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Foreign Policy
Winter 1998–99
Boom, Bust & Echo: How to Profit from the Coming Demographic Shift
By David K. Foot with Daniel Stoffman
Reviewed by Bruce Little *
An economist and a journalist might seem an improbable duo to turn out a mammoth bestseller, especially when its topic is demographics. But University of Toronto professor David Foot and freelance magazine writer Daniel Stoffman have produced a publishing phenomenon in Canada. In a country where 5,000 copies qualify a hardcover book as a bestseller, more than 250,000 copies of Boom, Bust & Echo have been sold since it first appeared in the spring of 1996. As of this October, it had popped up in the weekly top 10 nonfiction list of the Toronto Globe and Mail, Canada’s second leading daily newspaper, more than 109 times, occupying the number one spot for a full year.
The authors’ story line is simple. Canada’s major social and economic trends of the past half century have been shaped by three distinct groups: the massive baby-boom generation born between 1947 and 1966, which now comprises one-third of all Canadians; the much smaller baby-bust group that followed from 1967 to 1979; and the boomers’ echo kids who appeared between 1980 and 1995.
“Canada’s was the loudest baby boom in the industrialized world,” Foot and Stoffman proclaim, bigger than those in Australia, New Zealand, and the United States, the only other three countries to experience this phenomenon. As the first wave of boomers grew up, they forced a rapid expansion of primary, secondary, and postsecondary educational facilities. As they entered their twenties and thirties, their massive demand for apartments led to rent controls in the 1970s. Their subsequent need for homes sent housing prices soaring in the 1980s and then plunging once they were all housed. As they have approached their fifties in this decade, they have poured their money into mutual funds, saving for a no-longer-distant retirement. And they have taken up bird watching, gardening, and gambling (causing a proliferation of casinos).
The front-end boomers got to the good jobs and cheaper houses first; the rear-end boomers had a tougher time. The baby-bust group was a headache for purveyors of children’s toys in the 1970s. The price of baby-sitting climbed when boomer parents encountered a thin supply of teenagers.
These sorts of wide-ranging details are one reason why Boom, Bust & Echo is so popular. Clearly written and down-to-earth, its appeal rests also on its claims to foretell the future. Business people love the book for its pointed advice on approaching trends in food, alcohol, clothing, cars, and leisure activities. (Among the things to come: Beer sales will increase as the echo kids enter their alcohol-swilling teen years; aging boomers will forsake family-friendly minivans for luxury sedans and sports-utility vehicles; and the demand for community arenas will increase as the echo generation enters its prime hockey-playing years.) Management consultants can find an explanation for the organizational flattening they see taking place around them: The traditional corporate triangle, with few at the top and many at the bottom, had to change because it could not accommodate the rectangle of boomers pushing up through the system. For the owners of small businesses, who cannot afford to hire high-priced market researchers, the book offers a primer on demographic analysis, a sort of do-it-yourself kit.
Timing was another important factor behind Boom, Bust & Echo’s appeal. The book appeared just as Canadians had suddenly become very conscious that their government-run Canada Pension Plan was heading for trouble. There were not enough baby busters to pay for the generous retirement benefits that the boomers had financed for their less numerous elders. Since the book’s publication, a hefty increase in premiums (i.e., taxes) has solved that problem, but the passion among Canadians to save for retirement has not been quenched.
Foot’s ideas have created a cottage industry driven by admirers and detractors. David Cork, an Ottawa stockbroker who uses Foot’s work to develop investment advice for clients, teamed up with writer Susan Lightstone to produce the book The Pig and the Python: How to Prosper from the Aging Baby Boom, which also enjoyed an extended run on the bestseller lists.
Michael Adams, president of Environics Research Group Ltd. and one of Canada’s leading pollsters, weighed in with a sharply critical rejoinder in his 1997 book, Sex in the Snow: Canadian Social Values at the End of the Millennium. “Demography is not destiny,” he argues. Rather, Canadians fall into one of 12 “social values tribes” (four to cover the sometimes conflicting attitudes of the boomers alone) that are largely independent of age-group demographics.
At the same time, Derek Holt, a young Royal Bank of Canada economist and Foot’s onetime student, has turned out several papers debunking what he regards as the overselling of demographics. According to Holt, interest rates, employment, income, and government policies “all tend to swamp the role of demographics” in determining trends in consumer spending, household savings, and housing demand. “Simple extrapolation of population trends,” he writes, “is an obscure foundation for any business plan.”
The critics have a point. It is easy to come away from the book (or one of Foot’s frequent presentations) with the sense that demographics explain not only “two-thirds of everything,” as Foot says, but baseball’s famous 110 percent. Through it all, however, author and book roll serenely on. Foot, British-born, Australian-raised, and Harvard-trained, is now in such demand as a speaker (his cheeky wit goes over well) that he teaches only half-time. Boom, Bust & Echo 2000, a paperback edition that has been heavily revised to incorporate new data from the 1996 census and more examples from the United States as well as Canada, will hit the bookstores in time for Christmas. The odds are that fans of the earlier edition (or their gift-giving relatives) will line up to buy the update, assuring the book of another long run. Foot has pushed more hot buttons than Canadians probably knew they had.
Endnotes
*: Bruce Little is economics reporter at the Globe and Mail in Toronto, where he also writes a weekly column on economic and social trends. Back.