Rolex

Hey acquired listeners, we've placed this episode on Rolex toward the top of the podcast feed since people frequently say it is One of their favorites and a great place to start listening. It was recorded on February 23rd, 2025 All right, David. What's on your wrist? Well currently on the wrist is my stainless white face Daytona that my dad gave me I think it was still quite popular when he gave it to me probably close to 15 years ago But not like it is today a strong choice I'm actually also wearing a Daytona that I'm borrowing from good friend of the show Mmm, well fun fact for listeners the watch that David is wearing is the one that I was wearing during the Morris Chang interview When we wanted to foreshadow that this was our next episode.

Yes and in front of me here now in my hand But not on my wrist is my other Rolex that my dad gave me a long time ago my Rolosaur Datejust Did you gotta go on any trust? Yeah? Great. All right Welcome to the spring 2025 season of acquired the podcast about great companies and the stories and playbooks behind them I'm Ben Gilbert David Rosenthal and we are your hosts All you need for timekeeping is something that happens at a constant rate and some way to count it It could be sand and an hourglass It could be a weight being pulled down by gravity on a grandfather clock slowly turning the hands moderated by the tik-tok of a pendulum Or it could be a mechanical watch on your wrist driven by a complex and beautiful array of hundreds of gears and springs Today listeners we tell you the story that we can't believe we haven't already told on acquired Rolex Rolex is a cascade of paradoxes.

It's one of the best known brands in the world But despite that it's one of the least known companies in the world They're privately held by a charitable foundation the Hans Will's door foundation So they don't have to disclose anything and really they never do they're one of the most secretive companies that we have ever studied and David Check me on this. I think they're even more secretive than Ikea or Mars. Oh, yeah, it's funny that the closer to the present day We get the less we know totally they operate like an intelligence agency over there. Yes, like James Bond one might say Oh or one might not say listeners they make watches that everyone wants to buy but nobody seems to be able to get with famously long and opaque lists at Retailers except of course over a million people you're actually do buy one and for an average price of $13,000 each that is until you walk out of the store And then they instantly become worth more at least for a lot of the models these days To your point about paradoxes of Rolex this is one of the greatest ones It is absolutely one of the very very top top tier luxury brands in the world and yet They also sell a lot of units or mezz doesn't sell a million Birkins every year There's probably ten times more Rolexes sold than Birkins sold or at least on that order It's a success built on the back of craftsmanship engineering and manufacturing honed and perfected over 120 years is one of the greatest brands in the world built meticulously and So intentionally David and my favorite part of the paradox This is the story of the most successful Swiss watch company, but it wasn't founded in Switzerland or even by a Swiss person No, no, it was not it's a ten plus billion dollar revenue business performing a dead craft Obsoleteed by the digital world they make a watch that can't tell the time as good as my Apple watch or even a ten dollar casio for that matter So what is going on here?

How did Rolex become Rolex? This is a story we've been getting to share Oh, so excited. Well one big disclaimer up front much like how our NFL episode wasn't about football and our NBA episode wasn't about basketball This episode isn't really about watches. It's about the business of watches Yes, if you want to know every time an episode drops check out our email list It is the only place where we will share a hint of what our next episode will be and will share corrections updates and little tidbits that we learned from previous episodes That's acquired dot FEM slash email or click the link in the show notes join the slack come talk to us about this episode with the whole acquired community afterwards acquired dot FEM slash slack and if you want more acquired between monthly episodes check out ACQ to our interview show where we talk to founders CEOs and investors who are building businesses in areas that we've covered on the show The most recent one was a very fun interview We did with a friend of the show Guillermo Roush the founder and CEO of Vercel about really the whole history of web development frameworks And their latest and greatest product V zero a startup within a startup that lets you code web apps from scratch in just English Instead of a programming language.

Yes, search ACQ to in any podcast player and listeners This is not investment advice But you can't invest in this and you can't invest in many of the other great brands that we were gonna talk about on this episode either There's something kind of remarkable about the companies. We wish we could invest in but actually we can't so this show is for informational and entertainment purposes Only David where we start our story. All right, well we start as it's so often the case with these big old European companies back Not in the last century But even the century before that on March 22nd in 1881 in Kombak Bavaria about 30 miles north of Nuremberg in present-day Germany Where Hans Eberhard Wilhelm Willsdorf is born to young Anna and Johan Willsdorf and you might say this sounds like a German name Bavaria wasn't a part of Germany, right? Well, I was just gonna get to that technically it's not Bavaria anymore Technically it is part of the German Empire But this is a very very recent development as the Count Audubon Bismarck had only just ten years earlier convinced Bavaria to join forces and unite with Prussia To form the greater German state German Empire in the aftermath of the Franco-Prussian war where they battled Napoleon III over in France But as far as young Hans and his family are concerned they're Bavaria.

They don't identify with this Germany thing. This is foreign to them They are also Protestant not Catholic which puts them in the great minority in Bavaria at the time Now I say all of this deep European history here for two reasons one because it's sort of a fun story and calls back to our Mes and LVMH episodes and it's gonna call back very directly to those episodes in a minute here But also I think it's important to paint the picture of Hans is even from birth He's kind of this consummate outsider. He doesn't really fit in any sort of national or religious Identity in the either established or changing European order at the time. He doesn't really have a country.

He doesn't really have a religion or a people He sort of floats between the seams of Europe Which Rolex itself is going to do as we shall see in a very big way. Yeah now back to young Hans and his family His father Johann came from a line of successful iron mongers and very likely Hans was destined to go into this business as well However when Hans is 12 years old tragedy strikes and both his father and his mother died within a couple months of each other So he's orphaned just like this should sound familiar man. Oh, yeah, Louis Vuitton and their mez This is absolutely freaking nuts the founders of arguably maybe the three biggest and most significant luxury brands in the world today We're all orphans from the 1800s This is a wild and I wonder how much of a statistical bias there is here if we were studying anyone from this era How many of them would be orphans because of disease and war and yes all sorts of stuff just lots of people died for lots of reasons Yes, totally totally true, but it's just so interesting right these brands mean much less so Rolex But our mez LVMH are so steeped in this European history and the tradition of the nobility But it's actually these orphaned outsiders that founded them. Well, I think it's a great point Rolex doesn't share that heritage at all This is not steeped nobility This is not an artifact like a leather bag or a saddle that any kings ever had when you buy a Submariner a Daytona or even a date Just you are not buying Swiss history here.

You are buying 20th century Mother of the as we look at into so in the wake of this tragedy Hans and his brother and sister are placed in the care of his Uncles and the uncles decide that they are going to sell the family iron mongering business to fund sending Hans and his siblings off to boarding school I see so Hans would later write in this amazing document that is essentially his autobiography It's the first volume of a four-book set that the company published in 1945 for the company's 40th anniversary the Ruby Jubilee Hans writes our uncles were not indifferent to our fate nevertheless the way in which They made me become self-reliant very early in life made me acquire the habit of looking after my possessions and looking back I believe that it is to this that much of my success is to So Hans goes off to boarding school and becomes an excellent student there He excels in math and he also excels in foreign languages particularly English and while he's there in boarding school there in Bavaria He meets a friend who is from Switzerland and he develops an interest in that country and he no longer really has any family ties Or anything to Bavaria anymore doesn't really care about Germany. It's like a great Switzerland seems like a good place I'm gonna go live there when I graduate which he does he moves to Geneva and he finds work there first for a large pearl merchant So this business was buying like raw pearls from fishermen and then selling them to the famous Swiss jewelers there in Geneva And then he joins another local trading company in a adjacent industry to the jewelry business a firm called cunoe cordon Cunoe cordon turns out isn't in just any industry as far as Switzerland goes They are in the industry besides banking they are in the watch trade. We need something to bank Yeah, you need something to bank Exactly a country can't just have banking as an industry it needs a real economy to go banking on top of exactly start with jewelry watches Then you get into banking and cunoe cordon is actually a major player in the watch trade now They're not watch makers they are watch exporters So they are facilitating the trade of all these best-in-world Swiss watches out of Switzerland and into other countries around the world And at this time this is like the late 1890s cunoe is doing about a million Swiss francs worth of business a year I don't know exactly what the Swiss Frank to us dollar exchange rate was in 1900 But today the Swiss Frank is stronger than the dollar It's about one to one pretty close so call it a million dollars of business a year in the 1890s like this is big They're a big player and it's important to remember too It's not like watches where this little corner of the Swiss economy Exporting watches was a huge part of this was economy and a huge employer in the nation. Yes now We're saying watches here.

It's important to know what were watches at the time They weren't something you were on your wrist was not wrist watches because basically Hans and Rolex hadn't invented that in exactly invented But hadn't popularized it yet. We're talking about pocket watches. Yes, that's what the industry was this time And part of the reason is functional pocket watches were bigger So the movement to accomplish a certain amount of precision didn't require as little teeny tiny of tools and you had more Margin of safety and bigger watches and so whenever anyone tried to make a watch and put on the wrist at this point in history It was usually fragile or really inaccurate or actually worn more as jewelry And so they actually didn't call them wrist watches they called them wristlets and they were mostly worn by women Rislets, yes We'll get more into that later and I know you're chomping at the bit to give you the technical explanation of the crazy Human craft and engineering that goes into watches. It's amazing.

It's so unbelievably cool But back to the Han story for the moment so the job that young Hans gets here at kuno turns out to be pretty pivotal for him And the future of Rolex he is a secretary which means that he's answering letters from clients all around the world and then Responding and coordinating with them because remember he's really good at languages and what is his best language English? So he's coordinating with most of their clients in the British market in the UK And he sits at this really interesting choke point of the whole industry where he understands How all the producers are sort of laid out and how the whole value chain works on the Swiss side of things He's seeing the market prices and price action happen for all different types of watches from different makers in different parts, etc But he's also getting to know the buyers in Britain who are not individual people These are retailers. These are the jewelers in Britain. These are the distribution points for watches.

Yeah, so he's getting the perfect business market strategic background Distribution relationships for going on ultimately found Rolex, but it's not just that he falls in love with the business of watches there He also falls in love with the objects and watches themselves in their performance So he starts this habit of he would take home batches of pocket watches at night And he would run his own tests for accuracy on them on the product that kuno Gordon was trading So he would set them all at the same time and let him go overnight and then he would check them in the morning How much they or your disparate from one another and check their accuracy and the legend goes that one day he gets the idea that he's gonna take Three watches that he's found to be quite accurate in this whatever this recent batch that he's testing is and he's gonna go get them tested at the local Astronomical Observatory and have them measure these watches according to the strict observatory timekeeping tests Which are also called chronometer test if you've ever heard the term chronometer a chronometer is a timekeeping piece could be a watch could be a larger clock It could be all sorts of devices that has passed these astronomical observatory tests for being accurate enough for celestial navigation Yes, David I'm looking down at this Daytona right now and it says Rolex oyster perpetual which all three of those words we haven't gotten to yet Superlative chronometer officially certified cosmograph a lot of words in there that we will get to but at the moment where we are is Chronometer officially certified. Yes, and today. This is like a oh, you know cool That's cute your mechanical watch is like officially certified that it keeps good time back This is critically important celestial navigation if you're involved in anything and shipping the maritime trade is critical If you have a crappy timepiece, you're gonna go to the wrong place because you're using it for navigation And so to your point observatory chronometer certification No one's doing it for my pocket watch that I can set to local churchbell or whatever whenever I need to reset it But young Hans has this idea because it doesn't he guess what these three pieces that he takes these pocket watches They pass the test and they get certified as chronometers and he takes him back to his boss's it Whoa, well, let's get a market ass Slap that on the tin baby And it's this aha moment of kuno and then soon the rest of the industry realizes oh actually chronometer certification on pocket watches helps us move products Yeah, the other thing to realize here is we are in an era where this era would last the next hundred plus years But an era where having a watch is super important. Yes, it's not a fashion accessory It's not a nice to have without a pocket watch if you are leaving your house and moving about in the world You're lost it's almost like not having your phone today where you feel like I'm floating.

It's very uncomfortable Totally, it's even more than you're saying. It's like a smartphone in that you need it to function But pocket watches are also like smartphones today and other fidget devices if you're out in the world and like you're waiting in line Or you don't know what to do with your hands. You're in a socially awkward situation You know whatever you take a pocket watch out you're gonna open the class. This is what people did It was just so ingrained in everyone's day-to-day existence just like a smartphone is today It's an essential tool for moving about the world Which explains how it's such a huge industry that moves the needle for the nation of Switzerland and how there's these businesses that can be exporting a million dollars Worth over a hundred years ago and why there's so much attention being paid to it It's not a random accessory.

It is an essential piece of life a tool totally so after working at kunoh for a couple years and Liaising with the British market in 1903 Hans decides that hey, I'm good at English. I like London I might actually want to move there So he moves to London at age 22 and he goes to work for another watch company there in London locally We actually don't know the name. I don't think anybody has ever found the name. Mm-hmm What you and I read probably five books between us and wasn't any of them Yeah, he works there for two years and he writes two things struck me most forcibly about my new employers this British watch company on the one hand They're commercial competence and on the other hand their lack of specialization I soon gained confidence in myself and in 1905 at the age of 24 decided to set up in business alone feeling that my training education had Prepared me so he strikes out on his own start to zone watch importing company there in London But remember the specialization piece I'll come back in a sec.

Hmm. So on the zone is one problem though, which is in order to do what he wants to do which is import Swiss watches and sell them directly under his own banner where he Makes and keeps the profits there in London. He needs some capital in order to finance the buy got a place the order Yes, so through his lawyer he gets connected with a local man in London named Alfred James Davis who has some money to invest in So they meet through the lawyer they hit it off immediately and decide to go into business together and thus in 1905 Will's dwarf and Davis limited the world famous merchant watch trading firm is born and Yes, none of you know will sort and Davis however will sort of Davis limited is Rolex Yeah, as we shall see now It's often said that if you read anything about history people tell you well Davis was Hans's brother-in-law He married Hans's younger sister Anna that is true But I believe that didn't actually happen until after Hans and Alfred went into business together I think Anna met Davis through Hans but really it is Will's door company It's kind of funny that Davis's name is on it. I kind of get the sense.

He's mostly capital Yeah, he's there a little bit But it's almost as if you know Atari instead of being Atari is Bushnell and Valentine that's the equivalent here I think that's right and obviously they get closer over time as they become family when Davis Mary's Hans sister But yeah, I think this is Hans's business. He's running it Davis trust him. Yeah, and so what is the business doing? Well the business plan when they get going is they're gonna do what Hans has been doing his whole career at this point in time Which is importing Swiss made highest quality in the world watches into the London market where there is high demand for them And they're not selling directly to consumers, right?

No, just like back at Kuna Gordon the buyers are the retailers are the jewelers no end consumer had any idea Who made their watch at this point time? They were walking to the retailer say give me a fine Swiss watch sir and the retailer would sell it to them And the retailer would take one out from the case you look down at the face of the watch the face of the watch has the retailers name on it And you're just trusting that the retailer bought a good watch from some Importer who bought a good watch from someone on the Swiss side who managed to create a good watch by putting a movement in case and all that together Now there's a little bit of detail in there where sometimes the importer would import a fully built watch sometimes the importer would just import a Movement and then they would import a case differently and then they would put together themselves But this was the craziest thing that struck me is the retailer is the brand on the watch at this point in time Yes, there is no brand for the product right so Wilts Raffen Davis is occupying the spot in the value chain where they are importing the watches and Then selling them to retailers to brand. Yes Now you said there a minute ago something really important Which is there were kind of two ways that this would happen you would either import fully finished watches from Switzerland a whole product So to speak in either trading firm like will's door from Davis would do this or you know court and would export it or maybe the retailers Would buy directly from good according to that? So if they were big enough if they were big enough Yeah, what will's door from Davis are doing is they're saying well Hans knows through his time at kuna court and all the best Movement makers all the best case makers right he operated one click up the value chain sort of aggregating on the Swiss side Exactly so now that he's operating down on the importer level one click down the value chain He's like I can still aggregate all these producers and start building a watch myself Yes So he's not making anything but he is assembling the finished product So he would have watchmakers there in Britain assemble the best movements that he would import from Switzerland with the best cases That he would find and that was part of his value that he's adding to the industry here And this is probably an important time There is so much lingo in the watch industry and we're gonna do our very best on this episode to demystify it movement in Lay speak is the whole inside that makes the watch tick and drives the hands.

Yep, not the dial right? Correct no dial no hands no case no glass front and the movement I think like you said is kind of the critical piece absolutely That's the hard thing case is important dials important hands are important But that's all aesthetics and as far as performance goes hundred percent movement It's like semi-conductor production if you're a movement maker you're like TSMC right chronometer officially certified refers to the movement Actually in fact only the movements are tested not the whole final case watch not the finished watch It's yes, so David who is he importing movements from and how does he meet said movement maker? Well, that brings us to the other half of the Rolex equation one is John Eagler based in Bien, Switzerland Which is in the mountains of the north of the country importantly not to Geneva? Yeah, not Geneva Geneva's in the southwest of the country in Switzerland right next France So Eagler runs this movement workshop up in what is then a tiny little town in the Swiss mountains and it turns out that he's actually kind of like a generational talent And watch movement making and in particularly what he's really really really good at is making movements that are Accurate and on par with the highest quality most precise most accurate movements out there on the market But are also much smaller in size He's making miniature movements and Hans had gotten to know John when he was working at Koona Korten and kind of thought like oh, hey, man This guy's a diamond in the rough up there in the mountains He's as good or better as any movement maker and he's making these miniature movements before there's a real market It's almost like he's just doing it because it's the hardest thing you can think of totally It's like his hobby horse.

I'm gonna push the limits of human achievement of how small can I make this thing? Yes, I think it's probably known and respected in the industry But wasn't a large player and Hans is like oh actually this guy's my ticket to differentiation here I'm keeping his address so I can write him a letter when I get to when I start my own company Yeah, so here we are at the beginning of Will Storm and Davis Hans is importing these movements from Eagler He's putting into cases selling his watches here in the UK. This is 1905 This carries through this relationship for the next 99 years Until Rolex finally buys Eagler in 2004 where Eagler is making the movements for Rolex watches And I don't think there's ever any real formal arrangement here. It's basically a handshake deal.

Yep, that's correct We will make your movements handshake deal for 99 years. Yes, all the Rolex everything becomes this is the basis of it And so they weren't exclusive yet So in 1905 they're placing their first order and there's already a little bit of a dance that's starting to happen where of course The front of the watch on the dial is unsigned So the retailer can put their name there this already is starting to rub Hans the wrong way He kind of feels like these are my watches wise the retailer gets a put their name on it And so he goes to Eagler and says the ones we're gonna sell these are Will Storm and Davis watches I understand you made the movement But we got a brand it somewhere and so he gets Eagler to buy in on this idea that on the movement They're gonna put a W&D and then also inside the case back for whoever they're buying the case from they also inscribed W&D And so that's the state of things here in 1905 in those first few years after is there's a W&D on the inside case back on the movement But not on the face of the watch yep, which gets into the type of watches that they're making here now We're still in pocket watch land the wristwatch vision hasn't really entered Hans's brain yet Even though Eagler's specialty is these small miniature movements So remember what Hans said about his earlier British employers and their lack of specialization He continues in his autobiography talking about how he decided to do things differently here at Will Storm and Davis quote I undertook the financial side and management of our concern from the very outset our success was assured by our fundamental policy to trade only in specialty Horological products and especially in new lines the first specialty we adopted was the traveling watch called a portfolio watch Cased in the finest quality leathers this line I immediately placed in large quantities on the market the range covering every possible style and design so again We're not wristwatch yet But he's like the way that I'm gonna succeed and break through here is through differentiation Yes to do something different It's like we always talk about the most important thing to build a huge successful business is to do something different and unique That people have to come to you for and can't go to the commodity markets now That doesn't necessarily mean you're right yeah, cuz he's not right with traveling watches We don't tell any of the stories here on acquired of all the people who wanted to do something extremely unique and different and was not what the market wanted But it's the classic you have to be contrarian and right yeah, and you know I guess reading what Hans wrote there maybe he was right sounds like the traveling watch was a success enough He probably thought it was a success at the time Yeah, so then as legend has it one day shortly after starting the company and focusing on these travel watches Hans is reading an account of the second Boar War in South Africa But I never knew that all my like European absolutely lessons I tweeted this yesterday I know who knew that our livelihoods would depend on AP European history someday. That's right Anyway, Hans is reading an account of the second Boar War in South Africa And he reads that the soldiers that had fought had worn wristwatches So that they could coordinate their movements and their firing times and all their troop movements even while they were holding guns Do you know why in particular this war had them wearing wristwatches? Oh, I don't I just assumed that the technology had progressed enough because wristwatches existed at this point I just weren't thought of as serious watches.

That was part of it. Clined it. Oh, yes Of course, they can't wear their jackets and so they can't reach into their pocket and grab a pocket watch Of course because it's hot there. Yep.

Well climate is gonna become important again here in the development of the wristwatch industry So the soldiers and officers there would use these wristwatches because even though they weren't as accurate as pocket watches Like you said, but you probably weren't wearing a jacket Even if you were wearing a jacket like if you're engaged in battle You're gonna stop put your gun down figure pocket watch out of your vest open the case no The axis upon which you evaluate value is a different axis than when you're hanging out on the streets of London Yes, supposedly as Hans is reading this like a bolt of lightning He has the key insight well, it's not just soldiers these days It's actually like a lot of people in the world that could benefit from having an accurate timepiece on their wrist that they could just Turn their wrist and look down and look at instead of a pocket much now the funny thing is he calls Eglor maybe he writes to Eglor. I don't exactly know he sends him a text He places the largest order in Eglor's company history several hundred thousand Swiss francs for a bunch of these tiny movements and the great irony This whole thing is he's kind of wrong the time was not right for wristwatches yet The Boor War was not the shove that the world needed to say whoa wristwatches the soldiers come back from the Boor War And it's still kind of the wristlets era There's not really enough inertia to make it take off everywhere now It's kind of okay because Wells Griffin Davis is still this small company So they don't need that big of a market to address to feed the needs of the business But it would be another 10 years before World War one happened and you had this Incredible unfortunate tailwind saying oh my god, we need tons of wristwatches now Yeah, there does start to be a market for serious timekeeping wristwatches particularly in the far reaches of the Empire So Australia, South Africa of course after the Boor War and especially India These are places where you're probably not wearing a jacket or a vest that much So this is the initial seeds of the wristwatch market for Wells Dorff and Davis So interesting but Hans is like a true believer at this point This is gonna be the future way beyond just the Empire people in Britain are gonna want this too It's obvious to him why you wouldn't want to have to reach into your vest to bring out your pocket watch He's a total zealot. So it's like all right. We've got this killer product.

We're first a market We're basically gonna invent this whole market. We need a name for the product We need something that's gonna make consumers know to ask for this product for our watches We need to coin the term for the industry and he's inspired here by the Kodak camera Yes, which by then had been around for a while and was made not by the Kodak company But by the Eastman company and Kodak I believe was the first invented product brand name and it was a name that meant nothing Yeah, I think that's right and it intentionally meant nothing It was easy to pronounce. It was easy to say you could see it once. It was very memorable It worked in any language five letters.

It had a great sound to it So supposedly Eastman came up with the name Kodak with his mother using an anagram set And he said that there were three principal concepts that he was looking for in the name one It should be short easy to pronounce It's working any language and it should not resemble any other name or be associated with anything else Yeah, anyway Hans takes inspiration from this and he decides that he needs a Kodak for his new wristwatch And he writes I tried combining the letters of the alphabet in every possible way This gave some hundred names, but none of them felt quite right It was one morning when I was sitting on the upper level of a double decker bus powered at that time by horses driving alongside Cheap Side in London that a good genie whispered in my ear Rolex He's good at myth making many startups are named this way today Totally and a few days after this fruitful journey the Rolex brand was filed and then officially registered in Switzerland by Will Storff and Davis Now this is a brand name. This is not yet the company name It's Rolex by Will Storff and Davis, so they trademarked in Switzerland a couple years later They trademarked in London and you know it's short. It's easily pronounceable. It's memorable It's the same in every language, but there is this one other characteristic that makes it really perfect Which is what you hear Rolex you can kind of think about rolling a crown of a watch You know that little knob that's sticking out from it that you used to wind the clock it channels that and there's also the X Kind of has a time keeping feel to it also It almost is like the tick tick tick tick tick tick tick Rolex feels like maybe you're turning the crown until it hits the end or something like that You can intuit the type of product that would be called Rolex.

Yes, totally So Hans is like, okay, great. I've got my Kodak name. Got the brand invent this new category How am I gonna legitimize this with customers? Well, I have this one cool trick that I did before Exactly.

I had the one cool trick I'm gonna do the one cool trick just with wrist watches instead of pocket watches in 1910 He sends the first wristwatch movement to the school of horology in Switzerland to be awarded the world's first wristwatch Chronometer rating which is a big deal because people just did not think these things were accurate before and without Eglr Exactly now getting certified at the school of horology in Switzerland is nice and all but this isn't an astronomical observatory This doesn't carry the same weight as something like a oh say the royal observatory there in England So Hans and Eglr keep working on these products for finding the movements Eglr's getting better and better at making wristwatch movements that are truly great 1910 goes by 1911 goes by we're here in 1912 Will's door of ass Eglr specifically Hey, can you produce a wristwatch capable of achieving an observatory timekeeping certificate and David as you mentioned the Royal Observatory and Eglr says let me try and let me get to work It still takes a couple more years So he works for two years and then finally in early summer 1914 Hans takes one of Eglr's movements to the Q Royal Observatory in England KEWQ for testing now Q is Not only a well respected observatory for astronomical and specifically timepiece testing there in England It's where all the marine chronometers for the British Royal Navy are tested the British Royal Navy at this point time We're talking the British Empire the greatest Navy in the world and it takes 45 days They put it through the ringer to make sure that this marine chronometer is gonna get our soldiers our sailors where they need to go And even more than that it is of course Affiliated with the other great observatory in England the Greenwich Royal Observatory Yes, which you know was where Greenwich mean time was invented We were talking like probably the most important timekeeping institution in the world. Have you been there David to Greenwich? No, no, I want to go have you there's an awesome museum with a history of timekeeping when I spent some time in London summer Geez 15 years ago. I went and spent a day there.

It was amazing. Oh, we gotta go. Yeah, we'll stop by on our way to Geneva perfect So again here we are early summer 1914 Hans has submitted this wristwatch movement to Q and after the 45-day rigorous battery of testing on July 15th 1914 it comes back this past and it receives the first class a precision certificate known as the Qa KEW-A certification ever awarded to a wristwatch cause for great great celebration and fanfare all around the world Except that it is three weeks after World War one sites. Yeah So between the time that Hans had brought the watch in for testing and when it finally gets the certification Archduke Franz Ferdinand is assassinated in Bosnia by a Serbian nationalist the whole rats nest of European alliances gets triggered And next thing you know the whole world is a bore on the one hand nobody cares about watches There's a war breaking out on the other hand everybody cares about lots of right exactly exactly So it World War one is truly the first Crucible moment for Rolex because it's the best thing that ever happened to the company in the industry It made the whole world care about wristwatches Also, it's very directly the worst thing because all of a sudden anti-German sentiment in Britain goes through the roof totally insane There's all sorts of horrible propaganda.

I don't realize this till now Do you know why British people call German shepherds Alsatians? Yeah, cuz they don't want to call them German It's cuz this yeah There's all sorts of racism against Germans in England and in Britain which is utterly ridiculous because the British royal family was German So Queen Victoria married Prince Albert Prince Albert was a German prince the whole British royal family was German This is when they changed their name to Windsor. Oh, we can afford Windsor. Their family name was Saxa Coburgota Which is it gonna play well when you're at Oregon's the Germans?

No, no, no, no, no speaking of things that aren't gonna play well when you're at Oregon's the Germans You're not building a strong consumer brand in Britain in 1914 called Will's Dwarf I mean if the British royal family is rebrand changing their name Yeah, Will's Darff and Davis also needs to be brand despite the fact that at this point Will's Darff is a naturalized British citizen and feels no affiliation To Germany he really doesn't ever in his life consider himself German totally totally but this is the birth of the company Rolex so in 1915 they renamed the whole company after the brand name Rolex and the Rolex watch company limited is founded Well David I was about to ask you how does this become a Swiss watch company and the answer is definitely right around this time in World War One All right listeners now is a great time to tell you about a longtime friend of the show Vanta AI has scrambled the whole security picture It used to be that you prove that you were secure once a year on audit or a static PDF then everyone would not and you're done But in an AI first world that doesn't hold up anymore Yep, your risk surface changes every week now Vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week Let alone at your last audit Vanta's own research found that around 70% of companies have this quote-unquote shadow AI running with no security review at all Right and that's where Vanta comes in They're the leading agent trust platform meaning they've built the thing that closes the gap and the way that they close that gap is Vanta agent Think of it as a GRC engineer That's governance risk and compliance except that it's software and it doesn't sleep It finds the issues drafts the fixes and cuts the time that you'd spend on vendor assessments in half in half Which is exactly why more than 16,000 companies today run on Vanta companies like ramp cursor and snowflake I'll stay audit ready and catch the risks that crop up between audits across every vendor every AI tool the whole environment And that's the real value trust has to be continuous now Which is why Vanta automates your security your compliance and the work to earn and prove trust We're huge fans of anti over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years So you can get a thousand dollars off of Vanta at Vanta comm slash acquired That's V-A-N-T-A dot-com slash acquired for a thousand dollars off and just tell them that Ben and David sent you So how are we getting to Switzerland? How does Rolex become a Swiss watchmaking company? Well, obviously the anti German sentiment was part of it I think if that were the only factor Rolex probably would have stayed in England Yeah, at this point Will's door if he's a naturalized citizen his wife is British the company is called Rolex now Or they're working on it. It would have been fine.

Yeah, however The other reason that World War II in Britain is bad for business for the new Rolex company Is that Britain imposes a 33% import tax on watches early on in the war that's gonna kill your importing business? Well, it's interesting. I read that and yeah, it's gonna make it tougher It's crippling but it's still you could run a business You could figure out how to pass those prices along to customers That's often what happens in the case of tariffs But one year later at the beginning of 1916 the British government puts the nail in the coffin They completely banned the import of all gold and silver They made it impossible for Will's door to build this business based out of Britain because a lot of times he's actually exporting The watches for sale in colonies where he's importing a movement He's importing a case or maybe he's taking a local British case putting it together making a Rolex watch and then it's getting shipped out somewhere else And he's saying they're thinking I can't get these precious metals and I'm paying out the nose for these movements This is stupid to run my business here. Yeah, and I assume then as now Rolex's margins in the precious metal watches are way way way higher Then in non-precious metal watches it's insane a $10,000 watch becomes a $30,000 watch when yeah gold to it or platinum or whatever Yeah, the delta between it's like Apple selling memory exactly exactly Interestingly in the hype of 2020 to 2022 the precious metals were actually easier to come by as a customer because there was so much less demand to go Buy a 30 50 $100,000 watch that those would kind of be lying around while the steel ones were flying off the shelves and there were huge lines for them totally So on the back of this in 1916 Rolex first moves the assembly of the watches to be in in the Swiss mountainside near where Aigler is which makes sense They set up a office and basically say hey you're making the movements next door We're gonna put a case on him right here Yeah, and then be able to export from Switzerland now to countries all over the world and not go through Britain first ultimately after the war in 1919 Hans moves both himself and the official company headquarters to Geneva where of course it still is to this day and Even to this day.

This is crazy design sales marketing and I think final assembly all happen in Geneva while Production of the movement still happens up in the mountains in Vienna It's super interesting it would make sense if you are Britain to throw on some terrorists to finance your war You got to finance it somehow and at the same time It also makes sense if you're a business operating in Britain in this time to say and a move in a Switzerland Yeah, but there's this alternative reason to move the business to Switzerland and Hans knows it if he's gonna build a globally renowned Watch company he wants to do it in Switzerland this company becomes Rolex of Geneva not just Rolex again I'm gonna look at this watch all the way down at the bottom Swiss made don't you forget it or you look at a Patek Philippe Geneva right there on the face of every Patek Philippe watch they are extremely proud of this Did you buy love it? Jenev Ben Jenev Oh, I'm gonna hear about that one aren't you? It's okay. We're ugly Americans here.

Okay, so then the question is why does Geneva have this prestige? Why is Switzerland an amazing place for watchmaking? Well, David Will you indulge me and let me wind the clock back? I actually thought you were gonna start the timeline for this episode back in the 1500s I was shocked that you only started it in the 1800s So perhaps this is a good time to go and tell the history of watchmaking in Switzerland story by all means Okay, great a lot of this comes from Mark Bridge who is the founder and CEO of at present a marketplace for a unique jewelry from independent artists Mark is one of David and my very best friends and insanely coincidentally and lucky for us and you listeners He wrote his master's thesis 20 years ago on the Renaissance of the Swiss watch industry amazing He sent me a copy of it.

We're gonna link to it in the show notes It's awesome to have this resource available just very conveniently from one of our best friends So all the way back in the 1500s Geneva was a center of activity for the Protestant Christian world led by John Calvin And if you know anything about Calvinism is very focused on moral uprightness. Yes, the Protestant work ethic Yes, one of these tenants was banning frivolous things like ornamental jewelry Local goldsmiths and jewelers instead focused on watchmaking since watches served a real function in the world and were not frivolous It was sort of this exception to the rule if you had that skill set There's also human beings are human beings no matter what rules you impose on them It's like you know life finds a way status always finds a hundred percent Right, so you've got the rise of Calvinism along with that religious reason that sort of causing this local pivot of industries You have one of climate too There are these long harsh winters and so an industry that could be done indoors in a small physical footprint was perfect If you're gonna go pick a profession out of a hat to have in Switzerland mountainous country long-haul Like this is a great one and especially because it's so valuable at this point in time You can become an important player in Europe in the European economy making something that you can make in your climate Third there's a cultural reason so David are you familiar with the term itablissage? Oh, no Are you sure it's supposed to be Swiss not French I've been to Geneva and I've been to other places in Switzerland But I know very little about its culture and history talk to me about terroir. I know exactly what you're talking about But it's a massage.

I don't know okay. Well, it's Swiss for establishment basically But what it's a massage means in this context is that it's this system This sort of economic system that they established in the area of the gura mountains where very small independent companies often one to ten people Could focus on something small like a single component and then you'd have dozens of these small companies work together to create the finished product It's almost like a distributed manufacturing system. Ah, so this is where a go comes from This is why he's got the workshop in the mountains it's oddly size Yep, exactly and so with this specialization of labor in small companies You could get really really good at your tiny part making say hair springs that we'll talk about later or these essential elements of watch movements These tiny companies by artisanal craftsmen these very labor intensive Companies got really really really good and pretty efficient at making their one thing So that's kind of the backdrop of how the Swiss are producing things and lastly in the late 1500s The French had been rising as a watchmaking powerhouse And when the balance of power changed in France and the Catholics came to power the French Huguenot refugees who had talents in jewelry and metalwork and watchmaking fled to Geneva Yeah, these are the Protestants they got kicked out of France That's exactly right and so the Protestants safe haven of Geneva They brought their watchmaking expertise or if they didn't have watchmaking expertise That's all they could really do if they were jurors or metalworkers since you can't make anything too shiny and too off-putting Yep, so this is how Switzerland gets the reputation as the watchmaking capital of the world. Yeah, exactly Basically this creates centuries of momentum, especially in this distributed top-let-sage system of how Swiss watches were made I kind of think about it as this beautiful blend of French beauty and appreciation for aesthetic and Swiss precision Yeah, well, I mean it sounds like Switzerland itself.

It's a blend of French beauty and German precision I love it. Well, that's definitely one big reason why Hans is like, okay We got to move Rolex to Geneva to participate in this tradition as we're now going to be selling to the world But the other reason is after what we're going to be selling to the world now Britain is still going to be our largest market likely But every country in the world is fighting or at least every European country has troops fighting in World War I They're all seeing the benefits of the wristwatch. This is gonna be way way way bigger after World War I I need to be able to serve the whole world. So they want to be in a neutral country Yeah, yeah, and he just experienced like oh Britain puts these tariffs on and gosh Well, I didn't really have a market for Rolex is in Germany before but if I did I wouldn't have been able to sell in Germany I don't want that to happen in the future.

Who's not gonna put on a big tariff to finance a war? Switzerland Switzerland. Yeah, super interesting You know what else happens in 1919? Well now that we've set up shop next to Eglr for putting their movements in our cases It's time for us to get a little bit closer So Rolex and Eglr arranged for a deal where in 1919 1920 Erman Eglr who's the son of the founder John buys shares in Rolex unclear what the purchase price was that seems to be of been lost to history and joins the board So he owns about 15 percent and so the board is Will's dwarf Davis and Eglr There's a second part of the deal which is Rolex actually buys shares in Eglr too And this one's less talked about but there were two companies that were big purchasers of the movements It's Rolex and Gruen and both of them were watchmakers Gruen I think was American who's their second biggest client and both of them bought Eglr shares also Yeah, because Rolex did not focus on the American market until after World War two correct So the companies are a little bit more joined at the hip, but still not an exclusive partnership Yep, and like we said before I believe still even though there's this equity relationship There's no formal contract governing the provision of movements here.

It's crazy But you know it's in both their best interests to keep it going of course. So here we are now What war one is over? We've had the chat GPT moment. Shall we say for wristwatches all these soldiers from countries all over Europe in the world Experience the power of having an accurate watch on your wrist.

They come home to their civilian lives They want to bring it into their life and who makes the best and most accurate wristwatch chronometer timekeeping pieces in the world Rolex So of course they're gonna buy Rolex. No, that's not true. No, that is not what they're gonna do It's Omega, right? Well, I think it's lots of companies I mean basically the market went from the very early adopters in the British dominions the far-flowing reaches of the British Empire Before to now like all the sudden it's this giant European wide market Most of it says they have no idea about Rolex like Rolex whatever I don't know what Rolex is like I've never heard of such thing before so I think it was like everybody was now rushing in And even though Rolex had this history probably had the best product.

It just didn't matter Right. There was just massive demand for this new product category of which there were many good options And also there was massive demand But it was kind of like search engines before Google the product still kind of sucked You know, even really in many ways the Rolex product Rolex probably kept better time than competitors They were QA certified QA certified, right? But if you're wearing a wristwatch, it's a lot more exposed to the world than your pocket watch And you talked a little bit about how complex and delicate these movements are and especially in a miniature movement that goes into a wristwatch Any dust any water any humidity that gets into the case is gonna jam up your movement and your watch is gonna fail So I finally like had this aha moment when I'm doing the research for this episode I'd always thought it's just ridiculous You know, you go look at the watch market now Rolex is all the other brands they're like waterproof to 57 000 million meters like what there's no depth that exists David Rose is the watch aficionado he's telling exactly but like why who cares and there's like oh This is why waterproof watches are a big thing. It's not about water necessarily.

It's like dust more than water It's dust it's humidity. It's if you're waterproof that's shorthand for saying your Element proof your durable. Nothing is gonna get inside this watch and mess up your movement if water can't get in You can subject it in a hundred meters of still water and no impurities would get in right? You could throw it to the bottom of the ocean and it'll keep time forever, you know, etc Oh, this is why this is important Yeah, and servicing was a big deal like you had to get your watch service often and the more dust and humidity and stuff got in there Like it might just break entirely.

Yes, exactly great I like where you're going David because there's basically three big pillars of what makes a Rolex a Rolex or frankly what makes a good mechanical watch a Mechanical watch there's precise so there's officially certified chronometer and there's the other two. What's the second one? Oyster? Yeah, so like I said, there's demand for these products But they all suck because they're not element proof.

Well oyster is Rolex marketing speak for waterproof So there's this great race among high-end Swiss watchmakers to now produce a waterproof wristwatch and a Swiss case-making company called Francis Baumgardner Which supplied cases to Patek and many other great watch brands in the early 1920s They invent a new case style called the Hermetic you'll notice that your Rolex does not say Hermetic The way they do it is they put the watch case inside another watch case. Oh, that's right This is the weird hinge thing, right? It's like a scuba helmet. They take a watch and they put it inside a scuba helmet that is waterproof So it works it does make watches water and element proof, but it's big It's ugly and most importantly you have to unscrew the outside Case the seal and take out the inside case every day in order to wind the watch right because famously the crown is the most dangerous Entry point for water or dust so you can't leave the crown sticking out of the hermetic case or it would defeat the purpose Yeah, so that's the state of play through the early 20s and Rolex gets into this too They buy cases from Baumgardner and they make these aromatic watches you can go find them You see pictures of them in collectors books.

It's got a hinge on the left side of the clasp on the right side that goes around the crown Yep, and then this is so awesome. This is like a forest Mars moment from Hans in October 1925 Two Swiss casemakers file a patent for a moisture proof winding stem and button Ben just like you're saying it's the crown of the watch the winding system and the button where water is most Undustor most susceptible to getting into yeah, and mind you Rolex has been dying to solve this problem They had at least three failed attempts to create a waterproof seal in-house Yes, the whole industry has and Hans like forest Mars Reads the Swiss patent filing register Relatively every day he is reading all of the patents that are getting filed in Switzerland So he sees this patent get filed and he's like this is it I gotta get this right now So he goes to the two guys that invented this and he buys the patent and makes it exclusive to Rolex This turns out that this is the key component to making a waterproof mechanical wristwatch that doesn't need to be put in a jar Yep, and when I was reading this I thought oh man Rolex didn't actually invent the oyster case They just watch someone else do it, but that doesn't really matter They saw that this was absolutely essential and will start jumped right on the opportunity and said who cares who came up with the idea We're in the position to commercialize it to roll it out across all of our watches. I need to strike first This is his genius. He's not a watchmaker and Rolex were not watchmakers until they finally bought eggler in 2004 Hans is genius is he sees the vision for where the market's going He recognizes talent and innovation and he pulls it together and he makes it commercially viable and marketable In a way that like this patent got filed in the Swiss patent register any of the other watch companies who desperately wanted to solve this problem Could have seen it too, but he jumped on it.

Yep. I mean really it's like the mark Zuckerberg of his time Oh, that's a good analogy. Yeah, it is Instagram, you know and then copying stories from snap Hans doesn't care. He's like i'm gonna market this and i'm gonna make this the most successful thing possible I don't care that we didn't invent it.

Hmm. It needs to be in our product. Yeah, that's interesting For anyone who's a watch person who's sort of wondering what actually was in the patent It's essentially for the screw-down crown the hermetic seal on the all oyster watches going forward and of course It's named the oyster because oysters seal when they're closed It's a perfect thing to name it after everything works on a threaded system So the back of the watch screws into the middle part of the case and then the crown can screw down also So you have these airtight watertight threads that keep any impurities out So in july 1926 Hans and Rolex goes and registers the product name oyster This is really really big and hans was like i am gonna go big Everybody in the whole world needs to know the Rolex name needs to know that we are the exclusive owners of the oyster system He prepares to spend in britain alone Annual expenditures of over 10,000 pounds just on advertising for the oyster models dude knows how to build a brand He's already naming components. He's not just marketing Rolex.

This is Rolex the only watch that has oyster. Yes oyster technology A18 by octa Really the parallel is to apple or just like incredible. Oh, uh four hours from now. I was gonna make that point but So he's prepared to spend all this money.

He's got the product. He's like we gotta do a big launch I don't want to just buy regular ads in the newspaper here So in 1927 towards the end of the year The timing is right and that brings us to a young british woman named Mercedes glights Now glights was a secretary and bilingual stenographer in london much like young hans was back at kuno who happened to have a sort of unique hobby of Endurance swimming in the river Thames in her free time which is insanely cold very cold and I assume even back then quite polluted but So be it and she was so good at endurance swimming apparently she would swim for like 10 hours at a time in the river Thames And so in october of 1927 She decided that she was going to attempt to swim across the english channel Maybe even more cold definitely pretty choppy and she did she became the first british woman to successfully do so that year in october 1927 however a couple days after she completed her swim another woman emerged and claimed to have also Swam the channel but have done it faster And now it turns out that that actually was a hoax and Mercedes knew it was a hoax But in order to reprove herself she decided to stage a vindication swim that gets hotly covered by the press Which mind you she's doing this vindication swim. She's already spent 15 hours swimming across the channel Yeah, it's a miracle. She's still alive at this point hans.

It's like oh, this is our moment This is exactly the spectacle that we need so he comes up with a brilliant marketing stunt Of he is going to get Mercedes to do this vindication swim While wearing a new Rolex oyster model and what a Rolex doesn't talk about to these days is a footnote history of it Wasn't actually on her wrist. It's not like a lanyard around her neck Yeah, it was on a small chain that she wore around her neck, but nonetheless this is an incredible stunt Nothing ruins a good story like data. Let's just smooth it over the truth. Yes This is still featured prominently on the Rolex website today Mercedes' photo is everywhere, but it doesn't matter I mean at the end of the day who cares if it was not a wrist or not.

Yeah, she also doesn't actually make it But that doesn't matter either. That's the other crazy thing I think it was a especially cold day or especially choppy or something She makes it 10 of the 15 hours So the design of the test is a little bit arbitrary This is a watch while it wasn't on the wrist and it didn't make it all the way from england to france It was still in the water for a long time for 10 hours. Yeah, pretty good. Um, product testimonial Shall we say for a testimony?

So Hans after this event happens the next day He buys the front page of the Daily Mail newspaper, which is a nationally syndicated newspaper in written at the time I didn't realize you could do this back in the day You could actually buy the front page as an advertisement I think it was common I think it was a while before the front page was actually dedicated to editorial and early on it was very common for it to be a full page ad Yeah, so Hans does this and proclaims the success and announcement of the world's first Waterproof wristwatch fully enclosed in its own case without a second hermetic seal around it and the triumphant Launch of the Rolex Oyster. So this is how Rolex tells the story after I had heard this told a few different times I sort of expected to see this full page ad written in a certain way It is kind of buried maybe this is what the advertising style was back in the day But the big words are not watch survives English Channel swim The big words are Rolex Oyster and it says Rolex introduces for the first time the greatest triumph in watchmaking Okay, I still don't know it is then I see a picture of a woman's face Then it says send for this colored brochure It's free telling you to send in for more information Then there's four sketches of the different watch faces you can get of the Rolex Oyster And then it says the wonder watch that defies the elements There's words all over the place you finally finally get to the tiniest text in the entire thing Maybe the second tiniest font in this little corner It says moisture proof waterproof heat proof vibration proof cold proof dust proof Either Rolex hadn't found their groove in advertising yet or maybe people just read a lot more words back then But if you put this up today our tick-tockified brains would be like don't care next There's way too many words and they completely buried the lead that she did a channel swim with this thing and it survived It's hard to know how much of this is just the state of the art in advertising at the time Versus Hans designed and wrote all that himself So one of his maniacal control things was I believe up until he died or pretty close to it He did all the creative for all the advertisers. Oh, I didn't realize that Yeah, we'll get to it later, but they do bring on the J-Walter Thompson agency before he dies Probably the rest of the company's like all right on so we got a professional eyes a little video And that's when they get extremely good in the 60s extremely good. Yes, but I think it's fair to say There's two interesting takeaways here one.

They hadn't found their groove in advertising yet But two advertising hadn't really been professionalized in a way that we would see in the madman era Totally. We're still before World War II here. We're not yet in the modern world. Yep The other thing that's really interesting is there's something about this that was sitting with me too doing this research This is a major major major moment the Mercedes-Glight's moment the first brand ambassador of Rolex It's interesting that the moment and the person that Hans chose for this launch was a woman super interesting back in 1927 super interesting.

Yes, the wristwatch was a ladies item before World War I but after World War I Really? I think the big market is the men's market. It's interesting. I get into it in this era Rolex still was primarily a ladies product the men's market was growing Oh, but if you look at their product catalogs really up until World War II ladies models outnumbered men's models two to one Whoa, these are the little like Prince watches.

Yep. Yep And definitely Hans's vision was like a wristwatch is for everybody men and women But it's interesting that they were really women's focused and then we did a little more digging and asked some friends And even to this day, I believe the market of buyers for Rolex watches is basically 50 50 men and women Which is insane. I never would have guessed that especially because much of my research was lurking on the Rolex and watches sub-readits Which are a very particular type of dude and it comes across as a very male thing At least the way that I'm exposed to watches I mean you read the amazing journalism about watches on Houdinkey and the whole world around appreciating watches It's kind of male focused. It's like a person 9-eleven.

Right. It's amazing that Rolex is history index is so heavily to women and that even today They move a lot of units to women even though that's not where I come across Rolex in my day to day Well, it's certainly not where the enthusiast market is focused Yes, but it's one of the really unique things about Rolex so many of the other really really high-end watch brands with Cartier as an exception I think really are men's brands. Oh, yes. Whereas Rolex.

Yeah, it really is 50 50 amazing Alright, so that's Mercedes glights. That's the oyster story and that really is a huge watershed moment for Rolex and for the wristwatch industry And she's effectively the first testimony I'm not sure they'd come up with that terminology yet But this is something that they would lean heavily into as their means of marketing in the future They would hate you calling it a brand ambassador. Yes, partner. It's a Rolex partner.

It's what they call it No, I think it's testimony I'm pretty sure it's this like very particular word that they wanted to sort of invent and have to themselves And it's different to that influence in marketing It's different than the way that someone appears in advertising a perfume for a five-year deal I think it's this very long-term oriented You are a part of the brand and you are a part of the brand kind of for your lifetime Watching away for its Roger Federer is the purest embodiment of this today, but that is coming in the future It turns out though back to the product of the wristwatch oyster was huge, but it had a problem Ben, like you said the key to making it work You didn't have to have the whole scuba jar that you enclosed the whole watch in But the crown had to screw down the crown had to screw down like a jar And so that meant that when you went to go wind the watch you had to unscrew the crown Pull it out, wind the watch, expose it to the elements and then screw it back in Well, if you know anything about humans, probably at least half the humans on the planet Are not going to be exactly fastidious about screwing the crown back in Yes, there are three pillars to what makes this a breakout product that enables the wristwatch to really have its iPhone moment And that third of being perpetual of being self-winding is the magic Yes, and these things are so intrinsically linked and I didn't realize until getting so deep into the research Self-winding watches are kind of cool on their own But just like before I was like waterproof whatever, why is that important? Self-winding, yeah, seems cool, but how hard is it to manually wind your watch? That's what people were doing with pocket watches for centuries It's actually because it's tied to the oyster and the screw-down mechanism If you forget to screw your crown back down, you lose the element-proofness of the oyster Yes, oh, okay. I can't wait The way that the perpetual movement works is totally genius All right listeners, now is a great time to thank our longtime friend of the show Service now, if you are running a large enterprise, AI agents are likely spread across every team And deploying them is no longer the hard part Yeah, the hard part is knowing what permissions they have what employees are using them for Or what decisions AI is making AI security for an enterprise at scale is not a small concern Like the risks are real exactly and the challenge with AI is governing it securing it measuring it and making sure that it actually delivers value That is why Service now built the AI control tower Yeah, AI control tower gives enterprises a single place to see manage govern and optimize AI across the entire business And it works with any AI not just theirs every device on your network every permission across every system every AI agent visible and secure in one place And Service now can do this because they've spent more than 20 years building the operational backbone of the enterprise the workflows governance approval Security controls and institutional knowledge that power how work actually gets done across it HR customer service finance and security service now already runs more than 100 billion Workflows annually and trillions of transactions for more than 85 percent of the fortune 500 So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates And in a future that isn't going to be one AI it's going to be thousands of AI agents working across every function of the company But the question is who's managing them all?

So if you're trying to turn AI ambition into real business outcomes and make it work safely securely at scale go check out Service now.com Squared and tell them that Ben and David sent you So back to Oyster and leading into the need for self-winding and the perpetual element of Rolex If you can create a self-winding wristwatch Well, all of a sudden the element proofness of the oyster works fine for everybody because nobody actually has to unscrew the crown You never have to pop out the battery and put in another one. You never have to charge your Apple watch You name the analogy, but you just set it and forget it. Yep You walk around all day Your watch keeps perfect time ish and it's waterproof and you never need to wind it sounds like an amazing product Who doesn't want that? That's a Steve Jobs-like product right there Okay, before going into the nuance of how Rolex is particular Self-winding mechanism works.

I think this is a good time to explain how mechanical watches work at all What the key components are and frankly, yeah, it's like alchemy is one of the coolest things ever done to prepare for An acquired episode was go learn how mechanical watch works at a high level You need two major components to make a timepiece first a way to store energy and second a way to release that energy in a pre-release Ridicitable and precise interval, which seems like oh, yeah, of course you could do that these days with you know a battery in electronics But imagine doing that without a battery and without electronics exactly so yes on that first one storing energy There is something called a main spring. Do you read about this in the research? David? Yep A main spring can store potential energy So imagine a footlong skinny piece of metal that you wind real tight and you stuff into something called a barrel This looks like a film strip that's kind of stuffed inside a film canister that you'd see a stack of canisters in a projector room And a movie theater that sort of what you should imagine a real tightly wound Main spring inside that barrel now interestingly to your point David this kind of begs the question what is a battery right?

Yes, I said a battery technically that is a battery right? It's like a mechanical battery since it's a way to store potential energy to be used later now amazingly the way a mechanical watch works These days is so energy efficient that the main spring can store on the order of three days of potential energy to take the watch forward It's amazing amazing. Okay, so moving on obviously this isn't sufficient on its own If you just release the main spring in the barrel it would spin around real fast It would make all the gears spin and you'd let all the energy out of once break the watch Yes, so you need something to control the energy release from that main spring and do it in slow fixed time intervals all mechanically Yes, you need something to make the watch tick. Hey, oh yes watchmakers call this an escapement Now an escapement in a mechanical watch has two key components to harness that potential energy from the main spring One is a pallet fork come back to that and two is something called the balance So how does a pallet fork work?

Well a pallet fork looks like a little tee with teeth on the edges of the top of the tee and it moves back and forth a tick and a Tock like the pendulum of a grandfather clock and as it flicks back and forth It moves all the gears on the watch forward one tick or one beat and there's this element that uh This may be several steps down the chain. Well, it's actually usually like the our movement right that then drives all the other movements off of that kind of depends on the watch and what complications are right at things like that But yeah, the important thing to know is when one beat happens when the pallet fork enables everything to move forward one beat What it's really doing is allowing what's called the escape wheel to turn one click and that drives whatever else is in the gear train That particular watch gotcha, which some watches is, you know, just hours a minute some watches is hours a minute and seconds some watches is Date day moon phase what you had for breakfast, etc Right and with these complications which are these sort of features It's really amazing because you can sort of think through what the algorithm would be to make such a complication But when you're thinking through it, you're thinking sort of like a programmer You're saying well if this then that you know, if the date is 31 days Yeah, these are not computers right all of the logic is encoded mechanically in a gear train. It's beautiful Yeah So what we left off here is our escapement where we've got the pallet fork and it's this little T and it's a ticket to talk It flicks back and forth and moves the gears all forward one tick So how do you get it to tick back and forth? What is the mechanism by which this pallet fork goes tick tock tick tock tick tock tick tock This is where we introduce a big hero of the whole mechanical watch story the balance and the balance also has two parts There's a balance wheel and a hairspring and these two things are stuck together around the same center point So picture the wheel of a bike that would be the balance wheel kind of like a hula hoop And then the gears go around the same axle on a bike You know, you can imagine that you've seen the rear wheel of a bike in this analogy Those gears are the hairspring and the outer wheel is the balance wheel So that's what this component kind of looks like the hairspring looks really cool It is another coiled up piece of metal although it's much looser and more fluid than the tightly wound main spring that we talked about earlier Unlike everything else that is incredibly tight inside a watch This component the balance almost floats and it moves with really low friction It's weird because it's the opposite of everything else that's in the whole watch and the way it works is The hairspring spins really fast in one direction and for anyone who's ever taken a spring and tried to uncoil it You know, you kind of note that it only goes so far and then it wants to go back to its resting position And then you try to go the other direction and tighten it a little bit and that doesn't work either and it wants to go back to its natural resting position That's what's happening here So you've got the hairspring which spins really fast in one direction And then the energy that has stored is overcome by the mechanical resistance of unwinding the spring So it stops and then it spins real fast in the other direction And this cycle goes back and forth spinning back and forth tick and talk and flicking that pallet fork back and forth To continually release one little interval of energy and one little advance of the whole gear train It is beautiful amazing.

You can totally see why for the right kind of person This is like a portion 9-11 early. It's just catnip You can't get enough of this that's exactly right and you know, you end up with fancy names and proprietary things that Rolex makes in the far future Called a paracrom hairspring that has these amazing renders and animations and videos of how it works It's gorgeous now. This happens really fast. This isn't like I just described it where you go really far in one direction And then you run out energy and then you come back This happens three four five six times per second depending on the watch and that's if you hold a watch up to your hair and you hear These beats that's what you're hearing.

So the pallet fork drives that whole gear train releasing energy that powers the hands and all the other complications the day the Day the day etc exactly the right pace So when you take a step back and you look at it all the craziest thing is that it depends on the exact physical properties of the metals They're used the time is literally kept by the physical laws of the universe elasticity tensile strength inertia potential energy stored by specific materials And they have this down to such a precise science today that watches keep time Certified chronometers keep time within two seconds per day bonkers. It's awesome. I just named four parts of watch There are 200 parts. This is an oversimplification, but kind of the general concept of how it works Yeah, the other parts are also amazing I mean things like there are jewels in the watch because all of these gears need to turn on things that create friction And so you need extremely low friction things Well, it turns out that like actually rubies and sapphires that are milled into little nuts are the best way to do that And so there are actual jewel stones inside your watch that are being used for a mechanical purpose And because jewels can be really hard minerals and you don't want these things to wear out And so when you're slapping something back and forth six times per second You want to make sure that I mean most Rolex watches don't need to go in for service until every I don't know once a decade It's crazy that these things just don't wear out.

Yeah, I mean that's the Daytona I'm wearing right now I don't think it's ever been serviced and it's at least 15 years old if not more than that and Keeps time perfectly. It's so cool And this is a 500 year old art the idea of the main spring that applies energy to a escapement that has a balance wheel and a hair spring to oscillate it back and forth This isn't new every piece of digital technology. Heck most analog technologies are invented after this Totally so to bring us back to the perpetual on your Rolex watch You can imagine that adding this element of self-winding To the insane complexity that has been developed over centuries with extreme tolerances that are already in these watch movements Not exactly a trivial thing to do you can't just code it up in software No and in particular what we're talking about here is Remember I talked about the main spring that stores three days worth of energy inside the barrel all coiled up There's a ton of resistance on that I mean if you think about if you pop open a ground on a watch and you go to turn it with your thumb It's kind of hard to turn and so if you're gonna come up with a self-winding mechanism You need some way in which you are using mechanical advantage to wind something that's already wound really tight even tighter. Yes So here we are in the late 20s right around this time a British watch inventor named john harwood Comes up with an automatic system for watches now interestingly that wasn't his end goal He was trying to create a waterproof system just like Rolex was and the way that he went about it was he said Oh, yeah, like we were talking about it's the winding crown that is the weakest link in the element-proofness of a watch What if I just start by eliminating the winding crown?

Can I do that and supposedly he gets inspired one day by watching children play on a seesaw And that gives him the idea for his method of how he creates something called the hammer system of uh hammer going up and down and hitting Different ends inside the watch as the rest moves around you can imagine that turning a crank crank crank crank. Yep So he invents this system and just like his swiss counterpart to invented what became the oyster system under Rolex He patents it now what he decides to do is rather than making a watch out of this He's gonna create a company. That's just an IP company and he's gonna license this self-winding IP to other watchmakers Huh, which he does in a couple watchmakers out there take him up on it and incorporate it into their products However, it doesn't prove to popular in the marketplace because a consequence of how he designed the system The manual winding capability in the crown is eliminated entirely So if your watch stops if you don't wear it and you lose the charge in the mainspring Good luck getting it going again You gotta wear it for days or whatever to just get the energy back in there and then you can set the time Interesting so that's a pretty big flaw in this watch But because of how the patent was granted at least in the UK He and his company end up holding the rights to all self-winding watch technology Wow that is broad in Britain Yeah, no matter what the method is or at least that's my understanding Brill so Hans of course and Rolex sees as he knows he needs an automatic system for the oyster to really unlock the potential of the product and Fully break the wristwatch product for the marketplace here, but his hands are tied He can't do anything at least in Britain as long as Harwood has this patent and Hans knows that ultimately the method that Harwood uses Is not good. He's not gonna license from Harwood because he knows it's an inferior implementation.

Yep And then fortunately fate strikes and the market does its thing and in 1929 Harwood's company goes bankrupt Probably aided along by the stock market crash of 1929 and the entering into the Great Depression etc So finally the door is now open for Hans and Rolex to complete the product here Yep And while we're here in 1929 just a quick reference point for folks There was an article published at this time that said you could get a Rolex for as little as $25 Even if you inflation adjust that click 450 bucks today or for as high as a thousand dollars Which is 18,000 Rolex's top of their line today is a lot more than 18,000 dollars and the bottom of their line is a lot more than $450 but that gives you a sense of the type of wealth you would need in order to purchase a Rolex at this point in history It was a meaningful purchase but not a purchase reserved for only the elite class Definitely not Rolex at this point is not a luxury brand correct It's going to transform into one over the ensuing decades But no now you know Hans was really really focused and his genius and contribution to the field Was on creating the product of the wristwatch and he wanted the wristwatch to be on every wrist in the world Yep, which he achieved so here we are in the early 30s after a couple years of work Rolex finally cracks it and patents their own rotor Gonna quote self-winding system which still to this day is the primary method of self-winding across the entire industry This is a perpetual rotor at the back of the watch case that spins around in both directions and captures kinetic energy as the wear moves They're wrist around and importantly unlike the hammer movement. It spins 360 freely in either direction So it's not hitting anything. Yep. One of the other problems with the hardwood system was when the hammers struck each end it made a noise Oh, really?

Yeah, yeah, you'd wear your watch and go like clack clack clack clack clack One of the initial marketing points for the rotor system the perpetual system that Rolex comes out with is the silentness I think all the silent self-winding system. Mm. That's really interesting It's genius. You know you can imagine I'm sure people have seen videos or photos of a self-winding watch Imagine a disc that sits around a center point and then you cut off half the disc And so what happens is whenever you're swinging your wrist around or because it's a near frictionless system whenever you tilt the watch at all The heavy side of the rotor falls down due to gravity to whatever side is lower And so you're just constantly all day in it vertely spinning this perpetual rotor around and around and around and using that to wind the Main spring.

Yep, it's an incredible animation and feet of engineering stacked on top of all these other incredible feats of engineering that go into mechanical watches When they first start, you know, you're adding a new layer to the movement when you do this in the back of the watch It makes the watch back protrude a little bit. Oh the bubble back Yeah, yeah These early oyster perpetuals that are first launched into the market are known by collectors as bubblebacks now because the back of them sticks out a Little bit onto the wrist off of the lugs. It's so cool. And the other fun thing about this is it is legitimately an invention by Rolex Oyster was licensed to the credit for how accurate they were was really all agalers innovation This is the first time we're really seeing Rolex R&D Figure out some brand new breakthrough contribution to the watch world.

Yep. And once this is in place these are the three key pillars of Rolex technology and really all mechanical wristwatch technology of quality from this point forward You've got the accuracy the chronometer observatory certified You've got waterproofness element proofness via the oyster and now you've got self-winding with a perpetual oyster perpetual here It is that's all here. Yep. So in 1934 they launched the full system the oyster perpetual chronometer the bubblebacks known by collectors And for the first time they introduced a new look for the watches a two-tone mix of steel and gold for these new oyster Perpetuals that they call a rolla sore Really just rolls off the tug right there on your wrist, Stephen Right there not on my Daytona, but it is on my date.

Just this is the golden steel mix that is now just an iconic Rolex look and that's where that center link is the gold and the outer two links are the steel Yeah, now you're talking about the bracelet there bracelets for a long long long time or made by third party companies Rolex contracts them out But that look even goes on to the case itself. Oh, okay The bracelet usually echoes the case but combining gold and steel within one watch and casement was a new look Shall we say from Rolex at this time? You know what I was kind of carrying is through today, which is kind of interesting Rolex and just most tool watches have fluted bezels The flutedness is because it makes it easier to grip So when you need to screw the back off that was the original reason for fluting was to give you a screw head effectively to get leveraged to pop it off Yes, what so okay? Well, we're in the early 30s just to breeze us through much other interesting stuff that's happening the first time the crown the logo the five point crown Starts appearing is 1931 and 1931 was a weird year because Rolex was just Starting to figure out this perfect product mix and at the same time the world is heaved into a great depression and the British pound is devalued So exports out of Britain drop by two thirds Crisis happens so Rolex is looking to internationally diversify so they open new offices in Paris Buenos Aires and Milan They organize these trips to South America the West Indies China Japan They're really trying to figure out how we stabilize things while the world is in crisis, but they've got the right product and market Yep, I feel like there's an old sequoia saying or at least a micmorith saying that Recessions are the best time to innovate because coming out of the recession you're gonna have the best product ready to hit the gas Right and fewer competitors.

Yeah, exactly. I will say very interestingly in 1932 omega released a waterproof watch Which is I don't know half a decade after Rolex this is considered to be the world's first dive watch No one talks about this today. You hear dive watch you think Rolex but omega had the first dive watch you think some air Yeah, oh, I've got some really really really fun World War two dive watch stuff in a second. Oh great But before we get to World War two, okay in 1936 I feel like this is a big moment and kind of exactly what you were saying as your competitors fall off a cliff due to economic hardship There's an opportunity if you have the right product that's working well in the market to kind of consolidate power This is when Rolex goes to eggler and says hey, we want to take all of your production And so grew ends stops buying movements from a glare This is where I think Rolex may have bought the shares back from a glare But again, we don't know and we'll never know because no one in Rolex will ever talk about that And this is also when a glare adds Rolex to its name the a glare manufacturer of Rolex watches Yes, so take us into World War two at the beginning of the war in 1940 remember Rolex is in Switzerland Exporting to the UK which was still by far their biggest market gets cut off supply lines from central europe to the UK or cut off after france falls And so Rolex and all the other Swiss watchmakers are like well shoot Okay, if we can't get to england we got to go find other markets to sell to this like the beginning of covid You know all these companies are making up other products and doing all sorts of stuff This is my very favorite side bar piece of trivia.

I have no idea where you're going So do you know what Rolex did in Italy during this time? I have no idea They're casting about they're trying to find something their retail partner in Italy gets a contract from the Italian navy To supply watches to their divers and so this Italian retail partner comes to Rolex and is like hey We got a contract for dive watches. Can you make dive watches for us? And Rolex is like yeah, sure we can do that we can sit on our hands here at our factories Which is funny because this is like a decade and a half before the Submariner.

Yes. Yes. Yes This is the first dive watch that Rolex makes. Can you guess the name of the Italian retail partner?

Oh, I feel like it's gonna be a Final car company. No, no, it's even more on the nose. This is Panerai. This is the Panerai watch Who really makes the Panerai watch?

So, you know, anybody who knows Panerai famous, you know very art deco style dive watch They have two main models now the Luminor in the radio mirror. Yeah, Panerai was a retailer before World War two They weren't a watchmaker. Whoa, and then after the war Panerai kept going making these watches. Isn't that amazing?

Totally amazing And this also underscores another reason why Switzerland was such a watchmaking powerhouse This is a very engineering heavy industrial thing And they didn't have to devote any resources to the war because they were completely neutral And so all of their craftspeople and machinists and everything can keep making watches Yep, and so here they are selling to the Italian navy on the axis side Meanwhile, the thing that they're most focused on is trying to figure out some way to start Re-exporting to Britain selling to their old main market on the allied side They do figure out later in 1940 how to get watches back into Britain They sort of launder them first through Spain and Portugal and then through the straight edge of bralter get up to Britain Huh, this becomes critical because what is World War two that World War one wasn't? World War one made the market for the wristwatch, right? But World War two made the precision wristwatch market super important If you're a soldier in the trenches in World War one, yeah, you need to coordinate movements and whatnot If you're a military service member in World War two, it's a very technical war involving a lot of technology involving airplanes involving aircraft carriers And synchronized attacks all sorts of things synchronized attacks all this stuff stealth So the air battle of Britain, you know, it's such a key moment in the War Key theater All of these British royal air force pilots, they're all wearing roll-ass watches because at this point Rolex make the best wristwatches the most accurate the most wet-approved all the elements You know, you're going through all sorts of pressure changes going up going down You know these cabins quote unquote if you could call them that of World War two fighter planes There's no pressurization in there. These watches need to be able to withstand a lot of elements Usually you're navigating by them.

You might be flying in the dark. Wow super super important stuff Again, I would push back on it was just I would suspect Omega is the leading brand at this time Omega was thriving in the 40s 50s even into the 60s in this wishwatch world Yes, that is definitely true Rolex weren't the only ones that were selling to both sides here But nonetheless World War two is really changing the nature of what you need out of a wristwatch And air battles are maybe the most visceral, but then you start to think about all the other stuff that went into World War two There's radio communications. There's radar. There's early computing There's nuclear weapons and technology coming out of that there's scientists that are building all these things and time is like a really really important element for this stuff So you've really got this birth of a new military use case But that soon to be transitioned to professional need for watches and for time in the world So interesting well coming out of the war is really when Rolex starts to figure out their product lineup I mean we talked about oh, they had the perfect product at the perfect time with this oyster perpetual officially certified chronograph Well, what that looked like in product form was all kinds of crap They all said that and that's how they all worked But the cases where everything you could imagine it's not like you could browse on their website and see we make these six main families of watches with these Sub variations underneath it was far from it.

You look at these old advertisements and catalogs You're like I don't even know what that thing's called because it just looks so different than everything else as they're coming out of the war This is when they're starting to figure out. Oh a standardized product lineup and not quite yet But soon we're gonna build brand around each one of these things and who it's for and what it says about you if you wear this type of watch Yes, you are foreshadowing tool watches or sport watches a watch for a specific technical use case or more accurately a watch that says something about you as the wearer That is the legacy of world war two to come on the product side But first just on the market side as soon as the war is over there's no more European market Europe is in shambles But you know what market there is is america Yeah, you know who didn't have their cities all just destroyed in bomb to oblivion and has disposable income and gi's returning home Yep, you know who is atop the new world order now at least on catalyst side. I don't think communist we're buying a lot of Rolexes I'm sure there's some crazy stories about black market communist dealers of Rolexes to Russia oppose world war two I'm sure that happened there must be I'm pretty sure Castro famously loved Rolexes I think he even worked too. There's like some photos of him where he's wearing two Rolexes Amazing amazing Comming is like multiple Rolexes on your wrist here it is.

He's wearing I think it's a Rolex GMT and a Submariner on the same wrist. Yes He referred to one as a backup in case the first stops working, but that's extremely unlikely I suspect it's a keep Moscow time or he just wanted to wear two Rolexes on his wrist because he good Yeah, right exactly. Okay. Well the non-black market for Rolexes after the war if you're gonna go somewhere You're gonna go to america and hans in the company devised just about the most genius, you know three putt scheme to get there imaginable three putt scheme Get this so in 1940 Rolex would never three putt Tiger Woods would Rolex brand testimony.

Yeah Okay, so 1945 right after the war ends is also the 40th anniversary of the founding of will's north and Davis the ruby jubilee of the company For the occasion Rolex launches their finest model yet the date just and this is the first modern Rolex Still an iconic watch sold by the company today. Yep It's just beautiful. I've got one here in front of me for a lot of people if they don't picture a Submariner When you hear Rolex they picture a Datejust or a Daytona But we'll get to that. Yeah, and launched alongside the Datejust is the jubilee bracelet Which is the you know iconic beaded Rolex bracelet?

We all know now they name it the jubilee hans You know, everyone's to get into the american market He initially wanted to call it the victory bracelet, but uh his Swiss colleagues were like, um, that's not very Swiss We are neutral So it becomes the jubilee bracelet beautiful it goes great with the fluted bezel It just has a little more pizzazz to the wrist right around the same time Rolex manufacturers their 50 Thousand officially certified Swiss chronometer and just happens of course that that model is the new date just So hans decides that he is going to give this very special Rolex watch to the Swiss general Henri Guissant who led Switzerland through the war national hero in Switzerland the Dwight Eisenhower of Switzerland one might say What does that even look like to lead Switzerland through the war? That's a good question. I'm saying Well, remember this is a three-part. This is the first part here So guissant gladly accepts this great watch.

Well Rolex is really ramping production here now So it turns out you know a few months later they make their hundred thousandth chronometer that they have certified Oh, this one goes to Winston Churchill. This one hans goes to general guissant You know newly christened Rolex convert and says would you please on our behalf offer this to your dear friends or Winston Churchill? Winston Churchill accepts now Winston Churchill is a Rolex man Well, less than a year later Rolex makes their hundred and fifty thousand officially certified chronometer once again in the now, you know new top of the line date just model and Who does Hans go to for this one? Through not directly but with some influence of the fact that his friends are Winston Churchill wore it He goes to general Dwight D Eisenhower American hero leader of the allied forces Architect of the allied victory in this new world order and Eisenhower because his good friend Churchill wears Rolex says How could I not accept and so now Dwight Eisenhower becomes a Rolex man And then a few short years later in 1952 Eisenhower becomes president of the United States of America with his iconic gold Rolex Datejust on his wrist at almost all times Yes And this is the very first time that Rolex kind of gets the idea Of what all of their future marketing and positioning will be which is those who command the world where Rolex So at this time Rolex finally brings only third party advertising agency the J Walter Thompson advertising agency in New York Rolex and J Walter Thompson in collaboration after Eisenhower becomes president wearing his datejust Launch a campaign in the u.s Almost literally what you said then the tagline of the campaign is men who guide the destinies of the world where Rolex watches This yes, that is on the advertisement all over magazines across America and maybe the world do I don't know It's incredible men who guide the destinies of the world where Rolex watches shameless So many things to say like obviously today that would be you know people not men But it's also literally true, you know, you got Eisenhower you got Churchill We got Castro total wearing Rolexes I'm gonna save for later in the 60s and 70s some of their advertising campaigns But there are a few sentences that we just have to say do show up that is along these lines There's one that is when a man has the world in his hands you expect to find a Rolex on his wrist This is down Draper.

This is better than down Draper. Our Rolex will never change the world. We leave that to the people who wear them Oh I mean we can just end the episode here now that is brand positioning that Is true brand positioning and the fact that they engineered getting one on the rest of the president of the United States is so genius And interestingly even though they started with Mercedes glights this idea of like human achievement and accomplishment and the top of their field They aren't doing that in this era It is about the people who command the world and they later on come back to achievement and the people who are scientists and again I'll save it for the 60s and 70s, but this is a very clear positioning of those who command the world Yep. Yep.

Now the problem I guess with those who command the world is as just absolutely gangster as it is Is ultimately you're talking about a small market now. It's great aspirational You know, it helps the brand halo and whatnot but more people especially as we enter the 50s and 60s Wanna be Arnold Palmer shall we say then uh want to be Dwight Eisenhower? Yeah One final little product sidebar on the Datejust that I just love the original Datejust Had the date window It's called the Datejust because it's a regular watch with a little window on the dial that has the number of the date of the month in there In place of the three and you know, if you're picturing one today, you probably picture that magnifier that's sitting on the magnifier The cyclops eye in relax marketing of course So the legend of how that came about is Hans's second wife Betty will's nor from metler his first wife on a died tragically in 1944 right before the end of world war two And that is actually when hans sets up the hanswell door foundation and puts all of his ownership of the company into it Famously, he never had any family heirs. There was no one to pass the company to so he creates this foundation Yes, so his second wife Betty loved the datejust and still to this day the lady Datejust I believe is the single best selling model in the Rolex catalog Well, yeah, they have like eight watches for men and one for women Of course that one's good at a 50% or by women and you know women wear some errands and stuff too, but like come on Yeah, you're concentrating 50% of your sales into one quote-unquote model Yes, so Betty loved the Datejust but had a tough time reading the small numbers of the date in the window So as the story goes one day while hans is getting ready in his bathroom in the morning He's wearing a date dress and a drop of water drips onto it right above the date window and it magnifies The date you can't make this stuff up, but they made this stuff up.

They made this stuff up Yeah, I got it I got it. I got it. It's like your reka moment in the bathtub and that is the inspiration for the Cyclops window of the dates just if you're at Rolex and you're listening to this and you want to tell us know It really is true. Hello, I acquired that if we will happily come to Geneva and talk to you about it.

Yes Okay, so Ben as you were saying though the Datejust it's a dress watch It's a watch that you wear if you are commanding the world you're wearing a suit and you are amongst other respectable people Yes, but what Rolex kind of does from 1950 onward is yeah, of course we make that But we want to make a watch that you can wear while you're doing your extreme activity That's gonna look great when you show up to dinner afterwards too. Yep And that is the core of the brand today which gets built in the 1950s under Andre sports watches. It's sports watches It's a Submariner. It's the explorer.

It's the GMT master. It's the Daytona the modern sport watches And like you said these are very different than what Churchill and Eisenhower are wearing Yep, so Andre Heinegger the second CEO of Rolex after Hans Andre joined the company in 1948 right after the war And he was a former lawyer I believe by training And he first goes to South America and runs the South American market for Rolex and then he comes back to headquarters in Geneva And he becomes the director of marketing. So he's the one who brings on J Walter Thompson He's the one who does the destinies of the world campaign And then in 1955 I believe he becomes the director of watches and so bringing on J Walter Thompson Revamping the marketing message opening up the america's market and really the us market That's sort of his purview here and then later on he starts working with mark McCormick and IMG Which is the talent agency that we're gonna do for the testimonies Oh What Andre realizes is that now here in the 50s and into the 60s ahead All the technology and engineering and innovation that went into Rolex in the 30s to perfect the product of the wristwatch That's no longer defensible. You mentioned omega, but basically anybody else certainly any other Swiss company can make a Perfectly on parody watch to what Rolex can make at this point in time.

There's 30 Swiss companies doing this Yeah, especially because of the atablicage all of the component Manufacturers are outside the brand and so you just go around all the component manufacturers and Rolex is a little different because they have agler But in general you can go around to find all the different tiny little shops that are making each of these components and buy at megawatch Totally. So all the stuff that Hans was a genius at kind of isn't gonna cut it in terms of differentiation for this new era What Rolex now needs to do is move beyond what the actual product is on your wrist two more What does it say about you that you're wearing it to the brand of the company itself? What a signaling is what it means about you This is the first step towards becoming a luxury brand I don't know that Andre and they were thinking about it necessarily as luxury yet and it's not really luxury yet It's much more lifestyle at this point in time. It would later become luxury, but this is his real real genius So from 1953 to 1955 Rolex I think at Hans is still running the company he dies in 1960, but Rolex Hans Andre Wants a whole suite of wild new models very different than the Datejust and Oyster Perpetuals that we were talking about before This is the Explorer the Terna graph the Submariner the Milgaus and the GMT master These are what are then initially called the tool watches.

Yep, but quickly more often to be coming known as the sport watches Yeah, the industry kind of refers to them as sport watches or tool watches Rolex calls them professional watches Which is kind of funny because it's like the opposite of what you know a professional watch You would think is like the Datejust but they're thinking about as more of like a professional driver a professional race car drivers That's there. Yeah a professional pilot. Yes You'll continue to see this in everything that is in the Rolex universe is we don't want to be lumped into any sort of a category So we have to refer to something entirely different such that we can't be put into a box Like they don't make sport watches they make professional watches in the same way that there's something called the Rolex way Oh, you'd be like a vision pro is not Reality like the Rolex way there's a youtube video they put out describing the Rolex way and they just list all the things that they're not It's not limitless because that's too limiting everything in the Rolex universe needs to be described in a way that it's too impossible for you to describe It's just simply Rolex amazing amazing Ah, okay, so back to this suite of really world-changing tool watches or at least watch world-changing tool watches professional watches David professional watches. I'm sorry First is the Terna graph as perhaps foreshadowed by that really great name there.

What a horrible name That's the least successful of these watches that they launch you're not going to be buying any Terna graphs from authorized Rolex dealers these days But David if you look at a Terna graph, what's the original one look like? Well, it looks like the GMT master. We'll get back to that in a sec So the key feature the key professional feature of the Terna graph was it had a rotating bezel Around the dial around the face of the watch that you could use for timing different events and the way Rolex marketed this As this was going to be for international business people who were making international phone calls and needed to time the length of the Really? Kind of.

Yeah, that's funny. Swig in a mess. Swig in a mess. Not exactly really a romantic lifestyle.

You want to be associated with saving pennies on your I guess at the time It was saving you know $10 at the time on your longest its calls But yeah, sure but it'll come back the next least successful one is the milgouse. I love this watch I know this one is awesome. This has a whole second life Yes, it was designed in association with the engineers that sir in Switzerland the particle accelerator for scientists who are working While exposed to strong magnetic fields and the idea was that this milgouse was so well protected from magnetic fields that you could wear it in these environments And it would still tell accurate time which you can understand why this would be a big deal if you have a metallic Hairspring that is the primary thing making your watch tick you walk into some of these environments that scientists are operating in and yeah Your watch is gonna speed up or slow down. Yeah, so a little more romantic than timing international business calls in terms of the inspiration for this But not a large market for people who are scientists or you know aspiring to work in strong magnetic field areas So they discontinued that after a couple years, but then they bring it back in 2007 It's awesome.

I mean it's got this like lightning bolt second hand on it Yeah, it's so cool and the colors are great. It's got this really fun orange I've been contemplating whether I want to get an explorer or a milgouse And you know, it's effectively the same watch but the milgouse sort of has this very fun scientific origin and look to it Right who I can totally see you rocking either one. It just feels me doesn't it? Yeah, it does You definitely got the explorer, you know, you love exploring, you know backpacking You got that great iconic picture.

Is that still is that picture of you and your dad still up in? Yeah behind me? Yeah, yeah Yeah, that's so excellent. Yeah, but I feel like the milgouse might be more you know, both great watches.

Oh, both great watches Okay, that's number two and then the first really big one the explorer Ben like you were talking about Which the story is so awesome for this so awesome So supposedly it is made in honor of siretman hillary and tensing nor days summit of mount Everest the first human summoning of mount Everest 1953 I think I believe it was 1953 Yes, and they wore an oyster perpetual up that was sort of a prototype of what the explorer would be Yep, all of these tool watches here Sorry professional watches all of them they prototyped in partnership with various people who were living these lifestyles doing these human achievements Now the legend is that siretman hillary and tensing nor gay were working with Rolex wearing Rolexes Summiting Everest wearing Rolexes and that is in the marketing today. That is the lore around the brand today And importantly both of them become official Rolex testimonies brand ambassadors afterwards So they will for the rest of their lives tell you how much they love Rolex However, sir admin hillary did not prefer his Rolex He had a smith's watch that he preferred to wear and I think this smith's was the official outfitter of the expedition Okay, and Rolex was not so I do believe both watches ended up on the summit I think it's likely whether it was on wrists or in backpacks or what the deal is but it's just funny that there's Super tightly associated with Rolex is that summiting of Everest and like they were interested it was sort of there Yep But the explorer designed for withstanding extreme pressure changes being able to go up to the summit of Everest and still work fine It got to imagine yet another modern endeavor where timekeeping is critically important and means the difference between life and death You need to rely on your watch when you're summoning Everest. It's a really robust watch. There's not a lot of moving parts There's not a lot of complications.

There's not a spinning dial easily readable in the elements Exactly. Yep. So that's the explorer. It goes on to become iconic extremely popular still to this day Then there's the Submariner an equally fun origin myth story Shall we say if you separate it's Submariner from Rolex Submariner may actually be a bigger deal Submariner is its own whole franchise.

Absolutely. Almost in the way That's like what if you separated the Dallas Cowboys from the NFL? Who is the more important brain like the sub is if you're gonna get a Rolex and you're intending to have multiple You kind of should start with the sub because it's just so iconic. You're right.

It is really its own world It was Sean Connery's watch even Playing spot and then he wore it and yeah Let's get into it. So the Submariner is the Rolex dive watch the professional diving watch as we talked about not the first dive watch that Rolex made That would be the panorite But that's not what you know what you know is the sub is a great dive watch that Rolex makes and defines the category Yes works and is waterproof down to 100 meters in depth Not a lot of people who are buying these things are going down to 100 meters, but there we go Although I must say I think this is an overlooked thing about this category That's 100 meters in depth if there were no pressure changes and you weren't whipping your hand around It's nice to have 100 meters of depth so that if you're going 20 meters in depth And things happen you might at some given second while you're whipping your arm around or something weird happens underwater Approach the limit even though you're actually far from a hundred meters below and to that point I believe at some point Rolex starts actually testing their watches to significantly greater depth than what is advertised for this reason That's correct most of them. I think are a 10% extra margin of safety, but I think the dive watches are an extra 25% Yeah, you don't want to be like oh, I've got a 300 meter depth watch and I get down to 300 meters and think it good But actually go to 305 yeah, you know 100 meter waterproof watch is nice Even just for going and swimming pools and I'm not sure I would want a 10 meter waterproof watch it feels dangerous Yeah, but it's not really about the waterproofness so Around this time 1952 1953 much of popular culture is focused on a Frenchman named Jacques Cousteau probably uh rings bell to many of you And Jacques Cousteau was the first world famous undersea explorer. He actually invented scuba diving.

Oh interesting Yeah, he was a total renaissance man genius and in 1953 He's filming the documentary the silent world in the mediterranean sea that is going to go on to win the Oscar the academy award for best documentary I think in 1956 But the whole world is watching these exploits you know discovering the depths of the ocean this whole alien world for the first time along with Jacques and he's doing so and going down in these machines while wearing Rolex watches great so great now Interestingly, there's not an actual formal relationship between Jacques and Rolex and actually Rolex was formally working with another undersea explorer Who uh it didn't become nearly as famous But nonetheless Jacques was a Rolex fan was wearing Rolexes while doing all this as much of his crew And then when the movie comes out, they're all wearing these Rolexes and it's important to remember for people who scuba dive out there You have a dive computer these days. I mean, even I remember when I got petting certified even your very first few dives You're not wearing a dive watch you're using a dive computer at this time This was a legitimate tool that you needed It's not going to tell you your depth the way that a dive computer is but in order to know your total bottom time and in the same way If you're summoning Everest well, even more so than if you're summoning Everest you really need a submarine or a dive launch of your diving This isn't cute. This is an essential tool to complete this extreme task. Yes So, you know, that's great for marketing here, but then 1962 the very first James Bond movie Dr.

No comes out and as it is written in Ian Fleming's James Bond books Yes, because of course Ian Fleming himself was a Rolex man. Of course James Bond wears Rolexes now canonically I didn't know this till doing the research did you know that at least according to Ian Fleming canon James Bond's mother is Swiss and his father is British Kind of like he might say Rolex itself is oh Interesting so Sean Connery wears a Submariner in Dr. No, and then Connery, I believe would wear subs for all of his spawn movies and Ben like he said was in real life a sub guy himself I think that's right. There is no bigger.

You know if you're trying to build a lifestyle brand one of the first lifestyle brands in the modern world Like there's nothing better that you could do and this persisted from 1962 until 1995 yes with gold and I Yeah, when Pierce Brosnan came in they wanted to refresh Bond's brand image and they chose Omega for that one Oh wow, well, that's really terrible of you to the bond franchise there. No, it is now come on Omega paid them a boatload of money for product placement They did eventually but initially it was not a paid placement. Really? Uh-huh I was almost certain that 95 was when they decided to bid out all the stuff Well, let's put it this way if it was bid out Rolex would decline to bid because Rolex does not engage in Paid product placement.

Well, that's I assumed the only way to bond would stop wearing Rolex I guess maybe you could make an argument that you're trying to reboot the franchise around Pierce Brosnan Pierce Brosnan maybe as more of an Omega guy than a Rolex guy There's some weird line that they use around trying to reboot in with more of a European modern flair or something come on No way. I don't believe it. They freaking bid it out There's no way that James Bond is not a Rolex guy and certainly eventually Omega is paying a boatload of money to the James Bond franchise So much so that there's a bump in Omega sales every five years when a bond would be comes out a huge bump Golden eye was when BMW launched the Z3 coupe, right? So yeah, gold that was totally product placement central and now bond movies are like, you know, the whole budget's covered by product placement They only exist for product placement Uh, I don't know one of the sources I found on watches of espionage calm details Apparently the costume designer reached out to Omega and was given for free a sea master and there's a I think even a quote There was no product placement incentive in 1995 whatsoever I went to them and of course they were interested but it was no more than helping us they gave us watches for nothing It definitely turned into a backup the truck boatload of money thing But the Omega fans will insist that it was a organic thing at first.

Okay, maybe that's right Anyway, the point is from 1962 until 1995 If you like James Bond and you wanted to have a little bit of James Bond in your life too Then you wanted to wear a submarine on your wrist Yeah, it's perfect James Bond does a lot of diving and then he goes right from you know, diffusing the undersea bomb with the bond girl To then popping up and going to this high-class dinner afterwards. He's all wearing the same watch the entire time It's perfect. It's perfect. It's super fun.

We'll coda on the Submariner a few years later in 1967 Do you know the story of the sea dweller? Which I believe is still in the Rolex lineup to this day. It is. Is this the one that's like the super sub?

That's like a Submariner, but you can go real deep. It's the super sub. Yes So Rolex develops this in partnership with the French undersea exploration company comics And there's this issue where helium would get trapped in the watch in the Submariner And the pressure would break it as you're coming back up And so they developed a seed dweller, which is waterproof down to 600 meters and has a special helium release valve This is ridiculous. No person who is going to buy these Actually is going to use this stuff except for comics employees that are being issued them But it adds to the romance it adds to the you know, like this is a lifestyle purchase Okay, if you're already taking us from Submariner to seed dweller, you got to take us to deep sea challenge This is the ultra version.

Yeah, yeah, I go for it So they develop a watch this thing is so thick. You're not putting us on your wrist But they design a watch and they said well, what if we take this idea of originally the Submariner And then the seed dweller and we make this thing called the deep sea and there was an earlier version of this before James Cameron, right? Yeah, well the Cameron one I believe is the deep sea challenge Which is a extra extra version and the challenge is the one that's the 11 000 meter Whereas the regular deep sea is just regular all 3,900 meters So you get the deep sea for 3,900 meters the deep sea challenge to really get to the bottom the 11 000 meter James Cameron on a man submersible takes the Seed dweller deep sea challenge and it actually is I think all of those brands They like include the sub brand with the parent brand in this thing down to the mariana stretch to the deepest part of the ocean And this thing is like clipped onto the outside of the submarine Because it's useless to have it inside like humans would get crushed by this pressure if they were on the outside But the watch keeps perfect time keeps all the water out all the way to the deepest part of the ocean Amazing and of course James Cameron testimony. Yes, of course, of course So that's going down to the bottom of the sea bairamantic lifestyle, you know association By the way, isn't it interesting all these are in english all these watches have english names.

Yeah, what's the market here? It's american? Yes Come on So take us airborne david. Yeah, so we've gone down now.

We'll go up that brings us to the gmt master the Greenwich meantime master so in 1955 Boeing launched the 707 commercial jet airliner based on a Air Force air-to-air refueling tanker Nobody know that until this episode. Yeah, and the next year in 1956 pan am the iconic american airline begins flying intercontinental jet flights with the Boeing 707 for the first time and the jet age for the consumer is born and along with it jet lag New concept. Yeah, you know if you traveled across continents before you didn't move fast enough that you experienced jet lag So pan am is worried about the effects of jet lag on its pilots The pilots are you know going back and forth all the time across the Atlantic Ocean or the Pacific Ocean or whatever And so they decide that the best thing to do is to keep the pilots operating on their home time So let's say the pilots are based out of New York They need to operate on New York time even if they've just landed in London, okay They're gonna do that is they're gonna work with Rolex and develop a new professional watch for their pilots that can for the first time tell time Simultaneously in two different time zones amazing. So Rolex takes the failed tourniquraph, which isn't selling well, but has the rotating bezel remember By directional rotating bezel importantly because the submarine is just one Well, I may be not at first but eventually becomes just one so you don't you know screw up and do something you don't want to With it.

Yeah, and they change the markings on the bezel from 60 minutes or 60 demarcations that it was on the tourniquraph to 24 hours And then they add in a fourth hand on the movement that moves at a 24 hour movement And so all of a sudden you can now on one single watch face keep track of two different time zones and the GMT master is born You're the master of time with this watch legitimately very very useful whenever you and I travel for acquired I set the complication and the lower right of my apple watch to be the home time because it's just really nice to keep track of Home time in addition to where I am right now. Totally. So that's pretty cool And eventually they launch two tone on the rotating bezel the most famous of which being red on one half and blue on the other half And the Pepsi Pepsi model. Yes, so cool.

They do all these great limited editions the sprite the batman gray and black It's great. The community comes up with little nicknames for all the different color schemes that they do here super super fun Now this is for air travel and jet travel, but of course the pinnacle of 1960s and 1970s romance up in the air is not air travel But space travel. Yep. Oh, yes, which brings us to the Apollo missions For which standard issue from nasa is the omega speedmaster.

Yeah, which again I will say bolsters my case that in this 40s 50s 60s omega was the big brand like rolex had a target in mind to beat and that target was omega who was bigger Yep, but even though omega was standard issue on the Apollo missions Not all of the Apollo astronauts chose where their standard issue watches. So if you go to rolex headquarters There is an incredible signed picture from Apollo 13 You know the Apollo 13 mission the tom hanks movie signed by astronaut jax swagger a character he's played by kevin bakin in the movie To my long time friend rene jeener who I believe was rolex head of communications at the time Who enabled me to always be on time? So jack and I think maybe some of the other astronauts to preferred gm t masters and Where did gm t masters during the Apollo missions interesting? Yeah, because like you said the omega speedmaster famously is the moonwatch in many ways It's the big blemish in rolex's whole strategy of being the brand for people who accomplish the greatest heights in human history But this is a great little way to slide in and take a little slice of that history too.

Yep, and by choice by the astronaut's choice like Sean Connery Oh, what could be better? Yes, I can wear this inferior product Now i'm sure this is a rolex's version of history But supposedly nasa reached out to rolex first because they knew that test pilots preferred gm t masters But there was a mix up in rolex's new york purchasing office that led to this mishap of omega being selected instead Uh If you work at omega, please contact us and tell us what is the real version of the story because we know no one at rolex is going to call so let's hear at least Omega side of this yes, okay, so whatever the case you know This is all just building so much legend in laurin romance and you know the ultimate lifestyle brand here And like I said earlier, this really is the architecting of and we talked about the j-waltter Thompson relationship But I'd mentioned mark mccormick and img and starting here in the mid 60s with img is when they really Turbo charge and formalized this testimony brand ambassador partnership relationship and they are doing too pronged here These professional watches are happening, but they've also advanced their sort of dress line Yes, they come out with the date date Yes, the president as it's nicknamed the president was so ironic that the first president to wear a rolex were a date just not a date date Right, but future presidents were day dates Yes, but anyway in fact img i'm g was the first modern talent celebrity endorsement agency and really visionary mark mccormick To have found it in 1960 so he brokered tons of celebrity endorsements And he works with rolex and they sign the big three quote unquote in the golf world first arnel pomber Then gary player and then jack nicholas and for their whole careers. I believe probably their whole lives They are rolex men. Yep, and that is effectively the blueprint for everyone from federal to tiger woods forward Yeah, so just in golf video if you go forward tiger woods on a corn stem today scottie chef lurch jordan spieth jordan spieth jordan Thomas brokenderson lydia co You know not everybody but at least a large share of the best players at rolex players Well, it's interesting because when you list them off like that Yeah, it sounds like a large group, but I think the strategy is not a lot the strategy is only the best Yes, a large share of the very best players and that goes for individual athletes, but it also goes for which events they sponsor I mean, I was talking to ben climber at hodinky and he pointed out that they don't just sponsor pj tour They sponsor the masters.

They're not gonna really mess around much beyond that similar to tennis like we'll do Wimbledon Well, now they do all four grinslams. Oh, okay So yeah, arguably tennis especially post-feder is even more iconic rolex than golf is They partner with many of the top top players in the world, but federer really was transformational Yeah, I think that's right I mean, I don't think the federer rolex relationship is quite like a michael jordan likey relationship But it's in that next tier of great athlete partnerships And there's a couple really interesting things about golf and tennis specifically for rolex One just the overall brands of the sport, you know Mesh very well with swish luxury watch companies But also even going all the way back to the 30s and the will store of days the hons days of rolex Proving that you could keep accurate time while playing golf or tennis was like a really key marketing message because you've got the shocks Impacting the wrist of hitting the balls all the time think about that hairspring think about that delicate balance wheel floating there carefully Taking back and forth hovering the vibrations. I don't really understand how it keeps working perfectly Yep, totally It's also the type of sport where you can be an elite top of the world player for a very very long time As opposed to other sports. I mean think about feterers career think about arnold pomber's career Technicalist, you know, these people had multiple decades of dominance of being the pinnacle of human achievement.

Yep, that's right So that wraps up the iconic tool sport professional watches I don't know You haven't said Except for the model that both of us are wearing on our wrists right now the Daytona Really created a market. Yeah in and of its own. Yeah, and completely changed the mechanical watch market period Yes, the Daytona through a complete accident of history as we shall see in a minute here created a phenomenon created the modern watch collector market Yes And all of the crazy prices and auctions and insanity that occurs today I think you can say really is all because of the toner it's one component of it David. I want you to oversell Okay, at least from the Rolex side of yes, yes the Daytona is what created all of it All right listeners now is a great time to talk about one of our favorite companies legora the agent operating system for legal work Yes, most of you have dropped a contract into a chatbot by now, but as a lawyer how far can that really take you?

It's never seen your firm's precedence It doesn't respect confidentiality and you can't check where it's answer came from so legoras founders approached this the way that great founders do Early on the team moved into the office of a big law firm in Stockholm and learned four months How the work actually gets done a couple of thousands of enterprise customers and a hundred thousand users later They still work that way they employ a hundred legal engineers on staff These are lawyers sitting inside of firms and legal departments to deploy legora onto live situations like the deal closing this week or the policy review Do Friday the product has gotten very powerful in a short period of time a year ago The goal was a good answer from a chatbot with a legora agent you hand it the work and it comes back with a plan tasks like running diligence on a Data room or reviewing a defender contract get completed inside the tool you use every day like microsoftward and against your own precedence Playbooks every finding is sourced the lawyer directs the work and signs off before the system executes any steps Every legal team can get access to the same AI models So the models themselves do not give you an edge what you can do with your own data people playbooks That's the whole game today over a hundred thousand legal professionals at more than 1,800 law firms and in-house legal teams in over 50 markets use legora And when legora goes head to head with its top competitor in a pilot it wins 70 percent of the time A demo is one thing but what matters most is an associate who reaches for it at two in the morning during a closing or whether a general counsel trusts What it says before the board meeting so if your legal team wants to check it out whether you're at a firm or in-house go to legora.com Slash acquired and be sure to tell them that Ben and David sent you okay, so David the Rolex Daytona Yes the instant worldwide sensation Or not So the Daytona unlike all of Rolex's other watches is a chronograph or as they call it a cosmograph Yes, because again, this is Rolex we can't use industry standard terms So what is a chronograph a chronograph is a very fancy term for a stopwatch However complicated you thought a regular mechanical watch was now add in something like the Daytona where you also have a full seconds hand on the main dial That counts seconds and then another dial to count minutes and then another dial to count hours All in addition to the regular watch function. Yes, there are four dials on the watch face of the Daytona incredible Now it turns out Rolex has actually made a chronograph for a very long time This was the first tool watch that they introduced way back before well were to before Andre Heinegger before anybody was thinking about this stuff And in large part it looked like this but there was no craze around it Yes, so in 1962 Rolex becomes the official timekeeper of the then relatively new Daytona International Speedway in Daytona Beach, Florida And to commemorate this great moment the next year in 1963 Rolex officially starts calling their chronographs Which again they've been making for like three decades at this point Daytona's They thought about Lamont because they were also very closely involved with Lamont the race in France But to the name Rolex this has to have international appeal and can't have silent letters that Americans can't pronounce What's better than Daytona? I can look at the word I can say it out loud and again like we've been talking about the market is america First one word too. What could be more american glamour in 1962 than Daytona speedway fast cars movie stars Yeah, 24 hour race It's perfect and then a couple years later one of the true leading man actors of the day Paul Newman Stars in a 1969 film called winning about being a race car driver and after he stars in the movie Well, guess what he develops a hobby of becoming an actual race car driver And his equally famous wife the actress Joanne Woodward gifts him with a Rolex Daytona of his very own for his racing activities With the immortal inscription on the back drive carefully dash me Yeah, we've been talking romance lifestyle development.

I caught it. The bridge is iconic. You can't get any more iconic than that It's perfect. Yes, you can totally see how this would set off an absolute Insane craze in the market except to your point it doesn't right away Except it doesn't there's so many of these moments in Rolex history really in all the stories we tell well The company does everything in their power to align the stars perfectly and it doesn't work But then a butterfly flaps its wings several years later and all of a sudden it does say in Italy So 1969 is when Paul Newman stars in this movie It's sometime, you know in the next year or so after that when Joanne gives him this watch Paul Newman absolutely is iconic at this point in time.

He's being photographed all over the world He's a leading style figure because magazines and this is his watch. He's wearing this watch Anyways it for about 10-15 years or so and then one day in 1984 So long long long time later lots of history passes which we will come back to and one day in 1984 his daughter Nell has her boyfriend over and Paul asks the daughter's boyfriend doesn't know what time it is and the boyfriend replies I don't know I don't have a watch and Paul on a whim says here take this one It keeps good time and gives the boyfriend the watch the all Newman Daytona I actually didn't know this story swear to god. This is true This watch sold at auction for the most money ever ever think it was 17 and a half million Here take this one it keeps good time and at the time the market such as it existed for Daytona's the secondary market for Daytona It was like a $200 watch so you know, I like the boyfriend sure have a watch I'm done with it Man to have been the boyfriend Because two short years later in 1986 For whatever reason it is unknown a bunch of dealers in Italy starts snatching up Versions of the Daytona from the era when Paul Newman's Daytona was made and it's important to say here in Italy There is a real watch culture. This is true in various parts of Europe at this point in time in a way that in America There's actually not watch culture.

They want to market to americans There's all this rising wealth and people want to celebrate their successes and all that and they're trying but americans Hasn't have a watch culture the way that it only had both a collecting culture and a style culture Which is why there are secondary market dealers in Italy. Yeah, so one rumor is that around this time In the early 80s Paul Newman had been on the cover of an Italian style magazine wearing the watch Obviously taken before he gave it to the boyfriend and maybe that was the reason that people in Italy decided this is a cool watch Nobody really knows and nobody has ever been able to locate that magazine cover. So who knows? Well, for whatever reason a butterfly flapped its wings and Italians thought that the watch was cool So the dealers start buying up the quote-unquote Paul Newman style Daytona Which is a specific style was made for a couple years by Rolex in the late 60s early 70s and it had like an art deco style face to it Yeah, a very particular color scheme that sort of featured red around the edges as well Yes red around the edges around the track where the minutes and seconds are kept but also very specific font Yeah, also we should say we haven't said yet that on the Daytona and really all chronographs There's a very cool feature which is around the edge and this sort of gives the watch its signature design There is units per hour.

I don't know if it's logarithmic, but I should work out the equation I had maybe this logarithmic it starts at on the version I'm wearing 400 and goes all the way down to 60 and What that means is if you press start and you drive one mile and then you press the same button again to stop Wherever the second hand is pointed around the edge of the watch was your miles per hour for that one mile that you drove So if I was able to drive You know one mile in one minute then it's gonna come all the way around and it's gonna be pointed all the way up to the top and it's gonna Say 60 but you know it goes up to 400 because of race car drivers That's awesome. I actually did not know that that's what those numbers You own this watch. I know I know I know what you haven't thought about this watch in 15 years Yeah for anyone who's trying to figure out what's going on over in david land david used to work in investment banking And this was a part of the uniform when you got out of college Well, here's the whole story So my dad is big into watches has been for a long time starting Probably when I was in high school and college he got really big into watches and watch collecting Early before the market here in america Yeah, I mean that's before it took off in any way in the u.s Totally and I thought he was insane. I was like why are you blowing all this money on watches Which back then it actually wasn't that much money regardless I graduated I go to work in investment banking and back then and i'm sure still to this day investment banking had a watch culture And my dad gave me a couple watches to wear one of which was this stainless swiface Rolex They don't know which is an incredible piece.

It was incredible gift back then. I was like oh, this is super cool All my colleagues especially the senior bankers like who's this freaking kid? This is not a I got my first bonus so I went and bought a Rolex this was an it watch This is not an analyst watch I don't know if it was necessarily a managing director watch But it was probably something that like if you made vp you would go get something like this Yes, so it was odd for me to wear the Paradoxically it actually killed my interest in watches and desired to wear them because I realized it was weird for me to wear this watch And then I was like, you know what? I need to just stop so especially when I got to the west coast I was like I should just not wear watches this too much I need to get my bearings again.

Yeah, exactly. So then I didn't wear watches at all You know nothing on my wrist until the apple watch and then when the apple watch came out of one that every day since Until we went to Taiwan and we were like well should do a little little easter egg and we broke out the watches out of the safe So cool. So the question going forward is listeners if you're listening to this a few months years in the future The question will be do I keep wearing this? Do I go back to the apple watch?

What do we do? I don't know We'll see okay, but what you're forced out of here though is the hype over that Paul Newman dial which to be clear I'm not wearing a Paul Newman dial trickled out into the rest of the Daytona's it made any Daytona extremely desirable Just sticking with the Paul Newman models here in 1986 Prices for some of these models shoot to like 30 thousand dollars plus in 1986 dollars Yeah for a watch that Paul Newman gave away to his daughter's boyfriend two years before and was worth two hundred dollars Then you're right this one event didn't create the global watch collecting an investing market period But it was part of it. Absolutely was part of it. This was a huge moment of like oh wow these things aren't just purchases their investments And you can trade in them.

Yeah put a pin in that There's a whole world of 70s and 80s. That's the solosic parallel universe to Rolex that we're gonna go into here in a minute before we do that it's worth resuming our history of Rolex advertising because concurrent with releasing all of the professional watches Rolex expanded their aperture in their marketing it went from just Men who guide the destinies of the world where Rolex to suddenly you've got these scuba divers and these pilots and these race car drivers now with a Daytona And they're wearing the professional watches for their craft. We can probably sell a lot of watches by selling that lifestyle Yes So this is where the expansion goes from just commanding a world to human achievement those who sit atop their fields and in 1967 to 1970 There's this great campaign. They launched the if you were campaign in a big Google this we'll put some links in the show notes to google this i'm sure we'll tweet it so you can see it on our twitter account Big bold Helvetica font if you were flying the Concord tomorrow you'd wear a Rolex Picture of the Concord go in supersonic picture of the gm t master So great.

This is what these pilots at the top of their field are actually wearing They stayed a million miles away from features and it was all lifestyle advertising This is the person you would be if you owned this watch There's a version of speaking at the UN if you were speaking here tomorrow you'd wear a Rolex If you were climbing here tomorrow, yes diving down to great depths taming oil well fires I think there's even one where they're like walking in a volcano It's just this brilliant campaign that again. This is the late 60s It's everything we've learned from the madman era of advertising completely the opposite of the Mercedes glights era We are leaning heavily into who could you be? Yeah, and I do think this was the very first sort of chip of what made Rolex a real challenger to omega who had been kind of the Standard big Swiss watch brand Rolex was really the one to bring lifestyle advertising to bear Also, I know I keep harping on this omega thing omega was actually worn by the soldiers in the boar war that hans had recognized Hmm. So they had the history too.

They had the history too. Yeah. Yeah, those incredible ads That was really peak Rolex lifestyle era this kind of second era of Rolex Moving beyond the product to selling the lifestyle And the Daytona was part of that And then in the 80s when the Italian thing happens and the Paul Newman thing happens and the collector's market gets built It's actually I think the first real big move that Rolex makes Into the luxury world it did kind of create the one model in their lineup Where it had real hype around it and that just stayed true for decades I mean even in I don't know 2010 or something you can walk into a jeweler who's an authorized Rolex dealer And you could just buy something out of the case which you cannot do today. Yeah, goodbye seminary You could buy an explorer you could buy a day just but you couldn't buy a Daytona That sort of from this 80s forward was always this spot in their lineup where we'll have to call you about that one Today if you want to buy a Rolex of any model you go in and you put your name on the waitlist And then at some point in time could be a couple months could be a couple years You'll get the call that your model is available.

The Daytona is I think the only model where there is no waitlist Oh, I don't think that's true. Is that is not true? No, okay It's impossible to say that because they work through authorized dealers and so it's not up to Rolex It varies greatly dealer to dealer. I think they're actually called Rolex retailers now They changed it from authorized dealer, but it's whatever the local dealer's policy is Interesting.

I just at least historically it might be changing amidst the insanity right now You know if you go browse the forums the lingo that I read is the Daytona is not a waitlist. It's a wishlist Uh It's like most of the other models if you want one and if you get on a list at a authorized dealer At some point in time your turn will come up whereas with a Daytona It's like yeah, you can express desire. I have a few things to say on this But let's wait till we get to the present day We have the entire watch industry is going to fall apart and then get rebuilt from scratch and we have that in between Uh, where we currently are and where we'll end up. All right, let's go there.

All right. Take us back So this was a whole side quest that I did this episode Thank you. Let's get all Gen Z David and I interpreted the assignment differently to okay. Well, you're just pandering to Gen Z right now Do an episode on how would I know side quest interpreting the assignment?

I'm sorry. Is this Gen Z lingo? I even know I think it up pretty sure it is Anyway, we interpreted the assignment differently of doing episode on Rolex David viewed it as go as deep as possible on the entire history of the brand itself the company the relationship with agler and each of the watch models And I heard it as go fully understand the entire watch industry and contextualize Rolex's role within it So here it goes. Here's my best David Rosenthal impression for the quartz presses And I have two huge thank yous for this section Ben climber the founder and CEO of hodinky I spent hours pestering Ben and having phone calls with him And I probably read 30 things on hodinky in the modern watch arets that definitive place to read about watch culture And secondly to joe Thompson joe is the journalist in the industry most recently He's the executive editor of hodinky but over the last 40 years He has written all the canonical pieces.

He was the editor of watch time magazine He's one of the only people ever to get an interview with a sitting Rolex CEO He lived the quartz crisis firsthand and was flying around to janeva in taiwan and japan and reporting on it live So okay, you've mentioned the quartz crisis also known as the quartz revolution. Yes. What is this? All right?

So Here we are in the early 70s the Swiss are riding high They're the undisputed champs of watchmaking that's where we left our heroes here At one point the Swiss actually made up as much as 85 of the world's total wristwatches 85 of the market they had this is in 1945. So it's right after the war the analogy here is like TSM c and taiwan making mechanical wristwatches is an extremely difficult specialized skill Yes, they made 19 million of the total 21 and a half million that year Another thing to contextualize it is you can understand what is coming and how technology disruption will happen This 19 million watches produced was by 2500 individual companies 90 percent of which employed fewer than 50 people wow Completely decentralized means of production in many ways actually the taiwan metaphor totally extends It's like switzerland was hinchu science park and these places all sort of need it together and collaborate Yes, I was gonna say the exact same thing and so this is an industry built on skilled labor fragmented across a toner suppliers very little vertical integration So one makes the movement so makes the hands so makes the case and all this happens in one of the most expensive labor environments in the world Yeah, janeva ain't cheap. It's kind of amazing that there was this labor intensive industry in janeva. All right So that was 1945 three decades later in 1973.

It's still going strong The Swiss peaked at almost 90 million watches made in 1973 Wow up from 19 million 28 years before they're now at 90 million watches handmade in this crazy production process per year So we keep alluding to this quartz crisis But the quartz was not the first revolutionary new technology that was supposed to disrupt mechanical watches There was sort of a half step along the way to a technology that turned out to be a detour that actually wasn't the future David, do you know what that is? Oh, I would guess like digital timekeeping, but that's quartz. Yeah. Yeah, what else vibrates like a quartz crystal What do you think could oscillate to keep time something radioactive a tuning fork?

Uh, it's a great weird thing in history and part of this also comes from uh, Marc Bridges great research paper The whole Swiss watch industry had been marketing that you can judge the quality of a watch by its timekeeping And then suddenly this tuning fork watch comes out They're no longer the best at timekeeping mechanical watches are worse than the tuning fork watch There's this crazy watch that comes out the bolova accutron in practice though The accutron wasn't a disruptive technology in the sort of Clayton Christensen term It was a sustaining innovation. It took the existing thing and made it a little bit better The watch is still required though hundreds of components and handmade craftsmanship in order to make it Yeah, so it's still difficult to make right so this meant that the existing companies would have to integrate into their own workflow to produce it But there really wasn't a wide open window for some new entrant to use it as a disruptive force That's the thing that you kind of need is can a new producer come in and take a radically simpler approach like say a Japanese company Right so quartz Well, we all think of like oh quartz comes from Japan and Seiko and then that was this huge disruption of the switchwatch industry People had been exploring quartz technology for a very long time And in fact the first quartz clock was created all the way back in 1927. Do you know where David? Oh, well, I know the Swiss themselves were doing big industry wide consortiums correct But that was in the 60s and 70s in 1927 who possibly could be doing Research with quartz technology to use for timekeeping.

I have no idea. It's in america cutting edge technology Research bell labs bell labs. Okay. There we go in new jersey.

The first quartz clock is created Wow now unfortunately in 1927 the bell labs quartz clock was the size of an entire room The any act of clocks. Yes. Okay, so we've been describing the quartz crisis. What is it?

Well, how does it actually work? How do quartz watches function instead of a main spring that you have in a mechanical watch? You have a battery pretty straightforward instead of an escapement you vibrate the quartz crystal Quartz has this crazy thing where if you apply an electrical current and it's shaped a certain way they can vibrate at exactly 32,768 hertz. That's right.

I remember seeing that number It's weird. This is called the piezo electric effect and interestingly that was discovered all the way back in 1880 in Paris Wow The other important thing you need to know about a quartz watch is it requires an integrated circuit The modern quartz watch is dependent on using an ic to count the quartz vibrations and transform them from 32,768 hertz to 1 hertz To tick one second at a time or if you're using a digital watch to increment the seconds by one each time So by the time you get to the early 70s, you've now got integrated circuits Exactly right. The first quartz watch that hit the market in 1969 from sego was dependent on the invention and miniaturization of the transistor in integrated circuit before it could actually happen So that's where we're sort of stuck waiting from the 20s all the way to 69 before it can be used in a watch So really the whole thing is Bell Labs exactly right and everything we've talked about so far is a manufacturing story. It's a craft story It's an apprenticeship story.

This is a technology story Yeah, so amazingly as you pointed out the Swiss did see this coming just like how Kodak famously invented digital photography in their lab The Swiss saw what happened with the tuning fork and they wanted to be ready So in 67 two years before the Japanese debut of the sego astron there was a quartz chronometer in a lab at seh Which is switzerland's electronics watch laboratory that was twice as accurate as a mechanical watch They just didn't actually have an impetus to be first to market right right? Why would we this is really dangerous for our industry? We've made it. Yeah, let's keep this in the lab Yeah, so over to Japan the sego astron is launched in 1969 You would not have guessed it was going to struck the whole industry It cost as much as a new car and it wasn't more accurate It could be off by up to five seconds a day.

So what's the big deal? But just like semiconductors they get on the learning curve exactly that's exactly right It's a technology story It's based on semiconductors So the price value curve that it would follow actually looked a lot more like the early PC from the Microsoft episode We did the fact that it's in watches because that's the consumer need that's being filled actually isn't relevant for predicting how much better It's gonna get you should be looking at the technology So the quartz watch starts at this Toyota Corolla price point Comes down in price a thousand x. Yeah, it used way fewer parts and required very little know how to assemble it You could invest up front in machinery and have very very very low variable costs and labor costs So for the first time in watchmaking you had economies of scale and operating leverage It was a technology product in an artisan market. Yeah, so this whole thing once it gets going happens so fast And in the early days the Swiss industry and a lot of makers including Rolex released their own course models too Yeah, hold on to that for a second So here's how the quartz revolution went and the Japanese sort of think of it as the quartz revolution The Swiss think of it as the quartz crisis by the end of the 1970s You could get a quartz watch for cheaper than a mechanical watch it was more accurate So here in 1979 mechanical watches are for the vast majority of scenarios functionally obsolete Unless you are an astronaut or a pilot or an adventurer who prefers a spring over a battery that could die There is no practical reason to ever buy a mechanical watch again And it's like the Olympics are being timed with quartz timepieces right and interestingly omega quartz at the Olympics Interesting, but obviously this is not the end of our story and mechanical watches would go on to be a better business than ever 50 years later Very different but much greater in revenue than ever before so there's just kind of wild thing that our beautiful mechanical watch hero protagonist here Is now obsolete functionally So there were a few iterations of how this went the american firm tried to make quartz watches with led Technology the Hamilton pulsar came out in 72 these were really cool when you look at them But in the long run they were a complete failure You had to push a button to turn the led on so it actually took both hands to read the time One to wear the watch when to push the button some companies followed into the market starting in 74 And will be very familiar to acquire listeners national semiconductor fair child semiconductor T axis Yep, then came the stampede Commodore Intel HP Hughes aircraft dozens of companies flooded in Wow Hughes aircraft getting into the market Wow.

Yes And you know these companies made integrated circuits and so they thought well we can make consumer products around them too because we make the internals But a they weren't great at building brands These were all B2 companies and B they were horribly commoditized this market immediately became commodity had no barrier to entry and all the profits Immediately got her betranched out. So led failure the next step is twofold one quartz movements powering analog watches And this has started with the secoastron this was the thing that the Japanese did first in 1969 And the other branch which every listener will know well is digital LCD watches with liquid crystal displays That ended up being vastly superior to LEDs since they were always on and these also worked on a quartz movement Seiko citizen and later casio were extremely successful for a time making these out of japan So hong kong becomes the powerhouse for inexpensive manufacturing of all of this along with taiwan south korea and mainland china And so by 1980 just a few years in I mean think about this 69 the seiko astron launches 75 is when the swisser going oh crap and then within four years. It's over quartz completely around the table So by 1980 hong kong was already exporting 126 million watches a year half of which were digital Wow switzerland at peak made 90 million and then boom a few years in hong kong has 126 million by 1981 the next year japanese watch exports surpass switzerland seiko actually was great at brand building advertising messaging in a way that the american b2b semiconductor firms were horrible at And then 1985 just four years after japan meets switzerland Japan's exports are three x switzerland wow and the absolutely incredible thing is now that you all know this This is the backdrop. Yes that appal new increase happens right So the swiss markets global share would fall from that 85 at peak in 1945 to just 15 percent by 1980 Wow the number of firms fell from 2000 companies in 1960 to fewer than 500 in 1980 just absolutely destroyed quartz output accounted for Only 3 percent of units in 1975 by 1979 31 percent of new watches were quartz powered Wow from 75 to 81 82 you just have a complete running of the table And at least for the old reason of why you would buy a mechanical watch there is zero reason to buy there anymore zero Yeah, so this is like massively impacting the entire swiss economy, right?

Yeah extinction event for this huge industry for them There's a whole separate story about the founding of swatch group and how many of the swiss brands were sort of rolled together or a bunch of Them went bankrupt or they got sold off to conglomerates, but interestingly rolex was independent They were owned by a foundation. They sort of had no shareholders They also managed to resist joining the sort of Swiss cartel that was all sort of colluding on what's our national strategy here So they could sort of do their own thing I mean they watched this certainly happened They had a lot of fear around it But they weren't as caught up as the rest of the switzerland companies that were all super super dependent on each other The whole watch world by volume became almost entirely quartz and the market for time telling as a function went entirely to quartz full stop But a new massive market emerged That had been lurking in basically niche auctions Which was watch aficionados who valued pieces for their complexity their artistry and their rarity and rolex figured out How to build this enormous bigger than ever before business in this completely new market a of enthusiasts who sort of drive the excitement That's sort of the auction house world, but then be in this lifestyle aura of success And this is where we told it as part of the Daytona story because that's where it belongs But the Italian affair the Paul Newman affair Is the luckiest thing that ever happened to rolex because this gave them the golden opportunity to do that right? This is finally kind of clicked in my head It's not that mechanical watch made a comeback It's that there was an entirely new market that it turned out to be the perfect thing for after their initial market got wrecked Right. I think there's also another level of nuance here too Rolex was better positioned than most of the other Swiss companies because they had already transitioned to lifestyle However, that would not have been enough because eventually seiko and citizen were also going to transition to lifestyle companies And that in and of itself what wearing your watch says about you Isn't defensible in the long run against technology disruption You know wearing an apple watch what model what style what ban says a lot about you too?

I wear my airman's ban on my apple watch that says a lot about me But what is defensible is a luxury strategy and a luxury strategy expands to managing the entire market and overall brand management It's managing the secondary market and supply on it's doing things like oh the Paul Newman craze is happening Let's pull the model from the market. It's vertically integrating to ensure absolute product consistency It's instituting weightless. It's killing or pausing your most successful products It's not changing your price in response to demand shifts a purely lifestyle company wouldn't do all of those things And you know I can imagine like a member fossil the u.s. Watch company.

Oh my god. It's now basically bankrupt Yeah, they were a lifestyle watch company, but they were not a luxury company Yeah Yeah, that was sort of the fashion watch craze where the quartz technology enabled a whole wave of $25 watches where you could own five six seven of them and wearing with different outfits That was an interesting market for like 20 years before technology can obsolete at that one too. Yep with a smartwatch Interestingly, do you know what swatch stands for? I always thought swish watch group, but that's the common perception of it It's second watch These watches are so cheap you can have a second one Exactly there you go.

That is a perfectly viable lifestyle strategy Yeah, these watches are so cheap you can have a second one and each one says something different It's a fashion strategy, but it's not a luxury strategy and it's still subject to a functional displacement like what happened with the apple watch Yeah, totally Okay, so we're at this like complete demise of Switzerland here We're like thinking about how it could get better in the future But there is a whole parallel story which is the renaissance of my critical watches How they come to fill this new market to be this perfect product for a new market All right listeners now is a great time to talk about one of our favorite companies Statsick yes, there is a reason why the best product teams rely on statsick whether they are iterating on their core product features or shipping AI powered experiences at scale Yep in the crazy speed of today's AI world shipping fast is just table stakes now It's basically trivial to build and deploy your app constantly The real advantage is how quickly you learn what changes actually created value for customers And how fast you can use that signal to guide what you ship next This is where statsick comes in it brings experimentation feature flags and product analytics into one unified system So teams can ship safely test rigorously and directly link what they changed to how users actually behave So if you want to make learning your competitive advantage whether you're building new AI experiences or just evolving your existing core product Go to statsick.com slash acquired to get started Okay, so a thing that I had a hard time figuring out until really the end of our research process How did Rolex respond to the quartz crisis? Yeah, we knew that there was this transition that happened to luxury and it was in response to the quartz crisis But you go read all the stuff that's out there and nobody actually chronicles this no one connects the dots They talk about quartz crisis creation of swatch group saving what's left of the Swiss watch industry And then separately they talk about Rolex through the years building the lifestyle brand and all the race car stuff and the advertising But Rolex was in Switzerland during the quartz crisis, right? Right connect these dots, please Yeah, and the end of the story, you know, spoiler alert is Rolex is doing probably 10 plus billion dollars in annual revenue Way way more than any other company in the space dude Rolex is 30 percent of the revenue in the entire Swiss watch industry, right? It's insane.

So there's a lesson here. Yes, in part the lesson is it is incorrect to describe the markets by the products in them You should describe markets by the job to be done And the market of risk-based time telling was no longer available to the Swiss it entirely went quartz But there was a market for something different that the Swiss were great at if they were sort of set up and positioned correctly and managed correctly And I think that's the lesson here. This isn't the high end of the watch industry and the low end of the watch industry These are two completely different customer needs totally different things. There's an arc to this story Rolex sits back They see what not to do they see what to do and then they do it.

Yes So here's my attempt at chronicling what happened and I would love feedback from watch nerds If there's anything that I missed here, but this is how it seemed to be after reading five books talking to joe talking to ben talking to All sorts of friends in and around the industry So there are three concurrent stories here none of which are Rolex's there's the omega story Then there's an unlikely corner of Swiss watchmaking with Blancpain and then there's the auction houses And once you get those you then kind of get the Rolex story. So first is omega They blew a lead in the ninth thing. That's the only way to put it as you being my foil throughout the episode here being like actually David Omega was also big maybe bigger than Rolex the whole time totally So coming into the 70s. They just had their watch land on the moon and Apollo 11 They're the sponsor of the olympics.

They're an iconic brand and incredibly the joe Thompson to be off of this in a study conducted by gallop in 1978 They asked the question have you heard of Rolex eight out of ten americans in 1978 answered no wow Less than 20 years later eight out of ten said yes So Rolex did something incredibly right between 1978 and 1998 to go from 20 brand awareness to 80 brand awareness So over to omega as late as 1977 in the quartz crisis Omega is still the third largest watch brand in the world behind seiko the darling of the quartz revolution and timex Which was the volume player on the american side of quartz So in many ways they should have been switzerland's most likely horse to ride this thing out But they reacted extremely poorly. What did they do first a whole bunch of models? What did I do second go heavy into quartz? Well, they do third throw the kitchen sink at strategy like what should make a bunch of models brunch of rice points really diluted the brand They licensed the brand out to other companies I mean from afar this just looks like panic instead of thinking what are we uniquely best at in the world and trying to lean into that Omega thought this quartz thing is like absolutely essential to get right.

It's the future So we have to switch all of our production to it and this is essentially what the whole swiss industry did They either fell into this trap where they went bankrupt or got rolled up brightling hoyer you name it The only issue that the big glaring one here in hindsight is that quartz required a completely different set of competencies to do it Well a totally different culture a totally different headcount and a totally different cost structure Yeah, like you're saying earlier quartz is a fixed cost it's a technology business with fixed cost leverage Swiss mechanical watchmaking is a variable cost business They happen to both tell time But the means of how they tell time the two types of companies that you need to build together are entirely different They shouldn't resemble each other at all. So the other thing that killed them is that they had these Agencies locally and so omega would import their movements and then the agency could design their own case to suit the local market Oh interesting. So there weren't international standardized models to build brand around interesting. Yeah, yeah That is a major luxury.

No, no, yes a barkin is a barkin people exactly Rolex by this point late 70s They're importing whole watches. They've got their core six seven watches that people really find iconic and they're leading into this idea that It ain't one single global brand and product line. It's so funny If you look at some of the real like enthusiast type historians out there They sort of bemoan that Rolex stopped innovating after the golden era in the 50s where they introduced all the sport watches Right and it's like no, no, that's the point Yes They got the core product line upset and then they rode that horse once you create the portion 9 11 You should just tweak the portion 9 11 once every seven eight years and that way you can buy a 9 11 just like your grandfather bought a 9 11 And that I think is a huge piece of what Rolex got right that a lot of other people got wrong So to close the omega story, this is crazy It's the company that governments and militaries wanted to work with it's the company that Rolex was trying to beat with all their innovative ads and positioning This is the first company to ever want to dive watch before the Submariner and They rushed into here's how we fight the courts crisis head on when they were just not built to be a part of that at all So this is the place where we see the divide where Rolex becomes Rolex and Omega doesn't become you know Maybe cool watches but like it's not the brand they pay a lot of money to mgm to be in James Bond movies right So that's Rolex sitting on their hands watching Omega and going okay, don't do that But of course Rolex had the cash to do it You know Rolex is a privately owned very successful very wealthy company where they can take two or three years and see how it plays out If your ownership structure is different or you're not as profitable You don't have that luxury. You don't have the margin of safety to do that So chapter two guy named Jean Claude be there.

He's an exec at Omega of all places resigns out of frustration This thing sucks. They're so timid. He's the mornest jangle Omega Exactly. So in 1983 be there buys Blanc Pawn which was popular in the 1950s But it kind of disappeared and he buys it with this idea that I'm gonna resurrect this thing as a mechanical only luxury brand That's not the way that the rest of Switzerland was thinking They were thinking how do we take our big bloated old world companies and write it out in this tech transition He's like I'm just gonna buy the brand the goal is to do limited production handcrafted watches And the scarcity and the high cost to make them will lead to these high prices He picked up this brand again because everyone's panicking for nothing inflation adjusted.

I think it's like $16,000 This is like the the Bernard not no story buying Louis Vuitton out of Busec That's exactly right. He would later go on to sell it a decade later for 60 million Swiss francs nice Which back then that was really yeah So be fair comes up with this advertising slogan marketing genius to describe the essence of the brand is an old brandy bought Here's that this Logan since 1735 there has never been a quartz Blanc upon watch and there never will be yeah It's a great slogan because quartz is 13 years old 14 years old book he invokes 1735 You know for the first few hundred years it was impossible to have a quartz Blanc upon watch perfect So the idea is if you want to buy a commonplace a machine-made quartz watch go right ahead But if you value traditional craftsmanship you buy a Blanc upon we are selling champagne and caviar and they're selling calculators over there Rolex is watching this I'll play out and they're like oh, that's the playbook Yes Joe Thompson has this great quote that it was a feat of jujitsu to take the weakness of mechanical watch the old technology Inaccurate labor-intensive expensive to produce and turn them into strengths old world craftsmanship supported by these artisans In accord with 400 year old traditions to make these rare expensive masterpieces So Blanc upon and be fair they should get a lot of credit for this move but in practice they have nothing to lose It's like a fun hill Mary to try this approach I don't even think be fair could have predicted how well this strategy would end up working For Rolex, I think this was sort of a fun demonstration Okay, Blanc upon the right strategy at small scale with nothing to lose chapter three auction houses The mechanical watch renaissance really came first from auction houses If you think about what auctions do they value things that are rare and for a long time this meant vintage pieces Old things mostly fall apart. That means the ones that are surviving we can pay a lot of money for them Well mechanical watches even the new ones are becoming rare The whole market's going away companies are going out of business and you've got these few extremely high-end producers Like Patek Philippe that could fetch more than ever at auctions even new So Patek is the poster child for this. They came out with this thing called the caliber 89 Have you heard this this watch?

I am very familiar with Patek, but I have not heard of this watch So this thing you're not wearing on your wrist. It is multiple pounds in weight like you hold it with two hands It's the most complicated watch ever made. Wow. They required computerated design to manufacture it The strategy in 1979 internally at Patek was for our big anniversary celebration in 10 years So in 79 for 1989 we want to make the most complicated watch ever made it something like 30 complications This thing made people go nuts and at auction houses sold for over three million dollars Landmark high it gets mentioned on saturday night live in a skit for who would pay three million dollars for a watch Completely high watermark completely kicks off this new craze of complication makers people see it And they think oh I have to add as many complications as possible to my watch They got a little goofy and interestingly Rolex never participated in that no again They do their own thing.

Yeah, and they want to make best engineered extremely functional extremely reliable Not the most flair not the most artistic not the most any of that It is the 9-11 that you could have bought 30 years ago is the 9-11 that you have today But the one today is better engineered. Yep. So This auction house story from 1977 to 1985 is essentially the only interesting part of the mechanical watch world And then it sort of sparks the idea that hey new mechanical watches, especially these crazy complication ones can be really interesting too And so right around 1985 that's the same time that the Paul Newman dial goes nuts in Italy I really think a huge piece of the story is that the auction house market sparked the interest in the new Watches it totally totally did like highlight and rarity. Yep.

Okay, so we've got omega what not to do We've got long pond what to do at small scale with nothing to lose And we've got the auction houses taking the used market for lack of a better term and sparking the new market So what's Rolex doing? Well, at first they explored courts like everyone else, but very carefully the oyster courts. He always reports It feels profane to even see that one. I actually they look extremely cool Yeah, but they're very angular.

They've got this integrated band into the watch phase I quite like it, but they poured a huge amount of R&D into quartz watches But they didn't productize most of it They did these small runs of this oyster courts Which it was a very Rolex way to do courts that a lot of people have called over engineered But they pretty quickly got to this idea that if they wanted to lean into mechanical as a differentiation Even though it was a worst timekeeper and emphasized brand lifestyle the incredibly complex thing that was going on in the mechanical watch process They should just lean into that and the romance of it and courts just kind of violated their ability to tell that story So there's a great passage in the book electrifying the wristwatch which is Lucian troops book Says Andre Heinerger was a true visionary his opinion was that the originally very costly courts would soon be banal This had already happened with transistor radios TV sets and pocket calculators Top quality mechanical movements would always remain expensive and exclusive due to the large amount of highly qualified labor required for manufacturing These parts and assembling them the inescapable fact that a mechanical device can only tell time approximately could easily be hidden by writing Superlative chronometer officially certified on the dial People don't need an instrument that tells time they want a beautiful and exclusive object on their wrist It's amazing. It's kind of like this full circle moment back to the original wrist watch market Which was as ladies jewelry? Yes, we're part of the signifying aspect of it was I don't care about the accurateness of the time right care about its beauty and what it says about me That's exactly right the thing I was trying to dig on this is was this a risk that Rolex took? Mm was it counterintuitive and I asked Joe Thompson about it and he said in the late 70s every watch reporter knew one thing Mechanical watches were doomed every company told you that including all those in Switzerland It was a tremendously ballsy move to continue emphasizing the mechanical watch but they also were like Jensen or Morris really well Yeah, I bet the company but I knew I'd be right, you know They took their time they waited they watched what not to do and then they saw the playbook with long pan of what to do Yes, and then they get the gas and they were starting to see what was happening in Italy As you described the other thing that was making it take off in Italy is the Daytona became part of the uniform Like for young men wearing a bomber jacket and a stainless steel chronograph on your wrist was like a hook I need to go get a bomber jacket I'm a bit like crazy here we come But yes, I think your thing about Jensen's exactly right I also think Rolex had a built-in hedge because of their independence and because of their cash position Everybody else is just gonna do all the scrambling stuff fast They're all super reliant on each other and they're all overextended and Rolex is this incredibly conservative company Yep, we should say another word on that now So in 1944 when Hans's first wife died he created the Will's Door Foundation He put all of his ownership into that foundation Much like the IKEA foundations that we talked about on that episode The primary purpose of the Will's Door Foundation is to ensure the continued operations of Rolex It's even more ironclad than IKEA because IKEA is this rat's nest of all these different structures And all these different, you know, country foundations that they're in Rolex is just one foundation in Switzerland the most ironclad privacy foundation friendly laws in the world Now the foundation is also a charitable foundation and disperses huge amounts of money much of it locally there in Geneva But make no mistake they are not responsible for shareholder return profits Number one is continued operation to Rolex They have three bad years in a row and the CEO might not get fired Yeah, there's playing a different game.

Yeah, very emblematic of this in 1978 right in the middle of the courts crisis This is when Omega's thrown stuff at the wall. They released the C dweller 4000 more of the same You know, what should we do more of the same? Let's go down to 4000 meters. Right.

So Rolex sort of had this built-in hedge They would have been in great shape if they needed to go courts They had the brand they had developed the technology to do it well They had product oyster courts Yeah, they just sort of hoped it wouldn't come to that And also as we've talked about it would require dramatic change at Rolex If it became a courts company They really just wanted to be able to make their six watches And so I think if they had gone courts Rolex would be fine today That would be a way to build a good business But the way to potentially build a great business was to try this crazy long-pawn esque strategy But at scale with one of the biggest and most successful brands in the world And I think the important thing is they maintained the option to go play the other strategy That omega was playing if they really needed to but they sort of just hoped it wouldn't come to that Yeah, and it did. Yep. So by 1989 it's extremely clear that their strategy is working Along with petech Philippe, they had record sales that year record amidst this craziness Patek was similar to Rolex in their strategy. They had early exploration into courts But they came to the same conclusion our company is not going to be good at this So we either need to die trying or we need to really lean into this heritage handcrafted craftsmanship thing But it's actually an easier decision for them because they're only making 9,000 watches a year at this point Rolex is making like a hundred thousand Yeah, it really was as you say a incredibly well-managed But ballsy decision on Rolex is part.

Yeah, I'll take also at least now I don't know if it was a case back then they're in a very different part of the market than Rolex They're in the dress watch complication world. Yes listeners. We've been lying to you this whole episode Rolex is actually not a luxury company Oh wait to say I totally disagree. That is my opinion and it's arguably not even a craft product It's an exceptionally well-made industrial product with exquisite engineering and amazing branding But the luxury world of watches it's on our p.k.

It's petech Philippe These watches sell for eight 10 30 times as much as Rolex watches and they produce way fewer of them Rolex is a industrial engineered beautiful consistent reliable product. It's not art or complications or Fashion it's mass. I mean this thing sells a million one a million two products a year I agree with you. I think maybe our definitions of a luxury company are different If you were to find a luxury company as the most expensive highest end items Yes, totally that is not Rolex that is petech that is just some of the other low-volume companies The reason I think that Rolex is a luxury company extraordinaire is managing the market Hmm as opposed to participating in it to me.

That's what Hermes does better than anybody else out there They manage the market they're in control. They're in control and Rolex does the same thing Yeah, Rolex is in control Rolex is completely in control They could sell their products for much much more than they do and they do not because it is the right long-term decision to do so And there's a whole bunch of other elements to The luxury strategy that they manage with which really comes into the next CEO Andre Heinrich son Patrick who takes over in 1992 And if we look at luxury versus premium those definitions we used on the LVM H episode It is absolutely luxury. You're not buying Rolex for the features. Right.

You're buying Rolex for what it says about you Yeah, and they are a high-volume luxury player again in comparison to a petech or a automar or something like that Yes, I think the Birkenbeck is a really good comp for it because price-wise they're actually pretty similar You get a Birken for I don't know $12,000 $15,000 like I mean, it's insane amount of money but relative to what they could charge or what the secondary market prices are totally fair All right, take us to 1990 So everything we've been talking about managing through the courts crisis and this transition to luxury the auction houses the Paul Newman craziness in 1992 Andre retires and his only son Patrick takes over as CEO He had joined in 1986 as commercial director right at the height of the Paul Newman craziness and all of this that we've been talking about What Patrick really did within Rolex was he vertically integrated the company He presided over most importantly the Aigler acquisition in 2004 for rumored roughly a billion Swiss francs Rolex buys aigler and makes it officially in house But the other thing that he did that people talk about he consolidated all the factories Every physical location where parts that went into Rolex watches were made whether there's where in-house Rolex made or a third-party supplier From call it 30 different locations throughout Switzerland down to four four big massive consolidated sites where they own and produce everything in house This is super important and all in service of this luxury strategy of brand management and I owe a big Thank you to James Dowling one of the co-authors of the best of time which is a great Rolex history I mean, he's actually working on a new book that's gonna come out in October the Rolex legacy He helped me understand this then what you were talking about a little while back about what omega did Where you had the core movement, but then you had different end models and cases and products in different regions around the world Yep, that is the absolute opposite of what you need to do as a luxury company It can't be like this one's better than that one or different levels of quality or these imperfections here It's like absolutely not that is critically important because all the clientele that are buying these products Our global clientele they're comparing it against one another You can't sweep this stuff under the rug in the watch industry because of been what you were saying That there was this history of all these fragments of different little suppliers who are providing all these different parts to the different end brands You had a wide variation in quality among products and patrick said we need to make sure Every submariner that comes in a Rolex box is of uniform quality So he shrinks the suppliers from 27 down to just four Yep, Rolex bought their bracelet maker They started forging their own metals in house gold steel you name it proprietary stuff beyond just their famous 904L steel And they brand it Rolex nerds all recognize role as or an oyster steel and ever rose They already had a lot of control over their future from before from their private ownership But now they really do because production is also in their own hands Yep, and this also starts to build into the lore You know just like her mez has oh we have artisans that we train and we have our own schools and our own pipeline And there's 8,000 people that work in ateliers that we've developed in France Rolex now has the same thing in these four mega sites They have their own technology their own people their own machines in when was this 2015? I think they invited four bloggers Ben and James were two of them to come and tour the facilities Yeah, Ben climber has this unbelievable piece on hodinky about his experience Right and you read these pieces and you see the photos and hear them talk about all of our Machining all of our tooling we make in house custom and we've designed these facilities to be able to fit like There's just one giant hallway and better James like why is this hallway so thing like oh well We designed it so that the width of our biggest machine that we have we multiplied that by two so that we can get bigger ones to the future It's all about vertical integration and this creates that uniformity and that myth and that uniqueness of what you're buying when you buy a Sumerina or a Daytona it is so true. I mean after I read Ben's piece I kind of took a step back and thought huh Rolex actually is the high-quality thing. Yep, it's the brand But I mean who else makes their own machine that is going to open and close the class a thousand times in just a few minutes to test it Right who else is forging their own metals who else makes all their own movements Who else is quietly inventing new components of the watch and then not advertising them because they just wanted to make it a little bit better Even though they kept the reference number the same and they're going to absurd lengths to make these things the highest quality engineered and produce products in the entire industry or Any other industry too?

Totally so that's sort of the product and production side and that's the story of Patrick's time as CEO in 2008 sadly he develops health issue and it's a passing away way too young they transition leadership first a Bruno Meyer who had been the CFO and then in 2011 to Gian Ricardo marini who was a 40 year Rolex veteran and had come up through Italy And this is kind of weird to have two new CEOs in short succession over 90 years they had three CEOs Yep, that kind of speaks to the ethos of small iterative changes over long periods of time What other companies had three CEOs in the better part of the century? Yep, and I think it was just sort of a accident of timing that they then had these two CEOs for relatively short tenure and just was because they were older but they were both long term Rolex veterans and what they do together through 2008 in the financial crisis I think is the other side the demand side of the equation that cements in my mind Rolex being a luxury player is the financial crisis was Huge for the watch industry and sort of counterintuitive way and I remember I lived through this as a banker on Wall Street right out of college I graduated in 2007 and that first year that I was on Wall Street before the crash was the height of watches It was sort of borderline okay for me to wear my Daytona because it was good times, you know But everybody was spending their bonuses on Swiss watches the craze was on then the crash happened and all that dried up overnight you know austerity was the name of the day and That really really hurt a lot of other watch brands who then cut their prices to try and save revenue Rolex didn't do that And zeroed out ad spend yeah Rolex didn't cut prices didn't stop sponsoring the US Open So this is another spot where if you're Rolex you're like, well, how long's this financial crisis gonna last five years? What's five years? It's probably more like two years.

We don't know shareholders. I don't need to make my quarter I don't need to make next year. We have enough cash cushion that we can ride this thing out So we're gonna make the right five 10 20 years bets and this is all noise So interestingly Rolex actually massively doubled down on their marketing spend in the US during the 2008 financial crisis Well, everyone else is not only cutting marketing spend but cutting prices on existing products in stores to move inventory As you said the first time I saw this I was like who at Rolex I mean, how did they make this decision? How could you possibly make this bet and then as you start to learn more about it?

It's kind of the obvious move. Yep There's a secular thing that's happening which is the American watch aficionado market It really wasn't a thing until the early 2000s, but it was really starting to take off Yeah, this is when Ben found a dinky exactly enthusiast blogs YouTube channels I mean not yet and 2008 YouTube channels, but here's an example Rolex and other Swiss watch brands used to throw these events to generate interest in their watches And it would be for one person we talked to called them old Fuddy Dutties who would show up Or they would be for Chinese tourists and they would have them in the Chinese language That's how small america's watch aficionado market was in the early 2000s by O6.07.08. It's really taking off And so it's just the logical move to double down on this and in retrospect It looks like so ballsy but given Rolex's unique position versus what everybody else could do The opportunities there for the taking advertise hard go get that new customer Right. So here's the thing This was the easy half of the decision for Rolex was to double down keep going during and after the great financial crisis That's easy.

Of course textbook playbook the thing to do when you're in a position like Rolex the hard thing was The watch industry Did a hard bounce back up in the next couple years once zerp kicked in in response to the financial crisis as crazy as things felt in 2007 in the watch market By the time you get to 2011 2012 2013 were way beyond that in excesses And so many of the other brands totally did this whiplash seesaw thing where they were pricing really high Trying to become exclusive before 2008 2008 hits They panic they cut prices they cut marketing spend now the market comes roaring back and all of a sudden they're raising prices back up again And trying to catch it on the good times. What does Rolex do they stay the course same thing They don't raise prices but they control supply. Yeah, well they raise prices slowly every year It's a modest price increase every year that kind of sets the floor and frankly if they do it over enough decades Everybody just believes forever that these things are gonna appreciate because it's almost like they're the fed and they're guaranteeing a certain rate of return on these things There's this really awesome New York Times article in the last couple months talking about this dynamic How all the other luxury houses over the past couple years during the post-covie craziness really raised prices and price gouged themselves out of the market Once the reset happened and her meds didn't and Rolex followed this exact playbook over the last 10 years of not price gouging themselves out of the market But intentionally limiting supply letting the secondary market go nuts And then but keeping an even keel for themselves and then now that there's been a bit of a reset there stronger than ever I think Alright, so this is the question I was sort of had on my list to ask you A very very common narrative about Rolex right now is they have burned all of their biggest fans These wait lists have gotten out of hand the authorized dealers are being disrespectful They are intentionally limiting supply have they gone too far in their unavailability? I think it was a really good point One dimension where Rolex historically has been very different in their strategy versus Hermes or other luxury companies Is they don't control the last mile of retail on the customer relationship?

They've always had the authorized dealer model as we talked about so right now or at least until recent times These crazy waitlist things are actually sort of somewhat out of Rolex's control Yeah in a way that Hermes or Louis Vuitton or Chanel are they're managing their own customer relationships Rolex doesn't have their own stores and this was one of my really big questions as I was doing the research like why seems obvious They should have their own stores. This works so well for LVMH at Hermes and etc. Why doesn't Rolex do this? Historically at least the key difference between Rolex and other luxury houses is Rolex is a one category company Hermes can have their own stores because they sell furniture and they sell ready to wear and they sell jewelry and they sell handbags So like even though in any one category they sell a lot less of a given skew like far fewer broken bags than Rolex sells watches The totality of all the products they sell allows them to support a retail a dedicated owned and operated retail footprint Yeah, I don't buy this you don't buy this for a second.

Okay. Well, I do think this is changing now Rolex has 1500 authorized dealer locations And if all 1500 of those were Rolex stores, they would absolutely do a great job paying rent Yes, they don't need to sell a whole bunch of other things to lure people into the store to well I think that's true now and I think that's why they bought Boucher and 23 All right, let's have that debate now. Let's come back to scarcity. Okay.

Okay. Okay. So why buy Boucher? 2023 they spend a rumored $5 billion Five five.

Yeah, that's what I read. I mean nobody knows the details of the transaction But to buy one of if not their largest single retail partner the jeweler Boucher, right? And they have a hundred year old relationship This was one of the first retail partners for Rolex in the super early days And actually this alliance plus the eggler alliance helped them stay out of the Swiss cartel So in many ways they have Boucher to thank for their independence and their freedom while the rest of the industry was panicking So I've got this like tradition But the question is everybody jumps to shouldn't they own their own retail? They own their own everything else should they own their own retail?

Why what are the reasons? Well, there's control over the buying experience and to your point list management Yeah, as weightless management becomes more important. I think that becomes more critical. Yes, that's legitimate There's eking out every dollar of margin and there's getting full visibility into data on customers Which actually is interesting.

They don't get that today They like don't have their customer's email address or names or addresses because that data belongs to the authorized dealer Rolex doesn't actually know who's buying their product or likes their product Which is kind of crazy for a modern company of this scale in size One in elephant in the room to meet with all this is all these authorized dealers sell other brands too Boucher a sells omega And Boucher a uses the fact that they're a Rolex dealer to attract those other brands And to attract the customers who will buy a bunch of stuff in the store Once you have Rolex uh someone in the research put it to be your main man Yeah, but historically Rolex has been like that's fine Self-excel Audemars sell omega in the same physical location. Will that change now? Right. Okay, so just walk through the logic tree Rolex mostly didn't need to take on the burden or the fixed cost or the complexities of owning retail Rolex dictates terms to retailers on how their products should be sold displayed marketed They have exacting standards and over time retailers actually have less room to differentiate their own brand and experience and increasingly you walk in You're like, oh, is this a Rolex store and Rolex doesn't have to take on managing the store They have 16,000 employees doing 10 billion a year in sales Business is so efficient from a head count perspective and everybody talks about it like its craftsmanship It's high economies of scale production like yeah, there's people working on these things But there's a tremendous amount of machines and they don't have to operate the stores But they mostly get all the good parts of a highly controlled retail experience without having to also be in the very crappy Retail business.

I mean industry-wide third-party retailers make a 37 percent gross margin after they mark up from the wholesale price That's their margin for Rolex in particular. It's lower than average because Rolex you only get to keep 33 to 34 percent I've heard that actually went down 1% this year Rolex kind of gets to have their cake Need it too by not owning retail stores and having all the benefits of as if they did at least over the last 30 years or so I think your points are valid about they are increasingly kind of wanting that customer touch point Especially as it comes to things like wait lists. Yep, the thing about Rolex in pursuing this strategy until now at least They don't necessarily do things for the gross margins You know, this is a foundation owned company They do things for long-term strategic reasons And I think if at least you buy the premise that if they were to operate their own retail locations They would be pushed by customers to have more things in those stores than just the six or seven core Rolex models Which you probably can't walk out of the store holding one of them anyway You're just going there to sign up for you know a waitlist Which again is a very different experience than their emissary tail experience You can't walk out of there with a Birkin, but you sure as well can walk out of there with a scarf or a piece of furniture or uh, You know, Apple watch strap, you know, etc. It is astounding That Rolex has had the discipline to remain just a watch company Imagine the opportunity to become a fully diversified luxury company Rolex jackets Rolex sunglasses Rolex fragrance Rolex, you know You name it Rolex luggage.

Why are they not in the luggage business? You could make 904L steel carry-ons Right, you know make a remote look like child's play And I suspect that this is part of the reason not to have gone directly into retail Maybe I don't think so you think Rolex is going to give into customers saying I wish I could buy other things in the store or ignoring the free money I could be way off base here, but just like really imagine like okay What does it take to operate these retail locations? These days you're competing for physical space with LVMH So you are in the most expensive high-estrend highest-end places on earth And again, you may not necessarily care about your margins and maybe you can take that hit and they have tons of cash Maybe you can even buy the real estate But just as a shopper experience for the people that are now visiting those locations They want to go and they want to have an experience right and walk out with product And so if there's a Rolex only store and all there is is the 678 models there that you cannot walk out of the store like what does it do? High-end bonobos right yeah, it's a high-end bonobos Except you have no idea when you'll get the call right exactly now compare that to a boucher Well, like yeah, you can't walk out of there with Rolex, but you can walk out of there with a you know, I don't know a whole bag full of tag Hwears yeah, exactly and it's a non-exclusive market anybody who's a watch collector isn't just a Rolex collector or like just because you buy Uh, maybe I'm sure there's some people but I think for a lot of people who love Rolex They're also gonna own a pen or I or they're gonna own whatever and that doesn't hurt their relationship with Rolex yeah fair So the question kind of remains why did they buy bootcher?

Yeah, so here's my supposition Yes, it will help them improve their economics for watches that they self-rebooterer, but not why they did it Yes, it will help them improve leverage over other retailers, but they didn't need that they already do things like gee It would be nice if you wanted to remain a Rolex authorized dealer If you sunk a whole bunch of capital costs into rebuilding this part of the store to make it better Oh, no no, we mean you we would like you to do that We will get back to you this December if we're gonna renew the contract for next year for you to stay a dealer or not But let us know in those renovations they have all the leverage all of it So I don't think it's like oh now we own this retailer and um they didn't need that at all Yeah, okay. Yes. It will also let them have a tighter grip on watch allocation and the customer touchpoint waitlist management Which I agree is a huge liability for them right now, but they didn't need to own the ad's to do that Yeah, they had the leverage to control anyway They could easily have said hey in the contract for next year's renewal We're putting in a clause that you are no longer allowed to maintain waitlists on your own for customers We're centralizing that and if we catch you doing it you lose your license for the next year Great point. They absolutely could have done that now Maybe they didn't feel that was ethical they're like look it's the dealers business and we have to let them run their business But you could solve this without buying someone who represents 8% or whatever Boucher is of their total sales.

I honestly think the biggest reason to do it was so no one else buys it Mm Boucher is a 100 year old relationship the family didn't have anyone to pass it to they're looking to sell Rolex is a very private company They don't want anyone else owning an asset that has a lot of visibility into Rolex itself since they sell so much of Rolex is inventory They don't want a public company to own it and start reporting how many Rolex watches were sold that year through that You have a horrible for Rolex and I'm sure LVMH would have loved to have owned Boucher Absolutely. I mean they own Sephora. You don't think they want to own Boucher? Yeah, and Boucher also comes with what's the turno the American retailer, which I'm sure Rolex doesn't really want to own turno But here they are so I think it was so no one else buys it Yeah, I think you're probably right I do agree though I mean the reason that people are all up in arms about this I never got the call for my authorized dealer and the whole waitlist thing is because Waitlist were only really a thing for until honestly like 2015 for like steel Daytona Yeah, the rest of it you could just buy like it's this whole this new notion of having the privilege to go spend Seven to twenty thousand dollars on something and getting told no by the local jeweler.

That's crazy most of the time They're gonna say yes, absolutely. Let me walk you to the checkout aisle So because it's kind of a new motion the old way of doing it They basically didn't have the infrastructure to have a properly managed I know you are taking out the luxury strategy and you're showing me the page Please remind you of anti-law of marketing number six dominate the client and number seven make it difficult for clients to buy Oh, also number five do not respond to rising demand Honestly until 2015 like you could just buy a Rolex for most of them except for the ones that they deliberately wanted to use as Hey, this one's hard to get I should just be able to walk in and buy a sub You know, yes And so that's how customers feel because that's how it always was and then there each ad is using their own Mystical portal of waitlist which really means how many instagram followers do you have or are you famous enough for you to allocate one of the Six that I get to sell this month to you and so it's a customer hostile experience If Rolex was just put in the contract guess what we're managing the list and we're gonna actually manage it and we're gonna publish how it works I think they can earn a lot of customer good will and they wouldn't have to go buy a bunch of retailers and figure this whole thing out totally agree They absolutely could do that. Yeah, I will say I don't think Rolex wanted to be in the luxury business I think they wanted to be a lifestyle brand. I think they wanted to have fantastic engineering I think they wanted to continue making things a little bit better every year They wanted to have the very best brand they could with customers But I think global luxury kind of happened to them.

Yeah, and they didn't really have a good choice after the court's crisis. Yeah, other than to do this I heard an anecdote that um Rishmont and in particular Cartier decided that they were going to start acting like a luxury watch brand and they sort of reconvened the watch industry around them in a luxury way An example being to compete with Baselworld or the Baselfair Rishmont started their own thing in Geneva and they said look the industry gathers here in Geneva now and we're gonna be fancy about it And no one's eating brought worse anymore on the show floor We're gonna sell watches to customers with champagne and caviar and a presentation ceremony And so if you're not doing that guess what that's what watches are now I don't think Rolex was the driver of that. I guess is what I'm saying I think the industry went that way and they happened to be the most prestigious high volume player in it And so they're sort of trying to figure out what it means to be an accidental luxury brand I can totally believe that. I mean go back to Hans Wilstorf right like that was totally not his vision for the company His vision was a Rolex watch on every wrist.

Yep. Okay. So now that we're like over in scarcity land I want to revisit the question have they gone too far their unavailability? Well, the main reason I honestly believe this that they didn't ramp production to meet customer demand isn't Positioning it's not we're a luxury brand.

We don't do that it is they don't want to destabilize the business good times come bad times come We do not want to be the brand that ramped 20 percent in one year and is now slashing MSRP Which lots of watch brands have to do and embarrasses their customers who just bought it at full price and now suddenly it's 20 Percent off like that's a horrible way to destroy your brand. Yep Cartier over produce watches in 2016 and had to destroy hundreds of millions of dollars of inventory This kind of thing doesn't happen to Rolex very incremental slow increases to production over time That's the thing that has served them well They never want to be anywhere close to the line of what the real demand is There's sort of this business physics lesson here. It's very hard for a business to ever get smaller than it's largest ever. Mm.

Yes It's like a down-round in venture-back companies. Yeah customers don't like it and please don't like it It's hard to shrink your overhead to rational new realities after bubbles pop It just doesn't feel the same as when it was always your biggest best year ever Yep, and I think Rolex just really doesn't want to ever be in a position of that so they're like conservative to a fault on slow modest increases in production slow changes and when there's a bubble and a whole bunch of new fans of your brand come in It's like an immovable object meeting an unstoppable force like they're just not going to meaningfully ramp The biggest thing they did do is they started this new production facility construction that will be open in 2027 or something But even that I don't know that that'll be maybe 10 maybe 15% bump when that comes online But I think they're torn right now because they don't want to have all these customers whose demands they can't meet But they also don't want to risk destabilizing the next hundred years Yeah, new demand is actually like a risk if you're taking a very long-term view. Yes and managing Valuable customers who want a long-term relationship with you and who are angry while you're trying to protect your own stability Yep, it's hard which coming back to the waitlist. I think this is the positive justification for a waitlist Making sure that those people who become clients and buy your products and participate in your brand really want it And aren't just there because it's the hot flavor that we can they're gonna be gone next month, right?

And Rolex cares about that, but not as much as like a protect-the-leap I mean, protect-the-leap they want to make sure that they are appeasing the collectors and the true fan like Rolex I think they acknowledge that they're very commercial They're here for the the executive who got a promotion and the doctors and the dentists and the lawyers and the finance guys That's their bread and butter and I don't think they want to like lose the brand patina with that that huge volume of material wealth in aggregate Yeah, James Delling again put this to me in a really good visceral way The typical Rolex buyer is not comparison shopping with a patek or any other brand Hmm. They are comparison shopping with do I buy this Rolex or do I upgrade my 911? That's interesting one more rumor I heard And this should totally justify Rolex isn't happy that they're not able to make enough watches Like I really maintain this steel Daytona sure rainbow whatever sure those can maintain rare But like some Mariners should be on shelves or at least two weeks later. You should get a call about it I heard that in 2020 to 2022 they asked employees to come in six days a week instead of five to meet demand Wow, so if that's true, that's a pretty telling symbol about how they feel about it.

Yeah Now is a good time. I think to bring up. There's one more piece of Rolex the corporation and the story Which for the longest time I think both of us were totally puzzled by and when we were in Taipei to interview Morris in January We went into Taipei one-on-one and we were walking around in the shopping mall. Oh, we walked by Tudor Well, it was an authorized dealer that had both Rolex and Tudor Which I think a lot of ADs or reality if you take Rolex you have to take Tudor Yes, so what is Tudor?

Tudor Like the British royal Tudor family is Rolex's sub brand sort of technically it's another company owned by the Hans Will store foundation But in practice, yeah, sure. This is Rolex's sub brand and Ben to your earlier point If you're gonna make an argument that Rolex does not want to be a luxury company a textbook violation of the luxury strategy is to have a sub brand Right. And so we're like what the hell is this Tudor thing? Why did they have it?

And if you look at the Tudor products a lot of them like are the Rolex products, dude Okay, so Tudor was started by Hans Will store in 1926 with the stated purpose to be a more affordable brand to Rolex While maintaining high quality standards and originally they actually were Rolex cases and bracelets But with off-the-shelf movements from a third-party vendor ETA Which is actually now part of swatch group versus the ones that Rolex was getting from Eglor You look at it and it would look like a Submariner Totally you walk into a Tudor authorized dealer you go on the website and you're like wow That sure looks like a gm tmaster and that looks like an explorer and that looks like a Submariner Right. Yeah, even today it almost feels like knock-offy except that the Rolex knock-offs are shockingly good You go a decade owning a knock-off and not realizing it. Yeah. Yeah, so for the longest time You know, I at least I think you were too like what is going on here And then we realized the real limiting factor to Rolex production is movements movements are the hard thing to make And all their movements are regular movements, you know now in-house Rolex movements Tudor does not use regular movements does not use Rolex movements.

They use third-party movements This is funny. I hadn't had this insight. Yeah, so Tudor is kind of the release valve here They can ramp up production of the Tudor quote unquote Submariner or gm tmaster or explorer or whatever with third-party movements and that's okay But what do you mean release valve like customers can't get a Rolex so they get a Tudor? I think that probably rarely happens but to Hans's original vision of I want everybody to be able to own a Rolex This is the way that they can have that happen.

I don't think that's it. I don't think they care at all about that. Um Here's my logic. It is a shockingly low Percent of Rolex production less than 1% if that were true.

They would sell they would sell a lot more tutors in volume Let's take a black bay. This is the sort of the Tudor Submariner $4,000 Most people don't know or care about the black bay and if they walk in thinking they want to Rolex They're not walking out with a black bay. They sell so few of these things. So what are they doing?

I think it's kind of an innovation lab It's a way to protect Rolex's brand because if there's something new and interesting that might be a fad that customers seem to be caring about in the watch world Tudor can go and implement it and they can figure out how to produce it if it's a flop That's fine The watch aficionados who know about Tudor expect them to come out with weird stuff that flops But if it's durable then Rolex might get it in five to ten years with even more polish and fuffleness They've tested all sorts of stuff with Tudor dial colors ceramic bezels titanium watches A lot of these now are slowly making their way into Rolex's and I think the key thing is they can use Tudor to go and compete with Mega tag hoyer in the mid-market and Tudor basically can punch up so that Rolex doesn't ever have to punch down Yeah, yeah, I heard a great phrase that the shield protects the crown The Tudor shield protects the Rolex crown which makes total sense It's so that they don't ever have to risk doing something dumb chasing a competitor with Rolex and Tudor can always go figure it out I love it. It's like we used to think about the LP show right? It's our innovation lab and we still think about ACQ that way This is like if this is something we find interesting but we wouldn't do it on the main show or it's we just don't have a place in our lineup for it Yeah, it makes sense and it still provides value for all sides like it's still great for listeners. It's still great for the guest It's still good for us.

Yeah, yeah, but what is it? It's less than 10% of our show's listenership It's a great experimentation ground. Yeah, the real watch nerds will tell you that they actually love Tudors Even though it's a $4,000 watch the movements are incredibly high quality and I think consumers actually might be getting a pretty good deal on Tudor watches I mean if I go out tomorrow and buy an explorer, that's whatever MSRP is for $8,000 or something Rolex is making phenomenal margins on that thing Tudor they don't sell that many of them so at a $4,000 price point That's only $2,500 wholesale for a very high quality movement and there's not a lot of them made So economies of scalar really low so whatever the fixed costs are there's not that many watches to amortize those across and I think there's actually pretty significant Upfront fixed costs so I'm sure they're not losing money by having Tudor but it's a great deal for customers. Yeah, you're totally right I like your rationale better than mine Well, we've had a lot of good conversations to try to figure this out because you and I were texting each other.

We were like, what are they doing? This is the worst luxury company ever. Yeah Okay, well to wrap up at least the history here level set us on today. What is the company today?

All right? First of all, no one knows. Yeah, right But there's a lot of really good ways to guess and two great shout outs here One is to our good friend of the show Arvin Navarotnam He as usual did an amazing long form write up of the business of Rolex and he found awesome public sources of data We'll link to that in the show notes. Secondly, the industry report that everyone kind of refers to is this Morgan Stanley Luxe consults report Who sent us a copy in preparation for the episode?

So we did our own ways of trying to guess at these numbers in the shape of the business today And then we kind of looked at the Morgan Stanley one and thought okay What's the most reputable? Well connected a person who's networking with all the dealers coming up with I would bet all this is within 10 to 20 percent of right So I think they make about 1.1 million watches a year. Maybe a little higher Morgan Stanley said 1.24. So think 1.1 to 1.2 million a year.

Yep, sounds right to me For revenue think about it as around 11 billion dollars in revenue that they do in sales So the interesting thing is to start to look at market share The share of the Swiss watch market that Rolex has by revenue is completely insane Morgan Stanley and Luxe consult estimate at 30.3 percent of the whole Swiss watch industry No one else even comes close. Cartier and Omega have 7.5 percent each truly the number two and three player are at what is that quarter? Yeah, the number two and three player are at slightly less than half of the scale of combined of Rolex Yeah, exactly. Protect the leap is at 5.6 percent again by revenue Protect the leap makes freaking expensive watches and they still only are at 5.6 percent one-sixth of Rolex Out of our pk is at 5 percent and they just have massive fragmentation down from there Rolex makes something that isn't crazy expensive But it's pretty expensive and they sell the absolute crap out of them on a unit spaces So that was revenue that we talked about units They make something like 15 times the number of watches that protect the leap makes 22 times autumn rp gay It's crazy people even talk about these brands like they're in the same sentence just based on the volume of output Yeah, they're totally different segments of the market.

Yes in terms of price Rolex is average selling price not Rolex is price But what the retailer sell it for it's around $13,000 Item rp gay is $48,000 Vacheron Constantine is $38,000, particularly 40,000 dollars I mean totally different categories. This is part of my argument that Rolex really isn't luxury at all They have hit the sweet spot in the market if you think about a curve like an xy axis They have found the sweet spot where you can maximize revenue where you just sell an absolute ton of watches that let people express something about themselves But you stay away from that insanity of the true luxury market that limits you to a very small number of production So they're almost like their own thing entirely. Yeah, it's interesting right the secondary market Really lets them do this. I think yeah because Even though the model lineup of Rolex has remained stable for so many decades now or relatively stable for so many decades Because of the minute changes in all the reference numbers and the models you actually have incredible scarcity and rarity for people who care You segment the market yeah certain flavors and that can become the multi hundred thousand dollar watch market for Rolex the multi million dollar watch market for Rolex They can participate in the same thing that Patek and Audemars Are participating in just do it through the secondary market or even special editions in the primary and you look at the rainbow dial Daytona Oh the emoji watch right that thing is pretty baller They can do these extremely you know they play and protect the Lee plan both to your point in the secondary market But also in their sort of limited edition special watch market Yeah But I think if they weren't a strong player in the secondary market because obviously they'll really monetize that directly right I think they wouldn't then have the permission to go put out these special editions that sell for a couple hundred thousand dollars in the primary market Right the thing they've done so genius and beautifully well Is to create something that the whole world knows about that everybody looks at as a sign of success That you've made it that you're like those divers and you're like those pilots and you're like those explorers If you have one and because it's universally agreed upon as global wealth grew they basically just got to index it Yeah, think about it right like I certainly don't want to imply that a Rolex is not a lot of money It is a lot of money that is inaccessible to the vast majority of people However, let's say you work a solid white collar job in america these days You get a big promotion you have a big life event you have a kid etc Is it reasonable that you could purchase a Rolex it's right on the edge of unreasonable Which is exactly where they need to be to have this market exactly if you make sacrifices you can probably do it Yeah, depending on what your salary is yeah I mean truly since the 1950s.

There is a wealth class that has emerged doctors lawyers Finance people recently tech people if they can really figure out that market that Absolutely can go buy a 10 plus thousand dollar watch if it's the thing they choose to buy Yeah, like a Porsche a 911 is not that is completely inaccessible It is a impractical car for 10 times as much money Yeah, it's a pretty sweet little market to have that it's this almost unreasonable thing that a whole lot of people can buy And to your point about the confoundness of like luxury, I still maintain it is managed In the same fashion as the world's best luxury brands. However, it kind of sounds a lot like a BMW to me or a Mercedes Mercedes or a BMW Again, most people can't afford them and don't buy them or lease them But for a lot of people well beyond the 1% if it's something you really want in your life There's probably a way you can make it happen. Yeah, well most people finance BMWs, but nobody's well I think people write finance relaxes. That's I think there's ways to finance relaxes.

Yeah It's interesting. I did something about allegories to other categories like handbags or fashion or cars It's quite tempting to say that Rolex is Louis Vuitton and that paddock is Hermes, but Rolex isn't quite Louis Vuitton That's not giving Rolex enough credit. No, it's not managed like LVM regional Yeah, they are very careful stewards of the brand in a way that Louis Vuitton will slap it on t-shirts My best comparison that I think I came up with is Rolex is Porsche and I know they're different categories of price But like cars are expensive things and you do need one anyway It's real scale manufacturing with a high quality engineered product with extremely good margins differentiated by their brand you stick to six core models you iterate and refine each one of them once or twice a decade the Samariners the 911 you can buy what your grandpa had 50 years ago and it still looks like that modernized And it's actually a pretty good comp to call protectfully Ferrari. Yeah, totally.

We don't care what you think we are making this for us We are making it for collectors. It's very small volume production very small volume production It's five times more expensive totally. Yeah, and that's a completely different market Ferrari Lamborghini You're talking a million dollar plus cars is a very very different thing than an 80,000 car Right bottom line of what I'll stick to is patecus Ferrari and Porsche is Rolex and it's a really good business to be a yes Yes, I mean it's kind of ideal to your point. They have found the ideal point on the curve here I think that's it they multiplied two pretty big numbers together instead of one big number one small number Yeah And the way it manifests in watches is unique and different than other markets too 30% of this was watching the street Other categories don't have this kind of outsized winner even in handbags where Louis Vuitton is so they print money print money Somewhere around 20% I think Rolex defines the category of watches Or mezz doesn't do this.

We Vuitton doesn't do this Porsche doesn't do this. Those are all much more fragmented markets Yep, totally and for people who think we're like blow and smoke here of how is Rolex not a you know high-end luxury Rolex? We were just saying average price of 13,000 you look at Richard meal. I mean this is like a 280,000 maybe 300,000 average price point Jacob and co 100,000 on our pk that we were just talking about van cleave protectfully Vacheron Constantine Blancpain Piaget These are all meaningfully more expensive average price points than Rolex Rolex is the name you know But it's not the most expensive watch by a mile you could buy and there's 15 other brands that are higher end Yep, but success in America and owning a nice watch is a Rolex.

Yep. I think that's what's so amazingly unique about this company. Yes Okay, so employee count they have about 16,000 people worldwide about 9,000 of those are in Switzerland I had a lot of fun trying to size this market trying to figure out Swiss watches versus watches The Swiss watch industry is something like 35 billion dollars wholesale before the retail market Across all players including the super high-end and omega and swatch and everyone else Rolex does about 11 billion of that 35 billion which we've talked about holy crap But work it's very interesting is when we zoom out from just Swiss watches Switzerland produces 2% of the world's watches 2% Yeah, and everything else is a $10 piece of crap and it puts a real numbers on that switzerland makes 17 million watches a year And most estimates are that there are between 700 and 900 million watches made in the world every year 7 to 900 million including smart watches cheap $25 watches you have it So this 2% of units sold that happens in switzerland accounts for 45% of the dollars in all watches smart watches Time Xs all the stuff that's made in hong kong and china I mean 2% of units are made in switzerland and 45% of the revenue is captured there totally apple alone ships way more apple watches every Year than the entire Swiss watch industry way more. Oh absolutely estimates on the smartwatch industry are like 80 million smart watches a year Yep, and I think apple depending on the year does like 30 to 50 Yeah, it's funny the 17 million watches that includes a whole bunch of swatches and fashion watches and you know switzerland makes a lot of courts Also, so it is true that 45% of the dollars come from 17 million watches out of seven to 900 million But it's actually even more concentrated than just that 17 million because none of the courts watches contribute that much to the revenue Yep To make that point specifically 86 percent of switzerland's watch export comes from mechanical watches That whole move in the courts crisis to lean hard into mechanical really really really worked from a dollar perspective So 40 percent of all watch revenue in the world came from Swiss mechanicals mechanicals Amazing so then you start to look at net profit well Rolex has 30 percent of the Swiss market by revenue, but probably even more by profit Oh, yeah, it's totally an apple situation here Morgan Stanley and Luxe consult estimate that of the 35 billion dollars in total revenue for Swiss watch manufacturers There's about 11.8 billion of total profit implying that the industry wide operating margin is 29 percent Do you think Rolex has an operating margin of just 29 percent?

Hailed it And frankly, there's a lot of people in this category who have negative operating margin. There's big conglomerates that are trying to get into watches They're not generating a lot of profit there right now There are a lot of estimates between 30 and 40 percent I would bet it's way closer to 40 percent for Rolex's operating margin My best guess is that while they account for 30 percent of the industry's revenue It's in the neighborhood of 40 percent of the total Swiss profit Yeah, totally agree They're also so vertically integrated except for retail that you have to imagine that ultimately that would create a better profit structure too Has to be so then you get to balance sheet this is truly anyone's guess They're spitting off something like three three and a half billion dollars a year Maybe more maybe four Yep And they've done call it two to three billion for at least a decade or two And so it's not crazy to think that they've piled up 50 billion dollars plus in cash even before investment returns It's totally an IKEA situation There's tons and tons of cash sitting there in an IKEA we can see it in annual reports I have no idea what Rolex's assets look like So the Hans Will's Door Foundation of course doesn't publish any numbers publicly But they have said and people have estimated that they give away around 300 million Swiss francs Every year which by your numbers would be about one tenth of the cash that the business is generating or less and still that makes them one of the most Active annual dispersing foundations on the planet. It's unbelievable And it's a very broad base of philanthropic initiatives environmental science arts and it's not like they're just doing things that help Rolex This is like a very legitimate charitable foundation not to mention it seems like they're just giving money away all over Geneva Yes, this is the coolest thing about it A core part of the mission of the foundation that Hans put in its bylaws Is to help the city and people of Geneva And so I think they've found sort of over the years A comfortable belief that the best way to do that often is just giving people money if people need money Family can't make grant. I would help this you come up or something they can apply for grants and they just give them money and they don't make me deal about it It's pretty interesting one thing they definitely do with their money again I think it's safe to just ballpark.

There's 50 billion before investment returns sitting there But again plus my 50 percent They own some of the most expensive real estate in the world They own their own buildings in Switzerland They own in the Bond Street House area in London some really really prime real estate in Milan in Melbourne in Tokyo Famously in New York City. There's a gorgeous building that they're building about a block from Rockefeller Center and radio city music hall I mean the old Rolex building was nice this new one that's gonna be done next year. The architectural drawings look unbelievable in Manhattan. I mean they own a building in Manhattan You gotta put the money somewhere right real estate is a good place is any they own a lot of real estate in Geneva They own a big service center in Dallas the school in Pennsylvania Hilariously, they just bought the building where omega has their flagship store in Geneva So omega makes a rent check out to Rolex every month That's not the category of asset management, but it is in the category of spite.

I don't know Pretty funny. Yeah, 100% safe assumption that there's a boatload of money sitting there Yep So that's the shape of the business today. The question is how would you value it? If this were a publicly traded company today, you could look at it based on a sector multiple of other watch companies But come on applying the swatch multiple is not the right way to value Rolex Maybe protect the leap since it's also a vertically integrated very strong brand But it's privately held we have no idea But actually is very Rolex in a lot of ways other than the fact that they're multiplying a big number by a small number instead of two pretty big numbers You could look at conglomerates like lvm h or reichmont But there's too much other stuff in there.