Does “It's the old people" explain everything?

Societal issues caused by the old vs. young time bias problem

I know I said I’m vacationing this week, but I thoroughly enjoyed this email from a subscriber and wanted to share. Curious to know what readers think about it. Take it away AR…

Hi Ethan—

I am fascinated by your takes on old people. What makes it so interesting is that, the more that I think about it, "it's the old people" explains everything (read on if curious, or just bail if not): 

Premise 1: Old people would prefer higher profits now (and thus juiced 401ks) than lower, sustainable profits with investment in the future. Explains Disney and more. 

This was basically the undoing of Boeing: when Boeing merged with McDonnell Douglas, the suits at the latter supplanted the engineers at the former, focused on juicing share prices rather than innovating—and we got the 737 MAX, rushed to production because Boeing had _no_ new narrow body jets in development when Airbus dropped the A320. Today, Boeing does not have a single new models in development—and it takes a decade to bring one from the drawing board to the assembly line, so no new Boeing models until the 2030s. My great grandmother flew supersonic on the Concorde and I get mad about once a month thinking about how I probably never will—and we'll need a startup to bring us supersonic travel at all.    

This was also the undoing at GE: Jack Welch focused on cost-cutting and financial engineering, and diversifying GE into a shadow bank with jet engine business bolted on, but did not invest in the future. A 20-year fall in share price came essentially the day he stepped out. Maybe the wheels fell off right after he left, or maybe the seeds of its demise were sown long before. I think the only responsible assumption is that fundamental issues suffused the company, driven by his extreme cost-cutting, before his departure: he had stripped the productive and innovative capacity of the company bare in the interest of making sure he could show quarterly profits. (Note that several "GE men" went on to run Boeing.)

Bob Iger is the perfect test case. Neutron Jack left GE just in time; Bob Iger also timed his exit perfectly—and then blew it by coming back. He could have died a hero but chose to live to become a villain. There is something in my line of work called the explore/exploit dilemma, which basically says that for a given time horizon, there is an optimal ratio of exploring (testing new things) and exploiting (birds in the hand). When the time horizon approaches zero (see: old people will die soon), the ratio skews toward exploit: if you are on your last night in town before moving cities, go to your favorite spot for dinner; don't take a flier on some random dive. When you first move to a place, you need to explore to figure out the optimal restaurant rotation. Disney's focus on Marvel and Star Wars tells us one thing: the executives are all in on exploiting and do not care about exploring for new ideas—shareholder value for older me (now) but not for younger thee (later). This time will be fun, though: with Jack Welch we canonized someone who didn't deserve it because of sloppy thinking—that the inheritors to his mess broke everything, post hoc ergo prompter hoc. We get the cautionary tale we need with Bob Iger. 

Premise 2: old people don't have time for energy transitions, trust busting, or YIMBY. Since politics is toxic, I will just put forward some tensions without taking sides:  

• Regardless of what you think about climate change, it is obvious that something that pays a lot today to avoid damage 50 years down the line is not attractive if you will be dead in 30 years tops.

• In politics, there are a lot of issues that are hampered by differences between local and global maxima: big business is great in a lot of ways, but a lack of competition creates problems. Breaking up massive corporations might cause immediate chaos but a healthy ecosystem could be better for everyone—after the dust settles.

• A dynamic economy is one where people can get and move where they need to be to be productive. A lack of housing slows this dynamism, but rising property values are great for those who have property—and how are you really going to pitch someone on giving something up now because someone will invent the next great thing that we don't even know could be a thing yet, but totally could be? Imagine telling people in 1980 that we need some housing and some immigrants and they will get this thing called iPhone, a service called Google, and all kinds of other crazy stuff that they cannot imagine. It worked in 1980, because we built housing and let in immigrants, but now with Boomers 4 decades older and less likely to reap the benefits of the next big thing...

Incredibly, more thoughts:

This idea that a society equilibrates between the needs of cohorts of old and young people called Overlapping Generations Theory in economics (if you care at all), and there are other, more speculative ways that the current old-young disequilibration is everywhere: the new NBA TV deal feels like a classic IBGYBG trade (I'll be gone, you'll be gone), as do these trades with draft picks in 2057. I am not sure what to make of the problems with the All Star Game because younger players should want the league to exist—and be thriving—in 10 years (I guess only the good ones, but we are talking about All Stars); chunkier retirement benefits might make them, and even the older players, play harder than any All Star weekend shenanigans—skin in the game.  

You start looking around and basically everything is just "old people and young people have different time biases". It is as if everyone is playing Mischel's marshmallow test in a giant referendum—1 marshmallow today or the promise of 2 marshmallows tomorrow—but 51% of the population is going to die tomorrow.

If you got it this far, I am shocked. No question here for the mailbag; sorry. Have a nice day.