Walker & Dunlop, Inc. (WD) Earnings Call Transcript & Summary

Good afternoon, and welcome to today's Walker Webcast. I'm Susan Weber and joining Walker & Dunlop's CEO, Willy Walker, on today's webcast is Dr. Joseph Coughlin, Director of the MIT AgeLab. Willy and Dr. Coughlin will discuss what older consumers want, how they want it and how American businesses can tailor their goods and services to meet this valuable and disruptive demographic seeds. Thank you for joining us today. And now I'll turn it over to Willy.

Thank you, Susan, and good afternoon to those of you on the East Coast, and good morning to those of you further West, and welcome to another Walker webcast It's a pleasure to have my long-standing friend, Joe Coughlan from MIT's AgeLab joining me today. I will say this is -- there he is. I was just about to say, this is my 50th webcast, and it was the first one that I've started without my guests already being on, but Joe has come in, in just-in-time processing to join me right as we start. So that's great. Before I turn to Joe, a couple of comments on the markets and what we're seeing right now. I did a webcast this morning with Max Peak of Magnolia Partners and Doug Bibby, the President of the National Multifamily Housing Council. Doug and I were in agreement that the stimulus bill being passed by Congress today is excessive. And while components like the extension of unemployment benefits and checks to those citizens adversely impacted by the pandemic are not only warranted, but very much needed, there's hundreds of billions of dollars of aid that is neither necessary nor good public policy. We also spent some time discussing partisanship in Washington and how the retirement of senators, Portman and Blunt are unwelcome signs that each party is moving further and further to the extreme. We discussed housing policy and the Biden Administration's focus on affordable housing and the likelihood that FHFA, which is the regulator for Fannie Mae and Freddie Mac will likely have a new director in 2021. And we discussed technology. And I mentioned the Walker webcast from a few weeks ago when Brendan Wallace of Fifth Wall and Casey Berman of Camber Creek join me. I would strongly suggest anyone who missed that discussion on property technology, either watch the replay on W&D's YouTube channel or listen to the podcast driven by Insight. On the overall markets, a couple of quick thoughts. The Dow just hit a record today, which is truly amazing given the pandemic really kicked in almost exactly 1 year ago this week. And the 10-year is at 1.54% today, causing many people to wonder how high rates will go. I asked David Levy, Walker & Dunlop's Chief Credit Officer, to take a look back for the last time rates ran like this. And in typical fashion for an MIT-educated person, I had to add that plug given my guest today from MIT, David found in almost exact parallel. From July 1, 2016, to March 1, 2017, the 10-year move from 1.50% to 2.48% or up 98 basis points. Note rates were around 4.18% in July of 2016, and increased to 5% by March of 2017 or 72 basis points. That is almost exactly what we have seen today. From a 62 basis point 10-year treasury on July 1, 2020, up to a 1.59% 10-year treasury on March 1, a 97 basis point increase in the 10-year with the average note rate increasing by an extremely similar to what happened previously, 73 basis points. A couple of observations here. First, it wasn't that long ago that we saw rates run almost exactly like they have run over the last 8 months. Second, the period in 2016 to 2017 was when Donald Trump won the White House on the promise of tax reform, which drove the equity markets dramatically higher immediately after the election; third, while the 10-year reached 2.48% on March 1, 2017, it had rallied and retreated to 2.1% by June of that year. Now I'm smart enough not to predict rates, so I give you that as solely a data point and matter of fact; and fourth, note that the spreads were amazingly consistent between the run-up in 2016 and 2017 and what we are seeing today, 1 basis point different in the average cost of financing all in. So we have not seen spreads come dramatically tighter this time around than we did in 2016 and 2017; and finally, while rate increases typically cause owners to reassess acquisitions and refinancings, cap rates do adjust to new rate environments typically within 1 quarter and increasing base rates due diminish defeasance and prepayment penalties allowing for early refinancings at a lower total cost; final point I'd add, the Dow moved from 18,000 in July of 2016 to 21,000 in March of 2017 and continued rising to 24,000 by the end of 2017. In the 10-year, having started in July of 2016 at 1.5%, went up to 2.4% in March of 2017 and finished 2017 flat at 2.4%. So I think it's -- history never repeats itself, but it does rhyme sometimes. And I just thought it was interesting to go back and look at the last time we had this kind of rate increase, what it did to the equity markets and also what it did to the debt markets. Okay. Dr. Coughlin is Director of the Massachusetts Institute of Technology's AgeLab. He teaches an MIT's department of Urban Studies in planning and at the Sloan School's advanced management program. Dr. Coughlin conducts research on the impact of global demographic change and technology trends on consumer behavior and business strategy. He advises a wide variety of global firms in the financial services health care, leisure and travel, luxury goods, real estate, retail technology and transportation industries. He is a behavioral science fellow of the Gerontological Society of America, and a fellow of Switzerland's World Demographics and Aging forum. He is also a senior contributor to Forbes Magazine and writes regularly for Marketwatch and the Wall Street Journal. Dr. Coughlan has been recognized as one of 15 world mines by Zurich based World mines, a select community of global leaders in science, arts and business. His recent book, the Longevity Economy inside the world's fastest growing, most misunderstood market is one of CEO reads business best sellers. And you can see it behind him over his right shoulder to our left in this Zoom call. So Joe, I went skiing this past weekend, tweaked my back and really felt like I was a lot older than 53 when I got to the office yesterday. And as I looked at myself in the bathroom mirror, feeling a little tired, very sore and older than usual, I said to myself, well, if I've been born in 1900 and not 1967, I'd already be beyond my average -- the average life expectancy. It made me feel slightly better, but no less sore.

So here's the question. How long are you and I going to live? And I think more importantly, how old will we be when we stop being active adults?

Well, Willie, thank you for having me. It's always great to see you work with you and have such a great forum. And thanks for the pointing out of the product placement of the book back there. So one of the things with those of us getting into our 50s, we can still do most of the things that we did when we were younger, it's just the repair time, takes a lot longer than we ever expected. And should we say the ibuprofen is often a lot closer. So let me give you some hands as to about living longer is that, yes, you should exercise and eat well and manage whatever chronic condition you have. But here's the secret to old age. Is everyone listening? The correlation to old-age and living longer and better is not going to be a big a surprise. Believe it or not, it's not following doctors' orders. It's not eating well because I grew up in Philadelphia where tasty cake scrapple and cheesesteaks are food groups. And by the way, cheesesteaks were with the other kind of cheese. So it's probably not that, but it's education and income. Willy, 52% of us mostly skewed to that upper echelon of education and income, we'll make it past 85 and change. And basically -- it's basically -- until about the last year, 1.5 years that most people start to feel that [indiscernible] life years. So part of the problem is it's not just how -- if there's some sort of biological clock or natural expiration date on the bottom of your foot, it's how well did you take care of yourself the decade before? How well did you choose your parents? And how well did you use the environment to run you? But just to give you kind of a forward-looking piece, 52% or more of the children born in the so-called industrialized world, Europe, Japan, United States, Canada, the like, more than half of them now are forecasted to live over 100 years. So the bottom line is, you're right, by 46 or 47, life expectancy in 1900, boy, that gave you a whole new idea of mid-life crisis, if you will, when it came time to check out.

So you're right about the fact that there are 600 million 50-plus in the world today, and that number is going to go up to 1.5 billion by 2050. So clearly, and we're going to dive into the U.S. in a moment, but what countries out there really have an aging problem in the sense that they're not bringing in either immigration, they're not bringing -- they're not making babies. And that as they age, they're going to have a problem of taking care of this older cohort?

Well, first off, one of the things I would really want folks to think about, and you and I have talked about this over the years, Willy, is the notion of aging not being a problem, but a global opportunity. The only reason why it is a problem, except for an extreme cases, if you will, the oldest old, the only reason why it's a problem is because our institutions, our strategies and business, frankly, our societies, our families are still using an old narrative around old age. So we'll come back to that in a moment. But I'd rather see the greatest success of human kind be defined as an opportunity rather than show we say a loss. But those countries that are still looking at it as a loss, and it's the vast majority, in fact, probably almost every country is still panicked. And countries like most of all of Europe, but also Italy, Spain, Germany. For those of you in the investment community, the economic engine of Europe, Germany not only are they getting older where by mid-century, maybe as many as 38% to 40% of the population will be well past what we call retirement today. But by the way, they're -- should not just getting older, they're getting smaller. They were talking about a population that's going from roughly 89 million, that may go down as low as 68 million, where that 30% to 40% will be over retirement age. Entire parts of the country are emptying out outside of Munich and Bavaria. Italy, villages are emptying out and aging. Spain, same thing. Bottom line is the industrialized world as we know it, is shrinking. But let's look at China. None of us ever thought that we would ever see China issue a workforce shortage. By 2013, they had already said due to the one-child, one-family policy, which they have since -- well since relaxed, they're running out of workers. And they're going to have more people over age 60 by mid century than the entire population of the United States, more than 430 million. And of course, Japan is renowned, and if you -- has almost become a trite example of an aging world. And yes, we're also looking at Asia and Northeast Asia, in particular, Japan, Korea, parts of China and the like. Worth mentioning is, the fastest-growing part of the population is 70-plus, and 40% of the growth of that country will be -- that region rather, will be based on those 70 and older.

So talk about the United States for a moment, Joe, because we clearly have an aging population, and we have a huge cohort of baby boomers who are retiring and being active adults and active seniors. But we also continue to have an immigration policy. You just talked about Japan, which their immigration policy is no-immigration. It's -- they got no babies and they've got no immigration. But here in the United States, we not only have immigration, but those first generation immigrant families tend to produce a lot of babies. Talk about that, about the evolving demographics of the U.S.

Yes. I mean, one of the these that we talked about, those other countries, the Europeans, the selected Asian countries and whatnot that are aging dramatically. By the way, one of the things I want everyone to think about is that here's a number for you to thing that's well beyond probably most of your planning. By 2047 worldwide, there will be more people on the planet over 60 than there will be children under the age of 18. So while we pick on countries that we see in the economists of Wall Street Journal, whatnot, the bottom line is the trend line are all nations due to fertility dropping and greater longevity. So yes, Willy, here in the United States, we, too, are aging. In fact, we are the youngest of the industrialized countries, but we're also shrinking if we only looked at our native born. It is the immigrant population that is keeping us competitive in terms of population. And in many ways, if you will, providing that care that you speak of. But we have a new squeeze play that we're going to have to think out here as a matter of national policy, competitiveness and, frankly, our own family decision-making. How do we better use technology to provide care not that we think that high-tech and high-touch are necessarily equal. Who's going to show you, say, take care of that care force that is getting ever smaller and countries like the Philippines, who used to show we say, export a large number of nurses are actually starting to pull back on the number of people that they want to let out of the country because they need the care as well. Willy, the forecast is in terms of -- if we want to say, demography is destiny. The forecast in the United States is that we have a growing younger brown population that is going to be caring for a grain white population in the United States. And so yes, it is an issue. It is a priority, and it's got to be put into the mix as to how we think about immigration.

Joe, you talked about senior population and under 15 population, and there's something called the dependency ratio. Can you talk about why the dependency ratio is so important for all economies to understand.

It's really interesting. Even mathematics can be made biased. The dependency ratio in short is the ratio between the -- listen to the language, the unproductive population versus the productive population. And the unproductive population by definition is 0 to 14 and 65 plus. So anyone who's listening to this call right now, who is 65 and older, I want you to know, you are no longer considered a productive person. And yet, economists like to have you believe that they do objective analysis. So the ratio is exceedingly important because it is about who we think is productive, who is working, who is providing the care. And we are seeing that ratio as it is currently defined gets seriously out of whack. We used to have as many as 8 people being so-called productive to every 1 person who is not productive. This is why we need to really start changing and revisiting the notion of when unproductivity begins. 65 was an age totally made up as a reason to now be unproductive. Some countries make it a 50, 55, 60, some older. But Willy, this is a major issue that we have to think through on a corporate level and a national level.

So Joe, let me go to that about unproductive people. So I just -- I went and did a little bit of research on a couple of people that we all look to who are supposed to be wildly productive right now. Nancy Pelosi turns 81 on March 26. Joe Biden is 78. Willie Nelson, if you like his music, he turns 88 in April, Queen Elizabeth, about to turn 95 in August. And even Warren Buffett, the most respected investor in the world turns 91 in August. So I mean, given this -- after 65, you're supposed to go hit the couch, yet we have all of these people, not only participating in the economy for much longer, but holding very, very important positions. Why is it that there's this branding, if you will, disconnect between productive and unproductive? And why are we at this still in America. In this thought that once you turn 65, you kind of punch the clock, go hit your Lazy boy lounger and watch television for the rest of your life.

In many ways, Willy, it is because of what we have been socialized to believe. We really don't fully appreciate how strong the narrative is of how -- what old-age is supposed to be. And we can get into that in a little bit. But when you speak to the Nancy Pelosis or the Queen and the like, it's really what happens is that once you get into an institution, there's an institutional bias where you slowly, you stay there and shall we say you become at the top of that ranking. Those are the outliers, though. We still -- even in those nations, that so-called respect old agers, there's allegedly a cultural affinity to respecting old age. There's some Asian nations that have words for older workers defined, by the way, you and I are going to feel a little pain on this, Willy, over 50 as human garbage, give them a view, give them a window, but keep them off to the side of the corporation. Yes, we have those outliers where it's Queen, whether it's Nancy Pelosi, Willie Nelson and frankly, Mick Jager. And by the way, Keith Richards has lived an interesting life and he's still chugging along just to say what that may mean for medical science. It is largely those are the outliers. We are still shall we say, fencing in the productivity, the meaning and the connection of most people, starting by about age 50, and boy, by age 65, almost like a law of physics, they're supposed to move off.

So before we move to the economic opportunity for companies by focusing on the 50 plus, and we'll size that in a second. I just want to talk about mortality for a moment because I started this by saying that if I was born in 1900, I would be beyond the average life expectancy of an American citizen, and being born 67 years later, I now have an average life expectancy of over 85 years, as you said at the top. Talk about death rates, only because while 81% of deaths in the United States happen to people over 65 years old, we sort of -- and therefore, we say, "Oh, well, all people are there to die, and we don't have to focus on them." It's actually the other side of that, which is just what strides we've made to make it so that in the 1950s, everyone was dying. Up and down the spectrum, you had much higher infant mortality, you had much, much higher car crashes. You had lots of early onset of chronic diseases. And we don't have that today. And so I thought one of the interesting things you wrote about, Joe, was instead of celebrating that, we then have continued the narrative, which just says, okay, once you get over 65, you're just hanging out ready to die.

Here's the story of old age. I'm going to break the news to everyone. Old age is made up. Yes, believe it or not, old age is made up. In fact, as I write in the book, The Longevity Economy, the notion of old age was built around something called vital force or vital energy that was created in British medical science and then adopted here in the United States where basically said the following: that you were born with a certain amount of energy. And by the way, if you used it badly, which meant anything fun, of course, and work and the like, you would become tired. You would no longer be a glass that was full or even half full, you would become a glass half empty. But isn't it amazing how powerful stories and narratives not only create our understanding, Willy, but our language and our institutions. You'd become so tired, they had to create a word for it. You become tired. So therefore, you would have to retire from the workforce because in the 1800s or early 1900s. If you didn't use your body, you didn't work. And by the way, if you didn't work and you didn't have family to support you, you are poor. And so by default, poor homes became old people's homes. And many of those very homes by the 1930s were converted into, you guessed it, nursing homes. And of course, for those of us who are old enough, we used to refer to funeral homes. So you see that story of old-age has been imprinted on the minds of individuals, society and, frankly, even corporate strategies and national policy to define old-age not as living longer and better, not as an opportunity, but as a problem to be solved rather than an opportunity to be achieved.

So let's turn to the what's the opportunity. You write in your book, the over 50 cohort is responsible for over 50% of consumer spending and control 83% of total wealth. And you go on to talk about the massive wealth transfer that will happen over the next, I believe, it's 30 years, where $53 trillion will be handed down to heirs between now and 2061. So there's there's huge consumer spending there, there's huge existing wealth there, and there's a huge wealth transfer that's going to happen, yet corporate America seems to be turning away from it. Why?

It is completely obtuse. I always enjoy working with investors that are particularly interested in emerging markets. And they go far afield. They go thousands of miles away. And yet, here is an emerging market hiding and plain sight. It's incredible. I mean, women traditionally have been ignored, and that's 51% of the population. But the aging population, imagine this, is an emerging market, this 60-plus worldwide would make up the third largest global economy after the GDP of the U.S., GDP of China and then the longevity economy. And why are corporations ignoring it? Why are businesses and, frankly, even investors, it is the story that they are still using that old age is what their grandparents have had. No, no fairness to those businesses and data jocks who only see aging as a matter of demand rather than wants to be sold. They're still using the numbers, but they're using the background of what their parents, grandparents and great grandparents looked at -- look like. They have ignored the fact that old age has changed. We are living longer. We are more educated, more tech savvy, I already said more affluent, and not widely distributed but more affluent as a group. But here's the thing, Willy, I want to leave with you and all your viewers. The new generation gap is about expectations. In the words of the great philosopher, and I'm a fan of Jimmy Buffett, we are the people, your parents warned you about. The next-generation of old are not going to be as patient nor as polite with businesses, policymakers and the like by thinking that they should sit back, find that barcalounger and relax and hope that maybe the grandchildren visit. No, we are going to believe and demand, in fact, a pill, a policy, a product, a house or whatever service to help us live longer and better. And that gap between what our parents put up with and what we expect that's the innovation gap that is the longevity economy.

So let's turn to product design and functionality. You write in your book that seniors like all people are looking for products that they both like and excite them. How can businesses approach this brave old world, designing products and services that actually meet the needs and demands of the older population.

I am always amazed at, frankly, some of my students in fairness, but major companies with great R&D programs, $1 billion budgets that come up with really mundane ideas. So I have to say that even the greatest minds, whenever I talk to about older adults, you can't imagine how many pill reminder systems or walkers that are enabled with GPS that have come across my sites or have been brought into the lab is thinking that, that is innovation. So as I look out at Corporate America, corporate world worldwide, we have to stop with the idea that businesses and products and services for older people have to fill 3 categories: Big, beige and boring. You don't stop wanting to be excited and delighted, especially if you're the dankai of Japan or the baby boomers in the U.S. where everything has been kind of culturally made for you to be great and exciting. You're the focus of your parents and the focus of the marketplace. And now suddenly, we're living in a world where always seem to think that is needed is, help, I fall and I can't get up. So here's some advice for corporations in R&D, is get out there and watch, start looking at what people are doing. Don't be limited by what they say because we are also victims of the stories of old age. We often live out that script that retirement is about finding either a beach or a chair or a golf course to spend the rest of our lives in. Use empathy, get out there and to use tools, if you will, to understand the friction, the fatigue and the frustration, often felt by consumers by something that's too smaller, too hard to read. But more important than all of that, not simply responding to the customer because I don't want anyone on this call to say that I am advocating building an old man or old woman product because here's a little piece of advice that has been proven out over the last 70 years. If you build an old man anything or an old woman anything, a young man and a young woman will not buy it. But guess what? An old man and old woman will run with their hair on fire away from it as well. The problem we have in front of us is how to create products that are truly ageist -- ageless, that elicit desire and excite and delight across the lifespan.

So Joe, talk for a moment about agonist. You were brought in by Mercedes-Benz back in 2013 to work with them on designing a car that would be attractive to seniors. And you walked into a room and was it Berlin? Or was it in Munich? Munich, right?

Berlin.

That was Berlin. It was Berlin. You went in the room in Berlin that is filled with 20-something, 30-something and 40-something year old, engineers and designers. And you sit down to try and "inform" them of how they should think about building and designing an automobile that would be attractive to seniors. And you and your team came up with an innovative and, I think, incredible way of trying to get them to change their thoughts and ideas about how to do it. Can you explain it?

Well, we all love multidisciplinary teams. In fact, my lab, the AgeLab, that's what we're founded on engineering and social science and humanities. Well, we were trying to find a way to bring this team that was otherwise disparate together. In addition to the designers and engineers, there were the marketing people out there that were already making brochures and copy on something that it hadn't seen on it yet. And so we needed to come up with something that was common between them. So while the engineers wanted to have functionality, and the designers wanted to have beautiful dashboard space, and the marketers just wanted to get the message out about freedom and independence that this vehicle would provide. We got them to focus on the one thing that all companies should focus on, the customer. And to have them experience what it was like to feel multiple chronic conditions like arthritis and the inability to move as well and as seamlessly as we once enjoyed where vision changed, not just due to regular glasses, if you will, but contrast sensitivity. The knowledge that you need 20x more light to see at age 40 at night, to see as well as you did at age 20. In fact, we don't know when old-age actually begins. And so agonist, the age game now empathy system was invented to suit up these engineers, these marketers, these designers to have the aha moment to walk in shoes of that consumer. That's not perfect because basically, well, you get to take the suit off eventually. But the fact it was not perfect, but it gave them insight that no survey can give. No observation can give. And by the way, even product clinics and focus groups I'm going to tell a secret that we probably -- I'm not sure how many people are listening, so it's just going to be between us. Old people, frankly, all people, but older consumers, in particular, lie. And what I mean by that is they start to reduce, if you will, their expectations. And if I can't open a bottle where I can't reach on the dashboard or see a screen, it's not the designers fault. I may curse them in my quiet moments, but what are you going to do? I'm 60, I'm 70, I'm 80 years old. That's part of what it's like. But a designer, an engineer who sees that problem quite literally, realizes, no, that's something that's easy to change. So focusing on the common ground of the consumer and using agonists, using empathy across the lifespan across all product categories, is a driver of innovation.

I thought the use of agonist was -- I mean, you and I have talked about this plenty of times before, but just having to strap it on to actually live with the restrictions, to understand truly what your customer is seeing and feeling was so sort of eye opening, and quite honestly, made me start thinking about a lot of the ways that Walker & Dunlop segments are client base and really trying to think about how do consumers see our branding, how do consumers -- what are we doing to try and sell to this demographic and that demographic. And it was a wonderful thing for me to sit around and really think about it. Talk for a moment, Joe, about the work you did with CBS as it relates to the design and layout of CBS's. Because some of the work you did there and the way you help them reconfigure, redesign, relay out their CBS's also very innovative and very interesting for all of us because like a Mercedes-Benz, many of us have seen what that looks like and how they built that product.

So the insights that we provided them, they did wonderful things with -- in many ways, after it's done, it's truly ageless. It helps the younger consumer coming in, the middle age consumer that's harried and the older consumer that comes into a CBS store 2, 3, 4 times a week and the heads right for that pharmacy. So some of the things we did were, we improved the lighting to add to clarity. We didn't use those fancy colors that add to confusion for eyes to start to have problems with contrast sensitivity and sees yellows and reds with greater difficulty over time. We actually reduced the shelf height so that people could reach. If you're an older person with reduce strength and reduce flexibility, reaching up for something at the top or reaching down at the very bottom. And by the way, if you ever go into a grocery store or pharmacy, whatever it might be, it's interesting. The special products for diet or pets or whatnot are always at the very top, at the very bottom, the hardest to get. Reorganizing the signs around the problem to be solved, not the product to be sold. Understanding that when you come in the store, one of the first things you can learn by watching, but also learned by using, shall we say, agonists glasses like this that mimic certain conditions like dieback net retinopathy or contrast sensitivity. When you first come into a store, quite often what women -- older women will do is they will use the card, both to collect items, but also as a walker in many ways, pause right in the middle of the door way, take the purse, put it into the carriage, then change their glasses from sunglasses to regular glasses. And what do retailers typically do at the front door, they give no space. They have -- they're so eager to have you see the new products they're trying to push that they crowd that space. So literally understanding the consumer's journey and the caregivers journey shopping through CBS helped us make a store that was great for all ages, not just for mom.

I think you just said something that it's so important to keep in mind about how you changed their branding or marketing, if you will, to solving the problem at hand and not selling the product they're trying to sell. And forget about trying to sell the seniors and forget about CBS that's just an incredibly good lesson for all of us who are trying to market products and services to keep in mind of we all come up with these great acronyms about the various things that we're trying to sell and a client sits there and goes, I don't know what that acronym stands for. All I want you to do is either give me a loan or sell my building or sell me a car or whatever else.

No, it's a long-standing tradition, and I talk about it in the book that really we hire products, services and experiences to get jobs done. And so you should always ask whether you're an investor or whether you're an innovator, what is the job you're trying to get done? And the classic story is when people go out to buy a drill, do they buy a drill because of the color, the RPMs, the price, the brand. No. What are they buying? They're buying a hole. So the question you have to ask the people you work with, what is the job to be done by that older adult, buy the #1 adviser to an older adult, the oldest adult daughter. What is she trying to solve for? And then move your brand, move your product and experience around the job to be done, not what you think you are trying to sell.

So you spent and your team has spent a ton of time on autonomous vehicles. You spent over 25 years being really a very leading researcher on autonomous vehicles. The first question I'd ask you, Joe, is is the focus at the AgeLab been on autonomous vehicles because mobility is fundamental to opening up all sorts of different opportunities for an aging population. Or is it that, that's where the dollars have been and you've done research around it because it's such a breakthrough and such a transformational technology to society?

It's a little bit of both. Even my first book, I did with my colleague, Lisa D'Ambrosio, was on older drivers per se, an issue, if you will, trap between humor and horror. But no, the technology going into the car was almost a side show. Let's talk about what transportation truly is, and particularly in the United States, what driving is. It is not mobility. And for those of you that are digit heads or civil engineers who see transportation is getting from point A to B, it is not even that. That's great if you're trying to model it, but it's not what it means to the person. Transportation or driving is the very glue that holds all those big and little things together that you currently call life. Your car, transportation, not only is -- the car is the second largest purchase you will make after your house. Believe it or not, transportation is the second cost, largest cost in retirement. It is not health care. First is housing, then a transportation, then health care. The bottom line is we're looking to the autonomous vehicle as a way of how do we keep people mobile and safe for a lifetime. Willy, 70% of the 50-plus population in the United States, lives in Suburbia or Rural America. Transit either does not exist or it serves very badly. And by the way, if you wake up 1 day to a certain age and say, I don't feel well enough to drive or I don't feel well enough to have to get out that way. You're not going to wake up after 50, 60 years of driving and say, "Gee, I think I'll take the bus." And so one of the reasons why we've been excited about the autonomous car is how do we make it so that, that vehicle can give you point-to-point service, to do the things, not that you need, because I will get you to the grocery store, to the doctor's office somehow, but I want to get you to the ice cream cone that you suddenly said you wanted at a 7 o'clock at night in the July, and you hear the peepers out. And you suddenly decided, you know something, I think I want a soft ice cream cone. That one, that desire at that moment is how you measure quality of life in old age. And transportation is the glue that makes that possible.

So where are we as it relates to autonomous vehicles because you study it very closely. Are we on track, we're behind track. I have a new Audi that has a very sophisticated cruise control and senses where I am versus the cars and lane control. And at the same time, I went up to the mountains 2 weeks ago, and it was snowing and the sensors got covered over by snow and guess what, the entire thing goes away. So where are we as it relates to getting to autonomous vehicles?

Well, I'm going to mix my metaphors. The bottom line is we're getting there, but the full autonomy as we envision it with -- depending on your generation of George Jetson or whatever it might be, is down the road. So yes, you pointed out a very good example, where if it's heavy rain or snow, no autonomy for you. It is coming, but we need to move a couple of things to make this happen. It's not just about the technology. It's about the infrastructure as well. Some states paint the roads better than others. And that's how your car is being able to maintain where it is in the lane. Where you're likely to see autonomy first, and you're already seeing it ironically, in many cases, are in retirement communities or niche areas. The Las Vegases, the Disneys, the areas that can be cordoned off, if you will, and have specialized services that you will never own, but it will be likely to be by subscription. So we're talking probably over the next 10 years, you'll see a lot of autonomous vehicles in small markets, then you'll see them in trucking and transit, and then eventually, and here's my prediction, and I'm breaking my own rule. You know, Willy, I don't if you know this, you can't do this an investment of an academia, we can do this. You only predict far enough out where you're dead before they find out whether you're right or wrong. Well, this one's going to be a little closer, unfortunately, I'm going to predict that we will never own an autonomous car. That it will be life by subscription. Toyota is already experimenting with the idea of paying a subscription fee and having your choice of cars and being able to change them out over that period. And so eventually, the autonomous vehicle will be yours for higher.

I thought you were going to say you and I wouldn't have an autonomous vehicle in our lifetimes. And so when you just said we just won't own one, that's a big change to it. But when will we have a fully autonomous vehicle?

Boy, that one is up for grabs. My team is doing a lot of work in that area. And I think we will have an autonomous vehicle before we have an infrastructure or a public and infrastructure that's ready or a public that is willing to trust to giving up control.

Fascinating. So on that, I mean, okay, I don't want to belabor this too much, but I mean, by 2030, are we in autonomous vehicles? Or are we looking at 2040?

I think we're looking at 2030, definitely for vehicles that are commercial and transit and I think in selected lanes in selected areas, yes, I think that you'll see autonomous vehicles. The industry and the government are pushing very hard in that direction to make it happen. But there's going to be a lot of bumps, shall we say, in that proverbial road between now and then.

So you spoke previously, Joe, about the daughter swinging by to see the parents. You have -- one of the things that you said it in passing, and I want to make sure people understand it because you've said it and you've studied it. Typically, parents don't retire to some sunny community in Florida or Arizona. They retire to closest to their eldest daughter. And that is the eldest daughter who bears the majority of the caregiving and taking care of mom and dad when they go into needing assistance. Talk for a moment about what autonomous vehicles in city planning has ahead of it, given that mom and dad are typically moving to be close to their eldest daughter.

Well, the notion of age friendly communities comes to mind, which is about accessibility and transportation alike. I actually find the phrase age friendly somewhat annoying, even though it's the world standard. Age friendly sounds like I'm being polite, and I'm doing this out of courtesy. These folks have been living in the community or communities that they're moving to for decades and have been paying taxes and the like. I prefer the phrase age-ready, because we should make our communities, our infrastructure ready for everyone from 0 to 100 plus, whatever it might be. With the autonomous vehicle, we could envision the following with a full out autonomous or what they call Level 5, if you will, where a car just comes, picks up and whizzes you away. Or maybe it substitutes for that older -- oldest adult daughter to pick up mom and take her to the doctor or to take her to see a friend or something like that and then safely take her back home or whatever it might be. But there's a failure of systems thinking in the autonomous vehicle and urban planning community. We might be able to have the autonomous vehicle, but what is going to happen to that first 50 feet and the last 50 feet? Who gets mom in the car? If mom is physically disabled or has cognitive issues, who's going to trust putting mom in the car by herself? Who gets her out at the other end to make sure that she's going to the true destination, if you will. So the autonomous vehicle is going to make a lot of changes on how we design our cities, design our communities, making them more age ready, but the real hard part is not going to be the technology, not the common infrastructure, but the 50 feet in between.

And so on that, you talk a bunch, Joe, about automation and robots and how in Japan, they're using robots to do all sorts of things to help the elderly. But you also talk about the lack of touch, you talk about this one robot that can help get someone out of bed. But at the same time, it's just -- it's not a hand. It's not a caregiver. It's not someone who can talk to you and make you feel like you're still alive. Talk for a moment about 2 things: one, the future of technology and helping the elderly age in place; and then I want to get to the other side of this all, which is mental health and mental -- and interaction with human beings. Because I think right now, since we've been through the pandemic, you have some very interesting research as it relates to how the elderly have endured this pandemic and how it has really actually impacted some younger demographics more than it has the older demographic. But go on, number one, if you would, for a moment as it relates to technology and AI, enabling us to live more productive lives for longer.

First off, this technology that is already here and what's coming in the near-term as in the next 5 years and certainly in the next 10 years is very cool. It's also very creepy in some cases. One of my favorite examples, for instance, Willy, is the smart toilet that's already out on the market. By Toto, Panasonic and other companies, we're basically to put it nicely since we're near the lunch hour. Is downloads from the user, your body temperature or did you take your medication? Are you eating well? And then, I guess the best way to put it, uploads those data, if you will, to a dietitian to an oldest adult daughter or your doctor, whatever it might be. And yes, there's also technologies that are out there that are augmenting the fact that we have a shortage of the care force, not just the United States, but around the world of nurses, practitioners, doctors and also the folks that are CNAs in our places. So we're coming with technologies such as Robear which will actually pick up a patient and be able to move them from -- for bed transfers or get them throughout a facility. But high-tech, rarely, if ever, can every place, high-touch. One of the things my wife rolls her eyes when I say this, I have a lot of interest in middle age women. And why I say that in particular is that they are not just the primary caregiver, but they're the ones who are going to be choosing which technologies go into our homes, into their own homes. And frankly, they're even the best front end adviser for millennials, if you will, overall. And so these new technologies are not just about serving the older population. But with women now more educated, more affluent and more likely to be in the workforce, they are going to be relying on these technologies to augment their care giving. They're essentially going to use those technologies as a care-force multiplier, if you will. And as a result, they're going to be using those technologies to help our parents and us stay in our homes longer. No adult child likes to have that discussion with mom and dad about handing over the keys, let alone handing over the keys to the house and moving someplace else. And as a result, they're going to be reaching for these technologies to be able to keep people in their homes longer. And I dare say that the pandemic, if it has taught us anything, is that the smart technologies, the smart sensors and systems, video chatting, on-demand of food delivery, medication delivery have formed for adult daughters and older adults maintaining their own independence a virtual assisted living that's going to enable them to stay far longer in their homes than any of the current choice say permutations that we have assumed based upon demography alone.

So Joe, I had Professor Mauro Guillen from Wharton on the webcast about a month ago to talk about his book called 2030. And he said to me, the pandemic has accelerated technology and technological implement to the point where he wishes he had named the book 2028 because he thinks that had moved everything up by 2 years. You write extensively about the fact that venture capital has had a very difficult time, not biotech, but venture capital has had a very difficult time of revolutionizing the healthcare industry because of regulation. And then all of a sudden -- and you talk extensively about doctors' resisting telemedicine and not being able to get adoption of telemedicine either into the senior community or into the care providers. And then all of a sudden, we have a pandemic in 2020, and that all changes. So talk for a moment about, you were just saying, it's going to allow people to stay in their home longer. If I'm in the seniors housing industry, I say that doesn't sound too great to me because it means they're coming to me with higher acuity and they're staying for a shorter period of time. Talk about what the pandemic has done to accelerating the implementation of technology and what that means for senior care.

As I wrote a piece in Forbes, but I need to credit my team, who's been doing a rolling set of surveys during the pandemic to understand changing behaviors and attitudes around technology and how it's changing all of us, and we're going to continue this on even well after the pandemic has passed. But the watchword we found, Willy, was that technology became the new toilet paper. As people ran to the streets and the shelves and bought pallet loads of toilet paper, they were also buying the smart devices, the security systems, the video systems for their parents and the like. And I would suggest from the data that we've collected and the interviews we have done, that indeed, the pandemic has served as a propellent, pushing older adults probably at least 5 to 7 years faster than we would have anticipated to have technology in their homes. But here's the thing we've watched over the last year. I'm going to digress for a second. Military basic training is usually 9 to 12 weeks. That's not just to teach you new things, but it's a change behavior. Older adults caregivers, adult children, have now had 12 months of socialization on using technology, making it seamless. This has profoundly changed the nature of the customer, their attitude and how long they think they can, shall we say, stick it out at home and how long their adult daughter believes she feels okay with mom and dad sticking out at home because she's no longer using an ambiguous phone call where she hopes they answer and tries to judge their voice. Now she can see them. Now she can see how much they've moved. Did they take food delivery. In some cases, you can even tell how many times the door of the refrigerator has been open. Suddenly that nervousness has come down. And that will indeed extend the amount of time I spend at home and less time that we spent in how assisted living is designed and defined today.

So on that -- going back to that Forbes article because it was a fascinating article. You stated in it that the pandemic has transformed homes from places to live into platforms by which we access services, experiences and connect with one another. So as I sit there and think about a senior citizen moving into assisted living or into higher acuity skilled nursing. I think about the component parts, particularly on the assisted side, they want a sense of community. They want to interact with other people. They want to make sure that there's a safety net around them, should anything happen. And to exactly some of the points that you just mentioned, the pandemic has sort of flipped all that on its head that you can get a sense of community by Zoom-ing with somebody, and you don't actually have to go into the parlor at the seniors housing facility to see friends at the end of the day. The checking in, just as you said, the daughter doesn't have to worry about the mom or dad falling down and not seeing them. They now can Zoom with them and see every single day that they're taking their medication and doing well. This just seems to have Joe Profound impact. I mean, what's your estimation as it relates to how much this is -- if [indiscernible] said, 2030 should have been entitled 2028. If somebody is typically going to seniors care at 72, are we pushing that out to 74 or are we pushing that out to 78? What do you think we've added through the adoption of technology during the pandemic as it relates to entry levels into seniors housing.

I think that we probably have added at least 3 years to the ability to extend staying home, if you will. My lab is entirely funded by industry, and my colleague, Dr. [ Chao Li ], is leading an entire program around home as service. And we're envisioning how these technologies are not going to be something you outfit mom's house with because you want an old man's house. But rather the same technology that provides convenience where -- we'll make fun of the millennials for a minute. The millennials who are too lazy to cook or don't have food -- don't want to go out shopping, they have food delivered, it's going to be that technology. It's also going to be the same technology that provides the connectivity, if you will, for those in middle age that are balancing parents, kids and career, but it's also going to be at the other end of the spectrum, the same technology that provides care. So in fact, I think it's going to push older adults and be able to stay in their living rooms for at least another 3 years or better than you might have otherwise thought. But here's the thing, that technology is not going to be specially bought for mom and dad. It is going to be a natural evolution as to how the house or home of any type is going to evolve, providing convenience, connectivity and ultimately, care.

So I saw this morning, Joe, an article that said that Brookdale seniors had occupancy levels at just below 70%, about 69.4%, I think it was for February. And then many analysts think that, that's kind of a bottoming out. And then from here, seniors housing occupancy levels start to rebound. Is there an opportunity for the seniors care providers to provide something that, if you will, counteracts the trend that you just highlighted of people coming to them later and potentially staying shorter. As it relates to safety, as it relates to services, where is the flip side to the coin that just says, you know what, you're just going to have to wait for that demographic to move to you for another 3 years, and that's a really bad day for most operators of seniors housing.

Yes. No, actually, I've got some bright light at the other end. So after they heard what I just said, I don't want anybody tearing up sheets and trying to decide which way to slip their risk. There's some -- late at the end of this dark tunnel, if you will. First off, we started our discussion with Willy, the birth rates have plummeted through the floor. The number one way we have aged well is not by doctors, neither by nutritionists or even saving money, is by having adult children around to take care of us. Well, guess what? Even the baby boomers had far fewer kids than their parents did. And better with that. Their kid -- the baby boomers' children are better educated. Those adult daughters now have more degrees than any time in history and more degrees than men and are more likely to be in the workforce. Guess what? She's busy. And by the way, she moved so she may not be near where you need the care. So there's going to be, shall we say, I believe, an emerging care gap overall. Secondly, the way senior housing in general has always defined itself is, and this sounds a bit [indiscernible], I don't mean it to be, as a real estate play plus care. No, it needs to be go beyond the real estate. That technology is in people's homes is a natural pipeline to bring your brand, your experience and to build your trust, not just with the adult daughter, but with the very residents that you want to bring back to your properties. So we need to think outside the fence and to start building pipelines and to see that technology, not as a threat, but as an opportunity to develop new skills, new services and new experiences overall.

So talk about how Stitch has done that in the dating space.

So one of the things that we found, I wrote in the book, The Longevity Economy, is that Stitch was supposed to be about dating. Guys, gals, whatever partner you're choosing, about trying to, shall you say, I guess, the kids would say, hook up, if you will. But what we've found, in particular, particularly one woman interviewed was that, frankly, social connectivity was not just about trying to find somebody to hook up with but basically, someone to socialize with, someone to enjoy in the case of the book, to listen to Jeff Goldblum, playing Jazz in San Francisco. The idea that looking for a date is really about connecting overall. And the thing I want the folks to listen to on this that Stitch and others are about connecting groups that are affinity based that have similar likes, similar background, similar experiences. Please do not mistake the proximity that is putting people of a similar age all together as a community. I know we use that word. I know we try to engender it. But we know from sociology and common sense that just because you're the same age and you live next to each other. Does not mean that you're a community. Affinity, as we found through Stitch, whether it's based upon hobbies, former professions, belief systems, vocations and whatnot, that's the new future, I believe, for senior housing. Starting to think of themselves as a platform, both for services into the home, but a platform for affinities that build true communities, not by pride proximity but by interest.

So on that, as it relates to community, do you think you'll be back in the classroom in September at MIT teaching undergrads? And then the second part to that is, you also do executive education in your AMP program. Do you think that there's any difference in how quickly undergrads are back in the classroom versus executive education and people wanted to bring teams of people back to MIT to learn?

First off, the answer is I hope so because I really do miss the students, big time. I'm teaching my current course on global aging in the built environment, graduate program with urban planners, architects, business and whatnot. And it's interesting and fun to have students that are in Austria, New Zealand, Australia, China and the United States. But I find them nodding off, not just because of my usual lecture, but also, my god, it's 2 in the morning or 5 in the morning for them is they're listening. So I do think that in the fall, we will, shall we say, get back to the so-called normal. But I can tell you, the normal is not going to be the same. Is that online is here to stay. And as much as the AMP, the advanced management program, having people in-person to do teamwork and breakout sessions and whatnot. We're going to have to make a real compelling rich content case, an interactive case to make it so that you have to get into an airplane and camp out at a school for 3 days, 5 days or whatever that management program is going to be. So we're going to go back to so-called normal. But what you're seeing right now is here to stay.

And final question to you, Joe. As you -- I mean you work with companies across all spectrums. You work on consumer products, you work on healthcare, you work with automobile manufacturers, everybody who's trying to focus on this demographic. What's the screaming opportunity you've seen that nobody seems to have identified?

I'd say the screaming opportunity is broadly defined aspiration. You never hear, for instance, the F word, not that word, Fun mentioned with older adults. You just don't -- if you do, it's either a golf course or a cruise ship. There's more to life than that, especially more to life for the majority. So it's aspiration of trying to find things that are truly desirable and exciting. Let me close with a little bit of mathematics to give people the idea. From 0 to 21 years old, and if it makes it easier, drinking age is about 8,000 days. From 21 to mid-life crisis, 46, 47 thereabouts is 8,000 days. And I bet the quant jocks are getting the algorithm now. And from mid-life crisis to that biophysical law of retirement, 65 is about 8,000 days. But Willy, as you and I just discussed, more than half of us will make it past 85 and change. And from retirement age to 85 and change is 8,000 days. So if we take off the kids 0 to 21, here's the opportunity for business. I'm not asking you to provide me what I need. I am asking, in fact, as a baby boomer I am demanding that you invent 1/3 of my adult life because younger adulthood and mid-life is written. But you're leaving 8,000 days on the table to excite and delight me.

And they've got a lot of money.

And there's money, numbers and attitude.

Well, with that, Joe, you always have a great attitude and very insightful comments. It's been a true joy. Great to see you. Thank you very much for taking the time. I will see everyone back here next week for another episode of the Walker webcast. I hope everyone has a great day and a great week. And thank you, again, Joe, for joining me.

Willy, you're always a delight. Thank you.

Take care.

Bye.