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Wednesday, September 27, 2017

Millennials Aren’t Killing Your Favorite Business

Spoiler alert: creative destruction is all part of the market process.

Millennials are shaking up traditional industries and refusing to conduct business as usual. As a result, our economy is becoming more specialized and better able to cater to the unique interests of the individual. But with each new millennial innovation comes a displaced industry that can’t keep up with new competition.

And as outdated industries are being replaced by the new, the world now has access to ever-improving commodities. This should be cause for celebration. But instead of praise, millennials are being chastised for murdering the industries their innovative ideas are replacing.

Over the last several years, young people have been blamed for ruining all the things.

Market Preference

Each day, an article is released accusing millennials of “ruining” previously well-established market commodities. Oddly enough, the rest of the country seems to view this in a negative light rather than seeing the value millennial consumers and entrepreneurs bring to the market.

Over the last several years, young people have been blamed for ruining grocery shopping, napkins, chain restaurants, diamonds, and even boobs. But this is only a small percentage of the comprehensive list of sectors millennials are “responsible” for destroying.

Young people born between the years of 1980-2000 now make up the majority of the American consumer base. This means the millennial generation is largely responsible for fueling market demand. The way we spend our dollars is impacting which businesses survive, and which do not.  

And, as demonstrated by our market preference, we have very different wants and desires than the generations that preceded us. But our willingness to spend $20 on avocado toast rather than purchasing a home does not make millennials the enemy of the minority of consumers. On the contrary, millennials are arguably making life more convenient by means of creative destruction.

Creative Destruction

To blame millennials for ruining entire industries would be somewhat understandable if we weren’t also replacing those industries with options that are far better, more efficient, or more practical to our budgets.

Joseph Schumpeter describes free market capitalism as the “the perennial gale of creative destruction.” 

When millennials were denounced for the plummeting sales of napkins, for example, it was simply because millennials preferred to use paper towels instead. Previously, households had purchased both paper towels and paper napkins. Millennials saw this as a costly redundancy and corrected the problem.

Likewise, when articles lambast millennials for ruining the supermarket industry, primary attention is given only to the supposed destruction of that industry. If critics would instead focus on the innovative improvements that have sprung up in the wake of these dying industries, they may not be so quick to judge.

Sure, young people may not be grocery shopping as much as older generations did, but we still have to consume food. And that food has to be purchased from somewhere.

Millennials have hectic schedules and many hold multiple jobs in order to pay off student loan debt while still earning a living. The lack of precious time has led millennials towards quicker and more convenient alternatives that do not involve having to both grocery shop for items and then having to prepare a meal.

As a result, the popularity of meal delivery services in on the rise, providing a viable alternative for young professionals.

Companies like Blue Apron and HelloFresh have been extremely popular with younger consumers because they eliminate the hassle of grocery shopping. Instead, millennials select from a menu and have the ingredients sent to them in pre-measured containers. All the consumer need do is open the box delivered to their front door and follow the instructions.

This replacement of one commodity for another is what economist Joseph Schumpeter called “creative destruction.” Schumpeter even describes free market capitalism as the “the perennial gale of creative destruction.” In order for economies to evolve and grow with the wants of consumers, outdated products and services must be destroyed in order to make room for the new.

Millennials are consumption pioneers, boldly trying new products and then sharing our experiences with other consumers.

This is exactly what millennials are demonstrating today. While critics may focus only on the loss coming from this destruction, what we should be focusing on is the gains. New jobs are created and new commodities contribute to the foundation of what will someday be the next round of this destructive creativity. It is all part of the market process.

Consumption Pioneers

Older generations may be hesitant toward change, but luckily, millennials are making the adoption of new products and services that much easier through feedback.

Young people have an opinion on everything and we want to share it with everyone. As a result, we have become consumption pioneers, willing to boldly try new products and then share our experiences with other consumers.

Whether feedback is posted online or through word of mouth, it has been helpful in easing the fear that comes with the adoption of new products. Individuals are far more likely to try a new service if they know someone who has tried it first and can attest to its quality.

Restaurants exist to cater to the demand of the consumer, and not the other way around.

When the ridesharing industry came into fruition, millennials were among the first to try its services. As a DC resident unwilling to pay for a cab, I used Uber frequently in its earlier days. My parents may not have understood why I felt so comfortable jumping into an “unregulated” cab, but the service spoke for itself. For me, it was a safer and less expensive option than hailing a cab on a dark lit DC street.

After a year or two of being a loyal Uber patron, my parents called me one evening to talk them through their first Uber ride. A few months later, they were already using Airbnb instead of traditional hotels. Once they spoke to me and got a firsthand encounter of what they could expect from ridesharing, their opposition to it disappeared.

Over the last several years, as millennials were coming of age and becoming major market participants, chain restaurants began seeing a major decrease in sales. This was recently met with negativity from media outlets who were blaming millennials for their favorite restaurants shutting down. But just like Uber depends on consumers willing to trade money for a ride, restaurants exist to cater to the demand of the consumer, and not the other way around. If there are not enough consumers buying your product, you have no reason to keep your doors open.  

But when it comes to the millennial market destruction, what is most interesting is what happened after millennials stopped patronizing grocery stores: their parents followed.

Using census data, economist Mark Perry found that for the first time on record, consumers were moving away from using grocery stores and instead using their food budgets eating out or using meal delivery services. So even though there was initial hesitation, just like my parents with Uber, older generations have eventually gotten onboard with younger market trends.

Sure, millennials may be exhibiting different market preferences than our parents. But that doesn’t make our ideas dangerous or inferior to those that came before us. By catering the market to our specific modern needs, we have made the world a better, more convenient place to live. 

So instead of getting worked up next time another chain restaurant bites the dust, thank a millennial for providing you with market options that won’t make your stomach hurt afterward. 

  • Brittany is a writer for the Pacific Legal Foundation. She is a co-host of “The Way The World Works,” a Tuttle Twins podcast for families.