Rolex

Introduction

0:00Hey, Acquired listeners. We've placed this episode on Rolex toward the top of the podcast feed since people frequently say it is one of their favorites and a great place to start listening. It was recorded on February 23rd, 2025. All right, David, what's on your wrist? Well, currently on the wrist is my stainless white-faced Daytona that my dad gave me. I think it was still quite popular when he gave it to me probably close to 15 years ago, but not like it is today. A strong choice. I'm actually also wearing a Daytona that I am borrowing from a good

0:33friend of the show. Love it. Well, fun fact for our listeners, the watch that David is wearing is the one that I was wearing during the Morris Chang interview when we wanted to foreshadow that this was our next episode. Yes, and in front of me here now in my hand, but not on my wrist, is my other Rolex that my dad gave me a long time ago, my Rolesor Datejust. Dude, you got to go one on each wrist. Yeah, you got to go. Great. All right. Who got the truth?

1:03Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth?

Season Introduction

1:17Welcome to the spring 2025 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. All you need for timekeeping is something that happens at a constant rate and some way to count it. It could be sand in an hourglass. It could be a weight being pulled down by gravity on a grandfather clock, slowly turning the hands, moderated by the tick-tock of a pendulum. Or it could be a mechanical watch on your wrist, driven by a complex and beautiful array of

1:53hundreds of gears and springs. Today, listeners, we tell you the story that we can't believe we

Rolex Story

1:59haven't already told on Acquired, Rolex. Ooh. Rolex is a cascade of paradoxes. It's one of the best-known brands in the world. But despite that, it's one of the least-known companies in the world. They're privately held by a charitable foundation, the Hans Wilsdorf Foundation, so they don't have to disclose anything. And really, they never do. They're one of the most secretive companies that we have ever studied. And David, check me on this. I think they're even more secretive than Ikea or Mars. Oh, yeah. It's funny that the closer to the present day we get, the less we know.

2:33Totally. They operate like an intelligence agency over there. Yes. Like James Bond, one might say. Oh, or one might not say. Listeners, they make watches that everyone wants to buy, but nobody seems to be able to get with famously long and opaque lists at retailers. Except, of course, over a million people a year actually do buy one. And for an average price of $13,000 each. That is until you walk out of the store. And then they instantly become worth more, at least for a lot of the models these days.

3:06To your point about paradoxes of Rolex, this is one of the greatest ones. It is absolutely one of the very, very top, top tier luxury brands in the world. And yet they also sell a lot of units.

Luxury Brand

3:18Hermes doesn't sell a million Birkins every year. There's probably 10 times more Rolexes sold than Birkins sold, or at least on that order. It's a success built on the back of craftsmanship, engineering, and manufacturing, honed and perfected over 120 years. It is one of the greatest brands in the world built meticulously and so intentionally, David. And my favorite part of the paradox, this is the story of the most successful Swiss watch company. But it wasn't founded in Switzerland, or even by a Swiss person.

Hans Wilsdorf

3:48No, no, it was not. It's a 10 plus billion dollar revenue business performing a dead craft obsoleted by the digital world. They make a watch that can't tell the time as good as my Apple watch, or even a $10 Casio, for that matter. So what is going on here? How did Rolex become Rolex? This is a story we've been giddy to share. Oh, so excited. Well, one big disclaimer up front, much like how our NFL episode wasn't about football, and our NBA episode wasn't about basketball. This episode isn't really about watches. It's

4:21about the business of watches. Yes. If you want to know every time an episode drops, check out our email list. It is the only place where we will share a hint of what our next episode will be. It will share corrections, updates, and little tidbits that we learn from previous episodes. That's acquired.fm slash email, or click the link in the show notes. Join the Slack. Come talk to us about this episode with the whole Acquired community afterwards, acquired.fm slash Slack. And if you want more Acquired between monthly episodes, check out ACQ2, our interview show where we talk to founders, CEOs, and investors

4:55who are building businesses in areas that we've covered on the show. The most recent one was a very fun interview we did with a friend of the show, Guillermo Rauch, the founder and CEO of Vercel, about really the whole history of web development frameworks and their latest and greatest product. VZero, a startup within a startup that lets you code web apps from scratch in just English instead of a programming language. Yes. Search ACQ2 in any podcast player. And listeners, this is not investment advice, but you can invest in this and you can invest in

5:29many of the other great brands that we are going to talk about on this episode either. There's something kind of remarkable about the companies we wish we could invest in, but actually we can't. So this show is for informational and entertainment purposes only. David, where do we start our story? All right. Well, we start, as is so often the case with these big old European companies,

Early Life

5:51back not in the last century, but even the century before that, on March 22nd in 1881 in Kulmbach, Bavaria, about 30 miles north of Nuremberg in present-day Germany, where Hans Eberhard Wilhelm Wilsdorf is born to young Anna and Johann Wilsdorf. And you might say, this sounds like a German name. Bavaria wasn't a part of Germany, right? Well, I was just going to get to that. Technically, it's not Bavaria anymore. Technically, it is part

6:25of the German empire. But this is a very, very recent development, as the Count Otto von Bismarck had only just 10 years earlier convinced Bavaria to join forces and unite with Prussia to form the greater German state, German empire in the aftermath of the Franco-Prussian War, where they battled Napoleon III over in France. But as far as young Hans and his family are concerned, they're Bavarian. They don't identify with this Germany thing. This is foreign to them. They are also Protestant,

7:01not Catholic, which puts them in the great minority in Bavaria at the time. Now, I say all of this deep European history here for two reasons. One, because it's sort of a fun story and calls back to our Hermes and LVMH episodes. And it's going to call back very directly to those episodes in a minute here. But also, I think it's important to paint the picture of Hans as, even from birth, he's kind of this consummate outsider. He doesn't really fit in in any sort of national or religious identity in

7:33the either established or changing European order at the time. He doesn't really have a country. He doesn't really have a religion or a people. He sort of floats between the seams of Europe, which Rolex itself is going to do, as we shall see, in a very big way. Yep. Now, back to young Hans and his family. His father, Johan, came from a line of successful ironmongers. And very likely, Hans was destined to go into this business as well. However, when Hans is 12 years old, tragedy strikes, and both his father and

8:08his mother die within a couple months of each other. So he's orphaned, just like, this should sound familiar, man. Oh, yeah. Louis Vuitton and Hermes. This is absolutely freaking nuts. The founders of arguably maybe the three biggest and most significant luxury brands in the world today

Watch Industry

8:29were all orphans from the 1800s. This is wild. And I wonder how much of a statistical bias there is here. If we were studying anyone from this era, how many of them would be orphans because of disease and war? Yes. All sorts of stuff. Just lots of people died for lots of reasons. Yes. Totally, totally true. But it's just so interesting, right? These brands, I mean, much less so Rolex, but Hermes, LVMH are so steeped in this European history and the tradition of the nobility. But it's actually these orphaned outsiders that founded them.

9:04Well, I think that's a great point. Rolex doesn't share that heritage at all. This is not steeped in nobility. This is not an artifact like a leather bag or a saddle that any king's ever had. When you buy a Submariner or a Daytona or even a Datejust, you are not buying Swiss history here. You are buying 20th century modernity, as we will get into. So in the wake of this tragedy, Hans and his brother and sister are placed in the care of his uncles. And the uncles decide that they

9:36are going to sell the family ironmongering business to fund sending Hans and his siblings off to boarding school. I see. So Hans would later write in this amazing document that is essentially his autobiography. It's the first volume of a four book set that the company published in 1945 for the company's 40th anniversary, the Ruby Jubilee. Hans writes, So Hans goes off to boarding school and becomes an excellent student there. He excels in math,

10:24and he also excels in foreign languages, particularly English. And while he's there in boarding school there in Bavaria, he meets a friend who is from Switzerland and he develops an interest in that country. And he no longer really has any family ties or anything to Bavaria anymore. He doesn't really care about Germany. He's like, oh, great. Switzerland seems like a good place. I'm going to go live there when I graduate, which he does. He moves to Geneva and he finds work there first for a large pearl merchant. So this business was buying like raw pearls from fishermen

11:01and then selling them to the famous Swiss jewelers there in Geneva. And then he joins another local trading company in a adjacent industry to the jewelry business, a firm called Cuno Corten. Cuno Corten turns out isn't in just any industry. As far as Switzerland goes, they are in the industry besides banking. They're in the watch trade. Well, you need something to bank. Yeah, you need something to

Pocket Watches

11:27bank. Exactly. A country can't just have banking as an industry. It needs a real economy to build banking on top of. Exactly. You start with jewelry, watches, then you get into banking. And Cuno Corten is actually a major player in the watch trade. Now, they are not watchmakers. They are watch exporters. So they are facilitating the trade of all these best in the world Swiss watches out of Switzerland and into other countries around the world. And at this time, this is like the late 1890s.

11:58Cuno is doing about a million Swiss francs worth of business a year. Now, I don't know exactly what the Swiss franc to U.S. dollar exchange rate was in 1900, but today the Swiss franc is stronger than the dollar. It's about one to one. They're pretty close. So call it a million dollars of business a year in the 1890s. Like, this is big. They're a big player. And it's important to remember, too, it's not like watches were this little corner of the Swiss economy. Exporting watches was a huge part of the Swiss economy and a huge employer in the nation. Yes. Now, we're saying watches here. It's

12:34important to note what were watches at the time. They weren't something you wore on your wrist. It was not wristwatches because basically Hans and Rolex hadn't invented that yet. They didn't exactly invent it, but hadn't popularized it yet. We're talking about pocket watches. Yes. That's what the industry was at this time. And part of the reason is functional. Pocket watches were bigger. So the movement to accomplish a certain amount of precision didn't require as little teeny tiny of tools. And you had more margin of safety in bigger watches. And so whenever anyone tried to make a watch and put it on the

13:07wrist at this point in history, it was usually fragile or really inaccurate or actually worn more as jewelry. And so they actually didn't call them wristwatches. They called them wristlets. And they were mostly worn by women. Wristlets. Yes. We'll get more into that later. And I know you're chomping at the bit to give you the technical explanation of the crazy human craft and engineering that goes into watches. It's amazing. It's so unbelievably cool. But back to the Hans story for the moment. So the job that

13:39young Hans gets here at Kuno turns out to be pretty pivotal for him and the future of Rolex.

Wilsdorf and Davis

13:45He is a secretary, which means that he's answering letters from clients all around the world and then responding and coordinating with them. Because remember, he's really good at languages. And what is his best language? English. So he's coordinating with most of their clients in the British market in the UK. And he sits at this really interesting choke point of the whole industry where he understands how all the producers are sort of laid out and how the whole value chain works on the Swiss

14:20side of things. He's seeing the market prices and price action happen for all different types of watches from different makers in different parts, et cetera, et cetera. But he's also getting to know the buyers in Britain who are not individual people. These are retailers. These are the jewelers in Britain. These are the distribution points for watches. Yep. So he's getting the perfect business market strategic background distribution relationships for going on to ultimately found Rolex. But it's not just that he falls in love with the business of watches there. He also falls in

14:56love with the objects and watches themselves and their performance. So he starts this habit of he would take home batches of pocket watches at night and he would run his own tests for accuracy on them, on the product that Kuno Korten was trading in. So he would set them all at the same time and let them go overnight. And then he would check them in the morning, how much they are disparate from one another and check their accuracy. And the legend goes that one day he gets the idea that he's going to take three watches that he's found to be quite accurate in this, whatever this recent batch that

15:31he's testing is, and he's going to go get them tested at the local astronomical observatory and have them measure these watches according to the strict observatory timekeeping tests, which are also called chronometer tests. So if you've ever heard the term chronometer, a chronometer is a timekeeping piece, could be a watch, could be a larger clock, could be all sorts of devices that has passed these astronomical observatory tests for being accurate enough for celestial navigation. Yes. David, I'm looking down at this Daytona right now and it says Rolex Oyster Perpetual, which all three of

16:07those words we haven't gotten to yet, superlative chronometer, officially certified cosmograph. A lot of words in there that we will get to, but at the moment where we are is chronometer officially certified. Yes. And today this is like a, oh, you know, cool. That's cute. Your mechanical watch is like officially certified that it keeps good time. Back then, this is critically important. But celestial navigation, if you're involved in anything in shipping, the maritime trade is

16:38critical. If you have a crappy timepiece, you're going to go to the wrong place because you're using it for navigation. And so to your point, observatory chronometer certification, no one's doing it for my pocket watch that I can set to the local church bell or whatever, whenever I need to reset it. But young Hans has this idea, he goes and does it. Guess what? These three pieces that he takes, these pocket watches, they pass the tests and they get certified as chronometers. And he takes them back to his bosses at Kuno and they're like, whoa, well, let's got to market this.

17:13Slap that on the tin, baby. And it's this aha moment of Kuno and then soon the rest of the industry realizes, oh, actually, chronometer certification on pocket watches helps us move product here. Yep. The other thing to realize here is we are in an era where, and this era would last the next hundred plus years, but an era where having a watch is super important. Yes. It's not a fashion accessory. It's not a nice to have. Without a pocket watch, if you are leaving

17:47your house and moving about in the world, you're lost. It's almost like not having your phone today, where you feel like I'm floating. It's very uncomfortable. Totally. It's even more than you're saying. It's like a smartphone in that you need it to function. But pocket watches are also like smartphones today in that they're fidget devices. If you're out in the world and like you're waiting in line or you don't know what to do with your hands, you're in a socially awkward situation, you know, whatever, you take your pocket watch out, you're going to open the class. This is what people did. It was just so ingrained in everyone's

18:20day-to-day existence, just like a smartphone is today. It's an essential tool for moving about the world, which explains how it's such a huge industry that moves the needle for the nation of Switzerland and how there's these businesses that can be exporting a million dollars worth over a hundred years ago and why there's so much attention being paid to it. It's not a random accessory. It is an essential piece of life, a tool. Totally. So after working at Kuno for a couple years and liaising with the British market, in 1903 Hans

18:53decides that, hey, I'm good at English. I like London. I might actually want to move there. So he moves

London Move

19:00to London at age 22 and he goes to work for another watch company there in London locally. We actually don't know the name. I don't think anybody has ever found the name. Mm-mm. You and I read probably five books between us and wasn't any of them. Yeah. He works there for two years and he writes, two things struck me most forcibly about my new employers, this British watch company. On the one hand, their commercial competence. And on the other hand, their lack of specialization.

19:32I soon gained confidence in myself and in 1905 at the age of 24, decided to set up in business alone, feeling that my training and education had prepared me. So he strikes out on his own, starts his own watch importing company there in London. But remember the specialization piece. That'll come back in a sec. Hmm. So Hans is out on his own. There's one problem though, which is in order to do what he wants to do, which is import Swiss watches and sell them directly under his own banner where he makes

20:03and keeps the profits there in London. He needs some capital in order to finance the buy. Got to place the order. Yes. So through his lawyer, he gets connected with a local man in London named Alfred James Davis, who has some money to invest. And so they meet through the lawyer. They hit it off immediately and decide to go into business together. And thus, in 1905, Wilsdorf and Davis Limited, the world-famous merchant watch trading firm, is born. And yes, none of you know Wilsdorf and Davis.

20:39However, Wilsdorf and Davis Limited is Rolex. Yep. As we shall see. Now, it's often said that, you know, if you read anything about the history, people will tell you, oh, well, Davis was Hans's brother-in-law. He married Hans's younger sister, Anna. That is true, but I believe that didn't actually happen until after Hans and Alfred went into business together. I think Anna met Davis through Hans. But really, it is Wilsdorf's company. It's kind of funny that Davis's name is on it.

21:11I kind of get the sense he's mostly capital. Yeah, he's there a little bit, but it's almost as if, you know, Atari instead of being Atari is Bushnell and Valentine. That's the equivalent here. I think that's right. And obviously, they get closer over time as they become family when Davis marries Hans's sister. But yeah, I think this is Hans's business. He's running it. Davis trusts him. Yeah. And so what is the business doing? Well, the business plan when they get going is they're going to do what Hans has been doing his

21:43whole career at this point in time, which is importing Swiss-made highest quality in the world watches into the London market where there is high demand for them. And they're not selling directly to consumers, right? No. Just like back at Kuno Korten, the buyers are the retailers, are the jewelers. No end consumer had any idea who made their watch at this point in time. They would walk into the retailer, say, give me a fine Swiss watch, sir. And the retailer would sell it to them. And the retailer would take one out from the case. You look down at the face of the watch.

22:17The face of the watch has the retailer's name on it. And you're just trusting that the retailer bought a good watch from some importer who bought a good watch from someone on the Swiss side who managed to create a good watch by putting a movement and a case and all that together. Now, there's a little bit of detail in there where sometimes the importer would import a fully built watch. Sometimes the importer would just import a movement and then they would import a case differently and then they would put together themselves. But this was the craziest thing that

22:48struck me is the retailer is the brand on the watch at this point in time. Yes, there is no brand for the product. Right. So Wilsdorf & Davis is occupying the spot in the value chain where they are importing the watches and then selling them to retailers, to brand. Yes. Now, you said there a minute ago something really important, which is there were kind of two ways that this would happen. You would either import fully finished watches from Switzerland, a whole product, so to speak, and either a trading firm like Wilsdorf & Davis would do this or

23:21Kuno Korten would export it or maybe the retailers would buy directly from Kuno Korten, etc. If they were big enough. If they were big enough, yep. What Wilsdorf & Davis are doing is they're saying, well, Hans knows through his time at Kuno Korten all the best movement makers, all the best case makers. Right. He operated one click up the value chain, sort of aggregating on the Swiss side. Exactly. So now that he's operating down on the importer level, one click down the value chain, he's like, I can still aggregate all these producers and start building a watch myself.

23:56Yes. So he's not making anything, but he is assembling the finished products. So he would have watchmakers there in Britain assemble the best movements that he would import from Switzerland with the best cases that he would find. And that was part of his value that he's adding to the industry here. And this is probably an important time. There is so much lingo in the watch industry. And we're going to do our very best on this episode to demystify it. Movement in lay speak is the whole inside that

24:27makes the watch tick and drives the hands. Yep. Not the dial, right? Correct. No dial, no hands, no case, no glass front. And the movement, I think, like you said, is kind of the critical piece. Absolutely. That's the hard thing. Case is important. Dial is important. Hands are important. But that's all aesthetics. And as far as performance goes, 100% movement. It's like semiconductor production. If you're a movement maker, you're like TSMC here.

24:58Right. Chronometer officially certified refers to the movement. Actually, in fact, only the movements are tested, not the whole final cased watch. Not the finished watches, yes. So, David, who is he importing movements from and how does he meet said movement maker? Well, that brings us to the other half of the Rolex equation, one Jean Agler. Based in Bien, Switzerland, which is in the mountains of the north of the country. Importantly, not Geneva.

25:28Yeah, not Geneva. Geneva is in the southwest of the country in Switzerland, right next to France. So, Agler runs this movement workshop up in what is then a tiny little town in the Swiss mountains. And it turns out that he's actually kind of like a generational talent at watch movement making. And in particular, what he's really, really, really good at is making movements that are accurate and on par with the highest quality, most precise, most accurate movements out there on the market, but are also much smaller in size. He's making

26:01miniature movements. And Hans had gotten to know Jean when he was working at Kuna Korten and kind of thought like, oh, hey, man, this guy's a diamond in the rough up there in the mountains. Hans, he's as good or better as any movement maker. And he's making these miniature movements before there's a real market. It's almost like he's just doing it because it's the hardest thing he can think of. Totally. It's like his hobby horse. I'm going to push the limits of human achievement of how small can I make this thing? Yes. I think it's probably known and respected in the industry, but wasn't a large player. And Hans is

26:34like, oh, actually, this guy is my ticket to differentiation here. I'm keeping his address so I can write him a letter when I get to... When I start my own company. Yeah. So here we are at the beginning of Wilsdorf and Davis. Hans is importing these movements

Wristwatches

26:48from Eagler that he's putting into cases, selling his watches here in the UK. This is 1905. This carries through this relationship for the next 99 years until Rolex finally buys Eagler in 2004, where Eagler is making the movements for Rolex watches. And I don't think there's ever any real formal arrangement here. It's basically a handshake deal. Yep. That's correct. We will make your movements handshake deal for 99 years.

27:21Yes. All of Rolex, everything it becomes, this is the basis of it. And so they weren't exclusive yet. So in 1905, they're placing their first order and there's already a little bit of a dance that's starting to happen where, of course, the front of the watch on the dial is unsigned. So the retailer can put their name there. This already is starting to rub Hans the wrong way. He kind of feels like, these are my watches. Why does the retailer get to put their name on it? And so he goes to Eagler and says, the ones we're going to sell, these are

27:54Wilsdorf and Davis watches. I understand you made the movement, but we got to brand it somewhere. And so he gets Eagler to buy in on this idea that on the movement, they're going to put a W and D. And then also inside the case back for whoever they're buying the case from, they also inscribe W and D. And so that's the state of things here in 1905 and those first few years after is there's a W and D on the inside case back on the movement, but not on the face of the watch.

28:24Yep. Which gets into the type of watches that they're making here. Now we're still in pocket watch land. The wristwatch vision hasn't really entered Hans's brain yet, even though Eagler's specialty is these small miniature movements. So remember what Hans said about his earlier British employers and their lack of specialization. He continues in his autobiography talking about how he decided to do things differently here at Wilsdorf and Davis. Quote, I undertook the financial side and management of our concern. From the very outset, our success was assured by our fundamental

28:58policy to trade only in specialty horological products and especially in new lines. The first specialty we adopted was the traveling watch called a portfolio watch, cased in the finest quality leathers. This line I immediately placed in large quantities on the market, the range covering every possible style and design. So again, we're not at wristwatch yet, but he's like, the way that I'm going to succeed and break through here is through differentiation. Yes. To do something different. It's like we always talk about, the most important thing

29:31to build a huge successful business is to do something different and unique that people have to come to you for and can't go to the commodity markets. Now that doesn't necessarily mean you're right. Yeah. Because he's not right with traveling watches. We don't tell any of the stories here on Acquired of all the people who wanted to do something extremely unique and different and was not what the market wanted, but it's the classic you have to be contrarian and right. Yeah. And you know, I don't know, I guess reading what Hans wrote there, maybe he was

30:01right. It sounds like the traveling watch was a success enough. He probably thought it was a success at the time. Yeah. So then, as legend has it, one day shortly after starting the company and focusing on these travel watches, Hans is reading an account of the Second Boer War in South Africa. Ben, I never knew that all of my like European, AP European history lessons. I tweeted this yesterday. I know, I know. Who knew that our livelihoods would depend on AP European history someday?

30:33That's right. Anyway, Hans is reading an account of the Second Boer War in South Africa. And he reads that the soldiers that had fought had worn wristwatches so that they could coordinate their movements and their firing times and all the troop movements, even while they were holding guns. Do you know why in particular this war had them wearing wristwatches? Oh, I don't. I just assumed that the technology had progressed enough because wristwatches,

31:03they just existed at this point in time. They just weren't thought of as serious watches. That was part of it. Climate. Oh, yes, of course. They can't wear their jackets and so they can't reach into their pocket and grab a pocket watch. Of course, because it's hot there. Yep. Well, climate is going to become important again here in the development of the wristwatch industry. So the soldiers and officers there would use these wristwatches because even though they weren't as accurate as pocket watches, like you said, Ben, you probably weren't wearing a jacket. Even if you were wearing a jacket, like if you're engaged in battle, you're going to stop,

31:35put your gun down, take your pocket watch out of your vest, open the case. No. The axis upon which you evaluate value is a different axis than when you're hanging out on the streets of London. Yes. Supposedly, as Hans is reading this, like a bolt of lightning, he has the key insight.

Boer War Inspiration

31:53Well, hell, it's not just soldiers these days. It's actually like a lot of people in the world that could benefit from having an accurate timepiece on their wrist that they could just turn their wrist and look down and look at instead of a pocket watch. Now, the funny thing is he calls Agler. Maybe he writes to Agler. I don't exactly know. He sends him a text. He places the largest order in Agler's company history, several hundred thousand Swiss francs for a bunch of these tiny movements. And the great irony of this whole thing is he's kind

32:25of wrong. The time was not right for wristwatches yet. The Boer War was not the shove that the world needed to say, whoa, wristwatches. The soldiers come back from the Boer War and it's still kind of the wristlets era. There's not really enough inertia to make it take off everywhere. Now, it's kind of okay because Wilsdorf and Deus is still this small company, so they don't need that big of a market to address to feed the needs of the business. But it would be another 10 years

32:57before World War I happened and you had this incredible, unfortunate tailwind saying, oh my God, we need tons of wristwatches now. Yeah. There does start to be a market for serious timekeeping wristwatches, particularly in the far reaches of the empire. So Australia, South Africa, of course, after the Boer War, and especially India, these are places where you're probably not wearing a jacket or a vest that much. So this is the initial seeds of the wristwatch market for Wilsdorf and Davis.

33:34So interesting. But Hans is like a true believer at this point in time. This is going to be the future way beyond just the empire. People in Britain are going to want this too. It's obvious to him why you wouldn't want to have to reach into your vest to bring out your pocket watch. He's like a zealot. He's a total zealot. So he's like, all right, we've got this killer product. We're first to market. We're basically going to invent this whole market. We need a name for the product. We need something that's going to make consumers know to ask for

34:04this product for our watches. We need to coin the term for the industry. And he's inspired here by the Kodak camera, which by then had been around for a while and was made not by the Kodak company, but by the Eastman company. And Kodak, I believe, was the first invented product brand name. And it was a name that meant nothing. Yeah, I think that's right. And it intentionally meant nothing. It was easy to pronounce. It was easy to say. You could see it once. It was very memorable.

34:35It worked in any language. It was five letters. It had a great sound to it. So supposedly, Eastman came up with the name Kodak with his mother using an anagram set. And he said that there were three principal concepts that he was looking for in the name. One, it should be short, easy to pronounce. It should work in any language, and it should not resemble any other name or be associated with anything else. Yeah. Anyway, Hans takes inspiration from this, and he decides that he needs a Kodak for his new

35:05wristwatch. And he writes, I tried combining the letters of the alphabet in every possible way. This gave some hundred names, but none of them felt quite right. It was one morning when I was sitting on the upper level of a double-decker bus, powered at that time by horses, driving alongside Cheapside in London, that a good genie whispered in my ear, Rolex.

35:31He's good at myth-making. Many startups are named this way today. Totally. And a few days after this fruitful journey, the Rolex brand was filed and then officially registered in Switzerland by Wilsdorf and Davis. Now, this is a brand name. This is not yet the company name. It's Rolex by Wilsdorf and Davis. So they trademarked it in Switzerland a couple years later. They trademarked it in London. And, you know, it's short. It's easily pronounceable. It's memorable. It's the same in every language. But there is this one other characteristic that makes it really perfect,

36:05which is when you hear Rolex, you can kind of think about rolling a crown of a watch. You know, that little knob that's sticking out from it that you use to wind the clock. It channels that, and there's also the X, kind of has a timekeeping feel to it also. It almost is like the tick, tick, tick, tick, tick, tick, tick. A Rolex feels like maybe you're turning the crown until it hits the end or something like that. You can intuit the type of product that would be called Rolex.

36:37Yes, totally. So Hans is like, okay, great. I've got my Kodak name. I've got the brand. And you invent this new category. How am I going to legitimize this with customers? Well, I have this one cool trick that I've used before. Exactly. I had the one cool trick.

36:57I'm going to do the one cool trick just with wristwatches instead of pocket watches. In 1910, he sends the first wristwatch movement to the School of Horology in Switzerland to be awarded the world's first wristwatch chronometer rating. Which is a big deal because people just did not think these things were accurate before. And without Eggler, they kind of weren't. Exactly. Now, getting certified at the School of Horology in Switzerland is nice and all, but this isn't an astronomical observatory. This doesn't carry the same weight

37:31as something like, oh, say the Royal Observatory there in England. So Hans and Eggler keep working on these products, refining the movements. Eggler is getting better and better at making wristwatch movements that are truly great. 1910 goes by. 1911 goes by. We're here in 1912. Wilsdorf asks Eggler specifically, hey, can you produce a wristwatch capable of achieving an observatory timekeeping certificate? And David, as you mentioned, the Royal Observatory. And Eggler

38:07says, let me try and let me get to work. It still takes a couple more years. So he works for two years. And then finally, in early summer 1914, Hans takes one of Eggler's movements to the Kew Royal Observatory in England, KEWQ, for testing. Now, Kew is not only a well-respected observatory for astronomical and specifically timepiece testing there in England, it's where

38:37all the marine chronometers for the British Royal Navy are tested. The British Royal Navy at this point in time. We're talking the British Empire, the greatest navy in the world. And it takes 45 days. They put it through the ringer to make sure that this marine chronometer is going to get our soldiers, our sailors, where they need to go. And even more than that, it is, of course, affiliated with the other great observatory in England, the Greenwich Royal Observatory. Yes. Which, you know, was where Greenwich Mean Time was invented. We are talking like probably the

39:11most important timekeeping institution in the world. Have you been there, David, to Greenwich? No, no. I want to go. Have you? There's an awesome museum with the history of timekeeping. When I spent some time in London a summer, geez, 15 years ago, I went and spent a day there. It was amazing. Oh, we got to go. Yeah. We'll stop by on our way to Geneva. Perfect. So, again, here we are. It's early summer, 1914. Hans has submitted this wristwatch movement

39:41to Q. And after the 45-day rigorous battery of testing, on July 15th, 1914, it comes back, it is passed, and it receives the first Class A Precision Certificate, known as the QA, K-E-W-A, certification, ever awarded to a wristwatch, cause for great, great celebration and fanfare all around the world. Except that it is three weeks after World War I starts.

40:14Yeah. So, between the time that Hans had brought the watch in for testing, and when it finally gets the certification, Archduke Franz Ferdinand is assassinated in Bosnia by a Serbian nationalist, the whole rat's nest of European alliances gets triggered, and next thing you know, the whole world is at war. On the one hand, nobody cares about watches. There's a war breaking out. On the other hand, everybody cares about watches. Right. Yeah. Exactly. Exactly. So, World War I is truly the first crucible moment for Rolex,

40:45because it's the best thing that ever happened to the company and the industry. It made the whole world care about wristwatches. Also, it's very directly the worst thing, because all of a sudden, anti-German sentiment in Britain goes through the roof. Totally insane. There's all sorts of horrible propaganda. I didn't realize this till now. Do you know why British people call German shepherds Alsatians? Yeah, because they don't want to call them German. It's because of this. Yeah. There's all sorts of racism against Germans in England and in Britain, which is utterly ridiculous

41:18because the British royal family was German. So, Queen Victoria married Prince Albert. Prince Albert was a German prince. The whole British royal family was German. This is when they changed their name to Windsor. Oh, that's right. Because before Windsor, their family name was Saxe-Coburg-Gotta. Which isn't going to play well when you're at war against the Germans. No, no, no, no, no, no. Speaking of things that aren't going to play well when you're at war against the Germans, you're not building a strong consumer brand in Britain in 1914

41:49called Wilsdorf. I mean, if the British royal family is rebranding... Changing their name, yeah. Wilsdorf and Davis also needs to rebrand, despite the fact that at this point, Wilsdorf is a naturalized British citizen. And feels no affiliation to Germany. He really doesn't ever in his life consider himself German. Totally, totally. But this is the birth of the company Rolex. So, in 1915, they renamed the whole company after the brand name Rolex, and the Rolex Watch Company Limited is founded.

42:22Well, David, I was about to ask you, how does this become a Swiss watch company? And the answer is definitely right around this time in World War I. All right, listeners, this is a great time to thank one of our favorite companies here at Acquired, Sentry. That's S-E-N-T-R-Y, like someone standing guard. Yes. Sentry helps developers debug errors and latency issues pretty much any software problem and fix them before users get mad. As their homepage puts it, they are considered not bad by over 4 million software developers. Today, we are talking about the way Sentry works

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44:38Yes. Thank you, Sentry. So, how are we getting to Switzerland? How does Rolex become a Swiss watchmaking company? Well, obviously the anti-German sentiment was part of it. I think if that were the only factor, Rolex probably would have stayed in England. Yeah, at this point, Wilsdorf is a naturalized citizen. His wife is British. The company is called Rolex now, or they're working on it. It would have been fine. Yeah. However, the other reason that World War II in Britain is bad for business for the new Rolex

45:12company is that Britain imposes a 33% import tax on watches early on in the war. That's going to kill your importing business. Well, it's interesting. I read that, and yeah, it's going to make it tougher. It's crippling, but it's still, you could run a business. You could figure out how to pass those prices along to customers. That's often what happens in the case of tariffs. But one year later, at the beginning of 1916, the British government puts the nail in the coffin. They completely banned the import of

45:43all gold and silver. They made it impossible for Wilsdorf to build this business based out of Britain because a lot of times he's actually exporting the watches for sale in colonies, or he's importing a movement, he's importing a case, or maybe he's taking a local British case, putting it together, making a Rolex watch, and then it's getting shipped out somewhere else. And he's sitting there thinking, I can't get these precious metals, and I'm paying out the nose for these movements. This is stupid to run my business here. Yep. And I assume then as now, Rolex's margins in the precious metal watches are way, way, way higher

46:19than in non-precious metal watches. It's insane. A $10,000 watch becomes a $30,000 watch when- You add gold to it or platinum or whatever. Yep. The delta between- It's like Apple selling memory. Exactly. Exactly. Yes.

46:35Interestingly, in the hype of 2020 to 2022, the precious metals were actually easier to come by as a customer because there was so much less demand to go buy a $30,000, $50,000, $100,000 watch that those would kind of be lying around while the steel ones were flying off the shelves and there were huge lines for them. Totally. So on the back of this, in 1916, Rolex first moves the assembly of the watches to Bien in the Swiss mountainside near where Egler is. Which makes sense. They set up an office and basically say, hey, you're making the movements

47:10next door. We're going to put a case on them right here. Yep. And then be able to export from Switzerland now to countries all over the world and not go through Britain first. Ultimately, after the war in 1919, Hans moves both himself and the official company headquarters to Geneva, where of course it still is to this day. And even to this day, this is crazy. Design, sales, marketing, and I think final assembly all happened in Geneva while production of the movement still happens up in the mountains in Vienna.

47:41It's super interesting. It would make sense if you are Britain to throw on some terrorists to finance your war. You got to finance it somehow. And at the same time, it also makes sense if you're a business operating in Britain in this time to say, and I'm moving to Switzerland. Yep. But there's this alternative reason to move the business to Switzerland and Hans knows it. If he's going to build a globally renowned watch company, he wants to do it in Switzerland. This company becomes Rolex of Geneva, not just Rolex. Again, I'm going to look at this watch all the way down at the

48:15bottom. Swiss made. Don't you forget it. Or you look at a Patek Philippe. Geneve right there on the face of every Patek Philippe watch. They are extremely proud of this. Geneve, I love it. Geneve, Ben, Geneve.

48:32Oh, I'm going to hear about that one, aren't I? It's okay. It's okay. We're ugly Americans here. Okay. So then the question is, why does Geneva have this prestige? Why is Switzerland an amazing place for watchmaking? Well, David, will you indulge me and let me wind the clock back? I actually thought you were going to start the timeline for this episode back in the 1500s. I was shocked that you only started it in the 1800s. So perhaps this is a good time to go and tell the history of watchmaking in Switzerland story.

49:04By all means. Okay, great. A lot of this comes from Mark Bridge, who is the founder and CEO of At Present, a marketplace for unique jewelry from independent artists. Mark is one of David and my very best friends. And insanely coincidentally, and lucky for us and you listeners, he wrote his master's thesis 20 years ago on the renaissance of the Swiss watch industry. Amazing. He sent me a copy of it. We're going to link to it in the show notes. It's awesome to have this resource available just very conveniently from one of our best friends. So all the way back

49:36in the 1500s, Geneva was a center of activity for the Protestant Christian world led by John Calvin. And if you know anything about Calvinism, it is very focused on moral uprightness. Yes. The Protestant work ethic. Yes. One of these tenets was banning frivolous things like ornamental jewelry. Local goldsmiths and jewelers instead focused on watchmaking, since watches served a real function in the world and were not frivolous. It was sort of this exception to the rule if you had that

50:09skill set. There's also human beings are human beings no matter what rules you impose on them. It's like, you know, life finds a way. Status always finds a way. That's 100% right. So you've got the rise of Calvinism. Along with that religious reason that's sort of causing this local pivot of industries, you have one of climate, too. There are these long, harsh winters. And so an industry that could be done indoors in a small physical footprint was perfect. If you're going to go pick a profession out of a hat to have in Switzerland,

50:42mountainous country, long, cold winter, like, this is a great one. And especially because it's so valuable at this point in time, you can become an important player in Europe, in the European economy, making something that you can make in your climate. Third, there's a cultural reason. So, David, are you familiar with the term établissage? Ooh, no. Are you sure? It's supposed to be Swiss, not French. I was going to say. I've been to Geneva, and I've been to other places in Switzerland, but I know very little about its culture and history. Talk to me about terroir. I know exactly what you're

51:16talking about, but établissage, I don't know. Okay. Well, it's Swiss for establishment, basically. But what établissage means in this context is that it's this system, this sort of economic system that they established in the area of the Jura Mountains, where very small, independent companies, often one to 10 people, could focus on something small, like a single component. And then you'd have dozens of these small companies work together to create the finished product. It's almost

51:47like a distributed manufacturing system. Ah, so this is where Egler comes from. Yes. This is why he's got the workshop in the mountains. Établissage. Yep, exactly. And so with this specialization of labor in small companies, you could get really, really good at your tiny part, making, say, hairsprings that we'll talk about later, or these essential elements of watch movements. These tiny companies by artisanal craftsmen, these very labor-intensive companies, got really, really, really good and pretty efficient at making their one thing. So that's kind of the backdrop of how the Swiss

52:24are producing things. And lastly, in the late 1500s, the French had been rising as a watchmaking powerhouse. And when the balance of power changed in France and the Catholics came to power, the French Huguenot refugees, who had talents in jewelry and metalwork and watchmaking, fled to Geneva. Yeah, these are the Protestants that got kicked out of France. Yeah, that's exactly right. And so the Protestant safe haven of Geneva, they brought their watchmaking expertise, or if they didn't have watchmaking expertise, that's all they could really do if

52:55they were jewelers or metal workers, since you can't make anything too shiny and too off-putting. Yeah. So this is how Switzerland gets the reputation as the watchmaking capital of the world. Yeah, exactly. Basically, this creates centuries of momentum, especially in this distributed etablissage system of how Swiss watches were made. I kind of think about it as this beautiful blend of French beauty and appreciation for aesthetic and Swiss precision.

53:27Yeah. Well, I mean, it sounds like Switzerland itself. It's a blend of French beauty and German precision. I love it. Well, that's definitely one big reason why Hans is like, okay, we got to move Rolex to Geneva to participate in this tradition, as we're now going to be selling to the world. But the other reason is, after World War I, they're like, well, we're going to be selling to the world now. Britain is still going to be our largest market, likely. But every country in the world is fighting, or at least every European country has troops fighting in World War I. They're all seeing

53:59the benefits of the wristwatch. This is going to be way, way, way bigger after World War I. I need to be able to serve the whole world. So they want to be in a neutral country. Yeah. Yeah. And you just experience like, oh, Britain puts these tariffs on and gosh, well, I didn't really have a market for Rolexes in Germany before. But if I did, I wouldn't have been able to sell in Germany. And like, I don't want that to happen in the future. Who's not going to put on a big tariff to finance a war? Switzerland. Switzerland. Yeah. Super interesting. You know what else happens in 1919? Well, now that we've set up shop next to

54:33Egler for putting their movements in our cases, it's time for us to get a little bit closer. So Rolex and Egler arrange for a deal where in 1919-1920, Hermann Egler, who's the son of the founder, John, buys shares in Rolex. Unclear what the purchase price was. That seems to have been lost to history. And joins the board. So he owns about 15%. And so the board is Wilsdorf, Davis, and Egler. There's a second part of the deal, which is Rolex actually buys shares in Egler,

55:06too. And this one's less talked about. But there were two companies that were big purchasers of the movements. It's Rolex and Gruen. And both of them were watchmakers. Gruen, I think, was American. It was their second biggest client. And both of them bought Egler shares also. Yeah. Because Rolex did not focus on the American market until after World War II. Correct. So the companies are a little bit more joined at the hip, but still not an exclusive partnership. Yep. And like we said before, I believe still, even though there's this equity relationship,

55:41there's no formal contract governing the provision of movements here. Crazy. But, you know, it's in both their best interest to keep it going. Of course. So here we are now. World War I is over. We've had the chat GPT moment, shall we say, for wristwatches. All these soldiers from countries all over Europe and the world experience the power of having an accurate watch on your wrist. They go home to their civilian lives. They want to bring it into their life. And who makes the best and most accurate

56:12wristwatch, chronometer, timekeeping pieces in the world? Rolex. And so, of course, they're going to buy Rolex. No, that's not true. No. No. That is not what they're going to do. It's Omega, right? Well, I think it's lots of companies. I mean, basically, the market went from the very early adopters in the British dominions, the far-flung reaches of the British Empire before to now, like, all of a sudden, it's this giant European-wide market. Most of it says they have no idea about Rolex. They're like, Rolex, whatever. I don't know what Rolex is. Like, I've never heard

56:44of such a thing before. So I think it was like everybody was now rushing in. And even though Rolex had this history, probably had the best product, it just didn't matter. Right. There was just massive demand for this new product category of which there were many good options. And also, there was massive demand, but it was kind of like search engines before Google. The product still kind of sucked. You know, even really in many ways, the Rolex product. Rolex probably kept better time than competitors. They were QA certified.

57:15QA certified, right? But if you're wearing a wristwatch, it's a lot more exposed to the world than your pocket watch. And you talked a little bit about how complex and delicate these movements are. And especially in a miniature movement that goes into a wristwatch, any dust, any water, any humidity that gets into the case is going to jam up your movement and your watch is going to fail. So I finally like had this aha moment when I'm doing the research for this episode. I'd always

57:48thought it's just ridiculous. You know, you go look at the watch market now, Rolexes, all the other brands, they're like, waterproof to 57,000 million meters. I was just like, what? There's no depth that exists. David Rosenthal, watch aficionado, ladies and gentlemen. Exactly. But like, why? Who cares? And I was like, oh, this is why waterproof watches are a big thing. It's not about water necessarily. It's actually dust more than water. It's dust. It's humidity. It's if you're waterproof, that's shorthand for saying you're

58:19element proof. You're durable. Nothing is going to get inside this watch and mess up your movement if water can't get in. You could subject it in 100 meters of still water and no impurities would get in. Right. You could throw it to the bottom of the ocean and it'll keep time forever, you know, et cetera, et cetera. Like, oh, this is why this is important. Yeah. And servicing was a big deal. Like you had to get your watch serviced often. And the more dust and humidity and stuff got in there, like it might just break entirely. Yes, exactly.

58:49Great. I like where you're going, David, because there's basically three big pillars of what makes a Rolex a Rolex, or frankly, what makes a good mechanical watch a good mechanical watch. There's Precise, so there's officially certified chronometer, and there's the other two. What's the second one? Oyster. Yeah. So like I said, there's demand for these products, but they all suck because they're not element proof. Well, Oyster is Rolex marketing speak for waterproof. So there's this great race among high-end Swiss watchmakers to now produce a waterproof wristwatch. And a Swiss

59:26case-making company called Francis Baumgartner, which supplied cases to Patek and, you know, many other great watch brands. In the early 1920s, they invent a new case style called the Hermetic. You'll notice that your Rolex does not say Hermetic. The way they do it is they put the watch case inside another watch case. Oh, that's right. This is the weird hinge thing, right? It's like a scuba helmet. They take a watch and they put it inside a scuba helmet that is waterproof. So it works. It does make watches water and element proof, but it's big, it's ugly. And most

1:00:04importantly, you have to unscrew the outside case, the seal, and take out the inside case every day in order to wind the watch. Right. Because famously, the crown is the most dangerous entry point for water or dust. So you can't leave the crown sticking out of the Hermetic case or it would defeat the purpose. Yep. So that's the state of play through the early 20s. And Rolex gets into this too. They buy cases from Baumgartner and they make these Hermetic watches. You can go find them. You see pictures

1:00:37of them in collector's books. It's got a hinge on the left side and a little clasp on the right side that goes around the crown. Yep. And then, this is so awesome. This is like a Forrest Mars moment from Hans. In October 1925, two Swiss casemakers file a patent for a moisture-proof winding stem and button. Ben, just like you're saying, it's the crown of the watch, the winding system and the button where water is most on dust or most susceptible to getting in too.

1:01:09Yep. And mind you, Rolex has been dying to solve this problem. They had at least three failed attempts to create a waterproof seal in-house. Yes. The whole industry has. And Hans, like Forrest Mars, reads the Swiss patent filing register religiously every day. He is reading all of the patents that are getting filed in Switzerland. So he sees this patent get filed and he's like, this is it. I got to get this right now. So he goes to the two guys that invented this and he buys the patent and makes

1:01:44it exclusive to Rolex. This turns out that this is the key component to making a waterproof mechanical wristwatch that doesn't need to be put in a jar. Yep. And when I was reading this, I thought, oh, man, Rolex didn't actually invent the Oyster case. They just watched someone else do it. But that doesn't really matter. They saw that this was absolutely essential. And Wilsdorf jumped right on the opportunity and said, who cares who came up with the idea? We're in the position to commercialize it, to roll it out across all of our watches. I need to strike first.

1:02:15This is his genius. He's not a watchmaker. And Rolex were not watchmakers until they finally bought Egler in 2004. Hans' genius is he sees the vision for where the market's going. He recognizes talent and innovation and he pulls it together and he makes it commercially viable and marketable in a way that, like, this patent got filed in the Swiss patent register. Any of the other watch companies who desperately wanted to solve this problem could have seen it too, but he jumped

1:02:46on it. Yep. I mean, really, he's like the Mark Zuckerberg of his time. Ooh, that's a good analogy. Yeah. I mean, there's Instagram, you know, and then copying stories from Snap. Hans doesn't care. He's like, I'm going to market this and I'm going to make this the most successful thing possible. I don't care that we didn't invent it. Hmm. It needs to be in our product. Yeah. That's interesting. For anyone who's a watch person who's sort of wondering what actually was in the patent, it's essentially for the screw down crown. The hermetic seal on the all oyster watches going forward. And of course it's named the oyster because oysters seal when

1:03:21they're closed. It's a perfect thing to name it after. Everything works on a threaded system. So the back of the watch screws into the middle part of the case and then the crown can screw down also. So you have these airtight, watertight threads that keep any impurities out. So in July 1926, Hans and Rolex goes and registers the product name Oyster. This is really, really big. And Hans is like, I am going to go big. Everybody in the whole world needs to know

1:03:54the Rolex name, needs to know that we are the exclusive owners of the oyster system. He prepares to spend in Britain alone, annual expenditures of over 10,000 pounds just on advertising for the oyster models. Dude knows how to build a brand. He's already naming components. He's not just marketing Rolex. This is Rolex. This is Rolex, the only watch that has oyster. Yes. Oyster technology. A18 Biotic.

1:04:28Yes.

1:04:30Really the parallels to Apple are just like incredible. Four hours from now, I was going to make that point, but.

1:04:38So he's prepared to spend all this money. He's got the product, but he's like, we got to do a big launch. I don't want to just buy regular ads in the newspaper here. So in 1927, towards the end of the year, the timing is right. And that brings us to a young British woman named Mercedes Gleitz. Now Gleitz was a secretary and bilingual stenographer in London, much like young Hans was back at Kuno, who happened to have a sort of unique

1:05:09hobby of endurance swimming in the River Thames in her free time. Which is insanely cold. Very cold. And I assume even back then, quite polluted, but so be it. And she was so good at endurance swimming. Apparently she would swim for like 10 hours at a time in the River Thames. And so in October of 1927, she decided that she was going to attempt to swim across the English channel. Maybe even more cold. Definitely cold. Definitely pretty choppy.

1:05:42And she did. She became the first British woman to successfully do so that year in October, 1927. However, a couple of days after she completed her swim, another woman emerged and claimed to have also swum the channel, but have done it faster. And now it turns out that that actually was a hoax and Mercedes knew it was a hoax. But in order to reprove herself, she decided to stage a vindication swim that gets hotly covered by the press. Which mind you, she's doing this vindication swim.

1:06:17She's already spent 15 hours swimming across the channel. Yeah. Miracle she's still alive at this point. Hans is like, oh, this is our moment. This is exactly the spectacle that we need. So he comes up with the brilliant marketing stunt of he is going to get Mercedes to do this vindication swim while wearing a new Rolex Oyster model. And what Rolex doesn't talk about to these days is a footnote to history of, it wasn't actually on her wrist.

1:06:49It's like a lanyard around her neck. Yeah, it was on a small chain that she wore around her neck. But nonetheless, this is an incredible stunt. Nothing ruins a good story like data. Let's just smooth it over. Like the truth. Yes. This is still featured prominently on the Rolex website today. Mercedes' photo is everywhere. But it doesn't matter. I mean, at the end of the day, who cares if it was on her wrist or not? Yeah. She also doesn't actually make it. But that doesn't matter either. That's the other crazy thing. I think it was an especially cold day or especially choppy or

1:07:21something. She makes it 10 of the 15 hours. So the design of the test is a little bit arbitrary. This is a watch. Well, it wasn't on the wrist and it didn't make it all the way from England to France. It was still in the water for a long time. For 10 hours. Yeah. Pretty good product testimonial, shall we say. For a testimony. So Hans, after this event happens the next day, he buys the front page of the Daily Mail newspaper, which is a nationally syndicated newspaper in Britain at the time. I didn't realize

1:07:56you could do this back in the day. You could actually buy the front page as an advertisement. I think it was common. I think it was a while before the front page was actually dedicated to editorial. And early on, it was very common for it to be a full page ad. Yeah. So Hans does this and proclaims the success and announcement of the world's first waterproof wristwatch fully enclosed in its own case without a second hermetic seal around it. And the triumphant launch of the Rolex Oyster.

1:08:27So this is how Rolex tells the story. After I had heard this told a few different times, I sort of expected to see this full page ad written in a certain way. It is kind of buried. Maybe this is what the advertising style was back in the day, but the big words are not watch survives English channel swim. The big words are Rolex Oyster. And it says Rolex introduces for the first time, the greatest triumph in watchmaking. Okay. I still don't know what it is. Then I see a picture of a woman's face. Then it says, send for this colored brochure.

1:09:02It's free telling you to send in for more information. Then there's four sketches of the different watch faces you can get of the Rolex Oyster. And then it says the wonder watch that defies the elements. There's words all over the place. You finally, finally get to the tiniest text in the entire thing. Maybe the second tiniest font in this little corner, it says moisture proof, waterproof, heat proof, vibration proof, cold proof, dust proof. Either Rolex hadn't found their groove

1:09:34in advertising yet, or maybe people just read a lot more words back then. But if you put this up today, our TikTokified brains would be like, don't care. Next. There's way too many words. And they completely bury the lead that she did a channel swim with this thing and it survived. It's hard to know how much of this is just the state of the art in advertising at the time versus Hans designed and wrote all that himself. So one of his maniacal control things was, I believe up until he died or pretty close to it, he did all the creative for all the advertising.

1:10:10Oh, I didn't realize that. Yeah. We'll get to it later, but they do bring on the J. Walter Thompson agency before he dies. Probably the rest of the company is like, all right, Hans, we got to professionalize a little bit here. And that's when they get extremely good is in the 60s. Extremely good. Yes. But I think it's fair to say there's two interesting takeaways here. One, they hadn't found their groove in advertising yet, but two, advertising hadn't really been professionalized in a way that we would see in the Mad Men era. Totally. We're still before World War II here.

1:10:42We're not yet in the modern world. Yep. The other thing that's really interesting is there's something about this that was sitting with me too doing this research. This is a major, major, major moment, the Mercedes-Gleitz moment, the first brand ambassador of Rolex. It's interesting that the moment and the person that Hans chose for this launch was a woman. Super interesting. Back in 1927. Super interesting. Yes, the wristwatch was a ladies' item before World War I,

1:11:15but after World War I, really, I would think the big market is the men's market. Okay. It's interesting. I dug into it. In this era, Rolex still was primarily a ladies' product. The men's market was growing. Oh. But if you look at their product catalogs, really up until World War II, ladies' models outnumbered men's models two to one. Whoa. These are the little, like, Prince watches. Yep. Yep. And definitely Hans' vision was, like, a wristwatch is for everybody, men and women.

1:11:46But it's interesting that they were really women's focused. And then we did a little more digging and asked some friends. And even to this day, I believe the market of buyers for Rolex watches is basically 50-50, men and women. Which is insane. I never would have guessed that, especially because much of my research was lurking on the Rolex and watches subreddits, which are a very particular type of dude. It comes across as a very male thing, at least the way that I'm exposed to watches. I mean, you read the amazing journalism

1:12:20about watches on Hodinkee and the whole world around appreciating watches. It's kind of male-focused. It's like a Porsche 911. Right. It's amazing that Rolex's history indexes so heavily to women and that even today, they move a lot of units to women, even though that's not where I come across Rolex in my day-to-day. Well, it's certainly not where the enthusiast market is focused. Yes. But it's one of the really unique things about Rolex. So many of the other really, really high-end watch brands, with Cartier as an exception, I think really are men's brands.

1:12:56Oh, yes. Whereas Rolex, yeah, it really is 50-50. Amazing. All right. So that's Mercedes Gleitz. That's the oyster story. And that really is a huge watershed moment for Rolex and for the wristwatch industry. And she's effectively the first testimony. I'm not sure they'd come up with that terminology yet, but this is something that they would lean heavily into as their means of marketing in the future. They would hate you calling it a brand ambassador. Yes. Partner. It's Rolex partner is what they call it.

1:13:26No, I think it's testimony. I'm pretty sure it's this very particular word that they wanted to invent and have to themselves. And it's different than influencer marketing. It's different than the way that someone appears in advertising a perfume for a five-year deal. I think it's this very long-term oriented, you are a part of the brand and you are a part of the brand kind of for your lifetime. Flashing all the way forward, it's Roger Federer is the purest embodiment of this today, but that is to come in the future. It turns out though, back to the product of the wristwatch, Oyster was huge, but it had a problem.

1:14:05Ben, like you said, the key to making it work, you didn't have to have the whole scuba jar that you enclosed the whole watch in, but the crown had to screw down. The crown had to screw down like a jar. And so that meant that when you went to go wind the watch, you had to unscrew the crown, pull it out, wind the watch, expose it to the elements, and then screw it back in. Well, if you know anything about humans, probably at least half the humans on the planet are not going to be exactly fastidious about screwing the crown back in.

1:14:38Yes. There are three pillars to what makes this a breakout product that enables the wristwatch to really have its iPhone moment. And that third of being perpetual, of being self-winding, is the magic. Yes. And these things are so intrinsically linked. And I didn't realize until getting so deep into the research, self-winding watches are kind of cool on their own, but just like before I was like, waterproof, whatever, why is that important? Self-winding, yeah, seems cool, but how hard is it

1:15:08to manually wind your watch? That's what people were doing with pocket watches for centuries. It's actually because it's tied to the oyster and the screw-down mechanism. If you forget to screw your crown back down, you lose the element-proofness of the oyster. Yes. Oh, okay. I can't wait. The way that the perpetual movement works is totally genius. Okay, listeners, now is a great time to tell you about a new friend of the show we are very excited

1:15:39about, WorkOS. Yes. WorkOS is the enterprise-ready platform used by OpenAI, Cursor, Perplexity, Vercel, Plaid, and literally hundreds of other winning companies. So what are all these companies using WorkOS for? Imagine you're a fast-growing startup, you've got product market fit, and you're getting inbound interest from big enterprise customers. Very exciting. But then they send you their security questionnaire. Yep. And it's like 47 pages long with requirements that kind of sound like alphabet soup. Do you support

1:16:12SAML 2.0? Can you integrate with our Okta? Do you have SCIM provisioning, S-C-I-M? What about RBAC? And you're thinking, I have no idea what these acronyms even mean, let alone how to implement them. So here's the thing. These are not nice-to-haves. These are deal blockers. Without SSO, without SCIM, without RBAC, without audit logs, you simply cannot close enterprise deals, period. But none of these features make your core product better. They don't make your beer taste better,

1:16:44to use our favorite analogy here on Acquired. So if you're building like a design tool, spending six months building SAML authentication doesn't make your design tool more powerful. So this is where WorkOS comes in. They've built Stripe 4 enterprise features. WorkOS turns enterprise authentication requirements into drop-in APIs, abstracting away as much unnecessary complexity as possible. So instead of your team spending months reading SAML specs, you can implement enterprise SSO in minutes. WorkOS handles user provisioning, permissions,

1:17:16audit logs, all the checkbox items that enterprise IT requires. So whether you are a seed stage company trying to land your first enterprise customer, or already big and expanding globally, WorkOS is the fastest path to becoming enterprise ready. Just visit WorkOS.com or just message their Slack support. They have real engineers in there who answer questions fast. And when you get in touch, just tell them Ben and David sent you. So back to Oyster and leading into the need for self-winding and the perpetual element of Rolex.

1:17:48If you can create a self-winding wristwatch, well, all of a sudden, the element-proofness of the Oyster works fine for everybody because nobody actually has to unscrew the crown. You never have to pop out the battery and put in another one. You never have to charge your Apple watch. You name the analogy, but you just- Set it and forget it. Yep. You walk around all day. Your watch keeps perfect time-ish. And it's waterproof. And you never need to wind it. Sounds like an amazing product. Who doesn't want that? That's a Steve Jobs-like product right there.

1:18:19Okay. Before going into the nuance of how Rolex's particular self-winding mechanism works, I think this is a good time to explain how mechanical watches work at all, what the key components are. And frankly- It's like alchemy. Because one of the coolest things I've ever done to prepare for an acquired episode was go learn how a mechanical watch works. At a high level, you need two major components to make a timepiece. First, a way to store

1:18:50energy. And second, a way to release that energy in a predictable and precise interval. Which seems like, oh yeah, of course you could do that these days with, you know, a battery and electronics. But imagine doing that without a battery and without electronics. Exactly. So yes, on that first one, storing energy, there is something called a mainspring. Did you read about this in the research, David? A mainspring can store potential energy. So imagine a foot-long skinny piece of metal that you wind real tight and you stuff into something called a barrel.

1:19:23This looks like a film strip that's kind of stuffed inside a film canister that you'd see a stack of canisters in a projector room at a movie theater. That's sort of what you should imagine, a real tightly wound mainspring inside that barrel. Now, interestingly, to your point, David, this kind of begs the question, what is a battery? Right. Yes, I said a battery. Technically, that is a battery. Right. It's like a mechanical battery, since it's a way to store potential energy to be used later. Now, amazingly, the way a mechanical watch works these days is so energy efficient that the mainspring

1:19:59can store on the order of three days of potential energy to take the watch forward. It's amazing. Amazing. Okay, so moving on. Obviously, this isn't sufficient on its own. If you just release the mainspring in the barrel, it would spin around real fast. It would make all the gears spin and you'd let all the energy out at once. Break the watch. Yes. So you need something to control the energy release from that mainspring and do it in slow fixed time intervals. All mechanically. Yes. You need something to make the watch tick.

1:20:31Ayo. Yes. Watchmakers call this an escapement. Now, an escapement in a mechanical watch has two key components to harness that potential energy from the mainspring. One is a pallet fork. Come back to that. And two is something called the balance. So how does a pallet fork work? Well, a pallet fork looks like a little T with teeth on the edges of the top of the T. And it moves back and forth, a tick and a tock, like the pendulum

1:21:03of a grandfather clock. And as it flicks back and forth, it moves all the gears on the watch forward one tick or one beat. And there's this element that there's maybe several steps down the chain where it's actually usually like the hour movement, right, that then drives all the other movements off of that. Kind of depends on the watch and what complications are in it, things like that. But yeah, the important thing to know is when one beat happens, when the pallet fork

1:21:34enables everything to move forward one beat, what it's really doing is allowing what's called the escape wheel to turn one click. And that drives whatever else is in the gear train for that particular watch. Gotcha. Which some watches is, you know, just hours and minutes. Some watches is hours and minutes and seconds. Some watches is date, day, moon phase, what you had for breakfast,