Skip to comments.Clash of Generations on Wall Street
Posted on 05/31/2014 1:53:58 PM PDT by Kaslin
As boomers and gen-Xers hand over the economic reins to millennials, a once in a multi-generational attitude shift comes with it.
Unlike boomers and gen-Xers whose primary focus was on money and "getting ahead" lifestyles, millennials have more of a depression-era survival mentality coupled with a completely different set of values.
The ensuing attitude change has profound implications, and that is the focus of the Brookings study: How Millennials Could Upend Wall Street and Corporate America.
Let's start with a couple of demographic definitions then a look at the study.
Brookings Study Excerpts
By 2020, Millennials will comprise more than one of three adult Americans. It is estimated that by 2025 they will make up as much as 75 percent of the workforce. Given their numbers, they will dominate the nations workplaces and permeate its corporate culture. Thus, understanding the generations values offers a window into the future of corporate America.
In the future, most Americans, taking their cue from Millennials, will demonstrate a greater desire to advance the welfare of the group and be less concerned with individual success. They will be less worried about being guided in their daily decisions by software and more intrigued by the opportunities it offers. Even without any major environmental disaster, they will display a greater reverence for the environment and less interest in the acquisition of things as opposed to experiences.
It will be a world that is radically different than the one those who wield power today have grown accustomed to leading. The Baby Boom generation, born between 1946 and 1964, has made confrontation the touchstone of its existence. In their youth, Boomers protested the Vietnam War, or fought against those who did. As they aged, both conservative and liberal Boomers polarized Americas politics, making compromise morally unacceptable. Throughout their lives, Boomers have honed conflict and competition to a fine art.
As Boomers begin to leave the corridors of power in Congress and the executive suites of corporate America, they are being replaced by members of Generation X, who are largely devoted to the pursuit of the bottom linepreferring speed over reflection and autonomy over collective decision-making.
Silicon Valley CEOs, many of whom are drawn from the ranks of Generation X, look with disdain on the good old boys network of their Wall Street counterparts and are eager to leverage the technologies they have developed to gain advantage in the marketplace over the older, more established titans of the media and telecommunication sectors.
This is not to suggest that Millennial CEOs are, or will be, any less interested than Boomers or Gen-Xers in assuring the success of the enterprises they now, or eventually will, lead. Rather, it is to emphasize the importance of recognizing the differences in how Millennials define success and the way they make decisions in order to envision the future of corporate America.
Millennials as Consumer-Workers
Cone Communications has been tracking the attitudes of American consumers toward businesses involvement in social issues. As Millennials became a larger and larger share of the marketplace, the idea of cause marketing has evolved from a nascent promotional strategy to the key differentiator, not only in deciding what to buy, but who to trust and reward with brand loyalty.
Cones 2013 survey of over 1,200 U.S. adults found Millennials to be the generation most focused on corporate social responsibility when making purchasing decisions.
Almost all Millennials responded with increased trust (91%) and loyalty (89%), as well as a stronger likelihood to buy from those companies that supported solutions to specific social issues (89%). A majority of Millennials reported buying a product that had a social benefit and 84% of a generation that accounts for more than $1 trillion in U.S. consumer spending considered a companys involvement in social causes in deciding what to buy or where to shop. In 2013, 89% of all American consumers said they would consider switching brands to one associated with a good cause if price and quality were equal. That percentage was 23 points higher than when Cone first did its survey in 1993, at a time when no Millennials were part of the adult population.
Not only are Millennials creating the need for companies to pay attention to their corporate social responsibilities, but they are also leading a shift in buying behavior away from the glorification of consumerism to a more measured view of whats important in life. Young & Rubicams brand attribute survey in 2009 of 2,300 adults found that a majority of Millennials belonged to a segment labeled Spend Shifters. Not only did three-fourths of the Spend Shifters say they made it a point to buy brands from companies whose values are similar to my own, almost all of them (87.5%) disagreed with the statement that money is the best measure of success.
The authors of Spend Shift, John Gerzema and Michael DAntonio, pointed to a major shift between 2005 and 2009, just as the first wave of Millennials became adults, in what consumers were looking for in the companies with which they wanted to do business. Attributes such as exclusive (-60%), arrogant (-41%), and sensuous (-30%) fell from favor while values more associated with those of the Millennial generation rose dramatically.
Kindness and empathy rose 391 percent in these five years, the biggest shift in attitudes ever seen in the seventeen year history of the survey. Other values associated with the generation, such as friendly (+148%) and socially responsible (+63%), also rose dramatically. These shifts in consumer attitudes driven by Millennial values will give every American corporation that wants to attract customers, not to mention workers and investors, no choice but to deliver on a commitment to make the world a better place one cause at a time. Companies will also have to behave a lot more nicely than they are accustomed to in order to deliver those results, more like the characters in Her than those in The Graduate.
Evidence that these attitudes represent a generational shift, not one based simply on age, can be found in a benchmark survey of 1,250 insurance company employees conducted for LifeCourse Associates in 2012. Almost two-thirds of Millennial employees said they wanted their employer to contribute to social or ethical causes they felt were important. Only half of the Boomers and older Gen Xers surveyed felt the same way.
This desire on the part of Millennials for their daily work to reflect and be a part of their societal concerns will make it impossible for corporate chieftains to motivate Millennial employees simply by extolling profits, or return on investment for their shareholders, or even employee salaries. For example, a recent Intelligence Group study found that almost two-thirds (64%) of Millennials said they would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring.
Millennials Think About Money Differently
In its latest study of the Millennial Generation, Millennials in Adulthood, the Pew Research Center found that Americas youngest adults were the least trusting of any generation.
Only 19 percent of Millennials agreed with the statement that most people can be trusted, a percentage that was about half of all other older generations.
A recent survey by MFS Investment Management found that nearly half of Millennials never feel comfortable investing in the stock market. The survey also showed Millennials keep more of their assets in cash, less in stocks, and, in spite of their relative youth, have a shorter time horizonless than five yearsfor their investments than Boomers or Gen Xers.
A report by UBS Wealth Management in the Americas described Millennials as the most conservative generation since the Great Depression with regard to its savings habits. According to UBSs research, the average investor aged 21 to 36 has 52 percent of their savings in cash, compared to 23 percent for other age groups.
Clearly, one reason for this avoidance of the stock market stems from the same experience of extreme volatility and risk that the Millennials GI Generation great grandparents experienced when they were coming of age during the Great Depression. A 2013 study by Accenture confirmed these attitudes, with 43 percent of Millennials identifying themselves as conservative investors, compared with 27 percent for Generation X and 31 percent for Boomers. But the survey also uncovered a deeper reason than just the Great Recession for this cautious investing behavior by Millennials.
The Accenture survey found high levels of mistrust of financial institutions among Millennials and a greater reliance on the Internet, social media, and personal networks for financial advice. As Kelsey Raycroft, a Boston-based Millennial put it, The personal connection is important to me, especially with money stuff.... When I see these commercials with big companies, Id rather go to somebody I trust.
In fact, this deep level of distrust toward the banking industry led the authors of the Millennial Disruption Index to identify the financial sector as the industry most likely to experience severe disruption in its business model. Their three-year research study of more than 10,000 Millennials also found that of the ten least-liked brands among members of this generation four belonged to the nations most powerful banksJ.P. Morgan Chase & Co., Bank of America Corp., Wells Fargo & Co., and Citigroup. Seventy-one percent told the researchers that they would rather go to the dentist than listen to what banks are saying.
Report Merits a Closer Look
There is much more in the 19-page PDF that merits a closer look.
For example, the study contains a discussion of what working 9-to-5 means at a place like Goldman Sachs. The short synopsis is that for the first couple of years, 9-to-5 means 9AM to 5AM, seven days a week.
In the list of companies where millennials would like to work, there are some non-surprises like Google and Apple, but also some real surprises like the FBI and CIA. St. Jude's Children's Hospital, also a surprise, was the number one choice.
Major Attitude Shift
I have been writing about the implications of changing attitudes since at least 2008.
Flashback June 25, 2008: This is what I said about attitude changes in Peak Credit
Secular Attitude Change Underway
There is a secular attitude change happening right now. Boomers close to retirement are now (finally) scared to death as the equity in their houses has been vaporized. School age children are seeing homes foreclosed, and families destroyed over debt. The American consumer, who nearly everyone thinks will be back as soon as the economy picks up are mistaken.
Secular shifts like these come once in a lifetime. Sadly it's too late for many cash strapped boomers counting on equity in their houses for retirement.
Lessons Of The Great Depression Forgotten
The lessons of their great grandfathers who lived in the great depression era were forgotten. Over time, everyone learned to ignore the dangers of debt, risk, and leverage. Belief in the Fed and the government to bail out any problem are ingrained. Bank failures are distant memories.
Anyone and everyone who wanted credit got it, and on the easiest of terms: subprime, pay option arms, reckless leverage, and covenant lite debt and toggle bonds that allowed debt to be paid back with more debt. That's what it takes to hit a peak.
Peak credit has been reached. That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.
It took nearly 80 years for people to get as reckless as they did in 1929. 80 years! Few are still alive that went through the great depression. No one listened to them. That is the nature of the game. The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none.
Children whose parents are being destroyed by debt now, will keep those memories for a long time.
Social and Stock Market Impacts
Peak credit has been surpassed, but a substantial portion of the rise in credit is in the form of student loans that cannot and will not be paid back.
Importantly, millennial attitudes towards cars and other material goods is not the same as their parents. Moreover, student debt and a dearth of high-paying jobs ensures that housing formation will stay depressed, even if attitudes did not change.
As boomers retire, they will need to draw down on both their stock market portfolios and their savings (assuming they have either). Economic support from relatively low-paid millennials so that boomers can maintain their lifestyles will be massive.
Millennials will assist aging boomers via taxation and by overpaying for Obamacare. Higher taxes coupled with increasing time commitments to help care for aging parents will take a toll. And because boomers live longer than ever, the economic drain and time commitment from millennials will increase every year.
This has downward implications on the economy and the markets, especially in light of millennial-mistrust in stocks and the massive amount of student debt many of them carry.
Wall Street is not prepared for the major attitude and demographic shifts that are now underway. Are you?
In a related post, particularly for millennials searching for jobs, please consider BLS Employment Projections Through 2022: How Many Jobs Require a College Degree?
Living through a (near) depression will do that to you.
> By 2020, Millennials will comprise more than one of three adult Americans. It is estimated that by 2025 they will make up as much as 75 percent of the workforce. Given their numbers, they will dominate the nations workplaces and permeate its corporate culture. Thus, understanding the generations values offers a window into the future of corporate America.
BS. Figures are skewed based on the author’s biased view, flawed logic and information. Everybody knows thar robots will have already taken over their jobs and dominated the workforce...
I really think Millenials are going to give the Boomers a run for their money in terms of being the most screwed up, nation destroying generation.
Born in a time of wealth, then overprotected and coddled. Thrown into a collapsing society and burned at a critical point in their development. They’re so twisted at this point that they have cult-like PTSD reaction to anything that might improve their condition or the condition of the country. The Manchurian Candidate generation.
Of course they would say money is not the best measure of success. They have no money and everyone wants to believe they are successful.
Also, those who would rather have a $40k job they love rather than a $100k job they are bored in will say that. They know they will never be offered a $100k job.
Already some good comments!
I’m no finance guru but a few things stood out to me:
“The survey also showed Millennials keep more of their assets in cash
I understand the fear and the need to be a “saver” but considering what’s happening to the value of our money that can’t be the best strategy can it?
“The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none.”
Really? Look at food prices and energy just to name two and tell me there’s no inflation - and these two areas (especially if liberals keep control in 2016) it seems will continue to get worse.
“Millennials said they would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring.”
Well, if you’re still living with your parents and are single I guess that would work but if you ever want to be independent from them, a little boredom might be a game changer. I suppose there are those that might be taking the “long term view” just waiting for them to die so they can get the house and their car! What I don’t see (yet) is Millennials waking up politically. There are reasons why these terrible conditions exist in our country and failed policies by both parties that have brought us to this point.
I guess they do...as long as their weak, guilty parents let them live at home or continue giving them substantial financial assists.
1. the most conservative generation since the Great Depression with regard to its savings habits. According to UBSs research, the average investor aged 21 to 36 has 52 percent of their savings in cash, compared to 23 percent for other age groups.
Keeping your assets in cash is not conservative. However, the statistic is probably misleading. Younger people have less savings. If your savings are $20K or less, you are more likely to just keep the money in cash because making other investments requires time for research and monitoring, and the payoff of an additional few points of return on 20K is not worth the investment of time. If your savings are more than $200K, it starts to make sense to spend the time it takes to invest more wisely.
2. In ten to twenty years, when this generation realizes how it has been lied to, propagandized and brain-washed by the media/government/academia complex, cynicism may become so profound and widespread that the country will become ungovernable. Already, according to the article, "Only 19 percent of Millennials agreed with the statement that 'most people can be trusted,' a percentage that was about half of all other older generations." Wait 'til they figure out the tax and debt policies followed by Obama and the Democrats -- and find that they are stuck with the bill.
“Millennials will assist aging boomers via taxation and by overpaying for Obamacare.”
Not my millennial, nor most of her friends and acquaintances...
I taught her better than to do that.
She also learned by direct experience that her own personal involvement and actions matter, more so than throwing away her hard earned wages to a corrupt government and/or corrupt NGO charity.
“A majority of Millennials reported buying a product that had a social benefit and 84% of a generation that accounts for more than $1 trillion in U.S. consumer spending considered a companys involvement in social causes in deciding what to buy or where to shop.”
Don’t we Freepers do that, too? We support Chick-fil-a, we don’t like Homo Depot, especially since they added their Muzzie sensitivity training, Subway has Moochelle, Chili’s went gun-free.
I know that I personally do not watch movies or TV shows with blatantly Commie stars or patronize rabidly anti-conservative establishments.
Wait til you see this... you will REALLY HATE it:
Millennials said they would rather make $40,000 a year at a job they love than $100,000 a year at a job they think is boring.
Sounds like the kind of line you would use on a girl you were trying to get.
Gen X bump
The enormous economic crash which is coming? The hyperinflation? The massive default from all major economies around the globe?
Not Obama's fault. Not the fault of the World Bank, the IMF, the Fed, or Goldman-Sachs.
It's ... uhhhh ... it's ... ummmm ... it's those kids in their 20s. They're just messin' up everything.
I fear you may be correct
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“BS. Figures are skewed based on the authors biased view, flawed logic and information. Everybody knows thar robots will have already taken over their jobs and dominated the workforce...”
Millenials more than any other generation have forces arrayed against them to send decent jobs overseas for less money or bring foreigners here to do them for less money; on top of that, affirmative action should ensure that few of the remaining jobs are allowed to go to white millenials anyway.
They’re screwed, and they know that they have little role to play in the economy of the future. More than being surprised that young people would vote for Obama in any numbers, I was shocked at how many didn’t bother voting at all (in 2008 OR 2012). When I would ask them about voting or anything remotely political, they seemed to regard that as something someone else was supposed to care about.