Lending Mindset

Collaborative consumption and financial services

From The Social Cost of the Loss of Job Stability and Careers

McKinsey had Yankelovich survey the attitudes of young people a decade ago, and even then, the results were pretty disturbing. Yankelovich projected that college graduates would average 11 jobs by the time they were 38 (!), yet found they were demanding of their employers, wanting frequent feedback (as in lots of attention) and quick advancement. But if you are not likely to be around for very long, no one is likely to want to invest in you all that much (McKinsey, which was competing for a narrow slice of supposed “top” talent and not offering Wall Street sized pay opportunities, might have been more inclined to indulge this sort of thing than other employers).

But these rapid moves from job to job, and now a much weaker job market, are producing behaviors that old farts like me find troubling. One is rampant careerism. I’ve run into too many polished people under the age of 35 where the veneer is very thin. It isn’t hard to see the opportunism, the shameless currying of favor, and ruthless calculations of whom to help and whom to kick, including throwing former patrons under the bus when they are no longer useful (I can cite specific examples of the last behavior). The world has always had its Sammy Glicks, but now we seem to be setting out to create them on a mass basis.

While I do not share the idea that this new behaviour is by choice only, the current job instability is probably here to stay.

In the same time, probably not uncorrelated, we are seeing the rise of collaborative consumption:

Collaborative Consumption describes the rapid explosion in traditional sharing, bartering, lending, trading, renting, gifting, and swapping reinvented through network technologies on a scale and in ways never possible before.

WHAT’S MINE IS YOURS from rachel botsman on Vimeo.

Leveraging assets’ idle time makes a great economic sense, especially if incomes are becoming less constant than in the previous career framework.

The impact for financial services is major. If we take the example of the 2 major purchases that require credit : house and car, the current credit score system is based notably on stability of income over time as a way to measure reimbursement capacities. However the current career instability will have a negative impact on lending, making it less easy to access property.

However, if you consider the supplemental income that could be generated over the life time of an asset (House via Airbnb or Car via Getaround), then the decision for lending could be made using another basis than stability of the main source of income. Especially if these assets are built around the possibility of collaborative consumption. Taking the example of a car, Ford could pre-equip cars with the necessary equipment for sharing, allowing a wider population the access to car ownership.

Calculating risk and evaluating value over time is at the core of financial services. Applying those to new behaviours is not innovation, it’s just servicing customers.

8 replies on “Collaborative consumption and financial services”

What’s interesting to me is that we’re slowly moving from asset based personnal finance: I own a house, a car and I borrow money against these… to a cash flow system, where I own less, but I can enjoy more expensive services and benefits that I “rent”. 

I agree. I think one of the issues with the way that collaborative consumption is presented is that it focus on renting vs. ownership. Ownership is a key part of it, it’s more, as you say, a different way to view ownership. Maybe less or the same level, but more optimised toward maximising its use toward other experiences.

Very interesting, the question is whether this value can really be extracted efficiently. If not, making these assumptions is a bit far fetched in long term credit calculations at this point. I thought you’d go in the direction of collaborative consumption -> measuring the financial stability of groups and communities.

Ford would be disinclined to pre-equip cars for sharing because it might mean we needed fewer cars, and their business model is based on increasing car ownership and frequent car replacement.

Which is not to say the idea is wrong; it’s a great idea. But maybe even the auto industry is ripe for disruption. If Tata started producing shareable cars and invested heavily in an infrastructure to share them that would be interesting.

If I was Boris Johnson, I’d be looking to set up Boris Cars given the success of the Boris Bike.

You can look at it the other way. If changes to work environment is making access to regular credit more difficult with banks, then consumption of new cars is going to decline anyway because people won’t be able to afford them. Making it possible for “more” to access car ownership via the possibility of renting could be a good opportunity.

A car sharing scheme has been launched in Paris:

Yes, it is, but I am inclined to believe it will be more and more important. I am partial toward the community aspect of collaborative consumption (or currencies). I understand local plays a role and is required for a more sustainable development but I am wondering how much this could also be used the financial equivalent of gated communities.

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