The Demographics And Risk Management Tom Gillaspy, PhD Gillaspy Demographics November 2014 Gillaspy Demographics

The Demographic History Of The U.S. After World War II Roller coaster births--big differences in generation sizes Rapidly expanding workforce (youth and women) Suburban growth--central city and rural decline Sunbelt growth at the expense of the Northeast and Midwest Increasing diversity across many dimensions Gillaspy Demographics

Some Things Will Always Be True, (or will they) The fastest growth will be the sunbelt The suburbs will always grow Housing prices will always increase A college degree is the key to success Marriage is the foundation of the family High school students will always get their drivers license as soon as they can Gillaspy Demographics

Convergence of Population Growth Rates Census Bureau estimates, aligned with 2010 Census Gillaspy Demographics

This Decade, The United States Will Add As Many People 65+ As We Have In The Past Three Decades Combined Census Bureau forecast 2012 middle series Gillaspy Demographics

Early Next Decade The United States Will Have More People 65+ Than School Age Census Bureau 2012 forecast middle series Gillaspy Demographics

Liu and Spiegel, San Francisco Fed, Boomer Retirement: Headwinds for U.S. Equity Markets?, 2011 S&P 500 Predicted By The Ratio Of Middle Aged to Older Adults Gillaspy Demographics

US Labor Force Growth Will Be At Record Low Levels Be The End Of This Decade US Bureau of Labor Statistics forecast Gillaspy Demographics

Growth Of The Working Age Population Is Slowing Or Declining In Most Industrialized Nations Which Will Be A Drag On Economic Growth US Census Bureau International Data Base Gillaspy Demographics

Percent Of Employers Having Difficulty Filling Jobs Due To Lack Of Available Talent Manpower Group, 2014 Talent Shortage Survey Gillaspy Demographics

The “New Normal” Probably Means Global economic growth will slow Interest rates will rise Talent will be the scarce resources A single-minded focus on productivity Governments will worry about how to pay for past promises Government service cuts, courtroom delays, permitting delays More frequent disruptive events/innovations with larger impact on business A whole new set of challenges and opportunities Some will fall due to the Tyranny of Success. New economic leaders will emerge Gillaspy Demographics

The Third Industrial Revolution Is Transforming Economic Activity Advances in robotics, materials, software, bioengineering, and the web are fundamentally changing where and how economic activity takes place. Innovation is replacing physical capital as the foundation of economic growth. Physical location will be less important and those bound to it will find competition increasingly difficult. Gillaspy Demographics

What Should Keep You Awake At Night Creative Destruction/Disruptive Innovation Forces for change are heightened during periods of economic stress Disruptive changes are not evolutionary Some game changers will occur There will be big losers as well as winners Gillaspy Demographics

Avoiding The Tyranny of Success Will Be Difficult For Both Private And Public Sectors The impact of disruptive events will increase with the drive to increasingly lean operations. The global imperative to increase productivity will accelerate the pace of disruptive innovation. Conflict between the lean/quality based productivity improvement and the innovation side of the organization will increase. Gillaspy Demographics

“Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.” Donald Rumsfeld, US Secretary of Defense, 2002 To this I would add Unknown Knowns, things we know but forgot Gillaspy Demographics

Known Knowns (Some Things We Know We Know) Population is aging and retirements are skyrocketing. Many public and private promises are underfunded Population shifts have moved massive numbers of Americans into water short, storm, earthquake/volcano sensitive areas Income and wealth distribution is at levels not seen since 1929 Gillaspy Demographics

Known Unknowns (Some Things We Know We Don’t Know) Full impact of global aging Impact of growing extremes in wealth and income Impact of large numbers of retirees drawing down on wealth Impact of growing diversity and the loss of power by some groups Impact of social change in marriage and the family Gillaspy Demographics

Unknown Knowns (Some Things We Forgot We Knew) Some critically important occupations are dangerously short of qualified applicants Rapidly growing areas that are water supply vulnerable may lead to mass migration Others? Gillaspy Demographics

Unknown Unknowns We don’t know, and that is a problem Likely to be more frequent and problematic in times of grate change and stress (like today) However, we can manage for disruptors Problem with the Tyranny of Success Gillaspy Demographics

“I skate to where the puck will be, not to where it has been.” Wayne Gretzky Famous Canadian Philosopher Gillaspy Demographics