How Gen Z (and Gen AA) Are Reshaping the Economy

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Time-shifting the Generations

Bloomberg has lately been running a superb series about the generations growing up in the shadows of the Millennials. Go read it, though read mine as well, as I've been watching the emergence of this particular generation for a while, and disagree with a few of the conclusions that the Bloomberg articles make.
First, a question of timing. The whole notion of generations came about due to the work of two sociologists — William Strauss and Neil Howe, in the 1991 book Generations. They argued that if you looked at the variations in birth rate from the founding of the country to the present, there are clear patterns showing rises and declines with a cycle of about 18 years. The Baby Boom generation was the 23rd generation after the country was founded by their reckoning, making them Generation W.

There's a much more complex attempt at building a whole framework about Turnings and Saecular centuries (that old four score and ten) much of which gets into far more dubious territory. However, I believe that the basic observation about generations being unique is probably correct, but only if you fix an assumption that I think was flawed in their initial work. Strauss and Howe treated as a generation as being from the mid-point to the mid-point of birth rate.

I'd argue that the birth rate is usually determined long term by major (and deep) economic factors, and in general, when people are feeling optimistic about the future, they have larger families (at least in the US after 1900), while when the mood switches to pessimism, people have smaller families.


Buddy Holly, born in 1936, marked the beginning of Baby Boomer Culture. A fundamental flaw in generational theory was the decision to base generations upon midpoints rather than endpoints, but the generations make more sense if you slide the eras REDFERNS

Buddy Holly, born in 1936, marked the beginning of Baby Boomer Culture. A fundamental flaw in generational theory was the decision to base generations upon midpoints rather than endpoints, but the generations make more sense if you slide the eras REDFERNS


This aligns far more closely I believe with cultural events — the Baby Boom started in 1936 and peeked in 1954, with people like Elvis Presley, Buddy Holly, Roy Orbison and John Lennon all born within months of one another in 1936 and 37, with most beginning their careers as musicians in the late 1950s and peaking by the time of Wood Stock in 1969 at the age of thirty or so. Most of the leading tech titans — Steve Jobs, Bill Gates, Larry Ellison and so forth, were born in the mid-1950s, and in many respects are far more like what we think of as GenXers than they do Boomers.

By tracking the peaks and troughs of the birth rate (or its proxy, family size), the generations seem to be more homogeneous, which pushes the categories themselves back by about nine years: Gen W (Boomers) 1936-1954, Gen X (GenXers) 1955-1974, Gen Y (Millennials) 1975-1991, Gen Z (whom I call Digitals) from 1992 to 2008 and Gen AA from 2009 to around 2027 or so. This is important because it helps explain a lot of the distinctions between the Millennials, Gen Z and Gen AA.


What differentiates Gen Z and Gen AA from all others is that they “grew up” on the Internet. This creates a generational divide that is profound. GETTY

What differentiates Gen Z and Gen AA from all others is that they “grew up” on the Internet. This creates a generational divide that is profound. GETTY


Identifying Gen Z and Gen AA

I've written about the prime generations extensively elsewhere, so recommend if you're interested in the argument, to read more there. In this article, I'd like to focus on the Digitals. The oldest are now in their mid-twenties, the youngest, about ten. Many of the people who have been termed Millennials don't identify as such, because of that nine-year shift. If we use the idea that a generation is defined as that point when birth rate switches from positive to negative or vice versa, then Millennials, in general, were the ones that were pretty instrumental in building the Internet, from PC era to Tim Berners-Lee creating the first browser and server, just as their GenX precursors were the ones responsible for building out the PC era.

Gen Z lives on the Internet. Most have never known a time without Google or YouTube or Amazon. Most have had cell phones since they were ten. They didn't cut their teeth on tablets (that was Gen AA, the battery generation, more about whom below), but they are the first generation for whom the Internet was simply a given. While it is not the only thing that defines the generation, the Internet is such a big cultural influence on this generation that it drives a lot of the characteristics of the generation.

This is the cosplay generation — dressing up as characters from TV shows, comics and cartoons. After the introduction of polyester and prefabricated clothing in the 60s nearly killed the sewing and crafting industry, it was Gen Z's love of cosplay that single-handedly revived the fortunes of Joann’s, Michael's and similar cloth and craft stores.

It's a generation that has grown up with media, and it is no surprise that the vast majority of YouTube personalities today are in their early twenties. It's not so much that this generation is necessarily more entrepreneurial than previous generations (though it is), rather, it is a case of a generation comfortable with the tools essential to marketing are now taking such marketing in directions that no one could have anticipated — and being very, very successful doing it.

One of Strauss and Howe's tenets was that most generations tend to be the opposite of their parent's generation but similar to their grandparent's generation. The waters got muddied a bit because of something they couldn't have foreseen — the average age pilgrimage (first birth) for a woman was roughly 21 in 1936 (or even 1944, which is where Strauss and Howe started the Boomers). By 2019, the average age is now 29, and may even be thirty at this point. This skewed the generations by about nine years (or half a generation) and created a smaller population boom in relative terms than the Boomers had. Note that in absolute terms, there are more people born into Gen Z than in the Baby Boomers, making it the largest population increase in the United States in history.

Many journalists have commented about the seeming contradictions of the Millennials. That's because they were dealing with half being very pragmatic, pessimistic survivors in the mold of GenXers, the other being the Internet-savvy pioneers of Gen Z. Timeshift that back by roughly a decade, and you begin to see that Gen Y (the Millennials) look like the typical pre-2000 software developer, under the technical leadership of their GenX parents and older siblings.

This is also an example of what happens when you try to take a set of observations and make big sweeping generalizations about it. Humans are inherently messy creatures, and they do awful things to even the best models. This is a lesson that every journalist, historian and sociologist should take to heart.

So, if you time-shift a bit (to the above years), you can make some sweeping generalizations, including the ones that drive the writing of articles like this one:

  • Baby Boomers. Extroverted, passionate, outgoing, idealistic, optimistic about the future and their role in it.
  • Gen X. Introverted, pragmatic, analytical, technical, laid-back, pessimistic (some would say realistic). Corresponds roughly to the space age.
  • Millennials. Ambiverts, practical, hard-working, they were the programmers and designers that built the Internet.
  • Gen Z. Extroverts, oh, so extroverted! Creative, passionate, market-savvy, media-focused, entrepreneurial, iconoclastic.
  • Gen AA. Introverted, technically brilliant, pessimistic about the future, distrustful of authority and conservative with money.

AA batteries lie on an old white wooden table. The concept of vital energy reserveGETTY

AA batteries lie on an old white wooden table. The concept of vital energy reserve GETTY


AA: The Battery Generation

The year 2008 may have been one of the worst years for the US in its existence. Birth rates are remarkably stable. They rise and fall, but the curves are generally fairly smooth. There was a blip in 1942-4 when the birth rate dipped then rose again, but this was in great part because the US had just sent roughly 40% of its young men off to war. When they came back, the birth rate picked up where it had left off. It is almost unheard of for an inflection point to be sharp.

That's what happened in 2008 when the mostly even birthrates of the last twenty years (essentially the Gen Zers) dropped significantly ... and kept on dropping. The birth rate has now been falling for a decade, against the backdrop of what looked like the largest stock market increase in history.

Gen AA was born against this backdrop.

The oldest is now ten. Put that in perspective. Mobile phones are a given. So is massive student debt, siblings and even parents trying to hold down two or even three jobs each just to pay the bills, Knowledge is mostly decentralized, and the average Gen AA is adapting information strategies whereby they are facile generalists, learning to become experts quickly by making use of distributed knowledge, but at the cost of losing learning in-depth.

Schools will have trouble with them because teaching strategies worked out over decades concentrate too heavily upon fact-based in-depth knowledge acquisition. Once that is acknowledged (and it is making its way into education practices), what emerges is that Gen AA (the Battery Generation!) will likely score higher on general intelligence tests than previous generations. They won't necessarily be smarter, but they will have the strategies in place to become smarter if they need it.

Gen AA is an example of what I call a shadow generation. It usually follows an optimistic period where you see birth rate increases. Gen Xers are a good example of a shadow generation — the population fell off dramatically, meaning that the previous generation often was first into key positions within organizations, had better access to credit and better salaries, and once they'd succeeded, they stayed. There were more people in generation X, but their influence, by definition, waned over time, whereas the influence of generation W (Boomers) waxed. Most of the college campuses in the country were built or renovated in the 1960s as the Boomers went to school, many of them are now fifty years old or more and are falling apart.

People had less and less money and that money would soon get eaten away by inflation This meant that most Gen Xers were and are far more conscious and conservative about money than their Boomer peers were at the same age. They are more risk-averse. Gen Xers distrusted credit and usually tended to start with poorer credit ratings because jobs were less reliable and because credit tracking was in its infancy and consequently tended to be only available to the wealthy. A Boomer who was employed with a company could reasonably expect to work with a variation of that company for the rest of their lives. Gen Xers were the first.

This will likely be similar to the fate that befalls Gen AA, albeit with some major wrinkles. Businesses were far more monolithic than they are today, and we are likely entering a period where labor demand will continue unabated for some time, even with an economic slowdown. It is more likely that with the growing demand for AI-driven technologies, the demand for developers, creatives and analysts will likely grow, which benefits a more technically oriented generation. Indeed, in surveys of the youngest Gen Zers, what is beginning to emerge is that more of them are focused on STEM-related futures than media related ones (though it should be pointed out that there's a lot of overlap).

Gen AA will likely be more body-conscious. Indeed, many already see their older Gen Z siblings as being frivolous and flighty. More or likely to be hardcore into computer console gaming, but their interests lie more in pushing the speed, responsiveness and power of those games than on the design side. They are also more likely to be mechanically inclined.

Their political orientations are likely to be also pragmatic, but not necessarily in a direction recognized today. Rather, politics will likely be seen by Gen AA as something that is determined based upon merits of the issues and the priority of needs, rather than something that comes from a passionate defense of the issues. Gen Z are natural journalists, Gen AA would much rather be the ones manning the control booths and making sure the sound quality is good.

Neither like working for The Man. A huge challenge that many established companies would be facing in the future is the fact that despite the differences, Gen Z and Gen AA will tend to work in tandem in smaller startups, virtual startups and consulting rather than work for larger corporations. While this may seem ideal for companies that prefer to work with contingent labor, this also comes with a warning: both Gen Z and Gen AA have a greater ability to work in collective action than even the largest labor union, and their loyalty to their generation is far deeper than it is for the corporate world.


We have a pretty good idea of the world that Gen AA will grow up in. You see it visualized today in films, TV shows and through other media. GETTY

We have a pretty good idea of the world that Gen AA will grow up in. You see it visualized today in films, TV shows and through other media. GETTY


Making Fiction into Reality

Again, the reason for this is the Internet, which they will likely see as being the dividing line between generations. In many respects, they have a fairly clear map of what their lives will be like as they get older — if Star Trek established the sensibilities of GenXers and Star Wars, the sensibilities of Millennials, the world of the Battery Generation will look a lot like the Marvel Cinematic Universe or MCU (minus the Hulk, of course). Autonomous vehicles, drones, rogue AIs, cyborgs, holographic everything, carbon fiber suits wrapped by robotic exoskeletons, custom genetic manipulation (good and bad), quinjets ... we have a pretty good idea about what the world contains in 2035, and Gen AA is taking notes.

Indeed, one of the (many) reasons for the mediocre box office of Steven Spielberg produced Ready Player One may have been because for late Gen Z and Gen AA kids, this was all old hat, and in many cases, the cultural references had the force of overblown memes for that age-group.

Gen Z is captivated by narrative — they were the first generation in which it became possible to binge watch a series, rather than being reliant upon self-contained episodic content. Gen AA shares this trait but increasingly expects it of everything — the games they play, the books they read, the comics they consume. They are not looking for sequels — rather they are looking for storytelling that is immersive and cohesive across dozens or even hundreds of episodes ... and increasingly are also expecting to be able to participate, in some fashion, with the narrative.

This is a message that should not be ignored by either marketers or content developers. Engagement with this age group is expensive, and they are a tough sell. On the other hand, ironically, once they are engaged, they will stay engaged so long as the story is good, unfolds consistently over time, and provides hooks for them to stay involved. From a marketing standpoint, this means planning for the long haul — the thirty-second stand-alone commercial is rapidly going extinct, in part because it is now possible to link content together, to introduce an order that television was simply not capable of providing.


3D printing, now in its infancy, will become commonplace by the time that Gen AA is old enough to start families. This will change the economy profoundly, and it is this generation that will lead that charge. GETTY

3D printing, now in its infancy, will become commonplace by the time that Gen AA is old enough to start families. This will change the economy profoundly, and it is this generation that will lead that charge. GETTY


The Fall of Materialism

Gen Z and Gen AA both are also less materialistic than previous generations. This needs a bit of explanation, and it has nothing to do with idealism or spiritualism. People in their twenties and younger are growing up with wonder boxes in their hands. Physical toy sales continue to decline, but virtual toy sales, in the form of electronic games, continue unabated. The same thing is happening with books, with musical instruments, with drawing and craft supplies. Indeed, more and more action figures are being purchased not for or by pre-adolescent boys, but young adults, primarily women, who are nostalgic for the media of their youth and pissed off that no one ever makes female action figures.

However, that lack of materialism becomes a habit by the time adulthood is reached. Communal living, where three or more unrelated people live together in the same house, is becoming common. Couch surfing and Airbnb makes it possible to have a place to sleep without all the complexities of house ownership or paying increasingly exorbitant rents, and Uber or Lyft reduces the need for car ownership. Fewer Gen Zs have a driver's license than any generation going back to the beginning of the automotive era.

This is a big reason for the shock waves reverberating through retails right now, and it will only get worse. Spending reaches a lifetime peak in the mid-thirties, driven by the need to house children and the things that support them — furniture, clothing, toys and play equipment, vehicles for getting them to and from events. It is likely, given the demographic drop-off that Gen AA is already facing (against the largely flat “growth” for Gen Z), that they will also have fewer kids with fewer marriages, perhaps even fewer than the Gen Z generation.

Ironically, as 3D-manufacturing and just-in-time production become the norm, this one-two punch may very well spell the end of corporate capitalism that has been dominant in the American economy since the late 1930s. This form of capitalism was built upon the premise of mass-production and planned obsolescence to produce an excess of goods to needs, with the idea that the excess could be sold at reduced prices or destroyed, while at the same time producing items that would eventually fail to force purchasing of new goods. It was not efficient for resource use, but, particularly with the ability to socialize the disposal costs, it was economically quite profitable.

However, by the time Gen AA fully enters the workforce (in 2045) food production will almost certainly be significantly vat-based, autonomous cars will be the norm and car ownership will have dropped below 40%, manufacturing will be mainly just in time with the collapse of supply chain networks, most products will be self-repairing, and the amount of a city's infrastructure devoted to manufacturing, retail and corporate management will be at an all-time low (and transportation infrastructure will be heading there).

By traditional measures such as GDP, such an economy would seem unsustainable. There are far fewer avenues for large scale investment that provide significant returns. There will be a growing need for remediation projects, attempting to reclaim resources that have otherwise been turned into waste (or waste sites), but whether those needs will be satisfied comes down to whether people can make money off of them (in other words, it becomes the government's problem).

It is likely that between Gen Z and Gen AA, an economy that works in this situation will emerge. Value is still being created, needs are still being met, and the opportunity for growth and advancement are still very much there, but what will have changed is how that value is measured (and compensated for), who benefits, and what opportunities are being developed.

Creativity, in general, will be valued more than it is today, but the ability of gate-keepers to profit off that creativity will be directly proportional to the value that they provide in the chain. It also means that laws that made sense when gate-keepers also provided the means of production will slowly be changed to better reflect the role of gate-keepers primarily as editorial filters. Most Gen Z already understand at an almost visceral level that they have far more control over the distribution of their creative efforts than their parents or grandparents ever did, and that is already upsetting the balance of power between the pre- and post- Internet generations.


Gen AA and Futuristic GUI. GETTY

Gen AA and Futuristic GUI. GETTY


Summary

The generational theory should be seen primarily as a lens, as a way of determining broad (and usually subtle) characteristics that in the aggregate may affect the evolution of society. Gen Z (or the tail end of the Millennials by most reckonings) are unique in that regard in that they do have a common cultural thread (the Internet) along with an economic one, a thread that they share with Gen AA as well.

It's perhaps too soon to say what other traits differentiate Gen AA — the oldest is ten, after all — but given existing trends, it is not hard to predict that they will be in the thick of one of the most significant economic transformations the world has ever seen.

For more on Gen Z, check out my recent interview: New Kids on the Block: A GenZ Talks MarketingFORBES Kurt Cagle


Kurt Cagle is Managing Editor for Cognitive World, and is a contributing writer for Forbes, focusing on future technologies, science, enterprise data management, and technology ethics. He also runs his own consulting company, Semantical LLC, specializing on Smart Data, and is the author off more than twenty books on web technologies, search and data. He lives in Issaquah, WA with his wife, Cognitive World Editor Anne Cagle, daughters and cat (Bright Eyes).