As I read this Fortune piece that outlines how and why millennials are investing with robo financial advisors (eg Wealthfront, Betterment) in place of traditional financial advisors (eg Schwab, Fidelity), I couldn’t help but think about the broader divide between the mindset of millennials and prior generations.
The Internet has completely changed everything.
I was born in 1990. I began using Google when I was 9. At the age of 9, I learned that I can access any piece of information for free, instantly. I remember trying to access Encyclopedia Brittanica (Microsoft’s online encyclopedia in the days before Wikipedia), and I was confused why they charged so much money — hundreds of dollars — for what I thought was a free commodity: information. I asked my Dad, someone who built his career on the Microsoft stack (Microsoft made their money charging for software; Google made their money giving software away for free), why the information was so expensive. He told me that it was expensive to pay people to curate the information, and that the only way Microsoft could justify Encyclopedia Britannica’s existence was to charge for access to that information. I didn’t like his answer because I loved the ease and simplicity of Google search. But he was right: humans are expensive.
Then Wikipedia emerged in 2001 and systematically dismantled Encyclopedia Britannica and all of the other online encyclopedias. Since then, Internet economics have come to dictate that all information should be free. I am no longer the in exception in thinking that information should be free and freely available to everyone. The vast majority of information is already freely available to the public, and the public has come to expect that information should be free. For every company selling proprietary information, there are a dozen tech startups trying to dismantle legacy information arbitrage businesses.
This is the difference between the millennial mindset. When my father was growing up, he had to turn to a financial advisor to manage his personal capital. He had to go to a doctor’s office and wait in line to seek medical help. He had to call a travel agent to not only book plane tickets, but to even find out when flights were departing. And he not only had to interact with others to get this information, he had to pay for information (the cost of information dispersion was built into cost of the service). The people whom he spoke to had to draw salaries. Millions of businesses were built, some large, some small, that just sold access to information. These were information arbitrage businesses. Internet economics destroy information arbitrage opportunities.
I grew up assuming that I could access everything for free. When Encylopedia Britannica tried to charge me to learn about nature, I was confused. This is the root of the millennial mindset: that I can learn anything about anything on my own and be reasonably self-sufficient. Most millennials know that they aren’t physicians and that they aren’t sophisticated money managers, but they also know intuitively and intrinsically that these services shouldn’t be as expensive as they were because at their core, these are just information arbitrage services. Paying for information doesn’t make sense to millennials.
The Internet is the most democratizing technology ever invented, and my generation has absorbed this in a way that most others in prior generations have not. This is the millennial mindset.
PS, the Internet is the most capitalistic invention since the invention of capitalism itself. One of the core tenets of capitalism is that consumers have complete information of what they are buying — the quality of the product, the price, prices for competitive services and items, etc. The Internet empowers consumers by reducing the cost of information to $0. Capitalism fuels the millennial mindset, and the millennial mindset fuels capitalism. It’s a beautiful, virtuous cycle.
PPS, there are still many legacy businesses predicated on information arbitrage. They are most heavily concentrated around the government: tax advisors, FDA consultants, etc. I suspect we’ll see these services democratize over the next 30 years, but it will be a slow, long haul.