r/Plutonomy

I wanted to try explaining the basic r/Plutonomy idea visually, using the simple explainer style you often see in the r/DumbFact sub.

The core idea: The economy can look strong in aggregate while access feels increasingly stratified.

GDP can rise.
Markets can rise.
Corporate profits can rise.

But if more gains flow to asset owners, and scarce premium supply does not expand fast enough, then housing, travel, education, healthcare, restaurants, sports, culture, and desirable cities can all get harder to access.

That is plutonomy.

Not “everyone is poor.”

More like: The economy can be strong. But not everyone is living in the same economy.

I’ve been writing about plutonomy (the idea that a disproportionate share of economic outcomes is driven by a small powerful minority) and I realized there is a version of plutonomy inside the stock market itself.

A recent New York Times column by Jeff Sommer discussed research by Hendrik Bessembinder, a finance professor at Arizona State University, showing how concentrated U.S. public stock market wealth creation has been since 1926.

I downloaded the underlying dataset and graphed it. The result is striking: out of 29,081 U.S. public companies, only 276 (fewer than 1% of the sample) created roughly 80% of total net wealth. The top 10 alone account for about 29%, while 59% of firms reduced aggregate net wealth creation relative to Treasury bills.

That is plutonomy at the corporate level.

The stock market looks democratic: thousands of companies, public access, index funds, retirement accounts. But the actual wealth creation is highly oligarchic. A tiny corporate elite creates almost all the long-term wealth, while most listed companies contribute little or detract.

This also explains why indexing works. Indexing is not powerful because the average stock is great. It works because it guarantees exposure to the rare super-compounders before anyone knows who they will be.

The AI lesson is obvious: some current leaders may become century-defining wealth creators, but many companies riding the narrative will likely disappoint. The innovation can be real and still be a bad investment if investors overpay.

The U.S. stock market is a plutonomy of companies: thousands are listed, but only a tiny elite creates nearly all the wealth.

According to a recent blog post by the Federal Reserve Bank of New York, the labor share of U.S. income is now at its lowest level in the postwar period.

That means less of the economic pie is going to workers as wages and salaries, and more is going somewhere else: profits, margins, capital returns, owners, and shareholders.

The important part is that this is not just because the economy shifted from one industry to another.

The decline is happening within industries.

In other words, workers are producing inside the same broad economy, but labor is capturing a smaller share of the output.

That is the plutonomy divide.

The economy can grow. Companies can become more valuable. Markets can rise. But if labor’s share keeps falling, workers can still feel like they are losing ground.

The profit economy is not the same as the paycheck economy.

Edit: The BLS defines the labor share as “the percentage of economic output that accrues to workers in the form of compensation,” which includes other forms of pay like bonuses and pension contributions, as well as regular wages and salaries.