The world has reached 8 billion people. Where to next?

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. In the time it takes me to read this introduction, 140 babies will have been born. And earlier this month, one baby in the world became the 8,000,000,000th person on this earth. 

Audio Clip: [00:00:19] The global. Population is. Projected to hit an all time high on Tuesday, reaching the landmark. Figure of 8 billion. 

Sascha: [00:00:26] People. It took us until 1804 to reach 1 billion people. We added the other 7 billion in the 218 years following. So the world's population growth has been staggeringly fast over the past two centuries. But now the rate of growth has started to decline in 2020. This population growth rate fell below 1% per year for the first time since the 1950s. It's Friday, the 25th of November. And today, I want to know, we're at 8 billion people. Where to next? To talk about this, I'm joined by the co-founder of Equity Mates and my colleague here, Alec Renehan. Alec. Welcome to The Dive. 

Alec: [00:01:04] Thank you, Sascha. Good to be here. My first time back on the show since we won gold at the Australian Podcast Awards, so I just wanted to remind everyone of that.

Sascha: [00:01:13] Yeah, it's just been a fantastic week. We've also got to say neither of us had kids, so we're not doing anything to help this global population. Right. But we're going to talk all about what this means today, just as a recap. On November 15th, the United Nations announced that somewhere somewhere in the world, the 8,000,000,000th person was born. It's the first time the world population has ever reached 8 billion people. But before we get into what this all means for us, can you give me a brief rundown on the world's population growth up until this point?

Alec: [00:01:46] Well, before I give you a brief rundown, do you want to try and guess where the world's eighth billionth person came from? As you said in the introduction. The world produces about 140 babies a minute. Mm hmm. But there are two news organisations that reckon they cracked the code. Don't I have a guess? What? 

Sascha: [00:02:03] Wow. Well, look, I'm going to go with a really basic answer, and I want to say India. [00:02:06][3.7]

Alec: [00:02:07] Okay. You're going for it. The size. Why?

Sascha: [00:02:11] I just know that they're growing. Well.

Alec: [00:02:13] Unfortunately, it doesn't look like it was India. According to CBS, it was in the Dominican Republic. And then there was one other source that said the 8,000,000,000th person was born in Manilla. But given 140 babies are born in a minute, I feel like it's impossible to say. 

Audio Clip: [00:02:29] On 15 November 2022. The world will mark an important milestone. As the global population surpasses 8 billion people. 

Alec: [00:02:40] The UN doesn't even know the exact population at any one time because of delays in reporting around deaths and births. So if you were born on the 15th of November, I think you have a pretty good claim to being number 8 billion. 

Sascha: [00:02:53] So Alec, give me a wrap up on just how fast our population has grown over the last two centuries. 

Alec: [00:02:59] So it took us until 1800 to reach a population of 1 billion. We took 128 years from there to reach 2 billion, 1928 3 billion by 1960. And that's a kick in the head, 4 billion by 1975. Is this story alive? You can see that these increments are getting faster and faster. 5 billion by 1987. 6 billion by 1999. That's just 12 years apart at this point. Yeah. The 7 billion by 2011. And just 11 years later, in 2022, we hit 8 billion people. And in many ways, that's not surprising. Population growth is often exponential as one generation has multiple kids, and then each of those kids have multiple kids. Population growth grows quickly. But what is surprising is that that might not hold into the future.

Sascha: [00:03:59] But before we get to the slowing growth rate, to put this all in context, only 108 billion people have ever lived on our planet. So that means that today's population size makes up 6.5% of the total number of people ever born. But let's talk about why this population growth is now declining. 

Alec: [00:04:20] The world's population growth has actually been in decline for several decades. In 2020, it fell below 1% for the first time since the 1950s. And the U.N. expects that decline will continue, which means it's going to take longer and longer for us to add the next billion people and the billion people after that. So keep in mind, 11 years between 7,000,000,008 billion. It'll be 14 years between eight and 9 billion and then 21 years between nine and 10 billion, which means we'll get to 10 billion in 2058. 

Sascha: [00:04:53] So why is that happening, Alec? 

Alec: [00:04:55] So two key numbers that really drive population growth. The first is fertility. How many people are being born? And the second is mortality. And really, how long are people staying alive? And the headline is, both of these numbers are falling. So starting with mortality, this is a really good story. The global life expectancy for a baby born in 2019 was 72.8 years, which is up almost nine years from 1990. A baby's life expectancy like that's a huge leap up in a couple of decades. 

Sascha: [00:05:30] Yeah, 1990, says my peers. So within that time span, you're adding almost a decade to someone's average life expectancy. 

Alec: [00:05:36] Keep in mind, of course, that that's a global average. Life expectancy changes wildly based on where you are in the world in the least developed countries. They're about seven years behind that global average, and things also change year to year. So in 2019, we said the global average was 72.8 years. We've covered the world's life expectancy fell a little bit in 2021. Global life expectancy dipped slightly to 71. But good news: by 2050, global life expectancy is expected to reach 77.2. People are going to live longer and longer. So that's the first component of the global population. [00:06:15][38.7]

Sascha: [00:06:16] What about fertility then, Alec? 

Alec: [00:06:17] So fertility is about how many babies each woman has, and it's measured by the fertility rate. The key number here is the replacement rate, 2.1 births per woman, because that's roughly the level required for a population with low mortality to stay at a similar population. That's the population break even point. In about 1950, the world was having about five births per woman, well above the replacement rate. And that's why we saw such exponential growth in population over the last half of the 20th century. But that has massively come down globally. The world's fertility rate is about 2.3, 2.4 at the moment. And two thirds of the world's population live in an area where the fertility rate is below the replacement rate, below 2.1 births per woman. 

Sascha: [00:07:05] So, Alec, we're living longer and we're having less babies, which also brings us to this idea of peak child in quotation marks. There are never going to be more children on Earth as they are at this moment. This fact was wild to me and it makes sense. 

Alec: [00:07:21] Yeah. So we've reached Peak Child. We've actually passed Peak Child, and that will be followed by peak population, which means there will never be more people alive at this moment on earth. We're going to reach peak population according to the UN in 2083. 

Sascha: [00:07:35] But that's also peak population on a global level in individual countries around the world, we're well past peak population. For example, the population of Japan peaked in 2008 and it's been declining ever since. And there are many people that think that population decline is going to lead to civilisation decline. 

Alec: [00:07:57] I think the biggest problem the world will face in 20 years is population collapse typically is that there's also plenty of people that don't yet. [00:08:05][8.0]

Sascha: [00:08:05] Well, I, for one, hope that we don't because we're going to be living through that century. 

Alec: [00:08:10] Well, Japan seems to have kept the civilisation intact for ten years after it reached its peak population. 

Sascha: [00:08:15] So hopefully blue skies ahead, but also by 2050, over 60 fives are going to make up 16% of the world's population, which is up from 10% now. And there'll be twice as many over 60 fives as there are children under five. I mean. Well, just be shy of that 65 mark in 2050, but that's really our peers. 

Alec: [00:08:37] Yeah, we'll be the out-of-touch boomers at that point. [00:08:39][1.7]

Sascha: [00:08:39] Exactly what Karen.

Alec: [00:08:40] Might have been in the House. But that story is a result of the two numbers that we spoke about today. Longer life expectancy means older people are living longer and then less fertility rate means there's less children. And so the population pyramid shifts and there are more and more older people and less and less younger people. We've spoken about Japan. Japan has a fertility rate of 1.3, so their population pyramid is already inverted massively, and they've got huge amounts of older people compared to younger people. They also don't have strong immigration, so they're not really bringing in younger people from overseas. Australia, the US, China and the UK are all below 2.1 as well, so they're all at different stages of their population, pyramids inverting as well. And we should probably all look to Japan and see some element of our future in what they're living through today. 

Sascha: [00:09:32] So let's be specific. What does slower growth and an ageing population mean? 

Alec: [00:09:37] There are fewer people able to work to support people who can't work anymore. That is the fundamental challenge of an inverted population pyramid. And then from there, everything changes. How does government budgets work to keep up with health care costs, retirement costs, Social Security costs, especially when you have a lower tax base because you have fewer people of working age. So let's just take health care as an example that illustrates this. In Australia, the Federal Government spends about $3,250 per person on health care. By 2031, that's projected to rise to $3,900 per person. But by 2060 that's projected to rise to $8,700 per person. So almost triple in 40 years. And it's not just a spending challenge. The skills of workers will need to adapt. We're going to see more and more people move into caring roles such as nurses, doctors, occupational therapists, physios to look after the ageing population. But the challenges in a country like Japan, there's just less and less people able to do that. And so that's why you see pretty novel solutions coming out of Japan like, like robots and the like. So watch this space. 

Sascha: [00:10:51] I guess there's so much Dom back here, but let's take a quick break and then I would like to talk about the populations that are still growing that are above this replacement. Right. And what that means for them. Welcome back to The Dive. I'm your host, Sascha Kelley. I'm joined by my colleague Alec Lenihan. And today we're talking about the fact that the world, the global population ticked over to 8 billion people in the last month. Of course, if you're one of those 8 million and you're listening to us right now, you can do us a favour and give us a five star rating on whatever podcast app you're listening to. It helps us get to the ears of the other 8 billion. That would really help us imagine if we had 8 billion downloads. Alec, that would be amazing. So, Alec, the U.N. believe that they can quite accurately forecast the population out to 2080. What is going to happen over the next 60 years? [00:11:44][53.0]

Alec: [00:11:45] Well, the first thing is we're going to have more than 10 billion people on earth by 2080. And this was the fact that most surprised me. That population growth, the next couple of billion will come from just a few places. Eight countries are expected to deliver more than half the increase in global population to 2050. The Democratic Republic of the Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines and Tanzania. Those eight countries are expected to account for more than half the world's population growth for the next 30 years. 

Sascha: [00:12:20] And China is not on that list. 

Alec: [00:12:22] No, China is not on that list. China is about to start shrinking. By 2080, China is going to have well under a billion people. 

Sascha: [00:12:30] Wow. 

Alec: [00:12:31] Yeah. India will have long surpassed China by then. In fact, China is at 1.42 billion at the moment. India is at 1.41 billion. India is forecast to take over China next year and just keep going. 

Sascha: [00:12:44] Both countries currently have more than 1.4 billion people, but China's slowing birth rate is expected to lead to a decline in its population. Okay, so what about Western countries like the U.S. and Australia? 

Alec: [00:12:57] Yes. So the conversation here is a little bit more difficult and it's a little bit more difficult to forecast because of immigration. The U.S., Australia, the UK, Western Europe, they have net inflows of migrants which will really help them keep their population, I guess, young and working, even if their fertility rates stay below that 2.1 replacement rate. The US Census believes America will have over 531 million people by 2080, so not quite double their population, but a meaningful step up. Meanwhile, Australia's Bureau of Statistics believes that we will have between 37,000,049 million people by 2066. So at the top end of that range, we're doubling our population in the next 30 or so years and that's not because we're going to start having more babies. That's because we're going to have a lot more immigration. 

Sascha: [00:13:48] And naturally, a changing population changes the economy. 

Alec: [00:13:52] Yeah, exactly. Massive changes to the world economy where the global consumer is, where businesses are looking. But we don't have to wait until 2080 to see that change. We're living through it now. A lot of countries in sub-Saharan Africa, as well as parts of Asia, Latin America and the Caribbean are currently experiencing a time sensitive opportunity. Sounds like I'm giving you a Black Friday sale, Sascha. But this time, a sensitive opportunity to boost your economic growth isn't from a sale. It's from a demographic dividend. 

Sascha: [00:14:24] Look, you've set it up so well. I naturally just have to ask what on earth is a demographic dividend, it sounds like? As you said, an end of year sales special that you get a bonus somewhere. 

Alec: [00:14:35] It's basically when a large percentage of your population is in their prime working age between 25 and 64 years old. And when a huge chunk of your population is right in that sweet spot, in that hard working, tax paying, growing economy sweet spot, and you don't have a lot of older people or children to support in your economy. You can grow and you can grow quickly. Now you need more than a working age population. The UN spoke about a few things that you need which make intuitive sense. You need quality education, you need good health care, you need good infrastructure, and you need good opportunities for productive employment and decent work. You need a favourable business environment for people to be willing to start and grow businesses. But a number of countries in our region and around the world are really seeing that opportunity at the moment. The one that really comes to mind for me is Indonesia, where I think about 70% of their population is in that demographic dividend sweet spot.

Sascha: [00:15:34] So the eight countries that you mentioned earlier, they're all ones to watch. 

Alec: [00:15:38] Yeah, that's right. They're not all necessarily having that demographic dividend now, but they're going to be the big countries that drive the world's population. Think about how a whole generation of businesses turned towards China and orientated their offerings to delight Chinese consumers. You know, the luxury goods brands, Nike is their data says of the world. And now we're seeing businesses do something similar to India. They're looking. Towards India and saying, is there an opportunity here? This is really a product of two things: one, more people and two, more spending power per person. And if any of these eight countries the Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, Philippines and Tanzania can do something similar if they can match the expected population growth with an economic growth and increased spending power per capita, they're going to be the countries to watch because they're going to be the next billion consumers in the world. 

Sascha: [00:16:37] Hmm. It reminds me, and I cannot remember who to attribute it to, but there's a phrase that describes how demographics are destiny. And this whole story just makes me think of the opportunities that we have as investors to capitalise on that. So Alec, any final thoughts before we leave it today? 

Alec: [00:16:53] So, Sascha, you're right. Demographics are destiny, but the world isn't always great at predicting demographics. The U.N. thinks they're pretty accurate up to about 2080. Then their predictions become less certain after that. But we do need to be careful. The world doesn't have a great track record of predicting population. And then what? The effects of that population growth will happen from the Methuselah. An idea that we would run out of food in the 1800s to the book The Population Bomb in 1968. We're often wrong about demographics and how the world would develop to support those people. The Methuselah idea was that food production grows linearly while population grows exponentially, and that eventually we would run out of food if those growth rates continued. The population boom predicted major political and social upheaval and mass famine because of overpopulation. And both were wrong. And both were wrong for the same reason. Advances in technology. And that's what's going to cause the predictions that we've spoken about today to be wrong as well. Maybe we won't reach the peak population in 2083 because we will find a way to extend human life. Or maybe we see fertility rates in those eight countries we spoke about drop because we say rapid economic development, empowerment of women and inclusion in the workforce of women. And we see fertility rates drop as a result. Maybe we say Elon Musk takes half the world's population to Mars and that blows all of the UN demographic predictions out of the water. You've got to be careful with these predictions. You've got to take them with a grain of salt because time and time again, technology blows up the most accurate forecast. 

Sascha: [00:18:34] Well, I think the only prediction I'm prepared to make is I don't think I'm going to be on one of those rockets to Mars. That's the only thing I'm comfortable putting on the table.

Alec: [00:18:43] Fair enough. 

Sascha: [00:18:45] Look, if you enjoyed this episode today, please tell a friend about it. It really is the best way for our podcast to grow. Screenshot it, send it to a mate, share the link. And if you've just joined us for the first time, welcome. Go check out our back catalogue. We talk about all sorts of topics. Remember, you can follow us on Instagram at the dive business news. You can contact us by email thedive@equitymates.com and subscribe wherever you're listening right now so you never miss an episode. Let's get to that 8 billion downloads. Alec, thanks so much for joining me today.

Alec: [00:19:15] Thanks, Sascha. 

Sascha: [00:19:16] Until next time.