How have I not heard of AIO before?
Remember the bag phone?
This was one of the first commercially available mobile phones to hit the market in the 1980’s. I remember when our family bought one of these when I was about 9; we stored it in the glove-box of our car, seldom (if ever) using it due to the astronomical costs per minute.
To date, I cannot recall it ever being used one single time.
Fast forward to the the early 2000’s: mobile phones were still comically huge. I remember disagreeing with my newlywed bride in the fall of 2000 because she felt like she needed a phone in her car “in case something happened,” and I was incredulous! I remember thinking, “when would you ever actually need to make a phone call on the road?”
Wow, was I wrong.
Thankfully, my wife never had an issue where she needed to make one of those expensive bag-phone-calls. But mobile phones evolved so rapidly and proliferated so broadly that now most adults—myself included—likely couldn’t imagine heading down the road without their phone.
That progression took a very long time.
Just 15 years ago, by the end of 2007 only 9% of the world had a mobile smartphone subscription.
Today’s estimate is between 83-84%.
Why would that have taken so long to break into the market? And why do things that eventually take over still take so long to be adopted by the majority?
2 reasons: Familiarity and Social Custom.
If something is unfamiliar to us, we’ll likely just continue on with the more familiar options, even if the unfamiliar product is intrinsically superior. That’s why “speed of growth” isn’t always a great metric for a new product—mobile phones were extremely slow to permeate the market, but you would have been a fool to bet against their eventual success.
Whereas an amortized, conventional loan is so familiar as to have become the default option for homeowners in the US, the AIO—superior as it may be—is a slowly and steadily growing option for more and more homeowners. I’d bet the farm on it taking over the country, perhaps in about the same time it took for mobile phones to do the same. But remember, the AIO has only been available in the US for 15 years. In mobile phone timelines, that’s still early days.
All that to say, the fact that you’re only just now hearing of it means very little.
Anytime a new product becomes available that is vastly superior to its predecessor, the question isn’t how many people are getting onboard at the start. Just like electric vehicles, the question isn’t “how many people are buying these cars at present?” It’s this: “How many people who buy an EV will ever go back to buying a gasoline car again?”
Regarding the AIO, the question isn’t how many people already have one, the question is this: How many people who have an AIO will ever get another type of loan again?
Social custom is the second reason you may have never heard of an AIO.
We are programmed by instinct to follow our habits and to follow social copying. Anytime something new comes along the challenges us to stop doing things one way and start doing things another it will be met with hesitation. That makes sense. If everyone else ate the purple berries and they didn’t kill them, then I’m safe to assume they will be safe for me.
If you don’t know anyone in an AIO, you likely haven’t ever explored it yourself. That was my story too. But then I met a wide community of people who have had AIOs for years. There was no going back from there.
Mobile phones have come a long way since their baggy beginnings.
Mortgages have too.
Just like you, I’ll never go back to not having a mobile phone.
Having driven several electric vehicles for the last 8 years, I can also tell you will I likely never go back to buying a gas-powered car.
And after just a few years in the AIO, I’m just as sure: there’s no loan in the world that I’d ever even consider going forward.
