It's all of the operations of that business and it's very little actual cupcake baking.

One thing I was thinking when Eric was answering that is where the Harvard Business School alum who basically got money from professors and other investors to go and buy one of these businesses.

And so she didn't do that much.

So she's kind of in the same position as these accountants.

And she was telling us it took a year to find a business.

And she looked all over the country.

And one, she found this very high cash flowing slaughterhouse.

So can you talk then about how you gathered your data? Yours was actually quite unique in the opportunities that you had.

So I guess, Owen, what do you make of the tax breaks that we have made for this group of people.

I think one common thing that you see is that there are a lot of provisions that are sold to be on the benefit of small business, which is the federated institution in America that many people really respect, to expanding to very large and extremely big private businesses that are still trying to enjoy the same benefits.

And so, for example, if you look at the estate tax, which is one way that the tax on capital has gone down very materially in recent decades, that was largely argued from the perspective of, oh, look at this small business.

There's this guy named Charles Thigpen who testified before Congress, who is the grandson of slaves and was a farmer, and he wouldn't even been facing the estate tax.

And that was when it was about a million dollars for a couple And now it's $30 million that's exempt.

So it's way, way, way smaller in terms of how much money it's actually bringing in.

And then on other provisions, I think my general view is it's important to have a results-based fiscal policy where you actually look at what happens to real activity when you do a various tax change.

So what is the solution from a policy perspective? How do we fix this, Owen?

What about your view?

And when you go across America, it's amazing how much wealth there is.

There are 3 million everywhere millionaires.

Those are people running ordinary, everyday businesses in every town in America.

And they're not talked about because they're not tech titans or hedge fund folks.

And we try to tell the story of many of them.

It's folks like Dick Portillo, who grew up in the housing projects in Chicago and over decades of hard work ended up selling a business for a billion dollars selling hot dogs.

Jaguars.

What share of these businesses are relatively new businesses? Um, and by and large, you know, are these people with fancy degrees from Ivy League universities? Are these people who studied, you know, marketing at the local community college? Are these working-class people who, you know, started off at plumbers and then decided to take a risk and, you know, do their own plumbing company? Like, like, like, what kind of composition does this group have, and how does that reinforce or complicate our picture of, uh, what kind of person rises to this, uh, uh, quite remarkable wealth in, in America today?

That, that's a great question.

In terms of inheritance, we estimate about a quarter of people, um, who are in this group inherited their business, so the typical person either founded it or acquired it.

Um, and it's a broad swath of people.

So the example you gave of a plumber working for ten years and then running a plumbing company is much more common.

Uh, there are a lot of mundane businesses ranging from a guy who started as a, a repo, uh, man repossessing cars to running one of the largest repossession companies in the country.

Uh, there are some pretty large industries like auto dealers, beverage distribution, realtors, contractors.

So what, what-- how does that change our characterization of this political moment? Um, you know, what follows if we think that this is the second Gilded Age, and in what way does that misdescribe the world? In what way do we understand the world in a more helpful way if we follow your characterization?

Um, so talk about some of the things that make entrepreneurs different.

So, you know, I'll give one story and then a side story.

Uh, so one is the, I totally agree, they're relentless and they're often troublemakers.

So the Dick Portillo, um, and I'll, uh, spend 30 seconds on his story, and then I'll talk about how he's a troublemaker.

Um, so he grew up pretty poor.

He grew up in the housing projects of Chicago, the Cabrini-Greens, and he is, is the child of immigrants.

And when we talked to him, he said, you know, at one point they had so little money they had to sell some of his, like his tricycle, um, to, to put food on the table.

Well, [chuckles] are they?

Is that correct?

Yeah.

One of the questions that we had, it's very hard to get pol- uh, political information on them.

We got a little bit of a, a toehold on it from this study, uh, that we're, that you're citing that surveyed people who got the PPP loan, um, during the COVID pandemic, and you're right, um, in terms of the breakdown of their politics.

Many of them become more conservative as they become business owners because they have to deal with a thicket of regulations and some of which might be pretty annoying and burdensome to deal with.

And so you can kind of relate to some of those things if the typical citizen isn't considering how hard it is to open up or to follow through on some regulatory guidance, if it's a really burdensome process.

Like you can think about some of the more, uh, hassles that you encounter every day if you're filing some government paperwork and then kind of understand where they're coming from on some of these things.

What is it about car dealers that give them such, um, a large role here?

[upbeat music]

So the first insight starts with a story, which is how we open the book.

In November 2023, Bob and Paula Brockway of Coral Gables, Florida, hosted a wedding for their daughter, Madeleine.

The wedding, which is dubbed the wedding of the century, cost allegedly up to $60 million.

Guests were flown in by private jet.

They had a rehearsal dinner at the Paris Opera House.

They had fireworks at the Eiffel Tower.

[upbeat music]

His nickname is Beaver?

Yes.

So it's quite a story.

So I spent some of my childhood in Texas.

My family moved around a lot.

We lived in Dallas and Houston.

So I have some familiarity.

And do you think that's also a common characteristic, their ability to take on a lot of risk?

Is that correct?

Yeah.

One of the questions that we had, it's very hard to get pol- uh, political information on them.

We got a little bit of a, a toehold on it from this study, uh, that we're, that you're citing that surveyed people who got the PPP loan, uh, during the COVID pandemic, and you're right, um, in terms of the breakdown of their politics.

Many of them become more conservative as they become business owners because they have to deal with a thicket of regulations and some of which might be pretty annoying and burdensome to deal with.

And so you can kind of relate to some of those things if the typical citizen isn't considering how hard it is to open up or to follow through on some regulatory guidance, if it's a really burdensome process.

Like you can think about some of the more, uh, hassles that you encounter every day if you're filing some government paperwork and then kind of understand where they're coming from on some of these things.

What is it about car dealers that give them such, um, a large role here?

Is that correct?

Yeah.

One of the questions that we had, it's very hard to get pol- uh, political information on them.

We got a little bit of a, a toehold on it from this study, uh, that we're, that you're citing that surveyed people who got the PPP loan, uh, during the COVID pandemic, and you're right, um, in terms of the breakdown of their politics.

Many of them become more conservative as they become business owners because they have to deal with a thicket of regulations and some of which might be pretty annoying and burdensome to deal with.

And so you can kind of relate to some of those things if the typical citizen isn't considering how hard it is to open up or to follow through on some regulatory guidance if it's a really burdensome process.

Like, you can think about some of the more, um, hassles that you encounter every day if you're filing some government paperwork and then kind of understand where they're coming from in some of these things.

You have a great quote from Larry Summers, uh, [chuckles] who is often very quotable, "Large coalitions of small businesses are more evil than small coalitions of large businesses." What prompted him to say that?

Tell me a little bit about that.

Yes, so it's a great statistic.

It started out when we were thinking about the pass-through income and the growth of pass-throughs.

Let's add up all the income for top 1% pass-through business owners.

And what's a good reference for that to make the point that this is a huge, surprisingly huge group? Well, let's look at CEOs in the ExecuComp dataset, which is roughly the S&P 1500.

And it takes the CEOs, the CFOs, and adds up their salary plus at-the-market values of their options.

And you say, okay, add that up.

Tell us about why we should get rid of all these non-competes.

Can you actually just operationalize that a little bit more? What he contributed to the market, so to speak, such that either at his first place of employment or at his own entrepreneurship, he goes they go from 961 to one or whatever it is.

Yeah, so I think it's, you know, when you're dealing with customers, it's being really responsive, understanding what they need and just, you know, being hardworking and diligent and delivering and having a reputation for, okay, if I have some need, I'm going to go to this guy.

And it grew over time.

That's one broader lesson of the book is that it takes a long time.

In contrast to the Silicon Valley, move fast and break things.

It's often move slow and make things.

It takes decades often.

But I think that's an important part of it.

I'm asking you to solve the world's problems quite literally, but what are some examples? Like, what could solve that?

You know, one thing that's a little off topic, but it's fine, is the healthcare in the US we're really unlike many other countries in terms of how we do it.

They're just absolutely crushing healthcare costs for small businesses.

It's very bad for business and it's very bad for their workers.

So I'm on the board of a daycare, and this year we were quoted a health insurance cost increase of fifty percent.

Literally next year, whatever you're paying for health insurance for your employees goes up by fifty percent.

You're saying, "Okay, I'm going to tell some set of workers who are devoting their life to helping kids, who are basically making the minimum wage, I'm going to take your thirty thousand dollars and then seven thousand dollars of that is no longer going to go to you.

How do inheritances shape the path to wealth?

I'm curious, give us a little bit of the background of when that changed, at least in the tax code, and how that manifests itself amongst entrepreneurs in the economy.

Yeah, so pass-through businesses don't pay tax at the firm level.

So the tax rates that are relevant for them are the individual owner's taxes.

So the income flows through, that's why I say pass-through, to the owners, and then it's taxed at the individual level.

Until the 1986 tax reform, which was a bipartisan reform, Reagan was president, Democrats were in charge of Congress, brought the personal income tax rate down below the corporate tax rate for the first time in the history of the tax code.

It didn't make sense to be a pass-through because it was tax disadvantaged.

But all of a sudden, it was cheaper to be a pass-through if you were a business.

What percentage of these businesses fail? What doesn't make it?

Give me some examples, Owen.

Yeah, so it can be very basic things like storing paper.

Brian, I have three kids, and so I read a lot of kids' books.

And we somewhat jokingly talked about turning this into a kids' book of the ABCs of getting rich.

A is for auto dealer, B is for beverage distributor, C is for contractor.

And it's just the everyday businesses you drive by and don't really think about.

But when you go to a nice lake house, or a mountain town or a golf resort and ask who owns those big homes, it's very often these ordinary Americans who've gotten extraordinarily rich running these businesses.

First, you have a story of a guy who just wanted to sell hot dogs.

Give me some examples, Owen.

Yeah, so it can be very basic things like storing paper.

Brian, I have three kids, and so I read a lot of kids' books, and we somewhat jokingly talked about turning this into a kids' book of the ABCs of getting rich.

A is for auto dealer, B is for beverage distributor, C is for contractor, and it's just the everyday businesses you drive by and don't really think about, but when you go to a nice lake house, or a mountain town or a golf resort and ask who owns those big homes, it's very often these ordinary Americans who've gotten extraordinarily rich running these businesses.

Is

First, you have a story of a guy who just wanted to sell hot dogs.

One of our favorite stories is the story of Dick Portillo.

He grew up in the Cabrini-Greens housing project of Chicago.

Do they, do they see themselves as the rich, as the 1%?

Usually they, they have a pretty good idea.

Like often it's because it takes so long to, to get wealthy.

They're, you know, they've gone through the life cycle.

So one of my favorite characters that we talk to in the book is Dick Portillo, and he started, he grew up in the projects of Chicago, the Cabrini-Greens.

And he didn't know how to make a hotdog, and then started a hotdog company, and was washing the dishes by hand 'cause there wasn't running water.

And he ended up over decades selling a lot of hotdogs to become a billionaire.

Oh, that's cool.

Owen, do you think it's a good thing or a bad thing that more people are becoming millionaires this way?

I think there's a nice quote from Bill Clinton from a debate stage with George Bush where he said, I want to have more millionaires in this country than Reagan did and Bush did.

And Clinton basically wanted more millionaires and more people to have a shot.

And My view is that that's the right orientation, and it's good when we have more prosperity and more opportunity in America.

What do we do with this information? I

think there's a couple different things you can do.

So one is if you want to get rich yourself – you can realize that it's much closer to home.

You don't have to be some tech CEO to actually make a lot of money.

Owen, do you think it's a good thing or a bad thing that more people are becoming millionaires this way?

You know, I think there's a nice quote from Bill Clinton from a debate stage with George Bush where he said, "I wanna have more millionaires in this country than Reagan did and Bush did." And, you know, Clinton basically wanted more millionaires and more people to have a shot, and my view is that that's the right orientation, and it's good when we have more prosperity and more opportunity in America.

What do we do with this information?

I think there's a couple different things you could do.

So one is if you wanna get rich yourself, you can realize that it's much closer to home.

You know, you don't have to be some tech CEO to actually make a lot of money.

There are a ton of businesses near where you live.

You know, a second thing is if you want to understand policy outcomes, I think it's very helpful to have this lens for understanding the rise of inequality and, uh, the rise of kind of who's shaping a lot of rules, uh, not just at the federal level, but at the state and local level.

around the wealthy.

And there's also, you know, just the administration aspect and how much administration has been gutted.

If you look at the tax gap, which is really quite material, I think it's like $600 billion annually.

I think we have an estimate in the book that something like 44% of that is from pass-throughs and small business, sole props.

So almost half of that gap, you know, is just like not following the existing rules as generous as they are.

So that's another area to push.

And then a third one is on inheritance and estate tax.

So what should I tell my children? What does this tell them about what they may want to think about in terms of becoming prosperous?

All of a sudden, it made sense to reorganize your business such that you don't pay tax at the business level.

The two key dates in my head are 1986, when this really started taking off, but also 2017 when President Trump passed the biggest business tax cut in US history, the Tax Cuts and Jobs Act.

Is this trend going to continue?

One of the notable things about the One Big Beautiful Bill Act that you mentioned is that there are these really controversial Medicaid and SNAP cuts that collectively were about a trillion dollars.

And what wasn't really talked about was on the other side, there was about a trillion dollars of cut in the form of preserving this 20% deduction, as well as continuing to erode the estate tax system.

We need tax revenue as a country, and I think one reasonable step is to kind of ask very wealthy business owners to pay something closer to what ordinary salaried workers, uh, like us pay.

All of a sudden, it made sense to reorganize your business such that you don't pay tax at the business level.

The two key dates in my head are 1986, when this really started taking off, but also 2017 when President Trump passed the biggest business tax cut in US history, the Tax Cuts and Jobs Act.

Is this trend going to continue?

One of the notable things about the one big beautiful bill act that you mentioned is that there are these really controversial Medicaid and SNAP cuts that collectively were about a trillion dollars.

And what wasn't really talked about was on the other side, there was about a trillion dollars of cut in the form of preserving this 20% deduction, as well as continuing to erode the estate tax system.

We need tax revenue as a country, and I think one reasonable step is to kind of ask very wealthy business owners to pay something closer to what ordinary salaried workers, uh, like us pay.

Can you walk us through why it happened, what happened, what was America like before, and how you're making an argument that that change set up the stage for this kind of wealth creation for the 3 million homes, individuals in the country?

Yeah.

So in the 80s, if you started in 1980, the typical business in America is a C corporation.

So most public companies are C corporations and they face the corporate tax.

And if they pay it out to investors, then individual investors will have to pay a dividend tax.

And at the time, individual tax rates are quite high.

Reagan was president, and he had a history before he was president and before he was governor of California as a kind of B-list movie actor.

Can you share what you found out, the individuals you got to meet and learn more about? Who becomes a Main Street millionaire? Can we tell from their childhood experience that somebody is set up better or worse for that?

yeah yeah so i got a question just a funny side conversation before this podcast from a lady here in sweden i said i'm going to talk to you guys and uh and i asked her like if you can ask them anything what would that be and she kind of indicated like can you be i'm paraphrasing can you become a millionaire without being involved in like shady things I think the answer is yes.

One good example is the Dick Portillo hot dog guy that we talked about before.

If you think about what he did, he didn't go to college.

He went to the Marines and then he cobbled together a little bit of money from himself and his brother.

He built a hot dog stand with no running water and would go home and wash the dishes in this family bathtub.

There's a mustard ring around the the bathtub and he worked for decades and it's not like it's an industry fast food where there's a lot of market power and a lot of nefarious it's a super competitive industry and he clearly worked hard for decades and so i think there are a lot of stories like that of people um you know one one thing that's kind of contrary to the uh contrary to the con conventional wisdom in Silicon Valley that you need to move fast and break things.

We say you need to move slow and make things.

Owen, can you elaborate on that one?

feel, I mean, she was mostly talking about billionaires, but it sounds like this estate tax also would be pretty key for those auto dealers and those beverage distributors and people who want to start their kids off with $50 million tax-free.

Absolutely.

So if you look in the survey of consumer finance at the stock of unrealized capital gains of people who have $50 million or more, so these are people who had faced the estate tax, two thirds of that is in private business.

And you say, okay, how do people, how do these private business owners lower their tax bill? There are several ways.

One of the ways is like, say this auto dealer has three kids, you know, they give a third, a third, a third to their three kids, and then none of them has a majority share.

And so you can say, look, this is a minority stake in an auto business.

Because it's a minority stake, you don't have control.

And so I didn't realize the degree to which like some of these Main Street millionaires are really, really able to shape the rules that are made about them.