Friday, August 29, 2014

Hooking Up With Gen Y - Challenge for Business

Originally Published on on January 27th,2012
Tim Smith blogs on the “Echo Boom”, also known as Generation Y (Americans born between 1980 – 1995). Tim has previously appeared here discussing his generation’s attitude towardshomeownership and education.
They don’t date, they hook up.  They don’t marry, they cohabit.  They prioritize parenthood more than anything, even when they remain single.  Who are they?
Echo Boomers.
 We are witnessing major sociocultural shifts in the United States among one of the largest generations in American history – Generation Y.  With numbers estimated in the range of 80 to 86 million, at least a fourth of businesses’ customer base will be Echo Boomers as they grow older.  But they differ socially from other generations, which will mean major changes that any investor, entrepreneur or CEO needs to know regarding how business will be done in the future.  Echo Boomers will offer huge opportunities for some, but take away from others.
First, the social changes
I interviewed Susan Walsh, who wrote about hooking up, the replacement of dating.  Dating is intentional.  Hooking up is vague.  This introduces apattern of Generation Y: as Echo Boomers abandon specific ways of interacting with each other in terms of relationships, they may not seek the “settled” relationships that other American generations have.  Cohabitationmatches hooking up more than dating (by contrast, marriage matches dating more than hooking up).  And these mutable social arrangements don’t match “settled” business arrangements, like life insurance.  As social institutions become more flexible, the business world – in order to win customers – must match with flexible services.
Regarding the decline of marriage, I agree with Kay Hymowitz, who stated that what we’re seeing in the marriage rate decline is that the educated are still marrying while the uneducated are not.  However, 57% of current enrollments in college are women – a predictor that the marriage rate will be low due to a gender imbalance (Kay doing the math).  This means that “settled” business services will see less demand, unless Echo Boomers decide that education isn’t important in their married lives.
A final major social shift, noted by Kate Bollick, calls attention to the fact 40% of children born are to single parent homes.  Echo Boomers value parenthood and favor parenthood as a settled social arrangement.
What do these social shifts mean for three major industries?

Healthcare companies must ensure that they offer competitive coverage for cohabiting couples and single-parent families.  As these two trends will grow among Echo Boomers, companies with innovative arrangements for cohabiting couples and single parent homes will carry advantages over companies that lack these arrangements (the key question here being do you offer flexible coverage?). 
One frustration I heard from many Echo Boomers was their fixedhealthcare coverage – a person may not want to continue covering their partner in the instance of a break-up.  My suggestion to any healthcare company would be to eliminate “annual” plans, and allow for changes to occur as life takes place (this is a selling point “our insurance adjusts as your life changes”).  If you’ve thought about starting a healthcare company for the Millennial generation or own an existing healthcare company, these social trends give you an easy selling point. 
I agree with Mish and Peter Thiel that we’re seeing an education bubble.  But young women don’t agree.  Echo Boomers, in general, hold faith in education, as that was one of the top goals listed by Echo Boomers during my years at Wells Fargo.  Based on the social changes listed above, we should expect to see more one income families.  A cohabiting couple may not remain together for a decade, thus depending (or co-depending) on a non-educated partner carries financial risk – an advanced degree might appeal to someone seeking financial independence as a sole provider.  As the New York Times article listed above this mentions, young women seem to be considering education in higher numbers, and for good reason: the probability of finding an equally educated partner is diminishing.
Financial Instruments
Cohabitation changes the landscape of some financial instruments.  For an example, do you think that a cohabiting couple will see the advantages of a 20 year term life insurance policy, when their flexible arrangement may mean that they won’t be together in a two years?  Echo Boomers will seek life insurance for children, but some instruments must start allowing flexible adjustments if they want to continue obtaining customers.  While I worked at Wells Fargo, many Echo Boomers laughed at the prospect of life insurance for their partner, and for good reason: few had intentions of marrying (a strong selling point was children).
The same holds true for other instruments: the definition of “family” has changed.  Don’t assume your customers mean a traditional family when they talk about their family – it could be only their children and a cohabiting partner.
The major questions to ask whether you’re a CEO, investor or entrepreneur: (1) Do your products and services offer flexible entrances and exits; (2) do your products and services emphasize the importance and stability of children; (3) do your products and services target the educated or uneducated?  Sociocultural changes affect the economic and finance realm, and in a changing market, adapting to these trends will separate the winners from the losers.
Women making up 57% of college graduates reminds me of a cheer I heard – “Girls go to college to get more knowledge.  Boys go to Jupiter to get more stupider”.  Tim is always welcome here.  The pace of my posting may slow a bit as the day job turns into an also nights and weekend job for a couple of months.  My idea of a joke is leave the geriatric wing of the office and go to the cubes around 9:30 PM and tell the kids to take the rest of the day off.  The other really hillarious one is to tell somebody who is leaving late Sunday afternoon to have a nice weekend.  Anyway, if you don’t want to miss a post you can follow me on twitter @peterreillycpa.

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