The world economy is corrupt to the core. While this may sound hyperbolic, it doesn’t really matter whether it’s entirely accurate. This is the perception a large group of millennials have. Let me rephrase that, what will soon be one of the largest generations alive has little desire or even the ability to invest in our economy. That’s a scary thought. Only 26% of those under age 30 are invested in equities. Reasons for this vary, but the biggest ones are that people have a negative view of the current economic system or they just don’t know enough about investing to care. It only takes 10% of a population to convince the other 90% that change needs to happen, and well over 1 in 4 is already fed-up with the system we have.
In light of data leaks regarding widespread corruption such as the Panama Papers or the Unaoil scandal, it’s become quite clear that the wealthy are not bound by the same rules that an average investor is pressured to follow. We’re constantly bombarded with media coverage of how awesome the economy is because the media outlets are funded by banks and corporations who have a large vested interest in seeing their wealth appreciate. For those who do invest, they’re likely to just chuck a few percent of their earnings into a 401(k) or IRA and try not to waste anymore time thinking about it. That’s what professional economists and hedge fund managers are for, right? For those who delve a little deeper, the true extent of the corruption becomes glaringly obvious. Bond and asset prices are tampered with, currencies are depreciated, commodity prices are fixed. And that’s not even taking into account the constantly revised economic growth forecasts. It’s as if economics has purposefully been complicated to ensure the rich get richer and the poor and apathetic lose everything.
Corruption isn’t the only reason millennials aren’t investing. In fact in a survey reported by Bankrate, 53% of those under 30 said the reason they’re not investing is because they simply don’t have the money to do so. Another 21% said they don’t know enough about stocks. With student loan debt bubbling to levels never before seen, it’s hard to disagree that millennials are not well-off financially. However, they may never be if they don’t invest early in life. Even putting the few hundred dollars they were going to spend on the newest Apple product into the market is better than nothing. Where they should put their money is the million dollar question though. Many, including myself, believe we’re in the midst of one of the biggest financial bubbles of all time, propped up by foolish central bank policy that is keeping the market from naturally correcting. Perhaps instead of investing in a share of Apple, millennials should put some money into gold mining companies, temporarily into volatility indexes, or at the very least a safer, high dividend paying investment like Realty Income Corporation’s famous O. That’s a topic for another article however.
As far as not knowing about stocks, that’s an easy problem to fix. Millennials need to research. The easiest way to learn about investing is to actually do it. This can be with a practice portfolio like the one offered by Updown or with real money in a commission-free, convenient investment app like Robinhood. Instead of surfing Facebook for two hours, millennials should read about the Facebook IPO or Facebook’s earnings. Instead of liking a picture of a cute cat, they should read and upvote someone’s post in Reddit’s personal finance subreddit. Actually, scratch that; do both. Who doesn’t like a cute cat picture every now and then?
There are multiple resistances to the financial status quo, and there is hope. The Presidential campaign of Bernie Sanders is a prime example of the discontent over the economic situation in the United States. His promises of campaign finance reform, wealth redistribution from the top down, and a Wall Street tax have all struck a note that’s resonating strongly with dissatisfied millennials. Whether his ideas will truly fix things or even get a chance to come to fruition remains to be seen. However, even if he doesn’t win the Democratic nomination let alone the Presidency, the movement behind his campaign will not die and will only evolve with yet another reason to be angry at the system.
Another example of a resistance does not have a face behind it. Instead, what has rallied many to this cause is the lack of a face and the radical new ideas and technologies available. Most by now have heard of Bitcoin and its mysterious, unknown creator, Satoshi Nakamoto. A smaller percentage of people have actually delved into his ingenious blockchain technology by reading the Bitcoin white paper or by buying a bitcoin. An even smaller amount of people are completely ecstatic about the possibilities this new economy offers. There are hundreds of so-called altcoins out there that promise benefits over vanilla Bitcoin and to build new applications, data layers, and decentralized organizations on top of blockchain technology. Unfortunately, it’s difficult to separate the wheat from the chaff and differentiate the “pump and dump” coins, reminiscent of penny stock trading, from the startups that have real potential. Another complicating factor of this economy is the apparent tech-savvy required to get into it. It’s becoming easier by the day to invest in some of these startups though, and the organizations who are actually contributing something valuable are beginning to get more and more media coverage.
One promising example is Ethereum, an advanced blockchain that allows for dApps and DAOs (decentralized Apps and Decentralized Autonomous Organizations) to be built. Ethereum essentially provides an even more programmable version of money than Bitcoin. It allows developers to create apps with their currency or equity built in with no need for external, centralized, and most importantly corruptible bodies to mess things up. With DAOs, anyone invested in an organization has a voice and can vote for projects, allocation of funds, or the overall direction for the organization. Ethereum promises to work with any cryptocurrecy and claims that its Ether token is not meant to be a currency itself. It’s likely it will integrate with Bitcoin or something similar in the future. For more about Ethereum, check back here for our upcoming article.
The most beautiful aspect of this new crypto-economy is not just the possibilities in financial disruption but most importantly the democratization of money. With cryptocurrency and cryptoequity, anyone with a wallet can invest in a company should that company allow it. There is no need for accreditation or minimum investments of a million dollars. If you want to put $0.50 into a company like Slock.it, you can. And that $0.50 will allow you a voice, even if it is small, in where that company goes. You don’t have to sit on the board of directors or have a majority stake in the company. All you need is an internet connection.
“How does this all tie in to millennials?” you might ask. Millennials are the most tech-savvy generation that’s ever lived. Most don’t leave the house without their smartphone, and they probably have Square Cash, Paypal, or their bank’s native app on that smartphone. They are used to digital money, and they have a keen intuition on how to navigate new user interfaces. To pique the interest of millennials and get them investing again, it has to be fun, and it has to be fair. The mobile payments space is making this possible with apps like Acorns, where you can invest spare change from your purchases in the stock market, or the previously mentioned Robinhood, where you can trade stocks without paying ridiculous $10 commissions on every trade. There’s even a Messenger-esque app called GetGems that pays you to message friends. To grow their investment portfolio, millennials don’t want to have to go to the bank and sit down with a financial adviser that they know is also looking for profit. They want to be able to hear about the next big thing, open up an app on their phone or tablet, and buy a share or two all within a 10 minute span.
As the investment world changes and initiatives like Overstock’s tØ blockchain based settlement layer integrate this new cryptoeconomy into the legacy economy, it will become easier for everyone to invest with nothing more than a smartphone and a little bit of research. Finance will become transparent and far less corrupt as organizations publish their information on immutable blockchains. We won’t have to worry about some rogue collective “seasonally adjusting” sales numbers for a company to make it look more attractive because, in this new economy, the most transparent corporations will be the ones people remain loyal to. If they’re smart, millennials will remain on top of the latest developments in finance and will learn that investing can be fun when the barriers to entry are so low. We all have free reign over a wealth of information on the internet; let’s study it and better our world. As the shadows of corruption are gradually illuminated, remember that this is only the beginning. This is the dawn of a new, global economy.