As I discussed in a previous post, Beijing recently banned advertising in the capital that promotes hedonism or used the word luxury. However, according to a report by Reuters yesterday, this doesn’t appear to have affected a surge in home-grown luxury brands, thought to be driven by a desire from Chinese consumers to seek out goods that emphasise their culture.

Western luxury brands have on the whole experienced strong sales from the Chinese market in recent years, with consumers buying into the perceived heritage and exclusivity that the brands represent. However, with China expected to be the world’s biggest luxury market within five years, Chinese culture and preference cannot be ignored. More than 100 second-tier cities have populations with more than 1 million people and consumers in these cities have both the buying power of their tier-one peers and an interest in luxury brands, according to a report by PricewaterhouseCoopers.

Hermes last year launched its China-focused label Shang Xia, and the trend is set to continue.

That’s not to say sales of Western luxury brands in China will decline, according to Reuters, Sunny Wong, managing director of Hong Kong-based Trinity Ltd, said: “Luxury means heritage and it takes generations to build heritage. The Chinese customers want heritage brands — they want the story, they want the history.” It seems Wong is referring to Lambda personality types, who are likely to make choices based on how it will help them stand out, and how a decision benchmarks them against others. Western luxury brands are still very much a status symbol in China.

While focus for Western brands has traditionally revolved around marketing, now it is turning to the products themselves, presenting a new challenge for Western luxury brands.

Earlier this month, political commentator David Brooks wrote an article in the New York Times about “The New Humanism”. He spoke of the failure of relying on an overly simplistic view of human nature, whereby we believe reason can be separate from the emotions. Instead, he argued that emotion is not opposed to reason, rather that emotion is the basis of reason.

David Brooks’ introduction to emerging theories of behavioral psychology reminds us that without fully understanding the choices we make, we are essentially omitting a fundamental tenet of being human.

Our on-going research on human logic looks at what motivates our choice-making decisions. In short, the nature of our interpretive process is paradoxical: the need for similarity causes us to seek unity and certainty, while in parallel, we look to create contrast and challenge to differentiate ourselves.

Choice-making should be a structured emotional process based on our preference. Apathy, indecisiveness and even fanaticism occur when people cannot cope with the paradox that this situation presents. Even in business, organisations without strong leaders often suffer from these tensions in both commercial and ethical ways.

Either way, knowing oneself is the first key step. The second step is to align your preference with those of others to realize a shared vision.

I am often asked about the connection between my two areas of interest, namely organisational behaviour and luxury marketing, since they seem not to have any connection at all. My response typically points to the gap between two schools of psychology, one of which is called behavioural psychology and the other cognitive psychology.

The behavioural school is closely linked to people’s physiology and reflexes. It gained wider fame from the experiments of Ivan Pavlov who caused his dogs to salivate whenever they heard the ring of a bell because of its association with feeding time, despite some having had their throat slit and being unable to eat. Pavlov influenced two well-known American psychologists, J.B. Skinner and J.B. Watson, who followed his experiments and further showed that it is possible to influence behaviour.

Most of us are now familiar with the result of this school of behaviourism. Marketing campaigns are mainly based on the findings of this school, and we are constantly influenced to purchase one product or another. The fashion industry uses this knowledge as well by telling us how to dress, and celebrities are used as role models to put social pressure on us to copy their behaviour.

However, under the surface runs a different current. Many of us were brought up on the idea that “money talks”. After all, were we not incited by sales and discounts of all kinds, the industry would have abandoned this practice long ago. However, many studies show that monetary incentives do not play an important role in people’s decision-making. When asked, people place cost and other similar money matters at the bottom of the list even when choosing a bank. So who is right in this debate? Is it the researchers looking at cognitive views or the marketers who influence behaviour by offering us sales and discounts?

The answer is that both researchers and marketers are correct. There is a gap between what we say and how we act. While we say that money does not matter, we behave differently and we are enticed by monetary offers. I recently met an executive who explained this phenomenon succinctly. When commenting on the huge bonuses that executives receive, sometimes even when their company fails, he told me that even when people receive these fat bonuses their heart tells them a different story. By referring to people’s hearts, this gentleman actually talked about our values and worldviews which are not in sync with our behaviour.

So, how does out heart function? Back in 1955, George Kelly published his seminal work, The Psychology of Personal Constructs, based on his 25 years of clinical experience. This work describes how people interpret and anticipate their personal experience. Kelly was able to describe the rules upon which people interpret and the meaning they attribute to the events in their lives. Explaining the meaning and interpreting events is a verbal exercise and as Kelly noted: “If you do not know what is wrong with a person, ask him, he may tell you.”

However, the language we use to describe our experience is metaphorical. That means that we do not express the meaning we give to an event in a mere poetic way and even our conceptual system that is guided by our values is metaphorical, emphasising certain aspects and hiding others. In other words, different people will explain their worldview in a different language that reflects their values or conceptual system.

Our conceptual system is not something of which we are usually aware. One of Kelly’s last students, Dennis Hinkle devised a system to record this conceptual system. In my research, I provided the structure of this system and showed that two systems identical in structure, yet opposing in meaning, exist. I named one conceptual system Theta and the other one Lambda.

Looking at the behaviour manifested we now have two types of worldview to explore. The first one is the actual one which is influenced by all kinds of bias. Part of it is social and part of it results from a lack of awareness of our conceptual system and an unwillingness to follow it for various reasons. My research into organisational behaviour reveals the magnitude of that bias, which comes at a dear price. Not only does it cause personal damage leading to many phenomena of physical and psychological disorders such as addiction, neuroses of various kinds and more.  Acting not according to our values and worldviews damages the very fabric upon which our society is based and leads to social destruction and to corporate disintegration.

On the other hand, luxury enhances our awareness of our value and conceptual systems. When we use luxury, we pit our actual behaviour against our belief system and worldview; we become more aware of our worldview and act accordingly.

Hence,  I believe that whilst research into organisational behaviour highlights the tension between the two behavioural systems, luxury offers us the needed remedy.

Last month I attended the 10th European Corporate Governance Conference that focused on making corporate governance more effective. In addressing the many burning problems that the corporate world suffers from, many speakers offered a utopian, logical and rational solution. Unfortunately, nobody from the world outside the few people who attended the conference will ever pay attention to this. This happens again and again. Scholars point to flaws and have a wishful thinking that if we were to learn the lessons they teach and impose the rules they advocate, the world would be a better place.

Well, people won’t change and even when they listen they will not internalize the lesson and consequently, the world won’t change. For 2500 years we have been told that if we act rationally and logically we will understand the world. Yet even after Freud told us that we have to deal with our sub-consciousness and that nobody is immune from social bias, scholars still believe that it is possible to change this world if only we were acting rationally and logically.

At that conference, and on other occasions, I argued that my colleagues fail to recognize that we do not deal with computers or psychopaths or some economists and lawyers who seem not to have emotions and values. We all love and hate, motivated by our hidden agendas that sometimes we are not even consciously aware of. That is the essence of human material and if somebody doesn’t feel comfortable with everything he only has to look for some extra-terrestrial creatures to do the job.

On the other hand, I also claimed that we need to understand humans. If they are motivated by their deeply held values then our role should be helping people act upon those values and according to their worldviews. We do not follow our inner voice and when we listen to it we bias its recommendation. In fact, our ability to argue logically and rationally allows us sometimes even to act in ways that oppose our values and our worldviews while justifying our actions as being in line those values.

Rationality and logic are helpful when solving a problem that has only one correct answer; when we have to distinguish between good and evil. However, most of the issues we face are a matter of choice which can be as simple as choosing a dish from a menu to choosing a spouse. Choosing between two good options is what makes us human and the mechanism of it is totally different from that of logic and rationalism. It is underdeveloped and obscure and causes us to make wrong choices. Adding logic to it just turns our wrong decision into an unsolvable mess. It is time for change, not in the world but in ourselves. Let’s start to listen to our inner voice, act according to our deeply held values and behave in line with our worldviews. If we start moving in this direction we will not suffer from so many problems in corporations, politics or elsewhere.

The fluid nature of what luxury means to different people, and the challenges this presents to the luxury goods industry has been examined in a new report by the Boston Consulting Group (BCG) – ‘The New World of Luxury – Caught Between Growing Momentum and Lasting Change’.

“In this new world of luxury, being iconic and exclusive is not enough to make a brand grow, and fewer consumers are willing to blithely accept high prices as the mark of luxury. They need better reasons to buy,” it said in the report.

It was found that for most consumers the term true luxury connotes rarity, quality, and refinement; and is typically applied to hard and soft luxury (e.g. jewelry and fashion). However an Ipsos survey of 7,496 adults in seven developed countries, coupled with BCG analysis, revealed “experiences” must also be incorporated.

“In the eyes of most consumers, luxury also extends to alcohol and food, as well as to travel, hotels, spas, technology (for example, smartphones), and cars,” BCG said.

Other recent BCG surveys of consumer sentiment demonstrate that values such as stability, family, home, and spirituality became more important as a result of the economic downturn, while luxury and status in its traditional form became less of a priority.

“In the new world of luxury, consumers are looking more to ‘be’ than to ‘have,’” BCG said.

This model values the luxury industry at €1tr ($1.3bn; £846bn). Despite this massive profit pool, the challenges posed by the conceptual shift means the luxury goods industry must manage conflicting priorities in every major aspect of the business

Proving value, offering experiences, embracing new media, building brands, “refreshing” retail strategies and adopting corporate social responsibility should all be vital going forward, BCG concluded.

While we all strive to receive the best education possible, individual experiences are often limited by geographical constraints. Not all institutions are equal, and in many cases we need to travel to foreign countries just to seek the education we wish. Travelling is difficult and not always possible; even when we are able to travel we spend time and effort just adapting to our new environment and consequently our education suffers.

Modern technology enables us the luxury of bringing education to our doorstep. One of the markets predicted to grow and significantly upgrade the world of education in the next few years is the field of online synchronous learning. These platforms allow for students to participate in a full online classroom experience while enjoying one of the ultimate luxuries – geographical freedom.

Recently, many video conferencing suppliers have started to integrate their technology with Learning Management Systems (LMS) used by education institutions. This enables institutions to create fully interactive multi-party online classes. One of the major players in this arena is Groopex, which integrates Cisco’s WebEx and Microsoft’s Live Meeting (which supply roughly 70% of the videoconferencing market) with Moodle, one of the leading LMS’s.

It seems to only be a matter of time before advances in technology will once again transform the world of education.

The results of a recent McKinsey Global Survey show why the personal strengths and values we develop individually can produce the best leadership traits in the workplace. The research identified common traits of leaders around the world, to determine whether the personal characteristics of centered leadership were beneficial to being a good leader.

Centered leadership is a concept that is based on the existence of five key capabilities. These five dimensions are meaning – using your strengths in a way that inspires you, positive framing – seeing the upside of every situation, connecting – building relationships, engaging – taking risks, and energizing – keeping energy levels high.

The survey showed that when leaders embraced all five dimensions of centered leadership, they were most satisfied with their performance in the workplace and with life in general.

The importance of personal values in leadership is reiterated in another article by McKinsey, which states “the purpose of leadership is to change the world around you in the name of your values, so you can live those values more fully and use them to make life better for others.”

Self-awareness, whereby one can understand their own working style and their own strengths, and recognize whether they are Thetas or Lambdas, is important for becoming a good leader. Equally, people must be able to work with others, and whilst that means making your own values compelling to others, it also means connecting with people – one of the key five capabilities of centered leadership, revealing ‘real moments of truth’ to accomplish a successful relationship with employees.

Is money the key to happiness? Is losing your job always an unhappy event? New research in psychology and economics has revealed the seven secrets of a happy life.

The psychologists who conducted the study explored the reason behind why many people struggle to find real happiness. According to the study, we overestimate the emotional impact that events will have on our lives, preferring to linger on the most salient features of an experience, without taking into account all the repercussions. That means that when we chase a dream, say, of living on a paradise island, we only anticipate sunny weather, beautiful beaches and pure luxury. Instead, we might find ourselves homesick, without our friends and feeling displaced. Our inability to honestly conceptualise a new experience will leave us unsatisfied when we arrive there.

Instead of continually looking to greener pastures, the new research suggests that the secret of happiness lies in what we already have. It cites the value of friends over wealth and shows the brighter side to divorce and losing your job.  The most important finding, is that to achieve happiness, you should be satisfied with that you have.

This contradicts research that was released last month that offered the sum of $75,000 as the benchmark for achieving happiness.  The concept of buying happiness is, as I said in my post reflecting on this previous research, irrelevant to the nature of happiness itself.

The research also brings up the question of what luxury really is. Luxury is not a need – no one needs a diamond, for instance, but instead diamonds are a want. To desire and to want is key to giving us a purpose to live for and aspirations to target. If we reached the level of happiness in the way proposed in this research, whereby we should be satisfied and not yearn for more, we may fall into despair, because our goals had already been reached leaving us no further journey to take. Instead, luxury tells us that we do have a purpose by accentuating the difference between a must and a want, enabling us not to sink into constant pursuit of need with a false hope for happiness.

New reports suggest that India’s luxury market is growing and maturing quickly. Earlier this week Forbes reported that the luxury boutique hospitality association, Relais & Chateaux, recently launched in India.

Relais & Chateaux president Jaume Tapies said:

We currently have 40 members in Asia and I’m confident that we can reach 100 in the next three years. We started looking at India in 2007 and enrolled our first member two years ago. We plan to add five more members in the next 18 months. My big surprise in coming to India was when I saw the deep understanding there is for what we stand for.

Mr Tapies’ findings about India are not surprising. I’ve written previously about luxury real estate in India taking off, and luxury automakers fighting for dominance in the Indian market.

What Mr Tapies’ findings do mean is that more major brands in the luxury industry are taking notice. What started as a small drip of interest at the end of 2009 has turned into more of a torrent.

Mr Tapies’ quote “I saw the deep understanding there is for what we stand for” is very interesting, too. Relais & Chateaux is for the discerning luxury customer. Considering the price point for their rooms, it’s clear their primary target market are Theta personalities. Much of India’s newly-wealthy class could be considered Thetas.

Thetas are concerned with truthfulness and denounce fakes. The screening process to become a member of Relais & Chateau is a long-term assessment to determine whether the hotel is “real” or “fake”:

We have a team of nine inspectors who visit the property incognito and submit a technical report to the board which makes the final call. Typically, the process takes a year. We have to be scrupulous as 1.5 million people trust Relais & Chataeux every year. Collectively, our properties do 750,000 room nights annually at an average room rate of 345 euros.

Relais & Chateaux is catering to those in India who, now with greater incomes, are becoming hyper-aware of how they are perceived by others, especially those they believe to be part of the social class that they wish to belong.

The people who stay at these hotels know the rigorous inspection process that member hotels undergo. Because this is such public information, it adds to the allure for an Indian Theta.

When they book a reservation to stay at a Relais & Chateaux hotel, they are likely to tell their friends and colleagues. They need people to know that they are able to afford to stay at such an exclusive hotel in their home country.

As more major luxury brands take notice of India’s heightened luxury profile, it could inspire neighbouring Asian countries to take notice and make some changes.

For $700,000 you could own historically significant chimney piece heads. They’re not just any chimney piece heads. According to Luxist, it’s:

An extremely rare, important and well-preserved neo-Gothic terracotta chimney piece commissioned for Franz Joseph I, Emperor of Austria, King of Bohemia and King of Hungary, in the late 19th century

For potential buyers, the most important aspect of this is not the craftsmanship, or even how the chimney piece heads look. The most important aspect is its age and royal associations.

A Theta personality will be attracted to this because of the piece’s backstory. This piece serves no purpose other than to be put on display. Thetas gravitate toward luxury items that can be added to their existing personal picture and sense of unity. Thetas would see this item as fulfilling that need.

Thetas look for benefits that improve their social standing. Thetas look for recognition. As I mentioned above, this item would be bought and immediately put on display. A Theta personality would take great pride in showing off this historically significant item off to their friends and others who he perceives as also being part of his desired social circle.

The two guards on the chimney are engraved with a staying that Theta personalities would find great significance in:

Two knights standing on Corinthian columns flank the mantelpiece, which also bears the Emperor’s motto Viribus Unitis, “With united forces.”

Thetas seek unity within themselves, so it is likely that a Theta will attach some personal significance to this phrasing, which would make the item more attractive. Also, because the item is so old, it will likely become some kind of personal adage for the Theta personality.

Ultimately it will be the item’s rarity that will be the most items most attractive feature. Thetas will link their status to the rarity of the product. According to their worldview, if the product is rare, it would imply to anyone viewing it, that the owner, too, is unique.