Saturday, May 22, 2010



The Scientific American reported on that terrible disease, often just labeled the C... word: Cancer. Earlier research from the beginning of the 1980s indicated that the bulk of it was directly linked to a couple of things:


People are getting older these days. Great news for them of course, but it also means that there are more opportunities now to die because of specific diseases whereas previously we simply didn't live long enough to see that happening.


The linkage between smoking and cancer is quite old already and it seems like ages ago that cigarette producers got away with stories that their products were healthy. The health warnings on packages of cigarettes and other tobacco products indicate that we are now all aware of this factor. Actually: cigarette consumption in Western nations isn't really rising anymore. It is the Emerging Markets where we can expect a rise in smoking-related cancers. If you have ever traveled to China you will know that the Chinese population is at risk. With their increased wealth they will not really quit smoking but probably even increase it further. The linkage with one of the worst of all forms of cancer, lung cancer, is straightforward according to most scientists.

Smoking: Self-destructive consumer behavior in wealthy countries
Growing risk on a global scale due to growth in Emerging Markets


Western nations have developed diets that were not just one-sided, but also full of imbalances. Too much meat, and not just that, too much meat that was often one way or another genetically modified and/or treated with substances that turn out to be not so good for public health. Unfortunately - notwithstanding the fact that we are aware of this - cancer specialists are also still learning, whereas the food industry on the other hand is constantly looking at ways to increase production and/or create new products. Result: whenever we learn about one bad product or production technique, the next one is revealed.


One of the problems with increased wealth is that people tend to eat more. Very often far much than the 2000-3000 calories that health specialists consider healthy. With growing wealth in the world, we can expect this factor to have a negative impact as well.


Another aspect of development is that more physical jobs, e.g. working on a farm or heavy work in construction or in a factory are replaced by office work. Therefore: at a time when we can afford to eat more and heavier food financially, we should actually eat less due to this reduced need. This makes actual trends even worse than what they would otherwise have been.


Now, on the other hand we do still see that life expectancy in the world is going up. In most Western nations life expectancy figures or 80 years or older are quite normal. But with cancer now being health care risk nr 2 or 1 in most Western societies we cannot expect these numbers to rise continuously. The next 10 years increase in life expectancy will probably go slower than the previous one, although we should always take into account that scientific innovations might lead to techniques, products or pills that will further increase life expectancy.

Increased life expectancy does also create another time bomb. Not so much a standard health issue , but more a financial risk. With the period after retiring now longer, the amount of premiums that people would have to pay during their working years has to go up. Can Western countries still afford that?

We believe that there is no choice but to work longer and retire later. A retirement age of 70, not a reality in any country yet, will definitely be something that we will have to accept in the not too far away future.

In the meantime we will see that various governments will introduce policies that will stimulate health, be it through sports and preventive behavior and/or through improvements in their health care system so as to ensure that overall cost levels can be managed. Seen in the light of this discussion, it is not so strange that President Obama made his health care reform plans such a big issue during his first year in the White House. It is not just an important plan from the perspective of the lowest income brackets in society, i.e. social policy. It is clearly also part of a broader policy that has at its key the affordability of our Western society's business model in which people work about 40-45 years of a life that is now about 2 times longer than that. Compare that with the situation in the 1950s and 1960s when pension systems were created. In those years the working time was about 2 times longer than the retirement period.

 Obama knew he had to do all he can to control health care costs.


In the list above 'environmental risks' were not specifically mentioned. What about them? Wasn't the environmental lobbyist community very active the last 10-15 years? They were, but cancer specialists have confirmed the outcomes of their earlier study indicating that environment is not a very big cause of cancer. True, environmentalists question this result saying that there were mismeasurement issues due to high correlation between the aforementioned factors to the extent that their increases are linked to increased wealth. Wealth increases and environmental issues go hand in hand as well. And that is why we were probably not capable of seeing the environmental linkage clearly.

Of course we have to be careful and avoid pollution
But cancer specialists question the importance 
of the linkage between environment and cancer

This is the famous age-old problem that has to deal with correlation versus causality. Correlation could involve coincidental linkage between factor A and B when it is actually factor C that has a direct relationship with A. When there is a linkage between B and C, people might mistakenly think that B is the factor with the direct linkage with A, and not C.

It is scientifically a ''nice thing'' that China is now developing a relatively dirty, unhealthy environmental situation do to its heavy industry growth and relative lack of environmental protection by the government. This will lead to a situation in which environmental problems will arise far earlier in the economic development cycle than they did in the West. So basically, if environment is a bigger factor than cancer specialists think, this will immediately translate into cancer being a relatively bigger risk in China in an earlier stage of their development.


We doubt if it will lead to an outcome that revives environmental momentum in a way comparable to what happened before the whole 'scam' and 'fraud' discussions started (environmentalists modifying research findings in a way that would help their case).

If that is the case, it will also imply that the number 1 industrial growth sector in the Western world could and should be the Health Sector. Far more than renewable energy!  Renewable energy will not really be a threat for traditional energy production for many years to come. There are large budgets available for Renewable Energy and in-and-of-itself this is of course good. But Health Care is of an importance that is not just growing, it is also growing on a global scale without too many differences of opinion between governments. With all agreeing that something needs to be done, make sure that you do incorporate exposure to the Health Care industry in your portfolio be it via Pharmaceuticals, Senior Citizens Homes, Hospitals and Clinics, Bio-tech companies etc.

With increases in life expectancy, the consumer group demanding these products will grow rapidly all across the globe. And with the health care burden growing, the interest of others in making sure that health care risks are curbed one way or another are also so large, that one can be sure that this is a growth area.

It is definitely a Changing World out there. Tobacco producers with China exposure can be winners in your portfolio next to Health Care related firms with a global reach.

Click here for the original article from the Scientific American.

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