“The Risk Pool” by Malcolm Gladwell in The New Yorker, August 28, 2006
Every now and then an article or book comes along that gently but insistently challenges your assumptions. Malcolm Gladwell, whose thinking and work has been much maligned by the buzzwordification of his brilliant book The Tipping Point, pops up with this little beauty of an article in last week’s The New Yorker, thankfully made available online.
(NB – Speaking very late last night to The Village Grouch, we both agree that between The New Yorker, The Economist, Harvard Business Review and a handful of similarly insightful publications, we’d have to give up our jobs just to keep up with our reading. We also agreed, however, that it would be a worthy sacrifice.)
Gladwell uses the article to zoom in on a single demographic statistic called “the dependency ratio,” which is essentially the ratio of people who aren’t of working age (children and retirees) and those who are. Citing a range of examples, both national (Ireland, China, India and Japan) and corporate (GM and Bethlehem Steel, and Google), he convincingly makes the case that comparative advantage is in no small part dependent on demographics.
Clearly demographics are not the only issue – if dependency ratios told all, Africa would be an emerging economic superpower capable or rivaling Asia. Gladwell’s point, however, does have broader implications:
• For U.S. companies, who in the face of GM’s long slow meltdown must see pension and medical benefits as a time bomb;
• For the U.S. government and electorate, who now need to reassess the wisdom of allowing corporations to handle social benefits programs;
• For European and Japanese governments who now must revaluate the sustainability of their immigration and social policies; and
• For China, who needs to look beyond the current 11th Five Year Plan Guidelines and see that beginning in about 20 years they’re going to have an immense mass or retirees to support.