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Tuesday, April 1, 2008

Would you like a helicopter or minisub to go with that megayacht? - International Herald Tribune

Would you like a helicopter or minisub to go with that megayacht?
By John Tagliabue
Monday, October 1, 2007

MONACO: Massimo Vilardi, an executive with Eurocopter, came to this year's Monaco yacht show to sell helicopters.

Helicopters? At a boat show?

Yacht sales have increased 10 percent to 15 percent a year in the last few years, and this year was no exception. Since everyone who is anyone has to have a yacht, and increasingly does, what buyers want most now, naturally, are accessories: minisubmarines and helicopters.

Olivier Milliex, head of yacht finance at the Dutch bank ING, summed it up best. "Today, a mega-yacht is indispensable," he said. "It's not like 15 years ago, when a yacht was a luxury item."

Stock markets may be in rough seas and oil prices exploding, but none of that put much of a blemish on the mood at the trade fair last month in Monaco. Europeans often watch boat fairs like the canary in the coal mine to judge the overall health of their economies. But Monaco may not be the best bellwether: if other boating fairs are prêt-a-porter, Monaco is, by design, haute couture.

The annual boating trade fair, hardly the largest in a series of fairs that go from Cannes to Genoa to Fort Lauderdale, Florida, at the end of October, ran here from Sept. 19 to Sept. 22. Monaco limits the number of exhibitors to about 500; moreover, many yacht builders do not even show yachts. Their customers do not want off-the-rack yachts, they want boats custom-built to designs that will not be replicated.

One bauble that increasing numbers of big yacht buyers are asking for is a helicopter. Of course, that means adding a pilot and a mechanic to the yacht's crew, but for the people who buy these yachts, that is hardly a concern. So Vilardi, head of marketing in the business and private market segment of Eurocopter, a unit of the EADS aerospace group, has linked up with the British yacht broker Edmiston to meet their wishes. At Monaco this year, Edmiston showed a 60-meter, or 200-foot yacht with Eurocopter's smallest helicopter, which sells for about $2 million, perched atop.

"Our motto is, 'To create what money can't buy,' " Vilardi said. "You're looking at a global offer: a car, a yacht, a helicopter, maybe a plane." And, maybe, a submarine?

Across the fair from Edmiston, the Dutch company U-Boat Worx was showing its colorful two-seater submarine, whose bulbous shape makes it look like Mickey and Minnie Mouse would drive it, with a list price of $246,000. The minisub, said Erik Hasselman, U-Boat Worx's head of sales and marketing, is ideal for stowing on a yacht, but for safety reasons can only dive to about 50 meters, where there is still surface light. "It's only for recreation," he said.

The banks at the trade fair, said Milliex of ING, were doing cross-selling: offering tax and finance advice to the same people who they serve as private banking clients.

Some wealthy customers, for example, prefer a mortgage for their yacht, taking advantage of low interest rates, rather than tying up cash in a yacht purchase. Others need advice on creating a company to buy their yacht, rather than purchase it directly, to save on taxes, or on registering their boat in a foreign country to enable them to pay lower social security contributions for crew members. Many of the yachts parked in Monaco were registered in George Town, in the Cayman Islands.

"Anyone who is in the oil business, naturally, is going to be motivated to build a yacht," said Hans-Erik Henze, senior vice president for yachts of Germany's Blohm & Voss, a division of the ThyssenKrupp steel group. "And that's where we do a lot of our business."

Blohm & Voss had the largest yacht at the show, the 105-meter Lady Moura, but it was moored offshore, not for visiting, being too large to fit Monaco's narrow harbor. Henze said the company's three yards had 15 yachts under construction. "Once, 100 meters was thought big," he said. Now we have several projects above that."

Despite the ostentation of Monaco's yacht shoppers, some bargain hunters come here, and they, in turn, are attracting shipbuilders from low cost countries. One of those was Timmerman Yachts, a Russian-Polish enterprise with yards in Moscow that is named for the Dutchman who introduced Czar Peter the Great to the art of shipbuilding. The yards build yachts in five sizes, from 25 to 47 meters, and there are 12

Asked why someone in Monaco would buy a Russian yacht, Irina Bogatyreva, a company official, replied unabashedly: "The price is cheaper, and the quality is the same as in other countries."

Curiously, some of the world's biggest yachts are owned by Russians. Roman Abramovich, the Russian tycoon, owns at least three, and has another under construction, the 165-meter Eclipse, which according to Monaco newspapers, will be outfitted with twin helicopter landing pads, and a submarine.

The high price of oil, which yachts burn as fuel, did not seem to worry anyone.

"I would say this market can withstand a lot of fluctuations, as the economy worsens," said Diane Byrd, executive editor of Power & Motor-yacht, the trade publication. "It's a small group of owners, a handful of people, and it's still growing."

Nor did the anemic U.S. dollar appear to be having much influence on the flow of orders. Westport Yachts, which showed a 50-meter, $29 million yacht, said that of five 35-meter yachts it would build next year, all were sold, and of five 40-meter yachts, three were sold.

What did seem to be creeping into the business is an awareness of the environment. In a narrow stand, Lance Sheppard hawked a foam and fiberglass product that replicates wood, like teak, hence sparing the forests.

"These days it's hard to get all types of veneers," said Sheppard, marketing director of Digital Veneer, a unit of the SMI Group, of Whangarei, New Zealand. "A lot of teak is illegally lumbered, some by the Chinese, in Burma and Nepal."

But the boat that dripped green, in spirit if not color, was a 50-meter yacht built by the Italian yard Mondo Marine. Renato Polo, a company official, listed the yacht's environmental assets: devices to recuperate its used water, filters on its twin diesel engines to capture particles, a hull covering that is benign to its marine environment, filtered glass to diminish the heat on board and hence reduce the need for air conditioning.

The $34 million yacht was built for Luciano Benetton, of the clothing chain whose ads always promoted social causes, for instance, against poverty or for education, and Benetton named it Tribu, Italian for Tribe, for his large family. Benetton gave the yacht five spacious bedrooms, each with its own bath, plus two exercise rooms and a sauna. Asked how much the environmental features would add to the bill for such a boat, Polo replied, "On a boat of this size, the difference in cost is laughable."

The Perfect Business

Yes, you must be thinking, I thought this blog was about living, not working... You are right; however, to live well, you must have a good work life, since we do spend most of our time at work.

In this sense, here is a piece by Richard Russell of Dow Theory Letters on the perfect business.

This piece is by Richard Russell of Dow Theory Letters.

It's excellent, nothing to add!

The Perfect Business

AH PERFECTION: Strange, but the most popular, the most widely-requested, and the most widely quoted piece I've ever written was not about the stock market -- it was about business, and specifically about what I call the theoretical "ideal business." I first published this piece in the early-1970s. I repeated it in Letter 881 and then again in Letter 982. I've added a few thoughts in each successive edition. But seldom does a month go by when I don't get requests from subscribers or from some publication or corporation to republish "the ideal business." So here it is again -- with a few added comments.

I once asked a friend, a prominent New York corporate lawyer, "Dave, in all your years of experience, what was the single best business you've ever come across?" Without hesitation, Dave answered, "I have a client whose sole business is manufacturing a chemical that is critical in making synthetic rubber. This chemical is used in very small quantities in rubber manufacturing, but it is absolutely essential and can be used in only super-refined form.

"My client is the only one who manufactures this chemical. He therefore owns a virtual monopoly since this chemical is extremely difficult to manufacture and not enough of it is used to warrant another company competing with him. Furthermore, since the rubber companies need only small quantities of this chemical, they don't particularly care what they pay for it -- as long as it meets their very demanding specifications. My client is a millionaire many times over, and his business is the best I've ever come across." I was fascinated by the lawyer's story, and I never forgot it.

When I was a young man and just out of college my father gave me a few words of advice. Dad had loads of experience; he had been in the paper manufacturing business; he had been assistant to Mr. Sam Bloomingdale (of Bloomingdale's Department store); he had been in construction (he was a civil engineer); and he was also an expert in real estate management.

Here's what my dad told me: "Richard, stay out of the retail business. The hours are too long, and you're dealing with every darn variable under the sun. Stay out of real estate; when hard times arrive real estate comes to a dead stop and then it collapses. Furthermore, real estate is illiquid. When the collapse comes, you can't unload. Get into manufacturing; make something people can use. And make something that you can sell to the world. But Richard, my boy, if you're really serious about making money, get into the money business. It's clean, you can use your brains, you can get rid of your inventory and your mistakes in 30 seconds, and your product, money, never goes out of fashion."

So much for my father's wisdom (which was obviously tainted by the Great Depression). But Dad was a very wise man. For my own part, I've been in a number of businesses -- from textile designing to advertising to book publishing to owning a night club to the investment advisory business.

It's said that every business needs (1) a dreamer, (2) a businessman, and (3) a S.O.B. Well, I don't know about number 3, but most successful businesses do have a number 3 or all too often they seem to have a combined number 2 and number 3.

Bill Gates is known as "America's richest man." Bully for Billy. But do you know what Gates' biggest coup was? When Gates was dealing with IBM, Big Blue needed an operating system for their computer. Gates didn't have one, but he knew where to find one. A little outfit in Seattle had one. Gates bought the system for a mere $50,000 and presented it to IBM. That was the beginning of Microsoft's rise to power. Lesson: It's not enough to have the product, you have to know and understand your market. Gates didn't have the product, but he knew the market -- and he knew where to acquire the product.

Apple had by far the best product in the Mac. But Apple made a monumental mistake. They refused to license ALL PC manufacturers to use the Mac operating system. If they had, Apple today could be Microsoft, and Gates would still be trying to come out with something useful (the fact is Microsoft has been a follower and a great marketer, not an innovator). "Find a need and fill it," runs the old adage. Maybe today they should change that to, "Dream up a need and fill it." That's what has happened in the world of computers. And it will happen again and again.

All right, let's return to that wonderful world of perfection. I spent a lot of time and thought in working up the criteria for what I've termed the IDEAL BUSINESS. Now obviously, the ideal business doesn't exist and probably never will. But if you're about to start a business or join someone else's business or if you want to buy a business, the following list may help you. The more of these criteria that you can apply to your new business or new job, the better off you'll be.

(1) The ideal business sells the world, rather than a single neighborhood or even a single city or state. In other words, it has an unlimited global market (and today this is more important than ever, since world markets have now opened up to an extent unparalleled in my lifetime). By the way, how many times have you seen a retail store that has been doing well for years -- then another bigger and better retail store moves nearby, and it's kaput for the first store.

(2) The ideal business offers a product which enjoys an "inelastic" demand. Inelastic refers to a product that people need or desire -- almost regardless of price.

(3) The ideal business sells a product which cannot be easily substituted or copied. This means that the product is an original or at least it's something that can be copyrighted or patented.

(4) The ideal business has minimal labor requirements (the fewer personnel, the better). Today's example of this is the much-talked about "virtual corporation." The virtual corporation may consist of an office with three executives, where literally all manufacturing and services are farmed out to other companies.

(5) The ideal business enjoys low overhead. It does not need an expensive location; it does not need large amounts of electricity, advertising, legal advice, high-priced employees, large inventory, etc.

(6) The ideal business does not require big cash outlays or major investments in equipment. In other words, it does not tie up your capital (incidentally, one of the major reasons for new-business failure is under-capitalization).

(7) The ideal business enjoys cash billings. In other words, it does not tie up your capital with lengthy or complex credit terms.

(8) The ideal business is relatively free of all kinds of government and industry regulations and strictures (and if you're now in your own business, you most definitely know what I mean with this one).

(9) The ideal business is portable or easily moveable. This means that you can take your business (and yourself) anywhere you want -- Nevada, Florida, Texas, Washington, S. Dakota (none have state income taxes) or hey, maybe even Monte Carlo or Switzerland or the south of France.

(10) Here's a crucial one that's often overlooked; the ideal business satisfies your intellectual (and often emotional) needs. There's nothing like being fascinated with what you're doing. When that happens, you're not working, you're having fun.

(11) The ideal business leaves you with free time. In other words, it doesn't require your labor and attention 12, 16 or 18 hours a day (my lawyer wife, who leaves the house at 6:30 AM and comes home at 6:30 PM and often later, has been well aware of this one).

(12) Super-important: the ideal business is one in which your income is not limited by your personal output (lawyers and doctors have this problem). No, in the ideal business you can sell 10,000 customers as easily as you sell one (publishing is an example).

That's it. If you use this list it may help you cut through a lot of nonsense and hypocrisy and wishes and dreams regarding what you are looking for in life and in your work. None of us own or work at the ideal business. But it's helpful knowing what we're looking for and dealing with. As a buddy of mine once put it, "I can't lay an egg and I can't cook, but I know what a great omelet looks like and tastes like."

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