<![CDATA[Horolonomics]]>

<![CDATA[Horolonomics]]> Follow Horolonomics, filter it, and define how you want to receive the news (via Email, RSS, Telegram, WhatsApp etc.) https://follow.it/horolonomics Tue, 03 Oct 2023 01:19:48 +0200 <![CDATA[In-House Means In Control]]> https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwVbSBZFBr63K68qfTAM-Smm Among many avid watch collectors, the term "in house movement" seems to elicit eyerolling disdain.

Pieces of an assortment, including balance spring, from a non-Swiss movement.

There is a sizeable perception that "in house" is, in fact, nothing more than an unnecessary marketing ploy designed to tease more money out of the wallet of buyers (by way of definition, an "in house" movement means that the mechanism inside a watch was predominently manufactured by a brand itself, kind of like "we make our own bread" at a restaurant). I'll confess that I'd begun to think similarly, that is, until I read a 66 page report posted by the Swiss Competition Commision on May 10, 2023. Yes, this is the kind of thing an economist finds interesting on a weekend, or at least this economist.

Before we get into the details of this report, in the interest of full disclosure I should say that the original document was in a different language: lawyerese. I'm only partially joking, because it was actually written in German lawyerese which is perhaps doubly challenging. So, I used Google to translate the document and did my best to decypher the English legalese. I admit that there could be innaccuracies in what I thought I learned, but I promise to openly acknowledge those innaccuracies if I'm notified of them. Oh, one more thing. The Swiss competition authority actually redacted parts of this report like it was some kind of declassified nuclear weapon blueprint (ok, maybe not that heavily redacted but you get the point). I think it is pretty absurd to obscure commercial information in this way but who am I to judge? None of what I write here will depend upon an effort to fill in the literal blanks in this report.

One of the most important things I learned was that, as recently as 2015, almost every brand that manufactured a watch with a Swiss movement had to deal with one company, either directly or indirectly: Nivarox, a subsidiary of the Swatch Group. The difficulties with sourcing a Swiss-made movement are well-known and typically involve the whims of another Swatch company, ETA, which manufactures entire movements. What was somewhat unclear to me before I read this report is that both ETA and almost every other manufacturer of Swiss movements, such as Sellita, Soprod and the like, depend severely on the availability of parts from Nivarox. These parts are the tiny fiddly bits which are exceedingly difficult to manufacture with quality, such as balance springs and pallet forks. The customary name for this collection of parts is an "assortment." A table in the report makes it clear that in 2014 and 2015, less than 10% of Swiss movements were made without Nivarox assortments. The situation changed a bit by 2020, but even then, somewhere between 60 to 70% of all Swiss movements were built around Nivarox parts.

The Swiss movement market apparently was even worse than a character from the TV show Seinfeld I'll refer to as the Soup Guy.

This character was notorious for yelling at customers if they ordered soup in the wrong way, ending with "no soup for you!" and kicking customers out of his shop. I knew ETA was analoguous to the Soup Guy, turning away brands who wanted movements for a bunch of reasons I don't really need to get into. But the situation was even worse, because anyone who thought, "fine, I'll make my own soup" then had to deal with the Broth Guy, aka Nivarox, who was just as prone to say "no broth for you!" at which point you definitely weren't getting soup (ie a Swiss movement). Of course, complicating the case even further was that both the Soup Guy and the Broth Guy worked for the same Guy named the Swatch Group.

It's important we acknowledge that having a super-high market share, such as Nivarox's share of the "assortment" market, is not itself problematic from an economic perspective.

But we know that inefficiencies do emerge if a company uses its market power to restrict the availability of products and / or raises the price of products excessively. If Nivarox did something like that, then the Swiss movement market would involve an inefficiency called a "deadweight loss" and authorities may justifiably want to address this problem. And, to a large extent, that was the question investigated by Swiss authorities: did Nivarox abuse its market power?

When it comes to pricing, the Competition Commission (henceforth COMCO) noted that "Nivarox increased its prices a total of five times between 2013 and September 2021 (most recently in November 2018). The price increases cumulatively resulted in an increase in sales prices of around 55%." What this amounts to in your favorite currency unit is a little unclear from the report itself. COMCO does mention that Nivarox pricing ranged from a low of CHF 20 to a high of around CHF 1,000, meaning that the price hikes were between CHF 1.38 per year per sale and CHF 69 per year per sale. Nivarox cited rising labor and training costs (among other things) as a basis for their price increases. COMCO concluded that the price hikes were probably not an indicator that Nivarox was abusing its market position. COMCO came to this conclusion, in part, because Nivarox raised prices for fellow Swatch Group members (such as ETA) by the same amount that they raise prices for unrelated, third party, buyers.

COMCO also considered whether Nivarox inappropriately restricted the availability of assortments, a strategy that a monopolist would typically adopt. Here, the news for Nivarox was not as positive. Back in late 2013, Swatch Group issued a "declaration of intent" which indicated that Nivarox would only supply assortments to third parties up to a maximum determined by said third party's purchasing patterns over recent years. Strictly speak, this was not a restriction on the availability of parts, because Nivarox was offering a volume consistent with what buyers needed in the past. However, the declaration of intent also stated that "Swatch Group intends to begin negotiations with ComCo in mid-2016 regarding a gradual reduction in Nivarox deliveries, with the aim of concluding an amicable agreement with the Secretariat of the Competition Commission in this regard by mid-2018." This statement raised the spectre that the availability of assortments would be severely curtailed in the future.

Certain third party Swiss movement manufacturers were, apparently, not happy with the Nivarox announcement. According to COMCO, La Joux-Perret and Sellita reached out to the regulator and stated that, in their opinion, the declaration of intent regarding assortments ran afoul of an "amicable agreement" COMCO had arranged with Swatch Group designed to protect the availability of Swiss made movements. This outreach, and the declaration of intent, were two prinncipal reasons for the preliminary investigation which lead to COMCO's report.

So what did the commission find when it came to restricting quantity? There were a number of results. COMCO determined that Nivarox does have a dominant position in the relevant market and that Nivarox problematically discriminated against third-party buyers. The second of these conclusions was driven by the observation that "Nivarox has used the declaration of intent to limit the quantities and products available (see paragraphs 66, 75), refused to deliver excess quantities to certain third-party customers ... As far as is known, Nivarox's internal customers were not affected by such restrictions on purchasing options." In other words, Swatch Group buyers of assortments did not face purchasing restrictions that were similar to the limits that Nivarox imposed on third parties.

COMCO was careful to note, though, that any problematic behavior by Swatch Group / Nivarox would involve "relatively minor violations."

One of the Nivarox buildings in Switzerland.

Nivarox did sometimes supply assortments beyond the maximum implied by the declaration of intent and also made "technical adjustments" to assortments which were not required under the declaration of intent. For this reason, COMCO did not recommend a more in-depth investigation of Nivarox. However, COMCO did advise Nivarox that they should change their approach in order to avoid triggering more intense scrutiny and / or sanctions. The commission's recommendation read: "Nivarox [should fulfill] third-party customers' requests for the delivery of assortments within the scope of their specific production possibilities and [should] not discriminate against third-party customers - particularly with regard to the quantities and products available - neither against their internal customers nor among themselves." In other words, the commission suggested that Nivarox should probably cease imposing purchasing limits based upon historical patterns. Instead, supply limits should be determined by capacity.

All told, the outcome of the most recent inquiry into Swatch Group market behavior was fairly mild. Swatch was charged CHF 52,013.64 because their restriction of supply under the declaration of intent triggered the investigation and said investigation did find problematic behavior. COMCO indicated, though, that if Nivarox changed their approach in line with the recommendation described above, the matter would be largely resolved.

Let's get back to in-house movements though. It is fairly clear that sourcing assortments from Nivarox is a fraught prospect and the Swiss regulatory authority isn't really aggressively ensuring that assortments are available. From this perspective, manufacturing your own movement, including assortment components, is a very reasonable (but certainly costly) way to reduce the risk that the rug will be pulled out from under your brand by Nivarox. What's interesting is that there certainly is a growing competitive fringe which can serve as a non-Nivarox source for assortments. I was pretty surprised when COMCO wrote that Zenith (LVMH member) has purchased assortments from a Dutch supplier named Flexous Mechanisms. From a collector's perspective, though, it is rather unfortunate that production of assortments is increasingly fractured across numerous producers (including individual brands). COMCO repeatedly notes that production of these parts is subject to returns to scale, so that concentration of production in the hands of Nivarox, for example, would bring down component pricing. This, in turn, could potentially bring down watch prices as well.

What's clear is that COMCO is not inclined, nor empowered, to push things in this direction. Of course, in the rather tumultuous economic climate characterizing the global economy, lower watch prices may well emerge regardless of what happens when it comes to assortments. It remains to be seen if the trend towards independent assortment suppliers and in-house movement manufacturing will intensify or stabilize.

My Mission to Mars MoonSwatch and Fifty Fathoms homage by Steeldive.

The pictures from the last 10 days or so suggest that Swatch has delivered another blockbuster by way of their most recent "collaboration" with Blancpain, this one officially known as the Bioceramic Scuba Fifty Fathoms (SFF). Social media served up numerous photos of queues outside of Swatch stores ahead of the SFF launch on September 9. Plenty of aspiring owners waited long hours for their chance to buy the newest accessible riff on a design that typically commands a price in the five digit range. I'll admit that the photos convinced me that Swatch has a replicable formula for developing watches that are so in demand they can be flipped for a sizable premium.

As I've done before, though, I prefer to ask the data what, exactly, is going on with the release of this timepiece. And the data definitely tells a different story, particularly when we compare and contrast the Scuba Fifty Fathoms (henceforth SFF) drop with the MoonSwatch drop that preceeded it. One thing we'll see is that the recent Swatch releases are consistent with a principle economists refer to as diminishing returns. But let's start with the beginning.

I used an eBay seller tool to gather the selling price for MoonSwatches and SFFs that were flipped during a period of time spanning the official drop date. I've previously shared that asking price can be very different than actual selling price, so I was careful about using data on the actual price paid when a sale was successful. I crunched the numbers a bit and put together the graph presented below. This graph allows us to compare secondary market outcomes during the two launches.

Horizontal access is days from release, M=MoonSwatch, SFF = Scuba Fifty Fathoms.

Let's beging with the bars, which show the number of each watch sold: grey for MoonSwatch and orange for SFF (for real, Excel chose these colors on its own). The data tells us that flipping behavior was somewhat similar for MoonSwatch and SFF in that both watches were sold on eBay before the official launch date. Also, both watches saw the largest number of preowned sales on the launch date itself.

From there, the sales volume similarities end. Total eBay sales of SFF were much smaller in number than sales of MoonSwatch. There were 702 MoonSwatches sold over the nine days in question and only 208 SFF sold (70% lower than MoonSwatch flipping). Moreover, the trend in preowned sales volume was different for the two releases. For the SFF, sales constantly dropped over the days after the launch wherease for the MoonSwatch, there was an increase in sales in the third day after the release.

Now, it would be one thing if SFF sales volume was smaller because buyers love the watch so much they were not even willing to sell it on eBay. But pricing patterns suggest this is not what happened. The lines in the graph show the flipping premium, that is, the percent by which the sold price on eBay exceeded the retail price of each watch. The MoonSwatch premium peaked at 500% the day after the launch and then gradually decreased to a still-impressive 281% at the end of the sample. In contrast, the highest flipping premium for the SFF, at 229%, was lower than the lowest premium earned by the MoonSwatch. Moreover, the peak SFF flipping premium appeared two days before the watch was released (far earlier than the peak MoonSwatch premium). The lowest SFF premium, at around 80%, occured in the last two days of the sample.

The data is fairly clear: fewer SFFs were flipped on eBay and the return for reselling the newest Swatch "collaboration" was noticeably lower than the return to flipping MoonSwatch (I ran a formal test and the difference in returns is statistically significant). The data here is consistent with the principle of diminishing returns. This principle states that as more of an activity is undertaken, there is a smaller increment of benefit from repeating the activity. In undergraduate economics classes, we sometimes give the example of drinking a beer: the first one is really enjoyable but the tenth in an evening is typically not as fun (and may actually harm you).

In this case, it certainly appears that buyer reaction to the second Swatch collaboration was more muted, notwithstanding all those photos of long lines at boutiques. To be fair, it could be the case that flippers have decided not to use eBay to resell watches this time around, but I have no reason to believe that would be the case.

A natural question would be: why was collector response cooler this time around? I think there are a number of plausible explanations. First, it appears watch prices have continued to slide in recent months, so SFF may just be a victim of circumstances. Second, unlike MoonSwatch, there was a bit of a collision between the SFF offering and some of the "brand values" embraced by Blancpain. The OG Fifty Fathoms is much beloved by the ocean exploration community and Blancpain has responded by partnering with a number of ocean initiatives connected to ecology and sustainability. Right or wrong, the SFF is perceived as a plastic watch (Bloomberg coverage of this issue is absolutely amazing and suggests that Swatch's own patent describes bioceramic as a plastic). We know that the ocean environment has been heavily damaged by plastics. I wouldn't blame any collector who felt that SFF contradicted Blancpain's environmental commitment, thereby diminishing receptiveness to the new design. This type of issue did not crop up in the case of the MoonSwatch (although, to be fair, as I've written with co-authors, pollution is also a problem in outer space, but this problem has less to do with plastics).

At the end of the day, Swatch has managed to pull off another release which did generate a lot of excitement and, yet again, deliver a watch earning a premium on the secondary market. The difficulty of pulling off this kind of product launch should not be underestimated, and Swatch should celebrate their successful sequel. Nevertheless, some careful consideration is owed to the fact that the return to releasing a collaboration with an exclusive luxury brand appears to have diminished. At some point, the return may become low enough that it may not be in the interest of the Swatch Group to continue this strategy, at least in the short run. Only time will tell.

An older Timex that belonged to a family member.

The buyer plans to build a "food distribution center" on the property, but the sale will only go through if certain wetlands permits are approved. Moreover, "On May 10, the Middlebury Conservation Commission approved the permit for a food distribution center consisting of a 540,000-square-foot building and a smaller 180,000-square-foot building on a 111-acre site consisting of the 93-acre campus of the Timex property and a neighboring 18-acre property on Southford Road belonging to another Drubner family partnership." Further complicating the matter is the fact that a politician elected to state government managed to slip a clause into a two year budget bill making it even harder for the potential buyer to build the food distribution center. Said politician lives across the street from the Timex property.

Satellite view of the soon former Timex HQ, source: Google Maps.

The sale of the property may be related to Timex's November, 2020 sale of a majority stake to hedge fund Baupost Group, headquartered in Boston. Apparently, there's nothing quite like a $7.5 million cash injection to make an investment feel worthwhile. Although, considering the fact that Baupost manages a $29 billion portfolio, $7.5 million may not be a big deal. But where is Timex moving to? I reached out to their press contact and did not receive a response. I'm not entirely surprised by this. I've observed that news media in Connecticut like to make a big deal out of the decision of a corporation to move out of the state, as does the Governor. I wouldn't blame Timex if the brand was trying to keep all this quiet so that they didn't have to field any calls from an agitated state official.

Time will tell where the company lands (pun intended). The brand's had a hot hand in recent years, with offerings designed by Giorgio Galli pleasing many collectors and enthusiasts. Let's hope their relocation doesn't disrupt that trend.

A Rolex-Bucherer spoon, these were given out to accompany Rolex watch purchases.

Rolex announced its planned acquisition of retailer Bucherer last week. In this post, I'd like to offer some analysis, contextualization and possible consequences of the development. In hindsight, the acquisition makes perfect sense and I'd like to explain why that is the case.

To begin, let's remember how the modern Rolex brand was established.

A schematic illustrating the earliest era of Rolex's business organization.

Rolex co-founder Hans Wilsdorf passed away in 1960 without any direct heirs. Rather than sell his company, he left it to a charitable foundation in Switzerland. Rolex is a non-profit. In their press release announcing the acquisition of Bucherer, Rolex specifically mentioned that the retailer's current owner, Jörg Bucherer, does not have any direct descendants. This was not some toss-away line. The brand is pointing us to the fact that, from this perspective, Bucherer faces a pivotal moment which is almost exactly the same as the one Rolex itself faced more than six decades ago.

With good reason, the business philosophies and decisions made by legendary figures like Wilsdorf shape the decisionmaking in Rolex to this day. The logic is clear: Rolex evolved into one of the most valuable brands in history subsequent to Wilsdorf's decision to leave his business to a foundation. There is little reason to doubt that Bucherer will equally strengthen from joining the same foundation.

A schematic illustrating the Heiniger era of Rolex's business organization.

Wilsdorf is not the only revered leader in the halls of Rolex. Perhaps equally regarded are the Heiningers. Father Andre and son Patrick captained Rolex through turbulent and strategic eras which were arguably indespensible in creating the great success and desirability the brand currently claims. In particular, Patrick achieved vertical integration through a series of supplier acquisitions. Here is a timeline of key acquisitions- 1998: bracelet maker Guy Freres and case maker Genex, 2000: dial maker Beyeler, 2001: crown maker Boninchi, 2004: movement maker Aegler. These strategic acquisitions allowed the brand to control the quality and reliability of its source components.

Parts suppliers are the most upstream component of the supply chain (abstracting from raw materials).

A schematic illustrating the Dufour (present) era of Rolex's business organization.

Heiniger vertically integrated upstream. With the acquisition of Bucherer, present-day Rolex CEO Jean-Frederic Dufour extends Heiniger's vision of vertical integration in a completely natural, downstream, direction. Rolex will have in-house control of the "last mile" as a watch wends its way from Switzerland onto the wrist of a collector. From this perspective, Dufour's move into retail is also analogous to decision by business titan Steve Jobs to launch Apple Store. The move is also consistent with the decision by luxury watch brands such as Audemars Piguet to open their own retail locations (in that case, known as AP House). Rolex likely believes that it can elevate the retail experience for its buyers by controlling the sales space in Bucherer, and I don't have any reason to doubt that. As it stands, the Rolex retail experience in your typical AD can be enjoyable, but there are too many games and hurdles collectors have to deal with in order to obtain in-demand watches. I will return to this point.

There is an open question about whether regulators in Switzerland will raise a barrier to the acquisition. I'm not a betting man, but I wouldn't bet against Rolex. Merger review and regulation is a very complicated economic and legal topic involving reams and reams of publications, court decisions, and the like. A back-of-the-envelope guide, though, is that vertical mergers, involving different steps in the supply chain, typically require the least amount of oversight. For instance, if Rolex sought to buy Swatch Group (a horizontal merger, because both parties make watches), regulators might take a very close look at the plan because it could increase market power and adversely impact collectors. But it is hard to argue that vertical integration, particularly in this case, will adversely impact collectors. Bucherer is one among a very diverse array of channels through which one can buy a watch, particularly when you consider the secondary market. My prediction would be the Bucherer acquisition will be approved, perhaps with some minor conditions.

The great unknown, going forward, is the extent to which Rolex begins to allocate more and more of its production to distribution through Bucherer, leaving less and less for other incumbent authorized dealers. I believe this is extremely likely. There are many reasons. First, Rolex will be able to control, more extensively, the buyer experience at Bucherer and more continuously train sales staff. The brand will also be able to more quickly pivot and adjust the buying experience. Second, there have been two somewhat high-profile scandals at authorized dealers recently. One took place at C. D. Peacock in Chicago. Employees allege that new watches were shunted to the grey market, rather than actual collectors, presumably so that someone could earn more on sales. The second high profile scandal took place at a Patek autorized dealer in San Francisco, when a collector spent more than $200,000 on less-preferred merchandise in order to gain access to a Nautilus, which was the watch he actually wanted. The dealer involved lost their distribution agreement with Patek before the collector could buy the Nautilus, so the collector sued. Every brand would naturally like to eliminate any reputational harm from these types of dealer shenanigans. If Rolex channels more of their sales through a retailer they control, they minimize their exposure to reputational risk.

More generally, Rolex often plays the role of an "anchor" brand in stores selling other watch brands and / or jewelry. In American retail, malls often have a number of prominent stores that would serve as a "draw" for visitors. This means that smaller stores benefit from the presence of an anchor store since buyers visiting a large store, like Macys, maybe decide to drop in and spend money at smaller stores. Sometimes this is also described as a "halo" effect.

In multibrand stores, Rolex undoubtedly serves as a draw for buyers. And, "buying history" allows a client to take priority when it comes to acquiring a hard-to-find Rolex. For example, a client who buys 10 Breitlings, spending perhaps $80,000 in a multibrand boutique, may get access to a new Tiffany blue dial Datejust before other people. If Rolex does not like this practice, it can put an end to it in Bucherer stores. Or, it could prioritize access based upon purchases of Rolex and / or Tudor, thereby limiting the ability of other brands to ride the coat-tails of Rolex's reputation.

Do I think Rolex will completely shut down independent authorized dealers? At this point, I don't. Recently, rock star John Mayer took delivery of one of the first "puzzle" Day Dates at a multibrand boutique in Carmel, California. NFL quarterback Tom Brady also took delivery of a puzzle Day Date at a multibrand boutique. Granted, there were few alternative options for Rolex to distribute this watch to VVVIP clients. But this is, no doubt, a reassuring sign for the authorized dealers in question. Those dealerships with strong VVVIP relationships are probably safe from losing Rolex distribution entirely. And, there are probably others that are safe, particularly those that have long historical connections to the crown. However, it is quite likely that Rolex will have much less tolerance for even minor misbehavior by authorized dealers once they have an easy distribution alternative in Bucherer.

There is one clear financial downside from a pivot towards Bucherer as Rolex's preferred distributor. A sometimes-overlooked revenue stream for Rolex comes through their subsidiary Roldeco (think "Rolex" "Decorations"). When you visit a Rolex AD, you will see Roldeco products by way of decorations on the walls, on displays and all around the Rolex portion of the sales floor. These products are sold to ADs by Rolex via Roldeco. If Rolex does decide to shrink their distribution through independent ADs, it is likely they will find less revenue via Roldeco.

The amount of this revenue is not publicly known, so the magnitude of any possible loss from reduced Roldeco business is difficult to ascertain. It is worth noting, though, that Rolex has another option when it comes to reallocating inventory away from existing ADs and towards Bucherer. The brand could expand the presence of Tudor in non-Bucherer authorized dealers while Rolex shrinks, thereby maintaining a robust relationship with existing dealers. Roldeco business would then increase as newly redesigned Tudor sales floors are introduced.

The only people who know exactly what will happen probably aren't talking very much. Traders on the London stock market have placed bets on the future, though. When news broke about Rolex's plan to vertically integrate downstream into retail, the stock price of one authorized dealer plummeted. Watches of Switzerland shares dropped by approximately 25%, suggesting financial prospects had dimmed, at least in perception if not in reality. It could well be the case that traditional authorized dealers are able to maintain their relationships with Rolex. There is one thing we can state with confidence though. Between the bold Puzzle and Celebration dial releases this year, the announcement of Rolex's entry into certified pre-owned, and now this acquisition of Bucherer, we can not doubt that we now live in the Dufour era of the brand.

Photo of a Rolex Deep Sea which I took at the Beyer museum in Zurich.

If I told you there is a switch that Rolex could flip and immediately hamstring the American secondary watch market would you believe me? Frankly, I wouldn't have believed this myself until I stumbled upon a disclaimer in a Sotheby's catalogue from 2008. It read: "Important Notice regarding Importation into the United States of Corum, Rolex, Piaget or Franck Muller Watches. Sotheby's cannot arrange for the delivery of Corum, Rolex, Piaget or Franck Muller watches to the United States because U.S. laws restricts the import of Corum, Rolex, Piaget or Franck Muller watches.

The curiousity-inducing text from a vintage Sotheby's catalogue.

The buyer or a designated agent may collect the property in the country of sale." I thought this was an extremely odd restriction which, frankly, I had never heard of before.

Restrictions on international flows of goods are not, themselves, rare. Quotas on imports, as well as taxes on imports, are a vestige of an outmoded view of international trade. This idea behind mercantalism is premised upon a zero sum view of the world in which one party's gain will only emerge because someone else has lost. So, if your country imports something, the exporting country has won and your country has lost. Modern, mainstream, economic thinking has largely left mercantilism and the zero sum view of trade in the dustbin of history. Under fairly general conditions, trade is a win-win for both parties engaged in exchange.

Certainly in 2008, the benefits of free trade were widely known in the US. More open trade governed a large number of product markets as a result (mercantilism was the dominant view in the 15th - 18th centuries, it has seen something of an unfortunate resurgence in the past 8 years or so in the US). In 2008, barriers to imports for many many products were low and / or falling. For this reason, I found it hard to believe that US lawmakers specifically targeted preowned Corum, Rolex, Piaget and Franck Muller (CRPF) watches and prohibited their importation. Even if there were an anti-Swiss watch political coalition in the US in 2008 (again, extraordinarily unlikely) why would they have targeted this somewhat odd list of brands? They're all Swiss, but it is hard to know why other Swiss brands like Omega, for instance, would not have been verboten.

So I decided to do a little investigating to see if I could figure out the origin of the CRPF American import barrier. After a little digging in the archives of the watch forums (I hope we never lose these) I was on the trail of an article from the publication US Customs Today.

The article was entitled "An Untimely Christmas Delivery." The author details how, sometime prior to February, 2002, US Customs Senior Inspector Bonnie Adelman had turned her attention to a package which supposedly contained three Cartier watches and one Patek Philippe watch. When Inspector Adelman and Import Specialist Anthony Grossi opened the package, they found 15 Rolex watches. They immediately seized the watches. In all likelihood, the rogue shipment of Rolexes was sold at auction (only to a buyer who would take them out of the US) with the proceeds from the sale going to the US government.

At the very end of the US Customs article was an important part of the answer to the mystery of the CRPF trade barrier.

The expired US Customs trademark recordation for Rolex (expired 2005). Note the entry "Grey Market Importation Restricted Yes

There was a paragraph which read "The Rolex trademark recordation with Customs indicates 'Import of Goods Bearing Genuine Trademarks or Trade Names Restricted.' This means that genuine Rolex products can only be imported with the permission of the trademark owner, Rolex Watch U.S.A. Inc. A private individual can hand carry one Rolex watch from a trip overseas without obtaining permission. Bring in more than one, and they will all be seized as a trademark violation. Purchasing a Rolex from overseas by mail is also a trademark violation." This explains why the package shipper probably intentionally mislabelled the shipment as containing Cartier and Patek watches. When I searched the US Customs recordation page, I could not find an entry indicating that importing Patek to the US ever required permission. The same was true for Cartier. If the package documentation had been taken at face value by the customs agents, the 15 Rolexes would have circumvented the trade barrier.

Like Rolex, US Customs records do indicate that "grey market" US importation of Corum watches was restricted (it is important to note that US Customs seems to use the term "grey market" to refer to any watch shipped across the border by anyone other than the trademark holder, this is noticeably different than the present use of the term "grey market" as specifically applied to the watch industry). Interestingly, I was not able to confirm that Piaget and Franck Muller prohibited "grey market" importation of their watches. However, my guess is that I'm simply not conducting the search properly.

The updated US Customs trademark recordation for Rolex. Note the entry "Grey Market Importation Restricted No

Perhaps one of the most interesting remaining questions is: why did Rolex decide to drop its trademark-based barrier to unapproved US imports of their watches (see screengrab of current recordation)? In my book on Rolex, I provide archival documentation that the brand had a longstanding concern with the problem of "trade diversion," in which watches appeared in markets other than those Geneva initially sent them to. The trademark barrier was clearly one tool the brand relied upon for some period of time in order to prevent "unauthorized" shipments of watches into the United States. Further, authorized dealers in the US likely preferred the arrangement in which there was softer competition from pre-owned sources of watches abroad. Perhaps Rolex leadership realized that if other brands, such as Omega apparently, were not restricting imports, Rolex was at a competitive disadvantage. Collectors are certainly more likely to buy a watch in the first place if it is easy to resell.

One thing is clear, if not for the decision by Rolex to allow for much freer international trade in their watches, the vexatious shortage of certain references plaguing the modern era would have been much, much worse. From this perspective, it is only by grace of Rolex, and all the brands really, that watches are more available than strict enforcement of trademark barriers would allow. One does wonder, though, if there is an ongoing question discussed in the C-suite of certain brands: is it time to bring back the trademark barriers in the US?

Mission to Mars: One of two MoonSwatches in my collection.

In a recent episode, when host Rick introduced the topic of the most recent Swatch X Omega Mission to Moonshine Gold MoonSwatch, co-host Ariel Adams audibly sighed in apparent exasperation. I was simultaneously amused by and sympathetic with Adams' frustration at the 30-ish day cycle of new releases when it comes to the Moonshine MoonSwatches. Just to be clear: I have nothing against the MoonSwatch. I own two: Mission to the Sun and Mission to Mars. They are comfortable and fun to wear.

However, the "Mission to MoonShine Gold" (M2MG hereafter) product series is a bit of a stretch when it comes to the MoonSwatch. The underlying exercise takes place during each full moon, which is when Swatch releases a store-only special edition of the Mission to the Moon MoonSwatch with one small change: the chronograph seconds hand is coated in Moonshine Gold and embellished with a design of some sort. Swatch also provides a certificate which supposedly establishes that these watches were "born" during a corresponding full moon.

To me, the trouble here is that there is a whole lot of artifice in this exercise. Sure, the Speedmaster has an important historical connection with NASA's expeditions to the Moon during the Apollo missions. But the full moon really doesn't have any connection to the Apollo missions or the Speedmaster. I do associate the full moon with a precious metal, but it's silver not gold. According to many movies and fictional books, that's what you use to kill werewolves when they emerge during a full moon.

In light of all this, the M2MG releases give a certain inauthentic marketing vibe.

Mission to the Sun: the second of two MoonSwatches in my collection.

I can just imagine the meetings when the marketing team whiteboarded ideas on how to keep the MoonSwatch hype train moving down the tracks. I don't know which ideas were proposed. Maybe a wave emblem in order to evoke the tides generated by the moon? Then there's that antiquated notion that the moon is made of cheese, a dairy product which is certainly part of Swiss culinary tradition. I doubt it, but maybe someone on the marketing team suggested printing the name of different cheeses on the dial.

You get the point. So we have to wonder: why does Swatch keep releasing these Mission to Moonshine Gold MoonSwatches? The answer is: I think it is actually effective. In fact, there is real evidence that he M2MG releases are effective. In order to suss out the public reaction to the M2MG releases, I turned to Google Trends, which offers data on public searches for different terms.

Google Trends time series for the topic "MoonSwatch". Full moons marked by the full moon emoji, which admitedly looks like a cookie.

I downloaded the worldwide daily Google Trends data for the topic "MoonSwatch" from February 15 of this year through August 5. I'll first present a graph of the raw data. I've marked the full moon dates with a full moon emoji. Even by eye, you can tell that the public reacts to each new M2MG release by more frequently searching for MoonSwatch at each drop date. The reaction persists for a few days after the release. Clearly, the first reaction was the strongest, roughly triple the size of subsequent reactions.

We can use statistics to more formally quantify the M2MG effect. For stats lovers out there, I use an OLS regression with the Google Trends data as a dependent variable and two dummy variables as independent variables. The first dummy variable takes on the value 1 for the date of a full moon and two days after, zero otherwise. The second dummy takes on a value 1 for the day of the first full moon when there was a M2MG release and zero otherwise in order to capture the more sizeble initial reaction to the M2MG series.

I was surprised by how much of the ongoing interest in MoonSwatch could be explained by M2MG releases. The data suggest 68% of the variation in Google searches for MoonSwatch can be explained by M2MG releases. The first M2MG release created a massive surge in MoonSwatch interest. Searches for the timepiece tripled from the baseline level of searching we typically see on Google. The other releases had a smaller impact, but it was nothing to sneeze at. The ongoing M2MG releases increase searches for MoonSwatch by an estimated 37%. All of these estimates are statistically significant.

It is undeniably true that M2MG is not exactly a product authentically inspired by heritage. Nevertheless, it is a demonstrably effective strategy for spurring ongoing interest in the MoonSwatch. Much like celebrity ambassadorships, it may seem intuitively implausible that M2MG generates much benefit for Swatch. The data tells a different story.

My book on the history of Rolex marketing is now available on Amazon! It debuted as the #1 New Release in its category. You can find it here.

You can subscribe to Horolonomics updates here.]]> Fri, 11 Aug 2023 15:25:59 +0200 https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwVx2emFiENRgxKeetMRuZbW <![CDATA[Is Antiquorum Sufficiently Anticrime?]]> https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwWeKbLPa4mjTNKEpFgimKzx One of the more interesting people to arrive on YouTube in the past three years is Larry Lawton. After six years in the Coast Guard, Lawton drifted into the world of organized crime but law enforcement eventually caught up to him. Lawton spent many years behind bars and, now that he's been released, he genuinely seems interested in telling his story so that others won't make the same mistakes he did. His videos appear quite unfiltered when it comes to his crimes and his punishment.

Lawton ended up specializing in jewelry store theft. In some of his videos, he details how particular "jobs" went down. Lawton's vidoes focus on his crimes in Florida and the general region near Florida. His heists frequently involved leaving a store, getting on the highway, and driving long distances for the next phase of his operation: selling stolen items. This process involved getting on interstate 95, which is a highway that runs the length of the east coast of the United States. He and his co-conspirators would typically rob a store, get in the getaway car, and drive straight from Florida to New York City. They wouldn't speed and they would only stop for gas.

This is not a photo of a police officer standing with an auction house employee but it is what AI thinks that would look like.

That drive is probably 20 hours or more. At the end of it, Lawton and his crew would go to a diamond dealer or another jeweler, sell the stolen goods for cash, and split the proceeds. Why am I relating this story on a blog about watches? Well, I recently had a very interesting conversation with Chris Marinello about watch theft and it reminded me that, in the present day, watch thieves may very well use the same strategy as Lawton: watches are stolen in one place but increasingly it seems they are sold thousands, or tens of thousands, of miles away.

The Art of Property Recovery

How would Marinello know this? Simple: he works in the field of property recovery. I've previously written about Marinello's work. His business, Art Recovery, has extensive experience in the recovery of stolen or looted works of art. However, with the documented increase in theft of luxury watches, Marinello is now active in the recovery of stolen timepieces.

Most of Marinello's work is unknown to the public. He has been in the business for 35 years and he is a pragmatic problem solver. When he locates a stolen watch, often at an auction house or sometimes on the web page of a dealer or online auction platform, he knows the holder will worry about reputational harm from any public association with stolen goods. Also, auction houses, in particular, do everything they can to protect the privacy of their consignors and bidders. Finally, Marinello's own clients are often high-profile individuals who would sometimes prefer to stay out of the press when they're trying to recover a stolen watch. For this reason, Marinello offers to sign a non-disclosure agreement in order to reassure an auction house, or any other party, that the issue at hand can be resolved with discretion.

There is also the matter of financial loss. Suppose a collector bought an A. Lange & Söhne Lange 1 for $20,000. Based on a recent auction sale, that price represents a $5,000 "discount" on this particular watch. Suppose further that the collector wants to sell the watch and they consign it to Auction House X. Next, suppose Marinello identifies the watch as stolen and contacts the auction house. Now, the auction house may worry about "costing" the consignor $20,000 if they simply hand over the watch to Marinello. He gets this, and he asks to have a meeting with the auction house and the consignor and / or their representative. Marinello generally tries to "soften the blow" with the consignor. He didn't share particular tactics that he uses, but we can imagine a few. Suppose the theft victim had posted a reward of $8,000. He might offer to give those funds to the consignor. He might also point out that an auction house might charge 30% in fees on the sale, which at a price of $25,000 amounts to $7,500. Between those two things alone, the consignor only faces an effective loss of $4,500 ($20,000 - $8,000 - $7,500). Is that a good day for the consignor? No, it isn't. But it isn't as bad as the original purchase price suggested. And the story doesn't necessarily end there. In the past, Marinello has offered to help consignors recoup some of their funds from the party that sold them the watch. Given the approach he takes, in which he attempts to support the goals of all the parties in these difficult circumstances, it is understandable that Marinello's recent experience in the case of a stolen Richard Mille watch is particularly baffling.

The Richard Mille Tourbillon in Hong Kong

This part of the story begins at 9:30 at night in Milan, Italy, late September 2022.

An example of the Richard Mille RM002 Tourbillion in rose gold. Photo credit Richard Mille.

A tourist named Paul (name changed) was loading shopping bags into a taxi. According to a statement that Paul subsequently filed with Milan's police department (shared with me by Marinello), two people approached Paul. One injured his finger, perhaps using the moment of injury to expose Paul's Richard Mille RM002 tourbillon in pink gold. The watch came off Paul's wrist and into the hands of one of his attackers. Both criminals began to run. Paul gave chase, but the two thiefs split up. At that point, he gave up and sought medical treatment (it seems he has physically recovered from his injury). A watch worth approximately $200,000 had disappeared into the night.

Roughly seven months later, Marinello contacted the auction house Antiquorum because he'd learned that they had Paul's Richard Mille in their posession. It was in the catalogue for their June 13th sale in Hong Kong (hence my earlier reference to Lawton rapidly moving stolen goods from Florida to New York City).

A screenshot of the alleged stolen watch in the catalogue for an Antiquorum auction. Photo supplied by Chris Marinello.

According to an email Marinello shared with me, he contacted Antiquorum's Managing Director in Geneva, Julien Schaerer (I have asked Antiquorum if they would like to discuss this episode or provide a detailed statment, I provide their response below). Aside from an exchange of certain information, such as documents corroborating the theft of the watch, Marinello had a simple ask: "Please do NOT release the watch back to the consignor now that you know it is considered stolen property and an open investigation (sic)."

One day after Marinello's first email, he followed up with a second to Antiquorum's CEO, Romain Rea. Marinello wrote that, in his past experience with Antiquorum, the auction house would only communicate with police whenever Marinello found a stolen watch in the auction house's catalogue. As a result, he had contacted police in Italy, Geneva and the UK (where Marinello resides) in order to facilitate communication with authorities. Marinello asked for direct dialogue on the matter. The next day, although dialogue did not take place, it seems the watch was removed from Antiquorum's auction catalogue. Paul had indicated to Marinello that he would like to personally contact the police in Geneva about the matter (a move Marinello counseled against).

Four days after his first email, Marinello wrote to Schaerer, "I am disappointed that you have not responded to any of my emails or calls concerning this matter. I am aware that you have instructed your staff not to respond to me either. I don't find this particularly professional and suggest that you instruct your legal team to reach out to me. I would like to caution you again that now that you know the watch is stolen, (and withdrawn from your sale) you should not return it to your Consignor. Knowingly moving stolen property could be considered a criminal act in some jurisdictions." It appears that the staff at Antiquorum had elected to simply ignore Marinello, a move that was quite unprecedented in his 35 year career recovering stolen property.

On June 5, 2023, roughly one week after Marinello's last email to Antiquorum, a Genevan public prosecutor sent a letter to Antiquorum (I believe in Geneva) asking if the auction house was in the posession of the stolen Richard Mille watch. The letter was prompted by a criminal complaint filed in Geneva by Marinello's client, Paul. Antiquorum's Schaerer replied by letter on June 9. He wrote (translated by Google) "Further to your letter (simple letter) dated June 5, 2023, received on June 7, 2023, we hereby confirm that we are not, and never have been, in possession of the RM002 AE PG watch, case 134 , caliber RM002/4, 18k in pink gold, formerly lot 145 from the Hong Kong sale of June 13, 2023. As indicated to the Banditry Repression Brigade (BRB), this watch was offered for sale by Antiquorum Auctioneer Hong Kong Ltd., located at 9 Queen's Road Central, Central, Hong Kong. For any additional information about this watch, please contact the aforementioned Hong Kong entity directly."

Frankly, this response struck me as extraodrinarily bizarre. In essence, Antiquorum's Geneva office either 1) never talked to the Hong Kong office about this situation and, therefore, did not know what happened to the watch or, 2) they knew the whole story but they were not going to share the information with authorities. Honestly, neither of these are a good look for the auction house. If the first scenario is true, the auction house is extremely disorganized. It would suggest that one of their branch offices pulled a $200,000 watch out of the vault, essentially, and returned it to the consignor without first confirming that action with higher ups or other team members in Switzerland. I find this improbable. With the second scenario more likely, it seems disappointing that the office in Geneva would not simply fully divulge the location of the watch to local authorities. That would be the most transparent response. Instead, Schaerer seems to have offered the bare minimum required to answer the question that was posed. Genevan authorities have a more difficult job ascertaining where the stolen watch is located, as a result.

The State of Play and Macro Picture

I reached out to Antiquorum to see if they wanted to talk with me about the situation or send a detailed response. I honestly was not optimistic that they would respond since they reportedly did not reply to another publication that contacted them about this matter. To their credit, they did reply. Antiquorum's representative wrote, "The matter referred to by Mr Chris Marinello is currently in the hands of the justice system in Hong Kong. We make it a priority to comply with all our due diligence processes and to cooperate with the judicial authorities in all their requests. At this stage, we do not wish to comment on the case and will leave it to the courts and the police." A Twitter post from the account @artrecovery seems to corroborate Antiquorum's response. The post includes a screenshot of a crime report submitted to the Hong Kong Police Force on July 6.

I'd like to conclude this post discussing some more general aspects to the matter at hand. A somewhat oversimplified model of the decision to commit crime involves comparing the expected return to criminal activity with the return to obeying the law and finding legitimate employment. Let's say that a criminal escapes unprosecuted with probability p and earns C from crime. With probability (1-p) they would be caught and let's say the value of that outcome is I (representing imprisonment). Further, let's say E is the return to legal employment. An individual will rationally decide to commit crime whenever p⋅C + (1-p)⋅I > E.

If we rearrange this expression a bit, we obtain the "choose crime" condition as p⋅C > E - (1-p)I. The left hand side of this equation is the expected benefit from conducting crime and getting away with it. The right hand side is the return to not engaging in crime net of the expected return from doing crime and getting caught. We can think of this as reflecting "regret," ie, ex ante, how much better off an imprisoned criminal would be if they had not chosen a life of crime. The result of this analysis is pretty standard. Three conditions make it more likely that a person will choose crime: 1) a high probability of escaping punishment (p) , 2) a high return from crime (C), 3) a high return from being in prison (I) and 4) a low return from non-criminal pursuits (E).

We can now see why watch crime is on the rise. A lot of police departments and law enforcement seem less inclined towards pursuing watch crimes, for whatever reason. This raises the probability of escaping punishment. Of late, there has been a lot of economic uncertainty in certain countries, which means the return from non-criminal employment is low. And, with the rather rapid rise in the value of pre-owned timepieces, the return to stealing them is higher. The conditions are almost "perfect" for a rise in watch theft.

Let's return to the discussion of Antiquorum and other sales platforms. These players in the watch industry can directly impact the likelihood that watch crime will take place. By cooperating fully and transparently with the police, they can lower the probability that a criminal will escape punishment (lower p). Even if they don't impact this factor, if they vet lots more fully (by checking stolen serial numbers with manufacturers, for example) or collaborate more completely with property recovery experts like Marinello, they can reduce the return to engaging in crime. The last of these possibilities may not seem likely until you consider the full cycle of how a stolen luxury timepiece is handled. The graphic I've presented here is a visualization of that process. Any break in the cycle would mean that a thief would not profit from stealing a watch. For example, thieves almost always use "fences." These are the first people to whom they sell stolen property (the term "fence" seems to orginate from "defence" in the sense that a fence defends a thief from punishment by buying stolen property and not revealing the thief's identity).

If there were no fences, thieves would be much less likely to steal because it would be easy to connect the property, as evidence, to the criminal.

We can see that auction houses and online sales platforms can also disrupt the return to thieves. At the green portion of the cycle, watch values are quite low compared to the market value of a timepiece. The buyers of these "hot" or "dirty" watches face a lot of risk themselves. So, they will demand a discount when buying a watch. This is their fee for fencing the watch and / or exchanging it with others. In that process, its origin becomes more obscure and the watch is, basically, laundered. Auction houses and online platforms can offer market prices to fences and others closer to the thief in the chain of custody because the watch has "cooled down" and / or been "laundered" in the green part of the cycle. In essence, the red part of the cycle creates the return for those participating in the green part of the cycle. However, if auction houses and / or online platforms filter out stolen property more frequently, this reduces or perhaps eliminates the return to fences and others. That, in turn, would mean thieves will find it is harder to sell stolen watches, thereby reducing their incentive to engage in watch theft.

Conclusion

Marinello shared a few other observations about watch theft which are worth noting. He's recently seen a somewhat amazing level of sophistication on the part of thieves. One of his clients arrived in a European country by plane, went straight to his hotel, and within 15 minutes of going into his hotel room, his luxury watch was gone. The level of surveilance and coordination required for this type of theft is relatively unprecedented. Marinello also shared that he has located at least one other stolen watch, a Patek Philippe worth ChF 225,000 that was sold at an Antiquorum auction in May, 2022. In that case, the auction house has not shared with Marinello the name of the buyer. It would be fair to ask how many collectors unwittingly have timepieces bought at auction that, at any moment, could be identified as stolen. This risk is non-negligible.

Marinello does indicate that most auction houses take a professional approach when he contacts them, so there is some possibility that the industry, generally, is seriously approaching its responsibility to disrupt the cycle of watch crime I described above. Doing so is in their own self-interest. If auction houses and other platforms gain a reputation for feeding the cycle of watch crime, rather than disrupting it, it is likely that collectors will sour on luxury watches. The risks of becoming a victim, either through purchasing a stolen watch or having one stolen from you, would mean collecting is simply not worth it.

This week's release of the Royal Oak Offshore Self-Winding Music Edition.

The newest reference of the Audemars Piguet Royal Oak Offshore Selfwinding Music Edition in 37 mm (ref 77600CE.OO.A002CA.01) is not an opening act. It was in 2022 that we first saw the Royal Oak's famed tapisserie dial morph into stacked rectangular rainbow bars evoking musical spectrum analyzers (or perhaps EQ's on old school stereos). The most recent release is a first for me, though. I went hands-on with the ROO Music Edition a few weeks ago so I thought I would share some of my firsthand impressions.

This rendition of the ROO Music Edition is in black ceramic, a material in harmony with the musical motifs found throughout the design.

Crown and case detail from the Royal Oak Offshore Self-Winding Music Edition.

For example, many stereo systems sport a brushed black face. The titanium crown guards evoke the sliders on a sound mixing board while the case engraving immediately adjacent to the guards are a nod to a sound board's grooves and scales.

The tabs holding the rubber strap to the case are knurled in a manner that you've probably seen on the audio jack for a guitar amplifier.

My hands-on photo fo the ROO Self-Winding Music Edition.

For me, one of the most striking features of the Royal Oak Offshore Music Edition is the black rubber strap. The OG Royal Oak bracelet is perhaps one of the most well-known designs in all of watchmaking. I honestly believe that with their design for the Music Edition strap, AP has found an aesthetic that might rival the Royal Oak bracelet.

I still don't know how they did it, but the facets that are molded into the rubber strap reflect light in a fairly captivating manner. The effect is quite clear: we're meant to think of a disco ball. The reflective effect from a disco ball is comparatively easy to achieve. Rectangular pieces of mirror are affixed to a sphere and they reflect light in a somewhat unpredictable manner as the ball spins.

A wrist roll illustrating the "disco ball" efect on the ROO Music Edition strap.

I honestly don't know how AP achieved this same effect with a rubber material. The most obvious technique would involve some kind of polishing for the facets on the rubber, but this seems improbable (although certainly possible). There may also be something special in the material itself which surfaces a reflective effect when the rubber is molded. A third option would be some type of surface treatment which is reflective. I could probably populate a sizeable portion of this post with speculation about how the reflective effect is achieved. I will likely continue to ask until I get the answer.

The Royal Oak Offshore Selfwinding Music Edition also fits well within AP's connection to the world of music. The brand's relationship with Jay Z is the stuff of legend. They presently have an active relationship with musician Mark Ronson. Superstars such as Ed Sheeran and John Mayer seem an avid collectors of the brand. From this perspective, the Royal Oak Offshore Music Edition, in its newest rendition, is a natural for the Audemars Piguet catalogue.

The Audemars Piguet Royal Oak Selfwinding Music Edition is available in a limited production run of 250 pieces. Visit Audemars Piguet here for more details.

What it might look like if Aragon and Argon watches actually went to court over the trademark dispute.

My prior post described a disappointing development for those collectors hoping to acquire an Argon Spaceone watch via the brand's Kickstarter campaign. The campaign had reached over $1 million in funding when Kickstarter's management stepped in and froze the whole thing over an "intellectual property dispute." When I posted about this development on Instagram, Hodinkee editor Tony Traina noted in the comments that another brand, Aragon watches, had filed a complaint with the US Patent and Trade Office (USPTO) back in April (thanks Tony!). Argon's account replied and indicated that they had already filed a registration for their brand name and they were retaining counsel in New York City.

On Tuesday, June 27 of this week, more details were offered via a lawsuit filed in the US District Court for the Southern District of Florida. The case is filed on behalf of OKO International Co, which does business as Aragon watches. The CEO of Aragon, Wing Liang, is named in the case. The defendent is the watchmaker Theo Auffret. Interestingly, Auffret's reported partner in Argon, Guillaume Laidet, is not named in the lawsuit. For the purpose of readability, I will make reference to Liang and Auffret going forward (rather than Aragon and Argon).

One of Liang's principle complaints is that collectors may confuse Auffret's product with Liang's due to the similarity of the brand names.

A screenshot of the Aragon / Argon lawsuit filing.

Both are watch companies, although I will note that Liang's watch designs really are nothing like Auffret's Spaceone. Liang was granted a trademark on Aragon in 2016 by the USPTO. Auffret's trademark application in the United States is still under review. In two exhibits, Liang offers evidence of public confusion over the brands. Both exhibits are emails received by Liang (Aragon). The first email mistakenly sent to Liang (Aragon) is dated June 6. It is addressed to Argon's "Theo" in the salutation. The second is an email dated June 20, also mistakenly sent to Liang (Aragon), expressing concerns that Kickstarter had suspended Auffret's campaign. Side note: I receive a whole lot of misaddressed emails about dinner reservations, tee times, and the like on one of my accounts but I've never filed a lawsuit in response.

Liang's complaint also indicates that his attorneys twice contacted Auffret but did not receive a response. The "cease and desist" letter they present is dated June 14, 2023 and it is addressed to Auffret in Paris. The letter indicates that Liang may seek compensation in the form of "damages or disgorgement of [Auffret's] profits." Liang may also seek to treble these remedies and have their attorney's fees covered. Liang's attorneys demanded that Auffret cease using the name Argon and transfer their internet domain "argon.com" to Liang. They also demanded that Auffret withdraw his trademark application and send details about Argon's company finances. Liang's attorneys allege Auffret did not reply, despite a follow-up letter dated June 22 that raised the spectre of a lawsuit if Auffret did not reply by June 26. The fact that a lawsuit was filed suggests Auffret and / or his attorneys did not reply. If I'm honest, I can't blame them. The Argon domain name now has value and handing it over would have been quite costly.

Liang's complaint includes a few more details. Liang or his representatives did file a trademark violation form with Kickstarter on the same date they sent their first letter to Auffret (June 14). It stands to reason that this submission triggered the suspension of Auffret's Kickstarter campaign. In some ways, there is a glimmer of hope for backers of the Spaceone watch. Liang's complaint notes, "this suspension [by Kickstarter] is only temporary and that funds from the campaign may soon be disbursed." In addition, Liang's complaint includes a copy of a USPTO "Letter of Protest" memorandum, authored by USPTO attorney Allison Schrody, dated April 21. The memo outlines evidence that is possible grounds for refusal of Auffret's request for a trademark. Those grounds would include possible confusion between the words "Aragon" and "Argon."

Schrody also notes that USPTO could simply place a disclosure requirement on Auffret, presumably clarifying that Argon has nothing to do with Aragon. If I'm honest, I really wish everyone could just agree that this is the amicable solution to the dispute. A disclosure would address Liang's concern that buyers might be confused by the two brand names. It would also allow the Kickstarter campaign to continue, permitting fulfillment of transactions that would be mutually beneficial for Auffret and aspirational Spaceone buyers. That kind of seems like a win-win-win.

There is a fair question regarding whether Liang's lawsuit is frivolous or not. I don't actually believe Liang's attorneys are acting as trademark trolls because Liang does actually make and sell watches. However, OKO International (the holding company for Liang's Aragon brand) is clearly litigious. It appears they have filed six trademark lawsuits in the past ten years. They're fully within their right to engage in litigation and my understanding is that if a party does not defend their trademark, they are at risk for losing it. However, this episode illustrates one of the well-known downsides to intellectual property law. It can stand in the way of legitimate business and innovation. I'm not aware that Liang has ever designed or sold a jump hour wristwatch such as Auffret's Spaceone. From this perspective, it seems implausible that Auffret has diverted some of Liang's sales. The products are all watches, but not all watches are the same. One thing is certain: more of this story will be told in coming months.

For those interested in full details of the case, it is OKO International Co. v. Auffret Paris et al, filed on June 27, 2023 as 0:2023cv61232

Argon Watches search result on Instagram.

I just received a DM from IG @timesnewroman because he noticed that a project by Argon Watches is no longer available on Kickstarter's page. By way of background, Argon's Spaceone is a partnership between highly accomplished watchmaker Théo Auffret and watch businessman Guillaume Laidet. The watches are extremely creative, employing a jump mechanism, and have been very well received (you can see a compilation of their press coverage here).

Kickstarters "404 not available" screen as of right now.

There is a rather stark message on Kickstarter right now reading "Argon Watches is the subject of an intellectual property dispute and is currently unavailable." A screengrab is to the right. This has got to be a gut punch for the brand and for collectors who were looking forward to receiving these watches.

I reached out to Argon for an update and received the following statement:

+++
Hello there,

As of today, you might have received a message from the Kickstarter Trust & Safety Team concerning our recently closed SPACEONE project that you have backed.

We are surprised by this message from the Kickstarter team and have not received any advanced warning about this issue. This Intellectual Property Dispute concern our trademarks.

As a precaution, it seems that Kickstarter has frozen the project for the time being automatically while we provide the relevant documentation to their team.

The funds are currently still with Kickstarter - we have not received them yet and we will make sure that we stand right by you, the backer.

On our side - we want to confirm with you that we have indeed registered the trademark MONTRES ARGON in france in 2018 and extended to all EUROPE, USA & JAPAN.

We remain available for any other questions and will make sure to keep in close contact with you about the situation, the funds & the watches!

Best Regards, Guillaume, Theo and the Argon team
+++

Let's keep fingers crossed that this all gets ironed out sooner rather than later. A recent post suggests there are more than €1 million at stake!

The Franken Broad Arrow in question. I'm an economist, not a graphic designer.

Exactly seven days ago, I received a DM from a friend who works full-time in the watch space. They sent me a link to an article in a German language publication called NZZ. I'm not completely familiar with this publication and I had to rely upon a Google translation of the article, so I was properly skeptical of what I read. The piece buried the lede a bit. It started with allegations that a Omega Speedmaster Ref. 2915-1, nicknamed the "Tropical Broad Arrow," likely had conditions which were undisclosed when the watch sold at auction. The Tropical Broad Arrow achieved a hammer price of approximately $3.25 million in November of 2021 in Geneva. The result generated all kinds of excitement. This price was a new record for an Omega Speedmaster.

When I started reading the NZZ article, I initially thought it was a rehashing of an article by Jose Perez. That article had earlier raised important questions about the Tropical Broad Arrow. I've recently questioned whether the methodology employed by Perez was valid. Well, in this case, subsequent events seem to have established that he was onto something.

The NZZ article reached a whole new level, for me, when it presented statements by Omega officials corroborating the fact that the Tropical Broad Arrow was not what it seemed. This was the first time the brand had apparently agreed with Perez, publicly. Subsequently, fantastic reporting by Andy Hoffman at Bloomberg and articles by Fortune and WatchPro largely corroborated NZZ coverage. The Tropical Broad Arrow was, in fact, a "made up" watch assembled from pieces of other watches. The community sometimes refers to these as "Frankenstein" watches, so I will use the nickname Franken Broad Arrow from here on out. The fact that this watch was built from parts that were not originally asssembled by Omega was not disclosed at auction. In fact, the catalogue entry notes the watch was, "Accompanied by Omega Extract from the Archives confirming production of the present watch on November 22, 1957 and original product literature." Possible bidders for the Franken Broad Arrow (with the exception of the fraudsters) had, seemingly, imperfect information when participating in the auction. Further, that information was materially relevant when it came to the historical importance, and value, of the timepiece in question.

I haven't spent much time discussing the method I use to decide what I will post on my blog. In fact, there is not a single method and it evolves over time. I did want to post about the Franken Broad Arrow because it speaks to the matter of imperfect information in auctions. There is a significant economics literature on this topic. However, this is the kind of story one does not write unless you obtain information, directly, from a reliable source. So, I contacted Omega's press office and shared details about my intent when it came to any information they might send to me. I indicated that this blog post was one likely outcome.

I didn't hear from Omega for a bit and that raised questions. These are questions that others had been asking. The key questions were: who assembled this watch and who put it up for sale? Prior stories made it clear that Omega was pointing the finger at its own employees, including a high profile individual who worked in the museum / heritage areas. Relatedly, did these individuals work alone or did they take direction from others at Omega / Swatch Group? Brands have some interest in seeing high auction price results since this can serve as the "engine" of the train that pulls along all other prices. As I waited for a statement from Omega, I became more concerned this might be a possibility.

A lot of that concern was alleviated with the response I received today. I have reproduced it here without alteration:

"OMEGA Statement concerning the 2021 auction of an OMEGA Broad Arrow

OMEGA and Phillips were the joint victims of organized criminal activity involving the selling of this specific watch by auction.

At the auction, hosted by Phillips, the Head of OMEGA Museum and Brand Heritage worked in tandem with intermediaries to purchase the watch for the OMEGA Museum, arguing that it was a rare and exceptional timepiece that would be an absolute must for OMEGA’s showcase collections, and should therefore be bought in this auction at all cost.

In fact, the watch is an assembly of mostly authentic OMEGA components, commonly called a “Frankenstein” watch. This timepiece is currently a key piece of evidence in the ongoing investigation that must also bring to light the seller of the watch.

Its false legacy allowed the profiteers to justify a highly inflated bid made through the intermediaries, which allowed those involved to collect and distribute the profits generated from the sale.

As it stands at present, there are three former employees (among them the former Head of OMEGA Museum and Brand Heritage), who have admitted to the run of events when confronted during an OMEGA internal investigation, which is active and ongoing. OMEGA is bringing criminal charges against all involved."

Frankly, this is what I would expect Swatch Group and Omega to do. At a minimum, the circumstances require a third party to investigate the role of insiders at Omega in perpetrating this fraud. Swatch Group is a publicly traded company and a wide group of shareholders have been victimized here. Without an independent investigation, too many questions linger regarding the validity of other watches accompanied by certificates of authenticity, since those certificates likely passed through the hands of the reputed fraudsters. This crisis threatens to create a major disruption in the value of vintage watch collections worldwide. By pressing charges, Omega ensures that the police will independently investigate and prosecute exactly those who were involved in the fraud. Pressing criminal charges suggests that the C suite at Omega / Swatch Group has a certain confidence in their own innocence in this matter.

I'll note here that the remainder of this story remains to be told. My hope is that the thread of this story is not lost as prosecutors and the police pursue this case. It is quite clear that any brand with an archive, auction houses, and collectors stand to learn from this very unfortunate event. The coming investigation will serve as an indespensible part of that learning process.

A Tudor sponsored car taking the checkered flag in Japan. A clearer photo is later in the post.

Formula 1 and Rolex marked a decade of official partnership this year. One of the brand's most successful designs is named after a famous race: the Daytona (500). And, the record-setting Paul Newman Rolex Daytona which sold at auction in 2017 was worn by Newman during his illustrious career on the race track.

In this post I will detail a lesser-known relationship between Rolex and automotive racing. In the 1960's through the 1970's, Tudor and Rolex sponsored at least one race car in Japan. I initially learned about this sponsorship through my conversation with Elias, which was also the basis for my prior post on Tudor. While I am not the first to write on the subject of Rolex/Tudor auto racing in Japan (for example, see the posts here and here), I believe this post will be one of the most detailed explorations of Japan's Rolex / Tudor Watch Racing Team. Let's get into it.

(Note to readers: many of the photos presented here and their association with certain races have been curated by a group of Japanese auto racing enthusiasts. For this post, I draw from their threads on Discord as well as the hard copy of a Japanese magazine I obtained. Both are listed in sources at the end of the post. Please note that there may be slight innaccurracies in the material here. If I discover this is the case, I will revise the post accordingly. Also, I've relied upon Google Translate for material which was originally published in Japanese.)

Now Arriving, Haneda Airport

Our story begins in 1966 on the tarmac at Tokyo's Haneda airport.

Top: Jetliner delivery of the Porsche 906 chassis 120. Here it is still in the hold of the aircraft.
Middle: One of the earliest moments from the Porsche 906/120 arrival in Japan.
Bottom: Members of the Taki race team posing with the Porsche 906/120.

In a moment that would later make the cover of "Auto Sport" magazine, a white race car has been removed from the belly of an airliner and sits atop a cargo lift. The Porsche 906 (aka Carrera 6) chasis number 120 has arrived in Japan. An entourage of at least a dozen people attend to the car. This is clearly a big moment. Later, a team would pose with the car for a formal photo (Taki second from left).

The 906 launch was announced by Porsche in January, only a few short months before the 906/120 arrived in Japan. During the development process, the design of the Carrera 6 was tested in a wind tunnel, where it achieved impressive results. Only 50 examples of the car were manufactured. When it debuted in 1966 at the Daytona 500, it won its class, a feat that it repeated in numerous subsequent races. The 906 was a serious car for serious competitors. After retiring from racing, driver Tomohiko Tsutsumi described the Porsche with a compelling analogy: "I had driven many different cars before the Carrera. For example, if you had never eaten special sushi and always ate conveyor belt sushi, you would think that this was good. If you eat special sushi once, you'll know that the conveyor belt sushi you've been eating is a decent one. In that sense, Carrera 6 is special sushi."

In its earliest years in Japan, driver Shintaro Taki raced the 906 chasis 120. Taki previously raced a Lotus Elan. Taki had great success with the car during the 1966-7 seasons. He earned seven first place finishes.

Rolex and Tudor Sponsorship

We first find evidence that the Porsche 906/120 was sponsored by Rolex / Tudor during the 1968 Japanese racing season.

A photo of Rolex / Tudor Racing Team members with sponsor organizers. Front row: Mr. Reed, head of watches from Liebermann-Waelachli. Back row, left to right: Nishikawa, Tsutsumi, Yoneyama and Oshima. Oshima is also from Liebermann-Waelachli

According to a March, 1969 article in AUTO SPORT (published in Japan), the sponsorship was arranged by two representatives from an agency named Liebermann-Waelachli, the primary distributor of Rolex and Tudor in Japan. A Mr. Reed was head of Rolex for Liebermann-Waelachli and he was directly involved in the project. He collaborated with Sadao Oshima, who was the General Manager of Advertising and Planning at Liebermann-Waelachli. Oshima was quoted as saying "Rolex Tudor is the first attempt to turn a race into a venue for publicity. I will spare no efforts to make it a success. I have high hopes for the future of this team." The same article claims that Rolex/Tudor had a billboard at the Suzuka circuit.

Above: The earliest photos I found with Tudor livery, these from the 1968 Fuji 1000.

Rolex / Tudor sponsorship first appears on the Porsche 906/120 livery during the 1000km Fuji race held on July 21, 1968. The word "TUDOR" appeared in large lettering across the rear of the body between the brakelights. "ROLEX TUDOR RACING TEAM" appeared near the latch of the engine compartment (mid engine in this case), while the words "TUDOR" and what appears to be the Tudor Rose apppear over the rear wheel wells.

Records show that the drivers, who were new to this Porsche, struggled at Fuji. They did not finish the race. Two months later, though, their experience with the Fuji 1000 seemed to pay dividends. The same drivers came in second at the 1000km Suzuka race. A color photo of the car is available from this competition. "TUDOR" is emblazoned on the front hood of the car, between the headlights. Further up the hood, just beneath the windshield, the word "ROLEX" appears. It is decorated by curved lines in a manner that is similar to the engraving used on Rolex bracelet clasps. Just beneath the doors, the bodywork is marked "TUDOR WATCHES."

Tudor racing at the All Japan Clubman Fuji, 1969. The Tudor car is topmost. Note the appearance of the shield emblem.

In April, 1969, the Tudor-sponsored Porsche achieved a third place podium finish at the All Japan Clubman Fuji race. Roughly six weeks later, the Rolex / Tudor sponsored car had one of its best outings during the Suzuka 1000 race. I will return to this particular event later because I have managed to obtain many details about this particular competition. Just a few short weeks after the Suzuka 1000, the team reached the podium again, placing third in the Fuji 300 on July 29, 1969. The car continued to sport Tudor livery.

First and second photos above: The Tudor spider racing in the Suzuka 12 Hour in 1969. Third photo: The Tudor spider at the Fuji 12 hour in 1969. Fourth photo: the Tudor spider, race unknown.

Towards the end of the summer, after the Suzuka race, the team decided that a serious body modification was called for in order to maintain the Porsche's competitiveness. Later (see sources below), driver Tomohiko Tsutsumi explained, "After thinking about it for a long time, I came to the conclusion that weight reduction is the only option. However, even if we think about what can be made lighter, we cannot replace the material with our own hands. The only thing that came to my mind was the windshield. It was made of glass and weighed 20kg. So let's get rid of the glass, and we'll save a lot of weight and lower the center of gravity. It was my idea to remove the glass."

The resulting "spider" version of the Porsche 906/120 was visually striking. Tsutsumi was satisfied with the performance of the modified car. He cited qualifying for a number of decent pole positions with the spider and even seemed to gloat a bit about the fact that newer cars could not keep up with the then-aging Porsche. However, racing performance lagged a bit. The car did not finish the Fuji 1000 race in July. It finished twelfth in the Suzuka 12 hour race on August 10, 1969. The car suffered from gearbox problems in that race. The Tudor livery remained on the Porsche for both of these races.

First and second photo above: a green liveried race car with Rolex sponsorship prominently displayed, both are potentially the same car. Third photo: a car with Rolex marked on the front bonnet drafting a Ford GT40.

After 1969, Rolex and Tudor continued to sponsor Japanese race cars (these may or may not be the same Porsche). In 1970, Rolex branding seemed to become more prominent on sponsored cars. During the Junior 7 Hokkaido Challenge Race, a car wearing Rolex green livery appeared on the track. Between the rear brake lights, the car was marked by the word "Rolex" and two crowns in gold / yellow typeface. During another race in Suzuka, a photo shows a Rolex-sponsored car drafting a Ford GT40 (the word "Rolex" appears along the bottom of the front hood). In 1970, similar marks appear on a car racing in the Fuji International Golden Race 200, the Tsukuba All Japan Driver Championship and the NET Speed races.

By 1972, Tudor sponsorship was once again prominently displayed on a car, this season during the Fuji Masters 250 (Rolex seems to have disappeared from the livery at this point). In 1976, a GRD 34 racing car was marked "Tudor by Rolex" prominently on the hood. The side of the car's spoiler / wing was marked "Tudor Time Machines." The driver of this car was Tetsu Ikuzawa and he took the checkered flag twice that season.

Beginning with top photo for this paragraph: 1972 Tudor sponsored car. Remaining photos, 1976 "Tudor by Rolex" sponsored car, including a checkered flag finish.

Focus on June 1, 1969: A Legendary Tudor Racing Victory at Suzuka

Top: the group photo ahead of the 1969 Suzuka race. Bottom:The two Tudor drivers during the group photo (middle and right), note the shield emblem on their uniforms.

At 9:30am on a sunny day in June, 80 drivers representing 40 race cars assemble for a group photo at the start of the Suzuka 1000km endurance race. The prior day, during qualifying rounds, the Tudor Watch Racing Team took second in the lineup. The drivers for the Tudor team are Tomohiko Tsutsumi and Jiro Yoneyama. Yoneyama has already won a race with the Porsche 906 earlier in the year. In the group photo, Tsutsumi and Yoneyama appear seated just over the left shoulder of a driver who speaks at a podium. On their racing suits there is a red Tudor shield emblem embroidered on the left side of the chest. The driver at the podium is Kenjiro Tanaka, who races for Taki Racing Team. A French watch brand, Yema, sponsored that team. Their patch is on the right side of Tanaka's chest.

Top: the Tudor car seen from above during qualifying rounds, note the Rose/Shield emblem. Middle: the Tudor team pushing the car, likely to the race start. Bottom: the "L'Mans start," the Tudor car is second from the bottom in the lineup. All photos during the 1969 Suzuka 1000.

The race opens with a "Le Mans" start where the drivers stand across the track from their cars. When signaled that the race has begun, they run across the track, get in their cars, start their engines, and head out. For this competition, the race begins at 10am. The vehicle in pole position, the Taki Racing Lola T70, struggles at the outset. By 10:30 they've fallen to fourth place and the car is out of the race before 11am (likely due to engine trouble).

This clears the way for the Tudor Porsche to take the lead. By noon, the Tudor car is in second place, though, overtaken by the number 12 car driven by Totumi Takatake and Yoshifumi Kikua. The race is clearly a dynamic one. By 1 o'clock, though, the number 12 car is also out of the race, allowing the Tudor to retake the lead.

Top: a possible pit stop or driver swap for the Tudor team. Remaing photos show racing action. All photos from the 1969 Suzuka 1000.

This particular race was selected for inclusion in a series of magazines commemorating the "Best 100 Races" in Japan. For this reason, many photos of the Tudor car and team are available. We see from a photo of a possible driver swap that the Tudor race uniform was also embroidered on the back with two lines of text reading "Tudor Watch Racing Team." The helmet of someone kneeling at the gullwing door is also marked "Tudor."

Perhaps more striking is an extremely interesting icon used to represent the watch brand on the Porsche. The year 1969 marked a transition in which the Tudor Rose icon gave way to the Tudor Shield (I provide a few more details about this in a prior post). Someone cleverly designed an emblem for the Tudor Porsche which mixed these two icons. It is a yellow / gold rose surrounded by a shield. This emblem sits just above the word "Tudor" and between the headlights on the car's bonnet. It is also the emblem embroidered on the driver's uniforms.

After 1 o'clock, the Tudor Porsche never relinquished the lead.

Top: the Tudor team takes the checkered flag. Middle: Tudor drivers wear laurels at the top of the winner's podium. Bottom: the top three teams ride in a "train" through the crowd in order to close out the event. All photos the 1969 Suzuka 1000.

For more than four hours, the car was at the head of the pack. Tudor's driver was so excited when crossing the finish line, he flashed the Porsche's headlights. The racing official holding the checkered flag was on the pavement. He, too, was extremely excited. He jumped in the air while waving the flag.

The top three teams were on the podium by 5:25 and they were rewarded with a wreath of laurels. The Tudor team wore them bandolier style, which allowed unobstructed view of the Shield / Rose emblem. They waved to the crowd. They were then paraded around the crown in a "mini train." They appear dry, so it is unlikely the tradition of a "champagne shower" took place.

Conclusion

For at least a decade, spanning the 1960s and 1970s, Rolex and Tudor directly sponsored race cars in multiple venues in Japan. In many ways, this was emblematic of the era. Following defeat in World War II, the country began a period often referred to as an "economic miracle" involving rapidly rising incomes. Rolex and Tudor both participated in this upswing through the venue of car racing.

The effort was not without complications. During an interview conducted in his later years, Tsutsumi mentioned a controversial moment in his relationship with Rolex / Tudor. He said, "When I signed the contract with the team, they gave me a high-end Tudor watch, but I'm poor. So I usually wore a cheap domestic watch and kept my Tudor watch safe. When they found out about it, I was asked, 'Why aren't you using my watch?' That made me angry. It's embarrassing. He's from England, so he knew what motorsport meant, and he knew what to do with the exposure. I was scolded and finally said, 'Oh, I'm a pro.' I wasn't. Looking back on it now, my mindset was still that of an amateur. Today's drivers are probably well aware of that, but it was around this time that such professionalism took root in the domestic racing world. Even so, Japan was still an underdeveloped country in racing." (Side note: repeated controversies over wearing of jewelry in modern F1 races suggests Tsutsumi's watch wearing decision was consistent with a longstanding practice in motorsport.)

Tudor marketing materials containing historical photos of the racing team.

Despite any misunderstandings, the 1960s and 70s witnessed a long-standing, mutually beneficial relationship between Rolex, Tudor and the racing community in Japan. Indeed, a photo of promotional materials suggests Tudor did leverage its racing heritage in Japan as part of its marketing strategy. Also, in the same interview where Tsutsumi described confusion over which watch he should wear while racing, he noted that Tudor sponsorship meant he did not have to work as many jobs just to make ends meet while racing. From this perspective, Rolex / Tudor sponsorship in the earliest years of Japanese motorsport was part of a larger, longstanding, brand commitment to support exporation, adventure and the arts; a commitment which continues to this day.

Sources
AUTO SPORT Archives, Best 100 Race in Japan: '69, vol, 48, 2008.
Discord link

Sig.ra Resta, photo credit Audemars Piguet.

News broke this week that Audemars Piguet's board has selected Sig.ra Ilaria Resta as their new CEO. The commentariat quickly went to work (literally in comments on Instagram but sometimes in story posts). I saw a flury of opinions about what this leadership change "means."

Of course, when someone who is not cisgender male is hired (or even elected) into a position of leadership there is often a ton of baggage that goes into the subsequent discussion. Without pointing fingers at anyone in particular, I regrettably think we're seeing a bit of this play out in the present discussion of AP's leadership change. And, I will be the first to admit that as a cisgender male, my own post may not be as unslanted as I would otherwise like.

In order to perhaps minimize that risk, I decided to see if I could find sources where Sig.ra Resta, herself, actually described her leadership philosophy, achievements, and experience. Lo and behold, I could! There is actually a pretty interesting interview on YouTube that was posted about three months ago and Sig.ra Resta also actively writes posts on LinkedIn. Again, kind of telling that not a whole lot of people seem to be drawing from that material when discussing Sig.ra Resta's hiring.

At this point I could just urge you to go consult those sources (and I will provide links below if you'd like to) but I do want to offer a little more value add than links alone. So, I thought I would share here some parts of the material that speak to Sig.ra Resta's self-described values and philosophy. At the very end, I will offer some of my own thoughts about this development. (Note: I have lightly edited the quotes from YouTube for the purpose of readability.)

On the importance of professional development for employees: "for [her] the biggest reward is when [she] can promote people in their career." Side note: the new CEO in her old job is someone who reported to her.

On her experience with personal challenges and work balance: "being a a mother going back from maternity leave for the first time, it was really, really a big challenge because [she] had this sense of guilt of leaving [her] daughter behind, especially when travelling."

On her professional philosophy: "[she] believes in the power of the three L's ... love, learn and legacy ... you will have lots of hurdles, lot, lots of difficulties. What's important is that you make a conscious effort to see the bright side and your passion and fuel your passion, and then career follows love ... [Resta] truly believe[s], especially in the world of today, there is a a big advantage if you keep on learning every day and move from an attitude of 'I know it all, I know how it's done' into an attitude of learning, relearning every day ... And the third one is the most important for [her], it is legacy. You need to be able when you do a job to look back and and be proud of what you left behind."

On the importance of resiliency: "you need to keep on going even if things don't end up in the way you wanted in the creation process. That process is very complicated. It's not a linear process, so it requires real resilience and determination to keep on going and I'm very respectful of the creators in this industry because I've seen their struggle."

On the importance of boldness: "[Be] courageous in pursuing the idea, the idea might not be democratically accepted or accepted by everybody, but over time, if you look at the best, most successful launches of fragrances, if you look at fashion, if you look at art, what was not accepted at the beginning then became a blockbuster."

On the imporance of diversity: "There is no reason why it's not important, this is fundamental. Diversity is an obligation to represent society. So we we need to represent the society and as society changes, diversity will change and the meaning of diversity will change, so I am a true believer. We need to be a mirror of society and evolve to represent fairly in an equitable way our society. And today, it's not the case in [the fragrance] industry, which is surprising because this is an industry that has been consumed by women and loved by women, and where we have amazing women creators. But still, diversity is not there is not there in the management team, there is no diversity ... Diversity improves business results, so it's in the interest of the business. Not only that, it improves creativity because, by tension, diversity, and different point of views, creativity increases and creativity is the lifeblood of this industry."

On LinkedIn I won't directly quote from Resta's posts on LinkedIn, but I noticed a few things. First, she has regularly traveled to Asian and she clearly has experience in a market which is extremely important for the watch industry. Second, under her leadership, her company achieved a number of accolades for sustainability. And, third, the financial results she shares illustrate positive financial performance.

So now I would like to share a few other observations. First, Sig.ra Resta's leadership of Firmenich culminated in a successful merger which required shareholder and regulatory approval. The fact that Sig.ra Resta has experience and success with a merger provides AP's board with an option they may exercise in the future. I have no knowledge of whether this is likely, but it is certainly something a board would be aware of when hiring a leader. Second, there is a pattern in CEO recruitment where women are often hired by organizations which are struggling for some reason. It is referred to as the "glass cliff." I don't believe that Sig.ra Resta faces a glass cliff with AP, but it is certainly a historical pattern worth noting.

In sum, Sig.ra Resta strikes me as someone who is eminently qualified for the CEO position at Audemars Piguet. Frankly, as I reviewed her posts and her interview, I wished that the outlook and values that she mentioned were more broadly adopted in workplaces. I am really looking forward to seeing how AP progresses with Sig.ra Resta at the helm.

Links:
YouTube
LinkedIn

My book on the history of Rolex marketing is now available on Amazon! It debuted as the #1 New Release in its category. You can find it here.

You can subscribe to Horolonomics updates here.]]> Sat, 27 May 2023 17:25:10 +0200 https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwUZB3n5NDNrOK7VFky8BpXO <![CDATA[Decoding the Tudor Rose]]> https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwU0-uQB2-PT2iuZukmJ4mr4 I recently had a chance to discuss many things Rolex and Tudor with a man held in high regard by collectors and the industry alike. For the sake of discretion, we'll call this man Elias. As I've told him, the opportunity to visit and converse with him was a bit of a bucket list item which helped me understand much more about two legendary watchmaking brands. Despite the fact that I spent roughly eighteen months researching and writing about Rolex marketing, I remain convinced that so much of the present and past of Rolex and Tudor remain unknown, untold, and often misunderstood.

Before my conversation with Elias, which took place in Geneva, I had a chance to preview a large number of watches that were up for sale at Sotheby's.

A Tudor Pelgos "RaSP" which sold at Sotheby's in Geneva this month.

One of those watches was the Tudor Pelagos "Platinum Jubilee RaSP" (abbeviation PJR henceforth). This watch was specially commissioned for members of the Royalty and Specialist Protection service of London's Metropolitan Police Service. Now, I'm definitely going to oversimplify here, but I tend to think of this organization as "England's Secret Service." Or, given the fact that England has a much longer history than the United States, we could say the Secret Service is the "US version of RaSP." Either way, these are organizations responsible for guarding and protecting some high profile individuals who may face significant risks. Secrecy, discretion and camouflage, of a sort, are vital tricks of their trade.

Tudor Pelgos "RaSP" which sold at Sotheby's in Geneva this month, caseback.

The Tudor Pelagos "Platinum Jubilee RaSP" sold for just over $23,500, or roughly six times the retail price of the standard reference. Many factors may have induced collectors to pay a premium for this example. Queen Elizabeth passed away this year, meaning the PJR was issued in the final full year of her reign. The Queen's emblem is engraved on the caseback along with a number of additional markers.

Tudor Pelgos "RaSP" which sold at Sotheby's in Geneva this month, dial detail.

Undoubtedly, bidders for the PJR were also motivated by a particular special emblem on the watch dial. That colorful emblem, just above a rectangular index at six o'clock, was a crown atop a Tudor Rose. In this post, I will focus upon the Tudor Rose and explore an oft-overlooked meaning to this emblem. I credit Elias for opening my eyes to a particular connotation when it comes to rose iconography.

It is well-known that Tudor, the watchmaker, printed a rose on their standard dials for many of the brand's earliest years. After 1969, the rose was largely replaced by a shield symbol. In the modern era, a rose is sometimes engraved at the end of a Tudor watch crown and it also reappeared on the dial of certain Tudor references. Many collectors pine for the return of the rose to Tudor dials. In order to keep the discussion clear, going forward, I will refer to the emblem figuring prominently in British history as the Union Rose while I will refer to the emblem on wristwatches as the Tudor Rose.

Why did Tudor choose to place a rose on its dial? I think it is fair to say that the rose is congruent with other royal iconography that Hans Wilsdorf and his team adopted for Rolex in its nascent years. There is, of course, the symbol of a crown which is core to the Rolex/Tudor identity (friendly reminder: there were Rolex crown emblems on Tudor winding crowns for many years). The Prince was an early reference for Rolex. The list goes on.

For these reasons, it would be reasonable to conclude that Wilsdorf and his team simply selected the rose as part of a larger tip-of-the-hat to royalty and royal institutions.

A 16th century Union (Tudor) Rose from Haddon Hall in England.

The Union Rose marked an important point in the history of the British monarchy. During the War of the Roses, the House of York, which employed a white rose as an emblem, and the House of Lancaster, which employed a red rose, battled for the throne. After Henry VII prevailed, he subsequently adopted the Union Rose as his emblem. That design placed the white York rose inside the red Lancaster rose, thereby indicating a union of the two houses.

Through my conversation with Elias, though, I learned that the rose, as a symbol, also has a less well-known meaning: secrecy and confidentiality.

See placard for details. Presented only as an illustration of the "rose cross," placards accuracy is not guaranteed.

One of the earliest examples of this association is religious in nature. The Rosicrucian, or "rose cross," order emerged in Germany in the opening years of the 17th century. The publisher of Tobias Churton's book on Rosicrucianism describes it as follows: "For nearly 400 years, incredible myths and stories have been woven around the 'invisible' Brothers of the Rose Cross, the Rosicrucians. It is said that they possessed the secret of man and God, that they could turn lead into gold, that they governed Europe in secret, that theirs was the true philosophy of Freemasonry, and that they could save--or destroy--the world."

A poster for the "Salon de la Ros + Croix in Paris.

Although Rosicricianism is not as well-known in the modern era, it did have extensive historical reach. According to research by Julius Sachse, Rosicrucian adherents arrived in the United States as early as 1694, settling just outside of Philadelphia. Two centuries later, during a period spanning five years in Paris, artists presented works related to Rosicricianism as part of the "Salon de la Rose+Croix."

While it may seem a stretch to conclude that the Tudor Rose icon is connected to a secret society, we should also consider that the rose is used as a symbol of secrecy in the modern era. According to an August, 2019 publication by the US Army, the rose is an "ancient symbol of secrecy." For this reason, a rose figures prominently in the US Army military intelligence branch crest.

Left: US Army Military Intelligence pin. Right: DNI award pin (rose icon is in background).

The US Director of National Intelligence also offers an award with a rose integrated into its design. The office notes, "The heraldic rose, symbol of secrecy and confidence ... has been a traditional symbol to describe something to be kept secret and not repeated anywhere."

Now, I will admit that all of this could simply be pure coincidence and unrelated to Tudor's adoption of the rose. But when we begin to consider other aspects of Rolex and Tudor, the rose as a symbol of secrecy seems to fit the brands just as well as the rose as a royal symbol. Rolex is notoriously discrete when it comes to communication and access. There is also the famous connection between Rolex and secret agent James Bond (Bond's creator, Ian Fleming, was fond of Rolex). In my own book on Rolex, I establish a clear connection between the intelligence community in World War II and Rolex marketing efforts in the 1960s. And, Rolex / Tudor's reputation for secrecy is part of a much larger tradition of secrecy in the Swiss banking industry.

I'd like to wrap up this post with a recommendation for vintage collectors who, based upon the discussion above, accept the idea that the Tudor Rose is a symbol of secrecy.

A Tudor Submariner with rose dial, photo credit Adam Golden, used with permission.

The Latin term "sub rosa" or "under the rose" serves as a discrete way of noting that certain things should be kept in confidence. According to Merriam-Webster, in churches, roses were "placed over confessionals as a symbol of the confidentiality of confession." Clerics should never repeat what they are told "sub rosa." Of course, there is a particular Tudor reference that could easily embody the practice of "sub rosa." It is the reference 7928, the sub(mariner) rose (dial).

An AI generated image of a watch with a fingerprint on the dial.

So what do I mean by this made up term "horoloscopy"? Well, since I made it up, I guess I get to define it. No, it's not an unpleasant procedure recommended for your watch when it hits 50 years of age (sorry, couldn't resist). Instead, I'd define horoloscopy as the study of minute wrist watch characteristics in order to establish the identity of a wristwatch. Now, I want to be clear here, I'm not talking about a process used to establish that a wristwatch is genuine. We already have a term for that: authentication. I'm talking about a process used in an attempt to establish that one watch is exactly the same as another watch (or perhaps one watch component is exactly the same as another watch component).

To me, the unsurpassed master of horoloscopy is a man known as Jose Pereztroika (you can find him on Instagram using the handle @perezcope). I'm a big fan of his blog, Perezcope. There, Jose has surfaced some really important facts about the history of watch brands. He also presents compelling evidence tracing watches and / or watch parts through auction history. Jose's assessment of particular auction listings is always fascinating and, honestly, extremely important.

However, we really should start from a position of skepticism when it comes to auction lots and blog posts (including this one!). As I've read Jose's pictures and naratives presenting points of similarities across photos of watch dials, movements or other components, I've always had a bit of lingering doubt about methodology. Do we really know that matching blemishes shared across watch parts truly establishes the uniqueness / identity of those parts? How do we know this?

Here, I'll make the case that the reliability of horoloscopy is largely unknown when it comes to establishing the identity (uniqueness) of a particular watch part or an entire watch. Now, I could be wrong. It could be the case that 8 visually similar flaws across watches means that there is 1 in one gazoogalmillion (another made up term) chance the two are not the same watch. But, I think we need to acknowledge that there probably is a fair bit of uncertainty when it comes to horoloscopy as a method.

I was pretty shocked to learn that fingerprint matching, which is quite analogous to horoloscopy, has its doubters. According to an article in the Smithsonian magazine, as recently as 1991 a judge in the United States stopped accepting fingerprints as evidence of identity. The same article notes that at least 23 individuals have been wrongly connected to crime scene fingerprints. It does seem, though, that arches and whorls have been reliable elements that establish identity, although we don't have a great sense for exactly how rare fingerprinting errors might be according to this 2011 article.

So, why do I think horoloscopy is likely less reliable than dactyloscopy?

An AI generated image of "two Rolexes that are the same model." There are clear similarities but there are also differences.

Let's begin with the observation that humans and their fingerprints are generated through a fairly foible-prone biological process of genetics and other things I'm not qualified to discuss. We know this gives rise to an incredible diversity of all sorts, and as a result fingerprint features probably are quite unique. Watches, on the other hand, are manufactured. In addition, that process of manufacturing is intentionally designed to produce parts that are as similar to one another as possible. This also means that flaws are likely replicated across parts. A weird mark here or a scratch there may actually just repeat across dials, for example, because that's what is happening with the machinery. There is a fantastic article on A Collected Man about famous mistakes that have been replicated across examples of certain watch designs. So we already have evidence that foibles are not always unique to a particular watch.

Second, even if blemishes and marks on watch parts are valid in establishing identity, how many blemish matches do we need in order to have confidence about an identification? Law enforcement won't accept a small number of similar points across fingerprint examples as sufficient evidence of a match. At one point in England and Wales, 16 matching features were required before a set of fingerprints would be used in a court of law. I'm just not sure we have any sense of the analogous requirement when it comes to horoloscopy. If we're going to use blemishes to match watch parts, it would be helpful to have a thoroughly explained basis for the minimum number of similarities that would establish identity.

Last, I would like to see more exploration into whether photography, as the medium used to establish a match in watch blemishes, has unique characteristics which might limit the reliability of horoloscopy. Do we need to make sure that pictures of a watch are taken with similar settings, lenses, lighting, or perhaps even the same camera in order to have confidence in a visual analysis? It is certainly true that fingerprints are not always fixed in the same medium. One print might be ink, the second might be dust on an adhesive. But with fingerprints, we're doing a fairly straightforward assessment of two dimensional patterns. Watches have all kinds of hue and three dimensional features that may seem more similar through the lense of a camera than they really are.

I think horoloscopy is a fascinating practice that has great potential to shed light on the path followed by particular timepieces. I don't have concrete suggestions for how we might make this practice more reliable or precise. Until the practice of horoloscopy is more refined, it is probably best to treat its results with some caution.

An AI generated image of a Rolex Cosmograph Daytona on a red rubber strap. Much of this article will discuss a particular collector who is fond of such straps.

I'm all on board with the idea that inclusion should be at the center of the watch community. Regrettably, though, there is always this background matter that's become known as the Paradox of Tolerance, which was developed by philosopher Karl Popper. Here's the paradox: does tolerance extend to those who are intolerant? Relatedly, do you need to be inclusive towards those who are not inclusive?

A bit of a warning here, in what follows I explore the topic of mysoginy and describe some potentially upsetting material. I also discuss loss of life in an accident.

I'm not a philosopher and, admitedly, I haven't read Popper's work beyond a short excerpt I encountered online. But my understanding is that Popper's solution to the paradox was based upon the long-run implications when anyone tolerates intolerance: it will lead to the loss of tolerance. For that reason, Popper suggests that those adhering to tolerance must engage in rational debate to counter intolerant behavior. If rational debate won't work, Popper even advocates for direct action against those who are intolerant.

It would be fair to ask what all this has to do with the watch industry and watch community. Well, I think these questions are extremely relevant when it comes to a character who has a somewhat high profile in the watch community: Kevin O'Leary, aka Mr. Wonderful. O'Leary is on television a lot and he touts a carefully cultivated persona of business success. He's also active in watch industry commentary. If you search for "Kevin O'Leary watches" on YouTube, you get a lot of results. Some of the videos have millions of views.

Here's the thing: knowing what I know about O'Leary, I'm just not certain his approach is aligned with some very important efforts in the watch community. For example, I think work towards bolstering inclusion in our community is extremely important and, quite frankly, way overdue. We need to be honest: the watch industry has a history which has fallen short when it comes to inclusion. For example, in my book on Rolex I discuss the development of a 1965 advertising campaign by J. Walter Thompson in which a hypothetical Rolex owner is featured alongside prized posessions like a car and a horse. Notably "his wife" fell after the horse in the list of "possessions."

I'm honestly concerned that O'Leary's philosophy is more aligned with this outdated, mysoginistic industry legacy.

Screenshot of a tweet posted on Twitter by Kevin O'Leary.

My concern is based upon O'Leary's own words, which I've reproduced in the screenshot here. In February, on Twitter, Mr. O'Leary wrote, "You may lose your wife, you may lose your dog, your mother may hate you. None of those things matter." The tweet has over 12 million views and it is still online two months later. It would be one thing if O'Leary realized the post was a mistake and deleted the Tweet. But he has vigorously defended it. I'm not an expert in this subject, but it sure looks like the tweet has been ratioed, which suggests the general reaction to O'Leary's tweet has been quite negative.

There is probably more to O'Leary's philosophy than a single tweet. But his sentiment is plausibly more disturbing in light of recent legal developments. Roughly seven months before O'Leary's tweet, a Supreme Court case, "Dobbs v. Jackson Women's Health Organization" eliminated a right held by American women for three decades. To tweet something about the irrelevance of women in that context is failure to read the room par excellence.

The tone deafness of O'Leary's tweet has more layers.

An AI generated photo from a prompt involving Kevin O'Leary in a boat at night.

On August 14, 2019, two people were killed when Kevin O'Leary's boat hit another vessel at night on a lake in central Ontario, Canada. O'Leary's wife was charged with careless operation of a vessel. Ultimately, she was acquited of those charges. But just imagine if you were a family member of one of the people who was killed in this tragic accident and you read O'Leary's tweet about how losing a family member is irrelevant. I can't know how that would feel with certainty, but I think I'd be pretty upset.

Finally, let's also discuss the importance of authenticity in the watch industry. It's really really important. Buying an inauthentic watch is potentially disastrous. Buying from an inauthentic source is also potentially disasterous. The list goes on. In 2016, Canada's National Observer (a publication receiving a "High" accuracy rating by Media Bias / Fact Check) published an expose providing a fair bit of evidence that O'Leary was perhaps not as successful in business as his persona might suggest. This certainly leaves open questions regarding whether O'Leary's prominence in watch collecting helps advance authenticity in the watch industry.

In sum, Kevin O'Leary is a high-profile dynamic person who draws attention to the watch industry, which is unquestionable a good thing. There is a question, though, about whether his influence might make it more difficult for the industry to progress to a new, better plane. I don't know the answer, but I think it is a question worth asking.

The Palexpo venue, where Watches and Wonders is held. Source: Google Earth.

If there is any moment when the world might spare some of its valuable attention for the watch industry, it's now, when the tradeshow juggernaut Watches and Wonders is underway in Geneva. Of course, readers of this blog have seen that I prefer to employ data whenever possible. So, I turned to Google Trends in order to asses the impact of Watches and Wonders. The TL;DR on this is that the world is, in fact, watching (no pun intended, for real).

How do I know?

Google top searches in the United States for the first day of Watches and Wonders.

I began by reviewing the rankings of top Google searches in the United States for the first day of Watches and Wonders (I would have reviewed the worldwide rankings but Google does not offer this). Lo and behold, a story about Rolex ranked number thirteen in the list, just behind Keannu Reeves / John Wick 4 and the LA Clippers. The crown even beat news that Selena Gomez and Zayn Malik "hooked up" before they dated. Rolex is not usually this close to the top 10 in Google search results. The company's search volume is comparatively imperceptible when you compare it to the top searches for 2022 (such as Queen Elizabeth or the World Cup). So, we can conclude that Watches and Wonders does draw interest, at least to one of the most famous watch brands around.

There is more evidence of Watches and Wonders interest that can be found in Google search trends.

Google search trends for Rolex, Patek Philippe and Vacheron Constantin.

I queried the brand names "Rolex," "Patek Philippe," and "Vacheron Constantin" in order to learn how Google search volume has changed over the past seven days. Uou can see the significant spike in searches for the term "Rolex" on the first day of Watches and Wonders. Interest roughly quadrupled on the opening day of the trade fair, although on the second day it had largely returned to baseline. This data also reveals how much of an outlier Rolex is when it comes to public interest. Patek Philippe and Vacheron Constantin have comparatively miniscule search volume. However, as we'll see, they, too, experienced a major jump in interest at the opening of the fair.

The new Rolex Perpetual 1908. Source: Rolex.

Google also supplies a rank of "rising" terms associated with a particular Google search. For Rolex, the 1908 (Rolex's replacement for the Cellini) tops this list. It is clear that people are very interested in this new design which features small seconds, an observatory hour hand, and a display caseback. Ranking just behind the 1908 is the so-called "puzzle" Day-Date, featuring cloisonne puzzle pieces on the dial, emotions on the day wheel, and emojis on the date wheel. The new Yachtmaster in titanium is next in the list of rising searches related to Rolex.

The new Rolex Day Date "Puzzle". Source: Rolex.

One side note: subsequent to the opening of Watches and Wonders, the public is searching for "Rolex autism watch" on Google. This is likely due to the use of primary color puzzle pieces as a logo for the UK's National Autism Society in 1963. The logo was also used by the Autism Society of America. I hope Rolex is aware of these associations and prepared to address queries about these puzzle pieces adorning the dial. The association between autism and puzzle iconography is controversial to many.

Google search trends for Patek Philippe. Note the second spike marks the start of Watches and Wonders.

Returning to the other brands, Patek Philippe also saw an uptick in search popularity. However, the scale wasn't similar to Rolex. Patek's search volume approximately doubled on the first day of Watches and Wonders. Like Rolex, it quickly returned to baseline. For Patek, the related "rising" search terms didn't reveal interest in any particular new release. Macron ranked high in the related searches due to the hullabaloo over his removal of a Bell & Ross watch during an interview. Many believed it was an extremely expensive watch and, apparently, they thought it might be Patek.

Google search trends for Vacheron Constantin Philippe. Note the large spike marks the start of Watches and Wonders.

Interestingly, Vacheron Constantin saw a jump in search volume which was simlar to Rolex. Searches for VC jumped by a multiple of roughly four on the first day of Watches and Wonders. Also interesting is that the draw of attention to Vacheron seemed to persist a bit more than the other two brands, although much of it certainly dissipated on the second day of the show. There was one reference on the list of rising search terms tied to Vacheron: the Saltarello. That watch features a retrograde jump hour display. Interestingly, Vacheron did reveal a number of watches with a retrograde feature at Watches and Wonders. It is possible rumors about these releases were circulating and many mistakenly believed the brand might release a new Saltarello.

In sum, Watches and Wonders seemed to deliver on the promise of drawing attention to the watch industry and its new product releases at the start of this year. There are still important conversations about whether this attention is worth the resources devoted to the fair. At least when it comes to Google searches, the attention seems fleeting. Nevertheless, there are all kinds of additional, important, benefits from a trade show like Watches and Wonders. Many of them can't be captured quantitatively.

The box of a MoonSwatch, showing iconography used on the crown.

Overall, the financial picture looks good for Swatch Group. The company increased its dividend, which they wouldn't do if there were a crisis. Net sales increased by roughly CHF 140 million and almost all of those net sales benefitted the Swatch Group bottom line. The operating result (one measure of profit) increased by CHF 115 million. In addition, this operating result was a larger portion of net sales, going from 15.9% in 2021 to 17.2% in 2022.

A fair bit of this result is likely attributable to MoonSwatch. Some reports indicate that over 1 million MoonSwatches have been sold. With a retail price of CHF 250, it is at least plausible that MoonSwatch revenue of CHF 250 million generated a big chunk of Swatch Grouop's overall CHF 115 million improvement in operating results. Put another way, I'm sure the Swatch Group is glad they avoided the branch of the multiverse in which they did not introduce MoonSwatch.

Here are a few other things from the financials that jumped out to me:

Hedging

Swatch Group reports that it held CHF 847 million in forward currency contracts in 2022. This signals that management has a careful approach to financial management. Earning different currencies from around the world can expose an organization to significant currency risk. For example, if Swiss currency were to gain value against a wide range of other currencies, then (on the spot market) those currencies would yield fewer francs, which would make it much more difficult to pay franc-denominated bills. Swatch Group is well-hedged, or insured, in this regard. Around 69% of the company's forward contracts are denominated in euros and the US dollar. We can also view these euro contracts as the cost, to Swatch, of Switzerland not joining the euro.

Poof: Current Financial Assets

In 2021, Swatch Group held CHF 388 million in "current financial assets." This is one part of the group's liquidity, or "cash on hand," that it has available to pay bills. At the close of 2022, this balance was zero. If I were a shareholder (full disclosure, I'm not), I would be curious about this development. The good news is that it looks like Swatch Group paid off a lot of debt in 2022 (current financial debts dropped from CHF 98 to 8 million). So there is some chance this liquidity shift was tied to a reduction in borrowing. Cash and cash equivalents did increase, so I tend to believe the company was simply using slightly less liquid assets to build cash and pay off debt. Overall, that arguably increases the group's liquidity.

All Hands on Deck

My Hodinkee X Swatch Sistem51 Blue Edition

In 2021, Swatch group booked CHF 61 million in "short-time work allowances." According to ch.ch "If [a] company is temporarily in financial difficulties, [it] can reduce or totally suspend the work of [its] employees without having to lay them off" via the short-time work allowance program. Apparently, Swatch group made use of this option in 2021 and it cost them a fair bit. In the 2022 finanical report, Swatch group booked only CHF 1 million in short-time work allowances. This means the company was much more appropriately sized in 2022 compared to 2021, which is no doubt a welcome development for the group. Given that the company employed roughly 600 more workers at the end of 2022 (compared to year end 2021), it seems Swatch set goals that required an expansion of its workforce. The report also notes that just over half of its employees are women (I should note that the headcount figures are unaudited).

Hurray for the Red, White and Blue

Swatch group sales expanded at a fast rate in America, growing by 27% year on year. "Oceania," grew by a whopping 38% year on year, the largest expansion of any region in the report. Sales in Europe grew by 20%. There was some bad news in the largest market of all: Asia. There, sales decreased by roughly 9%. It remains to be seen if this region will rebound now that covid restrictions have seemingly eased there.

Clouds on the Horizon?

Swatch group registered an 8% inventory increase between 2021 and 2022. This is a fairly sizeable buildup in a short period of time. It is equivalent to more than CHF 450 million. A prior report seemed to suggest that this buildup of inventory was related to acquisition of raw materials in anticipation of future production. However, the 2022 financials suggest that a little over half of the new inventory, by value, was attributable to semi-finished and finished products. It remains to be seen if this is simply new product that the group properly anticipates selling in 2023 or whether it is unsold product from 2022 that has not found a home on wrists. This development is clearly something to keep an eye on as Swatch group releases interim reports in 2023.

Conclusion

The numbers suggest that Swatch Group had a good year in 2022. They employed more people, did not lay off many of those who were employed, saw a meaningful improvement in operating results, and increased their liquidity by reducing debt and increasing cash on hand. There are some reasons for the group to be optimistic given the potential for recovery of demand in Asia. There are also many opportunities to succeed with new releases this year, such as those associated with the Blancpain Fifty Fathoms 70th anniversary. However, given an upswing in inventory, the group should be somewhat cautious. Of late, there has been uncertaintly in the banking system, an uncertainty that has touched Switzerland itself. The watch industry isn't necessarily adversely impacted by such uncertainty, but it does suggest that caution may be the right approach in 2023 (for Swatch Group and others).

My book on the history of Rolex marketing is now available on Amazon! It debuted as the #1 New Release in its category. You can find it here.

You can subscribe to Horolonomics updates here.

]]> Tue, 21 Mar 2023 16:20:52 +0200 https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwUW0mF20hDwR3CrAHWlao0B <![CDATA[Fifty Fathoms Anniversary Act II: the Tech Gombessa]]> https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwX0AgM0BtZH-nHnycKeoCpf Although there are still some who debate the point, much evidence suggests that the first watch to check the requisite boxes for scuba diving (rotating bezel, luminous material, automatic winding and, obviously, significant water resistance) was the Fifty Fathoms introduced by Blancpain in 1953. This year marks the 70th anniversary for the watch and we’ve already seen “Act I” of a commemorative sequence of watches. In early February, a limited series of 210 watches with special dial marks (reading “70th Anniversary” and the series number of the watch) was introduced, 42mm in size.

Panelists at the Blancpain preview event earlier this week.

Earlier this week, I joined a number of guests at the Blancpain boutique in Manhattan for a preview of the Fifty Fathoms “Act II.” The event was truly global, with participants “tuning in” to a live stream featuring five hosts. Marc Hayek (Blancpain CEO and President) and Marc Junod (VP and Director of Sales) broadcast from Switzerland while Jason Heaton (writer and diver), Laurent Balessa (Gombessa Foundation Founder and Leader) and Tatiana Boube (Mokarran Protection Society Science Coordinator) joined in from Rangiroa, French Polynesia. This last location looked, frankly, like a tropical heaven on Earth.

By way of watches, I didn’t know what to expect from the gathering. The invitation card featured the partial arc of a dive watch bezel but the markings were truly baffling.

A teaser graphic sent by Blancpain ahead of the event.

At the spot usually reserved for a 10 minute elapsed time marker, there was a 30. At what is traditionally tge 50 minute marker, there was a 2:30. I guessed that this was, potentially, some indicator for a chronograph counter that ran at a different frequency than usual. This guess, it turns out, was somewhat close but also quite inaccurate. I’ll return to this in a bit.

Before getting into the specifics of the watch release, let’s revisit the “origin story” of the Fifty Fathoms. As captivatingly told by Jeff Kingston in a legendary HSNY lecture, in the very earliest days of scuba diving, Blancpain CEO Jean-Jacques Fiechter ran out of air while submerged in the Mediterranean. This spurred him to design a watch he could dive with that would reliably help any wearer track elapsed time.

In the modern era, Blancpain is still actively involved with the diving and marine science community in a variety of ways.

Details of the Ocean Commitment work with Great Hammerhead Sharks (on display at preview event).

In particular, through its Ocean Commitment program, Blancpain has sponsored at least five Gombassa Expeditions featuring technical, scientific and artistic goals achieved alongside highly technical ocean diving. The lead in these expeditions is Laurent Ballesta, an expert diver and photographer. What was particularly interesting about the Fifty Fathoms watch officially released by Blancpain today and previewed on Monday was that Ballesta’s participation in development of the watch echoed the origin story of the Fifty Fathoms itself.

More specifically, as a consequence of his dive experiences, Ballesta realized there was a function that was missing from timekeepers. In this case, the function is unique to modern, technical diving. But the method for developing a solution was quite similar to Fiechter’s own approach in the 1950s. Diving activity provided the parameters of what a watch should deliver and watchmakers spent a fair bit of time working out how to deliver that function. According to Ballesta, it took five years for Blancpain to onboard a new checkbox for a dive watch and deliver it to market with the box checked off. So, let’s talk a bit more about the watch.

The Blancpain Fifty Fathoms 70th Anniversary Tech Gombessa

My first good look at the Blancpain 70th Anniversary Tech Gombessa

The watch released today is the Blancpain Fifty Fathoms 70th Anniversary Tech Gombessa. The Fifty Fathoms hallmarks are all there in the timepiece. Arabic hour markers sit at 12, 3, 6 and 9. The diamond lume pip lives inside a curved unidirectional bezel. The script marking “Fifty Fathoms” is located at 6 o’clock on the dial.

A few new features jump out, though. The first of these is Blancpain’s choice of an orange hue for the hour and minute markers on the dial. This color carries through to the hour and minute hands as well as the word “Tech” presented just above the 6 o’clock marker. My guess is that these watches will be very well received in The Netherlands, where orange is the national color. If this is intentional, it is a wise choice. According to FH export statistics, The Netherlands was the 14th largest importer for Swiss watches. The country also punches above its weight: adjusted for population, it is the 10th most important market for Swiss watches.

The Blancpain Fifty Fathoms Speed Command in orange. Photo credit Phillips Auctions.

The avid Blancpain collector will note that the Tech’s dial furniture color is reminiscent of certain references from the aughts. In particular, the Fifty Fathoms Flyback Chronograph Speed Command (reference 5785F-11D03-63A 578511d0363a) has a similar orange flair. Other references from this period also featured bold coloring in dial elements, such as the L-evolution series.

The most unique feature, by far, is the watch’s fourth hand, which the brand refers to as a “three hour” hand.

A graphical display of the Fifty Fathoms Gombessa Tech. Note the 3 hour hand pointed just short of the five o'clock marker. In this case, if the wearer were timing an event that started when the 3 hour hand was pointed at 12, almost one hour and fifteen minutes would have elapsed.

Here, we see the influence of Laurent Ballesta in the design of the watch. Ballesta and his crew of divers use “closed circuit” systems while submerged. These employ chemicals to remove carbon dioxide from exhaled air and inject oxygen to replace any that is lost to metabolism. As a result, they do not create any bubbles which, in turn, offers advantages for observing wildlife. Ballesta shared that tracking three hours of elapsed time is particularly useful for diving with rebreathers since that is the envelope typically recommended for the closed loop system he uses. He also noted that, after three hours, exhaustion and cold begin to set in and it is usually time to end a dive. This is the major new complication in the Tech Gombessa watch. The three hour hand is geared to the minute hand, but it only completes a full rotation after three hours. In order to track a long event, you rotate the bezel so that the diamond pip aligns with the three hour hand. If you want to know how much time has elapsed, you simply read off the mark on the bezel that the three hour hand points to. This solved the mystery of the “30” and “2:30” markers on the bezel that I described earlier. The scale on the Tech Gombessa bezel differs from incumbent designs because the relevant hand does not complete a full rotation in one hour.

Although this new complication is handy for technical diving, it is also helpful for timing any event lasting three hours or less. The list of possible events is long, but examples include a movie (except for the longest) and, in my case, my classes (which are typically not more than two hours).

A wristshot of me wearing the Fifty Fathoms Gombessa Tech.

The three hour timing function may also be useful for flights which are on the shorter end. Also worth emphasizing is the Tech Gombessa’ integrated rubber strap and lugless design (the strap is affixed to the wrist with a traditional buckle and tang system). In some ways, the Tech’s strap system reminds me of vintage “disco volante” designs in which the strap can come closer to a closed loop because it isn’t limited by the length of the case. Now, I’ve made my own fair share of jokes about the hackneyed “it wears smaller” claim. But I’m really being honest here: this design works and makes the 47mm watch wearable. I recently purchased a surplus milspec “SOPMOD2” digital quartz watch which is quite oversized compared to your standard Casio. My watch is only 4mm larger than the Tech Gombessa, but the lugless design of Blancpain’s offering makes it feel like my SOPMOD2 is approaching 60mm in comparison. Take a peek at the wrist shot here, you can judge yourself. The use of titanium for the case also helps with wearability by reducing the heft of the timepiece.

Just a few additional items of note when it comes to the Tech Gombessa.

The Gombessa Tech's movement and skeletonized rotor, as seen through the display caseback

First, there is no date window (a complication that many would rather not have on a dive watch anyway). The display caseback provides visual access to the movement, which features a skeletonized rotor emblazoned with the Gombessa Foundation’s iconography. There is a helium escape valve near 10 o’clock. Three barrels in the movement supply a lengthy five day power reserve. Luminous material provides legibility in low light conditions. For price, we heard the watch was available at CHF 26,300 with VAT included.

Wrapping Up

The Blancpain Fifty Fathoms 70th Anniversary Tech Gombessa celebrates Blancpain's tradition of molding dive watch design in response to real-world diving experiences. In this case, it was the needs of closed circuit diving which inspired the addition of a new three hour hand complication. Interestingly, another recent release of the Fifty Fathoms was also inspired by closed circuit diving. Blancpain’s 2019 Nageurs de Combat Automatique, released in celebration of French Navy combat divers, features a barely perceptible black “7” numeral printed on the dial just above the six o’clock position. Covert military divers often use pure oxygen rebreathers, but these systems are not safe at a depth greater than 7 meters. This explains the decorative element on the Nageurs de Combat.

We see, then, a theme developing when it comes to the evolution of the Fifty Fathoms. Divers are now regularly pushing the frontier of the kit they use in order to achieve different goals and objectives underwater. In response, Blancpain has synchronized the development of the Fifty Fathoms with the emergent needs of the dive community. The Fifty Fathoms 70th Anniversary Tech Gombessa is the latest, but not likely the last, example of this design strategy.

My book on the history of Rolex marketing is now available on Amazon! It debuted as the #1 New Release in its category. You can find it here.

You can subscribe to Horolonomics updates here.]]> Thu, 16 Feb 2023 14:00:00 +0200 https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwX0AgM0BtZH-nHnycKeoCpf <![CDATA[Lovell Hunter: American Independent Artisanal Watchmaker]]> https://api.follow.it/track-rss-story-click/v3/IcuRW0MbYwVkQ1rg3ip2zMfGo0LrnZNO Confession: I struggle with whether I sometimes take this whole watch thing too seriously. Don’t get me wrong, I think it is completely healthy to approach watch collecting as an enjoyable leisure activity. Lightheartedness about horology, from a certain perspective, just makes sense. Part of the watch collecting “canon” is that watches are not necessary for keeping track of time. Collectors are also drawn to humor. I laugh at meme accounts on social media and even try my hand at making a meme now and then. When it comes to sustaining an industry, casual clients are just as vital as hardcore “savants.” But part of me starts getting a little uncomfortable when I hear people referring to watches as a “hobby” or as “something nobody needs.”

I did not dwell on this discomfort until I had a conversation with an extraordinarily accomplished American watchmaker named Lovell Hunter. We spent a bit of time discussing Lovell’s education and experience as a watchmaker, a topic I’ll return to in a bit.

Lovell Hunter, founder of Love Hunter Watches.

What came across in our conversation, though, was an unspoken impression that I think bears emphasis: watchmaking is a profession that many thoughtful people, and their families, have depended upon for many decades.

This perspective is also grounded in a somewhat recent development on the world stage. On December 12, 2020, the United Nations Educational, Scientific and Cultural Organization (UNESCO) formally added craftsmanship of mechanical watchmaking and art mechanics to the list of intangible cultural heritage. While the proposal for this adoption was spearheaded by Switzerland and France, their nomination form noted “artisanal watchmaking production does exist elsewhere in the world.” Indeed, if you’re deliberate in following Instagram tags on pictures of unfamiliar watches, you might find they are the product of a craftsperson in Eastern Europe, Canada, Germany, Australia, Japan or China.

Thomas Harland's shop in Norwich, CT. Source: *Old Houses of the Antient Town of Norwich, 1660 - 1800. Available here.*.

Artisanal watch and clockmaking also once found a home in Connecticut. English clockmaker Thomas Harland settled in colonial Norwich, Connecticut in 1773 and set up his workshop. He advertised production of clocks in cherry and mahogany cases, as well as enameled and “silvered” clock faces. One of Harland’s tall clocks from 1775 is on display with the Metropolitan Museum of Art in New York City while another example sold for $36,800 at auction in 2018 (granted, some of this price is explained by a woven newspaper dated 1785 held within the clock’s cabinet). Harland’s success allowed clock and watchmaking to bloom in Connecticut. By 1844, traveler G. W. Featherstonhaugh wrote, “In Kentucky, in Indiana, in Illinois, in Missouri, and here in every dell in Arkansas, and in cabins where there is not a chair to sit on, there was sure to be a Connecticut clock.” Recent reports suggest that there are still locations in a former clock factory which set off a Geiger counter, marking the location where luminescent radium was applied to dials many years ago.

The Path to Watchmaking

Let’s return to my discussion with Lovell, who recently launched his own independent brand called Love Hunter Watches in Connecticut. Lovell grew up in the Melrose Projects in New York City’s South Bronx. He shared that, in his early years, he was fascinated with geology, the solar system, and the heavens. For Lovell, the launch of the Hubbell Space Telescope was a particularly momentous event. He enjoyed disassembling mechanical devices in his youth, although he admits that reassembly was sometimes a challenge. Lovell also has fond memories of his fascination with a Casio calculator watch from those years.

Lovell’s father worked in the fashion industry. As many parents do, he offered a thoughtful suggestion of a possible career path that might resonate with his son. He told Lovell about watchmaking as a career and shared some details about what that job entailed. Subsequent events would show that Lovell’s Dad demonstrated keen insight when he realized how his son’s interests were natural compliments to horology.

In high school, Lovell began working for Tiffany’s in Manhattan. In most jobs, there really is not a great substitute for experience. The fact that Lovell began accruing experience in the fine jewelry industry before he reached adulthood has undoubtedly provided him with insights and skills which have stood the test of time.

A prototype baseplate machined by Lovell Hunter.

Following Tiffany’s, Lovell began working at the Tourneau watch retailer on 57th Street. He spent five years in sales and one year in management. Eventually, the call to deepen his understanding of watchmaking was too strong to resist. He enrolled as a watchmaking student in the Lititz Watch Technicum in Lancaster County, Pennsylvania. There, he completed a school watch. Through work on this pocket watch, Lovell gained experience with case-making and dial fabrication. Following graduation, he spent roughly ten months developing movements on paper.

Subsequent to Lititz, Lovell relocated to Connecticut and joined the watchmakers at Breitling’s service center. He mastered incredible challenges, such as servicing a Breitling perpetual calendar with 415 distinct parts. However, the routine of servicing watches did not provide Lovell with the opportunity to employ many of the skills he enjoyed developing in watchmaking school. He shared that the challenge of the job had largely disappeared. At some point, Lovell became uncomfortable referring to himself as a watchmaker.

Becoming Independent

A screenshot from a broadcast interview with Lovell Hunter. Source: WTNH.

Just after 2019, with the onset of the pandemic, Lovell took his first, bold, steps on a new career path. He began finding and acquiring machinery for his own workshop. Lovell acknowledges that without the care and support of family and friends, the effort may have been insurmountable. He related how his community helped him bring two key pieces of equipment down stairs leading into his workshop. They were angled at a steep 60 degrees. Lovell’s Schaublin 70 lathe weighs 750 pounds while his Schaublin 102 weighs 1650 pounds. It required some creative and skilled rigging to set up the machines in their designated locations. An electrical rewiring project was part of the effort.

Even in conversation on the phone, you can sense Lovell’s happiness and fulfillment when it comes to these efforts. Lovell’s design aesthetic draws from art deco and art nouveau styles. I’d seen a photo of one of his watch prototypes in a local newspaper (which was how I first learned of his work) and I suggested that it was reminiscent of Daniel Roth. Lovell replied “ahhh, now I know you know watchmaking,” while confirming that he found inspiration in that great watchmaker’s achievements. He is fond of using German silver for his mainplate. Lovell uses the same material for construction of finger bridges, a mechanical element which serves as an homage to traditional watchmaking.

A design schematic for Lovell Hunter's click system. Source: Lovell Hunter.

Lovell is currently completing his first commissioned watch, which he plans to deliver in the near future. Through work on this inaugural timepiece, Lovell has streamlined the process for making parts for his movements. For example, the design schematic presented here shows how six copies of a component in Lovell’s click system can be machined at the same pass. The result of a machining run can be seen in the next picture, where the six components have been milled on the end of a piece of bar stock.

Machined compenents for Lovell's click system. Source: Lovell Hunter.

This work shows that Lovell is developing his processes in a manner that allows for a certain degree of scale efficiency in production. This augurs well for the sustainability of his fledgling brand. Challenges certainly remain. For some measurements, Lovell must work in imperial while in others he switches to metric. We shared a laugh over the fact that such conversions have caused difficulties for NASA in the past.

I asked Lovell about his experiences with inclusivity in the watch industry. He specifically cited Audemars Piguet’s partnerships and collaboration with Jay-Z as a moment in industry history that inspired him greatly. Lovell shared that, in his view, this bold step towards improving representation in the watch industry was a key component to the brand’s success. It is said that inadequate inclusivity hurts everyone involved, both those excluded and those excluding. From this perspective, brand partnerships with individuals from under-represented communities are in the financial interest of brands themselves. The challenge to improve inclusivity is great. To the extent that watch brand employees from Europe, for example, operate in the United States, those employees are doubly challenged with addressing an unfamiliar market while at the same time implementing inclusivity within a similarly unfamiliar culture.

Alongside practicing his craft, Lovell is committed to transmitting his skills to the next generation. He presently teaches at a local high school and community college so that others can learn more about watchmaking. From this perspective, Lovell’s commitment to horology connects directly to something mentioned above: the official arrival of watchmaking as part of the world’s intangible cultural heritage. Through design, manufacturing and communication, Lovell Hunter is enlivening Connecticut’s long, but interrupted, contributions to horology. He is creating a new legacy for horology in America.

If you would like to communicate with Lovell Hunter about his watchmaking, you can reach him at lovellhunter1@gmail.com . You can find video of an interview with him broadcast in Connecticut here.