Human Capital: McKinsey Global Institute • Anu Madgavkar
The Vanishing Herd: Survival and Innovation
Global fertility rates are falling, populations are aging, and the consequences are already reshaping economies and societies. In this episode, Nic speaks with Anu Madgavkar, partner at the McKinsey Global Institute, about what these demographic shifts mean for the innovation capacity and long-term vitality of nations and companies.
They explore how shrinking workforces, aging populations, and declining dynamism threaten growth — while also creating opportunities for new models of productivity, technology adoption, and global collaboration. As fertility and vitality decline, what might these trends mean for us — and for the societies awaiting future generations?
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Anu is an MGI partner based in McKenzie's New Jersey office. She's a leader of the Mackenzie Global Institute, the economics and business research arm of Mackenzie and Company.
A news research spans broad topics of human potential, involving demographics, labor markets, technology, and the future of work, human capital, skills, and inclusive workforce.
Anu, welcome to a natural selection.
Thanks, Nic.
Very much looking forward to having this conversation because I think the topics that you work on in research impacts so much about innovation and competition.
But before we get going, I always ask a signature question so that people can understand in your words what motivates you and what you're passionate about.
Could you please let us know and what need or impact drives your work?
I think Nic, for me, the whole idea of researching what I broadly frame as human potential is, um, is, is a very powerful motivator in a way because it is so personal to people.
There is nobody I have met through all the years and all the countries in which I've served Mackenzie and beyond, who doesn't care about.
Their own well-being, the well-being of their family who doesn't think about the future well-being of their citizens or their people or their community.
Uh, and I think from research we understand that well-being has so many dimensions to it.
Individuals and human beings are workers, but they are also consumers.
They are also savers.
They are also users of technology.
So there are so many different dimensions to being human.
And the economic research lens that we use kind of investigates them in their breadth and over time and looks forward.
And I just feel that's that's a very useful contribution to the world just to help people understand what being human means in the context of economic forces.
That makes sense.
It's incredible.
The parallel to this podcast as well because we often find also that we're seeing glimpses into what being human memes in the context of innovation and evolution.
So I entirely can relate to what you're saying.
Yeah, it's expression of our ideas and our talents and our aspirations of what we want to do that in some shape or form drives innovation.
So it totally makes sense that it's so integral to being human.
Yeah, and especially because sometimes, well, oftentimes we get so bogged down in the immediate of what revolves around our work or our family lives or our lives in general, that it's hard as individuals to rise above that and think at a macro level.
What do these trends and patterns look like and what do they tell us about us as a species?
And so the work that you do, looking at, not specifically innovation, but looking at economics and business research through the McKinsey Global Institute, starts looking at these macro-level big data patterns that give you a sense of species evolution and the opportunities and challenges they're in, that things would be invisible to us otherwise just from our vantage point as individuals.
So before we go on, could you please tell us by explaining what the McKinsey Global Institute actually does?
Yeah, so uh, the Mackenzie Global Institute is essentially the economics and business research arm of Mackenzie and company.
Uh, the firm McKinsey and Company, of course, is a global consulting firm and uh, What we what we do as a firm, therefore, is to work with all sorts of stakeholders to improve uh, impact in terms of their performance as as defined, you know, most broadly.
But in the research institute, we uh, really sit between uh, the world of uh, business and the world of academia and the world of policy making.
We belong in, you know, we don't belong squarely in any one of those worlds, but we have the privilege, I would say, of, uh, thinking about topics that matter to each of these worlds.
Uh, and then, uh, as our contribution of knowledge to the world, uh, pursuing really intensive research programs around those topics, and sharing a thoughtful fact base, uh, as to what we think or anticipate the direction of travel is along economic forces that all these stakeholders care about.
Uh, since we aren't consultants, we don't make concrete recommendations.
Uh, we don't sort of shape or frame policy making necessarily.
And we're not as academic as, you know, true academic.
Thinking or research might be.
But we have a unique vantage point.
We understand business, we work with academic advisors, including some Nobel laureates on informing our research, and we put it together in ways that really shines the light on facts and data and trends.
Uh, to kind of unpack for the world, what, what, what to make of uh, structural forces and what the implications of those forces might be for different stakeholders.
And we do this across, I think, several domains, some of which I'm not an expert in, so for example, resources or sustainability.
But the one that I focus on is around work, labor markets, technology, and its broader impacts, and then ultimately most recently on population and demographics and such like.
That's so interesting.
And for the listeners that are used to listening to previous episodes, obviously, the focus has always been on specific industries and pioneers within those industries that are doing the innovation and the competition.
In this case, with the Mackenzie Global Institute, obviously being more of a research arm.
People might think, well, how's that factor into innovation and competition, which there are, to be fair, innovation and competition within those fields.
But I think the main reason why we're talking in news, specifically around the paper that you recently published January 15th of this year, 2025, dependency and the population confronting the consequences of a new demographic reality.
And the report shows that fertility rates have dropped below replacement in many countries, and that the share of working age people is expected to decline in 1st wave regions, as you call them.
How might these demographic shifts affect the rate of scientific and technological innovation in those countries?
I guess that's really the meat of why we're meeting.
It's obviously there are all kinds of consequences to falling fertility rates.
In our specific conversation, it's more about how does that affect a country's ability to innovate?
Yeah.
Um, I think uh, 1st and foremost, um, it's almost like, uh, our, His, you know, past or current, assumptions about how we innovate and how that innovation translates into productivity and economic growth, and the overall sort of calculus of how we live as societies with, uh, Certain people, Generating economic surpluses that support other people.
And I'm talking really about the whole question of supporting retirements, right?
So there are so many assumptions and sort of a balance on all of these dimensions that we've taken for granted for several decades now.
But the way fertility rates and the trend and the drop in fertility rates are changing the age structures of populations tells us that going forward, these assumptions are not going to hold.
Some things going to have to give if our societies continue to be uh, economically sustainable, with dramatically different age structures.
And so even before, We talk about what we might see as a consequence for innovation.
I think the bigger point is that We're going to need a lot more innovation than even historically.
Uh, for the reason that uh, the, the kind of patterns we have of, of, of the way we produce or the way we support each other, all of those patterns are going to have to change, and with those disruptions, it almost means that we need, We need innovation.
And we don't think about innovation necessarily as being uh, something that's constrained or bounded by uh, human capacity or age structures of population or the fact that, you know, you have more people uh, who are older or younger or more people in one part of the world versus another.
Innovation can come from anywhere.
Uh, but I think the need for that innovation to rise is what the research actually tells us.
And I'd love to unpack some of the reasons why we think that's the case.
But that's really the starting point for us.
That makes sort of sense.
And I guess there is a difference between innovation and competition because, um, to your point, we need more innovation to cope with these demographic changes, but then countries, um, when they think about their long-term competitiveness with each other, the innovation could come from somewhere else.
Sure, it's solving a problem, but then as a country that's not doing the innovation, then that negatively affects their competitiveness, right?
Because it affects their, um, their economies.
It affects their societies.
It affects them in so many different ways.
Yeah, and we would think about innovation as the whole spectrum of very upstream, you know, R and D lead breakthroughs, but then there is so much innovation in how you use available technologies or proven technologies and adapt them and then adopt them in the way you work or the way you live.
Right?
And I think every country can and should actually think a great deal about the race to adopt. Technology.
Ideally you want to also create technology, but it's not that every country can be equally competitive in all forms of technology.
But in the adoption of technology in terms of how it will change the work that gets done and the competitiveness, therefore, in a very downstream sense, the competitiveness of all industries, uh, of all services, businesses, uh, the degree to which you can produce at economically efficient rates for consumers or for global trade or what have you.
All of that does require more innovation in terms of how technology is kind of adopted.
And then also innovation in terms of how people who are users of technology but also impacted by it, particularly in the world of work, how we think about skills for those people and redefinition of the roles and expectations of what work means.
All of that requires innovation too.
And so I think it's not just sort of the fact that a technology may originate somewhere that drives competitiveness, it's also how well you respond to that and transform work and human skills in that context that drives competitiveness.
But certainly the need to kind of raise innovation levels are going to be experienced in parts of the world that are going through the sharpest demographic declines going forward.
And in our research, as you pointed out, Nic, we do say that, you know, 2 thirds of the world today live in countries where fertility rates on average, in the population have dropped to below the replacement rate.
The replacement rate is roughly 2.one, which is if the average woman in a country has 2.one children, that's sort of enough to replace the parents, right?
And such a country will have a stable population, but when, uh, 2 thirds of the world is well below that, uh, you're, you're actually seeing a lot of, you know, long term, even depopulation, those populations will shrink eventually going forward, but also go through very different age structures.
And, and just to bring that, Kind of, there are some stark facts here that even I wasn't aware of until we actually did the research, which is that fertility rates have reached levels of, I think South Korea is amongst the lowest or the lowest, where the fertility rate is 0.7 children per woman.
I think in East Asia, it's around one or one. One in China, for example.
In the US and Western Europe, it's around one. 4 or one.
5 On average with regional variations.
But even in countries like India, which one would think about as, you know, huge population and robust population growth, Well, the fertility rates are now below replacement, even in India.
And it's really only sub-Saharan Africa and a few parts of the Middle East, where fertility rates are above the replacement rate.
So regardless of where you look, the vast majority of countries are going to go through big demographic shifts.
And in the US and Western Europe in particular.
What that means is, We're going to have, Far fewer people of working age.
Working age is roughly defined as 15 to 60 or 65 years old, which is when you spend your time in work.
And sort of producing an economic surplus.
Uh, but we are going to have, Today we have about, in these countries, we have about 4 people of working age for every person over 65 and in the next 2 decades, that number is going to halve to 2 people.
So think about just the higher dependency rate in a population or in a country where you have half the number of people available to support retirees.
Uh, and you also have the complication of A slower per capita GDP growth or income growth because you have fewer people of working age, right?
So, If you put all of that together, what it means is that the annual productivity growth rate of these economies and by productivity and economic terms, it just means the value of output created per worker.
That productivity growth rate would need to double just to compensate for the demographic decline.
And that brings me back to the reason or the implication that innovation is going to be very important because that's how productivity is, it rises with innovation and the investment to back up that innovation.
So in a nutshell, that's what the demographic trend really tells us.
Wow, um, in a nutshell, there is so much into what you said just now that, um, I'd love to unpack some of that.
But again, because the audience of the show is so diverse.
I'd like to ask a few kind of very basic questions, um, that I'm sure other people might be thinking.
Number one, the replacement rate is said to be 2.one.
Um, for a lot of people is like uh, 2.one, that doesn't make any sense.
And from what I've read, and I could be wrong or missing some information.
The reason why, at least partially, is because, A, not all babies make it into adulthood into working for us, and then number 2 is because on average, more women are born than men.
And so I think the number is slightly elevated to account for that difference.
Is that correct?
Yeah, I think both both those things are correct.
Uh, and that's why the number, the target replacement rate, so to speak, is slightly over too, which you would normally think would be the arithmetical sort of required replacement rate.
But it's an area that's fraught with a lot of complications in terms of how to think about the numbers and how to actually estimate the numbers.
And we at the Mackenzie Global Institute aren't demographers, right?
So we don't actually calculate these.
The United Nations, uh, division for population actually tracks, Fertility rates based on birth registration data from each country.
So it's very bottom-up data.
It's only as good as the number of as good as your registration systems are.
Um, but but there are ways in which the UN actually collects this and sort of scrubs and harmonizes that birth data and then has a way of factoring in things like uh, the expected survival rate, once a child is born and so on, to project what that would mean for population growth going forward.
And so those are the sets of forecasts that we leverage.
One thing that's really interesting, I think, for your audience is the fact that, well, a set of facts, right?
One is that these fertility rates, as measured by the UN, have have been falling consistently.
We went back to 1965 and tracked what the trend is.
So it's pretty much a downward, uh, direction. Right, across countries.
And some of that is for really good reasons to do with economic development and social progress.
And this is declines and fertility rates from really high levels down to levels closer to 2 Because, you know, infant mortality drops, women, you know, you don't need to have so many children because your chances of survival are greater.
Women's reproductive health improves, you know, contraceptive coverage has gone up.
Healthcare access has improved and so on.
Also, just sheer economic development.
Now we need to invest in our children, not just have a lot of children to help us kind of in our work and help us survive, but we start investing in children, right?
So the equation changes and that also drives down the number of children that a typical family would have.
But what's really interesting is it hasn't stopped declining even after dropping below two.
And it has almost sort of got a new resurgence of decline in the last 10 or 15 years.
Ever since, I think, roughly the great financial crisis back in 2008.
If you look at the fertility rate data since then up till now, we've actually seen a sort of a, you know, brief plateauing before that, but then a resumption of the decline after that.
And it's an open question.
I think a lot of sociologists and perhaps anthropologists have thought about this question, what's going on?
Like why are.
Why this, you know, lack of desire to kind of expand the family and in such a synchronized way?
There are theories to do with, uh, various things that range from, uh, you know, the pessimism or optimism levels that young people have about the future, right?
As one example.
Uh, economic concerns about uh, prosperity, uh, and whether you're going to make it and what it takes, but also things like, Uh, A lower desire as shown in the data to sort of settle down, commit to a stable relationship.
Um, so, so, so that's being put off.
Right?
Maybe a greater reliance on social media and things like that as well, right?
You seek companionship in other ways, you can find it in other ways.
Um, And and with all that said, the last sort of question mark, I'll drop into the minds of your audience is that this is really hard to predict because these are averages that the UN calculates.
What is the expected number of children that me or any other woman would have in her lifetime?
And these average, average predictions tend to get colored by things like, oh, women are just delaying childbirth, right?
So it, you know, we will, we will catch up and get to the right number, but it will happen like with a 5 year lag, right?
It's it's it's a little bit difficult and uncertain about how that pans out.
Uh, but we have definitely seen that.
Expectations from the UN about how fertility rates will go back up and rebound have not been borne out.
So fertility rates have continued to drop despite predictions that they might actually rebound.
And that, Tells you that it's a fair assumption that we are in this world of potential.
Dependency and almost certainly a potential depopulation and almost certainly higher dependency.
That's a very safe assumption to go with as of now.
Yeah, yeah.
I, you know, I guess the, the, the question that comes to mind for me is because it, especially most people will listen to these kinds of studies and these very macro trends and statistics and it's easy to kind of dismiss it and be like, well, okay, maybe because to be clear, it's a complex dynamic systems.
Like you said, it's like there's so many variables.
It's hard to really pinpoint exactly why it's happening or where it's going to go from here.
It doesn't mean it's not happening, you know, just because you can't specifically indicate why or where it's going.
It doesn't mean it's not a trend.
But it's also because of the some of the fuzziness around it.
It hard for people to really personalize and be concerned from this.
And also, there is the question of, um, What's the consequence?
I mean, does this just, does this just net down at 0?
So like population ends.
Like, for example, you mentioned South Korea at like .7, I think you said, fertility, right?
Um, so like, do we foresee a future where there's nobody living in South Korea or does it, and we don't know this because no countries reach this?
Does it stabilize at some point?
Is there a rebound?
Are there factors that can make it rebound, like, for example, wars?
Uh, the consequence in the aftermath of a war where people maybe feel the need to, uh, have more children?
There's more of a stress on survival and other things.
Um, I guess really what I'm trying to ask is, what's the latest thinking on where all of this sounds?
If we're all trending towards zero, Is that a reality or is that just kind of, um, uh, a structure by which to think about how this is going to affect society?
Yeah, I think that's that's a really good question and there are a whole set of imponderables about what might trigger, uh, rebound and and a change in in these rates.
I think, you know, war, disease, cultural and societal attitudes for whatever reason could change and people might just value having children more.
Technology could enable much more, right?
Something we can't foresee, but it might entirely be possible that.
Reproductive technology itself changes, right?
So, All of that is possible.
But what we do know is that.
Looking out to around 2100, which is sounds an awfully long way off, but is actually, you know, whatever, 2 or 3 generations away, 2080, 2100 is not that far.
Uh, if, if, if we run the numbers, because even if something dramatic changes, it's, think, think about, think about this as like, you know, uh, uh, uh, like the pig in the python almost, right?
Um, Demographic change has to run its course.
Once it's happened, it will, it will run its course.
You can't, you can't go back in time and change facts, you could change facts prospectively and have more children at some point in the future.
But the structure that's already in place has to run its course over the lifetime of people as they are today.
So much of what you will see in the next 2 or 3 decades is not influenced by births that will happen today, but already by the trends in birth rates that have happened over the blast one or 2 or 3 decades.
And therefore there is a reasonably high certainty that, you know, by the time you're in the 2050 to 2100 timescale.
Uh, I think you're looking at between, you know, 20 to 40% population declines in some countries. Particularly countries which haven't really been immigration driven in terms of population growth.
So the United States is an exception.
There has been fairly robust.
Trend, long-term trend, right, of populations being shored up with immigration.
And so if you just assume those will continue with some ups and downs, but broadly will continue.
You don't see the US seeing this depopulation.
But for example, in our report, we show you the UN's numbers for China, or for, I think a country like Italy, right?
Where, uh, the depopulation rate over that 2100 timescale is is pretty, uh, is pretty significant.
But, but, but to make it tangible, we are not like everyone doesn't live in those countries and 2100 is still a long, long time away.
But if we look at the next 2 decades, what this means is that even in a country like the US...
Um, The fact that, We call it the labor force participation rate or the labor intensity of of an economy, which is at every age group.
People tend to be economically active in the workforce at different levels.
Yeah, very young people are in education, so they don't sort of, they're not active in the workforce.
The labor intensity rises, but after the age of 50, we see it dropping in almost all countries.
And because of that, it's not even all the way to retirement.
People start pulling back when they're 50, 55, you know, when they get closer to 60, they pull back even more.
And in the US, it turns out that for the average person who's above 60.
Uh, there is a roughly $60,000 a year gap between what they spend on consumption of various kinds versus what they earn through uh, their work in the labor market.
So that's that's a lot of the, you know, a gap, right?
That needs to be funded by something.
So far.
Some of that is funded through people dipping into retirement savings, because again, we've had the benefit of decades of real estate appreciation and, you know, equity markets have done well and people do have savings.
Older people do have more savings than younger people.
Part of that is funded through governments that have these systems of transfers, so retirement transfers, which are funded really through taxes or debt by governments, right?
And even in a country like the US, you would you would think about like when we add up the numbers.
Because the senior gap arises as you have more people entering the 60 plus cohort.
This is the equivalent of an additional 10 percentage points of tax on the labor income of everybody who's working in the US.
And in Western Europe, that's even more, right?
So, uh, that feels challenging and personal and relevant for everyone because this is this is a higher retirement burden that everyone is going to have to share the cost of in some ways.
And it's not out in 2100.
It is now in the in the coming decades, right?
Because older people continue spending, they just spend on different things.
They need more healthcare, for example.
Um, but they also spend on other things on recreation, on housing, right?
Maybe they don't commute to work so often.
But, but, but it's not that consumption drops, but the amount they're actually able to earn does drop quite a lot.
So, That's that's really the crux of the challenge and it's being experienced now.
Most people would say we are in the middle of that retirement crisis already today, but the numbers do add up in the coming one or 2 decades.
Well, that's incredible.
Um, And you've mentioned the US, obviously, my understanding is that one of the main things that keeps the US vitality, as high as it is, has been our open immigration policies.
If not for that, then our fertility rates would probably be lower than they are even right now.
And so it's it's definitely concerning when we see some of the, um, some of the challenges on our immigration policies and our, our view of, um, foreign students coming to our university staying here and opening jobs and starting companies, uh, I think people often, I guess there are competing, um, forces here, right?
So on the one hand, um, societies need to balance the economic necessity of migration.
But on the other hand, a lot of times you see this in the US, you see it in Europe as well, there are cultural frictions that happen at large scale immigration.
And, um, and I think if you're in one camp or the other, it's easy to forget how it affects the other side.
So I often think, and I'm for immigration, because I feel like it actually stimulates, the economy stimulates so much about society, but I do see that sometimes countries can lose their sense of identity in that process, especially if the scale is large.
I mean, if you're bringing in some people from different areas, that's one thing, if it's a very large influx of people, then that could actually change your society pretty quickly.
Um, how do you think about, that the, the, the need of, for immigration to counteract some of these following fertility rates, with also the balance towards countries that, Desperately want to preserve some of that cultural heritage that they have, and is there um, a factor in there about the scale to which you bring in uh, people from the outside that maybe balances these things out nicely?
Yeah, that's a great question.
And we did look at cross-border immigration as, you know, one potential lever to address this demographic change, particularly in these 1st wave countries, which is, you know, Western Europe, East Asia and the US, right, or North America.
Um, What's interesting is that, uh, If we, I mean, it's certainly true that the planet overall won't be short of people, because as I said, fertility rates are still high in some parts of the world, and those countries will continue to produce a lot more people.
But when you think about how much immigration would have to rise, In order to completely counteract the, Natural trend in, you know, population birth rates, that number is extremely high.
So even in the US or in the UK, which are historically immigration friendly, you would need immigration rates to go to one. 5 to 2 times their past historical annual levels or rates.
In other countries, you would, perhaps where the demographic decline is even steeper, you would need immigration rates to go up maybe 3 to 4 times.
If nothing else changes, if you rely only on immigration with the logic that, oh, there are people elsewhere in the world and we don't really have a problem.
And when you think about raising the annual rate of immigration by a factor of one. 5 to 2 to 3 or 4 times the past.
I think that's where the questions or concerns that you raised around, well, is that going to be socially possible?
Is that, uh, you know, going to throw up a whole new set of challenges that we are going to have to deal with.
Those questions become very relevant.
We have no way of saying.
Which path countries might take, but it certainly seems like relying only on immigration is going to be challenging just because of the extent to which it would have to go up in order to counteract.
And so, I think the bottom line is for all countries, it's not just one lever that they can rely on.
They need a combination of things, raising productivity growth.
Having people work longer potentially that is not retiring quite as early, but staying on in the workforce.
Uh, In some countries, you know, women being enabled to step up their uh, rate of, of being in the paid workforce.
Women do a ton of work, but in some countries they aren't as engaged in full-time paid work.
We can think about ways to make that happen.
Um, Including, I think, also things like just everybody works a little longer, right?
Increasing the work week, which and each of these is fraught with pushback and challenge.
I mean, we're talking about reducing or shrinking the work week in many parts of the world.
Certainly in Europe, the debate is right now about, should we think about a 4 day work week, not increasing the number of hours we work.
Um, and and and so I think in in summation, none of these things individually might be enough.
But I always come back to productivity growth as the one thing that is really hard to argue with, we should all be doubling down as policymakers and businesses, and individuals on how can we raise productivity because that almost feels like something that will increase, you know, the pie for everybody.
There is more to go around.
It doesn't have some of these social and other challenges that might go with it because it has the ability to make life better for, you know, the broad spectrum of people.
And so we come back to your theme around innovation and investment and productivity.
Yeah, no, I love that.
It's a great way to pull it back.
So I guess if we think about increasing productivity and then the link to innovation with that, um, we're seeing some incredible uh, technological advances.
And I do believe that we're very much also in a state of hyper innovation, uh, that technology is enabled, you know, starting from way back in the day with personal computers, and then eventually the internet, mobile technologies, um, and then now we're at, you know, the, the, uh, early stages still of AI.
Um, and in other fields as well.
We have great advancements in genomics with CRISPR technologies and so many other areas that are innervating super at lightning speeds.
How does that all factor into your thesis now on the demographic changes?
In some ways, it's going to make us more productive.
I can see that.
I mean, you already see AI making companies and individuals productive.
There's also, though, the concern that some of these technologies will displace people, um, AI in particular.
And so how do you anticipate that this plays out?
When it comes to the that balance again between using new technologies for increased productivity, but then also the unintended consequences that these new automated technologies have in displacing humans.
Yeah, absolutely.
So, uh, I I think, you know, just focusing on uh, the full spectrum of automation technologies of which AI and now, more and more of the automation technologies are enabled or powered by AI in some shape or form, so you can almost think about them somewhat synonymously, but just thinking about those technologies, their ability to raise productivity, by, uh, what I think of is, is that it actually, you know, the automation of work is transformative.
It does potentially displace human beings, but more importantly, it changes the way work is done, right?
That's that's what it really does.
And, uh, we've sort of, we think about quantifying and understanding the impact of technology on productivity and on work in a very granular and tangible way. In our research at the McKinsey Global Institute.
We think about it really as, um, uh, you know, how much, like what what kind of work is done in the economy today, obviously that varies a lot based on industry and occupation, you could be, uh, you know, uh, uh, a welder in a manufacturing or a construction, uh, business or you could be a healthcare worker or you could be like a legal, uh, professional, you know, there are all sorts of different occupations and people spend their time doing all sorts of different activities.
We have a way of saying, given uh, technologies which are available today, how much of that work could actually be automated.
Um, theoretically, and then how much is actually potentially likely to be automated, given all technologies kind of are adopted in a graduated way.
Technologies don't get adopted overnight, right?
So we have a way of thinking about how the adoption might move.
But if you add all of that up, what it tells us is that by 2030.
So in another 5 years or so, roughly a 3rd of the work hours that are Currently performed in the US economy could be automated by technology. 13rd, right?
And that feels like that is a large number.
That feels like a frightening number, but it's actually not because.
It doesn't mean that people become redundant or unemployed to the extent of 13rd of the workforce.
What it does mean is that we're freeing up human capacity and human potential to the extent of that 13rd of hours.
And we're making it available to do more.
The doing more could be, uh, increasing output.
So doing, you know, producing more.
Take the healthcare space, right?
We all are aware of constraints on healthcare capacity.
We know that the number of treatments, the number of patients, the number of, you know, diagnostics we are able to do today are constrained by human time and energy and capacity.
And if we imagine a world in which more of that human time, energy, and capacity is freed up because some parts of work can be automated, that allows you to do more, so more patients or do more diagnostics.
So, and that's just one example, but that is true across industries.
So you could raise output with the same number of workers and that's just as productive as, uh, you know, a business might think about it more narrowly saying, I can maintain my top line by reducing the amount I spend on people.
But when you add it up at a macro level, Different kinds of work become meaningful and important for people to do.
And technology has always had this effect of displacing people, changing the kind of things people do.
Uh, and creating new kinds of work and jobs, which weren't even imagined prior to technology.
So we've had dramatic revolutions in technology in the past, but we have still found ways for human beings to be engaged in work.
And so I think, That is really the, The kind of. Outlook we would have, right?
To say there is this productivity impact.
It is meaningful.
A 3rd of all work hours could get released.
There will be a massive sort of redeployment and reinvention of what people are doing.
Um, But yes, the transition period can be challenging and painful because not everybody can reinvent their skills and learn new skills and, you know, move, perhaps even move physically to where the new job is.
There are frictions in all of this.
So there is potentially a lot of, uh, preparing of the workforce that we have to plan for and execute meaningfully.
It's not just the technology.
It is human beings are kind of all the more important in the context of embracing technologies.
But I think the good news is that employers are more and more aware of this.
So the discussions that we're having and the way we see, Business is thinking about this is.
It's not just about what technology use cases I can put in and whether I get the ROI.
It is about how what does that mean for the people and.
How do I think about reconfiguring my workforce?
Because the effects are at, at a scale that, uh, you know, the people implications are, are, are pretty large and A lot of, I think, the, the conversation and the focus is also going towards, like how do we skill people up to kind of, do the new things that we'll be asking them to do.
By using technology.
No, I totally agree.
I mean, it's not a one-way road to a dead end.
It is an evolutionary process.
And if this were 50 years ago, I would definitely not be leading precision medicine, I might have been a farmer.
Um, and so we have to think in terms of just even looking into the past that that there were disruptions, and it led to the society that we have right now.
And so this isn't like necessarily all things will end.
It's more like in a 100 year society will be different.
We'll find ways of coping with us.
And, um, and to your point, technology and innovation is going to be critical to make sure that that coping process is easier, too, by elevating productivity, like you mentioned, and filling in gaps.
Honestly, and probably jobs that people would rather not be doing as well, right?
I mean, some of those are the, the, the quicker ones to be able to automate, and that frees people up to then focus on other things.
Like you said, it's going to be a transitionary period because people that are maybe you have been doing something for a really long time.
It's going to be hard for them to adjust to the pace at which innovation has changed in society.
But if we think long term, future generations, we'll be able to adopt those much more easily, uh, in a way that will just kind of blend into the fabric of society.
Yeah, and I do think uh, with going back to, you know, we frame this in the context of demographic change.
And I think one of the implications of that is that, It's tilting the balance or changing the balance between the things that people will prioritize and be willing to pay for, right?
And one example might be even beyond, I talked about automation of work.
But there is so much work that's not today recognized or paid for, and that is care work.
Um, there is, there is so much work that gets done, you know, caring for older people and that some, some of it falls to, you know, paid employees, but some of that actually falls to family members or caregivers who might not be paid, right?
Uh, And if you think about, Well, if you have a lot more people who need care, maybe we as a society and we as individuals will want to pay for care in a very different way, and that might incentivize more technological innovation in how care gets administered and uh, you know, taken care of.
Like how do we take care of care, right?
So that might be the area for a lot more innovation going forward because in a practical way, there's value to that, just given, given the kind of shift, shifts in demand that we will see.
And that might mean that it's not just the world of work that gets transformed with technology, but also the world of, uh, you know, akin to the white goods and domestic appliances revolution of the 60s, say, right?
The post-World War II.
You saw so many dishwashers and other appliances coming in and taking away the drudgery, the work that people didn't want to do, and allowed sort of women to enter the workforce, but also people to spend more time on leisure.
And you might see a similar revolution, but triggered by the needs of aging people to say what's the innovation we can see in the care of aging people that will then allow society overall to have either more leisure or be more engaged in paid work of different kinds.
We start at a high level.
We went down to the nitty-gritty.
Now if we can elevate back to a high level, just because I'd love to finish off with a singular question that only someone like yourself would be able to answer.
And you address some of this already.
I was going to ask you, what can innovators today be thinking about, the future needs of society where they should be innovating, starting companies, starting product lines, and so on.
You mentioned one which is thinking about caring for family members, particularly the elderly.
Um, I guess it's a 2 part question.
Number one is, do you see other areas that are ripe for innovation and disruption given these demographic changes that you're like, are we going to need a lot more of this and that beyond the caring?
And then secondly, what can organizations or even countries be doing to prepare for these demographic changes as we progress into these years that you mentioned 2050 or 2100.
Yeah, I think on the innovation we talked about caring or healthcare needs, and that's a sort of fairly obvious 1st order implication of demographics and aging.
But there are all sorts of Things that will be ripe for innovation and disruption simply because the segment that's the segment of consumers that is older is going to rise disproportionately, right, in most advanced economies.
So older people will be as much as, you know, a 3rd of all consumption in the next 10 or 20 years.
And they do have different needs.
And we're already starting to see product portfolios shifting.
So the very, uh, trite but relatable example of, you know, fewer baby strollers and more pet strollers, like Korea is actually that market where now they sell more pet strollers than baby strollers, right?
Or, you know, less baby food being produced and more, uh, vitamins and supplements and things like that being produced.
So there are shifts in terms of products.
You know, fewer home expansions to accommodate nurseries, but more to accommodate ADUs for older people, right?
So product needs will shift pretty dramatically.
But customer behavior will also shift and we have these really fascinating examples of innovation, in services economies, like in, I think it's the Netherlands.
There's this example of a retailer that figured out that they had so many more older customers who actually didn't want automated or brisk or impersonal checkout experiences.
They wanted friendly, personable, and kind of conversation oriented, checkout experiences.
And so they created these checkout lines that were chat checkout lines so that if you wanted to talk to somebody, you could go to that checkout line.
So it's a really small process innovation, if you will, but it's about shedding your stereotypical notions of what an older society wants or is, and being really close to the behavioral shifts and patterns and trends and different kinds of needs that will emerge, and being nimble enough in your business to be able to innovate around how to serve those needs, uh, more, more practically.
And that goes down to things like obviously retirement products and savings products will have to change too.
Uh, and what can company or countries really do to prepare for this?
I think in general, I would say 2 things, right?
One is, uh, You need to be really clear eyed about the macro implications of all of this for uh, public finance and fiscal uh, fiscal structures.
And I like to sum it up as a sort of be careful what you promise, right?
And this is particularly true, I think, for developing countries who are not at the per capita income levels of rich countries, but are going through a demographic decline, which is pretty sharp.
Latin America parts of Asia.
Be careful what you promise because if you have, uh, kind of retirement obligations that you can't fulfill, right, through the public uh, system, uh, you know, that leads to a very unsustainable fiscal structure, right?
So, you know, when you put down dollars to build infrastructure, do it in a way that takes into account the needs of aging people.
And so you don't have to rebuild a lot of infrastructure, for example, right?
So be really thoughtful about that.
That's one thing.
The 2nd thing I would say is create the conditions for technology and productivity and this kind of shift in work to really unfold because the more rigid your labor markets are, or the more rigid your processes are for allowing businesses to use technology and innovate, the less equipped you'll be as a country to kind of raise that productivity level to compensate for demographics.
So we really need to create the conditions for more fluid use of technology and more fluid labor markets that allow people or help people actually build up their skills and prepare for the future.
Oh, well, new, this has been such an insightful conversation.
It opened my eyes.
There's so many different things that you obviously live in a stratosphere that you get to see things that are macro level and those patterns are fascinating in some ways terrifying.
But I just want to take a moment to thank you for your generosity and your time.
It was an honor having you here.
Thank you so much for being with us under natural selection, and I look forward to having this conversation again.
Hopefully some of the new future.
Thanks very much.
It's delightful to talk.
Thank you.
