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Saturday, September 03, 2011

What about the unknown unknowns?


The much villifield ex- Secretary of Defence Donald Rumsfeld will probably be best remembered for his comment to journalists about known and unknowns.

There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don't know
We don't know.

Personally, I think if a marketer really understands what Rumsfeld was saying he/she will improve their chances of navigating the known and unknowns about the ageing population.

The article in Bloomberg about the US shrinking labour force made me consider this subject. The author of the article has taken a bucket load of the ‘knowns’ about population ageing, chucked them up in the air and hoped the landed providing a half decent forecast about the future. They didn’t.

His article boils down to these ‘knowns’.

As the boomers drop out of the labour market, either because of fatigue, death or retirement, their demand will decrease and hence weaken economic activity – the author reckons this will go on for the next two decades.

More retirees mean slower household formation that leads to reduced consumer spending and a downward pressure on equity prices. This is accentuated by the change in the portfolios of older people from equities to ‘safer’ investments.
Losses from the decline in equity prices will force older people to delay retirement and increase the number of older people re-entering the workforce.
Not all industries will be affected in the same way (i.e. health-care spending will increase) 
A significant group of older people will literally run out of money and become totally dependent on the state for their day-to-day living.
Note – none of these ‘knowns’ are quantified.


Let me add a few more ‘knowns’ to the list:
The need to translate housing wealth into income will result in a disturbance to the housing market as more properties are sold – this will have a knock-on effect to the price of rental property and the demand for ‘downsized’ properties.
The continuing move of economic activity from West to East will reduce the level of demand in the US and Europe.
The alternative interpretation of the above point is that the markets of the East will provide huge business opportunities that will result in increased economic activity.
The massive debt over-hang that was formed during a period of higher economic activity will act as a long-term brake on economic recovery.
Population increase and the limitation of raw materials and food will continually drive-up the costs of basic living expenses meaning there will be less discretionary spending.
Note – none of these ‘knowns’ are quantified.
Search around and you will find some pundits (including me) who have hazard a guess at the effects of some of these factors. What nobody has done has been to look at the inter-relationship between the factors.
This brings us to the subject of ‘unknown unknowns’.
Let’s dismiss the cataclysmic events of fire, earthquake, war and pestilence. Not because they will not happen but because there is no way they can be predicted or quantified.
By their very nature it is impossible to hazard a guess at the nature, let alone the dimensions, of unknown unknowns.
I suspect they will have something to do with the way science and then technology changes things. Maybe they will be connected to a mega change in social attitudes (i.e. the widespread use of assisted suicide).
What these 500 words of assorted thoughts demonstrate is the multitude of factors that are forming the environment in which marketers operate.
It doesn’t take much effort to get a couple of percentage points better than your competitors at interpreting these changes. If you don’t then you will be continually be in reaction mode. 
A good starting point is to at least be honest about the level of your ignorance and to admit what you don't know. Dick Stroud

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