The stuff economy

After a decade of being told to value experiences over products, we're entering a new era of goods consumption.

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And now, goods and services.

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The story we tell about How the Economy Works Now always provides cover for something else.

In the last decade, this story became all about The Experiences Economy.

During the 2010s, millennials moved into their prime consuming years. And instead of buying a home, having 2.5 kids, getting a minivan and some life insurance, this generation would be focused on doing things, having experiences. Or so we were told.

And while many of these experiences marketed to millennials as essential to living a full life came down to eating at restaurants and renting Airbnbs, this framework informed a whole generation of urban planners, commercial real estate developers, social networks, thought leaders, investment theses, and accepted truths.

Downtowns needed to be walkable. Coworking spaces needed to be everywhere and large common areas in converted-factories-turned-condos-for-young-families were a must. Don’t hire a commercial painter to do the space, hire a local artist who will tastefully include a hashtag in the wall’s main mural. All spaces were becoming public and all spaces needed both a physical and social identity.

And then came the pandemic.

Of course, no one plans for a pandemic. Or at least no one trying to market Nashville or Denver in a specific way to a particular subset of young professionals plans for a pandemic.[1]

And so but this experiences economy — like all phases of economic truth that come and go — was built on a specific set of lies we’d told ourselves about How the Economy Works Now to provide cover for the moneyed interests that had taken certain things away.

The housing crisis, if we get down to it, resulted as the outgrowth of policymakers’ extreme efforts to create a larger middle class by brute force. If a home defines middle class security, the goal was to create a larger middle class by opening access to that asset.

But homes are downstream from this security. The jobs and careers that would’ve traditionally enabled people to afford these homes had been systematically removed from the economy to protect corporate profit margins. The bubble and crisis resulted from a view that said if we just put people in homes they can’t afford the “doesn’t have a job that would enable someone to afford this” part would just go away. Which it did not.

So if we stylize the backdrop for the housing crisis as “get a home, become middle class,” then the 2010s became something like “have an experience, become an upwardly mobile knowledge worker.”

In the 2010s, a sluggish labor market recovery hamstrung by austerity at both the government and corporate levels created a glut of overeducated workers who undercut one another on pay. A lack of affordable housing was augmented by amenities meant to justify inflated rents in the cities people flocked to. In a world of increasing emphasis on experiences over things, the city itself became a consumable good bid up to new highs.

And, well, we know what happened next.

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In a pandemic where the virus is spread by extended close contact with other people, experiences don’t work. At least physical ones.[2]

And so we’ve seen a reversion by consumers to the form I learned to scorn as a kid and young adult: the American stuff havers.

Last week, economists at Wells Fargo predicted the 2020 holiday season would be a record because gifts are typically things, not experiences.

And in a world where a pandemic puts a freeze on all the experiences that attracted our dollars and attention, goods win.

[We] are forecasting holiday sales will increase 9.0% in 2020, which would be the largest increase on record. That is not to say that things are fine for all retailers, (they are not), nor is it to say that consumers are in excellent financial shape (they are not, particularly not toward the lower end of the income spectrum).

However, a forced thrift that has curtailed spending in the service sector and cancelled travel plans frees up income for more spending on gifts. After the anxiety and stress of a year defined by the virus, natural disasters and a divisive election, we suspect holiday sales will also benefit from a yearning for comfort and normalcy, which many consumers may associate with having a few more gifts under the tree.

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The world’s biggest public company also gives us a nice lens through which to see this paradigm shifting in real time.

Last week, Apple reported a record quarter for sales of iPads and Macs. Meanwhile, iPhone revenues were slightly light of estimates. We could caveat this away forever on the timing of the new iPhone impacting these numbers while at-home schooling and work creates an inflated and unsustainable demand for iPads and Macs and thus argue that nothing matters so buy the stock. Sure.

But if we look at Apple’s products in their crudest form, iPhone, Watch, and AirPods are all an experience. Macs and iPads are things, stuff.

When you go out and have a 2010s-style experience, you bring the iPhone to document it. When you stay at home all of the time to enjoy 2020-style social distancing, you can plant the Mac on the desk and bring the iPad into the other room to watch Netflix alone.

And don’t just take it from me. Here’s Apple CEO Tim Cook:

We continue to be bullish on what Mac and iPad can do… I think the moves that have taken place to remote learning and remote work are not going to go back to normal. Normal will become something different because I think people are learning that there are aspects of this that work well. And so I don't believe that we're going to go back to where we were.

And I think that means that iPads and Macs are even more important in those environments. The growth in both of these last quarter [was] phenomenal, as you can tell from your...data sheet with Mac at 29 [percent growth over last year] and iPad at 46 [percent growth over last year]. These are tremendous numbers.

And as [Apple CFO Luca Maestri] said, the September quarter was the all-time high for Mac in the history of the company and...not by a little bit, by $1.6 billion. And so it was a substantial difference. Now we did have an aggressive promotion for college students that were going back to school. And so that was an invariably part of it. But I think the other part of the remote work thing is not something that's going to step back to the way it used to be anytime soon.

Experiences, in other words, are simply not going to return to the form they once took. As David Chang said on his podcast back in May, February is never coming back.

And so it is that the U.S. consumer has enthusiastically returned to the world of stuff.

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In its way, the Fyre Festival is sort of the logical endpoint for where the experiences over things meme ends.

The event defines an entire generation of consumer habits in which the secondary layer of the experience — which is the experience’s chronicling on social media — becomes the primary product. If we value experiences over things then there doesn’t even need to be a thing, in this case a music festival. All we need is something to document, an experience to be had. A cheese sandwich, as it were. What we take with us are the good grams and good tweets we’ve all now forgotten. An experience, a feeling, a mood.

But instead of experiences and feelings and moods what we have today is a consistent level of dread about the virus’ spread with our hopes pinned on a vaccine and the days getting shorter and colder.

Our pre-pandemic economy pushed us towards a physical representation of how the internet presents the world to us. A world that is available for exploration, accessible by a plane ride made affordable by the right credit card rewards program.

Entire industries cropped up around traveling the world on a sponsor’s dime, taking nice pictures of the place, and not caring what the locals think. And the tailwind these industries rode was one of an understanding, a belief, that our dollars should be spent doing, not having.

But now we’re all back to being locals, subject to the forces of nature that keep us physically confined, one way or another.

All we have is having. Doing is out, being is in.

That’s what all the stuff is for.

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1: Apparently our government also did not plan for a pandemic, though I do think that’s in the job description for that group.

2: Do not @ me about the metaverse, Matthew Ball readers.