The 'intangible economy' is making everyone miserable

What explains this anomaly? Consider how few of the things we own are physical anymore. Our economy is increasingly built on intangibles, and it may be hard to feel satisfied when so much of what we have is no longer in the physical realm.

Take our wealth. I wrote a few months ago that more young people are investing in the stock market instead of housing. It's been a wise choice: The stock market has offered a higher return and less risk for the past decade. Stock investing doesn't require a down payment or tie the buyer to a single place in their prime skill-building years. Rising stock values are a big reason why Gen Z is the richest generation for their age.

But owning stocks is an intangible form of wealth. You own a share of the American economy, but it is hard to look at Amazon.com Inc. and feel as though part of it is yours. More of the American stock market, too, is made up of companies whose value is their intellectual property, another intangible.

Compare this to owning a home. You physically own property. You can put money or even your own labor into renovating your kitchen. You know your neighbors, feel part of a community and have an interest in investing in both. I don't look at fellow S&P 500 Index owners and feel a common sense of purpose, though theoretically I should.

The sense of community and belonging has been replaced with social lives that are less tangible as well. More socialization takes place in the virtual world. We spend less time with other people in person or even on the phone. We buy more online rather than see people and merchandise when we shop. This may leave us feeling more disconnected and lonely, even if we have more connections and can communicate with people all over the world.

Our human capital has also become more intangible. More of us work in the services sector and build skills relevant to it, rather than making things. Service jobs often earn more and are less physically arduous, but there is no output from our labor. Even in my own profession, journalists rarely see their ideas on the printed page anymore. The premium placed on knowledge work, meanwhile, has contributed to income and wealth inequality (though AI may shrink that). Wages are lower in a physical economy but also less disperse.

These shifts may help explain the backlash to data centers. Building factories tends to be popular and seen as a political triumph. Data centers also bring economic benefits to a community as they create construction jobs and are associated with growth. Yet, they have only been met with suspicion.

Some of the distrust springs from the belief that they will cause pollution and drive up electricity bills, though there is not much evidence that's true. Another point of friction is their newness and the difficulty of understanding what they produce and to whose benefit, particularly when the fear of job loss to artificial intelligence looms large. It's not like making a toaster, even if data centers are a sign of a much more advanced and wealthy economy.

Before we go full luddite, quit our jobs and live off the land in Alaska, it is important to remember that the intangible economy is why we are richer and live longer lives. Today's technological innovations reward knowledge and expertise much more than the tangible world ever valued physical labor. We also do much less physical labor, which is one reason we live longer and healthier lives.

So why are the benefits harder to feel good about? We are social creatures who evolved to compete for finite resources. This new world is less zero sum, since knowledge is infinite, but it leaves us completing for status and attention instead, which can be less satisfying and more ephemeral than a big house or a chunk of gold. It creates new status games, for example on social media, that we can't ever really win.

We also just like stuff. A large, beautiful house may bring more satisfaction than a one-bedroom rental apartment and a $2 million brokerage account balance.

Yet I am optimistic we aren't doomed to a life of misery that's devoid of meaning. It just takes time for norms to change. Growing your own food once felt like the most honest work compared to having a boss and working in a factory. We may still have a romantic attachment to the idea of farming, but few people want to be subsistence farmers.

What we consider valuable and meaningful is always evolving and sometimes the transition takes time because the economy moves faster than our norms and culture do. This process can be destabilizing and isolating. But eventually we find ways to connect and rebuild community in new ways. Perhaps we will get to the point where owning nothing tangible will be enough, if we own a lot on paper. (You know what I mean!)

(COMMENT, BELOW)

Allison Schrager, a Bloomberg columnist, is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.

Previously:
• We're all AI investors now, and that's risky
• College costs are due for a correction, not a crash
• Where is your happy place? Maybe it's Slovenia
• Gen Z is mistaking sports betting for investing
• Americans Are Richer Than Ever. Why Are They So Angry?
• Government intervention is often the cause of 'market failures', not the remedy for them<
• Reality of math is catching up with the reality of aging
• The influencer economy has crossed the linet
• AI might be a great investment --- but not for the government
• Don't rely on the Bank of Mom and Dad
• Can't find a job after graduation? Blame WFH, not AI
• Trump accounts are a new way to redistribute wealth
• Trump accounts are a new way to redistribute wealth
• Taxing the wealthy won't reduce their power
• A wartime economy would be different this time
• Why aren't Americans working as hard as they used to?
• $100,000 in Social Security benefits is too much
• The Laffer Curve is no longer a punch line
• Yes, Americans are saving enough for retirement
• Is free trade worth the cost in lives lost?
• Mamdani's New York is flirting with fiscal nihilism
• America's human capital is eroding
• Musk is wrong about AI and retirement --- You still need to save
• Go ahead and resent boomers but for the right reasons
• Raiding your 401(k) to buy a house should be an option
• Americans are living in the worst of all tax worlds
• Think of college like you would a junk bond
• The economy needs a little bit of unfairness
• The pension revolution is better for savers
• Affordability isn't a hoax. It's not a crisis for most, either
• America gets retirement wrong. Can Vanguard fix that?
• The American middle class is shrinking, and that's OK
• Want to buy a home? It's OK to wait till you're 40
• Mamdani is benefiting from New York City's changing workforce
• How can an economy this good feel this bad?
• Why boomers have more money than everyone else
• Democratize private investment?
• Lab-grown diamonds are testing the power of markets
• Inflation ate your free lunch, but you're still better off
• Good debt? Bad debt? There's no such thing
• Megabills didn't break the economy before and won't now
• America's broken politics is breaking economics, too
• A college degree is no longer a risk-free investment
• Break up Columbia? Maybe, and the rest of the Ivy League, too
• Even Dems might like MAGA accounts
• Reality Check about possibile volatility in trade war
• Is this really how American exceptionalism ends?
• The free-market conservative is a vanishing breed
• Shareholder capitalism is back
• Europe's risk aversion comes with consequences
• The Oxford curriculum that American universities need
• Private equity won't diversify your portfolio
• The era of declining interest rates may have come to an end, and many investors don't seem to realize it
• This one weird trick could save the U.S. economy
• The Fed's damage to the housing market may last years
• The future of unions looks very different
• To bring back the office, bring back lunch
• Does it really matter who gets into Harvard?
• Our pensions shouldn't be used to juice the economy
• A soft landing won't mean the economy is safe
• The 30-year mortgage is saving the U.S. economy … or is it?
• The one true secret to successful investing
• Less work, more burn-out
• When did risk become a bad word in the U.S.?
• AI-proofing your career starts in college
• Biden has to learn the same lesson as SVB
• Say it with Rubio: Changing clocks is stupid
• Sure, we'll return to the office in 2023 but not to stores
• How to manage the biggest risk of all: Uncertainty
• If you think U.S. pensions are safe, just wait
• Harry and Meghan and the perils of superstar culture
• Norman Rockwell's economy is never coming back
• Burned by crypto? Don't learn the wrong lesson
• Quiet Quitters are looking in the wrong place for meaningful work
• America's MBAs are the latest skeptics of capitalism
• Generation Z is getting a harsh lesson in stock risk
• The biggest threat to the U.S. economy is policymakers
• Buck up, boomers. You're still better off than your parents
• How to manage the biggest risk of all: uncertainty
• Startup boom is the kind of risk-taking Americans need
• Gen Z is too compliant to achieve greatness
• A bigger child tax credit isn't the poverty solution we need
• Finding your power in a higher-priced world
• The Biden administration's plans to double the tax rate on capital gains will prove costly to all Americans, not just the wealthy
• WARNING: Feel Good Now --- Pay Later: Stimulus is crammed with goodies but makes no economic sense
• The 'Stakeholder' Fallacy: Joe Biden's vision of capitalism is a recipe for failure