Demographics and the Governance of Choice
Economics is the science of choice. Politics is the science of expressing those choices. The degree of trust in markets to allocate resources largely determines where a country resides on the political spectrum. Little faith in markets veers towards state control of resources as in communism. In contrast, a high degree of trust in markets lurches towards highly competitive markets with little governance. As the last two hundred years have shown, the extremes of both positions end up in the same place with a concentrated group controlling everything. The greatest economic success luxuriated in a middle ground between the two extremes. The significance of trust for today is multi-fold: how do people trust each other, technology, or products, and how do demographic trends influence the outcome?
If a picture is worth a thousand words, what is a video worth? Trust in Government was a fundamental concern of the framers of the US constitution, which had as a precondition an informed electorate. Trust is an issue for all major types of entities globally: business, media, and Government. In the US, trust in the news media is near an all-time low and is bifurcated by political party with only 15% of Republican respondents trusting media. If people cannot trust the information they receive, then they can’t make an informed decision on how the Government should manage choice.
The challenge of media trust expresses itself in demographic profiles in the US, where younger people are less trusting of media than older people, according to a Knight Foundation survey. This result probably reflects the younger cohorts and their more intimate knowledge of how the technology works and the ability of people to create ’fake media’ in social media. While the media technology tidal wave may overwhelm the old, the impact is profound on one group: conservative voters. They are less likely to trust any media while very conservative voters only trust one source, Fox news. These outcomes have implications for the future of trust.
A greater understanding of the world occurs as people age, and in this regard, hope remains that trust will build through time as Millennials grow as a proportion of the labor force. In parallel, the older generation will become less dominant in the population, thereby reducing levels of trust. Over half the population is skeptical of the news, and nearly the same amount is inattentive to the news, according to the same survey. The critical question of restoring trust is the degree to which people become less skeptical or more informed.
Trust but verify. In an era of altered images, where our Amazon cart items follow us around the internet in display ads, and Facebook and Google micro-target audiences, people have an unhealthy distrust of social media. One of the easiest ways to trust a media source is when it comes from a person you know, and people are known to curate their news in this manner. This action reduces the requirement to verify information as there is an implicit trust in the other person. Unfortunately, this leads to enclosed media bubbles, where you see and hear what similar people are discussing. You don’t get to learn what you never experience.
What you’re missing may be critical. The ability of the major technology platforms to micro-target your specific profile may ensure that you don’t see or hear any other views but your own. Even if you did learn about these alternate views, you might not trust them. This result is a critical issue for the future: how to build trust with technology. If the technology companies don’t address the problem, there is a real chance that the anti-trust movement will do it for them. While the outcome may not be as severe as the Sherman Act of 1890 was on Standard Oil, there is much room to move between the current situation and that outcome.
In demographics terms, the Millennial generation grew up in a time of free apps and low incomes. Most assuredly, as they move along in life, they will gain higher incomes as their experience and productivity grow. The outcome is that they will be less economically captured by technology. As they approach household formation, the welfare of their children will come into play and act as a catalyst to ensure that their children are protected. This progression will force the leading technology companies to come to terms with how they collect and use data.
Manufacturing Design. One of the hallmarks of the last thirty years is the commoditization of nearly everything that technology touches. If a process is automatable, it will be. From the building of applications to personally designed stuffed bears, design has reached the masses. This transformation has led to a skill transitioning from structured processes to one of where creativity dominates. In this world, uniqueness reigns.
The freedom of design nullifies cost leadership. While offshoring was the critical phrase for business as the arbitraged labor around the world, the future is mass customization. In this world, time-to-market and ability to customize to the local consumer is paramount. People choose local produce and craft-brewed beers because of their perceived uniqueness, even though the products are commodities. Clothing is made-to-order, and shoes reflect your style. As technology has shown, it’s easy to target marketing to a specific group: now, technology enables particular products for each consumer. Economics of scale gives way to the scaling of design.
Services will continue to be set asunder as well. A prime example is investment management, an intangible service that is mainly numeric and inherently automatable. In this world, designing your investment portfolio to your specific needs is easy, often without requiring a physical advisor. Insurance has similar goals to monitor your health to lower your life insurance. Since cost leadership is attainable by all with zero-marginal cost digital services, then differentiation and focus are the only strategies that matter.
The demographics of manufacturing design are stark. As the Boomer generation saw the collapse of manufacturing employment since the turn of the Millennium, professional services accelerated. The changing types of jobs resulted in the typical Boomer staying in the workforce for longer than prior generations, as they try to fill their savings gap. Alternately, the Millennial generation are more than the twice as likely to not participate in the labor force at their current age. As the decade progresses, these trends will reverse. Critically, it will enable a fuller adoption of technology as the technology-limited Boomer gives way to the technology-literate, Millennial. These trends will unfold as insights from data science allow every person to leverage design.