1042 lines
53 KiB
Plaintext
1042 lines
53 KiB
Plaintext
bg image(https://s.turbifycdn.com/aah/paulgraham/bel-6.gif)
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[bel-7] * [2][bel-8]
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The Brand Age
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March 2026
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In the early 1970s disaster struck the Swiss watch
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industry. Now people call it the quartz crisis, but in
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fact it was a compound of three separate disasters
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that all happened at about the same time.
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The first was competition from Japan. The Swiss had
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been watching the Japanese in the rear view mirror all
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through the 1960s, and they'd been improving at an
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alarming rate. But even so the Swiss were surprised in
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1968 when the Japanese swept all the top spots for
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mechanical watches at the Geneva Observatory trials.
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The Swiss knew what was coming. For years the Japanese
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had been able to make cheaper watches. Now they could
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make better ones too.
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To make matters worse, Swiss watches were about to
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become much more expensive. The Bretton Woods
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agreement, which since 1945 had fixed the exchange
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rates of most of the world's currencies, had set the
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Swiss Franc at an artificially low rate of .228 USD.
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When Bretton Woods collapsed in 1973, the Franc shot
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upward. By 1978 it reached .625 USD, meaning Swiss
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watches were now 2.7 times as expensive for Americans
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to buy. [[3]1]
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The combined effect of foreign competition and the
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loss of their protective exchange rate would have
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decimated the Swiss watch industry even if it hadn't
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been for quartz movements. But quartz movements were
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the final blow. Now the whole game they'd been trying
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to win at became irrelevant. Something that had been
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expensive — knowing the exact time — was now a
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commodity.
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Between the early 1970s and the early 1980s, unit
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sales of Swiss watches fell by almost two thirds. Most
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Swiss watchmakers became insolvent or close to it and
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were sold. But not all of them. A handful survived as
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independent companies. And the way they did it was by
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transforming themselves from precision instrument
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makers into luxury brands.
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In the process the nature of the mechanical watch was
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also transformed. The most expensive watches have
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always cost a lot, but why they cost a lot and what
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buyers got in return have changed completely. In 1960
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expensive watches cost a lot because they cost a lot
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to manufacture, and what the buyer got in return was
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the most accurate timekeeping device, for its size,
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that could be made. Now they cost a lot because brands
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spend a lot on advertising and use tricks to limit
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supply, and what the buyer gets in return is an
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expensive status symbol.
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That turns out to be a profitable business though. The
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Swiss watch industry probably makes more now from
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selling brand than they would have if they were still
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selling engineering. And indeed, when you look at the
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graph of Swiss watch sales by revenue, it tells a
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different story than the graph of unit sales. Instead
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of falling off a cliff, the revenue numbers merely
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flatten out for a while, and then take off like a
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rocket in the late 1980s as the surviving watchmakers
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come to terms with their new destiny.
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It took the watchmakers about 20 years to figure out
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the new rules of the game. And it's interesting to
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watch them do it, because the completeness of their
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transformation makes it the perfect case study in one
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of the most powerful forces of our era: brand.
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Brand is what's left when the substantive differences
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between products disappear. But making the substantive
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differences between products disappear is what
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technology naturally tends to do. So what happened to
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the Swiss watch industry is not merely an interesting
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outlier. It's very much a story of our times.
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Jaeger-LeCoultre's web site says that one of their
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current collections "takes its inspiration from the
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classic designs of the golden age of watchmaking." In
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saying this they're implicitly saying something that
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present-day watchmakers all know but rarely come so
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close to saying outright: whatever age we're in now,
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it's not the golden age.
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The golden age was from 1945 to 1970 — from the point
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where the watch industry emerged from the chaos of war
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with the Swiss on top till the triple cataclysm that
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struck it starting in the late 60s. There were two
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things watchmakers sought above all in the golden age:
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thinness and accuracy. And indeed this was arguably
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the essential tradeoff in watchmaking. A watch is
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something you carry with you to tell you the time. So
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there are two fundamental ways to improve it: to make
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it easier to carry with you and to make it better at
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telling the time.
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Obviously accuracy is valuable, but in the golden age
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thinness was if anything more valuable. Even in the
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days of pocket watches the best watchmakers tried to
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make their watches as thin as they could. Cheap, thick
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pocket watches were derided as "turnips." But thinness
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took on a new urgency when men's watches moved onto
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their wrists during World War I. And since thinness
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was more difficult to achieve than accuracy, it was
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this quality that tended to distinguish the more
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expensive watches of the golden age.
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There is one other thing watchmakers have pursued in
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some eras: telling more than the time in the usual
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way. Telling you the phase of the moon, for example,
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or telling the time with sound. In the industry the
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term for these things is "complications." They were
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popular in the nineteenth century and they're popular
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again now, but except for one pragmatic complication
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(showing the date), they were a sideshow in the golden
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age. In the golden age, as always in golden ages, the
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top watchmakers focused on the essential tradeoff.
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And, as always in golden ages, they did it
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beautifully. The best watches of the golden age have a
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[4]quiet perfection that has never been equalled
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since. And for reasons I'm about to explain, probably
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never will be.
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The three most prestigious brands of the golden age
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were the so-called "holy trinity" of Patek Philippe,
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Vacheron Constantin, and Audemars Piguet. Their
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prestige was mostly deserved; they had earned it by
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the exceptional quality of their work. By the 1960s
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they stood on two legs, prestige and performance. And
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what they learned in the next two decades was that
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they had to put all their weight on the first leg,
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because they could no longer win at either of the two
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things watchmakers had historically striven to
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achieve. Quartz movements were not only more accurate
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than any mechanical movement, but thinner too.
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The holy trinity at least had another leg to stand on.
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Most of the other well-known Swiss watchmakers sold
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only performance. None of those companies survived
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intact.
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Omega showed what not to do. Omega were the nerds of
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Swiss watchmakers. They made wonderfully accurate
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watches, but they would have been ambivalent, at best,
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about the idea of being a luxury brand. When the
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Japanese got as good as the Swiss at making accurate
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movements, Omega responded in the Omega way: make even
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more accurate movements. They introduced a new
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movement in 1968 that ran at a 45% higher frequency.
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In theory this should have made it more accurate, but
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the new movement was so fragile that it destroyed
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their reputation for reliability. They even tried to
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make a better quartz movement, but there was nothing
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down that road but a race to the bottom. By 1981 they
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were insolvent and were taken over by their creditors.
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Patek Philippe took the opposite approach. While Omega
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was redesigning their movements, Patek was redesigning
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their cases. Or more precisely, designing their cases,
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because until then they hadn't.
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This is probably the point to mention what a strange
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beast the Swiss watch industry was in those days. It
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was a kind of capitalism that's hard to imagine today,
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and even then could only have been made to work in a
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country like Switzerland — a network of small,
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specialized companies locked into place by regulation.
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The companies that we for convenience have been
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calling watchmakers were merely the consumer-facing
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edge of this network. The holy trinity didn't design
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their own cases, or even their own movements most of
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the time.
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In 1968 (that year again) Patek Philippe launched a
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new watch that shifted the center of gravity of case
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design. This time they'd taken their own designs to
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the casemakers and said "this is what you're going to
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make for us." The result was a striking new model
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called the [5]Golden Ellipse. Somewhat confusingly,
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because it wasn't elliptical. The new case was more of
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what UI designers would call a round rect: a rectangle
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with rounded corners. And this new family of watches
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was quite successful. But it was more than that: it
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was the pattern for the future. [[6]2]
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How could merely designing a distinctive case be so
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important? Because it turned the entire watch into an
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expression of brand.
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The trouble with the best watches of the golden age,
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from the point of view of someone who wanted to
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impress people with the brand of watch he was wearing,
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was that no one could tell what brand of watch you
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were wearing. Until you got within a few inches of
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them, the watches of all the top makers looked the
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same. That's the thing about minimalism: there tends
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to be just one answer. Plus the watches of the golden
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age were small by present standards. Watchmakers had
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spent centuries working to make them smaller, and by
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1960 they'd gotten very good at it. So the only thing
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distinguishing one top brand from another was the name
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printed on the dial, and dials were so small that
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these names were tiny. The manufacturers' names on the
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holy trinity's golden age watches are between half and
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three quarters of a millimeter high. So by taking over
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the case, Patek expanded the size of the brand from 8
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square millimeters to 800.
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Why did they suddenly decide to make their brand
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shout, after a century of whispering? Because they
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knew they weren't going to beat the Japanese on
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performance. From now on they'd have to depend more on
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brand.
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There's a cost to doing this, which we can see even in
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this early example of case-as-brand. Golden Ellipses
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are not bad looking. They must have looked even cooler
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in the 1970s, when designers were turning everything
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into round rects. But the Golden Ellipse was not an
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evolutionary step forward in case design. Watches
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didn't all become round rects. Watchmakers had already
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discovered the optimal shape for the case of something
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that describes a circle as it rotates.
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They had also discovered the optimal shape for the
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crown, the knob on the side of a watch that you turn
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to wind it. But to emphasize the distinctive profile
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of the Ellipse, Patek made the crown too small, with
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the result that they're distractingly hard to wind. [
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[7]3]
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So even in this early example we see an important
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point about the relationship between brand and design.
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Branding isn't merely orthogonal to good design, but
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opposed to it. Branding by definition has to be
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distinctive. But good design, like math or science,
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seeks the right answer, and right answers tend to
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converge.
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Branding is centrifugal; design is centripetal.
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There is some wiggle room here of course. Design
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doesn't have as sharply defined right answers as math,
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especially design meant for a human audience. So it's
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not necessarily bad design to do something distinctive
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if you have honest motives. But you can't evade the
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fundamental conflict between branding and design, any
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more than you can evade gravity.
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Indeed, the conflict between branding and design is so
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fundamental that it extends far beyond things we call
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design. We see it even in religion. If you want the
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adherents of a religion to have customs that set them
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apart from everyone else, you can't make them do
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things that are convenient or reasonable, or other
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people would do them too. If you want to set your
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adherents apart, you have to make them do things that
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are inconvenient and unreasonable.
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It's the same if you want to set your designs apart.
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If you choose good options, other people will choose
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them too.
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There are only two ways to combine branding and good
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design. You can do it when the space of possibilities
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is enormously large, as it is in painting for example.
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Leonardo could paint as well as he possibly could and
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yet also paint in a style that was distinctively his.
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If there had been a million painters as good as
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Bellini and Leonardo this would have been harder to
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do, but since there were more like ten they didn't
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bump up against one another much. [[8]4]
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The other situation when branding and good design can
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be combined is when the space of possibilities is
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comparatively unexplored. If you're the first to
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arrive in some new territory, you can both find the
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right answer and claim it as uniquely yours. At least
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at first; if you've really found the right answer,
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everyone else's designs will inevitably converge on
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yours, and your brand advantage will erode over time.
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Since the space of watch design is neither unexplored
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nor enormously large, branding can only be achieved at
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the expense of good design. And in fact if you wanted
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one sentence to describe the current age of
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watchmaking, that one would do pretty well.
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Patek Philippe didn't know for sure that making
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visibly branded watches would work. It was not even
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their only strategy, at the time. They were finding
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their way. But it was the strategy that did work, at
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least as measured by revenues.
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For it to work the customers had to meet them halfway.
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Patek knew that not all their customers were buying
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their watches for the performance they delivered — for
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their accuracy and thinness. They knew that at least
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some customers were buying them because they were
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expensive. But it was unclear how many, or how far
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they could be pushed.
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To encourage them, Patek did something that none of
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the holy trinity had done much of before: brand
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advertising. And what they talked about was how
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expensive their watches were. A 1968 Patek ad
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explained "why you are well advised to invest perhaps
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half a month's income" in an Ellipse. "Like every
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Patek Philippe," the ad continued, "this thin model is
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entirely finished by hand. Since a Patek Philippe is
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the costliest watch to make, production is severely
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limited: only 43 watches are signed out each day for
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delivery to prominent jewelers throughout the world."
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[[9]5]
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You can tell this is an early ad because they still
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mention thinness. But there is no mention of accuracy.
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Presumably Patek felt that battle was already lost.
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The next move was made by Audemars Piguet, who in 1970
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commissioned the renowned designer Gérald Genta to
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design their own iconic watch, this one, daringly, in
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steel. The result, launched in 1972, was the [10]Royal
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Oak. And Audemars Piguet's ads (for they too now
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started doing brand advertising) emphasized its high
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cost even more dramatically. "Introducing steel at the
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price of gold," one began. "You're looking at the
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costliest stainless steel watch in the world — the
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Audemars Piguet 'Royal Oak'. What makes it even more
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precious than gold is the time that went into building
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it, by a vanishing breed of master watchmakers." At
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the bottom of the ad they turn the traditional formula
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on its head and describe their watches as being
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"priced from $35,000 and down."
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The Royal Oak was also a step forward in surface area
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devoted to brand. The Golden Ellipse had turned the
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watch face into an expression of brand, but it used
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ordinary straps and bracelets. In the Royal Oak, the
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watch face was integrated with a metal bracelet that
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continued its design all the way around the wrist.
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When it said "You're looking at the costliest
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stainless steel watch in the world," it said it with
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every square millimeter of surface area.
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Would customers buy this new approach? The initial
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results were moderately encouraging. The holy
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trinity's sales didn't take off, but they didn't go
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down to zero either. There were at least some people
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out there responding to the new message. Perhaps if
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they kept at it the number would grow.
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So they did. Encouraged by the success of the Royal
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Oak, Patek Philippe commissioned Gérald Genta in 1974
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to design a similar watch for them. The design of the
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Royal Oak had been inspired by a ship's porthole, so
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the design of this new watch would be inspired by... a
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ship's porthole. It was called the [11]Nautilus, and
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it launched at the Basel Watch Fair in 1976.
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In the Nautilus we really see the incompatibility of
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branding and design. It was huge. The most expensive
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men's watches at the peak of the golden age were
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typically 32 or 33 millimeters in diameter. The
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Nautilus was 42 millimeters. And as well as being huge
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it had gratuitous knobs on either side of the face,
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like a pair of ears. But you could recognize one from
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across the room.
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Of all the watches Patek makes now, the Nautilus is
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the most sought after. It's perfectly aligned with
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what present-day buyers want — basically, the loudest
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possible expression of brand. But in 1976 it was ahead
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of its time. In 1976 it was still a little too much.
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The watch that finally turned Patek's fortunes around
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was another iconic design, the hobnail calatrava. The
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hobnail calatravas were so called because they were
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decorated with tiny pyramid-shaped spikes. That was
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enough to make them look distinctive. But except for
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the hobnails they were basically golden age dress
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watches.
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The hobnail calatrava was apparently the brainchild of
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René Bittel, the head of Patek Philippe's ad agency.
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It was not a new design. Many watchmakers had
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decorated their cases with hobnails over the years,
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and there had been a Patek model with them since 1968.
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But in 1984 Bittel told Patek president Philippe
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Stern, in effect: make this your standard design, and
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I'll create an ad campaign to identify it in people's
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heads with your brand. [[12]6]
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It worked spectacularly well. The resulting watch, the
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[13]3919, is known as the "banker's watch" because it
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became so popular among investment bankers in New York
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in the 80s and 90s. Up to this point Patek had been
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hedging their bets, making quartz watches as well, and
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arguing defensively in their ads that quartz watches
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in fancy cases were almost as laborious to make as
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mechanical ones. But the ibankers bought the full
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mechanical story. They didn't even need self-winding
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mechanical watches; the 3919 was hand-wound. So be it.
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Patek stopped talking about quartz movements. And
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their sales, which had been flat since the early 70s,
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were by 1987 on a clear upward trajectory that has
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continued to this day.
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It's hard to say for sure whether the critical
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ingredient was Bittel's skill at advertising or a
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receptive audience, but as someone who knew these
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investment bankers, I'd lean toward the audience.
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These were the people for whom the term "yuppy" was
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coined. Living expensively was one of the things they
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were best known for. If anyone was going to adopt a
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new way to display wealth, it would be them. Whereas
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if Bittel had sent the same message ten years earlier,
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there might have been no one to hear it.
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Whatever the cause, something happened in the second
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half of the 1980s, because that's when all the numbers
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finally start going up again. Up till about 1985 it
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was still not clear what would happen with mechanical
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watches. By 1990 it was. By 1990 the custom of using
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expensive, highly-branded, conspicuously mechanical
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watches as status symbols was firmly established. [
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[14]7]
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Obsolete technologies don't usually get adopted as
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ways to display wealth. Why did it happen with
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mechanical watches? Because the wristwatch turns out
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to be the perfect vehicle for it. Where better than
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right on your wrist, where everyone can see it? And
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more to the point, what better to do it with? You
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could wear a diamond ring or a gold chain, but those
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would have seemed socially dubious to investment
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bankers. They might have been barbarians, but they
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weren't mafia. Whereas nothing could be more legit
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than a gold watch. The chairman of the company was
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still wearing one his wife gave him 20 years ago,
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before quartz watches were even a thing. If the
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increasing pressure to display wealth was going to
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emerge anywhere, this was the place. [[15]8]
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For men, at least. Women never really went for the
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idea of wearing mechanical watches. Most rich women
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are happy wearing a Cartier tank with a quartz
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movement. Why the difference? Partly for the same
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reason that most buyers of steam engines are men. But
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the main reason is that expensive mechanical watches
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now serve as de facto jewelry for men, and women don't
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need de facto jewelry because they can wear actual
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jewelry.
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It was critical, though, that mechanical watches were
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accurate enough. A new 3919 would have been off by no
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more than 5 seconds a day. That was nowhere near as
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good as quartz. Even the cheapest mass market quartz
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|
watches were accurate to half a second a day, and the
|
|
best ones were accurate to 3 seconds a year. But in
|
|
practice you didn't need that kind of accuracy. If
|
|
mechanical watches had only been accurate to a minute
|
|
a day they couldn't have made the leap from keeping
|
|
time to displaying wealth. It would have seemed too
|
|
manifestly unluxurious to have a watch that always had
|
|
the wrong time. But 5 seconds a day was close enough.
|
|
[[16]9]
|
|
|
|
This is an important point about the relationship
|
|
between brand and quality. Quality doesn't stop
|
|
mattering when a product switches to something people
|
|
buy for its brand. But the way it matters changes
|
|
shape. It becomes a threshold. It no longer has to be
|
|
so great that it sells the product; brand sells the
|
|
product; but it does have to be good enough to
|
|
maintain the brand's reputation. The brand must not
|
|
break character.
|
|
|
|
It was a lucky thing for the watchmakers that yuppies
|
|
arose just in time to save them. Or maybe not so
|
|
lucky. Because the evolution of the market that
|
|
yuppies represented has continued with a vengeance,
|
|
and watchmakers have perforce been dragged along with
|
|
it. If they don't make gigantic blingy watches for
|
|
buyers in Hong Kong and Dubai, someone else will. So
|
|
that is what they now find themselves doing. And what
|
|
began with a few comparatively subtle examples of the
|
|
conflict between branding and design is now an all out
|
|
[17]war on design.
|
|
|
|
The present era of mechanical watchmaking doesn't yet
|
|
have a name. But if we need one, it's obvious what it
|
|
should be: the brand age. The golden age ran from 1945
|
|
to 1970, followed by the quartz crisis from 1970 to
|
|
1985. Since 1985 we've been in the brand age.
|
|
|
|
|
|
|
|
|
|
|
|
This won't be the only brand age. Indeed, it's not
|
|
even the first; fine art has been in its own brand age
|
|
since the establishment of the Barr canon in the
|
|
1930s. And since we'll probably see more of this kind
|
|
of thing, it would be worth taking some time to look
|
|
at what a brand age is like.
|
|
|
|
How are things different now from the way they were in
|
|
the golden age? The best way to answer that might be
|
|
to imagine what someone from the golden age would
|
|
notice if we brought him here in a time machine.
|
|
|
|
The first thing he'd notice, if he walked through a
|
|
fancy shopping district, is that all the prominent
|
|
watchmakers of the golden age seem to be doing better
|
|
than ever. They're not only all still around, but most
|
|
now have their own boutiques instead of depending on
|
|
jewelers to sell their products as they used to back
|
|
in the day.
|
|
|
|
In fact this is an illusion. Only three watchmakers
|
|
survived the dark days of the 70s and 80s as
|
|
independent companies: Patek Philippe, Audemars
|
|
Piguet, and Rolex. All the rest are owned by six
|
|
holding companies, which reinflated them as it became
|
|
clear that mechanical watches would have a second life
|
|
as luxury accessories for men. Instead of separate
|
|
companies they're now more like the brands that got
|
|
rolled up into the big three American automakers:
|
|
they're ways for their parent companies to target
|
|
different segments of the market. So Longines, for
|
|
example, no longer competes with Omega, because the
|
|
company that owns them both has assigned it a lower
|
|
tier of the market. [[18]10]
|
|
|
|
There's a reason the Vacheron Constantin boutique
|
|
looks so much like the IWC and Jaeger-LeCoultre
|
|
boutiques, and for that matter the Montblanc and
|
|
Cartier boutiques. They're all owned by the same
|
|
company. It's similar with clothing brands,
|
|
incidentally. When you walk through a town's fanciest
|
|
shopping district, what seem to be the shops of lots
|
|
of different brands are actually owned by a handful of
|
|
conglomerates. That's one reason these districts seem
|
|
so sterile; like suburbs built by a single developer,
|
|
they have an unnatural lack of variety.
|
|
|
|
When our time traveler peered into the windows of
|
|
these shops, the first thing he'd notice was how large
|
|
all the watches were. This would surprise him, because
|
|
in the golden age, as indeed in all the preceding
|
|
centuries, big meant cheap. An expensive golden age
|
|
men's watch might have been 33 millimeters in diameter
|
|
and 8 millimeters thick. An expensive watch today will
|
|
be more like 42 millimeters in diameter and 10
|
|
millimeters thick — more than double the size. It
|
|
would astonish our visitor to look through the windows
|
|
of what were clearly very fancy shops and see what
|
|
seemed to be cheap watches. [[19]11]
|
|
|
|
We know how this happened. When watches switched from
|
|
telling time to telling brand, they grew in size to be
|
|
better at it. And not just in size, but in shape too.
|
|
That's another thing our time traveler would notice:
|
|
the surprising variety of strange case shapes and
|
|
awkward protrusions that have been produced as the
|
|
centrifugal tendency of branding played out. What,
|
|
he'd wonder, is going on with the huge guards on the
|
|
crowns of those Panerais? What do people do with these
|
|
watches that makes the crown need such protection? And
|
|
why would a crown guard have a message engraved on it
|
|
saying that it's a registered trademark? It's obvious
|
|
to us what's going on here, but imagine how confusing
|
|
it would be to someone from the golden age, when form
|
|
followed function. [[20]12]
|
|
|
|
As he puzzled over this strange assortment of bulky
|
|
watches, he'd notice a further pattern. He'd realize
|
|
that a surprisingly large number of them looked like a
|
|
specific brand of bulky watch he was already familiar
|
|
with.
|
|
|
|
I haven't talked about Rolex so far, because Rolex
|
|
didn't have to do much to adapt to the new era. They
|
|
already had one foot in the brand age during the
|
|
golden age. Early in their history they put a lot of
|
|
effort into making their watches better, but they
|
|
"stopped taking part in competitions in Geneva and
|
|
Neuchâtel at the end of the 1950s," and from about
|
|
1960 "largely abandoned research into mechanical
|
|
watchmaking." [[21]13] The reason was not that they'd
|
|
become lazy, but that they'd discovered they could
|
|
make sales grow faster by marketing their watches as
|
|
status symbols. So that became their focus during the
|
|
1960s, and by the time the quartz crisis hit ten years
|
|
later, their customers were self-selected to be people
|
|
who didn't care that much what was inside a watch, so
|
|
long as it was recognizably a Rolex.
|
|
|
|
And they were far ahead of other watchmakers in that
|
|
department. They already had in the 1940s what we saw
|
|
Patek Philippe and Audemars Piguet struggling to
|
|
create in the 1970s and 80s: a case that immediately
|
|
proclaimed the brand of the maker. The Rolex look
|
|
seems to have evolved organically, but once it did,
|
|
they realized how important it was. In fact they
|
|
pitched it as one of the features of their watches. A
|
|
1960s Rolex ad says "You can recognize its classic
|
|
shape, carved out of a block of solid gold, from the
|
|
other end of the conference table."
|
|
|
|
Indeed Rolex was ahead of its time in both dimensions:
|
|
their cases were not merely recognizable, but big too,
|
|
at least by golden age standards. That was not the
|
|
result of clever marketing, though. It was a byproduct
|
|
of the founder Hans Wilsdorf's obsession with building
|
|
waterproof watches.
|
|
|
|
As its name suggests, that was the raison d'etre of
|
|
the Rolex Oyster. Watches like the Oyster were
|
|
designed to be tough, like Jeeps. In the golden age
|
|
there were two poles of watch design. At one end were
|
|
tool watches, which were thick, tough, and usually
|
|
made of steel. At the other end were dress watches,
|
|
which were thin, elegant, and usually made of gold.
|
|
But Rolex blurred the line between them. When they
|
|
made thick, tough watches, they made them out of gold
|
|
as well as steel. The result was a sort of luxury
|
|
Jeep. And if that phrase didn't ring a bell in your
|
|
head, stop and think about it, because that is exactly
|
|
what everyone is driving now. That's what SUVs are,
|
|
luxury Jeeps. What happened to watches is the same
|
|
thing that happened to cars. And indeed if our time
|
|
traveler turned and saw a Porsche Cayenne pass by and
|
|
realized what it was — a huge, pseudo-offroad vehicle
|
|
meant to recall the Porsche 911 — he might have been
|
|
even more shocked than he was by the watches he'd been
|
|
looking at. [[22]14]
|
|
|
|
If the time traveller walked into a Patek Philippe
|
|
boutique and actually tried to buy a Nautilus, he'd
|
|
get the biggest shock of all. They wouldn't sell him
|
|
one. Because at Patek he'd encounter the most extreme
|
|
brand age phenomenon: artificial scarcity. You can't
|
|
just buy a Nautilus. You have to spend years proving
|
|
your loyalty first by buying your way through multiple
|
|
tiers of other models, and then spend years on a
|
|
waiting list. [[23]15]
|
|
|
|
Obviously this strategy sells more watches. But it
|
|
also supports retail prices by keeping watches off the
|
|
secondary market. A company using artificial scarcity
|
|
to drive sales can't allow too many of the scarce
|
|
models to leak into the secondary market, or they stop
|
|
being scarce. The ideal is the watch equivalent of
|
|
carbon sequestration: for the people who buy their
|
|
watches to keep them till they die.
|
|
|
|
To push the market toward this ideal, Patek squeezes
|
|
from both sides of the sale. They weed out flippers by
|
|
making the path to the scarce models so costly in both
|
|
time and money — so inconvenient and unreasonable —
|
|
that only a genuine fan would endure it. The lower
|
|
tier watches sell for below retail on the secondary
|
|
market, because Patek doesn't restrict their supply,
|
|
so a would-be flipper should have to spend years
|
|
making money-losing purchases before he could even get
|
|
something he could flip at a profit. Apparently some
|
|
people still manage to beat this system though, so
|
|
Patek's countermeasures don't end there. They keep a
|
|
vigilant eye on secondary sales to see who's selling
|
|
their watches. Auction listings usually include serial
|
|
numbers, so those are easy to trace, but if necessary
|
|
they'll rebuy their own watches on the secondary
|
|
market to get the serial number and trace the leak.
|
|
They buy hundreds a year. And when they catch someone
|
|
selling watches they don't want them to, they don't
|
|
just cut off that customer. If a retailer's customers
|
|
are responsible for too many such leaks, they'll cut
|
|
off the whole retailer. Which naturally makes
|
|
retailers eager to help them police buyers.
|
|
|
|
There will of course always be some leaks into the
|
|
secondary market. Even the most loyal customers die at
|
|
a certain rate. And in fact it's critical for Patek
|
|
that the secondary market continue to exist, because
|
|
it's one of the most valuable sources of information
|
|
they have about the most important question they face:
|
|
how fast to increase the supply of the top tier
|
|
watches. Their scarcity helps drive the purchases of
|
|
all the others, so those that do make it into the
|
|
secondary market should always sell for above retail.
|
|
And I'm sure Patek leaves a large margin for error
|
|
when increasing supply, because if secondary market
|
|
prices for these watches get close to retail prices,
|
|
you're getting close to a price collapse — which,
|
|
since people now buy these watches as investments,
|
|
would have the same disastrous cascading effect as the
|
|
bursting of an asset bubble. It wouldn't just be like
|
|
the bursting of an asset bubble. It would be the
|
|
bursting of an asset bubble. That's the business an
|
|
elite watchmaker is in now: carefully managing a
|
|
sustained asset bubble. [[24]16]
|
|
|
|
This is an instance of what I call the comb-over
|
|
effect: when a series of individually small changes
|
|
takes you from something that's a little bit off to
|
|
something that's freakishly wrong. I'm sure Patek
|
|
didn't cook up this whole scheme in one shot; I'm sure
|
|
it evolved gradually. But look at what a strange place
|
|
we've ended up in. Back in the golden age the way you
|
|
bought a Patek Philippe was to go to a jeweler and
|
|
give them money. Now Patek is policing buyers to
|
|
maintain an asset bubble.
|
|
|
|
The most striking thing to me about the brand age is
|
|
the sheer strangeness of it. The zombie watch brands
|
|
that appear to be independent and even have their own
|
|
retail stores, and yet are all owned by a few holding
|
|
companies. The giant, awkwardly shaped watches that
|
|
reverse 500 years of progress in making them smaller.
|
|
The business model that requires a company to rebuy
|
|
their own watches on the secondary market to catch
|
|
rogue customers. The very concept of rogue customers.
|
|
It's all so strange. And the reason it's strange is
|
|
that there's no function for form to follow.
|
|
|
|
Up to the end of the golden age, mechanical watches
|
|
were necessary. You needed them to know the time. And
|
|
that constraint gave both the watches and the
|
|
watchmaking industry a meaningful shape. There were
|
|
certainly some strange-looking watches made during the
|
|
golden age. They weren't all beautifully minimal. But
|
|
when golden age watchmakers made a strange-looking
|
|
watch, they knew they were doing it. In fact they give
|
|
the impression of having done it as a deliberate
|
|
exercise, to avoid getting into a rut.
|
|
|
|
That's not why brand age watches look strange. Brand
|
|
age watches look strange because they have no
|
|
practical function. Their function is to express
|
|
brand, and while that is certainly a constraint, it's
|
|
not the clean kind of constraint that generates good
|
|
things. The constraints imposed by brand ultimately
|
|
depend on some of the worst features of human
|
|
psychology. So when you have a world defined only by
|
|
brand, it's going to be a weird, bad world.
|
|
|
|
|
|
|
|
|
|
|
|
Well that was dark. Is there some edifying lesson we
|
|
can salvage from the wreckage?
|
|
|
|
One obvious lesson is to stay away from brand. Indeed
|
|
it's probably a good idea not just to avoid buying
|
|
brand, but to avoid selling it too. Sure, you might be
|
|
able to make money this way — though I bet it's harder
|
|
than it looks — but pushing people's brand buttons is
|
|
just not a good problem to work on, and it's hard to
|
|
do good work without a good problem.
|
|
|
|
The more subtle lesson is that fields have natural
|
|
rhythms that are beyond the power of individuals to
|
|
resist. Fields have golden ages and not so golden
|
|
ages, and you're much more likely to do good work in a
|
|
field that's on the way up.
|
|
|
|
Of course they don't call them golden ages as they're
|
|
happening. "Golden age" is a term people use later,
|
|
after they're over. That doesn't mean that golden ages
|
|
aren't real, but rather that their participants take
|
|
them for granted at the time. They don't know how good
|
|
they have it. But while it's usually a mistake to take
|
|
one's good fortune for granted, it's not in this case.
|
|
What a golden age feels like, at the time, is just
|
|
that smart people are working hard on interesting
|
|
problems and getting results. It would be overfitting
|
|
to optimize for more than that.
|
|
|
|
In fact there's a single principle that will both save
|
|
you from working on things like brand, and also
|
|
automatically find golden ages for you. Follow the
|
|
problems.
|
|
|
|
The way to find golden ages is not to go looking for
|
|
them. The way to find them — the way almost all their
|
|
participants have found them historically — is by
|
|
following interesting problems. If you're smart and
|
|
ambitious and honest with yourself, there's no better
|
|
guide than your taste in problems. Go where
|
|
interesting problems are, and you'll probably find
|
|
that other smart and ambitious people have turned up
|
|
there too. And later they'll look back on what you did
|
|
together and call it a golden age.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
|
[1] The Bretton Woods agreement didn't fix exchange
|
|
rates between currencies directly. It fixed each
|
|
relative to gold. Obviously this also fixed them
|
|
relative to one another.
|
|
|
|
[2] The Golden Ellipse isn't quite a round rect,
|
|
because the sides aren't quite flat. It's similar in
|
|
shape to the superellipses popularized by Piet Hein in
|
|
the early 1960s, and in fact that may be where they
|
|
got the name. But mathematically it's not an actual
|
|
superellipse. My guess is that Patek's designer just
|
|
experimented with French curves till he got something
|
|
he liked. And to be fair it is a good shape.
|
|
|
|
[3] It was ironic that Patek Philippe of all companies
|
|
made this mistake, because Adrien Philippe was the
|
|
inventor of the modern crown. But they must have
|
|
realized what they'd done, because later Ellipses have
|
|
if anything excessively prominent crowns.
|
|
|
|
[4] The high ratio of design space to practitioners in
|
|
fine art has combined with the practical importance of
|
|
attribution to give people the impression that
|
|
painting in a distinctively Leonardesque way is what
|
|
makes Leonardo good. The most dangerous problem faced
|
|
by curators, art historians, and art dealers — the one
|
|
that has the worst consequences if they get the wrong
|
|
answer — is attribution. So inevitably they spend a
|
|
lot of time thinking and talking about the features
|
|
that distinguish the work of one artist from another.
|
|
But those aren't what make artists good. What makes
|
|
the line of a woman's cheek in a Leonardo drawing good
|
|
is how good it looks as the line of a cheek, not how
|
|
little it looks like lines made by other artists.
|
|
|
|
Because painting has such prestige, the myth that
|
|
having a distinctive style (rather than painting well)
|
|
is the defining quality of great artists has in turn
|
|
given cover to a lot of bad design in adjacent fields.
|
|
A brand that does something hideous to distinguish
|
|
their products can say "Like all great works of art,
|
|
ours have a distinctive style," and people will buy
|
|
it.
|
|
|
|
[5] An ad that Patek Philippe ran in America in 1970
|
|
famously described a Patek 3548 with a gold bracelet
|
|
as a "$1700 trust fund." Was it actually a good
|
|
investment? In the very best case a dealer might pay
|
|
you $20k now for one in unworn condition with its
|
|
original box and papers. That's about a 4.5% rate of
|
|
return, which is not absolutely terrible. But
|
|
apparently the average rate of return on S&P 500
|
|
stocks over this period was more like 10%, if you
|
|
reinvested all the dividends after paying taxes on
|
|
them. The average rate of return would have been over
|
|
9% if you merely bought a lump of gold that hadn't
|
|
been made into a watch. So, not surprisingly, the ad
|
|
wasn't very good investment advice.
|
|
|
|
[6] Tania Edwards, who ran US marketing for Patek
|
|
Philippe in the 90s, said that Bittel literally
|
|
sketched the design of the 3919 on a piece of paper.
|
|
This sounds odd to me, because the 3919 looked exactly
|
|
like the existing 3520 with the addition of sub
|
|
seconds (a small dial with a second hand above 6
|
|
o'clock). Why would you sketch a design almost
|
|
identical to an existing watch when you could just
|
|
point to the existing watch and say "that, with sub
|
|
seconds." What this story does show, though, is the
|
|
degree to which people within Patek felt their ad
|
|
agency was responsible for the design of the 3919.
|
|
|
|
[7] If I had to date the turning point for mechanical
|
|
watches precisely, I'd say 1986. Unit sales of Swiss
|
|
watches rebounded in 1985, but revenue didn't, which
|
|
means what we're seeing is the boom in cheap quartz
|
|
Swatches. Indeed, sales of mechanical watches must
|
|
have been down if revenue was flat despite the sale of
|
|
all those Swatches. Whereas in 1986 revenue turns
|
|
sharply upward even though unit sales only increase by
|
|
a little, which implies a corresponding increase in
|
|
sales of expensive mechanical watches.
|
|
|
|
[8] There is of course another reason some people are
|
|
into mechanical watches: because they're interested in
|
|
old technology. And if you are genuinely interested in
|
|
mechanical watches, there's good news. You don't have
|
|
to wear a billboard on your wrist or pay a lot to own
|
|
one. Just buy golden age watches. They still keep good
|
|
time, they're much more beautiful, and they cost a
|
|
fraction of what new watches cost.
|
|
|
|
The key to buying a golden age watch is to find a good
|
|
dealer, and the best way to recognize one is by how
|
|
much they tell you about the watch. A bad dealer will
|
|
just have a lot of fluff about the prestige of the
|
|
brand and the sleek lines of the case. A good dealer
|
|
will tell you the model number of the watch and
|
|
movement, have lots of pictures, including some with
|
|
the case back open, give you dimensions, disclose all
|
|
damage and restoration, and tell you exactly how
|
|
accurately the watch is running. Good dealers tend to
|
|
be watch nerds themselves, so they're into this kind
|
|
of thing.
|
|
|
|
(There are a few independent watchmakers trying
|
|
earnestly to make good mechanical watches now, but
|
|
their efforts show how hard it is to do good work when
|
|
the current is against you.)
|
|
|
|
[9] Oddly enough it might have helped that the 3919
|
|
was hand wound. If a watch runs for long enough, 5
|
|
seconds a day starts to add up. After three months a
|
|
watch that gains 5 seconds a day will be 7 minutes
|
|
fast. But with a hand wound watch you occasionally
|
|
forget to wind it, and it runs down. And when you wind
|
|
it again you reset it — on average to a time about 30
|
|
seconds behind the actual time. So if you forgot to
|
|
wind a 3919 every two weeks or so, it would rarely
|
|
have shown the wrong time.
|
|
|
|
[10] There's one brand still waiting to be reinflated:
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Universal Genève, which was one of the big players of
|
|
the golden age but since 1977 has been little more
|
|
than a brand name passed from acquirer to acquirer.
|
|
They're scheduled to come back to life later this
|
|
year, no doubt with stories about their long tradition
|
|
of watchmaking.
|
|
|
|
[11] More precisely, a high ratio of size to accuracy
|
|
meant cheap. It's easier to make a larger movement
|
|
keep good time, but between two watches of the same
|
|
accuracy, the larger was usually the cheaper.
|
|
|
|
[12] Their form did once follow function. They were
|
|
originally diving watches. But they're long since
|
|
obsolete for this purpose. Present day diving watches
|
|
(now called dive computers) are digital and tell you
|
|
much more than the time.
|
|
|
|
[13] Rolex was awarded an average of 16.6 patents per
|
|
year in the 1950s, but only 1.7 per year in the 1960s.
|
|
|
|
Pierre-Yves Donzé, The Making of a Status Symbol: A
|
|
Business History of Rolex, Manchester University
|
|
Press, 2025.
|
|
|
|
[14] Rolexes also shared something more specific with
|
|
SUVs: aspirational manliness. An internal 1967 report
|
|
by Rolex's ad agency J. Walter Thompson explained the
|
|
idea they were trying to convey: "Because a Rolex is
|
|
designed for any situation, however rough or dangerous
|
|
or heroic or exalted, it implies that the man who
|
|
wears it is, potentially, a hero."
|
|
|
|
Reprinted in Donzé, op cit.
|
|
|
|
[15] This business model only works when purchase
|
|
decisions are driven mainly by brand. In a normal
|
|
market, if one manufacturer restricts production,
|
|
customers just buy from whichever competing
|
|
manufacturer offers something as good. It's only when
|
|
customers are seeking a certain brand rather than a
|
|
certain level of performance that you can manipulate
|
|
them by restricting its availability.
|
|
|
|
[16] Of course the first question one has on noticing
|
|
a bubble is: will it burst? The reason ordinary
|
|
bubbles eventually burst is that speculators get
|
|
overoptimistic, but in this case the CEO of Patek
|
|
Philippe controls the "money supply" and can thus take
|
|
measures to cool down an overheated market. So there
|
|
are probably only two things that could cause their
|
|
specific bubble to burst: if his successor is not as
|
|
capable, or if the whole custom of wearing mechanical
|
|
watches goes away. The latter seems the greater
|
|
danger. People aren't going to wear three things on
|
|
their wrists, so all it would take is for there to be
|
|
two popular devices that were worn on the wrist, and
|
|
mechanical watches would start to be seen by the next
|
|
cohort of young rich people as an old guy thing. It's
|
|
hard to imagine a luxury watch brand surviving that.
|
|
|
|
|
|
|
|
Thanks to Sam Altman, Bill Clerico, Daniel Gackle,
|
|
Luis Garcia, the people at Goldammer, Jessica
|
|
Livingston, Ben Miller, Robert Morris, John Reardon,
|
|
D'Arcy Rice, Alex Tabarrok, and Garry Tan for reading
|
|
drafts of this.
|
|
|
|
|
|
|
|
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━
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|
|
|
References:
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|
|
|
[2] https://paulgraham.com/index.html
|
|
[3] https://paulgraham.com/brandage.html#f1n
|
|
[4] https://goldammer.me/products/vacheron-constantin-18k-white-gold
|
|
[5] https://collectability.com/learn/the-history-of-the-golden-ellipse/
|
|
[6] https://paulgraham.com/brandage.html#f2n
|
|
[7] https://paulgraham.com/brandage.html#f3n
|
|
[8] https://paulgraham.com/brandage.html#f4n
|
|
[9] https://paulgraham.com/brandage.html#f5n
|
|
[10] https://www.sothebys.com/en/buy/auction/2025/fine-watches-5/reference-5402st-jumbo-royal-oak-a-series-a
|
|
[11] https://www.sothebys.com/en/buy/auction/2025/important-watches-2/reference-3700-11-nautilus-jumbo-a-stainless-steel
|
|
[12] https://paulgraham.com/brandage.html#f6n
|
|
[13] https://www.sothebys.com/en/buy/auction/2019/watches-online-6/patek-philippe-ref-3919j-a-yellow-gold-wristwatch/
|
|
[14] https://paulgraham.com/brandage.html#f7n
|
|
[15] https://paulgraham.com/brandage.html#f8n
|
|
[16] https://paulgraham.com/brandage.html#f9n
|
|
[17] https://www.patek.com/en/collection/grand-complications/6300-400g-001
|
|
[18] https://paulgraham.com/brandage.html#f10n
|
|
[19] https://paulgraham.com/brandage.html#f11n
|
|
[20] https://paulgraham.com/brandage.html#f12n
|
|
[21] https://paulgraham.com/brandage.html#f13n
|
|
[22] https://paulgraham.com/brandage.html#f14n
|
|
[23] https://paulgraham.com/brandage.html#f15n
|
|
[24] https://paulgraham.com/brandage.html#f16n
|