In a world with increasing wealth inequality, especially with a growing lot with stupendous wealth (even a trillionaire), wealth creation gets a negative connotation in social debates. Yet, there is a class of wealthy outside the mega tech deca/centi billionaires, that are ‘merely’ decamillionaires who have built their fortune in more unassuming ways. Nick Maggiulli reviews a new book : “The Everywhere Millionaire: Who Is Really Rich in America and How They Got There” written by Owen Zidar and Eric Zwick, “two economists who did specialized research on how much tax American business owners pay. Because of this, they were able to provide insight into the wealth of the upper class and the superrich.
Technically, Zidar and Zwick focus on households with a net worth above $5M (the top 4%), but the average net worth in their data is $25M. This provides an incredible glimpse into what Zidar and Zwick call America’s “Main Street Millionaires.””
Maggiulli shares some takeaways from the book:
Unsurprisingly, the study shows that most of these are business owners (mostly private). But more interesting is which industries do they come from. Dan Wang the author of the brilliant book ‘Breakneck’ where he makes the point that America is run by lawyers and China by engineers, stands vindicated. In Zidar and Zwick’s study law firm owners show up on top followed by finance (VC, PE, hedge funds), auto dealers, consulting and oil and gas extraction.
“There are a few things to note about these industries (and the 20 others fully listed in the book). First, these businesses exist across the nation. You might need a lawyer, a car, or a consultant whether you’re in Nebraska or New York. Second, these industries aren’t dominated by a few megafirms. There’s no Amazon or Walmart of law firms or auto dealers. Instead, each has thousands of independently owned businesses that tend to make their owners wealthy.
This is why Zidar and Zwick call these owners “everywhere” millionaires. They aren’t located solely in Silicon Valley or Manhattan, but all across the United States.”
Demographically, they are “older, male, married, and White. Ninety percent of decamillionaire ($10M+) business owners are married, and their median age is 62. A lot of this is a function of time. Since it typically takes decades to build a successful business (especially at the decamillionaire level), Main Street Millionaires tend to be much older.
…men are twice as likely to start a business as women, and Asian and White individuals are 7x and 5x more likely, respectively, to own an employer business than Black individuals….people from families in the top 1% of income are 2.4 times more likely to found a firm than those from families at the 90th percentile, and 4.1 times more likely than those at the median.
…Some 80 percent of decamillionaire business owners have a college degree, and 40 percent have a postgraduate degree (e.g., MBA, MD, DDS, JD, PhD).
These decamillionaire business owners are twice as likely to attend college and postgraduate school as the general population. But, interestingly enough, they’re less likely to go to college and graduate school than decamillionaires who don’t own businesses.”
As ever, right place matters: “Their first job, and, in particular, what industry their first job is in. Zidar and Zwick found that if your first job is in an industry that produces more entrepreneurs, then you’re more likely to become an entrepreneur. And if your first job is more entrepreneurial in nature (e.g., computer systems design, accounting, building equipment contracting), then you’re more likely to succeed as an entrepreneur.
That’s because your first job teaches you how an industry works and can help you develop a professional network that is valuable when starting a business. Zidar and Zwick estimate that these differences in early career experience explain 20% to 50% of the gaps in business creation by income, race, and gender. In other words, a meaningful part of why some groups start fewer businesses is that they’re less likely to get their start in entrepreneurial industries.”
The review ends with the sobering note: “It’s also worth noting that for every business owner who became a Main Street Millionaire, many more didn’t. According to Zidar and Zwick, only about 5% of founders built a firm worth more than $5 million within ten years, and around half of firms stopped operating as stand-alone entities within five. Yes, this data suffers from survivorship bias.”
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