By Michael Hodin
There is a massive, irreversible transformation under way in the U.S. and across the globe. It is poorly understood and often overlooked. Halfway through the second decade of our 21st century, we are failing to grasp the implications of population aging.
Life spans that have for the history of humankind been unimaginable are today the norm. Low birth rates that for centuries would have spelled the end of a civilization are now common. By midcentury, there will be more of us over 60 than under 14. A half century ago this demographic state of affairs would have been inconceivable.
The implications are profound. At personal and familial levels, each of us must ask a new set of questions about how to achieve financial security when we may live to celebrate our 100th birthday. At the societal level we confront a retirement crisis prompted by our stubborn refusal to recognize that 20th-century schemes don’t fit 21st-century lives. Retirement at 60 or 65 will make sense for very few among us when we must plan to live past 90.
The questions are equally complex for investors. First, there is the business opportunity. There will soon be 1 billion of us over 60, and we hold the lion’s share of the world’s disposable income. With longer lives – and better health in older age – a new consumer base emerges. These consumers want and need products and services that are different from when they were younger – and different, too, from what their parents wanted at their age.
As hundreds of millions of us live into our 80s and beyond, our tastes literally are changing, along with our body shapes, living conditions and leisure preferences. Which businesses are preparing to capitalize on this seismic opportunity?
Sure, health companies understand the diseases of aging; financial institutions are starting to get it too. But are there food companies creating products specifically for 75-year-old taste buds? Which travel company is accommodating the interests of and marketing to older travelers? Who is creating houses, appliances, furniture and other home goods for octogenarians? Which film companies are making movies that appeal to older viewers? Is there a technology company building the wearables market to assist the deteriorating hearing, vision and skin? What innovator is out there marrying fashion and need – dresses, shoes or bathing suits for the over-70 crowd?
The smart investor will look beyond the “baby boomer bulge” headlines and recognize that aging is not a trend but a revolutionary transformation. All over the world socioeconomic forces – urbanization, education, women’s rights, health care innovation and more – are intersecting to create real, enduring change. The smart investor will understand this is now a part of consumer demand writ large.
For investors the aging megatrend introduces a new set of metrics by which to measure the potential success of a company.
Is a culture of “age-friendliness” being cultivated within the organization? Will research, business development, strategy and marketing teams be recognized and rewarded for creative approaches to products and services that will sell to over-60 consumers?
Has population aging also shaped hiring and retention strategies? Paying retirement at 65 worked 50 years ago because there were so few who lived much past that age and most people could not or did not want to work as they got older. Now, it is a recipe for failure.
Is the company investing in research or marketing that will attend to an older demographic? Does it have a growth strategy based on aging?
Which companies are reshaping their benefits packages to attract and retain talent? And does this include benefits a 55-year-old might want as well as those for the 32-year-old who will be around for 60 or more years?
Does the organization have a strategic approach to align its future with the social, political and institutional changes that will occur externally as a result of the phenomenon?
In 2010, S&P, now a division of McGraw Hill Financial, broke important ground in its Global Aging report, asserting that “no other force is likely to shape the future of national economic health, public finances and policymaking as the irreversible rate at which the world’s population is aging.” Six years later we now understand that aging is equally a market force.
If a business wishes to be competitive and win in the 21st century, it will build a strategy to capture the opportunities brought by population aging. If an investor wants to succeed, he or she will look to these leaders as among the most prescient and worthy of investment.
The article can be found at http://www.institutionalinvestor.com/Article.aspx?ArticleID=3527807#/.VrpuAPkrK70.