Thanks to the recovering global economy, the world’s wealthiest individuals have regained their mega-spending confidence. Evidence of this can be found in the sudden up-tick in the number of mega-yachts being sold.

According to this Bloomberg article, boats over 100 feet are selling “very strongly”. Simon Clare, head of marketing for Princess Yacht, spoke to Bloomberg about the phenomena:

“Boats over 100 feet are selling very strongly as the very wealthy feel the crisis less and tend to buy bigger and more modern boats”.

The recovery in sales is very welcome, considering the beating the yacht industry took the previous year. International Boat Industry magazine found that European yacht sales plunged about 50 percent in 2009.

But who is buying these yachts? Juergen Tracht, head of Germany’s aquatic sports industry association offers some insight:

“Typical buyers for these boat categories like medium-sized entrepreneurs usually pay them with savings, and they still haven’t reached the level prior to the meltdown during the crisis”.

At first look, it doesn’t appear these are the Lambda personalities who were freely buying mega-yachts before the recession. But look at it another way: Many are still trying to recover their financial footing.

The people who are buying now are the people who feel compelled to set themselves apart from their friends, even if the size and price of the items is less than in earlier years. That is the mark of a true Lambda.

The race for the hearts and minds of China’s luxe car buyers is on, as Aston Martin joins BMW and Audi in upping production and overall presence in China.

The China Daily reports that Aston Martin opened its flagship China showroom in Beijing this past week.

The store, located at 66 Jinbao Street, Chaoyang District, is more than twice as big as Beijing’s other two Aston Martin stores and is the largest in Asia Pacific. The 500 sq m showroom will display seven of the luxury vehicles each costing roughly 1.3 million yuan.

Given that Aston Martins are typically more expensive than BMW, Mercedes or Audi vehicles, this move suggests that the demand is outstripping supply. This points to a new opening in the market for the super-rich.

While the entire article is interesting, because it further illustrates the growth in luxury goods and demand in Asia, there’s one quote in particular that is quite revealing of the way luxe brands are thinking about China.

Matthew Bennett, regional director for Aston Martin Asia-Pacific, said the following:

“(Beijing) has a growing appreciation for luxury goods and an authenticity of a product, that’s what we’ve been seeing. … ”This is the place to be.”

The phrasing is interesting, too. The “authenticity of a product” suggests a targeting of the Lambda personalities, who prefer both high quality and an air of exclusivity to their purchases.

Another statistic worth noting is that about 80 Aston Martin vehicles were sold in China last year. Even upping that number to 100 would allow Aston Martin to retain its shine of exclusivity.

There’s an interesting story in the New York Times today about the coming bonuses that rescued banks will begin doling out to its employees. Setting aside the furor over whether it’s the right thing to do, I want to look at what happens after the money is awarded.

The article suggests that those who get the bonuses will indeed accept them. However it will be a quiet affair, not a flashy, borderline show-off event. Purchases made with bank bonus money are treated with secrecy, as one New York Times reporter found:

In the Hamptons, where real estate agents court bankers looking for summer homes, the sales are also expected to be a boon for contractors, movers and groundskeepers. “A community like the Hamptons depends on house trades,” said Diane Saatchi, an agent with Saunders and Associates who just sold a home to a banker for $4.9 million. “Don’t ask to talk to him about it, because he won’t,” Ms. Saatchi said of the buyer, deflecting a reporter. “They don’t want anyone to know they are buying.” That includes the banker’s extended family, she explained, because he is worried they will ask him for money.

A by-product of the global recession has been how people feel about wealth. More specifically, how people feel about individuals who have great wealth.

Instead of being seen as the fruits of hard work and business savvy, it’s instead being seen as a sign of extreme greed and selfishness. It’s too early to tell if this will be a short-term side effect, or if the public psyche has been forever altered by it.

The torrent of populist rage against bankers enriching themselves in the midst of a global recession has had an impact inside the banks, according to the article:

“Bankers are being told by their bosses to be careful,” said Janet Hanson, who was an executive at Goldman Sachs for 14 years and is a founding member of 85 Broads, a professional women’s networking organization. “I mean, how does it look if you got a $1 million bonus from Goldman Sachs and you are sporting around in a new Audi TT? People will hate you.” (To deflect criticism, Goldman announced last week it would pay its top 30 executives in stock only.)

As the global economy continues to recover, it will be very interesting to see what the longer term affects that the recession will have on people’s perception of wealth.

Was the rage and, at comes, contempt, because others around were suffering? Or is it the build-up of years of frustration? If it’s the latter, then perhaps we will see this phenomenon continue, long after the economy has fully recovered.

Here’s an interesting story about China’s pursuit of luxury goods. Agence France-Presse (AFP) is reporting that increasingly high numbers of wealthy Chinese people are traveling to luxury capitals such as Paris to purchase goods that are discounted.

I wrote previously that the global economic downturn has caused luxe companies and retailers to put products on discount in order the move product. It appears that the Chinese, who have become more involved in the Asian luxury market, are going where the deals are.

The AFP article offers more detail:

The Chinese bought tax-free goods worth 158 million euros (222.5 million dollars) in France in 2009. That was an increase of 47 percent from the level the previous year, according to Global Refund, a company specialising in tax-free shopping for tourists.

The article also notes that this has been part of a larger, growing trend:

Tax-free shopping by Chinese tourists has been increasing for the last two years, rising by 39 percent in 2007 and 23.3 percent in 2008. They now represent 15 percent of sales and 13 percent of transactions.

More Chinese people are going abroad to buy high-ticket items, which suggests a growth in the number of people who might be considered Theta personalities in China.

Year on year increases in the number of Chinese traveling abroad to do this kind of shopping suggest the figures will continue to grow. What will be interesting to watch is the impact this has on China’s burgeoning luxe market.

We are used to associating luxury with expensive cars, plush hotels and exotic resorts. However, once we understand what luxury means, we can find it anywhere, even in the Nazi concentration camps.

As a son of Holocaust survivors, I have encountered many people who survived because of the generosity of their mates who decided to share with them their own daily rations. Many of you might be familiar with the derogatory term “Muselmann”, which describes those victims in the Nazi concentration camps who had been broken psychologically and physically by starvation and life in the camps.

Some gave away their meagre food portions because they lost any hope, but many did so because they hoped to survive and wanted to bring that hope to others, even temporarily by helping them with a bit of extra food. While we have to hail this behaviour as heroic, from a scientific point of view, this is a very interesting example of a form of luxury behaviour.

Yes, luxury is behaviour. Contrary to conventional wisdom, luxury is not embedded in products or services themselves; luxury instead is a type of behaviour characterised by needlessly squandering assets. This activity seems irrational as long as we do not pay attention to the deep reasons behind it.

Research shows that people use luxury for enhancing their self-esteem. Two main schools provide alternative explanations along the Theta / Lambda dichotomy. The Terror Management Theory (TMT), a Theta school, claims that luxury’s role is to confirm one’s self-worth.

On the other hand, the Lambda school promotes the Self-Determination Theory (SDT) which argues that the role of luxury behaviour is to provide individuals challenges in order to grow and develop psychologically as well as to structure their life choices in alignment with their own perceived identity.

Overspending or squandering assets sends us the message that we are able, fit and worthy.  Amotz Zahavi, the Israeli biologist calls this phenomenon “the handicap principle” whereby one proves one’s abundance of assets by destroying them.

Understanding what is behind luxury behaviour, enhancing our self-esteem, demonstrates the importance of the role of luxury in our lives and saying bluntly that luxury is good for us. Nevertheless, Self-Determination Theory emphasises another key factor, that of choice.

When we spend on something because we need it, this behaviour will never be luxury. Luxury is based on a choice, when we do something even when we do not need to. Overspending is a choice that exemplifies the fact that there is a rationality behind the irrational behaviour of overspending in that it enhances self esteem. Spending needlessly enables us to express the element of choice.

When Holocaust victims were ready to share their food with their mates, they sent two messages. The first was that they did not need all of it, at least for the time being and that some of their food was excessive. Secondly, they had a choice between two, equally good options, either to eat up the food or to give it away. Either of these two aspects clearly define this behaviour as luxury.

The heroic behaviour of those Holocaust victims teaches us two lessons; one educational and the other moral. The first lesson is that luxury is beneficial to us and that we should search for it everywhere. It is important because in enhances our self-esteem. Life is full of choices and by identifying them and actually choosing between them we enhance our self-esteem.

Morally, it does not matter what we spend on as long as we act correctly. We do not need a heroic gesture of sharing our last piece of the extremely needed bread to tell us how worthy we are. There are many other, much more pleasurable means of sending this message.  Luxury is a choice of our own behaviour.

Leadership is a developmental process, based on the type of worldview which a leader holds.  But what is truly ethical leadership and can it be applied in practice?

As previous blog entries have discussed, people tend to make choices – and leadership decisions – either as a Theta or a Lambda.  Thetas seek affiliation and order whereas Lambdas seek achievement and challenges.

Many people, from philosophers to business strategists, have attempted to understand the fundamental nature of leadership.  Some, such as the 19^th-century Scottish thinker Thomas Carlyle, argued that ‘great men’ or leaders are born, and that they hold naturally the essential skills which end up being mimicked by others.

Others, such as those from the developmental school of thought, believe that leadership skills are accumulated over time based on one’s experience and how one anticipates or sets expectations for the future.  In this sense, the leader is not born but rather ‘developed’ over time.

In my academic writing, I have argued that leaders tend to plan organisational activities and strategies based on their respective worldview (Theta or Lambda).  For instance, a Lambda leader who seeks challenge and creation may not naturally be able to provide the feedback and support that a Theta employee may need.  Conversely, a Theta leader who seeks unity and certainty may stifle the creative contributions and drive for personal achievement that Lambda employees offer.

As a result, ethical leaders must constantly strive to respect the worldviews of others within the organisation while remaining true to their own way of seeing the world.  This dynamic process suggests that truly ethical leadership is impossible to achieve in practice.  Rather, it can only be pursued as an ideal based on constant engagement with colleagues and other stakeholders.

As the markets begin to heal and the recession comes to a close, investors are beginning to regain their confidence. A good example of this is the recent investments in a European start-up that is hoping to make an impression in the growing luxury mobile phone market.

Reuters has more:

Celsius X VI III, which was founded by four thirty-somethings a few years ago, has an ambition to take the 500-year old tradition of hand-made watches and use it to make a mobile phone that would replace chips and electronics with moving parts.

In total, about €3.3 million has been invested in the company, according to the Reuters article. It appears that they are marketing to the Lambda personalities in the luxe market. The company’s co-chief executive confirms this:

“Our target is the man who owns a few sports cars and is an aficionado of Swiss watches,” said Edouard Meylan, co-chief executive of Celsius, who plans for customers to keep his mobiles for decades rather than tossing them aside after a year.

Are mobile phones the new “hot item” in the luxe market? Judging by the size of this investment, it appears some have confidence that it will be.

As the global economy begins to recover, so too is the luxury industry. Leading the way is the luxury travel industry.

In Australia’s Sydney Morning Herald, Paul Jones, chairman of One and Only Resorts said:

“We still have business from families, and seasons such as Christmas are booked out. Luxury travellers are not prepared to forgo their annual family trips”.

What we have are a lot of Theta personalities who are hurting financially, however not so much that they forego a vacation, or exclude themselves from the social circle of friends and colleagues who are also going on holidays with their families.

For Lambda personalities, the re-born luxury travel industry is offering up new experiences that offer the kind of exclusivity that they would find appealing:

Given the high cost of real estate in the word’s main cities, space is today’s new luxury, according to Sonu Shivdasani, the founder and CEO of the Six Senses group, which has been a pioneer in sustainable tourism.

If you can say that you’ve got the largest villa, that gives the impression of great wealth. Since space is evidently considered a luxury, we could see more luxury vacation resorts offering fewer rooms, but the ones they do have will be significantly larger.

If the the 39-carat diamond auctioned by Christie’s recently, which went for $5.4 million, is any indication, then the luxury jewelry industry may be bouncing back quicker than other industries.

However the New York Times is suggesting something greater: that the entire luxury jewelry industry may, in fact, be recession–proof. Mark Dunhill, chief executive officer of Fabergé, is quoted:

“During times of economic uncertainly real luxury comes back,” Mr. Dunhill said. At the same time, however, “there is a tendency to approach special purchases in a more discerning and discreet manner.”

Jean-Christophe Bédos, Boucheron’s chief executive calls the new approach ‘Beyond Luxury’: “[A] unique expression of excellence in design and craftsmanship.”

What Mr. Dunhill calls “real luxury” are the kinds of things that Lambda personalities prefer — the truly exclusive products and experiences that bestow status.

This is consistent with what some in the luxe industry are calling a return to the roots of luxe. I wrote previously that it’s possible the only way back for the luxe industry is to go exclusive. Not all agree, however it will become a strategy for some brands going forward.

India has become a battleground for the luxury industry, with both BMW and Mercedes competing for the spot of top luxe car brand in the country.

This year BMW plans to launch three new luxury brands in India, according to the Press Trust of India. BMW India President Peter Kronschnabl told reporters:

“BMW Group will further increase its commitments in India by bringing in more investments in the country through further capital investment in BMW plant in Chennai and BMW Financial Services India.”

This move likely comes in response to recent overtures by Mercedes aiming to regain the top spot in India from BMW. In the India Times, Mercedes Benz CEO Wilfried Aulbur explained why he thought Mercedes fell behind BMW in 2009:

“We lost out BMW in 2009 because of limited availability of our E-Class car” … “This will be a blockbuster year for us in India. We have launched new cars and would import several models to build up excitement through the entire year.”

I wrote previously that luxe brands are now finding themselves competing for dominance in non-traditional luxe markets, particularly in Asia. This is just an extension of that. Meanwhile in China, luxe car brands are also doing battle for market dominance, particularly Audi and BMW.

While the West continues to recover from the crippling recession, Asia will continue to grow its luxe markets, thanks in part to newly-wealthy Lambda personalities now throwing their wealth around. With all the uncertainty in the luxe industry today, one thing is certain: 2010 will be a very interesting year for luxe in Asia.