Barrack Obama is said to be scrambling for victories in this the first year of his presidency. It seemed up until last week that the health care reform bill that he championed would pass and make history. Republican Scott Brown ended that dream with a solid come from behind win of Ted Kennedy’s former United States Senate seat in Massachusetts. The White House has now gone silent on that issue and any mention of any other victory. In fact President Obama seems to have resorted back to his only presidential victory by ceremoniously reopening his campaign for president, a year and two months after he won. There is an irony here that is puzzling. President Obama may be overlooking an epic victory, a historic victory really that is right under his nose. 

From October 28 to November 30, 2009 the Pew Research Center conducted a new comprehensive nationwide survey on race among a nationally representative sample of 2,884 adults that included 812 blacks. The results of the poll are nothing less than astounding.

In spite of a dismal economy, fighting two current wars and 200 plus years record of inequality most blacks for the first time in the history of the United States feel that the state of black progress in America has improved dramatically. Isn’t this more important than health care reform? Haven’t we just witnessed and experienced a victory in a centuries old war on bigotry? Isn’t this what Abraham Lincoln and Martin Luther King Junior dreamed of but never realized in their life time?Pew States “Barack Obama's election as the nation's first black president appears to be the spur for this sharp rise in optimism among African Americans. It may also be reflected in an upbeat set of black views on a range of other matters, including race relations, local community satisfaction and expectations for future black progress.” 

It is not a mystery to anyone that blacks are especially hard hit in our current recession. Yet with Barack Obama in the white house the spirit of blacks is at an all time high.

Nearly double the number of blacks of all age groups and income levels, now (39%) as in 2007 (20%), state that the “situation of black people in this country” has improved over five years ago. And blacks are even more optimistic when questioned about the future. According to Pew: “More than half (53%) say that life for blacks in the future will be better than it is now, while just 10% say it will be worse. In 2007, 44% said things would be better for blacks in the future, while 21% said they would be worse.” More than half is most. Think about it. Most African Americans think the problem of racial inequality is on its way to being solved. This is a very serious issue that has been festering for hundreds of years. The majority of the minority culture that has born the brunt of the inequality is clearly seeing a future solution for the first time in history. Why aren’t we jumping up and down?  

Most blacks (54%) believe that it was Obama’s barrier breaking election win that improved race relations in the United States; only 7% stated that Obama’s win made things worse. So is President Obama spending too much time on black issues at the expense of whites? Not according to Pew’s research: “For example, only a small share of whites (13%) say Obama has been paying too much attention to the concerns of blacks.”

Are blacks and whites becoming more and more alike with similar values and living standards? The research would suggest yes. “Seven-in-ten whites (70%) and six-in-ten blacks (60%) say that the values held by blacks and whites have become more similar in the past 10 years. Similarly, a majority of blacks (56%) and nearly two-thirds of whites (65%) say the standard of living gap between whites and blacks has narrowed in the past decade.” Is this wishful thinking or the real thing? Time will tell but the perception is genuine and supported by the research.  

So is the racial issued solved? Are we living in Post Racial America as some have called it? The real proof of the pudding is found in the chart below. There is still a wide gap between blacks and whites in household income. This has to change to make perception become reality. 

We believe the change is coming.  And yes there are two other critical issues that must be addressed: crime and family. 

African Americans still make up for nearly half the crime in the United States, half the inmates in prison. African Americans make up only 14% of our total population. There are more blacks in jail than in college. 

Seventy-five percent of all black babies are born without a accountable male to take responsibility. Black marriages are the exception. This culture’s model of the family unit is nothing short of disastrous. 

Can these two fundamental core issues be addressed and corrected? We believe they can and in fact are being addressed. The real unknown is the enormous psychological effect the Obama family in the White House will have on the black culture going forward. As the family issue corrects, and it will, the crime solution will follow. 

So if President Obama is frantically searching for a victory to validate his tenor in the White house we would urge him to look no further than the rapid and historic advance of the black culture.

Ford’s Success is Generation Y

Could it really be that simple? We have stated before that Detroit overall misunderstood the new emerging market that Japan nailed, namely Generation Y. Generation Y (born 1985 to 2004) is actually bigger than the Baby Boomer Generation. So what could Generation Y’s attraction to Ford be?  There are actually three principal attractions and you can drive two of them, the Ford Mustang and the ubiquitous F150 Ford pick-up truck. Yes, for years the best selling car in the world has actually been a truck. How did such a simple fact get by us? Chevrolet does not have a Generation Y vehicle and neither does Chrysler, nothing. Not one. Ford has two. The third attraction is Ford’s marketing.

According to an Advertising Age story of November 2, 2009 Ford not only turned down Obama’s money but Ford’s Vice –president of Global Marketing Jim Farley has been busy stealing market share away from Chrysler and General Motors. According to the article Farley has simply made Ford’s brand greener than the competition. The article states “One example: He's upped Ford's green image with a push early this year for the 2010 Fusion Hybrid. Mr. Farley, who reports to President-CEO Alan Mullaly and who is also operations chief for Canada, Mexico and South America, is driving Ford into major social media and experiential plays.”  Hot selling cars, social media, green car marketing and a 25% of the Ford one billion dollar ad spend on digital media and you have a formula for capturing Generation Y. Have you driven a Ford lately? Generation Y has.

Should Environmentalists Run The World? 

The United Nation’s Copenhagen Conference has showcased the need to examine individual countries’ contribution to the perceived problem of global warming. It would follow then that great minds worldwide would then develop strategies to solve the problem and save the planet. An unexpected hero has emerged in this process and even though China has serious issues with its polluting industries and coal fired plants, its “one child only policy” is being heralded as a final solution in reducing the nations carbon foot print. In a December 8, 2009 article Financial Post.com declares over population as the real “inconvenient truth” and that China’s policy needs to be considered by all nations.

China has effectively reduced its fertility by 70% over the last thirty years and by its own numbers has prevented over 400,000,000 live births, bringing its population under control. Some environmental experts in Copenhagen have suggested that China could well be the model for the rest of the world and that a worldwide “one child only policy”   is the only answer to reversing global warming and correcting its real cause, over-population.

While the logic of reducing world population to control air pollution and global warming appears to have merit, environmentalists apparently have missed important economic factors. World renowned demographer, Nicholas Eberstadt, in a recent interview with The Age Curve Report, takes a counter-intuitive view of China’s dramatic drop in fertility. He stated simply that there is no nation in recorded history that has reduced its fertility, as China has, that has survived. China’s burgeoning market economy will have difficulty meeting its labor needs because they have effectively cut their future labor force by 70%. In addition China has all but eliminated future indigenous consumers that are so vital to their growth. Most Demographers and  even some economists throughout the world are warning of China’s inevitable economic collapse, a high price to pay for any nation seeking a solution to environmental issues.

Maybe they should have just cleaned up their dirty coal plants.

http://www.chinadaily.com.cn/china/2009-12/10/content_9151129.htm

http://www.financialpost.com:80/story.html?id=2314438

The huge Generation Y, born 1985 to 2004, is now making its mark in college enrollment as the share of 18- to 24-year-olds attending college in the United States hit an all-time high in October 2008, driven by a surge in enrollments at community colleges, according to a Pew Research Center analysis of newly released data from the U.S. Census Bureau.

It shouldn’t be a surprise to anyone that Generation Y would make its presence know in this arena because one of the early peaks in the Generation Y birth data came in 1990 with well over four million live births. These kids are now nineteen years old and ripe for college. Age Curve Consulting has bee watching the consumption of this “bigger than the Baby Boomer “generation very closely and Generation Y has not disappointed us. According to Pew Research Center almost 11.5 million students or about 40% of all Generation Y young adults ages 18 to 24 are enrolled in college as of October 2008 (Newest data available). Both the total number and the percentage are the highest ever. The spike in junior college would follow as the four year schools have their pick of the best and brightest and the two year schools take the overflow. In 2007 there were 3.1 million young adults in community colleges but by 2008 that number had swelled by 300,000 students or 11.8% of all the 18 to 24 year olds. Enrollment in the four year schools remained flat during this same period.

So what is the employment picture for these 18- to 24- years- olds? It’s bleak. According to the Bureau of Labor Statistics only 46.1% of them were employed as of September 2009, the lowest number ever since this data has been gathered starting in 1946.

The trend to two year community colleges has its financial advantages. Compared to four year public colleges the cost is on average a third less and compared to four year private schools the cost is about two thirds less (College Board, 2009). Is the trend to the cheaper college a product, at least in part, of the recession? Yes, without a doubt.

Is there a silver lining to this grey cloud of high unemployment and difficult economy for the large beleaguered Generation Y? Yes, for one they are graduating high school and attending college in record numbers. Education is a good thing. So if they can’t find work let them stay in school. The economy will rebound especially as China begins to falter because of its ill-fated one child only policy and manufacturing begins to find its way back to the States as China runs out of labor. The United States will have the biggest, best and most educated labor force in its history, another good thing. There’s more. Back in the early 1980’s when the 1957 peak of the Baby Boomers found the employment and economic climate to be very unfriendly what did they do? They opened their own businesses by the millions, so they could eat. Necessity is the mother of invention. We can’t wait to see what Generation Y will invent as they face the same challenges.    

Recently my wife, two daughters and I were invited to a home coming party for a middle-aged Latino friend, Angel, who had been away in the Philippines for several months on special military assignment for the United States Air force. The house was packed and we were definitely the non-Latino minority because every grandmother, grandfather, mom, dad, brother, sister, aunt, uncle, in-law, cousin, niece, nephew and friend was in attendance to welcome Angel home. It was an interesting mix. My demographic instincts took over. 

The older first generation folks who were born in Puerto Rico spoke English but with a definite Spanish accent. When they spoke among themselves they seemed to favor speaking Spanish. The second generation, Angel’s counterparts, spoke perfect English with a slight hint of a Spanish accent. The remaining third and forth generation young adults, teens and young children chattered away in English and so I’m told know little or no Spanish. There was of course a young anomaly or two who was a recent arrival who spoke Spanish. I was impressed with how quickly these Latino immigrants assimilate.  My German ancestors who came to the States in 1840 took one hundred years to break away from the old culture, but these Latinos seem to have done it in a single twenty year generation. Amazing.  

Demography aside, the food was wonderful, indigenous dishes I can’t pronounce but could certainly eat. Desert was cake and ice cream so Angel summoned the entire group into the dinning room for the ceremonious cutting of a huge sheet cake. Then a wonderful thing happened that I would never have expected. The entire family spontaneously sang (belted out) the Star Spangled Banner. 

Pew Research just completed an interesting study called:

Latino Children: A Majority are U.S.- Born Offspring of Immigrants. By Richard Fry and Jeffrey S. Passel 

Here are a few of the interesting findings that shed light on this dynamic group. Latinos now make up 22% of all kids under the age of eighteen in the United States, up from 9% in 1980. A whopping 52% of the Nation’s 16 million Latino kids are considered second generation, meaning that they are the native born offspring of at least one foreign born parent. The Latino immigration from Mexico, Central and South America began in earnest around 1980 and has only recently tapered off.

About 11% of Latino kids are themselves first generation meaning that they were born outside of the United States and about 37% are third generation meaning that they are U.S. born of U.S. born parents.    

Projections by the U.S. Census Bureau indicate that by 2025 nearly three in ten children in the United States will be of Latino ancestry. While on the surface this number might alarm some people it actually is very healthy from a demographic stand point. As immigrants go Latinos bring a lot to the table. They assimilate very quickly, are hard working, have strong family ties and are culturally very compatible with main stream America. It would be difficult to design a better immigrant. 

In 2007 there were 4,317,000 babies born in the United States, a record year. Twenty-five percent of those babies were Latino, precipitated by four-teen percent of the U.S. overall population. The United States is the only Western culture and industrialized nation in the world with above replacement level fertility (2.2), thanks to the Latino contribution. This means that unlike Asia or the European Union the United States will have a viable labor force for decades to come.

Forty Years after Woodstock, a Gentler Generation Gap 

It had to be one of the most divisive times in American history. Family was divided against family. No, this is not a reference to the Civil War, but rather it is a description of the turbulent 1960’s and early 1970’s in the United States. 

It was the Baby Boomers against the Silent Generation and the G.I. Generation, Hippies fighting the establishment, the young versus the old, the people under thirty against the people over thirty, war against peace, long hair versus short hair, parents against kids, kids against parents, authority opposed to chaos, protestors clashing with police, tolerance versus intolerance, the right against the left and above all: rock and roll against everything else music. It was a clash of cultures on a grand scale. No one really understood what caused the divide but it was certain that the Vietnam War played an important part. It was an unstable time that divided families and broke up homes, a time of elevated crime and drug use. This period was defined by its music and the exclamation point was a rock concert attended by over 500,000 people, Woodstock.   

The Pew Research Center released a very interesting and revealing Social and Demographic Trends Report in August 2009. It apparently was timed to coincide with the fortieth anniversary of the famous outdoor rock concert and music festival, Woodstock. 

Pew polled a nationally representative sample of 1,815 people age 16 and over from July 20 to August 2, 2009.  The results of the poll were surprising and counter intuitive. Apparently serious fractures still exist between young and old adults in their work ethic, respect/tolerance of others, acceptance of technology, religion, moral values and political views. But according to Pew “...this modern generation gap is a much more subdued affair than the one that raged in the 1960s, for relatively few Americans of any age sees it as a source of conflict- either in society at large or in their own families.” 

So if the fractures still exist, where is the conflict? Where are the protestors, the sit-ins, the mass marches? According to the Pew research there is one major aspect of the culture that enjoys a marked difference when compared to the clash of the 60s. We all like the same music; rock and roll. Two-thirds of the people polled by Pew stated that they favored rock and roll over country, rhythm and blues, hip-hop, classical, jazz and salsa. Back in 1966 a Harris poll showed that only 4% of people twenty-one and older stated that rock and roll was their favorite kind of music making rock and roll the most unpopular music of the day. Like Dylan sang “The times, they are a changing...” 

So does the common music sooth the savage in the different generations? Perhaps, Pew states it in a borrowed phrase: “… the generations appear to have found a way to disagree without being disagreeable.” Are we really a kinder gentler nation? It would appear so. According to a 1969 Gallup poll 74% of the public thought there were major conflicts between generations compared to Pew’s 2009 findings that show that 79% of Americans felt that there were major divides today between the perspective of younger and older adults.  Clearly we have more conflict today with surprisingly less acrimony. 

Could it be that the answer lies in the within the American family? Do Boomer parents get along better with their kids than their parents got along with them? The evidence would support a resounding yes. When asked, the Pew respondents supported this position. Only 10% of parents of older children reported that they often have major disagreements with their teenage or young adult kids. This is compared and contrasted to 19% that stated that they themselves routinely had major disagreements with their parents. Maybe Boomers are just cooler parents and maybe today’s issues just aren’t the stuff worth fighting for. 

A closer look at the American home could reveal some answers and give us an insight into what is perceived as differences between generations. The biggest differences according to the Pew poll fell predictably into two areas: technology and music. Eighty-seven percent of the respondents said that there was significant difference in the way young and old used new technology, the internet and computers. No surprise there. It would be hard to imagine a heated generational exchange erupting over a conflict between using email over texting or even Facebook versus LinkedIn. What about the music differences? Nine out of ten of the people polled cited huge differences between young and old preferences. But remember, its all rock and roll. So where is the divide? Is it worth hunkering down for a battle between oldies and pop? 

Who has better values?  The respondents to the Pew poll were very clear in their answer. With respect to three of the four values tested the public, regardless of age, voted two to one in favor of older Americans indicating that they are superior in terms of their moral values, respect for others and work ethic. The younger generation got the nod for being more socially tolerant, though the results were not lop-sided. 

The fact that the public perceives older Americans as having a better moral compass than their younger counterparts is no surprise. What is interesting is the one category of ethics where the younger generation shines, social tolerance. It is important because it represents a big change. Generation Y was taught not to see color and as a result they don’t. As our Nation becomes more and more ethnically diverse this quality of Generation Y will pay dividends. 

The work ethic of Generation Y is bound to improve as well as this cohort floods the workplace and faces twenty percent unemployment at entry level. Nothing improves your attitude faster about work than the need to eat. The lop-sided work ethic issue with young adults could easily have been a product of the tiny Generation X because this cohort enjoyed an employees market and full employment at entry level. In fact when Generation X entered the workforce there were ten jobs and eight workers. Nothing breeds a bad work ethic faster than being in demand. That’s all changing in today’s economic and demographic climate.  

It has been forty years since Woodstock and though the perception is that generations in the United States are still divided it is apparent that we have learned how to disagree, to get along. Boomers are not the same parents as their parents no more than Mick Jagger is the same as Benny Goodman. The Boomer’s kids, Generation Y, appear to prefer to make their mark and changes through harmony than through protest or discord. All this bodes well for The United States because we can ostensibly work out our internal differences and concentrate on making the world a better place.       

The 3 Beacon Blog

How to Profit from the Coming Demographic Storm and Stay Ahead of the Crowd

Book Review by Nicholas Eberstadt

August 10, 2009

Many thanks, Nick for "The Age Curve" book review on Amazon!

Wanna Read Just One Book On The Topic? This Is It,August 9, 2009 By Nicholas Eberstadt (Washington DC) Kenneth Gronbach has done a terrific job of making business sense out of demographics. His focus in this book is the US market--and the sometimes surprising impact that population changes can have on markets, investments and company prospects. Demographic fundamentals may not always be decisive here--but boy, when they do matter, they they can matter big-time! And people who do not get it are left hanging out to dry... "The Age Curve" is a very shrewd book, written in a funny, unassuming style that has the semi-miraculous effect of making demographics interesting to a broad audience. It is a great read for any curious generalist--and it should be required reading in the boardroom for every company merchandising consumer products large or small, especially in these difficult times. (Memo to GM and Chrysler: if you guys understood Gronbach's message, you might not be bankrupt right now..)

Nicholas Eberstadt, a political economist and a demographer by training, is the Henry Wendt Scholar in Political Economy for the American Enterprise Institute for Public Policy Research. He is also a senior adviser to the National Board of Asian Research, a member of the visiting committee at the Harvard School of Public Health, and a member of the Global Leadership Council at the World Economic Forum. He researches and writes extensively on economic development, foreign aid, global health, demographics, and poverty. He is the author of numerous monographs and articles on North and South Korea, East Asia, and countries of the former Soviet Union. His books range fromThe End of North Korea(AEI Press, 1999) toThe Poverty of the Poverty Rate(AEI Press, 2008).

Seriously who do those pesky little girls in green think they are anyway? We live in a free market. They didn’t invent cookies. OK, sure there are certain cookies that bear their signature and are sold on the merits of exclusivity but who’s to say that other retailers can’t capitalize on the market that the Girl Scouts of America established with decades of shoe leather by selling door to door? After all it happens all the time, small organizations establish a market and set the stage for larger more sophisticated corporations to take the process to the next level. So, what’s the big deal about Girl Scout Cookies? Are they a sacred product that is off limits to retail giants? It seems Wal-Mart asked that question internally and the answer was no.

Girl Scout cookies are big business. Nationally they sell over 100 million boxes a year in what amounts to The Girl Scouts most successful fundraiser. Someone at Wal-Mart apparently did the math and recently determined that this could be a profitable category for them. It is not clear where Wal-Mart will manufacture their knock-off cookies but it is certain that China is being considered. We’ll have to watch the ingredients carefully.

Many would consider this move by Wal-Mart to be reckless because of the certain public relations risk attendant in such a decision. Clearly Wal-Mart could make a case for check-mating the Girl Scouts but the reasoning would ring hollow and point up their lack of a moral compass. Wal-Mart is in financial trouble and the more trouble they get into the more desperate they become. Taking on the Girl Scouts is a desperate move made by a desperate retailer. What’s next? Maybe they can find a market for blood and edge out the Red Cross?

Shifting demography is dealing Wal-Mart a bad hand and they have no clue that it is happening. The bulk of their principal customers, The Baby Boomers, have crested fifty-years-old and according to the Bureau of Labor Statistics are weaning themselves off the consumption of stuff. The huge generation of Baby Boomers was a perfect customer for Wal-Mart. They knew what they wanted and Wal-Mart sold it for less than anyone. Selection and fashion were not considerations. Unfortunately for Wal-Mart, Generation X born right after the Boomer Generation is too small to consume at the level of the Boomers or satisfy the sales needs of the Wal-Mart retail footprint. Wal-Mart’s only market hope was the huge Generation Y born 1985 to 2004. The problem is young markets demand fashion and selection. Wal-Mart’s retail model of “Cheap and Deep” can not accommodate this market. Small start-up entrepreneurial fast turning retailers will flourish and eat up Wal-Mart’s business like a school of piranhas.

Are all big box retailers in trouble? No. Target, for example seems to have a governing ethos that is compatible with Generation Y. They are cool, caring and have fair prices. Wal-Mart’s indifference to human relations issues at all levels will seal their fate with Generation Y.

Generation Y is rewriting the rules for doing business, especially retail business going forward. Generation Y is “Green” to a fault and “Green” is not limited to environmental issues. “Green” to Generation Y is all about giving back. You can give back to the environment and you can also give back to your fellow man. Smart businesses, especially retail, need to develop a “Green” story and act on it publically with sincerity. Faking a “Green” story is called “green washing” and will be met with distain on the part of Generation Y. A Generation Y boycott would be deadly and certainly not worth the risk.

It was recently announced that PepsiCo intended to investone billion dollars over the next three years in Russia creating bottling plants and setting up production for the Frito Lay snack line. This bold move on the part of PepsiCo was possibly timed to coincide with President Obama’s recent visit to Russia and to help demonstrate a new economic cooperation between the Russia and United States. Also it is important to note that Coca-Cola already has a foothold in Russia having invested almost $2 billion. Politically speaking this move might have its own advantages and even short term financial gains. But I wonder if anyone really thought it through long term. Russia’s Ministry of Finance reports that more than $40 billion dollars of foreign investment was lost in the first quarter of 2009 and that another $70 billion will be lost in the near term. According to President Obama Russia currently makes up only 1% of the United States world trade capacity at $36 billion, comparable to America’s trade with Thailand. Russia is euphemistically called an emerging market, but is it really? Russia’s economic picture is more than a little cloudy, so perhaps Russia’s demographic portrait can clear things up.

Pardon my segue here but I need to make a point about strategic planning

I was in Michigan last week speaking to the members Michigan Credit Union League at their annual conference. This is a state that is very hard hit by the problems precipitated by the big three automakers. It was a big, very well attended, meeting. I expected a very somber group but these people seemed to be made of different stuff. I wouldn’t say that they were ebullient but there was no sign of corporate depression. The conference leaders didn’t ask me to paint a rosy picture of Michigan’s economy; they just wanted me to tell the truth. Most of the people in attendance were senior enough to know that good times and bad times are cyclical so they just wanted to know the long range economic picture and when they could expect a recovery, if at all. I told them that from my thirty-thousand foot demographic perspective, the future was bright. Manufacturing would return to the United States as China’s enormous demographic blunder, the one child only policy began to cripple their workforce. Detroit’s big three would recover. I qualified the fact that my view was long range (about five to seven years) and very big picture and reminded them that it is the long range picture is the only one that really counts.

Considering that most United States corporations are driven by the annual report and many by the quarterly report, the lack of long term vision is ostensible and understandable. The problem is you cannot be a visionary thinking one year into the future nor can you arrive at a viable strategic plan.

Strategic plans should map out your company’s direction three, five, seven and even ten years into the future. Obviously one of the most important considerations in developing a long range plan is determining how many customers you can expect to buy your product going forward. It would follow that most U.S. corporations don’t take this vital consideration into account because they are apparently content projecting the present infinitely into the future.

Back to PepsiCo and the billion dollars of shareholders money they plan to invest in Russia. From demographic perspective Russia is a Forth World country, a crash and burn disaster. The only way it could be worse is if the country went into famine or was being devastated by the plague. Hasn’t anyone noticed that Russia’s population has fallen by 500,000 people per year for years and that the prospects are for more of the same until further notice? Why? Because Russia has catastrophically low fertility and high mortality, they are not having kids and people are dying at very young age. This is a very bad situation that is only getting worse. A sixteen-year-old male in Russia has a fifty-fifty change of living to sixty-years-old. To put this in perspective Russia’s average life expectancy is lower that Pakistan or Bangladesh. Demographically Russia is going backwards. According to world famous demographer Nicholas Eberstadt, the Henry Wendt Scholar in Political Economy at AEI, the youth group, 15 to 24 years old, in Russia is slated to decline by half between now and 2025. I wonder if PepsiCo knows about the half part. Do young people consume soft drinks or eat chips?

PepsiCo’s foray into Russia demonstrates a classic lack of vision and planning. Russia’s consumer base and workforce will shrink to unacceptable levels and Russia’s economy will collapse. At that point Russia’s geography, resources and yes, women will be will be very attractive to their unstable southern neighbor China. Should be interesting.