Why We Need To Pay Attention to Demographics Now

You don't hear too much about demographics forcing an entire country to collapse or giving another a vast and long-term competitive advantage, but it's a future fact. Instead, demographics, especially globally, will likely empower a few countries and danger a whole bunch. This future is what Peter Zeihan is illustrating and warning about in his book - The End of the World Is Just the Beginning: Mapping the Collapse of Globalization. Not familiar with Peter Zeihan? Peter is a geopolitical strategist and author who has immersed himself in the world of international affairs throughout his career.

Okay, so now that you know the potential ending of the story, let's start at the beginning.

What are demographics?

According to dictionary.com, demographics are statistical data relating to the population and particular groups within it.

Merriam-Webster - The meaning of DEMOGRAPHIC is the statistical characteristics of human populations (such as age or income) used especially to identify markets.

Wikipedia - Demography (from Ancient Greek δῆμος (dêmos) 'people, society,' and -γραφία (-graphía) 'writing, drawing, description')[1] is the statistical study of populations, especially human beings. Demographic analysis can cover whole societies or groups defined by criteria such as education, nationality, religion, and ethnicity. Educational institutions[2] usually treat demography as a field of sociology, though there are a number of independent demography departments.

So why are demographics important?

Well, first, let's look at the images below from Peter's website. The charts below show the demographic breakdown of Italy in 1950 and again in 1995. In these diagrams, you are taking the birth year of the youngest members of 5-year cohorts and mapping them out, which looks like a pyramid in most countries (and companies). The pyramid forms because most people fall into the younger categories, while fewer and fewer fall into the older categories - the Circle of Life (you know you just heard the start of that song in your head). But you start to see a shift in 1995, and the diagram no longer looks like a pyramid. Why? Not enough babies are being born, so your largest population gets older and older and smaller and smaller.

There is more of a significant delta between the largest population in Italy and the youngest in 2020 and 2040. In 2040 it's a reverse pyramid with the oldest population demographic being the largest and the youngest as the smallest.

What's the concern?

Who is going to work and consume? Who will produce and consume the goods if most of your demographics are out of the workforce or retiring (read: not consuming as much)?

A new world order emerges. Countries like Italy (and most notably China - see the article image) have seen birth rates drop (some forced and others by choice) over the past few decades. Nationalism will replace globalization. Good news, we are somewhat okay or in a better position if you read this in the United States. Even though our birth rates are shrinking, they are not to the degree of China or Italy, and we are very capable of self-sustaining.

Do you genuinely think that Apple moving production from China was political or "COVID" motivated? Quite possible, but I think these companies think more long-term than we expect, and just maybe they read Peter's book. The Wall Street Journal reported, "U.S. companies are bringing workforces and supply chains home at a historic pace." I think natural resource dependency and bringing semiconductor manufacturing back to the U.S. are wise strategies. In a world where human capital has become more than 90% of company value (see chart below), being a position to ensure we have younger talent coming into the workforce ready and prepared will now be a competitive global advantage. This strategy should also include having a solid immigration policy to continue bringing talent into our country.

As noted on his webpage and in his book Peter Zeihan maps out the next world: a world where countries or regions will have no choice but to make their goods, grow their food, secure their energy, fight their own battles, and do it all with populations that are both shrinking and aging. However, Peter claims that the list of countries that make it all work is smaller than we think.

The once widespread concept of globalization that made many countries wealthy will soon turn to nationalism for survival, not politics. The growing demographic challenges are why we need to focus on demographics now - as leaders, companies, and citizens.