The Untouchable Economy: Why Are Gen Y - and American Business - Turning Against Stuff?

Once upon a time, like about four years ago, real men and women didnt deign to think about intangibles.

They were considered 'soft.' And Serious People only thought about what was 'hard.' Things you could count. That you could find on a balance sheet or income statement. Especially if they had been audited by a reputable firm. Because, it was believed, Serious People making Serious Money couldnt afford to spare the time to worry about mere concepts.

But yeah, that was before hard assets like real estate lost 70% of their value. And before it was learned that banks, those avatars of Seriousness, had leveraged their hard asset balance sheets up to 40 times their value. Which turned out not to be quite so hard once all their creditors started making not-so-polite inquiries about who owed what to whom - and who was actually good for it.

So we can forgive the Gen Yers - and most business people - for beginning to realize that in this economy, value and impact are where you find them. Not where some accountant whose fee depends on corporate largesse says it is. Sensibly, they are beginning to assess the value in entrepreneurial enterprise over a traditional job with benefits (assuming one can be found).

And the trend extends to other facets of the economy like housing and automobiles. Rent rather than buy. Lease rather than own. Because if businesses are sitting on the economic sidelines with billions they are unwilling to invest, why should mere mortals do any different?

The reality is that risk has never been higher, at least in the lifetimes of most people now living. But neither has opportunity been more manifest. Societal disapproval has been swept away by the tidal wave of failure associated with the financialized economy. You can try anything. And companies with silly names like Yelp or Zynga or Google can make people rich.

So give it a go, all you Softies. The hard dudes got nothing on you. JL

Michael Mandel reports in The Atlantic:

Young people are thinking entrepreneurially, viewing themselves as microbusinesses operating in a highly uncertain economic environment

Millennials are shifting from tangibles (cars and homes) to intangibles (education and access to data), but they are not alone. In today's data-driven economy, the business sector is moving along the same tangible-to-intangible path as the Millennials, perhaps at an even faster pace
Business spending on nonresidential structures, other than mining-related, is roughly 30% below the 2007 pre-recession highs, while investment in software is up almost 20% over the same period.

In fact, Milliennials are responding to the same trends as businesses, and for much the same reasons. Members of the younger generation are being forced -- or encouraged -- to think entrepreneurially, to view themselves as microbusinesses operating in a highly uncertain economic environment. Why buy a home or car if there are lower-risk, lower-cost options? Why invest in physical capital if spending on human capital and data can have bigger payoffs?

This shift changes corporate strategy and marketing aimed towards Millennials. If Millennials are operating like microbusinesses, then companies must reframe their appeal in terms of business values such as security, collaboration and competitiveness. So they will be open to companies that create products and services to help them protect themselves, find allies, or prosper economically.

For example, Millennials have a right to worry about the financial risk associated with buying a home. After all, they've seen home prices collapse unexpectedly, leaving millions of people with immense debts.

So to lure the younger generation back into the market, homebuilders need to broaden their definition of what they sell. Instead of just selling a physical product (the new home), homebuilders have to address the intangible core needs of security, collaboration, and competitiveness. One possibility: A sales contract that gives the buyer the right to sell back the house to the home builder at the original price for the first five years, minus an implicit cost of renting (obviously this simple version suffers from some moral hazard problems, but they can be fixed).

Or take cars. If Millennials want to socialize, they compare the cost of driving with the much lower cost of digital contact. That means automobile makers have to attract buyers by reducing auto operating costs--namely, dramatically increasing fuel economy. What's more, cars have to be positioned as essential tools for maintaining effective contact with other people.

As we further consider marketing to Millennials as microbusinesses, two interesting questions immediately arise. First, will they continue to consume data at ever-increasing rates? The answer would seem to be yes, if the cost of data keeps falling. We are already seeing people effectively starting to invest in their own personal databases, using cloud-based storage service such as Dropbox.

More difficult to assess is the question of whether this microbusiness mindset will persist into the childbearing years. From Gary Becker onwards, economists have formulated the decisions about whether to form households, to have children, and how to raise them, in economic terms. Yet it was never clear that people actually made their family decisions that way.

But Millennials may approach the decision about how many children to have, and how to educate them, with more of a business approach. Will this cause the number of children to rise or to fall? Children are a heavy investment, especially given the cost of college these days. Yet in a data-driven economy, they may be a valuable asset as well--which will open up whole new marketing opportunities.

Of course, it's possible that as the economy improves, Millennials will retreat from their microbusiness mindset. But even so, companies that want to sell to Millennials will likely do better if they try to understand what young Americans need to prosper in the business sense.