Perspective from the Spending Guru

The immensely popular TechCrunch blog features an outstanding guest column by the founder of, Aaron Patzer. For those unfamiliar with Mint, it is a personal finance site that tracks user’s spending on various accounts (bank, credit card, loan, anything that can be tracked online) and aggregates personal finances into one convenient source. The site allows for the collection and organization of a ton of data, and when considering its growing user base, now 900,000 users (or close to 1% of the US households), you can get an interesting cross-section of the economy.

The backdrop of the article is the world economic forum in Davos. Patzer is struck by the apparent triumph of rhetoric over data in many of the presentations given on the current global recession. An interesting point, as we hear nearly everyday that we are in the worst economy since the Great Depression. At least at Davos, there seemed little empirical data to support these claims other than the mention of equity market losses. The catastrophic global slump was taken on faith as “everybody knows” its that bad. Patzer, being an engineer, was not satisfied with settling on this dour premise from which to begin the summit without some proof of the dire circumstances as related through cold, hard data.

Lucky for us, Patzer is in a unique position to shed some light on the average Mint user, and in so doing, give us a clearer picture of the economy as a whole. His study of mint users between August 6, 2008 and December 15, 2008 yielded these results:

“Is it Great Depression bad? That’s a qualitative question I can’t answer. But what the data, the hard facts, mean for you – if you run a consumer business – is that your customers are spending $400 less each month than they were a year ago, have burned through half of their savings, and on average have taken on an additional $5k in debt.”

Perhaps most refreshing is the fact that Patzer happily leaves the numbers to tell the story. By contrast, many market commentators look for recognition by trying to time the market better than anyone or by being the most sensational out of their peers.

Furthermore, this article highlights a new and developing trend in research in the web 2.0 world. There is so much information available these days on the web that there will be increasingly meaningful data produced by aggregators like Mint. You are seeing the beginning of this trend in little ways around the web with various sites listing most popular articles, products and searches. Can you imagine the value of information stored at Google (GOOG)? Thank goodness their motto is “Don’t be evil.” Of course, social media sites like MySpace (NWSA) and Facebook have an incredible amount of data with their massive user base. They just have not yet figured out a way to harness it in a way that does not offend users, who often put very personal information on display. However, there is little more personal to an individual that your personal finance, and users are readily making tangible and meaningful data available to Mint.

As the saying goes, knowledge is power and new tools on the web are expanding people’s everyday uses for the web all the time. As Patzer said to end his article:

“Good decisions are based on good data. And data – in itself – may be one of the most valuable by-products of any startup.”

About Ockham Research 645 Articles

Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

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