One of the beauties of a free market economy is that demand spawns supply. When enough consumers decide they want or need something, a supply of goods or services emerges pretty quickly to satisfy that demand. Whatever you want, somebody in America wants to sell it to you.
In such an environment, finding interesting investment opportunities is often just a matter of looking for what consumers or businesses will want in the near future. For example, if there is something that consumers or businesses think they need more of but can't find, sooner or later, someone will come up with a solution for them.
One long-term problem, which will undoubtedly create new opportunities, is persistent labor shortages. Many businesses, as well as consumers, are frustrated by their inability to get a service when they need it. Think about the major service sectors of our economy that are chronically short-staffed. Health-care providers are frequently short of nurses and support staff, many schools find themselves without enough teachers each fall and hospitality firms almost always have a â€œhelp wantedâ€? sign out. On the consumer side, most homeowners feel lucky if they can find a plumber, carpenter or electrician to come to their house to make repairs.
There are, of course, several demographic trends behind these shortages. Perhaps the biggest factor is the decline in U.S. births after the Baby Boom that produced a smaller cohort of future workers that we now refer to as Generation X. As a result, the Census Bureau projects that by the end of this decade, there will be a 12 percent decline in the 35 to 44 age segment and a 3 percent decline in the 30 to 34 age group.
So just when Baby Boomers are entering the stage of life where they will need more health care, there may not be enough workers to provide them with those services. Unless there is another big jump in immigration, by 2010 there will be at least 5 million fewer workers ages 30 to 44 than there are now.
Compounding the shrinkage in numbers of workers is the fact that more of the younger cohort, ages 20 to 29, are taking themselves out of the labor force to go to college or graduate school. By 2010, the National Center for Education Statistics projects that 16.5 million people will be college or university students, up 10 percent from this year. And after college or grad school, most graduates, quite understandably, want a job that pays more than service workers generally earn.
Labor shortages may not seem like such a big problem right now, since U.S. businesses have laid off hundreds of thousands of workers over the past year. But the Bureau of Labor Statistics predicts that sometime during this decade, a gap will emerge in which there are at least 3 million more job openings than laborers to fill them.
That prediction suggests two things will happen. First, there may be federal legislation in a few years permitting more immigration, perhaps including selected amnesty for those who reside in the United States without a green card. Second, real inflation-adjusted wages for service workers are likely to rise and entice more of the 28 million retired people back into the work force.
But immigrants and retired people are not always available when and where employers need them. Devices that can substitute for human workers are therefore likely to proliferate until the next Baby Boom arrives. Already, ATMs have replaced some bank tellers, and electronic fare cards like the E-Z Pass in the Northeast are quickly replacing human toll collectors on the nation's roads. Any area of our economy where a digital device can be widely marketed to substitute for a worker will almost certainly present an investment opportunity. Two sectors likely to make substantial investments in people substitutes are health care and home maintenance. There are already more than a few firms that make labor-saving medical devices and some that market elaborate home security systems, but both sectors are still very labor intensive.
Maintaining one's body and maintaining one's home have several characteristics in common. Both need periodic checkups, diagnostics and monitoring. Diabetics, for example, must monitor their blood sugar level so that it stays within acceptable limits, just as Northern homeowners who travel in the winter need to monitor their home's temperature so the pipes don't freeze.
As the median age of Americans advances toward 40, and as more than 10 million people are added to the 55 to 64 age cohort in this decade, the demand for medical monitoring and diagnostics is likely to surge. In the medical device arena, the marketing challenge will be to convince Americans to pay for additional monitoring at home for chronic conditions. This could take the form of a small appliance that could monitor blood pressure, heart rate or other vital signs on a weekly basis.
But the aging Boomers who may need such medical services â€” because they are pushing 60 â€” are also likely to want to take long vacations or own a second home. The interesting aspect of these growing wants and needs is that nothing needs to be invented. The technology for monitoring homes by remote, for example, was invented years ago, but has not attracted high demand due to poor marketing. Such monitoring has taken the form of â€œsmart homes,â€? where appliances have been equipped with a computer chip that monitors everything from the heat to air quality. Large fortunes are almost never made by inventors anyway. They are made by marketing people who take some gizmo and convince millions of consumers that they can't live without it. Sometime over the next few years that may happen with homeowners. Someone may start to sell a 24/7 digital home inspector that uses a few sensors and small cameras linked wirelessly to a Web site that can inform homeowners about numerous problems, such as whether a door is unlocked or the electrical power in being used improperly.
What is needed in the health care and home maintenance sectors is a firm with the marketing savvy of a Microsoft and the distribution network of a Home Depot. The real product such a firm would be promoting is something that will likely never go out of style â€” peace of mind.