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SDC Weekly 23; Resale rights; Consumer surplus
GPHG commentary, Patek novelties, Moser teasers, Parkinson’s breakthrough, Sapiens again, CT scan of AirPods, Puddles of pee, Children, and WeWork’s weed-smoking Gulfstream.
“Friendship is a priceless gift that cannot be bought nor sold, but its value is far greater than a mountain made of gold; for gold is cold & lifeless - it can neither see nor hear, in time of trouble its powerless to cheer — it has no ears to listen, no heart to understand, it cannot bring you comfort or reach out a helping hand. So when you ask God for a gift, be thankful if sends not diamonds, pearls or riches but the love of real true friends.”
— Muhammad Ali, The Greatest
Hello 👋 and welcome back to the SDC Weekly. You’ll find the older editions of SDC Weekly here. Last week’s edition on the Christie’s debacle was really popular1. Thanks to those who shared the post, and welcome to all the new subscribers!
What a week… Moser teased a new micro-rotor movement (which is apparently not an actual watch), and Patek launched a rainbow minute-repeater Aquanaut with a CHF 2.5m price tag. Bizarre thing, given the Aquanaut ought to at least be waterproof, which it isn’t… but more importantly, a repeater in an Aquanaut case is, to me at least, the equivalent of wearing black tie attire to a children’s birthday party.
What2 are they doing? This isn’t quite ‘commoditisation of repeaters’, but there is a certain ‘repeater cachet’ which seems to be lost by putting the pinnacle of Patek’s movements into a sports watch case. This looks like Jacob & Co’s domain, to me. Good for them, though!
What’s your take?
Tonight, I shall be on the poors [sic]3 train to the UAE to attend Dubai Watch Week, among other things. I was not planning on going until a couple of weeks ago, and held fairly strong views about the event being a waste of time and money… but thanks to a good friend and his famous persuasion tactics, my views are about to be tested first hand. Here’s to friendship 🥂. Leave a comment if you’re planning to attend DWW, perhaps we can arrange to grab a coffee.
I posted an incomplete story on Monday, which began with dying in a car accident. I promised to share the complete story in the newsletter, so here it is - it is called “The Egg” by Andy Weir.
Let’s dig in.
ScrewDownCrown is a reader-supported guide to the world of watch collecting, behavioural psychology, & other first world problems. Both free and paid subscriptions are available.
⚖️ Resale rights?
Typically, once you purchase a car and it belongs to you, nothing stops you from selling it to someone else. That is not the case for the Tesla Cybertruck… In Tesla’s Motor Vehicle Order Agreement, they have added a section entitled “For Cybertruck Only” - here’s what it says:
In other words… Tesla can sue you for $50,000 if you try to resell your Cybertruck in the first year. Of course, if a customer has a good reason to sell their Cybertruck, Tesla may agree to buy it back at the original price minus “$0.25/mile driven, reasonable wear and tear, and the cost to repair the Vehicle to Tesla's Used Vehicle Cosmetic and Mechanical Standards.” If they decline to buy it back, you can ask for permission to sell it elsewhere, but until you get this permission, you’re stuck.
In the watch collecting world, this is a familiar concept. Authorised dealers (ADs) were once retaining Rolex warranty cards4 but I believe were told (By Rolex) to stop this practice. The rationale being, customers who had warranty cards retained were thereby encouraged to hold on to the watches for longer, as they would need to show the watch when collecting the warranty cards (a year or two after purchase). If they sold it anyway before collecting the warranty cards, they would receive less money as it could not be sold as a ‘full set’ watch.
The primary issue with the retention policy was customers not receiving everything they had actually paid for. When you pay the MSRP5 for a Rolex watch, the MSRP includes the box, warranty card, tags and user manual6. This retention policy therefore infringed on buyer’s rights, and Rolex rightfully put a stop to it.
That said, what stops any AD from creating a purchase agreement similar to the one Tesla is using? Sure, it might be difficult to enforce all the time but if there was a genuine legal restriction against selling watches, it would certainly reduce the amount of flipping taking place; A deterrent with legal consequences, as opposed to just financial ones.
The reason is quite simple… flipping might be frowned upon, but the existence of a grey market in which high-demand and (perceived) low-supply watches can trade above MSRP, is actually a key part of the watch market functioning smoothly. There used to be a time when ADs would dump unsold stock, at wholesale prices, directly onto the grey market; this still happens, but volumes are lower because the watch market has had a boom of sorts.
The reason I brought this topic up at all, was because I listened to the A. Lange & Sohne CEO speak on Hodinkee’s podcast:
He goes on about how their goal is to build long term relationships, and he laments the difficulties they face with identifying ‘true collectors’ and differentiating them from ‘flippers’. Give me a break.
ADs could significantly reduce flipping, but it is not in their own interests to do so. Brands which assert they want to build ‘long term relationships’ with customers and who also assert selling watches ‘destroys the relationship’ are, frankly speaking, full of sh*t.
The existence of highly desirable pieces which resell above MSRP is a mere tool in the sales arsenal. This is how they can, for example, extract tens of thousands of pounds or dollars out of a client who wants a Datograph, by selling them various other watches which are ‘required’ on the journey to owning a Datograph. This is not unique to Lange; F.P. Journe does the same thing with Black Label watches, which cannot be purchased before owning a couple of other (non-BL) Journe watches.
To be clear, this is not a novel concept; I just keep hearing the same BS come up repeatedly, with people pointing at ‘flippers’ as being some sort of plague. People are free to spend their money elsewhere, and as willing participants in the game, should have no reason to complain. Brands need not make up fairy tales about wanting to build meaningful relationships with customers… Sure, a good relationship never hurts, but as a customer, more transparency goes a lot further. If Lange wants $200k of spend within 18 months to unlock a Datograph, they should just say so; skip the small talk.
💸 Consumer surplus
On a similar topic to the previous section, you may have noticed large brands and independent watchmakers continue to increase their retail prices; so I thought this concept was worth a short discussion. Consumer surplus is unique to everyone, but represents some excess value one might enjoy from anything we purchase, when one pays less than our willingness to pay.
I use my gym daily, and I enjoy doing so. Its location is extremely convenient for me, and I like the setup inside. I signed up over 10 years ago at an attractive introductory offer, and my price has stayed at this level even though new-joiners today will pay up to 50% more than I do. In this case, if they decided to cancel my deal and raise the price to triple what the current price is, I would probably still pay it.
The gym doesn’t know that. They cannot triple the price just for me, because they are selling the same membership to others. Clearly, I am getting a lot of consumer surplus out of my gym membership.
In the world of watches, you can see how this works. Rolex ADs, and other retailers of desirable watches try to take advantage of consumer surplus, by creating rules about how consumers can enjoy their surplus. Over time, however, it seems they are simply becoming greedy, and want to capture some of this surplus for themselves in the form of cash up front.
The problem, as you can see from the chart, is both demand and supply matter in this equation too. Sure, the demand and supply curves could shift, but by definition… raising the price will reduce the demand. This is mostly irreversible, as very few tend to ever reduce their retail prices.
As consumers, it is a useful concept to keep in mind before banging on about how companies act, and how greedy they are. We enjoy consumer surplus as buyers of desirable watches.
For brands and independents, this is arguably more important to bear in mind, when deciding on retail prices. Covering costs is one thing, making a good living is another… but try not to lose sight of how much (or how little) consumer surplus is being created.
Bear in mind, consumer surplus goes beyond just physical or tangible objects. Amazon might be a huge and corporation, but they are probably generating billions in consumer surplus just because of users’ willingness to pay for convenience. Many people, including myself, are willing to pay more than what Amazon charges.
In the world of watches, this speaks to creating something in addition to the watches themselves, be it a community/club, or unique offerings such as annual collector events, or even a token gesture like house wine with custom labels on collectors’ birthdays.
The London F.P. Journe boutique hosts regular collectors’ events where collectors get together at the boutique, make new friends, share food and drink, and see some desirable watches. This is a service; an added benefit of being a customer, or prospective customer, at their establishment.
MB&F has their “tribe” … which is meant to feel like a family of sorts. This is the sort of setup which breeds consumer surplus, when done correctly. If a person finds themselves ’evaluating’ their own perceived value of MB&F watches, they will likely extrapolate beyond the monetary value of each watch, and attribute ‘new friendships’ and ‘great get togethers’ with their MB&F watches. It is genius for the most part, but not without flaws. There was an exclusive Maldives getaway earlier in the year (every collector paid for their own trip) arranged by MB&F, but given it was Maldives, not too many were invited. This put off collectors who were not invited, because while these folks thought they were close to the brand, the absence of an invite proved they weren’t as close as they thought. Yes, first world problems, and the world ain’t fair… but you get the idea. I bring up this example not to throw shade on MB&F… but to prove my point, that this stuff really does have value. If these butthurt collectors didn’t care about MB&F, they would not have been offended. If MB&F had simply embargoed the whole Maldives event, they could have kept everyone happy. The fact remains, consumer surplus is created by the existence of this tribe.
I had a few more examples, but really, I think the point is clear enough… if brands want to charge a fortune, and they can’t be bothered to spend on genuine R&D and major innovation each year, they ought to find a way to create additional consumer surplus to justify all the price increases… it probably goes further than we think!
📌 Links of interest
A man with Parkinson’s disease has regained the ability to walk after physicians implanted a small device into his spinal cord that sends signals to his legs!
“I can now walk with much more confidence and my daily life has profoundly improved,” said the patient, a 62-year-old named Marc, during a press conference.
Marc is the first and only person to have received the new spinal neuroprosthesis, a small device containing electrodes placed under the skin on top of his spinal cord. It works by sending bursts of electrical signals to stimulate the nerves in his spinal cord, which then activate his leg muscles. The implant is described in this study.
🎧 Have you ever seen a CT scan of Apple’s AirPods? Also shows the difference between real and counterfeit ones.
🗞️ A few moments of conscious breathing anywhere, anytime will slide back your blood pressure and heart rate.
💀 Elon Musk is preparing for the most consequential launch of his career. But this one isn’t rocket science—it’s brain surgery.
📚 There Are No Secrets: Thoughts On Shortcuts by
🔎 The Humane AI pin has no screen, no apps, and a creepy in-your-face camera.
📈 How the world’s largest hedge fund lost two top hires — and was paralyzed by puddles of pee.
✈️ WeWork’s imminent bankruptcy filing means billions in an estimated $11.5B in losses for SoftBank, the co-working space vendor’s biggest backer.
In case you missed it… I recently shared a post about a book:
Here’s the gist of it: The book evaluates choices, biases and the limits of human reasoning from several perspectives. They tell stories about how they trick themselves to becoming victims of the very limitations of thought that they are describing.
Short note on GPHG
The GPHG award ceremony took place in the last week, you may have heard about it? Here is the prize list for 2023. Many others will have covered this sh*t show, I see no reason to bore you with the watch details. That said, there was no ‘Men’s Prize’ awarded this year; instead, they awarded a couple of ‘discretionary prizes’ instead, which I understand are more prestigious. Shout out to Simon Brette ✌️
Anyway, the rationale for this, is when a watch wins a discretionary award like the "Horological Revelation Prize, it would have beaten more than just the watches in its own category. In these instances, they might award the ‘main category’ prize to the runner up - but I think this year, two of them got a special prize, so they didn’t want to make the 3rd in line feel bad!
Another interesting GPHG takeaway, was the fate of Xhevdet Rexhepi’s submission. I understand from 3 different sources that he submitted a watch which for the jury to evaluate, but it was not working. The balls on that guy are… immense. Of course, they were not amused, and he didn’t win anything. Case closed.
Final takeaway for me was the outgoing Audemars Piguet CEO François-Henry Bennahmias, appearing to sexually assault Édouard Baer on stage, and then making it all seem amicable and normal. If it wasn’t so wildly inappropriate, it would be hilarious! To be clear: No charges were filed, and no convictions seem likely… so this allegation of sexual assault is entirely my own, based on his facial expression alone. Watch the video, and make up your own mind.
GPHG is a bunch of industry circle-jerking anyway… It is difficult to completely ignore, because it happens to be like the Oscars of watchmaking - relevant, despite being plagued with conflicts of interest. One day I might do a deep dive into unpicking all these conflicts, but for now, I mostly don’t care. If you’re dumb enough to attach any significance to the awards in relation to how meaningful they are to your own purchasing decisions, then you deserve to be parted from your money. Happy shopping, and hearty congratulations to all the winners.
Until next time!
Bonus link: Masters of the Air
🍬 Check out the first trailer for World War II series Masters of the Air, Steven Spielberg’s long-awaited follow-up to Band of Brothers and The Pacific.
During World War II, airmen risk their lives with the 100th Bomb Group, a brotherhood forged by courage, loss, and triumph. Based on Donald L. Miller’s book of the same name, and scripted by John Orloff, “Masters of the Air” follows the men of the 100th Bomb Group (the “Bloody Hundredth”) as they conduct perilous bombing raids over Nazi Germany and grapple with the frigid conditions, lack of oxygen, and sheer terror of combat conducted at 25,000 feet in the air.
The 9-part series features a stellar cast and premieres January 26 2024.
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I have since edited it, to include another example, and a response from The 1916 Company… so have a quick look again if you missed those updates.
Back in the day, it also included protective stickers and bezel protectors too, but that no longer seems to be the case in most places.