103: Dummies Rules Of Economics

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Hello! My name's David Lee. In this video that I've called, "Dummies Rules Of Economics", I'd like to explain to you how I view the world running my small businesses over the last few decades, and how I can prepare and plan for things coming in the future, things that are unexpected, changing markets, and how I can project where I want my small business to be.

Now, I can tell you as I've given presentations to many small business owners over the years. The vast majority of just doing things on a day-to-day basis. They have no idea of what could be coming round the corner. Would you like to know how I see the world? And how I turned, not understanding economics when I was at school, into making a lot of sense out of it?

The reason is the economy is based on a collection, a vast collection of people, individuals. So whenever you see the markets or different economies or trade, that is the interaction of people wanting goods or services. So how can we relate it back to individuals?

The three rules are:
Number 1, Sex
Number 2, Greed
Number 3, Fear

These are all human emotions.

Let's look at number 1. Sex. Yeah, really? If there's no sex in the world how do you have population? How do you have future markets? Everything starts from sex. So a couple, for example, a husband and wife, they have a child. In fact, to maintain the population, in a given country, they have to have at least 2 children. In fact they need, on average, 2.1 children in case the child doesn't make it to adulthood.

So, everything depends upon there's a market out there. If there's no demand well there's no supply. So that's where it all starts off. I'd like to point down below to crystallise this. I've got a chart here you that has got the fertility rate per couple. Now it goes from one child, two children, three children, four children. It's not too complicated. It's general. We're looking at the trend.

I've started this for the Western world from 1950 through to 60s, 70s right up to now. Now, in fact, the Baby Boom generation started in the late 1930s and peaked up at around 1960 to 1962. So, that's where the peak occurred. But since then, in the Western world, gradually over the years it has declined. It's gone below the threshold of 2 children per household to now, in many countries, it's approximately 1.5.

In fact, the economies of Japan, Germany, Italy, United Kingdom, the United States, are all below that threshold. It means, over time, their population is dwindling. A more extreme example of that was China, at this time in the 1950s, had 6 children per household. And with the one-child policy it's gone right down to 1.5. And so, imagine the effect on the markets as these baby boomers, for example, where they were just children in the 60s... now 50 years on they're now hitting retirement age. In fact, they are now at retirement age.

What were goods and services and requirements for these children growing up and maturing, and having their own households, their own families, is now completely different market. You could be addressing a market where there is a boom in this (seniors) sector from the Baby Boomers' generation.

But look what's happened since? There's less and less (subsequent births). Automation, for example, is increased multi-fold since that time. So. if you're in an industry and you say, "What's happened and why has the market changed?" Well it could be this very reason.

Second, if you look back over the last 50 years. As these Baby Boomers were growing up they had wants, needs, and that's where we had all the demand and all the supply. The market went up. We had inflation in the 1970s as these Baby Boomers were learning their skills. They were expensive to look after, to bring into the economy.

And so, when they started being productive when they reached their late 30s, 40s and had children, that's when the greed came in. Because everybody wanted everything at the same time, and they used credit cards to max out and overspend. And what do people do? Through greed they want everything and they want it when? "Now!"

So that was a typical sign. And for me in the early 2000s, in the property industry, I could see people were overspending. The lending was getting out of control. And it was just... properties would come on the market in development areas and they were getting snapped up just like that. No thought about what may happen down the road. And what happened? In the late 2,000s, as I was seeing, as I was forecasting, the fear came into the market because, what happened? The crash came around 2007-2008.

And so, everybody, you can see the fear on their faces, and it's still there. Still today. When I'm in the train or in the coffee shop. I overhear people talking about their financial problems. Just the other day, a gentleman was sitting next to me having a conversation and saying, "I'm going to have to go into bankruptcy. It's going to be 6 years before I get out of it. I'm 54 years of age and I might as well go and spend the savings that I've got otherwise I'll lose it. Then I'll go into bankruptcy. But the kids are off my hands." And these are seniors that it's happening to.

Think about it in your industry what you're doing, who your target audience is. Look up "demographics" on Google. Look it up in combination with your market, with your industry. Understand that. Bring it back to the individual. For the most part, I'd say most people do not understand this. And yet, it makes so much more sense when you bring it back to this human level.

My name's David Lee. I talk about this when I help develop your business and see the things that you can't see. Because typically we doing things, burying our heads in the sand, trying to keep our heads above water on a day-to-day basis, juggling many things at the same time, aren't we? And we can't see things that others can see. With hindsight, yeah it's easy. But with foresight we can't see what's around the corner.

Give me a call. Get in contact with me and maybe I can help you in your small business.

Thank you very much. This is David Lee.