The ‘intangible economy’ is making everyone miserable

It turns out that not seeing the results of your labor as the economy becomes more and more effervescent is a total bummer

• By Allison Schrager / Bloomberg Opinion

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These are the best of times for Americans — at least economically, and at least on paper. They have never been richer or more prosperous as a nation. Living standards and life expectancy are at all-time highs. Yet, it feels like the economy is broken.

What explains this? 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 wealth. More young people are investing in the stock market instead of housing. It has been a wise choice: The stock market has offered a higher return and less risk for the past decade. Stock investing does not 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.

Illustration: Yusha

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

Compare this to owning a home. Someone can physically own property. They can put money or even their own labor into renovating their kitchen. They know their neighbors, feel part of a community and have an interest in investing in both. I do not look at fellow S&P 500 Index owners and feel a common sense of purpose, although 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 goods 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 become more intangible. More of us work in the services sector and build skills oriented to it, rather than making things. Service jobs often earn more and are less physically arduous, but there is no output from our labor. Journalists rarely see their ideas on the printed page anymore. The premium placed on knowledge work has contributed to income and wealth inequality. Wages are lower in a physical economy but less dispersed.

These shifts may help explain the backlash to data centers. Building factories tends to be popular and seen as a political triumph. Data centers could 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 cause pollution and drive up electricity bills. 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 is not like making a toaster, even if data centers could be 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 some people 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 many people 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, such as social media, that we cannot ever really win.

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

I am optimistic we are not doomed to a life of misery that is devoid of meaning. It just takes time for norms to change. Growing their 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. 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.

Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of Worth the Risk: The Seven Myths That Keep Us From Taking the Chances We Need to Take. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.