A really fascinating article about understanding the structural changes of capitalism and the economy - and how that affects our personal responsibility when it comes to money.
K-shaped economy: divergent recovery where different parts of the economy grow or decline at separate rates, creating a widening divide between wealthy (upper arm) and lower-income individuals (lower arm).
The top of the K (asset owners, high earners, people who bought homes before 2020) mostly recovered and then some. The bottom of the K (wage workers, renters, people without generational wealth) fell further behind.
This, in turn, also affects the type of audience that capitalism caters towards.
Under a capitalistic model, companies tend to innovate where the money is — more sales at higher margins means more value for shareholders. So when wealth concentrates at the top, that’s where the products and services follow.
Connecting the point-of-view of consumers to the economy, companies are now designing for two types of individuals: premium and budget.
Horvath argues that this results in the "missing middle". In this way, economies aren't catering to this "missing middle", resulting in those going out of their comfort zone to purchase luxuries that they may not be able to neatly afford.
Some people are experiencing real, material deprivation — the basics are genuinely slipping away. But a lot of people — and I think this includes much of this newsletter’s audience — have money. They just aren’t affording the life they thought they would have by now.
And the distance between those two experiences — and the way both groups misdirect their frustration — reshapes how we think and behave with money.
And because we have a culture built on individualism and meritocracy, when we can’t afford the stuff, or we miss the milestone, we’re more likely to blame ourselves than to critique the system. The ethos of personal responsibility runs so deep that structural failure gets internalized as personal failure.
The association of the middle class with personal responsibility and individualism provides an even deeper understanding of economies and how they cater.
“Middle class” has become a psychological container that absorbs all of this anxiety — the gap between self-concept and lived experience. The feeling is dissonance
That extraction language matters. This group isn’t just dealing with “prices going up.” They’re dealing with an entire consumer economy that’s been redesigned around making the base tier uncomfortable enough to push you toward a premium tier you can’t afford.
This results in an elite overproduction: societies produce more people who expect elite positions than positions exist. This discrepancy between elite status association and increased concentration of upper class ICPs further emphasizes the increasing issue of resistance.
The credentials of elite status — the graduate degree, the knowledge-work title, the coastal zip code — have proliferated, while the economic substance has concentrated into a smaller and smaller group at the very top.
I'm sure this can be related to a near-miss effect, creating a sense of "almost winning" but never quite there. The idea that you may be so close to actually getting a big break into the upper upper class.
The top 20% accounts for 59% of all consumer spending. But within that top 20%, the real divide is between people who earn and people who own.
Further, wealth is concentrated at the top 1%, specifically those who own a majority of the assets that drive the world's economy.
disillusionomics: Gen Z's approach to an economy where traditional paths to stability (homeownership, affordable education, and career longevity) are largely unattainable.
Understanding the precarity that is yours:
- material precarity: state of existence lacking economic stability, secure employment, and consistent access to necessary resources.
- positional precarity: insecurity, anxiety, vulnerability individuals experience due to unstable employment - a more psychological approach.
