EVERY SPOKEN WORD
150 min read · 30,081 words- 0:00 – 1:03
Daytonas on the wrist: setting up Rolex’s paradox
- BGBen Gilbert
All right, David, what's on your wrist?
- DRDavid Rosenthal
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.
- BGBen Gilbert
A strong choice. I'm actually also wearing a Daytona that I am borrowing from a good friend of the show.
- DRDavid Rosenthal
Mm, love it!
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Dude, you gotta go one on each wrist.
- DRDavid Rosenthal
You got it. [laughing] Great.
- BGBen Gilbert
All right.
- SPSpeaker
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?
- 1:03 – 5:52
Rolex the “known-unknown”: secrecy, scale, and instant resale premiums
- BGBen Gilbert
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.
- DRDavid Rosenthal
I'm David Rosenthal.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Ooh.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Oh, yeah. It's funny that the closer to the present day we get, the less we know. [laughing]
- BGBen Gilbert
Totally! They operate like an intelligence agency over there.
- DRDavid Rosenthal
Yes, like James Bond, one might say.
- BGBen Gilbert
Oh, or one might not say.
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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]
- DRDavid Rosenthal
No, no, it was not.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Oh, so excited.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
Search ACQ2 in any podcast player. And before we dive in, we want to briefly thank our presenting partner, J.P. Morgan Payments.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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?
- 5:52 – 10:25
Hans Wilsdorf the outsider: orphanhood, self-reliance, and early drive
- DRDavid Rosenthal
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.
- BGBen Gilbert
And you might say, this sounds like a German name. Bavaria wasn't a part of Germany, right?
- DRDavid Rosenthal
Well, I was just gonna get to that. Technically, it's not Bavaria anymore. Technically-
- BGBen Gilbert
Ah
- DRDavid Rosenthal
... 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.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Oh, yeah, Louis Vuitton and Hermès.
- DRDavid Rosenthal
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!
- BGBen Gilbert
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-
- DRDavid Rosenthal
Yes, all sorts of stuff.
- BGBen Gilbert
Just lots of people died for lots of reasons.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
I see.
- DRDavid Rosenthal
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."
- BGBen Gilbert
Hmm.
- 10:25 – 18:52
Geneva apprenticeship: the watch trade choke point and the chronometer insight
- DRDavid Rosenthal
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.
- BGBen Gilbert
Well, you need something to bank.
- DRDavid Rosenthal
Yeah, you need something to bank. [laughs] Exactly.
- BGBen Gilbert
A country can't just have banking as an industry. It needs a real economy to build banking on top of.
- DRDavid Rosenthal
[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.
- BGBen Gilbert
They're pretty close.
- DRDavid Rosenthal
... so call it a million dollars of business a year in the 1890s. Like, this is big. They're a big player.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
That's what the industry was at this time.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Wristlets, yes. [laughing] We'll get more into that later, and I know you're chomping at the bit to-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
... give me the technical explanation of the crazy human craft and engineering that goes into watches.
- BGBen Gilbert
It's amazing. It's so unbelievably cool.
- DRDavid Rosenthal
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?
- BGBen Gilbert
English.
- DRDavid Rosenthal
English. So he's coordinating with most of their clients in the British market, in the UK.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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-
- BGBen Gilbert
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.
- DRDavid Rosenthal
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-
- BGBen Gilbert
Gotta market that.
- DRDavid Rosenthal
Market this." [laughing]
- BGBen Gilbert
Yeah. [laughing]
- 18:52 – 25:20
London launch: Wilsdorf & Davis and the unbranded watch market
- DRDavid Rosenthal
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.
- BGBen Gilbert
Mm-mm. What, you and I read probably five books between us, and it wasn't in any of them.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Gotta place the order.
- DRDavid Rosenthal
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-
- BGBen Gilbert
Yep
- DRDavid Rosenthal
... 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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yep. And so what is the business doing?
- DRDavid Rosenthal
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.
- BGBen Gilbert
And they're not selling directly to consumers, right?
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes, there is no brand for the product.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
If they were big enough.
- DRDavid Rosenthal
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."
- BGBen Gilbert
Right, he operated one click up the value chain, sort of aggregating on the Swiss side.
- DRDavid Rosenthal
Exactly.
- BGBen Gilbert
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."
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
... Yep, not the dial, right?
- BGBen Gilbert
Correct. No dial, no hands, no case, no glass front.
- DRDavid Rosenthal
And the movement, I think like you said, is kind of the critical piece.
- BGBen Gilbert
Absolutely. That's the hard thing.
- 25:20 – 30:14
The Aegler relationship: miniature movements as Rolex’s hidden engine
- DRDavid Rosenthal
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.
- BGBen Gilbert
Importantly, not Geneva.
- DRDavid Rosenthal
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."
- BGBen Gilbert
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.
- DRDavid Rosenthal
Totally. It's like his hobby horse. "I'm gonna push the limits of human achievement of how small can I make this thing?"
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
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."
- BGBen Gilbert
"I'm keeping his address, so I can write him a letter when I get to-
- DRDavid Rosenthal
"When I start my own company."
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
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]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yep, that's correct. "We will make your movements," handshake deal for 99 years.
- DRDavid Rosenthal
Yes. All of Rolex, everything it becomes, this is the basis of it.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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."
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yeah, 'cause he's not right with traveling watches. [laughing]
- BGBen Gilbert
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."
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yeah.
- 30:14 – 37:00
Wristwatches become the future: Boer War, Kodak naming, and “Rolex”
- DRDavid Rosenthal
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-
- BGBen Gilbert
Absolutely
- DRDavid Rosenthal
... AP European history lessons are gonna- [chuckles]
- BGBen Gilbert
I tweeted this yesterday. I- [chuckles]
- DRDavid Rosenthal
I know, I know. [chuckles] Who knew that our livelihoods would depend on AP European history someday? [chuckles]
- BGBen Gilbert
That's right.
- DRDavid Rosenthal
... 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.
- BGBen Gilbert
Do you know why, in particular, this war had them wearing wristwatches?
- DRDavid Rosenthal
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.
- BGBen Gilbert
That was part of it: climate.
- DRDavid Rosenthal
Oh, yes, of course!
- BGBen Gilbert
They can't wear their jackets, and so they can't reach into their pocket and grab a pocket watch.
- DRDavid Rosenthal
Of course, because it's hot there.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
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-
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
... take your pocket watch out of your vest, open the case? No. [laughs]
- BGBen Gilbert
The axis upon which you evaluate value is a different axis than when you're hanging out on the streets of London.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Now, the funny thing is, he calls Aegler. Maybe he writes to Aegler, I don't exactly know.
- DRDavid Rosenthal
He sends him a text.
- BGBen Gilbert
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."
- DRDavid Rosenthal
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.
- BGBen Gilbert
So interesting.
- DRDavid Rosenthal
But Hans is, like, a true believer at this point in time.
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
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.
- BGBen Gilbert
He's like a zealot.
- DRDavid Rosenthal
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-
- BGBen Gilbert
Yes
- 37:00 – 42:15
Legitimizing the wristwatch: first certifications and WWI-driven rebrand
- DRDavid Rosenthal
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.
- BGBen Gilbert
Which is a big deal because people just did not think these things were accurate before, and without Aegler, they kind of weren't.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
And even more than that, it is, of course, affiliated with the other great observatory in England, the Greenwich Royal Observatory-
- BGBen Gilbert
Yes
- DRDavid Rosenthal
... which, you know, was where Greenwich Mean Time was invented. [chuckles] We are talking, like, probably the most important timekeeping institution in the world.
- BGBen Gilbert
Have you been there, David, to Greenwich?
- DRDavid Rosenthal
No. No, I wanna go. Have you?
- BGBen Gilbert
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.
- DRDavid Rosenthal
Oh, we gotta go.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
We'll stop by on our way to Geneva.
- BGBen Gilbert
Perfect.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
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.
- BGBen Gilbert
On the one hand, nobody cares about watches. There's a war breaking out. On the other hand-
- DRDavid Rosenthal
Everybody cares about watches!
- BGBen Gilbert
Right. [laughs]
- DRDavid Rosenthal
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?
- BGBen Gilbert
Yeah, 'cause they don't wanna call them German.
- DRDavid Rosenthal
It's 'cause of this.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
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-
- BGBen Gilbert
Oh, that's right
- DRDavid Rosenthal
... because before Windsor, their family name was Saxe-Coburg-Gotha. [laughs]
- BGBen Gilbert
Which isn't gonna play well when you're at war against the Germans.
- 42:15 – 59:27
Rolex becomes Swiss: tariffs, precious metals bans, and Geneva prestige
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Ooh, perpetual. I like what you did there.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yes. All right, David, so how are we getting to Switzerland?
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yeah, at this point, Wilsdorf is a naturalized citizen.
- DRDavid Rosenthal
His wife is British.
- BGBen Gilbert
The company is called Rolex now, or they're working on it. It would've been fine.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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."
- DRDavid Rosenthal
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]
- BGBen Gilbert
It's insane. A ten thousand dollar watch becomes a thirty thousand dollar watch when-
- DRDavid Rosenthal
You add gold to it or platinum or whatever. Yep. The delta between-
- BGBen Gilbert
It's like Apple selling memory.
- DRDavid Rosenthal
Exactly, exactly. Yes. [laughing]
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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."
- DRDavid Rosenthal
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.
- BGBen Gilbert
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."
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
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.
- DRDavid Rosenthal
[chuckles] Genève, I love it. Genève, Ben, Genève. [laughing]
- BGBen Gilbert
... Oh, oh, I'm gonna hear about that one, aren't I? [laughing]
- DRDavid Rosenthal
[laughing] It's okay. It's okay. We're ugly Americans here. [chuckles]
- BGBen Gilbert
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.
- 59:27 – 1:31:36
Oyster: waterproofing as the missing requirement for wristwatch reliability
- DRDavid Rosenthal
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.
- BGBen Gilbert
Oh, that's right. This is the weird hinge thing, right?
- DRDavid Rosenthal
It's like a scuba helmet.
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
It's got a hinge on the left side and a little clasp on the right side that goes around the crown.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes, the whole industry has. And Hans, like Forrest Mars, reads the Swiss patent filing register religiously.
- BGBen Gilbert
[chuckles]
- DRDavid Rosenthal
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]
- BGBen Gilbert
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."
- DRDavid Rosenthal
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-
- BGBen Gilbert
Yep
- DRDavid Rosenthal
... 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.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
I mean, really, he's like the Mark Zuckerberg of his time.
- BGBen Gilbert
Ooh, that's a good analogy.
- DRDavid Rosenthal
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."
- BGBen Gilbert
Hmm. It needs to be in our product.
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes, [chuckles] Oyster technology. [laughing] A18 Bionic.
- BGBen Gilbert
[laughing] Yes.
- DRDavid Rosenthal
[laughing] Really, the parallels to Apple are, are just, like, incredible.
- BGBen Gilbert
Ah!
- 1:31:36 – 1:39:34
Perpetual: self-winding completes the product (and explains Oyster’s limits)
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Definitely not. Rolex, at this point, is not a luxury brand.
- BGBen Gilbert
Correct.
- DRDavid Rosenthal
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-
- BGBen Gilbert
Yep
- DRDavid Rosenthal
... 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.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
One of the other problems with the Harwood system was when the hammer struck each end, it made a noise. [chuckles]
- BGBen Gilbert
Oh, really?
- DRDavid Rosenthal
Yeah, yeah, you'd wear your watch, and it'd go, like, clack, clack, clack, clack, clack.
- BGBen Gilbert
Huh.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Oh, the Bubbleback?
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Here it is. It's all here.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Right there on your wrist, David.
- DRDavid Rosenthal
[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.
- BGBen Gilbert
And that's where that center link is the gold, and the outer two links are the steel?
- DRDavid Rosenthal
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.
- BGBen Gilbert
Oh, okay.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes, love it.
- BGBen Gilbert
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.
- 1:39:34 – 1:47:33
WWII and the postwar pivot: Panerai origins, precision needs, and America
- BGBen Gilbert
Yes. So take us into World War II.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Ooh, I have no idea where you're going.
- DRDavid Rosenthal
So do you know what Rolex did in Italy during this time?
- BGBen Gilbert
I have no idea.
- DRDavid Rosenthal
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?"
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
And Rolex is like, "Yeah! Sure, we can do that. We're sitting on our hands here at our factories."
- BGBen Gilbert
Which is funny, 'cause this is, like, a decade and a half before the Submariner.
- DRDavid Rosenthal
Yes. Yes, yes, yes. This is the first dive watch that Rolex makes. Can you guess the name of the Italian retail partner?
- BGBen Gilbert
Oh, I feel like it's gonna be a, pff, I don't know, car company.
- DRDavid Rosenthal
[chuckles] No, no, no, it's even more on the nose. This is Panerai. This is the Panerai watch!
- BGBen Gilbert
Oh, really?
- DRDavid Rosenthal
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.
- BGBen Gilbert
Whoa.
- DRDavid Rosenthal
And then after the war, Panerai kept going, making these watches. Isn't that amazing?
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Huh!
- DRDavid Rosenthal
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-
- BGBen Gilbert
And synchronized attacks.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Wow.
- DRDavid Rosenthal
Super, super important stuff.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes, that is definitely true. Rolex weren't the only ones that were selling to both sides here.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
But nonetheless, World War II is really changing the nature of what you need out of a wristwatch.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
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.
- 1:47:33 – 1:58:49
Datejust + power branding: Churchill → Eisenhower and ‘destinies of the world’
- DRDavid Rosenthal
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.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
It's just beautiful. I've got one here in front of me.
- BGBen Gilbert
For a lot of people, if they don't picture a Submariner when you hear Rolex, they picture a Datejust.
- DRDavid Rosenthal
Or a Daytona, but we'll get to that.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
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-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
... but, uh, his Swiss colleagues were like, "Um, that's not very Swiss. [chuckles] We are neutral." [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
Oh, so it becomes the Jubilee bracelet.
- BGBen Gilbert
Beautiful. It goes great with a fluted bezel. It just adds a little more pizzazz to the wrist.
- DRDavid Rosenthal
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.
- BGBen Gilbert
What does that even look like, to lead Switzerland through the war?
- DRDavid Rosenthal
That's a good question. [chuckles]
- BGBen Gilbert
It's a lot of sitting.
- DRDavid Rosenthal
[chuckles] Yeah, well, remember, this is a three putt.
- BGBen Gilbert
[chuckles] Okay.
- DRDavid Rosenthal
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-
- BGBen Gilbert
Hmm
- DRDavid Rosenthal
... that they, uh, have certified here.
- BGBen Gilbert
Oh, this one goes to Winston Churchill.
- DRDavid Rosenthal
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?
- BGBen Gilbert
Mm-hmm. [laughs] There it is.
- DRDavid Rosenthal
Winston Churchill accepts. Now, Winston Churchill is a Rolex man. [chuckles] Well, in less than a year later, Rolex makes their 150,000th-
- BGBen Gilbert
[chuckles]
- DRDavid Rosenthal
- 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.
- BGBen Gilbert
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."
- DRDavid Rosenthal
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-
- BGBen Gilbert
[laughs]
- 1:58:49 – 2:06:24
The 1950s professional watch suite: lifestyle meets tool functionality
- DRDavid Rosenthal
... 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-
- BGBen Gilbert
Yep
- DRDavid Rosenthal
... but quickly morph into becoming known as the sport watches. [chuckles]
- BGBen Gilbert
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-
- DRDavid Rosenthal
Yeah, a professional pilot.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Oh, you mean like, uh, the Vision Pro is not, uh-
- BGBen Gilbert
Exactly
- DRDavid Rosenthal
... augmented reality?
- BGBen Gilbert
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.
- DRDavid Rosenthal
[laughs]
- BGBen Gilbert
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.
- DRDavid Rosenthal
Amazing. Amazing. Ah, okay, so back to this suite of really world-changing tool watches, or at least watch world-changing tool watches.
- BGBen Gilbert
Professional watches, David.
- DRDavid Rosenthal
Professional watches. I'm sorry. [laughs] First is the Turnograph, as perhaps foreshadowed by that, uh, really great name there.
- BGBen Gilbert
What a horrible name!
- DRDavid Rosenthal
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.
- BGBen Gilbert
But David, if you look at a Turnograph, what's the original one look like?
- DRDavid Rosenthal
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]
- BGBen Gilbert
Really? I never-
- DRDavid Rosenthal
Yeah. [laughs]
- BGBen Gilbert
That's funny. Swing and a miss.
- DRDavid Rosenthal
Swing and a miss. Not exactly really a romantic lifestyle you want to be, uh, associated with. [chuckles]
- BGBen Gilbert
[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-
- DRDavid Rosenthal
Yeah, sure, but it'll come back.... the next least successful one is the Milgauss.
- BGBen Gilbert
I love this watch!
- DRDavid Rosenthal
I know, this one is awesome. This has a whole second life.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- 2:06:24 – 2:29:57
Submariner, GMT, and the Testimonee machine: Bond, pilots, and space adjacency
- DRDavid Rosenthal
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.
- BGBen Gilbert
If you separated Submariner from Rolex, Submariner may actually be a bigger deal. Submariner is its own whole franchise.
- DRDavid Rosenthal
Absolutely.
- BGBen Gilbert
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.
- DRDavid Rosenthal
You're right. It is really its own world.
- BGBen Gilbert
It was Sean Connery's watch even before-
- DRDavid Rosenthal
Oh, oh, you're gonna get into it
- BGBen Gilbert
... he started playing James Bond-
- DRDavid Rosenthal
You're gonna get into it.
- BGBen Gilbert
-and then he wore it, and yeah.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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%.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yep. But it's not really about the waterproofness here. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
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.
- BGBen Gilbert
Oh, interesting.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Great.
- DRDavid Rosenthal
So great. Now, interestingly, there's not an actual formal relationship between Jacques-
- BGBen Gilbert
Hmm
- DRDavid Rosenthal
... and Rolex, and actually, Rolex was formally working with another undersea explorer-
- BGBen Gilbert
Ah
- 2:29:57 – 2:45:56
Daytona: the chronograph that accidentally sparks the modern collector market
- BGBen Gilbert
Thanks, ServiceNow. Okay, so David, the Rolex Daytona.
- DRDavid Rosenthal
Ooh, yes, the instant worldwide sensation. Mm, or not. [chuckles]
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
So the Daytona, unlike all of Rolex's other watches, is a chronograph, or as they call it, a Cosmograph.
- BGBen Gilbert
Yes, because again, this is Rolex.
- DRDavid Rosenthal
We can't use industry standard terms. [chuckles] So what is a chronograph? A chronograph is a very fancy term for a stopwatch.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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.
- BGBen Gilbert
And in large part, it looked like this, but there was no craze around it.
- DRDavid Rosenthal
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.
- BGBen Gilbert
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.
- DRDavid Rosenthal
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-
- BGBen Gilbert
24-hour race
- DRDavid Rosenthal
... 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.
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
You know, again, we've been talking romance, lifestyle, development of-
- BGBen Gilbert
Iconic
- DRDavid Rosenthal
... the brand here. It's iconic! You can't get any more iconic than that. It's perfect.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
You can totally see how this would set off an absolute insane craze in the market.
- BGBen Gilbert
Except, to your point, it doesn't right away.
- DRDavid Rosenthal
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.
- BGBen Gilbert
Say, in Italy.
- DRDavid Rosenthal
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]
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
... the watch, the-
- BGBen Gilbert
Oh
- DRDavid Rosenthal
... Paul Newman Daytona.
- BGBen Gilbert
I actually didn't know this story.
- DRDavid Rosenthal
Swear to God, this is true.
- 2:45:56 – 3:29:23
Quartz crisis side quest: Swiss collapse and Rolex’s strategic escape hatch
- BGBen Gilbert
So this was a whole side quest that I did this episode. [chuckles]
- DRDavid Rosenthal
Nice term.
- BGBen Gilbert
Thank you.
- DRDavid Rosenthal
Look at us getting all Gen Z.
- BGBen Gilbert
David and I interpreted the assignment differently to-
- DRDavid Rosenthal
[laughing] Okay, well, you're just pandering to Gen Z right now
- BGBen Gilbert
... do an episode on-- H- how, how would I know I-
- DRDavid Rosenthal
A side quest interpreting the assignment?
- BGBen Gilbert
I'm sorry, is this Gen Z lingo? I don't even know.
- DRDavid Rosenthal
I think it-- I'm pretty sure it is.
- BGBen Gilbert
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-
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
-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.
- DRDavid Rosenthal
So okay, you've mentioned the quartz crisis, also known as the Quartz Revolution.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
What is this?
- BGBen Gilbert
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.
- DRDavid Rosenthal
The analogy here is like TSMC in Taiwan. Making mechanical wristwatches is an extremely difficult, specialized skill.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Wow!
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yes. Yeah, [chuckles] I was gonna say the exact same thing.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Yeah, Geneva ain't cheap.
- BGBen Gilbert
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.
- DRDavid Rosenthal
Wow!
- BGBen Gilbert
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?
- DRDavid Rosenthal
Ooh, I would guess, like, digital timekeeping, but-
- BGBen Gilbert
That's quartz, yeah.
- DRDavid Rosenthal
Yeah.
Episode duration: 5:00:34
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Transcript of episode nUKLhaa0Pus
