Welcome to this classic episode.
Classics are my favorite episodes from the past 10 years, published once a month.
These are end of one conversations with end of one people.
This Business Breakdowns on Rolex is a longtime standout.
The founder of Hodinkee, Ben Clymer, was the perfect person to take us through the ins and outs of this legendary brand.
I hope you enjoy it.
This is Business Breakdowns.
Business Breakdowns is a series of conversations with investors and operators diving deep into a single business.
For each business.
We explore its history, its business model, its competitive advantages and what makes it tick.
This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
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Today, we're breaking down one of the strongest brands in the world, Rolex.
Founded in the UK in 1905 under the name Wilsdorf and Davis, Rolex has become the leading name in luxury watches.
But while the company's products are iconic, the business itself is highly secretive.
Owned by a foundation and run as a nonprofit entity, little is known about Rolex.
To unlock the secrets.
We're delighted to be joined by Ben Clymer, the founder of Hodinkee and an expert on all things luxury watches.
Ben has had rare access to Rolex and the people behind the manufacturer, making him the perfect person to dissect the business with us.
Please enjoy this excellent breakdown of Rolex.
So Ben, I was trying to think of an appropriate first question to break down Rolex.
I think it has to be, what is your favorite Rolex watch ever?
Oh man, that's a really complex question for a gentleman such as myself.
The Daytona is probably my favorite Rolex as an object.
There are Rolexes that mean a lot to me from a sentimental point of view, being my grandfathers, my fathers, et cetera.
But the Daytona as a thing has always been the peak of my fascination, from the early 6239s, which is first generation Daytona.
Back before it even said Daytona on the dial.
I wrote a story probably 10 years ago, plus at this point on Hodiki, about those.
There was some curiosity within Rolex about what they should call it.
And this was before they sponsored Daytona.
And the original name of the Cosmograph, the chronograph for racing was Le Mans.
It's called Rolex for a variety of reasons, but one of which is Rolex is Rolex in any language.
And Le Mans with that silent S.
The Rolex marketing department, as small as it was in 1963, said you know what that could turn off the American market?
And if you've ever tried to pronounce Audemars Piguet as Audemars Piaget, which is about 50 of humanity, you realize how uncomfortable that can be.
So they quickly went to the Daytona.
So the Daytona as an object is probably my favorite.
I actually just realized I bought two months after we published the inside the Rolex story that I wrote.
2015 is probably the one that means the most to me because I've just had it the longest.
And it was to celebrate something personal at the time.
So say a bit more about the Daytona.
Like what is it about it as a physical object that you think makes it special?
And the Daytona, not just with Rolex, but with all watches.
That is about cosplay and the idea of you can be whoever you want to be.
I'm this like quiet dork from upstate New York.
In my mind I'm Paul Newman and I'm driving a vintage Ferrari or vintage Porsche Le Mans or something super badass.
And the Daytona is the quickest way in my mind to get in there.
And then, as somebody who is obsessive about things, as you can imagine, being that, I started a blog about watches, and now here we are.
The Daytona has the most interesting history in the sense that it is and it was not produced.
The movement was not produced by Rolex until relatively recently in the 2000s.
Whereas everything else almost from day one was produced by Rolex.
So the Datejust, the Day-Date, the Submariner, GMP, those were all Rolex movements.
Daytona was not, which I think is just fascinating.
And it gives you something to do.
So in younger years when I was taking the subway, I would time how long my subway ride was, or how long it took to cook the chicken in the oven, et cetera.
But ultimately the idea of a professional watch, which is Rolex sports watches, with a dial that didn't have to be black.
All the other ones are black.
GMP is a black dial.
Submariner is black dial.
Aesthetically was different.
It was also smaller than most of the sports watches, with the exception of the Explorer, which is a 36 millimeter watch.
And it just had a lot of story that went with it.
One of which, of course, being the fact that Paul Newman himself wore one.
And that's, of course, the most expensive wristwatch ever sold, not for charity.
There's just so much about the Daytona.
But on a personal level it came down to the aesthetics, the connection to motorsport and then just simply the story behind it, that it was really not a success at all.
And chronographs, whether it was Rolex, Hoyer, Patek, anybody...
These were really engineering-focused or motorsport-focused watches.
They were not for consumers.
They were not for guys like you and me, unless we were driving at tracks on the weekend.
And similarly with the Submariner which I have right here.
This was not for the.
The idea of a desk diver, which is somebody that sits at a desk but pretends to dive, is really a very modern, very recent introduction.
And back then, you bought a Submariner if you were actually diving.
It wasn't because I'm going to my pool in upstate New York on the weekend.
You were really diving.
Otherwise, you were buying a small dress watch.
And whether it's Rolex or Patek or any other Vacheron AP Omega, the most expensive watches, historically speaking in the mid-century or last century were not sports watches.
They're not even complicated watches.
They were ultra slim watches.
So if you look at Patek or AP or Vacheron being the three big boys at high end, the most expensive watches were not the perpetual calendars of chronographs.
They were the ultra slim watches.
And that represented the highest end version of watchmaking at the time.
We're starting to see that a little bit now.
Actually, Richard Mille just this past week introduced the thinnest mechanical watch ever made, and it's 2 million.
And Bulgari released one earlier this year.
That was, up until last week, the thinnest watch ever made.
And that was about $500,000, where the standard Bulgari would be, say, $15,000.
So different times, for sure.
You said something interesting, which is one of the jobs to be done for buying a Rolex.
Is this cosplay idea of transporting you to a more interesting or fanciful lifestyle?
Maybe you could describe, before we get to Rolex specifically the brand, all the jobs that you think high-end watches do for people.
I don't want to take for granted that one of them is tell the time, but you can buy a Casio for 10 bucks that can tell the time.
Or your iPhone.
Or anything.
There's lots of ways to know what time it is.
So describe to me, through history and especially today, all the reasons, the main reasons, you think people buy high-end watches.
Historically speaking, digital time telling didn't exist before 1969, full stop.
When they were going to the moon, it wasn't like they could buy a Cassie or use an iPhone.
They needed a mechanical watch to strap on the outside of the flight suit.
When you were racing Le Mans or the Mille Miglia in the 1950s again, there was no such thing as digital time keeping, so you wore a watch, do that.
The functionality of it is obvious, but I think it's worth repeating here, because a lot of people don't remember, that 100 years ago, 50 years ago, 60 years ago, there was no option.
You were wearing a watch and it was a mechanical watch to do everything in your life.
And so the idea of me looking at my Rolex now and then comparing it to my MacBook here.
There was no option to do that.
I set this watch once with probably an hourly bell on the TV or the radio.
And that was it.
And then you would just assume that this would be accurate for basically in perpetuity.
And then, beyond that, going back to the earliest, earliest watches, the Marie Antoinette days, and she was one of the first, or the first supporters of what we call hot horology.
I'll say with an American accent, which is high end really, beyond basic time telling devices.
And what I mean by that is you can buy a mechanical watch, and Hodinkee sells mechanical watch for about 150.
So that's probably a Timex or it might be a Swatch System 51, which are not battery powered.
These are mechanical watches.
Those are machine assembled.
They're basically disposable.
You throw them out when they're broken.
You don't fix them.
There's no what we call finishing or finissage, which is effectively aesthetic flourishes that differentiate those type of watches from say, Rolex or Omega, which I would classify as mass market luxury but the most long-lasting of anything out there.
And then what we call hot horology, which is slightly more artistic.
You get complications, you get finishing of movements.
I don't have any here with me, but something like a Patek, an AP, a Vacheron, a Elan, etc.
I would classify those as a category frankly significantly higher in terms of finishing and significantly higher in terms of human touch than Rolex or Omega.
On a Rolex, it's a closed case back.
There are no Rolexes with open case backs, but there are some Omegas.
So Rolex is the number one brand in the world.
Omega is the number two brand in the world, historically speaking, by sales.
Omegas will have some open case backs on the new Speedmaster, for example, which went to the moon.
You can see the movement.
So a lot of nerds and now more than nerds want to see what's actually inside this watch.
And it's simply because you're paying six or seven grand for this thing.
You want to know what you're getting.
You want to see that human touch to it.
And that is why a lot of people are interested in high-end watchmaking today.
More recently and this is very recent really, over the past two or three years you get people that are buying on spec, on speculation, on the idea that these are safe investments, which they remain to this day.
And that is really a new thing for me.
So Hodinkee, our business, is 15 years old, approaching 15 years old.
And really nobody thought of watches as investment vehicles in 2008, 2009.
I should say very few.
Some people have a very high end.
And now it's kind of common practice.
And you know I do interviews with the Bloombergs of the world and Wall Street Journal of the world almost weekly at this point talking about the ROI of not just Rolex but AP and Omega Equoia, et cetera.
There are several reasons why somebody might buy a watch.
And frankly, that's why it was always so compelling to me as an ex-finance guy and why I wanted to get in this space was it could be interesting.
It could be interesting to somebody in design from an aesthetic perspective, an engineer from a manufacturing perspective.
There's so many reasons why you could be interested in it, but the reasons why that people continue to buy is that they are so for everlasting.
This watch I've had for seven years, I've never had it serviced.
And frankly, I probably won't need to service it for another seven years.
And when my daughter, who was just born six months ago, is my age, 40 years from now, she'll be able to wear this watch that I'm showing to you on the Zoom call right now.
There's something so wonderful about the longevity of these things in a way that frankly, nothing can replicate.
Even a great car we'll say a Mercedes or a Porsche or something like that you really need to maintain those.
And frankly, the internal combustion engine 50 years from now will probably not even be serviceable.
Jewelry is a different thing, because there's craftsmanship there and I have a lot of respect for great artisans' jewelry, but there's no engineering.
There's no motion there.
And I think what's so remarkable about Rolex, as the archetype of all mechanical watches, is that I can put this on my wrist.
And if I decided to sell all my other watches, I could wear this every day, while I sleep, while I shower, while I work out.
And it would continue to tell time for me and it would rely on me as much as I rely on it.
I think there's something beautiful in that, that kind of symbiotic relationship between the device and the man.
And it's just a wonderful kind of totem to a different way of living.
It's such a fascinating set of different things and considerations.
I'm also curious how you think about the luxury strategy itself from a marketing standpoint behind watches.
I remember reading this called Luxury Strategy, which I recommend to anyone interested in this topic.
And one of the ideas that stands out from that book is that when marketing a luxury product, you want the ratio of the number of people aware of something to those that actually have it to be as wide as possible.
Because one of the jobs you're doing when you buy a really fancy watch is you want other people to know that it's a marker of success, sort of like a signaling function to watches.
How do you think that piece of this has evolved over time?
That has become ever-present, and I think more so now than ever before.
Just speaking of my own experience.
15 years ago, when I started Houdini, nobody knew what a vintage Rolex was.
We were.
If I may say, we were the first people to give any attention at scale to vintage Rolex and collectible Rolexes.
Basically, if you went to an auction Christie, Sotheby's auction in New York, there would be about seven dealers in there and they would just be buying and selling amongst themselves.
Now you go, and it's a black tie affair with champagne, and several well-known personalities from entertainment and sports are sitting in the audience.
It's a totally different thing.
Again, we can talk about the origins of Rolex and how they were at the forefront of this.
They were effectively the first people to have real marketing dollars put behind a watch.
There were people that ran ads here and there.
Longines was a big one with Charles Lindbergh.
But Rolex did it in a concerted way.
And they have continued to do that in a way that is simply just unmatched by others.
And I think what's so remarkable, Rolex was always the number one brand in the United States, historically speaking, from the 1950s to today.
But if you look back, say, I don't know, 15, 16 years.
So pre-2008.
So the financial crisis of 2008, which is actually how I started when this all kind of came to be, was a real turning point for Rolex in the US because when all the other brands, their competitors being Omega, which is a huge, huge brand, Tag Heuer, which is a good sized brand, the folks that you would think,
They were there.
They were present in the conversation with Rolex.
They pulled back on marketing when people stopped buying after 2008, when Lehman collapsed.
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 now.
If you speak to them directly, they'll credit with that period as kind of the turning point for them in the US.
Maybe, before we go into the history, which is so interesting and really important, we could just do a level set for the audience on Rolex, the business and just some basics.
Like how many watches do they produce a year?
The revenue that they produce a year, maybe say a little bit about their very unique business structure, which I think would certainly shocking to me.
And I think we'll shock some people too, that aren't familiar with it.
Just level set us on the size and type of the Rolex as a business.
And I want to be completely clear and I'm sure Rolex will listen to this, so I want to be clear for them and for the audience is that they don't communicate anything.
So this is all speculative.
The information that I'll provide and that I'm sure you've read is completely speculative.
We have a good idea of what they might produce and what the revenue might be.
The assumption is that Rolex is making just north of around a million watches per year, with an average wholesale price of around 7000.
So you can do the math there to kind of give you an idea of size and revenue.
And a million watches per year is a lot, but it's not the biggest by quantity.
Apple, of course, would be bigger than that.
Arguably, if you included Apple, they would be an even bigger watch brand than Rolex.
But different thing, obviously.
But if you were to combine, for example, the entire Swatch group, which ranges from Swatch to Breguet, including Omega, it would be a larger business than Rolex in theory.
But again...
But Swatch is a publicly traded company.
You can see exactly what their revenue is, whereas Rolex is, as I think you've alluded to.
Rolex is quite the opposite.
Rolex is in fact run by something called the Hans Wilsdorf Foundation, which was founded in 1945 when the founder, Hans Wilsdorf, set it up to basically be, effectively a nonprofit run by a group of families that are still highly involved with business today that have, I would say, effectively zero public interaction.
I'm pretty close with Rolex and I'm pretty close with the watch industry, you could say.
And I have met, I think, one board member one time That was not by design.
I think I met him at a bar.
And I was like, oh, you're so-and-so and said yes.
These people are, in fact, the most powerful people in watches.
And nobody even knows their name.
Nobody even knows what they look like.
I happen to because this is my job.
But most people have no clue who's really kind of playing the strings at Rolex.
And there's a wonderful CEO named Jean-Fred Dufour, who used to be the president of Zenith, which is an LVMH brand.
And he is absolutely the face and brain behind much of Rolex.
But there is a board there.
And like any board, they have a different kind of influence over the brand.
But yeah, Rolex is effectively a nonprofit.
Some say one of the largest nonprofits in the world, which I would believe.
There are dozens and dozens of rumors that you may have heard, such as like they've got the largest private art collection next to the Vatican, or they own more real estate.
They make more money in real estate than they do in watches.
And Any of those things could be true.
I can say with the utmost certainty is that they will never reveal any of that to be true, even if it is.
They're not the type of brand, type of company that will ever stand on the rooftop and shout about anything.
And I mentioned this in the story that I wrote in 2015, whereas most brands, they're trying to create stories where there aren't any.
A lot of brands will say a watch is in-house and you manufacture it in-house when it's not.
Rolex doesn't do any of that.
In fact, What's so remarkable and I found this out on my own doing my own research for that story in 2015, they will make several updates to products at some significant cost to themselves and not change the retail price and not even tell anybody about it.
And the only reason that I found out is when, doing research for that story, I spoke to an independent watchmaker who is in New York City and is one of the best watchmakers in the country, if not the world.
And he said he works on Rolex as well as other brands.
These are the changes that they made to their movements.
Without anybody knowing.
And, by the way, these other brands that are communicating about Liga, which is a manufacturing technique that allows you to have frictionless gears.
A brand sent out a press release about that.
And then he came to find out that Rolex had been doing that for five years.
It was in half their watches already.
That's what's so kind of wonderful about Rolex is they just are so... remarkably Swiss.
They are so kind of conservative and thoughtful in the way that they communicate.
When I wrote that story in 2015, I was one of the first journalists to ever be invited inside Rolex manufacturing headquarters in Vienna Switzerland, which is where movements are made.
They just are not out there to talk about themselves really ever.
And it's incredibly charming.
The luxury world is so much about Instagram and influencers and people touting how prestigious any brand might be.
And Rolex is just quietly the most prestigious.
It is so ridiculously singular.
I cannot think of another example of a company that I want to come to vertical integration and quality on some of these key brand elements and real elements of a Rolex in the absence of a profit motive over such a long period of time.
There just aren't other stories like this where there's such dominance.
The only other two that come to my mind are two brands that I know of, one of which would be Protectly, which is another family.
It's owned by the Stearns completely.
There's not any outside capital.
Again, family run Geneva very, very close to the Rolex group, obviously physically and emotionally, I should say.
They continue to just do things in a way that is different than everybody else.
And then the other one would be Hermès.
They have some outside capital, but effectively controlled by one family has been for 100 years.
You know, Hermes is part of the fashion lifecycle.
So there are fashion shows and they get into Hermes watch box or ashtray or lounge chair or suitcase.
They're a little bit broader, but their commitment to quality and the way that they've integrated is exceptional, I can say.
But Patek and Rolex, I would say, are unique in that way.
Maybe you can give us the I don't really care how long it is, as long as you want to make it, because it's so damn interesting the history of Rolex, the brand and the company, its founding and its key timeline milestones.
Rolex is younger than most other brands.
It's younger than Omega.
It's younger than Vacheron by 150 years.
It's younger than Patek.
In the Swiss watch world.
I wouldn't call it a baby by any means, but it's not one of these grandfathers.
I mean, Vacheron was founded in 1755.
That's older than the United States of America.
Rolex was founded by a guy named Hans Wilsdorf, who's Austrian, but he was a total Anglophile.
He really just was obsessed with the United Kingdom in the early part of the 1900s.
So he goes into the UK and starts a company called Wilsdorf & Davis in 1905.
And back then, you have to remember that, like, forget digital watchmaking.
Wristwatches were not a thing.
The wristwatch was really a product of World War I, which was guys in trenches.
Trench watches were strapping pocket watches to their wrists so that they didn't have to pull it out of their pocket.
It was a little bit more complex, but that's it at a high level.
And Wilsdorf, in 1905, decides to focus on wristwatches, which is like crazy.
I mean, it was a little bit, frankly, like Elon Musk focusing on EVs 10, 15 years ago.
People just weren't ready for it.
So he committed to doing the wristwatch in the early part of the 1900s, 1905, 1908.
And in 1908, he creates a company called Rolex.
And again, there's lots of hearsay on why it's Rolex.
I think at the very least it's safe to say that he chose that word because it's the same pronunciation in all languages.
Some people say it's the sound it makes.
There's no confirmation on that.
But effectively, what he does is he's just a distributor.
So he's not making anything. from 1905 to about 1908.
In 08, he buys a movement, which is what powers a watch from a company called Aegler, A-E-G-L-E-R, which we'll get back to later.
They're still around kind of today.
Buys a movement, puts it in a case made by himself and sends it off to.
These are the most precise time-telling devices on Earth, typically done for marine chronometers.
And if you know anything about the history of longitude, like that is effectively how longitude was discovered.
This is just kind of paramount to basically all exploration of the time period.
But up until that point no wristwatches had ever even been submitted to this thing called the QA, which is a British testing facility.
In 1908, he does that with an eggplant-powered watch.
It's a 44-day test, and it is given the QA certificate.
And again, nobody had ever done it.
Some years later, about 10 years later, he submitted 136 movements back to the QA.
And I think 24 of them were cased in 34 millimeter gold cases.
And then another 112 were in what we call boy's size, which is really very small.
I mean, at this point, it would look like a nickel.
But these are effectively the Formula One cars of watch movements.
So there were other watch movements at the time that to you and me and to most people would look exactly the same, but these were high performance calibers.
And they did it with a special escapement.
And escapement is basically how the time counting is regulated.
And these were effectively the Formula One cars of watchmaking.
And they were done in a way that was very, even back then, very Rolex.
There's really no indication these are anything special on the dial besides it would say QA on that.
They're around.
You can buy them today for really less than you might think.
But once he had been given the QA certificates for the first wristwatch ever, he decided to really focus on three tenets of watchmaking, which really were not at all prevalent in that day at all, because it was really about utility.
The watch can tell you the time pretty well.
Or it was about luxury.
And at that point, we're talking, you know, the Cartier's, Patek Philippe's complications, really.
So his three tenets of manufacturing, which remain true to this day, would be precision accuracy, waterproofness which didn't really exist at the time and then self-winding.
And what I mean by that is the ability to not have to wind the watch manually.
So precision was done.
We've kind of covered that.
These watches were based on QA.
They came up with a new statement to make them more precise.
So waterproofness, I think, goes back to the question you asked about five minutes ago, which is how did you get something that more people know about, that basically can afford or can find?
And so he created something called the Oyster Case.
And now almost all Rolexes, with the exception of the Cellini line, use an Oyster Case.
And that basically just means a waterproof case.
Nobody was doing it at the time.
Omega had something that was pretty close and actually predates the Oyster Case, but never really took off in the same way.
Instead of using seals, it was almost like a locking system.
Didn't really take off.
But effectively there was this woman named Mercedes Glitz who was a typist of all things, basically a secretary in the UK.
And she had swum the English Channel successfully, the first woman to swim the English Channel successfully.
And Hans Wilsdorf, the founder, said hey, wouldn't it be cool if this woman A, she's a woman B, she's doing this amazing feat that no one had ever done before?
Wouldn't it be cool if she wore the watch around her neck?
So she didn't wear it on her wrist, to be clear.
She put it around her neck.
And she attempted to swim the English Channel.
She actually didn't successfully do it.
She failed, but nobody really cared because she had already done it before.
And so he took out an ad celebrating the fact that this watch was around this woman's neck for 10 hours in the English Channel.
And the timekeeping was flawless.
And so that kind of solidified Rolex as a household name, because the Oyster case had been validated in the English Channel with this early brand ambassador, I guess you would call her.
That was a huge deal.
And, I think, one of the earliest examples of real marketing by any luxury brand or any brand really at all.
And then the final tenant would be self-winding, which is I would equate it to like the automatic transmission.
When the automatic transmission came around, all of a sudden, driving a car became a hell of a lot easier.
You just became wider, accepted, et cetera.
So prior to I guess it was around 19, I'm going to say 30 something that Rolex patented the first self-winding movement.
To be clear, there was somebody called John Harwood that actually had a different self-winding movement first.
I think that was in the 20s.
And his idea was to make a hammer.
Something that would bounce back and forth like this to continue to power the watch.
Rolex said, let's go a different way.
Let's create a rotor.
So a weight that would oscillate around in a circle to power the watch.
That worked.
And Rolex had, actually, I remember the date.
It was 1933 because it had a 20-year patent on it.
And Patek Philippe, which was another stalwart of traditional watchmaking, saw this and said oh shit, we need to do that too.
But they couldn't actually release anything until 20 years later because of the patent.
The Patek 2526, which is their first self-winding watch came out in 1953.
And that's a different thing altogether.
But effectively, Hans Wilsdorf said, I want the watches to be precise.
Check with the QA.
I want them to be waterproof.
Check with the Oyster case.
And I want them to be self-winding.
Check with the Perpetual.
So if you see Oyster Perpetual on any Rolex which you'd see on all Rolexes now Oysters are waterproof.
Perpetual isn't self-winding.
From there, Rolex went out to make watches.
And they were doing things very much in a similar style to everyone else at that time, until the early 50s.
So in the post-war era, post-World War II era, they created their first sports watch.
And by sports watch, it's actually the technical term is professional watch by Rolex nomenclature.
It's the Submariner, which is a diver's watch, which is 1953.
It's the GMT, which is a pilot's watch, which was 1953.
5, Explorer 1, which is an Explorer's watch or an all-day, everyday watch, which is 53 as well.
Then you have the Daytona in 1963.
Later you have the Sea-Dweller in 67, which is like a beefed-up version of a sub, and then the Explorer 2 in, I guess, 1970 or so.
But those are the watches that I think most people now think of when they think of watch.
You see rotating bezel.
In most cases, you see a black dial.
In most cases you see an oyster bracelet, which is a very wonderfully produced bracelet with an oyster lock bracelet.
And that is really when things change.
And to be clear, Rolex was not alone.
There were other brands doing it.
Some would say earlier, some would say around the same time, but the Blancpain 50 Fathoms is credited to 1953.
The Omega Seamaster 300 and 120 are around the same time as well.
So they were not alone.
And you have to remember that, like even Rolex And the watch industry in that period, it was really a smattering of different suppliers.
If you look at, for example and I wrote about this several times over the past few years if you look at say, the Rolex Daytona from 1963 and the Heuer Carrera from 1963, it uses the exact same movement.
And I'm saying the exact same movement.
And that's a Belge 72.
Same case maker, same dial maker, same hand maker.
So what is the actual difference?
The assembly was done by Rolex and the assembly was done by Heuer.
But the product itself is really very similar.
And if you look at early Seamasters and early Submariners, a lot of similarity there.
The difference was, of course, the Oyster case.
But that was how watchmaking was done.
And if you look at, say, example of Patek Philippe, 2499, that's based on a Valjoux movement.
You don't think of that.
You think of Patek as Patek.
You know, this is the Holy Grail.
But up until really I mean the 2000s they were using what you call an Ebauch movement, which is just really movement blank.
And then it would be finished by Patek or finished by AP or Vacheron or whoever.
So Rolexes were really...
I would say finished to a higher quality than most.
But I mean, any good Blancpain or any good Omega would do much of what Rolex was doing.
It was really not until much, much later, in the 70s first, when we had the quartz crisis, which is effectively the creation of quartz, which is analog time telling, but with a battery which was dramatically more precise.
I mean, like dramatically more precise than mechanical watchmaking.
What is interesting to think about and I give full credit to my old colleague Joe Thompson, who's a legend in the watch writing world is the Japanese came in with quartz.
Seiko created it effectively came in and there was a war between Swiss mechanical watchmaking and quartz analog timekeeping.
And to be clear, the Swiss lost.
The Swiss lost by a country mile.
So all of a sudden, those guys that were buying a Rolex or an Omega or a Goyer because they were the most precise thing in the world, just said you know what?
Why would I do that?
I can buy a quartz watch that is 10 times more accurate.
10 times.
And by the way, you don't need to have it serviced.
You just swap out the new battery or whatever all the time.
And that decimated the Swiss watch industry to a point where very, very few brands were producing things at a profit of any kind.
Jack Hoyer, whose family owned Tech before it was Tech.
It was just Hoyer at the time.
In his biography, I mean, he talks almost going into bankruptcy.
If you talk to Thierry Stern, whose father, Philippe Stern, and his grandfather have owned the tech for generations.
In the late 70s they had to borrow against, you know, with their banks.
It's existential.
Yeah.
This was real.
And it wasn't just the smaller brands.
The tech had issues.
Hoyer had issues.
Rolex stayed the course.
And yes, they did make quartz watches, the Beta 21, which was the Swiss conglomerate's answer to quartz.
It's the most expensive quartz watch ever made.
I mean, like thousands and thousands of dollars.
They said, you know, we're going to focus on what we do best.
And the focus went away from precision and accuracy and time-telling to luxury.
And so that is when you start seeing the gold Rolex on.
You know I hate to say it, but like the used car salesman, and the gold Rolex became the thing.
70s and 80s opulence, you understand what the 80s were, of course, it just changed what Rolex was.
But, by the way, it worked and it allowed them to continue to be relevant when everybody else being Omega and and Patak to a degree Vacheron, like these brands really struggled.
And that is why so many of them ended up in conglomerates.
In the 80s and 90s, when watches were mechanical, watches were really not doing so hot.
A lot of folks came in and bundled them all up.
So Richemont owns a bunch of the great ones, including Vacheron.
Swatch owns everything from Swatch to Blancpain, Breguet, Omega.
It was a time of great challenge for sure.
And Rolex.
They struggled as well, never to the degree that the others did, but it was not great for them.
And then the 90s started to come around and Rolex had a CEO by the name of Patrick Heinegger.
His father was actually also CEO to give you an idea of how things worked at Rolex.
And he said, I want to take Rolex in-house.
And he was really the first to do, frankly, well before Patek or well before anybody else.
And so Rolex was using 27 different suppliers to make, say, a Submariner.
And after he was done with it, they're using four.
And now those four are completely owned by Rolex.
There are four different production facilities two in Geneva, one in what I would call proper Geneva, one in Plon-le-Watt, which is a little bit outside.
And then there's one in Schienenburg which does dials, and there's one in BL which makes the movements.
But what's so amazing is Rolex?
To me, the kind of secret sauce is equal parts case, equal parts movement.
The cases you can kind of reverse engineer if you're a competitor and say okay, what's an Oyster case.
It's got this, it's got that, it's polished there.
Seals are done by X, Y, and Z. Movements are a different thing entirely.
And what's amazing is Rolex Geneva, which is basically dials, cases, bracelets, all that stuff.
And Rolex Bienne, which is up in the mountains, the Valet de Joux, had a handshake deal for 70 years.
And I mean an actual handshake deal that the calibers made by what was then called Eagler, who made the first movement for Hans Wollstorff.
That company was making movements solely for Rolex Geneva based on nothing but a handshake.
And I mean that literally.
There was nothing in writing for up until 2004, which is just insane to think about.
I mean, Rolex was certainly a multi-billion dollar a year business before then.
And up until 2004 there was no contract in place to say that Agler couldn't make movements for Omega or Tag Heuer or whoever.
And so in 2004, Rolex said, you know what?
Enough's enough.
Let's get married here.
And they purchased the company.
And so now Rolex PN is basically what Eagler was up in the mountains until 2004.
And so Rolex now has four different production facilities.
As I wrote that story, I was among the first to be invited inside the movement manufacturing, which is really the source of the IP.
Like that is where the sausage is made, so to speak.
Just remarkable.
If you haven't read the story, it's on Hodinkey.
It's called Inside the Manufacturer, Visiting All Four Rolex Locations.
It was remarkable.
As I started out in that story, I was a, you know, this was 10 years ago or seven years ago.
I was a lover of watches.
I was a lover of Rolex.
And I had more Rolexes then than had anything else at that point.
None of them were as old as I was.
They were all considerably older than me.
And it's funny, I reread the story to kind of prepare for this interview.
And now since then, I've bought more modern Rolexes than I have vintage.
And the world is just a different place.
But Once you see everything that Rolex does to a watch and what I mean by that is the fact that they have their own foundry even the steel not just the gold and precious metals even the steel on a Rolex is proprietary and it's made by Rolex.
It's 904L.
It's wild.
They make their own gold.
It's called Everose if it's Rose Gold.
It's just remarkable.
And what I think is even more telling of what Rolex is about, is that one of their facilities they actually have and I mean this literally more than two Nobel Prize winning scientists on staff.
Working on watches.
Think about what that must mean from a material science perspective.
The innovation done by Rolex is just above and beyond anything I've seen.
I've been to every watchmaker in the world.
I've been to several car manufacturers doing this.
I've been all over.
I've been inside Hermes.
There's just nothing like this.
They create machines to test their machines that make watches.
They have their own oyster test, which of course provides artificial pressure on a watch.
You know, it's waterproof.
It's wild.
So you open this.
It's actually kind of difficult to do.
Imagine doing that a thousand times a minute.
They invented a machine to do that.
They have a machine in Chambord which is their dial and gem setting location to sort through all the stones that they're given.
First of all, Rolex only works with IF, which is internally flawless stones, which is obviously the most expensive IS then to ensure that the stones that they're given, whether it's diamonds or rubies or anything, are real.
They created a machine to sort them at scale and ensure that all of them are real.
And I said, well, are bad stones or fake stones are a problem for you?
They said, no, not really.
But we just want to ensure that every watch we sell is what we want it to be.
And I was like, how often do you get a fake diamond or fake anything?
And the answer was one out of 10 million.
To be clear, this machine was created either by them or they paid somebody to make it for them.
This is their machine.
It's not like it exists outside Rolex.
This gives you an idea of what they're about and how they do things.
It is so wonderful and so different than traditional luxury which, frankly I may say, even as a purveyor of luxury items, is full of shit half the time.
I'm into sneakers, but not in the way that I'm into other things.
Why would a pair of special edition sneakers sell for $5,000?
Sneakers are made in China by machines.
They're hand-stitched here and there.
It's just design.
It's artificial scarcity, etc., When you see what goes into a really high mechanical watch, but in particular Rolex, you really start to understand the Submariner will say it's 8,000 bucks.
That might be a deal after you see what goes into this thing.
And I mentioned in the story, several competing brand presidents had told me before I went on this trip that oh, Not a human hand touches a Rolex before it's made.
It's all done by machine, which effectively the most insulting thing a Swiss person can say, meaning that like it's void of character.
It's void of humanity.
It's like luxury should be about people.
It should be about craftsmanship.
And they're saying Rolex doesn't have to And I was like, oh, okay, like that's kind of a bummer.
That may have informed why I didn't own any modern Rolex at the time.
You walk into Rolex HQ in Geneva and you see hundreds of people finishing watches, and they're not finishing in the same way Patek or Lange would by hand with little pieces of wood.
They're finishing, you know, maybe six or seven Rolexes at a time on a polishing wheel, but they're still polishing really the way that it should be done.
They're assembling dials by hand.
They're assembling the bracelet by hand.
There's an incredible amount of handwork that goes into the most basic of Rolex, being like a Submariner or a Datejust.
Beyond that, what's so fun about them is they know exactly how different they are than everyone else.
They also know that everyone wants to be like them.
At least two of their four facilities, you might drive by and say, oh, there's Rolex.
It's five stories high.
It's a few hundred thousand square feet.
When you go inside you realize that it's actually 10 or 11 stories high, but five or six of those stories are below ground.
And I just remember thinking like, why would they do that?
What's the point of that?
And it was in fact to suggest to anybody that drives by that roll it to smaller than they actually are.
And I think if we had any idea of how big the foundation was, it would blow all of us away.
I think it's enormous.
I think they're probably producing more than a million a year, but that's kind of the generally accepted number.
It's who they are.
And if they're going to do something, they want to do things at the highest level.
I'm a golfer and have been lucky enough to meet some of their players.
And Adam Scott became a good friend.
And I asked, why don't you sponsor X, Y, and Z?
Or like, why don't you go grassroots?
Whatever.
And they said, this is Rolex, like my golf.
If we're going to do golf, we only want to be involved with the major.
So the US Open, the PGA Championship, the Masters, and of course the British Open.
And that's it.
If they're going to do tennis, it's going to be Wimbledon and the US Open.
They don't even want to mess with some of the other majors in tennis.
It's just remarkable how committed they are to working with the very best.
It's wild.
It really is.
It's an unbelievable story.
And also, it's amazing to me the commitment to quality over time.
And I'm sure there's incredible pressure for all sorts of reasons.
Maybe the non-for-profit thing is actually a benefit here.
But there's always pressure to skimp a little bit on quality, right?
Like give up the absolute perfect standard because it could mean a lot more sales or a lot more scale or whatever.
Right. and they just haven't done it.
So you could think about buying one and looking at it and having it be a reminder of this, like commitment to all the way down to the gold.
The fact that they own all the way down to the bare metals in the ground is just crazy.
As you think about their genius on, I guess, quality and manufacturing, what is the equivalent on the marketing and distribution side?
So you mentioned the great example of the woman swimming across the channel as like a marquee event that made a big splash and they're focused on, like the upper echelon of whatever they're doing.
What else do you think Rolex can teach the world's companies about unbelievable marketing or distribution?
Referencing slightly what I was just mentioning, a commitment to only working with the absolute best and foregoing opportunity, foregoing working with the next generation of, we'll say golfers in this case, the guys that are coming up now until they've been validated as the very best, then they're just not interested in, you know, kind of good work if you can get it.
Like.
Not everyone has the benefit of being able to say I want to work with Tiger Woods, therefore Tiger Woods will work with me.
But I think they are just so unrelenting to their pursuit of excellence in the literal sense.
The very best in the world, no matter what it is, you know, it's Yo-Yo Ma.
It's not the person that has played Carnegie Hall twice.
It's Yo-Yo Ma.
It's Roger Federer in the tennis world.
What's so amazing is they care about the people as much as they do the results.
And Roger, I think, is the ultimate archetype for the Rolex.
They call them Rolex testimonies.
They're called bastards.
Roger is, I wouldn't be ashamed to say, like, I think Roger is a hero to many of us.
And I'm not really even a tennis player or a tennis fan.
That's the way he floats above the air.
Yeah.
He floats above the air, no matter what room that he's in.
He's just a gentleman and he married his high school sweetheart.
It's just a wonder.
And I've met him through Rolex and he's just a delightful person and completely authentic.
They look at that.
They want to be associated with people that are not only the best, but are genuinely good people as well.
And again, good work if you can get it, or it would be nice to only work with the best people that are also the best performers.
But they really maintain with that.
And their partnerships are different.
I'm trying to think of an example.
I'll say Leonardo DiCaprio.
He's been an ambassador for Tag Heuer.
He's been an ambassador, I think, for IWC.
And he is a hyper-famous, hyper-talented person.
He doesn't care.
It's just money for him, etc.
The contracts he's had, let's say with Tag Heuer, probably lasted five years.
Rolex has worked with Jack Nicklaus since 1967.
1967.
They work with him to this day.
He's still very much alive, and he's had a bunch of Rolexes.
We did a video with him.
But I mean, think about that deal, 1967 to 2022.
It's just wild.
Omega does that to a degree.
They've had a partnership with Cindy Crawford since the early 90s, and now Kai Gerber is with Omega.
It's not an official ambassadorship.
It's a much longer-term thing.
But Rolex really takes it to the next level.
And they've been with Roger for his entire career.
They really are committed to long-term meaningful relationships, much more so than any other brand.
It's not like with some of these luxury brands or car companies where okay, new CEO.
I believe in tennis and equestrian.
Then he gets let go and the new guy comes in and I believe in sailing and motorsport.
It's not like that at all.
There are core tenets of Rolex.
Motorsport is in fact one of them.
Then that's it.
Like they're not playing in the NBA.
They're not sponsoring baseball.
They're not sponsoring the NFL.
They're doing the things that they do, which is equestrian sailing to a degree.
It's motorsports, tennis and golf.
And it's just amazing that these strategies continue to deliver decade after decade.
What was golf in 1967?
I actually don't know the answer, but I can tell you it was probably not a big deal, especially back then.
And the fact that they were committed back then and they're even more committed now is just remarkable.
What have you learned about maybe the way that they make decisions?
Obviously, like being so long-term oriented is one of those things that again, you think is most portable to other, either luxury brands or just businesses in general, based on how singular they seem to be and how they make their choices.
It's kind of silly, but it's almost too simple, I should say.
And I think it's ultimately this attitude of kind of like do the right thing.
They are creating products that deliver in a way that is so far beyond, I think, what people understand, that people would be shocked.
The way that I used to process, I used to write for the site.
I don't anymore.
But as a journalist, I went to journalism school.
I would say two types of companies, one of which is the more you learn about the company, the less you like, the less you respect them.
And frankly, that's a lot of luxury companies.
You realize that, okay, this Swiss-made watch is actually made in China.
This bag is actually not hand-sewn.
It's sewn by a machine, you know, little things like that.
And then there are other companies where the more you learn about them, the more you like them.
Rolex is the architect of that.
That article that I read in 2015.
That was a foundational shift in my opinion of how watches should be made mass luxury watches.
And I think they continue to innovate in a way that we at Houdinki continue to strive to be like.
I mean, as an example, they have two in-house components that nobody knows about or very few people know about.
One of them is called Parachrome, which is a balance wheel, which is literally like the thing that rotates inside the watch.
There was basically I wouldn't call it a monopoly, but pretty damn close to monopoly on getting those things.
And everybody from Patek to Rolex were using something called a Nivarox balance wheel.
And Rolex said, you know what?
We're going to make our own at some astronomical cost.
And it's going to be 10 times as accurate as the competitor.
And they did that.
And that's one of the few times that they actually communicated on like a technical innovation.
They also have their own shock observing system.
I think it's called ParaFlex.
That again, 30% more absorbent than your traditional shock absorbent system.
Would that change?
Would that stop you or me or the guy on the street from buying a Rolex if they didn't?
Not at all.
Not at all.
But they do it because they should.
And they are at the core of it.
What's so charming about them at the core of it is like they are master marketers, master everything, master distributors, but they are watchmakers at the core of it.
This Submariner, this GMT, this anything I would put against any watch in the world in terms of production ability.
The other thing I should say is that they know what they're good at and they know what they're not.
And Rolex does not sell watches.
Rolex makes watches.
They own exactly, and it may have even closed.
I should check.
I'll back check this afterwards.
Rolex owns one retail store one, and protect follows a similar model.
They have, i think, four.
They have london paris, geneva and, i think, hong kong.
Rolex has one and i actually think it may have closed and it's in switzerland, and that's simply because they had a i was basically like a family friend type situation that owned it.
Then they ended up acquiring it.
So if you go to like the rolex boutique in manhattan, for example, which is in the rolex building, that's not owned by rolex, that's owned by wimpy, which is a great authorized dealer.
Actually, right up the road it's a german based company.
If you go to the Rolex boutique in Singapore, it's either the Hourglass or another authorized dealer.
So they're not selling watches.
They're selling them at wholesale to retailers who then make between, we'll say, 20 and 50 on every product they sell.
And imagine you're Rolex.
You're thinking that you've got more demand than you could possibly ever supply.
And you're thinking, man, I'm giving away 20% to 50% of everything I sell.
Why don't we just do that?
Yeah.
And they don't change because they know that, first of all, everything's cyclical.
The watch market is going through a boom, unlike I've ever seen in 14 years of doing this.
Unlike the markets I've ever seen at all.
That may or may not last.
We've reached a shift where things will never go back to the way they were before, but things are softening up a little bit.
And they realize like, hey, we make watches, we don't sell them.
And to have the control, the self-control and the wherewithal to basically walk away from 20 to 50 of retail sales at that scale globally, when the demand is just capacious, is just so admirable.
And because they know that in 100 years maybe things will change, or maybe in 10 years things will change.
It wasn't really Rolex, but in 2014 or 15, around the same time that I went to go see them in Geneva, something called the Apple Watch came out.
And Rolex is Rolex, like they're going to be fine.
But a lot of the other brands are like, man, is this going to eat our lunch?
And to be clear, it did.
If you want to say apples to apples, the Apple Watch is a bigger watch than Rolex by quantity and by revenue.
But Rolex is obviously fine.
It has changed.
And this is not an Apple Watch segment, but I'll just mention it briefly.
It has changed how people buy luxury watches.
A luxury watch, pre-Apple Watch, I would consider $1,000 and above, maybe even $500 and above.
It has decimated that market.
So the market between $500 and sub $5,000 has just been destroyed.
The brands like Shinola and Fossil.
Fossil was a multi, multi-billion dollar company.
I just enormous.
They don't hear that name anymore.
Exactly.
Their share price in 2013, 14, pre-Apple Watch was $80 a share.
But last time I checked, it was eight, probably even lower than that now.
They've lost 90% of their market cap.
Apple Watch has in some ways helped the Rolexes and the Omegas of the world because Rolex and Omega and Tag Heuer, like they, are luxury to most people.
They're clearly expensive.
They start around 5,000 bucks instead of around one, like some of the other folks do.
That's like the baseline now.
Now you want a Rolex or Omega Tag Heuer or above or nothing.
You don't want the Shinola anymore.
You don't want the Fossil anymore.
And I think Apple Watch was a big, big player in that.
Maybe say a bit.
Are they very high gross margin, like a lot of luxury products?
They are.
How are they typically distributed?
Like anything interesting there that you think maps back onto Rolex?
This is business breakdowns, not just product breakdowns.
Although here are, the product is way more interesting.
Anything worth mentioning there just in how the business itself works that's unique?
Rolex is more vertically integrated than most.
So one can imagine that their margin would be once you absorb the cost of acquiring and bring everything in house like you, would assume that the margin would be a little bit higher because they're making everything themselves.
Historically and generally speaking, there are very few brands that are as vertically integrated as Rolex.
Weirdly, Seiko would be one, Grand Seiko would be one, Patek would be another.
But most brands are buying effectively everything.
The component, the movement might be an in-house design.
I'm using air quotes here.
In-house design, but they're buying e-bouches, base calibers, and modifying them significantly.
There's margin there.
They have to buy the products.
To this day, or at least back in 2015, Rolex actually did not manufacture their own hands.
I don't know why, but they were buying that from a company.
I forget the name of it.
I think Fiedler.
SA.
So Rolex was buying crystals and hands, but nothing else.
Most brands are buying pretty much everything.
And then they're assembling it and putting it together.
So then it just becomes like, okay, the production cost watch is the raw materials.
It's the man hours, the straps, it's all that stuff.
And then they would ship it out to a US distributor at generally probably about, I would say, 40 of what you'll see in the store.
So 40% of like US retail, and then the distributor would take 20%.
And then the retailer would take about 40% of that.
So you can assume that your retailer is buying stuff at about 40% below what you're paying.
And then the distributor is taking 20% of that.
And then the actual producer of the watch is probably making 200% on that.
If you think about Rolex specifically, great watchmakers in general, what do you think are the most important overall business lessons where you've seen how, let's say, Rolex specifically works at a base level?
You've walked the factory floors, you're intimately familiar with the products.
And then when you start thinking about other product categories whatever, it doesn't need to just be luxury goods.
What do you wish more businesses did or a certain way that they conducted themselves?
I think continuity of design is paramount.
That is probably really a simple thought.
If you look at the Samaritan I have on my desk, I have a 1954 Samaritan.
It looks pretty much like this.
I have one from 1965 that looks just like this.
And the idea that you can create a consumer good and in fact a completely superfluous kind of unnecessary consumer good that becomes iconic, is everything.
If you look at its competitors, look at Omega, the Speedmaster, the watch that went to the moon that is by far its most iconic product.
And because they're making the Speedmaster just like they did in the 1960s.
That is why it continues to have the following that it does.
Look at cars, Porsche 911.
911s are trading well above retail right now for a variety of reasons.
It wasn't always the case, but now they are.
And you look at the Hermes Birkin bag and, you know, it's just sticking with luxury.
You know, that bag has been around for 40 years and it will always be the iconic women's iron bag.
So continuity design and we just did a podcast on this, I think really is what creates multi-generational demand.
And I think with watches in particular.
My origin story is I was given an Omega Speedmaster by my maternal grandfather, who was my hero.
And that watch continues in some form or another to be made today.
And so when my daughter, who's on the other side of this wall, who's six months old again, is 25 or something, I can say hey Georgie, that's her name.
Let's go out and get a watch that looks just like dad's, that looks just like your great grandfather's, who you never met.
And there's something really wonderful about that because again, these are multi-generational items.
Thinking long-term, which is what Rolex does.
Rolex is planning.
I can guarantee they have their product mix figured out for 2035, guaranteed.
Being able to not have to answer to shareholders like so many of us do and play for the long ball, I think is intoxicating for somebody like me.
For example, in 2013, it was the 50th anniversary of the Daytona.
At that point, the watch was a steel watch with a steel bezel.
All people wanted was a black bezel.
That's it.
That was all we were looking for.
It wasn't too much to ask for.
They didn't give it to us.
They waited another two years.
They gave us a platinum Daytona with a colored bezel.
It was kind of brown ceramic bezel.
And I just said, man, that's kind of shitty.
Like 50th anniversary, they're not going to give us the thing that we want.
And it's just a black bezel.
It doesn't seem like much.
And then when the watch came out in 2015...
We all said, great, and we're celebrating it.
And that kind of set off the pandemonium.
But they do these iterative things where that black bezel now exists on the gold version of the Daytona, but not on a bracelet.
And so if you want to buy a black bezel on a gold Daytona, it comes on a rubber strap.
And I guarantee you next year, the year after that, we're going to get it on the bracelet.
This idea of iterating to a degree that is so frustrating, almost for the consumer, but it makes you so excited.
And, by the way, I want the gold Daytona on the bracelet with the black bezel, but because it didn't come out of the bracelet, I bought it on the rubber strap.
Even though it's not even really what I want.
You know, when it comes on the bracelet, I'm going to buy that too.
And the idea that they've got, they've created demand for product that people will buy several iterations of.
Basically this is not basically really the same thing.
It's just super admirable.
As somebody that creates products, which is what we do sometimes at Hikiki, I mean to do things in that level of detail and continue to foster the demand that far outweighs the supply is just remarkable.
But again, doing things in a way that is not shouting from rooftops, but the quality is there.
And for people like me who know a lot about this product in particular, I can look you or anybody in the eye and say yeah, if you can afford this watch, it's a great fucking product.
What other brands in your kind of world would you encourage people to study in this kind of detail, to learn interesting lessons?
The other brand that I've mentioned a lot in this episode here is Omega.
And I think Omega now is doing, they've learned a lot from Rolex, if I can say.
And nobody's told me that, but I can just see it.
The Omega Speedmaster which went to the moon organically.
You know, it's not like they paid NASA for that.
That is the greatest achievement of humankind.
We sent men to the moon.
It's insane.
And there was a Rolex, to be clear, in contention for that.
And NASA chose the Speedmaster over.
That's just the facts.
And so the Speedmaster was not, believe it or not, the commercial stalwart that it is for Omega now.
Up until probably five years ago, it was the Seamaster.
It was Daiwa.
And Omega is actually a larger brand in China than Rolex is, believe it or not.
You know, they were driven by Chinese consumers.
It was a lot of different colors and kind of interesting things.
Then, all of a sudden, the current president, a guy named Reynald Eschmann, came in and said you know what?
The Speedmaster is iconic.
The Speedmaster went to the goddamn moon.
Like this should be the thing that people go crazy for.
And this should be the product that can compete with Rolex.
And they started doing these special editions, these limited editions, one of which was to celebrate 15 years of Podenki.
They did them with some other folks here and there.
They did one with the Porsche Club of America.
They did some special things with Snoopy, which has a tie with NASA.
And then they stop.
They stop.
So no more limited editions, really.
They do different editions, but not limited.
And now all of a sudden, the Speedmaster trades above retail.
The Speedmaster is what everybody wants.
And we're an authorized dealer for Omega, and we can't keep them in stock.
And so you look at the Omega Speedmaster, which 10 years ago was really kind of a secondary product.
And now it's a primary product for the second biggest brand in the world, who sponsors the Olympics and James Bond and all these iconic things.
And they're really paying attention to the enthusiasts which Kodinky represents, which is who I represent, and the mass market folks, which is like just the guy that wants a nice thing.
I think Rolex has frustrated a lot of people, and this is no news to them.
I mean, I know they know, because you can no longer go in and buy the watch you want at all.
And historically, the Daytona was always kind of difficult to get.
But as a 25-year-old guy that used to work in finance which is when I started Hodinkee you make your first 5000 bonus or whatever, and you go into the store and you buy your Submariner and like okay, I'm an adult now.
I have a Submariner.
That doesn't exist anymore.
And I think that's a real bummer for a lot of folks.
And that certainly has made the aftermarket price of these things go in a significant way.
But it really turns a lot of people off.
And Omega, Tag Heuer, Hanarai, a lot of brands have really said, you know what?
If you can't get that Submariner, we'd be happy to sell you a watch.
And by the way, like, here's some champagne and we're going to invite you to our next party.
You might enjoy it.
Look, Rolex is an exceptional brand.
I would never say they're not.
I mean, I spent the last hour telling you why they're exceptional.
But these are just watches.
And then we have to remember that.
I'm the first person to say that, like nobody needs a watch.
There are no doctors prescribing us to buy watches.
We're not curing cancer here.
That's a really frustrating experience.
And X percent of you says, well, maybe I just want you more now.
But Y percent of you kind of says, well, you know what?
Screw you, man.
I'm going to go buy an Omega.
I'm going to go buy a Panerai.
And I'm going to love them, and they're going to love me.
It's just a matter of how much kind of ego there is involved there.
Some people don't care at all.
But I can tell you without question that several people that I know personally have been turned off not only from Rolex, Patek and Richard Mille and AP because these are phenomenally expensive things.
Like Rolex is on the low end side there.
Let's talk about AP, which the watch you want is probably $30,000.
The watch you might want is 150,000.
But like to walk into a store and say, hey, my name is Ben.
I've got 150 grand ready to go.
I want to buy this thing and be told, sorry, no.
Who are you?
Can I see your Instagram feed?
What do you do for a living?
Who do you know?
How insulting must that be?
And the answer is really fucking insulting to a lot of people.
And a lot of people say, you know what?
Fuck you.
I'm just going to go buy it for 500 on pre-owned site or I'm just going to not buy it at all.
I'm going to take a nice vacation or buy a Ferrari instead.
And I think this industry has really struggled with that.
The market has been so buoyed by easy access to capital, I'll say.
And the prices have just continued to go up and go up in a way.
It's not normal.
And that's not just true for watches, true for cars, wine, art, et cetera.
And all of a sudden, when things tightened up a little bit this year, which they have, people said oh wait a minute.
Like Rolexes will not always go up in value, then I'm out.
I'm just going to sell it.
That's a shame.
And I think not just Rolex, but all luxury brands who have their chest puffed out really broadly now should just remember that everything is cyclical and that if you have somebody that wants to buy a product from you that nobody needs, you should give them as much respect as possible, because it doesn't last forever.
We've talked a lot about the wonderful aspects of Rolex and some of these brands in general.
What are maybe some negative lessons?
Things that you've seen them do through history not just Rolex, but other brands like it do you think are good, valuable lessons of what not to do?
You've mentioned one there, which is what sparks my question.
The weakest link of any chain is always retail.
Finding people, good salespeople is remarkably hard because you're selling stuff.
And a lot of the folks that are able to afford this stuff frankly, are incredibly intelligent, incredibly well-versed in the world, know everything, know everyone.
If they don't, they're going to go on Houdinki and read all about it.
So they do know everything.
And you get salespeople that don't, aren't used to that.
And I think you have people that are selling product in a way that is so counter to what these things represent.
Just using what I have on my desk as an example, I bought this GMT with a good friend of mine.
He had just signed a deal to play in a band, a very famous band.
And I had just signed my seed round in fundraising for Hodinkee, which was a huge deal for me.
And we went into the Rolex store on Fifth Avenue.
We bought the exact same watch together.
So this watch has nothing to do with how much it costs or anything.
It has everything to do with that success in my life, that success in my friend's life.
And to be told no in that moment.
Imagine we were there together, trying to celebrate these achievements for both of us.
And we were like, sorry, you can't have anything.
And at that point, there were two of the exact same watch sitting in the case.
So it was easy.
But right now, if we were to do it again, we'd probably get told no.
It's so, so demoralizing, and I hesitate to use the word enemy but, like you, could create an enemy for life as a consumer.
That is crazy.
Rolex knows it's a problem and they are doing everything they can to meet it.
And I believe them when they tell me that they're creating more watches than ever before, since that demand outpaces it.
But there needs to be a better way.
And frankly, I don't know what that way is.
Maybe it's e-commerce.
I don't believe in that.
I don't know.
Maybe it's actual waiting lists where people can actually put their name down and say okay, this person's at number 1123.
When you get to that thing, you'll get the watch.
That doesn't exist.
And the idea that the waiting lists are even referenced by Rolex today is nonsense.
There's no such thing.
If you know somebody at Rolex, you'll get the watch.
If you bought a bunch of watches that they can't sell, then you'll get the one that they can sell.
It's a gift, basically.
And again, I want to be clear, Rolex is not alone.
Several brands that are very hot right now are doing the same thing.
But man, both my parents were teachers.
The fact that I have more than one Rolex is still shocking.
Like, I'm just happy to be here.
And so I think of if I wasn't me in the watch world but I had made a few thousand bucks, I wanted to buy one of these things.
How disappointed you would be, how angry you would be that you just worked your fucking ass off for the last 40 years to get to a point where you can afford this thing.
And you're told no.
I think that is a major problem.
And I think that is going to continue to be a problem for a long time unless somebody changes.
It's a really interesting balance of like wanting it to be something aspirational.
But once you achieve a certain bar to be able to do it, it's a fine line that you have to walk as a luxury brand.
Really, really interesting.
Look, it's integrity and it's honesty.
If somebody came to me and said hey, they knocked on my door and said hey, we want to buy your house.
I'd probably say, well, I really appreciate that, but we're not looking to sell it.
But in five years when my daughter's grown and we need a bigger house, I'll give you a call.
I would call that person.
And I think that person would respect me for saying not right now, but I'll give you a shout when we're ready.
What goes on now is not at all that.
It's basically say hey sir, please give me your name and we'll reach out if and when we have a product available, which It doesn't mean a thing.
It doesn't mean a thing.
If you're a celebrity, if you're an entrepreneur, if you're somebody that has a million Instagram followers, they're going to call you soon.
And if you're not, you're not going to get a call at all.
And I think that is when things get really dicey, when people that don't have purchase.
History is kind of like the new street cred in the watch world.
Here's another kind of interesting situation where a lot of brands are closing down all right.
So they're closing stores.
So let's say you Patrick, were the number one Audemars Piguet client at some dealer in Ohio or something.
And you had bought a million dollars worth of APs from this authorized dealer in Ohio over the past 10 years.
And then that dealer got closed.
And then you walked into the AP boutique on 7th street and said, Hey, my name is Patrick.
Like I've spent a million bucks with this dealer that no longer exists.
Like, can I have the new ceramic Derby on or whatever?
We're so pleased for you to come in while we love to chat, but you know you don't have a purchase history here.
So we're going to have to put you at the bottom of the list.
Like, how would you feel about that?
Imagine you've been buying that product in the correct meat from an authorized dealer for a decade and you just got told you had to start all over again.
And that is what's happening in the watch world right now.
I'm not singling out AP or anybody, but it's the arrogance of some of these brands that are very hot to think that they can continue to treat people that way, even though everything is cyclical.
And I've seen all these brands trade below retail, just like we're seeing them trade above retail right now.
I'll certainly remember this conversation for this idea of companies that as you get to know them, you like them more, which is probably quite a rare feature of any company.
Typically the thing you see on the front of it is the best version of the thing, almost by definition.
Like they're going to surface the most attractive interesting stories elements, whatever.
But this idea that I'll think of those five floors below ground is a great lesson.
Ben, this has been so much fun.
Like what an interesting brand.
I can't think of anything like it.
That's a nonprofit that's had this endurance that has this global recognition and style.
Thank you so much for taking the time today to break it down with us.
It's my pleasure.
It's been a lot of fun.
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