I am really excited to be
today my name’s Steve Krause I run a
study called the Ipsos affluent survey
and for 40 years we’ve been studying the
lives and lifestyles of affluent
Americans and as part of that we’ve been
studying the ebb and flow of wealth
concentration in our society and one of
the things that we found is the level of
wealth concentration has huge
implications not just for how people
spend or how they invest the level of
wealth concentration is shaping the
structure of our society itself shapes
who we vote for shaping our ambitions
our anxieties and even how we think
about the American Dream itself so
that’s what I want to talk about today
as I get started here I want to propose
that we do something radical and that is
we try to agree on some facts now in
this day and age of alternative facts
that sounds a little hard if we say oh
how about we agree on some facts people
say things like well let me go look up
in the dictionary the definition of
facts before I can agree that I might be
able to agree to some fact but I’ve got
some facts up here about the new economy
I don’t think are too controversial so I
would argue in the new economy
technology is proliferating faster than
ever and ever than ever before that
communication has become instantaneous
and global that consumer markets are
globalizing that labor markets are in
flux that wealth is shifting into a hand
into the hands of a few and by and large
those people are not hated they are
rather admired the stock market is
hitting new highs even though most
people are invested in the stock market
in this country so it’s not helping
everybody and finally as I mentioned
that the American Dream is changing from
one of comfortable affluence to desires
for uber wealth so can we agree on this
as basic facts about the new economy
well here’s the really interesting thing
I wrote this description to describe the
new economy of the 1920s and so grant to
fuel advance the slide there for a
moment if you think about the 1920s it
was a time of tremendous technological
change you had telephones radio motion
pictures you had all of the changes of
the Industrial Revolution
had labor markets in huge flux you had
occupation suddenly going out of
business people having to move to
different locations and learn new skills
to thrive in a new workplace that we had
tremendous income concentration the
picture up there is of John Rockefeller
he was by far the richest man in
American history in today’s dollars his
net worth would be about three hundred
and forty billion dollars if you look at
it all time in the u.s. you adjust for
inflation
Bill Gates comes in about number five on
the list
this guy was far and away number one and
although some people certainly called
him robber barons for the most part
these people were looked at as you know
it was a mixture of of envy and a
certain admiration I think and as those
images of really wealthy people became
more and more part of our culture the
American Dream itself started to change
and we started to aspire not just a
comfortable affluence but for the great
wealth of a Jay Gatsby prescott
Fitzgerald’s classic novel the exact
same thing is going on today so before
we get today I want to continue on with
this historical narrative a little bit
talk about how wealth concentration has
changed as context for thinking about
what wealth concentration is doing today
so this chart shows the amount of income
in share terms held by the the top 10%
of the country so if you look back
you’ll see that in the gilded era this
peaked in 1929 when you had 10% of the
people at the top garnering about half
of all of the income in the country you
see it went down a little bit with a
stock market crash of 1929 but really it
took the dragging on the depression for
several years for people to really take
action that action came in the form of
raising taxes on the wealthy in the
1920s the top marginal tax rate was less
than 30 percent they went up and up by
1945 the top marginal tax rate was 90
percent 90 percent tax bracket for the
wealthiest people and it remained there
from 1945 well
into the 60s and that change in taxes
brought about a period of time the
economists called the great compression
because the incomes of those at the top
and the incomes of those at the bottom
started via closer and closer together
it certainly wasn’t just taxes on the
wealthy there were a lot of other things
going on as well there was a booming
manufacturing jobs
there was a boom in education thanks to
the GI Bill labor unions were strong a
lot of things were going on that caused
that great compression and during that
time there was a lot of dislike of the
wealthy because at this point if you
looked at the Forbes list of the richest
people in the 50s and 60s they all had
the same last name there were
Rockefellers and dupont’s and Carnegie’s
and melons and they were looked down
upon just we just inherited the money
they didn’t really earn it themselves
and so the American Dream really started
to change and that American Dream the
1950s was very much a mass affluent
American Dream wanted a nice house in
the suburbs a nice car a stable job 2.5
kids that’s all you needed you know I
think my favorite exemplars of this
period of time was a man named George
Romney he had previously been governor
of Michigan at this time he was
president of American Motors Corporation
he was making about two hundred and
seventy five thousand dollars a year now
that put him in the top point oh one
percent of the country so it’s one of
the highest incomes in the country in
today’s terms maybe about 1.8 million
dollars today a CEO of a major company
is making 1.8 million dollars is
embarrassed because all of his other CEO
friends are going to make fun of them
for making so little but not for George
Romney George Romney was embarrassed cuz
he thought that was too much he said he
didn’t think executives should make that
much
it was almost bad taste back then to
make so much money now interestingly
this man George Romney had a son named
Willard who was better known by his
middle name of MIT who came of age
during a different generation of wealth
concentration and he did not stop at 1.8
million dollars he he did not think it
was bad taste to make Gordon that well
we’ll talk about that a little bit more
in a little bit so this is what happened
up until the 1960s
the top tax rate stayed at 90 percent up
until John F Kennedy decided he wanted
to lower that John F Kennedy while
trying to convince people this was a
good idea he actually coined the phrase
in this context a rising tide lifts all
boats John F Kennedy was philosophically
the father of trickle-down economics
even though we don’t remember him that
way we remember generally the father of
trickle-down economics as being Ronald
Reagan because it wasn’t really until
the 1980s that income concentration
started to take off and really has not
stopped since then taxes were lowered by
the start of the 1980s the top tax
bracket was 70% by the end of the 1980s
it had dropped to 28% capital gains
taxes were lowered and there were also
some other more arcane tax law changes
that really made it possible for the
venture capital industry to become the
very very profitable industry that it is
today
and so wealth became more and more
concentrated and what happened among
other things well our vision of the
American Dream changed so Gordon Gekko
and the movie Wall Street said greed is
good
he also said damn this phone is head
and as you can see if you get a look at
that line what percent of the income is
being guarded by the top 10% it’s higher
than ever it’s higher now than it was in
1929 so if we go ahead to the next slide
we’ve got another way of looking at it
here we’re going to focus in just over
the last 50 years or so and what if
sauce is done here is taken data from
the current population survey that’s
conducted every year by the Census
Bureau we look at household income we
track it back over 50 years
we’ve broken it into quintiles or fifths
we’ve adjusted for inflation and what
you see is that pretty much all of the
income growth of the past half-century
has gone to the people we would
generally call the affluent roughly the
top twenty twenty five percent of the
country and things are even more highly
concentrated than that if you look at
the top five percent you see their
growth has been even stronger and that
top five percent after you adjust for
inflation they’ve got a hundred and
eighty thousand dollars more a year than
people in the top five percent in the
1960s that’s a hundred and eighty
thousand dollars after inflation that
just drops to the bottom line and is
available for discretionary spending and
for investing so that’s kind of where we
are today I want to give you a few other
statistics if we’ll go ahead to the next
slide
about the state of income concentration
today well one good thing is that most
people now believe income concentration
is going on and for a long time that was
not the case when I first started
talking and writing about wealth
concentration back about ten years ago
often the reaction I got from audiences
was one of sort of reminded me of what
Mark Twain said about lies he said there
are three kinds of lies lies damned lies
and statistics and when I started
talking about well you know the rich are
getting richer people said well if
that’s your political point of view I’m
sure you could torture some data set
into finding some evidence that looks
like it’s supported well I I don’t hear
that anymore because we look at all the
most objective sources of information
out there and it’s very clear that the
rich had been getting richer it’s
happened non-stop since the early 80s it
paused briefly from 2008 to 2010
height of the recession it didn’t really
dip but it paused but it’s gone up and
up since then so people believe in
wealth concentration but they also
massively underestimated we’ve done a
number of studies where we asked people
questions like what percent of the net
worth in the country do you think is
held by the top X percent or the bottom
y percent and people do a terrible job
at this and they’re always getting the
answers wrong in the same direction of
under estimating how concentrated wealth
is in our society in round numbers 1/4
of the people in this country hold 3/4
of all the net worth 3 percent of the
people hold about 50 percent of the net
worth if we look at affluence again it’s
who we call roughly the top 20 25
percent of the country if we look at
their spending they spend on an annual
basis
2.5 times more than on a fluent
households they spend 2 to 3 times more
in every category you can think of they
spend five to ten times more and more
high-end or luxury categories the
affluent outspend the non affluent in 92
percent of the categories of the
government measures and the government’s
the only categories where the non
affluent out spend the affluent are
categories like cigarettes coin-operated
laundry and Medicare so it really is a
dramatic effect whether you’re looking
at income whether you’re looking at net
worth whether you’re looking at spending
Oxfam recently came out they found that
the top 8 individuals in the world have
as much net worth as the bottom half of
the planet the bottom 3.5 million people
those top eight people they’re all men
six of the eight are white male American
technology executives and maybe those
eight people are working 450 million
times harder than those people in the
bottom half but I find that a little
hard to believe you know another really
interesting stat I don’t have it up
there take a guess as to what the number
one Google search term was in 2016
anybody know
you might think that the most search
term had something to do with the
election
no those fills terms barely made the top
ten it wasn’t number one the number one
term searched on Google in the US and
2016 was Powerball that’s not a sign of
a healthy thriving economy in fact right
up at the top of the list what I call
the three P’s Powerball prints and
pokemons go way to keep your eye on the
ball America there’s another great
statistic if you’ll advance to the to
the next part of the slide Rex Tillerson
now our Secretary of State taking a
ninety-nine percent pay cut as CEO of
Exxon Mobil he made twenty four point
three million dollars a year as salary
that doesn’t include any stock options
the Secretary of State earns a little
bit over two hundred thousand dollars
think about how great a job would have
to be for you to take it if you’re only
going to earn one percent of what you
were making before if your new boss says
well here’s a great new job for you
we’re going to have to cut the last
couple of zeros off your salary so
wealth concentration as we’ve seen is a
reality and it’s dramatic and it’s more
dramatic than people understand and if
we’ll go ahead to the next slide what
we’ll see is that this is changing
everything it’s changing really
fundamental things in our society
obviously wealth concentration has a lot
of implications for luxury companies and
luxury brands in fact it’s reshaping how
every company is doing business a couple
of years ago Procter and Gamble which
became the biggest advertiser in the
world by creating brands for the great
thriving American middle class came out
and said you know what we don’t you the
economy that way anymore we don’t see a
great thriving American middle class we
see a small group at the top who can pay
a premium for high-end things and then
we see a great mass of people below that
and even in terms of the kinds of
behaviors that P&G would look at people
in the middle class who were becoming
fewer in numbers they often act like
people who are really struggling in
terms of their value
orientation and focus on coupons and
Groupons and store brand the economy has
really become bifurcated P&G looks at
the economy it says well increasingly
tied and crest are going to become
affluent purchases they’re no they’re no
longer sort of those those hallmarks of
consumer success that they were in the
50s and 60s and a few months after P&G
came out and said that frito-lay came
out and said you know what we view the
economy differently now there’s there’s
a small group of more elite less price
sensitive snackers and then there’s the
other 80% we’re more value oriented
snackers and companies hadn’t wanted to
say this for a long time because it kind
of sounds unamerican to say well there
isn’t this great thriving American
middle class anymore but in fact there’s
not these companies really didn’t get a
lot of blowback from it because people
are believing all of this now you know
financial service companies who have
kind of always really understood that a
few people own a lot of the money
they’re preparing now for the transfer
of wealth maybe you’ve heard about that
with the aging of the baby boom
trillions of dollars are going to be
handed down to the next generation there
will be a tremendous transfer of wealth
a very very concentrated transfer of
wealth mostly among that 3% of the
people who own half of the dollars so
wealth concentration is reshaping the
strategy of every business it I would
argue and I I did I wrote an article in
Forbes about how wealth concentration
was the most fundamental issue in the
election even though neither candidate
wanted to explicitly talk about it in
part because they were both
one-percenters by by a mile but first
let’s start with Bernie Sanders okay
here’s a guy who made it all the way
into the primary to the end of the
primary season
challenging the closest thing that we
had to an incumbent while coming out and
saying I’m a socialist what used to be
that was the worst insult you could hurl
at your political opponent to suggest
that your opponent might support
socialized medicine was like calling him
a commie pinko traitor and here we have
a guy saying I’m a socialist going all
the way to the end and then we have
Donald Trump who I would argue really
his success was built on those people
who were left behind
by income concentration and it’s not
just about red state blue state it’s
really about red county and blue county
and you see how it how it unfolds there
on that chart and you could overlay on
that income you could overlay on that
education you could overlay on that
urban and you really start to get a
sense of how polarized this country is
when John Edwards ran for president a
few cycles ago he his stump speech was
all about the two Americas it didn’t
really catch on his people weren’t quite
ready for the message yet but there are
definitely two Americas I would argue
maybe even three you’ve got the mass
population you’ve got this comfortable
athletes group in the top quarter then
you’ve got the group the really elite
group at the top now it’s interesting
that so many of these people left behind
lands become concentration voted for
Donald Trump and it’s not clear at all
that his policies are really going to
help them he’s talked about tax cuts for
everybody last time we had tax cuts for
everybody had translated to a few
hundred dollars for people in the middle
class and thousands of dollars for
wealthy people
Donald Trump has talked about repealing
the Affordable Care Act or Obamacare a
lot of people don’t realize the
Affordable Care Act was funded in large
part by a tax increase on those making
over 250,000 dollars so if the
Affordable Care Act goes away away it
goes that tax increase and all of a
sudden that top three percent of the
country that has half the dollars are
going to get thousands of dollars in tax
breaks and finally I would argue that
wealth concentration that we’re seeing
today is fundamentally changing the
American dream
you know we had that mass affluent
American dream of the 1950s if you’ll
advance the slide one you know you might
think of it it’s kind of a Leave It to
Beaver kind of thing we talked about
that you wanted safe secure your 2.5
kids well what happens now if you’ll
advance what we’ve got a whole
generation of people who’ve grown up
following the lies of Kim and Kanye and
that uber well feels so close to this
next generation one of the things that
we find is different about about Gen Z
the kids of today as opposed to
Millennials when Gen Z interacts with a
brand on social media they expect a
response
because that world of celebrity and
brand feels so close to them shaping
their expectations about what success is
the other day my phone rang and my my 10
year old son at the time saw it and the
call was coming in from Cleveland Ohio
my son said dad you better answer it it
might be LeBron now setting aside the
fact that when I was a kid a phone was a
thing on a wall that had a rotary dial
and we didn’t have caller ID and beyond
the obvious technological changes when I
was a kid it never occurred to me that
magic Johnson might be calling
I never said dad you better answer the
phone it might be Kareem abdul-jabbar
but we’re seeing a generation now who
have these images of success that are so
lofty it’s going to be interesting to
see how that plays out because it is a
generation that is struggling
financially it’s a generation as often
been said was weaned on participation
medals what happens when it sinks in
that it might not have the lives of Kim
and Kanye so full advance to just a
couple of final thoughts so what do we
do about all this well I think the first
thing we have to do is do what we’re
kind of doing today is agreeing on some
facts so those facts are it’s been going
on for 35 years it’s real it’s way more
prevalent than people realize and our 35
year experiment and trickle-down
economics has really shown no evidence
that it actually works and beyond that I
think we need to go out and seek out
more facts because there are other
places in the world that are really
attacking this problem aggressively
there are places in the world
experimenting with things like basic
income which is the notion that all
people deserve a basic level of income
regardless of their employment status
it’s a basic human right some countries
are creating more more compression that
narrowing of the wealth concentration
gap on a before-tax basis by doing
things around minimum wage laws others
do it on an after-tax basis so I think
we really have to look at facts try to
agree on facts seek out more facts as a
way of coming up with a strategy for
we’re gonna deal with this I think we
need to teach literacy about the new
economy and by that I mean sharing the
kinds of facts that we’re talking about
today with my own son I talked about the
economy and I talked about sort of these
these three Americas you’ve got the mass
population
you’ve got the affluent the affluence
for all intents and purposes went to
college
that’s sort of the biggest predictor of
sort of being in this mass affluent
group they got the same sensible job
their parents told them to get there’s
also a lot of evidence that that being
married or partnered sort of helps you
become affluent and stay affluent part
of it is just financial you get more
money more discretionary money there’s
also research shows that if you’re
married or partner you can better
recover from a challenge like losing a
job or losing your health insurance
while maintaining your affluent status
the wealthy are a little bit different
they have a different risk profile and
they took tremendous risk to go out and
start a business the things we find
about the wealthy is that by and large
they didn’t set out to be wealthy they
set out to pursue a passion and took
tremendous risk to make that happen
so I use this way of thinking about the
economy both when I’m talking to CEOs
and what I’m talking to my son to help
him think about what does the economy
like now what are the kinds of skills do
you might need what kind of skills are a
good fit for you think we need to
develop a new syntax of success if we
start to talk about putting more taxes
on the wealthy a lot of times people say
oh you’re talking about the
redistribution of wealth okay that’s the
new way of calling somebody a commie
pinko traitor and here’s the thing
anytime you have taxes you are
redistributing wealth and furthermore
we’ve been redistributing wealth for the
past thirty five years we’ve just been
redistributing it all to the rich people
so we need to talk about it differently
we’ve talked about changing how we
redistribute wealth I think one of the
most concerning things about all this is
social mobility is going down the
ability of people to move up the
economic ladder it’s becoming harder and
harder your parents income is becoming a
better predictor over time of your own
income so if we develop a new language
that avoids some of the the hot buttons
that set other people off and talk about
how do we build more social mobility how
do
we build more equality of opportunity I
think that can get us over the hump to
some changes the final thing I think
that we need to do is ask ourselves what
do we want America to look like think
about the American cities as part of
this wealth concentration the middle
class has gotten smaller a lot of
middle-class people have moved out of
the cities our cities are becoming
really really polarized so what do we
want American cities to look like if you
go ahead to the next slide do we want it
to look like Caracas Venezuela got the
really wealthy living side by side a lot
of very very poor people if you go to my
final slide
do we want American cities to look like
Dubai just let that image sink in a
little bit is that what we want instead
of pictures worth a thousand words well
leave you contemplating that image and
asking yourselves what do we want
America to look like thank you very much
[Applause]
today my name’s Steve Krause I run a
study called the Ipsos affluent survey
and for 40 years we’ve been studying the
lives and lifestyles of affluent
Americans and as part of that we’ve been
studying the ebb and flow of wealth
concentration in our society and one of
the things that we found is the level of
wealth concentration has huge
implications not just for how people
spend or how they invest the level of
wealth concentration is shaping the
structure of our society itself shapes
who we vote for shaping our ambitions
our anxieties and even how we think
about the American Dream itself so
that’s what I want to talk about today
as I get started here I want to propose
that we do something radical and that is
we try to agree on some facts now in
this day and age of alternative facts
that sounds a little hard if we say oh
how about we agree on some facts people
say things like well let me go look up
in the dictionary the definition of
facts before I can agree that I might be
able to agree to some fact but I’ve got
some facts up here about the new economy
I don’t think are too controversial so I
would argue in the new economy
technology is proliferating faster than
ever and ever than ever before that
communication has become instantaneous
and global that consumer markets are
globalizing that labor markets are in
flux that wealth is shifting into a hand
into the hands of a few and by and large
those people are not hated they are
rather admired the stock market is
hitting new highs even though most
people are invested in the stock market
in this country so it’s not helping
everybody and finally as I mentioned
that the American Dream is changing from
one of comfortable affluence to desires
for uber wealth so can we agree on this
as basic facts about the new economy
well here’s the really interesting thing
I wrote this description to describe the
new economy of the 1920s and so grant to
fuel advance the slide there for a
moment if you think about the 1920s it
was a time of tremendous technological
change you had telephones radio motion
pictures you had all of the changes of
the Industrial Revolution
had labor markets in huge flux you had
occupation suddenly going out of
business people having to move to
different locations and learn new skills
to thrive in a new workplace that we had
tremendous income concentration the
picture up there is of John Rockefeller
he was by far the richest man in
American history in today’s dollars his
net worth would be about three hundred
and forty billion dollars if you look at
it all time in the u.s. you adjust for
inflation
Bill Gates comes in about number five on
the list
this guy was far and away number one and
although some people certainly called
him robber barons for the most part
these people were looked at as you know
it was a mixture of of envy and a
certain admiration I think and as those
images of really wealthy people became
more and more part of our culture the
American Dream itself started to change
and we started to aspire not just a
comfortable affluence but for the great
wealth of a Jay Gatsby prescott
Fitzgerald’s classic novel the exact
same thing is going on today so before
we get today I want to continue on with
this historical narrative a little bit
talk about how wealth concentration has
changed as context for thinking about
what wealth concentration is doing today
so this chart shows the amount of income
in share terms held by the the top 10%
of the country so if you look back
you’ll see that in the gilded era this
peaked in 1929 when you had 10% of the
people at the top garnering about half
of all of the income in the country you
see it went down a little bit with a
stock market crash of 1929 but really it
took the dragging on the depression for
several years for people to really take
action that action came in the form of
raising taxes on the wealthy in the
1920s the top marginal tax rate was less
than 30 percent they went up and up by
1945 the top marginal tax rate was 90
percent 90 percent tax bracket for the
wealthiest people and it remained there
from 1945 well
into the 60s and that change in taxes
brought about a period of time the
economists called the great compression
because the incomes of those at the top
and the incomes of those at the bottom
started via closer and closer together
it certainly wasn’t just taxes on the
wealthy there were a lot of other things
going on as well there was a booming
manufacturing jobs
there was a boom in education thanks to
the GI Bill labor unions were strong a
lot of things were going on that caused
that great compression and during that
time there was a lot of dislike of the
wealthy because at this point if you
looked at the Forbes list of the richest
people in the 50s and 60s they all had
the same last name there were
Rockefellers and dupont’s and Carnegie’s
and melons and they were looked down
upon just we just inherited the money
they didn’t really earn it themselves
and so the American Dream really started
to change and that American Dream the
1950s was very much a mass affluent
American Dream wanted a nice house in
the suburbs a nice car a stable job 2.5
kids that’s all you needed you know I
think my favorite exemplars of this
period of time was a man named George
Romney he had previously been governor
of Michigan at this time he was
president of American Motors Corporation
he was making about two hundred and
seventy five thousand dollars a year now
that put him in the top point oh one
percent of the country so it’s one of
the highest incomes in the country in
today’s terms maybe about 1.8 million
dollars today a CEO of a major company
is making 1.8 million dollars is
embarrassed because all of his other CEO
friends are going to make fun of them
for making so little but not for George
Romney George Romney was embarrassed cuz
he thought that was too much he said he
didn’t think executives should make that
much
it was almost bad taste back then to
make so much money now interestingly
this man George Romney had a son named
Willard who was better known by his
middle name of MIT who came of age
during a different generation of wealth
concentration and he did not stop at 1.8
million dollars he he did not think it
was bad taste to make Gordon that well
we’ll talk about that a little bit more
in a little bit so this is what happened
up until the 1960s
the top tax rate stayed at 90 percent up
until John F Kennedy decided he wanted
to lower that John F Kennedy while
trying to convince people this was a
good idea he actually coined the phrase
in this context a rising tide lifts all
boats John F Kennedy was philosophically
the father of trickle-down economics
even though we don’t remember him that
way we remember generally the father of
trickle-down economics as being Ronald
Reagan because it wasn’t really until
the 1980s that income concentration
started to take off and really has not
stopped since then taxes were lowered by
the start of the 1980s the top tax
bracket was 70% by the end of the 1980s
it had dropped to 28% capital gains
taxes were lowered and there were also
some other more arcane tax law changes
that really made it possible for the
venture capital industry to become the
very very profitable industry that it is
today
and so wealth became more and more
concentrated and what happened among
other things well our vision of the
American Dream changed so Gordon Gekko
and the movie Wall Street said greed is
good
he also said damn this phone is head
and as you can see if you get a look at
that line what percent of the income is
being guarded by the top 10% it’s higher
than ever it’s higher now than it was in
1929 so if we go ahead to the next slide
we’ve got another way of looking at it
here we’re going to focus in just over
the last 50 years or so and what if
sauce is done here is taken data from
the current population survey that’s
conducted every year by the Census
Bureau we look at household income we
track it back over 50 years
we’ve broken it into quintiles or fifths
we’ve adjusted for inflation and what
you see is that pretty much all of the
income growth of the past half-century
has gone to the people we would
generally call the affluent roughly the
top twenty twenty five percent of the
country and things are even more highly
concentrated than that if you look at
the top five percent you see their
growth has been even stronger and that
top five percent after you adjust for
inflation they’ve got a hundred and
eighty thousand dollars more a year than
people in the top five percent in the
1960s that’s a hundred and eighty
thousand dollars after inflation that
just drops to the bottom line and is
available for discretionary spending and
for investing so that’s kind of where we
are today I want to give you a few other
statistics if we’ll go ahead to the next
slide
about the state of income concentration
today well one good thing is that most
people now believe income concentration
is going on and for a long time that was
not the case when I first started
talking and writing about wealth
concentration back about ten years ago
often the reaction I got from audiences
was one of sort of reminded me of what
Mark Twain said about lies he said there
are three kinds of lies lies damned lies
and statistics and when I started
talking about well you know the rich are
getting richer people said well if
that’s your political point of view I’m
sure you could torture some data set
into finding some evidence that looks
like it’s supported well I I don’t hear
that anymore because we look at all the
most objective sources of information
out there and it’s very clear that the
rich had been getting richer it’s
happened non-stop since the early 80s it
paused briefly from 2008 to 2010
height of the recession it didn’t really
dip but it paused but it’s gone up and
up since then so people believe in
wealth concentration but they also
massively underestimated we’ve done a
number of studies where we asked people
questions like what percent of the net
worth in the country do you think is
held by the top X percent or the bottom
y percent and people do a terrible job
at this and they’re always getting the
answers wrong in the same direction of
under estimating how concentrated wealth
is in our society in round numbers 1/4
of the people in this country hold 3/4
of all the net worth 3 percent of the
people hold about 50 percent of the net
worth if we look at affluence again it’s
who we call roughly the top 20 25
percent of the country if we look at
their spending they spend on an annual
basis
2.5 times more than on a fluent
households they spend 2 to 3 times more
in every category you can think of they
spend five to ten times more and more
high-end or luxury categories the
affluent outspend the non affluent in 92
percent of the categories of the
government measures and the government’s
the only categories where the non
affluent out spend the affluent are
categories like cigarettes coin-operated
laundry and Medicare so it really is a
dramatic effect whether you’re looking
at income whether you’re looking at net
worth whether you’re looking at spending
Oxfam recently came out they found that
the top 8 individuals in the world have
as much net worth as the bottom half of
the planet the bottom 3.5 million people
those top eight people they’re all men
six of the eight are white male American
technology executives and maybe those
eight people are working 450 million
times harder than those people in the
bottom half but I find that a little
hard to believe you know another really
interesting stat I don’t have it up
there take a guess as to what the number
one Google search term was in 2016
anybody know
you might think that the most search
term had something to do with the
election
no those fills terms barely made the top
ten it wasn’t number one the number one
term searched on Google in the US and
2016 was Powerball that’s not a sign of
a healthy thriving economy in fact right
up at the top of the list what I call
the three P’s Powerball prints and
pokemons go way to keep your eye on the
ball America there’s another great
statistic if you’ll advance to the to
the next part of the slide Rex Tillerson
now our Secretary of State taking a
ninety-nine percent pay cut as CEO of
Exxon Mobil he made twenty four point
three million dollars a year as salary
that doesn’t include any stock options
the Secretary of State earns a little
bit over two hundred thousand dollars
think about how great a job would have
to be for you to take it if you’re only
going to earn one percent of what you
were making before if your new boss says
well here’s a great new job for you
we’re going to have to cut the last
couple of zeros off your salary so
wealth concentration as we’ve seen is a
reality and it’s dramatic and it’s more
dramatic than people understand and if
we’ll go ahead to the next slide what
we’ll see is that this is changing
everything it’s changing really
fundamental things in our society
obviously wealth concentration has a lot
of implications for luxury companies and
luxury brands in fact it’s reshaping how
every company is doing business a couple
of years ago Procter and Gamble which
became the biggest advertiser in the
world by creating brands for the great
thriving American middle class came out
and said you know what we don’t you the
economy that way anymore we don’t see a
great thriving American middle class we
see a small group at the top who can pay
a premium for high-end things and then
we see a great mass of people below that
and even in terms of the kinds of
behaviors that P&G would look at people
in the middle class who were becoming
fewer in numbers they often act like
people who are really struggling in
terms of their value
orientation and focus on coupons and
Groupons and store brand the economy has
really become bifurcated P&G looks at
the economy it says well increasingly
tied and crest are going to become
affluent purchases they’re no they’re no
longer sort of those those hallmarks of
consumer success that they were in the
50s and 60s and a few months after P&G
came out and said that frito-lay came
out and said you know what we view the
economy differently now there’s there’s
a small group of more elite less price
sensitive snackers and then there’s the
other 80% we’re more value oriented
snackers and companies hadn’t wanted to
say this for a long time because it kind
of sounds unamerican to say well there
isn’t this great thriving American
middle class anymore but in fact there’s
not these companies really didn’t get a
lot of blowback from it because people
are believing all of this now you know
financial service companies who have
kind of always really understood that a
few people own a lot of the money
they’re preparing now for the transfer
of wealth maybe you’ve heard about that
with the aging of the baby boom
trillions of dollars are going to be
handed down to the next generation there
will be a tremendous transfer of wealth
a very very concentrated transfer of
wealth mostly among that 3% of the
people who own half of the dollars so
wealth concentration is reshaping the
strategy of every business it I would
argue and I I did I wrote an article in
Forbes about how wealth concentration
was the most fundamental issue in the
election even though neither candidate
wanted to explicitly talk about it in
part because they were both
one-percenters by by a mile but first
let’s start with Bernie Sanders okay
here’s a guy who made it all the way
into the primary to the end of the
primary season
challenging the closest thing that we
had to an incumbent while coming out and
saying I’m a socialist what used to be
that was the worst insult you could hurl
at your political opponent to suggest
that your opponent might support
socialized medicine was like calling him
a commie pinko traitor and here we have
a guy saying I’m a socialist going all
the way to the end and then we have
Donald Trump who I would argue really
his success was built on those people
who were left behind
by income concentration and it’s not
just about red state blue state it’s
really about red county and blue county
and you see how it how it unfolds there
on that chart and you could overlay on
that income you could overlay on that
education you could overlay on that
urban and you really start to get a
sense of how polarized this country is
when John Edwards ran for president a
few cycles ago he his stump speech was
all about the two Americas it didn’t
really catch on his people weren’t quite
ready for the message yet but there are
definitely two Americas I would argue
maybe even three you’ve got the mass
population you’ve got this comfortable
athletes group in the top quarter then
you’ve got the group the really elite
group at the top now it’s interesting
that so many of these people left behind
lands become concentration voted for
Donald Trump and it’s not clear at all
that his policies are really going to
help them he’s talked about tax cuts for
everybody last time we had tax cuts for
everybody had translated to a few
hundred dollars for people in the middle
class and thousands of dollars for
wealthy people
Donald Trump has talked about repealing
the Affordable Care Act or Obamacare a
lot of people don’t realize the
Affordable Care Act was funded in large
part by a tax increase on those making
over 250,000 dollars so if the
Affordable Care Act goes away away it
goes that tax increase and all of a
sudden that top three percent of the
country that has half the dollars are
going to get thousands of dollars in tax
breaks and finally I would argue that
wealth concentration that we’re seeing
today is fundamentally changing the
American dream
you know we had that mass affluent
American dream of the 1950s if you’ll
advance the slide one you know you might
think of it it’s kind of a Leave It to
Beaver kind of thing we talked about
that you wanted safe secure your 2.5
kids well what happens now if you’ll
advance what we’ve got a whole
generation of people who’ve grown up
following the lies of Kim and Kanye and
that uber well feels so close to this
next generation one of the things that
we find is different about about Gen Z
the kids of today as opposed to
Millennials when Gen Z interacts with a
brand on social media they expect a
response
because that world of celebrity and
brand feels so close to them shaping
their expectations about what success is
the other day my phone rang and my my 10
year old son at the time saw it and the
call was coming in from Cleveland Ohio
my son said dad you better answer it it
might be LeBron now setting aside the
fact that when I was a kid a phone was a
thing on a wall that had a rotary dial
and we didn’t have caller ID and beyond
the obvious technological changes when I
was a kid it never occurred to me that
magic Johnson might be calling
I never said dad you better answer the
phone it might be Kareem abdul-jabbar
but we’re seeing a generation now who
have these images of success that are so
lofty it’s going to be interesting to
see how that plays out because it is a
generation that is struggling
financially it’s a generation as often
been said was weaned on participation
medals what happens when it sinks in
that it might not have the lives of Kim
and Kanye so full advance to just a
couple of final thoughts so what do we
do about all this well I think the first
thing we have to do is do what we’re
kind of doing today is agreeing on some
facts so those facts are it’s been going
on for 35 years it’s real it’s way more
prevalent than people realize and our 35
year experiment and trickle-down
economics has really shown no evidence
that it actually works and beyond that I
think we need to go out and seek out
more facts because there are other
places in the world that are really
attacking this problem aggressively
there are places in the world
experimenting with things like basic
income which is the notion that all
people deserve a basic level of income
regardless of their employment status
it’s a basic human right some countries
are creating more more compression that
narrowing of the wealth concentration
gap on a before-tax basis by doing
things around minimum wage laws others
do it on an after-tax basis so I think
we really have to look at facts try to
agree on facts seek out more facts as a
way of coming up with a strategy for
we’re gonna deal with this I think we
need to teach literacy about the new
economy and by that I mean sharing the
kinds of facts that we’re talking about
today with my own son I talked about the
economy and I talked about sort of these
these three Americas you’ve got the mass
population
you’ve got the affluent the affluence
for all intents and purposes went to
college
that’s sort of the biggest predictor of
sort of being in this mass affluent
group they got the same sensible job
their parents told them to get there’s
also a lot of evidence that that being
married or partnered sort of helps you
become affluent and stay affluent part
of it is just financial you get more
money more discretionary money there’s
also research shows that if you’re
married or partner you can better
recover from a challenge like losing a
job or losing your health insurance
while maintaining your affluent status
the wealthy are a little bit different
they have a different risk profile and
they took tremendous risk to go out and
start a business the things we find
about the wealthy is that by and large
they didn’t set out to be wealthy they
set out to pursue a passion and took
tremendous risk to make that happen
so I use this way of thinking about the
economy both when I’m talking to CEOs
and what I’m talking to my son to help
him think about what does the economy
like now what are the kinds of skills do
you might need what kind of skills are a
good fit for you think we need to
develop a new syntax of success if we
start to talk about putting more taxes
on the wealthy a lot of times people say
oh you’re talking about the
redistribution of wealth okay that’s the
new way of calling somebody a commie
pinko traitor and here’s the thing
anytime you have taxes you are
redistributing wealth and furthermore
we’ve been redistributing wealth for the
past thirty five years we’ve just been
redistributing it all to the rich people
so we need to talk about it differently
we’ve talked about changing how we
redistribute wealth I think one of the
most concerning things about all this is
social mobility is going down the
ability of people to move up the
economic ladder it’s becoming harder and
harder your parents income is becoming a
better predictor over time of your own
income so if we develop a new language
that avoids some of the the hot buttons
that set other people off and talk about
how do we build more social mobility how
do
we build more equality of opportunity I
think that can get us over the hump to
some changes the final thing I think
that we need to do is ask ourselves what
do we want America to look like think
about the American cities as part of
this wealth concentration the middle
class has gotten smaller a lot of
middle-class people have moved out of
the cities our cities are becoming
really really polarized so what do we
want American cities to look like if you
go ahead to the next slide do we want it
to look like Caracas Venezuela got the
really wealthy living side by side a lot
of very very poor people if you go to my
final slide
do we want American cities to look like
Dubai just let that image sink in a
little bit is that what we want instead
of pictures worth a thousand words well
leave you contemplating that image and
asking yourselves what do we want
America to look like thank you very much
[Applause]
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