No Going Back

By Jim McNiven

When we read about the Great Recession of 2007-11, there seems to be an assumption on the part of commentators that as soon as the economy ‘turned around’, we could get back to normal. That’s not how it is turning out and that should not be surprising. There is no going back.

When the US economy came out of the recession, one of the things most noted was that this was a ‘jobless recovery’. Somehow, companies were producing a lot of stuff, but hiring growth was dismal, unlike other recessions. The truth was that US manufacturers gained back all the sales revenue they had recorded before the recession, but they did it with 5 million less jobs. Since the softness of demand during the recession meant they could not raise prices much, if at all, there had to be some kind of productivity growth to account for this situation.

The answer, for the most part, turned out to be robotics, by and large. Different kinds of robots: big arms doing welding; little ‘saucers’ scooting palettes along a floor; advertising robocallers pestering and selling products—all kinds of machines that replaced most any function that is repetitive. Some of the machinery is so cheap to install that manufacturing is leaving Asia for North America. Robots are cheaper than Chinese.

For years, I have been spending a couple months of the winter in Arizona. That’s why I am a ‘poster boy’ for the Boomerswork concept. When I am home, I want to be busy, but when the desert calls...see ya!. Last weekend, I spent a couple of days at the Tucson Festival of Books, something like Halifax’s Word on the Street, only immensely larger. 2012’s Festival drew an estimated 120,000 people. I went there to look into what has been going on in book publishing. Clearly, with Kindles, Nooks and Kobos as well as with iPads, book publishing has been leaving paper for bytes, which has wrecked the bookselling business. The Borders chain in the US went bankrupt last year. If you go to your local Chapters, you will find the gifts section growing. Even used bookstores are moving into DVDs, musical instruments and gifts.

As I understand it, the book business, like a lot of others, consists of production, marketing, distribution and retail. E-books tend to cut out a lot of production, distribution and retailing, with the exception of producing content and putting it into an acceptable form. The big publishing houses used to act as gatekeepers on content that was sellable. Also, they did some marketing of the books they published. Now, everything is falling apart. I went to a presentation by a Silicon Valley company called Smashbooks. The Marketing Director presented some amazing facts. In 5 years (2012-5=2007, remember from above?) the proportion of e-books went from zero to 30% of the market. But these were not just electronic copies of the publishers’ paper books. A lot of these were done by ‘Indie’ publishers, namely, anyone with the software to produce an e-book or who contracted the task out to Smashbooks or its competitors like Amazon.

Unlike the traditional publishers who understand as well as possible, what sells, these e-publishers are clear that they will get your great Canadian novel up in the cloud, but it is up to you to sell it. In 5 years, Smashbooks has published a quarter of a million titles from 50,000 authors. They distribute these to the new e-retailers, the Apple Store, Amazon, even the dot-coms of some traditional publishers. Their favorite pricing point is $2.99. Half the company’s revenues will soon be coming from non-American authors. This thing has global reach.

The book industry is the latest to go through a wrenching change, but watch out for education as well, especially higher education. It is an information industry like banking, real estate and media and eventually subject to the same rules. Universities have monopolies on certification and government money, but these are dwindling.

When a Stanford professor offered a free engineering course a couple of years ago, 50,000 people from around the world signed up. The MOOC (massively oversubscribed online course) was born. Now Harvard appears to be outsourcing its basic accounting course to another university, so its faculty can concentrate on higher level stuff. The California legislature passed a law this month requiring the state universities to offer and accredit online equivalent courses where there are required courses that are oversubscribed by their students and where faculty are not available to teach them. Finally, I am reminded of a comment made by a University of Phoenix (private for-profit institution) that he saw his major competition coming, not from other universities, but from Disney.

So, the Great Recession is over, but there’s no going back. There are dozens of industries that will never be the same again. If any of you are in the vicinity of the Dalhousie Library, go in and ask to see the 3-D Printer and think what this ‘toy’ will do to manufacturing in the near future. Make your own iPhone, anyone?  

Bill, Shane and Jim

By Jim McNiven

Chances are, you’ve never heard of any of these guys. They changed your life in the past decade and you may never have seen any of it. That’s ok, because almost no one else did either.

When I was in grad school at the University of Michigan in the 1960s, I took a job as a foreign student advisor for the Catholic student association. There were a lot of Latin American students there and I was supposed to help them in terms of settling in and having a good and somewhat religious experience. A popular activity was to take them into Detroit to see the Tigers play baseball. One night, my very pregnant wife went with us and about the 7^th inning, she started to feel ill. I took her down to the clinic just off the gate onto left field. They wouldn’t let me in to be with her (different days, then, and our son was born 2 months later), so I went out of the gate and stood and watched the game from ground level. When ‘Stormin’ Norman Cash hit a monster home run out past centerfield, I was awestruck. Simply awestruck.

That was the romance of the game. A decade or so later, a guy named Bill James, who called his analysis, sabermetrics, started to publish a compendium of what were then offbeat baseball statistics. Official baseball tended to ignore him and his ardent and noisy followers. Then in the early 2000s, the general manager of the Oakland A’s, facing a ruinous season because of the loss of a lot of good players to big-budget teams, decided to test James’ theories out. You can read the rest in Michael Lewis’ “Moneyball” or watch the movie of the same name. I suggest you read and then watch. The Oakland bunch of ‘losers’ managed to win 20 games in a row, breaking the all-time American League record.

Next, Bill James’ approach was translated into basketball. Applying a version of James’ notions about winning games led to noticing former Duke forward, Shane Battier. Battier, who was not much of a scorer, was valuable in a different way. You have to follow me on this. Basketball games are normally statistically close. If a game finishes at 104-103, the difference between winning and losing is less than 2 points out of 207 scored. What Shane Battier was good at was messing around with the opponent’s superstar. It turned out that the big scorers averaged many points less per game with Battier defending against them than when they were defended by anybody else. Somebody scoring 30 points a game might only get 25. That game noted above would then have ended 103-99.

Another big sport has taken up Bill James’ approach. We saw a bit of ‘big data and the superior ground game’ in the 2008 US election, but it really got turned on in 2012. From my point of view, that election was all but over the January before, when I read that the Obama campaign had established offices in all 50 States. What that meant to me was that Jim Messina, the operations guy behind Obama’s campaign, was going to combine heavy statistical demographic analysis with a ‘full-court press’ in the neighbourhoods of key States. Using 2010 census data to find where the 2008 Obama voters might be living in 2012, combining this with repeated house-to-house canvassing in those neighbourhoods, would get out enough of what should be the Democratic base to enable victory. Nate Silver, a sabermetrics expert and author of the recent “The Signal and the Noise”, followed Messina’s use of big data and accurately predicted the outcome of the election.

Now Jim Messina got some advice from Silicon Valley sources, such as Eric Schmidt of Google. Google lives by matching ads to your interests, based on what they know of your activity on the internet. It isn’t hard to make the jump to political organization sabermetrics. What appeals to your potential voters and what doesn’t? What social groups using what social media are likely to vote your way? How do you get them to the polls?  An election that in an old-style campaign probably should have been lost by an incumbent was won by superior organization and knowledge. Romney’s campaign depended on an air war while Obama’s began six months earlier on a ground campaign. Any veteran of any modern war will tell you that the air is vital, but soldiers still have to go in on the ground to succeed.

We can expect ‘big data and the ground war’ to come to Canadian campaigns soon. Normally, things political spread across the border with a lag of about 5 years, but this time is different. No one in politics here can ignore the Revolution of 2012. It will change political campaigning in many ways, not least in the rise of a professional and permanent party analytical and turnout organization. A good candidate is vital, but not organizing the campaign until after your candidate is selected will just be Romneyite old school. While you wait for Messina to publish his book, read Michael Lewis’ and Nate Silver’s.  

Half of Boomers not interested in downsizing homes

A September survey by Leger Marketing delivers some interesting results: 43.5% of respondents who were born between 1947 and 1966 want another primary residence that is a similar size or larger than their current property.

The February 26th article in the Financial Post shares some interesting insight into the new normal for Boomers in Canada: "...some Baby Boomers prefer to keep big homes for when the children and grandchildren flock home for the holidays; with the dissolution of marriages, kids frequently return to roost."

Read the full article here.

Who’s A ‘Boomer’?

By Jim McNiven

If you are part of the BoomersWork operation, then you are most likely over 50 and probably older than that. You know what a ‘Boomer’ is, somebody in the rough age group as you. It has not been a pejorative term, except maybe to those who are not Boomers. In fact, it may be a downright positive term to those who qualify, as Boomers, as a whole tend to have a disproportionate influence on society. Let’s explore what this is all about and why it means you will probably find yourself in perpetual demand as the economy picks up.

There is a lot of pop psych commentary on generations. There is the ‘Greatest Generation’, followed by the’ Baby Boomers’, then ‘Generation X’, followed by ‘Generation Y’, the ‘Millennials’ and, I expect next, the ‘Mobiles’. None of this is what I am talking about.

The Boomers have a particular characteristic that none of the other ‘generations’ has. It is defined by something we can measure. During the Depression and World War II, people either put off having many children or the menfolk, especially, but not exclusively, were away fighting in Europe or the Pacific. The war ended in mid-1945and soldiers began coming home and, by the end of 1946, births were beginning to increase. As the postwar prosperity in North America continued to build, families made up for lost time.

There is a concept called the age cohort. If you remember your schooldays, there was a cutoff date for birthdays beyond which you couldn’t be admitted to Grade 1. It was normally the end of September or mid-October. That set the limits to a lot of things in your life if you were a couple of weeks past the date. That cutoff created cohorts, people who all shared a common characteristic, in this case all in the same grade. Demographers use a similar age cohort when they look at social trends, like who is working and who is not.

The uniqueness of the Boomers lies in the growth in births through an 18-year period. Like that school cutoff that left your buddy a grade behind you, it is somewhat arbitrary. Since the birthrates started rising at the end of 1946, the Boomer generation’s beginning was set in 1946. If we look farther along the calendar, we will find that the Pill was cleared for use in Canada in the early 1960s, so the end of the Boomer period was set at 1964. The decline in the birthrate started earlier than this, but 1964’ll do. Today, in 2013, the oldest Boomers turn 67 and the youngest 49.

So, why will Boomers stay in demand? It is probably not what you would think.

If Boomers are characterized by being born when a lot of other people were, all of the other ‘Generations’ noted above consist of people born when not so many were being born. There is a concept that shows this, called the fertility rate. This is the number of children that would be expected to be born of an average woman in her period of fertility, roughly from 13 to 43 years of age. During the Baby Boom years, the fertility rate was generally above 3. The replacement rate, not surprisingly, is 2.1—one for mommy, one for daddy and 0.1 for accidents, etc. In the late 1960s, the Canadian rate fell to below what was required for replacement and has wobbled around 1.4—1.6 ever since 1971, 42 long years.

Now, you can’t go on not replacing the population for that long without something happening. First, any growth in our population comes as a result of immigration. Second, if you go back to the ages of Boomers, you will see that a lot of them are of retirement age, which today in Canada, is around 62. If we did not have enough babies for 42 years, then the crowd of young workers is a lot smaller than the older crowd heading for the workplace doorway. As this goes on, the number of unemployed may shrink, or not, but the number of jobs going begging will rise.

 I was discussing these things with a local businessperson, when he complained that none of the young people wanted to work anymore. He had only a couple of applications for an advertised job, when he used to get 10 or more. I tried to explain that the other 8 weren’t ever born, but he was having none of it. As it sinks in to employers, Boomers willing to work, on whatever schedule they want, will become really popular, replacing all those lazy, unborn kids.

This is a really serious problem. If you have ever seen Galen Weston advertising Loblaws’ baby foods and referring to a crowd of babies around him in their highchairs as the ‘Class of 2025’,you will know that it won’t be solved soon.    

Financial woes affecting planned retirement years

An article on postcrescent.com offers some interesting American statistics and commentary on those who are approaching retirement this day and age.  Some of the most startling:

• Most workers in a survey by the Employee Benefit Research Institute say they have virtually no savings or investments. And 37 percent of those surveyed in the 2012 Retirement Confidence Survey think they will have to wait until after age 65 to retire. 
• 34 percent of older Americans used credit cards to pay for basic living expenses, such as mortgage payments, groceries and utilities, according to research conducted AARP. As a result, they had average credit card debt of about $8,248. About half of the people over 50 in the survey were called by debt collectors, the study says. 
• New data from EBRI show debt has actually increased for retirees 75 and older, including housing debt. Craig Copeland, senior research associate, says it’s not clear why, but it may be because of health care costs.

More and more Boomers are not only going back to work to fight off boredom, but sadly out of necessity in a lot of cases.

Read the entire article here.

Boomers Go Long, But are they Falling Short? (PRESS RELEASE)

BMO says Boomers Working Longer to Bolster Retirement Savings Need to Be
Better Informed

TORONTO, April 15, 2009 - According to a new research study from the BMO
Retirement Institute, there is a strong sentiment among Canadian Boomers that
setting retirement clocks back a few years may be the best option to secure a
steady income stream. And while the research indicates people are accepting of
this notion, many may be making this decision without having all the necessary
information.

The study reveals:
• 31% of Canadians who plan to retire in the next 5 years are considering
delaying their retirement date
• Retirees are also thinking about returning to work. For those that are
considering it, 41 per cent definitely intend to return to paid work within the
next year.  
• More than two-thirds of respondents were accepting or happy about
delaying retirement
• However, almost half of pre-retirees say they do not know how much they
will receive from their personal savings and investments

“Money is the main reason people are working longer or returning to work.
Staying mentally active is of secondary importance, but money is by far the top
concern. However, many retirees and pre-retirees are making moves to bolster
retirement savings by working longer without a clear understanding of their
retirement income gap; the difference between how much is needed and how
much is available from various sources including personal savings, employer and
government benefits,” said Tina Di Vito, Director, Retirement Strategies, BMO
Financial Group. Di Vito also heads up the BMO Retirement Institute, a think tank
set up by the Bank to provide leading perspectives around retirement issues.
How Much, How Long and in What Capacity?

The study indicates that:
• Over 30 per cent say they do not know how much they will receive from
the Canada Pension Plan (CPP)/ Quebec Pension Plan (QPP)
• In addition, 42 per cent of pre-retirees and 59 per cent of retirees say they
have not spoken with their financial advisor about the potential impact that delaying retirement or working longer will have on their financial/retirement plan.

“How Boomers choose to go about remaining or re-entering the workforce will
shape their retirement lifestyle and a financial advisor can provide a realistic
perspective on how such decisions impact income in retirement,” said Di Vito.
“It is vital for Boomers to know where they stand financially and understand the
impact working longer will have on their savings so that they can determine how
long they need to continue to work, and in what capacity, to achieve their
personal retirement goals. In some cases, Boomers may discover they need to
work fewer years than anticipated to realistically meet their retirement goals.”

Making an Informed Decision
The BMO Retirement Institute has also just released a report Boomers Revise
their “Retire-By” Date as Financial Landscape Changes. This report details
various factors that should be considered so people can make an educated
assessment about working longer, including:

• Plan and Save - More burden of funding retirement has shifted to
individuals and away from government and employers. So a combination
of government and company pensions, personal savings, home equity and
insurance products are necessary.
• Healthcare - Many future retirees have not set aside enough funds to deal
with rising healthcare costs. It may be prudent to stay working to ensure
continued healthcare benefits and look for companies that have a
comprehensive benefits package.
• Inflation - Living longer puts pressure to save more and comes with other
financial risks. Even a relatively low inflation rate of 3% can significantly
reduce purchasing power over a 20-30 year period.
• Withdrawals - withdrawing money during a period of declining markets can
greatly reduce how long retirement savings will last. Instead, reducing
withdrawals during the first few years of retirement, as a result of working
longer, can significantly extend the duration of savings.

BMO Financial Group offers a simple online calculator to help pre-retirees and
retirees get a clear understanding of how key variables such as current age, life
expectancy and style of investing can impact one’s retirement savings. For more
information please visit: www.bmo.com/RetirementCalculators

About The BMO Retirement Institute
The BMO Retirement Institute, launched in April 2008, provides insight and
financial strategies for those either planning for or in their retirement years. The
Institute was launched to help pre-retirees simplify the complex dynamic between
personal finances, personal relationships and retirement lifestyles.
(www.bmo.com/RetirementInstitute)About the BMO Retirement Institute Study
A Harris/Decima online poll was conducted for the BMO Retirement Institute
between Feb. 26 and March 4, 2009 and is based on a sample size of 1,006
randomly selected retirees 55 years of age or older who indicated they “definitely
or probably will return to work” and pre-retirees who are planning to retire in the
next five years.

Rethink what you'll need for retirement

An excellent article in The Globe And Mail on Thursday offers insight into retirement planning for Boomers, especially those that are re-joining the workforce.  It does a good job of detailing action items like:

• Are you saving enough?
• Do not overestimate market returns
• Follow asset allocation retirement strategies
• Determining post-retirement essential and discretionary income 

A choice quote from Brenda Dalglish's story:

‘Aspirations plus financial situation divided by reality equals fulfilment in retirement.’

Read the full article here.