The Longevity Economy

A NOTE ON COLLABORATION

IN THE WORLD of research publications, it’s a poorly kept secret that the names following that of the first author are often responsible for the bulk of the hard work. The same is very much true in the case of this book. The Longevity Economy, frankly put, could never have been written without the help of my collaborator and friend, the science writer Luke Yoquinto. There is scarcely a sentence between the covers of this book that has not benefited from his research and reportage, his storytelling skill and keen editorial eye. He conducted several of this book’s interviews and helped me over the course of many months turn my disorganized thoughts into a form that, I hope you will agree, is at least marginally coherent. Some sections ahead, meanwhile, evolved out of ideas Luke and I first put forward in such publications as The Washington Post and Slate. For his hard work and prodigious talent, not to mention his ability to keep me on task, I owe him my profound thanks.

INTRODUCTION: THE LONGEVITY PARADOX

EACH OF US will grow old—if we’re lucky. The same can be said for nations: luck, in the form of prosperity, gives rise to older populations as surely as a good growing season leads to an ample harvest. Today, most countries around the world are about to haul in the biggest longevity crop of all time: the fruit of all the affluence, education, and technological progress that burgeoned in the second half of the 20th century.

The effect will be enormous. The aging of populations represents the most profound change that is guaranteed to come to high-income countries everywhere and most low- and middle-income ones as well. There may be other big shifts headed our way—related to climate change, say, or global geopolitics, or technological advancement—but their particulars are still up in the air. We can only speculate about how London will cope with sea-level rise, or Tokyo with self-driving cars. But we know exactly how global aging will unfold. We know when and where it will happen and to what degree. We know which subpopulations are likely to live long lives, and shorter lives, and how prepared they are for their future.

Because population aging will manifest in such dramatic-yet-predictable ways, when companies make long-term plans for the future, there should be nothing higher on their priorities list than preparing for an older world. It’s worth planning for the unexpected, after all, but only after you prepare for the guaranteed.

With few exceptions, however, companies—and nonprofits and governments—are not getting ready. The reason why is a mystery. In fact, from my perspective as the founder of the Massachusetts Institute of Technology (MIT) AgeLab, a research organization devoted to studying the intersection of aging and business, it’s the mystery.

Happily, I’m here to report, there is an answer. It’s so simple that it almost defies belief: old age is made up.

That doesn’t mean I think arthritis is imaginary or that we can will ourselves to live forever. Rather, the meaning of “old”—whether you’re talking about the life stage, the “senior” population, or even your conception of self—is what academics would call “socially constructed” and everyone else might call a mass delusion or a story that no one realizes is fictional. Certain bits of our current idea of old age are grounded in biology. But most of it was invented by human beings for short-term, human purposes over the past century and a half. Today, we’re stuck with a notion of oldness that is so utterly at odds with reality that it has become dangerous. It constrains what we can do as we age, which is deeply troubling, considering that the future of our older world will naturally hinge on the actions of the older people in it. It also distracts companies from serving the true needs of aging consumers, an already staggeringly powerful group that is growing larger, wealthier, and more demanding with every passing day.

The Setup

The world is growing older for three reasons, the most obvious of which is the fact that people are simply living longer. The story of the United States resembles that of most high-income nations: the majority of American babies born in 1900 could not expect to see their 50th birthday; as of 2015, life expectancy in the United States had reached 79 years. Even larger gains have unfolded in Western Europe, East Asia, and elsewhere. Of major economies, Japan leads the world with a life expectancy of 84 years; it’s followed closely by Spain, Switzerland, Italy, and Singapore. Nipping at their heels are most other western and southern European countries as well as standouts elsewhere in the world such as South Korea, Chile, Australia, New Zealand, Canada, and Israel.

If I were teaching this information to my graduate students, some wisenheimer in the back of the room would have chimed in by now: “What about childhood mortality?” It’s true: the biggest component of the post-1900 life expectancy bump is due to the fact that far more of us survive childhood than we did over a century ago, particularly the gauntlet of diseases that threaten kids from birth to age five. However, it would be woefully incorrect to say that all of our life expectancy gains are due to diminished child mortality. For one thing, we’ve also cut back on deaths for people in their twenties, thirties, forties, and fifties. A 30-year-old American man in 1900, for instance, was six times more likely to die within a year than a 30-year-old man is today, and a 30-year-old woman was 12-and-a-half times more likely to die within a year. As a result of things like public health measures, indoor plumbing, a lack of world wars (knock wood), modern medicine, antibiotics, safer workplaces, and—a big one—safer childbirth, far more of us are reaching 65 than ever before.

And the gains don’t stop there, because those who make it to 65 now get to stick around for longer. In 1900, a 65-year-old woman in the United States could expect to live to 78; 76 for men. Today these figures have reached 85.5 and 82.9, respectively. That is to say, over a century’s worth of scientific and economic progress has bought those of us who make it to 65 an extra seven years. And that’s just the United States—in Japan, the average 65-year-old woman can expect to reach age 89. That’s right: it’s now utterly unremarkable for Japanese women to live well into their 90s—and Spanish, French, Italian, and Korean women are right behind them.

But longer lives only account for part of why the world is growing older. A bigger factor, especially in lower-income countries, is the fact that birth rates around the world plummeted in the second half of the 20th century, a trend that in many cases has only picked up speed following the turn of the new millennium. As of 2015, fertility rates in every world region except Africa are near or below what’s considered the “replacement rate,” which in most high-income countries hovers around 2.1 children per woman. (Slightly more than two children per woman are needed to keep a population stable, because not every one of those children will survive to childbearing age.)

There are two sides to the fertility coin. Heads is the tale of the incredible, shrinking, high-income nations. Once again, Japan is the standout example: it has a one-word immigration policy (“No!”) and a very low fertility rate—1.46 children per woman, as of 2015. As a result of both, its population is shrinking more rapidly than any country outside Eastern Europe, a low-fertility region that is also losing large chunks of its population to emigration. Many countries other than Japan, such as Germany, Italy, Singapore, and South Korea, have similarly low or even lower fertility rates—much of southern and western Europe has been subreplacement for decades—but the shrinking effect in these countries is somewhat counterbalanced by an influx of immigrants. Still, Germany and Italy are projected to shrink by 2050, and so would be the United States, with its fertility rate of 1.9, if not for its twin bulwarks of immigration and the relatively large families that first-generation immigrants tend to have. (In fact, barring long-term changes in immigration policy, the slow-but-steady growth the United States is projected to experience by 2050 is unique. Of the handful of countries led by India and Nigeria that are expected to contribute to the bulk of the world’s population growth by 2050, the United States is the only high-income nation.)

The flip side of the fertility coin can be seen in lower-income nations where the birth rate, though still above replacement, has plummeted to where it is from great heights. India is a good example: in 1960, the average woman gave birth to 5.9 children; as of 2014, that number stands at 2.4, a precipitous drop. Similar stories have played out in Brazil, Chile, South Africa, Thailand, Indonesia, Turkey, Mexico, the Philippines, and elsewhere. In each case, the result is a society with a high-and-climbing proportion of older people. According to the United Nations, two-thirds of the world’s older adults live in developing countries, and that’s where the greatest part of the world’s old-age growth is currently coming from.

Finally, a third factor is contributing to global aging: the baby boomers. Many countries involved in World War II experienced a massive, postwar fertility bump, and, with some variation (Japan’s boom was limited mainly to the second half of the 1940s, for instance, while Germany’s was delayed by about a decade and followed by a baby bust), those babies are now becoming grandparents and even great-grandparents.

Thanks to both increased longevity and the baby boom, we now live in a world chock full of older people, with, as of 2015, 617 million people aged 65-plus, a population roughly double that of the United States, the world’s third-largest country. That number will increase to one billion by 2030 and continue to grow through the first half of the 21st century, reaching an estimated 1.6 billion by 2050. During that time, low fertility will do its work: the world’s youth population will remain flat, and its working-age population will grow only modestly. As a result, by 2050, the worldwide proportion of the 65-plus will have doubled from today’s 8.5 percent to 16.7 percent—nearly the age breakdown of 2015 Florida.

And if we’re looking at a world of Floridas, many high-income countries have already left the Sunshine State far behind. Japan, as usual, leads the pack. More than one in four Japanese people is 65 or older, while Germany, Greece, Italy, Portugal, Sweden, and other European countries have crossed the 20-percent mark. The number for the United States, 15 percent, is being held down for the time being by immigration and relatively high birthrates. By 2030, however, the United States will have joined the 20-percenters—welcome to the Sunshine States of America—and many countries already in that group will have crossed the 25-percent mark. Japan will be out ahead of the herd with an astounding third of its population aged 65 and up, a society the likes of which the world has never seen.

As other countries follow suit, one thing that probably won’t happen (barring extreme events) will be a reversal of the trend. When a country’s birth rates drop, they don’t tend to rocket back up. When life expectancy extends, it doesn’t retract much, except in times of calamity. And right when attrition is claiming the bulk of the baby boom generation, its children will begin to claim their AARP memberships. In short, when nations turn grey, they stay that way indefinitely.

Here’s the point for the business world. First, the emerging population of older adults isn’t just big. It’s so enormous, it’s as though a new continent were rising out of the sea, filled with more than a billion air-breathing consumers just begging for products that fulfill their demands. In fact, as outlandish as that image is, it’s not even adequate to illustrate how important global aging will be. Societies won’t just be older; they will function differently. Not just in the obvious ways, either. Eldercare responsibilities, healthcare spending, and pension liabilities will naturally ramp up. However, we’ll also see changes as wide ranging as new labor markets; amplified demand for products^* that seemingly have nothing to do with age, such as smart-home technologies; new forces affecting family composition and rituals; and far more. There will be new political agendas and fracture points. Jury pools may even skew older and interpret laws differently.

Most important, consumer demands will change right at the moment that spending by older adults (and on older adults) skyrockets. In Japan, the country that most closely resembles the future demographics of high-income nations, bellwethers of change are everywhere you look. Take karaoke, one of the nation’s great pastimes. During daylight hours, the Shidax Corporation, which runs the largest chain of karaoke establishments in Japan, now converts many of its karaoke rooms into classrooms where people, primarily women in their fifties, sixties, and seventies, can choose from more than 50 courses on subjects ranging from dance to languages to traditional flower arrangement. Meanwhile, starting as early as 2007, the country’s largest chain of eyewear shops, Paris Miki, began selling more reading glasses than all other types of eyewear. Perhaps most telling, in 2011, Unicharm, the country’s largest provider of sanitary products, reported selling more adult diapers than baby diapers. By 2026, the same will have taken place in the United States.

Although the Japanese consumer economy has already changed in fundamental ways, the aging of Japan is still far from its peak. Countries elsewhere in the world are just getting started, and older demographic groups are already dominant spenders. Older adults in the high-income world spend an average of $39,000 per year, while those aged 30 to 44, squeezed by student debt and residual effects of the Great Recession, spend only $29,500. In the United States, which has the highest head count of older adults among all wealthy countries, spending by people aged 50 and over came to $5.6 trillion in 2015, while those under 50 accounted for $4.9 trillion. The spending of the 50-plus, combined with downstream effects, accounted for nearly $8 trillion dollars’ worth of economic activity—nearly half of that year’s gross domestic product (GDP). That number is large enough to boggle the mind, but here’s what it represents: the outsize power wielded by the single most important consumer group in any one nation. What this number doesn’t account for, however—despite being larger than the GDP of every country except the United States, China, and the European Union—is the sheer magnitude of what’s to come. In fact, for companies that figure out how to provide value to an aging world, $8 trillion is a conservative—even worst-case—estimate of the size of the overall prize.

First, as Japan has seen, aging leads to shifts in spending patterns that might once have been considered immovable. Even if the raw total economic activity of the world’s older adults stayed inexplicably level for the next 35 years, changes in the way that money is spent would spell opportunity for companies considering jumping into the longevity economy as well as a threat to entrenched interests.

But spending in the longevity economy will not stay flat. The sheer rate of growth of the older population in the majority of countries guarantees that future spending on a global scale will dwarf current levels. Restricting its estimate to those aged 60 and up, market research firm Euromonitor predicts that by 2020, worldwide older-adult spending will reach $15 trillion—and that’s still well before global aging will fully hit its stride. By 2030, the Boston Consulting Group estimates that the 55-plus population will have been responsible for 50 percent of the US consumer spending growth since 2008, 67 percent of that of Japan, and 86 percent of that of Germany. It’s no exaggeration to say that the world’s most advanced economies will soon revolve around the needs, wants, and whims of grandparents.

Future extrapolations of current spending patterns are valuable up to a point, but one thing they can’t do is determine how much older adults could spend, in theory, if they wanted or needed to. This is where the real opportunity lies. In the United States alone, 50-plus consumers control 83 percent of household wealth. Between 2007 and 2061, they will hand down an eye-popping $53 trillion to their heirs (with some going to estate taxes, charity, and estate clearing costs). All told, it will be the largest wealth transfer in history—assuming the would-be benefactors don’t spend it first, which is a big assumption. Researchers have determined that American baby boomers, more than any preceding generation, do not consider it important to leave money to their heirs. In many cases, it’s not a matter of choice: many will outlive their savings. The fact that there is still an incomprehensible sum slated to be handed down to the next generation, however, despite the fact that most older adults would rather not leave a bequest, is telling. It suggests that future spending in the longevity economy could easily be far greater than projected, should companies come up with products inspiring enough to be worth the expense.

The Breakdown

What’s most remarkable is that none of this should be remarkable. These statistics and projections are the kinds of things any subscriber to The Economist or Businessweek or the Wall Street Journal can’t help tripping over on occasion. I have read these sorts of articles—and written them, and been quoted in them—for nearly a quarter century. As of 2017, the leading edge of the baby boom generation is well into its retirement years, something companies were first told would happen decades ago. And yet, the Economist Intelligence Unit has determined that just 31 percent of companies take global aging into account in their marketing and sales plans, while the Boston Consulting Group has determined that less than 15 percent of companies have established any sort of business strategy focused on older adults. Age 49 still serves as a de facto cut-off that many marketers don’t bother to cross, and less than 10 percent of marketing dollars are aimed specifically at the 50-plus. Even as late as the mid-2010s, despite a small uptick in cross-generational casting in commercials, advertisers spend 500 percent more on millennials than on all other age groups combined.

It should come as no surprise, then, that older adults find their relationship with consumer-facing businesses lacking. More than half of the 30,000 respondents in a 60-country survey told Nielsen that they “do not see advertising that reflects older consumers.” Of the rare campaigns that do feature older adults—mostly emanating from the pharmaceutical and retirement industries—older viewers find their contemporaries’ portrayal unappealing and overly stereotypical. In one 2014 survey of 400 people aged 70 and older, less than 20 percent said that they liked advertising that seemed aimed at them, and less than half thought that older adults in commercials were presented as “people to be respected.”

The failure to connect with older adults extends well beyond advertising. Half of respondents to the international Nielsen poll said that it was hard to find product labels that could be read easily, for instance, and 43 percent reported difficulties finding easy-to-open packaging—factors that are both more than capable of nudging a customer toward a competitor. Statistics like these are known; what’s harder to quantify is how many older people suffer in silence due to design that assumes a younger user. In the pages ahead, I describe an age-simulating suit, invented by my team at the AgeLab, that helps younger designers empathize with older bodies. It’s necessary in no small part because older consumers won’t just tell you what’s bothering them. In many cases, they assume that discomfort is normal—until they encounter a product or environment that disproves that notion. Failure to connect with older consumers doesn’t stop at their physiology, however. Many products also utterly miss the mark by violating their desires and self-image. But the most devastating business mistake of all is the one that’s impossible to measure: the failure to innovate. How many would-be, life-improving products have never come into existence, either because businesses refused to consider older consumers as worthy of innovation or because they rushed too readily to fulfill demands that fit some stereotypical idea of age without stopping to assess whether those demands matched reality?

Among the vast preponderance of businesses that are wholly unprepared for an aging world, there are a few bright spots—and not just in the industries you might expect, either. It should come as no surprise that pharmaceutical and financial services companies have taken a relatively proactive approach toward studying how population aging will affect their bottom lines. But so have companies that, at first glance, seem to have little to do with age. BMW, Audi, and Volkswagen plants, for instance, are now experimenting with exoskeletons in order to retain their highly skilled, aging factory workers, something I discuss in Chapter 7. Harley-Davidson, whose average consumer is nearly 50 years old, appears to be quietly doubling down on a strategy that makes motorcycling more pleasant for smaller riders—which is to say, women—as well as older riders by invoking lower seat heights (easier to mount if you have stiff joints) and more manipulable hand controls. In 2008, Harley introduced its first “trike,” a three-wheeled motorcycle of the sort that is increasingly popular among late-career road warriors.

But examples like these are the exceptions. For the most part, companies that are demonstrably unready for an older world seem to be either complacent about their status or blissfully unaware. In the many articles and books about this fact—at this point, nearly a genre of economic journalism unto itself—a hectoring tone is the norm. Businesses, the implication goes, just need to wake up, smell the Ensure, and start courting older consumers with all the fervor they currently lavish on millennials.

What no one seems to be willing to acknowledge is that there may be a reason for why businesses are acting the way they are. Think about it this way: if businesses did in fact knowingly work against their own best interests by refusing to give older adults the attention they deserve, that would constitute a spectacularly large, systemic failure—the kind that could only happen if everyone in business were either an absolute moron or ageist bigot or both.

I don’t think that explanation quite describes what’s going on. Rather, the apparent failure of the business community to act in its own best interest hints at something deeper.

The Source of the Problem

Imagine you’re sitting in a hotel lobby and you see a businessperson in an expensive suit approach the front door. He pushes on it; nothing happens. He pushes harder, grunting—until he finally realizes that he has to pull to open it. He does so and walks through, looking sheepish. From your perch in the lobby, you might, if you’re anything like me, chuckle a little to yourself and turn back to your newspaper. But wait—now another businessperson in a sharp suit comes up to the same door. Once again, she struggles mightily before figuring out how to work it. Hmm, you might think to yourself. Businesspeople aren’t very bright.

Now imagine sitting in that lobby every day for a week and witnessing the same struggle every time anyone tries to use that door. At a certain point, you’d have to stop blaming the people involved. You would have to surmise, Gee, there is something strange going on with that door!

Gee, there is something strange going on with old age. From my perch at the AgeLab, I’ve observed all sorts of businesses wrestling with it: pushing, pulling, trying to get a grip on an exceedingly powerful group of consumers who just don’t seem to be behaving as expected. And those are the smart companies—more concerning are the ones who fail to see the door for what it is and walk headlong into it, only to emerge with a sore nose and a red face.

None of the businesses involved recognize that their struggles are not their fault. Rather, the problem is our very idea of old age, which is socially constructed, historically contingent, and deeply flawed—as falsely defined as a pull-to-open door with a “push” sign on it.

Oldness, in this misleading definition, is bad. Any disinterested reading of the facts would suggest otherwise: older populations are a good thing, the natural result when societies keep their members healthy, out of danger, educated, and in command of their reproductive rights. And yet, there is an overwhelming tendency to view old age and the aging of populations as a slowly unfolding crisis. I can’t tell you how many times I’ve seen the aging of one group or another—nations, workforces, the entire world—referred to as a “ticking time bomb.” I can still recall one issue of The International Economy magazine that I stumbled across in an airport bookstore in 2004. Its cover story, “Aging: The Next Ticking Time Bomb,” was accompanied by an illustration of a figure in a bathrobe, crouched over a walker, attached to an intravenous bag filled with blood. The head of the “person” was planet Earth, which the artist had somehow managed to make appear wrinkled, with waves of planetary flesh rippling indiscriminately across land and ocean. Stuck in the top of the globe, naturally, was a burning fuse. When I saw that picture of that old-person-world-bomb, my head almost exploded. If that’s seriously how we think of older people as a group, how could someone who comes across as “old” ever hope to land a competitive job? How could she ever get funding to start up a business? And how could companies ever take her demands as a consumer seriously?

Dig into this sort of age-fearing literature, and you’ll quickly discover that the growing older population is up there with planet-killing asteroids and nuclear war as one of the great threats to the human race. You’ll soon learn that Social Security (or the equivalent pension scheme outside the United States) will fail, medical care will become too expensive for societies to manage, taxes will double or triple before today’s kids reach middle age, and the baby boomers will spend their later years surviving on cat food because they haven’t saved enough for retirement. In fact, if you think I trotted out some big numbers earlier in this chapter, they’re nothing compared to the figures the doomsayers of age have readily at hand. It’s been suggested, for instance, that the US government’s interest-and-all “bill” for taking care of its elders, when extrapolated out to the indefinite future, will come to more than $200 trillion.