America Is Full of Rich People, and They Aren't on the Forbes List
Notes from Odd Lots, 2026-09-18: pass-through businesses, car dealers and dentists, and the missing layer in America's wealth distribution. Educational, not investment advice.
Contents
“I know of no country where the love of money has taken a stronger hold on the affections of men.”
— Alexis de Tocqueville, Democracy in America (1835)
What This Episode Is About
On the 2026-09-18 episode of Bloomberg’s Odd Lots, Tracy Alloway and Joe Weisenthal talk with two economists — Owen Zidar of Princeton and Eric Zwick of Chicago Booth — about their new book, The Everywhere Millionaire.
The topic sounds like a tax-technical one: pass-throughs, S corporations, the U.S. tax code. It turns into something else. When people picture American wealth, they hold two images: a handful of tech billionaires at the top, and a large group struggling below. The layer in between — the people whose boats fill inland lakes, who keep a private wine locker at the steakhouse — has no name and no place in the conversation.
Joe said a line early on that stuck with me: most of these people did not invent anything. They sell cars, distribute beer, pour concrete, fix teeth.
The Main Points
A pass-through is the other path through the tax code. A C corporation like General Motors pays corporate tax on profits, then shareholders pay again on dividends. A pass-through skips the corporate layer: profits and losses land directly on the owner’s individual return. In the 1980s this path was small, with most profit sitting in traditional corporations. After Reagan’s 1986 reform pushed individual rates below corporate rates, it became the most attractive way to organize. Today it covers the vast majority of American businesses and about half of business profits.
The book rests on a database that connected two tax forms nobody had connected. More than a decade ago the Treasury commissioned the authors, because it could not estimate how a change in the code would hit these businesses — the firm’s return and the owner’s return lived in separate systems, the identifiers were never designed to be joined, and many filings were on paper. The two of them worked through old code books guessing what each column held. The turning point came around 2014, when Eric, giving a talk in Utah, learned that the engineer who designed the electronic-filing XML format lived on the road between the airport and the lecture hall. They had lunch. The man wore a flannel shirt, ordered a beer, and answered all twenty-five questions. In that era no model could read the undocumented spec for you. The knowledge sat in one person’s head, and you had to go find him.
What emerged does not match the standard inequality story. Seventy cents of every dollar of pass-through business income goes to the top 1%. More than half the growth in the top 1% income share since the 1980s comes from this kind of income. The authors expected passive monopolists collecting rents; the data pointed to millions of mid-market regional firms whose owners also run them. Their ratio: for every large public-company CEO, there are a thousand private business owners worth $25 million.
Car dealers top the list. Among the top 0.1% of pass-through income, auto dealerships are the largest single bucket. The book opens with a third-generation Mercedes dealer family in Florida flying guests to Paris by private jet, renting Versailles for one dinner, Adam Levine singing the first dance, $60 million spent — and they do not rank near the top of their own industry. On the services side, doctors’ offices are the single most profitable four-digit industry in the top 1%, and total U.S. dentist revenue exceeds the combined revenue of the NFL, NBA and MLB. The authors joke about writing an ABC book of getting rich: A is auto dealer, B is beverage distributor, C is contractor, D is dentist.
Skill and protection coexist inside the same industry. Larry Miller started in a Toyota parts department, took it from 961st in the country to first, and eventually owned forty-odd dealerships and the Utah Jazz. The other side is legal: a manufacturer cannot place another dealer of the same brand within a protected radius, and has little power to change that, which fixes the barrier to entry. Margin on the car itself is thin; financing, warranties and service carry the markup, and the customer is already standing on the lot. Beer distribution has the same shape — the three-tier system built after Prohibition was meant to stop brewers from dominating distribution, and the middle tier grew into the wealthy party. The authors’ position is that the good story and the rent are both real, in proportions that vary by industry.
The path is slower than intuition allows. Against Silicon Valley’s move fast and break things, this book runs on move slow and make things, over decades. Dick Portillo grew up in Chicago public housing, did not know how to make a hot dog when he started, washed dishes by hand because there was no running water, and decades later owned a yacht named Top Dog. Another subject spent twenty years making frozen quiche, losing money for most of it, until the big contracts came. Tracy noticed something: none of these people have hobbies. John Osher, who built a $5 electric toothbrush company, tried golf in Florida after selling out, got bored, and started another business.
The same work, taxed two ways. An anesthesiologist running income through an S corporation pays no payroll tax and no uncapped Medicare surcharge on the profit portion. The salaried one pays the top individual rate of 37%, plus payroll tax, with the state and local deduction cap applied. The 2017 reform pushed the pass-through rate below 30% with guardrails for professional services, and there are strategies to shift surgical fees, ancillary services or rented real estate into the favored bucket. Why do the loopholes survive? The book’s number: roughly a quarter of federal elected officials are pass-through business owners themselves. Ohio senator Bernie Moreno is a car dealer; his proposal with Elizabeth Warren to shore up Social Security puts the burden on salaried payrolls.
The pie grew, and so did the slice. Value added per worker — profits plus pay — went from $34K in 2001 to $52K in 2021. Of that $18K of growth, owners took $15K. Sixty percent of business-sector growth over 25 years came in pass-through form, so the pie did grow; meanwhile the owner’s share went from a third or 40% to around 50%. The authors’ decomposition splits it fifty-fifty between a bigger pie and a bigger slice.
Going Further
”I analyze an industry with public-company data. What am I missing?”
You research a sector using filings, earnings calls and sell-side notes. This episode puts a number on how small that mirror is: about half of American business profit sits in pass-throughs that file no reports, hold no calls, and appear in no screener.
Two consequences. First, competitive structure. When an annual report tells you the market is fragmented with no dominant player, that may only mean the competitors are private. Regional concentration in auto retail, beer distribution or dental practices does not show up in public data. Second, the private markets. Tracy’s line is worth keeping: a private equity firm looks like Wall Street from its New York office, and its portfolio may be a handful of HVAC companies in Missouri. The recent debate about the scale of private credit and private equity is a debate about these businesses. Next time you read a report filing them under “alternatives,” ask a different question — what kind of cash flow is being bought? If the answer is regional service-sector rollups, then labor costs, local regulation, and whether customers still come back after the founder leaves matter as much as interest rates.
My own version of this mistake: estimating supply in an upstream material by scaling up the listed producers’ capacity. The numbers never reconciled. Half the capacity sat with private family-owned plants. Extrapolating from the visible sample, in an industry where half the data is invisible, produces confident errors.
”Why is that unremarkable business so profitable?”
This was the most useful stretch of the episode. Zidar and Zwick decline to pick a side — Larry Miller’s skill is real, and the protection regional dealers enjoy is also real, in proportions that vary. That gives you a test you can run yourself.
Facing a business with suspiciously high margins, ask three questions. Can a newcomer open one next door? For an auto dealership, no — the brand is protected within a radius. For a hot dog stand, yes, which is why Portillo’s money was earned the hard way. Does the profit come from the core transaction or the add-ons? Dealerships make thin margins on the car and thick ones on financing, warranty and service — profit concentrated in what happens after the customer walks in, which is the value of the position. And who lobbied for the current rules? Three-tier beer laws and dealer franchise statutes were written to protect small operators from large ones; decades later the beneficiaries changed and the rules did not.
These three questions connect to the way I think about bottleneck layers: the layer that binds is the one nobody can route around. The dentist example makes it plain — everyone has teeth, every congressional district has dentists, and dentists can lobby against putting dental care under public insurance price pressure. Pricing power can come from capability or from a position nobody can bypass. On a financial statement the two look identical, and only the rulebook separates them.
”The company is growing. Why don’t I feel it?”
The $18K and $15K figures describe how added value splits between owners and workers. Most readers stand on the salaried side, which is one reason two decades of productivity growth have not felt personal.
Joe closed with a half-joke: the only class in America with no obvious route to minimizing taxes is people earning a W-2 at a company. Under the joke is an institutional fact — the code is more sensitive to the form of income than to its size.
I would not turn this into “go start a company.” The data here argues the other way: the median search fund return is negative, most participants lose the cost of the search, and the average is pulled into the low twenties by a few winners. The people in this book spent two or three decades, and they have no hobbies.
The conclusion the episode supports is narrower: your position in the distribution chain determines which segment of growth reaches you. If your income takes only one form, that segment is the shortest one available. What is adjustable is form rather than effort — whether a side project becomes an entity, whether the portfolio holds anything that puts you on the ownership side, whether the retirement accounts are in the right tax wrapper. None of those are security selection questions. They are income structure questions, and in this data structure does more work.
Further Reading
- The episode: Bloomberg Odd Lots, 2026-09-18, with Owen Zidar and Eric Zwick
- The Everywhere Millionaire, Owen Zidar and Eric Zwick — the authors describe it as “Piketty with people”
- The academic version: Smith, Yagan, Zidar & Zwick, “Capitalists in the Twenty-First Century” (QJE, 2019)
- Thomas Piketty, Capital in the Twenty-First Century — the running interlocutor of this episode, portraying the top 1% as passive recipients of capital income
- Alexis de Tocqueville, Democracy in America (1835) — the source of the “nation of entrepreneurs” impression mentioned at the top of the show
The One Thing Worth Keeping
Most wealth comes from an unglamorous business, plus several decades, plus a rule that permits it to earn that much. Of the three, the third gets the least attention and often carries the most weight.
Near the end, the authors mention their favorite game: asking people who the richest person from their high school class is, and what they do. The answer is rarely the person you would guess. It is the one who makes drive-thru windows, runs a pest control company, or owns a few dental offices.
I tried it once, with friends from three different circles. I guessed none of the three, and two of them work in industries I had never heard of. The interesting part was the second question — how did they do it — which nobody could answer fully. Everyone knew the outcome only. That blank space is the episode’s subject: our sense of how wealth accumulates comes from the few people who get written about, and those few are not the majority.
Try it. Pick three people from different circles, ask both questions, write down the answers. It requires nothing about investing and costs nothing.
This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.