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  • Chris Graham


Today, I’m going to talk about the youth bulge, and it’s not what you think. It's actually this really fascinating predictive tool that’s been used by even the CIA in predicting disrupted cultures around the world. In fact, they predicted the Arab Spring using these data points.

We talk a lot about demographics and demographic shifts at Crown Capital and it's one of our main themes as far as looking for investment opportunities. If you recall from my blog on Baby Boomers as they relate to the Crown Capital Investments platform, remember the statistics: of the 77 million Baby Boomers, 4% have achieved $3 million of net worth or more. Of 62 million Gen Xers, a much smaller population, only 2% have achieved $3 million of net worth or more. Following the Gen Xers, we have 88 million Millennials and over 95 million iGen.

With this contraction of population, what you might expect is a recession or some kind of contraction in valuations, but think about what happens when we get this bulge of youth. What you get first is disruption caused by there not enough room in the current infrastructure to accommodate all of this youth.

For example, in Guatemala, they’re suffering from this right now. For every 50,000 people leaving the job market, there's 150,000 entering the job market. So, there are a couple of things that happen when we have that kind of disruption. Either the people entering the market that can't find a space leave and migrate elsewhere to find a market that's big enough to accommodate them, or they disrupt the current system. Remember that in their youth, the Baby Boomers participated in student sit-ins, protests against the war, all kinds of disruption. Somalia is actually going through as well because they have the same kind of population density in their youth.

Usually, this youth bulge happens in countries that are going from third world or second world to first world, and as that happens, you get this disruptive explosion of youth. Think about it: people used to have eight babies and six died. Now, they have eight babies and they all live.

This youth bulge can cause all kinds of disruption in the economy. Then you move into the consumption years and here's what you get your youth bulge dividend. You move into the peak consumption years ages, which are ages 40 to 50 in any population, 46 being the peak in the United States, and what you get is a lot of need to acquire things during those acquisitive years. During those years, people are buying and generating their own self-driven market and people in that market or in that demographic are building things for other people in that market to consume so you get this great GDP growth. Then, that population moves off stage and you'd prefer to have a population behind it that could keep the trend up on demographics. Here, we don't. Instead, we've got this contraction of demographics, but given that Baby Boomers hold 82% of all financial assets, there might be a transition of liquidity that keeps valuations high and so far it has.

If you want to see a fascinating chart, look at the Harley-Davidson revenue chart and how perfectly it aligns with peak consumption of Baby Boomers. Then, look what they've done to reposition themselves to address this youth market going forward.

I'd suggest you look at your customers and your clients and see where they fall as a spread among the demographics and see what you might have left. I recently talked to a CPA firm that's dealing with this. For a CPA firm, it’s important to look at because as these Baby Boomers sell businesses, that work usually doesn't stay with the CPA firm. Instead, it goes to the new owner’s CPA firm, so they’re at risk for a transition as these Baby Boomers move into a more passive investment lifestyle. I hope that's helpful and helps you make some great decisions .

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