Who Needs a Wall When You Have Demographic Trends?

What if you built a wall to keep people out, and it turned out that no one really wanted to get in anyway? Okay, some people might still want to enter the U.S. from Mexico and other countries which have typically supplied low skill labor, but it looks like their numbers are dwindling. In fact, thanks to some demographic trends that are getting lost amidst the general hubbub, it may be that the numbers of migrants are headed down anyway, no wall required.

brookingsDemographics explain a lot, or at least that is my bias. They certainly explain a lot of the reasons why there was such a rush to countries like the U.S. from Mexico and Latin America in the past decades. The U.S., like much of the world, had a baby boom that lasted until the mid-1960s. That meant the supply of domestic-born, young, labor grew rapidly until the 1980s and then grew less rapidly thereafter. In other parts of the world, including Mexico, the baby boom went on longer which meant that young, low-skilled workers jostled with each other to get jobs in their home countries. Inevitably, some headed for the U.S., some illegally. That’s the part of the story we know, and it is that rush to reduce the number of illegal immigrants that is behind the idea of putting up a wall between the U.S. and Mexico. Except, maybe those who want that wall should maybe be considering whether it is worth the trouble.

The situation is outlined in this paper by economists Gordon H. Hanson, Chen Liu and Craig McIntosh of the Brookings Institution.  As they see it, between the early 1980 and the mid-2000s, there were lots of reasons for migration from Mexico and elsewhere in Latin America to the U.S..  The U.S. economy was strong, and for those seeking relatively low-paying work, there was not a huge amount of competition from the U.S. born population, a situation at odds with their circumstances at home. Around the time that the last recession hit the U.S., however, the undocumented population in the U.S. declined by an annual average of 160,000 for the years from 2007 to 2014.  Economics, the authors believed, just hastened a story that was going to happen anyway as a result of demographics.

So what does come next? Well, again you need to look at the demographics to understand it. The authors did that and came up with a very dramatic profile of what they expect migration to the U.S. to be over the next decades.  Using population projections from the United Nations as well as historical migration data, they modelled the likely inflows into the U.S. through 2050. The picture they came up with for the next thirty years looks almost like the inverse of the last thirty. And keep in mind that is not assuming any kind of wall, merely a continuation of demographic shifts that are already taking place.

The dwindling supply of young labor post-baby boom is one that is being mirrored in many countries including China. Think about it: Mexico provided cheap labor for Americans while China provided cheap goods made by cheap labor. When all of these countries age, what happens to the cost of living in the U.S. and elsewhere? It is an economic problem that does not get discussed as much as it should, but the reality will hit soon enough.

In the meantime, plans for a wall continue. No doubt once constructed the numbers of migrants from Mexico will fall, but analysts looking at the future numbers might want to consider the actual cause of that decline.


Maclean Publishes ’75 Charts Every Canadian Should Watch in 2017′

I’m happy to have been able to contribute to Macleans’ list of ’75 Charts Every Canadian Should Watch in 2017′.  My post was on the ‘Gig Economy’ and you can find it here (you have to scroll down to find it, but that gives you a chance to see some fascinating graphs first) but as I mention, wish the information we had on it was better. Are you listening Statistics Canada?


On Trend but Out of Luck: The Problem With Orchestras

If I had to think of an industry prone to poisonous industrial relations battles I would probably think first or the auto sector, or maybe even something like education or health. The battles in those industries, however, are apparently being matched by orchestras (can I say ‘in the orchestra industry’?) across North America.  Like many people, I tend to think of the music industry as full of a few superstars and many starving artists, but as it turns out that is not quite the full picture. Orchestras, as it turns out, have long been a unionized sector, and like other unionized sectors they are facing changing times a tumultuous period of restructuring.

Orchestras are actually a fascinating sector, albeit fascinating like watching a train wreck. Over the past few years, a host of North American symphonies have faced bankruptcies and closures (those in Louisville, Honolulu and London, Ontario are examples), long strikes and lockouts (notably affecting orchestras in Philadelphia and Pittsburgh this year) and deficits (the New York Philharmonic and the Toronto Symphony Orchestra come to mind but there are actually too many to list). They play pretty music, but they are actually going through ugly times.

Not surprisingly, much of the source of strife in the orchestra sector is happening because of money issues. Like firefighters and autoworkers, orchestras are finding that the non-profits that have long employed them no longer have the means or the desire to pay for what had been long-held contracts. In Pittsburgh, for example, players have been making a base rate of $107,000, which is something over $51 an hour not including benefits, which is in contrast to an what the Bureau of Labor Statistics says was an average wage in Pittsburgh of little over $22 an hour as of 2015. The current dispute centers around a plan to cut musicians’ salaries by 15 percent, and as well to freeze their pensions and to reduce the size of the ensemble.

Some argue that the market for musicians is intrinsically different than say the market for retail workers. If you ‘let the market decide’ on the level of salaries, goes the argument, you would not get you the best musicians. That is, the salaries for retail workers might be low since there are so many people willing to do the work, and since the job is simple enough that there is no shortage of qualified people. There may be lots of unemployed musicians, but if you let them outbid each other to work cheap, you might not get the ‘best’ ones.  And $100,000 there is a different pool available than there might be at $30,000, or at a ‘pay by the gig’ agreement.

There is some merit to this view. For one thing, I would argue that at the higher salary, you are not only choosing different workers, but as well guarding against the turnover that would inevitably happen if you hired at a lower or a gig rate. It would only make economic sense for musicians to migrate towards better paying short term gigs if they did not have security and a decent salary. Whether that decent salary should be above what a nurse gets paid (which in Pittsburgh is $25.84 an hour according to payscale.com) is up for debate, however.  And, the overriding trend in the labor market is to ‘gigify’ even the most traditional of jobs, which means the musicians are fighting a bit of a losing battle.

The bigger question really is what the correct industry model should be for orchestras. Should they be considered a public good, and therefore pretty much paid for by the state as they are in Europe? Or should they be left to sell tickets to pay their costs? That one is a bit of a non-starter if you want orchestras to survive, since virtually none are able to do so without outside support. According to a report by the League of American Orchestras, detailed in this story from The New York Times, as of 2013 (the last year for which data is available) orchestras had reached a ‘tipping point’ where they now rely more on philanthropy than ticket sales to generate revenue. Of course, private sector philanthropy rather than government grants could theoretically work, although there are far more demands for revenue from arts organizations than there is money to go around.

In my reading of it, orchestras actually should be a growth industry and the well managed ones could face a bright period ahead. Think about the major changes we are seeing as an economy and as a society. One of the biggest ones, to me, is the retirement of the baby boomers which will give a lot of people nothing but time – and those with time have time for music.

orchestraBoomers, retired or not, are now searching for ways to give their lives more meaning. Getting involved in hobbies, and in particular in music is a natural way for them to do that.  Baby boomers also want to be on boards or to do meaningful volunteer work, and to have some input into organizations that interest them. If orchestras can help them to do that, then the the next step for them is to get them to write checks. Rich boomers can write big checks and poorer ones can write small ones or buy tickets.  The trick is to tell them what is available and make it accessible to them. Savvy orchestras have already increased the size of their marketing departments and community outreach programs in order to reach this market.

The existence of cultural institutions is also an important consideration as baby boomers think about where they want to live once they retire. When listing what they want close to them, many cite proximity to cultural and entertainment venues as a consideration.  Florida, the haven for many pre-boomer retirees and in a way of model of how many communities will evolve, is actually a hub of small orchestras. Communities that want to attract or retain boomers would do well to retain their orchestras as well.

Even with higher demand ahead, the path for orchestra musicians is unlikely to be a smooth one. The economic future we are facing is one where many will go from gig to gig, and where job security is not a given for anyone. Musicians outside of the orchestra sector know what that career path looks like better than anyone. Perhaps they could give some coping lessons both to their colleagues and to the labor force at large.


Too Close for Comfort? The Downside of Open Plan Offices

Collaboration, sharing ideas, boosting creativity, creating bonds – all of these are reasons that are typically given for having open plan workspaces. Sit next to your colleagues in an open plan office or cubicle, goes the reasoning, and productivity will rise. Not so, says new analysis by researchers at the University of Auckland in New Zealand. In fact, as chronicled in this piece for the World Economic Forum  things may be so bad in an open plan office that you are really better ‘working remotely with your cat for company’. Ouch.

open-plan-office-014For many of us, the open plan model has existed for pretty much as long as we have been in the workplace.  Once upon a time (if you believe the scenario presented in shows like Mad Men which take place forty or fifty years ago), even fairly junior employees got actual offices with walls and doors and secretaries that sat outside them. Quaint. These days, the reality for the majority of office workers, even up to high middle management, is that you get some form of cubicle, or maybe a desk in an open plan office. ‘Hot desking’ – not having your ‘own’ desk with a space to put your kids’ pictures on or a drawer in which to stash your shoes in the winter – is also quite the trend these days. The reasoning is that we-are-all-friends-here and that it is more efficient to just grab whatever desk is available than to have designated spots for everyone.

The Auckland University researchers found a long laundry list of ‘employee social liabilities’ faced by those working in collaborative spaces.  Distractions obviously topped the list, but as well working in close physical proximity to others apparently also results in distrust and negative relationships. If you work close to someone you are apparently less likely to be friends with them, and you are more likely to think you are being well supervised by the manager who also works in proximity.  As for the idea of free and creative flow of ideas, that was not borne out by the data either.

The findings, which were based on a survey of 1,000 working Australians, are interesting and well worth pondering. These days, companies are struggling with how much to let employees work off-site as compared to in the office. For some workplaces everyone has to be present every day, but that is not always the case. Still, even when technology allows people to work elsewhere, there is often a deep distrust that they are going to get enough done. Out of sight of their supervisors, goes the theory, and they are probably cruising the internet or hanging out at Starbucks. The reality, however, is that they may be getting more done than if they were at work in their cozy little cubicle web.  Having their own offices, working with just one or two others, or working from home apparently produce more and better work than being in open plan offices.

No one is arguing that workers should never see each other or that they get more done if they spend most of their time isolated from one another. Many studies have shown that a bit of contact, whether in meeting rooms or around the photocopy machines, can yield great benefits. That is the real argument against allowing people to work from home although clearly there is room for something middle ground between the all-or-nothing model. Given that forcing everyone to hang together when they are at the office is apparently not yielding a lot of economic benefits, the researchers suggest that noise-cancelling headphones or walls of plants may be a good idea for some offices. As well, some simple courtesy towards co-workers might not go amiss.

It is an important thing for companies to get right. In the current economy, there is a huge need for productivity gains, as well as for keeping costs lean. That could mean cutting down on office space and shoving everyone together, or it could mean letting people work from home more frequently.  It could even mean putting up some walls, with the acknowledgement that sometimes good fences do indeed make good neighbors.



Fancy Fitness

Sure you can go for a run for free, but if you did you would be off trend. That is one take-away from some new statistics on where people are spending their fitness dollars. According to this article from Quartz (which quotes data from the International, Health, Racquet and Sportsclub Association, U.S. attendance at specialty gyms is on a tear. Money spent at fancy gyms like SoulCycle and Crossfit grew by 70 percent between 2012 and 2015, and those kinds of facilities now make up 35 percent of the fitness market. It is a pricy way to get fit, but then again the gyms as selling more than just fitness.

yogaAny gym sells an experience, and that in itself is a good retail strategy. It has long been clear that people are open to paying for ‘experiences’ rather than things.  Some of this might have to do with the move to not create ‘clutter’, which is a significant consideration given the popularity of books by people such as Marie Kondo. Beyond that, however, it seems that buying an experience just makes people happier, a finding that was borne out by recent research from San Francisco University. Travelling, playing golf, enrolling in an art class, going to a concert – all can make people more satisfied than they would be if they bought things at a mall.

Partly this is because of the social aspect of the experiences. If you buy a shirt for $80, you get the shirt. If you buy a ticket for that amount, you get the experience you paid for (hearing the music at the concert or whatever) plus the experience of being in a lovely concert hall with other people who enjoy the same music you do, whether that means the people you came with or the just other audience members. Selling a ‘luxury’ experience along with a good typically means you can charge more as well, something that Starbucks knows only too well. Yes, your latte may cost $4, but with it comes the chance to sit in a nice environment and work or socialize if you want.

The high end gyms do indeed sell a luxury experience, and if you walk into a yoga studio after having been used to a chain fitness membership, the difference in price can be stunning. As opposed to a big fitness chain that sells annual memberships at a relatively low monthly cost, high end fitness centers often charge by the class. As Quartz points out, that means that they are selling to people who are actually taking classes, rather than those who paid for a membership they may never use.

So why are people willing to pay so much? Partly because they get nice facilities and a nice product as their experience. They also get a sense of ‘belonging’ or ‘community’ something that is apparently absent from many people’s lives these days in North America. Crossfit is a great example of this. Working at a large company, I once saw one guy come up to another he had never met and say ‘I hear you’re a Crossfitter – I am too.’ It was an instant connection, as if they both had kids in the same class or maybe were Trekkies. Being a ‘Crossfitter’ is a bragging right, and is something that is bought along with the hefty price of attending classes.

As well as the social aspects of the gym experience, I would add that the boom in high ending gyms has a lot to do with economic trends as well. These days, one of the clearest retail trends is the split between luxury and economy. At the top end, Burberry and LVMH keep posting strong results, while at the bottom Walmart keeps prices low because their consumers are struggling to make ends meet eight years after the recession officially ended. So yes, gyms are a part of that trends. Towel service, nice toiletries, spa-like surroundings – these are all nice to have, and those who can afford them are apparently happy to pay for them.


How ‘Side Hustles’ Can be Happy Things

Maybe I’m late to the party, but it was only recently that I heard the phrase ‘side hustle’. Apparently it has been around a while: way back in 2013, Entrepreneur.com tacked up an online definition, calling ‘a way to make some extra cash that allows you flexibility to pursue what you’re most interested in’. It can also be your true passion – a chance to delve into fashion, travel or whatever it is you care about the most without quitting your day job. More recently, it has been attached to the Millennial Generation who apparently have the right mix of creativity, tech savvy and financial need to makes the Side Hustle something of a given. In fact, the Side Hustle may work well with another trend, that of people being unhappy with their work lives.  As it turns out, having a second, compelling career may make you more tolerant of your day job.

etsysellerThis article from Quartz spells out the way that it works.  Quoting the author of a book called The Happiness of Pursuit, Chris Guillebeau, the author makes the point that in this day and age there is no need for ‘occupational purity’. That’s a new phrase to me too, but I like it. For so many people, the skills they now have and the jobs they now occupy will have to be re-thought every few years in the future. That is true for all workers – think about unemployed 50 somethings who need to think up new careers – but especially true for those just entering the labor force.  Telling a 20something to pick a profession and assume they will be working at it for the next four decades or so seems like poor advice to me.

And so you have the Side Hustle. It has always existed for some out of economic necessity: for those pursuing a dream (wanting to be a rock star say), their reality also may mean being a barista or whatever. Which one of those jobs is the side hustle is a matter of opinion.  The new-style Side Hustle is the one where the full time accountant sings in a rock band on weekends, or the customer service rep  makes jewelry and then sells it on Etsy after hours. The singing accountants have always existed of course, as have the jewelry makers. What has changed is the technology that allows the jewelry to reach a wider audience – and perhaps as well the attitudes that now say it is a good idea for the accountant to channel his inner-Steve Tyler.

So why does it make people happier to have that side hustle? Well, clearly it makes them less invested in your regular job, which as we all know is hardly to be a job-for-life these days.  More simply though, the side hustle can just make people happier and more excited about life in general, and that no doubt will have positive spillovers for their regular jobs, however mundane they might be.

While I like the tone of the Quartz article and do not disagree that having a richer life makes you happier, I think that we are going to see side hustles rise at an exponential rate, but for reasons more related to economics. These days, more and more companies are getting less and less committed to having huge numbers of people on the payroll. That means we are moving to a world with a mix of full-time work, side hustles, freelancers, part-timers and temporary workers.   A lot about that mix makes those who study the economy and the labor market uneasy and worried about what that means for income security and economic growth, and I would not disagree that those are valid concerns. If those ‘new work world’ workers figure out how to make themselves a little happier amidst all of that, that might constitute a benefit that is harder to quantify but is a benefit just the same.


Why Twinkies are an Economic Indicator

Robots, joined by Gig Workers, are now making Twinkies, and they are doing such a good job that their parent company is going public.  That’s a powerful statement about today’s manufacturing and economy, never mind our nutritional preferences.

twinkieTwinkies, those flaky, cream-filled snack cakes that are apparently beloved by many, have been a business news story several times over the past few years. Hostess, the company that makes them, has been around since 1919. Over the decades, it became a huge company that not only employed many unionized workers to the extent that that eventually had 372 separate bargaining contracts at one time. As this story from the Wall Street Journal details, the company ran into financial troubles in 2004 and ended up in bankruptcy court, nearly closing operations. Although the company rallied, troubles with union contracts sent it back there in 2012.  It might have been the end of the line for the Twinkie.

The Twinkie rose again when the brand, along with the rest of Hostess’ snack food line, was purchased the following year by two investment firms, Metropolous & Co and Apollo Global Management. The company threw a bunch of money behind rebranding the product, with a huge amount of success apparently. Hostess reported revenues of $650 million for the year ended on May 31st of 2016, and according to the company has a gross margin of 43 percent. Earlier this month it was announced that Hostess would go public, allowing those who believe in Twinkies to actually buy shares in the company.

Thing is, although Twinkies do have a retro appeal, the business model behind them these days is very different from what it used to be.  When Apollo and Metropolous set out to remake the company, they not only created new products (bread, a frozen-fried  twinkie that will soon be released) they also poured about $100 million into investment. The number of bakeries used in manufacturing has been pared back, and larger ovens apparently mean more efficiency.

In reading the Hostess success story, however, two things really caught my eye. The first is that robots now pack Twinkies into boxes. That’s right, robots. For the most part, technology replaces workers in quite subtle ways. Word processing software and voice mail in one way or another did replace many secretaries, but that happened over time and was more about people not being hired than it was about anyone being fired and their job function taken over by machines. In this case, however, robots are doing exactly what human workers once did and getting Twinkies into boxes. That says a lot about the nature of manufacturing these days.

The other thing that stands out to me is that Hostess is now being sued by truck drivers in twelve states, saying that they are being called ‘contingent workers’ when they are actually (and would rather be) employees. To me, that one is perhaps even a more important trend than the Twinkie-packing-robots.  Increasingly, workers are being shifted into the ‘Gig Economy’, a place where they get assignments rather than jobs. For top-tier professionals that can be an awesome thing that allows them to charge top dollar and set their own hours.  For the truck drivers and others like them, it clearly means fewer benefits, less job security and probably a significantly lower income.  Whether or not the drivers win their suit, the move to a new class of ‘Involuntary Gig Workers’ is a genie that has left the bottle.

At the end of the day, Hostess now employs just 1,200 people in its Kansas City factory, as compared to 19,000 at its peak. That is actually 1,200 more than would have been employed had the brand not be saved, which is a good thing. The stock offering this Fall is likely to get a lot of interest and potentially could be a bonanza for investors, and the infusion of capital is likely to allow the company to expand, which is also an economic positive.

You cannot get away from it though: Hostess is but one example of a company that is using robots and Gig workers to move forward. In an efficiency sense that is great, but now is also the time to take note of the trends and ask what they will mean in a broader economic and social context.


Twinkies, it would seem, are an economic indicator and one that we would do well to follow.


Sharing the Spoils of the Gig Economy

Amongst the problems with the Sharing Economy – and its offshoot, the Gig Economy – is the fact that shares in it tend to be pretty unequal. In fact, even more than is the case of a usual employee-employer relationship, oftentimes the ‘employee’ in this example (who is really a gig worker) ends up with a pittance compared to the organization that helps them find the work.


An effort to get more of the spoils of their work into hands of the Gig Workers is behind a new start-up called Stocksy.com, which is profiled in this article from the New York Times.  Stocksy is a service that provides stock images by photographers for sale to users. Unlike other sites which provide similar services, it is structured as a ‘co-op’ owned by the photographers, who get a bigger cut than they would otherwise. Run by the former owners of iStock (a company that was  sold to Getty Images in 2006 for $50 million) it is an attempt to more equally  share profits, and to provide better incomes for Gig Workers who frequently find their Gigs pay a lot less than they would like.

Although I would think that photographers are less vulnerable to exploitation than many Gig Workers (more on that in a moment) the truth is that as structured right now the Gig Economy does not work all that well as an economic model for many. To start, in large part you cannot even buy shares in it, meaning that the vast majority of investors cannot participate in it. Companies like Uber and Lyft are based in Silicon Valley and backed with significant amounts of venture capital, and for the most part there is little indication that they will go public anytime soon.  More problematically for those who work for these organizations, the companies tend to be structured such that the vast amount of profits go to the companies, making many of those who work this way very much what I would call ‘involuntary Gig Workers’, workers who would rather have ‘real’ jobs.

The fact that photographers are being drawn to Stocksy because they are unhappy with existing stock companies does surprise me a bit. Thing is, the photography industry has always had a large number of ‘voluntary Gig Workers’, those who work alone or in very small groups. Traditionally, they have sold their services to a series of buyers rather than a single client. The advent of sharing platforms such as stock photo sites, or even the advent of the internet at all is potentially a huge boost to them, since they can make their wares available to a much larger platform. In fact, a study by Gig site Thumbtack saw skilled professionals with differentiated services to be the big winners from the Gig Economy, and predicted that that success would continue over the coming years. In contrast, they saw those providing undifferentiated services (one ride to the airport is really the same as another) as at risk of losing their gigs altogether as technology such as driverless cars takes over.

Stocksy’s model, whereby they end up paying their members a dividend at year end (providing they have ‘surplus revenue’) may be copied by others in the Gig industry.  Then again they might not – the big, Silicon-Valley backed players are a bit of a monolith against other players, and co-op based services will only work if a sufficient number of photographers choose to only provide services to them rather than others.

The big picture though, is that the Gig Economy is still a work in progress. There are things to be gained from being a part of it, but it is going to take some time before workers and ‘employers’ and buyers and sellers figure out the mix that makes the most economic sense to each of them.


The Economic Impact of Zika (or Why Disruptors are as Important as Trends)

A year ago most of the us knew little to nothing about the Zika virus, but at the mid-point of 2016, it appears that its existence is one factor that could disrupt world economic activity for years to come.  The existence of the Zika virus is a great example of a ‘disruptor’ a random factor that can throw even the most well-thought out business plan into shambles. In the case of Zika, its effects are now impacting economies both in those parts of the world where it is prevalent as well as those where it is not.

zikaA virus that has been around since the 1950s and which is spread by mosquitoes, Zika over the past year has officially reached ‘pandemic’ status.  In the Spring of 2015 there was a major outbreak of it in Brazil (the location of the upcoming summer Olympics) and since that time it has spread to parts of South America, Central America, Mexico and the Caribbean.

As everyone learns more about Zika, its influence on decision-making is starting to intensify. What we do know that its most ominous potential effects are to pregnant women whose babies may end up with microcephaly (a condition in which babies are born with an unusually large head). Accordingly, it seems like a no-brainer that Today show host Savannah Guthrie, who is expecting her second child, has announced that she will not travel to Zika-infected Rio to cover the Olympics.  It is more confusing, although perhaps also rational, that many men including golfers like Jason Day and Rory McIlroy will not go to Rio. However, there is apparently also evidence that the partners of infected men could give birth to babies with microcephaly, and as well that anyone infected can be at risk for Guilliamme-Barre disease.  Even more scary is the recent evidence that children infected with Zika can face long term health risks.

Given all of that, what will be the economic effects of Zika? Obviously the most immediate are to the affected regions, which are inevitably going to face a huge downturn in tourism and perhaps business travel, as well as sky-rocketing health costs. Earlier this year the World Bank put the 2016 tally at $3.5 billion, which will probably turn out to be a conservative estimate.  There will also be a multi-year effect, one that will hit successive countries as Zika spreads beyond Latin America and through a wider swathe of the world, including the southern United States.

And yes, there will be a flip side in the sense that some regions will benefit from the avoidance of travel to the affected regions. If you feel uneasy about taking a vacation to the Caribbean, maybe you seek out a beach on Cyprus or head for a U.S. destination like San Diego. If planning a conference in Rio seems like a bad idea, somewhere like Toronto (which conference planners avoided in droves during the SARS crisis of 2003) could be a good choice.  The only way that there would be real dead weight-loss is if people choose to not travel altogether and to not spend at all. That seems somewhat unlikely (if you really cannot take a vacation maybe you buy a big screen TV instead, for example) but at this point it is hard to say exactly how people will act as news about Zika hits a peak.

Perhaps more significantly, if Zika does not disappear quickly, long term investment and economic development plans will be affected.  Brazil, for example, is a country that has recently gone through an economic metamorphosis that has produced a new middle class. That should have presumably have meant a flutter of foreign investment and business activity coming into the country, an outcome that now may be at risk. Longer term, the potential tragedy of a generation of children affected with Zika would mean huge heath expenditures to many parts of the world. As well, public health expenditures on Zika would have to be diverted from some other areas, which would potentially have a productivity impact as well.

In a sense, a disruptor is the opposite of a trend, which is something with momentum that you can spot. When Rio bid for the Olympics, their plan no doubt covered many eventualities, including the threat of protests or even terrorism. It is doubtful, however, that their strategic plan included the scenario of a pandemic hitting the country at exactly the wrong time.  Perhaps it should have, however. Looking around the world, it is clear that so many random factors have the ability to change economic outcomes on a dime that stress-testing a huge number of scenarios is clearly the way to go.


Linda Nazareth's Relentless Economics