When I was a teenager, it was football stickers and Beanie Babies. Today the collecting habits of young people are less benign.
During the pandemic, young people have flocked to invest in cryptocurrencies and non-fungible tokens (NFTs) – essentially digital currencies and certificates of ownership. Some have made money, others have lost their shirts – and, as i reported yesterday, regulators are belatedly considering a crackdown.
But shouldn’t we be trying to understand why crypto assets are so popular among young people in the first place?
History is filled with get-rich-quick schemes which turned out too good to be true. Charles Ponzi made them famous in the 1920s with a postal coupon scheme that paid returns to existing investors with the money of new investors, and Bernie Madoff updated the genre at the turn of the century. Hype-driven investment schemes have existed for centuries.
The latest trend is not quite a Ponzi scheme, but it is close. Cryptocurrencies are often entirely speculative and always extremely volatile.
The NFT market is so concentrated that around 9 per cent of digital art collectors – nicknamed “whales” – own 80 per cent of market value. But what makes today’s investment craze unique is that it is explicitly targeted at those least able to shoulder losses – the young – via unregulated adverts and social media influencer campaigns.
In the UK, regulators are increasingly worried about the risks these investments pose to the young people who typically buy them. Such is the volatility of these assets that MPs are calling for cryptocurrency trading to be included in the Government’s gambling review.
But regulation is a blunt and reactive tool that can only ever play catch-up with fast-moving markets. Policymakers need to address why young people are risking their meagre pay packets on digital assets in the first place.
Part of the reason is surely that young people are desperate to own something, especially an asset that might appreciate in value. For all the talk from politicians since Tony Blair about the importance of people having a “stake in society”, ownership has become an increasingly alien sensation for people under 40 in recent years.
The “Generation Rent” phenomenon is obviously most acute in the housing market. Official statistics show people aged 25-34 today are three times more likely to rent their home than they were in 1993, and the share of people aged 35-44 with a mortgage fell from two-thirds in 1997 to a half in 2017.
But the label holds for most other asset classes too. Research for the Government shows that younger generations are considerably less likely to own a car than previous generations, driven in part by the delays to life events like settling down with family and getting a job.
They are highly unlikely to own stocks and shares, with 94 per cent of 18- to 24-year-olds and 85 per cent of 25- to 34-year-olds having no investments at all, according to the Financial Conduct Authority.
And the digital revolution means that the collections of music, books, films and – in my sisters’ case – Beanie Babies that were treasured by previous generations are now just streams of code in the ether.
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In essence, growing up today is to grow up a drifter on the wrong side of a rentier economy. And while renting undoubtedly has many consumer benefits, particularly flexibility and choice, it also has costs. Rent-seekers, by their nature, charge an economic rent on the rentee.
This can be considerable: excluding housing benefit, for example, private tenants pay 37 per cent of their income in housing costs, more than twice as much as those with a mortgage. Spotify, Amazon and Apple are all charging you rent every time you press download on a product you cannot touch, share or trade with someone else.
It is good news that regulators are waking up to the risks of digital speculation. But they should go beyond a simple whack-a-mole approach.
The long-term response to the current digital frenzy would be to design ways to help young people own things of tangible value, like stocks and shares or bricks and mortar, and ensure consumers have proper ownership rights over new digital asset classes.
Ministers need to wake up too. The youth vote is the biggest long-term political headache the Conservatives face.
Labour enjoyed a 31-point lead among 18- to 24-year-olds in 2019 – and in Scotland, research in March by Onward found 82 per cent of the same age group say they will support independence.
Younger voters will always struggle to see the benefits of conservatism if they have nothing of their own to conserve.
After all they’ve suffered in the past two years, young people deserve the chance to own something real to call their own.