Rolex: Timeless Excellence - [Business Breakdowns, Forever Episode]

22:54Instead of using seals, it was almost like a locking system didn't really take off. But effectively, there was this woman named Mercedes Glitz who was a typist of all things, basically a secretary in the UK. And she had swung the English channel successfully, the first woman to swim in the English channel successfully. And Alan's World War of the Founder said, But hey, wouldn't it be cool if this woman, A, she's a woman, B, she's doing this amazing feat that no one had ever done before, wouldn't it be cool if she wore the watch around her neck? So she didn't wear it on her wrist, she put her around her neck, and she attempted to swim the English Channel.

23:24She actually didn't successfully do it. She failed, but nobody really cared because she had already done it before. And so he took out and had celebrating the fact that this watch was around this woman's neck for 10 hours in the English Channel and the timekeeping was flawless. And so that kind of solidified Rolex as a household name because the oyster case had been validated in the English channel with this early brand ambassador, I guess you would call her. That was a huge deal. And I think one of the earliest examples of real marketing by Amy luxury brand or any brand really at all. And then the final tenant would be self winding, which is I would equate it to like the automatic transmission.

23:58When the automatic transmission came around, all of a sudden driving a car became a hell of a lot easier. just became wider, accepted, et cetera. So prior to, I guess it was around 19, I'm gonna say 30, something that Rolex patented the first self -winding movement. To be clear, there was somebody called John Harwood that actually had a different self -winding movement first. I think that was in the 20s. And his idea was to make a hammer. Some of them were balanced back and forth like this to continue to power the watch. Rolex said, let's go a different array. Let's create a rotor. So a weight that would oscillate around intercircle to power the watch that worked and Rolex had actually I remember the data was 1933 because it had a 20 -year patent on it and protectfully which was another stalwart of traditional watchmaking saw this it's a oh shit we need to do that too but they couldn't actually release anything until 20 years later because of the patent that protect 2526 which is there for self -winding watch command 1953 and that's a different thing and all together but effectively Huntsville's door said, I want the watches to be precise, check with the QA, I want them to be waterproof, check with the oyster case, and I want them to be self -winding, check with the perpetual.

25:07So if you see oyster perpetual on any Rolex, which you'd see on all Rolexes now, oysters waterproof perpetual is self -winding. From there Rolex went out to make watches, and they were doing things very much in a similar style to everyone else at that time until the early 50s. So in the post -war, air postal war two era, they created their first sports watch. And by sports watch. It's actually the technical term is professional watch by Rolex Nomec Lecher. It's the Samariner, which is a diver's watch, which is 1953. It's the GMT, which is a pilot's watch, which is 1955, Explorer 1, which is an Explorer's watch, or an all day everyday watch, which is 53 as well.

25:45Then you have the Daytona in 1963. Later you have the C2L Air in 67, which is like a beach cover sub, and then the Explorer 2, and I guess 1970 or so. But those are The watch is that I think most people now think of when they think of watch DC, rotating bezel. In most cases, you see a black dial. In most cases, you see an oyster bracelet, which is a very wonderfully produced bracelet with an oyster lock bracelet. And that is really when things change. And to be clear, Rolex was not alone. There were other brands doing it. Some would say earlier, some would say around the same time. But the Blanc von 50 ,000 is credited to 1953.

26:20The Omega C Master 300 and 120 are around the same time as well. So they were not alone. and you have to remember that like even Rolex in the watch industry, in that period, it was really a smattering of different suppliers. If you look at, for example, and I wrote about this several times over the past few years, if you look at say the Rolex Daytona from 1963 and the Hoyer Carrera from 1963, it uses the exact same movement and I'm saying the exact same movement, that's a Belgium 72, same case maker, same dial maker, same hand maker. So what is the actual difference? The assembly was done by Rolex on the assembly was done by Hoyer, but the product itself was really very similar.

26:56And if you look at early sea masters and early sea mariners, a lot of similarity there, the difference was of course the oyster case, but that was how washmaking was done. And if you look at, say example of Patek -Bulic, 2499, that's based on a valjou move. You don't think of that. You think of Patek as Patek now. This is the Holy Grail, but up until really, I mean the 2000s, they were using what you call an e -bouche movement, which was just really movement blank, and then it would be finished by a Patakra finish by AP, or Vacheron, or whoever. So Rolexes were really, I would say finished to a higher quality than most, but I mean any good Blanc Conor, any good Omega, would do much of what Rolex was doing.

27:33It was really not until much, much later in the 70s, first, when we had the courts crisis, which is effectively the creation of courts, which is analog time telling, but with a battery, which is dramatically more precise. I mean, my dramatically more precise than mechanical watchmaking. What is interesting to think about, and I get full credit to my old colleague, Joe Thompson, who's a legend in the watchwright world, is the Japanese came in with courts, say co -created it effectively, came in and there was a war between Swiss mechanical watchmaking and courts and a lot of timekeeping. And to be clear, the Swiss lost.

28:05The Swiss lost by a country model. So all of a sudden, those guys that were buying a Rolex or an Omega or a Boyer, because they were the most precise thing in the world, they said, you know what, why would I do that? I can buy a quartz watch that is 10 times more accurate, 10 times. And by the way, you don't need to have the service, you just swap out the new battery or whatever all the time. And that decimated the Swiss watch industry to a point where very, very few brands were producing things that are profit of any kind. Jack Hoyer, who's family -owned tag pool, before he was tag, it was just Hoyer at the time in his biography.

28:37I mean, he talks almost going into bankruptcy. If you talk to Terry Stern, who's father to leaf Stern and his grandfather have unprotected for generations. in the late 70s, they had to borrow against, you know, what their banks. There's an existential. Yeah, this was real. And it wasn't just a smaller brand, to tech -edit shoes, or your head -it shoes. Rolex was really smart in that, through that period of real turmoil, when, I would say, the Chief competitor Omega decided to make some courts watches, decided to make some funky -looking things. Rolex stayed the course. And yes, they did make courts watches.

29:07In the beta 21, which was the Swiss, a Swiss conglomerates answer to courts, is the most expensive courts watch ever made. I mean like thousands and thousands of dollars. They said, you know, we're going to focus on what we do best. And the focus went away from precision and accuracy at time, like, to luxury. And so that is when you start seeing the gold Rolex on, you know, I hate to say it, but like to use car salesmen. And the gold Rolex became the thing. 70s and 80s opulence, you understand what the 80s were. Of course, it just changed what Rolex was. But by the way, it worked. And it allowed them to continue to be relevant when everybody else being Omega and attacked to a degree of act for them, like these bands really struggle and that is why so many of them ended up in conglomerates.

29:49In the 80s and 90s, when watches were mechanical watches, we're really not doing so hot. A lot of folks came in and bundled them all up. So Rishmot owns a bunch of the great ones including Vacheron, Swatch owns everything from Swatch to Blanc -Tom Brigade. Omega, it was a time of great challenge for sure. And Rolex, they struggled as well. Never to the degree that the others did, but it was not great for them. And then the 90s started to come around and Rolex had a CEO by the name of Patrick Kineger. His father was actually also CEO of the idea of how things worked. Rolex and he said, I want to take Rolex in house.

30:20And he was really the first to do it, frankly, well before a protector, well before anybody else. And so Rolex was using 27 different suppliers to make safe America. And after he was done with it, they're using four. And now those four are completely owned by Rolex. There are four different production facilities, two in Geneva one, and what I would call proper Geneva one in Plum the Watt, which is a little bit outside. And then there's one in Shenenburg, which does dials, and there's one in the L, which makes the movements. But what's so amazing is Rolex, to me, the kind of secret sauce is equal parts case, equal parts movement.

30:54The cases, you can kind of reverse engineer if you're a competitor and say, okay, what's an oyster case? It's got this, it's got that, it's polished there, seals are done by X -Line. The movements are a different thing entirely. And what's amazing is Rolex Geneva, which is basically dials, cases, bracelets, all that stuff. And Rolex BN, which is up in the mountains, the Valais de Joux, had a handshake deal for 70 years. And I mean, an actual handshake deal that the calibers made by what was then called Eglier, who made the first movement for our school store. That company was making movements solely for Rolex Geneva based on nothing but a handshake.

31:28And I mean, that literally, there was nothing and writing for up until 2004, which is just insane to think about. Rolex was certainly a multi -billion dollar of your business before then. In up until 2004, there was no contract in place to say that AGLER couldn't make movements for Omega or Tiger Whale or whoever. So in 2004, Rolex had an option to get married here and they purchased the company. Now Rolex, BN, is basically what AGLER was up in the mountains until 2004. So Rolex now has four different production facilities. as a rather than story, I was among the first to be invited inside the movement manufacturing, which is really the source of the IP, like that is where the sausage is made so to speak.

32:06Just remarkable. If you haven't read the story, it's on hoating keys called Inside the Manufacturer Visiting All 4 Rolex Locations. It was remarkable. As I started out in that story, I was a, you know, this was 10 years ago or 7 years ago, I was a lover of watches, I was a lover of Rolex, and I had more Rolexes than had anything else at that point. None of them were as old as I was. They were all considerably older than me. But it's funny, I reread the story to kind of prepare for this every single now since then, I've bought more modern Rolexes than I have vintage. And the world is just a different place.

32:36But once you see everything that Rolex does to a watch, and what I mean by that is the fact that they have their own foundry, even the steel, not just the gold and precious metals, even the steel on Rolex is proprietary and is made of high Rolex, it's 904L, it's wide. They make their own gold, it's called everose of the tourist school is just remarkable. And what I think is even more telling of what Rolex is about is that one of their facilities, they actually have, and I mean this literally, more than to Nobel Prize winning scientists on staff working on watches. Think about what that must mean from material science perspective.

33:10The innovation done by Rolex is just above and beyond anything I've seen. I've been to every watchmaker in the world. I've been to several car manufacturers doing this. I've been all over. I've been inside Hermes. There's just nothing like this. They create machines to test their machines that make watches. They have their own oyster test, which of course provides artificial pressure on a watch. Now, it's waterproof. They have a machine that can open and close a Rolex class a thousand times a minute, which is kind of amazing because you actually have to open it. So you open this, it's actually kind of difficult to do.

33:38Imagine doing that a thousand times a minute, they invented a machine to do that. They have a machine in Shenboard, which is their dial and gem -setting location, to sort through all the stones that they're given. And first of all, Rolex only works with IF, which is internally flawless stones, which is obviously the most expensive ISDN, to ensure that the stones that they're given, whether it's diamonds or rubies or anything, are real, they created a machine to sort them at scale and ensure that all of them are real. And I said, well, are bad stones or fake stones are no problem for you? And they said, no, not really, but we just want to ensure that every watch we sell is what we want it to be.

34:10And I was like, how often do you get a fake diamond or fake anything? And the answer was one out of 10 million. To be clear, this machine was created either by them or they paid somebody to make it for that. This is bare machines. It's not like it exists outside Rolex. This gives you an idea of what they're about and how they do things. It is so wonderful and so different than traditional luxury, which frankly, I may say, even has a purveyor of luxury items, is full of shit, half the time. I'm into sneakers, but not in the way that I made other things. Why would a pair of some special edition sneakers sell for $5 ,000?

34:44Sneakers are made in China by machines, they're hand stitched here and there. It's just designed, it's artificial, scarcity, etc. When you see what goes into it, really, a volume high in mechanical watch, but in particular Rolex, you really start to understand the Samaritan will say is 8 ,000 bucks. That might be a deal. After you see what goes into this thing. And I mentioned in the story several competing brand presidents that told me before I went on this trip that, ah, not a human hand touches a Rolex before it's made. It's all done by machine, which effectively could be most insulting thing a Swiss person can say, meaning that it's void of character.

35:17It's void of humanity. It's like, the luxury should be about people. It should be about craftsmanship. And they're saying Rolex doesn't have to do that. And I was like, oh, okay, that's kind of a bummer. That may have informed why I didn't know any modern Rolex at the time. You walk into Rolex HQ in Geneva, and you see hundreds of people finishing watches. And they're not finishing at the same way a protect or longer would by hand with little piece of wood. They're finishing maybe six or seven Rolex like, is that a time on a polishing wheel? But they're still polishing really the way that it should be done.

35:44They're assembling dials by hand, they're assembling the bracelet by hand. There's an incredible amount of hand work that goes into the most basic of robots, being like a Samaritan or a dangerous. Beyond that, what's so fun about them is like, they know exactly how different they are than everyone else. They also know that everyone wants to be like them. So, at least two of their four facilities, you might drive by it's, oh, there's Rolex, it's five stories high, you know, it's about a few hundred thousand square feet. When you go inside, you realize that it's actually 10 or 11 stories high, but five or six of those stories are below graph.

36:15And I just remember thinking like, why would they do that? What's the point of it? And it was in fact, to suggest to anybody that drives by that roll it to smaller than they actually are. And I think if we had any idea of how big the foundation was, they would vote all of us away. I think it's enormous. I think they're probably producing more than a million a year, but that's kind of a generally accepted number. who they are. And if they're going to do something, they want to do things at the highest level. Some of golfers have been lucky enough to meet some of their players and Adam Scott became a good friend.

36:41And I asked, why don't you sponsor X, Y and Z? You're like, why don't you go grassroots, whatever they said, this is Rolex like my golf. If we're going to do golf, we only want to be involved with the M. So the US open, the BJ championship, the masters, and of course the British show. But that's it. If they're going to do tennis, it's going to be win -billed in and the US open. They don't even want to mess with some of the other majors and it's just remarkable how committed they are to working with the very best. It's wild, they really. It's an unbelievable story and also it's amazing to me the commitment to quality over time.

37:12When I'm sure there's incredible pressure for all sorts of reasons, maybe the non -for -profit thing is actually a benefit here, but there's always pressure to skimp a little bit on quality, right? Give up the absolute perfect standard because it could mean a lot more sales or a lot more scale or whatever. They just haven't done it. So you could think about buying one and looking at it and having it be a reminder of this like commitment to all the way down to the gold. In fact, they own all the way down to the bare metals in the ground is crazy. As you think about their genius on, I guess, quality and manufacturing, what is the equivalent on the marketing and distribution side?

37:43So I mentioned the great example of the women swimming across the channel as like a marquee event that made a big splash and they're focused on like the upper echelon of whatever they're doing. What else do you think Rolex can teach the world's companies about unbelievable marketing or distribution? Refreshing slightly what I was just mentioning, I commit me to only working with the absolute best and for going opportunity. For going working with the next generation of, we'll say golfers in this case, the guys that are coming up now until they've been validated as the very best then they're just not interested in.

38:15You know, kind of good work if you can get it, like not everyone has the benefit of being able to say I want to work with Tiger Woods. if they're for tech, which will work with me. But I think they are just so unrelenting to their pursuit of excellence in the literal sense, the very best in the world no matter what it is. It's Yo -Yo Mom. It's not the person that is by Carnegie Hall twice. It's Yo -Yo Mom. It's Roger Federer in the test world. What's so amazing is they care about the people as much as they do. The resultant Roger, I think, is the ultimate archetype for the Rolex. They call him Rolex Testimony.

38:43It's not called that. Roger is, I wouldn't be ashamed to say, like I think Roger's a hero to many of us. and I'm not really even a tennis player or a tennis family. This is the way he floats above the air. Yeah, he floats above the air. No matter what room that he's in, he's just a gentleman and he married his high school sweetheart. Just a wonder and I've met him through Rolex and he's just a delightful person and completely authentic. They look at that. They want to be associated with people that are not only the best but are genuinely good people as well. And again, good work if you can get it or it would be nice to only work with the best people that are also the best performers, but they really maintain with that.

39:16And their partnerships are different. I'm trying to think of an example. I'll say Leonardo DiCaprio. He's been an ambassador for Tagoyer. He's been an ambassador. I think right. You see, he's a hyper famous, hyper talented person. He doesn't care like this. He's funny for him, etc. The contract C -Saturday would say with Tagoyer probably last five years. Rolex has worked with Jack McQuiz since 1967. 1967. They worked with him so this day. He's still very much alive and he's had a bunch of Rolexes. We did a video with him. But I mean, think about that deal. 1967 to 2022. It's just wild. Omega does that to a degree.

39:50They've had a partnership with Cindy Crawford since early 90s at Alkijerber's with Omega. Like it's not an official ambassador ship. It's a much longer term thing. But Rolex really takes it to the next level and they've been with Roger for his entire career. They really are committed to long term meaningful relationships, much more so than any other brand. It's not like with some of these luxury brands or car companies where okay, I believe in tennis and a question, then he gets, like, go and the new guy comes in and I believe in sailing and motorsports. It's not like that at all. There are core tennis of Rolex motorsports in fact, one of them.

40:22And that's it. Like they're not playing in the NBA. They're not sponsoring baseball or I was sponsoring the NFL. They're doing the things that they do, which is a question sailing to a degree. It's motorsports tennis and golf. And it's just amazing that these strategies continue to deliver decade after decade. What was golf in 1967? actually don't know the answer but I can tell you it was probably not a big deal, especially back then. And the fact that they were committed back then and they're even more committed now is just remarkable. What have you learned about maybe the way that they make decisions, obviously like being so long -term oriented as one of those things, that again you think is most portable to other either luxury brands or just businesses in general, based on how singular they seem to be and how they make their choices?

41:05It's kind of silly, but it's almost too simple, I should say, and I think it's ultimately that this additive kind of do the right thing. They are creating products that deliver in a way that is so far beyond, I think, what people understand. That people would be shocked. The way that I used to process, I used to write for the site, I don't anymore, but as a journalist, I went to journalism school. I would say, two types of companies, one of which is the more you learn about the company, the less you respect them. And frankly, that's a lot of luxury companies. Do you realize that? Okay, the Swiss made watches, actually made in China.

41:35This bag is actually not hand -sown and some by machine, little things like that. And then there are other companies where the more you learn about them, the more you like them. Rolex is the architect of that. That article that I wrote in 2015 is there was a foundational shift in my opinion of how watches should be made, mass luxury watches. And I think they continue to innovate in a way that we had heard in continue to strive to be like. I mean as an example, they have two in -house components that nobody knows that. Our very two people know about. One of them is called Paracrome, which is a balance wheel, which is literally like the thing that rotates inside the watch.

42:09There was basically, I wouldn't call them a monopoly, but pretty damn close to monopoly on getting those things. And everybody from the tech to Rolex were using something called a Niverox balance wheel. And Rolex, you know what, we're going to make our own at some astronomical cost, and it's going to be 10 times as accurate as the competitor. And they did that. And that's one of the few times that actually communicated on like a technical recommendation. They also have their own shock and absorbent system. The thing is called the pair of flex. That again, 30 % more absorbent than your traditional shock and absorbent system.

42:39Would that change? Would that stop you or me or the guy in the street from buying a Rolex if they didn't? Not at all. Not at all. But they do it because they should. And they are at the core of it. What's so charming about them at the core of it is like they are master marketers, master everything. the Masters distributors, but they are watchmakers at the core of it. This Samaritan or this GMT, this anything I would put against any watch in the world in terms of production ability. The other thing I should say is that they know what they're good at, they know what they're not, and Rolex does not sell watches, Rolex makes watches.

43:09They own exactly an image, and maybe even closed, I should check, I'll fact check this afterwards. Rolex owns one retail store, one, and Protect Falls is a similar model they have, I think, four. They have London, Paris, Geneva, and I think Hong Kong. Rolex has one. I actually think it may have closed and it's in Switzerland. And that's simply because they had a, I was basically like a family friend that situation that I don't even have, they ended up acquiring it. So if you go to Rolex, the Rolex boutique in Manhattan, for example, which is in the Rolex building, that's not owned by Rolex. That's owned by Wampi, which is a great authorized dealer, an extra red of the road, it's a German basically.

43:42If you go to the Rolex boutique in Singapore, it's either the hourglass or another authorized dealer. So they're not selling watches. There's something that I'm at wholesale to retailers who then make between, you know, we'll say 20 and 50 percent on every product they sell. And imagine your Rolex. So like, you're thinking that you've got more demand than you possibly ever supply. And you're thinking, man, I'm giving away 20 to 50 percent at everything I sell. Like, why don't we just do that? And they don't change because they know that, first of all, everything's ticker. The watch market is going through a boom unlike I've ever seen in 14 years of doing this unlike the markets I've ever seen at all.

44:16That may have made our lives. We've reached a shift where things will never go back to the way they were before, but things are stopping up a little bit. And they realize, hey, we make watches, we don't sell them. And to have the control, the self -control, and the wear -ethyls, to basically walk away from 20 to 50 percent of retail sales at that scale globally when the demand is just capacious, is just so admirable. And because they know that in 100 years, maybe things will change, or maybe in 10 years single chain wasn't really Rolex but in 2014 or 15 around the same time that I went to go see that did you need a something called the Apple Watch gear now.

44:53And Rolex is Rolex like they're gonna be fine but a lot of the other brands are like man is this gonna eat our lunch and to be clear it did. If you want to say Apple's apples the Apple Watch is a bigger watch than Rolex by quantity and by revenue. But Rolex is obviously fine. It has changed and this is not an Apple Watch segment but I'll just mention it briefly. It has changed how people buy a leg prewatches. A luxury watch pre -apple watch I would consider a thousand dollars and above maybe even five hundred dollars and above it has decimated that market so the market between five hundred and sub five thousand has just been destroyed the brands like Shinola and fossil fossil was a multi multi -billion dollar company I'm just enormous they share that name anymore exactly they're share price in 2013 14 pre -apple watch was eighty dollars a share but last time I checked it was eight probably even lower than that now.

45:40They've lost 90 % of their market cap. Apple Watch has in some ways helped the Rolexes in the Omega's the world because Rolex and Omega and Tag Hoier are like they are luxury to most people. They're clearly expensive. They start around 5 ,000 bucks instead of around one like some of the other folks do. That's like the baseline now. Now you want a Rolex or mega tag Hoier or above or nothing. You don't want the Shinole anymore. You don't want the fossil anymore. And I think Apple Watch was a big, big player in that. Maybe say a bit. Obviously, we don't have the data on Rolex specifically, but just from what you know about the watch industry, about the income statement of a watch brand.

46:16Are they very high -grace margin like a lot of luxury products? How are they typically distributed? Like anything interesting there that you think maps back onto Rolex. This is business breakdown. It's not just product breakdowns, although here are the product. It's more interesting. Anything worth mentioning there, just in how the business itself works, that's unique? Rolex is more vertically integrated than most. So one can imagine that the margin would be once you absorb the cost of acquiring and bring everything in house like you would assume that the march will be a little bit higher because they're making everything themselves.

46:43Historically, in generally speaking, there are very few brands that are as vertically integrated as Rolex, weirdly, Seiko would be one, but Seiko would be one, but that could be another. But most brands are buying effectively everything. The component, the movement might be an in -house design. I'm using air quotes here, in -house design, but they're buying e -bouches, base calipers, and modifying them significantly. There's margin there. They have to buy the products to this day or at least in the back of 2015 Rolex actually did not manufacture their own hands I don't know why but they were buying that from a company.

47:12Africa the name. We got a few layers SA so Rolex was buying crystals and hands but nothing else Most brands are buying pretty much everything and then they're assembling it and putting it together So then it just becomes like okay the production cost watch is the raw materials It's the man hours the straps it's all that stuff and then they would ship it out to a US distributor at generally probably about, I would say, 40 % of what you'll see in the store, so 40 % of like US retail, and then the distributor would take 20%, and then the retailer would take about 40 % of that. So you're going to assume that your retailer is buying stuff at about 40 % below, what you're paying, and then the distributor is taking 20 % of that, and then the actual producer of the watch is probably making, you know, 200 % on that.

47:56If you think about Rolex specifically, great watchmakers in general. What do you think are the most important overall business lessons where you've seen how, let's say Rolex specifically works at a base level, you've walked the factory floors, you're intimately familiar with the products. And then when you start thinking about other product categories, whatever, it doesn't need to just be luxury goods. What do you wish more businesses did or certain way that they conducted themselves most based on what you've learned about Rolex. I think continuity of design is paramount. That is probably really a simple hub.

48:31If you look at the Samaritan I have on my desk I have a 1954 Samaritan it looks pretty much like this. You know I have one from 1965 that looks just like this. And the idea that you can create a consumer good and in fact completely superfluous kind of unnecessary consumer good that becomes iconic is everything. Like if you look at its competitors, look at Omega, the speed master, the wash of the moon. That is by far it's most iconic product and because they're making the speedmaster just like they did in the 1960s that is why it continues to have the problem that it does. Look at cars, Porsche 911.

49:01911s are trading well above retail right now for a variety of reasons. It wasn't always the case but now they are. And you look in the year as Birkenbad and you know it's just sticking with luxury. You know that bag has been around for 40 years and it will always be the iconic women's high and bag. So continuity design and we just did a podcast on the Sun and I think really is what creates multi -generational demand. And I think with watches in particular, my origin story is I was given an Omega Speedmaster by my maternal grandfather, who was my hero. And that watch continues in some form or another to be made today.

49:33And so when my daughter, who's on the other side of this wall, who's six months old again, is 25 or something. I could say, hey, Georgie, that's her name. Let's go out and get a watch. It looks just like that. It looks just like your great grandfather, so you never met. And there's something really wonderful about that because again, these are multi -generational items. Thinking long term, which is what Rolex does. Rolex is planning. I couldn't guarantee they have their product mixed figured out for 2035. Guarantee. Being able to not have to answer to shareholder's like somebody else do and play for the long ball.

50:05I think it was intoxicating for somebody like me. For example, in 2013, it was the 50th anniversary of the Daytona. At that point, the watch was still watched with the steel bezel. All people wanted was a black bezel. That was all we were looking for. It wasn't too much to ask for. They didn't give it to us. They waited another two years. They gave us a platinum Daytona with a colored bezel. It was kind of brown, ceramic bezel. And I'm just saying, man, that's kind of shitty. Like 50th anniversary, they're not going to give us the thing that we want. And it's just a black bezel, it doesn't seem like much.

50:33And then when the watch came out in 2015, we also great and we're celebrating it. And that kind of set off the Pan de Moneum. But they do these iterative things where like that black bezel Now exists on the gold version of the Daytona, but not on a bracelet. And so if you want to buy a black bezel on a gold Daytona, it comes on a rubber strap. And I guarantee you, next year of the year for that, we're going to get it on the bracelet. This idea of iterating to a degree that is so frustrating almost for the consumer, but it makes you so excited. And by the way, I want the gold Daytona on the bracelet with the black bezel.

51:05But because it didn't come out on the bracelet, I bought it on the rubber strap. Even though it's not even really what I want. You know, when it comes on the bracelet, I'm going to buy that too. And the idea that they've got, they've created demand for product that people will buy several iterations of basically, this is not basically really the same thing, it's just super admirable. And some of that creates products, which is what we do sometimes at HITIKI. I mean, to do things in that level of detail and continue to foster the demand that far outpace of supply is just remarkable. But again, doing things in a way that is not sharding from root -conference to the quality there and for people like me who know a lot about this product in particular, I can look you or anybody in the eye and say, yeah, if you can afford this watch, it's a great fucking product.

51:47What other brands in your kind of world would you encourage people to study in this kind of detail to learn interesting lessons? The other brand that I've mentioned a lot in this episode here is Omega. And I think Omega now is doing, they've learned a lot from Rolex, if I can say it, and nobody's told me that, but I can just see it. The Omega Speedmaster, which went to the moon organically, you know, it's not like they paid NASA for that. That is the greatest achievement of human content. We said, men to the moon, it's insane. And there was a Rolex to be clear in contention for that, and NASA chose the Speedmaster over.

52:20That's just the facts. And so the Speedmaster was not, believe it or not, the commercial stalwart that it is for Omega now. Up until probably five years ago, it was the Speedmaster, it was diewatches. And Omega is actually a larger brand in China than Rolex's believe or not. You know, they were driven by Chinese consumers. It was a lot of different colors and kind of interesting things. Then all of a sudden the current president, the guy named Rain all -nashman, came in and said, you know what, the speed master is iconic, the speed master. What the goddamn moon like this should be the thing that people go crazy for.

52:51And this should be the product that can compete with Rolex. And they started doing these special editions, these aluminum editions, one of which was to celebrate 15 years of Podinke. They did them with some other folks here and there. They did one with the Porsche Club of America. they did some special things with Snoopy, which is a tie of NASA. And then they stop. They stop. So no more limited editions really. They do different editions, but not limited. And now the sudden speedmaster trades above retail. The speedmaster is what everybody wants, and we're an authorized dealer from mega, and we can't keep them in stock.

53:19And so you look at the Omega Speedmaster, which 10 years ago was really kind of a secondary product. And now it's a primary product for the second biggest brand in the world, two sponsors, the Olympics and James Bond, and all these iconic things. And they're really paying attention to the enthusiasts, which, who I think you represent, which is who I represent, and the mass market folks, which is just the guy that wants a nice thing. I think Rolex has frustrated a lot of people, and this is no news to them. I'm gonna know they know, because you can no longer go in and buy the watch you want at all.

53:49And historically, the Daytona was always kind of difficult to get, but as a 25 -year -old guy that used to work in finance, which is when I started hooding, you make your first $5 ,000 bonus or whatever, and you go into the store and you buy your Samariner and like, okay, like I'm an adult now, I have a Samariner. That doesn't exist anymore. And I think that's a real bummer for a lot of folks. And that certainly has made the aftermarket price of these things go in a significant way, but it really turns a lot of people off. And Omega, Tag Hoier, Panerai, a lot of brands have really said, you know what, if you can't get that Samariner, we'd be happy to sell you a lot.

54:19And by the way, like, here's some champagne and we're gonna invite you to our next party. And you might enjoy it. Look, Rolex is an exceptional brand. I would never say they're not, I mean, I just want to go ask Howard, telling you by their exceptional. But these are just watches. And then we have to remember that. I'm the first person to say that, like, nobody needs a watch. No doctor is prescribing us to buy watches. We're not carrying cancer here. And so if somebody has worked so hard that they can afford a $10 ,000 Rolex and Rolex says, sorry, you can't have one, that's a really frustrating experience.

54:48An Xpercent or U says, well, maybe I just want you more now. But why I present U's kind of says, we're not kind of screw you, man. I'm gonna go buy an Omega. I'm gonna go buy an Enerite. and I'm going to love them and they're going to love me. It's just a matter of how much kind of ego there's involved there, some people don't care at all. But I can tell you without question that several people that I know personally have been turned off not only from Rolex, Attack, and for sure, Bill and AP, because these are phenomenally expensive things. Like Rolex on the low end side there. Let's talk about AP, which the watch you want is probably 30 pounds.

55:17The watch you might want is 150 pounds. But to walk into a store and say, hey, my name is Ben, I've got 150 grand ready to go. So I want to buy this thing and we told, sorry, no. Who are you? Can I see your Instagram P? What do you do for a living? Who do you know? How insulting must that be? And the answer is really fun, itself, to a lot of people. And a lot of people say, you know what? Fuck you. I'm just going to go buy it for 500 on pre -owned site or I'm just going to not buy it at all. I'm going to take a notification or buy a Ferrari instead. And I think this industry has really struggled with that.

55:46The market has been so buoyed by easy access to capital, I'll say. And the prices have just continued to go up and go up and away. It's not normal. And it's not just true for watches, true for cars, wine, art, etc. And all of a sudden, when things tighten up a little bit this year, which they have, people say, oh, wait a minute, like Rolex is or not, always open value, then I'm out. I'm just going to sell it. That's a shame. And I think, not just Rolex, but all luxury brands who have their chest puffed out really broadly now, should just remember that, like, everything's cyclical. And that, if you have somebody that wants to buy a product from you that nobody needs, you should give them as much respect as possible, because it doesn't last forever.

56:19We've talked a lot about the wonderful aspects of Rolex and some of these brands in general, what are maybe some negative lessons, things that you've seen them do through history, not just Rolex, the other brands like it, do you think are good valuable lessons of what not to do? You've mentioned one there, which is what sparks my question. The weakest link of any chain is always retail. Finding people, good salespeople is remarkably hard because you're selling stuff, and a lot of the folks that are able to afford this stuff, frankly, are incredibly intelligent, incredibly well -versed in the world, know everything, know everyone, if they don't, they're gonna go on, who they can read all about it, so they do know everything.

56:51And you get sales people that don't aren't used to that. And I think you have people that are selling product in a way that is so counter to what these things represent. Just using what I have on my desk, an example. I bought this GMT with a good friend of mine. He had just signed a deal to play in a band, the very famous band. And I had just signed my seed round in fundraising for Houdinkie, which was a huge deal for me. And we went into the Rolex store on Fidavin, and we bought the exact same watch to get. So this watch has nothing to do with how much it costs or anything. it has everything to do with like that success my life that success my friends like and to be told no in that moment imagine we were there together trying to celebrate these achievements for both of us now we were like sorry you can't have anything and at that point there were two of the exact same long sitting in the case it was easy but right now if we were to do it again we'd probably get told no it's so so demoralizing and insulting at his day to use the word enemy but like you could create an enemy for life as a consumer.

57:47That is crazy. Rolex knows it's a problem and they are doing everything they can to meet it. And I believe them when they tell me that they're creating more watches than ever before, since that demand is, uh, faces it. But there needs to be a better way. And frankly, I don't know what that way is. Maybe it's in commerce. I don't believe in that. I don't know. Maybe it's actual weighting this where people can actually put their name down and say, okay, this person is at that number for 1 ,123, when you get to that thing, you'll get the watch. That doesn't exist. The idea that the waiting list are even referenced by Rolex today is nonsense.

58:18There's no such thing. If you know somebody Rolex, you'll get the watch. If you bought a bunch of watches that they can't sell, then you'll get the one that they can sell. It's a gift, basically. And again, I wanna be clear, Rolex is not alone. Several brands that are very hot right now are doing the same thing. But man, both my parents were teachers. The fact that I have more than one Rolex is still shocking. Like, I'm just happy to be here. And so I think if I wasn't me in the watch world, but I had made a few thousand bucks so I wanted to buy one of these things, how disappointed you would be, how angry you would be that you just worked your fucking ass off for the last 40 years to get to a point where you can afford this thing, you told me no.

58:53I think that is a major problem. And I think that is going to continue to be a problem for a long time unless somebody's paying. It's a really interesting balance of like wanting it to be something aspirational, but once you achieve a certain bar to be able to do it, it's a fun line that you have to walk as a luxury brand, and really, really interesting. Look, it's integrity and it's honesty. If somebody came to me and said, hey, they knocked on my there said, hey, we want to buy your house. I probably say, well, I really appreciate that. But we're not looking to sell it. But in five years, when my daughter is grown and we need a bigger house, so it can be called.

59:19I would call that person. And I think that person would respect me for saying, not right now, but I'll give you a shout -out when we're ready. What goes on now is not at all that. It's basically say, hey, sir, please give me your name and we'll reach out if and when we have a product available, which doesn't mean a thing. It doesn't mean a thing. If you're celebrity, if you're an entrepreneur, or if you're somebody that has a million Instagram followers, they're gonna call you soon. And if you're not, you're not gonna get to call it all. And I think that is when things get really dicey when people that don't have purchase history is kind of like the new secret in the watch world.

59:49Here's another kind of interesting situation where a lot of brands are closing down off right here. So they're closing stores. So let's say you Patrick were the number one Audemars Piguet client at some dealer in Ohio or something. And you would buy a million dollars worth of APs from this software, I see it in Ohio, over the past 10 years. And then that dealer got close. And then you walked in the AP booth, you got on the seventh street. Today, my name is Patrick, like I've spent a million bucks with this dealer that no longer exists, like can I have the new ceramic terbian or whatever. We're so pleased for you to come in while we love the chat, but you know, you don't have to purchase this right here, so we're gonna have to put you in the bottom of the list.

1:00:24Like how would you feel about that? Imagine you've been buying that product in the correct me from an offer I see it for a decade, and you just got told you had to start all over again. And that is what's happening in the lot for right now. I'm not singling out AP or anybody, but it's the arrogance of some of these brands that are very hot to think that they can continue to treat people that way, even though everything is cyclical. And I've seen all these brands trade below retail, just like we're seeing them trade above retail right now. I'll certainly remember this conversation for this idea of companies that, as you get to know them, you like them more, which is probably quite a rare feature of any company.

1:00:57Typically, the thing you see on the front of it is the best version of the thing. almost by definition, like they're gonna surface the most attractive, interesting stories, elements, whatever. But this idea that I'll think of those five floors below ground is a great lesson. And this has been so much fun. Like, what an interesting brand. I can't think of anything like it. It's a nonprofit that's had this endurance that has this global recognition and style. Thank you so much for taking the time today to break it down with us. It's my pleasure. It's been a lot of fun. To find more episodes of Breakdowns ranging from Costco to Visa to Moderna or to sign up for our weekly summary, Check out JoinKalossas .com.

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