The Post-Ownership Society
washingtonmonthly.com
washingtonmonthly.com
The author seems to be under the impression that prior to the sharing economy, there weren't middle men still taking a cut for providing vehicles, leasing (or subletting) apartments or providing other services/assets that were needed to do a business. The question would be whether Uber, Zipcar, Etsy, etc are taking any more of a cut than a a more traditional taxi medallion, a car dealership, an art gallery, etc. I suspect they are taking less, since they are transferring a lot of the risk of owning the property and running a business to their contractors.
I don't think owning things in general creates wealth. Making smart financial decisions does. If you own a car and are paying a good amount of money to park, insure, maintain and purchase/lease that vehicle and don't drive it enough to justify that expense., it may make a lot more financial sense to use Zipcar, Uber and other public transportation. Similarly it may make sense to invest in owning enough kitchen supplies to prepare your own food instead of eating out all the time (or it may not, it just depends on your situation)
It sounds like the author has made a lot of poor choices and doesn't want to hold herself responsible for them.
Thanks, I was going to say the same thing. The fact that the author kept calling out the expensive coffee, drinks, snacks, etc almost makes me think the whole thing was trolling.
I also want to throttle the lady subletting her apartment on AirBnB. That's almost always against your lease, quite possibly the HOA rules, and maybe local ordinances. If breaking contracts and laws is the only way you can afford an apartment then you can't afford that apartment.
It's difficult to defend that kind of position when the only viable choices available range from bad to worse. By any rational standard, as someone a little older than the Millenials described in this article, I should be well off -- degree from a good university, work in tech industry, run my own small business these days, etc. -- and yet I have essentially no chance of buying a viable long-term family home in the city where I live.
It doesn't make a lot of difference how carefully I save or how hard I work to grow the company revenues, because we simply don't have enough houses to go around. That means the property bubble just keeps on growing, and those of my parents' generation who bought their first home multiple decades ago are now buying up the new ones as well, to use as investments and let out as rentals. They can make more money doing that than all but the most successful and fast-growing business can generate or the very highest paid jobs will pay, and it's effectively passive income most of the time, so the cycle continues with the gap widening by the day.
The next generation are even worse off, with pressure to have a degree to get just about any kind of job these days leaving them with tens of thousands in student debts before they even start their first job and in most cases doomed to spend much of their 20s just trying to keep up.
That being said, the smart financial decision, in your position, might be to relocate to a different city with significantly cheaper housing, education, food, etc. That has the social/emotional downside of not being as near to friends, family or the things that you like in your city, which may not be it worth it to you.
If a lot of people want to live in a certain area, and there is limited space to construct housing (or laws that prohibit new construction) its hard to see how prices would be able to stay low.
What do you think the best solution to this problem would be? In my mind, the biggest problem is that we have laws that favor bigger companies and richer people and provider an unfair advantage to those people. (some big companies pay no income tax for example, where that's not an option for a smaller businesses, or small businesses or poorer people can't defend themselves in civil cases due to excessive legal costs)
One difficulty with this is that moving somewhere cheaper often also means moving somewhere that work is harder to find and/or doesn't pay as well, so you can easily find that your gains are mostly cancelled out and you're just saving up even more slowly relative to more expensive areas with better paid work.
In any case, as you say, it's just not worth it to me to move somewhere far from the region where most of my family and friends live, my hobbies are well catered for, and work/schools/other practical facilities are readily available.
What do you think the best solution to this problem would be?
Build more houses -- lots and lots more houses. It's really as simple as that.
Here in the UK at present, we build very roughly half as many houses per year as most credible commentators reckon we need to support demand, and we have been underdeveloping for decades now. There is no need for artificial "help to buy" schemes, punitive taxes on landlords or holiday home owners or people with large homes, or any of that other complicated economic stuff the great and powerful keep talking about. Just build enough houses for everyone to find somewhere to live and the rest will take care of itself.
In reality, this means fixing our horrendously broken and onerous planning system. Right now, private individuals are up against a barrage of complexity and ambiguity if they want to build/extend themselves, so most new homes are built as part of large-scale commercial developments. Those developments typically receive planning consent on the basis of having a certain proportion of so-called affordable housing -- itself something of a joke in a city like mine, because no teacher or nurse or office junior can actually afford even an entry-level place -- but then the developers have a whole box of tricks for managing to build/sell the high-end, expensive, more profitable homes first and somehow a lot of the affordable ones never quite seem to get built.
In fact, I own a condominium already which I lease for passive income. I've also invested heavily into some other real estate holdings. I do this while paying off student loans, saving for a wedding, and starting a startup where I made very little for over half a year (1.5 years ago). Perhaps, I stumbled upon some large sums of money without realizing it but I also know I don't buy any video games, I don't go to concerts, I don't go on lavish vacations, I don't buy coffee in the morning or really party on the weekends. I challenge myself to spend where it's necessary and on very few indulgences, though obviously I do every once and awhile. I cook at home, I refrain from feeling obligated to have a drink in my hand when out, and I take vacations to see my family via middle of the night trains.
The average software engineering salary is easily into the 6 figures but there are people doing well making half of that. I don't buy that you have this oppressive force dragging you down and I would be inclined to say that most people in my generation and onward think $40 bottomless brunches, multiple $15 cocktails on the weekend, a week long vacation to the Bahamas, etc. are normal, in the same way people think that a college degree guarantees a job. The harsh reality is that Millennials take too much for granted and life has always required people to make sacrifices.
I don't know your particular situation, but head over to http://www.reddit.com/r/personalfinance and you'll probably discover a few changes you could make to your lifestyle.
In fact, I live in Cambridge, UK, where we're comfortably in the London commuter belt and have many nice new million pound flats for sale. On the other hand, if you're a nurse working at the local hospital and you want to raise your kids in your own house, you can expect to live far outside the city with a substantial commute into work. Because, you know, we don't overwork and underpay our medical practitioners already in this country!
I do know people around my age who have managed to buy in the city itself, but almost all of them had an unusual source of serious money for someone our age, and often for an unfortunate reason (big inheritance that arrived a lot earlier than expected, compensation lawsuit, that kind of thing). A few bought very young and got lucky to be on the ladder before prices got really crazy, though for every one of those I probably know someone else whose financial development was set back a decade after finding themselves in negative equity too early in their careers to cope with it. In any case, the latter was never an option for people a decade younger who are in the middle of that Millennial bracket and might traditionally have been buying their own place by that stage of their lives.
For "normal" people (and remember there's quite a high upper bound on what I'm calling "normal" in this discussion) looking for a normal family house because they've had a new baby or relocated to change jobs or have an elderly relative moving in, the reality here is that by the time they have got home from work, seen a nice place in the listings, and called the estate agent to arrange a viewing, the property has often already been sold. The better-looking properties are currently being bought literally within minutes of being available and without the purchaser even visiting them, such is the confidence in the market that the property can be sold at a substantial profit in a few months even if it turns out to have problems on closer inspection. Sealed bids is becoming a popular sale method, and winning bids on £400-500K family homes are coming in £100K+ over. No normal person can compete with professionals who have the time and resources to play the game by those rules.
I would think the opposite. What makes you think the companies wouldn't take maximal profit and make their contractors accept increased downside risk at little-to-no increased net income?
"We’re a generation in which children were empowered by promises that they could grow up to be anything they wanted to be."
You should remember that, since 1973, wages have been declining for the majority of men in the USA:
http://www.smashcompany.com/wp-content/uploads/2014/03/Scree...
Women have seen some modest improvement in wages, but for the most part, the era since 1973 has been a very bad one for American workers.
For young men, the problems started as early as the recession of 1958. That was the year that the ratio of average wage to average rent hit its all time best, making it easy for a young couple to set themselves up with their own place. For that reason, this was also the peak of the Baby Boom.
https://research.stlouisfed.org/fred2/series/COMPRNFB
Things have been fine for workers.
Don't even get me started on all the rent-seeking and tax acrobatics surrounding non-wage compensation. I would much rather just get paid cash and pay a somewhat higher rate of income tax than waste time trying to optimize some endless menu of benefit packages that require the skills of a CPA to analyze properly.
Purchasing power of electronics, appliances, etc, has gotten a lot better.
Purchasing power of food has somewhat stagnated, though variety has gotten better.
It is harder for a single earner to pay for a standard three bedroom house in a good school district that is close to jobs. It is also much more expensive to buy the education admission ticket to the job market, due to cost inflation of schools and credential inflation of job requirements.
A bunch of that non-wage compensation is just going directly into bigger healthcare bureaucracy that doesn't do anything the worker, it should be considered an increase in income that is offset by a bureaucracy tax. Healthcare has gotten better, but the things that have gotten better are generally related to where the money is going.
I.e., you haven't demonstrated any problem for workers.
Seems pretty logical to me when I look at my paycheck and make that calculation. Am I happy that my employer has control over my medical expenses? Probably not. Am I happy that they get huge discounts from insurance companies on my behalf(and that of their other employees)? Probably am.
As you might expect, these treatments have caused the price of health insurance to go up.
The problems arise when people realize too late that "hey, I took out $100k in loans to go to college for a job that pays $35k". Unfortunately, in that situation it's going to mean a lifetime of living in smaller apartments, having crappier cars, fewer vacations, etc than someone who chose differently. And that's not necessarily a bad thing! If following a dream means more to this person than these things, that's great! But let's not pretend that "grow up to be anything you want to be" necessarily means "...and you can afford to pay for everything you dream also".
I would agree with that! I would also make the point that parents nowadays feel like they "need" to spend very lavishly on their children. Companies have gotten very good at convincing parents they "need" all this extra stuff for their kids and more space to store more stuff. I grew up in a family of 5 in 1,200 sq/ft apartment. Nowadays my friend (who also has a family of 5) is moving out of her 2,500 sq/ft house because her family "needs more space." Somehow my generation and my parent's generation grew up with a lot less and still made it to adulthood. You can't discount cultural influences.
(I also think the need to live in a "good" school district is very overrated and I was in a very, very bad school district my whole childhood.)
Well gosh, maybe you have to actually do something to make financial stability happen instead of just expecting that it will magically materialize one day when you hit a certain age.
It used to be that, if you wanted to make it as a writer, you got a job at a factory or a restaurant or something to pay the bills while you tried to make it as a writer. (It was called a "day job".) You wrote before or after work, or on the subway to or from work - all the time you could find, in fact. You didn't have much of a social life, because all your spare time went into writing.
And, reading the article, the author shows a lot of evidence of "not doing something". She expects to be able to make a living as a writer right out of the gate. (In fairness, she did have an actual magazine job at one time.) She's buying wine at bars and $8 coffees, and then she doesn't have enough money for renting an apartment. It's like she's paying no attention at all to what she's doing financially, and then she's surprised that she doesn't hit that well-moneyed point when she expects financial stability to appear.
So that's the element of truth in what you say. The not-completely-true part is this: An awful lot of good-paying, long-term-stable jobs have disappeared, and they aren't coming back. This makes it considerably harder for large chunks of the population to make it to that relatively-well-moneyed point of stability.
We’d have $8 drip coffee in the mornings with a rosemary or lavender scone, or something else ridiculously fancy, rubbing shoulders with the people our age and older who actually made money.
Pick up any guide on how to get ahead in business or sales, and it will include advice to project an air of success and engage heavily in networking activities. Now I'm personally pretty frugal, but that in itself can be a limitation. You're not likely to meet your next hot netowrking prospect standing in line at Dunkin' Donuts, even less so making coffee in your kitchen and hunching over your computer at the library.
I'm not saying the way to success is to go out and spend yourself down on fancy coffee. but look at how so many startups operate; they set up very very nice work environments and then burn through their runway cash hoping they can innovate enough to attract another funding round while also attracting talent by creating a great team with a great place to work. This writer is just trying to leverage the same approach that is promoted all over the place. I don't think she's doing a very good job of it, but if you want to meet people who can advance your career then you need to put yourself out there and putting yourself out there costs money.
Maybe it's not best to follow the all-or-nothing strategy that works for startups (or, should I say, that works for the VCs that fund them because they can spread their risk over many investments).
If all the jobs that you have available are part-time and no benefits, where you have to have a minimum of two to make ends meet, that does not leave you much time to do anything else but hustle for your next gig; not to mention the vulnerability inherent in their no-benefits nature, no healthcare, likely very little sick time or time off etc.
Not having a social life for people in the "gig economy" also seems like a very bad decision, because if your network is not large it will be very difficult for you to find your next part-time gig when one of your current ones ends. As much as a $8 something is a lot of money, if that $8 enables you to meet somebody that knows somebody that can get you a gig it might be a necessary investment unfortunately.
The margin for error nowadays is extremely thin: some years back let's say you made a bad decision and went for an "unmarketable" degree, if you finished it you were still very likely to get a better-than-minimum-wage job, and it would be extremely unlikely that you'd be in any significant debt. This job would also likely have been full-time, and paid enough for you to have a modest lifestyle without having to depend on handouts, couch surfing, subletting etc. etc.
Until not that long ago a lot of people were able to put themselves through college by working summer jobs, that does not seem as realistic nowadays with the costs involved.
Also nowadays once you get out of college what next? entry-level jobs that lead to a full time career are few and far between, factory jobs are a shadow of what they once were, there are a plethora of "gig jobs" but they don't really allow one to consider things like settling down and having kids due to their temporary nature.
As much as the author of the article might have made some mistakes (who doesn't) it still doesn't disprove their thesis of the "gig economy" not fostering a stable and predictable life path, or at least not as stable and as predictable as it used to be one or two generations back.
In the author's case, the cause of being poor is high expenses (student loan debt, mainly) and low income.
I dislike the burden of ownership. Sharing can decrease expenses - for example, living with a roommate. Change driving habits and suddenly you're not as dependent on a car. (I do both these things BTW - the 90% of after tax income I don't spend I invest.)
It seems like the author's perception of poor is "not owning her own primary residence." Perhaps that is a common perspective.
But redefine wealth to mean "controlling cash flowing assets" and I can see how the sharing economy, combined with creativity and planning, actually helps in wealth-building.
That's what any sane definition would be. A lot of people seem to use the bizarro-world definition of wealth as "owning cash-gobbling, depreciating assets", such as cars, clothes or (in many cases) houses. Basically they've mistaken the trappings of wealth with the causes of wealth, and then become confused as to why they're not wealthy.
The "sharing economy" has always just been a PR term. I like Airbnb and Uber as services, but it's not a reinvention of human economic interaction. How does a "sharing economy" differ from a rental economy? How does a "sharing economy" differ from any market where people produce services for each other based on reciprocated exchange?
A lot of people working in software are building things that, in the aggregate, disempower people and transfer even more power into the hands of the owners of capital.
I know someone who, fully aware of the consequences, is helping build something to replace many food service industry workers with robots. It's a direct transfer of wealth from workers to the owners of capital. I won't work with him, on anything, because of this.
Why are we building this world? What are we thinking?
Information technology doesn't do that, broken social systems do that.
With a non-broken social system, the same automation would be empowering (Unconditional Basic Income is one element proposed as part of some proposed ways of un-breaking our social systems in this area.)
Software developers -- as citizens, especially in democracies, representative or otherwise -- ought to be aware of and engaged in solutions to broken social systems, but one shouldn't blame the effects of broken social systems on information technology.
Food workers tend to be minimum wage workers. Minimum wage really stands for minimum living wage which is different from place to place and somewhat artificial (e.g rent). If minimum wage workers could be paid less, the "owners of capital" would (because they don't generate that much value)
Example: if you order a 9$ burger and it costs 5$ to "manufacture" a burger (food processing, shipping, preparation etc.) and 4$ to have a minimum wage workers assemble it; by eliminating the minimum wage worker, eventually the price of the burger will go down.
But who will buy burgers? Automation/technology is about turning goods into commodities. Eliminating scarcity.
So, yeah, I would work for the guy killing minimum wage jobs because without him, 10-15 years from now, you'd be paying 25$ a burger and most of it will go to the minimum wage worker making 15$/hr doing a job a machine could do.
I won't bother to argue how mind numbing those jobs are.
The problem is that nobody's really interested in what happens to the low-skilled worker once their job gets automated away. Take a walk through the Tenderloin in San Francisco some time and ask homeless people what they used to do before they became homeless, and see how the "benefits" of automation have worked out in practice.
The pariah class, represented in my mind by the number of chronically homeless people, the prison population, or people who work in the informal economy because they can't get work due to either of those conditions, has grown since the 70s, I believe in large part because of automation. And relative poverty in the U.S. is getting worse, not better.
I don't disagree with the potential benefits of automation. I just wonder whether we're really paying attention to who's receiving those benefits.
I don't think your notion of transferring wealth from workers to the owners of capital holds much weight in the context of a sharing economy either. It seems to me that a sharing economy is simply a more decentralized way of doing business, in which individuals are leasing their property or providing their services more directly to consumers than before. A centralized economy still provides wealth from workers to the owners of capital (rental car companies, hotels, taxi medallions, etc), perhaps more so than a sharing economy does.
I basically agree with you, that automation could be profoundly empowering. But right now it isn't, unless you happen to control the automation technology.
You could have made the same argument before the industrial revolution, or massive improvements in communications and the internet, but I think we've been better off as a result. of those improvements. People have much better access to information/education and have a wider platform for free speech, as well as being able to live longer.
Hopefully you find writing software more meaningful and enjoyable than the much harder labor jobs that was more common 100 years ago. It could be that an automation revolution, could better enable you to better financially support yourself in those things that you really like to do, and that are harder to automate, since those may become much more valuable in a more automated economy. (Just as music, writing and cooking are arguably more financially viable occupations for more people today than it was 100 years ago)
Maybe. The newly created jobs don't necessarily appear immediately or provide a smooth transition for the displaced worker though. This can cause a lot of disruption in peoples' lives and may be a huge inefficiency of the system as a whole.
A challenge would be to figure out how to eliminate the disruption caused, while still 'innovating' and 'progressing'.
I think this is a good question. It really made me think. Why did we invent a steam shovel when it put so many ditch diggers out of work?
I think the answer is because you can build things with a steam shovel that you could never, ever build digging ditches by hand.
It may not be immediately apparent with some forms of automation, but I think that's the driving force behind all technological progress.
What if we want to deliver nutritious, affordable food to every person on the planet? Is that economically feasible with having a part of the supply chain rate-limited to a human capacity? I don't know, but I think probably not.
In the short term, some people might be out of work. In the long term, even poor people today have a higher standard of living than the richest people of a couple hundred years ago could dream of.
In my mind, it's more the latter. The ditch diggers are grown adults and should be capable of taking care of themselves.
The paternalistic approach has been tried, but it has some unpleasant side-effects e.g. Ford spying on his factory workers to monitor their behavior in their off hours. Personally, I'd find it infantilizing.
From the employer's perspective, it's not much of a choice. If a steam shovel exists, you can buy one and lay off your workers, or you can wait for your competitor to buy one and put you out of business, then you lay off your workers anyway.
Quite simple: because if we don't want to end up under the bus ourselves, we need to throw the underskilled masses there first and try to buy room to breathe.
We can't save them, but maybe we can save ourselves (maybe).
But I can't clearly see a way to get to there from here. We need to find a way to tax automated productivity as well as labour. We need to find a way to reverse the wealth concentration trend.
But we can try to build this world in the ways we know how, we can automate more and more and more and try to steer the future in the direction we wan't, because the alternative, some weird sort of labour preservation is clearly wrong.
>But I can't clearly see a way to get to there from here.
We can't leave that part up to chance! I think this is the future many of us want, but it is not inevitable.
That's not hard (well, except in terms of the political challenge due to its impact on the already politically powerful.) Just tax capital income the same as labor, rather than treating it preferentially.
The biggest problem is that there are no political entities fighting for this future. Both the left and the right agree that low unemployment is the highest political goal, and the idea that only a job and a career gives social status is very firmly entrenched in our society.
And even if there were political entities fighting for it, the current moneyed elite is very much against a higher capital gains tax.
He said "If you apply that reasoning everywhere, then almost nothing would be allowable."
The intention is not to disempower, but to make wealth for himself and his family. To buy and enjoy material things. (I wouldn't know, as I don't want kids and my tastes are spartan, but these are reasonable desires.) He's not trying to take advantage of anyone.
If someone invents something that eliminates a task/work/something, then they won't pass on all those costs to the general public. Not unless it suits them to undercut competitors. And that's just one example. On the other hand, you also have business owners that regularly pass on savings to their customers, even when not necessary.
If they can manage to do that, good for them. But let's not impose our unrealistic ideals on free-thinking individuals "just because it's good".
I also don't think the systems we're building are a result of "free thinking", I think it has a lot more to do with what's getting funding.
You don't have to accept that the sky is blue either, but we are all the descendants of those who obtained the most resources for themselves and their offspring.
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And my argument wasn't that competitiveness is natural. Simply, that individuals are free to do what they want. And you arguing what they should/shouldn't because of some noble ideals that you have and they obviously don't because of their choices, isn't feasible, good, or moral.
"But in fact we’re enriching the owners of whatever app or platform we’re using, becoming just a data point on the path to their payday while we age without assets. It’s their world, and we’re just renting it."
The argument against sharing economy isn't that we don't own any more. This was what many wanted from the start. It's that some models destroy other important economic frabrics (such as phantom scarcity created through empty airbnb flats). The argument about reducing workers rights and provisions is also valid. But one effect of decentralized digital labour is that unionisation becomes a more effective form of protection. So on this point, it will get interesting.
We are seeing a shift toward a more idealized, libertarian market. The problem is, in such a market, the only people getting richer are the owner class.
Indeed many of the people participating in the gig economy are essentially in the same position as a day laborer. Across time and space this class of people has always been the most vulnerable to socio-economic tumult.
The image of rural landless laborers in India and Ethiopia comes to mind. They were always the first to die in a famine.
Of course you don't. You just told us about how you have $8 coffee. Our grandparents ate canned vegetables and raised two kids in a 1500 sq ft home and you're complaining that you can't keep up with the Jones' while you sip on $8 coffee on a freelancer writer's budget. This isn't a generational problem, this is a complete lack of understanding of personal finance.
Look, I, as a Millennial, am aware that the average wage has decreased since the 70s. I'm also aware that being a software developer and making software puts other people out of work because we are automating the things that used to be done by hand. I'm further aware that I've had a stable enough upbringing from a middle-class family to teach me a few things on frugality, saving, and making the most of your education. Things definitely seem to be harder than they were, but whatever thesis the author was trying to defend completely went out the window when I read the quoted statement.
I'm part of this generation and I think this sentiment is the the thing I dislike most about my cohort. Nobody ever promised us anything like that. The story was you have the opportunity to be what you want to be, provided you work for it. For some reason, the kids I grew up with took that to mean they deserved whatever they wanted and that there would be no sacrifices involved. It's cliche, but entitled is the most appropriate word for millenials.
It's a moot point though; we were also empowered to question authority and think for ourselves. Anyone who did that realized that we can't all be rock stars.