Future planning and declining population

[2Cent]

In most developed countries people are having less children for a while now. Apparently by 2050 the world population will peak and start to decline. What I'm interested in is how to plan for that. How will that world look like. 2050 seems far off but of course population decline will be preceded by population aging, so from around 2030 already the working population of the world will start declining. We look at Japan, China and South-Korea and feel that's a far away problem, but in the US and EU I feel we have the same problem but it's just masked by immigration. And how long will the productive immigrants stay if the economy starts turning bad. I feel they will mostly just go back to India or wherever if they can earn well enough there.

So what I would like to discuss is what likely scenario's for the next 25 years we can expect and what is best to prepare for it. Lets not get sidetracked into what governments should do to address this or what people's reasons are not to have kids.

My feeling is that the stock market might actually not reliably go up on average anymore since the world productivity will be declining. On the other hand labour wages will go up as there will be a scarcity of personnel. Especially in jobs that old people and immigrants can't do well. So the best strategy would be to try not to rely on those kinds of jobs, and maybe finding a side job in a field that leans on local knowledge.

As for investing, of course investing in stocks is still an option, but maybe only as a last resort. Investing in durable house improvements that save energy and learning to do the maintenance work yourself would also be good. Or investing in housing that is good for elderly, and renting it out. Then later I could move there myself. House should be in a bigger city as those will most likely remain populated, and keep their services staffed.

And lastly planning for my kids to help out when I'm old, as the regular elderly care will be in huge demand and thus be unaffordable. Of course also it's good to invest in my own fitness so I will be able to take care of myself for as long as possible.

What are your thoughts on this? Are you planning anything for this future or am I missing a critical factor that will make stocks still the best choice?

[Paper Chaser]

I don't see a better alternative investment than stocks.

We're currently at peak demand for real estate in the US with both Baby Boomers and Millenials (the two largest generations ever) fighting for homes. But Boomers are aging out and dying off. That means less demand and competition moving forward.

If you want to capitalize on an aging population, I'd think that medical/pharma stocks would be a decent sector to consider. Although the demographic decline is likely to hit there too after the Boomer surge has waned.

Investing in your own independence is never a bad thing. The trades are graying rapidly, and wages are climbing. Learning a skill not only helps you avoid paying tons of money to others when you need jobs done, but it also gives you a tool that can be used to make money if you want/need to pursue that path.
Same goes for energy independence. Energy costs are only going to climb. Taking steps to reduce your consumption and improve efficiency can only help you, as well as society at large.
While those things have financial benefits, I don't really consider them financial investments, as that's not usually the primary goal of such endeavors. They're more lifestyle/quality of life choices.

[2Cent]

Hi Paper Chaser. Thanks for your reply. So you still expect stocks to be most profitable when the global economy is declining? My feeling is that the trend of the stock market always going up over time is mostly a consequence of the growing workforce and so we're now entering a long period of scaling down. We can already see that prices are going up a lot while pensions are not. Frugality will become more common in such times, so at least we're ahead of the curve.

[Metalcat]

It's not so much that stocks are expected to perform well it's that it's difficult to impossible to predict what will perform better.

As Paper Chaser said, investing in your own independence is never a bad thing, but you still have to do *something* with your money, and it's tricky to anticipate what best to do with it.

From my perspective as someone who has faced a metric fuck tonne of foundationally life altering events, there often isn't a predictable pathway to preserving what you have when the ground shifts underneath you. If the entire economic system around you foundationally changes, you aren't going to be able to easily hedge against that.

That doesn't mean you should do nothing, it means that you should prepare as much as you can to be maximally flexible. Frugality is one very powerful lever for flexibility, but it's not the only one.

It would be great if we could anticipate major geopolitical factors and actually predict how to hedge against them, that would be cool, but we can't really. So measures that make you more adaptable to change are probably more effective than measures that try to lock down as much security as possible.

I'm told pretty regularly that the things that have happened to me are people's worst nightmares because they don't see any way to feel secure in a life like mine. And I don't, I'm in real, tangible, constant danger of shit going very sideways at any moment and it is daunting. But for someone whose life is the living embodiment of many people's worst fucking nightmares, lol, I have a pretty awesome life because I'm highly adaptable and I readily thrive under some pretty wild conditions.

So consider focusing less on how to protect yourself from what's coming and more on how to thrive no matter what comes. What would it take for you and your kids to thrive in conditions that you really wouldn't want to live in by choice?

Life does not become bad when it becomes much harder than you expected it to be. It just becomes hard. What resources do you need to handle it being hard??

[markbike528CBX]

Hi Paper Chaser. Thanks for your reply. So you still expect stocks to be most profitable when the global economy is declining? My feeling is that the trend of the stock market always going up over time is mostly a consequence of the growing workforce and so we're now entering a long period of scaling down. We can already see that prices are going up a lot while pensions are not. Frugality will become more common in such times, so at least we're ahead of the curve.

Not the most profitable vs past performance , but more profitable than other investment types.   
Remember bonds are based on corporate earnings, directly in the case of corporate bonds , indirectly via taxes on corporations and individuals in the case of government bonds (federal and municipal). 

If the shit slides down the sewer, even slowly, stocks still should do slightly better than other investments.
Government bonds and other "fixed income" are subject to inflation and goverment fiat moreso than stocks (Communist revolutions being the exceptions).

[Metalcat]

Hi Paper Chaser. Thanks for your reply. So you still expect stocks to be most profitable when the global economy is declining? My feeling is that the trend of the stock market always going up over time is mostly a consequence of the growing workforce and so we're now entering a long period of scaling down. We can already see that prices are going up a lot while pensions are not. Frugality will become more common in such times, so at least we're ahead of the curve.

Not the most profitable vs past performance , but more profitable than other investment types.   
Remember bonds are based on corporate earnings, directly in the case of corporate bonds , indirectly via taxes on corporations and individuals in the case of government bonds (federal and municipal). 

If the shit slides down the sewer, even slowly, stocks still should do slightly better than other investments.
Government bonds and other "fixed income" are subject to inflation and goverment fiat moreso than stocks (Communist revolutions being the exceptions).

Exactly this. There's no predictable way to just put perform the market whether it's doing well or doing poorly. A shitty economy doesn't somehow magically make it easier to outwit everyone else who is trying to do the same thing.

[reeshau]

Not to pick apart your points, but there are two things, in particular, that brought up thoughts for me.  As Yogi Berra said, “It's tough to make predictions, especially about the future.”

We look at Japan, China and South-Korea and feel that's a far away problem, but in the US and EU I feel we have the same problem but it's just masked by immigration. And how long will the productive immigrants stay if the economy starts turning bad. I feel they will mostly just go back to India or wherever if they can earn well enough there.

If population decline truly made things that bad, I think it is just as plausible that countries change their immigration policies, as let it continue to deteriorate.  Japan, insular for centuries, has begun some small steps.  That doesn't change people's attitudes, but it does show movement is possible.  So, what happens to these new immigrants?  If they are prosperous, or at least more prosperous than their prior condition, they may even increase their families.  I have no idea what historical comparisons might apply, but it's a complex thing that is hard to predict with any certain ty.

My feeling is that the stock market might actually not reliably go up on average anymore since the world productivity will be declining. On the other hand labour wages will go up as there will be a scarcity of personnel. Especially in jobs that old people and immigrants can't do well. So the best strategy would be to try not to rely on those kinds of jobs, and maybe finding a side job in a field that leans on local knowledge.

To me, scarce labor and declining productivity are in opposition.  When labor is scarce, companies seeking profit will spend to increase productivity.  Look at the transformation of the fast food experience for a recent taste: self-service kiosks, drive-through-only locations, remote order takers, robots in the kitchen.  But this is nothing new.  Factory automation occurred because labor got expensive.  Farm automation occurred because labor gor scarce, as people joined the factories.

In terms of relative performance of stocks, look at what happened to real estate in areas of the US that have de-populated.  You can't move your whole house, at least economically.  Boarded up homes and buildings.  A true disaster.

[vand]

I opened up a discussion about it here previously
https://forum.mrmoneymustache.com/welcome-to-the-forum/demographics-decline-sustainability-or-catastrophe/

There isn't an easy way out, imo. 

I expect those countries on the cliff edge (S Korea, Japan) to all but disappear from the map within my lifetime.. and most of the rest of the world is perhaps only a generation or a generation and a half behind them.  Even here in the UK we have replacement rate of below 1.5 which isn't all that far off Japan's 1.2 or whatever it is now - as OP says though, countries with higher immigration can get away with it, although this also tends to lead to more social unrest.

I don't think people really appreciate just how much of a tailwind to global economic prosperity the population boom of the last century has been, or how much of an increasing headwind it's going to be when it eventually catches up with us all..

even here in the UK we are seeing the effects first hand, with a schools closing in the capital simply because there's fewer children than there used to be
https://www.bbc.co.uk/news/articles/cly559jnd2zo

[obstinate]

Just remember that it hasn't been thirty years since we were worried that there would be way too many people and overpopulation would lead to mass starvation. Things can change in unexpected ways. The future is a foreign country.

[roomtempmayo]

It seems likely that the rich world will be able to import labor for a long time even after the population peaks.  I doubt that in any of our lifetimes the population of the US or western Europe will decline significantly, even as large parts of the globe may be depopulated and become increasingly volatile.

I'm also not that concerned about stock returns.  Their primary driver is the consumption of the world's richest 5/4/3/2/1%.  As long as rich people have money and spend it, publicly traded companies will continue to make money and be worth money.

I think a far greater concern is unrest stemming from mass migration (both in and out), natural disasters and climate change, and increasing inequality between countries and within countries.  We're already seeing the leading edge of these problems, but it hasn't yet resulted in out and out war.

[Christof]

I actually wonder why this topic isn't discussed more broadly. In a world with a growing population companies can maintain the same relative market share or even reduce their market share and still grow. There is always one more person that needs something for the very first time.

If the world's population is shrinking companies actually have to compete on efficiency in order to just maintain revenue. Growing becomes significantly harder if there are fewer people to sell to.

Obviously this depends on the local market as well as the product you sell. Something you can use for a long time and pass on to your kids (real estate) will suffer more than something that you would need to replace regularly like tech gadgets.

[Morning Glory]

Just remember that it hasn't been thirty years since we were worried that there would be way too many people and overpopulation would lead to mass starvation. Things can change in unexpected ways. The future is a foreign country.

This. Having the population decline slowly and settle to some sustainable number is probably the best way to limit climate change and avoid overstretching resources.  There are whole industries full of bullshit jobs that can be eliminated if there ends up being a shortage of workers in critical industries.  If we started valuing care work more on a societal level there wouldn't be a shortage of elder care workers (plus people would probably be more willing to have children if the experience wasn't so punitive). 

Birth rates are not even the whole picture.  We could do a lot more to eliminate common causes of death in children and young adults (cough, gun control,  cough).  We could make sure every child has healcare, decent food, and good basic education to give them the best chance of becoming productive citizens.  We could work on social programs to reduce addiction and suicide.  We could reform prisons so that they actually rehabilitate people instead of locking them away for decades. There are many, many, many things we can do to increase the number of productive workers besides dumping more babies into the current mess.

[Morning Glory]

I actually wonder why this topic isn't discussed more broadly. In a world with a growing population companies can maintain the same relative market share or even reduce their market share and still grow. There is always one more person that needs something for the very first time.

If the world's population is shrinking companies actually have to compete on efficiency in order to just maintain revenue. Growing becomes significantly harder if there are fewer people to sell to.

Obviously this depends on the local market as well as the product you sell. Something you can use for a long time and pass on to your kids (real estate) will suffer more than something that you would need to replace regularly like tech gadgets.

This is the most fucked up argument for having children that I've ever heard. Better go pop out some babies so the shareholders can make more money while we destroy the planet even faster, really??? Explains why the "unfettered corporate greed" Republicans and the anti-abortion ones are allies, I guess.

As a person with a uterus who lives in 'Murica, I think the topic is being discussed too much lately and its more than a little icky. If they're worried about population they shouldn't be deporting people.

[Christof]

This is the most fucked up argument for having children that I've ever heard. Better go pop out some babies so the shareholders can make more money while we destroy the planet even faster, really??? Explains why the "unfettered corporate greed" Republicans and the anti-abortion ones are allies, I guess.

You are reading something into my response that isn't there...

[Morning Glory]

This is the most fucked up argument for having children that I've ever heard. Better go pop out some babies so the shareholders can make more money while we destroy the planet even faster, really??? Explains why the "unfettered corporate greed" Republicans and the anti-abortion ones are allies, I guess.

You are reading something into my response that isn't there...

I get that you are in Germany and don't have the same issues we are having over here.  Corporations here have way too much control over elections and if they say they want more  babies I don't know what kind of messed up policy we'll get stuck with but it will probably be written by someone at the heritage foundation, and it probably won't be something nice like subsidized childcare or paid family leave.
 
To get back to your original point withoutthe political baggage, I think "Infinite growth" and shareholder primacy are bad doctrines that should have been left in the 80's. Companies can still be profitable if they have a more sustainable business model.

[Christof]

Companies can still be profitable if they have a more sustainable business model.

Absolutely. My own company is profitable, that is, our revenue exceeds our expenses. Our profit doesn't change much which means we are not growing.* Growth and profit are independent values. Some companies grow like crazy, but produce hefty losses. Some companies make a decent profit, but don't grow at all.

A sustainable business model will be more important in the future, because there isn't going to be an ever increasing market and obviously not an ever increasing amount of resources.


* It's a bit more complicated when we look at changes compared to some other value like inflation.

[Metalcat]

I actually wonder why this topic isn't discussed more broadly. In a world with a growing population companies can maintain the same relative market share or even reduce their market share and still grow. There is always one more person that needs something for the very first time.

If the world's population is shrinking companies actually have to compete on efficiency in order to just maintain revenue. Growing becomes significantly harder if there are fewer people to sell to.

Obviously this depends on the local market as well as the product you sell. Something you can use for a long time and pass on to your kids (real estate) will suffer more than something that you would need to replace regularly like tech gadgets.

Is this not talked about broadly in Germany? Because it's talked about endlessly in North America. I've been hearing about it for years.

[Christof]

Is this not talked about broadly in Germany? Because it's talked about endlessly in North America. I've been hearing about it for years.

We talk about the impact of the aging population on our pension system or job availability in the coming years. We do less talk about the global population being declining and its impact. I've not heard anything significant about the impact of a declining global population on the longterm perspective of the stock market.

When I see stock charts they are usually plotted as time against money or time against index value. These charts more or less show a line going from the lower left corner to the upper right corner. I've not come across about charts that plot time against valuation per living person (value divided by the size global population at that time). Such charts will probably be more a relatively flat line.

[2Cent]

Just remember that it hasn't been thirty years since we were worried that there would be way too many people and overpopulation would lead to mass starvation. Things can change in unexpected ways. The future is a foreign country.

This. Having the population decline slowly and settle to some sustainable number is probably the best way to limit climate change and avoid overstretching resources.  There are whole industries full of bullshit jobs that can be eliminated if there ends up being a shortage of workers in critical industries.  If we started valuing care work more on a societal level there wouldn't be a shortage of elder care workers (plus people would probably be more willing to have children if the experience wasn't so punitive). 

Birth rates are not even the whole picture.  We could do a lot more to eliminate common causes of death in children and young adults (cough, gun control,  cough).  We could make sure every child has healh care, decent food, and good basic education to give them the best chance of becoming productive citizens.  We could work on social programs to reduce addiction and suicide.  We could reform prisons so that they actually rehabilitate people instead of locking them away for decades. There are many, many, many things we can do to increase the number of productive workers besides dumping more babies into the current mess.

I think that when we get really short of people, most companies will prefer to invest in robots over reforming criminals. Increased automation is definitely the future as customer service jobs are easily replaced. Actually in Europe we already have one good example where the population is already falling fast. Bulgaria is has low birthrates but instead of immigration they have emigration. Working age people are moving to countries like Germany or back to their country of origin(Turkey/Russia). The strange thing is that GDP is actually still growing there. So maybe not all hope is lost. I guess the future will have winner and loser regions, so it's best to be near the bigger cities in a rich country. Or be near an industry that can't be moved like mining. Or best of all, near a large colony of rich old people.

[twinstudy]

Although I am no huge fan of AI, I think within a few years AI will have evolved to the stage where it can supplant a lot of menial knowledge-work jobs. If you want to invest, invest in industries or technologies that can survive this change.

I also think that, while the population might stabilise and decline, demand to live in 1st world cities with temperate climates will only increase. Real estate investment in those areas will still be a good investment.

It surprises me that landlords (particularly large companies) don't do a better job of trying to monopolise certain suburbs or cities - with more market control, they'd have greater freedom to hike rents.

[Fru-Gal]

Just remember that it hasn't been thirty years since we were worried that there would be way too many people and overpopulation would lead to mass starvation. Things can change in unexpected ways. The future is a foreign country.

This. Having the population decline slowly and settle to some sustainable number is probably the best way to limit climate change and avoid overstretching resources.  There are whole industries full of bullshit jobs that can be eliminated if there ends up being a shortage of workers in critical industries.  If we started valuing care work more on a societal level there wouldn't be a shortage of elder care workers (plus people would probably be more willing to have children if the experience wasn't so punitive). 

Birth rates are not even the whole picture.  We could do a lot more to eliminate common causes of death in children and young adults (cough, gun control,  cough).  We could make sure every child has healh care, decent food, and good basic education to give them the best chance of becoming productive citizens.  We could work on social programs to reduce addiction and suicide.  We could reform prisons so that they actually rehabilitate people instead of locking them away for decades. There are many, many, many things we can do to increase the number of productive workers besides dumping more babies into the current mess.

I think that when we get really short of people, most companies will prefer to invest in robots over reforming criminals. Increased automation is definitely the future as customer service jobs are easily replaced. Actually in Europe we already have one good example where the population is already falling fast. Bulgaria is has low birthrates but instead of immigration they have emigration. Working age people are moving to countries like Germany or back to their country of origin(Turkey/Russia). The strange thing is that GDP is actually still growing there. So maybe not all hope is lost. I guess the future will have winner and loser regions, so it's best to be near the bigger cities in a rich country. Or be near an industry that can't be moved like mining. Or best of all, near a large colony of rich old people.

Everyone assumes that falling demographics account for stagnation in places like Japan. But for a better example of the result of automation is agriculture. 100 years ago half the population was farmers. Now 3% are farmers, and we have more food than ever. All due to automation.

[bmjohnson35]

Although I am no huge fan of AI, I think within a few years AI will have evolved to the stage where it can supplant a lot of menial knowledge-work jobs. If you want to invest, invest in industries or technologies that can survive this change.

I also think that, while the population might stabilise and decline, demand to live in 1st world cities with temperate climates will only increase. Real estate investment in those areas will still be a good investment.

It surprises me that landlords (particularly large companies) don't do a better job of trying to monopolise certain suburbs or cities - with more market control, they'd have greater freedom to hike rents.

Technology in general has been ramping up over the past few decades.  Putting aside the obvious concerns about AI development,  it will likely serve as a catalyst for even faster developments in science and technology.  Combine this with AI eliminating or reducing certain jobs and it could make the transition a bit smoother.  I think AI isn't going away, so getting onboard and learning more about it may help you adapt. 

The original poster didn't mention their age, but population isn't supposed to peak until the 2nd half of this century.  Using 2050 as a reference, that's 25 yrs away.  Furthermore, assuming we don't experience some unexpected global event or other major sequence of events, population decline will likely be relatively slow.  With this in mind, political instability, economic decline or possible future wars may a more direct threat than population decline.

Continuous personal development, pursuing financial independence and embracing the adaptation mindset is probably the best way to prepare for whatever the future holds.

[RetiredAt63]

We can guess the future but unforseen events can disrupt plans. Are we prepared for a year like 536?

[2Cent]

Technology in general has been ramping up over the past few decades.  Putting aside the obvious concerns about AI development,  it will likely serve as a catalyst for even faster developments in science and technology.  Combine this with AI eliminating or reducing certain jobs and it could make the transition a bit smoother.  I think AI isn't going away, so getting onboard and learning more about it may help you adapt. 

True, learning to use AI will likely be as simple as learning to use google. I'm not sure how much more to do there.

The original poster didn't mention their age, but population isn't supposed to peak until the 2nd half of this century.  Using 2050 as a reference, that's 25 yrs away.  Furthermore, assuming we don't experience some unexpected global event or other major sequence of events, population decline will likely be relatively slow.  With this in mind, political instability, economic decline or possible future wars may a more direct threat than population decline.

Continuous personal development, pursuing financial independence and embracing the adaptation mindset is probably the best way to prepare for whatever the future holds.

Peak population is 25 years away, but people retire sooner, so peak workforce may be just 5 years away. As I said in my original post, it's not the faraway future anymore. In fact, in many places it's probably already started to decline. Actually in 2050 it's in some ways less disruptive as the percentage working vs retired will have stabilized.

[2Cent]

We can guess the future but unforseen events can disrupt plans. Are we prepared for a year like 536?

The worst and most disruptive year in recorded history. And 5 years later the first great plague which set in motion the eventual downfall of the two super powers at the time (Rome and Persia) and gave an opening for the rise of Islam. I think prepping for that level of change, while possible will be too disruptive/costly. Besides keeping some canned food in storage I would rather just take the risk and face the consequences.

The nice thing about demographics is that you can see what's coming decades in advance, so planning is much more feasible.

[twinstudy]

We can guess the future but unforseen events can disrupt plans. Are we prepared for a year like 536?

No one could have guessed a pandemic like Covid was around the corner but for many of us the adverse effects of Covid on our personal lives were minimal, even though there were wholesale societal changes.

[reeshau]

We can guess the future but unforseen events can disrupt plans. Are we prepared for a year like 536?

No one could have guessed a pandemic like Covid was around the corner but for many of us the adverse effects of Covid on our personal lives were minimal, even though there were wholesale societal changes.

I don't think Covid was so unpredictable.  There were several virus candidates before that (SARS, bird flu, etc.) that could have had similar trajectories.  And the mRNA vaccines were possible in their timeframes because the government had been working on them for a decades, including developing one for MERS in 2013.

Lots of people--the whole public--were surprised.  And governments around the world were reacting to circumstances when shutting down economies, not following a plan.   But a significant community, with a key role to play in ending the pandemic, was not caught unaware.

Then there is Bill Gates, who had been warning of such a thing for many years.

People warn about many types of disaster all the time, so it would be wrong to just look at those who were right and say there is necessarily something special.  But Gates is no doomer; I give him credit for clear, long-term thinking.

[RetiredAt63]

Epidemiologists had been concerned about something like COVID for quite a while.  We weren't as well prepared as we could have been because the people who should have paid attention didn't.

Ancient Egypt had huge stores of grain because they knew crop failures were inevitable and there needed to be food reserves.

I partially blame just-in-time delivery planning for making us bad at planning for disruptive events.  It assumes that everything will work properly 100% of the time. 

[ChpBstrd]

IDK, there are a couple billion people in the world whose economic contributions are near nothing because:

• their countries failed to properly educate them,
• their cultures are incompatible with economic success*,
• they are crammed into places with insufficient resources which leads to expenditure of energy competing with others,
• they are paying massive congestion costs to live in the world's slums, without access to clean water, electricity, communications, or transportation.

Seen through this lens, the process of economic growth amid declining populations comes down to changing the circumstances of billions of people so that they can become productive. A slum containing a million people might have a lower economic output than a hundred thousand educated workers living in high rise apartments.

The rise of China was not driven by population growth; it was driven by a choice to do things differently. Had the urban workers who fueled China's economic explosion instead stayed as peasant subsistence farmers, China would matter to the world economy about as much as it did in the early 1970s. Similarly, the economic dominance of the U.S. in the late 20th century was not due to being more populous than other areas. Instead, it had something to do with how the people had organized themselves, established values, educated their children, and became more productive than people anywhere else.

Also seen through this lens, the problem to be concerned about is the risk that cultures fail to evolve in a more productive direction. Even as the cultures in China, India, Africa, the Middle East, and Latin America have become more capitalistic, consumeristic, and scientifically literate, we are seeing troubling trends toward an Anti-enlightenment in the Anglosphere and Euro space, with a growing tolerance for corruption and authoritarianism among these former leaders in the shift toward productivity. It seems the West has lost its ability to muster an immune response against anti-productive or backward cultural memes. The rise of the internet has created decay in the cultural institutions that once led to prosperity, like public health, education, universities, and governance.

*For example: Strict gender roles that reduce women to the level of cattle, hyper-religiosity leading to an anti-educational and anti-science biases, low openness to new experiences, high tolerance for corruption, nostalgia for the traditional ways, racism, superstition, and scapegoating of foreign others.

[GuitarStv]

We can guess the future but unforseen events can disrupt plans. Are we prepared for a year like 536?

No one could have guessed a pandemic like Covid was around the corner but for many of us the adverse effects of Covid on our personal lives were minimal, even though there were wholesale societal changes.

I don't think Covid was so unpredictable.  There were several virus candidates before that (SARS, bird flu, etc.) that could have had similar trajectories.  And the mRNA vaccines were possible in their timeframes because the government had been working on them for a decades, including developing one for MERS in 2013.

Lots of people--the whole public--were surprised.  And governments around the world were reacting to circumstances when shutting down economies, not following a plan.   But a significant community, with a key role to play in ending the pandemic, was not caught unaware.

Then there is Bill Gates, who had been warning of such a thing for many years.

People warn about many types of disaster all the time, so it would be wrong to just look at those who were right and say there is necessarily something special.  But Gates is no doomer; I give him credit for clear, long-term thinking.

We've known for quite a while that climate change will cause more pandemics, and are currently doing nothing at all to slow or reverse it's effects - making it all but certain that there will be more covids in the near future.

https://pmc.ncbi.nlm.nih.gov/articles/PMC11732228/
https://www.nature.com/articles/s41558-022-01426-1
https://www.gavi.org/vaccineswork/deadly-diseases-are-spiking-because-climate-change
https://www.theguardian.com/environment/2022/apr/28/climate-crisis-future-pandemics-zoonotic-spillover

[RetiredAt63]

We can guess the future but unforseen events can disrupt plans. Are we prepared for a year like 536?

No one could have guessed a pandemic like Covid was around the corner but for many of us the adverse effects of Covid on our personal lives were minimal, even though there were wholesale societal changes.

I don't think Covid was so unpredictable.  There were several virus candidates before that (SARS, bird flu, etc.) that could have had similar trajectories.  And the mRNA vaccines were possible in their timeframes because the government had been working on them for a decades, including developing one for MERS in 2013.

Lots of people--the whole public--were surprised.  And governments around the world were reacting to circumstances when shutting down economies, not following a plan.   But a significant community, with a key role to play in ending the pandemic, was not caught unaware.

Then there is Bill Gates, who had been warning of such a thing for many years.

People warn about many types of disaster all the time, so it would be wrong to just look at those who were right and say there is necessarily something special.  But Gates is no doomer; I give him credit for clear, long-term thinking.

We've known for quite a while that climate change will cause more pandemics, and are currently doing nothing at all to slow or reverse it's effects - making it all but certain that there will be more covids in the near future.

https://pmc.ncbi.nlm.nih.gov/articles/PMC11732228/
https://www.nature.com/articles/s41558-022-01426-1
https://www.gavi.org/vaccineswork/deadly-diseases-are-spiking-because-climate-change
https://www.theguardian.com/environment/2022/apr/28/climate-crisis-future-pandemics-zoonotic-spillover

Those of us in cold climates don't realize how much winter protects us.  We are already seeing the rise of high populations of deer ticks and Lyme disease in eastern Canada.   Termites are expanding their range.

We will see insect pests who have one generation per summer here but 2 or 3 further south start having 2 here. That is going to be bad for farming.

I know this is tangential to the original topic but it needs to be taken into consideration.

[2Cent]

True, climate change will have possibly far larger effects than population decline. The most common thing sited is mass migration as 3rd world countries will suffer from famine, water shortages and the resulting wars and the richer countries suffer from higher food prices and refugees. But this is not a short term thing. I feel this will take till the end of the century before it reaches catastrophic levels. I don't need to plan for that as I'm not going to be alive.

[wenchsenior]

I actually wonder why this topic isn't discussed more broadly. In a world with a growing population companies can maintain the same relative market share or even reduce their market share and still grow. There is always one more person that needs something for the very first time.

If the world's population is shrinking companies actually have to compete on efficiency in order to just maintain revenue. Growing becomes significantly harder if there are fewer people to sell to.

Obviously this depends on the local market as well as the product you sell. Something you can use for a long time and pass on to your kids (real estate) will suffer more than something that you would need to replace regularly like tech gadgets.

This is the most fucked up argument for having children that I've ever heard. Better go pop out some babies so the shareholders can make more money while we destroy the planet even faster, really??? Explains why the "unfettered corporate greed" Republicans and the anti-abortion ones are allies, I guess.

As a person with a uterus who lives in 'Murica, I think the topic is being discussed too much lately and its more than a little icky. If they're worried about population they shouldn't be deporting people.

Amen to that.

[Christof]

Amen to that.

Do you care to expand on this?

[2Cent]

Elon Musk is a big proponent of having more kids to boost (white) America. She seems to be quite invested in the whole left-right debate so she is hearing his position in your post, even though you didn't say that.

Even though there could be theoretical ways to reverse the birth decline, I feel that it's too costly for something that is only going to be profitable 20 years later. It's similar to climate change, no one wants to be the one to pay the bill. So while corporate America would love to have more kids, they will definitely not be paying for it.

I take it as a given that this decline is going to happen. In fact, it has already happened, the results are just not yet showing fully. Solutions will follow the laws of economics, meaning to get more workers companies will find them in the way that's as cheap as possible.

Early 2000's we had a huge shortage of software engineers. Companies payed for training, hired from abroad, etc just to get anyone who can write some code. In the near future I expect it will happen as well, but with jobs for construction and things like electrical engineering. Problem is that unlike software, it's not that easy to pick up, and not an attractive office job. I don't think we'll see a surge of middle aged people and woman joining that workforce.

[Morning Glory]

It's not just Elon.  We have a known rapist in the white house who recently announced he's going to be the "fertility president ", whatever that means.  Our speaker of the house is a Christian nationalist who does not believe in birth control or divorce.  Women have recently died (and many more have experienced needless suffering) in at least two states from draconian abortion laws that failed to clarify medical exceptions, and a brain dead woman in Georgia is now being kept alive as an incubator without the consent of her family.  There was recently a bill introduced that would make it harder for married women who changed their names to register to vote. The "concern" about population decline coming from men doesn't seem too genuine any more than the "concern" about babies in the abortion debate did.

To men (or even to women in more egalitarian countries) this might look like a thought experiment or partisan debate. To women whose rights are being stripped away, it sure feels like another excuse to control our bodies.

(I'm not blaming any individuals for failing to realize the  implications here, but please dont blame me for my immediate response being "oh hell no" when someone suggests population decline is a problem)

[vand]

Even though there could be theoretical ways to reverse the birth decline, I feel that it's too costly for something that is only going to be profitable 20 years later. It's similar to climate change, no one wants to be the one to pay the bill. So while corporate America would love to have more kids, they will definitely not be paying for it.

This is exactly the problem why it's effectively irreversible given the way the world works today.

We reaped a demographic dividend from the falling birthrate as more people entered the workforce and there was a golden period where there were not many old people to support, but also a decreasing number of children and babies to support too, so the ratio of workers to dependents increased massively.

Unfortunately you can't keep doing that and now we have passed the point of maximum workers to dependents as everyone is aging, and to reverse it you are going to have to undergo up a "reverse dividend" period where productivity is lowered as you sow the seeds for more future workers over a 20-30 year period... and no one is going to suck that up when there are bills to pay and elders to support right now.


I really do think that it'll take a huge upheaval of the world order similar to WW2 in order to shock us back into procreation. (NOT something that I want, to be clear).

[Christof]

(I'm not blaming any individuals for failing to realize the  implications here, but please dont blame me for my immediate response being "oh hell no" when someone suggests population decline is a problem)

That's why I'm asking. I don't live in the US nor is English my native language. I was under the assumption I was answering a question about the impact of a forecasted decrease of population on our long term investment strategy. As such I described my view of the worldwide economic impact. I also attempted to convey that investment experience and trends we have are only from a world with increasing population whereas we have close to zero experience with decreasing populations.

I was not assuming I enter a discussion about reversing the trend, about US politics, women rights in the US and elsewhere, or about religion. My question is: How could I have realized that the discussion wasn't about investments but about everything else I mentioned?

[2Cent]

(I'm not blaming any individuals for failing to realize the  implications here, but please dont blame me for my immediate response being "oh hell no" when someone suggests population decline is a problem)

...
I was not assuming I enter a discussion about reversing the trend, about US politics, women rights in the US and elsewhere, or about religion. My question is: How could I have realized that the discussion wasn't about investments but about everything else I mentioned?

You assume correctly. In fact I specifically didn't want to get sidetracked into personal choices about kids or politics as they have no bearing on future planning but are likely to overshadow it because of their contentious nature.

[Telecaster]

We're seeing this in real time in Japan.  There are odd effects like a house is something you assume will decline in value over time.   I don't really know how much this affects investing strategy though.  Even as the economy grows slower over time, individual businesses can grow, and presumably rise to the top.   Maybe it just comes down to accepting lower overall rates of return.   Perhaps that's compensated by things like declining housing costs? 

[RetiredAt63]

Things change.  It is just that we all get used to the new status quo. 

So now we have another new status quo to plan around.

As a biologist I welcome a declining birthrate to get the planetary population numbers down.  It sure beats plagues.  And even with modern medicine, people who have weak immune systems (think bad nutrition, stress, etc.) are most likely to succumb.  The big thing about the Spanish Flu wasn't that so many people died, at that period in time people were used to waves of deaths from things like dysentery/cholera/etc..  It was that healthy young adults died.  Usually it was the young and the old.

[Retire-Canada]

We were worried about overpopulation not too long ago. Then trends changed with wealth increases and educational improvements. Now we are worried about catastrophic population decline. I won't be around to see how the story plays out, but I suspect we'll end up at some lower sustainable population. 1B humans would be plenty to have a great society on this planet. and that's 1/10th of the likely peak population we are headed for.

With automation and AI we don't need a huge number of workers to support society in the future. People will live longer and have more free time. I won't be shocked if more people choose to have kids when resources are more plentiful and time is not as constrained.

And if most rubbish work is automated and the work humans choose to do is more interesting and balanced with other aspects of life...there may not be a huge desire to "retire".

Ultimately we can only play the game on offer and see what happens...making adjustments as we go. I doubt stock investing will cease to be useful for wealth creation in the lifetime of anyone reading this. What human society will look like in 100 years? It's anyone's guess, but it's largely academic for us today.
 

[scottish]

Things change.  It is just that we all get used to the new status quo. 

So now we have another new status quo to plan around.

As a biologist I welcome a declining birthrate to get the planetary population numbers down.  It sure beats plagues.  And even with modern medicine, people who have weak immune systems (think bad nutrition, stress, etc.) are most likely to succumb.  The big thing about the Spanish Flu wasn't that so many people died, at that period in time people were used to waves of deaths from things like dysentery/cholera/etc..  It was that healthy young adults died.  Usually it was the young and the old.

I agree with you.   The population's going to have to stop growing eventually.   The sooner we deal with this, and the more gradual the rate of decline, the easier the transition will be.

[Metalcat]

Things change.  It is just that we all get used to the new status quo. 

So now we have another new status quo to plan around.

As a biologist I welcome a declining birthrate to get the planetary population numbers down.  It sure beats plagues.  And even with modern medicine, people who have weak immune systems (think bad nutrition, stress, etc.) are most likely to succumb.  The big thing about the Spanish Flu wasn't that so many people died, at that period in time people were used to waves of deaths from things like dysentery/cholera/etc..  It was that healthy young adults died.  Usually it was the young and the old.

I agree with you.   The population's going to have to stop growing eventually.   The sooner we deal with this, and the more gradual the rate of decline, the easier the transition will be.

Exactly, overpopulation or underpopulation, climate crisis, collapse of empires, AI revolution, whatever. No matter what happens, the future will not likely look like the present and we will adapt.

Any plan that requires things to stay generally the same is a dumb plan.

[vand]

We're seeing this in real time in Japan.  There are odd effects like a house is something you assume will decline in value over time.   I don't really know how much this affects investing strategy though.  Even as the economy grows slower over time, individual businesses can grow, and presumably rise to the top.   Maybe it just comes down to accepting lower overall rates of return.   Perhaps that's compensated by things like declining housing costs?

If you think fewer people will lower living cost pressures you are very wrong..

Yes, there are lots of cheap houses in Japan... but they're all in remote, depopulated villages where no young people live with minimal infrastructure. 

Perhaps the greatest irony of depopulation is that it accelerates the trend towards urbanisation, driving up home prices to unaffordable levels anywhere where anyone wants to live.

It isn't a total coincidence that Seoul (where the birthrate is about 0.55bpw) also ranks as having the lowest home affordable amongst cities in developed economies.
https://www.numbeo.com/property-investment/rankings.jsp

[dividendman]

There is no certainty that the decline in birth rates will continue. I recall not too long ago people thought that the population would explode into the 10s of billions... Now it's the opposite. Predictions are hard.

[ChpBstrd]

We're seeing this in real time in Japan.  There are odd effects like a house is something you assume will decline in value over time.   I don't really know how much this affects investing strategy though.  Even as the economy grows slower over time, individual businesses can grow, and presumably rise to the top.   Maybe it just comes down to accepting lower overall rates of return.   Perhaps that's compensated by things like declining housing costs?

If you think fewer people will lower living cost pressures you are very wrong..

Yes, there are lots of cheap houses in Japan... but they're all in remote, depopulated villages where no young people live with minimal infrastructure. 

Perhaps the greatest irony of depopulation is that it accelerates the trend towards urbanisation, driving up home prices to unaffordable levels anywhere where anyone wants to live.

It isn't a total coincidence that Seoul (where the birthrate is about 0.55bpw) also ranks as having the lowest home affordable amongst cities in developed economies.
https://www.numbeo.com/property-investment/rankings.jsp

The current state of affairs is counterintuitive. Why aren't more of the urban young people bemoaning how they'll never be able to afford a home, while working on the internet, not seizing the arbitrage opportunity represented by small towns or less-fashionable districts? Any American or Japanese can own a very nice home if they are willing to move into a small town in the heartland.

And who cannot foresee the risk of working one's entire adult lifetime to get onto the property ladder when the population of one's country is likely to be much smaller in the same timeframe - maybe half? Will your HCOL area house be worth one lifetime of work in that future world, or will many of the houses necessarily be empty or abandoned?

In the U.S. I think we're about to see a major baby bust. Gen Alpha - kids brought up from a very young age with tablets and smartphones - are displaying extreme mental health problems including anxiety, depression, and phobias. Plus the 6-8 hours per day on the screen crowd has spent their formative years NOT learning the social skills needed to form enduring relationships or building families. The Japanese term for the digital recluses they are about to become is Hikikomori and these individuals tend not to reproduce. From an addiction perspective, it is as if young people in most developed countries all started doing an addictive drug like cocaine, starting in kindergarten, and now we are waiting to see the results of this worldwide experiment on whole generations. The drug cartels have become an overarching branch of government, so don't expect the experiment to be called off no matter how bad things get.

[classicrando]

The current state of affairs is counterintuitive. Why aren't more of the urban young people bemoaning how they'll never be able to afford a home, while working on the internet, not seizing the arbitrage opportunity represented by small towns or less-fashionable districts? Any American or Japanese can own a very nice home if they are willing to move into a small town in the heartland.

Because then you have to live in a small town in the heartland; the objection is obvious. :p

Teasing aside, I feel like there are a lot of valid reasons to not arbitrage in that manner.  In no particular order:

• There's the gamble that your LCOL small-town house is going to be worth anything comparable to what you bought it for if housing prices collapse enough to make HCOL houses a bad investment.  Like, think of rust belt cities, and then think of the small towns on the outskirts of those rust belt cities.
• Calling people back into the office from remote work doesn't carry the same corporate obligations of paying their moving expenses that assigning them to a new city/region does.
• If your partner does not already work remotely, you've given them either a commute or a pay cut.
• Social opportunities can be severely restricted if you fall somewhere outside of whatever the town's mainstream culture is.
• Small town restaurant situations
• Isolation from your larger industry, especially when you are just starting out and trying to establish your career.  If you have "fuck off" levels of qualifications, experience, and resources; then sure, people will put up with the inconvenience to them of you living out in the hinterlands.
• Getting into and out of some small towns, geographically, can be a downright pain in the ass.  Who doesn't love a 3 hour drive to the airport before a 12 hour international flight?  What do you mean this road isn't maintained in winter?
• Where are the gas stations, grocery stores, medical centers, hardware stores, etc.?
• How many people actually move to a small town that they have no prior or current connection to?  You can move to NYC or LA with no friends or family already living there, and possibly not even a job lined up, and most people will totally understand.  If you move to any one of the many communities named "Farmington" with none of those things however...well, you should be prepared for a whole lot of "why are you here?".
• Moving to a small town can feel like failure to some people.  Or like going back to what they worked hard to escape.

[ChpBstrd]

• There's the gamble that your LCOL small-town house is going to be worth anything comparable to what you bought it for if housing prices collapse enough to make HCOL houses a bad investment.  Like, think of rust belt cities, and then think of the small towns on the outskirts of those rust belt cities.

Two issues:

One, HCOL locations are less affordable in terms of people's earnings than LCOL locations. That's why during the 2007-2012 real estate deflation, HCOL areas were hit hardest, and LCOL areas were not hit at all.

Second, who is taking the bigger risk in the event of a real estate collapse? The person who has 50% of their net worth tied up in their home or the person who has 20%? I'd argue that even in those towns that absolutely died, like one-factory rust belt towns or various West Virginia coal mining towns, the people who had investment portfolios were able to leave (or stay) with plenty of their wealth intact.

Seems to me like there's an arbitrage opportunity even on the level of reducing one's exposure to real estate risk.

• Calling people back into the office from remote work doesn't carry the same corporate obligations of paying their moving expenses that assigning them to a new city/region does.
• Isolation from your larger industry, especially when you are just starting out and trying to establish your career.  If you have "fuck off" levels of qualifications, experience, and resources; then sure, people will put up with the inconvenience to them of you living out in the hinterlands.

Contrary to popular opinion, there are massive industries in small cities, towns, and even rural areas. Each such place has its own entire set of services industries too. Unemployment is often lower in small metros than in the biggest cities. Simply being in such a place means you are more likely to get a job in these industries rather than having to compete with 1,000 other applicants who are just resume-bombing the job ads.

Industries will continue to pop up in LCOL areas because these places offer an opportunity to undercut the competition in HCOL areas and deliver the same products or services at a lower expense.

• If your partner does not already work remotely, you've given them either a commute or a pay cut.
• Social opportunities can be severely restricted if you fall somewhere outside of whatever the town's mainstream culture is.

True, but also true if you are moving from LCOL to HCOL, or even between various regions. Any move comes with these drawbacks, but I wouldn't say a move from, for example, NYC to Des Moines would be an inconvenience in excess of its benefits. Does it matter that the commutes are shorter and the people are nicer?

• How many people actually move to a small town that they have no prior or current connection to?  You can move to NYC or LA with no friends or family already living there, and possibly not even a job lined up, and most people will totally understand.  If you move to any one of the many communities named "Farmington" with none of those things however...well, you should be prepared for a whole lot of "why are you here?".
• Moving to a small town can feel like failure to some people.  Or like going back to what they worked hard to escape.

To many people, these social expectations (which only some people feel) pale in comparison to the benefit of escaping hours-long traffic jams, high costs for everything, and no hope of ever owning a home, or they pale in comparison to the benefits of enjoying a standard of living only enjoyed by multimillionaires in HCOL areas. When you can own a big house, can afford to have a family, can get home from work before dark every day, and have a high savings rate, why would anyone feel like a failure? This seems to me like an unfortunate case of HCOL culture convincing people to think less is more.

I don't have an answer to your question of how many people actually do it, but I do know that people migrate both ways. Otherwise, the hinterlands would have long since been emptied of people. Probably most people move one step at a time. For example, moving from a metro with 10M people to a metro with 1M, or from 1M to 100k, and so on.

The definition of success has changed over time. Maybe the next generation will look at our worship of trendy locations with a skeptical eye, and seek to avoid congestion costs.

[deborah]

People may migrate both ways, but urbanisation has been a one way street for a long time.

https://en.wikipedia.org/wiki/Urbanization_in_the_United_States#/media/File:Urban_and_rural_populations_in_the_United_States_(US_Census_Bureau_(1790_to_2010)),_OWID.svg