[BidClub_]
Acquired · · 291 min

Rolex (Audio)

Ben GilbertDavid Rosenthal

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TL;DR

  • Rolex occupies an almost absurdly attractive point on the price-volume curve: roughly 1.1–1.24 million watches and about $11 billion of annual revenue, with an average-price figure that is internally inconsistent in the transcript—about $133,000 in the opening and about $113,000 later. That gives it an estimated 30.3% of Swiss watch revenue—about four times either Cartier or Omega—while long waits and immediate resale premiums preserve the feeling of scarcity. The paradox is the business: Rolex sells at industrial scale while convincing each buyer that the product is “something very special—and it is.”

  • Hans Wilsdorf did not begin as a watchmaking genius; the hosts’ thesis is that his repeatable advantage was seeing technical breakthroughs, securing them, assembling the right specialists, and making the result commercially legible. He paired Jean Aegler’s miniature, chronometer-grade movements with the screw-down Oyster case and Rolex’s own silent, 360-degree Perpetual rotor, creating the modern package: precise, element-proof and self-winding. His original Aegler order reportedly committed about five times the company’s capital; the transcript describes the order itself as several hundred Swiss francs—one of the few true bet-the-company moments in a history otherwise defined by patient execution.

  • Rolex built category ownership by attaching a stable product architecture to specific identities and achievements, not by advertising specifications. Rolex’s campaigns associated the Datejust with people who “guide the Destinies of the world,” the Explorer with Everest, the Submariner with undersea work and Rolex-wearing figures around Jacques Cousteau and Sean Connery, the GMT-Master with Pan Am pilots, and the Daytona with racing and Paul Newman. Campaigns such as “If you were flying the Concorde tomorrow, you’d wear a Rolex” turned a tool into a declaration about its wearer, while lifetime “testimonees” such as Arnold Palmer and Roger Federer compounded the association over decades.

  • The quartz crisis did not end with mechanical watches winning back the timekeeping market; it created an entirely new market in which telling time was almost irrelevant. Quartz became cheaper, more accurate and scalable, crushing Switzerland’s unit share from roughly 85% at its peak to 15% by 1980. Rolex watched Omega chase quartz and dilute its brand, watched Jean-Claude Biver turn mechanical obsolescence into Blancpain’s old-world virtue, and watched auctions make rarity valuable; its winning move was to sell craftsmanship, continuity, status and romance rather than an inferior timing instrument.

  • Foundation ownership gave Rolex the time horizon to act rationally when competitors were forced to act urgently. The Hans Wilsdorf Foundation’s first mandate is the company’s continued operation, and it can tolerate weak years without cutting prices, licensing the brand or optimizing a quarter. During 2008, while rivals discounted inventory and withdrew advertising, Rolex held pricing; the transcript is inconsistent about Rolex’s own advertising, with one line saying it zeroed out ad spend and a later passage saying it doubled down on US marketing. During later booms it raised prices gradually, constrained supply and refused to build a cost base that might require an embarrassing contraction.

  • Rolex’s luxury power comes from controlling quality and market behavior more than from occupying the highest price tier. Under Patrick Heiniger it acquired Aegler in 2004 for a rumored CHF1 billion, consolidated production from dozens of sites into four major facilities, internalized bracelets and metallurgy, and pursued extraordinary process consistency. Yet it left retail largely to roughly 1,500 tightly governed dealers, preserving operating efficiency while creating a growing liability: opaque allocations and customer-hostile waitlists that Rolex could centralize if it chose.

  • The hosts’ plausible valuation range runs from roughly $40–50 billion to $200 billion, but their conviction is that the business is worth well above $100 billion before considering its potentially enormous cash, investments and real-estate portfolio. They estimate pre-tax earnings could be $3–4 billion annually, operating margins could approach 40%, and accumulated cash might exceed $50 billion before investment returns; none is disclosed. The closest operating analogy is Porsche—six or seven enduring model families, industrial excellence and constant refinement—but the brand stewardship and economics resemble Hermès, while the combination of mass adoption, proprietary engineering and category definition evokes Apple.

Digest · the substance, structured for research

1. Rolex is a mass manufacturer disguised as an object of scarcity

  • Ben opens with the central paradox: Rolex is among the world’s best-known brands and “one of the least known companies in the world.” It is privately controlled by the Hans Wilsdorf Foundation, discloses almost nothing and, as David puts it, operates “like an intelligence agency”—an unusually opaque structure for a business likely generating more than $10 billion annually.

  • More than a million buyers apparently receive a Rolex each year, yet the transcript gives conflicting average-price figures: about $133,000 in its opening framing and about $113,000 later. Rather than normalize one figure, the grounded claim is that Rolex combines more than a million annual watches with roughly $11 billion in estimated revenue, while many desirable references become worth more as soon as they leave the store. That combination distinguishes Rolex from lower-volume luxury houses: Hermès does not sell a million Birkins, but Rolex sustains comparable symbolic intensity at radically greater unit volume.

  • The physical product creates another contradiction. A Rolex cannot tell time as accurately as an Apple Watch or even a $10 Casio, yet hundreds of gears, springs and precisely engineered components sustain a lucrative “dead craft obsoleted by the digital world.”

  • The episode’s governing question is therefore commercial, not horological: how did a company selling an inferior timekeeping technology turn craftsmanship, manufacturing and continuity into category ownership? As the hosts stress, “this episode isn’t really about watches—it’s about the business of watches.”

2. Wilsdorf began as an orphaned outsider without a natural country

  • Hans Eberhard Wilhelm Wilsdorf was born March 22, 1881, in Kulmbach, Bavaria, shortly after Bavaria joined the new German Empire. A Protestant in overwhelmingly Catholic Bavaria, he never strongly identified with the emerging German state; David sees that early ambiguity as foundational to a man—and later a company—comfortable “between the seams of Europe.”

  • Both parents died within months when Hans was 12. His uncles sold the family ironmongering business to finance boarding school for Hans and his siblings, forcing an early break with the career and social identity he might otherwise have inherited.

  • Wilsdorf later credited that upbringing directly: “The way in which they made me become self-reliant very early in life made me acquire the habit of looking after my possessions.” Ben and David connect him with Louis Vuitton and Thierry Hermès—three orphaned outsiders who built enduring luxury institutions without themselves emerging from nobility.

3. The Swiss watch trade taught Wilsdorf both the product and the choke points

  • Strong in mathematics, English and other languages, Wilsdorf moved to Geneva after boarding school, first working for a pearl merchant and then for watch exporter Cuno Korten. The latter reportedly did roughly one million Swiss francs of annual business in the late 1890s—a sign that watches were already economically consequential to Switzerland.

  • Cuno Korten did not manufacture watches; it connected fragmented Swiss producers to international retailers. Handling British correspondence put Wilsdorf at an unusually informative junction: he learned who made the best components, how prices moved, which retailers controlled distribution and what buyers in the largest export market demanded.

  • Watches then meant pocket watches. They were essential infrastructure and, in the hosts’ analogy, combined the utility and nervous habit of today’s smartphone: people needed one to navigate daily life and repeatedly took it out while waiting, thinking or managing awkward moments.

  • Wilsdorf also took batches home, synchronized them and compared their overnight accuracy. When three unusually good pieces passed observatory chronometer tests, the commercial lesson was immediate: certification developed for celestial navigation could also move consumer product. “Let’s slap that on the tin,” as the hosts summarize the industry’s realization.

4. Wilsdorf & Davis assembled value before Rolex manufactured it

  • Moving to London in 1903, Wilsdorf admired his employer’s “commercial competence” but faulted its “lack of specialization.” In 1905, aged 24, he founded Wilsdorf & Davis with Alfred James Davis, whose capital enabled the young company to place Swiss orders; Davis later married Wilsdorf’s sister, but the hosts regard Hans as the operative founder.

  • Retailers still owned the visible customer relationship. A jeweler’s name appeared on the dial, while the maker, movement supplier and importer remained invisible. Wilsdorf initially inserted “W&D” only on the movement and inside the case back—an early expression of his frustration that someone else received brand credit for the product he assembled.

  • His value was architectural rather than artisanal: source the best Swiss movement, pair it with the best case, assemble the finished watch in Britain and distribute it through established jewelers. The movement was the critical performance component—analogous, in the hosts’ framing, to the semiconductor inside a finished device.

  • The indispensable supplier was Jean Aegler in Bienne, a specialist capable of making unusually small movements without sacrificing accuracy. Their relationship endured largely on trust for 99 years, until Rolex acquired Aegler in 2004; “we will make your movements” remained, remarkably, closer to a handshake than a conventional long-term supply contract.

5. The wristwatch bet was early, oversized and initially wrong

  • The Boer War supplied Wilsdorf’s product insight. Soldiers in South Africa needed to coordinate while holding weapons and often could not conveniently wear the jackets that housed pocket watches, making wrist-mounted timekeeping valuable despite its inferior accuracy and fragility.

  • Wilsdorf extrapolated beyond the military: ordinary people would also prefer glancing at a wrist to extracting and opening a pocket watch. He placed Aegler’s largest-ever order—described in the transcript as several hundred Swiss francs and, later, as about five times Wilsdorf & Davis’s capital—for miniature movements suitable for the new form factor.

  • The immediate forecast was premature. Returning soldiers did not instantly make wristwatches mainstream, though hot markets across India, Australia and South Africa provided enough early demand for a small company. World War I, roughly a decade later, would supply the category-wide inflection Wilsdorf had anticipated.

6. “Rolex” converted a component bet into a consumer category

  • Wilsdorf wanted a name consumers could request rather than another invisible importer. Inspired by Kodak, he sought something short, pronounceable in every language, memorable and free of inherited meaning; after trying “some hundred names,” he claimed that “a good genie whispered in my ear: Rolex” while he rode a horse-drawn London bus.

  • The name also carried useful mechanical associations without literally describing the product: the sound suggests rolling a crown or a repeating tick. Rolex was registered first as a product brand under Wilsdorf & Davis, not yet as the company itself.

  • Certification supplied legitimacy. A Rolex movement received the first wristwatch chronometer rating from a Swiss horology school in 1910; after further work with Aegler, a movement survived 45 days of testing at England’s Kew Observatory and received the first Class A precision certificate awarded there to a wristwatch on July 15, 1914—just as Europe descended into war.

7. World War I simultaneously created the market and expelled Rolex from Britain

  • World War I made wristwatches indispensable to mass military coordination, but anti-German sentiment made “Wilsdorf” untenable in Britain even though Hans was a naturalized British citizen. The hosts compare the problem with the German-rooted royal family renaming itself Windsor; in 1915, Wilsdorf & Davis became the Rolex Watch Company.

  • Britain then imposed a 33% watch-import duty. In early 1916 it prohibited gold and silver imports, crippling a model that brought Swiss movements and precious-metal cases into Britain, assembled watches there and frequently re-exported them.

  • Rolex moved assembly beside Aegler in Bienne in 1916 and transferred Hans and the headquarters to Geneva in 1919. Neutral Switzerland offered more than lower trade friction: “Rolex of Geneva” could participate in Swiss watch prestige while serving former enemies without choosing a national side.

  • Around 1919–20, Hermann Aegler bought roughly 15% of Rolex and joined a board comprising Wilsdorf, Davis and Aegler; Rolex and another customer, Gruen, also held interests in Aegler. The relationship tightened, but production was not yet exclusive.

8. Switzerland’s fragmented craft system created both excellence and exposure

  • Geneva’s watchmaking position reached back to the Reformation. John Calvin’s ban on frivolous ornament hurt jewelers but left room for functional watches; long winters also favored valuable work that could be performed indoors within a small physical footprint.

  • Protestant Huguenots fleeing France brought jewelry, metalworking and watchmaking expertise to Geneva. Ben’s shorthand is “French beauty and Swiss precision”—a productive mixture of aesthetic culture and exact engineering.

  • The établissage system distributed production across one-to-ten-person workshops, each specializing in hairsprings, cases, gears or another narrow component. Centuries of accumulated skill produced extraordinary quality, but this dependence on fragmented, expensive labor would become a structural weakness when quartz introduced automated scale economics.

9. Accuracy was not enough because the wrist exposed watches to the world

  • World War I created explosive wristwatch demand, but even good movements remained vulnerable. A pocket watch lived inside clothing; a wristwatch encountered dust, humidity, impact and water, any of which could obstruct a miniature movement and force frequent servicing.

  • Early “Hermetic” watches solved this by putting a watch inside a second sealed case—effective but bulky and ugly. The wearer also had to unscrew the outer shell and remove the watch daily to reach the winding crown, reopening the system to contamination.

  • In October 1925, two Swiss case specialists patented a moisture-proof winding stem and crown. Wilsdorf, who reportedly read Swiss patent filings religiously, recognized the missing piece, acquired the patent and made it exclusive to Rolex after at least three failed internal attempts.

  • The resulting threaded construction screwed the back, middle case and crown together into a watertight enclosure. Ben’s assessment of Wilsdorf’s genius is precise: he did not need to invent every breakthrough; he needed to recognize, secure and commercialize the right one before competitors did.

10. Mercedes Gleitze made the Oyster a spectacle, with caveats intact

  • Rolex registered “Oyster” in 1926—the sealed shell made the name intuitive—and prepared to spend more than £10,000 annually on British advertising. Wilsdorf wanted a launch event powerful enough to establish that only Rolex possessed this element-proof system.

  • British endurance swimmer Mercedes Gleitze supplied it in 1927. After another woman falsely claimed a faster English Channel crossing, Gleitze staged a heavily covered “vindication swim,” and Wilsdorf equipped her with an Oyster. The mythology requires qualification: it hung on a chain around her neck, not her wrist, and she stopped after roughly 10 of the expected 15 hours.

  • The product nevertheless remained submerged for 10 hours and worked. Wilsdorf bought the Daily Mail’s front page the next day, declaring “the greatest triumph in watchmaking” and advertising the “wonder watch that defies the elements”—moisture-, water-, heat-, vibration-, cold- and dust-proof.

  • Choosing a woman was consistent with Rolex’s actual market, not merely progressive staging. Women’s models reportedly outnumbered men’s two to one until World War II, and the hosts believe modern Rolex purchasing remains close to 50/50, despite today’s enthusiast discourse being conspicuously male.

11. Rolex’s “testimonee” model began as proof, then became identity

  • Gleitze became the prototype for what Rolex calls a testimonee rather than a conventional influencer or temporary ambassador. The intended relationship is lifelong: the achiever becomes part of the brand’s history, and the brand becomes part of the achiever’s public identity.

  • The testimonial initially proved engineering under stress, but the framework later carried much more symbolic weight. Rolex could attach its watches to the person who crossed, climbed, dived, raced or led—then let customers buy a small participation in that achievement.

  • Roger Federer would become the purest modern embodiment, but the mechanism was already present in 1927: “human achievement” makes technical reliability emotionally and socially legible.

12. The Oyster required self-winding because humans could break its seal

  • The screw-down crown solved ingress only while closed. Every daily winding required the owner to unscrew it, expose the movement and then remember to reseal it fastidiously—an optimistic assumption about ordinary human behavior.

  • A self-winding movement therefore mattered less as a convenience than as the final condition for waterproofness. If normal wrist motion replenished the mainspring, owners could “set it and forget it,” leaving the Oyster sealed for years.

  • The three product pillars became mutually reinforcing: chronometer accuracy made the watch trustworthy, the Oyster made it resistant to the environment, and Perpetual self-winding protected the Oyster from its own user. This complete system—not any isolated feature—produced the breakout wristwatch.

13. A mechanical watch turns material physics into an algorithm

  • The mainspring is a mechanical battery: a long metal strip tightly coiled into a barrel stores potential energy, with modern versions holding roughly three days of power. Releasing it directly would spin and destroy the gear train, so the watch needs a precisely governed escape.

  • The escapement’s pallet fork rocks between tick and tock, allowing the escape wheel to advance one increment at a time. That wheel drives the wider gear train, whose mechanically encoded logic can control hours, minutes, seconds, date, day or far more elaborate complications without software.

  • A balance wheel and hairspring regulate the fork. The spring repeatedly stores and releases energy while the balance reverses direction three, four, five or six times per second; exact elasticity, tensile strength and inertia become time itself. Rolex-certified movements can remain within about two seconds per day.

  • A simplified explanation covers perhaps four parts, but a finished watch contains around 200. Rubies and sapphires serve as hard, low-friction bearings; components endure millions of oscillations, and most Rolex watches may operate roughly a decade between services. “It depends on the exact physical properties of the metals”—a 500-year-old art built from universal laws.

14. Rolex’s silent rotor displaced an ingenious but flawed predecessor

  • British inventor John Harwood, inspired by children on a seesaw, devised a hammer that swung with the wrist and struck alternate sides of the case. Eliminating the crown supported waterproofing, but the mechanism clacked, could not be manually wound and left a stopped watch painfully slow to restart.

  • Harwood licensed the intellectual property rather than building a scaled watch company, and his British patent apparently covered self-winding broadly. Wilsdorf wanted automatic winding but refused to adopt what he regarded as an inferior implementation; Harwood’s 1929 bankruptcy finally cleared the path.

  • Rolex’s Perpetual rotor rotated silently through 360 degrees in either direction. A weighted half-disc continually fell with gravity as the wrist tilted, using that motion to wind a resistant mainspring; early “Bubbleback” cases protruded slightly to accommodate the added mechanism.

  • Unlike Aegler’s movement precision or the licensed Oyster crown, the rotor was a genuine Rolex R&D contribution. Its underlying architecture remains the watch industry’s dominant automatic-winding method.

15. The Oyster Perpetual locked in Rolex’s enduring product grammar

  • In 1934 Rolex introduced the Oyster Perpetual chronometer: accurate, sealed and automatically wound. The words still printed on modern dials are not decorative lore; they summarize the three engineering problems that had to be solved before a wristwatch could become a dependable everyday tool.

  • Rolex added Rolesor, a two-tone combination of steel and gold, and began using the five-point crown logo around 1931. Even later aesthetic signatures retained functional ancestry: a fluted bezel originally provided grip for screwing a case component into place.

  • The timing was difficult. The Depression and sterling devaluation caused exports to fall by roughly two-thirds, so Rolex opened offices in Paris, Buenos Aires and Milan and explored South America, the West Indies, China and Japan. Its improved product emerged while weaker competitors were retrenching.

  • Omega, Ben emphasizes, still introduced what is considered the first purpose-built dive watch in 1932. Rolex’s later category dominance should not erase that competitors remained technically formidable; in 1936 Rolex finally secured all Aegler production, ending Gruen’s supply and making the firms operationally inseparable.

16. World War II made precision professional and Rolex politically flexible

  • France’s fall cut Rolex off from Britain, still its largest market. The company eventually routed watches through Spain and Portugal and past Gibraltar, restoring some Allied supply without abandoning neutral Switzerland.

  • At the same time, Italian retailer Panerai won a naval diving contract and asked Rolex to manufacture the watch. Panerai was then a retailer, not the famous watchmaker it later became; Rolex supplied its first real dive-watch platform to the Axis side years before launching the Submariner.

  • Royal Air Force pilots also wore Rolexes. Aviation’s pressure changes, darkness, navigation and synchronized missions raised the stakes beyond World War I trench coordination: the second war made exact, durable wrist time central to a technological system of aircraft, radios, radar and combined attacks.

  • Swiss neutrality allowed engineers and machinists to keep producing while combatants diverted industrial capacity to war. When Europe emerged devastated, Rolex faced an obvious growth market across the Atlantic: prosperous America, returning servicemen and a new global order.

17. The Datejust put Rolex on the wrists of the people running that order

  • For Rolex’s 40th anniversary in 1945, Wilsdorf launched the Datejust and Jubilee bracelet—the first product that visibly resembles a modern core Rolex. He reportedly considered “Victory” for the bracelet, but Swiss colleagues rejected the implication from a neutral company.

  • Rolex marked successive chronometer milestones with a three-step placement strategy. The 50,000th went to Swiss wartime leader General Henri Guisan; through Guisan, the 100,000th reached Winston Churchill; Churchill’s acceptance helped the 150,000th reach Dwight Eisenhower.

  • Eisenhower became US president in 1952 wearing his gold Datejust. Rolex and J. Walter Thompson then advertised, “Men who guide the Destinies of the world wear Rolex watches”—an audacious claim made credible by engineering the product onto Churchill and Eisenhower before making it.

  • The Cyclops date magnifier acquired its own Wilsdorf myth. His second wife, Betty, supposedly struggled to read the aperture; when a drop of water magnified it on Hans’s wrist, he cried, “I’ve got it.” The hosts enjoy the story while acknowledging that Rolex is exceptionally good at turning convenient anecdotes into corporate legend.

18. André Heiniger moved the moat from performance into identity

  • André Heiniger joined Rolex in 1948, ran South America, led marketing, brought in J. Walter Thompson and became director of watches in the mid-1950s before eventually succeeding Wilsdorf. His challenge was that chronometer-grade, waterproof, automatic watches were no longer unique; dozens of Swiss firms could assemble functionally comparable products.

  • Heiniger’s answer was to move from what the watch did to what wearing it said. The company was not yet fully “luxury” in the later market-management sense; it was becoming a lifestyle system organized around professionals operating at the edge of human capability.

  • Between 1953 and 1955, Rolex launched the Explorer, Turn-O-Graph, Submariner, Milgauss and GMT-Master. Calling them “professional watches” rather than tool or sports watches was itself on-brand: Rolex consistently resisted belonging to somebody else’s category and preferred the ineffable “Rolex way.”

19. Even Rolex’s misses produced reusable product architecture

  • The Turn-O-Graph introduced a rotating bezel but was positioned partly for international businesspeople timing expensive calls. The mechanism mattered; the promised identity—someone saving money on long-distance minutes—lacked the romance of diving, exploration or flight.

  • The Milgauss, developed with CERN engineers, protected its movement from fields up to 1,000 gauss so scientists could preserve accuracy around powerful magnets. Its lightning-bolt seconds hand and scientific origin were memorable, but the addressable professional market was small, and Rolex discontinued it before a popular 2007 revival.

  • These products reveal a durable development model: prototype a narrow technical solution with a credible professional group, make the engineering visible through a named watch, then let broader buyers adopt the professional’s identity even if they never encounter the underlying hazard.

20. The Explorer converted an imperfect Everest claim into durable mythology

  • The Explorer is linked to Sir Edmund Hillary and Tenzing Norgay’s 1953 Everest summit, with Oyster Perpetual prototypes participating in the expedition. Rolex later made both men testimonees and embedded the ascent into the model’s origin.

  • The hosts keep the inconvenient fact: Hillary preferred a Smiths watch, and Smiths appears to have been the expedition’s official outfitter. A Rolex likely reached the summit on a wrist or in a pack, but the clean modern story exceeds what can be confidently reconstructed.

  • The watch itself fit the use: robust, highly legible and free of unnecessary moving complications, it was built to survive pressure, shock and temperature changes when dependable time could be a matter of life or death. Rolex’s marketing turned “sort of there” into the category-defining mountaineering association.

21. The Submariner became a franchise larger than most watch brands

  • Rolex launched the Submariner amid worldwide fascination with Jacques Cousteau, the inventor of scuba diving and filmmaker of The Silent World. Cousteau and crew wore Rolexes without a formal partnership; at the time, a dive watch was genuinely essential for tracking bottom time, not nostalgic equipment beside a dive computer.

  • Sean Connery wore a Submariner in 1962’s Dr. No, consistent with Ian Fleming’s books and Fleming’s own preference. Connery was already a Submariner owner, and Bond remained associated with Rolex until Pierce Brosnan’s 1995 GoldenEye shifted to Omega—initially, the costume designer claimed, without a paid-placement incentive, though Omega later paid heavily.

  • The fit was exact: Bond could dive, defuse an underwater threat and attend an elegant dinner wearing the same object. Rolex was selling not waterproofness alone but the fantasy of effortless movement between extreme competence and sophisticated society.

  • Ben argues that, separated from Rolex, Submariner could nearly stand as its own major brand. It became the default first purchase for many collectors precisely because it defines the dive-watch category while remaining wearable almost anywhere.

22. Extreme depth amplified romance far beyond the real customer need

  • Rolex and French undersea company COMEX developed the Sea-Dweller in 1967 for saturation divers. Helium could enter a watch under pressure and damage it during ascent, so Rolex added an escape valve and increased rated depth to 600 meters.

  • Later products pushed the narrative: the Deepsea to 3,900 meters and the large Deepsea Challenge to 11,000 meters. James Cameron attached the latter outside his submersible for a descent into the Mariana Trench, where a human wrist would have been crushed but the watch kept time.

  • Omega technically took the depth record in 2019 when its Seamaster Planet Ocean Ultra Deep Professional went about 20 meters farther. The hosts’ punchline captures Rolex’s brand advantage: Omega may own the measurement, but ask the public which watch went deepest and many will still say Rolex.

23. The GMT-Master made the Jet Age visible on the wrist

  • Boeing’s 707 and Pan Am’s intercontinental service created a new problem: jet lag. Pan Am wanted pilots to remain aware of home time, so Rolex repurposed the Turn-O-Graph’s bidirectional bezel, marked it for 24 hours and added a fourth hand moving once per day.

  • The GMT-Master simultaneously displayed local and home time—an actual professional utility that remains helpful to modern travelers. Two-tone bezels turned day and night into color, while enthusiasts supplied nicknames such as Pepsi, Batman and Sprite.

  • Space provided a contested sequel. NASA issued Omega Speedmasters for Apollo, but Apollo 13 astronaut Jack Swigert preferred a GMT-Master; Rolex headquarters displays his signed thanks to communications executive René Jeanneret for enabling him “to always be on time.”

  • Rolex lore says NASA first approached it but a New York purchasing mix-up let Omega win. The hosts treat that as a story requiring Omega’s side, not a settled fact—one of several places where Rolex’s absence of public explanation leaves mythology to harden.

24. Rolex marketed the summit, not the specification sheet

  • Working with Mark McCormack’s IMG from the mid-1960s, Rolex formalized lifetime athlete relationships. Arnold Palmer, Gary Player and Jack Nicklaus became golf’s foundational trio; the strategy was not to sign everybody but to own a large share of “the very best.”

  • Golf and tennis fit on several levels: affluent global audiences, visible wrists, long elite careers and a legitimate technical test from repeated shock. Roger Federer later gave Rolex decades of excellence, composure and global recognizability—one tier below Jordan and Nike, in David’s view, but still among sport’s great brand associations.

  • The late-1960s “If you were” campaign completed the move from features to aspiration: “If you were flying the Concorde tomorrow, you’d wear a Rolex,” or climbing, diving, speaking at the UN and taming oil fires. The picture told customers who they could imagine becoming.

  • Later lines were even more explicit: “When a man has the world in his hands, you expect to find a Rolex on his wrist,” and “A Rolex will never change the world. We leave that to the people who wear them.” The watch borrowed importance from its wearer, then transferred that importance to buyers.

25. The Daytona needed two decades and one Italian butterfly

  • Rolex had produced chronographs—branded “Cosmographs” in Rolex language—since before World War II. The added stopwatch mechanism required central seconds plus separate minute and hour registers, multiplying the already formidable complexity of an ordinary mechanical watch.

  • After becoming official timekeeper of Florida’s Daytona International Speedway in 1962, Rolex renamed its chronograph the Daytona in 1963. “Le Mans” was considered, but Daytona offered American glamour, racing, movie stars and an internationally pronounceable word without silent French letters.

  • Paul Newman starred as a racer in 1969’s Winning, then became an actual racing driver. His wife, Joanne Woodward, gave him a distinctive exotic-dial Daytona engraved “Drive Carefully — Me”—a nearly perfect convergence of celebrity, authentic use and personal story.

  • Nothing happened immediately. Newman wore the watch publicly for roughly 10–15 years, but the Daytona remained relatively inexpensive and undesirable; Rolex had aligned the symbols, yet the market declined to respond on schedule.

26. Paul Newman’s discarded watch helped create the collector market

  • In 1984, Newman asked his daughter’s boyfriend the time. Hearing that he lacked a watch, Newman handed over the Daytona: “Here, take this one. It keeps good time.” Then worth perhaps $200, that exact watch later sold at auction for roughly $17.5 million.

  • Around 1986, Italian dealers began buying exotic-dial Daytonas like Newman’s, perhaps after an unlocated magazine cover. Prices for some of these models shot to roughly $330,000 or more, and the watch became part of an Italian style uniform: bomber jacket, stainless-steel chronograph and cultivated cool.

  • The Daytona’s tachymeter added functional theater. Time one mile with the chronograph, and the stopped seconds hand points to average miles per hour on the bezel—from 60 through racing speeds near 400.

  • Demand for the Paul Newman configuration spread to every Daytona. For decades it remained the model one could not casually buy; in modern dealer slang, other watches may have waitlists, but the steel Daytona has a “wish list.” The hosts see this as a critical spark for treating watches as tradable investments rather than merely purchases.

27. Quartz introduced semiconductor economics into an artisan market

  • Before quartz, Bulova’s Accutron used a tuning fork to improve accuracy. It was a sustaining innovation: hundreds of parts and skilled assembly remained, so established watchmakers could plausibly integrate it without surrendering their production model.

  • Quartz was different. Bell Labs built a room-sized quartz clock in 1927; an electrically stimulated crystal oscillates at precisely 32,768 hertz, and an integrated circuit counts those vibrations down to one hertz for a seconds tick or digital increment.

  • Switzerland saw the technology coming. Its electronic-watch laboratory reportedly produced a quartz chronometer in 1962, seven years before the Japanese debut of the Seiko Astron, that was twice as accurate as a mechanical watch. Like Kodak with digital photography, incumbents lacked an incentive to commercialize the technology that threatened their existing system.

  • Seiko launched the Astron in 1969. It initially cost about as much as a car and could drift by up to five seconds daily, hardly an obvious industry killer; but its semiconductor foundation placed it on a steep price-performance learning curve with fewer components, low labor needs and high operating leverage.

28. The quartz crisis erased Switzerland’s functional market in a decade

  • Swiss output had expanded from roughly 19 million watches in 1945 to almost 90 million in 1973. Yet 2,500 fragmented firms produced the earlier total, roughly 90% employing fewer than 50 people—a skilled but structurally inflexible network in one of the world’s most expensive labor environments.

  • By 1979, quartz was cheaper and more accurate. For almost every customer, the mechanical watch became functionally obsolete; only specialized users who preferred a spring to a battery had a remaining practical argument.

  • American semiconductor firms tried LED watches—Hamilton, National Semiconductor, Fairchild, Texas Instruments, Commodore, Intel, HP and Hughes Aircraft—but displays requiring a button press were inconvenient, and commoditization erased profits. Always-on LCDs and analog quartz proved superior, with Seiko, Citizen and Casio building brands around them.

  • Hong Kong exported 126 million watches in 1980, already exceeding Switzerland’s former peak. Japan passed Swiss exports in 1981 and reached roughly three times them by 1985; Swiss global unit share fell from about 85% at its historic high to 15% by 1980, while the number of firms plunged from 2,000 in 1960 to fewer than 500 two decades later.

29. Mechanical watches survived by abandoning the job of telling time

  • The hosts reject the phrase “mechanical-watch comeback.” Quartz permanently captured functional wrist time; what emerged was a different market for rarity, craftsmanship, aesthetic complexity, historical continuity, identity and status.

  • That distinction is the episode’s core strategic lesson: define a market by the customer’s job to be done, not by products that happen to look alike. A Rolex, Casio and Apple Watch occupy wrist space and show time, but they are bought for radically different reasons.

  • Mobile phones later removed even the minimal functional alibi for wearing any watch. Mechanical ownership became a pure statement: “I feel like a better version of me when I wear this,” supported by fascination with engineering but no genuine need for the time display.

30. Omega, Blancpain and the auction houses taught Rolex what the new market required

  • Omega entered the crisis as the prestigious leader: moon watch, Olympic timekeeper and, as late as 1977, the world’s third-largest watch brand behind Seiko and Timex. It responded with too many models, heavy quartz investment, licensing and locally varied cases—panic that diluted global product consistency and required capabilities foreign to its culture.

  • Frustrated Omega executive Jean-Claude Biver bought dormant Blancpain in 1983 for an inflation-adjusted figure around $16,000. His line—“Since 1735, there has never been a quartz Blancpain watch, and there never will be”—turned old, inaccurate and labor-intensive from weaknesses into proof of rare, inherited craft. A decade later, he sold the company for roughly CHF60 million.

  • Patek Philippe and auction houses supplied the other signal. The multi-pound Calibre 89, designed for Patek’s 1989 anniversary with roughly 30 complications, fetched more than $3 million and even reached Saturday Night Live; rarity and mechanical excess could command prices unrelated to timekeeping utility.

  • Rolex could observe all three lessons: do not follow Omega into a technology business with the wrong cost structure; use Biver’s “feat of jiujitsu” to make obsolescence desirable; and let auctions and Italian Daytona culture turn scarce references into financial and cultural assets.

31. Rolex preserved quartz as an option but committed its story to mechanics

  • Rolex spent heavily on quartz R&D and sold small quantities of the angular, highly engineered Oysterquartz. It did not dismiss the technology; it maintained the ability to pursue quartz if mechanical demand disappeared completely.

  • André Heiniger’s reported reasoning was brutally commercial: quartz would become banal, as transistors, televisions and calculators had, while mechanical production would remain expensive because of qualified labor. “Wealthy people don’t need an instrument that tells time. They want a beautiful and exclusive object on their wrist.”

  • The hosts debate how risky that decision really was. Contemporary reporters regarded mechanical watches as doomed, making Rolex’s commitment “tremendously ballsy”; yet its cash, brand and independence allowed it to wait two or three years, watch other strategies fail and preserve both paths longer than indebted rivals could.

  • By 1989 Rolex and Patek were reporting record sales. The decision had worked: Rolex hid the mechanical device’s approximate timekeeping behind “Superlative Chronometer Officially Certified” and made the labor, history and complexity the reason for paying more.

32. Foundation ownership transformed patience into a structural advantage

  • When Wilsdorf’s first wife died in 1944 and he had no heirs, he placed his ownership into the Hans Wilsdorf Foundation. Its primary purpose is the continued operation of Rolex; substantial charitable distributions, especially around Geneva, coexist with an unusually explicit mandate to protect the company.

  • The structure removes the quarterly demand for shareholder returns. Rolex can endure three weak years, preserve marketing, avoid discounting and continue investment without a board concluding that a strategy has failed because next year’s margin declines.

  • Continuity shows in leadership: for roughly 90 years, Rolex had only three chief executives—Wilsdorf, André Heiniger and Patrick Heiniger. Later short tenures still went to long-serving insiders Bruno Meier and Gian Riccardo Marini, sustaining a culture of incremental decisions over decades.

  • The one obvious early existential risk was Wilsdorf’s oversized Aegler wristwatch order. After that, the pattern became less heroic but more powerful: rational choices, superior execution and an organizational structure that let every advantage compound longer than competitors could tolerate.

33. Patrick Heiniger made uniform quality part of the luxury proposition

  • Patrick Heiniger became CEO in 1992 after joining as commercial director in 1986. His defining move was vertical integration, culminating in the 2004 purchase of Aegler for a rumored CHF1 billion and ending the fiction that Rolex was separate from its movement maker.

  • Production and supply locations fell from roughly 30 to four major Swiss sites. Rolex bought its bracelet maker, brought steel and precious-metal forging in-house and branded proprietary materials such as Oystersteel and Everose. Rolesor was the two-tone steel-and-gold design, not a proprietary material.

  • The strategic purpose was not merely margin. Every Submariner had to meet one global standard; a customer in Tokyo could not discover that a nominally identical model sold in New York used a different case or inferior local assembly, as had happened elsewhere in the fragmented Swiss system.

  • Visiting writers described custom machines, clasps opened and closed 1,000 times in a few minutes, and corridors designed at twice the width of the largest current equipment so future machines could move through. Ben’s conclusion shifted with the evidence: Rolex may genuinely be “the highest-quality thing,” quietly refining components without needing a new model name or marketing campaign.

34. Rolex used the financial crisis to widen the brand gap

  • The 2007 boom made expensive watches part of finance culture; 2008 stopped that demand almost overnight. Competitors cut advertising and discounted inventory to protect revenue, damaging customers who had just paid full price and teaching the market that official prices were negotiable.

  • Rolex held prices and maintained sponsorships such as the US Open. The transcript is internally inconsistent about Rolex’s own advertising: Ben says it “zeroed out ad spend,” while a later passage says Rolex “massively doubled down” on US marketing during the crisis. The latter move is connected to the secular rise in American watch enthusiasm through specialist media and online communities.

  • When demand rebounded in 2011–13, peers reversed themselves again, raising prices to monetize the boom. Rolex stayed comparatively steady: modest annual increases, controlled production and no attempt to capture every temporary dollar.

  • That continuity protects prior customers. A Daytona or Datejust bought 15 or 30 years ago still resembles the current product, so the owner feels intelligent rather than obsolete. Rolex avoids the consumer-electronics message that yesterday’s purchase was a mistake.

35. Third-party retail preserved efficiency but corrupted scarcity

  • Rolex historically distributed through roughly 1,500 authorized retailers, recently styled Rolex retailers. Dealers typically retain around 33–34% gross margin on Rolex—slightly below industry norms—while accepting exacting requirements for fixtures, display, marketing and store investment.

  • The arrangement gives Rolex the appearance of controlled global retail without the headcount, leases and operational burden. Roughly 16,000 employees can support around $11 billion in revenue partly because jewelers manage the last mile; the cost is that Rolex often lacks customers’ names, emails and purchase histories.

  • Ben challenges David’s argument that a single-category company cannot support owned stores: 1,500 Rolex boutiques would probably pay rent. David’s rebuttal is experiential—an unavailable six- or seven-model assortment makes a sterile store, whereas a multi-brand jeweler can still sell the frustrated visitor a TAG Heuer, Omega or Patek.

  • Most damagingly, each dealer manages opaque allocations. Buyers may interpret “waitlist” as orderly queuing when it can mean purchase history, fame, Instagram following or dealer discretion. Rolex could centralize allocation contractually without buying retail, making this customer hostility a correctable choice rather than an unavoidable feature.

36. Bucherer was probably acquired to keep anyone else from owning it

  • Rolex bought century-long partner Bucherer in 2023 for a rumored $5–5.5 billion, bringing major retailer Tourneau with it. Better customer data, economics and allocation control are real benefits, but the hosts doubt any alone justifies the price.

  • Rolex already possessed overwhelming leverage: it could condition annual authorization on renovations, data sharing or a centralized waitlist. Nor did it need ownership merely to stop dealers selling other brands; Rolex traffic is what makes many jewelers “made men.”

  • Ben’s strongest explanation is defensive. Bucherer’s family lacked a successor, and Rolex could not risk LVMH or another public owner acquiring a retailer with visibility into perhaps 8% of its sales, then reporting data that pierced Rolex’s carefully maintained secrecy.

37. Scarcity protects stability, but Rolex may have let dealers weaponize it

  • Before roughly 2015, most Rolex models could be bought from a display case; the steel Daytona was the famous exception. The recent experience of begging for permission to spend $7,000–$20,000 is therefore not timeless heritage but a new collision between explosive demand and a deliberately immovable production system.

  • The hosts do not think Rolex primarily withholds ordinary Submariners to manufacture hype. Management fears destabilizing the next century: ramp 20%, let the cycle turn, then discount, destroy inventory or shrink overhead. Cartier reportedly overproduced in 2016 and destroyed hundreds of millions of dollars of watches—exactly the outcome Rolex designs against.

  • New capacity expected around 2027 may add only 10–15%, and an unconfirmed report says employees worked six days a week during 2020–22. Those signals suggest Rolex wanted more supply, even as it refused to chase the entire bubble.

  • The dispute remains: extreme scarcity filters out short-term flippers and protects residual value, but an ordinary steel Submariner “should be on shelves,” or at least available after a transparent two-week queue. Long-term conservatism need not require arbitrary treatment by a local jeweler.

38. Tudor lets the shield absorb experiments before the crown does

  • Wilsdorf founded Tudor in 1926 as a more affordable sibling: Rolex-style cases and bracelets with third-party movements, historically from ETA. Today a Tudor Black Bay may resemble a Submariner at roughly $4,000, while a comparable entry Rolex might begin around $8,000.

  • David first interprets Tudor as a volume release valve, but Ben points out that its production is reportedly less than 1% of Rolex’s, “if that,” making that explanation insufficient. Most rejected Rolex buyers do not simply leave with a Tudor.

  • Ben’s stronger thesis is an innovation lab. Tudor can test ceramic bezels, titanium, unusual colors and transient fashion; failures do little harm, while durable ideas migrate into Rolex five or ten years later after further refinement.

  • “The shield protects the crown”: Tudor can punch up against Omega and TAG Heuer so Rolex never has to punch down, chase a competitor or risk one of its six or seven enduring franchises. The hosts liken it to Acquired’s smaller interview show—a useful experimental surface without endangering the flagship.

39. Rolex’s economics reflect a category with one outsized winner

  • The hosts estimate annual production around 1.1–1.24 million watches and revenue near $11 billion. Morgan Stanley and LuxeConsult put Rolex at 30.3% of Swiss watch revenue; Cartier and Omega each hold about 7.5%, Patek Philippe 5.6% and Audemars Piguet 5%.

  • Unit comparisons are more extreme: Rolex may make about 15 times as many watches as Patek and 22 times Audemars Piguet. The transcript gives conflicting Rolex average-price figures—about $133,000 in the opening and about $113,000 later—so no single Rolex average is normalized here. The later comparison figures given for other brands are roughly $48,000 for Audemars Piguet, $38,000 for Vacheron Constantin and $40,000 for Patek Philippe.

  • The transcript later says Switzerland produces only about 17 million of the world’s estimated 700–900 million annual watches—roughly 2% of units—but an earlier passage says 177 million. The later 17-million figure is the one used in the hosts’ subsequent comparison, but the transcript does not resolve the conflict. It also says that Swiss watches capture around 45% of revenue and that mechanical pieces account for about 86% of Switzerland’s watch exports and perhaps 40% of worldwide watch revenue.

  • Rolex employs roughly 16,000 people worldwide, about 9,000 in Switzerland. With industry operating margins estimated near 29%, the hosts suspect Rolex approaches 40% and captures perhaps 40% of all Swiss watch profit despite its 30% revenue share.

40. The unseen balance sheet could make Rolex one of the world’s most valuable private companies

  • If Rolex produces $3–4 billion of annual pre-tax earnings and has compounded billions of cash flow for decades, it may hold $50 billion or more in cash before investment gains—the hosts repeatedly stress that nobody outside the company knows.

  • The foundation reportedly distributes roughly CHF300 million annually across environmental, scientific, artistic and direct Geneva assistance. That is enormous philanthropy but potentially less than one-tenth of annual business cash generation, allowing both charity and asset accumulation.

  • Rolex owns major real estate in Geneva, London, Milan, Melbourne, Tokyo, Dallas and Manhattan, where a new building near Rockefeller Center was scheduled for completion the following year. It even owns the Geneva building housing Omega’s flagship, producing the comic image of Omega sending rent to Rolex.

  • Sector multiples imply a wide $40–50 billion to $200 billion enterprise-value range. Porsche trades around 15 times earnings and Hermès around 60; given Rolex’s growth, margins and brand stewardship, the hosts believe more than $100 billion before cash and property is readily plausible, potentially placing it among the world’s 50 largest companies if ever listed.

41. Rolex is industrial excellence with Hermès-like market control

  • Ben resists calling Rolex the pinnacle of artisanal luxury: Patek Philippe, Audemars Piguet and other high-end watchmakers produce fewer, more complicated and more expensive objects. Rolex is “an exceptionally well-made industrial product with exquisite engineering and amazing branding,” not primarily wearable art.

  • David defines luxury differently—as management of the whole market rather than maximal price. Rolex limits supply, refuses opportunistic discounts, protects secondary values, standardizes every object and sacrifices near-term profit to control how customers experience the brand; by that definition it belongs beside Hermès.

  • Their reconciliation is Porsche. Rolex sells a high-quality, high-margin engineered product at real scale; it protects six or seven core families, refines rather than replaces them and lets a buyer own a modern version of what a grandparent wore.

  • The average buyer is not necessarily comparing Rolex with Patek. James Dowling’s framing is sharper: the choice may be between buying a Rolex and upgrading the Porsche 911. Rolex sits “right on the edge of unreasonable,” accessible to many successful professionals through sacrifice while remaining meaningfully aspirational.

42. Brand is the visible power, but scale and continuity make it defensible

  • In Hamilton Helmer’s framework, branding is the obvious power: Rolex largely owns the category in the customer’s mind. The harder question is what let it establish that position when Omega once had comparable or greater history, scale and technical credibility.

  • The hosts find little classic counter-positioning. Rolex’s competitors could have signed achievers, standardized models or advertised lifestyles; Rolex simply formed a coherent product-and-brand system earlier, executed it better and refused to abandon it.

  • Once Rolex reached escape velocity, scale economies reinforced the lead. Only a roughly million-unit, high-margin manufacturer can justify proprietary metallurgy, bespoke machinery, extreme testing, global sponsorship and dealer leverage while quietly improving parts that customers may never notice.

  • The company’s preferred explanation would probably be “continuity.” Apart from the original Aegler wager, Rolex rarely depended on a single heroic risk; structure and resources repeatedly let it make the low-risk, long-horizon decision while competitors were forced into the urgent one.

43. Apple expanded the wrist market while destroying the mechanical watch’s last excuse

  • The Apple Watch launched in 2014 and devastated lower-end Swiss mechanical, fashion and quartz watches. Fossil’s stock subsequently fell about 99%, and a $500–$1,000 mechanical watch could look like an inferior device costing the same as a functional smartwatch.

  • At the high end, however, Apple helped. Millions became accustomed to wearing and spending hundreds of dollars on a wrist object; a small subset then climbed into mechanical collecting. The markets were complementary in motive even while competing for limited wrist space.

  • Ben and David wear Apple Watches for notifications, fitness and sleep, but a Rolex for craftsmanship and expression. Comparing their prices is almost meaningless because neither product is really purchased to tell time; one is a sensor-and-notification terminal, the other an identity-bearing mechanical object.

  • Rolex’s visual language even resembles Apple’s: named proprietary components, polished product films, products plunging through water and an industrial system combining mass production, high margins, engineering quality and enormous brand premium. “Billionaires have iPhones; people buying their first smartphone have iPhones”—a category-defining breadth Rolex uniquely approaches in watches.

44. Rolex’s final trick is being both the beginner’s choice and the connoisseur’s return

  • A novice entering watches often wants the universally recognized Rolex. The enthusiast may then explore complications, artistic independents and more expensive brands, only to return because Rolex combines precision, waterproofing, self-winding, serviceability and industrial consistency unusually well.

  • Ben’s quintessence is positioning: Rolex multiplies two large numbers—units and dollars per unit—rather than one large number by one small one. That is how a company can sell more than a million watches, maintain years-long demand and capture 30% of Swiss revenue.

  • David’s is market redefinition: mechanical watches now perform “an entirely different job to be done than they ever served in the past.” Rolex did not defeat quartz at timekeeping; it became the best operator in the new business of success, continuity and mechanical meaning.

  • The hosts’ closing judgment is unusually admiring: Rolex is “a company that the more you study it, the more you like it.” Wilsdorf appears to have paired extreme founder intensity with devotion to Geneva, both wives and a foundation designed to outlive him—evidence that an enduring institution requires someone to be “extremely something,” but not necessarily ruthless or cruel.

Verification Notes

  • The transcript gives conflicting Rolex average-price figures ($133,000 in the opening and $113,000 later), conflicting Swiss-watch unit figures (177 million in one passage and 17 million later), and conflicting descriptions of Rolex’s 2008 advertising spend (zeroed out versus doubled down in the US); the digest preserves these as unresolved rather than selecting a single value.
Ben Gilbert

All right, David, what’s on your wrist?

David Rosenthal

Currently on the wrist is my stainless steel, white-face Daytona that my dad gave me. I think it was still quite popular when he gave it to me, probably close to 15 years ago, but not like it is today.

Ben Gilbert

A strong choice. I’m actually also wearing a Daytona that I’m borrowing from a good friend of the show, M [?].

David Rosenthal

I love it.

Ben Gilbert

Fun fact for listeners: The watch that David is wearing is the one that I was wearing during the Morris Chang interview, when we wanted to foreshadow that this was our next episode.

And in front of me here, in my hand but not on my wrist, is my other Rolex that my dad gave me a long time ago: my Rolesor Datejust.

David Rosenthal

Dude, you’ve got to go one on each wrist.

Ben Gilbert

Welcome to the spring 2025 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I’m Ben Gilbert.

David Rosenthal

And I’m David Rosenthal, and we are your hosts.

All you need for timekeeping is something that happens at a constant rate and some way to count it. It could be sand in an hourglass. It could be a weight being pulled down by gravity on a grandfather clock, slowly turning the hands, moderated by the tick-tock of a pendulum. Or it could be a mechanical watch on your wrist, driven by a complex and beautiful array of hundreds of gears and springs.

Today, listeners, we tell you the story that we can’t believe we haven’t already told on Acquired: Rolex.

Ben Gilbert

Rolex is a cascade of paradoxes. It’s one of the best-known brands in the world, but despite that, it’s one of the least-known companies in the world. They’re privately held by a charitable foundation, the Hans Wilsdorf Foundation, so they don’t have to disclose anything—and really, they never do. They’re one of the most secretive companies that we have ever studied.

David, check me on this: I think they’re even more secretive than IKEA or Mars.

David Rosenthal

Oh, yeah. It’s funny that the closer to the present day we get, the less we know.

Ben Gilbert

Totally. They operate like an intelligence agency over there.

David Rosenthal

Like James Bond, one might say.

Ben Gilbert

Or one might not say, listeners.

They make the watch that everyone wants to buy but nobody seems to be able to get, with famously long and opaque lists at retailers. Except, of course, over 1 million people a year actually do buy one, for an average price of about $133,000 each. That is, until you walk out of the store, and then they instantly become worth more—at least for a lot of the models these days.

To your point about the paradoxes of Rolex, this is one of the greatest ones. It is absolutely one of the very, very top-tier luxury brands in the world, and yet they also sell a lot of units. Hermès doesn’t sell 1 million Birkins every year. There are probably 10 times more Rolexes sold than Birkins sold, or at least on that order.

It’s a success built on the back of craftsmanship, engineering, and manufacturing honed and perfected over 120 years. It is one of the greatest brands in the world, built meticulously and so intentionally.

David, my favorite part of the paradox: This is the story of the most successful Swiss watch company, but it wasn’t founded in Switzerland or even by a Swiss person.

David Rosenthal

No, it was not. It’s a $10-plus-billion-revenue business performing a dead craft obsoleted by the digital world. They make a watch that can’t tell the time as well as my Apple Watch, or even a $10 Casio, for that matter. So what is going on here? How did Rolex become Rolex?

Ben Gilbert

This is a story we’ve been giddy to share.

David Rosenthal

So excited.

Ben Gilbert

One big disclaimer up front: Much like how our NFL episode wasn’t about football and our NBA episode wasn’t about basketball, this episode isn’t really about watches. It’s about the business of watches.

David Rosenthal

Yes. And if you want to know every time an episode drops, check out our email list. It’s the only place where we’ll share a hint of what our next episode will be, along with corrections, updates, and little tidbits that we learn from previous episodes. That’s acquired.fm/email.

Join the Slack and come talk to us about this episode with the whole Acquired community afterward at acquired.fm/slack. And if you want more Acquired between monthly episodes, check out ACQ2, our interview show, where we talk to founders, CEOs, and investors who are building businesses in areas that we’ve covered on the show.

The most recent one was a very fun interview we did with a friend of the show, Guillermo Rauch, the founder and CEO of Vercel, about the whole history of web-development frameworks and their latest and greatest product, v0—a startup within a startup that lets you code web apps from scratch in just English instead of a programming language.

Ben Gilbert

Yes. Search ACQ2 in any podcast player.

David Rosenthal

And before we dive in, we want to briefly thank our presenting partner, J.P. Morgan Payments.

[Advertisement omitted.]

Ben Gilbert

All right, David. Where do we start our story?

1. Hans Wilsdorf Starts Over

David Rosenthal

We start, as is so often the case with these big old European companies, back not in the last century but even the century before that. On March 22, 1881, in Kulmbach, Bavaria, about 30 miles north of Nuremberg in present-day Germany, Hans Eberhard Wilhelm Wilsdorf is born to young Anna and Johann Wilsdorf.

Ben Gilbert

You might say, “This sounds like a German name. Bavaria wasn’t a part of Germany, right?”

David Rosenthal

I was just going to get to that. Technically, it’s not Bavaria anymore. Technically, it is part of the German Empire, but this is a very, very recent development, as Count Otto von Bismarck had only just, 10 years earlier, convinced Bavaria to join forces and unite with Prussia to form the greater German state—the German Empire—in the aftermath of the Franco-Prussian War, where they battled Napoleon III over in France.

But as far as young Hans and his family are concerned, they’re Bavarian. They don’t identify with this Germany thing. This is foreign to them. They are also Protestant, not Catholic, which puts them in the great minority in Bavaria at the time.

I say all of this deep European history for 2 reasons. One, because it’s sort of a fun story and calls back to our Hermès and LVMH episodes, and it’s going to call back very directly to those episodes in a minute here. But also, I think it’s important to paint the picture of Hans.

Even from birth, he’s this consummate outsider. He doesn’t really fit in with any sort of national or religious identity in either the established or changing European order at the time. He doesn’t really have a country. He doesn’t really have a religion or a people. He sort of floats between the seams of Europe, which Rolex itself is going to do, as we shall see, in a very big way.

Now, back to young Hans and his family. His father, Johann, came from a line of successful ironmongers, and very likely Hans was destined to go into this business as well. However, when Hans is 12 years old, tragedy strikes, and both his father and his mother die within a couple of months of each other. So he’s orphaned.

Ben, this should sound familiar.

Ben Gilbert

Oh, yeah. Louis Vuitton and Hermès. This is absolutely freaking nuts. The founders of arguably maybe the 3 biggest and most significant luxury brands in the world today were all orphans from the 1800s.

This is wild. I wonder how much of a statistical bias there is here. If we were studying anyone from this era, how many of them would be orphans because of disease and war and all sorts of stuff? Just lots of people died for lots of reasons.

David Rosenthal

Yes, totally true. But it’s just so interesting, right? These brands—much less so Rolex, but Hermès and Louis Vuitton—are so steeped in European history and the tradition of the nobility, but it’s actually these orphaned outsiders that founded them.

Ben Gilbert

I think it’s a great point. Rolex doesn’t share that heritage at all. This is not steeped in nobility. This is not an artifact, like a leather bag or a saddle, that any kings ever had.

When you buy a Submariner or a Daytona or even a Datejust, you are not buying Swiss history here. You are buying 20th-century modernity, as we will get into.

David Rosenthal

In the wake of this tragedy, Hans and his brother and sister are placed in the care of his uncles, and the uncles decide that they are going to sell the family ironmongering business to fund sending Hans and his siblings off to boarding school.

Ben Gilbert

I see.

David Rosenthal

Hans would later write in this amazing document that is essentially his autobiography. It’s the first volume of a 4-book set that the company published in 1945 for the company’s 40th anniversary, the Ruby Jubilee. Hans writes:

“Our uncles were not indifferent to our fate. Nevertheless, the way in which they made me become self-reliant very early in life made me acquire the habit of looking after my possessions, and, looking back, I believe that it is to this that much of my success is due.”

So Hans goes off to boarding school and becomes an excellent student there. He excels in math, and he also excels in foreign languages, particularly English.

While he’s there in boarding school in Bavaria, he meets a friend who is from Switzerland and develops an interest in that country. He no longer really has any family ties or anything to Bavaria anymore and doesn’t really care about Germany. He’s like, “Oh, great. Switzerland seems like a good place. I’m going to go live there when I graduate,” which he does.

He moves to Geneva and finds work there, first for a large pearl merchant. This business was buying raw pearls from fishermen and then selling them to the famous Swiss jewelers there in Geneva. Then he joins another local trading company in an adjacent industry to the jewelry business, a firm called Kuno Korten.

Kuno Korten turns out not to be in just any industry as far as Switzerland goes. Besides banking, they’re in the watch trade.

Ben Gilbert

You need something to bank.

David Rosenthal

Exactly. A country can’t just have banking as an industry. It needs a real economy to build banking on top of.

Ben Gilbert

Exactly. You start with jewelry and watches, then you get into banking.

David Rosenthal

Kuno Korten is actually a major player in the watch trade. They are not watchmakers; they are watch exporters. They are facilitating the trade of all these best-in-the-world Swiss watches out of Switzerland and into other countries around the world.

At this time—this is the late 1890s—Kuno Korten is doing about 1 million Swiss francs’ worth of business a year. I don’t know exactly what the Swiss franc-to-U.S.-dollar exchange rate was in 1900, but today the Swiss franc is stronger than the dollar. It’s about 1-to-1; they’re pretty close. So call it $1 million of business a year in the 1890s. They’re big. They’re a big player.

It’s important to remember, too, that it wasn’t like watches were this little corner of the Swiss economy. Exporting watches was a huge part of the Swiss economy and a huge employer in the nation.

Ben Gilbert

Yes. Now, when we’re saying “watches” here, it’s important to note what watches were at the time. They weren’t something you wore on your wrist. It was not wristwatches, because basically Hans and Rolex hadn’t invented that yet.

David Rosenthal

They didn’t exactly invent it, but they hadn’t popularized it yet.

Ben Gilbert

We’re talking about pocket watches.

David Rosenthal

Yes, that’s what the industry was at this time. Part of the reason is functional. Pocket watches were bigger, so the movement needed to accomplish a certain amount of precision didn’t require as tiny tools. You had more margin of safety in bigger watches.

Whenever anyone tried to make a watch and put it on the wrist at this point in history, it was usually fragile, really inaccurate, or actually worn more as jewelry. They didn’t call them wristwatches; they called them wristlets, and they were mostly worn by women.

Ben Gilbert

Wristlets. We’ll get more into that later.

David Rosenthal

I know you’re chomping at the bit to give the technical explanation of the crazy human craft and engineering that goes into watches. It’s amazing. It’s so unbelievably cool.

But back to the Hans story for the moment. The job that young Hans gets at Kuno turns out to be pretty pivotal for him and the future of Rolex. He is a secretary, which means that he’s answering letters from clients all around the world and then responding and coordinating with them. Remember, he’s really good at languages, and his best language is English.

He’s coordinating with most of their clients in the British market, in the United Kingdom, and he sits at this really interesting choke point of the whole industry. He understands how all the producers are laid out and how the whole value chain works on the Swiss side of things. He’s seeing the market prices and price action happen for all different types of watches from different makers, different parts, and so on.

But he’s also getting to know the buyers in Britain. These are not individual people. These are retailers. These are the jewelers in Britain. These are the distribution points for watches.

Ben Gilbert

He’s getting the perfect business, market, and strategic background, along with distribution relationships, for going on to ultimately found Rolex.

David Rosenthal

But it’s not just that he falls in love with the business of watches there. He also falls in love with the objects and watches themselves, and with their performance.

He starts this habit of taking home batches of pocket watches at night and running his own tests for accuracy on the products that Kuno Korten was trading in. He would set them all at the same time and let them go overnight, then check them in the morning—how much they had diverged from one another and how accurate they were.

The legend goes that one day he gets the idea that he’s going to take 3 watches that he’s found to be quite accurate in whatever recent batch he’s testing and get them tested at the local astronomical observatory. He wants to have them measure these watches according to the strict observatory timekeeping tests, which are also called chronometer tests.

If you’ve ever heard the term “chronometer,” a chronometer is a timekeeping piece—it could be a watch, a larger clock, or all sorts of devices—that has passed these astronomical-observatory tests for being accurate enough for celestial navigation.

Ben Gilbert

Yes, David, I’m looking down at this Daytona right now, and it says, “Rolex Oyster Perpetual Superlative Chronometer Officially Certified Cosmograph.” A lot of words in there that we haven’t gotten to yet.

David Rosenthal

At the moment where we are, we’re at “chronometer officially certified.”

Ben Gilbert

Yes.

David Rosenthal

Today, this is like, “Oh, cool. That’s cute. Your mechanical watch is officially certified that it keeps good time.” Back then, this is critically important. Celestial navigation, if you’re involved in anything in shipping—the maritime trade—is critical. If you have a bad timepiece, you’re going to go to the wrong place because you’re using it for navigation.

To your point, observatory chronometer certification—no one’s doing it for my pocket watch that I can set to the local church bell whenever I need to reset it. But young Hans has this idea. He goes and does it, and these 3 pieces that he takes, these pocket watches, pass the test and get certified as chronometers.

He takes them back to his bosses at Kuno, and they’re like, “Whoa, let’s slap that on the tin.” It’s this aha moment for Kuno, and then soon the rest of the industry realizes that chronometer certification on pocket watches helps them move product.

Ben Gilbert

The other thing to realize here is that we’re in an era where having a watch is super important. It’s not a fashion accessory; it’s not a nice-to-have. Without a pocket watch, if you’re leaving your house and moving about in the world, you’re lost. It’s almost like not having your phone today. You feel like you’re floating. It’s very uncomfortable.

David Rosenthal

Totally. It’s even more than you’re saying. Pocket watches are also like smartphones today in that they’re fidget devices. If you’re out in the world and waiting in line, or you don’t know what to do with your hands, or you’re in a socially awkward situation, you take your pocket watch out. You open the clasp. This is what people did. It was just so ingrained in everyone’s day-to-day existence, just like a smartphone is today.

It’s an essential tool for moving about the world, which explains how it was such a huge industry that moved the needle for the nation of Switzerland, how there were businesses that could be exporting $1 million worth of watches over 100 years ago, and why there was so much attention being paid to it. It’s not a random accessory. It is an essential piece of life—a tool.

Ben Gilbert

Totally.

David Rosenthal

After working at Kuno for a couple of years and liaising with the British market, in 1903 Hans decides, “I’m good at English. I like London. I might actually want to move there.” So he moves to London at age 22 and goes to work for another watch company there in London.

Locally, we actually don’t know the name. I don’t think anybody has ever found it.

Ben Gilbert

You and I read probably 5 books between us, and it wasn’t in any of them.

David Rosenthal

He works there for 2 years and writes:

“Two things struck me most forcibly about my new employers, this British watch company: on the one hand, their commercial competence, and on the other hand, their lack of specialization. I soon gained confidence in myself and, in 1905, at the age of 24, decided to set up in business alone, feeling that my training and education had prepared me.”

So he strikes out on his own and starts his own watch-importing company there in London. But remember the specialization piece. That’ll come back in a second.

Hans is out on his own. There’s one problem, though: In order to do what he wants to do—which is import Swiss watches and sell them directly under his own banner, where he makes and keeps the profits there in London—he needs some capital in order to finance the buy.

Ben Gilbert

You’ve got to place the order.

David Rosenthal

Exactly. Through his lawyer, he gets connected with a local man in London named Alfred James Davis, who has some money to invest. They meet through the lawyer, hit it off immediately, and decide to go into business together.

2. Wilsdorf And Davis Is Born

Thus, in 1905, Wilsdorf & Davis Limited, the world-famous merchant watch-trading firm, is born.

Ben Gilbert

And none of you know Wilsdorf & Davis. However, Wilsdorf & Davis Limited is Rolex.

David Rosenthal

As we shall see.

It’s often said that if you read anything about the history, people will tell you, “Oh, well, Davis was Hans’s brother-in-law. He married Hans’s younger sister, Anna.” That is true, but I believe that didn’t actually happen until after Hans and Alfred went into business together. I think Anna met Davis through Hans.

Really, it is Wilsdorf’s company. It’s kind of funny that Davis’s name is on it.

Ben Gilbert

I get the sense that Davis is mostly capital.

David Rosenthal

He’s there a little bit, but it’s almost as if Atari, instead of being Atari, were Bushnell & Dabney. That’s the equivalent here.

Ben Gilbert

I think that’s right. Obviously, they get closer over time as they become family when Davis marries Hans’s sister, but I think this is Hans’s business. He’s running it. Davis trusts him.

David Rosenthal

What is the business doing? The business plan, when they get going, is to do what Hans has been doing his whole career at this point: importing the highest-quality Swiss-made watches in the world into the London market, where there is high demand for them.

Ben Gilbert

They’re not selling directly to consumers, right?

David Rosenthal

No. Just like back at Cuno Korten, the buyers are the retailers. They’re the jewelers. No end consumer had any idea who made their watch at this point in time.

They would walk into the retailer and say, “Give me a fine Swiss watch, sir,” and the retailer would sell it to them. The retailer would take one out from the case. You’d look down at the face of the watch, and the face of the watch would have the retailer’s name on it. You were just trusting that the retailer bought a good watch from some importer, who bought a good watch from someone on the Swiss side, who managed to create a good watch by putting a movement in a case and putting all that together.

There’s a little bit of detail in there. Sometimes the importer would import a fully built watch. Sometimes the importer would just import a movement, and then import a case separately, and then put them together themselves.

Ben Gilbert

This was the craziest thing that struck me: The retailer is the brand on the watch at this point in time.

David Rosenthal

Yes. There is no brand for the product.

Ben Gilbert

Wilsdorf & Davis is occupying the spot in the value chain where they’re importing the watches and then selling them to retailers to brand.

David Rosenthal

Yes. You said something there that’s really important. There were kind of 2 ways that this would happen. You would either import fully finished watches from Switzerland—a whole product, so to speak—and either a trading firm like Wilsdorf & Davis would do this, or Cuno Korten would export it. Maybe the retailers would buy directly from Cuno Korten if they were big enough.

Ben Gilbert

If they were big enough.

David Rosenthal

What Wilsdorf & Davis are doing is saying, “Hans knows, through his time at Cuno Korten, all the best movement makers and all the best case makers.” He operated one click up the value chain, aggregating on the Swiss side.

Now that he’s operating down on the importer level, one click down the value chain, he’s like, “I can still aggregate all these producers and start building a watch myself.”

Ben Gilbert

Yes. He’s not making anything, but he is assembling the finished products. That was part of the value that he was adding to the industry.

David Rosenthal

This is probably an important time to say that there is so much lingo in the watch industry, and we’re going to do our very best on this episode to demystify it.

“Movement,” in lay terms, is the whole inside that makes the watch tick and drives the hands.

Ben Gilbert

Not the dial, right?

David Rosenthal

Correct. No dial, no hands, no case, no glass front. The movement is the critical piece.

Ben Gilbert

That’s the hard thing. The case is important, the dial is important, and the hands are important, but that’s all aesthetics. As far as performance goes, it’s 100% movement.

It’s like semiconductor production. If you’re a movement maker, you’re TSMC here.

David Rosenthal

Exactly.

Ben Gilbert

So, David, who is he importing movements from, and how does he meet said movement maker?

David Rosenthal

That brings us to the other half of the Rolex equation.

Jean Aegler, based in Bienne, Switzerland—which is in the mountains of the north of the country, importantly, not Geneva—runs this movement workshop up in what is then a tiny little town in the Swiss mountains.

It turns out that he’s actually a generational talent at watch-movement making. In particular, what he’s really, really good at is making movements that are accurate and on par with the highest-quality, most precise, most accurate movements on the market, but are also much smaller in size. He’s making miniature movements.

Hans had gotten to know Jean when he was working at Cuno Korten and thought, “This guy’s a diamond in the rough up there in the mountains. He’s as good as or better than any movement maker, and he’s making these miniature movements before there’s a real market.”

Ben Gilbert

It’s almost like he’s just doing it because it’s the hardest thing he can think of.

David Rosenthal

Totally. It’s like his hobbyhorse: “I’m going to push the limits of human achievement. How small can I make this thing?”

Ben Gilbert

Yes. I think it was probably known and respected in the industry, but he wasn’t a large player. Hans is like, “This guy is my ticket to differentiation here.”

David Rosenthal

“I’m keeping his address so I can write him a letter when I start my own company.”

So here we are at the beginning of Wilsdorf & Davis. Hans is importing these movements from Aegler, putting them into cases, and selling his watches there in the United Kingdom. This is 1905.

This relationship carries through for the next 99 years, until Rolex finally buys Aegler in 2004. Aegler is making the movements for Rolex watches, and I don’t think there’s ever any real formal arrangement here.

Ben Gilbert

It’s basically a handshake deal.

David Rosenthal

That’s correct: “We will make your movements.” A handshake deal for 99 years.

Ben Gilbert

For everything Rolex becomes.

David Rosenthal

This is the basis of it. They aren’t exclusive yet, so in 1905 they’re placing their first order, and there’s already a little bit of a dance that’s starting to happen.

Of course, the front of the watch, on the dial, is unsigned, so the retailer can put their name there. This is already starting to rub Hans the wrong way. He feels like these are his watches. Why does the retailer get to put their name on them?

He goes to Aegler and says, “The ones we’re going to sell, these are Wilsdorf & Davis watches. I understand you made the movement, but we’ve got to brand it somewhere.”

He gets Aegler to buy into the idea that on the movement they’re going to put a W&D, and then, inside the case back, for whoever they’re buying the case from, they also inscribe W&D.

That’s the state of things in 1905 and the first few years after: There’s a W&D on the inside case back and on the movement, but not on the face of the watch.

That gets into the type of watches they’re making here. We’re still in pocket-watch land. The wristwatch vision hasn’t really entered Hans’s brain yet, even though Aegler’s specialty is these small, miniature movements.

Remember what Hans said about his earlier British employers and their lack of specialization. He continues in his autobiography, talking about how he decided to do things differently here at Wilsdorf & Davis:

“I undertook the financial side and management of our concern from the very outset. Our success was assured by our fundamental policy: to trade only in specialty horological products, and especially in new lines. The first specialty we adopted was the traveling watch, called a portfolio watch, cased in the finest-quality leathers. This line I immediately placed in large quantities on the market, the range covering every possible style and design.”

Again, we’re not at the wristwatch yet, but he’s saying, “The way that I’m going to succeed and break through here is through differentiation.”

Ben Gilbert

To do something different. As we always talk about, the most important thing to build a huge, successful business is to do something different and unique that people have to come to you for and can’t get from the commodity markets.

David Rosenthal

That doesn’t necessarily mean you’re right.

Ben Gilbert

He wasn’t right with traveling watches. We don’t tell the stories here on Acquired of all the people who wanted to do something extremely unique and different, and it wasn’t what the market wanted.

David Rosenthal

It’s the classic: You have to be contrarian and right.

Ben Gilbert

I don’t know. Reading what Hans wrote there, maybe he was right. It sounds like the traveling watch was successful enough.

David Rosenthal

He probably thought it was a success at the time.

So, as legend has it, one day shortly after starting the company and focusing on these travel watches, Hans is reading an account of the Second Boer War in South Africa.

Ben, I never knew that all my European history lessons would be useful.

Ben Gilbert

I tweeted this yesterday. Who knew that our livelihoods would depend on AP European History someday?

David Rosenthal

That’s right. Anyway, Hans is reading an account of the Second Boer War in South Africa, and he reads that the soldiers who had fought had worn wristwatches so that they could coordinate their movements and their firing times, along with all the troop movements, even while holding guns.

Do you know why, in particular, this war had them wearing wristwatches?

Ben Gilbert

I don’t. I just assume that the technology had progressed enough, because wristwatches existed at this point in time. They just weren’t thought of as serious watches.

David Rosenthal

That was part of it. Climate.

Ben Gilbert

Oh, yes. Of course. They can’t wear their jackets, so they can’t reach into their pockets and grab a pocket watch.

David Rosenthal

Exactly. They can’t wear a jacket, and it’s hot there.

Climate is going to become important again in the development of the wristwatch industry. The soldiers and officers would use these wristwatches because, even though they weren’t as accurate as pocket watches, you probably weren’t wearing a jacket.

Ben Gilbert

Even if you were wearing a jacket, if you’re engaged in battle, you’re not going to stop, put your gun down, take your pocket watch out of your vest, open the case—

David Rosenthal

The axis upon which you evaluate value is different from when you’re hanging out on the streets of London.

Ben Gilbert

Exactly.

David Rosenthal

Supposedly, as Hans is reading this, like a bolt of lightning, he has the key insight: “It’s not just soldiers. There are actually a lot of people in the world who could benefit from having an accurate timepiece on their wrist that they could just turn their wrist and look at instead of taking out a pocket watch.”

The funny thing is, he calls Aegler—or maybe he writes to Aegler. I don’t exactly know. He places the largest order in Aegler’s company history: several hundred Swiss francs for a bunch of these tiny movements.

The great irony of this whole thing is that he’s kind of wrong. The time was not right for wristwatches yet. The Boer War was not the shove that the world needed to say, “Whoa, wristwatches.” The soldiers come back from the Boer War, and it’s still kind of the wristlet era. There isn’t really enough inertia to make it take off everywhere.

It’s okay because Wilsdorf & Davis is still this small company, so they don’t need that big of a market to address to feed the needs of the business. But it would be another 10 years before World War I happened and created this incredible, unfortunate tailwind: “Oh my God, we need tons of wristwatches now.”

Ben Gilbert

There does start to be a market for serious timekeeping wristwatches, particularly in the far reaches of the empire—Australia, South Africa, of course after the Boer War, and especially India.

These are places where you’re probably not wearing a jacket or a vest very much, so this is the initial seed of the wristwatch market for Wilsdorf & Davis.

David Rosenthal

Hans is a true believer at this point. This is going to be the future, way beyond just the empire. People in Britain are going to want this too. It’s obvious to him why you wouldn’t want to have to reach into your vest to bring out your pocket watch.

He’s a zealot.

Ben Gilbert

He’s a total zealot.

David Rosenthal

So he’s like, “All right, we’ve got this killer product. We’re first to market. We’re basically going to invent this whole market. We need a name for the product. We need something that’s going to make consumers know to ask for this product. We need to coin the term for the industry.”

He’s inspired here by the Kodak camera, which by then had been around for a while and was made not by the Kodak Company but by the Eastman Company.

Ben Gilbert

Kodak, I believe, was the first invented product brand name. It was a name that meant nothing.

David Rosenthal

Yes, I think that’s right. It intentionally meant nothing. It was easy to pronounce, easy to say, easy to remember, worked in any language, and was 5 letters long with a great sound to it.

Supposedly, Eastman came up with the name Kodak with his mother using an anagram set. He said there were 3 principal concepts he was looking for in the name: It should be short and easy to pronounce, it should work in any language, and it should not resemble any other name or be associated with anything else.

Ben Gilbert

Hans takes inspiration from this and decides that he needs a Kodak for his new wristwatch. He writes:

“I tried combining the letters of the alphabet in every possible way. This gave some hundred names, but none of them felt quite right. It was one morning, when I was sitting on the upper level of a double-decker bus, powered at that time by horses, driving alongside Cheapside in London, that a good genie whispered in my ear: Rolex.”

David Rosenthal

He’s good at mythmaking. Many startups are named this way today.

Ben Gilbert

Totally.

David Rosenthal

A few days after this fruitful journey, the Rolex brand was filed and then officially registered in Switzerland by Wilsdorf & Davis.

This is a brand name, not yet the company name. It’s Rolex by Wilsdorf & Davis. They trademark it in Switzerland, and a couple of years later they trademark it in London.

It’s short, easily pronounceable, memorable, and the same in every language. But there’s one other characteristic that makes it perfect: When you hear “Rolex,” you can kind of think about rolling the crown of a watch—the little knob sticking out from it that you use to wind the clock.

Ben Gilbert

It channels that, and the X kind of has a timekeeping feel to it. It almost sounds like the tick-tick-tick-tick-tick of the Rolex. Maybe you’re turning the crown until it hits the end or something like that. You can intuit the type of product that would be called Rolex.

David Rosenthal

Yes, totally.

Hans is like, “Great. I’ve got my Kodak name. I’ve invented this new category. How am I going to legitimize this with customers?”

Ben Gilbert

“I have one cool trick.”

David Rosenthal

Exactly. “I’m going to do the one cool trick, just with wristwatches instead of pocket watches.”

In 1910, he sends the first wristwatch movement to the School of Horology in Switzerland to be awarded the world’s first wristwatch chronometer rating, which is a big deal because people simply did not think these things were accurate before. Without Aegler, they kind of weren’t.

Ben Gilbert

Exactly.

David Rosenthal

Getting certified at the School of Horology in Switzerland is nice and all, but this isn’t an astronomical observatory. It doesn’t carry the same weight as something like the Royal Observatory there in England.

So Hans and Aegler keep working on these products, refining the movements. Aegler is getting better and better at making wristwatch movements that are truly great.

1910 goes by. 1911 goes by. We’re here in 1912. Wilsdorf asks Aegler specifically, “Can you produce a wristwatch capable of achieving an observatory timekeeping certificate?”

Ben Gilbert

And, as you mentioned, the Royal Observatory.

David Rosenthal

Aegler says, “Let me try,” and gets to work.

It still takes a couple more years. He works for 2 years, and then finally, in early summer 1914, Hans takes one of Aegler’s movements to the Kew Royal Observatory in England for testing.

Kew is not only a well-respected observatory for astronomical and specifically timepiece testing there in England; it’s where all the marine chronometers for the British Royal Navy are tested. The British Royal Navy at this point in time—we’re talking about the British Empire—is the greatest navy in the world.

It takes 45 days. They put it through the ringer to make sure that this marine chronometer is going to get the sailors where they need to go.

Even more than that, it is, of course, affiliated with the other great observatory in England, the Greenwich Royal Observatory.

Ben Gilbert

Which was where Greenwich Mean Time was invented. We’re talking about probably the most important timekeeping institution in the world.

Have you been there, David?

David Rosenthal

No. I want to go. Have you?

Ben Gilbert

I spent some time in London one summer, about 15 years ago, and went and spent a day there. It was amazing.

David Rosenthal

We’ve got to go.

Ben Gilbert

We’ll stop by on our way to Geneva.

David Rosenthal

Perfect.

Again, here we are. It’s early summer 1914. Hans has submitted this wristwatch movement to Kew, and after the 45-day, rigorous battery of tests, on July 15, 1914, it comes back. It has passed and receives the first Class A Precision Certificate, known as the Kew A certificate, ever awarded to a wristwatch.

It causes great celebration and fanfare all around the world, except that it is 3 weeks after World War I starts.

Ben Gilbert

Between the time that Hans brought the watch in for testing and when it finally gets the certification, Archduke Franz Ferdinand is assassinated in Bosnia by a Serbian nationalist. The whole rats’ nest of European alliances gets triggered, and the next thing you know, the whole world is at war.

On the one hand, nobody cares about watches. There’s a war breaking out. On the other hand, everybody cares about watches.

David Rosenthal

Exactly. World War I is truly the first crucible moment for Rolex because it’s the best thing that ever happened to the company and the industry. The whole world cares about wristwatches.

It is also very directly the worst thing, because all of a sudden anti-German sentiment in Britain goes through the roof.

Ben Gilbert

Totally insane. I didn’t realize this until now. Do you know why British people call German shepherds Alsatians?

David Rosenthal

Because they don’t want to call them German. It’s because of this.

Ben Gilbert

There’s all sorts of horrible propaganda. It’s utterly ridiculous because the British royal family was German.

Queen Victoria married Prince Albert, and Prince Albert was a German prince. The whole British royal family was German. This is when they changed their name to Windsor, because before Windsor their family name was Saxe-Coburg and Gotha, which wasn’t going to play well when you were at war against the Germans.

David Rosenthal

No, no, no, no. Speaking of things that aren’t going to play well when you’re at war against the Germans, you’re not building a strong consumer brand in Britain in 1914 called Wilsdorf.

Ben Gilbert

If the British royal family is rebranding and changing its name, Wilsdorf & Davis also needs to rebrand, despite the fact that at this point Wilsdorf is a naturalized British citizen.

David Rosenthal

And feels no affiliation with Germany. He really doesn’t ever in his life consider himself German.

Ben Gilbert

Totally.

David Rosenthal

This is the birth of the company Rolex. In 1915, they rename the whole company after the brand name, and the Rolex Watch Company Limited is founded.

Ben Gilbert

I was about to ask you how this becomes a Swiss watch company. The answer is definitely right around this time in World War I, but before we tell that story, now is a great time to thank our presenting partner, J.P. Morgan Payments.

[Advertisement omitted.]

All right, David. How are we getting to Switzerland? How does Rolex become a Swiss watchmaking company?

3. Rolex Becomes Swiss

David Rosenthal

Obviously, the anti-German sentiment was part of it. If that were the only factor, Rolex probably would have stayed in England.

At this point, Wilsdorf is a naturalized citizen, his wife is British, and the company is called Rolex—or they’re working on it. It would have been fine.

However, the other reason that World War II in Britain is bad for business for the new Rolex company is that Britain imposes a 33% import tax on watches early on in the war.

Ben Gilbert

That’s going to kill your importing business.

David Rosenthal

It’s interesting. I read that and thought, “Yes, it’s going to make it tougher. It’s crippling.” But you could still run a business. You could figure out how to pass those prices along to customers. That’s often what happens in the case of a tariff.

One year later, at the beginning of 1916, the British government puts the nail in the coffin. They completely ban the import of all gold and silver.

They make it impossible for Wilsdorf to build this business based out of Britain, because a lot of times he’s actually exporting the watches for sale in the colonies. He’s importing a movement, importing a case, or maybe taking a local British case, putting it together, making a Rolex watch, and then shipping it out somewhere else.

He’s sitting there thinking, “I can’t get these precious metals, and I’m paying out the nose for these movements. This is stupid to run my business here.”

Ben Gilbert

I assume that, then as now, Rolex’s margins in precious-metal watches are way, way higher than in non-precious-metal watches.

David Rosenthal

It’s insane. A $10,000 watch becomes a $30,000 watch when you add gold or platinum or whatever.

Ben Gilbert

The delta is like Apple selling memory.

David Rosenthal

Exactly.

Ben Gilbert

Interestingly, in the hype from 2020 to 2022, the precious metals were actually easier to come by as a customer because there was so much less demand to buy a $30,000, $50,000, or $100,000 watch. Those would kind of be lying around while the steel ones were flying off the shelves and there were huge lines for them.

David Rosenthal

Totally.

On the back of this, in 1916 Rolex first moves the assembly of the watches to Bienne in the Swiss mountainside near Aegler. It makes sense: They set up an office and basically say, “You’re making the movements next door. We’re going to put a case on them right here.”

Ben Gilbert

And then they can export from Switzerland to countries all over the world and not go through Britain first.

David Rosenthal

Ultimately, after the war, in 1919, Hans moves both himself and the official company headquarters to Geneva, where, of course, it still is to this day.

Even to this day, design, sales, marketing, and I think final assembly all happen in Geneva, while production of the movement still happens up in the mountains in Bienne.

Ben Gilbert

It’s super interesting. It would make sense if you’re Britain to throw on some tariffs to finance your war. You’ve got to finance it somehow.

At the same time, it also makes sense if you’re a business operating in Britain in this period to say, “I’m moving to Switzerland.”

David Rosenthal

Yes. But there’s this alternative reason to move the business to Switzerland, and Hans knows it. If he’s going to build a globally renowned watch company, he wants to do it in Switzerland.

This company becomes Rolex of Geneva—not just Rolex.

Ben Gilbert

I’m going to look at this watch. All the way down at the bottom: “Swiss made.” Don’t forget it.

Or look at a Patek Philippe. “Genève,” right there on the face of every Patek Philippe watch. They are extremely proud of this Geneva heritage.

David Rosenthal

I love it.

Ben Gilbert

Geneva.

David Rosenthal

Geneva.

Ben Gilbert

I’m going to hear about that one, aren’t I?

David Rosenthal

It’s okay. We’re ugly Americans here.

So the question is, why does Geneva have this prestige? Why is Switzerland an amazing place for watchmaking?

Ben, will you indulge me and let me wind the clock back?

Ben Gilbert

I actually thought you were going to start the timeline for this episode back in the 1500s. I was shocked that you only started it in the 1800s.

David Rosenthal

Perhaps this is a good time to tell the history of watchmaking in Switzerland.

Ben Gilbert

By all means.

A lot of this comes from Mark Bridge, who is the founder and CEO of At Present, a marketplace for unique jewelry from independent artists. Mark is one of David’s and my very best friends, and, insanely coincidentally and luckily for us—and for you, listeners—he wrote his master’s thesis 20 years ago on the Renaissance of the Swiss watch industry.

David Rosenthal

Amazing. He sent me a copy of it. We’re going to link to it in the show notes. It’s awesome to have this resource available so conveniently from one of our best friends.

Ben Gilbert

All the way back in the 1500s, Geneva was a center of activity for the Protestant Christian world, led by John Calvin. If you know anything about Calvinism, it’s very focused on moral uprightness: the Protestant work ethic.

One of these tenets was banning frivolous things like ornamental jewelry. Local goldsmiths and jewelers instead focused on watchmaking, since watches serve a real function in the world and were not frivolous. It was sort of an exception to the rule.

David Rosenthal

There’s also the human element. Human beings are human beings, no matter what rules you impose on them.

Ben Gilbert

Life finds a way. Status always finds a way.

David Rosenthal

That’s 100% right.

You’ve got the rise of Calvinism, along with the religious reason that was causing this local pivot of industries. You also have a climatic reason. There are long, harsh winters, and an industry that could be done indoors, in a small physical footprint, was perfect.

If you’re going to pick a profession out of a hat to have in a mountainous country with long, cold winters, this is a great one. Especially because it’s so valuable at this point in time, you can become an important player in the European economy by making something that you can make in your climate.

Third, there’s a cultural reason. Ben, are you familiar with the term établissage?

Ben Gilbert

No. Are you sure it’s supposed to be Swiss and not French?

I was going to say, I’ve been to Geneva and other places in Switzerland, but I know very little about its culture and history. Talk to me about établissage.

David Rosenthal

I know exactly what you’re talking about, but I didn’t know the word.

Ben Gilbert

It’s Swiss for “establishment,” basically. What établissage means in this context is that it’s a system—an economic system—that they established in the area of the Jura Mountains, where very small independent companies, often 1 to 10 people, could focus on something small, like a single component. Then you’d have dozens of these small companies work together to create the finished product.

David Rosenthal

It’s almost like a distributed manufacturing system.

Ben Gilbert

This is where Aegler comes from. This is why he has the workshop in the mountains.

David Rosenthal

Exactly.

With this specialization of labor in small companies, you could get really, really good at your tiny part—making, say, hairsprings, which we’ll talk about later, or other essential elements of watch movements.

These tiny companies, by artisanal craftsmen, were very labor-intensive, but they got really, really good and pretty efficient at making their one thing.

That’s the backdrop of how the Swiss are producing things.

Lastly, in the late 1500s, the French had been rising as a watchmaking powerhouse. When the balance of power changed in France and the Catholics came to power, French Huguenot refugees who had talents in jewelry, metalwork, and watchmaking fled to Geneva.

Ben Gilbert

These are the Protestants who got kicked out of France.

David Rosenthal

Exactly. The Protestant safe haven of Geneva—if they brought their watchmaking expertise, great. If they didn’t have watchmaking expertise and were jewelers or metalworkers, that was all they could really do, since you can’t make anything too shiny and too off-putting.

Ben Gilbert

Yes.

David Rosenthal

This is how Switzerland gets the reputation as the watchmaking capital of the world.

Ben Gilbert

Exactly. It creates centuries of momentum, especially in this distributed établissage system of how Swiss watches were made.

I think about it as this beautiful blend of French beauty and appreciation for aesthetics and Swiss precision.

David Rosenthal

It sounds like Switzerland itself is a blend of French beauty and German precision.

Ben Gilbert

I love it.

David Rosenthal

That’s definitely one big reason why Hans says, “We’ve got to move Rolex to Geneva to participate in this tradition, as we’re now going to be selling to the world.”

But the other reason is that, after World War I, they’re like, “We’re going to be selling to the world now. Britain is still going to be our largest market, likely, but every country in the world is fighting—or at least every European country has troops fighting—in World War I. They’re all seeing the benefits of the wristwatch. This is going to be way, way bigger after World War I. I need to be able to serve the whole world.”

Ben Gilbert

So they want to be in a neutral country.

David Rosenthal

Yes. He’s just experienced Britain putting on these tariffs and thinks, “I didn’t really have a market for Rolexes in Germany before, but if I did, I wouldn’t have been able to sell in Germany. I don’t want that to happen in the future. Who’s not going to put on a big tariff to finance a war?”

Ben Gilbert

Switzerland.

David Rosenthal

Switzerland.

Ben Gilbert

Super interesting.

David Rosenthal

You know what else happens in 1919?

Ben Gilbert

Now that we’ve set up shop next to Aegler for putting their movements in our cases, it’s time for us to get a little bit closer.

David Rosenthal

Rolex and Aegler arrange a deal where, in 1919 or 1920, Hermann Aegler, who is the son of the founder, Jean, buys shares in Rolex. The purchase price is unclear; it seems to have been lost to history. He owns about 15% and joins the board.

The board is Wilsdorf, Davis, and Aegler.

There’s a second part of the deal, which is that Rolex actually buys shares in Aegler too. This one is less talked about, but there are 2 companies that are big purchasers of the movements: Rolex and Gruen. Both of them are watchmakers. Gruen, I think, was American, and was Aegler’s second-biggest client. Both of them bought Aegler shares as well.

Ben Gilbert

Rolex didn’t focus on the American market until after World War I.

David Rosenthal

Correct. So the companies are a little bit more joined at the hip, but it’s still not an exclusive partnership.

Ben Gilbert

Like we said before, I believe that even though there’s this equity relationship, there’s no formal contract governing the provision of movements here.

David Rosenthal

It’s crazy.

Ben Gilbert

But it’s in both their best interests to keep it going.

David Rosenthal

Of course.

So here we are. World War I is over. We’ve had the ChatGPT moment, shall we say, for wristwatches. All these soldiers from countries all over Europe and the world have experienced the power of having an accurate watch on their wrist. They go home to their civilian lives and want to bring it into their lives.

Who makes the best and most accurate wristwatch chronometer timepieces in the world?

Ben Gilbert

Rolex.

David Rosenthal

And so, of course, they’re going to buy Rolex.

Ben Gilbert

No, that’s not true.

David Rosenthal

No, that is not what they’re going to do.

Ben Gilbert

It’s Omega, right?

David Rosenthal

I think it’s lots of companies. Basically, the market went from the very early adopters in the British dominions and far-flung reaches of the British Empire to this giant, Europe-wide market.

Most of those people had no idea about Rolex. “Rolex? I don’t know what Rolex is. I’ve never heard of such a thing before.”

I think everybody was rushing in. Even though Rolex had this history and probably had the best product, it just didn’t matter. There was massive demand for this new product category, of which there were many good options.

Ben Gilbert

There was massive demand, but it was kind of like search engines before Google. The product still kind of sucked. Even really— in many ways, Rolex probably kept better time than competitors. They were Kew-certified.

David Rosenthal

Kew-certified.

Ben Gilbert

Right. But if you’re wearing a wristwatch, it’s a lot more exposed to the world than your pocket watch. You talked a little bit about how complex and delicate these movements are, especially in a miniature movement that goes into a wristwatch.

Any dust, water, or humidity that gets into the case is going to jam up your movement, and your watch is going to fail.

I finally had this aha moment when I was doing the research for this episode. I had always thought it was ridiculous. You go look at the watch market now—Rolex and all the other brands—and they’re like, “Waterproof to 50, 100 meters.” I was like, “What? There’s no depth that exists.”

David Rosenthal

Watch aficionado, ladies and gentlemen.

Ben Gilbert

Exactly. But why? Who cares?

I realized, “Oh, this is why waterproof watches are a big thing.” It’s not about water, necessarily. It’s actually dust more than water. It’s dust, humidity. If you’re waterproof, that’s shorthand for saying you’re element-proof. You’re durable. Nothing is going to get inside this watch and mess up your movement.

If water can’t get in, you could submerge it in 100 meters of still water and no impurities would get in. You could throw it to the bottom of the ocean and it’ll keep time forever, and so on. I thought, “Oh, this is why this is important.”

David Rosenthal

Servicing was also a big deal. You had to get your watch serviced often, and the more dust and humidity and stuff got in there, the more likely it was that it might break entirely.

Ben Gilbert

Exactly.

4. The Oyster Makes Rolex Waterproof

David Rosenthal

I like where you’re going, Ben, because there are basically 3 big pillars of what makes a Rolex a Rolex—or, frankly, what makes a good mechanical watch a good mechanical watch.

There’s precision. There’s “officially certified chronometer,” and there are the other 2.

Ben Gilbert

What’s the second one? Oyster?

David Rosenthal

As I said, there’s demand for these products, but they all suck because they’re not element-proof.

“Oyster” is Rolex marketing speak for waterproof. There’s this great race among high-end Swiss watchmakers to produce a waterproof wristwatch.

A Swiss case-making company called Francis Baumgartner, which supplied cases to Patek and many other great watch brands in the early 1920s, invents a new case style called the Hermetic.

Ben Gilbert

Your Rolex doesn’t say Hermetic.

David Rosenthal

The way they do it is by putting the watch case inside another watch case.

Ben Gilbert

That’s right. This is the weird hinge thing.

David Rosenthal

It’s like a scuba helmet. They take a watch and put it inside a scuba helmet that is waterproof.

It works. It makes watches water- and element-proof. But it’s big and ugly, and most importantly, you have to unscrew the outside case, break the seal, and take out the inside case every day in order to wind the watch.

Ben Gilbert

Because famously, the crown is the most dangerous entry point for water or dust. You can’t leave the crown sticking out of the Hermetic case, or it would defeat the purpose.

David Rosenthal

Exactly.

That’s the state of play through the early 1920s. Rolex gets into this too. They buy cases from Baumgartner and make these Hermetic watches. You can find them in collector’s books. There’s a hinge on the left side and a little clasp on the right side that goes around the crown.

Then, this is so awesome: It’s like a Forrest Mars moment from Hans.

In October 1925, 2 Swiss case makers file a patent for a moisture-proof winding stem and button.

Ben Gilbert

Just like you’re saying, it’s the crown of the watch—the winding stem and the button—where water and dust are most susceptible to getting in.

David Rosenthal

Rolex has been dying to solve this problem. They had at least 3 failed attempts to create a waterproof seal in-house. The whole industry had.

Hans, like Forrest Mars, reads the Swiss patent-filing register religiously every day. He’s reading all of the patents being filed in Switzerland.

He sees this patent get filed and says, “This is it. I’ve got to get this right now.” He goes to the 2 people who invented it, buys the patent, and makes it exclusive to Rolex.

This turns out to be the key component in making a waterproof mechanical wristwatch that doesn’t need to be put in a jar.

Ben Gilbert

When I was reading this, I thought, “Rolex didn’t actually invent the Oyster case. They just watched someone else do it.”

David Rosenthal

That doesn’t really matter. They saw that it was absolutely essential, and Wilsdorf jumped right on the opportunity. He said, “Who cares who came up with the idea? We’re in the position to commercialize it and roll it out across all of our watches. I need to strike first.”

Ben Gilbert

This is his genius. He’s not a watchmaker, and Rolex was not a watchmaker until it finally bought Aegler in 2004.

Hans’s genius is that he sees the vision for where the market is going, recognizes talent and innovation, and pulls it together and makes it commercially viable and marketable.

David Rosenthal

In a way, that patent got filed in the Swiss patent register. Any of the other watch companies that desperately wanted to solve this problem could have seen it too, but Hans jumped on it.

Ben Gilbert

He’s really like the Mark Zuckerberg of his time.

David Rosenthal

That’s a good analogy.

Ben Gilbert

“Hey, Instagram. I’m going to copy Stories from Snapchat.” Hans doesn’t care. He’s like, “I’m going to market this and make it the most successful thing possible. I don’t care that we didn’t invent it. It needs to be in our product.”

David Rosenthal

That’s interesting.

For anyone who’s a watch person wondering what was actually in the patent, it’s essentially for the screw-down crown—the Hermetic seal on all Oyster watches going forward.

Of course, it’s named the Oyster because oysters seal when they’re closed. It’s a perfect thing to name it after.

Everything works on a threaded system. The back of the watch screws into the middle part of the case, and the crown can be screwed out as well. You have these airtight, watertight threads that keep any impurities out.

In July 1926, Hans and Rolex register the product name Oyster. This is really, really big.

He’s like, “I am going to go big. Everybody in the whole world needs to know the Rolex name. They need to know that we are the exclusive owners of the Oyster system.”

He prepares to spend more than £10,000 annually in Britain alone just on advertising for the Oyster models.

Ben Gilbert

The dude knows how to build a brand. He’s already naming components. He’s not just marketing Rolex; this is Rolex with Oyster technology.

David Rosenthal

Yes. Really, the parallels to Apple are incredible.

Ben Gilbert

Four hours from now, I was going to make that point.

David Rosenthal

He’s prepared to spend all this money. He’s got the product, but he’s like, “We need a big launch. I don’t want to just buy regular ads in the newspaper.”

So, in 1927, toward the end of the year, the timing is right. That brings us to a young British woman named Mercedes Gleitze.

Gleitze was a secretary and bilingual stenographer in London who happened to have a unique hobby: endurance swimming in the River Thames in her spare time.

Ben Gilbert

Which is insanely cold.

David Rosenthal

Very cold. I assume that even back then it was quite polluted, but so be it.

She was so good at endurance swimming that apparently she would swim for 10 hours at a time in the River Thames. In October 1927, she decided she was going to attempt to swim across the English Channel.

Ben Gilbert

Maybe even more cold.

David Rosenthal

Definitely cold. Definitely pretty choppy.

She did it. She became the first British woman to successfully do so that year in October 1927.

However, a couple of days after she completed her swim, another woman emerged and claimed to have also swum the channel, but to have done it faster. It turned out that this was actually a hoax, and Mercedes knew it was a hoax.

In order to prove herself, she decided to stage a vindication swim that was hotly covered by the press.

Ben Gilbert

She’s doing this vindication swim after she’s already spent 15 hours swimming across the channel. She’s still alive at this point.

David Rosenthal

Hans says, “This is our moment. This is exactly the spectacle we need.”

He comes up with the brilliant marketing stunt of getting Mercedes to do this vindication swim while wearing a new Rolex Oyster model.

Ben Gilbert

What Rolex doesn’t talk about these days is the footnote to history that it wasn’t actually on her wrist. It was on a lanyard around her neck.

David Rosenthal

Yes, it was on a small chain that she wore around her neck. Nonetheless, it’s an incredible stunt.

Ben Gilbert

Nothing ruins a good story like data. Let’s just smooth it over like the truth.

David Rosenthal

This is still featured prominently on the Rolex website today. Mercedes’s photo is everywhere. It doesn’t matter. At the end of the day, who cares if it was on her wrist or not?

Ben Gilbert

She also doesn’t actually make it across the channel, but that doesn’t matter either.

David Rosenthal

That’s the other crazy thing. I think it was an especially cold or especially choppy day. She makes it 10 of the 15 hours.

Ben Gilbert

The design of the test is a little arbitrary.

David Rosenthal

It’s a watch that wasn’t on her wrist and didn’t make it all the way from England to France, but it was still in the water for a long time—for 10 hours. Pretty good product testimonial, shall we say?

Ben Gilbert

A testimony.

David Rosenthal

So after this event happens, the next day Hans buys the front page of the Daily Mail newspaper, a nationally syndicated newspaper in Britain at the time.

Ben Gilbert

I didn’t realize you could do this back in the day. You could actually buy the front page as an advertisement.

David Rosenthal

I think it was common. It was a while before the front page was actually dedicated to editorial, and early on it was very common for it to be a full-page ad.

Hans does this and proclaims the success and announcement of the world’s first waterproof wristwatch, fully enclosed in its own case without a second hermetic seal around it, and the triumphant launch of the Rolex Oyster.

Ben Gilbert

This is how Rolex tells the story. After I’d heard it told a few different times, I expected to see this full-page ad written in a certain way.

It is kind of buried. Maybe this is what the advertising style was back in the day, but the big words are not “Watch survives English Channel swim.” The big words are “Rolex Oyster.”

It says, “Rolex introduces for the first time the greatest triumph in watchmaking.” I still don’t know what it is. Then I see a picture of a woman’s face. Then it says, “Send for this colored brochure. It’s free,” telling you to send in for more information.

There are 4 sketches of the different watch faces you can get for the Rolex Oyster. Then it says, “The wonder watch that defies the elements.”

There are words all over the place. You finally get to the tiniest text in the entire thing—maybe the second-tiniest font, in this little corner—and it says, “Moisture-proof, waterproof, heat-proof, vibration-proof, cold-proof, dust-proof.”

Either Rolex hadn’t found its groove in advertising yet, or maybe people just read a lot more words back then. If you put this up today, our TikTok-ified brains would be like, “Don’t care. Next.” There are way too many words, and they completely bury the lead that she did a channel swim with this thing and it survived.

David Rosenthal

It’s hard to know how much of this is just the state of the art in advertising at the time versus Hans designing and writing all of that himself.

One of his maniacal-control things was that, I believe up until he died—or pretty close to it—he did all the creative for all the advertising.

Ben Gilbert

I didn’t realize that.

David Rosenthal

We’ll get to it later, but they do bring on the J. Walter Thompson agency before he dies. Probably the rest of the company is like, “All right, all right, Hans, we need to professionalize a little bit here.”

Ben Gilbert

That’s when they get extremely good, in the 1960s.

David Rosenthal

Extremely good, yes.

I think it’s fair to say there are 2 interesting takeaways here. One, they hadn’t found their groove in advertising yet. Two, advertising hadn’t really been professionalized in a way that we would see in the Mad Men era.

Ben Gilbert

We’re still before World War II. We’re not yet in the modern world.

David Rosenthal

The other thing that’s really interesting is that something about this was sitting with me too while doing this research. The Mercedes Gleitze moment is a major moment: the first brand ambassador of Rolex.

It’s interesting that the moment and the person Hans chose for this launch was a woman.

Ben Gilbert

Super interesting. The wristwatch was a ladies’ item before World War I, but after World War I, I would think the big market is men’s.

David Rosenthal

In this era, Rolex was still primarily a ladies’ product. The men’s market was growing, but if you look at their product catalogs, really up until World War II, ladies’ models outnumbered men’s models 2-to-1.

Ben Gilbert

These are the little Prince watches.

David Rosenthal

Yes. Hans’s vision was that wristwatches were for everybody—men and women. But it’s interesting that they were really women-focused.

We did a little more digging and asked some friends, and even to this day I believe the market of buyers for Rolex watches is basically 50/50 men and women.

Ben Gilbert

That’s insane. I would have guessed otherwise, especially because much of my research was lurking on the Rolex and Watches subreddits, which are a very particular type of dude. It comes across as a very male thing.

At least the way that I’m exposed to watches, it’s very male-focused. You read the amazing journalism about watches on Hodinkee and the whole world around appreciating watches. It’s kind of male-focused.

It’s like a Porsche 911.

David Rosenthal

It’s amazing that Rolex’s history indexes so heavily to women, and that even today they move a lot of units to women, even though that’s not where I come across Rolex in my day-to-day.

Ben Gilbert

It’s certainly not where the enthusiast market is focused.

David Rosenthal

Yes. But it’s one of the really unique things about Rolex. So many of the other really high-end watch brands—with Cartier as an exception, I think—are really men’s brands.

Ben Gilbert

Whereas Rolex really is 50/50.

David Rosenthal

Amazing.

So that’s Mercedes Gleitze. That’s the Oyster story, and it really is a huge watershed moment for Rolex and for the wristwatch industry.

She’s effectively the first Testimonee. I’m not sure they had come up with that terminology yet, but this is something they would lean heavily into as their means of marketing in the future.

Ben Gilbert

They would hate you calling it a brand ambassador.

David Rosenthal

Yes. “Partner” is what Rolex calls them.

Ben Gilbert

No, I think it’s “Testimonee.” I’m pretty sure it’s this very particular word that they wanted to invent and have to themselves.

David Rosenthal

It’s different from influencer marketing. It’s different from the way someone appears in an advertisement for a perfume for a 5-year deal.

I think it’s this very long-term-oriented thing: You are a part of the brand, and you are a part of the brand for your lifetime.

Ben Gilbert

Roger Federer is the purest embodiment of this today.

David Rosenthal

That is to come in the future.

Back to the product: Oyster was huge, but it had a problem. The key to making it work was that you didn’t have to have the whole scuba jar that enclosed the whole watch, but the crown had to screw down.

Ben Gilbert

The crown had to screw down like a jar.

David Rosenthal

That meant that when you went to wind the watch, you had to unscrew the crown, pull it out, wind the watch, expose it to the elements, and then screw it back in.

Ben Gilbert

If you know anything about humans, probably at least half the humans on the planet are not going to be fastidious about screwing their crown back in.

David Rosenthal

There are 3 pillars to what makes this a breakout product and enables the wristwatch to have its iPhone moment. That third pillar—being perpetual, being self-winding—is the magic.

Ben Gilbert

Yes. These things are so intrinsically linked. I didn’t realize until getting so deep into the research that self-winding watches are kind of cool on their own.

Before, I was like, “Waterproof, whatever. Why is that important?” Self-winding seemed cool, but how hard is it to manually wind your watch? That’s what people had been doing with pocket watches for centuries.

David Rosenthal

It’s actually because it’s tied to the Oyster and the screw-down mechanism. If you forget to screw your crown back down, you lose the element-proofness of the Oyster.

Ben Gilbert

Oh, okay.

David Rosenthal

I can’t wait. The way that the Perpetual movement works is totally genius.

Ben Gilbert

Before we do that, we want to thank good friend of the show Fundrise.

[Advertisement omitted.]

5. Perpetual Completes The Product

Back to Oyster, and leading into the need for self-winding and the Perpetual element of Rolex: If you can create a self-winding wristwatch, all of a sudden the element-proofness of the Oyster works fine for everybody, because nobody actually has to unscrew the crown.

David Rosenthal

You never have to pop out the battery and put in another one. You never have to charge your Apple Watch. You name the analogy.

Ben Gilbert

You just set it and forget it. You walk around all day, your watch keeps perfect time, it’s waterproof, and you never need to wind it.

David Rosenthal

It sounds like an amazing product. Who doesn’t want that? That’s a Steve Jobs-like product right there.

Before going into the nuance of how Rolex’s particular self-winding mechanism works, I think this is a good time to explain how mechanical watches work at all—what the key components are.

Frankly, it’s like alchemy. One of the coolest things I’ve ever done to prepare for an Acquired episode was go learn how a mechanical watch works at a high level.

You need 2 major components to make a timepiece. First, a way to store energy. Second, a way to release that energy at predictable and precise intervals.

Ben Gilbert

You could do that these days with a battery and electronics, but imagine doing it without a battery and without electronics.

David Rosenthal

Exactly.

On that first one—storing energy—there is something called a mainspring. Imagine a foot-long, skinny piece of metal that you wind real tight and stuff into something called a barrel.

This looks like a film strip that’s stuffed inside a film canister. You’d see a stack of canisters in a projector room at a movie theater. That’s sort of what you should imagine: a really tightly wound mainspring inside that barrel.

Ben Gilbert

Interestingly, to your point, David, this kind of begs the question: What is a battery?

David Rosenthal

Yes. Technically, that is a battery. It’s a mechanical battery, since it’s a way to store potential energy to be used later.

Amazingly, the way a mechanical watch works these days is so energy-efficient that the mainspring can store on the order of 3 days of potential energy to tick the watch forward.

Ben Gilbert

Amazing.

David Rosenthal

Moving on, this obviously isn’t sufficient on its own. If you just released the mainspring in the barrel, it would spin around really fast, make all the gears spin, and let all the energy out at once.

Ben Gilbert

It would break the watch.

David Rosenthal

You need something to control the energy release from the mainspring and do it in slow, fixed time intervals—all mechanically. You need something to make the watch tick.

Ben Gilbert

Hey-o.

David Rosenthal

Watchmakers call this an escapement.

An escapement in a mechanical watch has 2 key components to harness that potential energy from the mainspring. One is a pallet fork—we’ll come back to that—and the other is something called the balance.

How does a pallet fork work? A pallet fork looks like a little T, with teeth on the edges of the top of the T, and it moves back and forth—a tick and a tock—like the pendulum of a grandfather clock.

As it flicks back and forth, it moves all the gears on the watch forward one tick, or one beat.

Ben Gilbert

There’s this element several steps down the chain where it’s actually usually the hour wheel that then drives all the other movements off of that.

David Rosenthal

It depends on the watch and what complications are in it. The important thing to know is that when one beat happens, when the pallet fork enables everything to move forward one beat, what it’s really doing is allowing what’s called the escape wheel to turn one click. That drives whatever else is in the gear train for that particular watch.

Ben Gilbert

Gotcha. Some watches have just hours and minutes. Some watches have hours, minutes, and seconds. Some watches have the date, day, moon phase, what you had for breakfast, and so on.

With these complications, which are the features, it’s really amazing because you can think through what the algorithm would be to make such a complication. When you think through it, you’re thinking like a programmer: “If this, then that. If the date is 31 days—”

David Rosenthal

These are not computers.

Ben Gilbert

All of the logic is encoded mechanically in a gear train.

David Rosenthal

It’s beautiful.

So where we left off is our escapement, where we’ve got the pallet fork. It’s this little T, and it’s a tick and a tock. It flicks back and forth and moves the gears all forward one tick.

How do you get it to tick back and forth? What is the mechanism by which this pallet fork goes tick-tock, tick-tock, tick-tock?

This is where we introduce a big hero of the whole mechanical-watch story: the balance.

The balance also has 2 parts. There’s a balance wheel and a hairspring, and these 2 things are stuck together around the same center point.

Picture the wheel of a bike. That would be the balance wheel, kind of like a hula hoop. The gears go around the same axle on a bike. You can imagine that you’ve seen the rear wheel of a bike in this analogy. Those gears are the hairspring, and the outer wheel is the balance wheel.

That’s what this component looks like.

The hairspring looks really cool. It is another coiled-up piece of metal, although it’s much looser and more fluid than the tightly wound mainspring we talked about earlier. Unlike everything else, which is incredibly tight inside a watch, this component—the balance—almost floats and moves with very low friction.

It’s weird, because it’s the opposite of everything else in the whole watch.

The way it works is that the hairspring spins really fast in one direction. For anyone who has ever taken a spring and tried to uncoil it, you know it only goes so far, and then it wants to go back to its resting position. You try to go the other direction and tighten it a little bit, but that doesn’t work either, and it wants to go back to its natural resting position.

That’s what’s happening here. You’ve got the hairspring spinning really fast in one direction, and then the energy it has stored is overcome by the mechanical resistance of unwinding the spring. So it stops, and then it spins really fast in the other direction.

This cycle goes back and forth, spinning back and forth, ticking and tocking, and flicking the pallet fork back and forth to continually release one little interval of energy and one little advance of the whole gear train.

It is beautiful.

Ben Gilbert

Amazing. You can totally see why, for the right kind of person, this is like a Porsche 911. It’s catnip. You can’t get enough of it.

David Rosenthal

Exactly. You end up with fancy names and proprietary things that Rolex makes in the far future, called a Parachrom hairspring, which has these amazing renders, animations, and videos of how it works. It’s gorgeous.

This happens really fast. It isn’t like I just described, where you go really far in one direction, run out of energy, and then come back. This happens 3, 4, 5, or 6 times per second, depending on the watch.

If you hold a watch up to your ear and hear these beats, that’s what you’re hearing. The pallet fork drives that whole gear train, releasing energy that powers the hands and all the other complications—the day, the date, and so on—at exactly the right pace.

When you take a step back and look at it all, the craziest thing is that it depends on the exact physical properties of the metals used. Time is literally kept by the physical laws of the universe: elasticity, tensile strength, inertia, potential energy stored by specific materials.

They have this down to such a precise science today that watches keep time—certified chronometers keep time—within 2 seconds per day.

Ben Gilbert

Bonkers. It’s awesome.

David Rosenthal

I just named 4 parts of a watch. There are 200 parts. This is an oversimplification, but it’s the general concept of how a watch works.

Ben Gilbert

The other parts are also amazing. There are jewels in the watch because all of these gears need to turn on things that create friction, so you need extremely low-friction surfaces.

It turns out that rubies and sapphires milled into little nuts are the best way to do that. There are actual gemstones inside your watch being used for a mechanical purpose.

Jewels can be very hard minerals, and you don’t want these things to wear out. When you’re slapping something back and forth 6 times per second, you want to make sure that it lasts.

Most Rolex watches don’t need to go in for service until every decade or so. It’s crazy that these things just don’t wear out.

David Rosenthal

The Daytona I’m wearing right now, I don’t think, has ever been serviced, and it’s at least 15 years old, if not more than that. It keeps time perfectly.

Ben Gilbert

It’s so cool. This is a 500-year-old art. The idea of a mainspring that applies energy to an escapement with a balance wheel and a hairspring to oscillate back and forth isn’t new.

Every piece of digital technology—and most analog technologies—was invented after this.

David Rosenthal

To bring us back to the Perpetual on your Rolex watch, you can imagine that adding this element of self-winding to the insane complexity that has been developed over centuries, with extreme tolerances already in these watch movements, is not exactly trivial.

Ben Gilbert

You can’t just code it up in software.

David Rosenthal

No. In particular, remember the mainspring that stores 3 days’ worth of energy inside the barrel, all coiled up. There’s a ton of resistance on that.

If you pop open the crown on a watch and turn it with your thumb, it’s kind of hard to turn. If you’re going to come up with a self-winding mechanism, you need some way to use mechanical advantage to wind something that’s already wound really tight even tighter.

So here we are in the late 1920s. Around this time, a British watch inventor named John Harwood comes up with an automatic system for watches.

Interestingly, that wasn’t his end goal. He was trying to create a waterproof system, just like Rolex was.

The way he went about it was to say, “As we were talking about, it’s the winding crown that’s the weakest link in the waterproofness of the watch. What if I just start by eliminating the winding crown? Can I do that?”

Supposedly, he gets inspired one day by watching children play on a seesaw, and that gives him the idea for his method: something called the hammer system, where a hammer goes up and down and hits different ends inside the watch as the wrist moves around.

Ben Gilbert

You could imagine that turning a crank—crank, crank, crank, crank.

David Rosenthal

He invents this system, and just like his Swiss counterparts who invented what became the Oyster system under Rolex, he patents it.

What he decides to do is, rather than making a watch out of this, he’s going to create a company that is just an IP company and license this self-winding IP to other watchmakers.

Ben Gilbert

He does that, and a couple of watchmakers take him up on it and incorporate it into their products.

David Rosenthal

However, it doesn’t prove too popular in the marketplace because, as a consequence of how he designed the system, the manual-winding capability and the crown are eliminated.

Ben Gilbert

So if your watch stops, if you don’t wear it and lose the charge in the mainspring, good luck getting it going again.

David Rosenthal

You have to wear it for days or whatever just to get the energy back in there, and then you can set the time.

Ben Gilbert

Oh, interesting.

David Rosenthal

It’s a pretty big flaw in the watch. But because of how the patent was granted—at least in the United Kingdom—he and his company end up holding the rights to all self-winding watch technology.

Ben Gilbert

Wow. That is broad in Britain.

David Rosenthal

No matter what the method is, or at least that’s my understanding.

So Hans, of course, sees this. He knows he needs an automatic system for the Oyster to really unlock the potential of the product and fully break the wristwatch product for the marketplace.

But his hands are tied. He can’t do anything in Britain as long as Harwood has this patent. And Hans knows that ultimately the method Harwood uses isn’t good. He’s not going to license from Harwood because he knows it’s an inferior implementation.

Ben Gilbert

Yes.

David Rosenthal

Fortunately, fate strikes and the market does its thing. In 1929, Harwood’s company goes bankrupt, probably aided along by the stock-market crash of 1929 and the entry into the Great Depression.

Finally, the door is open for Hans and Rolex to complete the product.

Ben Gilbert

While we’re here in 1929, just a quick reference point for folks: There was an article published at this time that said you could get a Rolex for as little as $25. Even inflation-adjusted, that’s about $450 today, or for as high as $1,000, which is about $18,000 today.

Rolex’s top of the line today is a lot more than $18,000, and the bottom of its line is a lot more than $450. But that gives you a sense of the type of wealth you would need to purchase a Rolex at this point in history.

It was a meaningful purchase, but not a purchase reserved only for the elite class.

David Rosenthal

Definitely not. Rolex at this point is not a luxury brand.

Ben Gilbert

Correct.

David Rosenthal

It’s going to transform into one over the ensuing decades, but not yet.

Hans was really focused, and his genius and contribution to the field was creating the product of the wristwatch. He wanted the wristwatch to be on every wrist in the world.

Ben Gilbert

Which he achieved.

David Rosenthal

So here we are in the early 1930s. After a couple of years of work, Rolex finally cracks it and patents its own rotor, or self-winding system, which is still to this day the primary method of self-winding across the entire industry.

This is a perpetual rotor at the back of the watch case that spins around in both directions and captures kinetic energy as the wearer moves their wrist around.

Importantly, unlike the hammer movement, it spins 360 degrees freely in either direction, so it isn’t hitting anything.

Ben Gilbert

One of the other problems with the Harwood system was that when the hammer struck each end, it made a noise.

David Rosenthal

Yes. You’d wear your watch and it would go, “Clack, clack, clack, clack, clack.”

One of the initial marketing points of the rotor system—the Perpetual system that Rolex comes out with—is that it’s silent. They call it the silent self-winding system.

Ben Gilbert

That’s really interesting.

David Rosenthal

It’s genius. You can imagine—I’m sure people have seen videos or photos of a self-winding watch—imagine a disk that sits around a center point, and then cut off half the disk.

Whenever you’re swinging your wrist around—or because it’s a near-frictionless system, whenever you tilt the watch at all—the heavy side of the rotor falls down due to gravity to whatever side is lower.

You’re constantly, all day, inadvertently spinning this Perpetual rotor around and around, using it to wind the mainspring.

It’s an incredible innovation and feat of engineering stacked on top of all the other incredible feats of engineering that go into mechanical watches.

When they first start, you’re adding a new layer to the movement in the back of the watch, and it makes the watch back protrude a little bit.

Ben Gilbert

The Bubbleback.

David Rosenthal

Yes. These early Oyster Perpetuals that are first launched into the market are known by collectors as Bubblebacks, because the back of them sticks out a little bit onto the wrist, off the lugs.

Ben Gilbert

It’s so cool.

David Rosenthal

The other fun thing about this is that it’s legitimately an invention by Rolex. Oyster was licensed. The credit for how accurate the watches were was really Aegler innovation. This is the first time we’re really seeing Rolex R&D figure out a brand-new breakthrough contribution to the watch world.

Ben Gilbert

Yes.

David Rosenthal

Once this is in place, these are the 3 key pillars of Rolex technology—and really all mechanical wristwatch technology of quality from this point forward.

You’ve got accuracy: the chronometer, observatory-certified. You’ve got waterproofness, or element-proofness, via the Oyster. And now you’ve got self-winding with the Perpetual.

Ben Gilbert

Oyster Perpetual.

David Rosenthal

Here it is. It’s all here.

So in 1934, they launch the full system: the Oyster Perpetual Chronometer. The Bubblebacks are known by collectors.

For the first time, they introduce a new look for the watches: a two-tone mix of steel and gold for these new Oyster Perpetuals that they call Rolesor.

Ben Gilbert

Rolesor really rolls off the tongue.

David Rosenthal

Right there on your wrist, David.

Ben Gilbert

Right there on my Datejust—not on my Daytona. This is the golden-steel mix. The center link is gold, and the outer 2 links are steel.

David Rosenthal

Now you’re talking about the bracelet. For a long time, bracelets were made by third-party companies. Rolex contracted them out.

But that look also goes onto the case itself.

Ben Gilbert

The bracelet usually echoes the case.

David Rosenthal

Combining gold and steel within one watch encasement was a new look from Rolex at this time.

Ben Gilbert

You know what else carries through to today, which is kind of interesting? Rolex—and most tool watches—have fluted bezels. The fluting is because it makes it easier to grip. When you need to screw the back off, that was the original reason for fluting: It gives you a screw head, effectively, to get leverage to pop it off.

David Rosenthal

Yes.

So while we’re in the early 1930s, just to breeze through a bunch of other interesting things that are happening, the crown logo—the 5-point crown—starts appearing for the first time in 1931.

1931 is a weird year because Rolex is just starting to figure out this perfect product mix, and at the same time the world is heaved into a Great Depression and the British pound is devalued. Exports out of Britain drop by two-thirds.

A crisis happens, so Rolex is looking to internationally diversify. They open new offices in Paris, Buenos Aires, and Milan. They organize trips to South America, the West Indies, China, and Japan. They’re really trying to figure out how to stabilize things while the world is in crisis.

Ben Gilbert

But they’ve got the right product in the market.

I feel like there’s an old Sequoia saying—or at least a Mike Moritz saying—that recessions are the best time to innovate, because coming out of the recession you’re going to have the best product ready to hit the gas.

David Rosenthal

And fewer competitors.

Ben Gilbert

Exactly.

David Rosenthal

I’ll say, very interestingly, that in 1932 Omega released a waterproof watch. This was considered to be the world’s first dive watch. No one talks about this today. You hear “dive watch,” and you think Rolex.

Ben Gilbert

You think Submariner.

David Rosenthal

I’ve got some really, really fun World War II dive-watch material in a second.

Ben Gilbert

Great.

David Rosenthal

Before we get to World War II, in 1936, I feel like this is a big moment and kind of exactly what you were saying. As your competitors fall off a cliff due to economic hardship, there’s an opportunity if you have the right product that’s working well in the market to consolidate power.

This is when Rolex goes to Aegler and says, “We want to take all of your production.”

Gruen stops buying movements from Aegler. This is where I think Rolex may have bought the shares back from Aegler, but again, we don’t know and never will, because no one at Rolex will ever talk about that.

This is also when Aegler adds Rolex to its name: Aegler Manufacture of Rolex Watches.

Ben Gilbert

Take us into World War II.

David Rosenthal

At the beginning of the war in 1940, remember that Rolex is in Switzerland exporting to the United Kingdom, which was still by far its biggest market. Supply lines from Central Europe to the United Kingdom are cut off after France falls.

Rolex and all the other Swiss watchmakers are like, “Well, shoot. If we can’t get to England, we’ve got to find other markets to sell to.”

Ben Gilbert

It’s like the beginning of COVID, when all these companies were making other products and doing all sorts of things.

David Rosenthal

This is my very favorite sidebar piece of trivia.

Ben Gilbert

I have no idea where you’re going.

David Rosenthal

Do you know what Rolex did in Italy during this time?

Ben Gilbert

I have no idea.

David Rosenthal

They’re casting about. They’re trying to find something.

Their retail partner in Italy gets a contract from the Italian Navy to supply watches to its divers. This Italian retail partner comes to Rolex and says, “We’ve got a contract for dive watches. Can you make dive watches for us?”

Rolex is like, “Yes, sure, we can do that. We’re sitting on our hands here at our factories.”

Ben Gilbert

Which is funny because this is a decade and a half before the Submariner.

David Rosenthal

Yes, yes, yes.

This is the first dive watch that Rolex makes. Can you guess the name of the Italian retail partner?

Ben Gilbert

I feel like it’s going to be a car company. I don’t know.

David Rosenthal

No, it’s even more on the nose.

This is Panerai.

This is the Panerai watch. Anyone who knows Panerai knows its famous, very Art Deco-style dive watch. It has 2 main models now: the Luminor and the Radiomir.

Panerai was a retailer before World War II. They weren’t a watchmaker.

Ben Gilbert

Whoa.

David Rosenthal

After the war, Panerai kept going, making these watches.

Ben Gilbert

Isn’t that amazing?

David Rosenthal

Totally amazing.

This also underscores another reason why Switzerland was such a watchmaking powerhouse. This is a very engineering-heavy, industrial thing, and Switzerland didn’t have to devote any resources to the war because it was completely neutral. All of its craftspeople, machinists, and everyone else could keep making watches.

So here they are, selling to the Italian Navy on the Axis side. Meanwhile, the thing they’re most focused on is trying to figure out some way to start re-exporting to Britain, selling to their old main market on the Allied side.

They figure out later in 1940 how to get watches back into Britain. They launder them first through Spain and Portugal, then through the Strait of Gibraltar to get them up to Britain.

Ben Gilbert

This becomes critical because World War I made the market for the wristwatch, but World War II made the precision-wristwatch market super important.

If you’re a soldier in the trenches in World War I, you need to coordinate movements and time and whatnot. If you’re a military service member in World War II, it’s a very technical war involving a lot of technology, airplanes, aircraft carriers, synchronized attacks, tanks, stealth, and all sorts of things.

The Battle of Britain is such a key moment and key theater in the war. All of these British Royal Air Force pilots are wearing Rolex watches because, at this point, Rolex makes the best wristwatches—the most accurate and the most weatherproof against all the elements.

You’re going through all sorts of pressure changes, going up and down. These cabins, if you could call them that, of World War II fighter planes have no pressurization. These watches need to withstand a lot of elements. Usually, you’re navigating by them. You might be flying in the dark.

It’s super important stuff.

David Rosenthal

Again, I would push back. I suspect Omega was the leading brand at this time. Omega was thriving in the 1940s and 1950s, even into the 1960s, in the Swiss watch world.

Ben Gilbert

That’s definitely true.

David Rosenthal

Rolex wasn’t the only company selling to both sides here.

Nonetheless, World War II is really changing the nature of what you need out of a wristwatch. Air battles are maybe the most visceral example, but then you start to think about all the other things that went into World War II: radio communications, radar, early computing, nuclear weapons and the technology coming out of that, and the scientists building all these things.

Time is a really, really important element for this stuff. You’ve got the birth of a new military use case, which soon transitions to a professional need for watches and for time in the world.

Ben Gilbert

So interesting.

David Rosenthal

Coming out of the war is really when Rolex starts to figure out its product lineup.

We talked about how they had the perfect product at the perfect time with this Oyster Perpetual, officially certified chronometer. What that looked like in product form was all kinds of different watches. They all said that, and that’s how they all worked, but the cases were everything you could imagine.

It wasn’t like you could browse on their website and see, “We make these 6 main families of watches, with these sub-variations underneath it.” It was far from it.

You look at these old advertisements and catalogs and you’re like, “I don’t even know what that thing is called,” because it looks so different from everything else.

As they’re coming out of the war, they’re starting to figure out a standardized product lineup. Not quite yet, but soon they’re going to build a brand around each one of these things—who it’s for and what it says about you if you wear this type of watch.

Ben Gilbert

You’re foreshadowing tool watches, or sport watches: a watch for a specific technical use case, or more accurately, a watch that says something about you as the wearer.

David Rosenthal

That is the legacy of World War II to come on the product side. But first, just on the market side, as soon as the war is over, there’s no more European market. Europe is in shambles.

Ben Gilbert

But you know what market there is?

America.

David Rosenthal

Returning home. You know who is at the top of the New World Order now, at least on the capitalist side? I don't think Communists were buying a lot of Rolexes.

Ben Gilbert

I'm sure there are some crazy stories about black-market communist dealers of Rolexes to Russia after World War II. There must be. I'm pretty sure Castro famously loved Rolexes. I think he even wore 2.

David Rosenthal

There are photos of him wearing 2 Rolexes.

Ben Gilbert

Amazing. Hang on—I'm looking. Nothing screams communism like multiple Rolexes on your wrist.

David Rosenthal

Here it is. He's wearing, I think, a Rolex GMT and a Submariner on the same wrist.

Ben Gilbert

Yes. He referred to 1 as a backup in case the first stopped working, but that's extremely unlikely. I suspect it was to keep Moscow time.

David Rosenthal

Or he just wanted to wear 2 Rolexes on his wrist because he could.

Ben Gilbert

Yeah, exactly.

David Rosenthal

The non-black-market market for Rolex after the war was America. If you're going to go somewhere, you're going to go to America, and Hans and the company devise just about the most genius 3-putt scheme to get there imaginable.

Ben Gilbert

3-putt scheme?

David Rosenthal

Get this. In 1945, Rolex would never 3-putt.

Ben Gilbert

Tiger Woods wouldn't.

David Rosenthal

Rolex brand testimony. In 1945, right after the war ends, is also the 40th anniversary of the founding of Wilsdorf & Davis—the Ruby Jubilee of the company. For the occasion, Rolex launches its finest model yet, the Datejust. This is the first modern Rolex, still an iconic watch sold by the company today.

Ben Gilbert

It's just beautiful. I've got 1 here in front of me. For a lot of people, if they don't picture a Submariner when they hear “Rolex,” they picture a Datejust or a Daytona. But we'll get to that.

David Rosenthal

Launched alongside the Datejust is the Jubilee bracelet, the iconic beaded Rolex bracelet we all know today. Hans wanted to get into the American market, and he initially wanted to call it the Victory bracelet. His Swiss colleagues were like, “That's not very Swiss. We are neutral.”

Ben Gilbert

So it becomes the Jubilee bracelet.

David Rosenthal

Beautiful. It goes great with a fluted bezel. It adds a little more pizzazz to the wrist. Around the same time, Rolex manufactures its 50,000th officially certified Swiss chronometer, and it just happens that the model is the new Datejust.

Ben Gilbert

So Hans decides he's going to give this very special Rolex watch to the Swiss General Henri Guisan, who led Switzerland through the war—a national hero in Switzerland, the Dwight Eisenhower of Switzerland, one might say.

David Rosenthal

What does it even look like to lead Switzerland through the war?

Ben Gilbert

That's a good question. A lot of sitting.

David Rosenthal

Remember, this is a 3-putt. This is just the first putt here. Guisan gladly accepts this great watch. Rolex is really ramping production now, so a few months later they make their 100,000th officially certified chronometer.

Ben Gilbert

Oh, this 1 goes to Winston Churchill.

David Rosenthal

This 1 goes to General Guisan, the newly christened Rolex connoisseur, who says, “Would you please, on our behalf, offer this to your dear friend Sir Winston Churchill?”

Ben Gilbert

There it is. Winston Churchill accepts. Now Winston Churchill is a Rolex man.

David Rosenthal

Less than 1 year later, Rolex makes its 150,000th officially certified chronometer, once again in the new top-of-the-line Datejust model. Who does Hans go to for this 1? Not directly, but with some influence from the fact that his friend Sir Winston Churchill wore it, he goes to General Dwight D. Eisenhower, American hero, leader of the Allied Forces, architect of the Allied victory in this new world order.

Ben Gilbert

And Eisenhower, because his good friend Churchill wears Rolex, says, “How could I not accept?”

David Rosenthal

So now Dwight Eisenhower becomes a Rolex man. A few short years later, in 1952, Eisenhower becomes president of the United States of America with his iconic gold Rolex Datejust on his wrist at almost all times.

Ben Gilbert

And this is the first time Rolex gets the idea of what all of its future marketing and positioning will be: those who command the world wear Rolex.

David Rosenthal

At this time, Rolex finally brings on a third-party advertising agency, the J. Walter Thompson advertising agency in New York. After Eisenhower becomes president wearing his Datejust, Rolex and J. Walter Thompson launch a campaign in the United States.

Ben Gilbert

Almost literally what you said, David.

David Rosenthal

The tagline of the campaign is, “Men who guide the destinies of the world wear Rolex watches.” They printed this all over magazines across America, and maybe the world too. I don't know. It's incredible.

Ben Gilbert

“Men who guide the destinies of the world wear Rolex watches.” Shameless. There are so many things to say. Obviously today that would be “people,” not “men,” but it's also literally true. You've got Eisenhower, Churchill, and Castro all wearing Rolexes.

David Rosenthal

I'm going to save for later some of their advertising campaigns from the 1960s and 1970s, but there are a few sentences that we have to say. 1 is, “When a man has the world in his hands, you expect to find a Rolex on his wrist.”

Ben Gilbert

This is Don Draper. This is better than Don Draper.

David Rosenthal

“A Rolex will never change the world. We leave that to the people who wear them.”

Ben Gilbert

We could just end the episode here. That is brand positioning. The fact that they engineered getting 1 on the wrist of the president of the United States is so genius.

David Rosenthal

Interestingly, even though they started with Mercedes Gleitze and this idea of human achievement and accomplishment at the top of their field, they aren't doing that in this era. It is about the people who command the world. They later come back to achievement and the people who are scientists. I'll save it for the 1960s and 1970s, but this is a very clear positioning of those who command the world.

Ben Gilbert

The problem with “those who command the world,” as gangster as it is, is that ultimately you're talking about a small market. It's great aspirationally, and it helps the brand halo, but more people—especially as we enter the 1950s and 1960s—want to be Arnold Palmer, shall we say, than want to be Dwight Eisenhower.

David Rosenthal

1 final little product sidebar on the Datejust that I love: the original Datejust had the date window. It's called the Datejust because it's a regular watch with a little window on the dial that has the number of the date of the month in place of the 3. If you're picturing 1 today, you probably picture the magnifier sitting on the date window—the Cyclops eye, in Rolex marketing speak.

The legend of how that came about is that Hans's second wife, Betty Wilsdorf Metler, loved the Datejust. His first wife, Anna, died tragically in 1944, right before the end of World War II. That is when Hans set up the Hans Wilsdorf Foundation and put all of his ownership of the company into it. Famously, he never had any family heirs; there was no 1 to pass the company to, so he created this foundation.

Betty loved the Datejust, and the Lady-Datejust is still, I believe, the single bestselling model in the Rolex catalog, but she had a tough time reading the small numbers of the date in the window. As the story goes, 1 day while Hans was getting ready in his bathroom in the morning, he was wearing a Datejust and a drop of water dripped onto it right above the date window. It magnified the date.

Ben Gilbert

I tell you, you can't make this stuff up.

David Rosenthal

They made this stuff up. He shouts, “I got it! I got it!” It's like the Eureka moment in the bathtub, and that is the inspiration for the Cyclops window of the Datejust.

Ben Gilbert

If you're at Rolex and you're listening to this and you want to tell us it really is true, hello@acquired.fm. We will happily come to Geneva and talk to you about it.

6. Rolex Creates Professional Watches

David Rosenthal

As you were saying, the Datejust is a dress watch. It's a watch that you wear if you are commanding the world, wearing a suit, and among other respectable people. What Rolex does from 1950 onward is say, “Of course we make that, but we want to make a watch that you can wear while you're doing your extreme activity and that will look great when you show up to dinner afterward.”

Ben Gilbert

And that is the core of the brand today, built in the 1950s under André Heiniger.

David Rosenthal

Sports watches. It's the Submariner, the Explorer, the GMT-Master, and the Daytona—the modern sports watches. Like you said, these are very different from what Churchill and Eisenhower are wearing.

André Heiniger is the second CEO of Rolex after Hans. André joined the company in 1948, right after the war. He was a former lawyer, I believe, by training. He first went to South America and ran the South American market for Rolex, then came back to headquarters in Geneva and became the director of marketing.

He's the 1 who brings on J. Walter Thompson. He's the 1 who does the “Destinies of the World” campaign. In 1955, I believe, he becomes the director of watches. Bringing on J. Walter Thompson, revamping the marketing message, and opening up the American market—really the US market—that's sort of his purview here. Later on, he starts working with Mark McCormack and IMG, which we'll get into for the testimonials.

What Heiniger realizes is that all the technology, engineering, and innovation that went into Rolex in the 1930s to perfect the product of the wristwatch is no longer defensible. You mentioned Omega, but basically anybody else—certainly any other Swiss company—can make a perfectly on-par watch with what Rolex can make at this point.

Ben Gilbert

There are 30 Swiss companies doing this, especially because of the ébauches. All of the component manufacturers are outside the brand. You just go around to all the component manufacturers—Rolex is a little different because they have Aegler—but in general, you can find all the different tiny shops making each of these components and buy them to make a watch.

David Rosenthal

Exactly. All the things Hans was a genius at kind of aren't going to cut it in terms of differentiation for this new era. What Rolex needs to do now is move beyond what the actual product is on your wrist to what it says about you that you're wearing it—to the brand of the company itself, what it signals, and what it means about you.

This is the first step toward becoming a luxury brand. I don't know that André and the company were thinking about it necessarily as luxury yet. It's not really luxury yet; it's much more lifestyle at this point. It would later become luxury, but this is his real genius.

From 1953 to 1955, Rolex—and again, Hans is still running the company; he dies in 1960—launches a whole suite of wild new models, very different from the Datejust and the Oyster Perpetuals we were talking about before. This is the Explorer, the Turn-O-Graph, the Submariner, the Milgauss, and the GMT-Master. These are what are initially called the tool watches.

Ben Gilbert

But they quickly morph into becoming known as the sports watches.

David Rosenthal

The industry refers to them as sports watches or tool watches. Rolex calls them professional watches, which is kind of funny because it's the opposite of what you would expect. A professional watch sounds like the Datejust, but they're thinking of a professional driver or a professional race-car driver.

Ben Gilbert

A professional pilot.

David Rosenthal

You'll continue to see this in everything in the Rolex universe. They don't want to be lumped into any category, so they refer to something entirely different, such that they can't be put into a box. They don't make sports watches; they make professional watches.

Ben Gilbert

It's like the Vision Pro is not reality.

David Rosenthal

Exactly. There's this YouTube video describing “the Rolex way,” and they list all the things that they're not. It's not limitless because that's too limiting. Everything in the Rolex universe needs to be described in a way that's impossible to describe. It's simply Rolex.

Ben Gilbert

Amazing. So, back to this suite of really world-changing tool watches—or at least watch-world-changing tool watches.

David Rosenthal

Professional watches.

Ben Gilbert

I'm sorry.

David Rosenthal

The first is the Turn-O-Graph. As perhaps foreshadowed by that great name—

Ben Gilbert

What a horrible name.

David Rosenthal

That's the least successful of these watches that they launch. You aren't going to be buying a Turn-O-Graph from authorized Rolex dealers these days.

Ben Gilbert

But if you look at a Turn-O-Graph, what's the original 1 look like?

David Rosenthal

It looks like the GMT-Master. We'll get back to that in a second. The key feature of the Turn-O-Graph was that it had a rotating bezel around the dial, around the face of the watch, that you could use for timing different events.

Rolex marketed it as a watch for international businesspeople who were making international phone calls and needed to time the length of the call.

Ben Gilbert

That's funny. Swing and a miss. Not exactly a romantic lifestyle you want to be associated with—saving pennies on your long-distance calls. At the time, I guess it was saving $10 at a time.

David Rosenthal

The next least successful 1 is the Milgauss.

Ben Gilbert

I love this watch. This 1 is awesome.

David Rosenthal

It has a whole second life. It was designed in association with the engineers at CERN in Switzerland, the particle accelerator, for scientists working while exposed to strong magnetic fields. The idea was that the Milgauss was so well protected from magnetic fields that you could wear it in these environments and it would still tell accurate time.

You can understand why this would be a big deal. If you have a metallic hairspring as the primary thing making your watch tick, you walk into some of these environments that scientists are operating in and your watch is going to speed up or slow down.

Ben Gilbert

A little more romantic than timing international business calls in terms of the inspiration for this, but not a large market for people who are scientists or aspiring to work in strong magnetic-field areas.

David Rosenthal

They discontinue it after a couple of years, but then bring it back in 2007.

Ben Gilbert

It's awesome. It's got this lightning-bolt second hand. The colors are great, and it's got this really fun orange.

I've been contemplating whether I want to get an Explorer or a Milgauss. It's effectively the same watch, but the Milgauss has this very fun scientific origin and look to it.

David Rosenthal

I could totally see you rocking either 1.

Ben Gilbert

It feels like me, doesn't it?

David Rosenthal

It does. You've definitely got the Explorer. You love exploring, backpacking, and you have that great iconic picture.

Ben Gilbert

Is that picture of you and your dad still up behind you in your home studio?

David Rosenthal

Yeah, back in Iceland. But I feel like the Milgauss might be more you.

Ben Gilbert

I know. Both great watches.

David Rosenthal

Both great watches. That's number 2.

The first really big 1 is the Explorer, like you were talking about. The story is so good. Supposedly, it was made in honor of Sir Edmund Hillary and Tenzing Norgay's summit of Mount Everest—the first human summiting of Mount Everest—in 1953.

Ben Gilbert

I think it was 1953.

David Rosenthal

I believe it was 1953. They wore an Oyster Perpetual up there that was a prototype of what the Explorer would become.

All of these tool watches—sorry, professional watches—were prototyped in partnership with various people who were living these lifestyles and doing these human achievements. The legend is that Sir Edmund Hillary and Tenzing Norgay were working with Rolex and wearing Rolexes while summiting Everest. That is in the marketing today, and it is the lore around the brand today.

Importantly, both of them became official Rolex testimonees, or brand ambassadors, afterward. For the rest of their lives, they would tell you how much they loved Rolex. However, Edmund Hillary did not prefer his Rolex. He had a Smiths watch that he preferred to wear. I think Smiths was the official outfitter of the expedition.

Ben Gilbert

Rolex was not.

David Rosenthal

I do believe both watches ended up on the summit. I think that's likely, whether they were on wrists, in backpacks, or whatever the deal was. It's just funny that the summiting of Everest is so tightly associated with Rolex.

Ben Gilbert

They were interested. It was sort of there.

David Rosenthal

The Explorer was designed to withstand extreme pressure changes, to go up to the summit of Everest, and still work perfectly. Imagine yet another modern endeavor where timekeeping is critically important and means the difference between life and death. You need to rely on your watch when you're summiting Everest.

It's a really robust watch. There aren't a lot of moving parts or complications, and there isn't a spinning dial.

Ben Gilbert

It's easily read in the elements.

David Rosenthal

Exactly. That's the Explorer. It goes on to become iconic and extremely popular, still to this day.

Then there's the Submariner, with an equally fun origin myth, shall we say.

Ben Gilbert

If you separated Submariner from Rolex, Submariner might actually be a bigger deal. Submariner is its own whole franchise.

David Rosenthal

Absolutely.

Ben Gilbert

Almost in the way that if you separated the Dallas Cowboys from the NFL, who's the more important brand? If you're going to get a Rolex and intend to have multiple, you kind of should start with the Sub because it's so iconic.

David Rosenthal

You're right. It is its own world. It was Sean Connery's watch even before he started playing Bond, and then he wore it in the movies.

Ben Gilbert

All right, all right, all right, all right. Let's get into it.

David Rosenthal

The Submariner is Rolex's dive watch, the professional diving watch. It was not the first dive watch Rolex made; that would be the Panerai. But what you know is the Sub: a great dive watch that Rolex makes and that defines the category.

It works and is waterproof down to 100 meters in depth. Not a lot of people buying these things are going down to 100 meters, but there we go.

Ben Gilbert

I think this is an overlooked thing about the category. That's 100 meters in depth. If there were no pressure changes and you weren't whipping your hand around, it's nice to have 100 meters of depth. If you're going 20 meters down and things happen, you might at some given second, while whipping your arm around or if something weird happens underwater, approach the limit even though you're actually far from 100 meters below.

David Rosenthal

To that point, I believe at some point Rolex starts testing its watches to significantly greater depths than advertised for this reason.

Ben Gilbert

That's correct. Most of them, I think, have a 10% extra margin of safety, but the dive watches have an extra 25%.

David Rosenthal

You don't want to be like, “I've got a 300-meter-depth watch,” get down to 300 meters and think you're good, but then actually go to 305.

Ben Gilbert

A 100-meter waterproof watch is nice even just for going in swimming pools. I'm not sure I'd want a 10-meter waterproof watch. It feels dangerous.

David Rosenthal

But it's not really about the waterproofness here. Around this time, in 1952 or 1953, much of popular culture is focused on a Frenchman named Jacques Cousteau, probably ringing a bell to many of you.

Ben Gilbert

Yes.

David Rosenthal

Jacques Cousteau was the first world-famous undersea explorer. He actually invented scuba diving.

Ben Gilbert

Interesting.

David Rosenthal

He was a total Renaissance man and genius. In 1953, he was filming the documentary The Silent World in the Mediterranean Sea, which would go on to win the Academy Award for Best Documentary in 1956.

The whole world was watching these exploits, discovering the depths of the ocean—this alien world—for the first time, along with Jacques Cousteau. He was doing so, going down in these machines while wearing Rolex watches.

Ben Gilbert

Great marketing.

David Rosenthal

So great. Interestingly, there isn't an actual formal relationship between Jacques Cousteau and Rolex. Rolex was formally working with another undersea explorer who didn't become nearly as famous. Nonetheless, Jacques was a Rolex fan and was wearing Rolexes while doing all this, as was much of his crew. When the movie comes out, they're all wearing these Rolexes.

It's important to remember for people who scuba dive that you have a dive computer these days. Even when I got PADI-certified, in your very first dives you aren't wearing a dive watch; you're using a dive computer. At this time, though, a dive watch was a legitimate tool that you needed. It wasn't going to tell you your depth the way a dive computer does, but to know your total bottom time, you needed it.

In the same way, if you're summiting Everest, you need a watch. Even more so than summiting Everest, you really need a Submariner if you're diving. This isn't cute. This is an essential tool to complete this extreme task.

Ben Gilbert

Yes.

David Rosenthal

That's great for the marketing. Then, in 1962, the first James Bond movie, Dr. No, comes out. As it is written in Ian Fleming's James Bond books—and of course Ian Fleming himself was a Rolex man—James Bond wears Rolexes.

I didn't know this until doing the research. Did you know that, at least according to Ian Fleming canon, James Bond's mother is Swiss and his father is British?

Ben Gilbert

Kind of like Rolex itself.

David Rosenthal

Sean Connery wears a Submariner in Dr. No, and I believe Connery would wear Subs for all of his Bond movies.

Ben Gilbert

As you said, in real life he was a Sub guy himself.

David Rosenthal

I think that's right. If you're trying to build a lifestyle brand—one of the first lifestyle brands in the modern world—there's nothing better you could do.

This persisted from 1962 until 1995, with GoldenEye, when Pierce Brosnan came in and they wanted to refresh Bond's brand image. They chose Omega for that 1.

Ben Gilbert

Wow. That's really charitable of you to the Bond franchise.

David Rosenthal

No, come on.

Ben Gilbert

Omega paid them a boatload of money for product placement.

David Rosenthal

They did eventually, but initially it was not paid placement.

Ben Gilbert

I was almost certain 1995 was when they decided to bid out all the stuff.

David Rosenthal

Let's put it this way: if it was bid out, Rolex would decline to bid, because Rolex does not engage in paid product placement.

Ben Gilbert

That's what I assumed. The only way Bond would stop wearing Rolex is if they were trying to reboot the franchise around Pierce Brosnan, who maybe is more of an Omega guy than a Rolex guy. There was some weird line about rebooting him with a more European, modern flair.

David Rosenthal

Come on. No way. I don't believe it. They freaking bid it out. There's no way James Bond is not a Rolex guy.

Ben Gilbert

Eventually, Omega paid a boatload of money to the James Bond franchise. So much so that there's a bump in Omega sales every 5 years when a Bond movie comes out.

David Rosenthal

A huge bump. GoldenEye was when BMW launched the Z3 coupe, so GoldenEye was totally product-placement central. Now Bond movies are like—the whole budget is covered by product placement. They only exist for product placement.

Ben Gilbert

I don't know. One of the sources I found on Watches of Espionage details that apparently the costume designer reached out to Omega and was given a Seamaster for free. There's even a quote: “There was no product-placement incentive in 1995 whatsoever. I went to them, and of course they were interested, but it was no more than helping us. They gave us watches for nothing.”

David Rosenthal

It definitely turned into a backup-the-truck boatload-of-money thing, but the Omega fans will insist that it was organic at first.

Ben Gilbert

Maybe that's right.

David Rosenthal

Anyway, the point is that from 1962 until 1995, if you liked James Bond and wanted to have a little bit of James Bond in your life too, you wanted to wear a Submariner on your wrist.

Ben Gilbert

It's perfect. James Bond does a lot of diving, then goes right from diffusing the undersea bomb with the Bond girl to popping up and going to a high-class dinner, all while wearing the same watch.

David Rosenthal

It's perfect.

Ben Gilbert

A fun little coda on the Submariner: a few years later, in 1967, do you know the story of the Sea-Dweller, which I believe is still in the Rolex lineup?

David Rosenthal

It is.

Ben Gilbert

Is this the super Sub, where you can go really deep?

David Rosenthal

The Super Sub.

Ben Gilbert

Yes.

David Rosenthal

Rolex develops it in partnership with the French undersea exploration company COMEX. There was an issue where helium would get trapped in the watch in the Submariner, and the pressure would break it as you were coming back up.

They developed the Sea-Dweller, waterproof down to 600 meters, with a special helium-release valve.

Ben Gilbert

This is ridiculous. No person who buys these is going to use this stuff, except for COMEX employees who are issued them.

David Rosenthal

But it adds to the romance. It adds to the idea that this is a lifestyle purchase.

Ben Gilbert

If you're already taking us from Submariner to Sea-Dweller, you have to take us to Deepsea Challenge. That's the ultra-ultra version.

David Rosenthal

Yes. They developed a watch so thick that you aren't putting it on your wrist. They said, “What if we take this idea of the Submariner and then the Sea-Dweller and make this thing called the Deepsea?”

Ben Gilbert

There was an earlier version before James Cameron, right?

David Rosenthal

The Cameron watch is the Deepsea Challenge, an extra-extra version. The Challenge is rated to 11,000 meters, whereas the regular Deepsea is rated to 3,900 meters.

Ben Gilbert

So you get the Deepsea for 3,900 meters and the Deepsea Challenge to get to the bottom—11,000 meters.

David Rosenthal

James Cameron took the Deepsea Challenge on a manned submersible to the Mariana Trench, the deepest part of the ocean. The watch was clipped to the outside of the submarine because it would be useless to have it inside. Humans would be crushed by that pressure if they were on the outside, but the watch kept perfect time and kept all the water out all the way to the deepest part of the ocean.

Ben Gilbert

Amazing.

David Rosenthal

And of course, James Cameron is a testimonee.

Ben Gilbert

Of course.

David Rosenthal

That's going down to the bottom of the sea. Very romantic lifestyle association.

Ben Gilbert

Isn't it interesting that all these watches have English names? What's the market here?

David Rosenthal

It's America.

Ben Gilbert

Come on.

David Rosenthal

So take us airborne, David.

Ben Gilbert

We've gone down. Now we'll go up. That brings us to the GMT-Master—the Greenwich Mean Time-Master.

In 1955, Boeing launched the 707 commercial jet airliner, based on an Air Force air-to-air refueling tanker design.

David Rosenthal

I didn't know that until this episode.

Ben Gilbert

Neither did I. The next year, in 1956, Pan Am, the iconic American airline, begins flying intercontinental jet flights with the Boeing 707 for the first time. The Jet Age for the consumer is born, and along with it, jet lag. It's a new concept. If you traveled across continents before, you didn't move fast enough to experience jet lag.

Pan Am is worried about the effects of jet lag on its pilots. The pilots are going back and forth all the time across the Atlantic Ocean, the Pacific Ocean, or wherever, so they decide the best thing is to keep pilots operating on their home time. If the pilots are based out of New York, they need to operate on New York time even if they've just landed in London.

The way they're going to do that is by working with Rolex to develop a new professional watch for pilots that, for the first time, can tell time simultaneously in 2 different time zones.

David Rosenthal

Amazing.

Ben Gilbert

Rolex takes the failed Turn-O-Graph, which isn't selling well but has the rotating bezel. Importantly, it's a bidirectional rotating bezel, because the Submariner is unidirectional.

David Rosenthal

Maybe not at first, but it eventually becomes unidirectional so that you don't accidentally screw up and do something you don't want to do with it.

Ben Gilbert

They change the markings on the bezel from the 60-minute or 60-demarcation scale of the Turn-O-Graph to 24 hours. Then they add a fourth hand to the movement that moves on a 24-hour cycle.

All of a sudden, on a single watch face, you can keep track of 2 different time zones. The GMT-Master is born. You are the master of time with this watch.

David Rosenthal

Legitimately, it's very useful. Whenever you and I travel for Acquired, I set the complication in the lower right of my Apple Watch to home time. It's really nice to keep track of home time in addition to where I am.

Ben Gilbert

Totally.

David Rosenthal

Eventually, they launch 2-tone bezels, the most famous being red on 1 half and blue on the other half.

Ben Gilbert

The Pepsi model.

David Rosenthal

Yes. So cool. They do all these great limited editions—the Sprite, the Batman in blue and black. The community comes up with little nicknames for all the different color schemes. It's super fun.

Ben Gilbert

This is for air travel and jet travel, but the pinnacle of 1960s and 1970s romance up in the air is not air travel but space travel.

David Rosenthal

Which brings us to the Apollo missions, for which the standard issue from NASA is the Omega Speedmaster.

Ben Gilbert

I will say that this bolsters my case that in the 1940s, 1950s, and 1960s, Omega was the big brand. Rolex had a target in mind to beat, and that target was Omega.

David Rosenthal

Even though Omega was standard issue on the Apollo missions, not all of the Apollo astronauts chose to wear their standard-issue watches. If you go to Rolex headquarters, there's an incredible signed picture from Apollo 13—the Apollo 13 movie, signed by astronaut Jack Swigert, a character played by Kevin Bacon in the movie.

Ben Gilbert

To my longtime friend René Jeanneret, who I believe was Rolex's head of communications at the time.

David Rosenthal

“Who enabled me to always be on time.” Jack—and maybe some of the other astronauts too—preferred GMT-Masters and wore their GMT-Masters during the Apollo missions.

Ben Gilbert

Interesting. The Omega Speedmaster is famously the Moonwatch. It's the big blemish in Rolex's strategy of being the brand for people who accomplish the greatest heights in human history. But this is a great way to slide in and take a little slice of that history too.

David Rosenthal

By choice, by the astronauts' choice.

Ben Gilbert

Much like Sean Connery.

David Rosenthal

What could be better? They're not going to wear this inferior product.

Ben Gilbert

I'm sure this is Rolex's version of history, but supposedly NASA reached out to Rolex first because they knew that test pilots preferred GMT-Masters. There was a mix-up in Rolex's New York purchasing office that led to Omega being selected instead.

David Rosenthal

If you work at Omega, please contact us and tell us the real version of this story, because we know no one at Rolex is going to call.

Ben Gilbert

Let's hear at least Omega's side of this.

David Rosenthal

Whatever the case, this is all building so much legend, lore, and romance around the ultimate lifestyle brand.

As I said earlier, this really is the architecture of André Heiniger. We talked about the J. Walter Thompson relationship, but I mentioned Mark McCormack and IMG. Starting in the mid-1960s with IMG is when Rolex really turbocharges and formalizes the testimonee, brand-ambassador partnership.

These professional watches are happening, but Rolex has also advanced its dress line. It's come out with the Day-Date, nicknamed the President.

Ben Gilbert

It's ironic that the first president to wear Rolex wore a Datejust, not a Day-Date.

David Rosenthal

Future presidents wore Day-Dates. But back to IMG: IMG was the first modern talent and celebrity-endorsement agency. It was visionary of Mark McCormack to found it in 1960. He brokered tons of celebrity endorsements and worked with Rolex to sign the Big 3 in the golf world: first Arnold Palmer, then Gary Player, then Jack Nicklaus.

For their whole careers—and probably their whole lives—they were Rolex men.

Ben Gilbert

That's effectively the blueprint for everyone from Federer and Tiger Woods forward.

David Rosenthal

In golf today, if you go forward to Tiger Woods, Annika Sörenstam, Scottie Scheffler, Jordan Spieth, Justin Thomas, Brooke Henderson, Lydia Ko—not everybody, but a large share of the best players are Rolex players.

Ben Gilbert

When you list them off, it sounds like a large group, but I think the strategy is not “a lot.” The strategy is “only the best.”

David Rosenthal

A large share of the very best players. That goes for individual athletes, but also for the events they sponsor. Ben Clymer at Hodinkee pointed out to me that they don't just sponsor the PGA Tour; they sponsor the Masters. They're not going to mess around much beyond that.

Ben Gilbert

Similar to tennis?

David Rosenthal

They'll do Wimbledon.

Ben Gilbert

And now they do all 4 Grand Slams.

David Rosenthal

Arguably, tennis—especially post-Federer—is even more iconic Rolex than golf. They partner with many of the top players in the world, but Federer was transformational.

Ben Gilbert

I don't think the Federer-Rolex relationship is quite like a Michael Jordan–Nike relationship, but it's in that next tier of great athlete partnerships.

There are a couple of interesting things about golf and tennis specifically for Rolex. The overall brands of the sports mesh very well with Swiss luxury watch companies. But going all the way back to the 1930s and the Wilsdorf days, proving that you could keep accurate time while playing golf or tennis was a key marketing message, because you've got shocks impacting the wrist from hitting balls all the time.

Think about that hairspring. Think about that delicate balance wheel floating there, carefully ticking back and forth. I don't really understand how it keeps working perfectly.

David Rosenthal

It is also the type of sport where you can be an elite, top-of-the-world player for a very, very long time, as opposed to other sports. Think about Federer's career, Arnold Palmer's career, and Jack Nicklaus. These people had multiple decades of dominance at the pinnacle of human achievement.

Ben Gilbert

That's right.

David Rosenthal

That wraps up the iconic tool, sport, professional watches.

Ben, you haven't said anything about the model that both of us are wearing on our wrists right now: the Daytona.

Ben Gilbert

The Daytona completely created a market of its own and changed the mechanical watch market period.

David Rosenthal

The Daytona, through a complete accident of history, created the modern watch-collector market.

Ben Gilbert

All the crazy prices, auctions, and insanity that occurs today really is, in large part, because of the Daytona.

David Rosenthal

It's 1 component of it.

Ben Gilbert

I don't want you to oversell it.

David Rosenthal

I've got a lot.

Ben Gilbert

Before we tell that story, now is a great time to think about our good friend of the show, ServiceNow.

Ben Gilbert

The Rolex Daytona

David Rosenthal

The instant worldwide sensation—or not.

7. The Daytona Creates Collectors

Unlike all of Rolex's other watches, the Daytona is a chronograph, or as Rolex calls it, a Cosmograph.

Ben Gilbert

What is a chronograph?

David Rosenthal

A chronograph is a fancy term for a stopwatch. However complicated you thought a regular mechanical watch was, now add something like the Daytona, where you also have a full seconds hand on the main dial that counts seconds, another dial to count minutes, and another dial to count hours, all in addition to the regular watch function.

Ben Gilbert

There are 4 dials on the watch face of the Daytona. Incredible.

David Rosenthal

It turns out Rolex had actually made a chronograph for a very long time. It was the first tool watch they introduced, way back before World War II, before André Heiniger, before anybody was thinking about this stuff. In large part it looked like this, but there was no craze around it.

In 1962, Rolex becomes the official timekeeper of the then-relatively-new Daytona International Speedway in Daytona Beach, Florida. To commemorate this great moment, the next year, in 1963, Rolex officially starts calling its chronographs—again, it had been making them for about 3 decades—Daytonas.

They thought about Le Mans because they were closely involved with the race in France, but the Rolex name needs international appeal and can't have silent letters that Americans can't pronounce. What's better than Daytona? You can look at the word and say it out loud.

Again, the market is America after World War II. What could be more American glamour in 1962 than Daytona Speedway, fast cars, movie stars, and a 24-hour race?

Ben Gilbert

It's perfect.

David Rosenthal

A couple of years later, 1 of the leading men of the era, Paul Newman, stars in a 1969 film called Winning about being a race-car driver. After he stars in the movie, he develops a hobby of becoming an actual race-car driver. His equally famous wife, actress Joanne Woodward, gives him a Rolex Daytona for his racing activities with the immortal inscription on the back: “Drive carefully—me.”

Ben Gilbert

We've been talking about romance, lifestyle, and brand development. It doesn't get more iconic than that.

David Rosenthal

You can totally see how this would set off an insane craze in the market.

Ben Gilbert

Except it doesn't right away.

David Rosenthal

There are so many moments in Rolex history—and in all the stories we tell—where the company does everything in its power to align the stars perfectly and it doesn't work. Then a butterfly flaps its wings several years later and all of a sudden it does.

In 1969, Paul Newman stars in the movie. Sometime in the next year or so, Joanne gives him the watch. Paul Newman is absolutely iconic at this point. He's photographed all over the world, he's a leading style figure, and he's in magazines. This is his watch. He wears it for about 10 or 15 years.

Then, in 1984—long, long after the watch was given to him—his daughter Nell has her boyfriend over. Paul asks the daughter's boyfriend if he knows what time it is. The boyfriend replies, “I don't know. I don't have a watch.” Paul, on a whim, says, “Here, take this 1. It keeps good time,” and gives him the Paul Newman Daytona.

Ben Gilbert

I actually didn't know this story. Swear to God, this is true. That watch sold at auction for the most money ever—$17.5 million, I think.

David Rosenthal

“Here, take the 1. It keeps good time.” At the time, the market for Daytonas—the secondary market for Daytonas—was about $200 for a watch.

Ben Gilbert

To have been the boyfriend.

David Rosenthal

Two short years later, in 1986, for whatever reason, a bunch of dealers in Italy start snatching up versions of the Daytona from the era when Paul Newman's Daytona was made.

It's important to say that in Italy there was a real watch culture. This was true in various parts of Europe at this point in time, in a way that there wasn't in America. Rolex wanted to market to Americans because there was all this rising wealth and people wanted to celebrate their successes, but America didn't have a watch culture the way Italy had both a collecting culture and a style culture. That's why there were secondary-market dealers in Italy.

Ben Gilbert

There is a rumor that around this time, in the early 1980s, Paul Newman had been on the cover of an Italian style magazine wearing the watch—obviously photographed before he gave it to the boyfriend. Maybe that was why people in Italy decided it was a cool watch. Nobody really knows, and nobody has ever been able to locate that magazine cover.

David Rosenthal

For whatever reason, a butterfly flapped its wings and Italians thought the watch was cool. Dealers started buying up the “Paul Newman-style” Daytonas. That's a specific style made by Rolex for a couple of years in the late 1960s and early 1970s. It had an Art Deco-style face and a very particular color scheme that featured red around the edges.

Ben Gilbert

Around the track, where the minutes and seconds are kept.

David Rosenthal

Also a very particular font.

Ben Gilbert

We should say that on the Daytona—and really on all chronographs—there's a cool feature around the edge that gives the watch its signature design. There are units per hour. I don't know if it's logarithmic, but maybe I should work out the equation in my head.

On the version I'm wearing, it starts at 400 and goes all the way down to 60. What that means is that if you press start, drive 1 mile, and then press the same button again to stop, wherever the second hand is pointed around the edge of the watch is your miles per hour for that 1 mile.

If I could drive 1 mile in 1 minute, the hand would come all the way around and point to the top, where it would say 60. It goes up to 400 because race-car drivers.

David Rosenthal

That's awesome. I actually didn't know that's what it did.

Ben Gilbert

You own this watch.

David Rosenthal

I know, I know. I haven't thought about this watch in 15 years.

Ben Gilbert

For anyone trying to figure out what's going on in David's world, David used to work in investment banking, and this was part of the uniform when you got out of college.

David Rosenthal

My dad has been big into watches for a long time. Starting probably when I was in high school and college, he got very big into watches and watch collecting.

Ben Gilbert

Before the market took off in America.

David Rosenthal

Before it took off in any way in the US. I thought he was insane. I was like, “Why are you blowing all this money on watches?” Back then it wasn't even that much money.

I graduated and went to work in investment banking. Back then—and I'm sure still to this day—investment banking had a watch culture. My dad gave me a couple of watches to wear, 1 of which was this stainless-steel, white-face Rolex Daytona.

It was an incredible gift. Back then I thought it was super cool, and all my colleagues, especially the senior bankers, were like, “Who is this freaking kid?” This was not a “I got my first bonus, so I bought a Rolex” watch. This was an investment-banking watch. It wasn't an analyst watch.

Ben Gilbert

Maybe if you made VP you would go get something like this.

David Rosenthal

It was odd for me to wear it. Paradoxically, it killed my interest in watches and my desire to wear them, because I realized it was weird for me to wear this watch. Then I thought, “You know what? I need to stop.” Especially when I got to the West Coast, I thought, “I should just not wear watches. This is too much. I need to get my bearings again.”

Ben Gilbert

Exactly.

David Rosenthal

So then I didn't wear watches at all—nothing on my wrists—until the Apple Watch. I've worn that every day since, until we went to Taiwan and thought we should do a little Easter egg.

Ben Gilbert

We broke out the watches from the safe.

David Rosenthal

The question going forward is, listeners, if you're listening to this a few months or years in the future: Do I keep wearing this? Do I go back to the Apple Watch? What do we do?

Ben Gilbert

I don't know. We'll see.

David Rosenthal

What you're foreshadowing here, though, is the hype over the Paul Newman dial. To be clear, I am not wearing a Paul Newman dial.

Ben Gilbert

The hype trickled out into the rest of the Daytonas and made any Daytona extremely desirable. Sticking with the Paul Newman models, in 1986 prices for some of these models shoot to $330,000 or more.

David Rosenthal

For a watch that Paul Newman gave away to his daughter's boyfriend 2 years before and that was worth $200.

Ben Gilbert

You're right that this 1 event didn't create the global watch-collecting and investing market. But it was absolutely part of it. It was a huge moment of, “These things aren't just purchases. They're investments, and you can trade in them.”

David Rosenthal

Put a pin in that. There's a whole world of the 1970s and 1980s—a parallel universe to Rolex—that we're going to go into here in a minute.

Before we do that, it's worth resuming our history of Rolex advertising. Concurrent with releasing all of the professional watches, Rolex expanded its aperture in marketing. It went from “Men who guide the destinies of the world wear Rolex” to suddenly having scuba divers, pilots, and race-car drivers wearing professional watches for their craft.

Ben Gilbert

We can probably sell a lot of watches by selling that lifestyle.

David Rosenthal

This is where the expansion goes from commanding the world to human achievement: those who sit atop their fields.

From 1967 to 1970, they launched the “If You Were” campaign. Google this—we'll put some links in the show notes. It used big, bold Helvetica font: “If you were flying the Concorde tomorrow, you'd wear a Rolex,” with a picture of the Concorde going supersonic and a picture of the GMT-Master.

Ben Gilbert

So great.

David Rosenthal

This is what pilots at the top of their field are wearing. They stayed a million miles away from features. It was all lifestyle advertising: this is the person you would be if you owned this watch.

There's a version saying, “If you were speaking at the UN tomorrow, you'd wear a Rolex.” There's the Concorde, climbing, diving down to great depths, taming oil fires—I think there's even 1 where they're walking in a volcano. It's a brilliant campaign.

Ben Gilbert

It's everything we've learned from the Mad Men era of advertising. It's completely the opposite of the Mercedes Gleitze era. They're leaning heavily into, “Who could you be?”

David Rosenthal

I think this was the first real step in what made Rolex a challenger to Omega, which had been the standard big Swiss watch brand. Rolex was the 1 to bring lifestyle advertising to bear.

Ben Gilbert

I know I keep harping on the Omega thing. Omega was also worn by the soldiers in the Boer War that Hans had recognized, so they had the history too.

David Rosenthal

They had the history too.

Ben Gilbert

Those ads were Peak Rolex lifestyle era. This second era of Rolex was about moving beyond the product to sell the lifestyle. The Daytona was part of that.

Then, in the 1980s, when the Italian thing and the Paul Newman thing happened and the collector market was built, it was the first real big move Rolex made into the luxury world. It created the 1 model in its lineup that had real hype around it, and that stayed true for decades.

Even in 2010 or so, you could walk into a jeweler who was an authorized Rolex dealer and just buy something out of the case. You could buy a Submariner, Explorer, GMT-Master, or Datejust, but you couldn't buy a Daytona. From the 1980s forward, that was always the spot in the lineup where they'd say, “We'll have to call you about that 1.”

David Rosenthal

Today, if you want to buy a Rolex of any model, you go in and put your name on the waitlist. At some point—maybe a couple of months, maybe a couple of years—you'll get the call that your model is available.

Ben Gilbert

The Daytona is the only model where there is no waitlist.

David Rosenthal

I don't think that's true.

Ben Gilbert

Is that not true?

David Rosenthal

It's impossible to say because Rolex works through authorized dealers, so it's not up to Rolex. It varies greatly from dealer to dealer. I think they're actually called Rolex retailers now; they changed it from authorized dealer.

Ben Gilbert

At least historically, it might be changing amid the insanity right now. If you browse the forums, the lingo I read is that the Daytona is not a waitlist; it's a wish list.

David Rosenthal

That's awesome.

Ben Gilbert

Most other models: if you want 1 and get on a list at an authorized dealer, at some point your turn will come up. With the Daytona, you express desire.

David Rosenthal

I have a few things to say about this, but let's wait until we get to the present day. The entire watch industry is going to fall apart and get rebuilt from scratch, and we have the period in between where we currently are and where we'll end up.

Ben Gilbert

All right, let's go there.

David Rosenthal

This was a whole side quest that I did this episode.

Ben Gilbert

Nice term. Look at us getting all Gen Z.

David Rosenthal

You and I interpreted the assignment differently.

Ben Gilbert

Do an episode on how?

David Rosenthal

You're pandering to Gen Z right now.

Ben Gilbert

What is “side quest” and “interpreting the assignment”? I don't even know.

David Rosenthal

Anyway, we interpreted the assignment differently. You heard, “Do an episode on Rolex,” and viewed it as, “Go as deep as possible on the entire history of the brand itself, the company, the relationship with Aegler, and each watch model.” I heard it as, “Go fully understand the entire watch industry and contextualize Rolex's role within it.”

Here's my best David Rosenthal impression for the Quartz Crisis. I have 2 huge thank-yous for this section: Ben Clymer, the founder and CEO of Hodinkee, whom I spent hours pestering and having phone calls with, and whose site I probably read 30 times; and Joe Thompson, the journalist in the industry, most recently the executive editor of Hodinkee.

Over the last 40 years, Joe has written all the canonical pieces. He was the editor of WatchTime magazine, one of the only people ever to interview a sitting Rolex CEO, and lived through the Quartz Crisis firsthand. He was flying around to Geneva, Taiwan, and Japan and reporting on it live.

Ben Gilbert

You've mentioned the Quartz Crisis, also known as the Quartz Revolution. What is this?

8. Quartz Destroys Mechanical Watches

David Rosenthal

Here we are in the early 1970s. The Swiss are riding high. They're the undisputed champions of watchmaking. At 1 point, the Swiss made as much as 85% of the world's total wristwatches—85% of the market.

Ben Gilbert

This is in 1945, right after the war.

David Rosenthal

Right. They made 19 million of the total 21.5 million watches that year.

Another way to contextualize it: watchmaking is an extremely difficult, specialized skill, like TSMC and Taiwan making semiconductors. In 1945, 19 million watches were produced by 2,500 individual companies, 90% of which employed fewer than 50 people.

Ben Gilbert

Completely decentralized means of production. In many ways, the Taiwan metaphor totally extends. It's like Switzerland was Hsinchu Science Park, and all these companies sort of knit together and collaborate.

David Rosenthal

Exactly. This is an industry built on skilled labor, fragmented across a ton of suppliers, with very little vertical integration. Someone makes the movement, someone makes the hands, someone makes the case, and all this happens in 1 of the most expensive labor environments in the world.

Ben Gilbert

Geneva isn't cheap.

David Rosenthal

It's kind of amazing that there was this labor-intensive industry in Geneva.

That was 1945. 3 decades later, in 1973, it's still going strong. The Swiss peaked at almost 90 million watches made in 1973, up from 19 million 28 years earlier. They're now making 90 million watches a year by this crazy production process.

We keep alluding to the Quartz Crisis, but quartz wasn't the first revolutionary technology supposed to disrupt mechanical watches. There was a half-step along the way—a technology that turned out to be a detour, not the future.

Ben Gilbert

I would guess digital timekeeping, but that's quartz. What else vibrates like a quartz crystal? What do you think could oscillate to keep time?

David Rosenthal

Something radioactive?

Ben Gilbert

A tuning fork.

David Rosenthal

That's a great, weird thing in history. Part of this also comes from Mark Bridge's great research paper. The whole Swiss watch industry had marketed that you could judge the quality of a watch by its timekeeping. Suddenly a tuning-fork watch comes out, and mechanical watches are no longer the best at timekeeping.

There's this crazy watch, the Bulova Accutron. In practice, though, the Accutron wasn't disruptive technology in the Clayton Christensen sense. It was a sustaining innovation: it took the existing thing and made it a little better. The watches still required hundreds of components and handmade craftsmanship.

Ben Gilbert

So they're still difficult to make.

David Rosenthal

Exactly. This meant that existing companies would have to integrate it into their own workflows. There wasn't a wide-open window for a new entrant to use it as a disruptive force.

Ben Gilbert

The thing you need is a new producer coming in and taking a radically simpler approach—say, a Japanese company.

David Rosenthal

Quartz. We all think of quartz as coming from Japan and Seiko. People had been exploring quartz technology for a very long time. The first quartz clock was created all the way back in 1927.

Ben Gilbert

Do you know where?

David Rosenthal

I know the Swiss themselves were doing big industrywide consortiums.

Ben Gilbert

That was in the 1960s and 1970s. In 1927, who could possibly be doing research with quartz technology for timekeeping?

David Rosenthal

I have no idea.

Ben Gilbert

Bell Labs.

David Rosenthal

Bell Labs.

Ben Gilbert

In New Jersey. The first quartz clock was created there.

David Rosenthal

Unfortunately, in 1927 the Bell Labs quartz clock was the size of an entire room.

Ben Gilbert

The ENIAC of clocks.

David Rosenthal

How do quartz watches function?

Ben Gilbert

Instead of the mainspring in a mechanical watch, you have a battery. Instead of an escapement, you vibrate a quartz crystal. Quartz has this crazy property where, if you apply an electrical current and shape it a certain way, it vibrates at exactly 32,768 hertz.

David Rosenthal

That's right. I remember seeing that number. It's weird.

Ben Gilbert

This is called the piezoelectric effect. Interestingly, that was discovered all the way back in 1880 in Paris.

The other important thing to know about a quartz watch is that it requires an integrated circuit. The modern quartz watch depends on an IC to count the quartz vibrations and transform them from 32,768 hertz to 1 hertz—to tick 1 second at a time—or, if you're using a digital watch, to increment the seconds by 1 each time.

David Rosenthal

By the early 1970s, you've now got integrated circuits.

Ben Gilbert

Exactly. The first quartz watch that hit the market, in 1969 from Seiko, depended on the invention and miniaturization of the transistor and integrated circuit before it could happen. That's why we're stuck waiting from the 1920s until 1969 before it can be used in a watch.

David Rosenthal

The whole thing is Bell Labs.

Ben Gilbert

Exactly. Everything we've talked about so far is a manufacturing story, a craft story, and an apprenticeship story. This is a technology story.

Amazingly, as you pointed out, the Swiss did see this coming. Like Kodak, which famously invented digital photography in its lab, the Swiss saw what happened with the tuning fork and wanted to be ready.

In 1962—7 years before the Japanese debut of the Seiko Astron—there was a quartz chronometer in a lab at the Centre Électronique Horloger, or CEH, in Switzerland, that was twice as accurate as a mechanical watch. They just didn't have an impetus to be first to market.

David Rosenthal

Why would we? This is really dangerous for our industry. We've made it. Let's keep this in the lab.

Ben Gilbert

Over in Japan, the Seiko Astron launches in 1969. You would not have guessed it was going to disrupt the whole industry. It cost as much as a new car and wasn't more accurate. It could be off by up to 5 seconds a day.

David Rosenthal

So what's the big deal?

Ben Gilbert

Just like semiconductors, they get on the learning curve. It's a technology story based on semiconductors, so the price-value curve it follows looks much more like the early PC from the Microsoft episode we did.

The fact that it's in watches, because that's the consumer need being filled, isn't relevant for predicting how much better it's going to get. You should be looking at the technology.

The quartz watch starts at a Toyota Corolla price point and comes down in price a ton. It used far fewer parts and required very little know-how to assemble. You could invest upfront in machinery and have very low variable costs and labor costs. For the first time in watchmaking, you had economies of scale and operating leverage.

It was a technology product in an artisan market.

David Rosenthal

This whole thing happens so fast. In the early days, the Swiss industry—and a lot of makers, including Rolex—released their own quartz models too.

Ben Gilbert

Hold on to that for a second.

David Rosenthal

Here's how the Quartz Revolution went. The Japanese think of it as the Quartz Revolution; the Swiss think of it as the Quartz Crisis.

By the end of the 1970s, you could get a quartz watch for cheaper than a mechanical watch, and it was more accurate. In 1979, mechanical watches were, for the vast majority of scenarios, functionally obsolete.

Unless you're an astronaut, pilot, or adventurer who prefers a spring over a battery that could die, there's no practical reason to buy a mechanical watch again. The Olympics were being timed with quartz timepieces.

Ben Gilbert

Omega quartz at the Olympics.

David Rosenthal

Interesting.

Ben Gilbert

Obviously, this isn't the end of our story. Mechanical watches would go on to become a better business than ever—50 years later, very different, but much greater in revenue than ever before.

David Rosenthal

There were a few iterations of how this went. American firms tried to make quartz watches with LED technology. The Hamilton Pulsar came out in 1972. These were really cool to look at, but in the long run they were a complete failure. You had to push a button to turn on the LED, so it took both hands to read the time: 1 to wear the watch and 1 to push the button.

Some companies followed into the market starting in 1974. They will be very familiar to Acquired listeners: National Semiconductor, Fairchild Semiconductor, and Texas Instruments.

Ben Gilbert

There we go.

David Rosenthal

Then came Commodore, Intel, HP, Hughes Aircraft, and dozens of other companies.

Ben Gilbert

Hughes Aircraft got into the market?

David Rosenthal

Yes. These companies made integrated circuits and thought they could make consumer products around them too, because they made the internals.

But they weren't great at building brands. They were all B2B companies. They were also horribly commoditized. This market immediately became a commodity, had no barrier to entry, and all the profits were arbitraged out.

LED was the failure. The next step was 2-fold: quartz movements powering analog watch faces, which started with the Seiko Astron, and digital LCD watches with liquid-crystal displays.

Digital LCDs ended up being vastly superior to LEDs since they were always on, and they also worked on a quartz movement. Seiko, Citizen, and later Casio were extremely successful for a time making these in Japan.

Hong Kong became the powerhouse for inexpensive manufacturing of all this, along with Taiwan, South Korea, and mainland China.

By 1980—just a few years in—Hong Kong was already exporting 126 million watches a year, half of them digital.

Ben Gilbert

Switzerland at its peak made 90 million.

David Rosenthal

And then, a few years in, Hong Kong has 126 million. By 1981, Japanese watch exports surpass Switzerland. Seiko was great at brand building, advertising, and messaging in a way that the American B2B semiconductor firms were horrible at.

By 1985, just 4 years after Japan meets Switzerland, Japan's exports are 3 times Switzerland's.

Ben Gilbert

That's incredible.

David Rosenthal

Now that you know this, this is the backdrop in which the Paul Newman craze happens.

The Swiss market's global share falls from 85% at its peak in 1945 to just 15% by 1980. The number of firms falls from 2,000 companies in 1960 to fewer than 500 in 1980. It was absolutely destroyed.

Quartz accounted for only 3% of units in 1975. By 1979, 31% of new watches were quartz-powered. From 1975 to 1981 or 1982, you have a complete running of the table. For the old reason to buy a mechanical watch, there is zero reason to buy 1 anymore.

Ben Gilbert

This is massively impacting the entire Swiss economy.

David Rosenthal

It's an extinction event for this huge industry.

Ben Gilbert

There's a whole separate story about the founding of the Swatch Group, how many Swiss brands were rolled together, how a bunch went bankrupt, and how some were sold off to conglomerates.

Interestingly, Rolex was independent. It was owned by a foundation and had no shareholders. It also managed to resist joining the Swiss cartel that was colluding around a national strategy. It could do its own thing.

David Rosenthal

The whole watch world by volume became almost entirely quartz. The market for time-telling as a function went entirely to quartz, full stop.

But a new massive market emerged that had been lurking in niche auctions: watch aficionados who valued pieces for their complexity, artistry, and rarity.

Rolex figured out how to build an enormous, bigger-than-ever business in this completely new market—enthusiasts who drive excitement, the auction-house world, and a lifestyle aura of success.

This is where we told the story as part of the Daytona story, because that's where it belongs. The Italian affair, the Paul Newman affair, was the luckiest thing that ever happened to Rolex. It gave them the golden opportunity to do that.

Ben Gilbert

This is finally clicking in my head. It's not that the mechanical watch made a comeback. It's that an entirely new market emerged, and it turned out to be the perfect market for the mechanical watch after its initial market got wrecked.

David Rosenthal

I think there's another level of nuance. Rolex was better positioned than most of the other Swiss companies because it had already transitioned to lifestyle. But that would not have been enough.

Eventually, Seiko and Citizen were also going to transition to lifestyle companies. What you say about yourself by wearing your watch isn't defensible in the long run against technology disruption. Wearing an Apple Watch—what model, style, or band you have—says a lot about you too.

What is defensible is a luxury strategy. A luxury strategy expands to managing the entire market and overall brand management. It means managing the secondary market and supply on it. It means doing things like pulling a model from the market when the Paul Newman craze is happening. It means vertically integrating to ensure absolute product consistency. It means instituting waitlists, killing or pausing your most successful products, and not changing your price in response to demand shifts.

A purely lifestyle company wouldn't do all those things.

Ben Gilbert

Remember Fossil, the US watch company that is now basically bankrupt? It was a lifestyle watch company, but it wasn't a luxury company.

David Rosenthal

That was the fashion-watch craze, where quartz technology enabled a wave of $25 watches. You could own 5, 6, or 7 and wear them with different outfits. That was an interesting market for 20 years before technology obsoleted it too, with the smartwatch.

Interestingly, do you know what Swatch stands for?

Ben Gilbert

I always thought it meant Swiss watch group.

David Rosenthal

That's the common perception. It means “second watch.”

Ben Gilbert

These watches are so cheap you can have a second 1.

David Rosenthal

Exactly. It's a viable lifestyle strategy. These watches are so cheap you can have a second 1, and each says something different. It's a fashion strategy, but not a luxury strategy, and it's still subject to functional displacement, as happened with the Apple Watch.

Ben Gilbert

So we're at the complete demise of Switzerland, thinking about how it could get better in the future. But there's a whole parallel story: the renaissance of mechanical watches and how they come to fill this new market.

David Rosenthal

Before we do that, we want to thank 1 of our newest sponsors here at Acquired, Huntress.

Ben Gilbert

How did Rolex respond to the Quartz Crisis?

9. Rolex Chooses Mechanical Luxury

David Rosenthal

We knew that there was a transition to luxury and that it was in response to the Quartz Crisis, but you go read everything out there and nobody actually chronicles this. They talk about the Quartz Crisis, the creation of the Swatch Group, and saving what's left of the Swiss watch industry. Separately, they talk about Rolex through the years building the lifestyle brand with all the race-car stuff and advertising.

But Rolex was in Switzerland during the Quartz Crisis. Please connect these dots.

David Rosenthal

The end of the story—spoiler alert—is that Rolex is doing more than $10 billion in annual revenue, way more than any other company in the space.

Ben Gilbert

Rolex is 30% of the revenue in the entire Swiss watch industry.

David Rosenthal

It's insane.

There's a lesson here. In part, the lesson is that it is incorrect to describe markets by the products in them. You should describe markets by the job to be done.

The market of wrist-based time telling was no longer available to the Swiss; it entirely went quartz. But there was a market for something different that the Swiss were great at if they were set up, positioned, and managed correctly.

This isn't the high end of the watch industry and the low end of the watch industry. These are 2 completely different customer needs.

Ben Gilbert

There's an arc to this story. Rolex sits back, sees what not to do, sees what to do, and then does it.

David Rosenthal

Here's my attempt at chronicling what happened. I would love feedback from watch nerds if there's anything I missed, but this is how it seemed after reading 5 books and talking to Joe, Ben, and all sorts of friends in and around the industry.

There are 3 concurrent stories here, none of which are Rolex. There's the Omega story, an unlikely corner of Swiss watchmaking with Blancpain, and the auction houses. Once you understand those, you understand the Rolex story.

First is Omega. They blew a lead in the ninth. That's the only way to put it.

Ben Gilbert

You're being my foil throughout the episode, saying Omega was also big—maybe bigger than Rolex—the whole time.

David Rosenthal

Coming into the 1970s, Omega has its watch land on the moon in Apollo 11. It's the sponsor of the Olympics. It's an iconic brand.

Joe Thompson tipped me off to this: in a Gallup study conducted in 1978, they asked, “Have you heard of Rolex?” 8 out of 10 Americans answered no.

Ben Gilbert

Wow.

David Rosenthal

Less than 20 years later, 8 out of 10 said yes. Rolex did something incredibly right between 1978 and 1998 to go from 20% brand awareness to 80%.

As late as 1977, in the Quartz Crisis, Omega was still the third-largest watch brand in the world behind Seiko, the darling of the Quartz Revolution, and Timex, the volume player on the American side of quartz.

In many ways, Omega should have been Switzerland's most likely horse to ride out the crisis. But it reacted extremely poorly.

Ben Gilbert

What did it do first?

David Rosenthal

A whole bunch of models.

Ben Gilbert

What did it do second?

David Rosenthal

It went heavily into quartz.

Ben Gilbert

What did it do third?

David Rosenthal

It threw the kitchen sink at strategy. It made a bunch of models at a broad range of price points, diluted the brand, and licensed the brand out to other companies.

From afar, it looks like panic, rather than asking, “What are we uniquely best at in the world, and how do we lean into that?”

Omega thought the quartz thing was essential to get right because it was the future, so it switched production to quartz. That's essentially what the whole Swiss industry did. They either fell into the trap, went bankrupt, or got rolled up—Breitling, Heuer, you name it.

The glaring issue in hindsight is that quartz required a completely different set of competencies: a different culture, headcount, and cost structure.

Ben Gilbert

As you said earlier, quartz is fixed cost. It's a technology business with fixed-cost leverage. Swiss mechanical watchmaking is a variable-cost business. They happen to both tell time, but the means by which they do so—and the types of companies you need to build—are entirely different.

David Rosenthal

The other thing that killed Omega is that it had local agencies. Omega would import its movements, and then the agencies could design their own cases to suit the local market. There weren't internationally standardized models to build a brand around.

Ben Gilbert

That's a major luxury no-no.

David Rosenthal

A Birkin is a Birkin.

Ben Gilbert

Exactly.

David Rosenthal

Rolex, by the late 1970s, is importing whole watches. It has its core 6 or 7 watches that people find iconic and is leaning into the idea that you need 1 single global brand and product line.

It's funny that if you look at real enthusiast historians, they bemoan that Rolex stopped innovating after the golden era in the 1950s, when it introduced all the sports watches.

Ben Gilbert

No, that's the point. They got the core product lineup set, and then they rode that horse. Once you create the Porsche 911, you should tweak the 911 once every 7 or 8 years. That way, you can buy a 911 just like your grandfather bought a 911.

David Rosenthal

To close the Omega story: this is the company that governments and militaries wanted to work with, the company Rolex was trying to beat with its innovative ads and positioning, and the first company to launch a dive watch before the Submariner.

Omega rushed into fighting the Quartz Crisis head-on when it simply wasn't built to do that.

Ben Gilbert

This is where the divide appears. Rolex becomes Rolex, and Omega doesn't become that brand. Omega makes cool watches, but it isn't the brand paying MGM to be in James Bond movies.

David Rosenthal

Rolex had the cash to wait. It was privately owned, very successful, and wealthy. It could take 2 or 3 years and see how things played out.

Ben Gilbert

If your ownership structure is different, or you have debt, or you're not as profitable, you don't have that luxury. You don't have the margin of safety.

David Rosenthal

Chapter 2: a guy named Jean-Claude Biver, an executive at Omega, resigns out of frustration.

Ben Gilbert

This thing sucks. They're so timid.

David Rosenthal

He's the Morris Chang of Omega.

In 1983, Biver buys Blancpain, which had been popular in the 1950s but had disappeared. He buys it with the idea that he will resurrect it as a mechanical-only luxury brand.

The rest of Switzerland was thinking, “How do we take our big, bloated, old-world companies and ride out this technology transition?” Biver says, “I'm just going to buy the brand.” The goal is limited-production, handcrafted watches. Scarcity and the high cost of making them will lead to high prices.

He picked up the brand because everyone was panicking. In inflation-adjusted terms, I think he paid about $16,000.

Ben Gilbert

This is like Bernard Arnault buying Dior out of Boussac.

David Rosenthal

Exactly. Biver would later sell Blancpain a decade later for 60 million Swiss francs. Back then, that was real money.

He comes up with a marketing slogan to describe the essence of the brand: “Since 1735, there has never been a quartz Blancpain watch, and there never will be.”

Ben Gilbert

It's a great slogan because quartz is 13 or 14 years old, but he invokes 1735. For the first few hundred years, it was impossible to have a quartz Blancpain.

David Rosenthal

Perfect. The idea is that if you want to buy a commonplace, machine-made quartz watch, go right ahead. If you value traditional craftsmanship, buy Blancpain. They are selling champagne and caviar, and the other companies are selling calculators over there.

Rolex is watching this play out and thinking, “That's the playbook.”

Joe Thompson has a great quote that it was a feat of jujitsu to take the weakness of the mechanical watch—old technology, inaccurate, labor-intensive, expensive to produce—and turn those things into strengths: old-world craftsmanship supported by artisans, in accord with 400-year-old traditions, to make rare, expensive masterpieces.

Blancpain and Biver deserve credit for the move, but in practice they had nothing to lose. It was a fun Hail Mary. I don't think Biver could have predicted how well this strategy would work for Rolex.

Ben Gilbert

Blancpain had the right strategy at small scale, with nothing to lose.

David Rosenthal

Chapter 3: the auction houses.

The mechanical-watch renaissance came first from auction houses. What do auctions value? Rare things. For a long time, that meant vintage pieces—old things, mostly falling apart, where the surviving examples could command a lot of money.

Mechanical watches were becoming rare because the whole market was disappearing. Companies were going out of business. A few extremely high-end producers, like Patek Philippe, could fetch more than ever at auction, even for new watches.

Patek is the poster child. It came out with the Calibre 89. Have you heard of this watch?

Ben Gilbert

I'm very familiar with Patek Philippe, but I haven't heard of this watch.

David Rosenthal

You don't wear this on your wrist. It weighs multiple pounds, and you hold it with 2 hands. It's the most complicated watch ever made.

Ben Gilbert

Wow.

David Rosenthal

It required computer-aided design to manufacture. The strategy in 1979, internally at Patek, was that for the big anniversary celebration in 1989, they wanted to make the most complicated watch ever made.

It had something like 30 complications. It made people go nuts. At auction, it sold for more than $3 million—a landmark high. It was mentioned on Saturday Night Live in a skit: “Who would pay $3 million for a watch?”

Ben Gilbert

A completely high watermark.

David Rosenthal

It kicked off the new craze of complication makers. People saw it and thought, “I have to add as many complications as possible to my watch.” They got a little goofy.

Interestingly, Rolex never participated in that.

Ben Gilbert

They do their own thing. They want to make the best-engineered, extremely functional, extremely reliable watch—not the most flamboyant, artistic, or complicated.

David Rosenthal

The 911 you could have bought 30 years ago is the 911 you have today, but today's 1 is better engineered.

Ben Gilbert

Exactly.

David Rosenthal

This auction-house story, from 1977 to 1985, is essentially the only interesting part of the mechanical-watch world. Then it sparks the idea that new mechanical watches, especially crazy complication watches, can be interesting too.

Around 1985, the Paul Newman dial goes nuts in Italy.

Ben Gilbert

I think a huge piece of this story is that the auction-house market sparked interest in new watches.

David Rosenthal

It highlighted rarity.

Ben Gilbert

So we've got Omega—what not to do. Blancpain—what to do at small scale with nothing to lose. The auction houses took the used market, for lack of a better term, and sparked the new market. What's Rolex doing?

David Rosenthal

At first, Rolex explored quartz like everyone else, but very carefully. The Oysterquartz feels profane to even say.

Ben Gilbert

I kind of want one. I think they look extremely cool. They're angular, and the integrated band into the watch face is great.

David Rosenthal

Rolex poured a huge amount of R&D into quartz watches but didn't productize most of it. It did small runs of the Oysterquartz, a very Rolex way to do quartz that many people have called overengineered.

It pretty quickly got to the idea that if it wanted to lean into mechanical watches as a differentiator—despite being a worse timekeeper—and emphasize the complexity of the mechanical process, it should lean into that romance.

Quartz violated Rolex's ability to tell that story.

There's a great passage in the book Electrifying the Wristwatch by Lucien F. Trüb. It says:

“André Heiniger was a true visionary. His opinion was that the originally very costly quartz watch would soon be commonplace. This had already happened with transistor radios, TV sets, and pocket calculators. Top-quality mechanical movements would always remain expensive and exclusive due to the large amount of highly qualified labor required for manufacturing these parts and assembling them. The inescapable fact that a mechanical device can only tell time approximately could easily be hidden by writing ‘Superlative Chronometer Officially Certified’ on the dial. Wealthy people don't need an instrument that tells time. They want a beautiful and exclusive object on their wrist.”

Ben Gilbert

It's an amazing full-circle moment back to the original wristwatch market, which was ladies' jewelry. Part of the signaling was that you didn't care about the accuracy of the time; you cared about the beauty and what it said about you.

David Rosenthal

Exactly. I was trying to determine whether this was a risk Rolex took—whether it was counterintuitive. I asked Joe Thompson. He said that in the late 1970s, every watch reporter knew 1 thing: mechanical watches were doomed. Every company told you that, including the Swiss companies.

It was tremendously ballsy to continue emphasizing the mechanical watch.

Ben Gilbert

Or, like Morris Chang, “I bet the company, but I knew I'd be right.”

David Rosenthal

They took their time. They waited, watched what not to do, saw the Blancpain playbook of what to do, and then hit the gas. They were also starting to see what was happening in Italy, as you described.

The other thing making the Italian market take off was that the Daytona became part of a uniform. For young men, wearing a bomber jacket and a stainless-steel chronograph on your wrist was a look.

Ben Gilbert

I need to get a bomber jacket now.

David Rosenthal

Midlife crazies here we come.

I think your thinking about Rolex's independence is exactly right. In 1944, when Hans's first wife died, he created the Wilsdorf Foundation and put all his ownership into it, much like the IKEA foundations we talked about in that episode.

The primary purpose of the Wilsdorf Foundation is to ensure the continued operation of Rolex. It is even more ironclad than IKEA's because IKEA is a rat's nest of different structures and country foundations. Rolex is 1 foundation in Switzerland, which has the most privacy- and foundation-friendly laws in the world.

The foundation is also charitable and disperses huge amounts of money, much of it locally in Geneva. But make no mistake: it isn't responsible for shareholder returns. Number 1 is the continued operation of Rolex. It can have 3 bad years in a row and the CEO might not get fired.

Ben Gilbert

They're playing a long game.

David Rosenthal

Very emblematic of that: in 1978, in the middle of the Quartz Crisis, when Omega was throwing things at the wall, Rolex releases the Sea-Dweller 4000.

Ben Gilbert

More of the same.

David Rosenthal

Exactly. “What should we do? More of the same. Let's go down to 4,000 meters.”

Rolex had a built-in hedge. It would have been in great shape if it needed to go quartz. It had the brand and the technology to do it well. It had the Oysterquartz. It just hoped it wouldn't come to that.

If Rolex had gone quartz, it would probably be fine today. That would have been a way to build a good business. The way to potentially build a great business was to try this crazy Blancpain strategy at scale with 1 of the biggest and most successful brands in the world.

The important thing is that Rolex maintained the option to play the strategy Omega was playing if it needed to. It hoped it wouldn't come to that.

Ben Gilbert

And it didn't.

David Rosenthal

By 1989, it was extremely clear the strategy was working. Along with Patek Philippe, Rolex had record sales and record profits.

Patek was similar in strategy. It had early exploration into quartz, but came to the same conclusion: “Our company isn't going to be good at this, so we either need to die trying or lean into this heritage and handcrafted-craftsmanship thing.”

It was an easier decision for Patek because it was only making 9,000 watches a year. Rolex was making about 100,000.

Ben Gilbert

As you said, it was a very well-managed but ballsy decision on Rolex's part.

David Rosenthal

Patek is also, at least today, in a very different part of the market from Rolex. It's in the dress-watch and complication world.

Listeners, we've been lying to you this whole episode. Rolex is not actually a luxury company.

Ben Gilbert

I totally disagree. That's my opinion.

David Rosenthal

It's arguably not even a craft product. It's an exceptionally well-made industrial product with exquisite engineering and amazing branding.

The luxury world of watches is Audemars Piguet, Patek Philippe, and others. These watches sell for 8, 10, or 30 times as much as Rolex watches, and they produce far fewer of them.

Rolex is an industrially engineered, beautiful, consistent, reliable product. It's not art, complications, or fashion. It's mass-produced. It sells 1.1 or 1.2 million products a year.

Ben Gilbert

Maybe our definitions of a luxury company are different. If you define a luxury company as the most expensive, highest-end items, I agree that Rolex isn't that. That's Patek and some of the other low-volume companies.

The reason I think Rolex is a luxury company extraordinaire is that it manages the market rather than participating in it. That's what Hermès does better than anybody else. It manages the market, and Rolex does the same thing.

David Rosenthal

Rolex is completely in control. It could sell its products for much more than it does, but it doesn't because that is the right long-term decision.

There are a bunch of other elements of the luxury strategy that come into the next CEO, André Heiniger's son Patrick, who takes over in 1992.

Ben Gilbert

If we look at luxury versus premium, using the definitions from the LVMH episode, Rolex is absolutely luxury. You're not buying Rolex for its features. You're buying it for what it says about you.

David Rosenthal

It is a high-volume luxury player, in comparison with Patek Philippe or Audemars Piguet.

Ben Gilbert

The Birkin bag is a good comparison. Price-wise, they're similar. You get a Birkin for $12,000 or $15,000—an insane amount of money, but relative to what they could charge or what the secondary-market prices are, it's similar.

David Rosenthal

Take us to 1990.

10. Rolex Controls Its Market

In 1992, André retires and his only son, Patrick, takes over as CEO. Patrick had joined in 1986 as commercial director, right at the height of the Paul Newman craze.

What he really did within Rolex was vertically integrate the company. Most importantly, he presided over the acquisition of Aegler in 2004, for a rumored roughly 1 billion Swiss francs. Rolex bought Aegler and made it officially in-house.

He also consolidated all the factories. Every physical location where parts that went into Rolex watches were made—whether in-house or by third-party suppliers, from about 30 locations throughout Switzerland—was reduced to 4 large, consolidated sites where Rolex owns and produces everything in-house.

Ben Gilbert

This is super important.

David Rosenthal

It's all in service of the luxury strategy of brand management.

Ben Gilbert

I owe a big thank-you to James Dowling, 1 of the co-authors of The Best of Time, who helped me understand what you were talking about earlier with Omega, where it had a core movement but different end models and cases in different regions.

That is the absolute opposite of what you need to do as a luxury company. You can't have 1 that's better than another, different levels of quality, or imperfections in certain markets.

That's critically important because the clientele buying these products is global. They're comparing them with one another.

David Rosenthal

You can't sweep this under the rug in the watch industry because of the history of fragmented suppliers providing different parts to different brands. There was wide variation in quality among products.

Patrick said, “We need to make sure every Submariner that comes in a Rolex box is of uniform quality.” So he shrank the suppliers from 27 down to 4.

Rolex bought its bracelet maker. It started forging its own metals in-house—gold, steel, and proprietary materials beyond its famous 904L steel. It brands them as Rolex innovations: Oystersteel and Everose.

Ben Gilbert

It already had a lot of control over its future through private ownership, but now it really does, because production is also in its own hands.

David Rosenthal

This builds into the lore. Just as Hermès has artisans it trains, its own schools, and its own pipeline, Rolex has the same thing in these 4 megasites. It has its own technology, people, and machines.

Ben Clymer has an unbelievable piece on Hodinkee about his experience touring the facilities. You read it, see the photos, and hear them talk about making all their machining and tooling in-house.

There's 1 giant hallway. Ben and James ask why it's so big, and Rolex says, “We designed it so that the width of our biggest machine is multiplied by 2, so we can get bigger ones in the future.”

It's all about vertical integration. It creates the uniformity, myth, and uniqueness of what you're buying when you buy a Submariner or Daytona.

Ben Gilbert

It's true. After reading Ben's piece, I took a step back and thought, “Rolex actually is the highest-quality thing.”

Who else makes its own machine, then opens and closes the clasp 1,000 times in a few minutes to test it? Who else forges its own metals, makes all its own movements, and quietly invents new components without advertising them because it just wants to make the watch a little better, even while keeping the same reference number?

It's going to absurd lengths to make these the highest-quality engineered and produced products in the entire industry—or in any industry.

David Rosenthal

That's the product and production side, and that's the story of Patrick's time as CEO.

In 2008, sadly, he develops health issues and passes away far too young. Leadership transitions first to Bruno Meier, who had been the CFO, and then in 2011 to Gian Riccardo Marini, a 40-year Rolex veteran who had come up through Italy.

Ben Gilbert

It's strange to have 2 new CEOs in short succession. Over 90 years, Rolex had 3 CEOs.

David Rosenthal

That speaks to the ethos of small, iterative changes over long periods of time.

Ben Gilbert

What other companies had 3 CEOs in the better part of a century?

David Rosenthal

It was an accident of timing. They then had 2 CEOs with relatively short tenures because they were older, but both were long-term Rolex veterans.

What they do together through 2008 and the financial crisis is the other side of the equation: the demand side that cements Rolex, in my mind, as a luxury player.

The financial crisis was huge for the watch industry in a counterintuitive way. I lived through this as a banker on Wall Street right out of college. I graduated in 2007, and the first year I was on Wall Street—before the crash—was the height of watches. It was borderline acceptable for me to wear my Daytona because times were good. Everybody was spending bonuses on Swiss watches.

Then the crash happened and all of that dried up overnight. Austerity was the name of the day. It hurt a lot of other watch brands, which cut their prices to try to save revenue.

Rolex didn't do that. It didn't cut prices, and it didn't stop sponsoring the US Open.

Rolex also zeroed out ad spend.

Ben Gilbert

Rolex didn't cut prices or stop sponsoring the US Open.

David Rosenthal

If you're Rolex, you think, “How long is this financial crisis going to last? 5 years? What's 5 years? It's probably more like 2. We don't have shareholders. We don't need to make our quarter or next year. We have enough cash cushion to ride this out, so we're going to make the right 5-, 10-, and 20-year bets. This is all noise.”

Interestingly, Rolex massively doubled down on marketing spend in the United States during the 2008 financial crisis.

Ben Gilbert

Everyone else was cutting marketing spend and prices on existing products to move inventory. The first time I saw this, I thought, “Who at Rolex made this decision? How could you possibly make this bet?”

As you learn more, it becomes the obvious move. There's a secular trend: the American watch-aficionado market wasn't really a thing until the early 2000s, but it was taking off.

David Rosenthal

This is when Ben founded Hodinkee.

Ben Gilbert

Enthusiast blogs, YouTube channels—not yet in 2008, but they were coming. Rolex and other Swiss brands used to throw events to generate interest in their watches. Someone told us that old fuddy-duddies would show up, or the events would be for Chinese tourists and be held in Chinese.

That's how small America's watch-aficionado market was in the early 2000s. By 2006, 2007, and 2008, it was taking off. In retrospect, it was logical to double down and go get that new customer.

David Rosenthal

The easy half of that decision was to keep going during and after the Great Financial Crisis. That's the textbook playbook.

The hard thing was that the watch industry bounced back in the next couple of years. Once zero interest rates kicked in, by 2011, 2012, and 2013, the market was beyond where it had been in 2007.

Many other brands did a whiplash seesaw. They priced high and tried to become exclusive before 2008. Then 2008 hit, they panicked, cut prices, and cut marketing spend. Then the market roared back, and suddenly they raised prices and tried to cash in.

What does Rolex do? It stays the course.

Ben Gilbert

It doesn't raise prices, but it controls supply.

David Rosenthal

It raises prices slowly every year. It's a modest annual increase that sets the floor. If it does that over enough decades, everyone believes forever that these things will appreciate.

Ben Gilbert

It's almost like the Fed. It's guaranteeing a certain rate of return.

David Rosenthal

There's a great New York Times article from the last couple of months about this dynamic. Other luxury houses raised prices during the post-COVID craziness and priced themselves out of the market once the reset happened. Hermès didn't, and Rolex followed the same playbook over the last 10 years: it didn't price-gouge itself out of the market, intentionally limited supply, let the secondary market go nuts, kept an even keel, and is now stronger than ever after the reset.

Ben Gilbert

Have they gone too far in their unavailability? A common narrative is that Rolex has burned its biggest fans. The waitlists are out of hand, authorized dealers are disrespectful, and Rolex is intentionally limiting supply.

David Rosenthal

One dimension where Rolex has historically been different from Hermès and other luxury companies is that it doesn't control the last mile of retail or the customer relationship. It has always had the authorized-dealer model.

These crazy waitlists are somewhat out of Rolex's control, in a way that Hermès, Louis Vuitton, and Chanel manage their own customer relationships.

Ben Gilbert

Rolex does have its own stores. This was 1 of my big questions during the research: why doesn't it have its own stores? This works well for LVMH, Hermès, and others.

David Rosenthal

The key difference historically is that Rolex is a 1-category company. Hermès can have its own stores because it sells furniture, ready-to-wear, jewelry, and handbags. Even though it sells fewer Birkin bags than Rolex sells watches, the totality of the products supports a dedicated retail footprint.

Ben Gilbert

I don't buy that for a second.

David Rosenthal

Why not?

Ben Gilbert

Rolex has 1,500 authorized dealer locations. If all 1,500 were Rolex stores, it would do a great job paying rent. It doesn't need to sell many other things to lure people into the store.

David Rosenthal

I think that's true now, which is why I think the 2023 purchase of Bucherer matters.

Ben Gilbert

All right. Let's have that debate and then come back to scarcity.

Why did Rolex buy Bucherer in 2023?

David Rosenthal

It spent a rumored 5 billion Swiss francs—maybe 5.5 billion—to buy 1 of, if not its largest, single retail partners. Bucherer has a 100-year-old relationship with Rolex. It was 1 of the first retail partners in the early days.

The Bucherer alliance, along with the Aegler alliance, helped Rolex stay out of the Swiss cartel. In many ways, Rolex has Bucherer to thank for its independence and freedom while the rest of the industry was panicking.

The question is why Rolex should own its retail. It already owns everything else.

Ben Gilbert

There is control over the buying experience and, to your point, list management. As waitlist management becomes more important, that becomes more critical.

David Rosenthal

That's legitimate. There's also more margin and full visibility into customer data.

Ben Gilbert

They don't get that today. Rolex doesn't have customers' email addresses, names, or addresses because that data belongs to the authorized dealer. Rolex doesn't actually know who's buying or liking its products, which is crazy for a modern company of this scale.

David Rosenthal

The elephant in the room is that all these authorized dealers sell other brands. Bucherer sells Omega, and it uses being a Rolex dealer to attract those brands and customers who buy other things.

Once you have Rolex, you're a made man.

Ben Gilbert

Historically, Rolex has said that's fine: sell Patek, Audemars Piguet, and Omega in the same location. Will that change now?

David Rosenthal

Let's walk through the logic. Rolex mostly didn't need to take on the burden, fixed cost, or complexity of owning retail. It dictates how its products are sold, displayed, and marketed, with exacting standards. Over time, retailers have less room to differentiate their own brand and experience. Increasingly, you walk in and think, “Is this a Rolex store?”

Rolex doesn't have to operate the stores. It has about 16,000 employees doing $10 billion in sales. It's an incredibly efficient business from a headcount perspective.

Industrywide, third-party retailers make a 37% gross margin after marking up from wholesale. For Rolex, it's lower—Rolex retailers only get to keep 33% or 34%. I've heard that went down 1 percentage point this year.

Rolex gets to have its cake and eat it too: it doesn't own retail stores but has many of the benefits of a highly controlled retail experience.

Ben Gilbert

I think your points are valid about Rolex increasingly wanting the customer touchpoint, especially for waitlists.

David Rosenthal

Rolex doesn't necessarily do things for gross margins. It's a foundation-owned company. It does things for long-term strategic reasons.

If you buy the premise that operating its own retail locations would pressure Rolex to put more things in those stores than the 6 or 7 core models—and you probably couldn't walk out of the store with one of those anyway—you'd be going to sign up for a waitlist.

That's a very different experience from Hermès retail. You can't walk out with a Birkin, but you can walk out with a scarf, piece of furniture, or Apple Watch strap.

Ben Gilbert

It's astounding that Rolex has had the discipline to remain just a watch company. Imagine the opportunity to become a diversified luxury company: Rolex jackets, sunglasses, fragrance, luggage.

David Rosenthal

Why isn't Rolex in luggage? It could make 904L-steel carry-ons and make Rimowa look like child's play.

Ben Gilbert

I suspect this is part of why it hasn't gone directly into retail.

David Rosenthal

Maybe, but I don't think so.

Ben Gilbert

You think Rolex is going to give in to customers who want other things in the store, or ignore all the free money from Rolex luggage?

David Rosenthal

I could be wrong, but imagine what it takes to operate these retail locations. You're competing for physical space with LVMH in the most expensive, highest-rent, highest-end places on Earth.

You may not care about margins and may be able to take the hit, but shoppers want an experience and to walk out with a product. If there's a Rolex-only store with 6 or 7 models that you can't walk out with, what is it doing?

Ben Gilbert

High-end Bonobos.

David Rosenthal

A high-end Bonobos where you have no idea when you'll get the call.

Ben Gilbert

Compare that with Bucherer. You can't walk out with a Rolex, but you can walk out with a bag full of TAG Heuers.

David Rosenthal

The market isn't exclusive. Anybody who's a watch collector isn't just a Rolex collector. Someone who loves Rolex may also own a Panerai or something else.

Ben Gilbert

So why did Rolex buy Bucherer?

David Rosenthal

It will improve the economics of watches sold through Bucherer, and it will give Rolex leverage over other retailers. But it didn't need that leverage. It can say, “If you want to remain a Rolex authorized dealer, you need to invest a lot of capital in rebuilding this part of the store. We'll get back to you in December about whether we're renewing your contract next year.”

It already has all the leverage.

It will also let Rolex have a tighter grip on watch allocation and customer touchpoints, including waitlist management. I agree that's a huge liability right now, but Rolex didn't need to own the authorized dealers to do that.

It could put a clause in next year's contract saying, “We're managing the list. You can't maintain your own waitlist. If we catch you doing that, you lose your license.”

Ben Gilbert

Great point.

David Rosenthal

Maybe Rolex felt that wasn't ethical—that it was the dealer's business and it had to let the dealer run it. But it could have solved the issue without buying a company representing 8% or whatever of total sales.

The biggest reason may be that Rolex didn't want anyone else to buy Bucherer. It's a 100-year relationship, the family had no one to pass it to, and they were looking to sell.

Rolex is a private company and doesn't want someone else owning an asset with visibility into Rolex, since Bucherer sells so much of its inventory. It doesn't want a public company reporting how many Rolex watches were sold through it. That would be horrible for Rolex.

LVMH would have loved to own Bucherer. It owns Sephora. You don't think it wanted Bucherer?

Ben Gilbert

Bucherer also comes with Tourneau, the American retailer, which I'm sure Rolex doesn't necessarily want to own. But here it is.

David Rosenthal

I think the reason was to keep anyone else from buying it.

The reason people are up in arms about not getting calls from authorized dealers is that waitlists were really only a thing until around 2015 for steel Daytonas. For the rest, you could just buy them.

It's this new notion of having the privilege to spend $7,000 to $20,000 on something and being told no by the local jeweler. That's crazy. Most of the time, they'd say, “Absolutely. Let me walk you to the checkout.”

Ben Gilbert

Rolex could put waitlist management in the contracts, manage the list, and publish how it works. It could earn a lot of customer goodwill without buying retailers.

David Rosenthal

It absolutely could.

Ben Gilbert

I don't think Rolex wanted to be in the luxury business. I think it wanted to be a lifestyle brand with fantastic engineering, to keep making things a little better every year, and to have the best brand it could with customers.

Luxury happened to it. It didn't have much choice after the Quartz Crisis.

David Rosenthal

I heard an anecdote that Richemont, particularly Cartier, decided to start acting like a luxury watch brand and reconvened the watch industry around itself in a luxury way.

For example, instead of competing with Baselworld or the Basel Fair, Richemont started its own event in Geneva and said, “The industry gathers here in Geneva now. We're going to be fancy about it. No one's eating bratwurst on the show floor. We're going to sell watches with champagne and caviar and a presentation ceremony.”

If you're not doing that, that's what watches are now.

Ben Gilbert

I can believe that. Go back to Hans Wilsdorf. That wasn't his vision for the company. His vision was a Rolex watch on every wrist.

David Rosenthal

I don't think Rolex drove that shift. The industry went that way, and Rolex happened to be the most prestigious high-volume player. It's figuring out what it means to be an accidental luxury brand.

Ben Gilbert

I can believe that.

David Rosenthal

Now that we're in scarcity land, have they gone too far in their unavailability?

The main reason Rolex didn't ramp production to meet demand isn't positioning, and it isn't “We're a luxury brand; we don't do that.” It's that Rolex doesn't want to destabilize the business.

Good times come and bad times come. It doesn't want to be the brand that ramped production 20% in 1 year and then had to slash MSRP, embarrassing customers who bought at full price and suddenly see the product discounted 20%.

Ben Gilbert

That's a horrible way to destroy a brand.

David Rosenthal

Cartier overproduced watches in 2016 and had to destroy hundreds of millions of dollars of inventory. That doesn't happen to Rolex.

It makes very incremental, slow increases to production over time. That's what has served it well. It never wants to be close to the line of real demand.

There's a business-physics lesson here: it's very hard for a business to become smaller than its largest-ever size.

Ben Gilbert

It's like a down round in venture-backed companies. Customers and employees don't like it, and it's hard to shrink overhead to rational new realities after a bubble pops. It doesn't feel the same as when it was always having its biggest, best year.

David Rosenthal

Rolex doesn't want to be in that position. It's conservative to a fault with slow, modest increases in production, and slow changes.

When a bubble brings in a lot of new fans, it's an immovable object meeting an unstoppable force. Rolex isn't going to meaningfully ramp.

The biggest thing it has done is start construction on a new production facility, which will open in 2027 or so. Even that might be a 10% or 15% bump.

Ben Gilbert

Rolex is probably torn. It doesn't want customers whose demands it can't meet, but it also doesn't want to destabilize the next 100 years.

David Rosenthal

New demand is a risk if you're taking a very long-term view. Managing valuable customers who want a long-term relationship with you and are angry while protecting your stability is hard.

Coming back to the waitlist, I think the positive justification is making sure people who become clients, buy products, and participate in the brand really want it and aren't just there because it's the hot flavor of the week.

Ben Gilbert

Rolex cares about that, but not as much as Patek Philippe. Patek wants to appease collectors and true fans.

Rolex acknowledges that it's commercial. It's here for executives who get promotions, doctors, dentists, lawyers, and finance people. That's its bread and butter. It doesn't want to lose the brand patina with that huge volume of material wealth in aggregate.

David Rosenthal

James Dowling put it to me in a visceral way: the typical Rolex buyer isn't comparison-shopping against Patek or another brand. They're comparison-shopping against, “Do I buy this Rolex, or do I upgrade my 911?”

Ben Gilbert

That's interesting.

David Rosenthal

There's 1 more rumor that should justify Rolex. It isn't happy that it can't make enough watches. I maintain that a steel Daytona, a rainbow model, or something rare can stay rare, but Submariners should be on shelves—or at least you should get the call 2 weeks later.

I heard that from 2020 to 2022, Rolex asked employees to come in 6 days a week instead of 5 to meet demand.

Ben Gilbert

If that's true, it's pretty telling about how Rolex feels.

David Rosenthal

There's 1 more piece of the Rolex corporation and story that puzzled both of us. When we were in Taipei to interview Morris Chang, we went into Taipei 101 and walked by Tudor. It was an authorized dealer with both Rolex and Tudor.

Ben Gilbert

I think a lot of authorized dealers—or maybe all of them—if you take Rolex, have to take Tudor.

David Rosenthal

What is Tudor?

Ben Gilbert

Like the British royal Tudor family?

David Rosenthal

Tudor is Rolex's sub-brand. Technically, it's another company owned by the Hans Wilsdorf Foundation. In practice, sure, it's Rolex's sub-brand.

To your earlier point, if you're going to argue that Rolex doesn't want to be a luxury company, a textbook violation of luxury strategy is having a sub-brand. We were asking, “What the hell is this Tudor thing?”

If you look at Tudor's products, a lot of them are Rolex products.

Tudor was started by Hans Wilsdorf in 1926 with the stated purpose of being a more affordable brand than Rolex while maintaining high quality standards. Originally, Tudor used Rolex cases and bracelets with off-the-shelf movements from ETA, now part of the Swatch Group, instead of the movements Rolex was getting from Aegler.

You look at it and it looks like a Submariner.

Ben Gilbert

You walk into a Tudor authorized dealer or go on the website and think, “That looks like a GMT-Master. That looks like an Explorer. That looks like a Submariner.”

David Rosenthal

It almost feels like a knockoff, except that Rolex knockoffs are shockingly good. You could go a decade owning 1 and not realize it.

For the longest time, we wondered what was going on. Then we realized the real limiting factor in Rolex production is movements. Movements are hard to make, and all Rolex movements are Aegler movements—or now in-house Rolex movements.

Tudor does not use Aegler or Rolex movements. It uses third-party movements.

Ben Gilbert

So Tudor is a release valve. It can ramp up production of the Tudor Submariner, GMT-Master, Explorer, or whatever with third-party movements.

David Rosenthal

What do you mean by “release valve”? Customers can't get a Rolex, so they get a Tudor?

Ben Gilbert

I think that rarely happens. But Hans's original vision was that everybody should be able to own a Rolex. This is 1 way for that to happen.

David Rosenthal

I don't think that's it. Tudor is a shockingly low percentage of Rolex's production—less than 1%, if that.

If that were the strategy, they would sell Tudors in volume. Take the Black Bay, the Tudor Submariner, at $4,000. Most people don't know or care about the Black Bay. If they walk in thinking they want a Rolex, they aren't walking out with a Black Bay. Tudor sells so few of them.

Ben Gilbert

So what are they doing?

David Rosenthal

I think Tudor is an innovation lab. It's a way to protect the Rolex brand. If there's something new and interesting that might be a fad in the watch world, Tudor can implement it and figure out how to produce it.

If it flops, that's fine. Watch aficionados who know Tudor expect it to come out with weird stuff that flops. If it's durable, Rolex might get it in 5 to 10 years with more polish and thoughtfulness.

Tudor has tested dial colors, ceramic bezels, titanium watches, and many other things that are slowly making their way into Rolex.

The key thing is that Tudor can compete with Omega and TAG Heuer in the midmarket, so Rolex doesn't have to punch down.

Ben Gilbert

I heard a great phrase: “The shield protects the crown.” The Tudor shield protects the Rolex crown. Rolex never has to risk doing something dumb in chasing a competitor. Tudor can figure it out.

David Rosenthal

It's like the LP show as an innovation lab. If something is interesting but doesn't belong on the main show, or there's no place for it in the lineup, it can still provide value.

Ben Gilbert

The real watch nerds will tell you they love Tudor. Even though it's a $4,000 watch, the movements are incredibly high quality, and consumers may be getting a pretty good deal.

If I go buy an Explorer tomorrow for its MSRP—$8,000 or so—Rolex makes phenomenal margins on it. Tudor doesn't sell many, so $4,000 is only $2,500 wholesale for a high-quality movement, with low economies of scale. Whatever fixed costs exist aren't being amortized across many watches.

I'm sure Tudor isn't losing money, but it may be a great deal for customers.

David Rosenthal

You're right. I like your rationale better than mine.

Ben Gilbert

We both had a lot of conversations trying to figure this out. We were texting each other: “What are they doing? This is the worst luxury company ever.”

David Rosenthal

Level-set us on the company today.

Ben Gilbert

First of all, nobody knows.

There are 2 good ways to guess. 1 is our friend Arvind Narayanan, who did an amazing long-form write-up of the business of Rolex and found excellent public sources. The other is the Morgan Stanley–LuxeConsult industry report, which sent us a copy in preparation for the episode.

We made our own estimates, looked at the Morgan Stanley report, and thought that the most reputable, well-connected person networking with the dealers was probably within 10% to 20% of the truth.

They make about 1.1 million watches a year, maybe a little higher. Morgan Stanley says 1.24 million, so think 1.1 to 1.2 million.

David Rosenthal

That sounds right.

Ben Gilbert

For revenue, think around $11 billion in sales.

The interesting thing is market share. Rolex's share of the Swiss watch market by revenue is insane. Morgan Stanley and LuxeConsult estimate it at 30.3% of the entire Swiss watch industry.

Nobody else comes close. Cartier and Omega are at 7.5% each. The number 2 and number 3 players combined are at slightly less than half Rolex's scale.

Patek Philippe is at 5.6%. Audemars Piguet is at 5%. Then you have massive fragmentation.

Rolex makes something that isn't crazy expensive, but sells the absolute crap out of it on a unit basis.

David Rosenthal

That was revenue. In units, Rolex makes roughly 15 times as many watches as Patek Philippe and 22 times as many as Audemars Piguet.

Ben Gilbert

People talk about these brands in the same sentence, but they're completely different segments.

David Rosenthal

Rolex's average selling price—not the listed Rolex price, but what retailers sell it for—is around $113,000. Audemars Piguet is $48,000, Vacheron Constantin $38,000, and Patek Philippe $40,000. They're totally different categories.

This is part of my argument that Rolex isn't really luxury. It has found the sweet spot in the market. If you think of a curve with units and price, Rolex found the spot where it can maximize revenue: sell an absolute ton of watches that let people express something about themselves while staying away from the true luxury market, where production is very limited.

It's almost its own category entirely.

Ben Gilbert

The secondary market lets Rolex do this. Even though its model lineup has remained stable for decades, the tiny changes in reference numbers and models create incredible scarcity and rarity for people who care.

You segment the market. Certain flavors can become the several-hundred-thousand-dollar Rolex market or the multimillion-dollar Rolex market.

Rolex can participate in what Patek and Audemars Piguet participate in through the secondary market, or through special editions in the primary market.

David Rosenthal

The rainbow-dial Daytona is pretty baller.

Ben Gilbert

The Emoji watch.

David Rosenthal

Exactly. Rolex can make these extremely expensive special editions, both in the secondary market and through limited-edition primary-market watches.

Ben Gilbert

If Rolex weren't as strong in the secondary market, it wouldn't have permission to release special editions selling for several hundred thousand dollars in the primary market.

What it has done so brilliantly is create something the whole world knows about—something everybody sees as a sign of success, of having made it. If you have one, you're like those divers, pilots, and explorers.

As global wealth grew, Rolex got to index into that.

David Rosenthal

A Rolex is a lot of money, and it isn't accessible to most people. But if you work a solid white-collar job in America, get a big promotion, have a major life event, or have a child, is it reasonable that you could purchase one?

Ben Gilbert

It's right on the edge of unreasonable, which is exactly where it needs to be.

David Rosenthal

If you make sacrifices, you can probably do it, depending on your salary.

Ben Gilbert

Since the 1950s, there's been a wealth class of doctors, lawyers, finance people, and recently tech people who can buy a $10,000-plus watch if it's what they choose to buy.

David Rosenthal

It's a sweet market. It's an almost-unreasonable thing that a lot of people can buy.

Ben Gilbert

To your point about luxury, I still maintain that Rolex is managed in the same fashion as the world's best luxury brands, even if it sounds more like a BMW or Mercedes.

David Rosenthal

Cars are expensive and you need 1 anyway. You can spend a lot of money on a 911, but you have the functioning alibi of needing a car you like driving.

Ben Gilbert

No one says, “I needed this because I needed a purse to carry things.”

David Rosenthal

Nobody needs a watch anymore. It has no functioning alibi. It's a pure display of, “I feel like a better version of myself when I wear this.”

Ben Gilbert

I genuinely love the engineering. It's unbelievable. But the alibi is much weaker than in other categories, which probably isn't an accident; it coincides with the takeoff of watches as luxury items.

David Rosenthal

You said Rolex has found the ideal point on the curve. It multiplies 2 pretty big numbers together instead of 1 big number and 1 small number.

Ben Gilbert

They have high volume and high dollars per unit.

David Rosenthal

Exactly. That makes the whole thing confusing.

Ben Gilbert

Calling this the high end or middle of the watch industry is wrong. Mechanical watches serve an entirely different job to be done than they did in the past.

David Rosenthal

This is a new industry with nothing to do with telling time. It's goofy to compare it with smartwatches, quartz watches, or fashion watches just because they look similar and occupy wrist real estate.

Ben Gilbert

We should define markets by the actual job to be done for customers. Coming out of the Quartz Crisis, Rolex found a completely new job to be done for its product and had positioned itself there during the previous 2 decades with professional watches, tool watches, and advertising.

David Rosenthal

Exactly.

Ben Gilbert

Employee count: Rolex has about 16,000 people worldwide, around 9,000 of them in Switzerland.

The Swiss watch industry is about a $35 billion wholesale market across all players, including the high end, Omega, Swatch, and everyone else. Rolex does about $11 billion of that.

David Rosenthal

Where it gets interesting is when we zoom out from Swiss watches. Switzerland produces only 2% of the world's watches.

Ben Gilbert

And everything else is a $10 piece of crap.

David Rosenthal

Switzerland makes around 177 million watches a year, while estimates put total global production between 700 million and 900 million.

Ben Gilbert

That includes smartwatches, cheap $25 watches, and everything made in Hong Kong and China.

David Rosenthal

The 2% of units made in Switzerland accounts for 45% of the dollars in all watches.

Ben Gilbert

Apple alone ships more Apple Watches every year than the entire Swiss watch industry.

David Rosenthal

The smartwatch industry is estimated at around 80 million watches a year. Apple may do 30 million to 50 million, depending on the year.

Ben Gilbert

The 17 million Swiss watches include Swatches, fashion watches, and quartz watches. It's true that 45% of dollars come from 17 million watches out of 700 million to 900 million, but it's even more concentrated because the quartz watches don't contribute much revenue.

David Rosenthal

86% of Switzerland's watch exports come from mechanical watches. The move during the Quartz Crisis to lean into mechanical really worked from a dollar perspective.

Ben Gilbert

40% of all watch revenue in the world comes from Swiss mechanical watches.

David Rosenthal

Amazing.

Ben Gilbert

Now look at net profit. Rolex has 30% of the Swiss market by revenue, but probably more than 30% by profit.

Morgan Stanley and LuxeConsult estimate that of the $35 billion in total revenue for Swiss manufacturers, there is about $11.8 billion in total profit, implying an industrywide operating margin of 29%.

David Rosenthal

Do you think Rolex has only a 29% operating margin?

Ben Gilbert

No. There are people in this category with negative operating margins—big conglomerates trying to get into watches and not generating much profit.

Estimates are between 30% and 40%. I would bet it's closer to 40% for Rolex. My best guess is that while Rolex accounts for 30% of industry revenue, it accounts for around 40% of total Swiss watch-industry profit.

David Rosenthal

Agreed. It's also vertically integrated except for retail, which should create a better profit structure.

Ben Gilbert

Then you get to the balance sheet. They're generating something like $3 billion to $5 billion a year, maybe more. They've done $2 billion to $3 billion for at least a decade or 2.

It's not crazy to think they have accumulated more than $50 billion in cash before investment returns.

David Rosenthal

It's totally an IKEA situation. There's a lot of cash sitting there.

The Hans Wilsdorf Foundation doesn't publish numbers publicly, but people estimate that it gives away around 300 million Swiss francs every year. By your numbers, that's about one-tenth or less of the cash the business generates, and it still makes Rolex 1 of the most active annual-disbursing foundations on the planet.

Ben Gilbert

It's unbelievable. It's a broad base of philanthropic initiatives—environment, science, arts—and not just things that help Rolex. It's a legitimate charitable foundation.

David Rosenthal

A core part of the foundation's mission, which Hans put in its bylaws, is to help the city and people of Geneva. Over the years, it seems to have concluded that the best way to do that is often just to give people money.

If a family can't make rent or has a health issue, it can apply for grants and receive money. The foundation doesn't make a big deal about it.

Ben Gilbert

One thing Rolex definitely does with its money is own some of the most expensive real estate in the world. It owns buildings in Switzerland, prime real estate around Bond Street in London, and property in Milan, Melbourne, Tokyo, and New York.

There's a gorgeous new building about 1 block from Rockefeller Center and Radio City Music Hall. The old Rolex building was nice, but the new 1, scheduled to be done next year, looks unbelievable.

David Rosenthal

They own a building in Manhattan. You've got to put the money somewhere.

Ben Gilbert

They own a lot of real estate in Geneva, a big service center in Dallas, and the school in Pennsylvania. Hilariously, they just bought the building where Omega has its flagship store in Geneva.

David Rosenthal

Omega makes a rent check out to Rolex every month.

Ben Gilbert

Amazing.

David Rosenthal

That's not asset management. That's spite.

Ben Gilbert

I don't know.

David Rosenthal

It's pretty funny.

Ben Gilbert

It's a safe assumption that there's a boatload of money sitting there.

David Rosenthal

How would you value Rolex if it were publicly traded?

Ben Gilbert

You could use a sector multiple from other watch companies, but applying the Swatch multiple isn't right. Maybe Patek Philippe, since it's vertically integrated and has a strong brand, but it's privately held, so we have no idea.

You could use conglomerates like LVMH or Richemont, but there's too much other stuff in there. Rolex is a pure-play, single-brand company with the leading brand in the sector.

David Rosenthal

There's only 1 comp for this business. Maybe 2 with Porsche and Hermès.

Ben Gilbert

That's where I was going: Hermès.

David Rosenthal

Porsche trades at 15 times earnings. Hermès trades at 60 times earnings, or roughly a 20 times revenue multiple. My best estimates for Rolex's growth rate are in the same neighborhood as Hermès, and Hermès's margins are also similar—around a 40% operating margin.

Ben Gilbert

That's where Rolex differs from Porsche. If the growth rates and operating margins are similar, and it's a single premium brand that's best in its sector, you could value it like Hermès.

David Rosenthal

We don't know Rolex's earnings, but you can back into something like $3 billion to $4 billion a year pre-tax.

Ben Gilbert

You could also use a revenue multiple. There are many things Rolex could do to improve operating margins, but it doesn't do them because they would erode its positioning.

David Rosenthal

The range is too wide to give 1 number, but plausible scenarios go from $40 billion or $50 billion to $200 billion.

Ben Gilbert

That's enterprise value before assets.

David Rosenthal

There's no way this business is worth only $40 billion. I don't know whether it's worth $200 billion, but it's worth more than $100 billion before assets. Market cap includes assets, so if it traded publicly with these assets, it would probably be among the top 50 companies in the world.

Ben Gilbert

It could be worth more than American Express, Goldman Sachs, Adobe, Pepsi, Disney, Qualcomm, or AT&T.

David Rosenthal

I like the Rolex business better than a lot of those.

Ben Gilbert

All of this feels profane because they would never do it.

David Rosenthal

If I bought Rolex shares, I could never do anything with them. I could never sell them.

Ben Gilbert

You'd have to ask why you were getting the shares and who was selling them to you. It might be a fake.

We didn't talk about the fake market in much detail, but I think it was great for Rolex for a long time. Rolex was certainly—and probably still is—the most-faked watch brand, if not the most-faked brand in the world.

David Rosenthal

That was good for Rolex while it was raising awareness and building prestige. In the 1990s and early 2000s, it was probably a good thing.

Ben Gilbert

Going to New York and hoping to buy fake Rolexes on Canal Street adds to the myth and legend.

David Rosenthal

Exactly.

Ben Gilbert

Now it probably isn't a big deal. It's also strange that the fakes are so good. You can go to reasonably reputable online retailers and not be sure you're getting an authentic Rolex. Often it's the wrong movement in the right case, or part of it is counterfeit but not all of it.

David Rosenthal

Let's move into analysis.

Ben Gilbert

Power. This is where we use Hamilton Helmer's framework of 7 Powers to analyze what helps a business achieve persistent differential returns—what makes it more profitable than its closest competitor.

David Rosenthal

Quite a task for us here.

Ben Gilbert

Should we just move on?

David Rosenthal

For new listeners, the 7 Powers are counter-positioning, scale economies, network economies, switching costs, process power, branding, and cornered resource.

Ben Gilbert

I think the interesting thing is to stack them against the closest competitor. In some senses it's Patek, in some senses Omega, and in some senses Apple.

I completely disagree on Apple. I'll go to the mattresses on Rolex. It's not a time-telling device. It has nothing to do with function.

David Rosenthal

I agree. However, there's only so much real estate on your wrist, and most people aren't going to wear 2 things on 1 wrist.

Ben Gilbert

I've been dual-watching all week—1 on each wrist—and it's a little much.

David Rosenthal

Do you feel funny?

Ben Gilbert

A little funny.

David Rosenthal

You're right. It is competitive for wrist real estate, and it's irrelevant that they both tell time.

Ben Gilbert

Neither of them tells time. One is a piece of craftsmanship on my wrist, and the other is notification center and fitness.

David Rosenthal

That's a huge reason I wear my Apple Watch. I've worn it to bed every night for 9 years to track calories and sleep.

Ben Gilbert

Same.

David Rosenthal

I don't compare their prices because they don't achieve the same function. If I buy a Rolex, I'll pay about 10 times what I paid for my Apple Watch.

Ben Gilbert

This is a silly exercise because the whole point of the episode is that Rolex doesn't have competitors. There's nobody for it to counter-position against.

David Rosenthal

The interesting question is what gave Rolex power in the 1940s, 1950s, and 1960s. Today it's almost boring: it's branding and category ownership.

Ben Gilbert

When did Rolex actually take risk? Outsize winners with outsize rewards often come from doing something risky or counterintuitive at the right time.

David Rosenthal

I think Rolex made rational decisions and executed better than anyone else. The 3D chess to get Eisenhower's watch, the lifestyle marketing, working with J. Walter Thompson and IMG, and the testimonials—they just did better than everyone else, and that advantage compounded.

Ben Gilbert

Was the Quartz Crisis really a risk? Rolex looked around and was in a privileged position with the resources and structure to make the decision. The same thing happened in 2008. It did the logical thing and had the structure and resources to pull it off.

David Rosenthal

It's dangerous to speak for Rolex because Rolex doesn't speak and nobody speaks for it. But I suspect its answer would be some version of continuity.

There have been major changes and different eras, but Rolex stuck with a strategy, positioning, product lineup, and culture longer than almost anybody else.

Ben Gilbert

The 1 time it really took a risk was the Aegler order.

David Rosenthal

Yes. That isn't the answer for why it has 30% market share today, but it was huge. The order was 5 times the capital Rolex had in the business.

Ben Gilbert

So it was either a multiyear order, financed, or both.

David Rosenthal

I'm sure Aegler extended credit.

Ben Gilbert

Since then, Rolex has made very shrewd decisions and executed immensely well. That feels very Swiss.

David Rosenthal

It does.

Ben Gilbert

Another weird playbook question: Rolex occasionally makes exceptions, like the jigsaw-puzzle Day-Date, the Emoji watch, or the Domino's Pizza deal.

David Rosenthal

They have just enough whimsy.

Ben Gilbert

It's not a cohesive weirdness. You look at Hermès and all the fun they're having is the same kind of fun. Rolex makes 1 befuddling decision every 10 years that doesn't seem impactful to the strategy.

David Rosenthal

Tudor with Tiger Woods as spokesperson is another 1. Why would you put Tiger Woods on Tudor?

Ben Gilbert

They occasionally have these very odd things where you wonder how they made it out the door.

David Rosenthal

Sometimes it works. The relaunch of the Milgauss was an awesome decision.

Ben Gilbert

The product naming is funny too. The Milgauss used to be basically a Submariner, and when they relaunched it, it was basically an Explorer. The only things they share are the name and the ability to withstand 1,000 gauss.

David Rosenthal

The GMT-Master II is basically a GMT-Master. What does “II” mean? When they release a sequel to a watch, it's the Hulk. The Deepsea is both a Deepsea and a Sea-Dweller.

Ben Gilbert

Their product naming is confusing.

David Rosenthal

Let's analyze smartwatches for a minute. The Apple Watch came out in 2014. Was that the best thing to ever happen to Rolex, Audemars Piguet, Patek, and others?

Ben Gilbert

It raised awareness for the category. Suddenly people were wearing something on their wrist and spending hundreds of dollars on it. They became open to spending thousands of dollars on it.

David Rosenthal

I never thought about that. I had a smartphone, so I hadn't worn a watch in a long time. Then I saw other people I looked up to doing it and thought, “I could potentially go up 1 level from a smartwatch.”

Ben Gilbert

It was a strange progression that definitely helped them. However, it destroyed the low end of luxury: Longines, Tissot, TAG Heuer, and anybody making a $500 to $1,000 mechanical watch.

David Rosenthal

Why buy an obsolete thing for the same money as an Apple Watch?

Ben Gilbert

There's a great New York Times piece from before the Apple Watch that quotes someone at Apple saying Jony Ive was bragging around the company that the forthcoming watch would destroy the Swiss watch industry.

David Rosenthal

He was both 100% right and 100% wrong. He was right that the low end of the Swiss industry, to the extent it existed after the Quartz Crisis, was destroyed. But the high end—and especially a gold Apple Watch—was not.

Ben Gilbert

The Apple Watch decimated the low end, but no one took the high-end edition seriously. It addressed a new market. High-end watch people weren't going to buy an Apple Watch, but for new Apple Watch customers there was no reason to buy a $10,000 watch.

For a small subset who bought Apple Watches, it became a gateway to the high-end mechanical-watch industry. That subset is small, but it spends a lot of money.

David Rosenthal

The Apple Watch also destroyed the fashion-watch industry. We didn't have room for the whole Swatch Group and Fossil story, but in the 1990s quartz watches made $25 watches possible. That market went away with the Apple Watch.

Ben Gilbert

Fossil's stock is down 99% since the Apple Watch came out.

David Rosenthal

That product category doesn't exist anymore.

Ben Gilbert

It would be amazing—and will never happen—if there were an Apple Watch Play for high-end mechanical watches, like CarPlay or Android Auto.

David Rosenthal

What would that mean?

Ben Gilbert

Wear a Rolex and get the fitness tracking.

David Rosenthal

I don't understand how that would work.

Ben Gilbert

Is there someone at Rolex working on this? Does Rolex treat it like quartz, or feel entirely safe? Is there a research lab trying to figure out what a Rolex smartwatch looks like?

David Rosenthal

I'm sure there is, and they won't release it unless they absolutely have to.

Ben Gilbert

Those people must be parasites around the building.

David Rosenthal

Talking about smartwatches reminds me of another moment we didn't discuss: when cell phones became popular, around 2002 or 2003, and certainly by 2010 when smartphones were popular. That was when you stopped needing a watch.

Ben Gilbert

Before 2005, you needed a watch. Everybody needed one. Now it's something you don't need.

David Rosenthal

There's no functional alibi anymore. Everybody needs a car. You can buy a 911, but you have the functioning alibi that you needed a car.

Ben Gilbert

Tell your spouse, “I needed this because I needed a purse.”

David Rosenthal

Nobody needs a watch. It has no functioning alibi, so it is a pure display of feeling like a better version of yourself when you wear it.

Ben Gilbert

I do genuinely love the engineering, but it's a much weaker alibi than other categories. That probably coincides with its takeoff as a luxury item.

David Rosenthal

Why did this become the status symbol associated with success? Why this 200-part steel thing on your wrist?

Ben Gilbert

Easy answer: for most of the 20th century, it was the only socially acceptable form of male jewelry. The women's watch market was also big and important, but it bled into jewelry. In the men's world, this was men's jewelry.

David Rosenthal

You could wear your wedding ring and your watch—the only broadly socially acceptable jewelry for men.

Ben Gilbert

For a long time, you needed 1. There was a functioning alibi, but there wasn't for jewelry for the practical man who didn't need jewelry.

David Rosenthal

Can a status symbol remain a status symbol after you get 100 years away from the last time it had utility?

Ben Gilbert

Thirty or 40 years is 1 thing. You remember your parent or grandparent using it. But what about 5 generations after anyone legitimately believes its utility is justified?

Is there a risk this becomes like the home telephone, fax machine, or some other technology that had utility, became a status symbol, and then got so far from its utility that it failed to be credible as a status symbol?

David Rosenthal

Maybe they become bracelets and jewelry.

Ben Gilbert

I could see that.

David Rosenthal

I don't know the real answer. I don't think it's happening anytime soon.

Ben Gilbert

I have 2 more points. The first is that the slow iterations and stable lineup help customers feel smart.

There's value in the fact that when I look down at my wrist and you look down at yours, what Rolex sells today is pretty much the same thing. That means I made a good decision 20 years ago when I bought this.

You'd feel dumb if you bought a Turn-O-Graph, just like you'd feel dumb if you bought an iPhone 3G and then 2 years later the iPhone 5S was out. It helps Rolex's long-term value to make customers feel they made a good decision when they bought the product.

David Rosenthal

The last thing: have you ever heard the phrase “former Rolex employee”?

Ben Gilbert

No. I'm sure that's by design.

David Rosenthal

I only saw it once in the research. You start working at Rolex and stay there. It's a loyalty thing, but also an incentives thing. Rolex pays well, has great benefits and perks, and is the best company in the industry.

It works well for secrecy, and it's doing cutting-edge work. It's not like you're just cranking the same machine every day.

Ben Gilbert

I'm sure many people are doing the final finishing on their 10,000th Submariner.

David Rosenthal

But the parts, processes, and methods are constantly changing.

Ben Gilbert

That's true.

David Rosenthal

Quintessence time. Let's land the plane.

Ben Gilbert

I often have a blank going into this because I feel like we arrive there throughout the episode. Mine is that Rolex is positioned at the perfect point on the curve of price and quantity.

It's the most optimally positioned supply-and-demand curve company we've ever covered. That's how you get 30% of market share by revenue and produce $10 billion a year making watches.

David Rosenthal

It makes millions of people feel they're buying something very special. They are, and that's why I admire the company.

Ben Gilbert

I've got 1 more addendum to my quintessence. There's no way to know for sure, because Hans has been dead a long time, but he seems like he was a really good person.

That's not always true of the protagonists or founders we cover on Acquired. Maybe I'm wrong and he was a big jerk, but it has been lost to history because there's not that much information about him.

He seems genuinely good. He loved and was devoted to both of his wives, then devoted himself to the company and its legacy even though he never had children. Putting the foundation together was motivated by the long-term legacy of the company, but the foundation gives away 300 million Swiss francs a year, with a large portion going directly to people in need in Geneva, his hometown.

That's amazing. He also made his secretary in London, Mercedes Gleitze, a star in 1927. He seems like a genuinely good person.

David Rosenthal

People ask whether you have to be a certain kind of person to found a company like this. I think you have to be crazy, but some people ask whether you have to be ruthless or bad.

The world is a microcosm: some people are good and some are not. You have to be extremely something, and that extreme quality has to fit your product, market, and timing.

Ben Gilbert

My thesis is that calling Rolex the high end or middle end of the watch industry is wrong. Mechanical watches are an industry today serving an entirely different job to be done than they served in the past.

It's a new industry with nothing to do with telling time. It is goofy to compare it with smartwatches, quartz watches, or fashion watches just because they look similar and occupy wrist real estate.

We should define markets by the job to be done. It's incredible that after the Quartz Crisis, Rolex found a completely new job to be done for its product and had positioned itself there during the previous 2 decades with the professional watches, tool watches, and advertising.

David Rosenthal

I couldn't agree more.

Here is the thing to leave you with: Rolex is the watch you want when you start getting into watches, but it's also the watch you end up at after you study the whole industry.

Ben Gilbert

You go through exotic steps along the way, with more artistry, more complications, and certainly more expensive price points, but when it comes down to the most exquisite engineering, quality, serviceability, precision, water resistance, and self-winding, amazingly the brand with mass appeal—the 1 all the newbies want, which sells a million a year—is also 1 of the highest-quality watches.

David Rosenthal

A different version of this, which I read somewhere in the research, is that Rolex is a company you like more the more you study it.

Ben Gilbert

I didn't want to record this episode because it meant I was going to stop researching. I loved bathing myself in this industry and this company and its products.

David Rosenthal

I have good news for you. If you decide to go down the watch rabbit hole, it's deep. The watch blogs, Hodinkee, and everything beyond it—it goes very deep.

Ben Gilbert

When you describe the curve, it starts with Rolex and ends with Rolex. It's a company that owns its category.

The comparison is Apple. Go to Rolex's website and click on any watch. It looks like an Apple product page. It names the components inside—the proprietary Parachrom hairspring, like a neural engine, or a Liquid Retina display.

Its YouTube channel looks like Apple's high-gloss promotional videos: products whizzing through space and plunging into water. The product is mass-produced and high-margin. There's a big brand premium, but it is also the highest-quality engineering in the industry.

The financials look so good because Rolex found the spot on the curve that lets it multiply 2 large numbers: units and dollars per unit.

Billionaires have iPhones, and people buying their first smartphone have iPhones. Unlike handbags or cars, the phone and smartwatch category has a single company that defines it: Apple.

David Rosenthal

Rolex and Apple are mirror-image companies in a lot of ways.

Ben Gilbert

I guess we have to do Apple now.

David Rosenthal

That isn't going to be 1 episode.

Ben Gilbert

No. In retrospect, this shouldn't have been 1 episode either. I don't know where we would have broken it up.

David Rosenthal

Thank you, listeners.

Ben Gilbert

This was a blast.

David Rosenthal

It really was.

Ben Gilbert

I have 1 piece of trivia for you before carve-outs. Can it top your Panerai trivia?

David Rosenthal

I'm proud of that 1.

Ben Gilbert

Rolex has become so sophisticated in manufacturing that it uses ultraviolet lithography in making its watches.

David Rosenthal

Hell yeah.

Ben Gilbert

It's not etching silicon—God forbid Rolex should get anywhere near a semiconductor. It's etching a very specialized, precise type of gear. In the Rolex Daytona, it ensures the teeth mesh perfectly, so when you start the chronograph, there's no jumping or accidental kickback. It starts exactly right.

David Rosenthal

That's amazing. I have 1 more piece of trivia for you.

Ben Gilbert

Go on.

David Rosenthal

What watch company holds the record today for the watch that has gone deepest in the ocean?

Ben Gilbert

This has to be a trick question. Of course it's Rolex. It went down to the bottom of the trench.

David Rosenthal

Omega.

Ben Gilbert

How did Omega go deeper? I thought Rolex went down the trench.

David Rosenthal

The Rolex Deepsea Challenge happened in 2012. In 2019, the Omega Seamaster Planet Ocean Ultra Deep Professional went 20 meters deeper.

Ben Gilbert

What did they do, drill a hole in the ground at the bottom of the trench?

David Rosenthal

I think they found a deeper part of the trench.

Ben Gilbert

This is the classic Omega versus Rolex thing. Technically, something else sits at the top, but for all intents and purposes, Rolex does.

David Rosenthal

Amazing.

Ben Gilbert

I have 1 carve-out. My family has been very sick with the flu over the last week, and I've had zero time for anything else. I owe an extreme debt of gratitude to Joe Brumm and the Australian Broadcasting Corporation for creating Bluey, the most wonderful children's cartoon ever.

My 3-year-old and millions of others sit and watch it, and I can watch with her without wanting to rip my eyeballs out.

David Rosenthal

My 15-month-old will be into that soon enough. I'll take your recommendation.

Ben Gilbert

It's so good. There's no comparison. It's the greatest children's content ever created.

David Rosenthal

You're in for a real treat.

Ben Gilbert

I have 2 carve-outs. On the podcast Armchair Expert, David and I joined Dax and Monica a couple of weeks ago to review the business of the NFL. It was fun to update our episode and do it with Dax and Monica, who are great.

My second is an app called ElevenReader by ElevenLabs. I'm sure it does more, but the thing I use it for is amazing. You paste in a link or upload a PDF, and in a convincing AI voice that sounds remarkably human, it reads you something that was text.

I'm the person who, 15 years ago, was highlighting emails, right-clicking, and using Apple's built-in speech function to read things because I'm much better at processing information auditorily than visually.

For this episode, I had so many PDFs to read as research—things that weren't audiobooks or podcasts. I willed myself to read 2 physical books because this Rolex material is mostly coffee-table books, with nothing available on Kindle.

ElevenReader saved me by letting me listen to much of what I needed to research. It's an excellent app if you like turning text into a compelling human-narrated voice.

David Rosenthal

You have the opposite research-consumption style from me. I need physical hard copies with a pencil that I'm writing on. You're best on a 10-mile run, listening to something and stopping to take notes.

Ben Gilbert

I love it.

Rolex (Audio) | BidClub