This is Wall Street Week.

I'm David Western bringing you stories of capitalism from the Himalayas, where inequality amplified by social media led to the fall of a government.

To the story not just of capitalism, but about capitalism looking for a new way forward in the wake of the Great Financial Crisis, with no new model in sight after seven years of looking for it, and small businesses, many of them family owned, helped drive the American economy.

As boomers retire, their children may not want to pick up where their parents left off.

But we start with China and the United States, with President g and President Trump trying to find ways to work together despite some important strategic differences.

Stephen Rattner of Willed Advisors manages the personal and philanthropic assets of our founder and majority shareholder, Michael Bloomberg.

Steve recently returned from the Middle Kingdom, where he surveyed the state of the economy and investment opportunities.

It was interesting, David, because I saw more than I've seen it before, a kind of two speed or two factor economy.

On the one hand, everything you read about the domestic economy is largely true.

Consumption is weak, consumers are dispirited.

They're still trying to sort out the property bubble.

G does not seem to have any real appetite to do stimulus or any of the things we would probably do here under the same circumstances.

It's not a disaster, it's growing, and so let's just put that in perspective.

But on the other hand, their cutting edge industries, their export industries are really extraordinary.

I toured car factories, I saw robots, I drove in autonomous evs, talked to a lot of people, obviously, and we should not be under any illusion about their competitiveness, even in things like that, which we can talk more about, relative to where we are at the moment.

Is that sustainable?

Do you think?

Because there was a time there was a dual circulation theory from President G that you had the domestic in supporting the international and vice versa.

If they don't really get the domestic consumption going and the domestic economy going, and they have, as you say, the property challenges has run with investment there, can they continue to support that level of innovation.

Well, that's why I want to put this in perspective.

Because domest economy is slow, prices are not rising.

They're not really much falling anymore, but it's still growing by some amount.

And they of course have far more fiscal space than we have because and a lot of different numbers around.

But my conclusion, my view is that they are not nearly as leveraged from a governmental point of view as we are, and so they have fiscal space.

She is just reluctant to use it.

But if you read his latest five year plan, for example, which came out a couple months ago, he is very focused on these cutting edge technology industries and of having Kina have a premier place in the world, and they are on their way to doing that, if not already there.

In a lot of cases, what.

Did you find in those cutting edge technologies?

I mean, we hear about biotech, we hear about evs certainly, and AI as you.

Mentioned, so we can take them in whatever order you want.

On biotech, they have gone from importing our drugs to their country to exporting their drugs to our country, not the actual drugs, but the drug development.

And if you talk to any biotech investor, and we have a number of them, they will tell you that they're now spending time in China.

What has become a thing is licensing Chinese drugs into the US.

You have to do the trials again and so forth to comply with US regulations.

But they can develop drugs faster, better, cheaper than we can for all the reasons.

You can imagine that China does things well when they put their mind to it, and so that's become a big thing.

AI.

We were obviously ahead, and we're still probably ahead, certainly in terms of adoption and the value the companies and things like that.

But they have a number of very good models and building more.

I think the question about AI for them is whether the world will use Chinese models.

I think it'll be tough here.

I'm not so sure it'll be that tough in the rest of the world because they will be so much cheaper.

For example, Huawei, as you may remember, was deep into the telecoms infrastructure in many parts of the world until we effectively shut it down, and so people were willing to use Chinese technology, and they may well in this case as well.

And in the case of evs and cars, they have something like fifty car companies too many, and there's consolidation going on and so on.

But the quality of the cars is unbelievable and the price is unbelievable.

It seems like Washington is fixated on China.

Is China as fixated on Washington?

Do they pay as much attention to us as we do to them?

It may well be on geopolitical and strategic things, which are not my area of expertise, as you well know, But on the economy, no, I don't.

I think they feel like they know how to do this us on They're just they're they're on their own.

For example, the last trade spat that Trump Benji settled, we lost.

Basically we need you know, they can buy soybeans from Brazil, they can get soybeans in other places.

We can't get these rare earth minerals.

So, by the way, aren't that rare?

As you know, what's rare is the processing ability that China has development, which we essentially keep limited here because of environmental concerns, which I certainly subscribe to.

But but the result was Trump essentially had to back down.

I mean, there's too much stuff that they make that we need at this point to survive.

And so I think they're in a pretty strong position visas vs.

As China looks externally what do they see as their opportunity markets.

I mean you mentioned Brazil, the soybeans, buying, soybean buying selvings, but what about for export?

Who do they think are their their opportunities out there?

Well, I think mostly the developed world.

Obviously their evs are huge in Europe.

The Europeans are trying to clamp down on it.

But if you look at new car registrations in Europe id is I think probably, I would guess registering as many cars there as everybody else all put together because of the price.

And it raises an interesting question for us, which is that you know, I believe in the auto industry here, as you know, but we're effectively denying our consumers the chance to buy a cheaper, better car because we effectively have banned Chinese cars by using one hundred percent tariffs, and so we sell sixteen million cars a year here, average price fifty thousand dollars a car.

If you cut ten thousand dollars off the price of that car, that's one hundred and sixty billion dollars a year of benefits to consumers here if we let them in at the cost of our automobile industry.

So these are really tough issues for US and for other developed countries.

What have you seen in the nature of the strategy for the US as against China, Because right now it appears that what President Trump and the administration are saying is let's slow China down through trade actions, through export controls, things like that.

Is that a viable strategy to slow China down?

My view is the only way we're going to be China is by doing a better job ourselves.

We're not going to out negotiate them, We're not going to out war them, if you will, we have to just do better ourselves.

There's no other solution to this, in my opinion.

Your day job is investing in picking investors, and that's why you went to China.

After all, What did you learn for investors who are looking at China?

What opportunities do you think there are there, if any?

Well, first of all, for the average investor, I would say you shouldn't be messing around with these These are sharp objects, and China is a sharp object, there's no question about that.

But investing, as you all know, is a mix of valuation and upside and China valuations even though the stock market has had a heck of a run this year, are still relatively cheap, certainly compared to the S and P.

The multiple is probably half of the S and PS or something like that.

And companies there are some doing well, some doing less well, depending upon what part of the economy they're levered to and things like that.

But the companies are still doing reasonably well.

For example, in AI in terms of the valuation point the Chinese, the Chinese LM is comparable to Open AI.

They're valued at four or five ten billion dollars, not five hundred billion dollars, and so you know, it's a lot harder to get hurt jumping out of a basement window.

Can you see a path whether we're on it now or not forward to a reasonable economic relationship between China and United States.

When we went through a long period of time we had no relations with them, then we sort of really became enamored, particularly with dunks shopping and coming to the wto you'll get more like us.

Now there's a growing disenchantment with it.

We have to get along with the second largest economy in the world.

Presumably, well, they never got more like us.

I'm very admiring of the Chinese.

I'm very respectful of them, but the idea that they play fair in trade was always an illusion.

And the people who thought putting them in the wto would bring them into the community of nations and then they'd start to play fair.

We're obviously mistaken because they have never had done it.

And you can go back to the Pirate of video cassettes and all the other examples there are of Chinese trade practices.

So we can do our best to nudge them, pull them, cajole them whatever, and if all else fails, then we do have to have trade restrictions if they're really truly not going to play fair.

But as I said, I think the only way we're going to quote win against China is by doing a better job at home.

Coming up Nessel in the Himalayas.

Nepal may seem far removed from the rest of the world, but it turns out that it shares problems of wealth, inequality and of vigorous social media to show its citizens just what's wrong.

This is a story about turmoil at the top of the world.

In September, Nepalese demonstrators took to the streets, burning buildings and forcing a change in the government.

Our colleague Michael McKee traveled to Katmandu to see firsthand what led to the violence and found a story of inequality and social media not all that different from the rest of the world.

I was tired of living in a country where not my capabilities or my competence, but the connection that people have takes them forward.

We plan to have a very small, peaceful protest.

Did you stay off of social media or did you go back to posting?

No, I went back to posting.

I will never stop posting.

It's fine even if I die, but I will be dying picking up for my countries.

There is a huge class difference and all these people they get these opportunities not because they are capable of it, just because they know.

Somebody Madagascar, Sri Lanka, Philippines, Maldives, East Team or Nepal.

Dublin property is being demolished, burned out.

Did we have a think that we will be talking next?

Note?

The big question is how many other similar countries does the spread to?

Now more than ever before, people have a window into the lives of others.

Social media connects youth across countries and continents, but it also shows them riches beyond their reach, and as inequality and unfairness become more conspicuous, some gen zers have taken to the streets.

But nowhere was the movement more visible and more violent than in Nepal, a small democratic country wedged between Tibet and India.

We were marching towards the parlament gate.

And I was always very opinionated.

I used to have opinions in everything.

I was a rebel kid.

This video is about me, or.

Asked Prashamsa Subeti is a twenty two year old law student who lives with her parents in the outskirts of Nepal's capital, Katmandu.

Not long ago, her life took a surprising turn.

It was twenty twenty four when I started uploading the videos about my political opinion, what I felt the government was doing raw and that's when it took off.

In late June, after anpolypolitician downplayed the country's poverty, so Baby posted an angry response on TikTok.

A day later, her clip had over a million views.

How can on leader monthly monthly see that gait before?

When we think of it, these politicians would not have their life public, so we would not know what their lifestyle was, how everything was going.

But then there is a very famous politician.

One of his family members was a vlogger and she used to document their lives and every clips used to go viral and people used to see what lavish lifestyle they were having, which we could not even imagine.

So that is how it all sparked.

That is how it all triggered so many people, and to mouth situation and then you show off your luxury, this and that everybody would get any.

So a I.

Although inequality in Nepal may be more visible, its existence is hardly new.

It's thirty one million inhabitants make an average annual income of less than two thousand dollars, and at around forty billion dollars per year, Nepal's GDP is lower than that of any US state, but GDP has been on the rise, climbing at an average annual rate of over four percent in the last ten years.

It's also got a GINI coefficient that's fallen over the past two decades, showing that with the limited data we have, the gap between rich and poor in Nepal seems to be shrinking.

Ghansham Upadyai is Nepal's finance secretary.

Experienced the four point two percent economic growth in the last decade.

One year we pissed the negative growth that is off the COVID nineteen year.

The economy of Nepal is resilient.

Inequality is reducing.

Small steps towards stability, but seemingly not enough.

Anger and resentment over perceived economic injustice built up over the years, and seeing stark inequality on social media pushed people over the edge.

There's sudden visibility to how much richer the rich are than the poor, right that ability to kind of see over the palace walls.

Clay Shirky studies the effect of social media on politics at New York University.

In Revolution after revolution, there has been some sudden change in perception of how the wealthier living in Nepal.

It was around this idea of Nepo babies, right.

It was the idea that the children of the rich were not suffering the way the rest of gen Z was.

There's a case one of the famous Nepalese influencers.

She was a former Miss Nepal.

She was a Harvard graduate and she was widely followed on Instagram and once the idea of the Nepo Baby arrives, many of her followers turned.

Against her as a kumone.

She suddenly became a target for outrage for exactly the same thing she'd been posting all the way along.

Something had changed about the way Nepal's youth saw their country and the lives of its wealthiest citizens.

It was not just the inequality that felt wrong, but the inequality of opportunity, the idea that those at the bottom would never have the chance to rise up and those at the top might not deserve to be there at all.

And although generational wealth, corruption and nepotism had always existed in Nepal, today they were in your face, on your phone, seemingly flaunted.

As the online feury grew, the government made a dramatic decision.

And Nepala is tragged down on a number of social media platforms, including Facebook, YouTube, Instagram.

X I was.

Foster called utterly hopeless and helpless.

Eighteen year old Schaswat Lamichan was one of the many gen Zers who was angry about the social media ban.

Talked with us some activist friends figured out like what we could do, and we concluded that the doing a protest will be the best way to do it.

Lamichan says he expected two hundred protesters to show up, but across the country, others like him were putting out the same call to friends and influencers.

Today we are He had to say.

Enough fus never ending corruption.

The collective action problem is if one person goes to the government and is protesting out front, they are completely helpless.

But if a thousand people do, they have to pay attention, and if ten thousand people do, they're overwhelmed.

Everyone we spoke with said the plan was for a small, peaceful protest, but in the three short days between the social media ban and the protest on September eighth, the call to action spread like wildfire.

By that point, the evening of the UNI Verse seven, we figured out that this would be huge because everyone was talking about it.

It ended up becoming a national thing.

But it's also what happened on September eighth, when you woke up in the morning.

I didn't sleep that day.

We all planned to wear school dresses so that police could not even beat us because it's illegal to beat school children.

We started marching and we were chanting slogans and we were having fun.

We were singing songs.

Some people were playing oh no there, and we were one hundred meters a week from Parliament where we were sitting, and we got the sense of tear gas.

In an instant, everything changed.

That is when I got the news of a person being killed.

We didn't think it would go that far, but there was a news of a person being targeted.

I was just scrolling through the new I could not work, I could not do anything.

I was just scrolling through the one scroll one, that one scroll one.

That's after the news that one person is shot and he is dead.

I felt so guilty because he might have watching my videos, so maybe I am responsible for his death.

Police firing eco sauce at children, children dying.

News of the violence traveled quickly and then escalation.

The very clip that I would say that ignited the fire in the people was a seventeen year old getting shot on his head.

It outreached the whole population.

The next day, it was not gen Z anymore.

It was the nation versus the government.

Then Hilton got burned.

They started burning all the government buildings and everything.

Our palaces were burnt, our banks were looted.

This factory belonged to the family of Nirvana Chodori, whose home was also set ablaze.

His family owns one of Nepal's largest businesses, So they went after your parents' house and then one of your factories.

Our showrooms got burned down, and motorcycles looted, vehicles looted.

People are prostrated, people are jobless.

Do they want to see big hooms over there?

Frustration was what was targeted towards individuals and families like ours.

By the end of the violence, over seventy people had died, two thousand injured.

All the gen Zers who spoke to us on camera made clear they never advocated violence and were far away when the situation escalated to the highest levels of government.

On September ninth, one day after the protests began, many of Nepal's top leaders resigned, including the Prime Minister himself.

We never imagine this situation.

It was like nobody told us we would be a country without a government.

The gen Zers worried that in to improve their democracy they might have inadvertently ended it.

The army was taking control, stepping into the vacuum left by Nepal's leadership, but then an unexpected phone call in the middle of the night.

The Imy invited us to sit down with them at the Army headquarters to talk on what to do next, what the future of the country should look like.

Subeti also got the Army's call, along with a handful of others.

They ask, you helped start this, now come fix it.

Lamichan, who had started a chat room to organize the protests, helped create another, this time to pick a new leader.

Over one hundred thousand people joined and for hours they debated and voted.

The name they chose Sushila Kak, a retired Supreme Court justice known for fighting corruption and supporting women's rights.

Subeti, the law student, got her phone number.

She was asking if we were okay in everything, and we asked to step up, and then she said, if you guys are trusting on me, then I will have to step up because it's not about me anymore.

It's about the country.

Do you look at this and think how amazing I spoke into this camera and look what's happened.

Actually no, because I still have that guilt of posting the video, and I still think some people might have come watching my videos and they had to lose their life.

But if something great happens in the days coming forward, then that day I might be able to grasp that I was one of the major people who was responsible for this change to happen.

In the week since Nepal's government was brought down, so called gen Z protests have erupted in other countries, including Morocco, Madagascar, and Peru.

The outcome of these movements is uncertain and their motivations are varied, but they are each ground in the economics of inequality and a belief among younger generations that the system has in some way failed them.

Has something changed in society that makes people angrier about their condition.

We've had the peasants and the royalty right forever.

So there is a general anti royalist and anti elite sentiment that is spreading from country to country, a sense that the leaders of the country are not natural rulers.

And there's also a sense that the economy should work for young people.

And some of this is really just comparative, right.

If you live in a place and you have a certain kind of life and you have no idea what anybody else's life is like, it's easy to just say this is how the world is but if you can see a cross right, if you can see to other countries, if you can see to other cities, is that comparative sensibility makes it harder for our royal family or a set of hereditary elites to maintain legitimacy.

And just the idea that the children of rich people should not have disproportionate opportunity, that is a surprising new idea.

For subedian others.

It's an idea whose time has come.

A look over the palace wall made them angry, but then also hopeful for a better future, hopefully enough to take action, and now hopeful that their action will be worth the sacrifice.

Up next to capitalism at a crossroads, That's what several experts have addressed in various ways as we seek a new model to replace the one that got us into the Great financial Crisis.

Here at Wall Street Week, we bring you stories of capitalism every week.

But this story is not just of capitalism, but about capitalism, where it came from, where it's headed, and why so many people are questioning its future and its foundations.

One of them is about to take over as mayor of Wall Street's home city at the end of the year.

I am a democratic socialist.

And if you listen to President Trump, it's not enough that mister Mumdannie embraces democratic socialism.

He insists on calling him an outright communist.

And now let's see how it communist does in New York.

We're going to see how that works out.

Our Bloomberg colleague, John Authors has taken a look through several recent books about capitalism's challenges, written not by its opponents but by its supporters, and he has some thoughts about why there's so much capitalist soul searching these days.

Thoughts that he shared with us.

What is capitalism?

How do you define it?

Well?

Part of its strength is something that grew up naturally and has had the ability to morph and adapt in a way that none of its alternatives socialism, communism, et cetera have been able to do.

I've been churning my way through this selection of enormous tomes, all of which have in common this belief that capitalism is in crisis.

The point is that it adapts each time it has a crisis.

There are more truly non capitalist alternatives being considered at present than they have been.

Arguably, the latest model of capitalism really fell in two thousand and eight.

We work for Bloomberg.

We're part of the citadels of capitalism.

Everybody, I think, has to agree that the model that was in force until eight really perished with the crisis.

You would normally expect them to be more clarity about what was coming next this long after the crisis, And I think the reason people are writing so much about capitalism now getting so worried is that we're not seeing that new model, that new narrative taking shape with any clarity.

Before we look at the new model, let's go about the old models.

What are the models that capitalism has evolved through.

I'll give you the schema that Anatol Koletski, who's sort of known these days for having set up the Gavkal.

His book Capitalism four point zero is about what is capitalism four point zero going to be?

One point oh?

Was laisse a fair?

It gave us the growth of the British Empire, the Industrial Revolution, the Gilded Age here in the States, and it finally perishes after the Great Crash and the Great Depression.

Capitalism two point zero is basically Keynesianism, the New Deal, the Marshall Plan, the gi Bill, it gives you the great successes of the post war economic miracles in Germany and pan and founders obviously in stagflation in the nineteen seventies.

Capitalism three point zero you would we generally think of, with regard to Ronald Reagan and Margaret Thatcher, the great pioneers of it, Paul Volker with the way he took over the Fed and changed monetary policy, the role of the dollar.

Nobody thinks that capitalism of the Thatcher rega kind is going to come back anytime soon.

We are going to have some transition on the scale of those ones I've just mentioned, the ones that came after twenty nine and after the seventies.

The question is exactly what the capitalism four point zero will be.

Although capitalism in markets and democracy in politics tend to occur together and have some things in common, they are not the same.

In each case.

It was the markets that signaled to the politicians that this model had ceased to work with the Great Crash, with the Great inflation of the seventies, and with the crisis of a democracy and capitalism have a symbiotic relationship.

There's a wonderful line from Winston Churchill that democracy is the worst way of running society that anybody has come up with, apart from all the others that have ever been tried.

Both have it in common that they're not perfect, but that they are more or less impossible to improve upon.

They have internal checks.

You don't want to get thrown out by the voters if you're a politician, you don't.

Greed and fear count each other, and the two systems check each other.

It's largely now up to governments to work out what to do next.

Does capitalism work without growth?

Yes, that is a critical problem.

This is a Sven Beckett's book, professor of history at Harvard.

He spent ten years writing this magnum opus on the history of capitalism, and one of the points he makes it's like a shark has to keep moving.

You could argue that it's capitalism one point zero Gilded Age.

Donald Trump is terribly excited by President McKinley, who went for very high tariffs in the late nineteenth century in America was expanding the way it was by building railroads connecting up the west and East coast and all the rest of it.

Was a way of protecting this infant economy as it's got ready to take over its hegemonic position in the world.

However, most of the people have been talking to would suggest that there's something a little more alarming going on, which you might call capitalism zero point zero or pre capitalism, which is mechantilism.

The idea that came before capitalism grows out of Britain's victory in the Napoleonic was the growth of the British Empire and the Industrial Revolution.

Different countries had their own spheres of influence and then try to build empires to give them a place to sell their stuff to.

One of the problems facing capitalism is the growing role of governments in intervening to minimize pain from markets and investors.

Well, my point, David in the book is not that capitalism has failed, but that it's been ruined, and it's been ruined by government over time.

Author Rasher Sharma is head of Rockefeller Capital Management's international business.

His book is What went Wrong with Capitalism?

So then you began to expand the role of the state.

The problem is that it has now expanded to such an extent, and it's not just about government spending, as I said, it's the culture of the bailouts, who does it help.

It's the regulations.

Who does regulation really help?

And what I say in the book is that all these things have systematically increased to undermine what capitalism is supposed to be, and the outcomes we're getting today is not what the founders had in mind.

When the Founders spoke.

About the architects of capitalism, they wanted more competition churned to happen, that the incumbents are never entrenched, that they're always challenged by insurgents.

Capitalism was supposed to create that freedom, let the insurgents come and challenge the incumbents.

Instead, what we are seeing today is that the incumbents are getting more and more entrenched.

The concentration of power, as you can see at the number of companies that dominate THESN p.

Five hundred, how concentrated that is.

And also the fact that you get this mismatch in risk, which is that you can capitalize the gains, but we are here to socialize the losses.

I think it's this perversion.

Of capitalism that we have seen today, and this is having real consequences.

That concentration has only increased in recent years.

Much of the growth in America's equity markets today is driven by the Magnificent seven.

Productivity growth around the world, and particularly like in America, has been falling off.

Right at the end of the day, the key to long term economic growth is productivity growth.

So productivity growth is falling off.

Why is it falling off?

I argue it's because that dynamism that capitalism brought about new people to come about taking out the dead world.

That dynamism is getting lost in this constant state support that we have for capitalism.

And the other negative consequence is this concentration of power.

And you know, when you have so much regulation out there, that helps the incumbents.

They are big, they can afford to deal with those regulations, and they can even lobby in Washington to get the kind of regulations that they want.

But small to mid size businesses they find it increasingly difficult to survive, forget even thrive in this kind of environment.

There's a deep unhappiness with the establishment as most people are very unhappy with their own fortunes right, which is that in America today, for example, I think about seventy percent of Americans today say that they are unlikely to be better off in their parents.

This is a violation of the American capitalist dream.

The American capitalist dream from forty to fifty years ago was that most Americans thought they're going to be better off than their parents.

You're supposed to be better off over time.

Young people in America today, when you pull them, they tell you that they'd rather have socialism than they would have capitalism.

You know, for me, that is suppossibly the one most important statistic that inspired me to write this book, that why are so many young people in this country disillusioned with capitalism?

And the answer for me is the fact that their disillusion with the current form of system, which they think is capitalism.

With all the challenges that capitalism faces today, perhaps the most ironic is that its biggest advantage, deep capital markets, may in the end itself turn out to be anti capitalist.

One of the things that surprised me.

I've spent the last twenty years of my life covering miss It's fascinating how many actual capitalists, people involved in finance now regard the degree of liquidity in the markets, the degree of financialization, as having been a problem.

One way to express this is called MRBDA, who's currently at Columbia.

Very interesting thinker argues that to make a market as deep as they currently are, to be able to trade things, you actually need to homogenize them.

You need to plan them.

You rely on MSCI and S and P to create indexes, and then you trade indexes.

You get the rating agencies to tell you, yes, this is triple AA.

You can split it around however you like that you end up.

In order to make market that liquid so that you can trade them, they can become as big and liquid as they are.

You have to make such sweeping decisions about how you define companies, how you allocate them, that you're basically taking the role of a communist planner.

So there is an argument which the liquefication, the financialization of the economy basically did away with judgment, with the notion of trust in people's dealings with each other, and therefore led to a version of capitalism that frankly, isn't any better than socialism or communism.

Coming up, what happens when the next generation isn't all that interested in inheriting that family owned business.

We've spent our lives building up the story of small business succession in the United States.

This is a story about hand me downs.

Not that sweater your cousin has grown out of, but a treasured local business that your parents spent a lifetime building up so you can take it over.

A business like the family Dry Cleaners Gary Bakner has run six days a week for thirty five years.

It all began in nineteen sixty one, when Gary's father, Seymour, opened the family's first dry cleaning shop on New York City's Upper east Side.

My father bought Joseph cleaner Is nineteen sixty one on York Avenue and eightieth Street.

He was obsessed with two things, Joseph Cleaners and the dry cleaning business and the New York Football Giants.

He lived the business, but as one of my friends said, it wasn't worked for him.

He loved the people, he loved the action, he loved trying to get the product to the people in a quality way.

And he just had a great work ethic, never missed a day of work.

From sixty one to ninety six.

Side by side, the father and son duo opened East Hills Cleaners in two thousand and three, expanding the family's legacy.

We had to sign a new lease in two thousand and one and rent was going up.

Of course, the doing business was going up.

Business was still good, and we decided to okay, well sell and then we decided to look for Starlong Island and we worked really hard to build this up.

Okay, thank you name.

After decades in the business, Gary is starting to look at what comes next, which for many mom and pops often means continuing the family business without the family.

Succession plan is something that I'm concerned with.

I can't keep working, you know, these hours.

I try to take some weekends off, in some time off.

It's a small business.

As the boss being here, my family says, the brand in a small business is you.

Gary Buckner is far from an outlier.

According to the US Census Bureau, just over half of US businesses are owned by people fifty five and older.

That's millions of small businesses nationwide that will soon be looking for someone new to take the reins.

The small, family owned businesses are huge part of our economy.

They're actually the backbone of our economy.

There are about five and a half million of them, and they employ from tremendous amount of the workforce in the US.

Christina Wing is founder of Wingspan Legacy and senior lecture at the Harvard Business School, specializing in what comes Next for America's family businesses is the nature of small family owned business is changing in the United States.

In years past, it was left to the children, and the children wanted to run it.

Now the rising gen would rather the family business owners sell their business, and they'd rather inherit the cash.

And that's going to cause a real issue in the economy because it's going to lead to jobs going away, and it's going to lead to people in communities owning the business that aren't part of the community.

Despite the importance of family owned businesses to the US economy, and despite the imminent retirement of many who built and run them, there's still a striking lack of planning for what comes next.

A recent US Bank survey shows that only half of the one thing small businesses interviewed has a succession plan in place.

We talk a lot about succession when it's a big public trader company.

Do small family owned businesses think and talk about succession as well?

So the funny thing is we actually talk about succession about other people, but inside the families, they don't talk about succession.

We really need to start talking about succession a lot earlier, and it has nothing to do with the size.

Of the business.

If I am an owner of a small business and I'm getting on in years and I want to figure out a way out, where do I turn?

Who do I ask for advice?

There are advisors, unfortunately, who most owners of a small business ask.

They ask a friend, and most friend has done it poorly.

We have this problem everywhere in the world where succession and age get mingled, and so you start to feel I'm old, I need a success and plan.

Oh I better sell.

But if they would talk to more professionals in this space, I think that they would see they have other options, and that's that spectrum of owner operator to owner investor.

I think there's a lot of people that would love to hold the business because sometimes their children might not want to work in it, but their grandchildren might want to.

And so if you can kind of play it out for a while, it gives you more flexibility.

Over the next twenty five years, baby boomer and older households are expected to pass down about one hundred trillion dollars in wealth, and though we don't know exactly how much will come from family owned businesses, those holdings make up roughly eighteen percent of their net worth, pointing to an estimated eighteen trillion dollars in business value that could change hands by twenty forty eight.

But unlike other assets, family businesses can be messy, which makes the next generation less interested in receiving what's being passed down.

The era of sort of twenty fifteen to twenty eighteen, I felt a little more pressure from founders wanting to work with their children, seeing less and less, i should say, challenges from the next generation wanting to remain with the business and really the business owner the founder looking for a solution provider.

Jarrett Turner comes from a family business, a roofing company founded and still operated by his seventy three year old father.

Like others, Turner didn't want to go into the business himself, but instead started a middle market private equity firm eleven years ago to help people like his dad when the time came for them to step down.

A lot of these businesses, the value in part is the connection to the community.

They know the owner, they've been going to the same shop for a long time.

Does the value of the business go down when it does come time for the founder to leave.

If the founder were to leave and control a lot of local relationships, I think inherently the business value would go down.

Turner's Soundcore gives owners the option to sell while staying involved in running their business for an extended period, preserving, at least for a time, the best of a local enterprise.

It provides capital to those who build the businesses and continuity for the communities they serve.

We're focus on developing theses in sectors which we deem to be highly fragmented.

At big market tams, where we can aggregate and buy a number of family founder owner operated businesses in the same sector, we can professionalize.

We can implement technology, best practices, procurement programs and take them to sort of the next level of professionalization, take market share, grow revenue, improve margins, and then typically sell within four to five years to a larger scale buyer.

Typically, when you buy a business, is it one hundred percent of the business.

So I think when you're a private equity firm, or maybe you're a family buying someone else's business, one of the challenges is customer relationships with the business owner and also the DNA of that business.

The culture is often driven by one or two people.

So for us as a philosophy, we look at sellers and we put together a seller retention matrix where we look at a lot of qualitative aspects of their personality and how long have they been with the business, the number of customers that they have, the number of suppliers that they have.

But one of the best ways is a buyer to assure that you're going to have interest in that business owner to continue to sort of drive the business forward and not improve their golf score the next day, is to have skin in the game.

Do you have much competition in private equity for small family owned businesses?

I would say you would have to look at our average multiple that we pay.

If you type in private equity and average purchase price multiple into Google another search engine, you will typically see twelve to twenty plus times epit DA.

We've averaged in context at a five point nine times multiple, and that's across one hundred and nine acquisitions.

So in terms of our volume and the number of acquisitions that we've done and apply that to the multiple, we're probably one of the lowest of any private equity firm in the United States.

I would use that as evidence that we don't have a lot of competition.

The way that we're able to do that is we're buying very small businesses.

In a changing economy.

Dependable cash generating businesses are gold mines, especially for private equity firms able to buy small and scale fast.

We at Soundcore we focus on recession resistant businesses.

What's your average length of time you hold them?

So we've owned businesses for a spread of three to seven years.

Our average is five years.

So that strikes me as remarkably short in private equity generally.

Right now, we hear a lot, read a lot about private equity generally the big private equity having trouble getting out of investments.

Is yours a different approach to private equity?

I think it is.

I mean, I think there are a few things that you can do wrong in private equity.

You can overpay for businesses.

You can over leverage them and put them into a bad capital structure.

Or you can pick your favorite child and put too much of your fund and a commingled fund into one deal that doesn't go right.

It drags down the rest of the fund.

I think by our strategy of not overpaying for businesses but giving business owners a fair price, not chasing to win auction processes.

There's a lot more opportunity even in this market to exit our businesses.

For many owners, firms like Turners present a way out, even if taken in stages.

But Wing warns that the rise of large consolidators brings its own consequences.

We're seeing immense consolidation in the space, which means a private equity firm might have a mandate to go buy one hundred dry cleaners within the Southwest or the southeast or wherever, and then the brand in the experience becomes that of the hundred, not of the local and so it's a change in the community.

Well that may not be the local community likes as much, but it may be a more efficient business, may it not.

I think that the role up of a lot of different personality based businesses.

There are great reasons to do that in certain places, but I don't think overall that I would make a statement that a financial buyer is a better owner than others unequivocally.

But there are cases where.

They are, and that brings Wing to a challenge.

She ses again and again.

Many longtime owners assume selling is their only way to retire.

Because they've been owner operators.

If we can get some of them to understand, they could become owner investors themselves, meaning they could keep the bone the business, have somebody else run it, pay that person, but still own it.

Legacy is everything, you know.

This is how I grew up.

Quality, responsibility, of personality.

We have great relationships with our customers.

We've known them now generations.

We give them a good product, and uh we like serving the serving the community for backner.

Like so many others, it's never just a business.

It's the early mornings, the familiar faces, the generations of trust that turn a storefront into a cornerstone of a community.

And as the next generation steps in or steps away, the values at the core of these small businesses remain the foundation for whatever comes next.

That does it for us.

Here at Wall Street Week, I'm David Weston.

See you next week for more stories of capitalism.