How Bad is Being Big?

 The Editor

The Economist                                                                                                                             via email

Re How Bad is Being Big? July 15^th issue.

Your article examines market concentration, churn in share, and “excess profits”. As you point out, bigness per se is not illegal in the US nor is reaping large profits. Lower costs to consumers and customers have been the overriding rationale for approving mergers and acquisitions. But I counter that bigness, particularly via acquisition, is inherently anti-competitive. I favor disapproval of further acquisitive growth and break-up of oligopolistic industry structures.

I base my view on 31 years as a denizen of large corporations and 16 years of consulting with small and independent businesses on how to outperform large competitors. Early in my career, I watched a frustrated FTC wrestle with oligopoly in a consumer-packaged foods market. Their point was that we did not have to conspire or collude to manage prices; knowing who would follow whom gave us the leverage we needed. But under anti-trust law, oligopolies are not illegal.  Later on, in another consumer product market,  I helped consolidate an industry and amass market share through purchase of 14 companies around the world. Later, as central marketing services provider to diverse members of our conglomerate, I provided a range of professional skills and assets, as market and consumer research, distribution leverage, syndication of media content, public relations and advertising expertise, systems development, purchasing and so on. Finally, with a different corporation in consumer and business services, I helped it grow and dominate through internal development, acquisition, and franchising.

What competitive advantages accrue to the large? Lower cost of capital than available to the independent. Ability to recruit promising talent from leading graduate schools. Special skills support such as risk management, quality control, distribution logistics, system development. Basic research that leads to product and service development. Supplier leverage and purchasing clout. Marketable shares with which to acquire. The list goes on and on.

Bigness is an asset. This is not to say the behemoths do not stumble. They generally are not nimble and lose agility. But don’t we often we see one enter a market second and use their inherent advantages to overwhelm and rise to #1? Bigness is inherently anti-competitive.

Is Demography Destiny?

For the most part, yes, though not entirely.

I’ve been fascinated with demography since early in my marketing career. In 1961, Teddy White published Making of the President, 1960. I read it for its political drama, but I was startled by to realize that these political strategists knew a lot more about their voters than we MBA marketing geniuses knew about our own customers.

My career as a marketer – first of consumer foods; then of crafts, games and toys; and subsequently of hotel and travel services – has ever since been grounded in demography. For example, by digging into the data, I helped our Star Wars toys displace Hot Wheels to become the top selling boys’ toys for four seasons. Later on, in the hotel business, it was casino operators who showed me they knew more about their gamblers than did we about the travel patterns of our hotel guests. I adapted Caesar’s Palace’s software to get a better handle on our guest patterns, leading to challenges to room design and décor. My fascination with demographic and behavioral data has been a constant ever since.

I began preparing this talk two weeks ago, playing with some population pyramid data, but the New York Times beat me to the punch with a long article in this week’s Sunday Magazine. For those of you who read the article, bear with me. For the rest, my intention is to pique your curiosity about demography, about population patterns, and to stimulate your thinking about the world your children and grandchildren are about to inherit. It will be a very different world than that we have grown up in and grapple with today.

Is Demography Destiny?

For the most part, yes, though not entirely.

After all, the basic elements, i.e., persons, of the near future of a population are already on the ground; we can count them. What do I mean by “near future?” The next seventy-five years or so.

The number of middle-aged we can count and these, in due course, will become retirees and elders, with attendant demands for pensions and costly health care. Witness Japan, now the oldest industrialized nation in the world, and shrinking in size. Their salad days as the world’s 3^rd largest economy are over.

The number of the world’s children already on hand is known; these kids will become tomorrow’s labor forces, will form families and become consumers – if they have incomes to spend.

The number of pre-school and teen-age girls is already known: they will become women of child-bearing age. The portion of them that will be educated, will live in cities, and the number of children they are likely to bear is changing, changes demographers are watching carefully, for birth rate change is proving to be the wild-card in forecasting future population patterns. I mention urbanization and education: – no surprise – the more citified and educated women become, the fewer children they choose to have.

So yes, within some reasonable range of uncertainty, demography is destiny. Demographics cannot foretell wars or pandemics or famine or drought or floods of course, but hints at potential instability are to be read in the data. Take for example, Nigeria, already Africa’s most populous country, where a huge portion, 43% of the population, is under 15 and will soon enter the work force. If Nigeria succeeds in attracting foreign direct investment and creating jobs, they will be the growth engine of Africa. But if Nigeria fails to generate employment for this huge cohort of literate young men, over one in five Nigerians, these young men will likely turn rebellious, spread social disfunction and crime, and send forth to Europe wave after wave of migrants.  

What else is to be found in today’s data? (Note: these population pyramids are depictions of today's profile by age and gender. The forecast curve at the right shows where such a profile is headed.)

·       That the world population will top out in 2087 at 10 billion, 430 million. Do we know that for sure? No. But given what we do know, that is the best forecast. It was but 3 billion when the Club of Rome was predicting disaster.

 

·       India is the country of the future. Should your grandchild’s trust or 529 Plan portfolio include shares of Tata or Reliance or the State Bank of India?

·       The Chinese economy will not surpass our US economy. At the end of this century, China’s likely will still be 2^nd largest in the world and ours will still be #1 – assuming we can avoid war or famine or pandemic.

·       Why? Because our magic sauce is immigration. Our population – our labor force and consumer base – is healthy because we take in immigrants, which China, Japan, and most of Europe don’t; so long as we prevent Trump or DeSantis or some other jingoist from closing the gate, we will continue growing even into the 22^ndC. China’s and all of Europe’s economies are aging into gerontocracies of expensive dependency. Health care and pensions drain their discretionary investment capacity. 

·       Turkey will become the largest country in Europe even if the rest of Europe were to staunch its decline. Were you a member, would you vote to invite a populous Muslim Turkey into the EU while Germany, France, Italy and Spain shrink?

·       Russia is on track to lose 1/3^rd of its population by the end of the century while the former Soviet Republic “stans” will, in 2060, be 50% larger than Russia.

 

 ·       Add in Afghanistan and Pakistan: these central Asian nations will total 685mm people, nearly twice the size of the US – and will still be growing in mid-22ndC.

 

·       In 2100, 40% of the world will live in Africa. Just 4% in North America. What demands on us can we expect? Should we continue to be the world’s largest arms dealer when who knows on whom those weapons will be trained?

 

Some of you, I know, are thinking, ‘well so what? I can’t change these demographics. I haven’t any power to wield here. I’ll be dead and gone. What does this matter to me?’

Ask yourself, instead, ‘what does this mean for my children and grandchildren? What attitudes and values must I encourage? How should I be preparing for their financial security? To what cultures should I be introducing them? What should our schools be teaching? How can I best help them meet whatever comes in the remains of this 21^stC?’

I hope I have intrigued at least a few of you enough to open https://www.populationpyramid.net/ and browse through it at leisure, moving your cursor to select countries and sliding over the curves, and asking – what might this mean to my kids and to theirs?

Demography is not necessarily destiny, but it’s the best tool we have to anticipate what’s over that horizon. And there is plenty of change coming our way. Pay attention.

 

I, Page Turner

The World's Greatest Chamber Music Party is in full swing, entering week two of the month-long Seattle Summer Chamber Festival. This is only arts genre in which Seattle is pre-eminent. We have a fine symphony, a good ballet, a very good opera and the best large jazz ensemble on the West Coast. But only in chamber music can Seattle claim to be at a world-wide pinnacle.

For years, I have watched page turners, fascinated by the interaction with their pianist; I don't know if I am weird or if others in the audience are similarly wired. Whatever . . .. 

During opening night of the Summer Festival, I mentally composed most ot this imagined confession  -- and yes, was still thrilled by the music; multi-tasking, afterall.  

I, Page Turner

I am paid to be unnoticed.

On stage, I sit off the left shoulder of the pianist, intently reading the music, anticipating her reaching the end of each page, unobtrusively rising, stretching awkwardly across to the opposite corner of the score, making sure to grasp only a single page, and snapping it over when time. She or he as the case may be nods imperiously at the same moment: do they really think only they can read the notes? Idiot: that’s why they hired me! Whatever.

If I screw up, could I derail the performance? Probably not. She has known for weeks what she will be playing, learned the score at home. She arrived three days ago and rehearsed with the rest of the quartet four or five hours working out nuances of their presentation of the work. Still, if I flipped two pages or miss-read there could be momentary stumbles. So, I am paid to pay attention.

Often, easier said than done. John Cage or Phillip Glass are so effing boring! Then again, that Bartok piece commissioned by Bennie Goodman is so exciting it’s impossible to sit still. Beethoven’s Archduke is so beautiful you’d have to be deaf – as he was – not to be moved, not sit still. More often than not, the music lures my mind to wander off into my own; I am a jazz pianist, after all. Being paid not to tap my foot, bob my head, neither to grin nor grimace.

At the end of the performance, I wait while the “artistes” take their bows. Then they troop off, and I meekly follow, carrying the score. Back stage, there may be a nod or brief “thanks” but most often, no word. They are too wrapped up in the audience’s applause, in congratulating one another, in deciding whether to troop out again and take another bow. So it goes. I’m paid to be the invisible accessory.

Speaking of pay: he or she gets many hundreds for their rehearsal and performance (plus, here in Seattle, travel expenses and free room and board.) While true: no one pays to come and watch me turn pages, but still . . . $50? And they are featured in the program with bio and picture and praise (much of which their agent writes.) No one knows my name. I am paid to be anonymous.

Someday. Someday, I’ll be known – maybe even have a page turner off my shoulder? Well, second thought, probably not, not for jazz; only these "classical artistes" appear to need them. Anyway, soon enough, all of them likely will be using tablet computers and managing their own scores via foot pedal, page turners just nostalgic artifacts of "the good old days." Oh, well . . ..

~~~~~~~

Tonight's the All Star Ganme. Well, we've got our All Stars right here on stage in Benaroya. For those of you who can reach Seattle, get a ticket and experience the world's great artists presenting wonderful, accessible music. Intimate, gorgeous, challenging listening; a festival, indeed. (But pay no attention to that page turner.) @ www.seattlechambermusic.org