I thought this a really interesting term and article: the End of the Millennial Lifestyle Subsidy. Many young people have grown up in a world in which they have never had to pay the real costs of things. How? Venture capital has been helping Silicon Valley companies run with big losses for over a decade now. The goal was growth at any cost – and cost overruns were not a problem with basically 0% interest rates and venture capital and stock market investors pouring money into tech and growth stocks. With rising interest rates however, the last 20 years of free money seem to be slamming shut. The real cost of the Uber trips, complementary next day shipping, cloud storage, free apps, and cheap eats are starting to come out.
Venture capital companies are warning startups that the money is drying up and they need to act fast. Across the entire startup landscape, VC money is dropping by double-digit percentages and costs must be cut. Even Facebook and Google are issuing dire earnings reports that show that the party is likely over. You can read lots of articles on Inc about this rapid change and it’s causing scores of startups to rescind offers and even lay off substantial amounts of their staffs – often 20% or more at a time.
Time will tell if we ever return to the heady days of 2% interest rates. Until then, I think a lot of young people might start experiencing things that many lived through in the late 70’s and 80’s – high inflation with just as high interest rates. Much like the Ghostbusters did: