How property is gradually replacing ownership.

The concept of property is one of the cornerstones of our social order, so to speak. So much so that even small children want to declare something as their property and can argue about it with their siblings. In the western world, however, the importance of property is diminishing more and more. A social development that is fueled by technology.

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Close link between possession and ownership

Just 60 years ago, possession and ownership were very closely linked. Anyone who owned something, especially high-priced goods, also owned the item. And, as a rule, they had made a contribution. They had saved for it. In other words, they were financially disciplined until enough time had passed and they had enough money left over to buy an item.

At the same time, objects became status symbols. They showed that you could afford something. The financing behind this was a lengthy feat of strength. Always assuming you hadn’t inherited or otherwise come into money effortlessly.

That’s why older people today congratulate you on a new car, for example.

Decoupling possession and ownership

In recent years, however, we have increasingly seen a decoupling of ownership and possession. And whereas in the past an individual consumer only had a relatively limited “ownership radius”, i.e. the number of different ways to own objects, today the possibilities are considerable.

If you have an average income and a good credit rating, you can get hold of almost anything imaginable today if you behave cleverly. Not the yacht or the 18-room villa, of course. But in any case, various things at the same time, for which a lifetime of sequential saving would not be sufficient.

This trend started in the business sector. Instead of tying up capital beyond the useful life of a machine, for example, leasing was used to pay only for the corresponding use and the provision of capital. This made “investments” clearly calculable, as the lessors or their partners guaranteed a fixed residual value (or at least a price band).

Later, the concept was gratefully accepted by banks and insurance companies and transposed into the private sector on the fly, so to speak. The credit industry as we know it today was born. Suddenly, private individuals were also able to make advance payments, so to speak, for usage that had previously been financed in arrears. In addition, they had and have no ownership risk, but only pay for a certain period of time.

Factors favoring this trend

And there is much to suggest that this trend will continue. I would like to pick out two points:

Money in abundance

As a result of the financial escapades of the financial sector, the money supply has been greatly increased. The result is that money is available in abundance. A kind of demand market for money has now emerged. The price of money has plummeted and has been at de facto 0 for around a year. People keep asking me whether we will return to an interest rate level of 3-8% and I always reply that this is not possible. I don’t think it is possible even if the central banks were to raise interest rates regardless of the economy. The investment opportunities are simply no longer available. And the globalized economy quickly became accustomed to low capital costs. I believe this is irreversible without a drastic break in the system, in which everyone loses massively.

What would have to happen, as I mentioned, is a systemic break: a destructive war, a debt cut, a credit cut, a system change. I don’t think it’s very likely that this will happen comprehensively. The EU crisis surrounding Greece in particular has shown how quickly business and politics are prepared to throw rules and principles overboard in order to maintain the “modus operandi”.

Sharing Economy

Today, we are more willing than ever to share things. Just think of all the people who share their own apartments and houses with other people via Airbnb. I am convinced that this would not have been possible 20 years ago. It sometimes seems to me that large parts of the western world are increasingly willing to share things they own with others if it means they can take more ownership of other things. That is precisely the appeal of ownership: it can be temporary. Today’s models and today’s material thinking go in exactly this direction. We use something for a certain period of time and usually know from the outset how this period will be measured.

An impossible thought for our grandparents. Even back then, people rented and rented out a lot, but it always had the aura of being inferior. Only people who couldn’t afford expensive clothes rented them for special occasions.

Today, however, it is completely normal, for example, to buy a house and already have a clear idea of when you want to move out. We are increasingly thinking in stages of life. Property hinders the transition from one stage to the next. In a world that is increasingly focused on individualism and agility, it restricts us considerably.

Politics still favors property

Politics still favors property ownership. In Switzerland, for example, this is done by allowing interest on mortgages to be deducted from tax. In addition, mortgage debts can be offset against assets, which leads to lower wealth taxes. Switzerland also has the instrument of imputed rental value, the offsetting of a hypothetical rent against income, which of course increases taxes. This is well-intentioned.

The bottom line, however, is that homeowners always benefit massively from cheap money. Because even if they pay a share of the tax, they don’t have the rest of the costs. And it leads to the absurd situation that a family that does not have the financial means to buy a home usually has to face housing costs that are 2 to 3 times higher than those of a family living in their own home. The opposite would be fair: people with high incomes pay more than those with low incomes.

At the same time, and this is where the whole madness of our system shines through, tenants are needed. This is because investment funds see the real estate market as the only secure, non-speculative way of generating returns for pension systems in the medium term. Put simply, the average Joe is paying for his parents’ pension with the comparatively high cost of housing. In the hope and naive assumption that they too will one day receive a pension.

What does technology have to do with it?

Digital technology is fueling this devaluation of property by making the perfect and efficient allocation of resources possible in the first place. I know that this is banal. But that’s the way it is.

Airbnb could also be made completely analog via newspapers. It hasn’t happened so far because, as mentioned above, social awareness of sharing wasn’t there yet. More importantly, the transaction costs on all sides – for the organizer, the consumer and the provider – would simply be too high in an analogue model.

The technology behind it reduces transaction costs and enables these new concepts to be operated efficiently. They lay the groundwork for paradigm shifts. This is a proven, repeating pattern and we will probably see it in many other areas too. I find this development in the financial sector particularly exciting. It is also an area in which transaction costs can be massively reduced.