This is Matt Russell, and I wanted to share a few notes ahead of this replay on Patek Philippe.
Patek, or Patek to the watch lovers, is the single most impressive branding story that I have come across in business.
And our guest, John Reardon from Collectability, details some of that in his discussion of the early 90s era for Patek in our conversation.
I would just mention that John is the ultimate Patek historian, and he has every detail you can possibly imagine about the history of the business and the brand.
He's written books, he's worked for the company, and he continues to revolve around the company today.
The other thing I would mention is that this episode was recorded and released before the polarizing release of The Cubitus.
And I would say it's safe to say that the watch watch community had a collective meltdown upon that release.
But when you go through John's old writing and John's details about the brand, you'll notice this is somewhat common for their watches.
The Nautilus being a good example of a watch that sold but didn't sell particularly well in the early days.
And that has become a collector's item to say the least. So enjoy this breakdown on Patek Philippe.
We will be back to regularly scheduled programming in the coming weeks.
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You never own a Patek Philippe.
You merely watch over it for the next generation.
I'll say it's the best marketing campaign in history.
A campaign appropriate for the premier watchmaker in the world and a watchmaker that is worthy of a business breakdown.
This is Matt Russell, and our guest today is John Reardon from Collectability.
John has worked at Sotheby's, the auction house.
Then he spent a decade at Patek Philippe in the early 2000s, and he continues to write for Patek Philippe Magazine, while he has launched Collectability, a brand dedicated to vintage and pre -owned Patek Philippe.
We cover what makes Patek such a special brand.
There is the almost 200 -year history and the craftsmanship.
There are the countless patents, like that self -winding mechanism that powers all automatic watches today.
This is a brand that keeps two chainsmiths on on staff, just in case.
They do not want to lose that artisanal expertise and knowledge that exists with the few remaining chainsmiths out there.
And what Philippe Stern did in 1989 could be worthy of a 10 -episode series.
So there is a lot to learn from this episode, a lot to learn from Patek Philippe, and it adds to a series of luxury episodes that we have now done across different different categories.
So please enjoy this episode on Patek Philippe.
All right, John, I am very excited to have you here.
And it's been one of the more fun research processes for me in terms of getting up to speed on Patek Philippe.
And I was thinking about where the best place to start for this episode was.
And I really wanted to capture why Patek is considered the premier watchmaker.
And I thought the best way to do that might actually be to sketch out how Patek differs from another very well -known watch brand, Rolex, which is also thought of very highly.
But I think Patek, by any reasonable watch enthusiast, is in a different category.
So maybe we can just start there with a simple sketch of how you would say Patek is differentiated from Rolex. Well, first of all, thank you, Matt, so much for having me on the show.
You're opening with a tough question, A comparison to Rolex. Wow, where do I begin?
A lot of people are obsessed with Rolex in the same way I'm obsessed with Patek Philippe.
So with all due respect to the Rolex fans out there, I acknowledge they are the number one brand in the world.
They're the best sports watch in the world.
And if you wear a Rolex, it does say something very special.
All right, now I'm going to answer it from a Patek Philippe perspective.
There's a lot of people with BMWs out there.
Good for them. There aren't so many with Ferraris.
It's a different storyline.
line. The car analogy is not perfect, but it gets the point across when it comes to exclusivity, history, handmade.
And Patek Philippe, at the end of the day, makes the finest watches that have ever been made in history.
And this is my personal opinion, and I love to debate it all day long.
And I hope we can talk about history recently, because it's very important to understand the tradition where Patek Philippe comes from.
But ultimately, you're buying one of of the most perfect forms that humankind has made of a mechanical object in history.
And whether it's a piece from 1839 or 2024, you're buying the best of the best. Yes, it is debatable, but ultimately, all roads lead to Patek Philippe.
And when people dig deep and really understand the watchmaking, the technology, the artistry, the know -how behind a Patek Philippe watch, watch, it comes out on top.
I've worked now three decades in this industry.
I've seen a lot of collectors go down the various roads of collecting many different types of watches, and frankly, different types of objects and different types of art.
The road always ends at Patek Philippe.
And that is what really captures my imagination because it is humankind's closest, would you say, attempt to reach mechanical perfection that the world has ever seen.
And that's an impressive claim to make.
Absolutely. Yeah, there were a few impressive claims there.
And I think you planted it very well.
You mentioned exclusivity.
I read somewhere that Rolex makes more watches in a year than Patek has made over the history of their business.
Is that remotely true?
Are those production numbers in any way auditable to suggest that that that type of exclusivity is the right way to think about it?
When I was working for Patek Philippe 20 years ago, we all knew that as a fact, but we were forbidden to state it.
In the 1990s, at some point, Patek Philippe made its 1 millionth watch. So at that point of time, this is going back 20, 25 years, Rolex was making approximately a million watches per year.
I think they're making more today.
So yes, Yes. In our lifetime, we could make the claim that more watches are made by Rolex in one year than are made by Patek Philippe in their history.
That's since changed.
Patek Philippe production numbers are probably around 70 ,000 per year today.
So the numbers just don't add up going into the 21st century.
But in the very recent history, it was a fact.
I like that. And I like that secret exclusivity even happening with inside the business.
I think think there's a lot of mystery with all watch brands, but interesting to hear how that was the case here.
For those that aren't as familiar with the brand itself, can you set the stage if someone was actually trying to purchase Patek Philippe, what it would look like in terms of price?
And I know that is a wide range, but also process.
Is this something that you could walk into a store and walk out with Patek today?
Or is there something else that goes into this?
Sure. My business is pre -owned and vintage, but I'm going to answer that on behalf of all of our retailer friends out there.
So as an individual walking in to buy a Patek Philippe from one of the Patek Philippe retailers in the U .S. or abroad, you're in store for a frustrating experience.
Odds are they're not going to have the watch you want in the case.
Odds are if there's a watch in the case, it might be reserved for another client already or simply not for sale.
And this is particularly true with some of the more coveted pieces, some of the sports watches, Nautilus, Aquanaut, but it's even true with some basic Calatravas.
And it's amazing that even a time -only Calatrava starts around $32 ,000 retail US today.
So the cost of entry at the most basic level is quite high, and odds are you can't buy it.
Now, if you're lucky enough to walk into a retailer find an Aquanaut for sale, a reference 5167A.
And this is their entry -level sports watch. Retails for only $25 ,000.
You're just not going to have that kind of luck in today's world because the secondary market value of that watch is $70 ,000 plus the moment that you buy it.
Everybody knows this.
You're not going to be able to buy one for that amount of money.
And all day long, retailers are basically telling end consumers, I'm sorry, it's not for sale.
So you could see even at the point of sale, there's this amazing experience that sometimes could start off as quite negative that you can't have the watch that you want.
Hopefully we can get into it soon, talking about the past, because this wasn't always the case.
This is something that we've experienced over the last four or five years, which is quite new to the watch buying world.
Yeah. I want to get into the history and now's a great time to do it.
We could start at the the very beginning, the founding story of Patek, who was behind the brand, was the idea of making the perfect mechanical timepiece, always the mission.
Walk us through what those early years were like and how long ago it actually was.
Sure. So the story starts in 1839, a Polish nobleman named Antoine Norbert to Patek.
He decided that he wanted to start a watch company, company.
And he was in the Polish Calvary and went to Geneva.
It was a center of watchmaking in that period of time.
And he and his partner, this gentleman named Mr. Czapek, Francois Czapek, started this company.
And their idea was to sell to Polish nobleman friends and eventually, ironically, their former enemy, the Russians, to sell some of the finest Swiss watches ever made.
The whole goal of the company was to move it back to Warsaw eventually.
And that never happened.
They stayed in Geneva.
History has a funny way of changing people's goals as time evolves.
But for those of you that have your own business, nothing happens as you imagine it will in the future.
And that was true with Mr. Patek and Mr. Chapek.
And these two gentlemen did have a falling out.
And after five years, Chapek left and started his own company.
And Patek found a new partner, a gentleman named Mr. Philippe.
Adrian Philippe was a watchmaker, the inventor of stem winding and stem setting.
So each of you out there that has a watch that's mechanical on your wrist, when you wind it and set it, there's at least eight parts that came from Mr. Philippe, his mind and his brilliance from the mid 19th century.
So I've heard the curator of the Patek Philippe Museum say this many times.
Each of us does have a little bit of a Patek Philippe on our wrist already.
So this really put Patek Philippe on the map from the very beginning.
in the 19th century.
And soon they had the ultimate celebrity endorsement in the 1850s when Queen Victoria bought a watch for herself and then bought a watch for her husband, Prince Albert.
And then everybody wanted to own a Patek Philippe and the rest is history.
I mean, there were ups and downs along the way, but the 19th century was this meteoric rise of the brand Patek Philippe.
And the idea was to make the best watch and that That value and that commitment to making the finest watch continues to this day.
The Queen being the original influencer was not something that I ever thought of, but there you go.
Great history where history really doesn't change.
It just rhymes a little bit.
You talked a lot about time only versus complications and what can actually happen inside these watches and some of the amazing things that they're able to do in such a small mechanical piece.
And one key moment in history that I was reading about was Henry Graves and the super complication.
So maybe you can walk us through that story of who Henry Graves was and what this watch was that he had designed by Patek.
And I'm going to answer that from a modern perspective.
Imagine the day that we had a phone that was accorded to the wall.
Then one day we had a flip phone that was wireless.
And then a few years later, we had the iPhone, which had pretty much everything.
thing. All the complications you can imagine.
It's a computer handheld.
Now take that and go back 100 years.
And Patek Philippe was doing that with moving parts and mechanical handmade pieces.
So at first, there was just time only.
So you knew hours, minutes, sometimes seconds.
And what Patek Philippe was able to do with this so -called super complication that was commissioned in the 1920s in the heart of the Great Depression and delivered in 1933 was to make a watch that it had 24 complications in total, which did everything that could possibly be done with technology that existed during that time period.
This watch could calculate time of sunrise, time of sunset.
One dial, it was a pocket watch, of course, had mean time, which is what we have on our watches today.
And the opposite side had sidereal time or star time.
And the list goes on with the type of alarm mechanisms. This watch that you could set, it had a repeater and a grand and petite sunnery, meaning that you could literally push a button and it tells you what time it is because that is just one of the most amazing complications out there is when a watch audibly tells you the sound with a series of gongs.
And my favorite part of this particular watch is a sky chart with moving stars and enamel, which shows you the sky as seen if you're standing ending where the Statue of Liberty is, Liberty Island.
And that watch was able to do all of these complications and more.
And it was a sensation for the media and for the collector, Henry Graves himself, he knew he had the most important watch ever made.
You mentioned the history was always selling to noblemen.
It sounds like Henry himself was was a prominent person, someone with wealth.
When I think of Rolex, some of those early advertisements were for people climbing mountains, people diving.
You very much attached it to activities and professions.
Was Patek always the dress watch or something very much driven towards the wealthy and looking for something exclusive?
It's a good question.
At first, it was...
The watches were marketed specifically to noble people of the Western world.
But then it expanded, particularly selling to pieces to the kings and queens globally.
And for the United States, the kings and queens were the titans of industry.
And people like James Ward Packard of automobile fame and Henry Graves Jr. were the titans of industry.
People like JP Morgan were watch collectors, Henry Clay Frick, the Vanderbilt.
And one of the fun things is when we find these amazing watches out there today, you can tie down the history very quickly because often they had their initials or names on the back.
So here's a soundbite for you.
A Rolex would ultimately be sold to the people that were climbing the mountains, but potentially watches are being sold to the people that own the mountain.
I like that quite a bit.
And there is something associated with their process for keeping track of the watches that are sold in the archives and being able to trace that back.
Can you share about what happens there?
It's something that I read about, but I didn't fully capture or understand relative to other brands and watches and how they have historically tracked what they produced.
And it does come down to tracking.
It's almost a historic blockchain type of thought pattern.
Is there any watch that was made by Patek Philippe from the very beginning is documented in the extracts from the archives, which you could request from Patek Philippe.
You have to pay for them.
They're 500 Swiss francs each, but you're able to get a copy of the birth certificate of that watch to find the date that it was made, seeing the movement, the case numbers.
It won't tell you who it was sold to, but Patek Philippe very carefully guards that.
Can you imagine their client list through history?
But at the end of the day, particularly has records of every single watch they ever made.
And they're willing to share that information.
And that has made buyers at auction and collectors out in the world very comfortable to know that they could get these documents and see the blockchain of where that watch came from when it was made.
And some details, sometimes the dial description, case description.
And that's very comforting for people to have that connection to this little room in Geneva that holds all these secrets from the past. Where is the identifier on the physical watch that allows them to do that?
Ultimately, it comes down to the movement number.
And in the early years, the movement number and the case number were identical.
Today, there's a movement number and a case number.
So each and every watch has these two unique identifying numbers to connect to the archives.
Incredible. And you talked a little bit about the handmade process that's relative to being something that's machine made.
Can you talk about how many hands are involved, what the process looks like, just to make one watch, and anything that you can share on that?
Absolutely. And the answer changes throughout history.
It's fun to think. In the 19th century, Patek Philippe was working with subsuppliers.
And this is just how the Swiss industry worked.
There were various people in the mountains.
There was the dial makers.
There was the case makers.
makers, the mainspring makers, and they would piece it together and ultimately brand each watch. And this is the same with Audemars Piguet, Vacheron Constantin.
I mean, this is just traditional Swiss watchmaking.
What we see throughout the 20th century is a consolidation for more vertical manufacturing.
And especially after the quartz revolution in the 1970s, things get very interesting as the watch brands.
The major houses were trying to basically buy out all of these small makers, the ones that survive and get all of these craftspeople under the same roof.
And that's the story of the late 20th century.
Now, early 21st century, it gets very interesting because there's more money, there's more growth.
And of course, there's CAD design, which has been around for over 40 years.
And of course, various machining and CNC machines.
For those that visit any of the manufacturers today in Geneva, they're shocked of how much is actually made by machines.
What differentiates Patek Philippe is, yes, there are parts that are made by a machine, but there are humans that are actually finishing each movement.
And that's almost like the fingerprints, the DNA of each individual piece is different because there's actually humans that are not just assembling the piece, but finishing each individual piece within each watch. Would that show up anywhere?
When I think about humans, it might actually leave a mark, whether it's where the dial is or the font or the stamping of something?
Is there anything that actually shows up in output that shows some type of human touch to it relative to what machines would do?
Well, I probably shouldn't share this so publicly.
But when I was at Patek Philippe, you would see the mistakes that were made because they would come back.
You would see in very few occasions dials with numbers that might be upside down or placed the classic upside down postage stamp.
I see some really silly mistakes that would happen and come back from a QC perspective.
But I always found comfort in knowing that a computer would not make these mistakes.
A human would put number two upside down or something that's rather than 12, 21.
I mean, just something ridiculously stupid.
And it's so funny that some of those things would actually make it to the end consumer and particularly made it very clear that no one is going to hear about these things or ever see these.
Now occasionally some of these mistakes show up at auction and bring extraordinary prices and it's a classic case of sometimes the truth of the mistakes that humans can make is a wonderful thing to see when you see these errors occur.
It's very rare but it happened.
Yeah and it's almost an audit in the sense that it proves that there's humans actually involved.
It reminds me a bit of sports memorabilia and error cards and how much those can fetch at times.
Super, super interesting.
I want to hit another key moment in the history.
And that was the year of 1989.
I know there was a lot going on in this year.
But I thought you could just lead us however you think makes most sense with what happened at Patek in 1989.
Sure. I did a video on our Collectability YouTube channel digging deep into 1989 and how it's such a pivotal year in the history of Patek Philippe.
It was all engineered by the genius of Philippe Stern, who is today the honorary chairman of Patek Philippe, and at the time he was president.
And at that point in time, Patek Philippe was having an identity crisis, trying to figure out how does it connect with the world that was obsessed with technology, moving forward and accepting courts as the new norm on the wrist and trying to differentiate itself through being a luxury good.
And Patek Philippe was the sales warrant.
It's not like today.
I mean, you can go into a store, you could buy anything you want back then.
I wish I had a time machine.
But what Philippe Stern is, he brilliantly engineered, I think, the ultimate watch market coup in history.
And it was a multi -pronged attack.
I almost think of it from a military perspective.
At first, he wanted to make people understand that watches were art.
So he connected with the world's leading watch auction house at that time, Anticorum, otherwise known as Habsburg Feldman, and put together a Patek Philippe art of Patek Philippe sale.
Indeed, Patek Philippe was one of the major consignors of that sale.
And they were also a major buyer.
So, this was a way to show the world that Patek Philippe historically had pieces that people have a huge desire to own and modern watches, which is the same type of obsession and desire.
And it was a collection of watches of Patek Philippe that were brought around the world.
Many people saw the historical breadth of production for the first time.
And it was a huge media event for 1989 to see these watches sell for such extraordinary prices.
That's what kicked off the modern era of Patek Phlebit auction.
Who was buying in those auctions?
Was it a different crowd in terms of the art community, or was it still people who would wear these watches?
Did it introduce anybody else to the brand?
In the late 80s, it was a lot about the Japanese.
The Japanese were leaders in watch collecting.
It was a lot about the Italians, which continue.
They invented watch collecting.
I to give them credit for that.
The Italians were driving that from the beginning.
There were some very obsessive, which are still in the game today, American collectors that wanted to own the best at any price.
And there was old school European collectors that wanted to buy too.
And then there was a sprinkling of South American collectors.
This just was a global event.
Everyone had their own reasons to buy and they were all chasing to own some of the most coveted Patek Philippe watches.
But that's not the only thing Philippe Stern did in 1989 that was so impressive.
He launched the concept of limited edition watches for the first time, inspired by vintage pieces that the company made.
Minute Repeaters came back into the modern production line for the first time since the early 1960s.
In 1989, it was just the culmination of this celebration of watchmaking through the auction, limited editions, and of course, a series of books educating why Patek Philippe is what it is.
And all of a sudden, everyone was talking about the brand.
Even Saturday Night Live did a piece about a watch called the Calibrating Nine, which they called the Turnip, which was the watch that was the first piece that was more complicated than the Henry Graves 24 complication.
Patek Philippe made in 1989, one with 33 complications.
So this was, in pop culture, the most desirable across the board as a brand.
People knew that Patek Philippe was number one.
And the brand itself outlined very clearly why they were number one in the world and did it.
It's funny, in a humble way, but in a very bold way at the same time.
It was the ultimate humble brag, we'll call call it, that put them on the map.
Yeah. It seems to be an incredible campaign in order to take what they were already doing with the production quality and this history and this heritage, but really show it off to the world.
I think I mentioned before we were recording, the word narrative can get negative connotation associated with it, but it's really controlling the narrative about your brand.
They seem to do it so beautifully there.
I want to bring up the marketing campaign.
I think it's something that many people become familiar with Patek Philippe because of this marketing campaign and how powerful it was.
And the famous line, you never actually own a Patek Philippe, you merely look after it for the next generation.
Do you have any insight?
It seems like it coincided early 90s era, which would have been alongside that 1989 campaign by Philippe Stern.
So anything about that campaign that stands out out to you.
It's just incredible and it continues to this day.
It's amazing when you talk to someone that doesn't know or think about Patek Philippe.
One of the first things they say is, oh, is that that ad campaign?
You never actually own a Patek Philippe?
Like, I love that. I hear that all the time from people that aren't into watches.
But that came from a very specific place in history.
In the 1980s, well, starting in 1989, the ad campaign was called Tradition Is Our Future.
And I think to understand Patek Philippe's business strategy, you have to understand they don't exist in the past, present, or future.
They exist in all three places at the same time.
And I think this is fascinating from a marketing point of view.
They're very proud of what they've done in the past and they lean on the past. They're absolutely obsessed with what they're doing now and how that reflects the past. But they're always looking towards the future at the same time.
When I was there, decisions aren't made about the quarter or the year.
They were, what about 10, what about 15 years from now?
Even when I was working there 20 years ago, they were talking about the 200th anniversary in the year 2039, which we're all looking forward to, which is quickly approaching.
So the idea of tradition is our future is ingrained in their DNA.
And in 1995, this campaign under the leadership of Philippe Stern, once again, never actually own a Patek Philippe, you merely look after it for the next generation, really caught upon the emotional angle of this timelessness of past, present, and future.
Earlier campaigns were focused like long -form journalism and great descriptions of why Patek Philippe is technically the best, why their craftsmanship, why their artistry is the best. But people didn't sit down and want to read a book.
They just wanted to be told why.
And I think emotion is one of of the greatest ways to convey that.
And that campaign is so brilliant because it just captures the heart of giving a watch to your son or daughter and imagining your grandkids having that peace in the family.
And that transcends all other messages.
And that's what people walk away and remember to this day.
Absolutely. Yeah, I think it has a place if it's not the greatest of all time.
It is certainly in a very small handful of other campaigns in that category.
You referenced before that 1989 auction.
And in the little research I did, it did seem like Patek embraced auctions differently than other heritage brands, watch brands.
How involved were they?
You mentioned they were both consignee and a buyer in these auctions.
How important was that strategically for them?
Obviously, there's a big secondary market.
Talk a little bit about the auction space, which you have quite the history in yourself.
Going back to 1989, the idea of a single brand auction was just quite foreign.
There were Habsburg Feldman slash Anticorum.
They did it with a couple of other brands.
Off the top of my head, I think Cartier, Omega had a sale.
But Patek Philippe was the first that really the brand itself was fully behind it.
And even their Their advertisements were both Patek Philippe and the auction house hand in hand in the PR machinery of the auction houses and the brand itself worked together.
So this was all just uncharted territory.
Now that was all great.
And it worked because there was such a small community of people that were even interested in auction at that time.
But over time, people would be like, all right, well, the brands are gaming the auctions because then all of a sudden we saw every brand have an auction.
They saw what Patek Philippe did and they're like, oh, let's try this same.
And it was in the early 2000s that Patek Philippe significantly backed off from auctions.
They just stopped. Their museum has everything they could ever imagine that they could want.
So they weren't active in buying.
And this was my era in the auction world.
It was frustrating that Patek Philippe was not buying the top pieces at auction anymore.
But the beauty of it was it was a pure form of a marketplace.
The momentum was already going and collectors and individuals sometimes investors and buyers of all sorts they were buying patek philippe at auction so the prices just kept going up up and up and as patek philippe backed off completely the prices just kept going up furthermore and when they historically did buy in those auctions you mentioned the museum is that where those pieces would go were they ever then coming back out and selling them or doing anything else with the watches is?
So when Patek Philippe buys a watch at auction, and they were very active in the 1990s, in the early 2000s of buying, that was the golden era of all the great pieces were surfacing at auction.
They were all going into the museum.
They were being cleaned, overhauled, and put on view to this day.
You can go see them in Geneva.
It was an amazing period of time to acquire some of the rarest pieces that surfaced.
It's like that intergenerational timing made sense.
pieces from the 1930s through 60s were showing up at auction during that period of time.
Go through an auction catalog from 1999, your heart melts the opportunities that one had.
Today, we just don't see the same types of pieces surface at auction.
You get one or two great watches a season, where back then you might get 5 to 10 amazing watches per auction.
And probably at materially lower prices, I'm sure.
I mean, the prices just make me want to cry.
When thinking about auctions and the secondary Patek market, I heard some numbers that were quite outrageous.
But can you put some ballpark around how big of a secondary market Patek actually has?
In anticipation for that question, I was trying to get real numbers for you.
So I'm going to give guesstimates.
Two parts. First, the annual turnover of the company itself, of modern production pieces, of what Patek Philippe is selling.
They don't share these these numbers publicly or privately, but I'm guesstimating between 1 .2 and 1 .5 billion a year.
And this is just modern of that 70, 75 ,000 watches they're selling per year.
But where it gets interesting, and this is my world is pre -owned and vintage.
We estimate that approximately $8 billion annual turnover of vintage and pre -owned.
So we're talking real numbers.
It's unfathomable. But the point being is the pre -owned and vintage market is much larger than the primary market.
And I think through the last three, four years, those numbers just keep getting greater.
Really hard to pin down the exact numbers because just think every transaction that we see at auction is public.
but imagine the amount of business that's being done out there that it's with dealers, it's with retailers, it's online.
There are significant numbers and there are many of us trying to figure out how much it really is, but that's my best estimate.
That's incredible. Those numbers.
I mean, once you get into the billions, that's one thing.
And then well into the billions, that is remarkable just to understand how much of of an economy exists just around this single brand.
How do they think about that secondary market, the vintage market?
Because at least from my sense of things, it obviously has a massive impact on brand image.
But from an economics perspective, they're not capturing any of the economics of those watches that are selling in the secondary market.
Is there a way that the brand deals with that strategically just to have a sense of what's going on in that market?
And it it must impact what ultimately happens in their primary sales or the new modern sales.
But what's going on inside the walls there in terms of how they're thinking about that?
I think internally at Patek Philippe, they are very mindful of what happens at auction.
They're very aware of what's happening on the secondary market.
But it's not their business.
Their business is selling modern production watches.
They're watching very closely.
I'll put it this way.
I expect they're watching very closely what other brands are doing, especially Rolex. that's going into pre -owned, we see what Vacheron, Constantin is doing, what Audemars Piguet is doing on the brands itself with the secondary market.
But Patek Philippe has taken a position of just not being part of it in any way, shape, or form.
They're focused on what they're doing, which is making the best watches that have ever been made.
Now, that said, when I was working for Patek Philippe, the first question I asked naively, I asked the president of Patek Philippe USA at the the time.
What, in your opinion, is Patek Philippe's greatest competition?
And I thought the answer was going to be Rolex. I was very wrong.
I was quietly informed that Patek Philippe's greatest competition is Patek Philippe from the past. And that's a very interesting way of looking at things.
So I wonder if that mindset is still in the minds of management of Patek Philippe that they've done such a great job in the past. That's what we should be looking out for.
It's very interesting because I'm focused on vintage, that I'm dealing with a lot of collectors that are trying to decide, do I buy a modern minute repeater or do I buy a vintage perpetual chrono?
These are the questions that then consumers having, sometimes they ask the dirty question, John, which one will go up more in value in the future?
A question I just don't want to hear because I don't know.
But I could tell you a major collectors in the world are really trying to decide whether whether vintage is the future or modern watches are the future.
And the great thing is everything that's being made today by Patek Philippe, it'll eventually be vintage.
So the answer is very circular at the end of the day.
It's just a matter of where do you want to place your bets?
Yeah, it's quite interesting.
And you referenced the collectors.
And I'm curious when it comes to something like this, where it's wearable art, but there is this sense of, do you own your products or do your products own you and the fear of wearing something that's that expensive.
So when you're dealing with collectors, do you think the majority of these are being put in cases and sitting in safes or in closets or whatever it might be?
Or are most of the collectors that you're talking to wearing these on a whether it's day to day or on a more regular basis, whatever it might be?
What's your sense of that and just dealing with the tech and what you suggest?
Because obviously, if you buy something like this, you want to wear it.
But I think there's there's a fear that comes into play.
Many Patek Philippe collectors take great pride in wearing their watches out there.
And the beauty is not everyone's going to know what's on your wrist. I mean, there's simple Calatravas from the 1950s that are worth half a million dollars.
But for the uneducated eye, it looks like a $3 ,000 watch. And people are out there wearing these.
And I absolutely love and respect when these things are seen out there in the wild.
My eye is trained. It's what I'm looking for.
I walk into a room, of course, I'm looking at everyone's wrists and trying to assess what do people have. Yes, if you're wearing a Rolex covered in diamonds, you're screaming to the world what you have. And that's the point of it.
Yes, if you have a Richard Mille that you just bought $1 .4 million and it has a million different colors and bells and whistles, you're screaming to the world something very specific that's on your wrist. But when you wear a vintage, classic chronograph, no one's going to know.
It's going to be hidden under your cuff.
It's 33 millimeters of beauty that no one's going to know about.
It's discreet, it's understated, and ultimately has more demand than those other watches over time.
I love the understated luxuries that for the trained eye, obvious, but for everyone else a lot less obvious.
You referenced a few times you worked at Patek Philippe.
I'd love to just hear a little bit about what the experience was like, both being hired there and also just inside the organization.
How big is it? What is the culture like?
I get some sense from the outside of what it's like, but how much did that match the inside?
Anything you could share there would be fascinating.
Sure. In my period of time, there was from 2000 to 2010.
So it was a very different different era, but it was also a very important era of transition of the company from being this unknown.
I remember telling my parents, I might work for Patek Philippe.
The first answer is, who, what, where?
They had no clue. It's like, why can't you get a job at Rolex?
I think I heard. And ultimately, it was an adventure moving into the company of Patek Philippe.
And just to share a quick story, I thought it was a joke at first when I received a phone call from a headhunter saying that we're interested in hiring for an important Swiss company to work for the distributor as a sales rep in New York.
I was working at Sotheby's at the time, so I was quite happy with my job.
But I remember telling this headhunter, unless you're Patek Philippe, the conversation's over.
And she said, yes, it's Patek Philippe.
So I said, let's talk.
It was a dream come true, even though I still thought it was a joke because Patek Philippe doesn't call.
But after a long series of interviews with the headhunter, I eventually was able to meet the principals of Patek Philippe in New York.
And I remember, wow, countless interviews with the president and with the vice president, Tanya Edwards, who happens to be my colleague and co -founder of Collectability.
We still work together to this day.
Tanya was vice president and head of marketing of Patek Philippe USA at the time.
And going through that interview process with these individuals, I felt like I was trying to to get into the CIA. And then it took another six months until I eventually had a job offer.
And then finally, I made the jump.
Once working inside the organization, again, any rough size of how many employees are there?
How much is going on in the US versus in Switzerland?
And anything else that you can share there?
Sure. In New York, it was small.
I mean, it was also the service center.
So it's distribution.
distribution and it was all sales and education for Protect Flip USA.
It was based out of the Henry Stern watch agency as it is today.
I think it was 48 people at the time.
And today, I think it's a hundred.
So it has doubled in size, but it was a small culture.
You truly felt during my time there, you worked for a family company.
You truly felt like the Stern family had your back.
And I I remember being told, every decision that you make, everything that you do when you speak to a client and consumer or retailer, imagine that Mr. Stern is standing there with you.
This omniscient presence of Philippe Stern judging everything that you say and everything that you do, which was overwhelming, but also comforting.
And you just knew what to say.
You tried to always do the right thing.
You tried to be there for the customer at all times, was always put at the focus of every decision.
And that was a lot of fun during that period of time.
It felt like a small company and what people perceived as the outside, as I looked at the outside and just respected this company so much, it turned out to be true when I was in the inside.
And that was just a beautiful thing.
I absolutely, to this day, I don't work for the company anymore, but I do feel as though I still represent the values of the company as best as I can.
And it's going to be around a lot longer than any of us.
Batek Philippe is here to stay.
Yeah, it speaks to the power of the brand that two people working inside the organization split out but remain very much attached to the organization and everything they've done.
I think that tells you a little bit about the culture.
On the distribution point, you've mentioned how it can be a bit of a painful process for any new prospective buyer trying to purchase Batek.
Can you just share what is the distribution strategies of working with authorized dealers?
Are they doing any of this direct?
Anything that you can share there in terms of the sales process?
A lot has changed during my time at Patek Philippe, so I'll do my best. When I was there, we had 126 points of sale in the United States.
Now, they're under 40 points of sale in the United States.
So, it's a complete change in consolidation and strategy.
Back when I was there, so going back 20 years ago, you could buy a Nautilus 5711, 11, which retailed at the time for $18 ,000, $19 ,000.
I remember retailers had a tough time even selling it for $15 ,000.
It's a watch today.
It's worth six figures plus.
So it was a different era.
It was truly sales driven.
During that period of time, the sales were driven through education.
No coincidence that my company and I was just obsessed with education of all things Patek Philippe because that's what I grew up with is when you learn and study and compare, all roads do come back to Patek Philippe, vintage and modern.
So in answer to your question of how does it work today, I think it's different.
It's not as much about education as it is about allocation.
It's about what have you bought from a particular retailer and are you entitled to buy the piece that you want to own next?
It's a different storyline.
It's not one that really captures is my heart.
It's more about money than knowledge.
And that I think is one of the brand's biggest struggles today.
Now I'm speaking as an outsider because I know I can't go walk into a retailer and buy the watch that I want.
But I also know that people that have a billion dollars in the bank can't go walk in and buy the watch that they want from a retailer.
It's very democratic in that way.
You just can't have the watch that you want.
What you do need to do is build trust over time and almost build your reputation with the company in order to be allocated the pieces of your dreams. And I don't think they do it on purpose, but it's almost like a gamification.
It's fascinating to see how end consumers bite into this or engage in this game that can go through decades in order to buy the watches that they want.
And indeed, I speak to collectors all the time.
They'll buy pieces they actually don't want in order to preserve relationships to get the watches that they do want.
And they'll spend hundreds of thousands of dollars to preserve this relationship.
And they'll never sell any of their pieces because they don't want to get in trouble in the meantime.
So it is a really interesting thing.
And it probably exists in the car collecting world.
I've heard Ferrari collectors jump through hoops all day long, and that certainly does also happen with detective collectors.
It's quite interesting, whether it's the thrill of the chase, or you want what you cannot have, But the ability to stroke on emotion and what that can do in terms of consumer behavior.
With the points of sale, are these actual Patek branded dealers or are they individual existing watches of Switzerland authorized dealer types that are selling on behalf of Patek?
They're authorized dealers.
In the United States, there's no Patek Philippe owned boutiques, for example.
Like here in the New York, New Jersey area, Wempy, Tiffany, London Jewelers, these are powerhouses that go back generations.
Those are the retailers that represent the area.
But it's just so shocking for me to see less and less retailers out there.
The good news is, in theory, they should have more watches at each point of sale.
That hasn't proven to be true yet, but I think over time we'll start to actually see watches in cases again.
gun. Yeah. I have to imagine that there is the person purchasing the watch who has to maintain this relationship with their dealer, but then those dealers also have to maintain the relationship with Patek Philippe.
When you talk about that consolidation of dealers, is that happening out of bad acting on behalf of the dealers where they're doing things that Patek isn't liking?
What was the mindset behind consolidating all of those dealers beyond making it, I guess, more exclusive as a result?
My answer is based in speculation, but I could compare to my experience.
One retailer I used to cover, I mean, it wasn't that long ago.
So this is 20 years ago.
I would go to Abilene, Texas twice a year in West Texas.
And I'd meet with this amazing family, multi -generational store.
And the goal, my goal, my job was to make sure they kept 15 Patek Philippe watches in stock at all times.
So I'd go twice a year and it's not easy to get to Abilene.
There are no direct flights and absolutely had a great time having some barbecue and you sit and spend time with the family and you talk watches.
And my job was to explain to them why that 15 watch minimum was so important so you could properly show the breadth of production of Patek Philippe.
Now, fast forward to today, there are no retailers out there that are required to have a 15 -watch minimum, their buy -in is much, much bigger.
I'm guessing it's 100 watches or more.
And it's just ironic that they might even only have 15 watches in stock to this day because everything's sold out.
So what Protect Leap has done is rather than focus on smaller markets globally, they were focusing on bigger markets and going in deeper with more prominent displays, more highly trained sales staff.
And frankly, the goal is to have more watches available available through last point of sales.
This is just me as an observer seeing what they're trying to do.
And when you have a situation like the Tiffany partnership, which seems to date back many years with Patek, but then Tiffany comes under the ownership of LVMH, did that change anything?
It brought us the new Nautilus with the Tiffany dial, which was something new that came to the market.
But was there any change just in terms of that partnership and shift in dynamics?
I'm just curious about LVMH as they gobble up more and more how that impacts an independent watchmaker like Patek.
I don't know the exact numbers, but when I was with Patek Philippe, we had eight Tiffany locations that sold Patek Philippe watches.
And now I think there's maybe one or two tops.
There's obviously New York.
I don't know how many other points of sale they have, but I know it's been cut significantly.
significantly. The relationship between Tiffany and Patek Philippe goes back to the mid -19th century.
And what people forget is from a historical point of view, it was a love -hate relationship from day one.
Decade by decade, you see how the brands, sometimes Tiffany needed Patek Philippe, sometimes Patek Philippe needed Tiffany.
And there are some great writings from the time that Mr. Patek was alive and how he just really did not like doing business with the Americans.
He didn't always see eye to eye with his friends at Tiffany.
And I say friends in quotes.
There were cultural differences.
There was misunderstandings.
And at the end of the day, it was about money.
I think throughout the 20th century, the relationship ebbed and flowed. And everyone thinks it's Tiffany as it is now.
But you have to remember, Tiffany has this long storied past that people just so conveniently forget.
Just for example, Tiffany was owned by Avon.
Remember the Avon lady ringing the doorbell trying to sell cosmetics?
From 1980 to 1985, Tiffany was fully owned by Avon before it was sold off.
This was a different era where the brand was dying, more or less.
And Patek Philippe stood by them.
The Tiffany -stamped dials, you could see some of the most important watches that we see at auction, were sold by Tiffany New York in this era.
Tiffany signed 2499s.
It's fun to think back from a historic perspective.
I guess an answer to your question is, wow, how's the relationship doing today from an outsider's perspective?
I'm shocked by it, but it seems to be working.
The Tiffany salon in New York is absolutely extraordinary.
The Tiffany Patek Philippe salon is aesthetically beautiful.
They have a wonderful, highly educated sales force.
They could probably use a few more watches.
There's not much availability.
But I'm going to answer this question from a historian's perspective, I have no doubt there will always be a Patek Philippe, period.
Drop the mic. I don't know what the future of LVMH is.
50 years from now, will LVMH be LVMH?
Everyone could draw their own opinion.
50 years from now, will there be a Patek Philippe that's considered one of the finest watches in the world?
Yes. On that point, I think the independence is a major thing here, being an independent brand.
Has that ever been at risk?
Or do you think that's of any risk moving into the future?
Obviously, when you reference some of those sales numbers, I don't know what the costs are that go into producing these watches.
It does seem like there's a lot of labor involved.
But is there a scenario where independence is at risk?
I'll answer that from a historic perspective.
In the Great Depression, Patek Philippe was owned by the descendants of Patek and Philippe and actually became a publicly held company for a time period.
Interestingly, one of the six shareholders in the early 20th century was an American who was a former employee of Tiffany.
So it's such a full circle storyline.
Fast forward to 1932, 33 in the Stern era.
Now we're on one, two, three, four, four generations of ownership of the Stern era.
As long as there is someone with the last name of Stern that is obsessed and really believes in the cause that the Stern family is going to continue ownership of Patek Philippe, in my opinion, I think it's in their DNA.
Dynasties don't last forever.
That's one thing we see time and time again.
But I highly, highly doubt that in our lifetimes, we're going to see the company Patek Philippe sold to one of the conglomerates.
I just can't imagine that happening.
It's just something that I don't think is in the works.
A lot of gossip about it, but I just don't imagine that actually happening.
And privately held, I think, makes that a lot easier to remain that way versus being a public business.
When I think about other risks that have come up over the years, obviously, the quartz revolution was something that was big.
Now, to some extent, you have electronic, whether it's Apple Watches or performance -based watches.
How has the business typically dealt with that?
When you go back to that quartz period, was there anything that they did uniquely or in a way that they handled that?
And then do you look at what's going on, anything related to the Apple Watch or anything else that comes to mind when you think about evolving as a business.
One of the things we could learn from Patek Philippe historically is how they dance between evolution and revolution.
And it's very interesting to look at what happened with quartz revolution, where all of a sudden, all these mechanical timepieces were considered obsolete.
And Patek Philippe really doubled down with explaining the history, the craftsmanship and tradition as being assets of value, the result of that equation is luxury in its finest form.
As quartz watches became, they were expensive in the 70s and spent hundreds of dollars, but soon they were a matter of cents where you could buy a quartz watch for under a dollar.
But Patek Philippe went the other direction and just went to the height of of the market and making some of the finest handmade pieces imaginable.
Now, fast forward to the technological revolution, Patek Philippe doubled down in the same way.
Everyone was saying, oh, everyone's going to wear an Apple Watch, so who's going to be wearing a half -million -dollar Patek Philippe minute repeater?
It's completely meant obsolete.
What's so surprising is now you see people have an Apple Watch on one wrist and the Patek Philippe on the other wrist, and it shows that the two can coincide.
What people forget is by collecting watches, it's part of a community.
It's the ultimate connection to like -minded individuals that want to own the best. And people might want to join a country club or private jet ownership or you name whatever you connect to the world with.
But when you own a Patek Philippe, you are connected to an international community of people that really are truly like -minded.
I've just seen this so many times, men and women just connecting in business and in life based on the watch on their wrist. I mean, the connections that people make just based on what watch they wear is absolutely extraordinary.
Why settle for the second best when you could buy the best?
And I think I've heard you say before, once you go down the rabbit hole and buy one, usually that is not the last that you end up owning in terms of protection.
It's a wonderful addiction.
Yeah, it's true. Very few people own one.
This has been an absolutely fabulous conversation, history lesson.
We try to close these out with just general business lessons that we can take away from whatever company we're examining in the episode.
What do you think are the standout lessons from Patek that you might be able to apply elsewhere in life or just thinking about your own business?
Wow. It's so cliche, but Patek Philippe has brilliantly navigated now soon to be 200 years years of history by never putting all their eggs in one basket.
When a company focuses on one product or one style, and they're just so hyper -focused on being the best, but in a very limited scope, you're at risk in a wider marketplace.
Patek Philippe has always navigated the 19th century ups and downs in the economy, and certainly in the 20th and now early 21st century.
By being true to making the best but of a wide product line.
Yes, they make sports watches.
Yes, they make dress watches, but they've always made clocks, also jewelry.
There's been a wide array of different types of product offerings that they've made throughout their history.
So there's always something for everyone.
So I think that's very important because if you look at other watch brands, they're focused on one particular aesthetic, one particular look, and that's highly risky.
If the world changes really fast and all of a sudden, I'll be obnoxious, your 60 millimeter watch all of a sudden is out of style because it's too big, then your brand is done.
Patek Philippe has always offered something for everyone.
And it's also very, very focused on an important women's line as well as a men's line, simple watches and also complicated watches.
So there is something for everyone in high -end horology within the world of Patek Philippe.
So that's the first lesson.
Never put all your your eggs in one basket.
The other thing I think they've really navigated is how to run a family business, which is not easy.
And it comes back to that idea of dynasty, where from one generation to the next, times change.
There's always an ebb and a flow.
But Patek Philippe, by always thinking in the past, present, and future, at the same time, they're able to make decisions that are not short -sighted.
And I think the business world can learn a lot about branding by looking at how Patek Philippe has navigated their history.
And it's a masterclass in understanding how to protect your brand at all costs, take enough risks to build your brand, but never be too hyper -focused in one particular product or you could lose everything.
And by being a family -run business, they've been able to navigate that absolutely brilliantly generation after generation.
Absolutely rings true.
And I think in my own research and a lot of the things that you've done, on 1989 and the real strategic shift that happened there, there's so much interesting lessons to learn from that.
And I've been stuck on that really for the past week and a half, thinking about how thoughtful the approach was and how much they really just controlled the message that was going out there and aligning it with what they had done for years and years and years.
So thank you very much, John.
This was a masterclass in terms of this business, and we really appreciate you coming on.
Thank you for your time, Matt.
And absolute Absolute pleasure to be part of your show.
I've had a lot of fun today.
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