Millennial Investors
By: Hiroshi Hatano
Tags: Investing, Millennials, Capitalism

Millennials shake up shareholder capitalism

Photo by Melissa Askew on Unsplash

Until recently, my classes of international business were filled by the next generation, what they call it millennials. Those youngsters were born between 1981 to 1996 and raised in a frightening period of two economic crises, the bursting of dot-com bubble in 2001 and Lehman Shock in 2008. When they were merely ten years-old or so, dot-com start-ups met a substantial fall in fund raising, an event to change the initial public offering scheme. Followed by the burst, Lehman Brothers surprised the teens with subsequent quantitative easing, a drain of currency to the capital market. From 2010 to this day, the economy behind the scene has been booming with a rapid expansion of free trade, open market, and globalization.

Free world in the principles of growth faces a new challenge, the Covid-19 pandemic this year. Since the outbreak, my classes came to a complete halt. During those hard years of teaching college students in the next generation, I came up a small thing I don’t regret. My class assignment was very simple, letting Asian students choose their own themes to study business cases and give a presentation before the class.

Millennial is very different in choosing the topic. At least a third of those enrolling students selected a topic of social causes such as climate change, diversity, fair trade, animal protection, and ethical consumption. A tiny portion of eager minds gave a presentation of social causes in front of class. Their mind-set is clearly consistent, projecting their own future with less pension payment and less rewards from hard and grueling work in Tokyo. A psychological shift was obvious. That was my observation until I read a story of the Economist in October.

Millennials are typically defined as those born between 1981 and 1996, aged from 24 to 39. A British paper describes that the generation pursue sustainable goals on top of financial performance. Deloitte, a consultancy, reckons that 87% of millennials in survey believe that corporate success comes from more than financial achievement, mostly share prices derived from corporate profits. Morgan Stanley, a bank, finds that surveyors under the age of 35 are likely to sell their holding in assets if they detect a socially unsustainable behavior by the listed companies. Do they shake up shareholder capitalism in the future?

Millennial will be cumulating a lot of assets. The young increase their wealth by inheriting and earning it. Behind a consecutive record of economic growth with steady income in the past decade, the earning power will continue to rise and accumulate the wealth into their hands. Their assets grow with inheritance flows from their parents, baby-boomers. The Economist says that millennials owns mere 7% of the total assets. But every five years in America, $1.3trn in investible assets or 5% of stock in a total of $130trn passes down to the generation. Cerulli Associates, a research firm, millennials see inheritance flow of $22trn by 2042.

Direction is set to show the clear path in asset management. Their assets will continue to grow from current single digit to roughly a third of the entire wealth. At present time, more than a third of labor force in America is millennial. Managerial drive will be clearly embedded in the mind-set of the youngsters. They will sell the shares of environmentally and socially unsustainable organizations with evident messages.

Messages have partially been released by my students at colleges in Tokyo. Those students spent hours researching facts on such topics as renewable energy in Vietnam and animal protection from experimental use to develop new commercial products for humans. This is a good signal that wealthy millennials will fight against excessive behaviors of shareholder capitalism.