Willy Walker: Thank you, Susan, and good afternoon to those of you on the East Coast and good morning to those of you further west, and welcome to another Walker Webcast. It's a pleasure to have my long-standing friend, Joe Coughlin, from MIT's AgeLab joining me today. I will say this is – there he is! -- I was just about to say this is my 50th webcast and it was the first one that I’ve started without my guest already being on, but Joe has come in just in time, processing to join me right as we start, so that's great!
Before I turn to Joe, a couple comments on the markets and what we're seeing right now. I did a webcast this morning with Max Peek of Magnolia Partners and Doug Bibby, the President of the National Multifamily Housing Council. Doug and I were in agreement that The Stimulus Bill being passed by Congress today is excessive. And while components like the extension of unemployment benefits and checks to those citizens adversely impacted by the pandemic are not only warranted, but very much needed, there's hundreds of billions of dollars of aid that is neither necessary nor good public policy. We also spent some time discussing partisanship in Washington and how the retirement of Senators Portman and Blunt are unwelcome signs that each party is moving further and further to the extreme. We discussed housing policy and the Biden administration's focus on affordable housing and the likelihood that FHFA, which is the regulator for Fannie Mae and Freddie Mac, will likely have a new director in 2021. And we discussed technology, and I mentioned the Walker Webcast where a few weeks ago when Brendan Wallace of Fifth Wall and Casey Berman of Camber Creek joined me. I would strongly suggest anyone who missed that discussion on property technology either watch the replay on W&D’s YouTube channel or listen to the podcast, Driven by Insight.
On the overall markets, a couple quick thoughts: the Dow just hit a record today, which is truly amazing given the pandemic really kicked in almost exactly one year ago this week; and the 10-year is at 1.54 percent today, causing many people to wonder how high rates will go. I asked David Levy, Walker & Dunlop’s Chief Credit Officer, to take a look back for the last time rates ran like this. And in typical fashion for an MIT-educated person, I had to add that plug, given my guest today from MIT, David found an almost exact parallel. From July 1, 2016 to March 1, 2017, the 10-year move from 1.50 percent to 2.48 percent, or up 98 basis points. Note Rates were around 4.18 percent in July of 2016 and increased to 5 percent by March of 2017, or 72 basis points. That is almost exactly what we have seen today from a 62 basis point 10-year treasury on July 1, 2020, up to a 1.59 percent 10-year treasury on March 1st, a 97-basis point increase in the 10-year, with the average note rate increasing by an extremely similar to what happened previously 73 basis points.
A couple observations here: First, it wasn't that long ago that we saw rates run almost exactly like they have run over the last eight months. Second, the period in 2016 to 2017 was when Donald Trump won the White House on the promise of tax reform, which drove the equity markets dramatically higher immediately after the election. Third, while the 10-year reached 2.48 percent on March 1, 2017, it had rallied and retreated to 2.1 percent by June of that year. Now I’m smart enough not to predict rates, so I give you that as solely a data point and matter of fact. And fourth, note that the spreads were amazingly consistent between the run-up in 2016 and 2017 and what we are seeing today. One basis point different in the average cost of financing all-in. So we have not seen spreads come dramatically tighter this time around, than they we did in 2016 and 2017. And finally, while rate increases typically cause owners to reassess acquisitions and refinancings, CAP rates do adjust to new rate environments typically within one quarter. And increasing base rates do diminish the fees and some prepayment penalties, allowing for early refinancings at a lower total cost. Final point I’d add, the DOW moved from 18,000 in July of 2016 to 21,000 in March of 2017 and continued rising to 24,000 by the end of 2017. And the 10-year, having started in July of 2016 at 1.5 percent, went up to 2.4 percent in March of 2017 and finished 2017 flat at 2.4 percent. So, I think it's, you know, history never repeats itself, but it does rhyme sometimes and I just thought it was interesting to go back and look at the last time we had this kind of rate increase, what it did to the equity markets and also what it did to the debt markets.
Okay, Dr. Coughlin is director of the Massachusetts Institute of Technology’s AgeLab. He teaches in MIT’s Department of Urban Studies and Planning, and at the Sloan School’s Advanced Management Program. Dr. Coughlin conducts research on the impact of global demographic change and technology trends on consumer behavior and business strategy. He advises a wide variety of global firms in the financial services; healthcare; leisure and travel; luxury goods; real estate; retail technology; and transportation industries. He is a Behavioral Science Fellow of the Gerontological Society of America and a Fellow of Switzerland’s World Demographics and Aging Forum. He is also a senior contributor to Forbes Magazine and writes regularly for Market Watch and the Wall Street Journal. Dr Coughlin has been recognized as one of 15 World Minds by Zurich-based World.Minds, a select community of global leaders in science, arts, and business. His recent book, The Longevity Economy: Unlocking the World's Fastest-Growing, Most Misunderstood Market, is one of CEO Reads Business Best Sellers and you can see it behind him over his right shoulder to our left in this Zoom call.
So Joe, I went skiing this past weekend. Tweaked my back. And really felt like I was a lot older than 53 when I got to the office yesterday. And as I looked at myself in the bathroom mirror, feeling a little tired, very sore, and older than usual, I said to myself, “Well, if I had been born in 1900 and not 1967, I’d already be beyond the average life expectancy.” It made me feel slightly better, but no less sore. So, here's the question: How long are you and I going to live? And I think more importantly, how old will we be when we stop being active adults?
Dr. Joseph Coughlin: Well, Willy, thank you for having me. It's always great to see you, work with you, and have such a great forum. And thanks for the pointing out of the product placement of the book back there. So you know, one of the things with those of us getting into our 50s, we can still do most of the things that we did when we were younger, it's just the repair time takes a lot longer than we ever expected. And shall we say, the ibuprofen is often a lot closer. So, let me give you some hints as to about living longer. Is that yes, you should exercise and eat well and manage whatever chronic condition you have. But here's the secret to old age. Is everyone listening? The correlation to old age and living longer, and better, is not going to be as big a surprise. Believe it or not, it's not following doctor's orders. It's not eating well because, you know, I grew up in Philadelphia, where Tasty Cakes, Scrapple, and cheese steaks are food groups. And by the way, cheese steaks were with the other kind of cheese. So it's probably not that. But it's education and income. Willy, 52 percent of us mostly skewed to that upper echelon of education and income will make it past 85 and change. And basically, it's basically ‘til about the last year, year and a half, that most people start to feel that real disability, in later life years. So part of the problem is not just how if there's some sort of biological clock or natural expiration date on the bottom of your foot. It’s how well did you take care of yourself the decade before. How well did you choose your parents? And how well did you use the environment around you? But just to give you a kind of a forward-looking piece, 52 percent or more of the children born in the so-called industrialized world – Europe; Japan; United States; Canada; the like more than half of them now are forecasted to live over 100 years. So the bottom line is, you're right. By 46 or 47 life expectancy in 1900 boy, it gave you a whole new idea of midlife crisis, if you will, when it came time to check out.
Willy Walker: So, you write about the fact that there are 600 million 50+ in the world today and that number is going to go up to 1.5 billion by 2050. So clearly, and we're going to dive into the U.S. in a moment, but what countries out there really have an aging problem? In the sense that they're not bringing in either immigration; they're not making babies; and that, as they age, they're going to have a problem of taking care of this older cohort?
Dr. Joseph Coughlin: Well, first off, one of the things I would really want folks to think about --you and I’ve talked about this over the years, Willy -- is the notion of aging not being a problem, but a global opportunity. The only reason why it is a problem, except for in extreme cases, if you will, the oldest old. The only reason why it's a problem is because our institutions, our strategies and business, frankly, our societies, our families, are still using an old narrative around old age. So, we'll come back to that in a moment. But I’d rather see the greatest success of humankind be defined as an opportunity, rather than shall we say, a loss. But those countries that are still looking at it as a loss, and it's the vast majority in fact, probably almost every country is still panicked are countries like most of all of Europe, but also Italy, Spain, Germany. For those of you in the investment community, the economic engine of Europe – Germany, not only are they getting older, we're by mid-century, maybe, as many as 38 to 40 percent of the population will be well past what we call retirement today. But, by the way, they're not just getting older, they're getting smaller. We’re talking about a population that's going from roughly 89 million that may go down as low as 68 million, where that 30 - 40 percent will be over retirement age. Entire parts of the country are emptying out outside of Munich and Bavaria. Italy: villages are emptying out and aging. Spain: same thing. Bottom line is the industrialized world as we know it is shrinking. But let's look at China. None of us ever thought that we would ever see China issue a workforce shortage! By 2013 they had already said, due to the one-child/one-family policy, which they have well since relaxed, they're running out of workers. And they're going to have more people over age 60 by mid-century than the entire population of the United States. More than 430 million. And, of course, Japan is renowned, if you will, it has almost become a trade example of an aging world. And yes, we're also looking at Asia -- and clearly Northeast Asia in particular: Japan; Korea; parts of China and the like….imagine this, the fastest growing part of the population is 70+ and 40 percent of the growth of that country will be based, on that region, rather will be based on those 70 and older.
Willy Walker: So, talk about the United States for a moment, Joe, because we clearly have an aging population. We have a huge cohort of baby boomers who are retiring and being active adults and active seniors. But we also continue to have an immigration policy. You just talked about Japan, which their immigration policy is no immigration.
Dr. Joseph Coughlin: …It’s just No!
Willy Walker: They’ve got no babies and they've got no immigration. But here in the United States, we not only have immigration, but those first-generation immigrant families tend to produce a lot of babies. Talk about that, about the ever-evolving demographics of the US.
Dr. Joseph Coughlin: Yeah, I mean, one of the things that we talked about those other countries -- the Europeans, the selected Asian countries and whatnot --that are aging dramatically. And by the way, one of the things I want everyone to think about is that, here's a number for you to think that's well beyond probably most of your planning. By 2047 worldwide, there will be more people on the planet over 60, than there will be children under the age of 18. So, while we pick on countries that we see in The Economist, The Wall Street Journal whatnot, the bottom line is the trend line are all nations due to fertility dropping and greater longevity. So yes, Willy, here in the United States, we too are aging. In fact, we are the youngest of the industrialized countries. But we're also shrinking, if we only looked at our native born. It is the immigrant population that is keeping us competitive in terms of population and, in many ways, if you will, providing that care that you speak of. But we have a new squeeze play that we're going to have to think out here, as a matter of national policy, competitiveness, and frankly our own family decision making. How do we better use technology to provide care? Not that we think that high tech and high touch or necessarily equal. Who’s going to shall we say, take care of that care force that is getting ever smaller? And countries like the Philippines, who used to, shall we say, export large number of nurses, are actually starting to pull back on the number of people that they want to let out of the country because they need the care as well? Willy, the forecast is in terms of if we want to say demography is destiny; the forecast in the United States is that we have a growing younger, brown population that is going to be caring for a graying, white population in the United States. And so, yes, it is an issue. It is a priority. And it's got to be put into the mix as to how we think about immigration.
Willy Walker: Joe, you talked about senior population, and under-18 population, and there's something called the dependency ratio. Can you talk about why the dependency ratio is so important for all economies to understand?
Dr. Joseph Coughlin: You know, it's really interesting; even mathematics can be made biased. The dependency ratio, in short, is the ratio between the, listen to the language, the unproductive population versus the productive population, and the unproductive population by definition is 0 to 14 and 65 plus. So, anyone who's listening to this call, right now, who is 65 and older, I want you to know that you are no longer considered a productive person. And yet, Economists like to have you believe that they do objective analysis. So, the ratio is exceedingly important because it is about who we think is productive, who is working, who is providing the care, and we are seeing that ratio, as it is currently defined, get seriously out of whack. We used to have as many as eight people being so-called “productive” to every one person who is not productive. This is why we need to really start changing and revisiting the notion of when “unproductivity” begins. 65 was an age totally made up as a reason to now be unproductive. Some countries make it a 50, 55, 60, and some older. But Willy, this is a major issue that we have to think through on a corporate level and a national level.
Willy Walker: So, Joe let me go to that about unproductive people. So, I went and did a little bit of research on a couple people that we all look to who are supposed to be wildly productive right now. Nancy Pelosi turns 81 on March 26th, Joe Biden is 78, Willy Nelson, if you like his music, he turns 88 in April, Queen Elizabeth is about to turn 95 in August, and even Warren Buffett, the most respected investor in the world turns 91 in August. So, I mean given this, that after 65 you're supposed to go hit the couch, yet we have all of these people not only participating in the economy for much longer but holding very, very important positions, why is it that there's this branding if you will disconnect between productive and unproductive? And why are we at this still, in America, in this thought that once you turn 65 you kind of punch the clock, go hit your lazy boy lounger, and watch television for the rest of your life?
Dr. Joseph Coughlin: In many ways, Willy, it is because of what we have been socialized to believe. We really don't fully appreciate how strong the narrative is of what old age is supposed to be, and we can get into that in a little bit. But, when you speak to the Nancy Pelosi’s or the Queen and the like, it’s really what happens is that once you get into an institution, there's an institutional bias where you slowly, you know you stay there, and shall we say you become at the top of that ranking. Those are the outliers though. We still even in those nations that so-call “respect” old age, there's allegedly a cultural affinity to respecting old age. There’s some Asian nations that have words for older workers defined, by the way, you and I are going to feel a little pain on this Willy, over 50, as human garbage. Give them a view, give them a window, but keep them off to the side of the Corporation. Yes, we have those outliers where it's the Queen, whether it's Nancy Pelosi, Willy Nelson, and frankly Mick Jagger, and, by the way, Keith Richards has lived an interesting life and he's still chugging along, just to say what that may mean for medical science. It is largely those are the outliers. We are still, shall we say, fencing in the productivity, the meaning, and the connection of most people starting by about age 50, and boy by age 65, almost like a law of physics they're supposed to move off.
Willy Walker: So before we move to the economic opportunity for companies by focusing on the 50 plus, and we'll size that in a second, I just want to talk about mortality for a moment because I started this by saying that if I was born in 1900 I would be beyond the average life expectancy of an American citizen. You know, being born 67 years later I now have an average life expectancy of over 85 years, as you said at the top. Talk about death rates only because while 81 percent of deaths in the United States happen to people over 65 years old. We sort of you know, and therefore we say, “Oh well, old people are there to die, and we don't have to focus on them.” It's actually the other side of that, which is just what strides we've made to make it so that in the 1950s everyone was dying, up and down the spectrum, you had much higher infant mortality, you had much, much higher car crashes, you had lots of early onset of chronic diseases, and, we don't have that today. So, I thought, one of the interesting things you wrote about, Joe, was instead of celebrating that we then have continued the narrative which just says, “Okay, once you get over 65 you're just hanging out ready to die,” right?
Dr. Joseph Coughlin: Here's the story of old age; I’m going to break the news to everyone. Old age is made up! Yes, believe it or not, old age is made up. In fact, as I write in the book “The Longevity Economy”, the notion of old age was built around something called vital force or vital energy, that was created in British Medical science and then adopted here in the United States, which basically said the following, that you were born with a certain amount of energy. And by the way, if you used it badly, which meant anything fun, of course, and work and alike, you would become tired. You would no longer be a glass, or was full or even half full, you become a glass half empty. But, isn't it amazing how powerful stories and narratives not only create our understanding, Willy, but our language and our institutions? You’d become so tired they had to create a word for it. You become tired so, therefore, you would have to retire from the workforce, because in the 1800s, early 1900s, if you didn't use your body you didn't work. By the way, if you didn't work and you didn't have family to support you, you were poor! So, by default, poor homes became old people's homes and many of those very homes by the 1930s were converted into, you guessed it, nursing homes. So of course, for those of us are old enough, we used to refer to funeral homes. So, we see that story of old age has been imprinted on the minds of individuals, society, and frankly, even corporate strategies and national policy to define old age, not as living longer and better, not as an opportunity, but as a problem to be solved, rather than an opportunity to be achieved.
Willy Walker: So, let's turn to the “What's the Opportunity”. You write in your book the “over 50 cohort” is responsible for over 50 percent of consumer spending and control 83 percent of total wealth and you go on to talk about the massive wealth transfer that will happen over the next, I believe, it's 30 years, where $53 trillion will be handed down to heirs between now and 2061. So, there's huge consumer spending there, there's huge existing wealth there, and there's a huge wealth transfer that's going to happen, yet corporate America seems to be turning away from it. Why?
Dr. Joseph Coughlin: It’s completely obtuse. I always enjoy working with investors that are particularly interested in emerging markets, and they go far afield, they go thousands of miles away, and yet here is an emerging market hiding in plain sight. It’s incredible! I mean, women traditionally have been ignored and that's 51 percent of the population. But the aging population have, imagine this, as an emerging market, the 60 plus worldwide would make up the third-largest global economy after the GDP of the U.S., GDP of China, and then the longevity economy. Why are corporations ignoring it? Why are businesses and, frankly, even investors? It is the story that they are still using, that old age is what their grandparents have had. Now in all fairness to those businesses and data jocks who only see aging as a matter of demand rather than wants to be solved, they're still using the numbers but they're using the background of what their parents, grandparents, and great-grandparents looked like. They have ignored the fact that old age has changed. We're living longer, we are more educated, more tech-savvy, I already said more affluent and not widely distributed, but more affluent as a group, but here's the thing Willy that I want to leave with you and all your viewers. The new generation gap is about expectations. In the words of the great philosopher, and I’m a fan of Jimmy Buffett, “We are the people your parents warned you about.” The next generation of old are not going to be as patient, nor as polite with businesses, policymakers, and the like by thinking that they should sit back find that Barcalounger and relax and hope that maybe the grandchildren visit. No, we're going to build belief, and demand, in fact, a pill, a policy, a product, a house, or whatever service, to help us live longer and better, and that gap between what our parents put up with, and what we expect; that's the innovation gap; that is the longevity economy.
Willy Walker: So, let's turn to product design and functionality. You write in your book that seniors, like all people, are looking for products that they both like and excite them. How can businesses approach this brave old-world designing products and services that actually meet the needs and demands of the older population?
Dr. Joseph Coughlin: I am always amazed at frankly, some of my students in fairness, but major companies with great R&D programs, billion-dollar budgets, that come up with really mundane ideas. So, I have to say that even the greatest minds, whenever I talk to them about older adults, you can’t imagine how many pill reminder systems or walkers that are enabled with GPS that have come across my sites or have been brought into the lab, is thinking that that is innovation. So, as I look out at corporate America, corporate worldwide, we have to stop with the idea that businesses and products and services for older people have to fill three categories: big, beige, and boring! You don't stop wanting to be excited and delighted, especially if you're the Don Chi of Japan, or the Baby Boomers of the U.S. where everything has been kind of culturally made for you to be great and exciting. You’re the focus of your parents and the focus of the marketplace, and now suddenly we're living in a world where all we seem to think that is needed is “Help I’ve fallen and I can't get up!” So, here's some advice for corporations in R&D is get out there and watch. Start looking at what people are doing. Don't be limited by what they say, because we are also victims of the stories of old age. We often live out that script that retirement is about finding either a beach or a chair or a golf course to spend the rest of our lives in. Use empathy, get out there, and use tools, if you will, to understand the friction, the fatigue, and the frustration often felt by consumers by something is too small or too hard to read. But more important than all of that, not simply responding to the customer, because I don't want anyone on this call to say that I am advocating building an old man or old woman product, because here's a little piece of advice that has been proven out over the last 70 years. If you build an old man anything or an old woman anything, a young man and a young woman will not buy it! But guess what? An old man and an old woman will run with their hair on fire away from it, as well. The problem we have in front of us is how to create products that are truly ageless that elicit desire and excite and delight across the lifespan.
Willy Walker: So, Joe, talk for a moment about AGNES. You were brought in by Mercedes Benz back in 2013 to work with them on designing a car that would be attractive to seniors. You walked into a room and was it Berlin? Or was it in Munich? Munich, right?
Dr. Joseph Coughlin: Berlin
Willy Walker: Oh, it was Berlin, it was Berlin! You walked into a room in Berlin that is filled with 20-something, 30-something, and 40-something-year-old engineers and designers. And, you sit down to try and “inform them” of how they should think about building and designing an automobile that would be attractive to seniors, and you and your team came up with an innovative, and I think incredible way, of trying to get them to change their thoughts and ideas about how to do it. Can you explain it?
Dr. Joseph Coughlin: Well, you know we all love multi-disciplinary teams. In fact, my lab, the AgeLab, that's what we're founded on, engineering, and social science, and humanities. Well, we were trying to find a way to bring this team that was otherwise disparate together, in addition to the designers and engineers, there were the marketing people out there that were already making brochures and copy on something that we hadn't seen yet, and so we needed to come up with something that was common between them. So, while the engineers wanted to have functionality, and the designers wanted to have beautiful dashboard space, and the marketers just wanted to get the message out about freedom and independence that this vehicle would provide. We got them to focus on the one thing that all companies should focus on - the customer! And, to have them experience what it was like to feel multiple chronic conditions like arthritis and the inability to move as well, and as seamlessly as we once enjoyed, where vision changed, not just do the regular glasses, if you will, but contrast sensitivity, the knowledge that you need 20 times more light to see at age 40 at night! To see as well as you did at age 20! The fact that we don't know when old age actually begins. And so, AGNES, the Age Gain Now Empathy System, was invented to suit up these engineers, these marketers, these designers, to have the “A-Ha!” moment; to walk in the shoes of that consumer. No, it's not perfect, because basically well you get to take the suit off eventually. But the fact it was not perfect, but it gave them insight, that no survey can give, no observation can give, and, by the way, even product clinics and focus groups. I’m going to tell a secret that we probably, I’m not sure how many people are listening, so it's just going to be between us. Old people, frankly, all people, but older consumers, in particular, lie. And what I mean by that is, they start to reduce, if you will, their expectations, like if I can't open a bottle or I can't reach on the dashboard or see a screen; it’s not the designer’s fault. I may curse them in my quiet moments, but what are you going to do! I’m 60, 70, 80 years old; that's part of what it's like. But a designer, an engineer who sees that problem, quite literally, realizes no, that's something that's easy to change. So, focusing on the common ground of the consumer and using AGNES, using empathy across the lifespan, across all product categories, is a driver of innovation.
Willy Walker: I thought the use of AGNES was, I mean you and I talked about this plenty of times before, but just having to strap it on, to actually live with the restrictions, to understand truly what your customer is seeing and feeling, was so sort of eye-opening and, quite honestly, made me start thinking about a lot of the ways that Walker & Dunlop segments our client base, and really trying to think about “how do consumers see our branding? How do consumers who, what are we doing to try and sell to this demographic, and that demographic?” And it was a wonderful thing for me to sit around and really think about it. Talk for a moment, Joe about the work you did with CVS as it relates to the design and layout of CVS because some of the work you did there, and the way you helped them reconfigure, redesign, re-layout their CVS is also very innovative and very interesting for all of us, because, like a Mercedes Benz, many of us have seen what that looks like and how they built that product.
Dr. Joseph Coughlin: So, you know, the insights that we provided them, they did wonderful things with, and in many ways, after it's done, it's truly ageless. It helps the younger consumer coming in, the middle-aged consumer that's harried, and the older consumer that comes into a CVS store 2, 3, 4 times a week and heads right for that pharmacy. So, some of the things we did were improve the lighting to add the clarity. We didn't use those fancy colors that add to confusion for eyes that start to have problems with contrast sensitivity and sees yellows and reds with greater difficulty over time. We actually reduced the shelf height so that people could reach. So that if you're an older person, it would reduced strength and reduced flexibility reaching up for something at the top, or reaching down at the very bottom and, by the way, if you ever go into a grocery store or pharmacy, whatever it might be, it's interesting; the special products for diet, or pets, or whatnot, are always at the very top or the very bottom; the hardest to get. Reorganizing the signs around the problem to be solved, not the product to be sold. Understanding that when you come in the store, one of the first things you can learn by watching but also learned by using, shall we say, AGNES’s glasses like this, that mimic certain conditions like diabetic retinopathy or contrast sensitivity. When you first come into a store, quite often, what older women will do is they will use the cart both to collect items, but also has a walker in many ways, is pause right in the middle of the doorway, take the purse, put it into the carriage, then change their glasses from sunglasses to regular glasses. And what do retailers typically do at the front door? They give no space. They’re so eager to have you see the new products are trying to push that they crowd that space. So, literally understanding the consumer’s journey and the caregiver’s journey shopping through CVS helped us make a store that was great for all ages, not just for Mom.
Willy Walker: I think you just said something that is so important to keep in mind about how you changed their branding or marketing, if you will, to solving the problem at hand and not selling the product they're trying to sell. Forget about trying to sell to seniors, and forget about CVS, that's just an incredibly good lesson for all of us who are trying to market products and services to keep in mind. We all come up with these great acronyms about the various things that we're trying to sell, and a client sits there and goes “I don't know what that acronym stands for. All I want you to do is either give me a loan, or sell my building, or sell me a car,” or whatever else.
Dr. Joseph Coughlin: No, it's a long-standing tradition and I talked about in the book that really we hire products, services, and experiences to get jobs done. And so, you should always ask whether you're an investor or whether you're an innovator. What is the job you're trying to get done? And the classic story is when people go out to buy a drill, do they buy a drill because of the color, the RPM, the price, the brand? No. What are they buying? They’re buying a hole! So, the question you have to ask the people you work with is “What is the job to be done?” By that older adult, by the number one advisor to an older adult, the oldest adult daughter. What is she trying to solve for? And then move your brand, move your product, and experience around the job to be done, not what you think you are trying to sell.
Willy Walker: So, you spent, and your team has spent, a ton of time on autonomous vehicles. You spent over 25 years being a very leading researcher on autonomous vehicles. The first question I’d ask you, Joe is, is the focus at The Age Lab been on autonomous vehicles because mobility is fundamental to opening up all sorts of different opportunities for an aging population? Or is it that that's where the dollars have been, and you've done research around it because it's such a breakthrough and such a transformational technology to society?
Dr. Joseph Coughlin: It's a little bit of both. Even my first book I did with my colleague, Lisa D'Ambrosio was on older drivers per se an issue, if you will, trapped between humor and horror. But no, the technology going into the car was almost a sideshow. Let's talk about what transportation truly is, and particularly the United States what driving is. It is not mobility. And for those of you that are digit heads or Civil Engineers who see transportation is getting from point A to B, it is not even that. That’s great if you're trying to model it but it's not what it means to the person. Transportation or driving is the very glue that holds all those big and little things together, you currently call wife. Your car, transportation, not only is the car the second largest purchase you will make after your house. Believe it or not, transportation is the second cost, largest cost in retirement, it is not healthcare. First is housing, then transportation, then healthcare. The bottom line is we're looking to the autonomous vehicle as a way of how do we keep people mobile and safe for a lifetime. Willy 70 percent of the 50 plus population in the United States lives in suburbia or rural America. Transit either does not exist or it serves very badly. And by the way, if you wake up one day at a certain age and say you know I don't feel well enough to drive or I don't feel well enough to have to get out that way you're not going to wake up after 50-60 years of driving and say gee I think I’ll take the bus. And so, one of the reasons why we've been excited about the autonomous car is how do we make it so that that vehicle can give you point to point service to do the things not that you need, because I will get you to the grocery store or to the doctor's office somehow. But I want to get you to the ice cream cone that you suddenly said you wanted at a seven o'clock at night in July and you hear the peepers out and you suddenly decided, you know something I think I want a soft serve ice cream cone. That one, that desire at that moment, is how you measure quality of life at old age, and transportation is the glue that makes that possible.
Willy Walker: So where are we as it relates to autonomous vehicles because you study it very closely. Are we on track? Are we behind track? I have a new Audi that has a very sophisticated cruise control and senses where I am versus the cars and lane control and at the same time I went up to the mountains two weeks ago and it was snowing and the sensors got covered over by snow and guess what the entire thing goes away. So where are we as it relates to getting to autonomous vehicles?
Dr. Joseph Coughlin: I’m going to mix my metaphors; the bottom line is we're getting there, but the full autonomy as we envision it, depending on your generation of George Jetson or whatever it might be, is down the road. So yes, you pointed out, a very good example where if it's heavy rain or snow no autonomy for you. It is coming, but we need to move a couple things to make this happen. It's not just about the technology. It’s about the infrastructure as well. Some states paint the roads, better than others and that's how your car is being able to maintain where it is in the lane. Where you're likely to see autonomy first and you're already seeing it ironically, in many cases, are in retirement communities or niche areas. The Las Vegas’s, the Disney’s, the areas that can be cordoned off, if you will, and have specialized services that you will never own, but it will be likely to be by subscription. So we're talking probably over the next 10 years you'll see a lot of autonomous vehicles in small markets, then you'll see them in trucking and transit, and then eventually and here's my prediction and I’m breaking my own rule you know. Willy I don’t know if you know this you can't do this and investment, in academia we can do this. You only predict far enough out where you're dead before they find out whether you're right or wrong. Well, this one's going to be a little closer unfortunately. I’m going to predict that we will never own an autonomous car. That it will be life by subscription. Toyota is already experimenting with the idea of paying a subscription fee and having your choice of cars and being able to change them out over that period, and so eventually the autonomous vehicle will be yours for hire.
Willy Walker: Thought you were going to say you and I wouldn't have an autonomous vehicle in our lifetimes. And so when you just said, we just won't own one that's a big change to it, but when will we have a fully autonomous vehicle?
Dr. Joseph Coughlin: Boy that one is up for grabs. My team is doing a lot of work in that area, and I think we will have an autonomous vehicle before we have an infrastructure or a public. An infrastructure that's ready or a public that is willing to trust giving up control.
Willy Walker: Fascinating. So on that, I mean okay, I don't want to belabor this too much, but I mean by 2030 are we in autonomous vehicles are we looking at 2040?
Dr. Joseph Coughlin: I think we're looking at 2030 definitely for vehicles that are commercial and transit, and I think in selected lanes and selected areas, yes, I think you'll see autonomous vehicles. The industry and the government are pushing very hard in that direction to make it happen. But there's going to be a lot of bumps shall we say that proverbial road between now and then.
Willy Walker: So you spoke previously, Joe, about the daughter swinging by to see the parents. One of the things, you said it in passing, and I want to make sure people understand it, because you've said it and you've studied it. Typically parents don't retire to some sunny community in Florida or Arizona, they retire closest to their eldest daughter, and that is the eldest daughter, who bears the majority of the caregiving and taking care of mom and dad when they go into needing assistance. Talk for a moment about what autonomous vehicles and city planning has ahead of it, given that mom and dad are typically moving to be close to their eldest daughter.
Dr. Joseph Coughlin: Well, the notion of age friendly communities comes to mind, which is about accessibility and transportation alike. I actually find the phrase age friendly somewhat annoying even though it's the world standard. Age friendly sounds like I’m being polite and I’m doing this out of courtesy. These folks have been living in the community or communities that they're moving to for decades and have been paying taxes and the like. I prefer the phrase age ready. Because we should make our communities or infrastructure ready for everyone, from zero to 100 plus whatever it might be. With the autonomous vehicle, we could envision the following with a full out autonomous, what they call level five, if you will, where a car just comes picks you up and whizzes you away. Where maybe it's substitutes for that oldest adult daughter to pick up Mom and take her to the Doctor or to take her to see a friend, or something like that, and then safely take her back home and whatever it might be. But there's a failure of systems thinking and the autonomous vehicle and urban planning community. We might be able to have the autonomous vehicle but what is going to happen to that first 50 feet and the last 50 feet, who gets mom in the car. If mom is physically disabled or has cognitive issues who's going to trust putting mom in the car by herself. Who gets her out at the other end and make sure that she's going to the true destination, if you will. So the autonomous vehicle is going to make a lot of changes on how we design our cities, design our communities, making them more age ready, but the real hard part is not going to be the technology, not the common infrastructure, but the 50 feet in between.
Willy Walker: And so on that you talk a bunch Joe about automation and robots and how in Japan they're using robots to do all sorts of things to help the elderly, but you also talk about the lack of touch. You talk about this one robot that can help get someone out of bed, but at the same time it's just, it's not a hand, it's not a caregiver, it's not someone who can talk to you and make you feel like you're still alive. Talk for a moment about two things one, the future of technology and helping the elderly age in place. And then I want to get to the other side of this all which is mental health and interaction with human beings. Because I think right now, since we've been through the pandemic, you have some very interesting research as it relates to how the elderly have endured this pandemic and how it is really actually impacted some younger demographics, more than it has the older demographic but go on number one, if you would for a moment, as it relates to technology and AI enabling us to live more productive lives for longer.
Dr. Joseph Coughlin: First off, the technology that is already here and what's coming in the near term as in the next five years, and certainly the next 10 years is very cool. It's also very creepy in some cases. One of my favorite examples, for instance Willy, is the smart toilet that's already out on the market by Toto, Panasonic, and other companies, we're basically to put it nicely since we're near the lunch hour it downloads from the user your body temperature, did you take your medication, are you eating well, and then I guess the best way to put it uploads those data, if you will, to a dietitian, to an oldest adult daughter, your doctor, whatever it might be. And yeah there's also technologies that are out there that are augmenting the fact that we have a shortage of the care force, not just the United States but around the world of nurse’s, practitioners, doctors and also the folks that are CNA’s in our places. So we're coming in with technologies such as ROBEAR which will actually pick up a patient and be able to move them from bed for bed transfers or get them throughout a facility. But high tech rarely, if ever, can ever replace high touch. You know, one of the things, my wife rolls her eyes when I say this, I have a lot of interest in middle-aged women. And why I say that, in particular, is that they are not just the primary caregiver, but they're, the ones who are going to be choosing which technologies go into our homes, into their own homes, and frankly they're even the best friend and advisor for millennials if you will overall. And so these new technologies are not just about serving the older population. But with women now more educated, more affluent, and more likely to be in the workforce, they are going to be relying on these technologies to augment their caregiving. They’re essentially going to use those technologies as a care force multiplier if you will. And, as a result they're going to be using those technologies to help our parents and us stay in our homes longer. No adult child likes to have that discussion with mom and dad about handing over the keys, let alone handing over the keys to the house and moving someplace else. And as a result they're going to be reaching for these technologies to be able to keep people in their homes longer and, I dare say that the pandemic if it has taught us anything is that the smart technologies, to smart sensors, and systems video chatting, on demand of food delivery, medication delivery, have formed for adult daughters and older adults maintaining their own independence, a virtual Assisted Living that's going to enable them to stay far longer in their homes than any of the current choice A permutations that we have assumed based upon demography alone.
Willy Walker: So, Joe I had Professor Mauro Guillen from Wharton on the webcast about a month ago to talk about his book called 2030 and he said to me the pandemic has accelerated technology and technological implementation to the point where he wishes, he had named the book “2028” because he thinks that it moved everything up by two years. You write extensively about the fact that venture capital has had a very difficult time not biotech, but venture capital, has had a very difficult time of revolutionizing the healthcare industry because of regulation. And then all of a sudden, and you talk extensively about doctors resisting telemedicine, and not being able to get adoption of telemedicine either into the senior community or into the care providers. And then all of a sudden, we have a pandemic in 2020 and that all changes. So, talk for a moment about you were just saying it's going to allow people to stay in their home longer. If I’m in the seniors housing industry, I say that doesn't sound too great to me, because it means they're coming to me with higher acuity and they're staying for a shorter period of time. Talk about what the pandemic has done to accelerating the implementation of technology and what that means for senior care.
Dr. Joseph Coughlin: As I wrote a piece in Forbes but I need to credit my team who's been doing a rolling set of surveys during the pandemic to understand changing behaviors and attitudes around technology and how it's changing all of us. And we're going to continue this on even well after the pandemic has passed. But the watchword we found Willy was that technology became the new toilet paper. As people ran to the streets and the shelves and bought pallet loads of toilet paper they were also buying the smart devices, the security systems, the video systems for their parents and the like. And I would suggest from the data that we've collected, and the interviews we have done, that indeed the pandemic has served as a propellant pushing older adults probably at least five to seven years faster than we would have anticipated to have technology in their homes. But here's the thing we've watched over the last year. I’m going to digress for a second. Military basic training is usually nine to 12 weeks that's not just to teach you new things but it's a change behavior. Older adults, caregivers, adult children have now had 12 months of socialization on using technology, making it seamless. This has profoundly changed the nature of the customer, their attitude, and how long they think they can, shall we say, stick it out at home and how long their adult daughter believes she feels okay with mom and dad sticking out at home because she's no longer using an ambiguous phone call where she hopes they answer and tries to judge their voice. Now she can see them. Now she can see how much they've moved. Did they take food delivery. In some cases, she can even tell how many times, the door of the refrigerator has been opened. Suddenly that nervousness has come down and that will indeed extend the amount of time I spend at home and less time as we that we spend in how Assisted Living is designed and defined today.
Willy Walker: So on that, going back to that Forbes article, because it was a fascinating article, you stated in it that the pandemic has transformed homes, from places to live into platforms by which we access services, experiences, and connect with one another. So as I sit there and think about a senior citizen moving into Assisted Living or into higher acuity Skilled Nursing I think about the component parts, particularly on the assisted side, of they want a sense of community, they want to interact with other people, they want to make sure that there's a safety net around them should anything happen. And to exactly some of the points that you just mentioned, the pandemic has sort of flipped all that on its head, that you can get a sense of community by Zooming with somebody. And you don't actually have to go into the parlor at the seniors housing facility to see friends at the end of the day. The checking in just as you said, the daughter doesn't have to worry about the mom or dad falling down and not seeing them they now can Zoom with them and see every single day that they're taking their medication and doing well. This just seems to have, Joe, profound impact. I mean what's your estimation, as it relates to how much this is… you know Mauro Guillen said 2030 should have been entitled 2028. If somebody is typically going to seniors care at 72 are we pushing that out to 74, are we pushing that out to 78? What do you think we've added through the adoption of technology during the pandemic, as it relates to entry levels into seniors housing?
Dr. Joseph Coughlin: I think that we probably have added at least three years to the ability to extend staying home, if you will. You know my lab is entirely funded by industry and my colleague Dr. Chaiwoo Lee is leading an entire program around home as service. And we're envisioning how these technologies are not going to be something you outfit mom's house with because you want an old man's house. But rather the same technology that provides convenience for, will make fun of the millennials for a minute, the millennials who are too lazy to cook or don't want to go out shopping to have food delivered is going to be that technology. It’s also going to be the same technology that provides the connectivity, if you will, for those in middle age that are balancing parents, kids and career. But it's also going to be at the other end of the spectrum, the same technology that provides care. So, in fact I think it's going to push older adults to be able to stay in their living rooms for at least another three years or better than you might have otherwise thought. But here's the thing, that technology is not going to be specially bought for mom and dad it is going to be a natural evolution as to how the house or home of any type is going to evolve, providing convenience, connectivity and ultimately care.
Willy Walker: So I saw this morning, Joe, an article that said that Brookdale seniors had occupancy levels it just below 70 percent about 69.4 percent I think it was for February and then many analysts think that that's kind of a bottoming out and then from here seniors housing occupancy levels start to rebound. Is there an opportunity for the seniors care providers to provide something that, if you will, counteracts the trend that you just highlighted of people coming to them later and potentially staying shorter as it relates to safety. As it relates to services. Where's the flip side to the coin that just says, you know what you're just going to have to wait for that demographic to move to you for another three years and that's a really bad day for most operators of seniors housing.
Dr. Joseph Coughlin: No actually, I’ve got some bright light at the other end. So after they heard what I just said, I don't want anybody tearing up sheets and trying to decide which way to slit their wrists. There's some light at the end of this this dark tunnel, if you will. First off, you know we started our discussion, Willy, the birth rates have plummeted through the floor. The number one way we have aged well is not by doctors, not by nutritionists, or even saving money; it’s by having adult children around to take care of us. Well guess what even the baby boomers had far fewer kids than their parents did. And better than that, the baby boomers children, are better educated. Those adult daughters now have more degrees than any time in history, and more degrees than men, and are more likely to be in the workforce. Guess what? She's busy and, by the way she moved so she may not be near where you need the care. So there's going to be, shall we say, I believe, an emerging care gap overall. Secondly, the way senior housing in general has always defined itself, and this sounds pejorative, I don't mean it to be, as a real estate play plus care. No, it needs to be go beyond the real estate. That technology that is in people's homes, is a natural pipeline to bring your brand, your experience, and to build your trust, not just with the adult daughter, but with the very residents that you want to bring back to your properties. So, we need to think outside the fence and to start building pipelines and to see that technology not as a threat but as an opportunity to develop new skills, new services, and new experiences overall.
Willy Walker: So, talk about how Stitch has done that in the dating space.
Dr. Joseph Coughlin: So one of the things that we found and I wrote in the book The Longevity Economy is that Stitch was supposed to be about dating. You know, guys gals whatever partner you're choosing about trying to shall we say, I guess the kids would say hookup, if you will. But what we found in particular, particularly one woman that I interviewed was that, frankly, social connectivity was not just about trying to find somebody to hook up with. But basically, someone to socialize with. Someone to enjoy in the case of the book to listen to Jeff Goldblum playing jazz in San Francisco. The idea that, looking for a date is really about connecting overall. The thing I want the folks to listen to on this that Stitch and others are about connecting groups that are affinity based. That have similar likes, similar backgrounds, similar experiences. Please do not mistake the proximity that is putting people of a similar age, all together, as a community. I know we use that word. I know we tried to engender it. But we know from sociology and common sense that just because you're the same age and you live next to each other, does not mean that you are a community. Affinity as we found through Stitch whether it's based upon hobbies, former professions, belief systems, vocations and the whatnot, that's the new future, I believe, for senior housing. Starting to think of themselves as a platform, both for services into the home, but a platform for affinities that build true communities, not by proximity, but by interest.
Willy Walker: So, on that as it relates to community do you think you'll be back in the classroom in September at MIT teaching undergrads? And then the second part to that is you also do Executive Education in your AMP program, do you think that there's any difference in how quickly undergrads are back in the classroom versus Executive Education and people wanting to bring teams of people back to MIT to learn?
Dr. Joseph Coughlin: First off, the answer is I hope so because I really do miss the students big time. I’m teaching my current course on global aging in the built environment; graduate program with urban planners, architects, business, and whatnot and it's interesting and fun to have students that are in Austria, New Zealand, Australia, China and the United States. But I find them nodding off, not just because of my usual lecture but also by God it's two in the morning or five in the morning for them as they're listening. So, I do think that, in the fall, we will shall you say get back to this so called “normal.” But I can tell you the normal is not going to be the same. Is that online is here to stay and as much as the AMP the Advanced Management Program having people in person to do teamwork and breakout sessions and whatnot, we’re going to have to make a real compelling, rich, content case, an interactive case, to make it so that you have to get into an airplane and camp out at a school for three days, five days or whatever that management program is going to be. So we're going to go back to so called “normal,” but what you're seeing right now is here to stay.
Willy Walker: And final question to you, Joe, as you, I mean you work with companies across all spectrums. You work on consumer products, you work on healthcare, you work with automobile manufacturers, everybody who's trying to focus on this demographic. What's the screaming opportunity you've seen that nobody seems to have identified?
Dr. Joseph Coughlin: I’d say the screaming opportunities broadly defined – aspiration. You never hear, for instance, the F word, not that word, fun mentioned with older adults, you just don't. If you do it's either a golf course or a cruise ship. There's more to life than that, especially more to life for the majority. So, it's aspiration of trying to find things that are truly desirable and exciting.
Let me close with a little bit of mathematics, to give people the idea. From zero to 21 years old, and if it makes it easier, drinking age, is about 8,000 days. From 21 to midlife crisis 46-47 there abouts is 8,000 days and I bet the quant jocks are getting the algorithm now, and from midlife crisis to that biophysical law of retirement 65, is about 8,000 days. But Willy as you and I just discussed more than half of us will make it past 85 and change. And from retirement age to 85 and change is 8,000 days, so if we take off the kid zero to 21 here's the opportunity for business. I’m not asking you to provide me what I need. I am asking, in fact as a Baby Boomer I am demanding, that you invent one third of my adult life because younger adulthood and midlife is written, but you're leaving 8,000 days on the table to excite and delight me.
Willy Walker: And they've got a lot of money.
Dr. Joseph Coughlin: Money, numbers, and attitude.
Willy Walker: Well, with that Joe you always have great attitude and very insightful comments. It's been a true joy great to see you, thank you very much for taking the time. I will see everyone back here next week for another episode of the Walker Webcast. I hope everyone has a great day and a great week, and thank you again, Joe, for joining me.
Dr. Joseph Coughlin: Willy you're always a delight, thank you.
Willy Walker: Take care.
Dr. Joseph Coughlin: Bye.