The Founder of Rolex: Hans Wilsdorf

1. 0:00 – 2:31

   A Rare Book and an Orphaned Childhood

   1. DSDavid Senra0:00

      The book that I'm gonna talk to you about today is nearly impossible to find. It was first published in 1946. There's only 1,000 copies ever made. It's called Rolex Jubilee, and then the subtitle is actually in Latin, but when you translate it from Latin into English, it literally means, "Go with me." And so it's a s- tiny four-volume, like, history of Rolex, and volume one was written by Hans Wilsdorf, who is the founder of Rolex. And so he tells the founding story of Rolex in his own words. There's a lot of things that'll surprise you in this story, the first one being that he was the sole shareholder of Rolex, but the second one was that he was an orphan. So he goes right into his early life, and in one sentence, he sets the entire stage for us. He says, "I was born on March 22nd, 1881. My mother's early death was soon followed by that of my father's, and at age 12, I was an orphan." And there's a decision made by his uncles that is gonna change the trajectory of Hans' entire life. They decide to sell the family business to pay for boarding school for the kids that are left behind. So he says, "My mother's brothers decided that it'd be wiser to liquidate the prosperous business which had belonged first to my grandfather and then later to my father, believing that in this way we children could be better prepared for life without having to call upon anyone for help." His life would have been very different without his uncles and that decision to actually liquidate the business and then take that money and actually send him to boarding school, which I'll get into why that's so important for the founding of Rolex in one second. But he talks a little bit about the fact that one of the best things his uncles ever did for him and his siblings was that they taught him self-reliance. Keep in mind, the words I'm reading you, Hans is writing them. He is in his mid-60s. He's looking back at his life, and so he says, "Our uncles were not indifferent to our fate. They made me become self-reliant very early in life. Looking back, I believe that it is to this that much of my success is due." Now, this part is really important. There's gonna be a few times where I'm gonna talk to you today about things that happened early in Hans' life he doesn't understand. So you and I talk about this over and over again, the, the idea that the world is a classroom. Like, the, the, the books that you're reading, the knowledge and skills that you're acquiring, the relationships you're building, you have no idea that the opportunities that they unlock in the future, you just can't possibly predict it. And so they're gonna put him in a boarding school. So I'm gonna read this to you, and then I'm gonna t- say why this is, uh, so important to the founding of Rolex. Highly likely that if he didn't learn all these languages at this boarding school, that there wouldn't have been a Rolex, or his, his career definitely would have been vastly different, and I'll explain why in one second. So it says, "We're placed in a boarding school of excellent repute where we received that sound

2. 2:31 – 6:03

   Languages and an Education at an Import Agent

   1. DSDavid Senra2:31

      education so necessary to the man who has to make his own way in the world. I showed a particular liking for mathematics and languages." The languages is so important. "And this inclination drove me to travel and work in foreign countries." So this education in multiple languages I would argue is maybe the basis for his entire career. It will lead directly to his discovery of the opportunity on which his life and career will then be devoted to. And it happens relatively early in his life because at the age of 19, he-- Hans is gonna start working in the watch industry at 19, and he will do so for the next six- 60 years until his death. Now, when I say it's the watch industry, this is the thing that blew my mind because everybody knows the brand Rolex. Without a doubt, one of the most valuable brand names in existence, right? But there was no such thing as a wristwatch industry for men at the time that Hans is-- when he's 19 years old. This is the most, one of the most shocking things about me during re- doing all this re- reading and research. It's one I've been repeating all week to, to friends that I've been telling about Hans, and I believe it's to be one of the most inspiring parts of this entire story, and I'll go, I'll go into that. But, so at 19 years old, right, he goes to this little city in Switzerland to g- he has a job. He's gonna work as an English correspondence and a clerk with a Swiss company called Cunha Cortin. Now, watch how this all ties together. So Cunha Cortin, it's a Swiss company. All they do is they export Swiss pocket watches. The watch industry, like 99, maybe more than 99% of the watch industry at this time in history, is pocket watches. And so this company, they act as import agents. This is really important. S- because he spoke, because at this point, Hans speaks English, German, French, I think there's a [chuckles] there's a few other languages that he actually speaks, he gets a job where he handles the business correspondence of this relatively large import agent for Swiss watch manufacturers. This business is operating in a ton of different countries and a ton of dif- uh, different languages, so this helps him get a, a really good inter- uh, understanding of international strategic marketing. And I'm not sure there's a better form of education for a young person learning business. Like, when I was reading this section, it, it reminded me exactly of what, like, a young Rockefeller. So Hans is 19 where we are in the story. Rockefeller gets a job when he's, like, 16 or 17 for this produce commission firm in Cleveland that's called Hewlett and Tuttle. And as a result of that job, Rockefeller learns so many valuable skills. He understands bookkeeping. He understands contracts. He's looking at shipping. He's learning about margins. He's learning skills that he's gonna use for his entire career once he starts building his own company. And when you're in a position like Rockefeller was in Ohio or like Hans is, is in Switzerland, like, you can learn so fast. So in, in the case of Hans, like, he's gonna start working here at 19. By 25, he starts his own company. That, that's the company that's gonna turn into Rolex. And so Hans describes the time of his life. He says, "It was a big concern exporting about 1 million francs worth of watches annually. All grades of watches were dealt with, although only a small proportion was manufactured by the firm itself." So I need to translate that for you. In the late 1800s, early 1900s, when you hear the word concern, we would call that a company today. They would call what we would call a product, they would call an article. So this import agent's business for Swiss watch manufacturers was a pretty big business, is what he's saying. And the next sentence is why I said that decision made by his uncles to educate him, to send him to the, to the best school, that school teaches him multiple languages, is why he- the, the opportunity to found and develop Rolex was unlocked many years in the future. And he says, "My work there provided an excellent opportunity to study the watchmaking industry closely and to examine every type of watch produced

3. 6:03 – 9:36

   Groping Toward a Focus and Starting Wilsdorf and Davis

   1. DSDavid Senra6:03

      both in Switzerland and abroad." So a few years later, he's going to switch to another firm and move to London, and this is what he said about this time, and he's only gonna last two years before he starts his own company. "Two things struck me most forcibly," that's interesting writing, "most forcibly about my new employers. On one hand, their commercial competence, and on the other hand, their lack of specialization." And now looking back after having done all this other additional reading and research, that sentence is really important to me because he's talking about that they, you know, they're very commercially competent, right? In other words, they have their shit together. They're running a great business. Hans will do the same, but then he says their lack of specialization. So this is something I've been talking about nonstop this week that is frankly very inspiring to me, and you see it over and over again in the stories. I think that's why reading business biographies is far superior than reading just business books. Because in every single life of an entrepreneur, you like grope your way to what you're doing. There's all these like false starts, dead ends. You can just see as you go through not only Hans' life, but everybody's life, it's just like they're trying to f- they figure it out a little bit along the way. And they also ape and copy, right, people that came before them, experiences they had before them. So when he starts out, this is the, the, the one of the most inspiring things because like Rolex is so unbelievably focused today. They know what they're great at, and they focus relentlessly on it. But in the very beginning, Hans had no idea, and what I mean by that is he had, you know, I don't know, 15 different brand names. He wasn't making watches at all. He was just reselling them. He was really a gifted marketer, which I'll get to in a minute. When you think about lack of specialization, is this like their focus on luxury-- Rolex, say, is foc- fo- focused on luxury watches. He was selling cheap watches, you know, mid-grade watches, really expensive watches. He is constantly experimenting, using that action as a form of im- uh, education, right? It gives him information back, and then you see him adjust slowly over time, and it is through that process that he uncovers or discovers this phenomenal opportunity. And this is when he describes founding the company that's gonna turn into Rolex. "I soon gained confidence in myself, and in 1905, at the age of 24, I decided to set up in business, feeling that my training and education had prepared me to stand on my own." And so he starts this company called Wilsdorf and Davis, and he says they had mo- "We had modest capital at our disposal." So Wils- this is fascinating too about, again, this, this constant iteration that you see throughout the life of Hans Wilsdorf. So Wilsdorf and Davis was n- they were not m- watch manufacturers. They purchased watches from Swiss manufacturers. Think about his experience that he had. He worked for two firms that did exactly this. So it's like, "Oh, I can do this too," right? Let me draw another analogy to Rockefeller. Did Rockefeller jump from Hewlett and Tuttle, this produce commission house, into Standard Oil? No. What did he do? He quit and started his own produce commission house, and then that opportunity led him to this accidental discovery of realizing, "Hey, I can actually become one of the first oil refiners." So again, this is fascinating. So Wilsdorf and Davis, they're not watch manufacturers. They purchase watch, watches from the Swiss watchmakers, right? From Swiss... I keep saying Swish. [chuckles] I don't know why I'm adding an H, an H on there. From Swiss manufacturers, and then would sell them to retailers. But I love this idea where he starts out, he's just got an office. He's got no money. So what are you gonna do? Like you can't make 'em yourself. You just gotta sell 'em. When they're talking about they're importing watches, they're talking about pocket watches. If you only remember one thing from this episode, the only one thing is this is like the power of belief. The, the reason Rolex is what it is today, the reason that we're talking about Hans, you know, what, 80 years after he died, something like that, it's because his belief, this belief in the wristwatch for men, which did not exist when he started believing in it. Hans is a huge collector of pocket watches, which I think is also important. He's working in the industry.

4. 9:36 – 14:51

   The Wristwatch Nobody Wanted

   1. DSDavid Senra9:36

      He collects pocket watches. When you collect something, when you see something, you see its flaws, and you see what should be improved. You see that with the way Hans was thinking about developing a new market for wristwatches because he saw the, the deficiency of the pocket watch industry 'cause he was, he's so intimately involved in it. And so he's describing what the state of this industry was when he was 24 years old when he started his first company. He says, "At this period, the wristlet watch..." So this is hilarious. They do not call 'em wristwatches, right? They called them either wristlet watches. They would also call them bracelet watches, and the reason they call 'em bracelet watches because at this time, only women would wear wristwatches. And so he talks about this. The fact was, for men, the wristwatch or the bracelet watch was an object of derision. The idea of wearing a watch on one's wrist was, at this time, thought contrary to the conception of masculinity. One guy remarked that he wouldn't be caught doing such an unrefined thing, meaning wearing a watch on his wrist. He said you'd be likely to catch him in a dress as you would to be wearing a wristlet. And this sentence says everything. Prior to World War I, wristwatches for men did not exist. That blew my mind. Prior to World War I, wristwatches for men didn't exist, and the reason that people, uh, the men in World War I in, uh, wore, uh, wristwatches, they were known as trench watches, and they did that so they could coordinate movement on the battlefield. That is the very beginning of the wristwatch industry for men. And so Hans talks about the fact that, hey, you know, of course, if the public is skeptical, then of course the existing players in the industry are gonna be skeptical. I think this is why it's so im- important that he was, uh, somebody young. Usually people younger coming into industries, they, they see all the things that, all the flaws that they could fix. So he says, "Watchmakers all over the world remained skeptical as to its possibilities," meaning the wristwatch for men, "and believed that this newfangled object was bound to prove a failure. Their argument against the wristwatch were the following," and they're legitimate arguments. These are essentially the way I, you would think about what he's describing here. It's something you and I have talked about over and over again, that problems are just opportunities in work clothes. Business is problems, so the best companies are just effective problem-solving machines. And so they're like, "No, you have all these pr- unsolved problems. First, the mechanism required by this type of watch must of necessity be small and delicate and could therefore never withstand the violent gestures of the hand and arm. Second, dust and water would rapidly spoil the mechanism." He's gonna solve that problem too. "Third, accuracy and regularity of working could never be attained with such small, so small of a movement." That's a third problem that he is going to solve. Back to Hans. "In spite of all of this, I kept my faith in the wristlet watch and was determined to see what could be done." Now, this is the crazy thing. So he's writing that as a 65-year-old man. I found a quote when he is 33 in 1914. This guy really believed in this. He says, "My personal opinion is that the pocket watches will almost completely disappear and that wristwatches will replace them definitively. I am not mistaken in this opinion, and you will see that I am right." That is insane. He's 33 years old when he's saying that. So he says, "The task I undertook meant the overcoming of enormous difficulties." He just laid out all the problems that were preventing other people from doing this. "And yet today, after 40 years of striving, it seems to me that I have surmounted them, and I believe that in doing so, I have contributed to the development of the watchm- watchmaking industry in general." And then it gets even more fascinating because then you could tell he, he, he's thinking like an entrepreneur. You know, he wanted to build wealth, as you can imagine, an orphan wanting to do so, right? And so he, such a he, he identifies, like, well, this pocket watch, the pocket watch i- industry is never gonna grow because how are we using it? P- at the time, pocket watches were passed down from father to son, then from son to grandson, and they're also hidden in your pocket. And Hans is looking at this as like, this is a big problem. And so what he realizes, like, i- if he could take it out of the pocket and put it on your wrist, right, there's gonna be w- more wear and tear, but you're also gonna see it. So he says, "The wristwatch was bound to bring about a certain revolution in the industry. It would have to cause an increase in sales, not only on account of its novelty, but also because, by its very nature, it called for more frequent renewal, more exposure to damage than the pocket watch." That is actually really shrewd observation. It was just like, well, you're gonna buy one pocket watch, and it's gonna last for 100 years. No one sees it. It's protected. Of course this, uh, this industry's gonna be so much smaller than the wristwatch industry could be if we can just convince men to wear these damn wristwatches. And then he also had, like, this shrewd insight to human, uh, nature and human psychology because, you know, it's hidden in your... You, you don't see the product being used. But now if I br- take that product that's, that was hidden in your coat and I put it on your watch, what happens? It becomes a fashion accessory. And so people see it. It helps the product spread. And so he says, "The wristwatch is the type of product of which each individual likes to have not only one, but several." And then this may be the most important sentence I read from Hans or about Hans because this is just an incredible sentence. Because Hans had the highest order bit that other people in the watch industry didn't, and that was belief. And this is what he said:

5. 14:51 – 18:41

   Belief as the Highest Order Bit

   1. DSDavid Senra14:51

      "I had very early realized the manifold possibilities of the wristwatch, and feeling sure that they would materialize in time, I resolutely went on my way. Rolex was thus able to get several years ahead of other watch manufacturers who persisted in clinging to the pocket watch as their chief product." This is something that cannot be skipped over. So Steve Jobs had this idea, and I heard him say it right before he died. This is, like, two years before he died. He was giving this interview. I think he was on stage with Bill Gates, if I remember correctly. But he talked about the highest order bit, and so I actually had to look that up. What did that mean when I heard Steve said it? And so he's, he's ref- he's using a computer reference. He says, "In computing, the highest order bit, also called the most significant bit, is the bit position in a binary number having the greatest value." And so in Steve's case, what he's talking about on stage is the fact that you gotta love what you're doing. You gotta have passion because if you're doing anything that's worthwhile, it's so difficult that if you don't love it, you don't have passion, you're gonna quit because the people that quit doing things they don't love, they're sane people, and that this love and passion for what you're doing can make you, in some ways, irrational, and that irrationality is rewarded because you just don't give up. You have this, like, dogged determination. So I understand. Uh, who am I gonna to argue with Steve? But I don't know. I obviously believe that. I'm, like, completely obsessed with what I'm doing. But I think actually the highest order bit, it's belief. It's belief in yourself, and it's belief in your idea. And in Hans' story, that's certainly the case. It wasn't passion and love. It was belief that he saw an opportunity, and he was willing to pursue it and to actually change the entire industry. And you know what I thought of when I read this section? The first thing, this... I mean, this happened instantaneously too, which was fascinating 'cause this is one of the most important things. I thought of this paragraph in Ted Turner's autobiography. This is episode 327. And it's just remarkable because Ted is looking at the landscape, right? He's, he's like, "I'm going to make the world's first 24-hour news network." That idea led him to become a billionaire, but he's analyzing this. He's like, "Wait, I don't understand this. Why am I seeing the opportunity that no one else is?" And so this is from, this is the paragraph that I thought of when I was reading this, Hans describing the opportunity that he saw, and this is Ted Turner writing in his autobiography. "Clearly, the companies for whom the economics of a 24-hour news network would have made the most sense were the big three broadcasters," right? So ABC, CBS, NBC. Why? Because they already had most of what was needed. They had studios. They had bureaus. They had reporters. They had anchors. They had almost everything but a belief in cable. Ted Turner had the highest order bit. He didn't have a studio. He didn't have the bureaus. He didn't have the reporters. He didn't have the anchors. He'd have to go and collect and build that. But he had something they didn't. He had a belief in cable. And the crazy thing is, like, there's a great description of this. I gotta read this story 'cause it's, it's hilarious. Ted Turner's 38 years old when this story happens, and this guy interviewed in his autobiography is saying that they just happened to wind up being on, on a plane together. They wind up, uh, sitting next to each other, and he says, "As soon as we get airborne, Ted pulls out a copy of the Delta Lines, Delta Airlines magazine. He turns to the map of the United States and starts explaining how he's gonna become a billionaire." And he quotes Ted here. He goes, "Make sure you buy my stock. I'm going to be a billionaire," and why, and he just lays out this entire thing. And then the story ends perfectly. He says, "His enthusiasm was so genuine and so infectious that I'll never forget it." So go back to that. This is, uh, what, what a sentence. "I had very early realized the manifold possibilities of a wristwatch, and feeling sure that they would materialize in time, I resolutely went on my way. Rolex was thus able to get several years ahead of other watch manufacturers who persisted in clinging to the pocket watch as their chief product." If I remember correctly, Ted Turner had, like, an 11-year head start on everybody else. It's absurd. Okay, so how does he start acting on

6. 18:41 – 22:44

   The Aegler Partnership and a Seven-Decade Handshake

   1. DSDavid Senra18:41

      this belief? I think one thing that's important to understand the story of Hans Wilsdorf is the fact that he understood the opportunity better than anybody else, and he would invest heavily in developing the technology that he needed to bring it to fruition. And so again, it goes back to this idea that the whole world is a classroom, that you never know how your previous experience, the things that you're learning will be used in the future. This, you know, knowledge, skills, relationships, all these things compound. So, you know, years before he founds his own company, he's working at that firm in Switzerland, and he hears about this guy named Hermann Aegler. And Hermann's innovation that he made in 1902 was these movements that you need inside of a watch, he made movements that would work in smaller watches. And so Hans is gonna learn this many years before he's able- he has actually the company to actually use it. But he says, "My interest had been roused by this innovation, as the mechanism created by Aegler," right, "had proved very successful from a technical point of view, as well as being accessible in price. So then after founding my firm in 1905, I go and place an order with Aegler. This was the first step forward in our climb to success." So I need to bring- There's a bunch of other things I read, uh, to, to prepare for this podcast. Uh, I'll leave all of them linked down below. I pulled out a bunch of different books. Uh, but this podcast my friend Patrick did, it's one of the best business podcasts I've ever heard in my life. I don't even know how many times I've listened to it now. It is an episode of Business Breakdowns. I will link it down below, but if you just go in your podcast player, look for Business Breakdowns and then search, just search Rolex. It has a great name too, Rolex: Timeless Excellence. My friend Patrick interviewed Ben Clymer. Ben's the founder of HODINKEE. He got access back in, like, 2015. He's one of the first people Rolex ever- 'cause they're super, super secretive, but he was one of the first people to actually go and tour all of their four manufacturing, uh, facilities. So he wrote this fantastic article that I also reread, and then, uh, he talks a lot about the history of Rolex and then how they operate today. But the reason I need to bring this up is 'cause Aegler is a very important name in the history of Rolex. From the very start of Rolex, Aegler's actually the one manufacturing the watches that were sold as Rolex watches. Buying these movements from Aegler is what Hans describes as his very first step forward in our climb to success. Now, the crazy thing, the reason I bring this up is 'cause I also love, like, an old school keep your word mentality. So Hans and the founder of Aegler had a handshake deal for 70 years, and the deal was that Aegler would make movements solely for Rolex. And when they say, there's a great line in the, the podcast episode when he's like, "When I say an actual handshake deal, I mean a handshake deal." There was nothing on paper. There was nothing in writing all the way up until 2004 when Rolex finally buys Aegler. Undoubtedly, undoubtedly at that point in 2004, Rolex is already making, selling, you know, billions of dollars worth of watches. That's nuts, and I just love that. You know, two founders of companies coming together to say, "Hey, we're gonna work together. I'm a man of my word. We're gonna seal this with a handshake." And that relationship and agreement was unbroken for seven decades. That's one of the coolest things I've ever heard. And so Hans is gonna describe, so you have the manufacturing and the making of Rolex watches are what's gonna be sold under Rolex brand, which I haven't even got there yet, is gonna happen in Switzerland. He's still in London. So d- the design and the sales is separate from the manufacturing, and so he would travel from London to Switzerland several times a year, and he says, "I would bring with my collaborators new and personal idea- ideas, demanding that they be realized. In this way, hundreds of models were conceived and launched all across the world." He's selling this. So again, this goes back to the world as an entire classroom. You have no idea how you're gonna use all the, the experience you have. Remember, he was, he, he worked for an importer. They were taking Swiss watches and sending them everywhere, so he's just doing the same thing now with his own products. And as we'll see, he's a master marketer, which I'll get into in a minute, but he, he's having immediate success. "This is how both a new fashion and a great commercial success sprang from an apparently foolhardy idea." He's referencing the fact that everybody around him thought he, what he was doing was silly. Men are never gonna wear these watches. "Soon we were placing orders for tens of thousands, and to the uninformed, must have appeared extremely

7. 22:44 – 26:16

   Brand Name Experiments and Choosing "Rolex"

   1. DSDavid Senra22:44

      audacious young people." When I read that, I thought of one of my favorite things Winston Churchill ever did. He had a personal motto that he'd repeat. He would say aloud to himself, "Always more audacity." Hans, when a young man, was n- he was a many things, but one of the things he was, he was definitely audacious. I love the idea. It's like these guys are crazy. They, they are extremely audacious young people. And so at this point, I need to be clear about something. This is not Rolex. He's selling under a ton of different brand names. He's eventually gonna realize, hey, I don't wanna just be, sit in the middle, right? I don't wanna be a middleman. I want, like, all the value creation is gonna be if I own my own brand, and he-- g- this is what I meant about this, like, constant iteration, this trial and error. I'm gonna read some of the brand names he had. They're, they're freaking terrible. And so at this point, pre, you know, doubling down on this fantastic idea of Rolex, he hasn't discovered that yet. So what he's doing is, is, like, there's a bunch of other brand names that he's, he's experimenting with. He had this idea, this is hilarious too, 'cause I was reading about this. 'Cause you know, Rolex is a, now there's, I don't even think there's such thing as a cheap Rolex, right? And so he had this idea, he's like, "Well, I can supply a watch for every pocket." And what that means is, like, let's say you can order, you know, if I'm making these numbers up, but, like, a $5 watch or a $100 watch or a $2,000 watch. He's like, "I wanna, I'm gonna serve every single aspect of the market," which obviously they don't do anymore. This is h- his iteration, his, like, learning from experience. I thought he... [chuckles] The, the note out for myself was actually made me chuckle 'cause I've done a bunch of episodes on these, uh, the early automobile industry founders, and I go, oh, Hans was GM, General Motors, before focusing in on Ferrari. [laughs] Like, that's the way I think about it. And so listen to some of these brand names. I love this because I, you know, you've heard me struggle with naming stuff all the time. And think about last week, Steve Jobs, or the week before, Steve Jobs thinking of calling the iMac the MacMan. Like [chuckles] it's just terrible ideas. So I, I take solace and inspiration with the fact that like, oh, everybody struggles with this stuff. And so even, you know, Rolex is one of the best names I've ever heard, one of the best brands that's ever existed. And before that he had Unicorn, Rolco, Elvira, Roll Watch Co., Falcon, Genex, Lonex, Rolex [laughs] Rolexis, Lexus, Hofex, and Windex. He even used different variation of the Rolex name itself. He had the Rolex Watch Company. He had the RWC Limited, and he would even combine Rolex with other brand names, and i- this again, this is where he just realized this is a fucking terrible idea. I'm trying to sell, uh, every single price point on a watch. So, uh, there was one, Marconi, named after the inventor of the radio, and so he had one called the Rolex Marconi, and all that did was allow people to think that they're buying Rolex, but they're getting it at a cheaper price. And so it's through all this trial and error wh- where Hans realized, like, "Oh, this is a terrible idea. I'm cannibalizing sales, like this doesn't make sense. I'm gonna focus." And so this is where in 1908 he's like, "Okay, I'm gonna have like one single brand name and a brand that I can invest in for the long term." So he says, "It was time to think of giving our watches a name of their own, a trade name," what we would call a brand name, "a brand name which could be inscribed on the dials. I was well aware that unless I succeeded in making our watch known under its own name, that my prospects would be limited." He would just be a middleman, right? And so there's actually a letter that he wrote in 1958 where he's talking about how he came up with Rolex. He had a series of traits that the name had to have and for, for him to select it. And so he said, "I needed a short name. It had to be five letters or less because it has to be able to fit. It has to look good on the actual watch. It has to be easy to pronounce in every language. It has to have a good ring to it, and it has to be easy to remember." And so when I was thinking about this, I was like how great he did in selecting the name Rolex. If

8. 26:16 – 31:20

   Advertising Directly to the Public and Making Retailers Come to Him

   1. DSDavid Senra26:16

      you listened to last week's episode about how Steve Jobs sold, one of the ideas, main ideas from how Steve Jobs communicated, how he sold his ideas to people, was that if you can make them, ideas easy to understand, then they're easy to spread. Ideas that are easy to understand are easy to spread. And I think you see an echo of that idea with Hans naming and actually picking. He's like, "This is the brand that I'm gonna build and the one I'm gonna invest in for the rest of my life." So now that he has a name, he does something that's really, really smart. Again, this is very uncommon for watchmakers to advertise directly to the public. Not only does he do so, but he, th- Rolex continues to do so. So he says, "I decided to launch the Rolex trademark by means of an intensive advertising campaign. This policy entailed an annual expenditure of more than 12,000 British pounds, not for one year alone, but for several in succession." So I wanna go back to how important this is. I wanna go back to that Business Breakdowns episode on Rolex called Timeless Excellence. So it says, "Rolex was effectively the first people to have real marketing dollars put behind a watch. Rolex did this in a concentrated way, and they have continued to do it in a way that is simply just unmatched by others in their industry. Rolex has been the number one brand for watches in the United States, historically speaking, from the 1950s to today." Now, I wanna fast-forward way ahead in the story, many, many years after Hans died because I think this, this idea is so important, and I'm gonna show where I've seen this idea. Other people use this idea successfully as well in a different industry. Uh, so go back to the transcript from this episode. The, the financial crisis of 2008, all the other brands, the competitors, you know, Omega, Tag Heuer, all these other, the brands that are, quote, competitors to Rolex. When the financial crisis happens in 2008, they pull back on their marketing. Rolex did not. Rolex put the pedal down, and it was really 2008, 2009, 2010, which really elevated Rolex in the United States to a level that it is today. If you speak to them directly, meaning Rolex the company directly, they'll credit that period as a turning point for them in the US. Now what is incredible is Izzy Sharp, who's the founder of Four Seasons. This is episode 184. Episode 184, if you haven't listened to it, you should. His autobiography is incredible. Izzy Sharp did the exact same thing. This is what he says in his autobiography, right? Founder of Four Seasons. "It's tempting during a recession to cut back on consumer advertising. At the start of each, each of the last three recessions, the growth of spending on such advertising has slowed by an average of 27%. But consumer studies of those recessions have showed that the companies that didn't cut their ads had, in recovery, captured the most market share." That's exactly what happened with Rolex in 2008, 2009, 2010. "We did not cut back on our ad budget." This is now founder of Four Seasons again. "We did not cut back on our ad budget. In fact, we raised it to gain brand recognition which continued advertising sustains. It is much easier to sustain momentum than restart it." So think about how important that intuition was. He's like, "Well, I'm starting a new name. All these other watchmakers, they're not advertising. Like, why don't we... Why? Why wouldn't we advertise? It doesn't make sense. Other products are advertised. We should do that, and I'm gonna do an intensive..." This is the words he used, "I'm gonna do an intensive advertising campaign, and not just this year, but several years in succession." And then this is nuts. I know I keep saying that because this whole story is nuts because it, the industry today, in large part to the, to what Hans and Rolex did, is completely different. So at this time, you have your own watch brand, but you don't have your own stores, so you're selling to retailers. At the time, the watch brands don't have the names on the watches. The retailers would buy the watches and put their name on it. And so Hans talks about being one of the first people like, "No, no, no. Like, I'm gonna sell you my, I'm gonna wholesale my watch, and you're gonna put my brand name on it, not yours." I think it was like a decade or a decade and a half, if I remember correctly, where he had to fight. And so he said something like, you know, f- "When I first started doing this, one out of six..." They, they would agree, like, "One out of six watches could have my name on it. Then it was two out of six, then three out of six, and then finally five out of six." And insisting on doing this is actually really, really important because he also is a perfectionist, and so he realizes like, oh, quality. I said in the Steve, one of Steve Jobs episodes I just did that quality was his survival strategy. I would say for Hans it was the exact same thing. He's determined to produce the best wish- wristwatch possible, and we'll go into how accurate and the ways- He was really smart, like marketing around that too. So he, he thought that was the key to his success, like, "I just have to be the best possible." And he's not going to be able to do that unless customers demand that they get a Rolex, and not just same watch, which is just renamed by whatever shop they happen to be buying it from. And insisting that the name is seen, because before the, the, the brand name could be seen inside the watch, but no one... the, the customers are not opening up the watches. And so th- I think this idea is really, really important. I'm gonna read a summary of this entire section to you. He also realized that he would get better orders and more control over the wholesale price of his watches if he could build up demand so that customers would go in the shop and ask for, and insist on a Rolex watch by name. By his branding and advertising campaigns, Hans effectively turned the tables on the retailers. No longer would he have to approach retailers and ask them to stock his watches. Customers would demand Rolex-branded watches, and the retailers would have to come to him. So

9. 31:20 – 34:25

   Precision and the Kew Observatory Certificate

   1. DSDavid Senra31:20

      as you already know, I'm obsessed by these people that identify a handful, handful of principles. They know what's important to their business, and they just execute on those principles. They repeat them for decades, and that's exactly what Rolex did. That's exactly what Hans did. He had essentially three things that... And it took him, what I'm about to describe to you is gonna, you know, take two decades maybe to actually fulfill to the degree that he wanted to, 'cause remember, he starts his company back in 1905. The first waterproof watch is one of the, one of his three tenets, isn't gonna happen for 20 years after that, and I think another six years after that till he gets to perpetual. So he has three things that he wants. So he goes, "I want the watches to be precise," which he d- he handles that product, that problem first. Uh, number two, "I want them to be waterproof." And number three, "I want them to be self-winding." And so the first thing he does is like, "Okay, my watch is..." Again, he's a perfectionist. They have to be the best in the world. So he goes to Aegler and he's like, "How can we improve the timekeeping of the watches?" And one thing that Charlie Munger says in Poor Charlie's Almanack is that social proof is a form of leverage. And so what Hans does here is very smart. He insists, he goes to Aegler and he's like, "Hey, I wanna get certificates of performance from independent testing establishments." And so these are actually like astronomical observatories. They'll test how good these pieces are at timekeeping, essentially. And so there is a letter that Hans writes to Aegler in 1912, and he's like, "Hey, we need to produce a wristwatch that's capable of achieving an observatory timekeeping certificate." Two years later in 1914, Aegler actually solves that problem for Hans. And so Rolex achieves the first Class A certificate ever to be awarded by an observatory for a wristwatch. This is what Hans says in his autobiography. "Another red-letter day in the development of our firm was when a small Rolex wristwatch won a Class A certificate at the famous Kew Observatory. This was on July 15th, 1914, and it was a day I shall never forget." And keep that in mind, he is writing, uh, about this 50 years later. And so the reason I brought up what Charlie Munger said is because he uses this social proof, right? Saying, if y- what's funny is I read a b- there's so, there's so many fantastic, uh, o- old Rolex ads that, that were published when Hans was alive, and if you look at them, like they, a lot of their ads say like, "The first, the only." So they'll say like, "The world's first self-winding watch. The world's first waterproof wristwatch." Another ad I found, it says, "The Rolex still remains the only wristwatch in the world to gain certificates at Kew." And so if you think about that, insistence on this idea to get, to become the first to get the certificate, what happens? That makes your ads more effective. It's one form of leverage stacked on another. People are busy. If they're in the market for a wristwatch, right? They're, they wanna have one that's most accurate, and guess what? There's only one brand in the world that has proven it keeps a- it keeps time so precise, that went that extra step to get it tested to get an observatory timekeeping certificate. That is another example of doing the, as much work as possible for the customers. W- we talked a lot about the last two weeks for, for Steve Jobs. Hans is doing the same thing. He just makes it, your decision easier. Oh, okay. Oh, I want a precise... O- obviously, you want a precise wristwatch. Oh, these are the most precise? Okay, cool. That makes my d- my buying decision so much easier. And

10. 34:25 – 37:35

    The Waterproof Oyster and Wilsdorf's Guiding Aims

    1. DSDavid Senra34:25

       so that is in 1914. Now, he wanted the, the second part. He's got the three-part. He's like, "I want them to be precise. I want them to be waterproof. I want them to be self-winding." And so this goes back to what I told you about. One of the most important things to understand about Hans is the fact that he understood the opportunity better than anybody else, and he would invest heavily in developing the technology to bring his ideas to fruition, and that means he didn't have to invent it himself. He would buy the inventions of other watchmakers, and then combine their ideas with his efforts. And look at how fast he would move. So there's two inventors, they're in Switzerland. They fi- they file a Swiss patent, and they create the world's first waterproof seal for a wristwatch. The patent is granted and published on May 1926. Hans buys the pa- patent in July. Two month- 60 days later, he already owns the patent. And what does that mean? He owns the patent, so of course, now this new innovation is only ex- it's exclusive to Rolex watches. You see how he's stacking one advantage over another? He's like, "Hey, we have the most accurate wristwatch in the world. Here's proof. Oh, now we have this new technology. Guess who owns the patent? We do. You can only get it here." And so this is the creation of the Oyster watch, which still, the Oyster classification is waterproof. And so in his autobiography, he's laying out, like, "This is all the problems I had to solve, and this is why I had to solve them in sequential order, and how once they're solved, it gives me just an unfair advantage that no one else has." So he says, "On looking back into the past, I find that in developing and extending my business, I have always had certain aims in mind. This course from which I never deviated." Keep the main thing the main thing is what he's saying. "Perhaps these aims can be summarized as follows. Number one, I have to create watch designs suitable for both men and women." Done. "Number two, I have to standardize a range of movements of different sizes." Done. "Number three, to obtain a high degree of quality that our watches, whatever the calib- caliber, should be recognized as chronometers by the observatories." That's the Kew, uh, certificate. Done. Next one. "To maintain this high degree of precision by protecting the movements against the penetration of dust and impurities." The danger to which the wristwatch is particularly exposed, and that was why he needed this, this patent, this waterproof seal that proved so important. It's gonna unlock his ability to do the perpetual in a minute. But he talks about, he tells us in his own words why this is so important. "This last point presented a problem which could only be resolved by protecting the movement against all outside influences. To my technical assistance, my refrain, my constant refrain was from the very earliest days, 'We must succeed in making a watch case so tight that our movements will be permanently guaranteed against da- damage caused by dust, water, heat, and cold. Only then will the perfect accuracy of the Rolex be secured.'" Why am I reading this all to you? Because he's gonna tell us why this is so important. "This seemingly insolvable problem has been solved. The waterproof case was finally created in 1926. This invention was applied exclusively to the Rolex watch. The fact is, like an oyster, it can remain an unlimited time underwater without detriment to its parts. The name Rolex Oyster has become famous throughout the world." And

11. 37:35 – 41:57

    Marketing the Oyster: Channel Swims, Window Displays and Famous Wearers

    1. DSDavid Senra37:35

       I love that he said that, "The name becomes famous," because it sets up for the next part. How did the name become famous? Well, remember, Hans is a gifted marketer. He takes an event, and he's gonna do this multiple times. He takes an event that's already getting a lot of attention and inserts his product, and therefore amplifies and leverages that existing attention. And so there was a secretary named Mercedes who had swam the English Channel before. She was doing it again. He hears about this, so he's like, "Okay, wear a Rolex Oyster around your neck." And so she goes for another attempt. This time she actually fails. She, I think she's, she gets, uh, like 10 hours and then her, there's like muscle cramps or something like that. But the fact is no one, since she'd already done it, that was like kind of irrelevant to the story because it's still being covered, the fact that she was in this freezing cold water in November swimming the English Channel and that the Rolex was around her neck. It survived and kept perfect time for the entire 10 hours and even after the fact of when she was swimming the channel. So what does he do? He takes that, it's being covered, and then he runs this gigantic ad, and he has a great line when he describes it. He says that they found the watch was still running as perfectly as it had, as if it had never left dry land. And so he says, "The event caused a sensation at the time, for the waterproof watch was still unknown to the general public. On November 27th, 1927, I reserved the front page of The Daily Mail newspaper at a cost of a ton of money for an ad proclaiming the success of the first waterproof watch. This was the first step in the triumphant rise of the fame of the Rolex Oyster." But look at how fast he moves. So this is invented in May 1926. He buys it in July 1926. The next year, he takes advantage of this news event, this, you know, this event that's gonna get a ton of idea- uh, eyes on it anyways, amplifies his product. That same year in 1927, he goes and creates these window displays in all of the retailers that are now going to sell his watch, and so this is how he describes it. "We devised special window displays that which gave the buying public great pleasure. The chief feature was an aquarium with other plants and goldfish, and in it was plunged an Oyster watch, which was the only watch in the world that was as watertight as an oyster." The same year, he gets one of the top British actresses and the, he starts running ads. The r- the ad is, uh, one of the top British act- actresses. Her hand is in like a goldfish bowl, so half of her arm is in a tank, and then you can see that she's wearing the watch. And so he'll use this idea over and over again, and one of the things that Rolex does that's f- phenomenal is like they always associate themselves with the very, very best. So another British guy named Malcolm Campbell, he broke like the land speed record in a car like nine different times, and the last time that he did it, Hans learns that Malcolm Campbell had been wearing a Rolex when he broke the speed record. And so then he starts publicizing, he starts running ads broadcasting that during this record-breaking land speed attempt, the driver was wearing a Rolex. So Hans is doing this in the 1920s. He does this until he dies. He does this over and over again. He wanted to place Rolex watches on the wrist of as many high-profile people, like extreme achievers. He would go around and identify these, these leaders or these high achievers, and he would gift them Rolexes, and then they'd be photographed wa- wearing them. Winston Churchill, uh, Dwight D. Eisenhower before and during that he, uh, he, he got elected to the presi- American presidency. And keep in mind, he's giving these watches to Churchill and Dwight D. Eisenhower. This is post-World War II. He's aiming straight to the top, the, the, you know, the greatest leaders in World War II. There's an actual ad that's run around this time that was excellent. The, the, the tagline is, "Men who guide the destinies of the world wear Rolex watches." Chuck Yeager, the pilot who broke the sound barrier for the very first time, he was wearing a Rolex watch. That was an ad. The expedition that first summited Mount Everest, some of the people on the team were wearing Rolexes the same year. They get to the deepest level. Uh, another team went to the, like the, the, at the time, the deepest level, uh, that a human had gotten to in the sea. I think it was like 10,000 or 12,000 feet underneath. And so they run an ad, "From the top of the world to the bottom of the sea, Rolex proves dependable." But this constant positioning of Rolex is the very top. We are only associated with the very best. You go and look at these taglines, they would say over and over again, "Rolex, the masterpiece of watch craftsmanship, sold exclusively by quality jewelers." So I'll come back to the ads 'cause I really think the a- studying the advertising and marketing of Hans, like he, he was a legit gen- genius in this domain, but I wanna, I'll come back to that. I wanna go back to that

12. 41:57 – 45:47

    The Perpetual Self-Winding Watch

    1. DSDavid Senra41:57

       third pillar that he was trying to do. So he starts off with, "Number one, I want the watches to be precise." He's done that. "Number two, I want them to be waterproof." He's done that. Now he says, "I want them to be self-winding," which he's gonna call perpetual. And so not only is this an example of him, him having to solve another lo- longstanding problem, but it is another example of something that pops up in the book, so you and I talk about the fact that opportunity unlocks more opportunities in the future. So he talks about in his autobiography, he's like, "Listen, the creation of the perpetual watch, whose movement is self-winding and guaranteed to run without interruption- This idea, of course, had preoccupied many famous horologists of the past. I am not a watch guy. I don't own any watches. My wife has a hard enough time getting me to wear a wedding ring. I'm very minimalist, right? So I didn't know what the hell that word was, so I looked it up. All that is, is a horologist is just a person or a company that makes or repairs clocks and watches. They're also g- referred to throughout history as a clockmaker. So what Hans is telling us is like, "Listen, this is not-- I wasn't the first c- person to notice this is a problem. I was the first person to solve it, and I wouldn't have been able to solve it if I didn't solve the waterproofing first." He said, "The waterproof watch had, in itself, marked a great step forward towards the realization of this new achievement. An automatic watch can function with the utmost regularity only if the movement is placed in a waterproof case." What he's telling you is Oyster unlocked the opportunity for perpetual. "It had been my belief that the watch of the future is the perpetual watch, in other words, the automatic or self-winding watch. In this field, too, Rolex has been a pioneer. Without the waterproof watch, the perpetual could never have been discovered." And so I need to repeat that 'cause it's so important. "Without the waterproof watch, the perpetual could never have been discovered." Now, something's also interesting. This is, like, a centuries-old problem. They're gonna run a fantastic ad talking about, like, [chuckles] about how they solved this, this centuries-old problem, and there's a great line that I found in this Rolex blog that talks about that. It says, "Inventing the automatic wristwatch that could wind itself was the dream of the ages in the watch world. For centuries, many famous watchmakers had tried to perfect the automatic or self-winding watch, but none were successful." There's an important principle here for-- that you and I can apply to our own work, and the fact that it-- the more work that you do for the customer, the, the, the, the easier you can make for c- the customer, the greater the market can be. So before I read this section about why this is so important, because, you know, why-- constantly winding a watch is a pain in the ass. It's not convenient. It's not as convenient as a perpetual watch. Steve Jobs put this best when he was talking about the difference of, you know, this hobbyist culture in the early, like, personal computer industry, and he says, "My vision was to create the first fully packaged computer. We were no longer aiming for the handful of hobbyists who liked to assemble their own computers, who knew how to buy transformers and keyboards. For every one of them, there were a thousand people who would want the machine to be ready to run." In other words, if we can make this easier, we can expand the market by a thousand. Turns out he drastically under, [chuckles] underestimated that. Probably expanded the market by 10 million or 100 million or whatever [chuckles] the crazy number is. And so when Rolex creates this perpetual automatic watch, it eliminates the need to ever wind a watch again. And so they run this incredible ad that the headline is "Master Horologist's Dream Is Realized 140 Years After His Death," and it tells the history of this guy, in theory, had invented the v- world's first self-winding watch, but hi- what he actually made was imperfect in practice. And now us, Rolex, the only watch company in the world, has perfected... You know, they, they, they, they essentially honor him. They say he was a great watchmaker, maybe, you know, maybe the greatest ever, and now his dream is finally realized 104 years after his death, and it was realized by Rolex. Oh, by the way, do you want one?

13. 45:47 – 48:50

    Wilsdorf's Reflection, the Trust, and Sources

    1. DSDavid Senra45:47

       And then right before Hans dies, he gives this interview, and I found a transcript that was translated from French, and I think he does a wonderful job summarizing the impact that his 60-year career had on the industry that he, in large part, created. "I entered the watch business as a young man at 19 years of age. That was 60 years ago, when wristwatches didn't exist. Wristwatches for men didn't exist at all. Men wore pocket watches, which went from father to son and son to grandson, and the opportunity for the watch industry to grow was extremely limited, as sales were very slow. As a young man, I understood it would be very difficult to obtain results in an industry that had little chance to make lots of money. Watches were cheap, and the quality was not very good, especially since there was no factory able to produce small watches, which was necessary for wearing them on your arm. The wristwatch was the peak of my career, as I foresaw the total development of the wristwatch for the Swiss watch industry. I can say I was one of the initiators in the whole watch industry. I was not only the first to understand the potential of the wristwatch, but I also made personal efforts which contributed largely to the development of the industry." I think it's absolutely incredible to be able to hear the words of somebody who had six decades of experience in this industry. And then the last idea I wanna leave you with I think speaks to just how unique Hans and his story truly is. In 1944, Hans set up the Hans Wilsdorf Trust, which owns and controls Rolex to this day. He brilliantly set up the bylaws of his trust so Rolex could never be sold or made public, so it would never have to worry about catering to anything but making timeless watches. If you think about it, this means Hans' vision is still very much alive and being executed on a daily basis, despite the fact that he passed away more than half a century ago. How many people can you think of that build a world-class business, and 50 years after they pass away, the company keeps going as if they were still running it? And that is where I'll leave it. As far as buying the book, there's-- I can only find one copy available, and it's like $500. But there is a series of other sources that I used for this podcast that I highly recommend. I'll link all these Rolex enthusiast blogs which I thought were fantastic. I also used subjects, or ideas rather, from the book The Luxury Strategy, which I highly recommend. It reads like a textbook, uh, but it's actually fascinating. The subtitle is Break The Rules of Marketing to Build Luxury Brands. I'll probably do an episode on it, uh, in the future. And then, of course, what I would do now is listen to that Business Breakdowns episode on Rolex called Timeless Excellence. It covers the history of Rolex, but also how they operate the business in present day. It'll blow your mind. So I will leave that link down below, or you can just search Business Breakdowns Rolex, and it'll come up in your podcast player. That is 351 books down, 1,000 to go, and I'll talk to you again soon.

Episode duration: 48:51