“When I attempt to find a simple formula for the period in which I grew up, prior to the First World War, I hope that I convey its fullness by calling it the Golden Age of Security.”
Thus begins the autobiography The World of Yesterday in which the Austrian author Stefan Zweig, born in 1881, recounts his early life in Vienna at the height of the Belle Époque. It was a time of high culture, of prosperity, and of people who believed that war was forever relegated to the past. Then came the shock of WW1, the breakup of Austria-Hungary, the difficult inter-war period, Zweig’s own forced exile, the horrors of WW2, and finally death. Zweig and his wife committed suicide in Brazil, far from Vienna and very far from the Belle Époque, in early 1942 at a time when the Nazis still looked unbeatable.
There was a life that started and was lived in the sun and with infinite promise for the first 33 years and that slid gradually to ultimate oblivion in the subsequent 27 years. The future is nothing if not unknowable. An attempt to extrapolate it from the present can be a foolish exercise, even for someone living in the capital of Austria-Hungary at the zenith of its glory. The path of life is nonlinear.
That is useful to remember when pondering Warren Buffett’s assertion in 2012 that children born in America today are “the luckiest crop in history”. That showed Buffett’s legendary optimism and his strong faith in the future of the United States. Considering that life expectancy is now about 80 years, this meant that Buffett saw the US as the most peaceful and prosperous country for the remainder of the 21st century.
It is true that adults now living in the United States have been among the luckiest people in the world. By the random lottery of birth, every American living today has found himself in one of the freest, most prosperous countries in human history. Since the birth of the nation 239 years ago, it was often (though not always) luckier to be born here than in any other country on the planet. So if we compare people of the same generations across time, the US-born citizen usually fared better, at least on the peace and prosperity measures if not on all dimensions of the human experience.
But what about the US baby born today vs. the US baby born one hundred years ago, or fifty years ago? When you approach the question from this angle, you can understand Buffett’s optimism. The timing of his birth in 1930 was nearly perfect.
Many unemployed and destitute parents looked at their children in the early 1930s and worried greatly about what would become of them. As fate would have it however, these children turned out to be the luckiest generation in history.
Born in the USA in 1935
A child born in 1935 may have experienced some difficulties in his early years because of the Depression but he was too young to remember much of it in later years. He was also too young to fight in WW2 which started when he was four and ended when he was ten. In his teen years, the US economy started its long prosperous post-war boom. He was too young at fifteen to fight in the Korean war and too old in his early thirties to be drafted for Vietnam.
The economy enjoyed a prosperous run from the time he entered the work force until the first oil crisis of 1973 at age 38. He muddled through in his early forties until the Reagan boom kicked off in 1982. That is when he entered a second long prosperous run from age 47 to age 65 in the years 1982-2000. He retired at 65 in the year 2000, then enjoyed his last fifteen years and died this year (assuming a life span of 80 years).
Buffett was born in 1930 and his life span is close to that of someone born in 1935, which explains his strong optimism.
Born in the USA or Germany or Belgium in 1925 or 1945 or 1899
But a ten year difference in either direction, a birth in 1925 or 1945, would have resulted in a different outlook on life. The child born in 1925 remembers the Depression, went to war in WW2 and saw his sons leave for Vietnam. The child born in 1945 was himself drafted for Vietnam but then enjoyed a nice economic run starting in his late thirties until well into his fifties and perhaps until today at age 70.
For an even sharper contrast, consider also a US baby born in 1899. To begin with, his life expectancy was only about 45 years, significantly lower than the 80 years expected for today’s baby. At eighteen, he was drafted for WW1. He experienced the war in Europe first-hand and lost some friends in combat or in the 1918 influenza pandemic. At age 30, the stock market crashed and the Depression started. At age 40, WW2 started and his sons went to war. At age seventy, if he was still alive, his grandsons went to Vietnam. It would be understandable if this person felt less positive about future life events than his counterpart born in 1935.
Now consider this man’s contemporary born in Belgium or Germany in 1899. It is the same timeline and the same trials but with far greater impact. His country was destroyed when he was in his teens and destroyed again when he was in his early forties. In between, he struggled with a severe economic depression, with hyperinflation and the rise of Nazism. The war ended when he was 46 and he felt beaten down and defeated. Then things improved gradually, though he lived with the threat of a Soviet invasion until he died. There was good reason for this man to be circumspect about the future.
The time and place of one’s birth are a random lottery. Some generations and nationalities have been far luckier than others and a shift of one decade can significantly impact one’s outlook on life. Which brings us back to the original question: How lucky is a US baby born today?
Buffett’s statement may prove accurate in relative terms. The US faces many challenges in the next few decades but they seem more manageable than the challenges faced by other nations. But what about comparing today’s baby to babies of previous generations? Is he luckier or less lucky? Difficult to say because the future is unknowable. What is certain is that generational luck is real and there will be some future generations that are far luckier and others far less lucky than the one born today.
Among the challenges faced by the current generation are the declining growth of the US population and a rising dependency ratio for the next few decades. These demographic factors made for steady economic tailwinds for Buffett’s generation but they will turn into important headwinds for current generations. See related readings below.
In the examples above, the unlucky child of 1899 was born during the Gilded Age and the lucky child of 1935 was born during the Great Depression. Those with a sense of irony may see an inverse relation but there is no real relation. Nonetheless, a key conclusion is that being born, like Stefan Zweig, in a prosperous place at a prosperous time is no guarantee of a wonderful future existence. Conversely, being born in desperate times does not consign one to a life of unending trials.
The Economy’s New Boss: Demographics