The Baby Boomer’s Future: Crisis & Opportunity
For over two decades, I have been helping organizations and individuals shape a positive future by learning to anticipate changes before they happen. The first and most important step is to learn to look into the visible future – the part of the future that is clearly visible – and identify emerging trends.
In my book Technotrends, I explain why so many trends are proven wrong over time. There are actually two types: hard trends and soft trends. And, I should note that no other forecaster or futurist has made the distinction between the two trends; however, it is of critical importance.
Often, well-meaning analysts misread the future because they rely on soft trends, which contain possibilities, usually in the form of best-case/worst-case scenarios, speculation of what might be. The predictions are most-often based on public opinion surveys, news events that show a pattern, shifts in popular culture, and anecdotal flotsam and jetsam. They can also be based on looking at past numerical patterns and pushing the graph forward, as if nothing could stop the trend.
I can recall a major government report, which took several years to assemble and cost taxpayers millions, that started with the words, “If present trends continue…” It was easy for me to predict that the conclusions drawn from this report would prove to be very inaccurate over time. It was written just before the Internet boom.
When President Bush (the younger) took office, he based his tax cut and other spending decisions on trends that showed that the U.S. economy would continue to boom with billions of surplus dollars. Unfortunately, he and his advisors were unaware that the trends they were using to base most of the decisions were soft trends that soon proved to be wrong.
This is not meant to be a political comment or criticism, it is meant to show the importance of knowing the difference between the two trends.
Identifying soft trends is important and should be done, as long as you know they’re soft. Soft trends always make a lot of sense when viewing them from the present, but keep in mind that this type of trend “may” continue.
Hard trends, as the name implies, are concrete and verifiable. They are based on the scientific study of tangible, physical, existing items in our world. They are not derived from shifting patterns of taste and fashion, sales statistics or spending patterns over a specific period of time. I’ll give you an example. Studies of the aging population of the U.S. have revealed very accurate hard trends. People are tangible and their age is measurable, leading to more accurate forecasts over time.
Technology also can provide hard trends, such as Moore’s Law, which states that processing power will double every 18 months. Over the past two decades, I have used this law, and a few of my own, to produce highly accurate forecasts for the future of technology.
The impact of the baby boomer generation is a hard trend that the United States and the rest of the world are not ready for. In the U.S. alone, there are over 80 million baby boomers, people born between 1946 and 1964. When all of those young men came back from World War 11, we could have guessed that might happen; but we didn’t. Our hospitals were not ready for all of those babies! And, when those babies were old enough for school, all of a sudden, as if it was unpredictable, there was a massive shortage of elementary schools and teachers. In every phase of the baby boomer’s life, we have caught government and business off guard.
Historic Wealth Transfer
The parents of baby boomers literally created our modern economy as they left the farm and moved to the city and higher paying jobs. My father was the first to leave the farm, get a college degree in engineering and, after serving in WWII, a management job in a large corporation. Before retiring, he was a senior executive with a very nice salary. Unfortunately, my parents have both passed away and their estate went to their children. This is another example of a hard trend, as this becomes a common occurrence for all baby boomers throughout the decade and beyond. The resulting hard trend will be the biggest transfer of wealth in history.
Stock Market dive
Today, the oldest baby boomers are in their mid- to late-fifties. Now, let’s use the power of hard trends to look at the end of this decade and the beginning of the next. Simply add ten years to the age of 80 million baby boomers and ask some strategic questions.
Will the oldest boomers be entering a retirement mode? Yes. When millions of boomers begin to retire, are they investing their money in aggressive growth and growth stocks? No. They will be shifting their money into a retirement portfolio, pulling much of their money out of aggressive growth and growth stocks, and getting into conservative stocks and bonds that pay interest. When the oldest of the baby boomers start pulling out of growth stocks, will the word spread to younger baby boomers, who will react by shifting their investments as well? This is very likely. Will this only happen for a few years and then growth stocks will be popular again? This is not very likely. Hard trends show us that there was a baby bust after the baby boom, so there are not enough people to make up for the shift in asset allocation that will take place. In addition, hard trends tell us that the baby boomers will not get young again. They will stay in a conservative investing mode for the rest of their lives.
What about the children of the baby boomers? It’s true that the baby boomers’ kids will just be entering their investing years and will find some very good prices, but when young people begin investing, they usually do not have large amounts of money to invest.
The Aging of Industrialized Countries
The majority of the industrialized world also has an aging population, with Japan leading the way. This will propel this hard trend even further. The areas of the world that are made up of predominantly young people are economically behind, and it will take time for them to bring the global stock market back.
What will happen to the stock market? This hard trend tell us that by the end of this decade and well into the next decade, the stock market will be in for a rough ride.
Many Boomers Won’t Retire
Before going any further, let’s look at another future fact: not all baby boomers will be able to retire. According to a recent USA Today article, “…more that one-third of adults say they have no money saved in any kind of retirement account.” Keep in mind the poll covered “all adults,” not just the baby boomers, but it is clear that many boomers will have to continue to work.
In addition, some boomers who could retire won’t. Back in the 1980s, I identified a shift in focus from retirement to re-engagement. People will retire from one job and take a new job that allows them to fulfill a career need they did not meet during their previous employment, and it will give them a sense of purpose.
Will working baby boomers offset the stock market problems mentioned previously? No. The boomers who have not saved for retirement will have little money to pull out of the market, so they will not help the problem. Those boomers who have money but opt to continue to work will have shifted their savings to a retirement mode due to their age.
Real Estate Boom and Bust When people retire, do they typically stay in their big homes? Many do, but history teaches us that millions move; they sell their big homes and move into smaller homes or condos. And, as we all know, retirees usually prefer a city in a warm climate.
The baby boomers have been the most mobile of all generations, having lived in several locations. They have also traveled more than any other generation and during the past decade they have been keeping an eye out for that perfect retirement spot. They plan on living long, and living their dreams.
Today, baby boomers are pouring millions into real estate. Many are buying their retirement home in a warm climate ahead of time to beat the boomer rush and living in it whenever they can or renting it out until they can retire and permanently move. Some see it as a better investment than the stock market. This trend will accelerate as boomers try to lock in their retirement dreams before they become too expensive.
The hard trend is that millions will move to what is perceived as a healthy, warm location and the impact of the baby boom retirement migration will cause a real estate bust in many areas and a real estate boom in other. Remember, there was a baby bust after the boom, so the numbers of eligible buyers will not be there to buy all of the large houses that will be up for sale.
Planning Ahead
Now that you understand how demographics can yield hard trends, use the aging baby boomers to define your own hard trends and look for future crisis and opportunity. For example, social security and our national health care system are two major areas that are not ready for the aging of the baby boomers. This is a soft trend. If needed changes and tough decisions were made, both could be ready; but given current political debates that drag on year after year with little action, this is becoming less likely.
Remember, failing to plan is planning to fail. The opportunity for you is in knowing the difference between hard trends and soft trends so you can take the appropriate action and shape the best possible future.
Daniel Burrus, one of the world's leading technology forecasters, business strategists, and author of six books
Copyright 2003 Author retains copyright. All Rights Reserved.
