Over the last year there’s been ample debate about the legitimacy of NFTs as an investable asset class. Some swear they are. Others acknowledge that while NFTs may appreciate financially, their real value is in the “utility” they grant owners (e.g. serving as tokens for accessing membership, as I wrote about here).
The jury is still out on if NFTs will actually deliver on the promise of providing both “use” and a financial return.The recent flop of the auction of Jack Dorsey’s “first tweet” NFT provides an interesting backdrop to this question. The NFT was bought roughly a year ago for $3M, and recently placed up for auction. As of yesterday, the highest bid was about $10,000.
Despite this inevitable NFT market cooldown, the overall appetite for NFTs, especially from younger consumers, made me consider a bigger question: to what extent do Gen Z’s want their investments to serve a broader purpose, and at what cost? How significant of a potential ROI tradeoff are they willing to make for some type of “usage” (be that something actually usable, or just the ability to socially flex their “asset”)?
Before diving in, a bit of context on Gen Zs.
Also worth noting, while I use the term “Gen Z”, many of these principals hold true for the younger cohort of millennial consumers.
Gen Z’s are generally thought of as being born between 1997 and 2012. They make up ~30% of the global population, and, when it comes to investing, seem more proactive than older generations. Gen Z’s start investing for retirement at 19, while millennials start around 25. (source)
A number of key, historical events - both related to technology and society more broadly - have likely impacted Gen Z’s investment perspectives and behaviors. Specifically, in socializing Gen Z’s to be comfortable with digital-first, community oriented, and “nontraditional” types and methods of investing.
Gen Z’s were the first generation to grow up with widespread tech adoption. In 2007, Apple launched their first iPhone. And, by 2012, nearly 80% of US households had home computers. (source) In addition to the ubiquitousness of tech hardware, Gen Zs spent ample time interacting and transacting online. Gaming companies like Roblox, Fortnight and Minecraft normalized the concept of digital currency, which one could argue familiarized users with non-traditional digital assets early on. While not widespread at the time, Bitcoin was also created in 2009.
Gen Z’s also experienced multiple, major political events that catalyzed and aggregated distrust in centralized, opaque entities (e.g. banks, governments, etc). Millennials were likely more impacted by events like the 2008/9 financial crisis (via watching their parents lose jobs and starting to think about early career building during a period of deep uncertainty) as well as Occupy Wall Street in 2011. Gen Z’s played much bigger roles in, and were more impacted by, community led, digitally enabled movements like #blacklivesmatter and #metoo.
The combined impact of these unique social and technological influences showed Gen Z’s that they can push back against antiquated, opaque systems, often utilizing online platforms as tools to do so. This bias for transparency is also captured and illuminated by how Gen Z’s choose to represent themselves online. The obvious example here is the contrast between content on Instagram and TikTok. Instagram, largely popularized by millennials, is polished and curated - users show off only the best and most refined aspects of their lives. TikTok, in contrast, popularized by Gen Zs, prides itself in unedited, unfiltered, and transparent content.
Lastly, it’s worth explicitly calling out that Gen Z’s are one of the most socially conscious generations to date. They care about their communities, the planet, and social causes, even when not directly impacted by them. 22% of Gen Z’s have at least one immigrant parent, and many are open to living and working in a mobile, global way. (source) Broadly speaking, they regard themselves much more as “citizens of the world”, versus having deep American affinity and patronage. (source)
What Does This All Mean For Investing?
How does this context impact Gen Z investing preferences? My thesis is early and evolving here, but my main thoughts are the following:
First, while it’s well understood that Gen Z’s want to invest alongside their values (e.g. 57% sell stocks when a company is not good for society or the planet) “social value” alignment is just one piece of their non-ROI driven investment framework. Gen Z’s seem drawn to investment mechanisms that are fun, social, and grant access to products and experiences they value, even if the returns are lower and the time commitment is higher. StockX, a marketplace for buying and selling high end sneakers and streetwear is a great example of this. The company effectively turned sneakers - cultural collectibles and mechanisms for self expression - into an investable asset. 75% of StockX users are under 35, and the vast majority are under 25. (source)
A recent survey administered by Public provides more context to this observation - only 55.5% of 18-29 year olds consider “financials” when making an investment decision - a stark contrast from all age brackets 30+. It’s likely this dynamic shifts with time, with Gen Z’s placing more emphasis on returns, but today many view investments as extensions of their personas. As we get deeper into Web3, and things like verifiable credentials, it’s likely that this generation will increasingly consider how their investments serve as a reflection of who they are and what they care about.
Second, as alluded to earlier, Gen Z’s are much more comfortable with community governed and led investing. Unlike their parents, who wanted a centralized, dedicated entity overseeing investments, this generation embraces community driven knowledge. Using this insight, companies have formed in industries where they didn’t exist prior (e.g. Public, a social investing app geared toward younger consumers). Non-verticalized social platforms are also benefiting from these tailwinds. For example, 52% of Gen Z’s turn to TikTok for financial advice. (source)
Lastly, Gen Z’s are highly comfortable with digital-first, global currencies. For many, their first "financial account" likely held exclusively digital assets (e.g. a game wallet), and their second account is likely a Coinbase, RobinHood, or something of the likes. They don't have traditional banking and investment relationships. Moreover, I’d argue that the willingness and desire to live and work in more distributed ways, coupled with a declining sense of American patronage, makes digital assets and currencies - as opposed to country specific fiats - more appealing to Gen Z’s.
Looking forward:
I’m excited to participate in new methods of investing that align with the things that I care about. Although, I’m still unsure if utility and an optimized ROI can truly coexist across all, or even most, industries. One area I’ve gotten stuck on recently is music NFTs, where artists allow fans to invest in songs as NFTs, and then redistribute a percentage of streaming revenue to holders over some period of time. I’ve personally invested in a few of these, but when you run the numbers on actual earning potential it’s extremely low, unless the artist theoretically “makes it big”. (My investments in music NFTs have been entirely utility driven - showcasing ownership, meeting other co-owners of the project, getting access to the artist in a private discord, etc.)
If you’re building in this space, or noodling on this theme, I’d love to chat. Inbox always open at [email protected], or you can find me on TikTok. : )