Our Current "Millennial Lifestyle Sponsorship"

David Trammel's picture

Greer has written before at the ADR and now at Ecosophia, that some point soon the real costs of things like the Internet will begin forcing its price higher, to the point that few will have access. Right now ad revenue is subsidizing the cost of Internet access. I've seen an example of this with the most recent renovation of my local community library. Their extension ended up being entirely a room filled with computers, to allow people without home Internet to access it there. I expect that as rates increase, more people will drop their private service and go with part time public access. As they leave, ad revenue will fall (since they will be using the Internet less), which will raise rates, which will make more people leave, and on and on.

I had not thought though of the ways that other services subsidize their users. Here's a good article highlighting the effect.

The Millennial Urban Lifestyle Is About to Get More Expensive

"If the company spends millions on podcast ads, its user base and revenue base will grow and grow. Outside analysts will gasp and marvel: This meal-kit thing is on fire! But look closer: If it costs $500 to add a new user, and the typical marginal user—like you—only spends $400 on meal kits, there is no path to profitability. The road leads to the red.

This example is not a hypothetical. The meal-kit company Blue Apron revealed before its public offering that the company was spending about $460 to recruit each new member, despite making less than $400 per customer. From afar, the company looked like a powerhouse. But from a unit-economics standpoint—that is, by looking at the difference between customer value and customer cost—Blue Apron wasn’t a “company” so much as a dual-subsidy stream: first, sponsoring cooks by refusing to raise prices on ingredients to a break-even level; and second, by enriching podcast producers. Little surprise, then, that since Blue Apron went public, the firm’s valuation has crashed by more than 95 percent.

Blue Apron is an extreme example. But its problems are not unique. WeWork’s valuation crumbled when investors saw the company was losing more than $1 billion a year. Peloton’s stock got crushed when investors balked at its growing sales and marketing costs. Lyft and Uber may collectively lose $8 billion this year, in large part because the companies spend so much money trying to acquire new customers through discounts, promotions, and credits. Unit economics will have its revenge—just as it did after the last dot-com boom.

For years, corporate promises rose as profits fell. What’s coming next is the promise-profit convergence. Talk of global conquest will abate. Prices will rise—for scooters, for Uber, for Lyft, for food delivery, and more. And the great consumer subsidy will get squeezed. Eating out and eating in, ride-hailing and office-sharing, all of it will get a little more expensive. It was a good deal while it lasted."


Its not just the Millennials whose lifestyle is subsidized. I am sitting here listening to music on Youtube while I write, not even thinking that Youtube is basically paying me to use their website. When we hit the next stair step downward into further collapse, I wonder what other services I take for granted will go away or become expensive.

mountainmoma's picture

In areas close to affluence, like where 2 sets of my millenial offspring live, it is so easy to get free stuff, dressers, bricks for making a walkway, other furniture and household items. This is because the older people with more money keep redecorating or upgrading. One they are more careful with their money, or stop the redecorating and new dishes, it is way more expensive for the young folks and poor folks who are getting by with used stuff

mountainmoma's picture

It is unfair and unsustainable to have different prices for the same service at hospitals. So people who are seen to have assets are subsidizing people on medicaid, for example. They are subsidizing young folks kept on their parents health insurance plan until they are 26 also. That law raised everyone in that insurance pools rates.

Yes, "healthcare" has alot of bloat and people who do no medical work being paid. At the same time, people are being subsidized.

I do not believe making the system one nation forced buy-in insurance scheme will change this, that will still have people perceived as having more assets subsidizing everyone else. Usually it is the middle class who is hurt most by all this, at some point, likely soon, they just cant do more. Taxes are exhorbitant for that group.

College education also has a weird subsidy going on where it is basically free for low income, no matter what their odds are for a job from the chosen degree. While guess whos millenial kids get no college, state or federal grants and just pay the high taxes and high tuition to subsidize. Yes, colleges are spending too much on "fluff" to compete for students, new student union buildings, large amounts of diversity staff, etc..... so maybe they can cost cut some when the subsidizes stop.