By: Jeff Pollock
June 15, 2016 

Defined as anyone born between 1981 and 2000, millennials now represent the largest generation in the United States at 75.4 million people, surpassing the 74.9 million Baby Boomers born between 1946 and 1964. This demographic spends $170 billion each year, but certainly not the same way their parents do.

The materialistic underpinnings that defined previous generations doesn’t accurately describe millennials. In fact, the Duke of Cambridge himself, born in 1982, said last fall, “There’s a lot of … people living with an enormous amount of stuff that they don’t necessarily need. The materialism of the world I find quite tricky sometimes.”

According to a study conducted by the Harris Group, 72% of millennials would prefer to spend money on “experiences” rather than possessions. This would include things like travel, concerts, or gaming. In trying to understand this change in behaviour, the poll also concluded that millennials exhibit a “fear of missing out” and the need for recognition (perhaps measured by the volume of “likes” that follow a Facebook or Instagram post).

While the economy will experience a structural adjustment in the coming years to reflect this behaviour, so too will the workplace. A Deloitte survey found that 66% of millennials would be open to leaving their present workplace by 2020, and only 16% expect to remain at the same organization in a decade. Beyond feeling “underutilized” and “undeveloped as a leader,” many participants attached an importance to experience working in a “job with meaning.” Not only do they want to be challenged in their workplace but they expect to learn new skills at the same time.

A demand for experiences in lieu of materialistic possessions is reflected in the data. According to the US Department of Labour, millennials own fewer cars than any other generation born after 1929, rent apartments (two-thirds), spend the largest relative share of their budgets eating out, and buy less apparel than the Baby Boom generation.

This impacts your investment portfolio from an obvious angle. The future will see significantly more dollars spent on experiences including travel, concerts, social media, and gaming. The decline in car ownership, jewelry, and apparel will likely continue. Vestcap has identified several attractive investments in the “experiences” segment. While finding a growing company is one part of the equation, paying an appropriate price is the other. As we continue to find opportunities in the “experiences” space, underlying growth as well as an appropriate valuation will guide our purchase (and sell) decision-making.

 

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