There is plutonomy inside the U.S. stock market itself
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.
