Luxury: How Experiences Became the New Luxury | The Decade Ahead

**Bryce** (0:00)
The top 1% now own more than the bottom 5 billion people combined. And that gap is distorting the economy so much so that courtside seats to the NBA Finals went for $280,000. Today, we're looking at how you can invest in the luxury market that is being fuelled by inequality.
Welcome to The Decade Ahead, a 10-part series on Equity Mates where we're exploring 10 themes that we think are set up for the next decade. My name is Bryce.

**Ren** (0:30)
And I'm Ren. And today, we are talking about the luxury economy. And let's be clear from the outset, we're not talking about how much we endorse that inequality that Bryce just flagged. We are just dealing with the world as it is, because unfortunately, the world as it is has the rich getting richer and them spending that money in ways that in industries that previously probably were unthinkable.

**Bryce** (0:55)
This episode of Equity Mates is brought to you by ANZ Business Start Right. Starting a business can come with a lot of what ifs, but ANZ is here to help you with what's next.

**Ren** (1:05)
All right, Bryce, well, like it or not, inequality is increasing. We're going to talk a lot in this episode about the 1% or actually probably more specifically the 0.01% because their spending is creating big growth pockets in the economy that we can all invest in even if we can never match their spending patterns.
So you said the richest 1% now own more wealth than the bottom 5 billion adults combined. The top 0.001%, so that's just 56,000 adults, small enough to fit inside a stadium, holds more wealth than the bottom 2.8 billion adults combined.

**Bryce** (1:45)
Elon Musk alone has more wealth than 3.8 billion people, 46% now.

**Ren** (1:54)
Yeah, right. Okay, so my number must be out of date. Yeah, I think this has happened. True, we prepped this before SpaceX.

**Bryce** (2:01)
And so since it's listed, this number is now shot out. But he alone is 46%, which is just sickening and wild.

**Ren** (2:09)
Everyone is saying like, oh, it's just paper wealth, which is true, but all of our wealth is paper wealth. That's what we're talking about here. And the argument is, well, Elon couldn't sell $800 billion worth of SpaceX stock.
True, but you know, Sergey Brin probably couldn't sell $300 billion worth of Google stock. But more importantly, the rich people don't sell the stock. What they do is borrow against it. So it's not could Elon sell $800 billion worth of SpaceX stock. It's how much would JP Morgan lend to him against this stock.

**Bryce** (2:40)
Let's go down to rabbit hole. You also don't need him to sell $800 billion for there to be wild income inequality.
Even these guys having, I don't know, $500 million dollars spitting off passive income is a huge amount of money that they need to be spending on other goods and services or other assets. Yeah. You don't need them to liquidate $800 billion.

**Ren** (3:07)
Yeah. I think we're making slightly different points, but I 100 percent agree. I think whatever you think of Gary's economics, we are down this rabbit hole now. I agree with him, his central point that wealth inequality is a self-perpetuating beast that feeds on itself because the rich literally cannot spend the amount of money that their investments generate, and so they are just forced to continue to invest it. Exactly. Inequality eats everything by that nature of the power of investing and passive income. Yeah.
They just can invest more, they have more spending power. We are, as a society, going to have to reckon with the ultra, ultra, ultra, ultra wealthy.

**Bryce** (3:49)
Yeah.

**Ren** (3:50)
But not in this episode.

**Bryce** (3:51)
No. Let's park that.
All right, Ren, well, let's bring it back. The gap is, unfortunately, getting wider, faster.

**Ren** (3:59)
That doesn't sound like you're bringing it back. That's true. Let's keep going.

**Bryce** (4:02)
Since 1995, billionaire's wealth has grown at about 8% per year, which is nearly twice the rate of the bottom half of humanity. That came from the World Inequality Report.
At 8% a year, billionaire wealth is compounding more than 10-fold since 1995 It's outstripping that of the growth of the bottom half.

**Ren** (4:21)
So, inequality is a force that is compounding itself.
And the question then becomes, aside from Australian Residential Housing and other investments, where are the rich spending their money?
A lot of it has been going to luxury goods. That has been the story to date. In the personal luxury goods market, Bain did a study and they found that top customers, the ultra wealthy, those spending more than 20,000 euros a year on luxury goods, now account for about 46% of the market. In 2019, it was 30% of the market. So, the ultra rich are continuing to buy more in that space. Boston Consulting Group did another study. They found that just 0.1% of luxury consumers are responsible for 37% of the total luxury market. Their definition of the luxury market was broader than Bain's. Their definition of the luxury market includes cars, longevity, wellness, some other categories. But just like pause on that, 0.1% of the customers responsible for 37% of the spending.