The Mind the Delta Dispatch

Don't curse them -- they might hear you!

There is an expression in business analysis: “Mind the delta.”  “Delta” is the mathematical symbol for change, depicted as a triangle.  In business analysis the single most important number is the change, not the current status.  If I am introducing a new gizmo that has a development lead time of three years, it is not useful for me to know that, in 2011, 75 percent of gizmos are purchased by Australians.  If I know that, five years from now, the total world gizmo market will be only 5 percent bigger than the current one but Australians will be buying an estimated 50 percent of all gizmos and Indonesia will be buying the other 50 percent (they currently buy only 6 percent of gizmos, BTW), that is useful.  It tells me to market the new gizmo to Indonesians.

So the most important number for American business today is that virtually all of the growth in consumer spending will be in the Asia Pacific region for at least the next 20 years.  Almost all of that will be China and India.  Here are the numbers:

Regional Consumer Spending (as a percentage of global spending)      [source: OECD]

Essentially, China and India will swap places with Europe and the United States in a mere 20 years.  The reasons for this are purely mathematical: the United States currently spends 77 percent of its GDP on consumer spending, so there is no room to grow.  India spends just over 50 percent of GDP on consumption, China just over 30 percent.  So that is where the growth will be.  Even if China and India fell off the face of the earth, the US is just not going to grow that much as an economic engine in the next 20 years.  We have topped out.

The chart above will define our world and our lives for the remainder of my life.  For those who would wish it weren’t so, who would insist upon some form of hegemony (military, technological, spiritual, geopolitical, whatever), it is simply not going to happen.  The chart will dominate everything.

So what is our best move?  Learn how to create, distribute and sell products and services to Asian consumers better than our competitors.  It is really our only move.  Such export-driven strategies have created terrific standards of living for countries like Germany, Sweden and Korea.  We need to get busy on it now.  Besides, hegemony is overrated.
                                                                        -- Brian Prioleau