SDC Weekly 48; What is Luxury; Kahneman on Judgement and Decision-Making
Patek Insights, Auction week, Hodinkee's Disingenuity, AI Fvckery, Asian Watch Market Update, the Best Beers in the World and much more.
Is the Morgan Stanley Report on Watches actually reliable? How do you define luxury? What is strategic ignorance?
I guess everyone’s pumped for the upcoming auctions… We’ll touch on those in today’s issue, and we will also explore the essence of luxury, unpack Kahneman’s framework for understanding decision-making, shed some light on a ridiculous new AI tool, and cover a recent update on the Asian watch market.
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Small stuff
Inside Patek Philippe (and Morgan Stanley’s watch report)
In this recent interview with Thierry Stern, they cover a few things. For starters, they employ ~3,000 people, 2,050 of which are based in their Geneva HQ.
Thierry waxes lyrical about how Patek Philippe has “moved with the times”. Stern spoke almost proudly about straps in “innovative jeans-inspired colours,” explaining this was a way to appeal to younger clients. He spoke, in the same breath, of “remaining true to our DNA” and “maintaining a classic style.” Alrighty then…
They produce “95-98% of added value in-house” - he didn’t say watches and components! They buy straps and screws externally, as well as certain dials. Still, I guess he was trying to say Patek is almost entirely in-house. Fair enough. Stern explained how they are already prepping the marketing for products launching up to 2027, and have a product pipeline which takes them to about 2038.
Stern attributes their success to passion and credibility. He says everyone at the company shares a deep passion for their craft, and that the brand has consistently produced Swiss watches entirely in-house since way back in 1839. This is not entirely true, but he seemed to be quite liberal with his exaggerations.
Being an independent, family-owned company has its obvious perks. Stern talked about how it allows them to be more agile in their decision-making, since they don't have to run everything by shareholders or a board of directors.
Even though Patek Philippe sells through retailers, Stern emphasises how his team make it a priority to personally connect with their customers. He says he’s constantly out and about, meeting with customers and retailers globally. Then, he takes some more pot shots… he claims to who knows his customers better than all other brands, and reckons all other brands moving to direct sales are doing it for the money and not to connect with customers.
Perhaps most interesting is a question about the Morgan Stanley report, according to which Patek sells 70,000 watches per year and has a turnover of 2 billion Swiss Francs. Stern says this figure is “flattering… but.. we’re really not at that level.”
As an aside, even Nick Hayek disputes the veracity of the Morgan Stanley numbers:
The figures circulated in this so-called study by Morgan Stanley on Breguet are devoid of any substance and are far from reality.
This totally superficial study gives Breguet an average selling price of 15,332 francs. However, the actual average price is more than twice as high, at CHF 33,627. Accordingly, Morgan Stanley is of course also far off the mark in terms of sales.
Hayek continues, when asked whether this inaccuracy was limited to Breguet only:
As far as our own brands are concerned, the estimates are catastrophically wrong. The deviations amount to an average of 60 percent in average prices, 40 percent in terms of unit numbers and 30 percent in sales – sometimes in one direction and sometimes in the other. You can assume that they are wrong not only for the brands of the Swatch Group, but for the entire watch industry, including Rolex. This is not serious work and, above all, damages the reputation of Morgan Stanley.
Scathing stuff! I guess Morgan Stanley and LuxeConsult need to work on improving their estimates. I will add, for watch enthusiasts, it is better to have the MS report than not - Hayek would have said nothing at all, if there was no MS report to comment on. Same for Thierry. So I am happy the report exists, but they should probably work on their methodology.
Update: An important point of clarification seems necessary, following some feedback: The data being called into question here is for the annual Morgan Stanley report covering the primary watch market (made with LuxeConsult). There are other reports produced by Morgan Stanley which focus on the secondary watch market - these use secondary market data from WatchCharts, and are not the ones under scrutiny.
Anyway, this section was about Patek - so for all you wondering about the future of Patek Philippe, it looks like it’ll be staying in the family. Apparently Stern’s two sons have decided to work with him. Too bad Mr. Arnault!
More AI coming to the hobby
sent me this video of a query he submitted at GoodSort:What you will see, is an AI version of
recommending Dan Henry as an vintage alternative to a Tudor Black Bay 58. 😂I find it remarkable that people like Eric Wind and Erik Gustafson have allowed their names to be used for this purpose. I mean, this is basically AI making up complete garbage, and the user seeing the name of a reputable watch personality to make them feel better about what they are reading. What could go wrong?
Auction week
Important Watches: Part I at Sotheby’s (12 May), The Geneva Watch Auction: XIX featuring the Guido Mondani Collection at Phillips (11 - 12 May), Important Modern & Vintage Timepieces at Antiquorum, Rare Watches Including the Property of Michael Schumacher at Christie’s (13 May), and of course, the one everyone’s been waiting for: Only Watch at Christie’s (10 May).
Bear in mind, the Only Watch auction contains unique pieces for charity; the results are therefore meaningless in the context of market values - but may offer some insight into the appetite of high-end collectors as well as the impact of the recent scandal they’re trying to put behind them.
In the other auctions, I can’t do this justice without turning this into an ‘auction newsletter!’ So I will point out a handful of pieces which may be of interest… This RRCC1 and this AK05 will probably be watched closely, along with this Daniels Millennium, this Patek 2523 as well as this other Patek 2523, and this Green Nautilus which has fallen off a cliff relative to its previous highs.
There’s also a rare Lange 1 in steel, a Paul Gerber, a 34mm Simplicity, a Patek 130, a Klings tourbillion, a Longines Swissair 6630, Michael Schumacher’s Daytona and a neat little Charles Frodsham piece. My own favourite lots across all auctions: This Black Label Journe Resonance, and this Patek Philippe 3979 Minute Repeater.
At the risk of sounding like a
fan boy… He pointed out this gem on a recent podcast - a minute-repeating perpetual calendar from Franck Muller. As much as it pains me to share Hodinkee content, its Tony… Everyone likes Tony, right? 😛Finally, I reached out to Eric Ku for his Geneva Auction picks - better informed than most, so here goes:
Phillips
Lot 29 Steel Lange 1 - “Blue dial is definitely more interesting and attractive than the already hard to find silver, I think these are kinda cheap in the last few years for what they are.”
Lot 71 Cartier Tank a Guichets - “Hasn’t been one at auction in some time and I know a lot of people are looking for these. With a super reasonable estimate, I expect the results to be much higher.”
Lot 159 Goldpfeil x Vianney Halter - “Full disclosure, I have one of these and I really love them. The backstory of the collab is so interesting, and it’s a very cool watch made by an independent legend for relatively little money.”
Sotheby’s
Lot 35 RM27-01. “This and the RM009 are the two best RMs ever made. Don’t agree? Fight me.”
Lot 41 AP Salmon Jubilee - “During the AP hype, these were more than double the estimate range. With hype subsided, I still love this model and love that this is one of the original dials and not a service replacement with the later style fonts.”
Christie’s
Lot 88 Breguet Pocket Watch - “It’s rare enough to have the opportunity to buy a Breguet watch made during his lifetime, but this one showcases one of his most important inventions: the natural escapement. It also happens to be one of only 4 known to exist today. (I suggest you read the lot essay to explain more but this is not only an important but beautiful piece.)”
Antiquorum
Lot 134 Patek Philippe 1463 - “This is one of, if not THE best, 1463 I have ever seen. Crisp case, amazing two tone enameled dial with retailer signature…”
Lot 591 Patek Philippe 605 World Time Cloisonné - “While the double crown will likely garner more attention, this watch really deserves the spotlight. It’s not often we discover new things from Patek, but this is the only example of this reference in pink gold with the world map motif ever made. The map features a pinkish color motif, matching the case and the rest of the dial.”
Thanks for taking the time, Eric!
Random extra: Phillips has also announced some early highlights from their June auction in New York - which includes a Dufour Duality with two dials - estimate is $800,000-$1,600,000. Here’s the details on the NYC auction if you’re interested:
Alright, enough about auctions…
Hodinkee and disingenuity
On the 18th of April, Hodinkee released an episode of Talking Watches with Ronnie Fieg - the founder of Kith. Now, if you’re not familiar with Hodinkee or their Talking Watches series, I will offer a brief explainer. To me, this series is one of the few remaining aspects of ‘the old Hodinkee’ which people love to reminisce about. It is supposedly an honest and authentic conversation with a noteworthy, famous, or particularly thoughtful watch collector who offers an authentic peek into their world of watch collecting. Perhaps this was one of the few remaining areas of original content where Hodinkee hadn’t enabled ‘shill mode’ … or so we thought.
Just a couple of weeks after this video dropped - in which Fieg shows off his Tag F1 collection as if it is an organic collecting pursuit - we saw the launch of The TAG Heuer Formula 1 | Kith collaboration. Now, you can read the article for yourself… it is being explained as a ‘deeply personal’ project for Fieg, as if this narrative perhaps excuses the apparent ‘bait and switch’ approach taken in the Talking Watches episode.
Now, I get it - this is a Tag Heuer collaboration, and Tag is an LVMH brand. LVMH owns a stake in Hodinkee… So it is easy to see how a subtle teaser or hype video for something in the pipeline can come about. But doesn’t this make you cringe? Why does Hodinkee think it is a good idea to treat readers/viewers like morons?
I don’t care about these watches, I just wanted to point out how Hodinkee remains … their own worst enemy.
On this topic - Here’s a piece by Ariel Adams which makes the case for independent watch media - incidentally, he also takes the piss out of independent hobbyist writers (like myself, I suppose).
Asia update
The Mercury Project put out a report last Thursday, detailing the watch and jewellery retail sector performance in Japan, Singapore, Hong Kong, and Mainland China during the first few months of 2024.
In Japan, department store sales were up 16.7% year-on-year and were up 62.1% compared to pre-pandemic levels in 2019. Inbound sales, driven by increased tourism and a weaker yen, exceeded 10% of total sales for the first time. Sales growth was particularly strong in Tokyo and Osaka, with Isetan Mitsukoshi reporting a 43.8% increase.
Singapore’s retail sales of watches and jewellery increased by 10.9%, significantly outperforming other retail categories. This growth was driven by tourist spending, particularly from China, which became the top source of visitors for the first time since January 2020.
Hong Kong’s watch and jewellery retail sales were up 8.8% in the first two months of 2024, supported by robust festive demand and the recovery of inbound tourism. Despite tourist arrivals being only 63% of 2019 levels, watch and jewellery retail sales surpassed total retail sales by more than 15%. Major retailers like Chow Tai Fook and Luk Fook reported strong growth, and several luxury brands are renewing their focus on the city by opening new stores or expanding existing ones.
Mainland China saw slower growth compared to other Asian markets, but still achieved a 5% increase in retail sales against a high base in 2023, reaching a record high of RMB 70.8 billion. Sales were particularly strong in Beijing, Guangzhou, and Shanghai.
Some retailers have however indicated the performance in the coming months may be less favourable, with softer traffic following the Chinese New Year holiday and a shift in consumer sentiment towards caution due to economic uncertainties and changing demographics.
Overall, the watch and jewellery retail sector in Asia seems to be doing better than the west - mainly due to increased tourism, festive demand, and post-pandemic recovery spending… but they don’t think it will last into the coming months.
Toledano and Chan
The good news: The consummate geezer himself, Mister Enthusiast, announced the launch of this watch brand a while ago… and it is finally due to be revealed tomorrow. If you’re into the Rolex King Midas and brutalist architecture, this is one to watch. It will only go on sale from 16th May. They shared a few teasers on Instagram, including the bracelet and dial shown in the images below.
The bad news: 1) It is a 175-piece limited edition and 2) It is being sold exclusively by Hodinkee.
I like Phil, and this seems like a fresh aesthetic in the sea of modern shitters - so I thought it deserved a mention. Still falls in the ‘shitter’ category, to be clear; But there is absolutely nothing wrong with that, and congrats to them on the launch!1
Enough small talk? Let’s dig in.
ScrewDownCrown is a reader-supported guide to the world of watch collecting, behavioural psychology, & other first world problems.
👑 What is luxury anyway?
As far as consumer goods go, the concept of luxury is used too loosely. Have you ever considered what separates true luxury goods from premium goods? This distinction came up in the LVMH podcast, and merited further discussion.
The Luxury Strategy, offers a succinct explanation (emphasis mine):
“Premium means pay more, get more in functional benefits. Luxury is elsewhere. It signals the capacity of the buyer to transcend needs, functions, or objective benefits. This is how luxury brands are different from premium or super premium brands. Beyond the experience, they bring creative power, heritage, and social distinction.”
Essentially, premium products tend to offer superior functionality and/or quality compared to their ‘standard’ counterparts. Luxury items go beyond practical considerations. They embody a sense of artistry, history, or status which appeals to the emotional and aspirational desires of the consumer. (The status bit is important and we will revisit it)
Marc Jacobs puts it this way:
“Luxury is about pleasing yourself, not dressing for other people.”
His sentiment suggests true luxury is a personal indulgence… a way of expressing your individual taste and style rather than conforming to societal expectations. Okay… but luxury as a concept, surely cannot be ‘static’?
Coco Chanel famously said:
“Luxury is a necessity that begins where necessity ends,”
This implies the definition of luxury evolves as society’s basic needs are met and new desires emerge. I would argue this applies on an individual level too - as your wealth increases, the point at which your necessities are fulfilled, will also shift.