Economists Owen Zidar and Eric Zwick, in their book "The Everywhere Millionaire: Who Is Really Rich in America," challenge conventional notions of wealth by highlighting a vast, often overlooked segment of affluent Americans: the "Main Street millionaires." These individuals, typically owners of private businesses outside of finance and technology, collectively possess significantly more wealth than the well-known Forbes 400 list.

Zidar and Zwick define an "everywhere millionaire" as an individual with a net worth of at least $5 million, excluding those in finance and tech. This threshold places them around the fourth percentile of the wealth distribution. Their research indicates that approximately 3 million such individuals exist in the United States, with an average net worth of around$25 million. Collectively, this group holds more than 13 times the wealth of the Forbes 400 and earns over 10 times the income of typical C-suite executives, and 1.5 times that of average CEOs of public companies.

The foundation of their research lies in linking confidential U.S. tax records to individual business owners, a feat previously unachieved. Working from their positions at Princeton University (Zidar) and the University of Chicago Booth School of Business (Zwick), they spent a decade developing this comprehensive database. Their initial work at the Treasury Department in 2014 aimed to improve tax policy by understanding the financial landscape of private businesses. By connecting business tax forms with individual owner filings, they were able to "follow the money" and gain an unprecedented view of the entire economy.

The Rise of the Pass-Through Business

A pivotal factor in the growth of this "everywhere millionaire" class is the Tax Reform Act of 1986. Prior to this reform, C-corporations faced higher tax rates, and dividends were taxed again at the individual level. The 1986 act significantly lowered individual tax rates, making pass-through business structures—where profits and losses flow directly to the owners—more attractive. This shift led to a revolution in business structure, with the majority of profits now generated by pass-through entities.

This tax reform, coupled with other economic tailwinds such as globalization and deregulation, has enabled these businesses to thrive. Globalization has opened new markets and provided access to lower-cost manufacturing, while deregulation has facilitated cross-state competition and growth through acquisition. These factors, combined with the ability to retain more of their earnings due to lower tax burdens, have significantly increased the valuations of these private businesses.

Geographic Distribution and Diverse Business Models

Unlike the Forbes 400, which is heavily concentrated in a few major cities, "everywhere millionaires" are distributed across the entire country. Their book highlights numerous examples from diverse locations, illustrating that significant wealth creation is not confined to coastal hubs.

The book showcases a wide array of often "unglamorous" yet highly lucrative businesses. Examples include:

• Auto dealerships: Protected by franchise laws, these businesses are a significant source of wealth.
• Seamless gutter manufacturers: A.B. Walters, based in Texas, exemplifies how specialized businesses can generate substantial fortunes.
• Kiche producers: Nancy Mueller's slow and steady expansion of her kiche business eventually led to significant wealth.
• HVAC repair shops: Businesses providing essential services can be remarkably profitable.
• Bathroom supply distributors: Ensuring the availability of basic supplies for restaurants can be a lucrative venture.
• Trash bag liner manufacturers: One individual sold his company for $350 million.
• Window manufacturers for drive-throughs and plastic producers for shoelaces are also cited as examples of niche businesses generating wealth.

Entrepreneurial Pathways and Personal Attributes

Zidar and Zwick emphasize that becoming an "everywhere millionaire" is not solely about initial capital. Stories like Karen Bentlage, who started with tanning and waxing salons, demonstrate the importance of learning from experience, identifying consumer trends, and gradually scaling a business. Her pivot to waxing salons as tanning's health concerns grew illustrates adaptability.

The book also profiles Dick Portillo, who built a hot dog stand empire from humble beginnings in Chicago's housing projects. His story, and the systematic data, reveal that while privileged backgrounds offer advantages, a significant number of successful entrepreneurs come from disadvantaged circumstances, including immigrant families. Key attributes for success include persistence, grit, obsession, a willingness to be underestimated, and a "grinder" mentality.

Inheritance and Exit Strategies

While many "everywhere millionaires" are self-made, inherited wealth and multi-generational family businesses do play a role, accounting for an estimated 25-30% of this affluent group. However, managing an operating business across generations presents unique challenges, distinct from managing passive investment portfolios. The book explores both successful transitions and pitfalls, such as families treating businesses as personal bank accounts.

The rise of private capital markets has also created more exit options for business owners. While private equity acquisitions are common, the book highlights alternative approaches, such as long-term investment strategies and Employee Stock Ownership Plans (ESOPs), which can prioritize legacy and employee well-being over immediate maximum financial return.

Political Influence and a New Gilded Age?

The widespread geographic distribution of these millionaires translates into significant political influence. With numerous private business owners in Congress and active engagement in local politics, this group shapes policy, particularly tax codes and regulations. The authors argue that this broad base of influence distinguishes the current era from the Gilded Age, which was characterized by a smaller number of monopolistic industrialists.

Zidar and Zwick contend that while there are similarities to the Gilded Age, such as rising wealth concentration and conspicuous consumption, the current "Age of Millionaires" is more broadly based. The economy is now service-oriented, allowing for wealth creation with less capital-intensive industries and even with tools like laptops and legal expertise. The presence of "really rich lawyers in every town in America" is cited as an example of this broader economic landscape.

Ultimately, "The Everywhere Millionaire" aims to broaden the public's understanding of wealth in America, revealing a vast and influential group of individuals whose success stories are often hidden in plain sight. The book encourages readers to look beyond the headlines of tech billionaires and recognize the diverse pathways to financial prosperity that exist across the nation.