Boomers must confront the new reality

Sharp slowdowns in the last three months for orders for new equipment, from houses to cars to machines that do work, have manufacturers scratching their heads, rewriting forecasts, rethinking investments and reducing staffs. It seems like uncharted territory.


“Reflecting back, we can see that commerce essentially stopped for three weeks in December,” said one of our market research clients. “It has restarted, but at a much lower level than before.”

But while this slowdown came on with unprecedented speed and clarity, it remains just that – a slowdown, and events like it have happened before, albeit not with quite such haste. As always, it is better to look at larger trends to understand what can and should be done about it.

Some facts:

A systemic decline in U.S. automobile manufacturing has been ongoing for 40 years. We only need to look at GM’s market share – which halved during the last 25 years of consolidation, global expansion and low-fuel costs – to understand why Detroit is such a mess. This didn’t start in December, and it won’t end in ‘09.

Related slowdowns in steel, paper, plastics and chemicals have been rippling through the U.S. economy unchecked for decades, partly as a response to shifting car production, but also due to fundamental shifts in behaviors like the use of computers for business and commerce, and straining U.S. natural resources, specifically energy and labor.

We didn’t panic then. Why panic now?

Underlying today’s bad news are bad habits and some simple demographics that are playing games with our national psyche. We’re arguing about whether or not to borrow on the future today, because all of the sudden, we don’t trust that we’ll have the will or the capacity to pay it back tomorrow.

Our confidence is shaken. Why? Two reasons:

If there is a single defining attribute of an American product designed during the boomer years, it is that it is larger than it needs to be. Measured against any other culture, wealthier or poorer, boomer stuff is bigger. Our machines, our meals, our cities; all bigger per capita than anywhere in the world. What the rest of the world knows is that bigger isn’t better. In fact, this recession has exposed the underlying truth that size costs, and if you finance those costs, you create risk. In fact, the truth is the opposite: smaller is almost always better. It provides flexibility, speed and assurance. LEAN teaches this, but we’ve never really gotten the message.

There is one area where smaller is not better, and that is talent. Think back two short years to 2007 and the end of a decade of climbing commodities prices. During that period, we heard constant complaints from U.S. business leaders that there was a shortage of willing, skilled workers in the United States. What they were really saying is that they were caught in a talent shortage crisis, between checking out boomers, and a dearth of qualified replacements.

U.S. Census data explains the issue. Consider that the number of people entering the most productive career years, the years between 35 and 50, has declined during the last 10 years by 15 percent, while the number of people entering what we might call the sunset career years has increased by 25 percent. From the perspective of the U.S. entrepreneur, this represents an enormous competitive disadvantage, and it feels as if they are running out of options. The good news is that the number of people who will enter the workforce in the next decade is on the rise. But they are not ready yet, and they may not be, if we don’t lend them the educational support that they and we deserve.

So we have four negative forces: 1. Boomer stuff is big and the carrying costs are high; 2. Boomers want to work less; 3. There are not enough people in the age group that is generally willing to work more; and 4. The up-and-coming population isn’t getting the education to compete.

In fact, this recession may be just the ticket to return to a more balanced economic condition, but it will take a new view.

We boomers are going to have to step up again and do what is necessary to rebuild our markets along the way, making important choices: should we stay in the workforce to help renew it? Should we share some of the wealth we’ve amassed in the last 40 years to re-educate the next generation of American workers? Should we embrace the technologies and the resource limits of the day to help find the creative, smaller and more manageable solutions to our problems? If we say yes to these questions, then the American dream remains alive.

Markets will return; that is inevitable. We have people, and they have aspirations, and we will have to help them meet them. The companies that will emerge stronger will be those that have embraced the obvious reality: that smaller is better and talented people are paramount.


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