The signifiers of success used to be simple. Own a home (or two) and a car (or two) and voilà! You’ve achieved the American Dream. Ownership, however, is a complicated concept for an increasing number of Americans (this writer and her sister, included) — and not for all the reasons you might think.
Multiple studies and datasets have shown that millennials are not buying homes and they are not buying cars. In fact, they are not buying many big ticket items at all (save for their smartphones) in the way generations of the past have. This behavior has earned them the nickname Generation Rent and has businesses struggling to understand how to market to a demographic that is resistant to ownership. As with most trends among millennials, economic factors delaying major milestones (as well as, perhaps, a general fear of commitment) are cited as part of the issue.
While that certainly has impacted the situation, the greater element at play is shifting value systems.
Young people have redefined success, and their new definition values experience over possession. The word “experience” may sound like a code word for “free,” but the change is not necessarily a reaction to underemployment or even a desire to save money.
I know this macrotrend firsthand. I am a millennial, I am gainfully employed, and I have a nice chunk of change saved up. But I choose to rent my apartment and rent my furniture. It allows for much more flexibility — financially, geographically, spatially, liquidity’ly. What’s more, growing up on my family farm in rural Oregon, I used to dream about living in a big city like New York or London, wearing black, talking fast, having to wear real reading glasses, owning a few homes, and maybe having a driver (I saw it on a movie once!). Now? Those material things are not interesting to me. At. All. I just use Uber or Lyft for the “personal driver” effect. And Airbnb for the “owning multiple homes in cool places” effect. And without any of the overhead or attaching myself to material possessions (I do, however, live in New York City, frequently wear black, have real reading glasses, and talk fast). Like my little sister and our friends— who live similarly — these moves allow us to be flexible and value experience over possession. And on a deeper, more spiritual level: it has allowed me to really let go of the concept of possessing things. It is liberating not just financially, but also soulfully.
Up to this point, I’ve pinned this shift on “young people” (or millennials, if you will). I was holding back on you. In fact, we are seeing these values aren’t just relegated to the youngins’. The Atlantic’s James Hamblin wrote in October of this year: “Over the past decade, an abundance of psychology research has shown that experiences bring people more happiness than do possessions.” Hamblin goes on to cite at-length learnings published by Thomas Gilovich, Matt Killingsworth, and Amit Kumar in the journal Psychological Science in August 2014. In particular, their findings “expanded on the current understanding that spending money on experiences ‘provide[s] more enduring happiness’.”
Three points to call out from Hamblin’s piece that are particularly instructional for the discussion at hand:
- “Turns out people don’t like hearing about other people’s possessions very much, but they do like hearing about that time you saw Vampire Weekend.” — Amit Kumar, Cornell doctoral candidate
- “Even a bad experience becomes a good story.”— James Hamblin, The Atlantic
- “You read these stories about people rioting, pepper-spraying, treating each other badly when they have to wait [for material goods]…. There are actually instances of positivity when people are waiting for experiences. […] We know that social interaction is one of the most important determinants of human happiness, so if people are talking with each other, being nice to one another in the line, it’s going to be a lot more pleasant experience than if they’re being mean to each other which is what’s (more) likely to happen when people are waiting for material goods.”— Amit Kumar
In addition to basic human psychology driving a preference for experiencing over owning, the Internet age has produced accessibility, impermanence, and rapid change like no other moment in time. A few examples of how these shifts have shaped the overall “Rent, Stream, Experience” attitude and are now impacting our real-life decision-making:
- The ability to have instant access to any media or information for a nominal fee (if any) has been an increasingly-offered feature since the days of Napster (and now the era of Netflix, Hulu, Spotify, Pandora, Audiobooks, et al.)
- Today, streaming services and cloud-based technologies mean there isn’t even a file on a hard drive to “own.” Possession is finite, access is unlimited.
- The constant stream of new information and changing media formats also makes ownership unappealing. Why choose when what you want today may change tomorrow?
For businesses, the lesson here is to emphasize service over product. To this point, several industry newcomers are finding success by focusing on lifestyle and offering consumers instant access.
- When every cab has its light off (or you want to save on the overhead of a personal driver — I am lol’ing at my silly 12 year old self), mobile services mentioned above like Uber and Lyft find drivers instantly.
- Rent the Runway solves the issue of wanting a new designer outfit for every event, including Ugly Sweater holiday parties. They even offer a monthly must-haves option for $49.99 a month which bleeds into subscription services. (As an aside: I am waiting for the day that I can rent nearly all of my clothes. After moving ten times in as many years, I’ve been blown away by the amount of clothes I choose to donate or sell each move. Main culprits: Seasonal stuff, changing sizes over the years.)
- Speaking of subscription services… Birch Box, Umba (boxes for babies even!), and Bark Box (for dogs!) give subscribers a curated smorgasbord of new items each month.
- Flash sales on sites like One Kings Lane and Gilt are just as much about the experience of scoring a deal as the items themselves (though the model might not be as sustainable for a crowded field of players as their respective up-and-to-the-right curves first showed).
More than the ability to make large investments in things that depreciate (save for a home), I am struggling with understanding my incentive. Perhaps after seeing so many lose their material possessions during the financial crisis, my sister, our friends, and even non-millennials see ownership as more of a liability than an attribute.
- Ownership can be generally limiting (see the Five Year rule), and the Millennial Generation that changes jobs every three years and values independence needs to keep our options open.
- And arguably, these things are impacting Gen-Xers and Boomers, too. Both generations are (1) working to keep pace with shifts in the types of skills needed, which requires a great deal of flexiblity and (2) still recovering from the unfortunate, multi-layered outcomes of the financial crisis. And then there are just basic economics of a possessions lifetime value. My self-made, Boomer-Gen uncle has long chosen to lease his car over owning it because of a cars sharp depreciating value. He’s one of the smartest guys I know, so I take note.
- Heck, even my 93-year-old grandma decided owning her house and car was a bit much (despite being fully capable of handling both, she’s amazing). Grandma Bradshaw chose to rent an apartment within walking distance to all the things she needs (bank, library, grocery store, hairdresser). While her reasoning is different from the arguments posited above, of all the generations living today, the Greatest Generation surely knows how to stretch a dollar and be smart with their resources.
My conclusion? Our increased aversion to ownership is not a shortcoming, it’s an opportunity. Valuing experiences means we don’t want just one thing; we want a little bit of everything. Businesses launching or adapting to this are smart to do so. While many Americans still choose to invest in buying a home when the time is right in their lives (or when wanting to invest in an appreciating asset), renting, streaming, and experiencing are here to stay in a big way.
Initial ideas originally published in my capacity as a Fellow at the U.S. Chamber of Commerce Foundation on their blog earlier this year. NB: In what appears above, I’ve updated my original thoughts to reflect a changes in the market, expanded generational thinking beyond millennials, and to insert my own voice a bit more.
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