Rolex (Audio)

Ben Gilbert 0:00 All right, David, what's on your wrist?

David Rosenthal 0:02 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 fifteen years ago, but not like it is today.

Ben Gilbert 0:14 A strong choice. I'm actually also wearing a Daytona that I am borrowing from a good friend of the show.

David Rosenthal 0:20 Mm, love it!

Ben Gilbert 0:21 Well, fun fact for our 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.

David Rosenthal 0:32 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 Rolesor Datejust.

Ben Gilbert 0:41 Dude, you gotta go one on each wrist.

David Rosenthal 0:43 You got it. [laughing] Great.

Ben Gilbert 0:46 All right.

Speaker 0:46 Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight, another story on the way. Who got the truth?

Ben Gilbert 1:03 Welcome to the Spring twenty twenty-five season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

David Rosenthal 1:11 I'm David Rosenthal.

Ben Gilbert 1:12 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 in an hourglass. It could be a weight being pulled down by gravity on a grandfather clock, slowly turning the hands, moderated by the tick-tock 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.

David Rosenthal 1:49 Ooh.

Ben Gilbert 1:49 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 Wilsdorf 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.

David Rosenthal 2:14 Oh, yeah. It's funny that the closer to the present day we get, the less we know. [laughing]

Ben Gilbert 2:19 Totally! They operate like an intelligence agency over there.

David Rosenthal 2:22 Yes, like James Bond, one might say.

Ben Gilbert 2:24 Oh, or one might not say.

David Rosenthal 2:27 [laughing]

Ben Gilbert 2:28 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 a year actually do buy one, and for an average price of thirteen thousand dollars 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.

David Rosenthal 2:53 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. Hermès doesn't sell a million Birkins every year.

Ben Gilbert 3:07 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 a hundred and twenty years. It 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. [laughing]

David Rosenthal 3:35 No, no, it was not.

Ben Gilbert 3:37 It's a ten-plus billion dollar revenue business performing a dead craft obsoleted 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 giddy to share.

David Rosenthal 3:56 Oh, so excited.

Ben Gilbert 3:57 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.

David Rosenthal 4:09 Yes.

Ben Gilbert 4:10 If you wanna 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 we'll share corrections, updates, and little tidbits that we learn from previous episodes. That's acquired.fm/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.fm/slack. And if you want more Acquired between monthly episodes, check out ACQ2, 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 Rauch, the founder and CEO of Vercel, about really the whole history of web development frameworks and their latest and greatest product, v0, a startup within a startup that lets you code web apps from scratch in just English instead of a programming language.

David Rosenthal 5:06 Yes.

Ben Gilbert 5:07 Search ACQ2 in any podcast player. And before we dive in, we want to briefly thank our presenting partner, J.P. Morgan Payments.

David Rosenthal 5:15 Yes, just like how we say every company has a story, every company's story is powered by payments, and J.P. Morgan Payments is a part of so many of their journeys from seed to IPO, or in this case, [chuckles] uh, never being public ever, uh, and beyond.

Ben Gilbert 5:30 And listeners, this is not investment advice, but, um, you can invest in this, and you can invest in many of the other great brands that we are gonna talk about on this episode either. There's something kinda remarkable about the, uh, companies we wish we could invest in, but actually, we can't. So this show is for informational and entertainment purposes only. David, where do we start our story?

David Rosenthal 5:52 All right. Well, we start, as is 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 Kulmbach, Bavaria.... about 30 miles north of Nuremberg, in present-day Germany, where Hans Wilsdorf Eberhard Wilhelm Wilsdorf is born to young Anna and Johann Wilsdorf.

Ben Gilbert 6:21 And you might say, this sounds like a German name. Bavaria wasn't a part of Germany, right?

David Rosenthal 6:26 Well, I was just gonna get to that. Technically, it's not Bavaria anymore. Technically-

Ben Gilbert 6:31 Ah

David Rosenthal 6:31 ... it is part of the German Empire, but this is a very, very recent development, as the Count Otto von Bismarck had only just 10 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 Bavarian. 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, um, calls back to our Hermès 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 as, even from birth, he's kind of this consummate outsider. He doesn't really fit in 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.

Ben Gilbert 7:55 Yep.

David Rosenthal 7:55 Now, back to young Hans and his family. His father, Johann, came from a line of successful ironmongers, 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 die within a couple months of each other. So he's orphaned, just like [chuckles] ... This should sound familiar, Ben.

Ben Gilbert 8:22 Oh, yeah, Louis Vuitton and Hermès.

David Rosenthal 8:26 This is absolutely freaking nuts. The founders of arguably maybe the three biggest and most significant luxury brands in the world today were all orphans from the 1800s. This is wild!

Ben Gilbert 8:40 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-

David Rosenthal 8:51 Yes, all sorts of stuff.

Ben Gilbert 8:52 Just lots of people died for lots of reasons.

David Rosenthal 8:54 Yes, totally, totally true. But it's just so interesting, right? These brands, I mean, much less so Rolex, but Hermès, LVMH, are so steeped in this European history and the tradition of the nobility, but it's actually these orphaned outsiders that founded them.

Ben Gilbert 9:10 Well, I think this is a great point. Rolex doesn't share that heritage at all. This is not steeped in nobility. This is not an artifact, like a leather bag or a saddle, that any king's ever had.

David Rosenthal 9:22 When you buy a Submariner, or a Daytona, or even a Datejust, you are not buying Swiss history here. You are buying 20th-century modernity, as we will get 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 ironmongering business to fund sending Hans and his siblings off to boarding school.

Ben Gilbert 9:50 I see.

David Rosenthal 9:51 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 due."

Ben Gilbert 10:24 Hmm.

David Rosenthal 10:25 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. He's like, "Oh, 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 Cuno Korten. Cuno Korten, 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.

Ben Gilbert 11:32 Well, you need something to bank.

David Rosenthal 11:33 Yeah, you need something to bank. [laughs] Exactly.

Ben Gilbert 11:36 A country can't just have banking as an industry. It needs a real economy to build banking on top of.

David Rosenthal 11:41 [laughs] Exactly. You start with jewelry, watches, then you get into banking. And Cuno Korten is actually a major player in the watch trade. Now, they are not watchmakers, they are watch exporters, so they are facilitating the trade of all these best-in-the-world Swiss watches out of Switzerland and into other countries around the world. And at this time, this is, like, the late 1890s, Cuno is doing about a million Swiss francs worth of business a year. Now, I don't know exactly what the Swiss franc to US dollar exchange rate was in 1900, but today, the Swiss franc is stronger than the dollar. It's about one to one.

Ben Gilbert 12:18 They're pretty close.

David Rosenthal 12:20 ... so call it a million dollars of business a year in the 1890s. Like, this is big. They're a big player.

Ben Gilbert 12:24 And it's important to remember, too, it's not like watches were this little corner of the Swiss economy. Exporting watches was a huge part of the Swiss economy and a huge employer in the nation.

David Rosenthal 12:37 Yes. Now, we're saying watches here. It's important to note, what were watches at the time? They weren't something you wore on your wrist. It was not wristwatches, because basically Hans and Rolex hadn't invented that yet. They didn't exactly invent it, but hadn't popularized it yet. We're talking about pocket watches.

Ben Gilbert 12:55 Yes.

David Rosenthal 12:56 That's what the industry was at this time.

Ben Gilbert 12:58 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 in bigger watches. And so whenever anyone tried to make a watch and put it 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 wristwatches, they called them wristlets, and they were mostly worn by women.

David Rosenthal 13:26 Wristlets, yes. [laughing] We'll get more into that later, and I know you're chomping at the bit to-

Ben Gilbert 13:32 [laughing]

David Rosenthal 13:32 ... give me the technical explanation of the crazy human craft and engineering that goes into watches.

Ben Gilbert 13:39 It's amazing. It's so unbelievably cool.

David Rosenthal 13:41 But back to the Hans story for the moment. So the job that young Hans gets here at Cuno 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?

Ben Gilbert 14:08 English.

David Rosenthal 14:09 English. So he's coordinating with most of their clients in the British market, in the UK.

Ben Gilbert 14:16 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.

David Rosenthal 14:28 He's seeing the market prices and price action happen for all different types of watches from different makers and different parts, et cetera, et cetera. 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.

Ben Gilbert 14:46 Yep.

David Rosenthal 14:47 So he's getting the perfect business market, strategic background, distribution relationships for going on to 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 and 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 Cuno Korten was trading in. So he would set them all at the same time and let them go overnight, and then he would check them in the morning, how much they were 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 tests. So if you've ever heard the term chronometer, a chronometer is a timekeeping piece, could be a watch, could be a larger clock, could be all sorts of devices, that has passed these astronomical observatory tests for being accurate enough for celestial navigation.

Ben Gilbert 16:07 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.

David Rosenthal 16:28 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 then, this is critically important. Celestial navigation, if you're involved in anything, in shipping, the maritime trade, is critical. If you have a crappy timepiece-

Ben Gilbert 16:48 You're gonna go to the wrong place 'cause 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 the local church bell or whatever, whenever I need to reset it.

David Rosenthal 17:03 But yeah, young Hans has this idea. He goes and does it, and he... Guess what? These three pieces that he takes, these pocket watches, they pass the tests, and they get certified as chronometers. And he takes them back to his bosses at Cuno, and they're like: "Whoa! Well, let's-

Ben Gilbert 17:17 Gotta market that.

David Rosenthal 17:18 Market this." [laughing]

Ben Gilbert 17:18 Yeah. [laughing]

David Rosenthal 17:19 Slap that on the tin, baby, you know? [laughing] And it's this aha moment of Cuno, and then soon the rest of the industry realizes, "Oh, actually, chronometer certification on pocket watches helps us move product here." [chuckles]

Ben Gilbert 17:33 Yep. The other thing to realize here is we're in an era where, [chuckles] and this era would last the next hundred-plus years, but an era where having a watch is super important.

David Rosenthal 17:47 Yes.

Ben Gilbert 17:47 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.

David Rosenthal 18:03 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, in that they're 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 your pocket watch out. You're gonna open the clasp. This is what people did. It was just so ingrained in everyone's day-to-day existence.... just like a smartphone is today.

Ben Gilbert 18:30 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.

David Rosenthal 18:52 Totally. So after working at Cuno 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 wanna 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.

Ben Gilbert 19:17 Mm-mm. What, you and I read probably five books between us, and it wasn't in any of them.

David Rosenthal 19:21 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, their 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 and education had prepared me." So he strikes out on his own, starts his own watch importing company there in London. But remember the specialization piece. That'll come back in a sec.

Ben Gilbert 19:55 Hmm.

David Rosenthal 19:56 So Hans is out on his own. There's 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 buying.

Ben Gilbert 20:16 Gotta place the order.

David Rosenthal 20:17 Yes. So through his lawyer, he gets connected with a local man in London named Alfred James Davis, who has some money to invest. And so they meet through the lawyer, they hit it off immediately, and decide to go into business together, and thus, in 1905, Wilsdorf and Davis Limited, the world-famous merchant watch trading firm, is born. And, uh, yes, none of you know Wilsdorf and Davis, however, Wilsdorf and Davis Limited is Rolex-

Ben Gilbert 20:49 Yep

David Rosenthal 20:50 ... as we shall see. Now, it's often said that, you know, if you read anything about the history, people will tell you, "Oh, well, Davis was Hans' brother-in-law. He married Hans' 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.

Ben Gilbert 21:12 But really, it is Wilsdorf's company. It's kind of funny that Davis's name is on it. I kinda 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.

David Rosenthal 21:29 I think that's right, and obviously, they get closer over time as they become family when Davis marries Hans' sister. But yeah, I think this is Hans' business. He's running it. Davis trusts him.

Ben Gilbert 21:41 Yep. And so what is the business doing?

David Rosenthal 21:44 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.

Ben Gilbert 22:00 And they're not selling directly to consumers, right?

David Rosenthal 22:03 No, just like back at Cuno Korten, the buyers are the retailers, are the jewelers. No end consumer had any idea who made their watch at this point in time. They would walk into the retailer, say, "Give me a fine Swiss watch, sir," and the retailer would sell it to them.

Ben Gilbert 22:18 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 retailer's 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 and a 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 it 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.

David Rosenthal 23:00 Yes, there is no brand for the product.

Ben Gilbert 23:02 Right. So Wilsdorf and Davis is occupying the spot in the value chain where they are importing the watches and then selling them to retailers to brand.

David Rosenthal 23:11 Yes. Now, you said there, a minute ago, something really important, which is there were kinda two ways that this would happen. You would either import fully finished watches from Switzerland, a whole product, so to speak, and either a trading firm like Wilsdorf and Davis would do this, or Cuno Korten would export it, or maybe the retailers would buy directly from Cuno Korten, et cetera.

Ben Gilbert 23:32 If they were big enough.

David Rosenthal 23:33 If they were big enough, yep. What Wilsdorf and Davis are doing is they're saying, "Well, Hans knows, through his time at Cuno Korten, all the best movement makers, all the best case makers."

Ben Gilbert 23:47 Right, he operated one click up the value chain, sort of aggregating on the Swiss side.

David Rosenthal 23:52 Exactly.

Ben Gilbert 23:54 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."

David Rosenthal 24:03 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.

Ben Gilbert 24:20 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.

David Rosenthal 24:36 ... Yep, not the dial, right?

Ben Gilbert 24:39 Correct. No dial, no hands, no case, no glass front.

David Rosenthal 24:46 And the movement, I think like you said, is kind of the critical piece.

Ben Gilbert 24:51 Absolutely. That's the hard thing.

David Rosenthal 24:53 Case is important, dial is important, hands are important, but that's all aesthetics. And as far as performance goes, 100% movement. It's like semiconductor production. If you're a movement maker, you're like TSMC here.

Ben Gilbert 25:05 Right. Chronometer officially certified refers to the movement. Actually, in fact, only the movements are tested, not the whole final cased watch.

David Rosenthal 25:13 Not the finished watches, yes.

Ben Gilbert 25:14 So David, who is he importing movements from, and how does he meet said movement maker?

David Rosenthal 25:20 Well, that brings us to the other half of the Rolex equation, one Jean Aegler, based in Bienne, Switzerland, which is in the mountains of the north of the country.

Ben Gilbert 25:33 Importantly, not Geneva.

David Rosenthal 25:35 Yeah, not Geneva. Geneva is in the southwest of the country in Switzerland, right next to France. So Aegler 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 [chuckles] at 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 Jean when he was working at Kunz & Corten 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."

Ben Gilbert 26:22 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 he can think of.

David Rosenthal 26:29 Totally. It's like his hobby horse. "I'm gonna push the limits of human achievement of how small can I make this thing?"

Ben Gilbert 26:34 Yes.

David Rosenthal 26:35 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 is my ticket to differentiation here."

Ben Gilbert 26:45 "I'm keeping his address, so I can write him a letter when I get to-

David Rosenthal 26:47 "When I start my own company."

Ben Gilbert 26:48 Yeah.

David Rosenthal 26:49 So here we are at the beginning of Wilsdorf and Davis. Hans is importing these movements from Aegler that 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, [laughing]

Ben Gilbert 27:09 [laughing]

David Rosenthal 27:09 Until Rolex finally buys Aegler in 2004, where Aegler 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.

Ben Gilbert 27:24 Yep, that's correct. "We will make your movements," handshake deal for 99 years.

David Rosenthal 27:28 Yes. All of Rolex, everything it becomes, this is the basis of it.

Ben Gilbert 27:33 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. Why does the retailer get to put their name on it?" And so he goes to Aegler and says, "The ones we're gonna sell, these are Wilsdorf and Davis watches. I understand you made the movement, but we gotta brand it somewhere." And so he gets Aegler to buy in on this idea that on the movement, they're gonna put a W and D, and then also inside the case back, for whoever they're buying the case from, they also inscribe W and D. And so that's the state of things here in 1905 and those first few years after, is there's a W and D on the inside case back on the movement, but not on the face of the watch.

David Rosenthal 28:31 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 Aegler'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 Wilsdorf 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 at wristwatch yet, but he's like, "The way that I'm gonna succeed and break through here is through differentiation."

Ben Gilbert 29:34 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.

David Rosenthal 29:49 Yeah, 'cause he's not right with traveling watches. [laughing]

Ben Gilbert 29:52 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."

David Rosenthal 30:04 Yeah, and, you know, I, I don't know, I guess reading what Hans wrote there, maybe he was right. It sounds like the traveling watch was a success enough. He probably thought it was a success at the time.

Ben Gilbert 30:13 Yeah.

David Rosenthal 30:14 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 Boer War in South Africa. Man, Ben, I never knew that all of my, like, European-

Ben Gilbert 30:30 Absolutely

David Rosenthal 30:30 ... AP European history lessons are gonna- [chuckles]

Ben Gilbert 30:32 I tweeted this yesterday. I- [chuckles]

David Rosenthal 30:34 I know, I know. [chuckles] Who knew that our livelihoods would depend on AP European history someday? [chuckles]

Ben Gilbert 30:40 That's right.

David Rosenthal 30:41 ... Anyway, Hans is reading an account of the Second Boer 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 the troop movements, even while they were holding guns.

Ben Gilbert 30:59 Do you know why, in particular, this war had them wearing wristwatches?

David Rosenthal 31:04 Oh, I don't. I just assumed that the technology had progressed enough, 'cause wristwatches existed at this point in time. They just weren't thought of as serious watches.

Ben Gilbert 31:14 That was part of it: climate.

David Rosenthal 31:16 Oh, yes, of course!

Ben Gilbert 31:17 They can't wear their jackets, and so they can't reach into their pocket and grab a pocket watch.

David Rosenthal 31:21 Of course, because it's hot there.

Ben Gilbert 31:23 Yep.

David Rosenthal 31:24 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, Ben, 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-

Ben Gilbert 31:42 [laughs]

David Rosenthal 31:42 ... take your pocket watch out of your vest, open the case? No. [laughs]

Ben Gilbert 31:47 The axis upon which you evaluate value is a different axis than when you're hanging out on the streets of London.

David Rosenthal 31:53 Yes. Supposedly, as Hans is reading this, like a bolt of lightning, he has the key insight. Well, hell, 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 watch.

Ben Gilbert 32:14 Now, the funny thing is, he calls Aegler. Maybe he writes to Aegler, I don't exactly know.

David Rosenthal 32:19 He sends him a text.

Ben Gilbert 32:20 He places the largest order in Aegler's company history, several hundred thousand Swiss francs, for a bunch of these tiny movements, and the great irony of this whole thing is he's kind of wrong. The time was not right for wristwatches yet. The Boer War was not the shove that the world needed to say, "Whoa, wristwatches!" The soldiers come back from the Boer 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 Wilsdorf and 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 ten years before World War I happened, and you had this incredible, unfortunate tailwind saying, "Oh, my God, we need tons of wristwatches now."

David Rosenthal 33:14 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 Boer 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 Wilsdorf and Davis.

Ben Gilbert 33:40 So interesting.

David Rosenthal 33:41 But Hans is, like, a true believer at this point in time.

Ben Gilbert 33:44 [laughs]

David Rosenthal 33:44 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 wanna have to reach into your vest to bring out your pocket watch.

Ben Gilbert 33:56 He's like a zealot.

David Rosenthal 33:58 He's a total zealot. So he's like, "All right, we've got this killer product. We're first to 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-

Ben Gilbert 34:19 Yes

David Rosenthal 34:19 ... 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.

Ben Gilbert 34:34 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.

David Rosenthal 34:42 It worked in any language. It was 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 should work in any language, and it should not resemble any other name or be associated with anything else.

Ben Gilbert 35:06 Yep.

David Rosenthal 35:06 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 Cheapside in London, that a good genie whispered in my ear, 'Rolex.' " [laughing]

Ben Gilbert 35:38 [laughing]

David Rosenthal 35:38 He's good at myth-making.

Ben Gilbert 35:39 Many startups are named this way today.

David Rosenthal 35:41 Totally, and a few days after this fruitful journey, the Rolex brand was filed and then officially registered in Switzerland by Wilsdorf and Davis. Now, this is a brand name. This is not yet the company name. It's Rolex by Wilsdorf and Davis. So they trademark it in Switzerland. A couple years later, they trademark it in London.

Ben Gilbert 36:02 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, when you hear Rolex, you can kinda think about rolling a crown of a watch, you know, that little knob that's sticking out from it that you use to wind the clock. It channels that, and there's also the X, kinda has a timekeeping feel to it also. It almost is like the tick, tick, tick, tick, tick, tick, tick. A 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.

David Rosenthal 36:44 Yes, totally.... So Hans is like, "Okay, great. I've got my Kodak name. I've got the brand, invent this new category. How am I gonna legitimize this with customers?"

Ben Gilbert 36:57 "Well, I have this one cool trick that I've used before." [laughs]

David Rosenthal 37:00 Exactly! "I have the one cool trick. [laughs] I'm gonna do the one cool trick, just with wristwatches 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.

Ben Gilbert 37:21 Which is a big deal because people just did not think these things were accurate before, and without Aegler, they kind of weren't.

David Rosenthal 37:27 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, uh, oh, say, the Royal Observatory there in England. [laughs] So Hans and Aegler keep working on these products, refining the movements. Aegler's getting better and better at making wristwatch movements that are truly great.

Ben Gilbert 37:55 1910 goes by, 1911 goes by. We're here in 1912. Wilsdorf asks Aegler specifically, "Hey, can you produce a wristwatch capable of achieving an observatory timekeeping certificate?" And David, as you mentioned, the Royal Observatory, and Aegler says, "Let me try, and let me get to work." It still takes a couple more years.

David Rosenthal 38:17 So he works for two years, and then finally, in early summer 1914, Hans takes one of Aegler's movements to the Kew Royal Observatory in England, K-E-W, Kew, for testing. Now, Kew 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 in time. We're talking the British Empire, the greatest navy in the world.

Ben Gilbert 38:53 And it takes 45 days. They put it through the wringer to make sure that this marine chronometer is gonna get our soldiers, our sailors, where they need to go.

David Rosenthal 39:02 And even more than that, it is, of course, affiliated with the other great observatory in England, the Greenwich Royal Observatory-

Ben Gilbert 39:13 Yes

David Rosenthal 39:13 ... which, you know, was where Greenwich Mean Time was invented. [chuckles] We are talking, like, probably the most important timekeeping institution in the world.

Ben Gilbert 39:23 Have you been there, David, to Greenwich?

David Rosenthal 39:25 No. No, I wanna go. Have you?

Ben Gilbert 39:26 There's an awesome museum with the history of timekeeping. When I spent some time in London of summer, geez, 15 years ago, I went and spent a day there. It was amazing.

David Rosenthal 39:35 Oh, we gotta go.

Ben Gilbert 39:36 Yeah.

David Rosenthal 39:37 We'll stop by on our way to Geneva.

Ben Gilbert 39:39 Perfect.

David Rosenthal 39:40 So again, here we are. It's early summer, 1914. Hans has submitted this wristwatch movement to Kew, and after the 45-day rigorous battery of testing, on July 15th, 1914, it comes back, it is passed, and it receives the first Class A precision certificate, known as the QA, K-E-W dash 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 I starts.

Ben Gilbert 40:21 Yeah.

David Rosenthal 40:22 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 rat's nest of European alliances gets triggered, and next thing you know, the whole world is at war.

Ben Gilbert 40:39 On the one hand, nobody cares about watches. There's a war breaking out. On the other hand-

David Rosenthal 40:43 Everybody cares about watches!

Ben Gilbert 40:44 Right. [laughs]

David Rosenthal 40:45 Yeah. Exactly. Exactly. So World War I is truly the first crucible moment for Rolex because it's the best thing that ever happened to the company and 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 didn't realize this till now. Do you know why British people call German Shepherds Alsatians?

Ben Gilbert 41:16 Yeah, 'cause they don't wanna call them German.

David Rosenthal 41:18 It's 'cause of this.

Ben Gilbert 41:19 Yeah.

David Rosenthal 41:19 There's all sorts of racism against Germans in England and in Britain, which is utterly ridiculous because the British royal family was German. [laughs] 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-

Ben Gilbert 41:38 Oh, that's right

David Rosenthal 41:39 ... because before Windsor, their family name was Saxe-Coburg-Gotha. [laughs]

Ben Gilbert 41:44 Which isn't gonna play well when you're at war against the Germans.

David Rosenthal 41:46 No, no, no, no, no, no.

Ben Gilbert 41:48 Speaking of things that aren't gonna play well when you're at war against the Germans, you're not building a strong consumer brand in Britain in 1914 called Wilsdorf.

David Rosenthal 41:58 I mean, if the British royal family is rebranding-

Ben Gilbert 42:00 Changing their name, yeah. [laughs]

David Rosenthal 42:02 [laughs] Wilsdorf and Davis also needs to rebrand, despite the fact that at this point, Wilsdorf is a naturalized British citizen.

Ben Gilbert 42:09 And feels no affiliation to Germany. He really doesn't ever in his life consider himself German.

David Rosenthal 42:15 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.

Ben Gilbert 42:29 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 I. But before we tell that story, now is a great time to thank our presenting partner, J.P. Morgan Payments.... Just like Rolex, J.P. Morgan's story spans generations in the pursuit of excellence, reliability, and perpetual improvement.

David Rosenthal 42:53 Ooh, perpetual. I like what you did there.

Ben Gilbert 42:55 Hey, you like that? Last year, J.P. Morgan invested seventeen billion dollars in technology across the firm. That's an incredible number, and in the payments business, that fuels the stability and modernization of the core payment infrastructure, while also advancing the end-to-end payments experiences and novel use cases for clients. This durable foundation has been critical for J.P. Morgan Payments and enables them to layer on strategic partnerships as a part of their innovation philosophy. They were the first bank to publish a partner network, and it's now one of the very largest payments ecosystems, containing hundreds of third-party integrations spanning virtually every industry and use case.

David Rosenthal 43:31 Yep. Listeners might remember us talking all about this last season. It essentially connects J.P. Morgan's clients to the broader payments and technology ecosystems, such as treasury management, ERPs, point-of-sale hardware, payments gateways, and more. Think of it like a B2B marketplace, where merchants can set up shop and sell to customers while someone handles all the money exchanges and security behind the scenes.

Ben Gilbert 43:54 So they have really invested in this network over the last year. They've built out partnerships to help businesses accept, manage, and make payments by any method, any time. One example is Slope, which lets clients leverage Slope's AI-driven underwriting with J.P. Morgan's debt facility. So Slope can then originate short-term loans and offer extended terms to small and medium-sized business customers. Merchants receive payment upfront, helping ensure immediate liquidity, while customers benefit from flexible financing. J.P. Morgan also has expanded the ecosystem to include partnerships from EMEA, LATAM, and APAC. Like PPRO, a leading provider of local payments infrastructure, that's one of their partners available in EMEA. This way, J.P. Morgan clients can do things like accept local payment methods in one integration and in one contract.

David Rosenthal 44:42 Yep, they've made it easier than ever to search and learn about partners on their website. And for clients, ultimately, what you're getting here is access to the best-in-class tools and end-to-end partner connections to help scale your business in a way that really only J.P. Morgan can. Listeners can check out the partner network and learn more by going to jpmorgan.com/acquired.

Ben Gilbert 45:01 Yes. All right, David, so how are we getting to Switzerland?

David Rosenthal 45:06 Ah, 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.

Ben Gilbert 45:19 Yeah, at this point, Wilsdorf is a naturalized citizen.

David Rosenthal 45:22 His wife is British.

Ben Gilbert 45:23 The company is called Rolex now, or they're working on it. It would've been fine.

David Rosenthal 45:28 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 thirty-three percent import tax on watches early on in the war. That's gonna kill your importing business.

Ben Gilbert 45:45 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 nineteen sixteen, the British government puts the nail in the coffin. They completely banned the import of all gold and silver. They made it impossible for Wilsdorf to build this business based out of Britain. 'Cause a lot of times, he's actually exporting the watches for sale in colonies, or 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 sitting there 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."

David Rosenthal 46:32 Yep, and I assume then, as now, Rolex's margins in the precious metal watches are way, way, way higher than in non-precious metal watches. [chuckles]

Ben Gilbert 46:44 It's insane. A ten thousand dollar watch becomes a thirty thousand dollar watch when-

David Rosenthal 46:49 You add gold to it or platinum or whatever. Yep. The delta between-

Ben Gilbert 46:53 It's like Apple selling memory.

David Rosenthal 46:55 Exactly, exactly. Yes. [laughing]

Ben Gilbert 46:58 Interestingly, in the hype of twenty twenty to twenty twenty-two, the precious metals were actually easier to come by as a customer because there was so much less demand to go buy a thirty, fifty, a hundred thousand dollar 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.

David Rosenthal 47:16 Totally. So on the back of this, in 1916, Rolex first moves the assembly of the watches to Bienne in the Swiss mountainside near where Aegler is.

Ben Gilbert 47:27 Which makes sense. They set up an office and basically say, "Hey, you're making the movements next door. We're gonna put a case on them right here."

David Rosenthal 47:35 Yep, 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 Bienne.

Ben Gilbert 48:04 It's super interesting. It would make sense if you are Britain to throw on some tariffs to finance your war. You gotta finance it somehow. [chuckles] And at the same time, it also makes sense if you're a business operating in Britain in this time to say, "Eh, I'm moving to Switzerland."

David Rosenthal 48:19 Yeah.

Ben Gilbert 48:19 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, Genève, right there on the face of every Patek Philippe watch. They are extremely proud of this.

David Rosenthal 48:50 [chuckles] Genève, I love it. Genève, Ben, Genève. [laughing]

Ben Gilbert 48:55 ... Oh, oh, I'm gonna hear about that one, aren't I? [laughing]

David Rosenthal 48:58 [laughing] It's okay. It's okay. We're ugly Americans here. [chuckles]

Ben Gilbert 49:01 Okay, so then the question is, why does Geneva have this prestige? Why is Switzerland an amazing place for watchmaking? Well, David, will you, uh, 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.

David Rosenthal 49:27 By all means.

Ben Gilbert 49:27 Okay, great. A lot of this comes from Marc Bridge, who is the founder and CEO of At Present, a marketplace for unique jewelry from independent artists. Marc 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.

David Rosenthal 49:48 Amazing.

Ben Gilbert 49:48 [chuckles] 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, it is, uh, very focused on moral uprightness.

David Rosenthal 50:11 Yes, the Protestant work ethic.

Ben Gilbert 50:13 Yes. One of these tenets 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.

David Rosenthal 50:33 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 way. [chuckles]

Ben Gilbert 50:41 That's a hundred percent right. So you've got the rise of Calvinism. Along with that religious reason that's 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, cold winter, 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 établissement?

David Rosenthal 51:25 Ooh, no.

Ben Gilbert 51:27 Are you sure?

David Rosenthal 51:27 It's supposed to be Swiss, not French.

Ben Gilbert 51:29 [chuckles] I was gonna say. [chuckles]

David Rosenthal 51:31 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-

Ben Gilbert 51:39 [chuckles]

David Rosenthal 51:39 ... but établissement, uh, I don't know.

Ben Gilbert 51:41 [chuckles] Okay. Well, it's Swiss for establishment, basically.

David Rosenthal 51:45 Mm.

Ben Gilbert 51:45 But what établissement means in this context is that it's this system, this sort of economic system that they established in the area of the Jura Mountains, where very small independent companies, often one to 10 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.

David Rosenthal 52:09 Mm.

Ben Gilbert 52:09 It's almost like a distributed manufacturing system.

David Rosenthal 52:12 Ah, so this is where Aegler comes from?

Ben Gilbert 52:15 Yes.

David Rosenthal 52:15 This is why he's got the workshop in the mountains.

Ben Gilbert 52:17 Établissement. Yep, exactly. And so with this specialization of labor in small companies, you could get really, really good at your tiny part, making, say, hairsprings, 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.

David Rosenthal 53:05 Yeah, these are the Protestants that got kicked out of France.

Ben Gilbert 53:07 That's exactly right. And so the Protestant 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 jewelers or, or metalworkers, since you can't make anything too shiny and too off-putting.

David Rosenthal 53:23 Yep. So this is how Switzerland gets the reputation as the watchmaking capital of the world?

Ben Gilbert 53:31 Yeah, exactly. Basically, this creates centuries of momentum, especially in this distributed établissement 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.

David Rosenthal 53:50 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 gotta move Rolex to Geneva to participate in this tradition, as we're now gonna be selling to the world." But the other reason is, after World War I, they're like, "Well, we're gonna be selling to the world now. Britain is still gonna 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."

Ben Gilbert 54:30 So they wanna be in a neutral country.

David Rosenthal 54:32 Yeah. Yeah, and he just experienced like, "Oh, Britain puts these tariffs on, and gosh, well, I didn't really have a market for Rolexes in Germany before, but if I did, I wouldn't have been able to sell in Germany-

Ben Gilbert 54:42 Mm.

David Rosenthal 54:42 - and, like, I don't want that to happen in the future."

Ben Gilbert 54:44 Who's not gonna put on a big tariff to finance a war? Switzerland.

David Rosenthal 54:47 Switzerland, [chuckles] yeah.

Ben Gilbert 54:50 Super interesting. You know what else happens in 1919? "Well, now that we've set up shop next to Aegler for putting their movements in our cases, it's time for us to get a little bit closer."... So Rolex and Aegler arrange for a deal where in 1919, 1920, Armand Aegler, who's the son of the founder, Jean, buys shares in Rolex. Unclear what the purchase price was, that seems to have been lost to history, and joins the board. So he owns about 15%, and so the board is Wilsdorf, Davis, and Aegler. There's a second part of the deal, which is Rolex actually buys shares in Aegler, 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. It was their second biggest client, and both of them bought Aegler shares also.

David Rosenthal 55:47 Yeah, 'cause Rolex did not focus on the American market until after World War II.

Ben Gilbert 55:50 Correct. So the companies are a little bit more joined at the hip, but still not an exclusive partnership.

David Rosenthal 55:58 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.

Ben Gilbert 56:08 It's crazy. But, you know, it's in both their best interest to keep it going.

David Rosenthal 56:12 Of course. So here we are now, World War I is over. We've had the ChatGPT moment, shall we say, for wristwatches. All these soldiers from countries all over Europe and the world experience the power of having an accurate watch on your wrist. They go home to their civilian lives, they wanna bring it into their life, and who makes the best and most accurate wristwatch chronometer timekeeping pieces in the world? Rolex. And so, of course, they're gonna buy Rolex.

Ben Gilbert 56:41 No, that's not true.

David Rosenthal 56:42 No. [laughs] No, that is not what they're gonna do.

Ben Gilbert 56:45 It's Omega, right?

David Rosenthal 56:46 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-flung reaches of the British Empire before, to now, like, all of a sudden, it's this giant European-wide market-

Ben Gilbert 57:02 Hmm

David Rosenthal 57:03 ... most of which says they have no idea about Rolex. They're like, "Rolex, whatever. I don't know what Rolex is. Like, I've never heard of such a 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.

Ben Gilbert 57:15 Right, there was just massive demand for this new product category, of which there were many good options.

David Rosenthal 57:20 And also, there was massive demand, but it was kinda like search engines before Google. The product still kinda sucked. You know, even really in many ways, the Rolex product. Rolex probably kept better time than competitors.

Ben Gilbert 57:36 They were QA certified.

David Rosenthal 57:38 QA certified, right? But if you're wearing a wristwatch, it's a lot more exposed to the world-

Ben Gilbert 57:45 Mm

David Rosenthal 57:45 ... 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.

Ben Gilbert 58:05 Yep.

David Rosenthal 58:05 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, Rolexes, all the other brands, they're, like, waterproof to 57,000 million meters-

Ben Gilbert 58:20 [laughs]

David Rosenthal 58:20 ... or, like, you know, I was just like, "What? There's no depth that exists."

Ben Gilbert 58:23 David Rosenthal, watch aficionado, ladies and gentlemen.

David Rosenthal 58:25 Yeah, right, [chuckles] exactly. But, like, why? Who cares? Then I was like, "Oh, this is why waterproof watches are a big thing." It's not about water necessarily.

Ben Gilbert 58:35 It's actually dust more than water.

David Rosenthal 58:37 It's dust, it's humidity. It's... If you're waterproof, that's shorthand for saying you're element-proof. You're durable. Nothing is gonna get inside this watch and mess up your movement if water can't get in.

Ben Gilbert 58:49 You could subject it in 100 meters of still water, and no impurities would get in.

David Rosenthal 58:53 [chuckles] Right. You could throw it to the bottom of the ocean, and it'll keep time forever, you know, et cetera, et cetera. Like, oh, this is why this is important.

Ben Gilbert 59:01 Yeah, and servicing was a big deal. Like, you had to get your watch serviced often, and the more dust and humidity and stuff got in there, like, it might just break entirely.

David Rosenthal 59:10 Yes, exactly.

Ben Gilbert 59:12 Great. I like where you're going, David, 'cause there's basically three big pillars of what makes a Rolex a Rolex, or frankly, what makes a good mechanical watch a good mechanical watch. There's precise, so there's officially certified chronometer, and there's the other two. What's the second one?

David Rosenthal 59:27 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 Baumgartner, which supplied cases to Patek and, you know, 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.

Ben Gilbert 1:00:11 Oh, that's right. This is the weird hinge thing, right?

David Rosenthal 1:00:13 It's like a scuba helmet.

Ben Gilbert 1:00:15 [laughs]

David Rosenthal 1:00:15 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.

Ben Gilbert 1:00:36 Right, 'cause 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.

David Rosenthal 1:00:46 Yep. So that's the state of play through the early '20s, and Rolex gets into this, too. They buy cases from Baumgartner, and they make these Hermetic watches. You can go find them. You see pictures of them in collectors' books.

Ben Gilbert 1:01:01 It's got a hinge on the left side and a little clasp on the right side that goes around the crown.

David Rosenthal 1:01:05 Yep, and then, [chuckles] this is so awesome. This is like a Forrest Mars moment from Hans.... In October 1925, two Swiss case makers 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- or dust, are most susceptible to getting in to.

Ben Gilbert 1:01:31 Yep. 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.

David Rosenthal 1:01:41 Yes, the whole industry has. And Hans, like Forrest Mars, reads the Swiss patent filing register religiously.

Ben Gilbert 1:01:52 [chuckles]

David Rosenthal 1:01:52 Every day, he is reading [chuckles] 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. [chuckles]

Ben Gilbert 1:02:16 Yep, and when I was reading this, I thought, "Oh, man, Rolex didn't actually invent the Oyster case. They just watched someone else do it," but that doesn't really matter. They saw that this was absolutely essential, and Wilsdorf 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."

David Rosenthal 1:02:38 This is his genius. He's not a watchmaker, and Rolex were not watchmakers until f- they finally bought Aegler in 2004. Hans's 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-

Ben Gilbert 1:02:58 Yep

David Rosenthal 1:02:58 ... 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.

Ben Gilbert 1:03:09 Yep.

David Rosenthal 1:03:09 I mean, really, he's like the Mark Zuckerberg of his time.

Ben Gilbert 1:03:12 Ooh, that's a good analogy.

David Rosenthal 1:03:13 Yeah, I mean, this 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."

Ben Gilbert 1:03:23 Hmm. It needs to be in our product.

David Rosenthal 1:03:26 Yeah.

Ben Gilbert 1:03:27 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.

David Rosenthal 1:04:02 So in July 1926, Hans and Rolex goes and registers the product name Oyster. This is really, really big, and Hans, he's 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.

Ben Gilbert 1:04:35 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.

David Rosenthal 1:04:45 Yes, [chuckles] Oyster technology. [laughing] A18 Bionic.

Ben Gilbert 1:04:50 [laughing] Yes.

David Rosenthal 1:04:52 [laughing] Really, the parallels to Apple are, are just, like, incredible.

Ben Gilbert 1:04:55 Ah!

David Rosenthal 1:04:55 Ah.

Ben Gilbert 1:04:56 Four hours from now, I was gonna make that point, but... [laughing]

David Rosenthal 1:05:00 [laughing] So he's prepared to spend all this money. He's got the product, but he's like, "We gotta do a big launch. I don't wanna 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 Gleitze. Now, Gleitze was a secretary and bilingual stenographer in London, much like young Hans was back at Kuno, who happened to have a, uh, [chuckles] sort of unique hobby of endurance swimming in the River Thames in her free time.

Ben Gilbert 1:05:39 Which is insanely cold.

David Rosenthal 1:05:41 Very cold, and I assume even back then, quite polluted, but- [laughing]

Ben Gilbert 1:05:45 [laughing]

David Rosenthal 1:05:46 ... 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.

Ben Gilbert 1:06:01 Maybe even more cold.

David Rosenthal 1:06:03 Definitely 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 swum the channel but have done it faster. [chuckles]

Ben Gilbert 1:06:24 [chuckles]

David Rosenthal 1:06:25 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.

Ben Gilbert 1:06:37 Which, mind you, she's doing this vindication swim. She's already spent 15 hours swimming across the channel.

David Rosenthal 1:06:44 Yeah, uh, [chuckles] it's a miracle she's still alive at this point. Hans is like, "Oh, this is our moment. This is exactly the spectacle that we need." So he comes up with the brilliant marketing stunt of, he is going to get Mercedes to do this vindication swim while wearing a new Rolex Oyster model. And, uh, what, uh, Rolex doesn't talk about to these days is a footnote to history of it wasn't actually on her wrist.

Ben Gilbert 1:07:12 It was on a, like, a lanyard around her neck?

David Rosenthal 1:07:14 Yeah, it was on a small chain that she wore around her neck. But nonetheless, this is an incredible stunt.

Ben Gilbert 1:07:20 Nothing ruins a good story like data. Let's just smooth it over.

David Rosenthal 1:07:23 Oh, like the truth.

Ben Gilbert 1:07:24 Yes. [chuckles]

David Rosenthal 1:07:24 Yeah. [chuckles] ... This is still featured prominently on the Rolex website today.

Ben Gilbert 1:07:29 Mercedes's photo is everywhere, but it doesn't matter. I mean, at the end of the day, who cares if it was on her wrist or not?

David Rosenthal 1:07:35 Yeah. She also doesn't actually make it, [laughs] but that doesn't matter either.

Ben Gilbert 1:07:39 That's the other crazy thing. I think it was an 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-

David Rosenthal 1:07:54 It was still in the water for a long time.

Ben Gilbert 1:07:56 For 10 hours.

David Rosenthal 1:07:57 Yeah, pretty good, um, product testimonial, shall we say.

Ben Gilbert 1:08:00 For a testimony.

David Rosenthal 1:08:02 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 Britain at the time. I didn't realize y- you could do this back in the day. You could actually buy the front page as an advertisement.

Ben Gilbert 1:08:24 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.

David Rosenthal 1:08:32 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.

Ben Gilbert 1:08:50 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 what 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 TikTokified brains would be like, "Don't care. Next." There's way too many words, and they completely bury the lead that she did a Channel swim with this thing and it survived.

David Rosenthal 1:10:13 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 [chuckles] advertising.

Ben Gilbert 1:10:33 Oh, I didn't realize that.

David Rosenthal 1:10:34 Yeah. We'll get to it later, but they do bring on the J. Walter Thompson agency before he dies. [chuckles] Uh, probably the, the rest of the company's like, "All right, all right, Hans. [chuckles] We gotta professionalize a little bit here."

Ben Gilbert 1:10:44 And that's when they get extremely good, is in the '60s.

David Rosenthal 1:10:47 Extremely good, yes.

Ben Gilbert 1:10:49 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 Mad Men era.

David Rosenthal 1:11:02 Totally. We're still before World War II here. We're not yet in the modern world.

Ben Gilbert 1:11:07 Yep.

David Rosenthal 1:11:08 The other thing that's really interesting is there was something about this that was sitting with me, too, doing this research. This is a major, major, major moment, the Mercedes Gleitze 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-

Ben Gilbert 1:11:30 Super interesting

David Rosenthal 1:11:31 ... back in 1927. Super interesting. Yes, the wristwatch was a ladies' item before World War I, but after World War I, really, I would think the big market is the men's market. It's interesting. I dug into it. In this era, Rolex still was primarily a ladies' product. The men's market was growing-

Ben Gilbert 1:11:50 Oh!

David Rosenthal 1:11:50 ... but if you look at their product catalogs, really up until World War II, ladies' models outnumbered men's models two to one.

Ben Gilbert 1:12:00 Whoa! These are the little, like, Prince watches?

David Rosenthal 1:12:03 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.

Ben Gilbert 1:12:23 Which is insane. I never would have guessed that, especially because [chuckles] much of my research was lurking on the Rolex and watches subreddits, 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, you read the amazing journalism about watches on HODINKEE and the whole world around appreciating watches. It's kinda male-focused.

David Rosenthal 1:12:50 It's like a Porsche 911.

Ben Gilbert 1:12:52 Right. It's amazing that Rolex's history indexes 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.

David Rosenthal 1:13:04 Well, it's certainly not where the enthusiast market is focused.

Ben Gilbert 1:13:06 Yes.

David Rosenthal 1:13:07 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.

Ben Gilbert 1:13:19 Oh, yes.

David Rosenthal 1:13:20 Whereas Rolex, yeah, it really is 50/50.

Ben Gilbert 1:13:23 Amazing. All right, so that's Mercedes Gleitze.

David Rosenthal 1:13:25 That's the Oyster story, and that-... really is a huge watershed moment for Rolex and for the wristwatch industry.

Ben Gilbert 1:13:32 And she's effectively the first Testimonee. I'm not sure they'd come up with that terminology yet, but this w- 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.

David Rosenthal 1:13:46 Yes, partner. It's Rolex Partner, is what they call it.

Ben Gilbert 1:13:49 No, I think it's Testimonee. I'm pretty sure it's this, like, very-

David Rosenthal 1:13:51 Oh, really?

Ben Gilbert 1:13:51 -particular word that they wanted to sort of invent and have to themselves, and it's different than influencer marketing. It's different than the way that someone appears in a, 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.

David Rosenthal 1:14:12 Flashing all the way forward, it's Roger Federer is the purest embodiment of this today, but that is to come in the future. It turns out, though, back to the product of the wristwatch, Oyster was huge, but it had a problem. [chuckles]

Ben Gilbert 1:14:26 [chuckles]

David Rosenthal 1:14:27 Ben, like you said, the key to making it work, you didn't have to have the whole scuba jar that you enclose 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 gonna be exactly fastidious about screwing the crown back in.

Ben Gilbert 1:15:01 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.

David Rosenthal 1:15:16 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.

Ben Gilbert 1:15:47 Yes. Oh, okay, I can't wait. The way that the perpetual movement works is totally genius. But before we do that, we wanna thank good friend of the show, Fundrise. The team at Fundrise is awesome. Their CEO, Ben Miller, and tons of the folks there are huge Acquired listeners, just like all of you.

David Rosenthal 1:16:08 And since we first started working together three years ago, Fundrise itself has gone through quite a transformation. Longtime listeners may remember that Fundrise launched its move into venture investing via an Acquired sponsorship back in 2022. And at the time, Fundrise was primarily known as the US's largest real estate investment platform for retail investors, and it wasn't obvious that this crazy idea that they had to bring democratized investing to venture capital would work.

Ben Gilbert 1:16:35 And fast-forward to today, incredibly, they have demonstrated that they can break into venture investing in a big way. Ben Miller and Fundrise have invested in Databricks, Anthropic, Canva, Anduril, Ramp, fellow friends of the show, Vanta, ServiceTitan, which just went public in December and had a successful IPO.

David Rosenthal 1:16:53 Yep, it's genuinely awesome what Fundrise has done, which is something that many people have tried over the years, but no one else has actually been able to accomplish in Venture. They've taken a retail platform that any American can invest in and gotten pre-IPO access to some of the best private companies in the world. They've created access to all the value creation that's been locked in these private companies over the past decade-plus, as growth companies have been delaying their IPOs and staying private longer.

Ben Gilbert 1:17:20 Yep, so when ServiceTitan went public, thanks to Fundrise, tens of thousands of regular investors got to celebrate alongside VCs, LPs, and their employees.

David Rosenthal 1:17:29 Yep, just awesome. We'll be talking about Fundrise all season long, and you can go check out their full portfolio that Ben and the Fundrise team are building over at fundrise.com/venture. And if you're a growth stage founder looking for a great Series C or later investor, get in touch with them and tell them that Ben and David sent you.

Ben Gilbert 1:17:47 This is a paid endorsement for Fundrise, and all investments can lead to loss. Our thanks to Fundrise.

David Rosenthal 1:17:53 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.

Ben Gilbert 1:18:11 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-

David Rosenthal 1:18:18 Set it and forget it.

Ben Gilbert 1:18:19 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?

David Rosenthal 1:18:29 That's a Steve Jobs-like product right there. [chuckles]

Ben Gilbert 1:18:32 [chuckles] Okay, before going into the nuance of how Rolex's 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-

David Rosenthal 1:18:48 It's like alchemy.

Ben Gilbert 1:18:49 'Cause one of the coolest things ever done to prepare for an Acquired episode was go learn how a 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 predictable and precise interval.

David Rosenthal 1:19:08 Which seems like, oh, yeah, of course, you could do that these days with, you know, a battery and electronics, but imagine doing that without a battery and without electronics. [chuckles]

Ben Gilbert 1:19:17 Exactly.... So yes, on that first one, storing energy, there is something called a mainspring. Did you read about this in the research, David?

David Rosenthal 1:19:25 Yep.

Ben Gilbert 1:19:26 A mainspring can store potential energy. So imagine a foot-long, 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 at a movie theater. That's sort of what you should imagine, a real tightly wound mainspring inside that barrel. Now, interestingly, to your point, David, this kind of begs the question: what is a battery?

David Rosenthal 1:19:55 Right. Yes, I said a battery. Technically, that is a battery.

Ben Gilbert 1:19:58 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 mainspring can store on the order of three days of potential energy to tick the watch forward. It's amazing.

David Rosenthal 1:20:18 Amazing.

Ben Gilbert 1:20:19 Okay, so moving on. Obviously, this isn't sufficient on its own. If you just release the mainspring in the barrel, it would spin around real fast, it would make all the gears spin, and you'd let all the energy out at once.

David Rosenthal 1:20:30 Uh, break the watch.

Ben Gilbert 1:20:31 Yes. So you need something to control the energy release from that mainspring and do it in slow, fixed time intervals.

David Rosenthal 1:20:39 All mechanically.

Ben Gilbert 1:20:40 Yes. You need something to make the watch tick.

David Rosenthal 1:20:43 Hey-o.

Ben Gilbert 1:20:44 Yes. Watchmakers call this an escapement. Now, an escapement in a mechanical watch has two key components to harness that potential energy from the mainspring. 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 T with teeth on the edges of the top of the T, 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.

David Rosenthal 1:21:25 And there's this element that, uh... This may be several steps down the chain, where it's actually usually, like, the hour movement, right, that then drives all the other movements off of that?

Ben Gilbert 1:21:38 Kind of depends on the watch and what complications are in it, 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-

David Rosenthal 1:21:59 Mm.

Ben Gilbert 1:21:59 -for that particular watch.

David Rosenthal 1:22:00 Gotcha, which some watches is, you know, just hours and minutes, some watches is hours and minutes and seconds, some watches is date, day, moon phase, what you had for breakfast, et cetera.

Ben Gilbert 1:22:12 Right. And with these complications, which are the sort of features, it's really amazing, 'cause 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 thirty-one days..."

David Rosenthal 1:22:28 Yeah, these are not computers.

Ben Gilbert 1:22:30 Right. All of the logic is encoded mechanically in a gear train. It's beautiful.

David Rosenthal 1:22:36 Yeah.

Ben Gilbert 1:22:36 So where we left off here is our escapement, where we've got the pallet fork, and it's this little T, and it's a tick and a tock. 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, 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 mainspring 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, 'cause 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 kinda 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 it 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 tock, 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.

David Rosenthal 1:24:53 Amazing. You can totally see why, for the right kind of person, this is like a Porsche 911, or, like, it's just catnip. You can't get enough of this.

Ben Gilbert 1:25:02 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 Parachrom 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 of 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 ear and you hear tick, tick, tick, tick, tick.... 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 date, et cetera, at 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 that are 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.

David Rosenthal 1:26:14 Bonkers.

Ben Gilbert 1:26:15 It's awesome! I just named four parts of a watch. There are 200 parts. This is an oversimplification, but kind of the general concept of how a watch works.

David Rosenthal 1:26:25 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. And, 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.

Ben Gilbert 1:26:52 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 wanna 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.

David Rosenthal 1:27:10 Yeah, I mean, gosh, the Daytona I'm wearing right now, I don't think has ever been serviced, and it's at least 15 years old, if not more than that, and keeps time perfectly.

Ben Gilbert 1:27:21 It's so cool, and this is a 500-year-old art. The idea of the mainspring that applies energy to a escapement, that has a balance wheel and a hairspring to oscillate it back and forth, this isn't new. Every piece of digital technology, heck, most analog technologies are invented after this.

David Rosenthal 1:27:42 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.

Ben Gilbert 1:28:05 No, and in particular, what we're talking about here is, remember I talked about the mainspring 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 crown on a watch, and you go to turn it with your thumb, it's kinda 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.

David Rosenthal 1:28:35 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 a hammer going up and down and hitting different ends inside the watch as the wrist moves around.

Ben Gilbert 1:29:32 You could imagine that turning a crank, crank, crank, crank, crank.

David Rosenthal 1:29:36 Yep. So he invents this system, and just like, uh, his Swiss counterparts, who 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.

Ben Gilbert 1:30:03 Huh.

David Rosenthal 1:30:03 Which he does, and a couple watchmakers out there take him up on it and incorporate it into their products. However, it doesn't prove too popular in the marketplace, because a consequence of how he designed the system, the manual winding capability and the crown is eliminated entirely.

Ben Gilbert 1:30:24 Oh.

David Rosenthal 1:30:25 So if your watch stops, if you don't wear it-

Ben Gilbert 1:30:28 [laughs]

David Rosenthal 1:30:28 ... 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-

Ben Gilbert 1:30:37 Set the time

David Rosenthal 1:30:38 ... set the time.

Ben Gilbert 1:30:38 Oh, interesting.

David Rosenthal 1:30:39 So it'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-

Ben Gilbert 1:30:55 Oh

David Rosenthal 1:30:56 ... technology. [laughs]

Ben Gilbert 1:30:57 Wow, that is broad.

David Rosenthal 1:30:58 In Britain, yeah, no matter what the method is, or at least that's my understanding.

Ben Gilbert 1:31:03 Brutal.

David Rosenthal 1:31:03 So Hans, of course, and Rolex, sees this. 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.

Ben Gilbert 1:31:35 Yep.

David Rosenthal 1:31:36 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, et cetera. So finally, the door is now open for Hans and Rolex to complete the product here.

Ben Gilbert 1:31:57 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, it's, like, 450 bucks today, or for as high as $1,000, which is 18,000. Rolex's top-of-their-line today is a lot more [chuckles] than $18,000, 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.

David Rosenthal 1:32:35 Definitely not. Rolex, at this point, is not a luxury brand.

Ben Gilbert 1:32:40 Correct.

David Rosenthal 1:32:40 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-

Ben Gilbert 1:32:58 Yep

David Rosenthal 1:32:58 ... 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, quote, unquote, "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 wearer moves their wrist around. And importantly, unlike the hammer movement, it spins 360 freely in either direction, so it's not hitting anything.

Ben Gilbert 1:33:35 Yep.

David Rosenthal 1:33:36 One of the other problems with the Harwood system was when the hammer struck each end, it made a noise. [chuckles]

Ben Gilbert 1:33:42 Oh, really?

David Rosenthal 1:33:43 Yeah, yeah, you'd wear your watch, and it'd go, like, clack, clack, clack, clack, clack.

Ben Gilbert 1:33:46 Huh.

David Rosenthal 1:33:47 One of the initial marketing points for the rotor system, the perpetual system that Rolex comes out with, is the silentness of it. They call it the silent self-winding system.

Ben Gilbert 1:33:58 Mm. Oh, that's really interesting, and it's genius. You know, y- you can imagine in... I'm sure people have seen videos or photos of a self-winding watch. Imagine a disk that sits around a center point, and then you cut off half the disk. And so what happens is, whenever you're, 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, inadvertently spinning this perpetual rotor around and around and around and using that to wind the mainspring.

David Rosenthal 1:34:37 Yep. It's an incredible innovation and feat 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.

Ben Gilbert 1:34:55 Oh, the Bubbleback?

David Rosenthal 1:34:57 Yeah, 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.

Ben Gilbert 1:35:08 It's so cool. And the other fun thing about this is it is legitimately an invention by Rolex. Oyster was licensed. The credit for how accurate they were was really all Aegler's innovation. This is the first time we're really seeing Rolex R&D figure out some brand-new, breakthrough contribution to the watch world.

David Rosenthal 1:35:27 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 the Perpetual, Oyster Perpetual.

Ben Gilbert 1:35:53 Here it is. It's all here.

David Rosenthal 1:35:56 Yep. So in 1934, they launched the full system, the Oyster Perpetual chronometer, the Bubblebacks, known by collectors, and for the first time, they introduce a new look for the watches, a two-tone mix of steel and gold for these new Oyster Perpetuals that they call Rolesor. [laughs] It really just rolls off the tongue.

Ben Gilbert 1:36:24 Right there on your wrist, David.

David Rosenthal 1:36:26 [laughs] Right there. Not on my, uh, Daytona, but it is on my Datejust. This is the gold and steel mix that is now just an iconic Rolex look.

Ben Gilbert 1:36:36 And that's where that center link is the gold, and the outer two links are the steel?

David Rosenthal 1:36:40 Yep. Now, you're talking about the bracelet there. Bracelets, for a long, long, long time, are made by third-party companies. Rolex contracts them out, but that look even goes onto the case itself.

Ben Gilbert 1:36:51 Oh, okay.

David Rosenthal 1:36:52 The bracelet usually echoes the case, but combining gold and steel within one watch encasement was a new look, shall we say, from Rolex at this time.

Ben Gilbert 1:37:03 You know what else kind of carries through to today, which is kind of interesting? Rolex and just most tool watches have fluted bezels. The fluted-ness 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 leverage to pop it off.

David Rosenthal 1:37:22 Yes, love it.

Ben Gilbert 1:37:23 So okay, while we're in the early '30s, just to breeze us through a bunch of other interesting stuff that's happening, the first time the crown, the logo, the five-point crown, starts appearing is 1931. 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 do we stabilize things while the world is in crisis?" But they've got the right product and market.

David Rosenthal 1:38:13 Yep. I feel like there's an old, um, Sequoia saying, or at least a Mike Moritz saying, that, "Recessions are the best time to innovate."

Ben Gilbert 1:38:22 Mm.

David Rosenthal 1:38:22 'Cause coming out of the recession, you're gonna have the best product, ready to hit the gas.

Ben Gilbert 1:38:26 Right, and fewer competitors.

David Rosenthal 1:38:28 Yep, exactly.

Ben Gilbert 1:38:29 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.

David Rosenthal 1:38:45 You think Submariner, yeah. Ooh, I've got some really, really, really fun World War II dive watch stuff in a sec.

Ben Gilbert 1:38:51 Oh, great.

David Rosenthal 1:38:51 But before we get to World War II-

Ben Gilbert 1:38:53 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 Aegler and says, "Hey, we wanna take all of your production." And so Gruen stops buying movements from Aegler. This is where I think Rolex may have bought the shares back from Aegler, but again, we don't know and we'll never know, 'cause no one at Rolex will ever talk about that. And this is also when Aegler adds Rolex to its name.

David Rosenthal 1:39:30 The Aegler manufacturer of Rolex watches.

Ben Gilbert 1:39:34 Yes. So take us into World War II.

David Rosenthal 1:39:37 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 are cut off after France falls. And so Rolex and all the other Swiss watchmakers are like, "Well, shoot, okay. [chuckles] If we can't get to England, we gotta go find other markets to sell to." This is like the beginning of COVID, when, you know, all these companies were making up other products and doing all sorts of stuff. This is my very favorite sidebar piece of trivia.

Ben Gilbert 1:40:17 Ooh, I have no idea where you're going.

David Rosenthal 1:40:18 So do you know what Rolex did in Italy during this time?

Ben Gilbert 1:40:23 I have no idea.

David Rosenthal 1:40:25 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?"

Ben Gilbert 1:40:44 Hmm.

David Rosenthal 1:40:45 And Rolex is like, "Yeah! Sure, we can do that. We're sitting on our hands here at our factories."

Ben Gilbert 1:40:50 Which is funny, 'cause this is, like, a decade and a half before the Submariner.

David Rosenthal 1:40:54 Yes. Yes, yes, yes. This is the first dive watch that Rolex makes. Can you guess the name of the Italian retail partner?

Ben Gilbert 1:41:01 Oh, I feel like it's gonna be a, pff, I don't know, car company.

David Rosenthal 1:41:05 [chuckles] No, no, no, it's even more on the nose. This is Panerai. This is the Panerai watch!

Ben Gilbert 1:41:10 Oh, really?

David Rosenthal 1:41:11 Rolex 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 and the Radiomir. Yeah, Panerai was a retailer before World War II. They weren't a watchmaker.

Ben Gilbert 1:41:25 Whoa.

David Rosenthal 1:41:26 And then after the war, Panerai kept going, making these watches. Isn't that amazing?

Ben Gilbert 1:41:31 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.

David Rosenthal 1:41:52 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, [chuckles] 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 Strait of Gibraltar, get up to Britain.

Ben Gilbert 1:42:18 Huh!

David Rosenthal 1:42:18 This becomes critical, because what is World War II that World War I wasn't? I mean, World War I made the market for the wristwatch, right? But World War II made the precision wristwatch market super important. If you're a soldier in the trenches in World War I, yeah, you need to coordinate movements and time and whatnot. If you're a military service member in World War II, it is a very technical war involving a lot of technology, involving airplanes, [chuckles] involving aircraft carriers-

Ben Gilbert 1:42:50 And synchronized attacks.

David Rosenthal 1:42:52 All sorts of things, tanks, synchronized attacks, all this stuff. Stealth. So the Air Battle of Britain, you know, is such a key moment in the war, a key theater. All of these British Royal Air Force pilots, they're all wearing Rolex watches, because at this point, Rolex make the best wristwatches, the most accurate, the most weatherproof to 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 II 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.

Ben Gilbert 1:43:32 Wow.

David Rosenthal 1:43:33 Super, super important stuff.

Ben Gilbert 1:43:35 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 the Swiss watch world.

David Rosenthal 1:43:46 Yes, that is definitely true. Rolex weren't the only ones that were selling to both sides here.

Ben Gilbert 1:43:52 Hmm.

David Rosenthal 1:43:53 But nonetheless, World War II is really changing the nature of what you need out of a wristwatch.

Ben Gilbert 1:44:01 Hmm.

David Rosenthal 1:44:02 And air battles are maybe the most visceral, but then you start to think about all the other stuff that went into World War II. There's radio communications, there's radar, there's early computing, there's nuclear weapons [chuckles] 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 then soon to be transitioned to professional need for watches and for time in the world.

Ben Gilbert 1:44:32 Hmm. 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 were 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, and 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.

David Rosenthal 1:45:33 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.

Ben Gilbert 1:45:45 [chuckles]

David Rosenthal 1:45:46 That is the legacy of World War II 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.

Ben Gilbert 1:45:56 Oh!

David Rosenthal 1:45:58 But you know what market there is, is America. [chuckles]

Ben Gilbert 1:46:02 Hmm. Yeah, you know who didn't have their cities all just destroyed and bombed to oblivion, and has disposable income and GIs returning home?

David Rosenthal 1:46:10 Yep. You know who is atop the new world order now, at least on the capitalist side? [chuckles] I don't think communists were buying a lot of Rolexes.

Ben Gilbert 1:46:18 I'm sure there's some crazy stories about black market communist dealers of Rolexes to Russia post-World War II. I'm sure that happened.

David Rosenthal 1:46:26 There must be. I'm pretty sure Castro famously loved Rolexes.

Ben Gilbert 1:46:31 I think he even wore two. There's, like, some photos of him where he's wearing two Rolexes.

David Rosenthal 1:46:36 [laughs] Amazing, amazing. [laughing]

Ben Gilbert 1:46:39 Hang on, I'm looking it up right now.

David Rosenthal 1:46:40 Nothing screams communism like multiple Rolexes on your wrist. [chuckles]

Ben Gilbert 1:46:43 Here it is. He's wearing... I think it's a Rolex GMT and a Submariner on the same wrist.

David Rosenthal 1:46:50 Yes.

Ben Gilbert 1:46:51 He referred to one as a backup in case the first stops working, but that's extremely unlikely. I suspect it's to keep Moscow time.

David Rosenthal 1:46:58 Or he just wanted to wear two Rolexes on his wrist, 'cause he could.

Ben Gilbert 1:47:01 Yeah, right, exactly.

David Rosenthal 1:47:03 Okay, well, the non-black market for [chuckles] Rolexes after the war, if you're gonna go somewhere, you're gonna go to America. And Hans and the company devise just about the most genius, you know, three putt scheme to get there imaginable.

Ben Gilbert 1:47:19 [chuckles] Three putt scheme.

David Rosenthal 1:47:20 [laughs] Uh, get this. So in 1945-

Ben Gilbert 1:47:24 Rolex would never three putt. [laughing]

David Rosenthal 1:47:28 [laughing] Tiger Woods wouldn't. Rolex brand testamony. [chuckles]

Ben Gilbert 1:47:32 Yep.

David Rosenthal 1:47:33 Okay, so 1945, right after the war ends, is also the 40th anniversary of the founding of Wilsdorf and Davis, the ruby jubilee of the company. For the occasion, Rolex launches their finest model yet, the Datejust, and this is the first modern Rolex. Still an iconic watch sold by the company today.

Ben Gilbert 1:47:56 Yep.

David Rosenthal 1:47:57 It's just beautiful. I've got one here in front of me.

Ben Gilbert 1:47:59 For a lot of people, if they don't picture a Submariner when you hear Rolex, they picture a Datejust.

David Rosenthal 1:48:05 Or a Daytona, but we'll get to that.

Ben Gilbert 1:48:06 Yeah.

David Rosenthal 1:48:07 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, now, remember, he wants to get into the American market. He initially wanted to call it the Victory Bracelet-

Ben Gilbert 1:48:21 [laughing]

David Rosenthal 1:48:22 ... but, uh, his Swiss colleagues were like, "Um, that's not very Swiss. [chuckles] We are neutral." [laughing]

Ben Gilbert 1:48:28 [laughing]

David Rosenthal 1:48:29 Oh, so it becomes the Jubilee bracelet.

Ben Gilbert 1:48:34 Beautiful. It goes great with a fluted bezel. It just adds a little more pizzazz to the wrist.

David Rosenthal 1:48:38 Right around this same time, Rolex manufactures their 50,000th officially certified Swiss chronometer, and just happens, of course, that that model is the new Datejust. So Hans decides that he is going to give this very special Rolex watch to the Swiss General Henri Guisan, who led Switzerland through the war. National hero in Switzerland. The Dwight Eisenhower of Switzerland, one might say.

Ben Gilbert 1:49:08 What does that even look like, to lead Switzerland through the war?

David Rosenthal 1:49:11 That's a good question. [chuckles]

Ben Gilbert 1:49:12 It's a lot of sitting.

David Rosenthal 1:49:13 [chuckles] Yeah, well, remember, this is a three putt.

Ben Gilbert 1:49:15 [chuckles] Okay.

David Rosenthal 1:49:15 This is just the first putt here. [laughing] So Guisan 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 100,000th chronometer-

Ben Gilbert 1:49:30 Hmm

David Rosenthal 1:49:31 ... that they, uh, have certified here.

Ben Gilbert 1:49:32 Oh, this one goes to Winston Churchill.

David Rosenthal 1:49:35 This one, Hans goes to General Guisan, you know, newly christened Rolex convert, and says-... Would you please, on our behalf, offer this to your dear friend, Sir Winston Churchill?

Ben Gilbert 1:49:47 Mm-hmm. [laughs] There it is.

David Rosenthal 1:49:48 Winston Churchill accepts. Now, Winston Churchill is a Rolex man. [chuckles] Well, in less than a year later, Rolex makes their 150,000th-

Ben Gilbert 1:49:58 [chuckles]

David Rosenthal 1:49:58 - officially certified chronometer, once again, in the now, you know, new top-of-the-line Datejust model. And who does Hans go to for this one? Through, not directly, but with some influence of the fact that his friend Sir Winston Churchill wore it, he goes to General Dwight D. Eisenhower, American hero, leader of the Allied forces, architect of the Allied victory and 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.

Ben Gilbert 1:50:52 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 wear Rolex."

David Rosenthal 1:51:07 So at this time, Rolex finally brings on a 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 US, almost literally what you said, Ben. The tagline of the campaign is, "Men who guide the destinies of the world-

Ben Gilbert 1:51:34 [laughs]

David Rosenthal 1:51:34 - wear Rolex watches." [laughs]

Ben Gilbert 1:51:37 They printed this?

David Rosenthal 1:51:38 Yes, yes!

Ben Gilbert 1:51:39 That is on the advertisement.

David Rosenthal 1:51:41 All over magazines across America, uh, and maybe the world, too. I don't know. [chuckles] It's incredible.

Ben Gilbert 1:51:46 "Men who guide the destinies of the world wear Rolex watches." Shameless, shameless.

David Rosenthal 1:51:53 [laughs] 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, [chuckles] you got Castro-

Ben Gilbert 1:52:03 Totally

David Rosenthal 1:52:04 ... wearing Rolexes.

Ben Gilbert 1:52:06 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."

David Rosenthal 1:52:24 [laughs] Oh, so... This is Don Draper. This is better than Don Draper.

Ben Gilbert 1:52:28 "A Rolex will never change the world. We leave that to the people who wear them."

David Rosenthal 1:52:33 Oh. [laughs]

Ben Gilbert 1:52:35 I mean-

David Rosenthal 1:52:36 We could just end the episode here.

Ben Gilbert 1:52:37 Now, that is brand positioning.

David Rosenthal 1:52:40 That is true brand positioning. And the fact that they engineered getting one on the wrist of the president of the-

Ben Gilbert 1:52:48 Yes

David Rosenthal 1:52:48 ... United States is so genius.

Ben Gilbert 1:52:50 And interestingly, even though they started with Mercedes Gleitz, 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, uh, 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.

David Rosenthal 1:53:14 Yep, yep. Now, the problem, I guess, with those who command the world [chuckles] is, as just absolutely gangster as it is, [laughs]

Ben Gilbert 1:53:24 [laughs]

David Rosenthal 1:53:24 ... is ultimately, you're, 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, than, uh, wanna be Dwight Eisenhower.

Ben Gilbert 1:53:39 Yeah.

David Rosenthal 1:53:40 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.

Ben Gilbert 1:53:55 In place of the 3, and, you know, if you're picturing one today, you probably picture that magnifier that's sitting on this-

David Rosenthal 1:54:02 Well, the magnifier, the Cyclops eye in-

Ben Gilbert 1:54:05 Of course

David Rosenthal 1:54:05 ... Rolex marketing speak.

Ben Gilbert 1:54:06 Of course.

David Rosenthal 1:54:06 Of course. So the legend of how that came about is Hans's second wife, Betty Wilsdorf Mettler. His first wife, Anna, died tragically in 1944, right before the end of World War II, and that is actually when Hans sets up the Hans Wilsdorf Foundation and puts all of his ownership of the company into it.

Ben Gilbert 1:54:27 Famously, he never had any family heirs. There was no one to pass the company to, so he creates this foundation.

David Rosenthal 1:54:33 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.

Ben Gilbert 1:54:44 Well, yeah, they have, like, eight watches for men and one for women. Of course, that one's gonna- uh, 50% are bought by women. And, you know, women wear some Mariners and stuff, too, but, like, come on.

David Rosenthal 1:54:54 Yeah.

Ben Gilbert 1:54:54 You're concentrating 50% of your sales into one, quote-unquote, "model."

David Rosenthal 1:54:58 Yes. So Betty loved the Datejust but had a tough time reading the small numbers of the date-

Ben Gilbert 1:55:05 Ah

David Rosenthal 1:55:05 ... 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 Datejust, and a drop of water drips onto it, right above the date window-

Ben Gilbert 1:55:19 [laughs]

David Rosenthal 1:55:20 ... and it magnifies [chuckles] the date, and he-

Ben Gilbert 1:55:22 I tell you, you can't make this stuff up, but they made this stuff up.

David Rosenthal 1:55:25 They made this stuff up. Yeah, yeah, and he shouts, "I got it! I got it." It's like the eureka moment in the bathtub-

Ben Gilbert 1:55:31 [laughs]

David Rosenthal 1:55:31 ... and that is the inspiration for the Cyclops window of the Datejust.

Ben Gilbert 1:55:37 Ah, if you're at Rolex, and you're listening to this, and you wanna tell us, "No, it really is true," hello@acquire.fm. [chuckles]

David Rosenthal 1:55:43 We will happily come to Geneva and talk to you about it.

Ben Gilbert 1:55:46 Yes.

David Rosenthal 1:55:47 Uh, okay. So Ben, as you were saying, though-... the Datejust.

Ben Gilbert 1:55:53 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.

David Rosenthal 1:56:02 Yes.

Ben Gilbert 1:56:02 But what Rolex kind of does from 1950 onward is, "Yeah, of course, we make that, but we wanna 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."

David Rosenthal 1:56:18 Yep, and that is the core of the brand today, which gets built in the 1950s under Andre.

Ben Gilbert 1:56:24 Sports watches.

David Rosenthal 1:56:26 It's sports watches. It's the 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.

Ben Gilbert 1:56:38 Yep.

David Rosenthal 1:56:39 So Andre Heiniger, 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.

Ben Gilbert 1:56:51 Hmm.

David Rosenthal 1:56:51 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.

Ben Gilbert 1:57:05 Hmm.

David Rosenthal 1:57:05 He's the one who does the Destinies of the World [chuckles] campaign.

Ben Gilbert 1:57:10 [chuckles]

David Rosenthal 1:57:11 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 Americas market, and really the US market, that's sort of his purview here. And then later on, he starts working with Mark McCormack and IMG, which is the talent agency that we'll get into for the testimonies.

Ben Gilbert 1:57:36 Oh!

David Rosenthal 1:57:37 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-parity watch to what Rolex can make at this point in time.

Ben Gilbert 1:58:07 There's 30 Swiss companies doing this, yeah. Especially because of the establishments, all of the component manufacturers are outside the brand, and so you just go around to all the component manufacturers, and Rolex is a little different 'cause they have Aegler, but in general, you can go around to find all the different tiny little shops that are making each of these components and buy it and make a watch.

David Rosenthal 1:58:28 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 to more, what does it say about you-

Ben Gilbert 1:58:48 Hmm

David Rosenthal 1:58:49 ... 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. And 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, and again, Hans is still running the company. He dies in 1960. But Rolex, Hans, Andre, launch a whole suite of wild new models, very different than the Datejust and the Oyster Perpetuals that we were talking about before. This is the Explorer, the Turnograph, the Submariner, the Milgauss, and the GMT-Master. These are what are then initially called the tool watches-

Ben Gilbert 1:59:47 Yep

David Rosenthal 1:59:47 ... but quickly morph into becoming known as the sport watches. [chuckles]

Ben Gilbert 1:59:50 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- oh, a professional watch you would think is like the Datejust, but they're thinking about it more of like a professional driver, a professional race car driver. So that's their-

David Rosenthal 2:00:09 Yeah, a professional pilot.

Ben Gilbert 2:00:11 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, there's something called the Rolex way.

David Rosenthal 2:00:30 Oh, you mean like, uh, the Vision Pro is not, uh-

Ben Gilbert 2:00:32 Exactly

David Rosenthal 2:00:33 ... augmented reality?

Ben Gilbert 2:00:34 Like, the Rolex way, there's this 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.

David Rosenthal 2:00:45 [laughs]

Ben Gilbert 2:00:45 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.

David Rosenthal 2:00:52 Amazing. Amazing. Ah, okay, so back to this suite of really world-changing tool watches, or at least watch world-changing tool watches.

Ben Gilbert 2:01:03 Professional watches, David.

David Rosenthal 2:01:05 Professional watches. I'm sorry. [laughs] First is the Turnograph, as perhaps foreshadowed by that, uh, really great name there.

Ben Gilbert 2:01:15 What a horrible name!

David Rosenthal 2:01:16 That's the least successful of these watches that they launch. You're not gonna be buying any Turnographs from authorized Rolex dealers these days.

Ben Gilbert 2:01:24 But David, if you look at a Turnograph, what's the original one look like?

David Rosenthal 2:01:27 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 Turnograph, 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 phone call. [chuckles]

Ben Gilbert 2:01:55 Really? I never-

David Rosenthal 2:01:56 Yeah. [laughs]

Ben Gilbert 2:01:57 That's funny. Swing and a miss.

David Rosenthal 2:01:59 Swing and a miss. Not exactly really a romantic lifestyle you want to be, uh, associated with. [chuckles]

Ben Gilbert 2:02:04 [chuckles] Saving pennies on your... I guess at the time it was saving, you know, $10 at a time on your long-distance calls, but-

David Rosenthal 2:02:10 Yeah, sure, but it'll come back.... the next least successful one is the Milgauss.

Ben Gilbert 2:02:17 I love this watch!

David Rosenthal 2:02:18 I know, this one is awesome. This has a whole second life.

Ben Gilbert 2:02:21 Yes.

David Rosenthal 2:02:21 It was designed in association with the engineers at CERN in Switzerland, the particle accelerator, for scientists who are working while exposed to strong magnetic fields, and the idea was that this Milgauss was so well-protected from magnetic fields that you could wear it in these environments, and it would still tell accurate time.

Ben Gilbert 2:02:43 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.

David Rosenthal 2:02:56 Yep. So a little more romantic than, uh, 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 secondhand on it.

Ben Gilbert 2:03:20 Yeah, it's so cool, and the colors are great. It's got this really fun orange. I've been contemplating whether I wanna get an Explorer or a Milgauss, and, you know, it's effectively the same watch, but the Milgauss sort of has this very fun, scientific origin and look to it.

David Rosenthal 2:03:35 Right. Ooh, I could totally see you rocking either one.

Ben Gilbert 2:03:41 It just feels me, doesn't it?

David Rosenthal 2:03:43 Yeah, it does. You definitely have got the Explorer. You know, you love exploring, you know, backpacking. You've got that great iconic picture. Is that still... Is that picture of you and your dad still up in-

Ben Gilbert 2:03:52 Oh, yeah, behind me in my home studio

David Rosenthal 2:03:53 ... in your studio?

Ben Gilbert 2:03:54 Yeah.

David Rosenthal 2:03:54 Yep, backpacking.

Ben Gilbert 2:03:55 That's, uh, Iceland.

David Rosenthal 2:03:56 Yep, but I feel like the Milgauss might be more you.

Ben Gilbert 2:03:59 I know. Both great watches.

David Rosenthal 2:04:01 Oh, both great watches. Okay, that's number two, and then the first really big one, the Explorer, Ben, like you were talking about.

Ben Gilbert 2:04:10 Which the story is so awesome for this.

David Rosenthal 2:04:13 It's so awesome. So supposedly, it is made in honor of Sir Edmund Hillary and Tenzing Norgay's summit of Mount Everest, the first human summiting of Mount Everest.

Ben Gilbert 2:04:27 1953, I think.

David Rosenthal 2:04:30 I believe it was 1953, yes.

Ben Gilbert 2:04:32 And they wore an Oyster Perpetual up that was sort of a prototype of what the Explorer would be.

David Rosenthal 2:04:40 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-

Ben Gilbert 2:04:49 Yep

David Rosenthal 2:04:49 ... doing these human achievements. Now, the legend is that Sir Edmund Hillary and Tenzing Norgay were working with Rolex, wearing Rolexes, summiting Everest wearing Rolexes.

Ben Gilbert 2:05:03 And that is in the marketing today. That is the lore around the brand today.

David Rosenthal 2:05:07 And importantly, both of them become official Rolex testimonies, brand ambassadors, partners afterwards.

Ben Gilbert 2:05:15 Yep.

David Rosenthal 2:05:15 So they will, for the rest of their lives, tell you how much they love Rolex.

Ben Gilbert 2:05:20 However, Sir Edmund Hillary did not prefer his Rolex. He had a Smiths watch that he preferred to wear.

David Rosenthal 2:05:28 And I think the Smiths was the official outfitter of the expedition-

Ben Gilbert 2:05:32 Okay

David Rosenthal 2:05:33 ... and Rolex was not.

Ben Gilbert 2:05:34 So I do believe both watches ended up on the summit. I think that 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, eh, they were interested. It was sort of there.

David Rosenthal 2:05:52 Yep, but the Explorer designed for withstanding extreme pressure changes, being able to go up to the summit of Everest and still work fine, and gosh, 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 summiting Everest.

Ben Gilbert 2:06:14 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.

David Rosenthal 2:06:20 Easily readable in the elements.

Ben Gilbert 2:06:23 Exactly.

David Rosenthal 2:06:24 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.

Ben Gilbert 2:06:38 If you separated Submariner from Rolex, Submariner may actually be a bigger deal. Submariner is its own whole franchise.

David Rosenthal 2:06:48 Absolutely.

Ben Gilbert 2:06:49 Almost in the way that's like, well, what if you separated the Dallas Cowboys from the NFL? Who's the more important brand? Like, the Sub is... If you're gonna get a Rolex, and you're intending to have multiple, you kinda should start with the Sub 'cause it's just so iconic.

David Rosenthal 2:07:04 You're right. It is really its own world.

Ben Gilbert 2:07:07 It was Sean Connery's watch even before-

David Rosenthal 2:07:09 Oh, oh, you're gonna get into it

Ben Gilbert 2:07:10 ... he started playing James Bond-

David Rosenthal 2:07:11 You're gonna get into it.

Ben Gilbert 2:07:11 -and then he wore it, and yeah.

David Rosenthal 2:07:13 All right. All right, all right, all right, 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 Panerai.

Ben Gilbert 2:07:23 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.

David Rosenthal 2:07:29 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.

Ben Gilbert 2:07:36 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 100 meters below.

David Rosenthal 2:08:05 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.

Ben Gilbert 2:08:16 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%.

David Rosenthal 2:08:24 Yeah, you don't wanna be like, "Ooh, I've got a 300-meter depth watch," and, uh, get down to 300 meters and think you're good, but actually go to 305.

Ben Gilbert 2:08:31 Yep. You know, 100-meter waterproof watch is nice, even just for going in swimming pools, and I'm not sure I would want a 10-meter waterproof watch. It feels dangerous.

David Rosenthal 2:08:42 Yep. But it's not really about the waterproofness here. [laughing]

Ben Gilbert 2:08:45 [laughing]

David Rosenthal 2:08:47 So around this time, 1952, 1953, much of popular culture is focused on a Frenchman named Jacques Cousteau. Probably, uh, rings a bell to many of you, and Jacques Cousteau was the first world-famous undersea explorer. He actually invented scuba diving.

Ben Gilbert 2:09:07 Oh, interesting.

David Rosenthal 2:09:08 Yeah. He's a, a total Renaissance man, genius, and in 1953, he's filming the documentary, The Silent World, in the Mediterranean Sea, that is gonna go on to win the Oscar, the Academy Award for Best Documentary, I think, in 1956.

Ben Gilbert 2:09:25 Hmm.

David Rosenthal 2:09:25 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.

Ben Gilbert 2:09:40 Great.

David Rosenthal 2:09:41 So great. Now, interestingly, there's not an actual formal relationship between Jacques-

Ben Gilbert 2:09:48 Hmm

David Rosenthal 2:09:48 ... and Rolex, and actually, Rolex was formally working with another undersea explorer-

Ben Gilbert 2:09:54 Ah

David Rosenthal 2:09:54 ... who, uh, uh, didn't become nearly as famous. But nonetheless, Jacques was a Rolex fan, was wearing Rolexes while doing all this, as was much of his crew, and then when the movie comes out, they're all wearing these Rolexes.

Ben Gilbert 2:10:07 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 PADI certified, even your very first few dives, you're, 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 gonna tell you your depth the way that a dive computer is, but in order to know your total bottom time and-

David Rosenthal 2:10:30 In the same way, if you're summiting Everest, well, even more so than if you're summiting Everest, you really need a Submariner, a dive watch, if you're diving.

Ben Gilbert 2:10:37 This isn't cute. This is an essential tool to complete this extreme task.

David Rosenthal 2:10:42 Yes. So, you know, that's great for marketing here. But then 1962, the very first-

Ben Gilbert 2:10:49 Dr. No

David Rosenthal 2:10:50 ... James Bond movie, Dr. No, comes out.

Ben Gilbert 2:10:53 And as it is written in Ian Fleming's James Bond books-

David Rosenthal 2:10:57 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 you might say Rolex itself is.

Ben Gilbert 2:11:19 Oh, interesting.

David Rosenthal 2:11:22 So Sean Connery wears a Submariner in Dr. No, and then Connery, I believe, would wear Subs for all of his Bond movies, and Ben, like you said, was in real life a Sub guy himself.

Ben Gilbert 2:11:34 I think that's right.

David Rosenthal 2:11:35 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.

Ben Gilbert 2:11:44 And this persisted from 1962 until 1995.

David Rosenthal 2:11:48 Yes, with GoldenEye.

Ben Gilbert 2:11:50 Yeah, when Pierce Brosnan came in, they wanted to refresh Bond's brand image, and they chose Omega for that one.

David Rosenthal 2:11:56 Oh, wow. Well, that's really charitable [chuckles] of you to the Bond franchise there.

Ben Gilbert 2:12:00 No, it is.

David Rosenthal 2:12:01 No, come on! Omega paid them a boatload of money [chuckles] for product placement.

Ben Gilbert 2:12:05 They did eventually, but initially, it was not a paid placement.

David Rosenthal 2:12:09 Really?

Ben Gilbert 2:12:10 Uh-huh.

David Rosenthal 2:12:10 I was almost certain that '95 was when they decided to bid out all the stuff.

Ben Gilbert 2:12:15 Well, let's put it this way. If it was bid out, Rolex would decline to bid because Rolex does not engage in, ugh, paid product placement.

David Rosenthal 2:12:23 Well, that's why I assumed the only way that Bond would stop wearing Rolex... I mean, I guess maybe you could make an argument that you're trying to reboot the franchise around Pierce Brosnan. Pierce Brosnan maybe is more of an Omega guy than a Rolex guy.

Ben Gilbert 2:12:37 There's some weird line that they used around trying to reboot him with more of a European modern flair or something.

David Rosenthal 2:12:44 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.

Ben Gilbert 2:12:51 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 movie comes out, a huge bump.

David Rosenthal 2:13:02 GoldenEye was when BMW launched the Z3 coupe, right? So yeah, GoldenEye was totally product placement central.

Ben Gilbert 2:13:09 And now Bond movies are like, you know, the whole budget's covered by product placement.

David Rosenthal 2:13:13 They only exist for product placement. [laughs] Uh...

Ben Gilbert 2:13:18 I don't know. One of the sources I found on watchesofespionage.com details, apparently the costume designer reached out to Omega and was given, for free, a Seamaster, 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-

David Rosenthal 2:13:43 Okay

Ben Gilbert 2:13:43 ... turned into a-

David Rosenthal 2:13:44 [laughs]

Ben Gilbert 2:13:44 ... back up the truck, boatload of money thing, but the Omega fans will insist that it was a organic thing at first.

David Rosenthal 2:13:52 Okay. Maybe that's right. [laughing]

Ben Gilbert 2:13:56 [laughing]

David Rosenthal 2:13:56 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 Submariner on your wrist.

Ben Gilbert 2:14:09 Yep. It's perfect. James Bond does a lot of diving, and then he goes right from, you know, defusing 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.

David Rosenthal 2:14:23 It's perfect. It's perfect.

Ben Gilbert 2:14:24 It is.

David Rosenthal 2:14:25 Uh, super fun little 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.

Ben Gilbert 2:14:36 It is. Is this the one that's like the Super Sub, that's like a Submariner, but you can go real deep?

David Rosenthal 2:14:41 It's the Super Sub, yes. So Rolex develops this in partnership with the French undersea exploration company, Comex. And there's this issue where helium would get trapped in the watch, in the Submariner-

Ben Gilbert 2:14:56 Yep

David Rosenthal 2:14:56 ... and the pressure would break it as you're coming back up, and so they developed the Sea-Dweller, which is waterproof down to 600 meters and has a special helium release valve. [laughs] This is ridiculous. No person who is gonna buy these actually is gonna use this stuff, except for Comex employees that are being issued them. But it adds to the romance, it adds to the, you know, like, this is a lifestyle purchase.

Ben Gilbert 2:15:22 Okay, if you're already taking us from Submariner to Sea-Dweller, you gotta take us to Deepsea Challenge.

David Rosenthal 2:15:28 [laughs]

Ben Gilbert 2:15:29 This is the ultra, ultra version.

David Rosenthal 2:15:31 James Cameron?

Ben Gilbert 2:15:31 Yeah.

David Rosenthal 2:15:31 Yeah. All right, go for it.

Ben Gilbert 2:15:33 So they develop a watch. This thing is so thick, you're not putting this 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 Sea-Dweller, and we make this thing called the Deepsea?"

David Rosenthal 2:15:48 And there was an earlier version of this before James Cameron, right?

Ben Gilbert 2:15:52 Yeah. Well, the Cameron one, I believe, is the Deepsea Challenge, which is a extra, extra version, and the Challenge is the one that's the 11,000 meter, whereas the regular Deepsea is just regular old 3,900 meters. So you get the Deepsea for 3,900 meters, the Deepsea Challenge to really get to the bottom, the 11,000 meter. James Cameron, on a manned submersible, takes the Sea-Dweller Deepsea 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 Marianas Trench, 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.

David Rosenthal 2:16:50 Amazing.

Ben Gilbert 2:16:51 And, of course, James Cameron, testimony.

David Rosenthal 2:16:54 Yes, of course. Of course. So that's going down to the bottom of the sea, very romantic lifestyle, uh, you know, association.

Ben Gilbert 2:17:05 By the way, isn't it interesting all these are in English? All these watches have English names.

David Rosenthal 2:17:10 Yeah, what's the market here? It's Americans. [laughs]

Ben Gilbert 2:17:11 Yes. [laughs]

David Rosenthal 2:17:12 Come on. [laughs]

Ben Gilbert 2:17:15 So take us airborne, David.

David Rosenthal 2:17:17 Yeah, so we've gone down, now we'll go up. That brings us to the GMT-Master, the Greenwich Mean Time Master. So in 1955, Boeing launched the 707 commercial jet airliner based on a Air Force air-to-air refueling tanker design.

Ben Gilbert 2:17:39 Mm.

David Rosenthal 2:17:39 I didn't know that until this episode.

Ben Gilbert 2:17:40 Neither did I.

David Rosenthal 2:17:41 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. [laughs]

Ben Gilbert 2:18:01 Mm-hmm.

David Rosenthal 2:18:01 It's a new concept.

Ben Gilbert 2:18:02 Yep.

David Rosenthal 2:18:02 You know, if you traveled across continents before, you didn't move fast enough that you, uh, 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.

Ben Gilbert 2:18:34 Okay.

David Rosenthal 2:18:35 And the way that 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.

Ben Gilbert 2:18:46 Amazing.

David Rosenthal 2:18:47 So Rolex takes the failed Turnograph, which isn't selling well, but has the rotating bezel, remember?

Ben Gilbert 2:18:54 Bidirectional rotating bezel, importantly, 'cause the Submariner is just one.

David Rosenthal 2:18:58 Hmm.

Ben Gilbert 2:18:58 Well, uh, maybe not at first, but it eventually becomes just one, so you don't, you know, screw up and do something you don't want to with it.

David Rosenthal 2:19:04 Yep, and they change the markings on the bezel from 60 minutes or 60 demarcations, that it was on the Turnograph, 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 are the master of time with this watch.

Ben Gilbert 2:19:35 Legitimately very, very useful. Whenever you and I travel for Acquired, I set the complication in the lower right of my Apple Watch to be the home time, 'cause it's just really nice to keep track of home time in addition to where I am right now.

David Rosenthal 2:19:51 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, uh, the other half, and-

Ben Gilbert 2:20:04 The Pepsi

David Rosenthal 2:20:04 ... this is the Pepsi model.

Ben Gilbert 2:20:05 Yes.

David Rosenthal 2:20:06 So cool.

Ben Gilbert 2:20:07 They do all these great limited editions. The Sprite.

David Rosenthal 2:20:10 The Batman, gray and black.

Ben Gilbert 2:20:11 It's great. The community comes up with little nicknames for all the different color schemes that they do here.

David Rosenthal 2:20:16 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.

Ben Gilbert 2:20:30 Yep. Oh, yes.

David Rosenthal 2:20:31 Which brings us to the Apollo missions.... for which standard issue from NASA is the Omega Speedmaster.

Ben Gilbert 2:20:41 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.

David Rosenthal 2:20:54 Yep. But even though Omega was standard issue on the Apollo missions, not all of the Apollo astronauts chose to wear 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 Jack Swigert, a character who's played by Kevin Bacon in the movie, "To my longtime friend, René Jeanneret," who I believe was Rolex's 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, too, preferred GMT-Masters and-

Ben Gilbert 2:21:44 Oh!

David Rosenthal 2:21:44 ... wore their GMT-Masters during the Apollo missions.

Ben Gilbert 2:21:47 Interesting. Yeah, 'cause like you said, the, uh, 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 accomplished 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.

David Rosenthal 2:22:07 Yep.

Ben Gilbert 2:22:08 And by choice, by the astronaut's choice, much like Sean Connery.

David Rosenthal 2:22:11 Oh! What could be better?

Ben Gilbert 2:22:12 Yes.

David Rosenthal 2:22:13 Not gonna wear this inferior product. [laughing]

Ben Gilbert 2:22:15 [laughing]

David Rosenthal 2:22:16 Now, I'm sure this is, uh, Rolex's version of history, but supposedly, NASA reached out to Rolex first-

Ben Gilbert 2:22:25 [laughing]

David Rosenthal 2:22:25 ... because they knew that test pilots preferred GMT-Masters, but there was a mix-up in Rolex's New York purchasing office that led to this mishap of Omega being selected instead.

Ben Gilbert 2:22:39 Ah.

David Rosenthal 2:22:41 Ah, yeah.

Ben Gilbert 2:22:42 If you work at Omega, please contact us and tell us what is the real version of this story. [chuckles] 'Cause we know no one at Rolex is gonna call, so let's hear at least Omega's side of this.

David Rosenthal 2:22:50 Yes. Okay, so whatever the case, you know, this is all just building so much legend and lore and romance and, you know, the ultimate lifestyle brand here. And like I said earlier, this really is the architecting of André Heininger, and we talked about the J. Walter Thompson relationship, but I had mentioned Mark McCormack and IMG. And starting here in the mid-'60s with IMG is when they really turbocharge and formalize this testimony, brand ambassador, partnership relationship.

Ben Gilbert 2:23:21 And they are doing two-pronged here. These professional watches are happening, but they've also advanced their sort of dress line.

David Rosenthal 2:23:28 Yes, they've come out with the Day-Date.

Ben Gilbert 2:23:29 Yes, the President, as it's nicknamed.

David Rosenthal 2:23:32 [chuckles] The President. It was so ironic that the first president to wear a Rolex wore a Datejust, not a Day-Date.

Ben Gilbert 2:23:38 Right. But future presidents wore Day-Dates.

David Rosenthal 2:23:41 Yes. But anyway, and back to IMG, IMG was the first modern talent celebrity endorsement agency, and really visionary of Mark McCormack to 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 Arnold Palmer, then Gary Player, and then Jack Nicklaus. And for their whole careers, I believe probably their whole lives, they are Rolex men.

Ben Gilbert 2:24:15 Yep, and that is effectively the blueprint for everyone from Federer to Tiger Woods forward.

David Rosenthal 2:24:20 Yeah, so just in golf, you know, if you go forward, Tiger Woods, Annika Sörenstam, today, Scottie Scheffler, Jordan Spieth, Justin Thomas, Brooke Henderson, Lydia Ko. You know, not everybody, but at least a large share of the best players are Rolex players.

Ben Gilbert 2:24:35 Well, it's interesting 'cause 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.

David Rosenthal 2:24:44 Yes, a large share of the very best players.

Ben Gilbert 2:24:47 And that goes for individual athletes, but it also goes for which events they sponsor. I mean, I was talking to Ben Clymer at HODINKEE, and he pointed out that they don't just sponsor PGA Tour, they sponsor the Masters. They're not gonna really mess around much beyond that. Similar to tennis, like, "Yeah, we'll do Wimbledon."

David Rosenthal 2:25:03 Well, and now they do all four Grand Slams.

Ben Gilbert 2:25:06 Ah, okay.

David Rosenthal 2:25:07 So yeah, arguably tennis, you know, especially post-Federer, 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.

Ben Gilbert 2:25:19 Yeah, I think that's right.

David Rosenthal 2:25:20 I mean, I don't think the Federer-Rolex relationship is quite like a Michael Jordan-Nike 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 Swiss luxury watch companies. But also, even going all the way back to the '30s and the Wilsdorf days, the Hans 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.

Ben Gilbert 2:25:59 Think about that hairspring. Think about that delicate balance wheel floating there, carefully ticking back and forth, hovering. The vibrations, I don't really understand how it keeps working perfectly.

David Rosenthal 2:26:11 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 Federer's career, think about Arnold Palmer's career, Jack Nicklaus, you know. These people had multiple decades of dominance, of being at the pinnacle of human achievement.

Ben Gilbert 2:26:32 Yep, that's right.

David Rosenthal 2:26:33 So that wraps up the iconic-... tool sport professional watches like Rolex. [laughs]

Ben Gilbert 2:26:43 No, it doesn't. I, I, I don't, you-

David Rosenthal 2:26:43 So to speak.

Ben Gilbert 2:26:43 There's a thing you haven't said. [laughs]

David Rosenthal 2:26:46 Except for the model that both of us are wearing on our wrists right now. The Daytona really created a market-

Ben Gilbert 2:26:56 Yeah

David Rosenthal 2:26:56 ... in and of its own.

Ben Gilbert 2:26:58 Yeah, and completely changed the mechanical watch market, period.

David Rosenthal 2:27:02 Yes. The Daytona, through a complete accident of history, as we shall see in a minute here-

Ben Gilbert 2:27:08 Created a phenomenon

David Rosenthal 2:27:09 ... created the modern watch collector market.

Ben Gilbert 2:27:12 Yes.

David Rosenthal 2:27:13 And all of the crazy prices, and auctions, and insanity that occurs today, I think you can say really is all because-

Ben Gilbert 2:27:21 Ooh

David Rosenthal 2:27:21 ... of the Daytona.

Ben Gilbert 2:27:22 It's one component of it, David. I don't want you to oversell. I've got a lot-

David Rosenthal 2:27:25 Okay, okay, at least from the Rolex side of things.

Ben Gilbert 2:27:28 Yes, yes.

David Rosenthal 2:27:28 The Daytona is what created all of it. But before we tell that story...

Ben Gilbert 2:27:33 Yes, now is a great time to thank good friend of the show, ServiceNow. We have talked to listeners about ServiceNow's amazing origin story, and how they've been one of the best performing companies the last decade, but we've gotten some questions from listeners about what ServiceNow actually does. So today, [chuckles] we are gonna answer that question.

David Rosenthal 2:27:54 [chuckles] Well, to start, a phrase that has been used often here recently in the press is that ServiceNow is the, quote-unquote, "AI operating system for the enterprise." But to make that more concrete, ServiceNow started 22 years ago, focused simply on automation. They turned physical paperwork into software workflows, initially for the IT department within enterprises. That was it, and over time, they built on this platform, going to more powerful and complex tasks. They were expanding from serving just IT to other departments, like HR, finance, customer service, field operations, and more. And in the process, over the last two decades, ServiceNow has laid all the tedious groundwork necessary to connect every corner of the enterprise and enable automation to happen.

Ben Gilbert 2:28:45 So when AI arrived, well, AI kind of just by definition, is massively sophisticated task automation. And who had already built the platform and the connective tissue within enterprises to enable that automation? ServiceNow. So to answer the question, what does ServiceNow do today, we mean it when they say they connect and power every department. IT and HR use it to manage people, devices, software licenses across the company. Customer service uses ServiceNow for things like detecting payment failures and routing to the right team or process internally to solve it. Or the supply chain org uses it for capacity planning, integrating with data and plans from other departments to ensure that everybody's on the same page. No more swivel chairing between apps to enter the same data multiple times in different places. And just recently, ServiceNow launched AI agents, so that anyone working in any job can spin up an AI agent to handle the tedious stuff, freeing up humans for bigger picture work.

David Rosenthal 2:29:39 ServiceNow was named to Fortune's World's Most Admired Companies list last year, and Fast Company's Best Workplace for Innovators last year, and it's because of this vision. If you wanna take advantage of the scale and speed of ServiceNow in every corner of your business, go to servicenow.com/acquired, and just tell them that Ben and David sent you.

Ben Gilbert 2:29:57 Thanks, ServiceNow. Okay, so David, the Rolex Daytona.

David Rosenthal 2:30:02 Ooh, yes, the instant worldwide sensation. Mm, or not. [chuckles]

Ben Gilbert 2:30:09 [laughs]

David Rosenthal 2:30:10 So the Daytona, unlike all of Rolex's other watches, is a chronograph, or as they call it, a Cosmograph.

Ben Gilbert 2:30:21 Yes, because again, this is Rolex.

David Rosenthal 2:30:24 We can't use industry standard terms. [chuckles] So what is a chronograph? A chronograph is a very fancy term for a stopwatch.

Ben Gilbert 2:30:33 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.

David Rosenthal 2:30:54 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 World War II, before Andre Heininger, before anybody was thinking about this stuff.

Ben Gilbert 2:31:13 And in large part, it looked like this, but there was no craze around it.

David Rosenthal 2:31:17 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, Daytonas.

Ben Gilbert 2:31:44 They thought about Le Mans, because they were also very closely involved with Le Mans, 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.

David Rosenthal 2:32:02 And again, like we've been talking about, the market is America, post-World War II. Now, what could be more American glamour in 1962 than Daytona Speedway, fast cars, movie stars-

Ben Gilbert 2:32:18 24-hour race

David Rosenthal 2:32:19 ... beaches? 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. [chuckles] 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." [chuckles] You know, signed me.

Ben Gilbert 2:33:04 [laughs]

David Rosenthal 2:33:04 You know, again, we've been talking romance, lifestyle, development of-

Ben Gilbert 2:33:06 Iconic

David Rosenthal 2:33:07 ... the brand here. It's iconic! You can't get any more iconic than that. It's perfect.

Ben Gilbert 2:33:11 Yes.

David Rosenthal 2:33:11 You can totally see how this would set off an absolute insane craze in the market.

Ben Gilbert 2:33:20 Except, to your point, it doesn't right away.

David Rosenthal 2:33:23 Except it doesn't. There's so many of these moments in Rolex history, really in all the stories we tell, where 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.

Ben Gilbert 2:33:39 Say, in Italy.

David Rosenthal 2:33:40 So 1969 is when Paul Newman stars in this movie. It's some time, 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, he's in magazines, and this is his watch. He's wearing this watch, and he wears 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 does he know what time it is, and the boyfriend replies, "Uh, 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- [laughs]

Ben Gilbert 2:34:37 [laughs]

David Rosenthal 2:34:37 ... the watch, the-

Ben Gilbert 2:34:38 Oh

David Rosenthal 2:34:38 ... Paul Newman Daytona.

Ben Gilbert 2:34:40 I actually didn't know this story.

David Rosenthal 2:34:41 Swear to God, this is true.

Ben Gilbert 2:34:42 This watch sold at auction for the most money ever.

David Rosenthal 2:34:45 Ever. I think it was 17 and a half million.

Ben Gilbert 2:34:47 [laughs] "Here, take this one. It keeps good time."

David Rosenthal 2:34:51 And at the time, the market, such as it existed for Daytonas, the secondary market for Daytonas was, like, a $200 watch. So, you know, "Hey, I like the boyfriend. Sure, have a watch. [laughs] I'm done with it." Ah, man, to have been the boyfriend. [laughs]

Ben Gilbert 2:35:10 [laughs]

David Rosenthal 2:35:12 Because two short years later, in 1986, for whatever reason, it is unknown, a bunch of dealers in Italy start snatching up versions of the Daytona from the era when Paul Newman's Daytona was made.

Ben Gilbert 2:35:34 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 wanna market to Americans. There's all this rising wealth, and people wanna celebrate their successes and all that, and they're trying, but America doesn't have a watch culture the way that Italy had both a collecting culture and a style culture.

David Rosenthal 2:35:56 Which is why there are secondary market dealers in Italy.

Ben Gilbert 2:35:59 Yep.

David Rosenthal 2:36:01 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?

Ben Gilbert 2:36:25 Hmm.

David Rosenthal 2:36:25 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 Daytonas," which is a specific style, was made for a couple years by Rolex in the late '60s, early '70s, and it had, like, a art deco-style face to it.

Ben Gilbert 2:36:48 Yeah, and a, a very particular color scheme that sort of featured red around the edges, as well.

David Rosenthal 2:36:54 Yes, red around the edges, around the track where the minutes and seconds are kept, but also a very specific font.

Ben Gilbert 2:36:59 Yep. 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 maybe I should work out the equation in my head. Maybe it is 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 race car drivers.

David Rosenthal 2:37:55 That's awesome. I actually did not know that that's what those numbers-

Ben Gilbert 2:38:00 No, you've gotta be kidding me!

David Rosenthal 2:38:00 ... that [laughs]

Ben Gilbert 2:38:01 You own this watch.

David Rosenthal 2:38:02 I know, I know, I know.

Ben Gilbert 2:38:03 [laughs]

David Rosenthal 2:38:03 But, you know, I haven't thought about this watch in 15 years. [laughs] So-

Ben Gilbert 2:38:08 Yeah, for anyone, uh, who's l- trying to figure out what's going on over in David land, David, uh, used to work in investment banking, and this was a part of the uniform when you got out of college.

David Rosenthal 2:38:18 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. In college, he got really big into watches and watch collecting, so, like, early, before the market here in America.

Ben Gilbert 2:38:31 Yeah, I mean, that's before it took off in any way in the US.

David Rosenthal 2:38:34 Totally, and I thought he was insane. I was like, "Why are you blowing all this money on watches?"

Ben Gilbert 2:38:38 Which back then, it actually wasn't that much money.

David Rosenthal 2:38:41 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 white face Rolex Daytona, which is an incredible piece. It was an incredible-... gift back then. I was like, "Oh, this is super cool." And all my colleagues, especially the senior bankers, were like, "Who is this freaking kid?" [laughs] Like-

Ben Gilbert 2:39:03 Right, yeah. This is not a, "I got my first bonus, so I went and bought a Rolex." This was an it watch.

David Rosenthal 2:39:09 This is not a, 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.

Ben Gilbert 2:39:18 Yes.

David Rosenthal 2:39:19 So it was odd for me to wear it. [laughs]

Ben Gilbert 2:39:21 [laughs]

David Rosenthal 2:39:21 And, uh, paradoxically, it actually killed my interest in watches and desire 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 is too much."

Ben Gilbert 2:39:37 I need to get my bearings again. [laughs]

David Rosenthal 2:39:38 Yeah, exactly. Exactly. So then I didn't wear watches at all, you know, nothing on my wrist until the Apple Watch.

Ben Gilbert 2:39:44 Ah.

David Rosenthal 2:39:44 And then when the Apple Watch came out, I've worn that every day since, until we went to Taiwan, and we were like, "Well, we should do a little, little Easter egg," and we broke out-

Ben Gilbert 2:39:51 Yeah

David Rosenthal 2:39:51 ... the watches out of the safe.

Ben Gilbert 2:39:53 So cool.

David Rosenthal 2:39:54 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.

Ben Gilbert 2:40:04 We'll see. Okay, but what you're foreshadowing here, though, is the hype over that Paul Newman dial-

David Rosenthal 2:40:10 Which, to be clear, I am not wearing a Paul Newman dial. [laughs]

Ben Gilbert 2:40:13 ... trickled out into the rest of the Daytonas. It made any Daytona extremely desirable.

David Rosenthal 2:40:18 Just sticking with the Paul Newman models here in 1986, prices for some of these models shoot to, like, $30,000-plus.

Ben Gilbert 2:40:28 In 1986 dollars.

David Rosenthal 2:40:30 Yeah, for a watch that Paul Newman gave away to his daughter's boyfriend two years before and was worth $200. Ben, you're right, this one event didn't create the global watch collecting and investing market, period, but it was part of it.

Ben Gilbert 2:40:45 Absolutely was part of it.

David Rosenthal 2:40:46 This was a huge moment of like, "Oh, wow, these things aren't just purchases, they're investments, and you can trade in them."

Ben Gilbert 2:40:53 Yeah. Put a pin in that. There's a whole world of '70s and '80s that's this almost, like, 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 wear Rolex," to suddenly you've got these scuba divers, and these pilots, and these race car drivers now with the Daytona, and they're wearing the professional watches for their craft. We can probably sell a lot of watches by selling that lifestyle.

David Rosenthal 2:41:39 Yes.

Ben Gilbert 2:41:40 So this is where the expansion goes from just commanding the world to human achievement, those who sit at atop their fields. And in 1967 to 1970, there's this great campaign they launched, the If You Were campaign.

David Rosenthal 2:41:55 Mm.

Ben Gilbert 2:41:55 In a big... I mean, Google this. We'll put some links in the show notes, too, but Google this, and 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 Concorde tomorrow, you'd wear a Rolex." Picture of the Concorde going supersonic, picture of the GMT-Master.

David Rosenthal 2:42:14 So great.

Ben Gilbert 2:42:15 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 speaking at the UN, "If you were speaking here tomorrow, you'd wear a Rolex."

David Rosenthal 2:42:36 "If you were climbing here tomorrow..."

Ben Gilbert 2:42:38 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 Mad Men era of advertising, completely the opposite of the Mercedes Gleitz era. We are leaning heavily into, "Who could you be?"

David Rosenthal 2:43:01 Yeah.

Ben Gilbert 2:43:01 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 Boer War-

David Rosenthal 2:43:25 Mm

Ben Gilbert 2:43:25 ... that Hans had recognized.

David Rosenthal 2:43:26 Hmm, so they had the history, too.

Ben Gilbert 2:43:28 They had the history, too, yeah.

David Rosenthal 2:43:30 Yeah, th- those incredible ads, that was really peak Rolex lifestyle era, this kind of second era of Rolex, of 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 collectors' market gets built, it's actually, I, I think, the first real big move that Rolex makes into the luxury world.

Ben Gilbert 2:44:01 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 could 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.

David Rosenthal 2:44:20 Yep. You could buy a Submariner, you could buy an Explorer, you could buy a GMT-Master, you could buy a Datejust.

Ben Gilbert 2:44:25 But you couldn't buy a Daytona. That sort of, from this '80s forward, was always this spot in their lineup where, "Eh, we'll, we'll have to call you about that one."

David Rosenthal 2:44:34 Today, if you wanna 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.

Ben Gilbert 2:44:53 Oh, I don't think that's true.

David Rosenthal 2:44:54 Is that, is that not true?

Ben Gilbert 2:44:55 No, it c- it's impossible to say that because they work through authorized dealers, and so it's not up to Rolex.... Hmm, and 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.

David Rosenthal 2:45:12 Hmm, interesting, interesting.

Ben Gilbert 2:45:13 At least historically. It might be changing amidst the insanity right now.

David Rosenthal 2:45:16 You know, if you go browse the forums, the lingo that I read is, "The Daytona is not a waitlist, it's a wish list." [laughing]

Ben Gilbert 2:45:23 [laughing] Ah, that's awesome.

David Rosenthal 2:45:26 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."

Ben Gilbert 2:45:39 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 [chuckles] uh, where we currently are and where we'll end up.

David Rosenthal 2:45:52 All right, let's go there.

Ben Gilbert 2:45:55 All right.

David Rosenthal 2:45:55 Take us back.

Ben Gilbert 2:45:56 So this was a whole side quest that I did this episode. [chuckles]

David Rosenthal 2:46:02 Nice term.

Ben Gilbert 2:46:03 Thank you.

David Rosenthal 2:46:03 Look at us getting all Gen Z.

Ben Gilbert 2:46:05 David and I interpreted the assignment differently to-

David Rosenthal 2:46:08 [laughing] Okay, well, you're just pandering to Gen Z right now

Ben Gilbert 2:46:11 ... do an episode on-- H- how, how would I know I-

David Rosenthal 2:46:14 A side quest interpreting the assignment?

Ben Gilbert 2:46:17 I'm sorry, is this Gen Z lingo? I don't even know.

David Rosenthal 2:46:19 I think it-- I'm pretty sure it is.

Ben Gilbert 2:46:20 Oh, well, anyway, we interpreted the assignment differently of do an 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 Aegler, 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-

David Rosenthal 2:46:45 [laughing]

Ben Gilbert 2:46:46 -for the quartz crisis. And I have two huge thank yous for this section. Ben Clymer, the founder and CEO of HODINKEE. I spent hours pestering Ben and having phone calls with him, and I probably read thirty things on HODINKEE. I mean, on the modern watch era, it's the 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 HODINKEE, but over the last forty years, he has written all the canonical pieces. He was the editor of Watchtime 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 Geneva and Taiwan and Japan and reporting on it live.

David Rosenthal 2:47:35 So okay, you've mentioned the quartz crisis, also known as the Quartz Revolution.

Ben Gilbert 2:47:39 Yes.

David Rosenthal 2:47:40 What is this?

Ben Gilbert 2:47:41 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 eighty-five percent of the world's total wristwatches. Eighty-five percent of the market they had. This is in 1945, so it's right after the war.

David Rosenthal 2:48:07 The analogy here is like TSMC in Taiwan. Making mechanical wristwatches is an extremely difficult, specialized skill.

Ben Gilbert 2:48:15 Yes. They made nineteen million of the total twenty-one and a half million that year. Another thing to contextualize it, so you can understand what is coming and how technology disruption will happen, this nineteen million watches produced was by twenty-five hundred individual companies, ninety percent of which employed fewer than fifty people.

David Rosenthal 2:48:41 Wow!

Ben Gilbert 2:48:43 Completely decentralized means of production. In many ways, it actually, the Taiwan metaphor totally extends. It's like Switzerland was Hsinchu Science Park, and these places all sort of kneaded together and collaborate.

David Rosenthal 2:48:55 Yes. Yeah, [chuckles] I was gonna say the exact same thing.

Ben Gilbert 2:48:58 And so this is an industry built on skilled labor, fragmented across a ton of suppliers, very little vertical integration. Someone makes the movement, someone makes the hand, someone makes the case, and all this happens in one of the most expensive labor environments in the world.

David Rosenthal 2:49:12 Yeah, Geneva ain't cheap.

Ben Gilbert 2:49:13 It's kind of amazing that there was this labor-intensive industry in Geneva. All right, so that was 1945. Three decades later, in 1973, it's still going strong. The Swiss peaked at almost ninety million watches made in 1973.

David Rosenthal 2:49:29 Wow!

Ben Gilbert 2:49:30 Up from nineteen million twenty-eight years before, they're now at ninety 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?

David Rosenthal 2:49:59 Ooh, I would guess, like, digital timekeeping, but-

Ben Gilbert 2:50:03 That's quartz, yeah.

David Rosenthal 2:50:04 Yeah.

Ben Gilbert 2:50:04 What else vibrates like a quartz crystal? What do you think could oscillate to keep time?

David Rosenthal 2:50:10 Something radioactive? [chuckles]

Ben Gilbert 2:50:12 A tuning fork.

David Rosenthal 2:50:13 Ah.

Ben Gilbert 2:50:14 This is a great, weird thing in history, and part of this also comes from, uh, Marc Bridge's 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 Bulova 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 still required, though, hundreds of components and handmade craftsmanship in order to make it.

David Rosenthal 2:50:58 Hmm. Yeah, so it's still difficult to make.

Ben Gilbert 2:51:00 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-

David Rosenthal 2:51:17 Like, say, a Japanese company?

Ben Gilbert 2:51:19 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 Swiss watch 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?

David Rosenthal 2:51:42 Oh, well, I know the Swiss themselves were doing big industry-wide consortiums.

Ben Gilbert 2:51:47 Correct, but that was in the '60s and '70s. In 1927, who possibly could be doing research with quartz technology to use for timekeeping?

David Rosenthal 2:52:00 I have no idea.

Ben Gilbert 2:52:01 It's in America, cutting-edge technology, research.

David Rosenthal 2:52:07 Bell Labs?

Ben Gilbert 2:52:08 Bell Labs.

David Rosenthal 2:52:09 Yeah, okay, there we go.

Ben Gilbert 2:52:10 In New Jersey, the first quartz clock is created.

David Rosenthal 2:52:14 Wow!

Ben Gilbert 2:52:16 Now, unfortunately, in 1927, the Bell Labs quartz clock was the size of an entire room.

David Rosenthal 2:52:23 [laughing] The ENIAC of clocks.

Ben Gilbert 2:52:25 Yes. Okay, so we've been describing the quartz crisis. W- what is it? Well, how does it actually work? How do quartz watches function? Instead of a mainspring that you have in a mechanical watch, you have a battery. Pretty straightforward. Instead of an escapement, you vibrate the quartz crystal.

David Rosenthal 2:52:44 Hmm.

Ben Gilbert 2:52:45 Quartz has this crazy thing where w- if you apply an electrical current, and it's shaped a certain way, they can vibrate at exactly thirty-two thousand seven hundred and sixty-eight hertz.

David Rosenthal 2:52:55 That's right, I remember seeing that number.

Ben Gilbert 2:52:57 It's weird. This is called the piezoelectric effect, and interestingly, that was discovered all the way back in 1880 in Paris.

David Rosenthal 2:53:05 Wow.

Ben Gilbert 2:53:06 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 thirty-two thousand seven hundred and sixty-eight hertz to one hertz, to tick one second at a time, or if you're using a digital watch, to increment the seconds by one each time.

David Rosenthal 2:53:30 So by the time you get to the early '70s, you've now got integrated circuits.

Ben Gilbert 2:53:35 That's exactly right. The first quartz watch that hit the market in 1969 from Seiko was dependent on the invention and miniaturization of the transistor and integrated circuit before it could actually happen. So that's why we're sort of stuck waiting from the '20s all the way to '69 before it can be used in a watch.

David Rosenthal 2:53:53 So really, the whole thing is Bell Labs.

Ben Gilbert 2:53:55 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.

David Rosenthal 2:54:04 Yeah.

Ben Gilbert 2:54:05 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 Seiko Astron, there was a quartz chronometer in a lab at CEH, 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.

David Rosenthal 2:54:36 Right, right.

Ben Gilbert 2:54:37 Why would we... This is really dangerous for our industry. W- we've made it.

David Rosenthal 2:54:40 Yeah, let's keep this in the lab. [chuckles]

Ben Gilbert 2:54:41 Yeah. So over to Japan, the Seiko Astron is launched in 1969. You would not have guessed it was gonna disrupt 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?

David Rosenthal 2:54:58 But just like semiconductors, they get on the learning curve.

Ben Gilbert 2:55:01 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.

David Rosenthal 2:55:32 Yeah.

Ben Gilbert 2:55:33 It used way fewer parts and required very little know-how to assemble it. You could invest upfront 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.

David Rosenthal 2:55:50 Yeah.

Ben Gilbert 2:55:51 So this whole thing, once it gets going, happens so fast.

David Rosenthal 2:55:55 And in the early days, the Swiss industry and a lot of makers, including Rolex, released their own-

Ben Gilbert 2:56:01 Oh, yes

David Rosenthal 2:56:01 ... quartz models, too.

Ben Gilbert 2:56:02 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