Lance Cottrell introduced our speaker. Mr. Aaron is a graduate of what he says is the eleventh best college in Georgia, the University of West Georgia. He is also a graduate of the Defense Language Institute in Monterey, California, where he studied the Egyptian dialect of Arabic. He began his professional career as an FBI Agent where he worked foreign counterintelligence specializing in Middle Eastern affairs. From 1978 until 1981, he was the spokesman for the FBI’s
San Francisco office. In 1982 he entered the securities business with Morgan Stanley where he specialized in traditional money management. In 1998, he founded Wood, Hat & Silver, LLC, an SEC Registered Investment Advisor, where he ran a hedge fund until retiring in 2006. Finding he had too much time on his hands, Mr. Aaron turned his attention to the future. His focus is on demographics and technology and the impact they have on our economy.
What is an economic futurist? A futurist is a person who identifies trends in society. A slow developing trend that started in 1810 when 84% of our workers worked in Agriculture. At the turn of the century it dropped to 46% and today less than 2% of people work in agriculture. One can spot a trend but it's hard to make a living on it. For instance the price of computers drops regularly and their capability increases, another trend known as Moore's Law. "Futurists identify trends and "...frankly they are a dime a dozen. Us economic futurist, we're the real deal." We deal with the impact these trends have on us a individuals our country etc."
Let's start with demographics. It's not a bright story. We only have to remember one number and that is 2.1. 2.1 is the number of children each woman must produce for a country to maintain its population. In the US our birth rate is 1.9 and our population of 325 million will stay pretty stable. because we get a boost from immigration. The bad news is there are 7 countries in the western world that have stopped breeding. Ironically, it starts with the Catholic countries, Italy, Spain, and Portugal with birthrates of 1.4, 1.3, and 1.2 respectively. Then Japan, Austria, and Germany are at 1.4 and Switzerland is at 1.5. If a country maintains a birthrate of 1.4 for 20 years they will lose 30 % of their work force. In the future these countries will have more people drawing out of government programs than paying into them. He refers to this as an economic death spiral. These countries have what is known as an "Aging Society," which means there are more walkers than baby carriages - more people are over 65 and under15 (non-workers).
Germany and Japan have the distinction of having a birth rate below 2.1 for the longest time. Germany went below 2.1 in 1969 and 2 years later Japan followed and both have continued in a downward spiral. There is a major difference between the two countries. In Germany the population is 83 million and they have 1 million immigrant a year - they need 1.5 million to maintain their population. A hundred years from now they are going to be like the Jews there will be about 6 million Germans left. 200,000 native born Germans die each year, many more than are being born.
Japan rejects any and all immigration. There are 127 million people and the population is 98.5% pure which means some Japanese went abroad, married someone and brought them home. In 1960 one out of every 15 (about 6%) of Japanese were over 65. That is about where we are today. Today in Japan it is about one out of every 4 people who are over 65. If you go to 2060 the Japanese government estimates the population will have fallen to 87 million. The bad news is that
a43 million, almost half, will be over 65. The country cannot economically sustain itself - survive. Since 1899 the Japanese mothers have rewarded their country with a million babies. They didn't make that many babies last year and the population dropped from 128 million to 127 million - they lost 1 million people. That is a first for a civilized country. They close 300 schools a year. They literally sell more Depends in that country than baby diapers. 1/3 of the work force will age out
over the next 20 years - from 65 million workers to 45 million workers. 70% of a country's GNP is from consumer spending and we know old people spend less than young people.
What is Japan going to do? What are the affects? The thing for sure they are going to sell a trillion dollars in American debt they own. That's about 5% of our debt. It will put some pressure on us but not a lot. They are not the only country that will be selling our debt. Japan is our 4th largest trading partner. How do you grow a country. There are only two ways; either increase the population or increase worker productivity which is measured as the output for the number of hours worked. Our productivity is now growing anemically at 1% per year. Japan can do what Australia does, they have a population of 25 million and take in 250,000 immigrant each year. 1 of 4 Australians is an immigrant. In 25 years Australia has never had a recession or consecutive quarters of economic contraction. Japan with their declining workforce and aging society they can't seem to escape a recession as they have had 5 in the last 7 years. The US has had 7 since 1970. Immigration is a political issue. He claims illegal immigration will stop by the year 2025 all over the world. The countries he mentioned will be paying workers to immigrate to their country. In Japan they are already doing it but they are called transportation workers - workers who work and participate in the economy but are not offered citizenship.
At the end of WWII there were 40 people paying into Social Security for every one that was drawing out. Today it is 3 to 1 and is headed in 2030 to 2 to 1. This trend is not sustainable for our country. Capitalism has never flourished in the absence of a growing population.
On the upbeat we will talk about autonomous vehicles. There is none available today but there is a twin sister which is the electric vehicle. Electric vehicles are growing at a rate of 43% (year over year). Tesla has orders for over 400,000 cars next year, their model 3s. They can't produce 400,000 cars in one year. If they could it would cause a growth rate of 400% exponentially. Tesla is worth more than Ford Motor Company according to the stock market. Motor Trend magazine named it the "Car of the Year" not the "electric car of the year", but the "Car of the Year." Consumer Reports says it is the best car ever made and gave it a score of 103 out of 110. Tesla has only one plant and it is running at capacity. China is trying to build a plant for them.
They are building the Gigafactory in Sparks, NV which is planned to have 15 million square feet and Elon Musk has already given them orders to double it. It needs to be 4 times as big to produce 400,000 cars a year for which they have orders. The good news is the cost of the batteries is declining as their charge rate is being reduced and their output is increasing. This is Moore's Law applied to batteries. 40% of the cost of an electric car is in the battery. In 5 years if the cost of the battery is cut in half what happens is the cost of the car it will be very competitive with internal combustion engine cars. When one fills their gas tank it costs $50 and when he charges his
electric car it costs $7.50. Think of the convenience of never having to visit a service station. An electric car has approximately 20 moving parts if you include the wipers and electric windows.
The stink pot (internal combustion engine) has 2,000 moving parts. What could possibly go wrong? He argues the electric car is more convenient, requires less maintenance, and is less costly to buy and own than a gas burning auto. The cost per mile for the electric car will go down from approximately $.05 to $.01. When the autonomous car comes out we will refer to transportation as a service not a vehicle one owns. He
feels we will start seeing them in the larger cities about 2021. Ford plans to introduce one that does not have a steering wheel, it's not going to have pedals and older people may not trust it but the younger people will embrace it. Older folks will follow the younger generation. When one first rides in a driverless car they will be shaky the first time the car turns left in front of on coming traffic, but the second time won't be as dramatic and third less until one is comfortable trusting the car to drive. If one can save $5,600 per year on their taxes they will opt for the electric car.
The autonomous car fleets will provide a car free to the user in exchange for a price per mile. Uber loses money on every drive they give. Their survival depends on the emergence of the autonomous car. "Your car sits on its lazy ass 94% of the time." we have about 250 million cars in the country, 17 million new cars and trucks each year, 14 million go to the junk yard. With the autonomous car there is no need to own one so production of cars will drop by about 50%. That will have an impact on our economy. Our kids of today will never have a driver's license. Kids of today will not be allowed to have a driver's license because we kill one another. We kill about 40,000 people a year. The autonomous car doesn't have to be perfect, it just has to be better than we are. Insurance are going to drop for autonomous cars and will increase for those who insist on driving.