Monday, 10 June 2013

Longevity is Opportunity: Riding the Demographic Wave

On 1 May 2013, at the Milken Institute Global Summit, a panel of thought leaders considered this topic: Longevity is Opportunity: Riding the Demographic Wave.  The panel members were:

Jody Holtzman,  Chair and Senior Vice President, Thought Leadership, AARP
Pinchas Cohen, Dean University of Southern California Davis School of Gerontology
Mike Hodin, Executive Director, Global Coalition on Ageing
Paul Irving, President, Milken Institute
Dan Houston, President, Retirement, Insurance & Financial Services, Principal Financial Group

The conspicuous absence of female thought leaders on this panel was notable. Statistically, women are still living longer than men and thus, historically, have more to lose if they suffer ill health or have failed to save sufficiently. Female contribution to and their ability to participate in the creation of new longevity opportunities are equally vital.

Quoting Sarah Harper of the Oxford Institute on Ageing, “A young girl born in the 90’s today will live in three centuries”. From a personal standpoint, in the first years of their young lives, my five daughters have already lived in a decade, a century and a millennium. Along with their boomer parents, they will definitely be in position to catch this particular wave.

Here are my takeaways from the discussion:

TAKEWAYS
  • the growing disconnect between lifespan and health span will directly affect wealth span and have far reaching implications with respect to consumer behaviour
  • seek to improve healthiness, earlier
  • the new longevity will reveal opportunities for new markets
  • we must raise expectations positively with respect to our mature years
  • it is necessity to embrace encore careers
  • this will require insight and innovation in both the public and private sphere
  • the new longevity brings a time of great change will require great restraint and great responsibility
  • we have a serious under savings problem that is only getting worse; need to shift reliance on Social Security
  • onus is on the individual to take personal responsibility for actions, lifestyle choices
  • boomers need to be willing to accept change across every dimension of life and make this the new normal
  • we must be more proactive about planning/integrating our additional 20-30 years and not just tack it on as a later life bonus.
It would be stunningly naive to pretend that ignoring or denying what is presently occurring will sort itself out without instituting sweeping changes and public policy reforms.Therefore, the time is now to devise life-long, lifestyle choices to enable present and future ageing persons the opportunity to carefully nurture and avoid squandering the new longevity. 

Staggering opportunity clearly exists but in order to ride that wave, you've got to catch it first. The time to catch old is now not nigh.

Deborah Gale

Full report follows here:
Milken Institute Global Summit
Longevity is Opportunity: Riding the Demographic Wave
1 May 2013

Panel:
Jody Holtzman,  Chair and Senior Vice President, Thought Leadership, AARP
Pinchas Cohen, Dean University of Southern California Davis School of Gerontology
Mike Hodin, Executive Director, Global Coalition on Ageing
Paul Irving, President, Milken Institute
Dan Houston, President, Retirement, Insurance & Financial Services, Principal Financial Group


WHAT THESE THOUGHT LEADERS HAD TO SAY
This panel spoke in global terms, though arguments were mainly presented in the US context. They directed their attention on the imperative to improve outcomes that will correlate positively with longer lives. The remit for this task is vast and will require brave new thinking about the new longevity.
It was likewise acknowledged that because the caliber of the work force is also shifting across ages, adjustments will be necessary so that productive human capital can be re-utilized in completely differently ways.

Pinchas Cohen
Dean University of Southern California Davis School of Gerontology

Cohen opened with a quick overview of how life expectancy has risen by 30 years since the turn of the last century. That said, it is well documented that health enjoyed in those extra years has declined substantially while health care costs, in general, have risen dramatically. This is unsustainable and he reiterated the need to stop unnecessary spending on healthcare.

Changing these spending patterns represents a tremendous economic opportunity. Healthcare and care are both givens, across the life course and at varying stages of disability. As we age, care is inevitable because assuming we stay alive, everyone will eventually need care. Therefore, as the world ages, this need for care will become the most powerful economic force for years to come.

Consequently, building communities with appropriate gradations of care and creating the correct labor force, with proper skills and training is fundamental to seeing this economic opportunity fulfilled. At present, 80% of healthcare dollars go into the last year of life and 50% in the last month of life. It is therefore logical to shift healthcare investment towards prevention, earlier. This will prolong and promote healthy lives and most importantly, postpone disability.

Cohen also addressed criticism directed at the concept of delayed retirement and second careers. Both are too often seen as direct competition to already marginalized and unemployed youth, particularly during the current period of no economic growth. This, however, ignores the fact that we actually do face anticipated employment shortages. He sees the new entrepreneur or “olderpreneur” as a way of helping society address formidable skills gaps. They make job creation possible for the very people who will be creating the new, and necessary products required to service ageing populations. This group also has the highest spending power in society. Cohen sees this confluence as addressing two problems, firstly youth unemployment and secondly, not limiting opportunities for people to remain productive post retirement.

Mike Hodin
Executive Director, Global Coalition on Ageing

Globally, there will be over 1B > 60 year olds in 2020. For businesses, this demographic shift – longevity plus low birth rates - is transformational. Gradually, the market is realizing that it can no longer be exclusively focused on the youth market. To date, 200 companies are participating in the Global Coalition on Ageing and they recognize this shift is occurring.  Concurrently, the implications for public policy cannot be underestimated.

Case in point: the specter of AD (Alzheimer’s disease) is at present an unavoidable potential pandemic by 2050. Potentially, this is more than just a health crisis and it could also contribute to a fiscal nightmare. The statistics at present are that 20% of over 70’s have AD and if you include mild cognitive impairment in the numbers, over 2/3rds of over 90’s are affected.  Current costs run to around $200B/yr and are estimated to rise to $1T over the next 30 years.   This represents a critical point where health care costs are being directly impacted.

Consequently, we need to change the way we look at the over 50-90 year old cohort. Not as a homogeneous entity but as a cohort of which some percent, yet unknown, can remain active and economic contributors to society. This necessitates policy adjustments that allow us to spend differently in two areas: a public spend on wellness and a willingness to increase public spend on research that will bring us answers, even if they won’t come until much later. Hodin spoke of a new organization http://www.ceoalzheimersinitiative.org/faqs, the CEO Initiative, where companies, not solely involved in health care, are recognizing that the dramatic increase in costs from AD are impacting the economy.

He emphasized the importance of doing everything possible to defer or delay the  onset of cognitive decline. Intellectual stimulation through life long learning opportunities must be acknowledged as fundamental to any attempt to postpone decline but educational institutions will have to lead the charge. The importance of education is a recurring theme to harnessing and retooling this economic engine. It becomes increasingly clear that the barriers now being presented by AD must be managed at the same time as we focus attention on turning able and willing 60-90 year olds into a new form of economic opportunity and productivity. Hodin continued with his observation that the current global financial crisis has masked this issue and only now are we beginning to treat our ageing population as a potent economic opportunity.

This is because progressive employers who look at low birth rates, as well as the fact that we are living longer, are starting to realize the employment shortfall we face. Hodin believes this represents a basic structural issue and because of low birth rates, we are already running out of young employees. In Singapore, with a population of 2M, this employee deficit has already been recognized and programs are in place allowing ex-employees to return to work.

He optimistically suggested that the global success of the women’s movement, recognition of their human capital and economic productivity potential might offer a template for changing the societal norms regarding the employment of 60-90 year olds. At present however, the burden of entitlement, inadequacy of pensions, rising costs of health care and challenges of disease remain serious impediments. Further, he pointed to restrictive retirement policies still operating in places like the World Health Organization, WHO. The rhetoric has yet to jive with reality. He used Dr Alex Kalache of Help Age International as an example. Kalache had to exit WHO when he turned 62 but now heads up the International Center for Policies on Ageing in Rio, acts as a special advisor to the New York Academoy of Medicine and a member of the advisory board of the World Demographic and Ageing Forum.


Jody Holtzman
Chair and Senior Vice President, Thought Leadership, AARP

Jody opened by lamenting the fact that only in Washington would “addressing the unmet needs of 100M people be viewed as a dual financial burden and unaffordable cost.” He added, that given this mindset, it will be up to the private sector to address this enormous unmet need.

Therefore, meeting this unmet need constitutes a huge commercial opportunity for new markets across industry sectors including: health care, fin services, technology and consumer. Focusing specifically on healthcare, he explained that it was now possible to diagnose AD, with a 90% accuracy, in pre-symptomatic people. Obviously, treating people in advance is an area of great interest and increasing attention:

Healthcare is the huge opportunity and it also represents a significant part of GDP. The healthcare issue, however, needs reframing so that it is recognized as a strength, instead of a liability. Given the huge global implications it represents, innovation, for all ages, is required. To this end, the AARP has a new program for healthcare innovation where innovators are put in front of venture capitalists and financiers to pitch their ideas.  Authors note: This is along the lines of the work being done by Steven Johnston at Aging2.0.

Holtzman continued by suggesting that because population ageing is exponential and can’t be solved with a linear solution. At present, the AARP estimates the unpaid value of care giving in the US is $450B annually. Notably, this figure is not considered as part of GDP. Consequently, there is a desperate need to monetize that and he suggested that some progress is being made in this regard.  Senior Link, a venture capital backed company in Boston is paying family caregivers for previously unpaid care: http://www.caregiverhomes.com The results have been impressive; not only do the carers feel valued but the quality of care and better health care outcomes have resulted. In addition, this translates to less public expense, the potential for new business creation and also represents a paradigm shift. Related to this and another area of necessary change is within the insurance industry. Insurers must undergo a transformation and instead be incented to keep people out of the hospital. This is particularly true  in this era of no fed funding. Holtzman reiterated his observation that it becomes increasingly necessary for the private sector to step up to the plate.



Looking at Europe for inspiration, Jody then used BMW as an example of how to retain and utilize existing talent. BMW opened a new assembly line and populated it with employees at the ages they forecasted the age distribution of their work force would be in five  years time. They then asked those employees on the new line to recommend improvements to productivity. Overall productivity was shown to have increased by 7% and absenteeism dropped to the lowest level in all of BMW. This experiment demonstrates the benefits of employee involvement in the process as well as an acceptance of the realities of an ageing work force.

Dan Houston,
President, Retirement, Insurance and Financial Services
Principal Financial Group

Houston began by explaining that Principal Financial Group (PFG)  speaks from a position of some authority given that globally, they have $450B of retirement assets under management.
According to Houston, the advent of the employee based 401(k) defined contribution system in 1978 represents the most important development in retirement savings. Unfortunately, this breakthrough is now 35 years old and we have a situation in which 50% of today’s 45-54 year olds have not made sufficient savings. In addition, less than 1/5th of this cohort have what they need for retirement. This, he explained is due to the rising costs of nursing home cover and unreimbursed health care expenditures. He also noted that unfortunately, the distinction between events covered and not covered by Medicare and Medicaid is widely misunderstood.
Houston offered that saving for retirement has traditionally been a three-legged stool: personal savings, social security and pension.  In the post global financial crisis world, losses in the value of the housing market has produced a decline in personal savings across the board. Simultaneously, shortfalls in saving and pensions do not suffice and thus have made people solely reliant on Social Security. The current challenge will be to replace Social Security and move all workers away from defined benefit to defined contribution pension schemes.

In addition, because no one knows with any degree of assurance what their ageing fates will be, we must develop better models for predicting costs of healthcare and spending during the retirement years. PFG estimates 13-14% of annual income must be saved between the years of 30-67 in order to replace 85% of income at retirement.  In the recent past, reliance on social security allowed retirees “to limp across the finish line”. That worked to a degree when people retired at 65 and died at 68. In the age of new longevity, this is no longer the case.

Further, he made the point that today is the first time we have ever had four generations in the work force, at the same time.  At the same time, the sandwich generation is being squeezed to the limit with dependent children at one end of the age spectrum and caring for ageing relatives at the other. While policy improvements have been made with the 2012 introduction of the new Family Medical Leave Act http://www.dol.gov/whd/fmla/, such provision is often insufficient. Echoing Mike Hodin’s comments about Singapore’s rehiring initiative, Houston explained that programs like PFG’s own rehiring scheme, “Happy Returns”, are on the rise.

The secret to the success of such programs is in understanding the changed profile of these returning employees. While they want increased flexibility and fewer hours, what they bring in intangibles like work ethic, wisdom and institutional knowledge can turn such career resumption opportunities into an economic win-win situation. Likewise, there is evidence that mentoring can also teach younger employees about the choices they are making as employees. This brings work/life balance issues out into the open and has demonstrable, positive impact on employee retention.

Paul Irving
President, Milken Institute

Irving opened his remarks stating that “….with 78M boomers in the US, the most glaring observation is our stunning naivete and stubborn reluctance to recognize the opportunity imbedded in something that is unavoidable.”

He continued by reminding us that beyond the substantial business opportunities already discussed, there are also significant entrepreneurial opportunities for boomers. Research out of the Kauffman Foundation indicates that people at 50 start companies at 2X the rate of people in their 20’s.

Obviously, growth and innovation will be required to solve the broadening spectrum of social problems but from a personal standpoint, it is clear that other quite ordinary while pressing problems already exist. He cited some examples:
-       women want and need shoes that don’t hurt but are stylish,
-       everyone wants cars that we can get into easily,
-       better hearing aids

We are in a state of denial and not taking advantage of the opportunity to serve what will clearly be a welcoming audience. Irving explained that  we are living what is now a much longer life but that it was actually designed for a completely different time. Where ageing used to represent precipitous decline into disability and decrepitude, it does not necessarily equate to disability in the 21st C.  Therefore, we need to innovate with respect to maintaining wellness. He used Ken Dychtwald’s linear life plan model to further the case for life long learning. He emphasized the importance of rethinking our new 30 year longevity bonus so that we start to incorporate it throughout life and not just consider it as something we now get to tack on at the end. Authors note: message to boomers, incorporate changes now in order to inspire younger and future generations to emulate and take the life long learning message on board.

He then suggested that retirement offered a clear demonstration of our societal reluctance to accept that this demographic change and the new longevity, is actually underway. Irving pointed out that 25 years ago, the average age of retirement was 63 while today it is only 64.  Retirement today however, comes under many guises be it self-directed choice, forced by health issues of the retiree or their spouse, or skills obsolescence leading to lay off’s. Arguably, within those categories, there is a gap in terms of what decisions are made based on personal circumstances.  What is worryingly clear however, is that no structure exists in the system to take advantage of this new asset class of human capital.  We are talking about educated, trained and talented people with a potential thirty more years of productive capacity. Authors note: We need to motivate and inspire the willing and able and economic imperative will help to motivate willingness.

In addition, despite all that we now know about lifestyle choices and health, we still aren’t taking personal responsibility seriously enough. He pointed to research showing that for every dollar a company spends on wellness programs, there is a $6 cost savings recognized by the employer. He also explained that a pack a day smoker who quits today will save $71,296 over twenty years. While it is obviously good for companies to embrace wellness and recognize the cost savings from healthy employees, it is fundamentally incumbent upon each of us to take responsibility for our own longevity.

Further worrying, despite the fact that the over 60’s already represent the majority of the population and will continue to do so, Irving noted that there is only one school of Gerontology in the US, the Davis School of Gerontology, part of UCLA where expert panelist Pinchas Cohen is Dean . Authors note: There are 20 other schools in the US with gerontology programs. Geriatric training in medical schools in addition, is also lacking. Research data is scarce, but only 56 percent of medical students nationwide had clinical rotations in geriatrics in 2008, according to a University of Cincinnati study.

Returning to AD, Irving continued by suggesting that like breast cancer, AD is the next pink ribbon disease. More women are affected at the same time that 2/3rds of caregivers are women. Furthermore, caregiving is additionally debilitating for women because it reduces opportunities for advancement in the workplace and restrains income generation potential. He then suggested that this might represent an opportunity to retrain and redeploy ageing women as caregivers, thus allowing younger women to advance in careers. Paying these care givers, as in the Senior Link of Boston example cited by Holzman is the way forward.

Next, Irving turned to the recent success of the 2011 movie, The Best Exotic Marigold Hotel www.imdb.com/title/tt1412386/‎ to further the case for mentoring and downplaying the Washington DC driven us vs them narrative surrounding intergenerational tension. He cited research by Participant Media and encore. Org who found that 70% of the boomers interviewed said that they would be prepared to make a financial sacrifice in order to act as a mentor    

This dovetails perfectly with Laura Cartensen’s work at the Stanford Longevity Center.  Her research on adult intelligence indicates that even though short term memory can suffer in the form of “senior moments”, changes to our intelligence gives us a greater degree of wisdom and judgment. In turn, mixing young and older workers together offers intergenerational benefits and makes for better business. It is this combination of IQ and EQ that can occur when older workers return as mentors. Like the BMW example, they need to look at an ageing work force in a positive way and change in business practices to optimize opportunities. This does require progressive thinking by companies but offers a pathway for how to win the competitiveness race in the 21st C.

Irving observed that companies regularly invest in physical plant, technology and infrastructure but we let ourselves down on investing in human capital. Confining continuing education to 18-28 year olds is shortsighted. He believes we must commit to retraining talent through programs that move beyond trying to put returning employees back into their old jobs. We need to look at mini-continuing education to mine the demographic assets of older people and find them something new to do instead.

Irving believes that from a societal perspective, growth occurs at the convergence of demographic change and innovation. He thinks we  are at this critical juncture now and there is a desperate need for change and a lack of innovative ideas trying to catch this age wave. He speculated on the lost opportunity in that to date, given the degree of upheaval from the global financial crisis, no one brought a private equity longevity fund to the market yet. This represents a glaring omissions and there will be a need to give the ageing boomers choice. In turn, the ageing boomers must seek to improve healthiness before retiring and be open to retraining or finding new jobs or encore careers.

Q and A

1.    What is a diet for the new longevity? 

Pinchas Cohen answered, anything except what Americans eat before espousing the scientifically proven benefist of a Mediterranean diet, weight control and exercise both physical and mental.
2. A question was posed  by the CEO of AntiAgeing Games. She said that a third career track exists for people who don’t need full time and therefore work part time, for benefits. Unfortunately, however, from an insurance standpoint, part time employees preventative testing is not covered by their policies.

Mike Hodin offered his view that in order to move from public awareness of a problem to implementation of a solution, a philosophy and a political position were required. You don’t get on the agenda by force. Similar to the way that the sustainable development agenda gained traction, he believes that a new set of business principles for population ageing currently under development by the Global Coalition on Ageing and the World Economic Forum will provide dewcata good starting point.

TAKEWAYS
·      the growing disconnect between lifespan and health span will directly affect wealthspan and have far reaching implications with respect to consumer behaviour
·      seek to improve healthiness, earlier
·      the new longevity will reveal opportunities for new markets
·      we must raise expectations positively with respect to our mature years
·      it is necessity to embrace encore careers
·      this will require insight, innovation public and private sphere
·      this time of great change will require great restraint and responsibility
·      we have a serious undersaving problem that is only getting worse and we need to shift reliance on Social Security
·      onus is on the individual to take responsibility for actions, lifestyle choices
·      boomers need to be willing to accept change across every dimension of life and make this the new normal
·      we must be more proactive about planning/integrating our additional 20-30 years and not just tack it on as a later life bonus.

CONCLUDING THOUGHTS

In the author’s opinion, the conspicuous absence of female thought leaders on this panel was notable. Statistically, women are still living longer than men and thus historically, have more to lose if they suffer ill health or have failed to save sufficiently. Female contribution to and their ability to participate in the creation of new longevity opportunities are equally vital. Exploiting ageing for positive outcomes is the goal. That said, it would be stunningly naive to pretend that ignoring or denying what is presently occurring will sort itself out without instituting sweeping changes and public policy reforms.

Therefore, the time is now to devise life-long, lifestyle choices to enable present and future ageing persons the opportunity to carefully nurture and avoid squandering the new longevity. Staggering opportunity clearly exists. Quoting Sarah Harper of the Oxford Institute on Ageing, “A young girl born in the 90’s today will live in three centuries”. From a personal standpoint, in the first years of their young lives, my five daughters have already lived in a decade, a century and a millennium. Along with their boomer parents, they will definitely be in position to catch this particular wave.


Deborah Gale

3 comments:

  1. Are we certain that all members of this Summit were human? With the exception of Jody Holtzman's remarks, my takeaway from the minutes of this forum is that each nation would be well-advised to sponsor a number of forums. Said groups will need both IQ and EQ in equal measure plus a qualifying knowledge of gerontology, of commonly appearing states of ill health related to aging, and most important of all, of women. Posted by M Murray

    ReplyDelete
  2. Hi Deborah,

    I have a quick question for you regarding your blog, but I couldn't find your contact information. Do you think you could send me an email whenever you get a chance?

    Thanks,

    Cameron

    cameronvsj(at)gmail(dot)com

    ReplyDelete
    Replies
    1. Cameron,
      I can be reached at deborah.gale@ageingaficionados.com
      or feel free to ask away here in the comments section.

      Many thanks.
      Deborah Gale

      Delete