Our days are filled with questions. We are surrounded by them. It is part of what makes being human exiting, fun and painful. Jerome Powell and the Federal Reserve are wrestling with questions about interest rates and inflation. You might be asking yourself if you want to spend the time reading this blog. In Information Technology (IT), there are many other questions too.
Many of our day to day conversations are fixated on questions about ChatGPT and more generally Generative AI. I am excited at the enthusiasm, but concerned about the nature of the fixation. Why is this worth exploring in a blog? I believe there are many important questions we should be asking ourselves, but many I hear every day just don’t’ seem to be on point. Let me explain.
Prioritizing the Narrative
Of all the big questions we are discussing I believe there are two that are most important, and there are many that are less important. The two really important questions do not refer to climate challenge. Nor do either mention geopolitics or political polarity. And yet politics and climate are huge, complex challenges that fill our news channels and airwaves. What possibly could be bigger?
The questions we are not discussing adequately, in my mind, impact everyone more than anything else. They two really important questions we are not spending enough cycles on concern demographics and energy. This blog will focus on demographic changes, their implications, and what does this mean for us. I will leave energy for a later blog.
It’s not about you, or me. It’s about us
Demographics and the changes underway will define our human narrative for the Next 40+ years. It was demographics that provided the underlaying platform for our collective historic rise as a species and the growth we have all experienced. Changing demographics didn’t cause our growth. It was a critical condition that enabled many other things to take place. As populations grew, there were more bodies to do work. Populations created things, fed themselves, and built cities, nations, and everything. The reverse is also true: As populations decline, so economic growth declines.
Recently we updated our long range forecasting and estimating research views. That work it called Tapestry (Complexity, Chaos and Confidence: A Tapestry of Trends Across Brave New Worlds). This research looks out over the longest horizon in our work. It is our most strategic insight for factors impacting our collective decisions. In our new update we drilled down into many topics and I had the pleasure of working with the team looking at demographic changes. There are major demographic changes taking place, all noted in the press.
What does the data say?
The following trends are seen in many regions around the world, but not all. They are most often centered on the larger, or more advanced economies.
- Total population is declining and is aging (UN, 2019; China 2023)
- Working-age population, that pays taxes, is declining (PRB).
- Birth rates, that fuel growth 20 years later, remain depressed and low (IMF, 2022).
- Life expectancy, at the other end of the timeline, is declining too. This is a relatively new phenomenon and not yet global (CDC).
Our research looks at the implications of these trends, and what actions organization’s might take to either mitigate the risk, or exploit the opportunity. The bottom line here is that a range of demographic dynamics that used to be tail-winds are now all converging on becoming head-winds. These head-winds are not really headline news per se. One story does pop-up here, and another somewhere else. But there are few places where these points are being looked at as a whole. Re-election and populism seem to be the main focus of policy wonks. Yet these dynamics will define and limit our economic options for the next 40+ years, starting now.
From one thread to another
In this updated work it became clearer to me that other long range trends (published in the tapestry work) are underpinned by demographics. The tapestry links are more clear; the threads are more woven into a tapestry. Demographics is like a fundamental fuel. It will limit our social and economic speed absolutely.
This limit has, literally, mortal implications. In agricultural society it was expanding populati0ns that enabled growth. This was achieved by putting more farm hands on the land to drive food production. This in turn supported a larger population. Land however was a fixed assets in that you could not add more to the earth. We do work (input) and we produce more things (output). Getting more with less drives growth. And the difference between input and outputs is productivity. And productivity has been pretty poor for quite some time (World Bank).
Doing more with less
At key points in our history, we have dramatically changed productivity. During the Industrial Revolution, our species dramatically changed how we worked. Manual labor and horsepower were the primary source of energy in agricultural economies. However energy was liberated with the introduction of coal. At the time, the impact was small. But over time new ways of working took advantage of the massive supply of energy, and that is when growth kicked in. Over an extended period, coal replaced muscle as the source of energy. Land, what had been thought of as a fixed asset, experienced a step-change in productivity improving practices and tools. See Energy and the English Industrial Revolution (E.A. Wrigley) for an excellent analysis of this.
Shifting from muscle to coal changed the economics of work. Agriculture was limited by the amount of land dedicated to the different kinds of production undertaken. Land is a finite resource. With coal, many kinds of work were reinvented. The limitations of the amount of land dedicated to production was changed forever in a big way.
New markets evolved. It took many years for coal production to ramp up; and many more years for business and society to adjust to new ways of working and living. We are still living off the successes of the innovations of our predecessors. Land, once a constraint of growth, became an asset that had many other productive options and uses.
Back to our limits
Land is of course one of the factors of production. Along with labor, capital, and entrepreneurship: we all know the rest. Towards the end of the agricultural era, our societies were stuck. They were unable to drive increased productivity from more muscle beyond incremental steps. Along came coal, and things started to change. The changes were slow at first and local. Over time cities grew in size, transforming markets. Roads were developed to streamline delivery, and new services were formed. Much like this period, our current economies are in a funk.
Out economies are much like those first few years of the industrial resolution. Data is the new factor of production. Our economy, our society, is now often referred to as digital. Yet where is the step change in growth? Where is the transformation that leads to a new level of prosperity? As with the industrial resolution, we are not yet over the hump. We have yet to redesign how we work to take account of data as an asset of production. We know there is value in data, but we have yet to industrialize that idea at scale.
Interestingly, the Chinese government has regulated that data be treated as a factor of production. The implication is that organizations in China are taking a different view for how to decide what to invest in (see Quick Answer: How Should Chinese Enterprises Better Deliver Data Monetization Regarding “20 Data Measures”?). Yet it is the lack of data’s exploitation that hampers the digital Revolution around the world.
Once more with feeling
We are in the early stages of the Digital Revolution. What we need to do is industrialize how our businesses, organizations and societies work and live in a digital world. Visionaries among us claimed this revolution kicked off years ago. It may have. But for the vast majority of organizations we have not sufficiently reorganized how we do work, taking into account how data and digital drives everything. We are still effectively behind the plough wondering what all the fuss is about. Today we still fixated on dashboards and reports, much like we used to with a warm bath after a hard days work on the farm. We have not yet been liberated by data, as coal liberated the workhand to upskill themselves to use a calculator. A little education on how the Industrial Revolution evolved over many years would help a lot.
The bottom line with this thread is that if demographics has become a limiting factor on our chances for growth, it is productivity that will change the negative economic calculus heading our way. With fewer workers and taxpayers, and higher bills to pay for all the oldies (me included), sick and infirm, the math looks bad. We need to dramatically change productivity if we are to change the calculus. I just think that we should be asking many more frank questions about demographics (do we agree the implications?) and how we transform ourselves in order to drive productivity.
Changing the question
If we focused on the right questions about demographics, I think we would change the narrative and speak more about real solutions that might make a difference. Generative AI really excites me because of its potential impact on productivity. Yet many conversations in the media and generally are all over the map. Parts of the world are going overboard with hype. Parts of the world are being more measured. I think we all need to bite down hard and demystify Generative AI, and quickly.
Demographic dynamism is in decline. If we don’t dramatically improve the productive capability of our smaller working populations, our future generations will be markedly worse off. The very same transition we made from an agricultural economy to an industrial has to be effected with a shift, entirely, to a digital economy. We have hardly started. As I noted, one notable enabler for the industrial economy was the way in which energy was created, and the plentiful supply of it. That is the second really important topic we should be asking about, and I fear we are looking in the wrong direction. But that is enough for one blog.
For additional reading:
- Innovation Insight for Generative AI. Gartner, Dec 2022
- Use Generative AI in Applied Innovation to Drive Business Value Gartner, May 2023
- In ageing Japan, one town holds the secret to making more babies, WSJ, March 2023
- It’s ‘now or never’ to stop Japan’s shrinking population, PM says, Reuters, Jan 2023
- French protesters worry about parents retirements, WSJ, April 2023
- UK’s healthcare crisis sounds an alarm for aging countries, WSJ, Feb 2023
- The world’s peak population may be smaller than expected, Economist, Apr 2023
- America is stagnating—demographically, that is, Economist, Feb 2023
The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.
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