Memo #14: Burritos, Botox, the Billionaire Playbook

Buy Now – Panic Later

It’s often said that markets move in cycles, but culture does too - right now, both are flashing familiar warning signs.

Let’s begin with the Buy Now, Pay Later (BNPL) sector. Once hailed as the future of consumer credit, the sector is now facing some uncomfortable realities. Klarna, the Swedish fintech that spearheaded the BNPL revolution in the Northern Hemisphere, was valued at $45.6 billion at its peak in 2021. That valuation has since collapsed by over 85%, with its most recent private funding round in 2022 valuing the company at just $6.7 billion¹.

Worse still, Klarna has had to aggressively pivot its messaging, diversify into subscriptions and marketing services, and scale back its operations in several key markets, including the US, where delinquency rates are rising, and regulatory scrutiny is catching up. There's growing concern that BNPL providers, by allowing users to split payments on fast fashion and takeaway orders, have overstretched household budgets under the illusion of affordability.

A recent Bankrate report determined that of those surveyed ~20% of BNPL users in the US missed a payment last year². Anecdotal reports of customers using BNPL to finance burritos or Uber rides, once a quirky footnote, now read more like a symptom of consumer distress. Subprime lending used to be about mortgages. Now, it’s about mascara and meal kits.

The credit ratings agencies have been slow to respond³. Many BNPL loan books are still being treated with risk weightings that don’t reflect the customer cohort or the unsecured nature of the debt. And just as rating errors helped fuel the 2007 housing bubble, a mispricing of risk here could spell a similar, if smaller-scale, blow-up in consumer finance.

The broader risk? This debt may be bundled and resold (after all Wall Street loves to securitise anything if it can.)⁴ As interest rates remain high and household savings dwindle; defaults are likely to increase. If this sounds alarmist, remember people rarely realise they're in a credit bubble until it bursts.

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Gremlins & Ghost Towns

Now, onto the new face of luxury. No, not Kris Jenner's new face (although we’ll get to that). We’re talking about Labubu, a bug-eyed, gremlin-like toy you’ve probably never heard of unless you’re under 25 or dating someone with a Depop side hustle. Think of them as the Gen Z equivalent of Beanie Babies, except instead of soft pastel animals, they're a bit more... haunted. Prices are soaring, resales are combative, and grown adults are queuing up like it's 1997 at Toys"R"Us. It's another textbook case of scarcity-driven hype economics — and a reminder that consumer culture always finds its next sugar hit.