SDC Weekly 28; Rolex novelties and patents; Cognitive dissonance
SDC Weekly 28; Rolex novelties and patents; Cognitive dissonance
Rolex's new USA HQ, The 1916 Company, Social psychology and watches, MrBeast, Zuck's $100m Hawaii compound and Formula One!
Hello 👋 and welcome back to the SDC Weekly. You’ll find the older editions of SDC Weekly here. Let’s start with some random advice you will never use, but will probably still find amusing:
Cool, right?
I am off to Africa tomorrow… can’t wait. I plan to carry on posting, but don’t be surprised if I call in sick. Until then, this quote seemed to fit with the theme of today’s newsletter - so here it is, and let’s dig in!
“Man is the creature of the era he lives in; very few can raise themselves above the ideas of the time.”
- Voltaire
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⚡ It’s not ALL bad!
In recent weeks I have commented on the declining market… but of course, this decline does not apply to every type of watch. Truly remarkable watches will always fetch attractive prices. In recent auctions we saw a 14kt gold Daytona “JPS” sell for triple its estimate. The the owner passed in 1974, not long after buying it, and his family reportedly found this 6241 in a pouch, having been ‘untouched’ for nearly 50 years. One can speculate on authenticity, and provenance nowadays can be expertly fabricated… but still, that’s quite a result!
In the same auction, a 1999 Submariner 16610 with a “Panama Canal” dial also sold for more than triple the high estimate. This Patek 1518R fetched $1.5m and a Space-Dweller 1016 sold for just under double its high estimate.
What are truly remarkable watches anyway? Opinions will vary, but condition (including originality) and rarity are probably a good starting point for evaluating anything - beyond that, it will come down to how much the collector community can unanimously agree on the desirability of a watch. Whether we like it or not, the words of leading watch market advisors and commentators will always have an impact on the market, despite any conflicts of interest.
Todd Levin, an art advisor and watch investor1 has been marketing the ‘investability’ of George Daniels and RW Smith watches ever since he bought himself a couple of these pieces. Todd advises rich people who also buy expensive art, and these people trust him implicitly; of course it helps that Todd personally owns the watches he is recommending. Now, you’re smart, so let me ask you: What do you think would happen if the market for these watches suddenly started declining significantly… but Todd advised his clients this was an opportunity to “buy low”? Indeed, the prices would go back up, or at least the decline would cease! Classic agency problem.
In many ways, therefore, certain watches gain blue-chip status by virtue of their longevity in the collecting community and their resulting investability. Paul Newman Daytonas are in this camp, Rolex Milsubs, and perhaps the extreme Pateks like 1463s or 1518s. You get the idea, I hope.
When it comes to ‘normal’ watches, the story differs slightly. In the US, the Fed seems to be on course to cut rates which is probably due to the upcoming elections, and according to Tim Bender there is still a huge surplus in grey supply. I don’t expect rates to go down much in 2024. They’ll end 2025 at about 4% - more than 2x where they ended in 2019. Wall Street is expecting rates to potentially stay this high for a decade, using the phrase “higher for longer” in equity research reports.
Even in the broader luxury industry, signs point to an oversupplied market outside of just luxury watches with share prices of LVMH, Kering and Burberry down 12%, 23% and 33%, respectively since early August. Tim is calling the bottom of the market to be… now, or at least within the next quarter i.e., by the end of March 2024. In the UK, there is an almost foregone conclusion of a Labour government taking over from the Conservatives, and this means more taxes on the wealthy: the same folks (primarily) who tend to buy expensive watches with some regularity.
To conclude … I will end with three takeaways;
There will always be more rich and willing people than there are exceptional and objectively rare watches - so the good stuff is probably priced correctly as we see the values today.
Dealers and speculators have been experiencing a liquidity crisis for the last 6-12 months, which means we’re firmly in a buyers’ market, and will remain in one for at least the next 6-12 months in both Europe and the US.
It’s not ALL bad! This is the time you should go out and find those deals on watches you previously thought were out of reach. Try them, enjoy them, and if you don’t like them you may sell them for a small loss. Consider it the ‘cost of scratching an itch’ which will be an invaluable source of education on your collecting journey.
Rolex patents to predict novelties
Patek filed their patent for a perpetual calendar in 1889, and manufactured their first wristwatch with this functionality in 1925, using a movement taken from a ladies pendant watch. Breguet made the first movement (4244) actually built for wrist watches a few years in 1929. Yet, Rolex has never offered a perpetual calendar despite its liberal use of the word “Perpetual” in all of the marketing copy!
Until, perhaps, 2024? This patent filed by Rolex late last year publicly available since the middle of this year suggests the crown might be surprising us soon. This patent builds on its Sky Dweller movement, and claims this new perpetual will minimise energy loss and avoid a significant loss of amplitude which occurs when there is an instantaneous jump between 2 or 3 days in February.
If you don’t already know, the Yacht Master II is a Rolex dedicated to … being an actual Yacht Master and it has a specific countdown feature for timing a regatta start2.
According to this patent the movement is about to be updated so the countdown can be set via a pusher while the chrono is stopped (while chrono is running, it has a flyback function as normal). Being a relative dog of the Rolex sports lineup, I think this would be a good time to sell your Yacht Master II if you have one - a newer, better model will simply lower the appeal and value of the current model.
This patent filed in 2019 and dated 7 November 2023, is another interesting development for Rolex chronographs. It appears to be a a rotating bezel of sorts, which can lock and unlock the chronograph pushers likely in a similar manner to the Sky Dweller’s ‘ring command’ system. I don’t think this will be coming in 2024, given the Daytona just got a refresh, but I wonder how badly this will affect the aesthetics of a Daytona. In some ways, despite being annoying to operate, the screw down pushers are part of the design now! You will never get one at retail anyway, so who cares!
Rise of cognitive dissonance
On the first of December Furlan Marri launched a new mechanical chronograph. Those who know me will already know my term for this genre of watches: “shitters”. Mildly derogatory, perhaps - the watch may be decent, but to be defined as a shitter, it delivers less value than the price would suggest, and it has no brand power. At 2,750 CHF, this watch is in Tudor territory. Except you’re getting a Sellita movement with some marketing BS that seeks to justify the absurd price… along with a bunch of plagiarised design ideas which are blessed by Auro Montanari - a knowledgeable and long-time watch collector who has taken on the role of chief shill of shitters to close out his career. To be fair, however, my friends who know him say he’s a lovely bloke.
As I type this, none of these watches are sold out - that’s a run of 300 pieces, across 3 variants. An SDC subscriber and friend, Paddy, reached out to tell me his experience which took me back to this old post:
Basically Paddy purchased one of these watches as a reaction to the launch announcement, and then cancelled his order when he saw it wasn’t sold out in record time (as he was used to seeing). It turns out, this reactive behaviour is something which is learned over time - this also means it can be unlearned over time too.
Under the broader theory in psychology known as cognitive dissonance theory, people often gravitate towards information which supports their existing views rather than information which challenges it. This is called the confirmation bias... where we seek out support for our views or ideas. In this case Paddy was looking for the product selling out, as confirmation of his views being supported. That didn’t happen, which then led to post-purchase dissonance3.
How could this play out in the coming months for watch collectors or watch brands? I think the more significant impact will be for brands. Take Furlan Marri in this example - they are used to selling out as this is all they have experienced to date, and that is because they have historically been trading above retail on the secondary market. In this bearish market, buyers are more circumspect, and these have not sold out. Now that everyone realises these watches do not sell out, they will be less likely to sell out in the near future. This cycle compounds, and the brand will likely have to revisit pricing until they find a price and production quantity which balances supply and demand. Except, by then, the market might move on and people will not buy this watch even at £1000 less. If that happens, they become pointless to make, because they can no longer be profitable! This is the problem when brands have close to zero genuine brand power. To be frank, when there is so little brand equity, these watches are basically worthless to all but the ones who bought it truly out of love for the object… And so, there is unlikely to be much love left for shitters, right?!
Moving on to ‘big’ brands - Vacheron is a good example here. Back in 2021 when the hype for Vacheron was at its peak, I wrote this about their foolish mistreatment of regular collectors (so called “non VIPs”):
The problem with this approach is the short-sightedness of it all. Hype won’t necessarily last forever, and the original clients who simply loved Vacheron, will be burned by this approach, and they are the very people who will come and buy the watches when the hype is gone…
Here we are, a couple of years later, and the Vacheron hype is gone. During peak hype, Vacheron hiked their retail prices to astronomical levels, and today, people are struggling to see the value in these watches despite the brand value. The Overseas 4500v retailed at ~£19,000, but is now up over 25% to £24,100 - and the grey market prices are of course all below retail. I personally know two people who have turned down an Overseas Perpetual Calendar Ultra-Thin Skeleton in recent months - these were trading at a premium when released - and at the time, only available to VVIPs with massive spend-history and to be sold via Vacheron Boutiques exclusively (no authorised dealers).
All this means to me, is the brands will begin offering discounts again, as penance for being too arrogant with their retail pricing strategy. They should also move their boutique-only models back to being sold by any authorised reseller of the brand. Finally, they will likely reduce production and try to stop the bleeding while also reducing headcount and leaning out their cost structures. I would advocate for the reduction of retail prices instead, but this gets tricky when you have sold watches and EU laws have customer protection rights with cooldown periods - so perhaps discount is the only option.
In the meantime, the likes of Patek have been increasing prices and also reducing dealer margins which they can do, because they happen to be a bonafide blue chip who are heading down the direct-to-consumer route with their salons - so both customers and authorised dealers are happy to take whatever they can, while it is available. Problem here is twofold: Patek increased production in the last few years, and now the more expensive stuff is often available at a discount. So if people are taking haircuts on grand complications, and then being rewarded with sports pieces - why would they bother?
They could potentially buy the sports pieces on the grey market and break even - but they buy at the boutique because they like to preserve the relationship. This is true today… but over time the balance may shift away from Patek and the snowball cycle will go against them. Again, the easiest fix is to reduce production, NOT increase prices and shove it down customers’ throats. This would be extremely short sighted, but I fear this is how they are all thinking.
“You wouldn’t realize modern big brands have a perish risk unless you were familiar enough to remember all the other things that perished that looked investable and permanent but they weren’t.”
Charlie Munger, in what likely was his final recorded interview.
To use a stock market analogy: ask anybody who bought General Electric in 2000... for no other reason than “it was GE” – not only the best-performing stock for years, but the most valuable, just like Patek today in terms of watch brands. GE was challenged in valuation by Microsoft, and then Exxon Mobil.... At certain points, Cisco, Intel, Pfizer and Citigroup were in the running… but if you had bet on GE at the peak of its popularity, you would have done better by simply betting on the market. Ironically, Apple wasn’t even among that era’s market cap monsters… and it turned out to be the biggest of them all.
Of course, this is not about stock picking, and watch collecting has an intrinsically emotional component which has nothing to do with investment returns - but I use this analogy to drive that point home: when you are considering a watch to buy, and you assess relative value… cognitive dissonance will find you at the horizon if you do not, at the very least, genuinely like the watch to begin with. The rest is noise.
📌 Links of interest
🏢 David Chipperfield Architects announced the new Rolex HQ in the US will be completed in late 2025 and open its doors in 2026.
⛓️ IWC introduces My IWC Passport, a blockchain powered digital product passport linked to an individual IWC watch. Old news really, Awake Watches did this a few years ago already.
📈 TikTok becomes first non-game app to reach $10B in consumer spending.
🦷 Bad news for dentists: Lantern Bioworks says they have a cure for tooth decay. Their product is a genetically modified bacterium which infects your mouth, outcompetes all the tooth-decay-causing bacteria, and doesn’t cause tooth decay itself!
⌚ Apple to pause sales of its Watch Series 9 and Ultra 2 in the U.S. due to an ongoing patent dispute.
🎭 Elderly French couple lose rare African mask case worth millions.
📐 The untold story of science and technology during six centuries of the Ottoman Empire.
💻 Jeff Bezos joins Lex Fridman on Podcast #405 - this is over 2 hours, but I’d recommend starting 90 mins in, if you have limited time.
💀 AI disinformation disrupting Bangladesh’s election - this shows how generative AI tools can be exploited in elections and the difficulty in policing their use in smaller markets is currently being overlooked by US tech companies.
🔎 Pew Research Center’s Striking findings from 2023. This is US-centric, but so is my readership so 🤷
👹 The top YouTuber in the U.S., MrBeast (Jimmy Donaldson) co-founded the new analytics platform ViewStats, which is now available in beta. Look at how many of the top channels are from India - unsurprising reminder of delusions of grandeur in ‘the west.’
🛍️ Cartier sales have more than doubled in the UK over the past seven years.
🤔 You Know It’s a Placebo. So Why Does It Still Work? This makes you wonder about watches too…
End note
In case you missed it… I reposted this old piece:
Here’s the gist of it: I predicted the new brand, Furlan Marri, was going to gather dust in the watch boxes of collectors who bought one - and here we are, a couple of years later, and I think I was right. Not only that, as mentioned above, they are o longer hot property’ - I feel smug4.
In other news… Harry Fane, a London-based vintage-Cartier dealer, passed away in the last few few days. He is remembered as a charming man who always had a great story to share, and many describe his Cartier knowledge to have been encyclopaedic. RIP harry.
Next, a throwback to SDC Weekly 22 when we discussed The 1916 Company and their 1000 pre-owned Rolex watches which became overnight CPO stock. Their Director of Marketing replied to me immediately to clarify this stock had indeed been certified by Rolex directly - and in this interview with Watchpro, their CEO reiterates the point. An interesting interview to say the least; my takeaway is they are preparing The 1916 Company for an IPO in 4+ years, probably longer given the economic climate.
Finally, the front that is the Louis Vuitton Watch Prize ... has revealed their finalists. Astute readers may recall this old post where I explained my theory that this “prize” was merely a funnel for talent, as part of the long term strategy to turn La Fabrique du Temps (LFdT) into a watchmaking powerhouse. The prize is €150,000 and a year long mentorship… along with the support of a dedicated team assisting in such areas as communication, copyright, and corporate legal aspects, as well as marketing, industrial strategy, and the financial management of a brand. Given Simon Brette’s phenomenal success and extreme fame relative to the other finalists, he might be the most lucrative winner for LV - but that would not serve LFdT in the long run, as he isn’t really a watchmaker but a designer and marketing man (just like the man he is emulating: Max Busser). I’d venture a guess, that the most valuable winner to eventually absorb into LFdT is Andreas Strehler, and the least valuable would be Peterman Bedat or John-Mikaël Flaux. Raúl Pagès has some niche indie appeal, and of all these people, might be the one whose brand benefits the most - so on that basis, I have no clue who the front runner is, but observe how the jury comprises of a retailer of one finalist, and a hater of another finalist 😂… maybe you’ll guess the winner.
I realise it will be Christmas before the next edition… so Merry Christmas!
Until next time!
F
🔮Bonus link: Formula One: Explained!
One more thing…
Another bonus for ya: Meta CEO Mark Zuckerberg is building a sprawling, $100 million compound in Hawaii — complete with plans for a huge underground bunker. A WIRED investigation reveals the true scale of the project — and its impact on the local community.
If you enjoyed this post, please do me a solid and hit the heart button below; thank you!
I say investor, because he never collected watches before going balls deep into Roger Smith and Daniels watches - he has claimed in several interviews - including a conversation in Clubhouse with me personally - that he ‘saw the light’ and went straight for ‘the very best’ and didn’t see the point in messing around with a collecting journey. He is full of sh*t. He is an investor, not a watch collector. That’s totally fine of course, but semantics matter!
If you want to know more: https://www.rya.org.uk/e-news/inbrief/understanding-a-race-start
Post-purchase dissonance is a phenomenon that occurs when a consumer feels discomfort or uneasiness after making a purchase. This feeling is caused by a discrepancy between the expected outcome of the purchase and the actual outcome. Post-purchase dissonance is also known as post-purchase regret, buyer's remorse, or post-purchase cognitive dissonance. It is a common phenomenon that most people have experienced at some point.
There are several factors that can contribute to post-purchase dissonance. One is cognitive dissonance, which is when two ideas are in conflict with each other. For example, a person may experience cognitive dissonance if they buy a product believing it will make them happy and then does not. Another factor is regret, which can occur if a person feels they made the wrong decision in making a purchase.
Not really. This is not rocket science at all!
Good stuff here! How else would anyone find this patent info!? And once again “few punches pulled” 😳😥..... 4 1/2 🌟content rich and eclectic yet fascinating links to check out ...... what’s not to like🤷.....
And now the world knows I buy shitters. Oh the shame 😂