I feel I feel high. Heat. Heat. Hey everybody. Hey, hey, hey. Hey, hey, hey, hey, hey, hey. Clear. Clem up. Cleat. Great. Well, uh, welcome everyone, uh, to this LSE public event to mark the launch of the new book by Eric Zik and his co-author Owen Zidar on the every everywhere millionaire uh, who is really rich in America and how they got there. Um, so on a day of uh tube strikes and torrential downpours, I think some congratulations are due to everyone who's managed to make it here uh in person. Uh, and thanks also to all of you who are tuning in online. Uh, my name's Andy Summers. I'm director of the Center for Analysis of Taxation and faculty associate of the International Inequalities Institute here at LSSE who are kindly uh co-hosting tonight's event. With me on stage is our speaker and author of this fantastic new book, Eric Vic. Eric is the Joel F. Gam professor of economics and finance at the University of Chicago Booth School of Business. His research focuses on the interaction between public policy and corporate behavior with a focus on taxation, fiscal stimulus, inequality, entrepreneurship, and housing policy. He's also a leading expert on income and wealth inequality in the US, an area of research that's frequently spilled over from the pages of top economics journals in which Eric's written into the mainstream news. And it's that intersection uh between cutting edge use of economic data and wider perceptions about wealthy uh individuals that persist in in the media. um that forms the focus of the book that Eric will be presenting to us this evening. Um and as a fellow tax data nerd, um I love that this book takes so seriously the challenges and opportunities of using tax data to study the wealthy. Um but as you'll see, Eric and Owen have also collected some fascinating insights from actually speaking with um individuals behind these data points, which which adds, I think, an extra dimension to the analysis that Eric will share with us uh this evening. So, I'm super excited to hear what Eric has to say about the book and then also to hear thoughts and questions from our live audience both uh in the room here and uh from those of you online. Um before we get stuck into the main event, um I just need to let you know a few logistics. So this event is being recorded and will hopefully be made available as a podcast uh subject to no technical difficulties. We're not expecting a fire alarm, so if one occurs, please take it seriously and follow the steward's instructions. And finally, as I mentioned, there'll be a chance for audience Q&A after uh Eric has given his presentation. We'll aim for Eric to speak for around about 40 minutes and then to have a similar amount of time again after that for questions and I'll explain the format um for asking your questions when we get to that part of the event. Um, so in the meantime, just remains for me to reiterate how pleased we are to have Eric here and to say over to you, Eric. Thank you so much. Thank you so much. Um, I will walk around, I think, because I have a mic attached to my body. Um, that will help me give a little more dynamic. I know it's the end of the day. I appreciate everybody coming out in the weather. Um, this book is, uh, I'm very excited to announce coming out in September. Um, so this is a bit of an early look at what's there. Um, it's available for purchase. This goes to, um, a billionaire's website where you can buy the book. Um, um, but, uh, if you want to go to like the book website, everywheremillionaire.com, there's links to bookshop.org, which is a small independent bookstore. Not sure if there's a UK uh version of that, but uh um we definitely encourage you to buy it wherever you prefer to buy books. Um and think of this as a commitment device to have it come to you on September 15th if you buy it now. But it's joined with Owen Zadar. Um it's definitely a sto a story about the American economy, but I think there are a lot of lessons here uh for thinking about Western Europe and the rest of the developed world. Um and I'm looking forward to sort of seeing what resonates with the audience here. um and get a sense um from you all uh about the story. So what we're trying to do in this in this book is um unseat I think a very compelling narrative that lives in the conventional wisdom about wealth in America and replace it with one we think is closer in resemblance to reality. Um we're doing this with a two-pronged approach. So the first prong um which I think will make the book actually quite um um entertaining for folks to read uh who might not be used to reading a book written by two economists that's entertaining um is uh we have vivid stories. So the book actually opens with this wedding of the century um and these are images from the wedding from social media. Um this wedding was an American uh bride uh but they actually flew all of the guests to Paris uh for the wedding. Uh they rented out Versailles for an evening, not for the wedding itself, but um for like a dinner before. Um um here on the bottom right, you can see at the uh uh bride's sort of bachelorette jaunt um the month before, the bride dressed kind of unironically like Marie Antuinette. Um and uh and um needless to say, this was quite an event. Adam Lavine of Maroon 5 actually sung the first dance. Um and um and overall the estimates for the cost of the wedding are about $60 million. So I want to start the audience with a question. Who has $60 million to spend on their daughter's wedding? And you may be led to I think certain um figures that play prominently in the conventional wisdom about who's really rich in America. So members of the Forbes 400 list, this journalistically collected list of billionaires um tech finance, uh the Waltons from the Walmart um um company and so on. Uh we can also think about public company CEOs, Jamie Diamond, uh from you know uh JP Morgan and so on. And this view that in order to get really rich in America, you have to get take this path of finance or real estate, maybe a coastal startup, a tech company. Um Elon I think is like you know in every story about billionaires these days or about rich people in America these days a very important figure. Um our argument is that sort of there's this much broader vast forest uh of American uh wealth u rich private business owners collectively um that we've sort of missed by focusing on a few kind of redwoods in Silicon Valley. Um, and you know, we're going to make this case with vivid stories such as the wedding of the century, but also based on a decade of research using comprehensive new data that links the population of firms to their owners and and employees to really sort of tell what we think is a properly representative story about the American economy. Um, that uh distinguishes it from other sources of data on topend wealth. The Forbes list, public company CEOs are only for public companies. Um even the survey of consumer finances conducted by the Federal Reserve only has a few hundred folks in the top 0.1% of the wealth distribution because of survey response uh difficulties. Very hard to run surveys of high net worth individuals. Our data is going to be quite a bit more comprehensive and descriptive than than these other data sets. Um the central figures, the heroes and occasionally villains of the book we call main street millionaires. Uh these are the three million roughly uh private business owners in America with net worth above $5 million. So that's the, you know, low end. They have average net worth of $25 million. So I think by conventional measures, these are well-off individuals. There are a lot of decaillionaires. There are a lot of centillionaires. There are a lot of sort of light billionaires in this class. Um, these are folks that own main street businesses. Uh, the typical top 0.1enter, almost all of them own a main street business. This kind of business. Examples that maybe don't come to mind are beer distributors, car dealers, uh owners of an HVAC, that's like uh heating and AC, you know, servicing businesses. Um also like skilled white collar businesses that have scaled some doctors, dentists, consultants, and so on. Um they are very numerous. So for every large public company CEO, there are more than a thousand private business owners each with at least $25 million in net worth. And these are the true kind of middle rich in America. and their story is quite quite fascinating and that's the story that we tell in the book. So there are three questions we're going to ask and try and answer. First is kind of descriptive. Who is really rich in America? Who are these people? Um and this is going to you know draw on tax data research that where is where we started um and the story about things going on in tax policy in the American economy that really made these people visible to us and to the world for the first time. we'll then transition to think about where they came from, how they got rich. Uh and then we'll also think about how they shape society. So, um there are a lot of policy questions that um their prominence and prosperity raise uh that we'll try and sort of elucidate for folks to then think about, okay, what solutions to the problems they raise u might we consider. Um this is not a policy advocacy book. I want to be quite clear. um we're actually trying to say before we like propose a bunch of policies, we need to really diagnose the problems to understand society as it is. Um so it's really a descriptive exercise that we're doing. But um we can talk about views in the Q&A and I'm happy to share them. Okay. So the foundation is this research administrative tax data anonymized. Okay. So when working with the treasury folks where we started we were looking at millions and millions of businesses starting with um a unique form in America where um these are called pass through businesses. Uh they're businesses that don't pay tax at the firm level. The individual owners pay tax as the income flows through. This allows us within the tax environment to actually link folks at the top of the income distribution through to the firms they own to understand what is the type of firm, where are they located, how big are they, what industries are they in. So this descriptive work we're able to do in this data um without identifying the individuals um is what allows us to say okay the typical top 1enter is a closely held business owner of a mid-market business 50 employees you know tens of millions of revenues um but because they closely they are one of very few owners of that business they could be still quite wealthy um by virtue of of that being their source of income um over time we've built and supplemented this data with other sources which I'll draw on in my talk test score data uh looking at the backgrounds of family backgrounds sort of like you know rich kids versus poor kids and like the pro prominence of uh pass through business owners from both groups that kind of thing for the book we then decided okay let's like deanonymize this data in a way that's legal which is to say not use the tax data at all um but we know what they should look like from the research we've done let's get some yacht and private jet registry data where you do have the individuals and then find, you know, ones that look like the private business owners that our research administrative research showed. We'll look at property records for high-end real estate in um places like Aspen, places like um Lake of the Ozarks, which is not uh a very famous resort community, but in the middle of America, turns out there are a lot of $5 million homes in places like that. Um and you look at the owners, they're just a bunch of main street millionaires, like kind of mundane businesses that have generated tremendous wealth for them. Those are some examples of the data we're going to supplement. And then we conducted a number of interviews where we actually found these people and talked to them, try to tell their stories. So we're trying to put sort of faces and names to these stories to try and understand who they are, where they come from. Okay. So first, let's meet some of them. I think this is a pretty simple chart um but it's pretty powerful once you understand what it is. So what we've done here is taken the last year of the survey consumer finances. This is the Federal Reserve conducts a survey to try and estimate wealth and the portfolios of folks in the wealth distribution in the United States. Um the last year available 2022 here the Forbes 400 collectively taking all of the Forbes billionaires and adding up their net worth was $4 trillion. Closely held business owners with net worth above 5 million have more than 10 times as much wealth. So individually they're not as rich as Elon, but collectively they command far more resources. In some sense, this graph really sort of summarizes the story we're telling. It's like if you want to understand wealth in America and even high-end wealth and you know who the rich are and how much resources they command, we really need to unpack this class and figure out who they are and what's going on with them. So for every member of the Forbes 400, there are more than 4,000 private business owners with at least $10 million in net worth. Um, so that's a lot of rich people that we have no idea who they are. Okay. How do we find them and how do we decide to focus on them? So we ended up going to the Treasury right after graduate school. Owen and I along with Danny Jagen working with folks at the Treasury Department to try and help them develop models um to tax private businesses in this pass through business form that I explained before. Um, this form had grown quite dramatically in the wake of tax reforms of the 1980s, which all of a sudden made it very advantageous to elect this form because the tax rates for individual incomes fell a lot and the corporate rate was no longer such an attractive uh uh rate to pay if you were going to operate a private business. What followed was the top 1% income share. Um, so this is the famous Pikotine SAZ series for fiscal income. The blue is the actual series going through to 2022 I believe. Um a huge share of this rise more than half of it comes from pass through business income rising. Um so if you want to understand where the rise of the top 1% income share comes from you need to understand the rise of pass through businesses. What are the people doing that are earning the income in that form? Um and this was sort of the first chart that we made that kind of point us towards okay we need to understand these passroughs. Who are they? law firms, car dealerships, doctor's practices. We didn't know anything about that at the time. Um, but they drove more than half of the rise in the top 1% share. Yet, they had really not been explored um their role in income inequality uh in the US. What's the nature underlying this data in terms of the industry mix? So in contrast to traditional public companies which are um in the internal revenue code referred to as Ccorporations for the subchapter of the internal revenue code um according to which they're taxed. A huge share of that is in manufacturing very capital intensive industry. And if you compare that to sort of the distribution of where workers are in the American economy it's very disproportionately represented manufacturing public companies that's when we look at sort of the stock market reports um the Wall Street Journal coverage and so on. Those are the types of companies we're much more likely to learn about. Um, additionly, you know, company like Walmart or retailers, etc. The pass through businesses, so that's in gold here, the millionaire owned pass through firms much more broadly disseminated across the economy. There is some manufacturing for sure. Um, there's a lot of skilled services that's less capital intensive. Um, so these professional services ends up, you know, being slices of the economy. They're not visible when we look at public companies. When we look at superstar firms, we don't learn so much about um these past their businesses either um because they're smaller, they're regional, they're in different industries. Drilling down into the types of industries we're talking about. There are some usual candidates you might not be surprised by. Um so lawyers are here at the very top. So these are the top 25 pass through industries by collective top owner income. So just trying to decompose that top 1% income into the types of industries. Um the most recent data which we recently updated um you know lawyers the number two financial investment activity. Those are be like general partners of hedge funds, private equity funds, venture capital funds. That's the finance story. We're not saying that there aren't a lot of rich people in finance but we're saying that they, you know, represent just a fraction and not a huge fraction of all of this broader class of wealth. Number three is one probably folks in this in this audience aren't that familiar with. Auto dealers. It turns out auto dealers in America are incredibly rich and there are a lot of them. Um these would be people who sell cars on behalf of manufacturers and service them and finance and etc. Um and uh these are characters that we uh we inquire several times in the book about the nature of their wealth. But then going further down, consulting, doctors, you know, oil and gas, construction, restaurants. Um, it's a pretty broad industrial mix. You know, we have realtors here. Um, there's some tech, computer systems design, but not too much. It's a pretty broad industrial mix, maybe a bit service intensive relative to capital intensive. Um and uh there the story here is there are many paths to this prosperity um in the economy. Okay, one vivid example. So here's a car dealer um whom we found uh through our yacht data. Uh Herb Chambers um is a northeastern um car dealer who specializes now in especially high-end autos. He has 59 dealerships in New England. Um um came from a working-class background actually. So this is a bit of a rise to the top um story. Um he's one of more than 4,500 auto dealership owners that are worth at least $10 million in United States. Um and uh his yacht is a is I think was a more than hundred million dollar yacht called excellence or something or excelsier or something like this. Um another story uh in terms of like trying to put some richness onto this uh is a geographic story. So when you look at where four 400 people live, it is kind of a coastal story. Like half of them live in five cities. Uh Miami, uh Los Angeles, San Francisco, New York, um and then all the other places. So that's actually four cities. And then we look at the mainstream millionaires and where they're distributed. Um much less concentrated. There's still a lot of representation in those places for sure. Um, but they're much more ubiquitous across uh the regions of the economy. You can find them in actually most major cities. You can find them in most towns. Um, and uh, you know, one version of this is going back to Herb Chambers. There's a car dealer in almost every town. Um, and a lot of them are, you know, doing quite well. We actually take a road trip across America to meet some of them. Um, Alabama, Mississippi into Texas, looking at travel centers. Uh this is a patent lawyer. Um a seamless gutter manufacturer. Um some pretty funny stories. Some of them uh a human resources consultancy in Salt Lake. Um the very nice house, very like very pretty house. We end in Palo Alto um you know Silicon Valley but instead of meeting like a tech founder we meet somebody who manufactured frozen uh kiches uh uh and sold um her uh business to a private equity firm I think for 30 $40 million something like that move slow and make things that's sort of the alternative uh path that that Nancy Mueller um illustrates in that story. Okay. Okay. And so I think I've sort of emphasized this. The typical top earner we end up seeing is this owner operator of a single closely held firm, mid-market in size, 30 employees, you know, $25 million of annual revenue worth maybe $25 to $50 million. Um, actively participating in their firm. Um, in terms of the demographics, you know, white male, late middleage, college graduate, usually married, but there's a lot of diversity, a lot of heterogeneity in this population as well. Okay, so that's seeing who they are. Now, let's think about where they come from. Um, this is going to be a little bit for the folks who aspire to get rich. Uh, um, there may be some in the audience or, you know, hopefully among those who buy books. Um, um, I would not recommend writing a book as a way to get rich. uh um but you know part of it is sort of trying to understand well you know for the successful entrepreneurs in the data um what are the factors that really sort of promote their entrepreneurship um and here we're drawing on this vast administrative research data research we've been working on for almost a decade in collaboration with folks here at the LSC John Van Rein who's very I'm very happy to see in the audience um but we also tell some stories of some of these figures uh this gentleman here um very swavely dressed is Dick Portillo. Um behind him is a picture of the first hot dog stand he opened. Um which had no running water. And so they uh they actually had to take dishes uh back home um every night to wash in the bathtub um where they developed a mustard uh stain uh in the bathtub um at home um from that phase of the business's growth. Over time he grew it into 75 locations across the Midwest and Sunb Belt and sold the company for a billion dollars in 2014. Um, we found him in the yacht data. His yacht is called Top Dog. Um, and uh, he used no debt to build this business, no venture capital, no outside equity at all. Just plowed the money back in as profits came in, reinvesting, reinvesting, reinvesting to grow it over that time period. When he sold the company, actually still owned a bunch of the real estate, renting it back to the private equity investor. Um so there are a lot of folks like Dick Portillo who grew up actually in um a housing project uh in Chicago. So um from you know immigrant parents uh very low income beginning. If we zoom out and think about broader data on where founders come from including those that end up to grow into large businesses um it is the case that there are more founders including of star businesses from the middle class. My understanding is in the UK the middle class goes up to the 99th percentile. Um which is an interesting observation. I guess Owen and I disagree actually. He doesn't even think that this should be the middle class on the P66 to P90. Um but there's you know a lot more from these groups than from the top 1%. Which is not to say that there's an equal opportunity to become a successful entrepreneur independent of where you're born. Um if we look at the propensity to be a founder based on where you're born um rich kids you know are nearly an order of magnitude more likely to be founders than poor kids. Um and the question you know we try and inquire is like is that because of access to financial resources or because of access to opportunities to learn things um to take risks um what's going on with those background environments um that promotes folks into entrepreneurship. One thing that isn't driving that but we can say from the rich administrative data is um specific scholastic aptitude. So if we look at folks who um score at different levels of the standardized test scores that go into college in the US the SAT um we look at income at age 35 there's a increasing relationship that then turns quite steeply positive in the top decileis. It seems like you need to you know it helps to be quite academically um successful uh if you want to earn a lot of income at age 35. if you want to be an inventor. So to to sort of do some scientific um um innovation, um it's even steeper the relationship with standardized test scores, which kind of makes sense if you think about the dependence on inventing on science and math especially. Um if you want to be a star founder, it's almost flat. Um there's an increasing relationship, but you know, one way of putting this is like you don't have to be a rocket scientist to start and grow a successful hot dog business, right? um there's quite a bit more democratic access to this path um based on scholastic aptitude at least. Um there are other factors that seem to be quite relevant for these successful entrepreneurs um which I think is a quite interesting and compelling finding. Um, another question you might be asking is like, well, we are selecting success stories, right? We're looking at the top 1%, the folks who made it, but of course, a lot of people start a business and it fails and what happens to them. Um, so in our uh, you know, research, one thing we're able to do is sort of track folks um, who start businesses. So that's what I'm showing here in green. um and compare them to very similar workers sim with similar incomes, industry and where they were working before founding a business and just track them over the subsequent decade. Um and here we can see that this is uh on average the entrepreneurs versus the matched workers, they do about 10% better per year in terms of their income. Um not including the sort of the growth compounding growth of the value of the business that they started. um the median slightly outperforms the similar matched worker. There is an increased likelihood of say losing money on the in the left tail. There's no question about that. There's a much greater increased likelihood of being in the right tail of the earnings distribution. Um so in some sense entrepreneurship pays even at the sort of at the median and average here. Um this includes all the failures this data. So if the business fails you reenter the labor market, maybe you start something again. Um and uh so it's risky but not I don't want to overstate how risky it is. Okay. So that's kind of the you know aspirational rise to the top lots of options um uh component of it. there's maybe like a more nuanced or you know darker vision of like where the entrepreneurial income comes from um which is to think about as the pie grows as these businesses grow are they sharing it with workers or grabbing bigger slices for themselves and so we've tried to decompose the growth in ownership pay into components going to to workers we can see a non-trivial chunk of the growing profits is coming from a smaller share going to workers a smaller labor share a higher share going to owners um and even within this sort of a smaller share going to the component of owner payments that are taxable. So there's increasing role for tax policy to also um allocate income towards the owners uh relative to the government. Um another way to test this that that Owen's done in some related research is to look at uh firms that receive patents. What happens to the surplus that's created by those patents? How is it shared between workers and and owners? it seems like owners are able to capture, you know, the vast majority of those additional profits and gains. So, there's a lot of negotiating power for these owners um perhaps reflecting their specific position, their unique assets they bring to the table. Um the relative weakness of the laborers bargaining power in these types of firms. Um and these are some aspects about sort of the slicing in the sharing between owners and workers that we try and inquire into the work. So like a component of this growing profit share is falling labor share um for these firms uh that we want to try and understand. Okay. Now it's nice to start a firm and grow rich coming from a poor background but you know the easiest way to get rich is to be born rich. Uh and so you know I recommend it if you can figure out how to do so. uh uh we try and you know spend we spend some time on what we call the shortcut uh which is to sort of inherit a family business um or to be born as a child of you know one of these main street millionaires. Um you know there's not amazing data on this. We try and back it out in different ways using even our administrative data to think about what fraction of the folks at the top that are closely held business owners. I've done so through founding businesses of their own versus inheriting. Um so founding and acquiring an existing business versus inheriting um is much more common but you know a quarter to maybe even 30% um are inherited family businesses. So we spent some time profiling these um to try and understand what it looks like when things go well and the transition goes well what it looks like when it's hard to find a successor you know among your children. um kind of the King Lear story uh but you know with actual stories uh of people where it's not naturally the case that you can you know find somebody to take over the business and and you know what happens then to the business is uh private equity takes over and so private equity has emerged in the US as a natural successor to a lot of these businesses when there's no natural air um so here on the left is Warren Buffett's protege who actually left Berkshire to start um a private equity business that focuses on acquiring mid-market businesses like manufacturers of boat covers. Um and uh on the right is a story in the Financial Times uh titled Harvard Burger School. Um which has emphasized sort of the increasing prominence of fast food franchising as a path um for folks after getting a prestigious MBA. They then go and run a series of Burger King franchises uh in sort of like a coastal um North Carolina. And so NBA trained operators have increasingly you know moved in. Basically the growth of main street millionaires in the US has actually transformed finance in a way attracting talent and capital from private equity um increasingly into this slice of the economy. Um and uh when capital floods that way, this is a nice way that you know these mainstream millionaires cash out and that's when their consumption often turn turns up. Okay, so for the last part of the talk, let me talk about how these folks shape society uh in subtle ways that have been underappreciated. Um so one way is through what we call stealthy politics. Um so we've called these folks the stealthy wealthy because they fly under the radar. Um and uh you know we encountered them um in the political process as we were uh following the 2017 tax uh reform debate in the United States. This chart shows the wealth distribution for the general population in comparison to disclosed net worths of members of Congress. This is the federal legislative body in the US. Um the average net worth uh for folks in the Senate was $10 million or $7 million in the House. There are many private business owners in this population. A quarter of the tax writing representatives um recently um were business owners. Pest control, auto dealer, construction, three auto dealers here. It's remarkable. There not a lot of auto dealers in the population, but there are three on the tax writing committee. Um that has like 40 members. It's like 10% of the the tax writing committee. Um, here's a franchise owner. Uh, Kevin Hearn, or he's known as Kevin McCongman. Um, Nick KS, I think, has this nice quote. Would you like to be represented by millionaire lawyer, millionaire businessman? So, there's a conventional view of money and politics in the US that like a lot of it comes through lobbying. I think sort of surprising fact is that a lot of folks actually the business owners themselves become politicians. Um, it's not to say that they only write policy to benefit themselves, but it becomes less surprising when policy emerges that seems to benefit business where the votes came from. But it's not just at the federal level that this shows up. If we look at representation in city halls, um, you know, 85% of mayoral positions, so these are mayors of cities and towns, are part-time. It's a lot easier to have a flexible job, so you can do that part-time mayor position if you run a business. um 30 to 40% of these mayors are business owners or executive. What are the political leanings? Um so the recent study tried to use um data from the paycheck protection program to create a sampling frame to find these business owners and ask them about their political views. Um they are a bit more Republican. Um they're much more likely to report being independent than when asked sort of like are you R or D, they're more likely to be Republican. Um, so about 10 percentage points more more likely. But there are a lot of Democrats here, too. And I think, you know, recognizing this bipartisan nature of the rise of these mainstream millionaires and their, you know, role in politics can also help explain the tilt of policy and its endurance and, you know, resistance to to to reform independent of who's say, you know, in the White House or independent of who's in charge of Congress. There's a lot of representation on both sides. Now, of course, there is also the money and politics version of the story where they're donors. So, in the 2024 election, um, which folks on this side of the of the ocean may have also followed, um, the first biggest donor was Elon Musk, and that's been very well covered. The second business donor um, were founders of a shipping and packaging materials company in Pleasant Prairie, Wisconsin called the Uline. Um and they spent tens of millions of dollars um just behind Elon in terms of their aggregate spending much more under the radar for sure. State level lobbying. There's some data on this. So it's not just at the federal policy because so many of these businesses operate in local markets where local regulation is actually more important for the effectiveness of these businesses. Um we look at the distribution of lobbying like what types of industries the money comes from. It looks a lot like the distribution of sort of top pass through profits. Um there's a high correlation. Um these businesses are, you know, independently not as large as sort of like a Fortune 500 company, but when they form into a consortium of the National Association of Auto Dealers, um the beer distributors and so on, um they can lobby with considerable clout. Um, one example, uh, this is John McCain, um, a former senator from Arizona who was a a Republican nominee for president. Um, he was a war veteran, uh, and his maverick reputation, um, is sort of well known as sort of, you know, part of his political story. Part of his political story that's less well known is that a lot of the financing for his early campaigns, his continuing campaigns come from, um, his wife's family who are beer distributors based out in Arizona. Um and uh it turns out to be a beer distributor uh is is a license to get extremely rich by controlling um the ability of manufacturers of beer uh to sell to restaurants or bars and so on. Um and it's very hard to cancel those contracts in a lot of states because of state laws that they've lobbied over time to get put into place. Um and these beer distributors have um basically generated protections in almost all states. um for their business. Um they managed to beat PepsiCo's attempt to circumvent them um when trying to sell a hard version of Mountain Dew back in the day. Um they're the third largest political action committee spender in 2022 and very very underappreciated. Um but there are a lot of pass through beer distributors uh in our data. And I think it's interesting to think about this local market power story for certain industries where entry is effectively blocked or heavily regulated. These are industries where we do see a lot of these mainstream millionaires emerge. Um another example would be in um the auto dealers as we've talked about. All 50 states have franchise laws that basically make it impossible for manufacturers um to cancel a contract with the dealer um without paying them a lot to trans to to to cancel that contract. Uh 17 states ban direct sales. So when you know Tesla tried to sell um they were kind of blocked from doing so in many states. Um recently Volkswagen was trying to um sell directly under a new brand and the dealers have been fighting back. Um in the auto bank bankruptcy and bailout um they managed to even as the entire auto industry was at risk of verge of failure to um to fight back consolidation attempts that would have made a little bit more efficient. Um the auto uh dealers um were quite powerful in that. And then the center here and in the skilled services this is quite an important story in America. Um professional licensing guilds across many industries um either restrict entry uh into these these skilled services. So think about the number of doctors um the number um of dentists or what dentists can do uh versus what hygienists can do. So dentists in a lot of states have been able to pre prevent hygienists from doing teeth whitening. Um so it's a way of protecting um um their turf. Uh and then realtors. So in the US we have this realtor industry where the contract structure and control to the listing operation basically creates protection for realtors um to charge quite high fees on transfers that are you know quite high by sort of international standards. Um, so this is an interesting contrast to kind of the market power by, you know, large multinationals story that I think is much more prevalent in the news. Um, because geographic dispersion is creating a kind of political leverage. Um, because they're all kind of all over uh there's a car dealer in every town. They they employ a lot of people in every town. Um, they pay a lot of sales tax um at the local level. And you know through these mechanisms um they can command a lot of power that kind of flies under the radar. Okay, this is a bit of a joke but this is this is me, Danny and Owen um um wearing our S corporation t-shirts at at Danny's wedding actually. Um but uh you know one one of the ways we came upon uh the power of the mainstream millionaires was um in this 2017 tax reform debate um where we you know were sort of working with folks at the Treasury to develop these new models that then we thought could inform tax policy design and once we know what the right tax policy is right it'll just happen right because the policy makers will do it. Um so the naive right the that's the be story is the coming of age element of this of this book. Um we are characters in the book and you can you know pity us or or uh or whatever you like to do when reading that story. Um the history of personal tax policy over the 60 years has been one that has bent in the direction of these closely held private businesses in a lot of ways. So top personal income tax rates have come down quite dramatically over time. Um and in addition uh capital gains rates have come down further. So if you want to sell your business um and the estate tax has been eroded considerably over time as well. So if you want to transfer your business um to next ofkin for a private business is especially attractive um because of valuation rules that make it relatively easy to transfer large fractions of the business at relatively low price um to avoid the estate tax. One example that's quite salient from the 2017 tax cuts and jobs act. This is Senator Ron Johnson from Wisconsin um who held out his vote for a while to get uh reduced rate for pass through businesses. Um including uh Mr. Johnson's familyrun plastics manufacturing business. Um this quote is quite evocative. I just have in my heart a real affinity for these owner operated passroughs. We need to make American businesses competitive. They're not right now, but in making business competitive, we can't leave behind the passroughs. Um so yes, so tugging on those heartstrings. Um it's just like his passion for passroughs. Um so this 199A deduction is sort of like a targeted pass through income tax cut cost $400 billion over 10 years. Um, in blue states, there were pass through business tax cuts that basically allowed folks to get around a cap on state and local tax deductions. Um, and then these estate tax exemptions that have become much more generous over the last 25, 30 years all benefit kind of um, these closely held businesses quite dramatically. Um, in the paycheck protection program, we had the most generous um, uh, small business support program during the pandemic, which gave in some sense unconditional forgivable loans um, to like businesses up to $10 million um, for for several months. Um, I think 30 members of Congress reportedly received PPP loans. Um, these are some of the car dealers uh, who received them. um including uh Roger Williams as a character from Texas um whom we profile a little bit uh in the book. Um and then most recently uh in the one big beautiful bill uh which you know has a a very self-descriptive name um this deduction for passroughs uh was made permanent at a cost of $740 billion over 10 years. Um the salt cap workarounds were preserved. the estate tax exemption was further increased to $30 million. Um so you can pass $30 million now to heirs um um tax-free uh which is quite dramatic and a special deduction for new car auto loan interest for four years. Um so in that 2017 reform, we learned about the power of the auto dealers and writing tax policy because there was a cap on how much you could deduct of interest in the corporate tax bill. But then there was a carveout just for floor plan financing for uh dealerships. Um and that's where we sort of started to recognize there's something going on here with these folks. Um tax policy isn't just being written um with the interest of um um making the most efficient tax system. And uh the book closes actually a bit where we learn about Mike Johnson who's the current speaker of the house um who rents his DC residence from a car dealer scion. So that's the story of the book. Um, one way to think about what we're saying is that, you know, a lot of new stories have made the case that this is the next guilded age or the guilded age has returned. And we think that's not quite correct because this is more of an age of mass affluence, which we call the age of millionaires. um this hidden class of business owners that prevail at the top with diverse backgrounds from diverse industries and geographies who you know individually are not as wealthy as Elon but collectively command far more resources and have like very significant influence on public policy and on society around us in ways that um you can recognize once you know to look for them. Um but they're kind of flying under the radar. Um some build from scratch. they seem to rely more on experience and sort of like that grind is an important part of the story say for somebody like Dick Portillo others inherit or acquire existing businesses and as I've mentioned they're surprisingly powerful um so I'm really appreciative of your attention and time looking forward to questions and yeah you should no longer be surprised to learn that um the wedding of the century was a third generation car dealer from Coral Gables who sold their business for several hundred million dollars in a rollup um and decided to spend a big chunk of it on their daughter's wedding um in in Paris. So, thank you so much. Thank you, Eric. That was a fascinating uh tour based on such amazing data and and coupled with those uh yeah, very uh striking anecdotes. Um, we've got time for uh quite a few questions, I think. So, if you're here in the um audience, um or online, um start start mulling over um questions that you might like to ask. In the meantime, I'm going to just abuse my uh position as as chair to um to ask a couple of things that struck me from um from that talk. So, so one is the question about sort of why the media um portrayal is so different from the um from what you can reveal from these data sources. And in particular, the puzzle that struck me looking at this is what you're painting is a picture of sort of local businesses actually mostly consumerf facing kind of industries or at least not all businessto business. these aren't kind of hidden businesses in in in that sense. Um, and so you might think that people would be quite in touch with the existence of these businesses. So where's the is the misperception coming from just how profitable they are or is there some other kind of misdirection that's going on in terms of what the media focuses on? perhaps because the public data sources are quite concentrated at the very very top of the wealth distribution. So I'd be interested in thoughts on what kind of has led to this misdiagnosis. And second kind of related question on measurement is just what you think could be missing from the data that you have. So you're obviously starting with a population of business owners or kind of active business owners. Should we think about there being an important sort of subset of wealthy Americans that aren't active business owners? So, you know, landed wealth, passive uh holdings of um shares in in you know, perhaps listed companies and so on. So, yeah, interested in thoughts on what what might be missing from the albeit very um uh wide ranging picture that you've painted already. >> Yeah. Awesome. Um, so on the media question, I think it's a bit of a looking under the lampost diagnosis, which is to say what is easy to see are the listed companies, the public companies, which are not representative of the American economy. um the tech billionaires, especially those that seek public attention, which is a subset of them. Um Forbes covers because Forbes can find them. Um Forbes cannot find the like $300 million mid-market even B2B business um that doesn't want to be found, of which there just many because of the size of the economy. Um in addition you know the journalists business journalists are doing their best. They do concentrate in a few media markets. Um you know New York Times is in New York, Wall Street Journal in New York. Um Washington Post is in DC. There's some stuff in the West Coast. But there's much less just coverage. There's just much less access to a big chunk of the population, the economic activity. Um so you're just not seeing it that way. uh a lot of the stories I've told here uh there's a consumerf facing element to them and I do think that's an important part of it in part just because of how big those markets are. Um but there is like a there's a bit of a twist where you don't see them because say the beer distributor doesn't put the beer distributor company's name on the side of the truck. What's on the side of the truck is Budweiser. where the beer distributor's name shows up is like on the door and a little decal that says Reyes distribution. Um the franchise, the McDonald's franchise says McDonald's on the front, but there somebody who owns 50 McDonald's that then licenses the McDonald's franchise. That's the owner. Um and so I was talking to somebody who's like the general counsel of McDonald's who had retired who said, "Yeah, our shareholders and the owners McDonald's, they did quite well. The founder, you know, did extremely well." Um, the franchisers are richer than us and the distributors are even richer than them. So, it's the guys who sell the cheese and the buns and the plastic bag liners and the napkins and stuff that uh turn out they're able to just like, you know, capture a huge chunk of that business and and and do extremely well. And those are harder to find unless you start thinking about the supply chain and start thinking about like, oh, who sells buns to McDonald's? and it turns out there's like some bakery based in, you know, Baltimore or something like that that ends up doing a lot of it. That kind of thing. So, you start figuring out ways to find them that they're not immediately obvious. Um, there are a lot of businessto business ones also and uh they can be harder to find for different reasons. We do cover a bunch of them in the manufacturing sector especially. Um on your last question about active versus passive to the extent that if you look at top income statistics um where top 1% income top.1% income comes from it's not interest or rents. Um so maybe they have a bunch of land but it's not generating any income. Um I think that's just not the right story for the modern economy when thinking about uh wealth. There are the multigenerational families for sure. Um, you know, the Waltons for Walmart, the Mars family for the Mars Corporation, these kinds of things. And those are very rich families mostly not involved in the business that are passive beneficiaries of the business. Um, so there's definitely some of that. Uh, but if we looked at, you know, the statistics that we have on inherited versus versus founded, um, this first generation seems to be quite large. Um, so sort of interesting to to recognize how much dynamism there still appears to be. >> Great. Thanks. So, we uh have some time for uh questions from both the uh live audience here in the room and online. I'm going to try and collect a bit of both over a few rounds of questions. I'll take maybe two or three um per round. So, I've got some hands up already here. Um, I can take this uh gentleman in the front row first. Um, mic is making its way to you. Yeah, if you um and also if you could everyone uh start if you're comfortable with this, please just uh briefly introducing uh who you are and your affiliation if you have one. >> Uh thank you so much. My name is Richard. I was a graduate student here many moons ago. I've loved your presentation. So, thank you again. Um quick a couple of quick questions but have you at all looked at data outside the US or was this endeavor more than enough for you? Um secondly whilst it of course it's fascinating of course it is the story of America um you know America was the land where people could come and run businesses. Um, as an economist, do you have an insight or an analysis or a perspective as to how this wealth was scaled? Is there something about America? I have a view on that, but I'm interested in your thoughts. Thank you very much. >> Great. And question here from the gentleman in the blue jumper. >> Hello, my name is Justin Copek. I'm a master student in economics here at the LSE and um, thanks for being here with us tonight. really enjoyed the presentation. Uh my question for you is I was really curious about how much you were able to find about the differentiation in where wealth is stored amongst these main street millionaires especially towards the lower threshold as opposed to say the Forbes f 400 types and uh the billionaires. how how much more does it end up in places like housing in terms of a primary residence versus secondary residences stocks versus in the businesses themselves? Um curious what you were able to to find with respect to that. Thank you >> and question just in the third row here. >> Uh thank you very much and thank you very much for the presentation and sharing such interesting data. My name's Ed Butcher. I'm a private citizen just interested here as a member of the public uh with no affiliation. Um I was interested um uh in any analysis that you undertook with the impact on growth. So you sort of talk about these people but what what's their impact on uh the e American economy and uh what would happen if they didn't exist? Where do they sit in the sort of rich forer of the the American economy? Um, and a few times you sort of euphemistically uh refer to efficient taxation. Um, but I was wondering whether you're able to kind of say what that might look like and I I you know what the impact is of t taxation on the existence of these people and you know whether greater or less taxation would would um have an impact. >> Okay, great. I think we'll take that cool set of three to begin with. >> That's great. Um so yeah the global question uh versus you know the US story um this seemed like a big enough topic um and we're taking advant we're trying to also stick to the data um and try and use that as a foundation to make sure we don't say things that we don't have support but we have some observations um there have been attempts following our research and you coincidence to sort of look at um other countries where you can start to link through from you know individuals at the top of the income wealth distribution to like the businesses they own to see to what extent are folks at the top in the UK in Scandinavia in France also private business owners and I would have to say my first blush reading of that is that it's like quite common in a lot of these countries as well um an important distinction is it doesn't show up in income um statistics the way it does in the US because of this taxation difference. So in the US where there's a pass through tax, it shows up on the individual's income tax return as profits. In most western countries, there's still the preference for leaving the income to acrue and earn within the corporation doesn't show up. It gets paid as dividends occasionally. There's pretty generous request rules. There's life insurance. There are other games for moving it across generations. meaning that like the income tax statistics, the inequality that is based on that don't really show the private businesses in the same way we see in the US. But I feel like the difference between the US and a lot of these other countries is smaller than maybe a lot of our priors. And I think it's an exciting area for continued research is to try and bring these data online in other countries. I'm not like an American exceptionalist. I think people want to get rich in a lot of these countries and have strategies to do so. There are different rules and so I do wonder whether you know differences in how we regulate mid-market firms versus small firms do change the incentive to grow within the private sector versus sell to a large company earlier on. um pension systems that have less capital allocated to private alternatives because of the structure of the pension system means these exit opportunities for these closely held businesses are like much less available or less lucrative in a lot of Western Europe than they are in the US. Private equity is just is present but like I think less prominent. It's an interesting exit valve. So I think there are some differences. I mean where did that growth come from? You know, some of these folks benefited greatly from globalization and sort of also crossstate deregulation that basically made their markets a little bit bigger. Um, some of these folks like the auto dealers benefited from just having captured a local market, not they're not being entry, but just the economy getting bigger and bigger and bigger and demand for that product growing with the economy and they're just capturing a slice of it. Um, so they're incumbents. I don't think that's great for growth. I don't think that's great for consumers. Um, so I think what's interesting about this story is there is some nuance where like you have competitive industries like restaurants, food service, lot of entry, maybe not massive innovation, but incremental innovation like making a better fried chicken sandwich than the incumbent. Um, but then you have these like car dealers where I feel like it's, you know, there's a competitive question there that's really important to address. Um, and so some of that wealth comes from, you know, the pockets of consumers. um the portfolios of the merely rich. Uh so you know we set our threshold a bit low above five million but that's still high enough that most of those folks are not primarily housing or pension rich and so the average net worth is 25 million. I think what's striking is like unless they've sold the business which most of them haven't um their wealth is really concentrated in this you know undiversified asset um that throws off a lot of profits but they can't access a huge chunk of it to consume um and their portfolios look quite exposed to that asset for a big chunk of you know the life cycle of of the firm and and for them um for growth I talked a little bit about this in terms of you inov there's incremental innovation there's more transformative innovation but I don't see a lot of the more transformative innovation in this class I think it's interesting to think that you could find niches and gaps and market opportunities in growth areas where you're not being super innovative but maybe taking some existing skill set and applying it diligently to establish a business grow it build a customer list kind of do kind of boring stuff like there's some guy talked to that basically they sell carpet refurbishment services to schools. So schools need to redo their carpets pretty often because you know schools are dirty. Um and you know cuz kids have fun and uh and and the business of basically, you know, redoing those carpets is like a pretty stable business. That's like not a huge business, but it's you're the guy who does it. You get referrals and you just keep doing it, I guess. um and they someone figured out that that was a business to do. Um now I think in the industries where there's more of a market capture story or like a local market power story that's not contributing to productivity growth. Um that's profits with without a ton of productivity growth and that's like a problem I think for regulation to think about. Um and then on tax, what would an efficient tax system do? I'm not sure the case for giving these businesses tax preference relative to the traditional personal income labor income tax rate makes a lot of sense in terms of like if you give them that tax preference do they really grow? Do they really invest? Do they really hire more? Um the evidence suggests not so much and you create strong incentives to relabel labor income as profits which I think just is like a creates a system of unfairness in the tax code overall and um leakage that you know sort of undermines the system I think is important to revisit. So I'm you quite focused on kind of harmonizing the labor and capital income tax rates. you know, we cut the tax rates for large multinationals because of crossber international competition. Um, but to like cut the tax rate for the car dealer because we cut the tax rate for like the large multinational pharmaceutical company seems like maybe we could be more creative >> and take another round of questions now and start first of all with a question uh from the online audience which I think Andrew is going to read out for us. Yeah. So, um, one of the ones online is, um, people tend to accept inequality more when they see it as earned rather than inherited or extracted. Uh, so does the image of the mainstream millionaires that you're portraying as kind of, you know, more relatable, self-made, legitimate wealth creators make redistribution politically more challenging? >> Um, and some two more questions from the room. I'm going to give priority to the people who were left over from the last round. So, um the lady in the purple jumper. >> Hello, my name is Marta Melis alumni. H thank you for the interesting talk. So, I understand that the millionaires that you measured all together um have like more income than the 400 richest. But are these millionaires like connected enough for them to have real power? Like if every of them has just like a small chunk of power then um how is that power like considerably enough um more than for example what Elon Musk has? >> Um and the gentleman in the white t-shirt toward the back there. >> Hi, thanks for your time. I've heard about your book on Bloomberg. So um good good advertising. Um two two types of questions. So I'll try and make them clear. The first one is um and it's kind of like two questions in one. Um how far back does your data go in terms of range? I might have missed that at the beginning and I wanted to know like a derivative question of that is um you know now we're very much in a digital world. Are there any interesting trends you've seen in uh segments that are not selling physical products even if it's B TOC? And are there any interesting tax I say loopholes but is there any interesting tax considerations with people that are crypto millionaires and content makers and stuff like that? That's the first thing. And the second question is um does wealth management organizations and private equity that do they do they make trying to access data for millionaires more difficult because maybe this they're being businesses are being acquired more by these well maybe not wealth management maybe more private equity are they acquiring businesses much earlier which is making it difficult for you to um get good rich anal analysis on data. So that's the two two types of questions. >> Thank you. Cool. Um, so a lot of awesome questions. Okay. So, uh, earn versus inherited and preferences for redistribution. So, I think we are grappling with how much redistribution should we have and how should we implement it. And I think it's like a it's a it's a really challenging um political moment where we see wealth inequality high and rising, income inequality high and rising. Understanding the nature tells you about both like do we think it was just or unjust the way that they got there and also tells you about what do we think of the consequences of increasing the tax on them such that we could promote redistribution. Um I'm not a political philosopher but on the question of like looking at what they're doing and you know whether we could sustain taxing them more. My view is that like the evidence here suggests that they can afford to pay more tax and it wouldn't necessarily change their behavior all that much. um finding so many of these like more mundane billionaires and the data on yacht and jet registrations um and like $5 million houses across the country suggests to me like there's plenty of consumption that they can afford a little extra tax. Also, were we to even roll back our tax code to like where it was in the late 90s? um we could close probably half of the deficit without having a very very dramatically different tax system. Um we have a structural deficit in the US about 7% of GDP at close to full employment. Um you know taxing the billionaires will do a little bit but it's not sufficient. I think just the numbers aren't quite there unless you know like very high tax rates. um maybe you could get close, but more incremental taxes on a lot of these folks, you know, whether they earned or inherited, seems like they can afford to pay. And as we've shown, some look like there's more of an earn story. Some look like there's more of an inherited story. Some looks like there's more of a market cap power story. Um there's a lot of nuance there, but ultimately like are we going to hurt the economy by incrementally increasing their taxes? How much can we raise? I think the answer is pretty clear on that one. Elon versus the army of ants or we sometimes we call them the middle garchs. Um so they're sort of like the oligarchs but like they're in the middle earth um like Tolken. Uh you know one colorful story from this most recent OB3 tax debate that renewed the personal income taxes. Um that legislation occurred at a time when Elon had just like had his adventure in the government with Doge. Um the clean energy like the tax credits for clean vehicles went away. The car dealers got the deduction for auto loan interest. Um that was a new tax break plus the per the made permanent uh income tax preference that that benefited them. I think that's evidence that there's like quite a lot of power even if it's distributed that's operating there as a counterveailing force to like the small number of the tech billionaires who clearly have a lot of power as well. And I'm not arguing against that. I think it's more that the narrative seems to basically have only focused on that. Um and um that's a pretty recent phenomenon where they've really aligned with you know one party. Um, but I think the story of rising inequality of change trends in the American economy, it's a much longer story. And so I don't think the timing quite of works either if you want to understand where it's coming from. Um, how far back does our data go? So we really do trace the rise of passroughs back to this 1980s reform that really change and flip the rules. Um, and there are a lot of economic trends that are also like helping. So first that just creates the data almost the paper trail lets us see them for the first time which is cool. um the reduced tax rate allowed them to get more after tax profits and maybe reinvest that and build up in sort of a cumulative fashion. But you also have these trends that are headwinds um globalization uh declining interest rates that just make those businesses more valuable. Um you have some deregulation across states that allow them to go across markets um and expand their footprint a bit. Um and those forces I think are helping them grow at the margin. Um in healthcare you have just like this growing demand for health services and curtailed supply which in the US is like quite uniquely concentrating profits in you know there's providers there's hospitals there's drugs so on our health care system like a whole separate topic but like they show up here in a little bit in the corner is quite interesting the digital world um right we're intentionally kind of saying look like tech is cool love it AI fascinating but like let's not chase all the shiny objects. Let's like also think about some like less shiny objects that are nevertheless like ubiquitous and quite important. Um one observation on AI that I think is kind of fun. It really has reduced the cost of like starting a business um like the sort of boring business planning stuff. Um and so I think there's like a lot of ways to be an entrepreneur. You still have to like figure out an idea and you also have to think about the competitive environment in which everybody's doing the same thing. Um, so like what's your moat? What's your defense? Um, and usually these folks that are successful, they like worked for a while in some kind of unglamorous sector and then sort of figured out like here's an opportunity to like maybe go a step further and take some risk, start a business, take advantage of that. But I'm kind of excited about the prospects of AI to disrupt a lot of especially skilled service businesses. Um, they're charging really high prices for services that seem to be like able to be done, at least some of them, with the help of the AIS, crypto and content creators. Don't have much to say about them. I'm not sure how many there are. Um, I think, you know, um, I'm still I'm open to learning. Um but yeah, this is like a really digital tactile bluecollar kind of, you know, um contrarian view of the economy that like maybe it's just going to be obviously wrong in a decade, but we're at least taking a stand. Um, and then on private equity, I think the private equity story is kind of fun because like it's like folks are going to glamorous business schools in order to run plumbing businesses and that's like a funny story or to run like you know a fast casual like uh Outback Steakhouse kind of restaurant. Um, and that's just a quite funny story um, about how there's just a lot of surplus there to be captured and private equity is like finding the niche where there's a willing seller which is a big problem for them often is to like find a target that's willing to sell. Portillo was only willing to sell because he was in his early 80s and even then it was like kind of hard to convince him to sell. He really didn't want to sell and he immediately regretted it because he thinks they screwed up the business after he sold it. So, it's just like the guy's just obsessed with running these restaurants. >> Okay, I think we've got time for one or possibly two more rounds of questions, but do get your uh hand up and your question in if if you can in this round and take one more um from online and then two from the audience. >> Yeah. So online um someone has asked the number of publicly listed companies in the US has uh decreased by about 50% from the mid1 1990s to today. Does your research offer any insight as to why that is? Is it due to the rise of private equity? >> Um and question uh from the person in the uh black blazer um toward the back there. >> Uh thank you for your talk today. Uh my name is Kadan. I'm a year 12 student at Dartford Grammar School and my question is uh through your own research on that the invisible millionaire business owners like how do you observe the localized market and political power of these main street millionaires comparing to like the uh superstar firm narrative of the Forbes 400 and like what do you think has the greater impact on America today like the mid market or the globalized firm? Uh and question from the gentleman in the check shirt here. >> Yeah, thank you for the talk. That was really really good. Um I'd like to ask about diversity and whether the data you've got allows you to talk a little bit about in two two aspects. One is the international aspect. Are you seeing people coming to the US and the sort of American dream of setting up their business and becoming very successful? Are you seeing tax driving people out of the US and going overseas? The argument in the UK about taxing the wealthy more is often at the moment around well if you tax the wealthy more they'll go and live somewhere else and we won't get any of their money so we need to keep our tax rates competitive uh so they stay here and pay taxes here and the other the other is the the within the cohort you have you you said the typical person was a a white middle-aged man uh married etc is that how typical is that and what diversity do you see I mean is that kind of um a stereotype or and do you see you know do you how wide is the distribution of age and ethnicity and gender and and so on because you've got quite a big cohort was it a million or so people so you must see quite a lot of diversity in there >> oh yeah for sure >> yeah um so okay the fallen public companies um yeah I think that you know in the US like rising private capital markets um has played a pretty important role in basically extending the runway for companies to stay private. You sort of see the valuation at which companies go public. It's a cashing out. Um or I mean in the recent set maybe because there's just such frothy valuation for AI related businesses. It's like you want to issue equity when the price is really really attractive. um you know but like they're able to raise tons and tons of money before then and you know maybe private equity more of the mid-market buyouts has also played some role in we've seen growth endowments pensions and so on allocating there for sure um it's still a few thousand companies plus or minus very manufacturing oriented very like multinational oriented you know important for economic activity multinational and multi global activity. But I think what's interesting about all these folks is they're kind of just like operating in an economy just like at another plane. Um and uh and yeah, the evolution of private capital markets is sort of happening in the background but not necessarily affecting them in the same way as it's affecting say the VC back startup um which is just like a really small sliver um of of this broader economy. global firm market power versus the midmarket. Yeah. I mean, look, I think Amazon commands some power in web services specifically. In retail, it's complicated. I view that as complicated because it's like generating a ton of consumer surplus at the same time um by providing like same day shipping or whatever like you know the treatment of workers is a problem and uh so there's like market power and labor markets there. interesting thing that we sort of spent some time on is labor market protections that seem to also affect these franchise businesses that are not owned by like large multinational companies where you see non-competes and other things for like sandwich artists at Jimmy John's or franchise you know businesses and um you know like there's a role for minimum wage to help workers at these mid-market businesses not just sort of the Amazon workers and so I think you know what's going on in the labor market that these firms have access access to I think healthare access to healthare services is an important problem in the US um where access forces people to work for big companies versus small companies um and so they're like there's some really interesting dynamics where I think power is not the same story for like the Amazon versus the mid-market real retailer um the car dealers have demonstrated tremendous market power visav the manufacturers and it's quite telling to see that. Um, and they've like used lobbying at the state level. Um, and the fact that they are geographically decentralized to get these local regulations and protections. Um, and uh, you know, the manufacturers are very geographically concentrated. So that's a story that we don't hear that much when you think about market power or antitrust. And I think that's an important one. Um so then diversity yes so um two dimensions of this international yes immigrants are disproportionately entrepreneurial there's like definitely an important component of the immigrant story there that's like quite um you know it's it's an vision of the American dream that's like kind of inspiring right and it's nice to have a little bit of data that suggests that it's not completely gone um because there is like a lot of fear the American dream is dead we're saying well like you know maybe it's a little bit weak than it was before, but there's still a lot of opportunity there. We tell one story about um a guy who came to the US as an immigrant named Shahit Khan, went to University of Illinois, so like a state university in engineering. Then he went and worked for like an auto parts supplier. Then he started like manufacturing bumpers, and then he ends up like being like the number one distributor of bumpers into auto manufacturers. Um, and he bought the Jacksonville Jaguars, so he owns like a sports team. Um, he's like quite rich, uh, and has a great mustache. And so, um, you know, like that's like an immigrant story. There are more recent ones as well. Um, in the AI, you know, like startups, there's some as well. I think, uh, there's been some really amazing research on like the disproportionate share of immigrants that are entrepreneurs. And to the extent that we attract those types of people, um I think that's got to be great for growth, productivity, and so on. Um hopefully we continue to do that. Um on yes, they're not equally representative of the population. There are females. So, you know, I told the story of Nancy Mueller, the like kiche, the kiche maven. Um there's another one like a travel center uh couple that started sort of they sell truck stop. They did a bunch of truck stops where like you get gas if you're a trucker and then you go in and take a shower and get food and stuff called loves and there's like a husband wife where they each were playing a role in the business and that kind of thing. There a lot of those kinds of stories. There are fewer female entrepreneurs in the data. Those gaps have not closed very dramatically over time. It's an interesting challenge. It's interesting to think about was the nature of the entrepreneurial job that makes it hard harder for women to enter or grow businesses except in some sectors. Um maybe they're greedy jobs which I think you know Claudia Golden has an interesting book on greedy jobs, jobs that like make families there's flexibility but it's also like these people are on all the time. Um so I think that's quite interesting. um there's still room to close gaps in the data, but I think the SAT GA graph that I showed is also giving a lot of opportunity and hope. Um so, uh so I like that as a counter to the fact that clearly there are some persistent disparities. Want to understand them. Great. Thanks. Uh so we're into our last round of questions and they're going to need to be reasonably concise uh questions as well, please. So, uh I think those of you who have braved the tube strikes and the rain to be here are going to get um priority in this round. So, I'm going to take three from uh our inperson audience. Uh starting with the uh gentleman in the white t-shirt there in the third uh third row. >> Thank you. Um I'm a year 12 student. Uh I go to Lenny Park School for boys and my questions are related to what the chair first asked. Um and I'm wondering you the chair sort of said um the in the media it really flies under the radar these um main street millionaires and I was wondering uh well what do you think the most effective way of increasing awareness about this this issue is and do you think it's do you think it's an issue that sort of the everyday person needs to know or is it something uh that should be left to specialists to deal with in in their own way or um and yeah if if it is a problem that everyone needs to know then how do you think you can um uh increase awareness of it. >> Great. Uh and uh just right behind uh where I back. >> Awesome. Hi. Um great presentation. My name is Max. I'm an Atlantic fellow at the International Inequalities Institute. And my question is around is if there's any like statistically significant difference in some of the indicators of power between owners and labor. The slide you had was really interesting about the share of labor has declined over time. So wondering things like unionization rates in these firms, things like full-time benefits, full-time contracts, things like the ratio between the highest paid employee to the lowest paid employee. Are those stat statistically significantly different than maybe Fortune 500 or much smaller type businesses? Thanks. >> Okay. And last question to the gentleman at the back in the red. Uh please. >> Hi, I'm Shaker Dlani. I'm just a lay person. Um thank you for the presentation. I had a quick question and it's an continuation of what you mentioned earlier about um is there a longitudinal study or something that you looked into or your team looked into where which compares the incumbent uh trying to build these taxs um kind of moat around themselves reducing innovation over time in those industries versus had those tax advantages not been in place, would innovation have been faster? >> Yeah. So, I'll try to also answer shortly because I'm I'm realizing we're short on time. Um, ways to raise awareness of this group, you know, write a book and talk your head off about it, I guess, as kind of the answer. Um, you know, I do think like the narrative component of the book, um, and like the little bit of the entertainment value of the book with some of the funniness of some of these these stories is meant to capture, right, like people's attention in a way. Um, um, do I think the general lay people I think the like lay audience everybody has an opinion about inequality and is concerned about it and its effects. Um, and there's also folks who like, you know, aspire to financial success. Um, and so I think recognizing where it comes from, who it is, right? So then if you want to if you want to reduce inequality like after tax inequality, um, you know, a really high threshold billionaire tax will affect a very small slice of it. you know, maybe that's an important thing to do, but it's not the only thing that we should be thinking about if you want to address the inequality question. If you, you know, aspire to financial success, which is not, some people do, some people don't. Um, tech and finance are not the only ways to do it. Learning a trade and then continuing to grow and take some risk. Um, at slow and steady way, um, there are a lot of success stories along that path. And it's kind of interesting to think about. um these people are really passionate about what they're doing even in if it like looks boring from the outside. Um and so I do think it's important to recognize what a grind it would be if you didn't enjoy being that um kiche manufacturer, you know what I mean? So um on uh workers at uh these businesses versus at large businesses I mean a pretty important one is uh healthcare. Uh so there so again like at a large bis you know multinational or like a large employer now you know has economies of scale such that they can offer health health insurance by pooling among all those workers at a cost advantageous way relative to small businesses. Um this affects the labor pool that like wants to go work at some of these firms. So I think like the way we provide that benefit specifically in society is just increasingly distorting labor supply in ways that are like kind of unhelpful. Um it also maybe creates some power like for those you know firm owners if they want to hire workers they offer those benefits they're willing to pay quite low wages for workers who really really demand or want those benefits that kind of thing. Um, I don't know if there's greater pay disparity between the top and bottom workers within these firms. I don't think there's huge differences there necessarily. Um, they're less likely to provide incentive pay at the top than I think larger companies are with stock and, you know, profit sharing type arrangements. um we suggest that, you know, some of these owners might benefit from providing a little bit more rent sharing, incentivized rent sharing, um to their workers, but they're like, you know, maybe historically conservative, preserving ownership and being very secretive about the nature of the business. Um it's an interesting question that we we try and explore a bit. Um would the absence of tax preferences have changed the competitive position of these businesses? I'm not so sure. It seems like the local market regulations, the way they've lobbied for protections, um um is kind of like a separate part of it, but then once you have those protections, how much you get to keep of the rents that that those protections create, the tax rules do matter there. Um and uh it's interesting to think if they are rents uh then increasing the tax on them isn't going to affect effort um or activity there. Um but another policy you might prefer is to promote entry or promote more competition in those industries. Um and uh that would benefit consumers, maybe increase labor demand, benefit workers um you know at the expense of some of these like incumbents. Um, and I think in some of these industries it's pretty important to to to to look at that. >> Yeah. >> Great. We are uh right out of time unfortunately and it's I think it's testament to uh the provocation of the book that there were more many more questions we could have got to. So, apologies to those who missed out, but um so Eric's book is on sale from September, but as he reminded you earlier, you can click now to um uh commit to purchasing one, and I strongly recommend that you do. It's been great, and I look forward to reading uh the whole thing end to end when it's out. Um so, uh thank you very much again uh to Eric uh and have a good evening all.