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.
You can catch up on the older editions of SDC Weekly here. Remember, free subscribers receive the full newsletter via email - 2 weeks after publication - so if you’re not subscribed already, that’s a good reason to do so!
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.
So far, we have established:
Luxury items go beyond practical considerations and appeal to the emotional and aspirational desires of a buyer.
Luxury is about personal indulgence - so if you buy something to gain status in others’ eyes, it is less about luxury and more about utility.
The idea of what constitutes luxury will evolve as our needs evolve.
In the same podcast, they explained how true luxury is recession-resistant - i.e. appealing to a wealthy clientele whose purchasing power is less affected by market fluctuations. Logically, this checks out. Wealthy people don’t suddenly stop buying LV bags or Patek Philippe watches because the markets are down… they continue to buy whatever they want. Generally speaking, these ‘aspirational products’ are what we would regard as true luxury goods.
What I think happened in the watch market in recent times (as well as other times in history - Rolex Bubble Back, Franck Muller hype etc), is that luxury watches as a category, were discovered by the proletariat as being a source of arbitrage (riskless profit). This led to the commoditisation of many watches which were once true luxury goods. Here’s a clip from Sotheby's (which has nothing to do with the topic, but seemed to fit really well here!) to make the point:
Until recently, people often asked whether someone bought a watch at retail, before deciding what ‘status’ to assign to the buyer. Are they a big spender with a good relationship at the authorised dealer, or someone ‘with more money than sense’ who buys hype watches ‘to show off’? As a reader, you may be up in arms as you read this, proclaiming you don’t buy watches to show off or to flex; I believe you, however, you cannot escape the labels!
So, what is luxury? A luxury item is, and always was, something one does not need. This is true for all watches which cost more than 10 bucks, but that is not the only criteria. The other criteria is the purchase must also demonstrate your capacity to spend the cash on that watch without abandon! As Stallone puts it:
“It’s not about the time… it’s about keeping in step with where you are in life”
Buying a Daytona at retail is something even ‘poor’ people would do because they can ‘enjoy the status’ of owning a Daytona without losing money. It is not a luxury purchase to such people, it is an investment. (Not that there is anything wrong with that, but we are talking about the semantics around the term luxury!)
On the other hand, buying a Rolex Day-Date to celebrate your retirement, knowing you may only get back 60c on the dollar if you sold it a day later, is what I would describe as a true luxury purchase. You can afford to write that money off, and it is therefore keeping in step with where you are in life.
Of course, for a vast majority of collectors, this general idea is aggregated over an entire collection. You may have a collection worth $2 million in total. You then might argue, any single watch doesn’t really mean that much, as you could potentially consolidate the collection into a single watch like a Dufour Duality or a Patek 2523… But would this actually work for you? Are you the type of person who can walk around wearing a $2 million watch without abandon? Probably not. Inn contrast, if you were Bernard Arnault, or Jay-Z, you would probably do so without a care in the world.
Therein lies the difference. Perhaps you can afford to write off a 5k loss, 50k loss, or a 500k loss… it is all relative to your own wealth - and that’s why luxury is not static. It evolves, and is relative to a consumer’s needs. This brings us back to the point about personal enjoyment. A collector who buys a Nautilus while they can’t technically afford to ‘lose’ that money - but justifies the purchase using its resale value - also doesn’t get to fully enjoy the watch as a purely luxury object. They baby the watch, they worry about scratches which may devalue it… this is, after all, an ‘investment’ and a signalling tool. It only really qualifies as luxury when it can be enjoyed in a carefree manner. This is why you often see people go as far as promoting how scuffed up their watch is… it' is another way of signalling they can truly afford it; but let’s not go there…
I am being purposely inflammatory and ‘restrictive’ in my definitions here to goad you into arguing with me or providing a different take.
To conclude this section; The commoditisation of certain watches has blurred the definition of luxury watches. So-called ‘risk free’ purchases like a Rolex Daytona and a Patek Philippe Nautilus don’t even fit the bill as true luxury objects as far as I am concerned, because they are now more commonplace than ever. How is that luxury?
Why does this matter? If people behaved rationally, then many who buy commoditised watches like Daytonas and Nautiluses would eventually stop doing so, as they would no longer be risk-free sources of profit and such people can’t really afford to own and enjoy these watches. If this were to happen, it would devalue the utility of these watches as ‘status symbols’ which in turn, would reduce the demand for them. The drop in demand, would then reduce the market price, and in turn, reduce the utility of commoditised hype watches. We’d go back to the days when a Nautilus was a mere £12,500 (£18,000 in today’s money) - See bonus link below.
Yes yes… I can hear the economics geeks shouting from the peanut gallery: “the market is not, and will never be, rational.” No sh*t.
Ultimately, the essence of luxury lies in its ability to transcend mere functionality and tap into deeper human desires - but above all, it is personal to each collector.
There may be many old school collectors who bought today’s hype watches before they were hype watches - and I’d bet you a lot of money that many of them resent that these watches became hyped, despite the paper profits they made along the way. Why? George Akerlof’s Market for “Lemons” offers a simple explanation: Adverse selection. As so many people are using hype watches as signalling tools, the prevalent assumption by any observer, even for the old collectors, is that they are signalling too - even if they aren’t intending to! As a result the watches they previously loved as luxury objects, have, for them, become a symbol of everything except true luxury.
I find myself wishing this was a podcast episode with a few collector friends, so we could discuss this in more detail - but I trust you will do so in the comments section!
💡 Kahneman’s Framework for Understanding Judgement and Decision-Making
Introduction
In his groundbreaking paper published in The American Economic Review, Nobel laureate Daniel Kahneman proposed a new framework for understanding how people make judgements and decisions. This paper came up randomly in a conversation with a collector last week, and they suggested I talk about it. So here we are… Another Kahneman post!
The insights from Kahneman’s research have always been of great interest to me, and if you’ve followed SDC for a while you will already know his work is relevant to the luxury watch industry.
It’s not for nothing, by the way. The truth is, by understanding the psychological factors which influence people’s judgements and decisions, watch brands can more effectively position their products, create more persuasive marketing messages, and perhaps even create experiences that resonate with consumers’ intuitive preferences.
For collectors, we can become more aware of how brands’ choices are intended to affect us, and we can train ourselves to be more alert when we’re on the verge of making poor decisions. So please, pay attention 😁
The Two Systems of Cognitive Processing
Central to Kahneman’s framework is the idea that we have two distinct modes of thinking and deciding, which he refers to as System 1 and System 2. System 1 operates automatically, intuitively and effortlessly, while System 2 engages in more deliberate, controlled and deliberate mental activities.
“The operations of System 1 are fast, automatic, effortless, associative, and often emotionally charged; they are also governed by habit, and are therefore difficult to control or modify. The operations of System 2 are slower, serial, effortful, and deliberately controlled; they are also relatively flexible and potentially rule-governed.”
Kahneman argues most of our judgements and actions are actually guided by the intuitive System 1. In contrast, the rational and logical processing of System 2 is used more sparingly, often only to monitor and correct the intuitive responses.
The key insight here is a divergence from a common assumption in economics, that people primarily rely on deliberate and considered reasoning to make decisions. Turns out, that isn’t quite true!
For watch collectors, the distinction between System 1 and System 2 processing can help explain how we are drawn to certain watches. The aesthetics, craftsmanship, or emotional resonance of a particular watch may speak powerfully to the intuitive preferences of System 1, even if a more deliberate analysis of cost and features (System 2) might lead to a different choice. Rolex vs Omega fans come to mind here.
Brands that are able to effectively engage System 1 processing through evocative design, storytelling, and experiential marketing will always hold an advantage in the marketplace. This is not news to you - even if you haven’t thought about it. Rolex associates itself with achievement and success, Patek appeals to the generational wealth narrative, Omega offers a nod to human achievement in moon missions or to the allure of a British government spy in 007. All of this is linked to System 1 processing.
The Role of Accessibility
One of the key determinants of whether we engage System 1 or System 2 is the accessibility of different thoughts and responses - in other words, how easily this stuff comes to mind. Kahneman argues the impressions and responses generated intuitively by System 1 are highly dependent on the accessibility of different features and attributes.
The above image from the paper is a good example… You could easily figure out the average length of the lines in Figure 3. That’s because “When a set of objects of the same general kind is presented to an observer— whether simultaneously or successively—a representation of the set is computed automatically.”
If instead, you were asked to find the total length of all the lines - that would require much more effort. The point of this is to demonstrate what it means when they say “information is more accessible to your brain.” It’s not necessarily about ‘simplicity’ versus ‘complexity’ - it’s about a myriad of things, including your own confidence in your intuition.
This idea of accessibility also has important implications for watches too. The way a watch is framed and presented - be it in advertising, retail displays, or even discussions among collectors - will significantly influence how it is perceived and valued. Brands which can effectively control the narrative around their products, emphasising their most desirable and distinctive attributes, will always be able to command a premium in the marketplace. That’s precisely how hype works.
On this subject it is worth adding - something we have covered several times on SDC - The endowment effect suggests once a watch is owned, the collector discussing it will often value it even more highly than an equivalent piece they do not possess.
From an old post of mine:
The formal theory on this topic can be summarised as follows: Thaler (1980) called this pattern - the fact that people often demand much more to give up an object than they would be willing to pay to acquire it - the endowment effect. To put it another way, people are more likely to keep something they own, than acquire that same object when they do not own it.
Linking Intuition to Perception
Kahneman draws a novel link between intuition and perception, arguing that they operate according to similar principles. Just as certain features of a visual stimulus can be perceived automatically and effortlessly, attributes like affective valence (good vs bad) and causal propensities are intuitively accessed when we consider an idea or option.
Affective valence refers to the intrinsic attractiveness (positive valence) or aversiveness (negative valence) of an object, event, or situation. Simply put, this is our intuitive, emotional evaluation of whether something is good or bad. Kahneman argues this evaluation is one of the main attributes automatically computed by System 1 and is a crucial factor in guiding intuitive judgements and decisions.
As an example, when we encounter a new product, person, or experience, our initial ‘gut reaction’ of liking or disliking is an assessment of affective valence. This intuitive impression can then colour our subsequent judgements and decisions, even if we are not consciously aware of its influence.
With watches, perhaps I am stating the obvious, but affective valence could relate to the immediate emotional appeal of a specific design, brand associations, or marketing imagery.
Causal Propensities refer to the intuitive perceptions of cause-and-effect relationships between objects or events. Kahneman suggests that just as we automatically assess affective valence, we also have a natural tendency to infer causal links and make predictions based on our observations and experiences.
These causal inferences are often based on heuristics and associations rather than a deliberate analysis of evidence. For example, we might intuitively assume a product with sleek, modern design is somehow ‘technologically advanced’ or that a brand with a long history or a very high price tag ‘must’ produce more reliable products. These intuitive causal links can guide our judgements and decisions, even if they are not always accurate.
For a watch collector, causal propensities could manifest in beliefs about the relationship between price and quality, the effect of certain materials or manufacturing techniques on durability, or the influence of brand heritage on resale value. Collectors often make purchasing decisions based on these intuitive causal theories, even without concrete evidence to support them.
In recent times, there is a causal inference between the term ‘hand finishing’ and price. As a result, the use of the words “hand finished” and “hand made” is becoming more popular, even if it used to describe a part made entirely by a machine and touched-up by hand only briefly. O this point, when you see these terms, raise a red flag and ask more questions to find the truth about the true value of the time spent by artisans using their hands.
The key point is both affective valence and causal propensities are automatic, effortless assessments generated by System 1 thinking. They exert a powerful influence on our judgements and decisions, often without our conscious awareness.
Heuristics and Biases
The paper also revisits Kahneman’s earlier work with Amos Tversky on heuristics and biases2. It frames judgement heuristics, such as representativeness and availability, as a form of attribute substitution - when people rely on a readily accessible attribute to make an assessment, rather than a more deliberate calculation.
For example, when asked to judge probability, people may rely on how representative an outcome seems of a particular process (the intuitively accessible attribute), rather than carefully considering base rates or other statistical factors. This can lead to systematic biases in probability assessments.
I thought this was a great example too:
“What are the sizes of the two horses in Figure 7, as they are drawn on the page?” The images are in fact identical in size, but the figure produces a compelling illusion. The target attribute that observers intend to evaluate is objective two-dimensional size, but they are unable to do this veridically. Their judgments map an impression of three-dimensional size (the heuristic attribute) onto units of length that are appropriate to the target attribute, and scaled to the size of the page. This illusion is caused by the differential accessibility of competing interpretations of the image. An impression of three-dimensional size is the only impression of size that comes to mind for naïve observers—painters and experienced photographers are able to do better—and it produces an illusion in the perception of picture size.
Watch collectors are (obviously) not immune to judgement heuristics and biases - in fact, one might argue that is precisely how individual taste works.
The representativeness heuristic may lead enthusiasts to overvalue watches that seem emblematic of a particular brand or style, even if they are less rare or mechanically significant than other references.
The availability heuristic can distort perceptions of value based on recent auction results, memorable marketing campaigns, or social media buzz.
Watch brands leverage these heuristics in their product strategy and communications in an effort to shape collector demand - remember that time when Omega got caught bidding on their own fake watch?
The Limits of Intuition
While arguing for the influence of intuitive System 1 processing, Kahneman also explores the conditions under which the more deliberate operations of System 2 are activated to monitor and correct intuitive judgements. Factors like time pressure, cognitive load and mood are what tend to influence how likely we are to engage in deliberate and conscious reasoning.
Importantly, Kahneman notes that even when System 2 is activated, its monitoring and correction of intuitive responses is often quite ‘laid back.’ Compelling answers which seem intuitive are often endorsed by our System 2 with little scrutiny. Failure to check our intuitions is highlighted as a major source of judgement errors and biased decisions.
The limits of our intuition suggest that watch collectors make suboptimal choices based on incomplete information, time pressure, or emotional factors. As someone who identifies with this group, I can safely say this is bang on! If you think about it, brands that provide robust, easily accessible information about their watches always help collectors engage System 2 processing, and thus, allow them to make more considered decisions.
Coincidentally, I shared an excellent PDF about Sartory Billard’s SB08 a couple of weeks ago - didn’t you find that educational and/or insightful? That’s exactly the sort of thing I am referring to.
We are all aware of how a sense of scarcity or urgency can overwhelm deliberate analysis and lead to more intuitive or impulsive purchasing. Salespeople overdo this too… saying they have a customer waiting if we say no, or that there are several enquiries but we are the chosen ones. Don’t fall for this.
Implications
The framework outlined by Kahneman clearly had profound implications, far beyond our hobby. It directly affected economic models of behaviour and global public policy decisions. The takeaway headline goes something like this: the context in which information is presented and choices are elicited, will have a powerful influence on people’s decisions - often in ways that violate the consistency and coherence assumed by rational models.
For the watch industry, the implications are twofold.
First, brands need to carefully consider the framing and context in which they present their watches, as these factors can significantly influence collector judgements and decisions.
Second, as the market becomes increasingly crowded and competitive, there may be opportunities for brands to differentiate themselves by engaging collectors in more deliberate, System 2 processing.
This could involve providing more extensive information and education, creating more frequent opportunities for hands-on experience and evaluation, and fostering a community of informed enthusiasts. Instead of constantly trying to sell, brands should value helping collectors make more considered choices. In doing so, brands will build deeper, more enduring relationships.
As for collectors… this hobby is actually a lifelong journey. We live and we (hopefully) learn. I guess that’s why you’re reading this!
📌 Links of interest
🟢 This Omega patent dated 30 April 2024, is for a watch case. Looks like a Planet Ocean, but the crown guards look more squared off than the current catalogue. So perhaps a new one is in the pipeline?
💹 A 1968 Grand Seiko Sold for $90,000.
🐴 Watchmaker Ondřej Berkus on Haute Horology, Horsepower & Horses.
💎 Purported Member Of The Cartier Family And Five Colombian Nationals Charged For Their Roles In International Money Laundering And Narcotics Conspiracies.
🌌 How do time systems work on Mars? (5 min video)
📜 New iPad Pros are the thinnest Apple device ever, with dual-OLED screens - and the new “Apple Pencil Pro” can do a barrel roll. Here’s a full rundown on yesterday’s Apple launch event.
💨 Scientists studying pre-modern societies find that states age — and eventually collapse.
🧐 A new meta-analysis confirms positive links between cognitive diversity and team performance but shows that context and type of diversity matter too.
♠ Berkshire after Buffett, with the FT.
🏳 The Most Common Last Name in Every Country. US and UK share “Smith” … Switzerland and Germany share Müller. China: Wang. India: Devi, which was baffling as I’ve never heard this name before!
☕ How Coffee Became a Joke - a fun, light hearted read on a serious topic.
🍺 The Best Beers in the World, According to 280 Experts.
🥓 The Restaurant Reservation Racket: how people are gaming restaurant reservation platforms and selling tables on secondary markets.
🤳 A Lawsuit Argues Meta Is Required by Law to Let You Control Your Own Feed.
🤜 The Physics of Karate - A human hand has the power to split wooden planks and demolish concrete blocks. So why doesn’t this shatter our bones?
🥑 What Stone Age hunter-gatherers ate may not be exactly what you think.
🧝♀️ How actor Daniel Radcliffe overcame being known solely as Harry Potter.
End note
In case you missed it… here’s a fun post from last week:
Speaking of LVMH, they are exploring options to sell their Marc Jacobs brand, which is unusual, given how they’re usually buying, not selling.
Yesterday I was reading this WSJ article entitled How TikTok Is Wiring Gen Z’s Money Brain, and it examined how TikTok is shaping the financial decisions and perceptions of young adults. Many under 30’s supposedly obtain their news and financial information from TikTok, which presents a blend of economic pessimism and rampant consumerism. This has given rise to a phenomenon they call “money dysmorphia,” - essentially, young adults developing a distorted view of their financial well-being. As a result, they are incurring more debt to keep up with trends and lifestyles promoted on TikTok. The constant exposure to consumption-focused content and the pressure to share experiences on TikTok has made it challenging for some to resist spending, despite concern about their long-term financial prospects.
This probably sounds familiar to some. You’re scrolling through your feed, and you can’t help but notice posts showcasing incredible collections, rare watches, coveted new watch alerts, and all sorts of ‘luxury’ goods. If you haven’t calibrated yourself correctly, this constant exposure can mess with your head.
Even when it doesn’t mess with your head, many develop a distorted view of what is “normal” or achievable in the collecting world. For those who see all these amazing collections and start feeling like their own collection as a pile of junk in comparison... that’s the same as this “money dysmorphia” concept the WSJ piece describes.
On the subject, I have discussed envy before:
A lot of what you see on social media is merely a highlight reel. We never get the full picture of the sacrifices or struggles that might be going on behind the scenes. Why would you bother comparing your own blooper reel to someone else’s greatest hits? It is an injustice to yourself.
It’s not exclusively a social media issue either. It is coming at us from all angles. Every minute, WhatsApp messages are flooding in, every week it seems like new watch models are being released and dealers are sending their broadcasts out with no respite… then there’s the odd limited edition, and then auctions kick off and results are announced… all this stuff floods your life - it can be an overwhelming amount of data.
It can be tempting to try and stay on top of every new release, every industry development, and every opinion shared by fellow collectors… but it is impossible to keep up with everything without sacrificing your most valuable asset: attention.
This is where the concept of strategic ignorance comes into play. In a world of infinite information, being selective about what we consume and what we ignore has never been more important.
Consider two types of ignorance: low agency and high agency.
Low agency ignorance is the passive consumption of the loudest voices in the watch community, be it influencers, brands, or algorithms. This is an endless rabbit hole leaving no room for “I don’t know.” Low agency ignorance may appear to be a sign of insane dedication to the hobby, but in the pursuit of trying to stay informed about everything, it ultimately leads to being knowledgeable about nothing.
High agency ignorance is strategic. It acknowledges that our attention is limited and must be allocated wisely. High agency ignorance proactively seeks information exclusively from reliable, high-value sources while creating firewalls against the constant barrage of noise in the watch world. It is not afraid to say “I don’t know” because it understands that true expertise comes from focused, intentional learning.
As watch collectors, we have a choice - we can get caught up in the never-ending cycle of low agency ignorance, or we can embrace the power of strategic ignorance to deepen our knowledge and appreciation for things which truly matter to us.
Remember, we’re all standing next to the same river of information. Some of us choose to draw from it strategically, and others mistake it for a bucket which must be emptied out, despite the never ending stream which continues to fill it. Choose wisely.
Until next time,
F
🔮Bonus link: Historical Perspective
This 30-minute video is a window into the world of watches just over a decade ago… when a Ref. 3700 Patek Nautilus cost a mere £12,500. A fun video, particularly if you are relatively new to the hobby…
Believe it or not, that “❤️ Like” button matters – it serves as a proxy to new visitors of this publication’s value. If you enjoyed this post, please let others know. Thanks for reading!
Shitters - watches which distract from, and take funds away from, your primary collecting goal(s).
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131.
This seminal paper introduced three key heuristics - representativeness, availability, and anchoring - and discussed several biases that arise from their application. It had a profound impact on the field of psychology and laid the groundwork for much of Kahneman and Tversky’s subsequent research on decision-making, uncertainty, and bounded rationality.
Their later work expanded on these ideas and developed them into more comprehensive theories, such as prospect theory (Kahneman & Tversky, 1979) and cumulative prospect theory (Tversky & Kahneman, 1992). However, the 1974 Science paper remains one of the most influential and widely-cited publications of their collaboration.
I purposefully scuffed up my entire collection this am, ty for the courage to do this ❤️
Fantastic read Flum! 👏🏾👏🏾👏🏾Agree, this deserves a part II podcast. Would love to hear collector’s perspectives on auction pieces, as well as a deeper dive into the luxury paradox. Luxury is such a fascinating topic these days. 👌🏾🎩