Lange & Sohne CEO Wilhelm Schmid's Take on the Watch Market and Luxury Timepiece Design

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0:40on the edge of what we think we know. Wherever you get your podcasts. Bloomberg Audio Studios. Podcasts, radio, news. This is Masters in Business with Barry Ritholtz on Bloomberg Radio. This week on an extra special live edition of Masters in Business, I'm at the Audrain Newport Concourse d 'Elegance. And my conversation is with Wilhelm Schmidt. He is the CEO of Alangenzone, one of the finest watch companies in the world. They're located in Glashuda, Germany. Our conversation talked about everything from collectible timepieces to collectible cars. I found it fascinating, and I think you will also, with no further ado, my discussion with Alangenzone's Wilhelm Schmidt.

1:37But Wilhelm Schmidt, welcome to Bloomberg. Thank you so much, Barry. Thank you so much for hosting this event and participating in our conversation. I have so many things to talk to you about, but I have to start with this prestigious concourse in this spectacular setting on what could be the nicest day of the year. What is the connection between classic cars and fine mechanical timepieces? Yeah, some mean people say me because I like cars and watches and watches and cars, but I think it's, of course, more than that. You know, watchmaking, that's what we emphasize. And 90 % of our energy will go into watchmaking.

2:21That's our home turf. But I believe as a global brand, you also need to find a world that is focused on something else, but where you have sort of a common ground that you can walk on. And about 14 years ago, we were looking for a platform where we can show the brand and we can bring customers to entertain. And if you look at these cars, let's start with the cars and look at the word concourse of elegance. So we're not in vintage cars or racing. It's about concourse of elegance. It's about beauty. It's about heritage. It's about craftsmanship. It's about design. and if you look onto the pillars on which our brand rests it is exactly it's history heritage it's design and it's of course the craftsmanship and trust me these cars that you see here as they were built they were built by proper craftman and even today without proper craftman you will not keep them on the road and i know that you studied as an engineer and mechanic before eventually moving over to watches.

3:36Obviously, the design ethos of some of these cars, they're just so phenomenal and spectacular. What sort of inspiration do you, running a fine watchmaker, take from the designs of these cars? I don't think you can immediately take something from that world into our world. But if you look at these cars, Well, the first thing that comes to mind is some of them are 50, 60, 80, 100 years old. And we look at them today and they still fascinate us. So obviously that design survived all the different fashion, change of taste, odds of time. They are here today and they're as attractive as they were probably back then when they were brand new.

4:26if you look at specifically the purpose-built car you know the race cars they were built for only one purpose and that's what they were perfect in and i think in watches you also have to identify what is it that you emphasize on and then don't compromise too much on it because if you start making big compromises you end up with something which is you know a little bit of everything but nothing particularly really good so I think that's what you can take from cars into watches identify the purpose and then everything should direct to achieve that if I call it the North Star you know that purpose and for watches it's exactly the same so there's a lovely white Mercedes going out there is a red interior and I once heard someone ask you to compare a longer to a car and you thought about it and said the goal wing because the design was purposeful from start to finish tell us what you mean by purposeful in either watch or card design well you know if you if you go back and uh think about the mid 50s in germany um i mean i wasn't born there i'm not that old but um you know i can i see i saw pictures i saw pictures of the autobahn i saw the cars on the road back then and then think about very suddenly something like the gold wing appears i mean an alien could have landed and caused the same result um tubular frame 210 horsepower you know 235 kilometers an hour high speed um you know what it did the doors because you couldn't have a door over that frame exactly the body too the seals were too wide right so they just came up with the doors and you know what they did at limo they wanted to permit that because in the book it it it didn't say explicitly it's not allowed but you know neubauer got leave and they did very well absolutely they did absolutely did no but i think the car was made for one purpose and I was winning races in the first place and and and paving the way for Mercedes internationally to be back where they wanted to be and that is very high up don't forget the price of these cars I mean you could probably bought streets for the same price not houses streets mm-hmm in in the mid 50s Arguably the first supercar ever made.

7:04So you're a connoisseur of vintage cars. I know you have a couple of Porsches. Tell us what else you like in classic automobiles. I do like what I call the oddballs. The Porsche that I have are actually the exceptions because everybody knows what a 911 is. And probably many people know what a 356 is. so that's um i don't say utility but these cars are you know the the 356 is my swiss pocket knife right because you know you can go on a tour with it which i take that car a lot and if the weather is nice you just open the roof and it takes you 30 seconds and if the rain comes it takes you 30 seconds to bring the roof back on it is not as watertight as you think it is i have to say there's still a lot of water coming through but at least you're roughly protected against the environment and the 911 is the car that I never wanted and I will never sell it's just a fantastic driving car but you know the other cars that I have are more for people that really know about cars you know if I share somebody I have a Fraser Nash most people right wouldn't even know what that is And that's not a surprise because I think they build about 600 cars pre-war and then about 83 post-war.

8:22So the likelihood that you know it, if you're not into the hobby, is very high. So I keep meeting people here, chatting about cars, chatting about watches. When I was doing a little research on you, it turns out that you really know the firm's clients, both customers and collectors. What do you do in an event like this? How much time do you spend with some of the Lange collectors and people who are so enthusiastic about the brand? I would say 90%. Really? If I'm not in interviews with you, then I'm out there and talking to our customers. That's the most important for us because at the end, we mustn't forget all that is not paid by Lange und Söhne.

9:06This is paid by our customers. So there's a quote of yours I really enjoyed. We want to surprise, inspire, and enchant our clients with an unprecedented imagination and ingenuity. How do you go from those lofty goals to turning it into a mechanical timepiece? Yeah. Well, first of all, it takes strict discipline. The moment you do things that are not in line with who you are, You may surprise people, but probably not positively and for sure eventually will dilute your brand equity. So the third thing is you have to apply discipline. That's why we have six different watch families and we have sort of a horizon of seven years and we want to apply each watch family at least once, let's say within 24 months rolling.

10:00um so that's you know sort of the the engineering structure all the temps that doesn't answer your question i know um staying traditional but thinking out of the box uh because our value set is very traditional but our thinking is often very much out of the box i give you a good example the tourbillon has been invented by breguet i think about 280 years back or so something like this it was there to enhance the accuracy of a watch by you know eliminating the mistake that happened through gravity basically and mostly pocket watches which were always facing down and and of course it's a very delicate mechanism um it does do the job because think about you put your watch on desk next to your bed so at least for 10 hours it is exposed to gravity without moving Anyhow, I want to argue the necessity of a tourbillon.

10:58What we found very interesting is that it was there to enhance the accuracy, but it was impossible to set time correctly. Because if you do that with a running second, it is pure luck that you hit exactly the point. So we were the first in 2009 to come up with a mechanism that makes the tourbillon stop. so the second hand comes to a stop and you can adjust the time properly we then went one step further with the 1815 tourbillon where you not only stop the moment you pull the crown that second hand goes to zero which is the best way to adjust your watch properly now that sounds easy but if you take into consideration that that tourbillon has about 85 little parts the total weight is about 0.75 gram wow you you know any impact and the mechanism will be destroyed so you have to be very careful in what you do that is just one example where we think out of the box a chronograph with sort of a running minute which most of them do you know the second hand goes and it's catching the the minute counter and then as as the second hand goes on the minute counter slowly moves which makes it quite difficult is it now two minutes or three minutes or four minutes so hours in most cases have the jumping so it's the second hand crosses the 12 it jumps by one minute so you're absolutely clear it's one minute two minutes three minute or four minute not is it two and a half or is it three just little things that don't mean a lot for people that are not into fine watches but they mean the world for our customers i i want to talk about the odysseus in a little bit and that particular chronograph which is fairly unique but we're not quite there yet i want to stay with the fact that langa is famously a german watchmaker what advantages are there or disadvantages for being a german maker in an industry dominated by giant swiss brands look it i think it's more an advantage than a disadvantage um first of all i always say there is no Swiss watchmaking and there's no German watchmaking.

13:11Because think about it. I mean, you can find Swiss made watches for 100 euro and then you find the same for a few million. How can how can be there any common denominator that covers the Swiss made from there to there? So same for Germany, you know, we have watches that are very inexpensive and then you have us with sometimes watches up to two million. Obviously, at the at the top end, it's like a package. It's like a box of chocolate. And our chocolate is craftsmanship, history, and design. And we stay very strict to it. So some of the bigger brands put out watches in the millions of units. Rolex famously two to three million.

13:55Patek is known to do about 75 ,000 watches. Lange does a small fraction. every piece is made by hand assembled twice um and not because we can't get it right first time just to make that assembled first and then the pieces are taken apart and hand engraved and decorated well it's it's you know because we use the original sources um we believe that anything um that nothing is much better than than german silver you know that's the perfect material it's it's been good for the last 150 years so we believe in this and we don't want to coat it which means over time it will develop a very nice patina you know the silver will get that little golden glue which is beautiful problem is you breathe on it or you touch it it will look very ugly very soon and you cannot even clean it you have to machine it so that means to to to to maintain a statical and technical perfection you first have to make sure your movement is absolutely up to scratch all tolerances are there everything is adjusted everything works you go through the test and if you have assurance you know that movement is like it has to be it goes back to the watchmaker he or she will disassemble it clean it put in the final decoration because now you know you don't have to adjust anymore because that's done you clean it you oil it you put the final decoration in case that it goes again through the test and only then it ends up in a on a happy wrist so inherently the way you build watches you're going to be somewhat limited in production how does that affect the decision making process of what sort of watches you make and i know there are a number of longer watches that are limited editions of 100 or 50 or even 25 what's the thinking behind that very easy um you know sometimes let's take the minute repeat a perpetual calendar that we launched this year in april we know it's going to take three to four years to build the 50 watches meaning from start to finish you'll do a couple of watches every year wow you know so and we know that so in today's world to come up now with this sort of capacity and say we produce a hundred means the last one we'll get to watch in eight years right that's a long time that doesn't make any sense so what that's you know capacity balanced by what we think we can expect from a customer to wait that usually gives an idea about the limitation.

16:42I was looking at the Lange Perpetual in black and I stopped by the boutique and they said, figure somewhere between 12 and 15 months before yours is ready. So when someone orders a watch that goes into the system and my watch is moving, it's literally that specific. Coming up, we continue our conversation with Elangenzone's CEO, Wilhelm Schmidt. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

17:33As our use of AI expands, how do we make sure it doesn't end up breaking the internet? I'm Hannah Fry, host of The Exponential Era, a series that explores the real-world impact of future network technology. And I sat down with two experts to discover how we can support the massive connectivity needs of AI. Find out what I learned at bloomberg.com forward slash Nokia.

18:05I'm Barry Ritholtz. you're listening to Masters in Business on Bloomberg Radio. Let's continue our conversation with Wilhelm Schmidt, CEO of watchmaker Alangenzona. So the Odysseus came out, very unique looking sports watch, then a lightweight titanium version. No, first a white gold. White gold. So it was 24th of October, 19th, stainless steel in April, 2020, white gold, then titanium. then the honey gold then the honey gold no then the odysseus chronograph ah the chronograph which is the honey gold so i let's talk about the chronograph most people are familiar with chronos because they typically have two or three sub dials not with the odysseus that wouldn't work because of the design of the dial you know if you're so the big day and date if you take the dial off and you look at the uh movement on the upside of the movement you will see it's almost all blocked so So there is no way that you come through.

19:08And of course, we also didn't want to increase the size by much. You know, we want to have a wearable watch. So the only way was to utilize the center even more than we usually do. And that's why the chronograph, the second and the minute hand comes out of the center. And when you reset the chronograph, it does a little bit of a dance. That's kind of unusual. I've spoken to a lot of people about this. nobody has been able to explain that to me. You're my last hope. Tell us about that. It's very easy because they are geared together. So if you reset it,

19:49the minute hand will do as many turns as the second because it's linked. Right. It is so quick that you can't see it. I probably would take a good camera and then you slow it down to see it. But basically, if you have stopped 17 minutes and let's say 30 seconds um what works like this is factually seven times going around to come to zero why does it why does it do that because it's geared together it's there's you know because it comes out of the center because of it's a center hand that's exactly the point huh that that's really that's really fascinating so a watch like the z work or the odysseus how long is that process when someone first conceives of this.

20:34Take us through how long it is from idea till the finished product in the boutique. Very different. You know, Odysseus, as I said, took us 25 years, basically. I think that the real process where we identify that's the face, you know, that looks different to anything else in the market that will not cannibalize anything within our own range. to launch to watch at the 24th of October in 2019. Always a good seven years. Seven years from start to finish. That's amazing. So yesterday at the event, two new longas dropped, the Saxonia Thin in black onyx and platinum. Is that right? Yes, true. Onyx, honey gold and platinum.

21:23Really striking dress watches. The Saxonia are sort of, I don't want to call it entry level, but they're less pricey than some of the other watches. They are more simple. Simple, okay. For us, it's all about the amount of parts, the years it takes to develop, the hours it takes to assemble. That at the end will define whether it's a complicated watch or I would say a more simple watch and two hands. I think we don't go more simple than two hands. And my first nice dress watch was a rose gold Saxonian mood phase over black. Yes. And one of the things that people are genuinely surprised is the same level of detail and finishing.

22:11What you describe as simple, a lot of people think of in terms of price point. There seems to be no difference. No, no, no. If you look at our process in the manufacturing, the people that work on finish, they sometimes have no idea where that part will end up. So they will not say, oh, that goes into grand complication. We do it a little better or that goes into thin. Oh, we do it a little. The same thing regardless, a million dollars or entry level. We do not distinguish in quality at all. It's all the same emphasized on lofty detail, craftsmanship, hand polishing, decoration, hand engraving.

22:51There is no difference. Double assembly, it's one process. It doesn't matter whether the watch would cost 25 ,000 euro or 2 million. And when people say to me, I'm looking for an elegant dress watch, but something that's not too pricey, my answer is always the Saxonia. it's just timeless and so elegant and continues to just the design gets better over time and and it's it's it's a you know people you look at it and you see it's an Alango and Zöner watch if you have something complicated like this you have a lot of hands to work with you have to sub dials you know you have to push but you can do a lot but I think one of the biggest challenge for designers is you have two hands to work with and not a lot on the dial.

23:41Make it an a lange and a söhne. So the datagraph has been called one of the best chronographs ever designed. What's the core of that watch's appeal? What makes that so special? I think it's it's more than just a watch you know I'm a watch collector for a long long time I can remember when I opened a newspaper in in 1994 and I saw the ad with the four lange watches 99 were most companies around the world we're still using somebody else movement and often the same supplier here comes a chronograph which is one of the crown things in watchmaking from germany in a very unique design with an outsized date i think it was a wake-up call and and and we must not underestimate what that watch started in the watch industry because before that chronograph didn't play a role there were two supplier and that was it basically after that and if you then go and and analyze what happened from then to the following five six seven years a lot of chronograph movements came out so that's why this watch is so important for us because that was the first real complication other than the tourbillon polymerate that we worked on and I think that was a wake-up call and it just gave us a reputation as a solid watchmaker that it's the next level up for sure absolutely the next level up so you get to spend a lot of time with with clients with customers with collectors how are you seeing the um their expectations and desires changing what does the client base look for from langa over the next decade it does it never changed um never changed no um you know first of all do you have any idea what you will like in three years from now on who does exactly so when people say oh you come with a small watch because you follow trend And I say, look, I mean, I wish we had known seven years ago when we started developing the movement.

26:16We are not in the fashion industry business. You know, our processes and the time it takes to come to market is so long that you maybe can anticipate. But maybe you have to stay true to yourself. And I think the one thing which our customers expect from us is authenticity. It has to be in our lange und Söhne. and if you had followed the discussion after we launched the Odysseus because you know we always said we only precious metal and here can we steal and later on with titanium so of course there was a heated debate of course there was and we were aware of it because that is a tension that on purpose we wanted um there were a lot of people that said that it's not for me i see longer as dress watch only there were luckily a lot more people that say i want that watch desperately where we can produce fine um however it just opened up a new chapter in our design language because now we have a playground to try out things that we would never do with our classical watch families.

27:35And every car enthusiast knows when the Porsche 911 came out, the 356 purists were upset. What are you giving us such a big car? Who needs six cylinders? Absolutely. That's why they built a 912, put a four cylinder in. You know, that's exactly what they did. And so, yeah, that's funny sometimes. I love this quote of yours, and I'm wondering if it still applies. You said, part of Langa's success is that we're a secret. Yeah. So question number one is, what makes that an asset? And question number two is, look at this event. How much longer is this a secret? Oh, it is. It is. It is. In the wide world, we are still absolutely unknown, and I think that's a good place to be.

28:22there are there are three reasons to it the one is what we do is very difficult to understand specifically at the price point that we request for people that are not into fine watchmaking why would you spend so much money on a watch when your iphone gives you the time more precisely. You know, the general thinking. For sure. The second is, in today's world, you don't want to show off too much. These are very much under the radar, and I am always shocked at people who haven't the slightest idea when I'm wearing this, as opposed to the better known brands. Isn't that nice? I mean, that gives you a certain confidence.

29:09Quiet. You don't need to shout. And on the other hand, and I'm sure you can agree on it, if you see somebody that is also having a lange und Söhne, it's not difficult to get the communication started, isn't it? Immediately you have something to chat about. If you know, you know. And that's why I believe it is so important to remain a secret. I also admit the real challenge is to share a secret with the right crowd of people because at the end, you know, I mean, I'm fine. But whenever we take the new apprenticeship trainees in, in August, I feel the duty on my shoulders because now they start a career as watchmaker and they're in for the next 40 years.

29:56So we need to make sure that the next generation knows what we do and we stay relevant for this. So I only have you for a few more minutes. I want to get to my last couple of questions. Speaking of the next generation, How do you appeal to younger buyers and what sort of approach do you have as all these tastes seem to shift amongst the 20 and 30 something crowd? Yeah, gladly we don't have a real issue here. We have a surprisingly young customer base. I always say that and I never understood it. I mean, if you're young and you're interested, what speaks against quality, longevity, classless and timeless design, robustness, value creation?

30:45I mean, it doesn't matter whether you are 100 years old or 10. If you're into that, you're going to like it. The way we connect with these people is different to the way, let's say, I was connected to the watch industry. because as i grew up it was very difficult to find even specialized magazines for for watches today you have everything you can think of i believe we live in absolute paradise times for for watching through the us because never ever in history have there been more watch brands um higher information right more information and easy accessible information you know you can do your research without leaving your room that was impossible in times you know where i started to get into the hobby although i i would tell people go see the watch go try it on make sure the only thing that matters that's right it's the only i just say the natural habitat of a wrist watch is is the wrist so forget about looking at something and i like it that's a good start but the moment of truth is you grab that watch you put it around your wrist you look at yourself and see is it me or is it not so how do you have access to every longer watch there is how do you decide what you're going to grab that day to wear i you know this one because of you know chronograph we're in our world uh it's the 1815 so that's the more classical line i'm a huge fan of chronographs and it doesn't get any better than a chronograph ratrappant.

32:23So, you know, that. And I admit, I think it works very nice with my tan color right now. So our last question, tell us what's next for Longa and Sona. What surprises are coming up down the road? What should we be looking for? I think it's always good to look for. But if I now share secrets, there's no surprise. And that's the one thing people love surprises. But I can share with you as much as this is not the last surprise for this year. Oh, really? So the Saxonia Thins, not the last surprise of 2025? That's what I said. Fantastic. That was my conversation with Wilhelm Schmidt, CEO of Alangenzona at the Newport Audrain Concourse de Elegance.

33:18Extra special thanks to the team that came up to Newport to help film this. Alexis Noriega is my video producer. Sebastian Escobar is my videographer. Anna Luke is my producer. Sage Bauman is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.