It is a well-known fact that Albert Einstein was the cleverest person that ever lived- apart from Steve Jobs and Bill Gates. He managed to curve time and space and came up with a theory of relativity so damned clever that most people cannot get their heads around. If he were alive, I am sure he would propose one of his famous quotations as a way to solve this virus outbreak:No problem can be solved from the same level of consciousness that created it.
Note: he said consciousness, not knowledge or science.
Science will come up with a short term solution to the Coronavirus – this COVID-19. But the economic and societal problems will be much harder to solve. And most of the world is in denial, like French Aristocrats at the onset of the revolution who thought it would all blow away by Easter. You can’t lock up the world’s population for three months – or longer – and expect it all to blow away. All that populism is coming back angrier than ever. We have been locked up for six months and we are as mad as hell.
How will this impact the superyacht industry? Experts are advising on the short term issues, such as force majeure, cancelled contracts, navigation, crew, finance, MLC and so on. These guys really know their stuff and superyachtnews has an excellent legal update from HFW (which we will summarise later). But I want to step outside the superyacht microcosm and look at the wider global context. While the charter and cruising season may well start in June, the big boats will be sailing through very different waters. As Einstein said: Imagination is more important than knowledge. How will the world appear to the confined as they step out of their houses blinking at the bright light of the summer sun?
Life is like riding a bicycle. To keep your balance you must keep moving
There is going to be a huge economic crisis needing innovative solutions to redress the debt balance that most countries will carry on exiting from the crisis. All that money that governments are throwing at the problem has to come from somewhere. Today the EU leaders are squabbling about raising Eurobonds, with some nations onside, others dead against.
Imagination is everything. It is the preview of life’s coming attractions.
Previous economic solutions have been adopted according to the perceived wisdom of the age. After the first world war, austerity was implemented: it did not work and lead to poverty, the Crash and ultimately another war. After the second world war, an economic stimulus programme was tried and it worked, more or less. After the crisis of 2008, some countries tried austerity, with mixed results. This time around, austerity will not be accepted by populations who have seen their incomes plummet while being locked up for months. And there will not be any money left to inject as a stimulus.
Two things are infinite: the universe and human stupidity; and I’m not sure about the universe
What’s in an acronym?
Before the crisis of 2008, the purchase of a yacht was financed with the security of the yacht. When banks could no longer hold yachts as 100% collateral, the sales market had to adapt. The UNWIs benefited from the money pumped into the financial system by central banks to get the wheels of the economies back on track, via business, rather than through social initiatives. It was the UNWIs who were better placed to gain access to this quantitatively eased money and could cross finance the purchase of a yacht. But what about in 2021 when the virus has been defeated, leaving trillions of national debt in its wake? There will be doubt and banks do not lend when in doubt. The supply of yachts and global money is inextricably linked.
The superyacht industry is a child of the expansion of the global money supply. It is like party time in the Rome of 60 BC, with the parties on yachts in the bay of Naples lasting long into the night. After the money ran out, as a result of the economic devastation caused by the Antonine plague (mortality rate 25%), the lights went out in Baie, the Monaco of its time. We are not ancient Rome, of course, and we have better science, but what goes up is going to come down. Newton proved that when an apple fell on his head. Einstein, always the optimist, said something else: In the middle of difficulty lies opportunity.
The industry will change in the coming years. How is not clear – it never is. To paraphrase the great man: Try not to become an industry of ownership, but rather try to become an industry of value. The very concept of ownership will change. See my post The Superyacht of Things. Yachts will be defined by a network of services and functions, just as a computer is a joint venture between hardware and software manufacturers. If you don’t pay Bill Gates or Steve Jobs their for the operating system, your device is no use at all.
The future of the superyacht of the future as an agglomeration of hardware and rented services may seem fanciful, but confined indoors for days on end makes the mind wander down an untravelled path, seeing new horizons and the sun rising on a new age.