The ‘post-ownership’-society

How ‘Millennials’ are shaping and changing the global economy

For at the least a century now, the vast majority of economic trends and our consumer-behavior have their roots in the US.

Front and center was the rise of the automobile culture – that started when cars became affordable to average workers thanks to Henry Ford’s persistence (see chapter 41) – and led to idea to build big shopping-malls with huge parking-lots outside city centers. The first modern-type suburban shopping-malls were built in Seattle and in California’s capital Sacramento in 1946 and 1947.

For the ‘baby-boomers’  – people born between 1946 and 1964 – the pursuit of ‘the good life’ was highly connected with ‘consumerism’. That continual buying and consuming of material possessions has become one of the dominant global social forces. First in the US and with time lag of a few years – across differences of religion, class, gender or ethnicity – globally.

This behavior was in many ways also followed by the ‘Generation X’ – people born between the mid 60′ to the mid 80’s – and Madonna’s song ‘Material Girl’ from 1984 was their hymn. Statisticians came to the conclusion in 1999, that there has been more material progress in the US in the 20th century than there was in the entire world in all the previous centuries combined.

The definition of success by material goods one possesses (from big cars and big houses to clothes and accessories with the ‘right’ fashion-label – even a fake is fine) is surely nothing strange in Romania. In fact, it’s nowadays far more important here than in many countries in western europe, where many people  (with nice cars in their garages) rather take the bike to drive through the cities.

And the trend ‘away from consumerism and materialism’ is most likely here to stay – and it will effect the economy quiet significantly.

‘Responsible’ for this shift in consumer behavior are the so called ‘Millennials’ – people  born between the mid 80’s and 1980 the mid-2000s. This is now the largest generation in the US, about one-third of the total US-population. In other words: Millennials will shape the economy for decades to come not only in the US but – with a usual time lag – globally.

The most significant trend by Millennials is the forming of the ‘post-ownership’ – society through the ‘sharing economy’ that allows individuals – and groups – to make money from underused assets. In this way, physical assets are shared as services. For example, a car owner may allow someone to rent out her vehicle while she is not using it, or an apartment owner rents out his place while he’s on vacation.

Millennials are taking a more asset-light stance toward consumption, putting off buying a home in favor of renting, forgoing a car payment and taking Uber, or skipping a hotel in favor of booking a room via Airbnb.

‘This trend really exemplifies the higher volumes/lower prices model we see from places like Amazon, driving more efficient consumption that’s not necessarily reflected in traditional economic metrics’ says Rick Rieder, Chief Investment Officer of BlackRock, the world’s biggest money manager.

The scale of disruption posed by the sharing economy is already impressive: According to a report by consultancy company Pricewaterhouse Coopers (PwC), Airbnb averages 425’000 guests per night, totaling more than 155 million guest stays annually – that’s nearly 22% more than Hilton Worldwide, which served 127 million guests in 2014.

And Uber (founded only 6 years ago in March 2009) already operates in more than 250 cities worldwide and is currently valued over 50 billion USD – that’s higher than the market-cap of Ford and General Motors.

Investors are increasingly intrigued by the potential of these sharing companies that could radically change how we consume goods and how we work to afford them. For Arun Sundararajan, professor at New York University’s Stern School of Business, this trend is as significant as the rise of the mass market automobile that set the trend for consumerism. “The way we lived, the way we consumed, this whole ownership economy much of it emerged out of driving our cars”, Sundararajan says. “We built a big house in the suburbs, we moved there, we acquired stuff. The direction of change here is probably different, but it’s comparable in how profound it was and the societal implications.”

The changes of ‘Millennials’ that most likely will change society and economy are:

  1. quality instead of quantity
  2. contribution instead of consumption
  3. collaboration instead of control

PwC is projecting, that five key sharing sectors (travel, cars, finance, staffing and music/video streaming) have the potential to increase global revenues from roughly 15 billion USD today to around 335 billion USD within the next decade.

I sincerely  hope this trend will also catch up in Romania – even with the usual time lag – and ‘quantity’, ‘consumption’ and ‘control’ will be replaced over time  by ‘quality’, ‘contribution’ and ‘collaboration’ –  it would surely boost the quality of life for all romanians.

 

The ‘Economist’-coverstory underscores the remarkable impact of the sharing economy for the future.

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