Say Goodbye to the ‘Millennial Lifestyle Subsidy’

Writing in The Atlantic, Derek Thompson warns of the “end of the millennial lifestyle subsidy,” that blissful era when Uber rides across town cost a few dollars and you could have a meal delivered from any restaurant for a nominal extra fee. “Almost each time you or I ordered a pizza or hailed a taxi, the company behind that app lost money. In effect, these start-ups, backed by venture capital, were paying us, the consumers, to buy their products.”

Yet investors continued to support companies that grew their user bases while losing money. “As long as money was cheap and Silicon Valley told itself the next world-conquering consumer-tech firm was one funding round away, the best way for a start-up to make money from venture capitalists was to lose money acquiring a gazillion customers.”

Now, those companies are facing a reckoning. “These start-ups weren’t nonprofits, charities, or state-run socialist enterprises. Eventually, they had to do a capitalism and turn a profit.” By 2022, “Rising interest rates turned off the spigot for money-losing start-ups, which, combined with energy inflation and rising wages for low-income workers, has forced Uber, Lyft, and all the rest to make their services more expensive.”

Meanwhile, improved labor market conditions mean that workers have more leverage over employers. “Today, job openings are historically plentiful and nominal wages are rising fastest for low-income workers.”

It turns out, Thompson concludes, “The golden age of bougie on-demand urban-tech discounting has come to a close.” We may now have to go back to paying the real cost of products and services.