When Extreme Inequality Breeds Its Own Revolution

The top 10% own 93% of all equities in America. When inequality reaches such extremes, history teaches us one thing: it doesn't last.

From New York to California to France, the backlash is already brewing. Zohran Mamdani rode a wave of anti-inequality sentiment to New York's mayorship, promising to tax the rich for free childcare and transportation. California unions are pushing a 5% retroactive wealth tax on billionaires. France's parliament debated—and watered down—a 2% wealth tax on assets over €100 million.

Even BlackRock'sLarry Fink, speaking at Davos, abandoned the long-standing mantra of "stakeholder capitalism" for something more radical: turning everyone into owners of economic growth.

The Daoist Principle in Action

"Strengthening an ascending tendency also strengthens the opposition to it," goes the ancient Daoist principle of reverse historical movement. Silicon Valley's plutocrats may have inadvertently set this principle in motion.

The numbers tell the story. In Europe, the top 10% control nearly 60% of wealth while the bottom 50% own just 5%. Latin America is even starker: the richest 10% hold 77% of wealth, the bottom half just 1%.

Fink's diagnosis was blunt: "Since the fall of the Berlin Wall, more wealth has been created than in all prior human history combined. But in advanced economies, that wealth accrued to a far narrower share of people than any healthy society can sustain."

AI: The Next Inequality Accelerator

If current inequality feels unsustainable, AI threatens to make it exponentially worse. Early gains are flowing to owners of models, data, and infrastructure. The rest face an uncertain future as AI does to white-collar work what globalization did to manufacturing.

"We need a credible plan for broad participation in the gains," Fink argued. "Not abstractions about 'the jobs of tomorrow,' but actual ownership stakes in growth."

The California case study reveals both the appeal and the trap of current approaches. Taxing billionaires who buy $60 million homes while median house prices hit $1 million has obvious populist appeal. But California already relies on the top 1% for 50% of its revenue. When billionaires like Elon Musk and Google's founders flee to tax havens, who pays for schools and infrastructure?

A National Solution for a National Problem

Gov. Gavin Newsom is right that state-level wealth taxes "make no sense" in a competitive reality with 49 other states. The solution requires federal action—and creative thinking.

One intriguing proposal from Silicon Valley's more socially conscious titans: require publicly traded companies above a certain threshold to contribute 2% of their market value annually in shares to a sovereign wealth fund. Every adult American would receive a synthetic security indexed to the stock market, vested for 20 years to allow compound returns to grow, with tax-exempt capital gains upon withdrawal.

The catch? You only qualify if you vote in elections.

This approach avoids state competition while literally giving citizens ownership stakes in the economy. Given America's massive investments in AI dominance, successful companies are unlikely to flee to anti-tech Europe or strategic rival China.

The California Compromise

For California, there's a middle path. Instead of taxing individual billionaires, the state could negotiate a modest annual tax on large tech companies' market valuations—designed to capture AI-driven productivity gains.

Revenues could fund two goals: offsetting federal healthcare cuts and doubling the federal government's $1,000 savings accounts for California children. This helps plug budget gaps while building wealth from below through broader capital ownership.

The key is aligning incentives. California-based tech companies want to stay because of the robust innovation ecosystem that's absent in Florida or Texas. The political challenge is making Californians want Silicon Valley to succeed because they'll share in the gains.