Who Actually Gets Rich in America? It’s Not Who You Think

Owen Zidar, a professor of economics at Princeton University and co-author of "The Everywhere Millionaire," discusses the true nature of America's wealthy. Contrary to popular belief that millionaires are often young, extravagant celebrities or executives, Zidar explains that the typical millionaire is usually someone who owns an unglamorous, often tactile, private business. These include auto dealers, beverage distribution companies, or owners of multiple franchises. Zidar's work builds upon and updates the findings of "The Millionaire Next Door," but with a crucial difference: his research utilizes the full population data of wealthy Americans, rather than relying on surveys which often miss responses from the rich. This allows for a more representative picture of wealth. He defines "everywhere millionaires" as individuals with $5 million or more in net worth, placing them in the top 4% of the national wealth distribution, and including all assets less liabilities, such as houses, private businesses, and stocks. He notes that the $5 million threshold is used to avoid the common pushback that $1 million today doesn't feel as significant due to inflation and rising housing costs. While it's hard to generalize the psychology of this group, Zidar observes that many work exceptionally hard, especially early in their careers, often blurring the lines between weekdays and weekends. Common traits and paths to wealth vary. While inheritance is the easiest, most wealthy individuals either found a business or acquire one. This path is often a decades-long "slog" of grit and hard work, contrasting sharply with the "move fast and break things" Silicon Valley model. He cites the example of Larry Miller, who started in a Toyota parts department and eventually owned the Utah Jazz NBA team after decades of building his auto dealership empire. For the everyday worker, Zidar emphasizes that the vast majority of people with $20 million or $30 million did not get there by earning a salary; they own something. The key takeaway is that most rich people "own rather than earn." However, salaried work can provide the experience needed to eventually acquire or start a company. The typical "everyday millionaire" is around 62 years old, has a college degree, and owns a closely-held private business. Wealth accumulation generally follows a life cycle, with saving and accumulation over time. Zidar's data, obtained by working with the Treasury, offers more granular insights than the Federal Reserve's Survey of Consumer Finances, particularly regarding geography, occupation, and industry. For instance, growing up in Salt Lake City makes one three times more likely to start a business than in Mississippi. Specific industries also stand out: construction, for example, is a strong starting point for entrepreneurs, as many workers in that field eventually start their own businesses. Auto repair also generates more founders than auto manufacturing. Entrepreneurship, while risky and often requiring long hours, can be deeply fulfilling. Zidar recounts stories like Karen Bentlage, who, against her mother's advice to become a nurse, became the third-largest tanning bed distributor in America. Empirically, even with business failures, the typical person starting a business sees an increase of $5,000 to $10,000 per year in income a few years later. Those who fail often return to similar jobs, making the risk less catastrophic than sometimes perceived. A surprising finding from his research is the prominence of "unglamorous" industries in generating significant wealth. Tech, real estate, and finance account for only 20% of million-dollar income-generating private businesses. Ordinary fields like dentistry and auto dealerships are major wealth creators. Dentists, for example, collectively generate more revenue than the NFL, NBA, and Major League Baseball combined. Bankers view dentists as reliable clients due to their consistent income and stable operations. Zidar explains that these "everywhere millionaires" remain largely invisible because the cultural spotlight focuses heavily on a few tech CEOs and public companies, neglecting the vast pool of private businesses that drive much of the American economy across the country, not just in major media hubs. Regarding the path to transformational wealth, Zidar suggests that luck and foresight play a role, alongside hard work. Most wealthy individuals are "self-made" or acquired their businesses, rather than inheriting them. While founding businesses is slightly more common, acquiring existing businesses is an increasingly popular and exciting path, especially with many baby boomers looking to sell their companies as they retire. This creates opportunities for individuals to buy cash-flowing businesses in niche areas, such as medical billing or ambulance dispatch. Zidar highlights the prevalence of highly specialized, often overlooked businesses that generate substantial wealth, such as selling windows for drive-thrus or supplying toilet paper to fast-food restaurants. These "tactile" businesses are "everywhere" and represent significant, often untapped, opportunities. On investment strategies, Zidar notes that many wealthy individuals take significant risks by holding concentrated positions in their businesses and reinvesting for decades, allowing wealth to compound. He cites Dick Portillo, who started a hot dog shack from scratch and eventually sold Portillo's for a billion dollars, emphasizing his concentrated focus and aversion to debt. Regarding the risk profile of entrepreneurs, Zidar observes that wealthier individuals are more likely to start businesses, possibly due to a safety net. However, many middle-class and poor individuals also achieve great success as entrepreneurs, simply because there are more of them. Zidar addresses whether entrepreneurs primarily grow the economic pie or claim a larger share. He finds that both are happening, roughly half and half for the income growth of this group. While some owners uplift employees through equity stakes or ESOPs, there's also an empirical trend of a growing share of the pie going to owners. Zidar believes the American dream is "alive" and should be nurtured. He argues for encouraging more millionaires, as they generate employment, competition, innovation, and progress. He points to success stories like Dick Portillo and Shahid Khan (an immigrant who started with $10, founded a car bumper company, and bought the Jacksonville Jaguars) as evidence. Data shows that about 10% of those who rise from the bottom 20% to the top 20% do so by owning a business, a rate higher than attending an Ivy League school. While the U.S. is generally conducive to business compared to other parts of the world, Zidar suggests improvements. He advocates for reducing barriers to competition and entry, especially in sectors like housing, healthcare, and cars. For example, easing restrictions on starting new car dealerships, increasing the supply of doctors and allowing nurses more autonomy, and making healthcare more affordable and reliable for entrepreneurs are crucial policy changes that could foster more entrepreneurship. For those looking to start on this path, Zidar advises gaining expertise in a specific industry, becoming an expert in a domain, and actively seeking out opportunities. He recommends working in an industry for a year or two to understand its "nuts and bolts," citing the example of NBA player Junior Bridgeman who worked every job at Wendy's before buying his own franchise. In a rapid-fire session, Zidar recommends buying a business over starting one, emphasizes execution over a great idea, and prioritizes hard work over fortunate timing. He states that concentrating wealth creates it, and identifies construction as the most underrated millionaire-producing industry, while a salaried job is the most overrated path to wealth. He believes becoming wealthy is harder than staying wealthy, and the biggest misconception about millionaires is "how important it is to run a public company." Personally, Zidar has invested in a friend's search fund, indicating his belief in the entrepreneurial path. However, he also shares a sociologist's perspective that giving children vast inherited wealth (e.g., $40 million) can bring complexities, aligning with Warren Buffett's philosophy of providing enough for children to do something, but not so much that they do nothing.