29 May 2014
An earlier post to this blog begged the obvious by stressing the rapid and accelerating rate of change in today’s business environment. That post then pointed to a number of conditions that are driving that change, which were rather loosely grouped into four categories: Globalization, Sustainability, Technology and Demographics & Trends. This post looks more closely at several change drivers classed as Demographics & Trends.
Upstream or Downstream?
Anyone who has paddled, rowed or sailed a small boat understands the power of winds and currents. In business, demographics and trends demand similar respect. Demographics and trends provide insight into basic changes affecting the business environment, which, of themselves, are beyond the control of most individuals or firms. While demographics and trends are beyond individual control, individuals and firms can choose how to react. One can choose to row with the current, to row against the current, or to ignore the current.
The 20th century produced a vast number of technical marvels — space travel, nearly universal electrification, virtual elimination of many infectious diseases, television, the Internet and on and on. However, my personal choice for #1 — the most important technical achievement of the 20th century — is effective, universally available contraception. The world’s population exploded from about 2.5 billion in 1950 to over 7 billion today. But today, the explosion appears to be over.
Population growth has slowed dramatically, especially since the Great Recession. The Census Bureau now projects U.S. population growth at 0.7% per year from now through 2040. Birth rates in many economically developed countries have dropped below replacement. China’s one child policy remains in place. Almost everywhere in the world, the trend is the same — fewer babies are being born.
When the birth rate slows, the population ages — with proportionately fewer younger people and more older people, especially as life expectancy also increases. Business expectations, however, are conditioned by several centuries of population growth and youthful populations, crowned by the post-war baby boom. An aging population changes the available workforce and, even more dramatically, the customer base and the demand that customer base creates. That Malthus appears to have been tamed is good news — unless you make baby bottles, children’s clothes, family homes or a multitude of other things.
A huge change in the birth rate generates what can be a slow motion train wreck for your business — you can see it coming, but you can’t stop it. Or, it could be a source of opportunity. Sail with the tide, sail against the tide or try to ignore it. Your choice.
Women, Women Everywhere
The women have come out of the kitchen. Technical advances in the 20th century have enabled women to expand from traditional domesticity into wide participation in virtually all aspects of modern life. The increasing presence, hence influence of women in business adds fresh perspective, not to mentioned a much larger talent pool. Margret Thatcher and Angela Merkel have already demonstrated that women can successfully lead nations. Women already serve as CEO at large corporations, including DuPont, Hewlett Packard and General Motors.
Expect to see increasing numbers of women in every aspect of business, from top to bottom. Expect their presence and influence to affect how all aspects of business really work. Oh… I understand that there are about 21.8 million college students in the U.S. Of those, 12.5 million are women, compared to 9.3 million men. If college grads continue to become tomorrow’s leaders, what does that say?
At least once in every decade that I can remember, the U.S. economy has experienced recession. And recession, with its corresponding interest rate gymnastics, plays havoc with business and with the lives of people who depend on business. The periodic nature of recession suggests an intrinsically unstable economic system. The flashing-blue-lights urgent political interventions that accompany recession can’t really be expected to address the core issues.
To compound the situation, Globalization has made national economies increasingly interdependent. The global economic system, as it exists today, consists of the highly politicized remnants of Bretton Woods agreement from the end of World War II, small “s” socialist ideas from the West as well as from the East, along with fallout from a great deal of debate among economists of several stripes.
Today’s global economic system has no fixed reference point — nothing like a “gold standard” — only the “full faith and credit” of individual sovereign nations. Hmmm. Add to that an almost universal political aversion to balancing budgets, justified (or perhaps rationalized) on Keynesian grounds. But Lord Keynes himself pointed out that events that precipitate recession usually result when outstanding debt exceeds the means to service that debt. Throw in declining population growth, with the declining future tax base that implies…
I’m not an economist, and I don’t know how — or when – the global economic system is going to be fixed. Until it is fixed, I expect the existing trend of periodic recession to continue. Since I see the global economic system as becoming more unstable, rather than less, my guess is that recessions will become more frequent and likely more severe until the system itself is reconstructed.
You can — and should — draw your own conclusions on this. For myself, I will plan based on a cyclic economy, certainly not on an assumption of uniform “x%” annual growth, continued indefinitely. I will also make provision, as best I can, for the bad things that happen in business when recession does occur.
The trend is your friend. Or maybe not.
Thoughtful comments and experience reports are always appreciated.
… Chuck Harrington (Chuck@JeraSustainableDevelopment.com)
P.S: Contact me when your organization is serious about pursuing Sustainability … CH
This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.
Money Vortex image thanks to Patrick Hoesly, Creative Commons via Flickr
 See Four Change Drivers, this blog:
 Women to men ratio from P.J. O’Rourke: