a house or a plot of land is easy to inherit a business not so easy to inherit because you got to know what you're doing you got to know how to run it and if you don't top workers will leave competitors will enter industry trends attack you from all dimensions and you don't know how to restore.

20:30So you're not going to respond because you don't know exactly what you're doing you just like we're brought up and born into the business so that dynamic of you know inheriting a family business and not knowing what to do is quite common one thing that we're seeing at the macro level is baby boomers and silent generation folks who have accumulated to use wealth running these businesses are looking to pass them on they don't have natural. So we're willing to take over those businesses this presents an amazing opportunity for entrance for folks to either come in and compete with them or buy businesses that are on the verge of selling that dynamic that churn one way to summarize it in a statistic is if you're a kid born in the top 1% 40% of those kids will fall out of the top 1% so there's no guarantee that being born which is going to allow you to stay there. Eric zwick and oh and Zadar co-authors of the everywhere millionaire I should point out that 2014 are there about treasurer they come to you newly minted PhDs as you describe and they say help us figure out what businesses are paying taxes you do a decade of research and now this is this is the net of all of the work that you have done.

21:43But the treasury department is not going to allow you to out the people that you're writing about you needed to go out and find them. So that you could tell the individual stories in the book and to do that you purchased ownership lists for yachts as well as for jets and then something else that that I thought was revelatory in the book as of June of 2024 over 8 million homes in America. Nearly one of every 10 are worth at least one million dollars two million are worth at least two million dollars and about two hundred and fifty five thousand are worth more than five million many of these homes belong to main street millionaires and they live all over the country and I assume you then were able to access the property records because in one of the chapters of the book you kind of take us on a driving tour of communities all over the country where there's always like that one extraordinary. Measured by square footage house and it's the mainstream mainstream mainstream millionaire that you're writing about so that's how you were able to tell the stories right the combination of the real estate the combination of the jet information who's flying privately and the yacht registries.

23:02Yes, that is a great encapsulation of what we are doing and are not doing in this book we are not revealing people's tax information that is illegal. The research we did with the tax data always worked with anonymized data where we couldn't see the identities of the people of the names of their businesses. We could see rough geographies and we could see industry and we could see the size of the businesses these kinds of things so we from the research built on that data have a sense of where to look and so we thought for the book okay let's go and find people in data sources where we're allowed to ask who they are so you know industry and trade publications. I started reading the nation's restaurant news to find like fast casual restaurants that are growing really quickly and look up some of the founders of those businesses more colorful data sets that we love playing with the yacht and jet registration data and to your point about from the beginning about the millionaire next door which really emphasizes frugality among this class of millionaires.

24:06When you look at the yacht and jet registration data or you look in the property data where you can also see the names of people who own these mega mansions all over the country. You don't see a profile of consumption that is inconspicuous. You see a lot of wealth 100 foot yachts owned by car dealers all over the country. You see these huge mansions in not in flyover country so the book is a bit of a love letter to flyover country you know I live in Chicago which is you know the third city or the third coast which I love. But you know people are not used to taking a road trip instead of flying over and so we start in Mississippi and we find a mansion run by a seamless gutter manufacturer you know who all they do is think about seamless gutters doing them planning to do them. And they have this you know beautiful antebellum mansion in that just Mississippi the biscuit capital of the world as they have appointed themselves and we go from there across the country through Texas up to Oklahoma city into Salt Lake finding these mansions and telling the stories the mainstream millionaires we found who own them.

25:12And it's pretty fun because you could you could do a version of that road trip you know of course respect people's privacy don't knock on the doors. But you know it's sort of a fun thing to be able to do with with the data and and to I think make it much more tangible and visible to people the story we're telling through these different different approaches that we take in the book. I'll leave you with a final thought and thank you for being so gracious with your time it's a book that parents ought to read and ask their children to read but I I think I think so often were inclined to push toward the education oh go get the highest degree possible and so forth and not stop to think about the power of being an entrepreneur and opening a business and aspiring to be one of these everywhere millionaires. Thank you for writing it thank you for being here to discuss that I thought it was terrific. Thanks for having me Michael it's a it's a pleasure to be here. Eric Zwick and Owen Zadar the authors of the everywhere millionaires.

26:13Hey this is Will or net host of smartless smartless is a podcast with myself and Sean Hayes and Jason Bateman where each week one of us reveals a mystery guests of the other two. We dive deep with guests that you love like Bill Hader, Selena Gomez, Jennifer Aniston David Beckham, Kristen Stewart and tons more so join us for a genuinely improvised and authentic conversation filled with laughter and newfound knowledge to feed the smartless mind listen to smartless now on the serious XM app download it today. I'm Galen co founder of Brooklyn Solar Works with my chase sink business premier card I get unlimited 2.5% cashback on purchases of $5,000 or more so everything we buy to run our solar business gives us cashback that we put back into the neighborhood donating solar panels to community gardens chasing cashback build for every business find the right card at chase.com slash ink real business owner compensated for the participation cards issued by JP Morgan Chase Bank and a member of DECC subject to credit approval terms applied.