Pyramid Schemes

I’ve been playing with population pyramids. These are graphical depictions of a country’s population showing the number of women and men in five-year age bands. They’re called pyramids because, historically, humankind has lots more infants than school children, more schoolchildren than lovers, more lovers than.... as time takes it toll on each of the seven ages of man.

Consequently, the picture looked like this, with women on one side of the vertical line and men on the other.

In Europe the historical pattern no longer holds, as everyone knows. Mortality is down across the board, as nutrition, public health and medical care have improved; birthrates are down because lives are more secular and state pensions have replaced children as the guarantors of one’s old age; consequently nations like Germany and Spain are likely to have inverted pyramids by the middle of this century.

You can while away hours checking out the animated pyramids that the U.S. Government’s Census Bureau maintains for more than 200 states, from Afghanistan to Zimbabwe by way of Comoros, Mayotte, and Samoa. Go there, and watch the Cook Islands depopulate, Nigeria explode, and Russia become a nation of widows from a devastating combination of low birthrate and the effects of tobacco and alcohol on its adult men. The shrinking population in Russia’s already sparsely settled east partly explains the nation’s fear that hordes of land-hungry Chinese will pour across its border - though China, too, will soon struggle with an aging population from the effects of its one-child policy.

You can also start deriving all kinds of business ideas from demographic data. Angela Merkel defended Germany’s unwillingness to pony up a big stimulus package on the grounds that her nation, with a shrinking population, could not afford to take on debt that America, with a growing one, can. Demographers like David Bloom of Harvard’s School of Public Health posit that there’s a demographic golden age spot when a nation’s birthrate has just begun to slow, but before its elderly population has begun to swell. That combination produces a low “dependency ratio” - not a lot of kids, not a lot of retirees - and many adults of presumably productive age.

India is moving into this highly desirable apple-shaped configuration now. Nandan Nilekani, the chairman of Infosys, describes the opportunities this presents in compelling, enthusiastic terms in his excellent new book Imagining India. The population of Brazil likewise will soon swell in the middle, like India’s. This apple can harbor worms, however: a population bulging with strong young men, but no work. Many states in the Middle East have population pyramids like this, which could be a basis for unrest in the absence of economic growth.

While it’s possible - and fascinating - to read the geopolitical tea leaves of demography, it is also possible - and potentially very rewarding - to study its economic entrails for entrepreneurial ideas. In Japan - where the population is both aging and shrinking, and which has been historically averse to admitting foreigners even for menial work - companies like Toyota are investing trillions of Yen into inventing robots to care for the old and infirm. Ambitious European entrepreneurs might hypothesize that (once the recession lifts) in their home market per-capita income will grow faster than GDP. That would argue for Bang and Olufson over Panasonic, Jacadi over Old Navy, and Pret a Manger over McDonalds. Or it might argue for a visa to India or Brazil.

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