Tag: demographics

When entrepreneurship gets old

As the baby boomers retire, the cruel reality of demographics is forcing them back into business

As part of their series on America’s aging population, Bloomberg looks at the story of 61 year old Lee Manchester who lives in a friend’s basement.

While the Bloomberg story focuses on the contrast between Lee and her father who benefitted from the post World War II economic boom, the real story is Lee’s work history.

Key to her work history is her setting up a business in 1986, that business failed in the late 1980s recession and Lee ponders what might have been had she not made that investment.

Lee sometimes can’t help dreaming about the trips she’d be planning if she’d invested the $150,000 she spent to start a construction company.

This is the downside setting up your own business that those currently peddling the cult of the entrepreneur don’t mention. If the business fails, and many do, then the costs can be high in lost savings and damaged career opportunities. Being an entrepreneur is high risk, hard work.

We may well find though that more people find themselves launching businesses in their older years as the economic realities of the post baby boom era start to be felt by communities.

In many respects though Lee is ahead of the curve, the generation behind her have no expectations of a long and affluent retirement, “the government will abolish the pension about two years before I retire” is the common theme among Gen Xer and Ys.

For GenYs and Xers this attitude is realistic, the demographic sums that worked for Lee’s father are now working against them while the post war economic system that guaranteed Lew Manchester a safe job and company pension ceased to exist in the 1980s.

Had boomers like Lee been thriftier, they would have still been hurt by a shift to 401(k) accounts from pensions in the 1980s. Thirty-seven percent of the elderly in the U.S. collect pensions, which provide some guaranteed income until they die. Fewer than 10 percent of boomers collect pensions, and that number is quickly shrinking.

Lew’s generation were the lucky ones, while the boomers – particularly the early boomers born between 1945 and 55 – believe they are entitled to similar benefits as their parents, their reality is going to be a much harder and precarious existence into old age.

While Lee is paying the price for interrupting her career with a stab at running her own business, in many ways she’s better prepared for a future that is going to require people of all ages to be more entrepreneurial.

In fact, many of those baby boomers forced to become entrepreneurs may well enjoy it, “launching the business was the most fun I ever had and my way to fight a frightening medical diagnosis” says Lee.

As the reality of their financial situation dawns upon them, many of Lee’s contemporaries are going to find themselves launching businesses long after the age they thought they were going to settle into a sedate retirement – lets hope they have fun too.

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A difference in expectations

While the focus is on the work ethic, expectations and careers of GenY workers, could it be the group set up for the most disappointment are the baby boomers as they reach their retirement years?

Could it be the age group set up for the most disappointment in today’s economy are the baby boomers rather than GenYs?

The Wait But Why? blog has a provocative post on why Generation Y Yuppies are unhappy. It hasn’t gone down well with some prominent Gen Y writers.

Part of the reason the article offended Gen Ys like Adam Weinstein is its focus on the younger generation having an entitlement mentality and feeling ‘special’.

Were I a GenY I’d be pretty irritated at those views, particularly – as Weinstein points out – when younger folk are saddled with much greater debts and far less work security than baby boomers. Interestingly, Weinstein’s rebuttal makes almost the same points the Wait But Why blog from the opposite perspective.

A mismatch of expectations

Despite some of the provocative statements, the Wait But Why post makes a very good point about the expectations of different generations and the mismatch between what different age groups expect and the reality they encounter.

The economic boomers – the group born from 1935 to 1955 – had the good fortune to spend most of their working lives during the post World War II period that saw the Western world experience the greatest economic boom mankind has seen.

During their working lives, all but the lowest paid economic boomers became healthier, better fed and had more access to creature comforts than even royalty had a generation earlier. The average Westerner today is rich beyond the belief of our great grandparents a hundred years ago.

As the Wait But Why blog contends, the result is the boomers are the happiest, most fulfilled generation we’ve ever seen.

In contrast, GenYs are facing a far less fulfilling future in a lower growth economy that is far tougher and a society more focused on ‘user pays’, ‘cost recovery’ and outsourcing labour to the lowest cost provider than the greater good of the community.

Can boomers continue to be lucky?

While this is true of both Boomers and GenY, it’s worth questioning whether the Boomers’ happiness of exceeded expectations will continue.

Today governments are cash strapped, almost pension scheme is underfunded and the demographic time bomb of an aging population has started to be felt across the developed world.

Worse for the baby boomers is their retirement plans require their assets – primarily their homes, investment properties and small businesses – need to be sold at prices beyond what GenX and GenY buyers can afford.

A reversion to the mean in asset prices for economic boomers means a lot of them will be going back to work.

Recently I spoke to one economic boomer who had lost heavily after the global financial crisis. “No worries,” he said. “If need be I’ll get one of my old jobs back, I can still use a set square and drawing board.”

Sadly, he didn’t understand that being good at using a set square and drawing board in a modern engineering office are as useful as making horseshoes or operating an electric telegraph. Those skills, while noble, are no longer necessary.

While GenY will get on with adapting to the realities of their economic situation – they have little choice but to do so – the big challenge will be for their parents to deal with the modern economy.

A new ‘Greatest Generation’?

Perversely it’s likely the GenYs will turn out more like their grandparents who had to deal with a great depression and a massive World War.

While hopefully the GenYs won’t have to deal with either of those, they are faced with a much different economy than the one which nurtured their parents.

So the real ‘happiness deficit’ could turn out among the baby boomers in retirement at the very time in their lives they are least able to deal with it.

Hopefully the GenY workers will be compassionate on their asset rich but cash poor parents and grandparents.

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Offshoring, the internet and the future of business

Outsourcing sites like oDesk, elance and Freelancer are changing recruitment and labour markets in ways that big and small businesses need to understand.

One of the big changes in business over the past thirty years has been outsourcing offshore – offshoring – as labour markets around the world have opened, communications have become cheaper and trade barriers fallen.

As the global war for talent accelerates, offshoring may be one of the ways many businesses deal with labour shortages in their home markets.

For most of the last thirty years, offshoring was only really available to larger businesses who had the resources to manage overseas suppliers and service providers.

With the internet becoming accessible services like eLance, Freelancer.com and oDesk started appearing that established virtual labour exchanges where smaller businesses could connect with individual contractors.

As part of the Decoding The New Economy video series, I had the opportunity to speak to Matt Cooper, Vice President of Business Development & International at oDesk about how the global workforce is evolving.

oDesk itself came about in 2005 when its founders Stratis Karamanlakis and Odysseas Tsatalos wanted to engage developers in their native Greece while working in North America.

That project turned out to be a business in itself and now the company now has over three million freelancers registered with the service.

Addressing the global skills shortage

Cooper sees oDesk’s big opportunities in areas such as developers, e-commerce and customer service.

“If you look globally there are very acute shortages in certain geographic areas and certain skills,” says Cooper.

Looking ahead, the company sees new skills coming onto the market with larger companies adopting oDesk and similar services.

“We’ll see new skills come onto the marketplace with increasing liquidity and depth with this longer scale of skills,” says Cooper. “We’re also seeing increased demand from enterprise companies. Of the 600,000 clients using oDesk have been traditionally small companies, entrepreneurs and startups. Now we’re seeing increasing demand from the enterprise companies.”

Managing remote workers

Regardless of the size of the company, managing a global workforce of freelancers presents challenges for management and Cooper has some advice for those businesses looking at engaging workers through his service.

“Managing an online, distributed workforce is different to managing locally,” says Cooper. “You have to be much more specific, you have to document your expectation and you have to make the investment in getting your team up to speed.”

One common problem Cooper sees with engaging workers through services is like oDesk is employers thinking they can throw their problems over the fence, “you can’t just throw your project over the wall and hope it comes back.”

Cooper also suggests businesses “try before they buy” with engaging potential freelancers to do smaller trial tasks to see if they do have the skills needed.

“If you need one person, hire three and keep one.” Cooper says, “create a very small and very discrete project that closely replicates the long term role that you want and see how they perform.”

The threat to existing businesses

Services like oDesk present a number of opportunities and challenges to industry, in some ways they threaten existing service businesses which have relied on providing skilled knowledge work to local markets.

Now cheaper workers are to anyone with a computer and a credit card, there’s a fundamental shift happening in the small business sector.

How the small business sector, and larger corporations, use services like oDesk and Freelancer.com while reacting to the threats these sites present to their businesses will determine how many of them will survive over the rest of this decade.

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Kinkabool – the highrise past and future

A visit to the Gold Coast’s oldest high rise raises some questions about sustainability.

Today high rise buildings are the norm on Queensland’s Gold Coast, but just over fifty years ago in Surfers Paradise, nine storey Kinkabool was the first of the breed to be built. Its condition today is a warning on how skyscrapers can turn into expensive liabilities for owners.

ABC Open has an interview with one of the workers on the building and in the accompanying video Bob Nancarrow shows just how Kinkabool dominated the then sleepy seaside resort of Surfers Paradise in 1960.

kinkabool-overshadowed

A visit to Kinkabool today reveals a building struggling in the face of poor maintenance and an undercapitalised ownership. Luckily for the owners’ corporation,  the Queensland government pitched in to repair the roof but much of the rest of the complex is showing its age.

kinkabool-lobby

The rabbit warren lobby with its orange tiles indicate some of the building was upgraded in the 1970s but apart from a lick of paint, it hasn’t seen much love since.

kinkabool-lift-lobby

The lift is are where the building’s age and owners’ lack of investment really shows. An old, slow elevator that hasn’t been upgraded since the first residents moved in clunks its way up the building. Even Hong Kong’s Chunking Mansions – the world’s best example of a dysfunctional high rise – gets its lifts upgraded sometime.

kinkabool-lift-interior

Inside the lift, it’s a depressing scene and one wonders if the antiquated equipment would meet today’s building standards. Even if it does meet the regulations, the dispiriting ride on its own would knock a big chunk off the asking prices for buyers or renters.

kinkabool-lobby-stairwell

Stepping out of the lift, the view in the stairwell isn’t much better. The lack of maintenance or investment begins to show in old fittings, damaged glass and hints of painted over graffiti.

kinkabool-stairwell

While standing on the ninth floor, music from unit 1B drifts through the building – it’s lucky the occupant has a taste in cheesy 1970s music as some thumping headbanger music could to serious damage to the building along with the residents’ sanity.

One wonders just how noisy the building would be with a party happening or a young, crying baby although it seems families aren’t really interested in these apartments or the central Surfers Paradise location.

Though a very undistinguished building, it does have one touching little architectural feature in  the different tile patterns on each floor, although probably not enough to redeem it in the eyes of most people.

kinkabool-tile-featurekinkabool-tile-feature-2

Probably the saddest thing about Kinkabool is how a building that once dwarfed everything in the region is now overshadowed by its much bigger neighbours.

kinkabool-neighbours

Across the road, and blocking out most of Kinkabool’s sunlight, is the 1980s Paradise Centre.

Time isn’t proving any kinder towards the Paradise Centre with the lack of maintenance beginning to show on the thirty-year old complex as this vent across the street from Kinkabool illustrates.

kinkabool-neighbours-rusting

Generally, if the landlord or owners’ corporation is too stingy to afford a coat of paint, then you can be sure there are more nasty surprises

Both the Paradise Centre’s and Kinkabool’s declines illustrate a much more fundamental problem in an economy driven by property speculation and taxation allowances — there isn’t a lot of money to go around for maintaining older buildings.

While Kinkabool’s residents can get by with a clapped out lift, inhabitants of larger and more modern complexes like the Paradise Centre will find the costs of running and maintaining their buildings an increasingly difficult burden.

It could just turn out that Kinkabool, should it escape the wrecker’s ball, may well turn out the more desirable dwelling than its bigger, more modern neighbours.

For the meantime though, Kinkabool marks the beginning of a far more sophisticated era in Australian and Gold Coast history. Whether that era became too sophisticated for itself remains to be seen.

kinkabool-goodbye

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Making way for Gen Y in the executive suite

A challenge for organisations is opening the career path for Gen Y managers as baby boomers hang around the executive suite.

One of the great challenges in today’s workplace is how organisations will manage Generation Y entering the boardroom.

Lazy, unfocused and high maintenance are some of the descriptions used by boomers when talking about younger workers, but how much truth is there really in that and how do organisations plan for this generation to take leadership positions?

As part of the recent Sydney EMC Forum, I had a chance to discuss the challenges of managing Gen Ys with social researcher Micheal McQueen and EMC Australia Managing Director Alister Dias.

Like many tech companies, EMC has a younger workforce with around 25% of staff being GenY and Diaz sees global thinking and a fresh, bright approach as some of the advantages younger people bring to the workplace.

“We want to see this grow,” says Diaz. “There’s two reasons for this; one is that energy level, quick learning and adaption to the new world but the other is the shortage of general talent in the market.”

That shortage is an early part of the global race for talent, with Diaz seeing the priority for EMC and other tech companies to develop home grown skills rather than importing skilled workers.

Offering a career

For Diaz’s, one of the great challenges in this race for talent is retaining skilled and motivated Gen Y and Gen X through offering more diverse career options.

Career progression is one of the big problems facing both GenY and X workers as, in McQueen’s view, the baby boomers have no intention of going anywhere as many define themselves by their work so they don’t plan to retire.

“For Baby Boomers their work ethic is their identity,” says McQueen. “Stepping back from a leadership position, or any position in general is a big deal.”

Not working huge hours which is a key difference between baby boomers and their GenY kids and grandkids who don’t wear long hours as a badge of honour.

Language barriers

An area that concerns McQueen is a lack of vocabulary as text and social media messaging has eroded the teenagers vocabulary with average 14 year old today only knowing 10,000 words as opposed to 25,000 in 1950.

“It started off as text speak and it’s gone beyond that now,” says McQueen. “If you have a Gen Y person operating with older workers there’s often a disconnect there.”

The effects of electronic gaming and communications also has created a climate where today’s teenagers have less empathy than those of twenty years ago — McQueen cites a University of Michigan study — this has consequences in fields as disparate as sales, technical support and nursing.

Organisations are going to have to learn to deal with these differences.  “In our own organisation we talk about the need to adapt to Gen Y,” says EMC’s Diaz. “Personally I think we have to meet them half-way.”

“We’ve found it difficult to get talent. You really have to do your homework on it.”

Part of EMC’s problem in finding skilled Gen Y workers has been the collapse in university IT course enrolments along with the broader turning away from STEM — Science, Technology, Engineering and Mathmetics — related degrees.

Diaz is quite positive on this and sees the pendulum swinging back towards more technical degrees and diplomas with more younger people taking on STEM subjects. At present though enrolment statistics aren’t bearing this out.

Finding those skilled workers is going to be one of the great challenges for business in planning for the rise of GenY workers, one of the greater tasks though might be getting the baby boomers out of the corner office.

Image of a younger worker courtesy of ZoofyTheJi through sxc.hu

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Never going to let you go – the failing businesses clinging desperately to baby boomers

As younger people turn away from old business models, those comfortable with the status quo cling desperately to their established but shrinking markets

Probably the driving factor of the consumerist society’s development was the baby boomers’ growing up.

Through the last fifty years everything from Coca-Cola to baby products and hair loss treatments has been aimed at the cohort born between 1945 and 65.

For many businesses and marketers this group has been so profitable it’s been hard to let them go.

The US motor industry is a good example of this with Bloomberg reporting the over 55 age groups are dominating domestic car sales as younger folk turn away from car ownership.

A similar thing is happening in Australia as TV executives decide that competing with the internet for millennials is too difficult so sticking with the over 50s market is safer.

“We’d go out of business if we stayed with our traditional demographic of 16-39.” Channel Ten CEO Hamish McLennan told the Mumbrella360 conference in Sydney earlier this year.

The problem for both the US motor manufacturers and Australian TV stations is the trends are against them.

For TV stations trying to compete against the internet, the older age groups are following their kids across to the web at the same time that they are beginning to save for retirement.

That need to save is also working against the car dealers, while many boomers fawn over new cars a large number simply aren’t going to be able to afford these indulgences. It’s not a good prospect for the motor industry.

In the meantime, younger people are turning away from the motor car, Bloomberg quotes University of Michigan Transportation Research Institute s researcher Michael Sivak who penned a report on generational shifts in the US motor industry.

“I have a son who lives in San Francisco; when I get a new car and I tell him what I got, he couldn’t care less,” Sivak said. “To him, it’s a means of getting from A to B. He goes into great lengths about taking a BART or bus, even though it takes him an hour longer. He does have a car, but uses it very rarely.”

The movement away from the motor car indicates something much more profound about western society — if the baby boomer represented the age of consumerism, the entire Twentieth Century was defined by the automobile.

For politicians and town planners wedded to a 1950s view of economic development, it may be they are making terrible and expensive mistakes in pushing freeway and other road projects.

While aging baby boomers purr over their expensive cars, the forces of history may be passing them by. Those businesses pandering to those older groups might just want to consider whether they want to be left behind as the economy, and the kids, move on.

It’s comfortable to cling onto what has worked for the last fifty years, but sometimes the lowest risk lies in letting go.

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Dealing with the digital investor

The Telstra Digital Investor report shows the problem facing the financial services industry and many other sectors in dealing with connected consumers.

Telstra’s Digital Investor report released earlier this week looked at the generational changes for the financial planning industry and the effects of technology on delivering advice and services.

At the core of the report is the projection that by 2030, 70 per cent of Australia’s financial assets will be held by the digitally savvy Generations X and Y and the advice industry is doing little to cater for this group”s media and reading habits.

This is barely surprising, financial planners are one of these fields subject to arcane rules and regulations which make practitioners extremely conservative about innovation or changing work habits, even when the new tools don’t breach any laws.

One of the nagging questions though with the report is the underlying assumptions on wealth generation over the next twenty years. Will it really follow the same pattern as we’ve seen for the last few decades?

As the Stanford Graduate School of Management notes in its dissection of the Forbes richest 400 Americans, the path to wealth is changing.

“Three of the 10 wealthiest people in the United States – Bill Gates, Larry Ellison, and Michael Bloomberg – built their fortunes on information technology that barely existed in the 1980s,” says the author Joshua Rauth.

It may well be that the financial planning industry’s core assumptions, of a large, stable middle class workforce steadily squirreling away a nest egg is going to be challenged in an economy undergoing massive change.

Another generational aspect in the Digital Investor report is the handing down of family owned enterprises. The paper quotes social analyst Mark McCrindle saying “Succession planning is already a key issue (for SMEs) – yet by 2020 40% (145, 786) of today’s managers in family and small businesses will have reached retirement age. We are heading towards the biggest leadership succession ever.”

As this blog has described before, many of the current generation of small business owners will never pass their operation on. Their barber shops, car dealerships and factories will retire or die with the proprietor as Gen X and Y entrepreneurs can’t afford to buy the business and the owner can’t afford to retire.

The investment climate of the next quarter century will be very different from the last fifty years as will the business models and the paths to wealth. It’s something that shouldn’t be understated when considering how Generation X and Y will manage their finances.

Despite the weaknesses, the Telstra Digital Investor report is an interesting insight into how one industry is failing to identify and act upon the fundamental changes that are happening in its marketplace.

The financial planning industry isn’t the only sector challenged though and that makes the report good reading for any business trying to understand how marketplaces are changing.

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