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Saturday, June 11, 2011

Fluid and Crystallized Intelligence and what happens to them when you age

There is an article in yesterdays WSJ (Sorry – paywall) about the broader implications on the US economy of the deterioration in the cognitive abilities of older people.

A Harvard Prof was speaking to a group of financial advisers about the: “Age of Reason.” Well it probably should have been re-named the "Age of Confusion.

A lot of what the Prof said can be found in a previously published paper. The argument goes something like this:

About 35% of wealth is controlled by those 65 or older (approx $18 trillion)

Fluid intelligence (new term to me) is the intelligence displayed in things like memory tests — decreases dramatically with age. In fact, “it’s all downhill from age 20” said the good Prof.

Crystallized intelligence (another new term to me) — memory, wisdom and so on — does increase over time, but less so, on average, in senior years.

All told, the point at which we make the best financial choices is 53 years old, according to his data.

That is a bit too precise for my liking but I get the theory.

The Prof believes that many seniors end up in a state called cognitive impairment without dementia that isn’t quite dementia, but still (as the name implies) a deterioration of memory. In spite of this, people still may make financial decisions on their own. He estimates that 16% of those 71-79 years old, 29.2% of 80-89 year olds, some 38.8% of those over 90 years old are in such a state.

The bottom line of argument is that a great sway of US wealth is in the hands of older people who are not going to make the smartest financial decisions.

I don’t want to put words into their mouths but I think a retort they may give is: “well we cannot make more of a mess of things than our grandchildren and children have done.”

There is a serious issue for marketers. Undoubtedly, cognitive change (I hate the word decline) is a big, big factor that we spend far to little time understanding. It impacts all factors when marketing to older people. Dick Stroud

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