Life Expectancy

Rachel Salaman: In your work you've said that the three-stage model of life that we're used to, based on education, work and retirement, isn't sustainable any more for financial and non-financial reasons. So can you talk a bit about that?

Andrew Scott: Yes absolutely, and that is I think one of the big findings. So as you said, we have this three-stage life: we tend to start with education, and that education sees us through our working career, and then we retire, and actually that retirement period at the end is kind of happening a bit by accident.

It's just for most of human history you didn't really retire, you died young, and you often died close to when you were still working, and so as we've had longevity increase and increase and increase, retirement has got longer and longer and longer, and it's not really been a social decision. Oh, let me take a block of time at the end.

So that's I think an interesting starting point, but the problem with the three-stage life is as follows: if you're going to live to 100 then the current three-stage life where people retire at 60 or 65, it just can't work financially: you have to save so much during your working career to get you through your retirement period with a decent income, but it just doesn't add up.

So then that means it doesn't work from a financial point of view – of course, you can work for longer and of course it's not just we're living for longer, there's a lot of evidence, the compression of morbidity, that says we're healthier and fitter for longer. I always like to give the example of the Rolling Stones whose aggregate age is around 300 or something, and their average age is around 70, and there they are still performing live and in a way that we wouldn't have expected of 70-year- olds 20, 30, 40 years ago.

So you could work for longer, and I'm sure the Rolling Stones can afford a long retirement, but if you do the calculations you'll probably having to work until you're about 80 and then retire for 20 years.

So if you have a three-stage career that means you finish education at 20 or 21, you work till you're 75 or 80, and then you retire, so you have that enormous second period and that's also we believe unsustainable. This is work I'm doing with Lynda Gratton here at London Business School. And we believe it's unsustainable, not so much from a financial point of view – it works financially – but from another very important part.

We draw a distinction between financial assets, tangible assets, and intangible assets. Intangible assets take many forms, but they're kind of like skills and knowledge, and that focuses on your happiness assets. Now, skills and knowledge are unlikely to last a 55-year time period, and we don't think that the education you get at age 21 will see you through a career till 75. Industries will disappear – they'll become technologically obsolete – and although in the past your knowledge might have got you through 20 or 30 years, the rate of technological obsolescence is increasing, 55 years seems impossible.

So we don't think your skills will see you through without topping up and investment, and also we think just your health, your relationships, and your happiness will also suffer. Fifty-five years doing the same role, the same job: it sounds terribly boring. So I'll think you'll get frustrated and working for 55 or 60 years. What does that mean about your family relationships, your marriage, your children, your grandchildren? So we believe that that elongated second period, if that's the thing that makes it work financially, it's not optimal from an intangible point of view.

Rachel Salaman: So what's the alternative?

Andrew Scott: Well, I think there are a number of different ways to look at it here. The first is obviously you have to have more stages, and we can debate later about what you can do in those stages, but basically it's more stages, and we have a whole bunch of proposals at different times in life of what you might do. So one might be a career that is earning you serious money, that will fund your retirement. Later on you might have a portfolio career, earlier on you might have an experimental entrepreneurship career – there are lots of different options but you will basically no longer have a three-stage life.

We paint lots of seven- or eight-stage lives actually, and a little bit more about that: if you have two or three different careers during your life then of course in between those careers you can have transition periods. Now those transition periods may be time off, time raising a family, time looking after your parents, or time re-skilling and learning a new network. So every kind of new stage automatically brings a transition stage as well. So you have a lot of stages – certainly more than three – and that also adds some very interesting issues, because if you think of the three-stage life there's only one way to arrange a life; education, work, retirement. You can't work and then educate and then retirement, you can't retire first.

So you kind of have to do it only one way, but if you have a five- or seven- or nine-stage life then there's loads of different ways of arranging it, and I think that's then interesting because with a three-stage life if you know someone's age you broadly know their stage, and that of course leads to a fairly homogenous workplace where you know people's ambitions – you know their career path, you know their hierarchy, and age and experience and position in a hierarchy are very strongly correlated.

If you have a multi-stage life, given you can arrange it in so many different ways, you will not be able to tell from a person's age what their stage is, so you'll have people at the same stage with very different ages and very different ambitions and very different needs. That has a whole bunch of very interesting HR issues within a company as well as of course our own life around planning because I think you're going to see two things, and you're seeing it already.

The first is a huge amount of social experimentation, because we don't yet know what these new stages are. We know what the three-stage life looks like and we had our parents' role model to follow, but we're inventing new stages of life, and some stages we'll experiment and won't work. Others will work and be adopted by many people, so we're likely to see huge social experimentation, and perhaps we'll talk more about that later, because I think you can see it in a couple of age groups already.

Another thing you're going to get is huge social heterogeneity, because people will choose differently, and they'll choose differently at different points in time, so you're going to see just a lot of heterogeneity in the way people structure their lives and their career paths. That of course will require huge changes from individuals, from companies, financial providers and governments, and as always with these things individuals are way ahead of everyone else, and I think we already see people experimenting, but we're going to have to start to see the corporate and the legal and governmental change in decades to come.

Rachel Salaman: One of the stages that you've written about in the past is covered by a new term – "beconomy." Can you tell us what you mean by this?

Andrew Scott: I think it's particularly apparent if you look at the 18- to 35-year old age group, although I don't think it's restricted to that, and the beconomy is trying to pick up on that age group and a real firing of entrepreneurship, although a very distinct form of entrepreneurship. It's a lot to do with experimentation, a massive focus on startup rather than selling out and exit, and it's almost a sort of existential path where I think people aged 18 to 30 – not everyone of course – are saying, "Well, I'm probably going to work till I'm 75 or 80, I need to find out what I'm good at and what I like and let me use these years to experiment."

And of course those have always ages of experimentation, but rather than perhaps take a train to Marrakech, what you're seeing this group do is hanging around Shoreditch or other areas like that and just really being entrepreneurial, but in a very different way. There's a sharing culture, there's a free IP access, and there's such an emphasis upon the startup itself, almost sort of proving you can do something as opposed to looking at the exit. So I think this is a nice period where individuals can find out what they're good at, and I think there's a number of motivations for that, so let me try and go through some of them.

The first – and I'll draw an analogy with the creation of teenagers – it's quite interesting: for most of human history we had children and we had adults; the word "adolescent" didn't really exist until about the 1880s, and teenagers is a post-Second World War term. As school-leaving age was increased you suddenly saw this age group, 13 to 18, who previously used to be at work, no longer being at work and society didn't really know what to do with this group, and it was clear they had different needs and motivations, and from that long social experimentation we eventually get the concept of a teenager which now of course is very well defined and well known, and I think you could almost say that teenagers have emerged as an independent consumer group: they have money, they have consumption needs, and they're well catered for by marketing and products.

I think what we're beginning to see emerge now is post-teenage, this 18- to 30-year age bracket where I'd almost classify them as independent producers. So it's interesting: why are increasing numbers of people taking this path? And I think there's positive and I think there's negative forces; the negative forces over the last few years have been a tough economy, we've seen very high levels of youth unemployment, we're also seeing the standard graduate internment process become more and more limited and more and more competitive, but I think the biggest driver is a more positive phenomena which is just longevity: I think this is a generation who know they're going to be living a long time and I'm very struck – in a finance theory you have options, and options become more valuable the longer the period over which they hold.

So I can buy an option to buy a share at $2; the share price might be a $1.50 today, so how much I pay for this option to buy at two will depend upon the length of the option. If the options are only going to exist for the next hour then it's not very valuable. If it's going to hold for the next 10 years it becomes more valuable. The other thing that becomes important for options is the volatility – the uncertainty. If a market is very uncertain then those options become more valuable, and I think if you look at that from the perspective of someone who is aged 18, the horizons now look longer, so options are more valuable.

Secondly I think there is a perception that technology and globalization – all these mega-trends – are making the world more uncertain, so options become more valuable, and options mean you don't commit yourself, so you don't commit yourself to a graduate internship career; you don't commit to buying a house; we're seeing the average age of buying a house now well into the 30s – 32 or 33 – we're seeing the average age of marriage at around about the same. We're seeing the average age of women having a child for the first time now in their thirties, and I think these are all very logical post moments. It's about keeping hold of options.

Similarly this is a generation who don't buy cars – the amount of cars they buy has fallen significantly – and I don't think it's all economics, it's "Why make a commitment?"

So this entrepreneurship is I think a great way of embellishing your CV: learning some general skills, growing as a person, but improving your education, and almost curating an existence before you really then decide what it is you want to do.

Rachel Salaman: You talk about options as if people are choosing not to buy a house until they're in their thirties; not to start a family until they're in their thirties. Other people might have observed that these aren't really choices, so how does that fit into your theory?

Andrew Scott: Well, that goes very much back to the positive and the negative forces, and there are definitely negative forces that postpone the decision to commit, and of course one of the things about demography is that if people live for longer then house prices get more expensive, so there's a very complicated set of actions. And of course as an economist I always think of choices and choices are affected by prices, and when prices go high you have fewer choices. So that's definitely true, but I really don't think that is the only thing at work; I think there's also this sense of optionality, of learning and discovering and experimenting, and I think also embellishing academic qualifications.

Within your university education you learn certain skills, and they may or may not get you a career path or it may be that you don't know what career path you want to follow, and if you have got that additional time that longevity gives you; using it to experiment; being your own boss which being an entrepreneur enables you do; working closely with people similar to you, just seems a sort of rather natural extension of those teenage years.

Rachel Salaman: A lot has been written about the Millennial Generation or Generation Y. How do those labels fit into what you've been saying?

Andrew Scott: I really don't like the millennials concept. It's partly being an economist, because you can always explain the fact that people are different by just saying they're different, and that's a little bit what millennials does.

I think this is a really interesting generation because they are embarking on a huge social experiment, because they are the first generation to rethink about longevity and recognize that the life choices that my father had are not going to be available to them – they can plan their whole life afresh. Like most of my generation I kind of followed a three-period model of life, looking at my parents as a role model. This generation doesn't.

So I think the millennials is not terribly helpful, because it suggests that it's a passing phase, a passing set of values. I think longevity increases are permanent and so that this is a generation who are finding a new way of living and new stages, and they will make mistakes; they will make errors that previous generations will learn from and not copy, but I think some of the change of values and some of the changes of lifestyle reflect longevity, so this is not a one off – this is the beginning of something.

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Rachel Salaman: So why should the economy be seen as distinct from the mainstream economy? What advantages are there to seeing it as separate?

Andrew Scott: So it's hard to come up with a phrase, so I have used this term "beconomy." It's a bit of a pun because I think this: 18- to 30-year-olds who are being entrepreneurial are "becoming," so there's a becoming existential development and economy all mixed up there, but it is different from the economy – there's a sense of authenticity which I think if it's too commercial, is destroyed, and so if you do wander around Shoreditch or the equivalents in other cities around the world it is quite a tight-knit community who believe passionately in what they're doing.

They're motivated by money but money is not by any means the main consideration: it's about doing something – hopefully earning enough money that you can wash your face as it were – but it's also about forming networks, learning skills, and being an active member and creating something new, and that's not just a work choice, there's something lifestyle about that.

Now every now and then something emerges from the beconomy and it becomes part of the economy. Facebook would be an obvious example about that, and that's something where it becomes monetized and incredibly valuable, and of course technology is enabling that to occur, and obviously that's hugely interesting to the economy, but in general I think the beconomy is something that is tender saplings. If it were too connected to the economy it would start to go wrong, which is a challenge for the formal economy because I think these are very interesting people.

If we go back earlier to different lifestyle choices there are some of that generation who have just gone into careers through internships, and they will be rising up the corporate ladder, learning corporate brands, learning very useful skills, and then there are these people in the beconomy who are much more entrepreneurial and doing things in a very different way.

I suspect in 10 years' time those individuals will want to come back into the formal economy and they will have really interesting skills for firms, but how does a firm make use of those individuals and how do they then combine them with the career path people they've been working with the last ten years? So it's a very interesting interface I think there.

Rachel Salaman: Do you have any answers for that question?

Andrew Scott: I think one is that they'll definitely be needed by the large firms because they will bring a creativity and a sense of the new that will be incredibly valuable, but they're also of course going to be a group who are used to their own power – used to their own choices and values – and that will be very difficult to integrate into a large professional service firm for instance. So you're going to have to have either very specific roles which are very free floating, or have some form of separate spin-off that enables them to co-exist with the large organization.

Rachel Salaman: Now you've said that entrepreneurship is prevalent in the beconomy, and that it's not always commercial – it's not always driven by money – so if you add to that the fact that youth unemployment is very high – as you've mentioned nearly 25 percent in Europe and 16 percent in the U.S. – and that leaves a lot of other older people supporting these younger people financially. So how does that work from an economic point of view?

Andrew Scott: It can work. It's obviously not very desirable, but I do think this beconomy is one response to that because there's a certain subsistence culture in some places that goes on because actually the youth tend not to want to get supported by others – although I'm sure there is something of a transfer from the parental bank rather than the commercial bank – but you're seeing alongside this some quite innovative funding schemes as well, so it's not for everyone, but there's a really interesting space here where people who actually do want to be independent: they want to make their own choices and face the consequences of that, and that's the very essence of entrepreneurship.

The interesting thing about the beconomy is when I talk to people of this age, 18 to 30, they don't like the idea that this is restricted to their cohort, and in particular they always tell me that they have lots of similarities with the 60-plus age group. And that group is also very interesting because that's a group who have perhaps finished their formal career – they are still fit, they aren't ready just to retire and do nothing, and also they may need money, and so they are really interesting too in this space, and often for subsistence, they're not there to build a multi-million pound industry, but they want a purpose, they want to learn, they want to experiment and if it brings in money that covers their expenses, all to the good because that's better than just running down your wealth.

So it's a very interesting age group that 60-plus where you see certain common similarities with the 18 to 30 group, this new experimentation.

Rachel Salaman: The obvious difference is that the 60-plus people will have probably have had some kind of formal career beforehand so they will have learnt things like responsibility and the value of working your way up through the ranks and so forth, which perhaps the younger cohort won't have known.

Andrew Scott: That's right: I think the work at the hierarchy is interesting, this technology – and by the way I never use the word "technology" as you show your age, because my children don't refer to it as technology, they just use the stuff. You don't refer to a toaster as technology, but if we refer to technology as ICT, information community technology, it's very non-linear and very non-hierarchical.

So, for instance, a number of firms don't like emails: they argue that we're using technology in the wrong way. What you might find in a firm is someone will write a draft, they send it round to everyone, people give comments and the person then revises the draft, then the process happens again: a very linear development. Whereas of course what you could do is simply put a document and have everyone continuously edit it like Wikipedia, so it's a very non-linear approach to doing things.

The other approach is sort of a matching function or a "groupiness." So when I was a teenager I had very good friends who lived near me locally, but we had to compromise on hobbies because someone liked Formula One, I liked football, and we compromised because we enjoyed each other's companionship. But of course with the Internet you can find someone who has got precisely the same interests as you anywhere in the world, so you get this very close matching.

Now why is that interesting? Well, if you look at things like pop-ups. So imagine you wanted to run a restaurant 30 years ago. You would go to catering college, you would leave aged 18, you would start washing dishes in a restaurant, then you might be preparing vegetables, then you might be chopping herbs, boiling water, so eventually you were a chef and then you might think about running your own restaurant aged 40 or 50. Now with a pop-up people can coordinate online, get the resources and just run a restaurant for two weeks, and that's a phenomenal thing: you've suddenly got a young generation who has experience of running a restaurant.

It's not that slow linear process – that slow hierarchical process that the older generation are used to – but it's what they've done and what they do, and I think that's rather exciting. But then of course it does create a problem if you're then going to put them into a very hierarchical organization.

Rachel Salaman: What would you say to people who said, "Well actually there's a lot of value to be gained from working your way up from scrubbing vegetables to running your own restaurant"?

Andrew Scott: I think I probably told my children that as well, so patience is a virtue. I think that's probably the basis of it. I guess the question is what is gained if there's a world where you don't have to do that? Perhaps those values are less important.

I think this goes to a very deep-seated question about technology and how it's changing the mind, so you can draw a big distinction between reading the way I used to read a book and the way that my children would read a screen. When I read a book I want quiet because I have a deep personal relationship with the author, and I turn the page and I want something that's free of distraction, and I want to get lost in the book.

When my children now read a virtual page – because they rarely read a physical book – they are continually having to make decisions: do I click on this link to find out what that means? Do I click on this link to find out about what that person actually is in practice? And that's a much shallower version of reading, because you're having to make these decisions all the time. But of course that then leads to advantages: they can process multiple stimuli very differently but they've lost the ability of deep concentration, and the brain is a muscle: if you use the brain in a certain way it develops strengths. If you don't use the brain in other ways it loses those strengths. So we are seeing a technology that I think is changing the decision-making process and the concentration of people, but from someone who didn't have those skills I think that deep concentration and silence is incredibly valuable, but if this is an environment that doesn't cater for that any more then I'm not ensure I should be enforcing that.

So the slow progress through the ranks and learning through experience: I can see why some people think it's valuable, but actually you can also imagine at age 18 running a restaurant and discovering what goes wrong, but it not having lasting consequences because it was just a pop-up and it was self-funding. So that's a phenomenal learning experience to have in such a very short period of time. So it's speeding things up.

Rachel Salaman: Very much so. Are you suggesting that you can learn as much in two weeks by running your own restaurant as someone can learn in 10 years?

Andrew Scott: No, obviously not, but it does mean that you're going to have a 20-year-old who knows a lot more than the previous 20-year-old who had just been chopping vegetables. The question is what happens when you reach age 40, but again when you think about this multi-stage view of life, so in the book I'm writing with Lynda Gratton, we look at different personas and one character is a baby boomer who qualifies as an engineer, gets a job age 20, retires at age 65, goes through three or four different firms but throughout his entire life he's an engineer. And you can imagine that individual when he's retired, when asked what did you do, he says "I was an engineer" – that's his identity.

I think the whole consequence of a 100-year life and a multi-stage view is that you won't be able to say that any more. You won't say "I was an engineer" because being an engineer won't last for 60 years. So you're going to have a very different sense of identity: you're going to have to go through very many different transitions which we're really not very good at – the three-stage life does not prepare us for transitions, whether it be a change of job, whether it be a change of industry, whether it be a divorce, you're going to have to go through so many different transitions in a hundred-year life, and Lynda and I focus in particular on the need to develop this flexibility but still holding onto your sense of identity.

That's going to be a really big challenge. So in a world where you did one thing for most of your life perhaps that patient approach was valuable but I'm not sure that's the world we're going to be in going forward. Now we can have a debate about whether that's good or bad, just as I can have a debate about whether it's good or bad that I don't think my children can concentrate as long as I used to. Now if I show my children a film made in the 1980s or 1990s, after half an hour nothing has happened and they're bored stiff. So I can decry that but whether it's good or bad, it just happens. Technology has always changed the way we think and work.

And it's fascinating if you look at the way in which the book replaced oral history. If you look at Homer for instance: we talk about Homer, but Homer was a collection of people who told a story, and every time the story was told the group who heard it considered it their story and they no doubt told it to other people, and so it was group owned and there wasn't a definitive written text.

Once the book was invented eventually we worked out the novel and the university, and it required this very linear process: I research, I write, the final draft is published, it is my book and then the reader reads my book in silence, and universities are based round that concept, but that wasn't what it used to be like when we had pre-literature, when we had an oral tradition.

And in a way the internet is going back to that oral tradition where things are group owned: you can't say there is one single author, and it's not a silent concentration of one person in deep concentration reading a book with an author; you can no longer talk about the final text because it's a living document, just as Homer's "Odyssey" was a living document. So technology changes the way we think and changes the way we structure our lives, and that's always the biggest impact of technology. So I can say it's bad, but the next generation will say it's good and it's just the change that is occurring.

Rachel Salaman: What about when the current 18- to 35-year-olds become 50- to 68-year-olds. Do they then magically get some kind of mantle of responsibility?

Andrew Scott: I would argue that between 18 and 30 they actually are sharing responsibility, particularly as this beconomy is a very interesting thing: it is a responsibility, and if you do a pop-up and although it's transient responsibility, which may sound a contradiction in terms, but people learn that there are consequences and that surely is a key part of responsibility.

They're also kind of curating an existence because in that 18 to 30 space, if you are doing these pop-ups or running these entrepreneurial events you are kind of creating your own media channel, and you'll be leaving this big digital footprint which is a modern CV in a way – so we always tell people be careful what you put on Facebook – but it's also going to be a way in which you project who you are, what you do and what you like, and I think that's a very interesting part of preparing people for the future.

Rachel Salaman: So let's say I'm a 45-year-old executive managing a team of 18- to 35-year-olds in a large organization. Now these of course won't be classic becons as you've described them because they are traditionally employed, but how could I use some of the ideas we've talked about to better manage them?

Andrew Scott: So I think there's a couple of things there. One: I would actually say to the 45-year- old, think about yourself because you've probably got another 30 years ahead of you in your working career, and what are you going to be doing? Is it the same role? The same industry? And I think that's also a great place to begin, because once you think like that you will probably understand a bit more the 18 to 35-year-old perspective, which is this isn't what I'll be doing always.

No matter how good they are, no matter how devoted and committed they are, I don't see an 18-year-old working till they're 70 in the same firm and industry. So I think that's the first bit of advice that I would give.

The second, I wouldn't want to say that all 18- to 30-year-olds are going down the beconomy route. There is a massive social experimentation and some of these millennial characteristics we talk about are confusing the one off generation with this lifestyle change, but I think the realization that these are individuals who want to make a success of their career for now but will be thinking about other options elsewhere. The groupiness is hugely important and the flatness of the hierarchy, this is the way they are used to interacting and making decisions, and any attempt to be too hierarchical will definitely cause problems and challenges. So telling them that back in the day I just did two years of photocopying that was a good practice for me isn't really going to do any benefit whatsoever, so I think it's addressing that groupiness, non-hierarchical but non-linearity as a source of inspiration.

Now of course within any organization you can't let one group dominate everyone else, and I think one of the challenges we've got is with the 18 to 35-year-olds with this non-hierarchical group in a sense, it is so antithetical to corporate hierarchy that it does quickly become a dominant culture, but I think it is one where the rest of the organization needs to morph and evolve rather than expect the 18- to 30-year-olds to change – it is that dramatic.

Rachel Salaman: Andrew Scott talking to me in London. You can explore this topic further on the Mind Tools site where you'll find resources on managing different groups of people and bridging the age gap in the workplace.

I'll be back in a few weeks with another Expert Interview. Until then goodbye.