CEO Stories: Purpose and a Paycheck
Economics writer Chris Farrell on how the aging workforce can be a boon to our economy, not a burden–and why it matters.
MYTHS AND PREJUDICES
There are persistent myths about older workers: they have nothing to contribute and are just running out the clock until they can collect Social Security, and that they will be a drain on our economic resources. And while in 2034 there will be more people over the age of 65 than under the age of 18–a demographic first–that doesn’t have to spell economic disaster. Older workers have knowledge, skills, and wisdom, and can continue to add value to their employers, particularly as part of multigenerational teams.
PASSION, PURPOSE, AND ENTREPRENEURSHIP
Older workers are increasingly drawn to fulfilling a sense of purpose as they think of the next stage of their career–or finding a new one, especially through entrepreneurship. In 2017, people ages 55 to 64 formed 27% of the new businesses–compared to 15% in 1996. People 55 and over are less risk-averse; and have not just experience to draw on but robust networks. With technology lowering startup costs, most small businesses are started with $5,000 or less.
EARNING AND LEARNING
Research–much of it done in Europe—makes a strong case for the idea that working longer keeps people healthier. An essential aspect of health is constant learning–and not necessarily in the guise of formal training or education. In fact, creativity peaks at 65, belying the idea that 65 is the time for people to exit the workforce.
This Is Capitalism: Chris Farrell
RH: This is Capitalism. I’m Ray Hoffman. For Chris Farrell, it was probably inevitable that as his career as an economics and finance writer evolved he’d be drawn ever deeper into matters of age. After all, for the past quarter-century the dominant theme in personal finance has been about savings, IRAs, and 401(k)s and such and the fact that most Americans haven’t saved enough money to retire on. And in economics there is a parallel strain that centers around the aging of the U.S. population and how an economy with fewer younger workers and more and more retirees living longer could reach a tipping point.
But Chris Farrell, senior economics contributor for Public Radio’s Marketplace program, economic commentator for Minnesota Public Radio, columnist for PBS’s Next Avenue, columnist for the Minneapolis Star Tribune and for many years a colleague of mine at BusinessWeek, Chris Farrell doesn’t think it has to turn out that way. And his latest book, Purpose and a Paycheck, is about the too often ignored realities and the still largely unappreciated potential of older people in the workforce. And when we met in a New York restaurant, we talked a lot about how people are living a lot longer.
CF: And particularly people who’ve had education, skill, careers. And by the way, education doesn’t mean that you’re working in necessarily a cubicle or a corner office, but it’s skilled machinists, skilled electricians. They’re problem solvers and there’s an incredible amount of knowledge that they’re using. So I think that anybody who has used skill throughout their life, their average life expectancy has gone up dramatically, it’s gone up dramatically overall but particularly for people who’ve exercised skill throughout their lives.
RH: And something I never knew about you until I read this book was a certain skilled profession that you had early on, onboard merchant ships.
CF: I was on board merchant ships. My first job was a wiper and a wiper is a very descriptive term because I cleaned the engine room and I cleaned the bathrooms of the seamen. I loved it. And so I became fireman, oiler, water tender, passed my Coast Guard exam, joined the Seafarers International Union. Then I became an engine utility and on and off I was a Merchant Seaman for four years.
RH: And you learned something about skill and skilled employment from that.
CF: I learned a lot. And what I really learned is we have tied so much to education, to having a BA, a master’s. And what I learned is I was around people who had incredible knowledge and incredible skill and I admired them and I learned from them. I’m in an engine room 12, 15 stories high and it’s all pipes, pipes everywhere, and of course the big boilers because these were the old steam boilers in my first ship, 1942 those boilers were built.
And this merchant seaman kept trying to teach me to think like steam. Because there’s a problem and what he could do is think that he is steam going through all these pipes in this 15-story, huge engine room. And he would figure out where the problem is. And he kept saying, “Chris, you have to think like steam.” I never, ever managed to think like steam.
RH: Did that disappoint him?
CF: It really did. He said, “You know…” when I was tightening a bolt and I sheered it, he just looked at me and he goes “You know, Chris, you’re a really nice guy and you’re really smart and I like you but you’re never going to be an engineer.” [Laughs.]
RH: What was your degree?
CF: My degree was in history. [Laughter.]
RH: Yeah well…
CF: That says a lot right there, doesn’t it?
RH: It really does, yeah. You point out in the book in 2034, which is only 15 1/2 years away, the number of people over 65 in this country will for the first time in American history be greater than the number of people under age 18.
CF: That’s right. Isn’t that a stunning figure? And there are two things that come from that. One is if you’re an organization, you’re a business, you’re a nonprofit, you’re a government agency, it doesn’t matter what kind of organization, your labor force is going to age. It’s just going to happen. It’s the nature of the beast.
The second point though, and this is the underappreciated point and this is why I wrote the book, is that the underappreciated asset in the United States is the experienced worker. They have knowledge, they have skill. And we have all these stereotypes, we have all these prejudices, you know, you can’t teach an old dog new tricks, they’re grumpy, they’re just looking out the window, can’t wait till the day to retire.
And here’s the thing, if you’re creative in your twenties and your thirties, you’re creative in your sixties and seventies. When does productivity peak? It peaks around the time people retire, age 65. And you start going through all these stereotypes and all these prejudices–there is a lot of research out there that says this is wrong.
And so the fact that the population is aging, that’s not something to worry about. What is to worry about if managements don’t create the opportunities for their experienced workers to exercise their creativity, to be productive, to be part of a multi-generational team–which by the way, the research also shows, and it makes sense if you think about it–the most productive teams are multi-generational.
RH: And this demographic trend has tremendous economic implications.
CF: It does. And one of the motivations for writing the book, and you know this from your career, for the past 30 years there has been this strand of economic commentary that says the demographics of aging, oh this is a bad thing, this is really bad, we’re going to have all these dependent elderly being supported by too few young workers. And the underlying dynamism of the U.S. economy is just going to erode and we’re just going to have this world of secular stagnation. That’s been the story that’s out there.
But what if there’s a very different story to talk about the worker who is 50 years and older? See if they go with Steve Jobs, 2005–he gave a commencement address at Stanford University and part of that speech was about connecting the dots and how important it is to connect the dots. But as he said you don’t know how to connect the dots looking forward, you connect the dots looking back. It’s called wisdom.
And when I mentioned earlier that these multi-generational teams are most the productive…so when you read the research coming out of Europe at a truck factory or a car factory, it’s pretty funny, well, they’re economists so it’s not that funny but you get an image from it. But what they say is that the experienced worker makes more mistakes but they’re much smaller compared to the younger worker.
But when something goes wrong, when the unexpected happens, they don’t panic, they don’t run around, they draw on their experience, they connect the dots, and so they help solve the problem much more quickly than your younger workers, who are not bad but they haven’t seen this. And they’re running around, causing a lot of commotion but not solving the problem. So you put the two together and you end up with a more productive team.
RH: I’m assuming the research into this is all very recent.
CF: It is and a lot of it’s coming out of Europe and particularly looking into factories. And a lot of the stories that are most interesting also come out of Europe in terms of factories because manufacturing has an older than average workforce.
So there’s the famous example of BMW. Germany has an older workforce than the United States and BMW realized what does this mean for our assembly lines and our productivity as the workforce ages? So they created what became known as the “pensioners’ line” and it reflected what the population of Germany was going to look like in say 10-15 years. And the initial productivity of that pensioners’ line was way below the productivity of their traditional line in Dusseldorf, Germany.
Then they spent $50,000. Now what does that get you, one BMW maybe? Like the cheapest one coming off the lot? Barbershop chairs, bigger computer screens, corkboard and bamboo floors, meditation and yoga. Productivity of the pensioners’ line now matches or exceeds the productivity of their other lines.
RH: There’s a phrase that reaches back more than 100 years in U.S. economic history–the forgotten man. Amity Shlaes wrote a book about the Great Depression recently, The Forgotten Man, and it showed up a lot in 2016 in the demographics of the vote, the mill workers and miners from southwestern Pennsylvania and towns that were hollowed out. So in terms of these people?
CF: The one thing…the United States does many things well when it comes to business. I mean, we do many, many things well. The one thing we don’t do well is training and retraining. The reason I think has to do with there’s this belief that if I train you, you’re going to leave. You’re now more valuable in the marketplace. I just spent all this money to train you and now you’re gone. And for a long period of time, labor didn’t have a whole lot of choice, they didn’t have a whole lot of options, they were in a weak position, so if you wanted to get training, it’s on your dollar, your dime.
What we’re seeing now is training is picking up because of this tight labor market. It’s not easy to retrain, it isn’t, but we have a lot of evidence of where retraining does work. Danville, Virginia, one of the poorest sections in Virginia, it used to be very well off because of manufacturing and then it really went way downhill. And there was a program, it was done in North Carolina and Virginia, right on the border there, and then some nonprofit organizations and community colleges.
And it was for workers who had been laid off from a mill. And they were doing clerical work. And the program had a very high success rate. So I talked to them and I said, “I want to learn more about this, I’m going to get on an airplane and fly out, this is a great thing.” They said, “Well, we had a very high success rate but the program shut down because we ran out of money.”
And what made that program succeed, when I talked to the people who went through it, it paid for your home insurance and it paid for your health insurance and it paid also for your education. So families were able to afford to pick up a new education.
So one woman that I interviewed, she’d been a clerical worker. She was the oldest person in class, she was 55 or 56, the oldest person in her class, and was going to be an assistant in an early-childhood education program. She was making the exact same amount of money doing that job, enjoying it much more, and she was now going back to school to pick up her extra degree.
So if people are working longer and the labor force participation rate goes up, then you’re just going to increase the amount they pay in taxes, the delay when they have to file for Social Security. It truly is a win-win situation. So I think rather than looking at the aging of the population as a disaster, look at it as an incredible opportunity to get this economy to a higher growth path. And that’s what I really believe we can do.
Open up the doors because hey, 27% of new businesses were formed by the 55-64 year old age group in 2017. And that up from about 14-15% in 1996. Now a lot of times it’s a small business, it’s a craft business, nevertheless….
RH: And of course there’s a lot of risk involved in that and there’s a quote I noticed from when you did an over-55 improv workshop in Minneapolis your instructor said the over- 55s are more willing to experiment, they take risks that younger improvisers don’t. So what kind of improviser, first off, were you in that over-55 group?
CF: I brought a lot of smiles to everybody’s face. I just did, yes.
RH: How does this over-55 derring-do spill over into entrepreneurship?
CF: The risks of starting your own business surprisingly are less. And here’s why. You have knowledge and experience to draw on and typically you’re drawing on contacts that you developed over the years. And the reason why you see that there’s a problem you can solve is because you’ve actually been in the business. So you believe “I can solve this problem.”
Secondly, you probably own your own home, the home is an office, and technology has lowered the overall cost of doing business and managing your business. So I’m not minimizing the time constraints, and a lot of times people are doing things on the weekends and in the evenings or testing out their ideas, seeing if this is going to work before they take that leap–which by the way is a good idea to do–and hopefully joining a co-sharing workspace or an incubator where you’re surrounded, where you can get some feedback from people.
But most small businesses are started with $5,000 or less. And that comes from Steve King, he’s a consultant out in the Bay Area, a small business consultant. Other people have confirmed that number. So it’s easier to start a small business today, you can test it out easier in the market and it costs you less money. Do not put your house or your 401(k) at risk to start your entrepreneurial business. Let’s just put that out there really clearly.
But people had this knowledge and they had this skill but they also had this sense of “this is what I want to be doing. What do I want to get up in the morning and do? What do I want to do next? What would I really like to do?” That’s a challenge but that’s a worthwhile challenge to have.
RH: And there’s the purpose part.
CF: And there’s the purpose part.
RH: You quote so many people in the book. Do you have any idea how many people you quoted in the book?
CF: No, but it’s a lot. [Laughter.]
RH: Yeah, I’d say at least 125 or something like that?
CF: Something like that. Oh, there’s so many stories but one in particular…. When I interviewed Rick Harris. Rick Harris grew up in segregated Texas, goes to California in his 20s, he builds his own business in the Bay Area, and what he’s doing is in commercial interiors. Five kids, they’re off. And then his wife gets a job in the Twin Cities, headmistress/headmaster of a private high school. They decide, “why not? “
Come to the Twin Cities, tries to start a new business, same thing, commercial interiors, where he has all the expertise. Hard to break in, tough market. His son came to him and said, “Dad, I want to go into business with you.” That just rejuvenated him. We have so much conversation about intergenerational conflict in our society, but when you start looking more closely, you know, the generations share a lot of values. And what they shared was the value of working together, doing a good job, and building a business. His son wanted to learn from his dad.
RH: And another story that I love is the one of Tim Carpenter in Burbank and his various senior art centers, which creates such a wonderful sense of purpose for people and probably improves the health of a substantial percentage of the number of people attending.
CF: Oh, absolutely. And I’ve been to his place in Burbank and it’s low-income, it’s affordable housing. These are people who probably never really did a whole lot of art while they were growing up. It’s modeled after a college curriculum. You’re taking a playwriting course from a playwright and you are going to, at the end of the semester, you’re going to deliver your play. People are just thriving in that kind of an atmosphere.
And he started that because he was in the health business and he’d visit these nursing homes and he’d see this little, dark, room in the basement and there’d be fluorescent lighting and people would have Popsicle sticks and glue them together and paint them and it depressed them so much. And what he has found is give people the opportunity to learn something and create something and they do it and they love it, that’s a metaphor for our whole society.
RH: And it counters to such a great extent age-related depression.
CF: It does. There was always this question about are the people working longer healthier or does working longer make you healthy? More and more what we’re realizing is in general it makes you healthier.
RH: And to the extent that we can separate Chris Farrell and the professional journalist and my longtime colleague at BusinessWeek from the Chris Farrell who lives in the Twin Cities and reached 65, what in particular have you learned about the aging process and the renewal process within the aging process that you understand better now that you’ve hit 65?
CF: What I really understand now is to always be learning. That sounds like a cliché but it’s really true. Now I write a lot about work, continue to use your skills or pass on your skills, but if it’s not in work it’s doing something else but it is important to learn. And this notion that you hit some arbitrary age, age 60, and then your learning is over, that’s it, you don’t tap into your skills, your knowledge, your experience, and use them again, that is absolutely wrong.
We age, we do age, and you can’t do certain things. But you can do other things that you didn’t know enough about when you were younger, by the way. And so keep learning, that’s the motto. Never stop learning. When life becomes the couch and the TV, it slows down a lot.
RH: Chris Farrell sharing his purpose in his new book, Purpose and a Paycheck. This is Capitalism. I’m Ray Hoffman.
About the Series: Featured stories from the intersection of the free market and entrepreneurial success. Here we speak with leading CEOs, academics, philanthropists and up and comers on their contributions and perspectives on the American economy.
About Ray Hoffman: Ray Hoffman, a veteran business journalist, is highly-regarded for his news and analysis features and insightful CEO interviews. Representing BusinessWeek on air for twenty-one years, Mr. Hoffman was the morning business news voice on the ABC Radio Networks from 1995 to 2006. Mr. Hoffman also represented The Wall Street Journal, on air, for eleven years. His daily WCBS CEO Radio feature was recognized by the New York Press Club as best radio business news report in both 2012 and 2015. In this podcast, Mr. Hoffman invites some of America’s most dynamic CEOs to share their stories as business builders and perspectives on free enterprise.