Super Yachts

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0:36Adam Tooze: Hi, and welcome to Ones and Twos, FP's economics podcast. Every week we take a couple data points, use them to try to explain the world. I'm Cameron Abadi, FP's deputy editor with you in Berlin, Germany. Joining us in Berlin is FP's economics columnist and Columbia University professor, Adam Twos. Hi, Adam. Hi, Kevin. So we have one data point for you all today that is$22 billion. That is the upper end of the estimated size of the global superyacht industry. Now, the precise size of that industry depends on whose methodology you use, but what is not disputed is the definition of a superyacht. That is boats that are over 24 meters or 80 feet long.

1:23Adam Tooze: And also the number of those superyachts that are currently afloat. that's about 6 ,000 in total with another 1 ,000 or so on order in various shipyards in Europe and the United States. There are so many boats here. How many boats are actually at the boat show?

1:41Cameron Abadi: We've got 600 in water and probably 200 or 300 on land. We've got probably$2 billion worth of boats.

1:47Adam Tooze: So yeah, in total, yachts, I guess, are a fairly niche industry, but also a pretty fascinating case study. It struck us in terms of plenty of the things that we like to talk about on this show, from tax arbitrage to globalized labor, supply chains to sanctions, and yeah, general social and economic history. And what better time than the middle of summer to discuss that all. So to start off with, Adam, in terms of the history of yachts, I thought we could start with the etymology of the term. Yacht derives from the word yacht. You know, that's a German word that means hunt and it becomes yacht via, you know, certain Dutch cognate words.

2:33Adam Tooze: And I'm curious, you know, that term suggests that the boats were originally designed for the purpose of pursuing other boats. And that is in fact what the history suggests. And I'm curious how they transformed from boats of hunting or pursuing to signifying leisure. I mean, it seems like there was a Gilded Age transformation of some kind of yachts into essentially floating mansions of a kind. So what exactly did that history consist of?

3:05Cameron Abadi: Yeah, this is a fascinating topic. It used to confuse me enormously as an English kid growing up in Germany, because I would read the word in English books and think it had to be pronounced Jacht or like Jagd in German. And then hopefully for my mom to correct me and go, what on earth are you talking about? It's a yacht, which to look at its spelling, you wouldn't think. And it does indeed come out of the Anglo-Dutch connection, basically. These were very small, fast sailing boats originally that the Dutch merchants used to pursue pirates in relatively shallow waters. But then as the Anglo-Dutch connection becomes more and more important in the late early modern period, the 17th and 18th centuries, the Dutch gifted Charles II on his return to the throne a 60 foot, so not quite a super yacht by our standards, that's 20 meters, named Mary, which was used on the Thames and for racing.

4:00Cameron Abadi: So it's a kind of North Sea connection. And then in the 18th and 19th century, the British aristocracy become the setters of fashion worldwide. They start racing these boats pretty regularly in the Channel, in the North Sea. And then in the mid-19th century, the American elite get in on the act when the New York Yacht Club beat a British vessel around the Isle of Wight. That was in 1851, the year of the Great Exhibition, the great display of Victoriana and Victorian abundance. And that then sparked the creation of the America's Cup. So at this point, yachts are still very much competitive, high speed, streamlined.

4:39Cameron Abadi: They're beautiful things. Sailing boats, right? The America's competition boats of the late 19th century are really a thing to behold. And it's in the course of the 20th century that they begin to be transformed into the pleasure palaces of the Gilded Age aristocracy. I've actually had the pleasure of spending time several times on one of these that was converted. It was fascinating. It was a high-speed World War I German destroyer design that after the end of World War I, the German military dockyards were diverted into high-end luxury production. And these boats, which were designed, these ships which were designed for ultra high speed military operations, destroyers being amongst the smaller military vessels, were then transformed into multi-masted early 20th century American Gilded Age yachts.

5:31Cameron Abadi: And so this is where you get the transition in the early 20th century from one mode of thinking about yachts to the other. But the name remains, the spelling, the idiosyncratic spelling remains to confuse people all the way down to the present day.

5:46Adam Tooze: What is also the case is that even among billionaires who own super yachts, you know, this ownership of these boats is a minority taste. I mean, I think the statistics show it's only some 2 % of billionaires, you know, that estimate varies sometimes, but it's certainly less than 10 % of billionaires and usually somewhere in the single digits. Only that small minority of even billionaires pursues ownership of a yacht. And, you know, that contrasts with other kinds of billionaire purchases, whether it's multiple residences or, you know, even, I guess, art collections. So yeah, in what sense is yachting a kind of niche industry, but especially relative to its cultural salience?

6:33Adam Tooze: I mean, is that disparity particularly significant with respect to yachts?

6:37Cameron Abadi: Yeah, I mean, I think it's in general something to say, right, is that in the 20th century, one of the great world historic transitions of the 20th century is that for really long range mobility, we move from the water, the sea, the ocean, the river, which up until that point, you know, there was no argument that if you wanted to move over very long distances with any kind of weight at all, you had to do it with the benefit of buoyancy. So all of the big luxury travel of the early 20th century is on ocean liners, right? These were the nonplus ultra of luxury. This is where modernist design, modernist architects get their inspiration from the ultra fast transatlantic passenger ships, the Titanic and its successors.

7:21Cameron Abadi: They are superseded in the 20th century by air, by the possibility of air travel. This is Carl Schmitt's point about the way in which global geopolitics is transformed by the advent of the airplane. But at a more mundane level, if you actually want to get from A to B fast, no one in their right mind goes by water anymore. because though there are certain attractions to it, in other words, you can move heavy weights with buoyancy, it's incredibly slow, you know, even by contrast with road. Modern railways are from the 1850s onwards, really, at scale. Modern roads, more recently, really from the early 20th century.

7:54Cameron Abadi: And then airplanes and large scale, the possibility of airplane travel changes the game once again. So boats of all kinds, liners, yachts, the whole business find themselves, as it were, superseded in this logic. So the simple answer to your question is why the private jet market is maybe two or three times larger than the yacht market, why there are maybe 24 ,000 business class jets, many of which are strictly private compared to 6 ,000 plus yachts, is that having a private business jet is a genuine amenity. It was Epstein's secret sauce, right? That's how he got people to play with him. It's like he would offer them private jet trips.

8:35Cameron Abadi: I've never had the privilege of doing it, but everyone I've spoken to who has says it's totally life transforming because you avoid airports. If you were really rich, it's something that you would seriously consider getting, whereas a yacht is not fit for purpose in the sense of taking you from A to B. And the crucial thing about them is they depreciate. They depreciate terribly, right? Anyone who knows, boats are an absolute money pit because fundamentally you're putting something man-made into an environment which is profoundly corrosive, which is salt water and the elements that are associated with that.

9:08Cameron Abadi: And so they don't last. And that's what's the big contrast then to the art market. Because if you buy art, and as we've talked about on the show, and you stash it in a tax-free warehouse in Switzerland, you have a fair expectation that it appreciates in value. Whereas if you buy a beautiful yacht from a North Italian dockyard, which is one of the principal suppliers of really high-end docks, the one thing you know about it is that every year it depreciates. So that, to me, would be like the triangle here, which is why the art market is$60 billion. The aircraft market is tens of billions. And your estimate for the yachts was really on the high side.

9:46Cameron Abadi: Yeah, I think a lot of people would say the luxury market's more like$10 billion to$11 billion. So from a purely utilitarian point of view, you can see why these things are organized that way. Or to put the same point another way around, your investment advisor, if you're an ultra high net worth individual, will at some point start asking you, would you not prefer, would you not like to have a property here or there? Have you ever considered investing in art? And they will certainly ask you, you still flying commercial? Surely you should be flying private. But they are not going to be asking you, do you really want to walk yacht?

10:22Cameron Abadi: isn't it time to think about a money pit is not a question that is you know going to is going to be on that you know in the headline of a sensible family office manager so i think that's where that's where the logic so in other words it's a passion project if you do this it's because you really want it and you fancy the lifestyle and the sort of strange sense of mobility that it offers whereas of course you can always just fly to wherever you want to go and then get on the boat if you rather than which is what the big owners of the big yachts do i mean they don't actually spend a lot of time traveling in the things the things go to where the rich owners are going to be and then they fly in by private and then by helicopter most you know normally or by by private

11:01Adam Tooze: and then tender to the boat okay we're going to take a quick break right here but we'll be back in a second to continue talking about yachts

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14:06Adam Tooze: slash ones twos. What's also clear in reading about yachting is that it has a really highly concentrated geography this industry does. And that geography itself is sort of organized seasonally. There is a kind of Mediterranean yachting season that sort of runs from May to September. And then there's a Caribbean American yachting season that is sort of the flip side of that between November and April. And I'm curious how that kind of polarized geography works in this kind of industry, specifically with respect to labor, because presumably the people who service and or work on these boats would themselves have to migrate, I would imagine, between these places.

14:55Adam Tooze: And so how does labor get organized if you have this kind of bipolar seasonal geography?

15:01Cameron Abadi: Yeah, I mean, the two geographic determinants are A, that though these ships are rated as ocean-going, no one really wants to spend a lot of time in the open sea of the Atlantic or the Pacific. So they're basically operating in Southeast Asia, which has also got a lot of landlots, interesting, beautiful water, Mediterranean or the Caribbean. And the other crucial determinant is extreme weather. So the Caribbean season starts when it does because November is just after the end of hurricane season. so any time during the summer and the early fall will be dangerous to do, or at least risky. And you're right, yes, these boats need staff.

15:39Cameron Abadi: In fact, they constantly need attention. You can take them out of the water, but then that's expensive. They're being maintained. If they're on the water, they need maintaining. The assumption is like basically a 10 % maintenance bill every single year. So if the thing costs a million dollars, it's$100 ,000 to upkeep. A basic superyacht, 30 meters, has a crew maybe of five, something like that. Roundabout, those kind of numbers. Once you're into the 30 to 60 meter range, you'll have captain, a chief engineer for very, very serious engines. You'll have a dedicated chef probably and then interior staff.

16:15Cameron Abadi: Once you get over 60 meters, we're talking full on like 50 plus with a lot of specialized staff on board. And I actually had the pleasure of hanging out with quite a lot of these people in the Bahamas when I had that lifestyle. And they are indeed just radically itinerant. So if you multiply the number of boats, 6 ,000 plus, by the number of people roughly on them, you end up with an estimate of the total staff for yachts, super yachts worldwide, around 100 ,000 to 150 ,000 people. And they do indeed migrate. And that's part of the attraction of the job. This is not a stationary job. It's what you buy into as a yachting person.

16:57Cameron Abadi: And jobs range from basic deckhand to sophisticated maintenance engineer to professional fishing guide and fishing captain. So one of the things you can actually do on these boats, because there's one of the weird things for me about them, is when you're on them, you kind of, well, let's lie down and read a book. other than, I don't know, scuba diving or swimming. But the range of activities is inherently limited, and one of the things you can do is do very, very sophisticated fishing. So I spent an evening drinking once with a professional fishing guy who went round just basically tracking the big skulls of fish.

17:33Cameron Abadi: And they migrate, and they keep on migrating, and you just buy into this lifestyle. The attraction from the point of view of the crew often is it's room and board. right it's it doesn't the salaries i've been able to find on the pay that i've been able to find online is not particularly generous 40 50 000 perhaps for deck hands 100 150 000 150 000 plus no doubt for the captains of the really big boats um but you know it's full room and board you live the dream how far you actually experience it depends crucially on whether you're above deck or below deck if you're below deck the whole time you know it's a very different experience as it is on you know in the american navy or whatever if you're below deck on an aircraft car you You barely ever see the light of day.

18:14Cameron Abadi: And on these boats, it's not different. But the folks which are above deck are obviously living an outdoor life continuously. For some people, it's absolutely the dream. And it is an itinerant flying around the world, connecting to boats, wherever. It's the luxury end of seafaring in general, which is totally itinerant. I was standing in a queue recently in Singapore with a bunch of Indonesian guys that were on their way to northern France. And then from there to Morocco to intersect with a major container ship that they were getting onto. And they carry these particular visas that enables them to travel around the world.

18:50Cameron Abadi: And there's a crew of 15 Indonesian guys who are going via Singapore to Morocco to join a boat. So people move around the vessels. The vessels move relatively slowly. One crew will sail them from the Caribbean to the Mediterranean. Then another crew will fly in. And it's that kind of merry-go-round. But all told, people say, if you look at the industry, including the dockyards and the maintenance and the supply chain, if you like, no, we may be talking about half a million people in this kind of high end of boating. And if you take it out further into, you know, the MAGA faithful who are operating their little, you know, outboard driven, you know, weekend cruisers and going up and down the American coastline, you've spent the summer there, right?

19:35Cameron Abadi: Like it's a that's a really big market because you're talking about mass market for boats. They're none of them cheap. They cost more than cars and they need continuous maintenance. So, yeah, it's a real industry.

19:48Adam Tooze: Yeah, there's a real romance, I think, to what you're describing in terms of the labor market and how it functions with respect to this industry. I mean, you know, I feel like we've talked about, you know, youth unemployment or, you know, sort of the effect of AI on employment and white collar work and how people are searching for jobs now. And it seems like AI itself is sort of just like rejecting people's resumes automatically. And one is obliged to wait for some kind of response being generated by a machine. And in this case with the yachts, it sounds like people just seems like a very, very different approach to getting hired.

20:20Adam Tooze: You kind of can travel to some part of the world. It sounds like you can be hanging out in a dockside bar and getting swept up into a boat for some kind of legitimate potential adventure. I realize that's a romantic description of the industry, but it does seem very different than much of the…

20:37Cameron Abadi: Yeah, and as soon as we get into the technical jobs, obviously, there's a great deal of training required experience in this Caribbean. I mean, this is not both the Mediterranean and the Caribbean. You can end up in a really tricky situation, incredibly fast. They break all the time. Like, you know, the people who are in this business need to have their wits about them and, you know, acquire enormous experience. But I like your fantasy of a future of all of us setting to see, escaping AI to stow away as cabin boys on the yachts of the AI mega-barrient. Yeah, I'm permitted my fantasy.

21:15Adam Tooze: Maybe I was revealing too much about some fantasy I'm having of flying to Monaco and ending up on a boat or something. Yeah, this is not this is to be clear. This is not employment advice to any listeners.

21:25Cameron Abadi: Do not anyone who's out there who has a super yacht who would like to host a recording of ones. Yeah, exactly. Exactly. Exactly. Should feel themselves invited to host invitations to foreign policy. We will consider your you'll consider your bids.

21:41Adam Tooze: happy to receive those invitations. But it also seems like yachts are an illustration, from another perspective, of regulatory and tax arbitrage. And that's, you know, via the jurisdictions that these yachts can end up in and the choices by which yacht owners can direct their yachts to head in. And yeah, Monaco, as I mentioned, is sort of seems to be a capital of this kind of system. And I'm curious how this could work. I mean, how could yacht owners use their boats to avoid paying income taxes or other kinds of taxes for that matter?

22:23Cameron Abadi: I mean, yeah, this is quite an interesting area. I mean, the most obvious thing is that you, of course, don't privately own the boat. You own a business which owns the boat. And the boat then earns its keep through charter. And because it's a business asset, you can avoid paying various types of tax on the asset. De facto, of course, it's your own personal private boat, but they're too big, they're too expensive. And they actually also just for their well-being as boats need to move, the engines need to be churning, they need to be going on, they need to be fully crewed. And so if you own one of these boats, you're basically setting yourself up in the boat chartering business.

23:01Cameron Abadi: if you're doing it remotely efficiently. The fantasy, of course, the kind of James Bond fantasy is that you live on the boat continuously. You never spend enough time anywhere to actually count as a resident. You thereby avoid tax residency and you just pay tax to no one, right? Because you're basically your own self-contained unit floating around the world. And this is presumably possible. It's easy. The fact of the matter is that the two things that make this implausible, which is, A, if you're really that wealthy, do you care about tax enough to basically sacrifice residence anywhere? That's, after all, quite a trade-off.

23:43Cameron Abadi: And secondly, if the real issue is tax residency, there are loads of jurisdictions where you can register and not pay very much tax, which also have great yacht facilities, not by accident. so the you know the emirates the gulf for an attractive location for this reason as people discovered during the war the ongoing war with iran right all of a sudden there were these expats brits who were registered in the gulf so as to avoid uk taxation and couldn't get there because of flight cancellations this kind of thing so so a you know to really do the crazy uh you know escape tax altogether that kind of life is is a huge price secondly there are other ways around it.

24:22Cameron Abadi: And then thirdly, it's harder than you think. So there are actually a bunch of, it's really funny, Australian websites explaining to would-be Australian tax exiles. In other words, fun Australian young women and young men who want to go to sea and escape the burden of paying taxes on their incomes, which explains that not being in Australia doesn't make you a non-tax resident. So you still end up paying taxes. Because if you are in Australia and like Southeast Asia beckons and there is this entire zone of like digital nomaddom that you could join up to, which would include this realm of, you know, being a deckhand on a boat.

25:03Cameron Abadi: You know, it's very tempting to imagine that you thereby escape the claims of the Australian nation state. And that isn't true. So not being domiciled there doesn't necessarily mean that you're not resident for tax purposes. So it's more complicated than that particular fantasy looks.

25:19Adam Tooze: Well, what's clear is also that yachts are a target of sanctions, and that's become very apparent after Russia's invasion of Ukraine. You know, after that war got started, Western governments in Europe and the United States froze or detained about 20 Russian-linked super yachts. There were big announcements about this at the time, kind of claims that the value of those boats amounted to some$4.3 billion. dollars. There were promises by those governments that the proceeds from seizing these boats would then go on to fund Ukraine's reconstruction. And here we are four years later. And from what I can tell, that campaign seems like a fiasco in various terms.

26:07Adam Tooze: I mean, you know, recent reporting suggests that only four of the 20 seized yachts have been formally confiscated at all. And meanwhile, enormous maintenance costs have been paid by Western taxpayers to maintain the boats that Western governments have detained. So what exactly has happened here? I mean, why haven't yachts been a useful target of sanctions?

26:34Cameron Abadi: Yeah, I remember doing a rather derisory show about this when this first came out. You know, the glee expressed in Congress at sanctioning other people's oligarchs was really a thing to behold. And yes, the ultimate irony of expropriating somebody else's money pit and then discovering that, oh, the money pit is mine. Yeah, by the accounts of a British ship broker, that clutch of yachts that were seized has probably lost 600 million euros in value over the time that they've been held. Because if you want to maintain them, you end up having to spend the 10 % per year to maintain them. If you don't maintain them, they rapidly depreciate, and you can't maintain them properly if you ban movement of the yachts.

27:22Cameron Abadi: I mean, there's Russian mega yachts parked in central London, effectively in Canary Wharf, that they've got scaffolding on them because to move them to a dockyard would violate the sanctions rules because it would put the thing in play. And as you say, very few of them have been formally confiscated. So it turns out that if you're actually going to make money out of confiscating money pits, the crucial thing to do is to confiscate it and then sell it as quickly as possible to the status-obsessed oligarch of your choice who's willing to buy in on the money pit game. And if you do that, if you do that really quickly and then hand the proceeds over to the Ukrainians, you've actually got a way of paying reparations.

28:02Cameron Abadi: But if you just seize these rapidly deteriorating assets, you know, it's incredibly, I mean, you punish the oligarchs, many of whom are actually not formally personally sanctioned. But, you know, we're just in the crosshairs of Western indignation about the outbreak of the war. Well, you know, there's no doubt I'm not making a case here for the general defense of the rights of Russian oligarchs. But there is something there is something ironic, perverse, eyebrow raising about the Western enthusiasm for this profoundly dysfunctional policy. Yeah.

28:34Adam Tooze: I mean, why not simply walk away from these entirely? I mean, it seems like the actual ongoing maintenance costs are a kind of insult to injury at this failed policy in some ways. I don't even know what can justify the continued kind of, I guess the thought is they'll have to be returned if they're not formally -

28:52Cameron Abadi: But they're in legal limbo, right? Yeah. And if you're a bureaucrat and you've done something crazy and you're now in the situation of having to manage the crazy, the question is, do we deliberately just allow these assets to deteriorate, which is what is broadly speaking happening? Or do we actually, we've got this beautiful boat sitting there, shouldn't we look after it? and in some cases as you say the italians i think have stumped up tens of millions of euros to maintain one of the ones that they've seized you don't do that of course the thing becomes increasingly valueless because no one in their right mind is going to buy a badly deteriorated highly complex ship like that like the main you know the risk the costs of restoring them are huge better to start with a fresh clean sheet i mean this is generally speaking one of the problems with the basic idea of like, you know, Trump's kind of general idea of how to pay for wars, which is to seize things.

29:45Cameron Abadi: Like when you do that, especially if you seize complicated things, you have to reckon with the follow on costs and the complexity of actually maintaining complex things. And in this case, maintaining complex things in whose nature it is almost continuously to lose value.

30:00Adam Tooze: Yeah, it seems sort of inherent when you're dealing with oligarchs from wherever they hail that they're going to have probably expensive lawyers who are making their ownership claims complicated intentionally for various, you know, financial and other legal reasons. So yeah, that's clearly what these Western governments have discovered upon seizing these boats, that they are indeed complicated ownership objects. But this entire discussion, and perhaps this is the place to end the conversation, reminds me of a, you know, heterodox economist episode that we had previously recorded way back when, namely on Torsten Veblen, famous economist who analyzed the markets of luxury goods among the wealthy and the way those worked.

30:51Adam Tooze: And I'm curious, yeah, if yachting really is almost the kind of purest, if not maybe the last kind of obvious Veblen good that is to say it's you know sort of desirable precisely because of its high price and that is clarified by the market dynamics that you were describing about kind of unavoidable resale losses the kind of near guaranteed losses that are taken on yachts and, you know, lack of obvious utility. So the only way to measure the good here is positionally and in terms of positional status. So is this really, is yachting perhaps the most obvious and clear Veblen good that exists in our world today?

31:39Cameron Abadi: Certainly one of them. I liked your definition of it as the truest Veblen good. It would certainly fall into that category. But then I got to thinking about other high status items that people buy in the face of knowing that they're going to depreciate spectacularly from the moment that you buy them. And the obvious case in point is new cars. Like if you buy a new car off the lot, as you drive it out the door, it begins to depreciate and it'll depreciate between 15 and 30 percent in the first year that you buy it. And in 2025, Americans bought 16.3 million light vehicles at an average price of, believe it or not,$47 ,000.

32:26Cameron Abadi: So this is expensive stuff. And in the face of the knowledge that as they drive it out of the forecourt, it's going to begin to depreciate. And it's going to depreciate by more than a percent every single month, the first year of ownership. so the americans in doing that are accepting a depreciation which runs to between 150 and 170 billion dollars every year when they buy new cars and tell me that the what is the utility of a new car as opposed to one that's one year old like none the utilities again as you say it's strictly positional it's the fact that you know that you got the latest model and there was a reason for having that and it was because you didn't want last year's model and not having last year's models was important for some reason.

33:09Cameron Abadi: And that's an extraordinarily large price to be paying, $150 to$170 billion. That's 15 times the size of the yacht market. And at$47 ,000, on average, that's the upper middle class's equivalent of the yacht play, right? To have that in your in your in your two car garage in your giant suburban house you know that's the

33:37Adam Tooze: kind of that's the kind of logic it's an interesting example as well because presumably no one else knows if your car is new in other words no one sees the odometer in your car unless you're going out of your way to show it to people like people who know no okay really i mean like a car that's that's that's one year old versus a car that's not i mean you know they can tell by

33:59Cameron Abadi: the registration in the UK and they know by the model and there are people who just don't want to drive you know pre-owned cars you know and there's lots of tax incentives that set this up so not that many people are directly facing that loss but nevertheless just in terms of the depreciation it struck me that that was a kind of maybe a comparable not comparable but an interesting extension of your thought where else do we see this kind of behavior on a really large scale

34:27Adam Tooze: Well, if one of those, again, I guess I'll extend the same invitation. One of those 6 ,000 super yachts out there wants to host us at some point, you know, you can email us or reach us via foreign policy. In the meantime, we wish everyone a good summer week ahead, wherever you are, whether on a boat or not. And we'll be back next week with new data points.

34:54Adam Tooze: ones and twos is written and edited by adam and me and produced by claudia tady the show is made possible through the support of foreign policy readers and ones and twos listeners as always we love getting listener feedback you can leave voice messages on the ones and twos homepage on foreign policy.com or email us that's podcasts at foreign policy.com or you can tweet us that's at onesandtwospod. I'm Cameron Abadi. Thank you very much for listening, and we'll be back in your feed next week.

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