Do they? What if Mr. Savvy's "wealth" is tied up in a start up with a Beta of 4?

In the hypothetical, Mr. Savvy's wealth was in publicly listed companies like Apple and Nvidia. It wasn't "tied up" in anything.

Money invested in the stock market is subject to some degree of risk from day to day - but that's true whether the invested funds are after-tax earnings (neighbor earns a million and then invests in the market) or reflect accumulated capital gains (Mr. Savvy has a million invested in the market grown from long-ago investments). The only difference is the basis that's used for tax calculation - in terms of the wealth of the individuals, both brokerage accounts identically contain $1M in stock.

Mr. Savvy doesn't have zero wealth or earnings because his money is invested in the stock market. It's not abstract, it's not non-existent, it's not "just numbers on a brokerage statement." Regardless of whether those shares have appreciated to their current level, or if Mr. Savvy had bought them yesterday. Marketable securities aren't identical to cash, obviously, but that doesn't mean their value is zero or that the wealth you accumulate through those securities doesn't exist until you convert to cash.