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strategy and business
 / Spring 2010 / Issue 58(originally published by Booz & Company)


Facing Up to the Demographic Dilemma

So my thought is that we have to bring focus to this issue — the need for changes in social policy and for innovation in products and services. There is a huge gap in information. My consulting clients want to know what the right measures are. And when people say there are risks, what exactly are they and how can we quantify them? And how does it really translate into the business? There is an unmet need for better information. What is presented often is not at a level that will actually change people’s perceptions and awaken them into action. Better information is the fundamental thing needed to address the demographic risks that we have been discussing over the last few years.

MA: I agree, but prior to defining the target and the focus, I think we also have to tackle the relative issue of how aging is being positioned in the community and in society. In most of society, we define — or some people define — aging as regression, as poor, as noncontributive, as reliance and dependency. I think we need to appeal to the whole world to position aging as a blessing to society, not a problem or a difficulty. After we have set the scene, then we will know how to focus.

LEHMANN: At the risk of being somewhat provocative and controversial, I don’t think that we can say that aging is only a blessing for society. I think it can also be a terrible drain — in the case, for example, of elderly people with Alzheimer’s disease or other forms of deterioration. It depends on the conditions; in some cases it can be a curse. When you look at the proportion of the population of Europe that now is over 65, it is 33 percent, so you’re starting to talk critical mass there. And I think this is going to have all sorts of implications, some positive, but some negative.

MA: I think we also need to focus on those 90 percent [of elders] who are healthy and active, and can live independently and still contribute to their families and to society. It seems that we always misallocate our attention to those who are weak and senile and sick.

HORI: We all pay respect to the elderly, and we want them to live longer and have a happy life and a happy ending as well; we all believe in that. But as the number of elderly people rises in proportion to the number of young people, the question is, Who is going to bear the burden? That, to me, is the real issue — the issue is pensions, health care, the nursing care system — and the implications for business and society.

If you look at Japan, lots of issues are arising as a result of population aging. The pension system and health-care systems are coming under strain, but very few solutions have been put forth. I’ll give you an example of what happens. We know that elderly people require a lot more care from doctors and hospitals than younger people. In Japan, older people are using seven times as much of the budget for health care as younger people are. So the Japanese government proposed health-care reform that would have required people over 75 years of age to bear some portion of their costs. It was vastly rejected by the elderly.

WANG: Again, I think that there is a lack of focus and a lack of data that’s tailored toward solving problems. In the energy sector, there’s a lot of interest right now in the idea of the smart grid, and how it can help tackle our environmental problems. One reason that people are actually interested in developing solutions around the smart grid is that people in that sector are showing detailed data about how much money is being spent on things like resources, transmission lines, and electricity usage, and they can demonstrate the efficiencies that are possible. When we get the kind of information that can show how we can create efficiencies in medicine that could help solve problems related to aging, then people will start to see business opportunities instead of problems. Another example is that when we talk about aging, much of the data is just about people over 65, or over 75. We need to differentiate much further, looking at the needs and resources required by people in their 50s, 60s, 70s, 80s, and 90s. Once you put more information like that behind it, you can describe the issues much more specifically.

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  1. David E. Bloom, David Canning, and Jaypee Sevilla, The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change (RAND Corporation, 2003): A review of the effects of demographic change on economic growth.
  2. Chiemi Hayashi et al., “Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaborative Strategies” (World Economic Forum, 2009): A detailed look at the question of aging societies and their implications for health care and pensions.
  3. Florian Kohlbacher and Cornelius Herstatt, eds., The Silver Market Phenomenon: Business Opportunities in an Era of Demographic Change (Springer, 2008): Leading experts examine the business opportunities and implications of aging societies in this collection of 33 essays.
  4. George Magnus, The Age of Aging: How Demographics Are Changing the Global Economy and Our World (Wiley, 2008): How low birthrates and rising life expectancy are leading to rapid aging and a stagnation or fall in the number of people of working age in Western societies.
  5. Nandan Nilekani, “India’s Demographic Moment,” s+b, Autumn 2009: The economic force of a burgeoning population.
  6. Richard Rawlinson and Natasha Kuznetsova, “50-plus: A Market That Marketers Still Miss,” s+b, Spring 2009: Why companies miss out by failing to market to aging baby boomers in the U.S. and western Europe.
  7. For more thought leadership on this topic, see the s+b website at:
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