Ep 408 | Locked Out: The Private Market Wall Between You and the Next Apple

Let me show you something that should alarm every investor in America.

In 1996, we had roughly 8,000 companies listed on our stock exchanges.

And today, that number is closer to 4,200.

In a single generation, we lost about half our public companies.

Think about how strange that is.

The economy got bigger, the population got bigger, new industries were born that didn't even exist back then, and yet the number of companies you're actually allowed to buy got cut in half.

Measured per person, it's even worse.

About 30 public companies per million Americans in 1996, down to roughly 14 today.

The Wilshire 5000, named for the stocks it traded, peaked near 7,500 in 1998, and today it holds fewer than 4,000.

They may have to rename it.

Now I want to be straight with you.

Those figures are contested.

Scholars argue how much of the drop is mergers versus companies that never went public.

So verify it yourself, but the direction is not in dispute.

The public market is shrinking.

So where did all the companies go? The answer is simple.

They stayed private.

On purpose, and part of the reason is regulation.

After the accounting scandals of the early 2000s, Congress passed Sarbanes-Oxley.

The intentions were good, restore trust after Enron, but it made going public and staying public far more expensive.

I'll be honest, the decline actually started before Sarbanes-Oxley.

So regulation isn't the whole story, but the cost of being public is very real.

Legal bills, audits, compliance departments, quarterly pressure from Wall Street.

For the leaders of a young company, the question becomes, why bother? Why open your books to the world when you don't have to? And that leads us to the second, even bigger reason.

There's now an ocean of private money willing to fund companies for years.