Possessions vs Experiences

Consumers are spending more on doing things rather than buying them, but are we really becoming less materialistic? Richard Rawlinson examines the evidence

Shopping illustration

Illustration by Raymond Biesinger

As we consume less, we do more: this is the premise of the Experience Economy, a term coined to describe a shift in emphasis from buying stuff to spending our money on memorable experiences.

The trend is never more topical than today. This spring, figures from Barclaycard showed a hike in spending in pubs, restaurants, theatres and cinemas compared with the same period last year, and a drop in spending on clothes, cars and household appliances. Even IKEA's head of sustainability Steve Howard deferred to the drift when he told a conference audience: "In the West, we have probably hit peak stuff."

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Meanwhile, Harden's restaurant guide counted 200 openings in London in its 2017 edition, with cities from Bristol to Glasgow celebrating similar booms. And Manchester's HOME arts centre – which includes a theatre, gallery, cinema complex and several dining venues – has smashed expectations since opening in a rundown area that was crying out for rejuvenation.

But what factors are driving society in this direction, and are we really becoming less materialistic? For every millennial heading for the fields of Glastonbury or the beaches of Goa, surely there's one who prefers to save up for designer shoes and bags instead. For every empty-nester enjoying regular cultural city breaks, there's a nest-builder receiving John Lewis deliveries. Then there are parents, striving to give their children both those new trainers and the experiences that will keep them sweet during the school holidays. Just do it and just buy it.

It's premature to herald a rejection of capitalism's promises of choice and abundance, even with contemporary concerns about environmental sustainability, and in spite of political uncertainty and an emphasis on austerity. Communism's experiment whereby the state supplied citizens only with basic essentials – and even then after queuing round the block – has few advocates left.

However, more people are seeking contentment in doing things even when that means cutting back on buying things. And while most would agree that a Ferrari trumps a Fiat, it's easier to see that the joys of either skiing in Klosters or caravanning in Carnarvon are in the eye of the beholder.

"The best place to find status, identity, happiness and meaning is in experiences," says James Wallman, a trend forecaster and author of Stuffocation: Living More with Less. "In the system where more is always better, you can never have enough. And people sacrifice too much to get more stuff."

The digital revolution is linked to the experience revolution in a host of ways. The inspiration for an away day is but a click away. We share our antics on Facebook, and while it's fine to publicise our popular status with party selfies, it's naff to post a photo of the new home cinema. We perhaps compensate for virtual overload with more physical experiences: live concerts are more popular than ever despite the accessibility of tunes on Spotify. And as online shopping liberates us from trawling the high street, we have more time for leisure activities.

The internet is also a factor in keeping down the cost of stuff, leaving more cash for getting out and about. Research conducted at Cambridge University reveals the average British family spends 45% less on clothes than 40 years ago. A case in point in the household goods sector is that a Hoover Automatic washing machine cost £88 in 1969, a sum equivalent to £1,044 today.

An abundance of research shows we're happier about anticipating an experience than buying a product

Behavioural finance experts add a further psychological dimension to the rise of the Experience Economy. Colin Strong, head of behavioural science at Ipsos, tells MoneyPlus Portfolio: "There's an abundance of research showing that we're happier about anticipating an experience than buying a product. We've all experienced how much more excited we are about planning a meal out than choosing which mobile phone to buy. When we get a product in our hands we adapt to it quickly, it just seems normal. With experiences, we can relive them time and again in our memories."

So the hedonistic payoff of experiences is greater than that of buying stuff. Moving from psychology to philosophy, two adages spring to mind that can be applied to both forms of consumption: you only live once, and you can't take it with you.

What we learn from money movies

Those with even a passing interest in finance are drawn to films about the key economic events that are so central to our lives. But Hollywood tends to simplify Wall Street scandals as hero-and-villain dramas. Margin Call is an exception. Set in a money-management firm, the traders are amoral rather than criminal: it's their job to obey the market's profit and loss signals. When they realise the recklessness of a financial model that presumes past behaviour will persist into the future, they rush to sell soon-to-be worthless securities at current market prices. The takeout of this film – aside from being a cautionary tale about too-big-to-fail complacency – is that governments share blame with bankers. The Fed's stimulus policies contributed to lenders, investors, rating agencies and regulators riding the boom without correction. And come the crash, it was bailout time with taxpayer cash.

Greed vs fear

Illustration of a bull and bear fighting

"Be fearful when others are greedy, be greedy when others are fearful," said Warren Buffett, whose contrarian investments have made him a billionaire. But is the stock market actually controlled by these two emotions, and doesn't successful investing actually require control of both fear and greed?

Greed powers bull markets as people buy, buy, buy in the hope of getting rich. Buffett's statement implies we should flee from this scenario: stop buying and start raising cash for when fear takes over. Fear drives bear markets. Buffett's statement implies we should snap up the investments that others are dumping.

It's much easier said than done when pundits are talking about doom and gloom rather than bargain buys that will potentially produce big gains. As a result, the typical investor buys at market premiums and sells at market troughs, hence the fact so few are as successful as Buffett. The herd instinct tells us never to be optimistic in falling markets. But according to the master, we should block out the background noise.

This is all well and good, just as long as you have the nous to back a rising star. Buffett, who bought his stake in Coca-Cola at an opportune time, has also said: "it's better to buy a wonderful business at a good price than a good business at a wonderful price." Here lies the key to his fortune as much as swimming against the tide. He has a genius for identifying winning businesses.

Colin Strong, head of behavourial science at Ipsos, says: "When people are fearful they're generally risk averse. If you can keep your nerve, then these are the conditions in which you could make money. But as we all know, this is no guarantee. Following the crowd can at times be the right thing. Success depends on you managing to make sensible decisions – which requires you to manage your emotions carefully."

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