This seems dangerous, like people are going to spend 100% of their paycheck every month and get everything taken away from them if they go a week without a job.
Not owning anything allows you to go where the work is and keep your net worth in assets that produce actual income (like index funds and bonds), instead of sitting around collecting unemployment during a dry spell because you're encumbered by your depreciating assets.
I'm sure some people will use this as a way to temporarily live beyond their means...but it's not like Credit Cards don't enable this behavior already. The US is the land of the free of course, where we allow the weak to be preyed upon.
However the example of a contractor who lives an unencumbered life and saves a lot of money is not at all typical. It's similar to using the example of an investment banking associate or corporate attorney who pay high rent in Manhattan for some years and invest the rest, as an argument against buying a home and having a mortgage.
In reality, many/most people are better off with a mortgage because it forces them to save money, which they behaviorally wouldn't be able to do otherwise. Likewise, buying something and keeping it around probably prevents a lot of needless repurchases and upgrades of the same item. If you are rational the rental lifestyle can make sense in some cases. But for most it just facilitates impulsive behavior. Hence the rush to capitalize on it.
I'm going to go ahead and guess you don't have a large peer group who were buying houses in the late-2000s. A mortgage in no way forces you to save money, added to which it has a tendency to decrease savings due to the moral licensing of exactly your train of thought. "I'm already saving with my sweet ARM, I can afford to lease that car!"
People who are financially illiterate are going to be bad with money, regardless of the system.
I am curious though as to the distribution of freelance / contract rates. Is $200 / hour also 1% of engineers? More? Less? Financially for the same person what's actually a better route? For someone that can get $400k a year at google, is that better or worse than the contract route on average?
Another day older and deeper in debt.
St. Peter don't you call me cause I can't go,
I owe my soul to the company store.
For larger and more involved transactions (especially homes) things get more complex, but that's still the basic arithmetic.
Making more things rentable isn't a big problem. The big problem is that many people don't understand this arithmetic so they end up shooting themselves in the foot when you start giving them options. And unfortunately the people who need this knowledge the most are often the least likely to have it.
There's a simple solution which is to just teach a great personal finance curriculum in high schools nationwide. (Well, as simple as solving a problem for hundreds of millions of people is going to get.) Of course this being HN we can probably dream up fancier solutions like incentivizing people to take some personal finance training online.
A classic scenario is renting a movie. Let's use DVDs as an example--even though they're falling out of favor, they're a little simpler to talk about, and the economics of online aren't that much different.
Studios like big numbers and would like to sell movie media/rights/access/whatever (it's complicated) to someone who can drive lots of demand. So the rental outlet will get a steep discount on those things for buying in bulk.
Meanwhile, you're not even sure if you'll want to watch that movie more than once, and the resale value of a used DVD after a couple years is basically zero. So renting the DVD at least the first time, and maybe every time you want to watch it, is a pretty good deal.
Case in point, Redbox's "markup" over whatever they're paying the studios is large, but it's still a pretty good deal for you and me.
I think the real benefit to the consumer of renting from Redbox instead of buying is that Redbox has economies of scale on exchanging movies between consumers and distributing them geographically. If a consumer buys a movie, watches it, and resells it, that's a lot of hassle, whereas Redbox has managed that redistribution by building automation.
I think what happened is they started selling to Walmart et al for the same price.
This article (admittedly from 2008) says studios hate Redbox. And that Redbox gets its DVDs from regular movie wholesalers (I assume where Walmart gets them too).
https://arstechnica.com/tech-policy/2008/10/universal-studio...
I actually don't know the details of Redbox. The specific example I remember is Blockbuster video, which used to get copies of movies for virtually free, in exchange for sharing a portion of their profits with the studios: https://www.quora.com/How-much-do-movie-rental-stores-e-g-Bl...
I think the studios agreed to this because of market segmentation, for any given movie there are people who have no interest in paying $20 to own it, but will pay a few bucks to rent it once or twice. If the studios didn't support this model they'd be leaving money on the table.
It's all ancient history at this point so my memory is fuzzy, but I think hobbyist stores actually had the better business model by that measure (they'd focus on a limited selection of classics that people would rent again and again). Then Blockbuster came along with these studio deals they were able to negotiate based on their volume, allowing them to offer practically unlimited copies of new releases. In conjunction with a decent selection of classics this enabled them to lure customers away from the hobbyists. A combination of pressure from the studios and the emergence of competitors with lower operating cost (Redbox, Netflix etc.) later crushed Blockbuster. And watching the studios raise their fees until Blockbuster collapsed surely contributed to Netflix's decision to produce a lot of original content. And now we're caught up to the present day.
1. https://www.investopedia.com/terms/t/timevalueofmoney.asp
If the subscription economy has the effect of being a low-interest loan on anything, it's not a bad deal. One would be unwise to turn down a 0% car loan-- save your money, and grow it, instead of paying up front for the entire car. Same idea, but applied to the subscription economy.
I have a 0% loan right now on my LEAF. I'm likely to pay off that loan pretty soon as the value of that insurance (to me) is decreasing as the car ages, but I can't dump it unless the loan is paid off.
I think a better option is shared ownership, such as several neighbors sharing a lawnmower, or similar things that see regular use, but also have significant idle intervals between uses.
Communal spaces and tools save money and foster collaboration.
At least with something desirable like a car, where some parts of the world have seen a significant shift towards renting.
No idea how well it works for beds, but it wouldn't surprise me if there's margin there too.
In that model they wouldn't rent _or_ buy a bed, because they could just sleep on the floor. Or more accurately, they'd rent or buy whatever they think would maximize income including the cost of it; e.g. if having a bed maximized overall health over life or something then they'd buy or rent the most basic bed that fulfills the criteria of keeping their back healthy or whatever.
I own loads of furniture that's like, mine. It has value to me in the fact that it's my object, unencumbered by financialization.
Personally I seek to minimize financialization wherever possible. I'll pay slightly more up front for things to just delete the monetary stuff from my brain. I don't want to think about it, I want my life to work and money to exist at the side of it not in the forefront.
It seems to me there's a fairly straightforward regulatory solution to this issue: require tighter financial checks, or reduce the protections given lenders in case of default.
There's not many things you only ever buy one of.
You might be right... but I’m pessimistic here. Renters and leasees take less good care of the items they let or rent. The clothes will have a faster velocity to the waste dump, etc. manufacturers and purveyors will cater to this increased velocity...
People are worried about drinking straws. Imagine all the new plastic items to cater to this new usage pattern...
I know now that anything rented should maximize durability while minimizing cost. Time will tell which one weighs heavier, but I'm pessimistic also, and guess that minimizing cost is overall cheaper than durability.
It may be a boon for repair-ability though if they see it's economical to have in house fixers.
Again, Rent-A-Center has existed for decades already, and their goods are certainly not more durable than standard consumer goods.
re-sell things they've bought at a loss
Only a loss compared to the price at the start. If you account for the utility they got from the item and depreciation it's probably just the current market value.