Rolex

The episode opens with the hosts comparing watches. David is wearing a stainless white-face Daytona his father gave him, which he thinks was "still quite popular" when he got it nearly 15 years ago, "but not like it is today". He also has a Rolesor Datejust from his father. Ben is wearing a Daytona borrowed from a friend of the show. Ben notes that David's watch is the one Ben wore in the Morris Chang interview to hint at this episode.

Ben introduces timekeeping as anything that "happens at a constant rate" plus a way to count it, from hourglass sand to a grandfather clock's pendulum to a mechanical watch with hundreds of gears and springs. From there he sets up Rolex as a story the show is surprised it had not told already.

Rolex is a cascade of paradoxes.

The hosts list the paradoxes. Rolex is one of the best-known brands in the world but one of the least-known companies. It is privately held by a charitable foundation, the Hans Wilsdorf Foundation, so it does not have to disclose anything. Ben thinks it is even more secretive than IKEA or Mars. David adds a limitation that shapes the whole episode: "the closer to the present day we get, the less we know."

Ben says Rolex makes watches everyone wants but nobody seems able to get, with long, opaque waiting lists at retailers. Yet over a million people a year buy one, at an average price of $13,000, and many models are instantly worth more once they leave the store. David calls this one of the biggest paradoxes. Rolex is a top-tier luxury brand that also sells a lot of units: "Hermès doesn’t sell a million Birkins every year." Ben roughly estimates that about 10 times more Rolexes are sold than Birkins, "or at least on that order".

Other contradictions the hosts raise: - Rolex is the most successful Swiss watch company, but it was not founded in Switzerland or by a Swiss person. - It is a $10-plus billion revenue business built on a craft the digital world has made obsolete. - Its watches keep time less accurately than an Apple Watch "or even a $10 Casio". - Its success rests on craftsmanship, engineering and manufacturing refined over 120 years.

Ben adds a disclaimer about scope. Just as the NFL and NBA episodes were not really about the sports, this one is about "the business of watches", not watches themselves. He also points out that listeners cannot invest in Rolex, or in many of the other brands discussed, and that the show is for informational and entertainment purposes only. Between these framing remarks, the hosts promote their email list, their Slack community, and ACQ2, including a recent interview with Vercel founder Guillermo Rauch about web development frameworks and the v0 product.

The story begins on March 22, 1881, in Kulmbach, Bavaria, about 30 miles north of Nuremberg. Hans Eberhard Wilhelm Wilsdorf was born there to Anna and Johan Wilsdorf. David explains that Bavaria had only recently become part of the German empire. About 10 years earlier, Otto von Bismarck had persuaded Bavaria to unite with Prussia after the Franco-Prussian War. Even so, David says, the family saw itself as Bavarian, not German. They were also Protestant, a small minority in Catholic Bavaria.

David gives two reasons for including this history. It connects to the show's Hermès and LVMH episodes, and it presents Hans as an outsider from birth, with no settled national or religious identity. In David's words, Hans "floats between the seams of Europe," and Rolex will later do the same.

Hans's father came from a line of successful ironmongers, and Hans was probably headed for that trade. When Hans was 12, both of his parents died within a couple of months of each other. David points out that the founders of Louis Vuitton, Hermès and Rolex were all orphaned in the 1800s. Ben questions how much this means. He asks whether there is a statistical bias, since disease and war killed many parents in that era. David agrees, but still finds the pattern striking. Hermès and LVMH are tied to European nobility, yet orphaned outsiders founded them.

Both hosts stress that Rolex does not share that aristocratic heritage. Ben notes that a watch is not an artifact "like a leather bag or a saddle that any king has ever had." David puts the contrast plainly:

You are buying 20th century modernity, as we will get into.

After the parents died, the children went into their uncles' care. The uncles sold the family business to pay for boarding school. David quotes Hans's autobiography, the first of four volumes the company published in 1945 for its 40th anniversary. In it, Hans credits his early self-reliance for much of his success:

Our uncles were not indifferent to our fate. Nevertheless, the way in which they made me become self-reliant very early in life made me acquire the habit of looking after my possessions, and looking back, I believe that it is to this, that much of my success is due.

At boarding school, Hans did well in math and foreign languages, especially English. A Swiss friend there sparked his interest in Switzerland. With no remaining ties to Bavaria, he moved to Geneva after graduating. He first worked for a large pearl merchant that bought raw pearls from fishermen and sold them to Geneva's jewelers. Then he joined Cuno Korten, a trading firm in the watch trade.

The hosts joke that a country needs something to bank, and Ben argues that banking has to sit on top of a real economy. David says Cuno Korten was a major exporter, not a watchmaker. It did about a million Swiss francs of business a year in the late 1890s. He is careful to say he does not know the exchange rate around 1900. Today the franc is roughly 1:1 with the dollar, so he "call[s] it" about a million dollars a year. Ben adds that watch exports were a huge part of the Swiss economy and a major employer.

At this point, "watches" meant pocket watches. David says Hans and Rolex "didn’t exactly invent" the wristwatch, but had not yet popularized it. Ben gives the technical reason. Pocket watches were bigger, so a precise movement did not need such tiny tools, and there was more margin for error. Early watches worn on the wrist were usually fragile, inaccurate, or mostly jewelry. They were called "wristlets" and were worn mainly by women.

Hans worked as a secretary at Cuno Korten, handling correspondence with clients around the world. Because English was his strongest language, he dealt mostly with the British market. Ben describes this as a choke point in the industry. Hans could see how Swiss producers were organized and how the value chain worked. David adds that he also saw market prices across makers and got to know British buyers, who were retailers and jewelers, not individual customers.

Hans also cared about how the watches performed. He took batches of pocket watches home, set them all at the same time, and checked overnight how far they drifted apart. According to the "legend", as David calls it, he once sent three of the most accurate ones to the local astronomical observatory for chronometer testing. David explains that a chronometer is a timepiece that has passed these observatory tests for accuracy good enough for celestial navigation.

Ben reads the dial of his Daytona: "Rolex Oyster Perpetual," "Superlative chronometer, officially certified cosmograph." David says certification seems like a nice detail today but mattered greatly then, because shipping depended on celestial navigation. Ben points out that nobody certified an ordinary pocket watch that could be reset by the church bell. All three of Hans's watches passed. Cuno Korten, and soon the rest of the industry, realized that chronometer certification on pocket watches "helps us move product."

The hosts explain why the industry was so large. Ben says a pocket watch was "not a fashion accessory" but something you needed, like a phone today. David takes the comparison further. Pocket watches were also fidget devices that people took out and opened in awkward moments, as "ingrained in everyone’s day-to-day existence" as smartphones are now. Ben says this explains the export volumes and the attention paid to accuracy.

In 1903, at age 22, Hans moved to London and joined a local watch company. The hosts say its name is unknown. Ben notes it did not appear in any of the roughly five books they read between them. Hans later wrote about what he learned there:

On the one hand their commercial competence, and on the other hand their lack of specialization.

In 1905, at 24, he started his own watch importing business. He needed capital to buy stock, so through his lawyer he met Alfred James Davis, a Londoner with money to invest. That year they founded Wilsdorf and Davis Limited, the company that became Rolex. David addresses a common claim that Davis was Hans's brother-in-law. Davis did marry Hans's younger sister Ana, but David believes this happened after the partnership began, and that Ana met Davis through Hans.

Ben sees Davis as mostly a source of capital. He compares it to Atari being named "Bushnell and Valentine". David agrees that the business was Hans's to run and that Davis trusted him.

The plan was to import top-quality Swiss watches into London's strong market and sell them to retailers, not to the public. David says end customers had no idea who made their watch. They asked a jeweler for "a fine Swiss watch". Ben stresses how odd this looks now. The dial carried the retailer's name, and the buyer simply trusted a chain of importers and Swiss makers. Sometimes the movement and case were imported separately and assembled later. As David puts it, "There is no brand for the product."

Hans's advantage was knowing the supply side. At Cuno Korten he had worked "one click up the value chain," bringing together Swiss producers. Now, as an importer one step down, he could still choose among the best movement makers and case makers. David is clear that Hans was "not making anything". British watchmakers put his chosen Swiss movements into his chosen cases, and that selection and assembly was the value he added.

Ben defines the movement as "the whole inside that makes the watch tick and drives the hands," without the dial, hands, case or glass. David calls the case, dial and hands aesthetics, and says performance comes "100% movement." He compares movement makers to TSMC in semiconductors. Ben adds that chronometer certification tests only the movement, not the finished watch.

The key supplier was Jean Aegler, based in Bienne, in the mountains of northern Switzerland, not in Geneva. David calls him a generational talent who made miniature movements as accurate as the best on the market. Ben suggests Aegler built small movements before there was real demand for them, as though it were simply the hardest challenge he could find. David guesses Aegler was respected in the industry but not a large player. Hans had met him at Cuno Korten and saw him as a way to stand out.

David says the relationship that began in 1905 lasted 99 years, until Rolex bought Aegler in 2004. He does not think there was ever a formal contract: "It’s basically a handshake deal." He calls it the basis of everything Rolex became.

Ben notes that the arrangement was not yet exclusive. Branding was already causing friction. The dial was left blank for the retailer's name, which bothered Hans, who felt the watches were his. He got Aegler to mark the movement "W and D", and the case maker engraved "W and D" inside the case back too. In those first years, the firm's name appeared inside the watch but not on its face.

David says that even though Aegler specialized in small movements, Hans had not yet thought of wristwatches. Having noticed his London employer's lack of specialization, Hans built his firm around a different policy, as he described in his autobiography:

From the very outset, our success was assured by our fundamental policy to trade only in specialty horological products and especially in new lines.

The first specialty was the "portfolio watch", a travel watch cased in fine leather. Hans says he put it on the market in large quantities and in every style. Ben ties this to a lesson the show often returns to: big businesses do something different that customers can only get from them. He adds a caveat about survivorship bias. The show does not tell the stories of founders who did something unique the market did not want, and success requires being "contrarian and right."

The hosts disagree slightly about the travel watch. David first says Hans "is not right with traveling watches." After rereading Hans's account, he softens this: maybe it was enough of a success, and Hans probably thought so at the time.

Then comes the turning point. As "legend has it," Hans read an account of the Second Boer War in South Africa. Soldiers had worn wristwatches to coordinate troop movements and firing times while holding their guns. David assumed the technology had simply improved, since wristwatches already existed but "just weren’t thought of as serious watches." Ben adds climate: in the heat, soldiers did not wear jackets, so they could not reach for a pocket watch.

David agrees and says climate will matter again later in the wristwatch story. Even when soldiers wore jackets, nobody in combat would put down a gun, pull a watch from a vest, and open its case. Wristwatches were less accurate than pocket watches, but they were usable. Ben sums up the shift: on the battlefield, people judge value on "a different axis" than on the streets of London.

David describes Hans Wilsdorf's realization, which he presents as possibly embellished ("Supposedly"), that accurate wrist-worn timepieces were not just for soldiers. Many people could benefit from simply turning their wrist to read the time instead of pulling out a pocket watch.

Acting on this, Hans placed the largest order in Aegler's company history: several hundred thousand Swiss francs for the tiny movements. Ben says how he placed it is unclear. Ben calls this the great irony: Hans was "kind of wrong." The Boer War did not create mass demand, and returning soldiers stayed in what Ben calls "the wristlets era." Because Wilsdorf and Davis was still small, it did not need a large market to survive. The real push would come about ten years later with World War I, which Ben calls an "incredible unfortunate tailwind."

David adds that a market for serious wristwatches did begin in the far reaches of the empire: Australia, South Africa after the Boer War, and especially India. In those places people were less likely to wear the jackets or vests that held pocket watches. These were the first seeds of the wristwatch market for Wilsdorf and Davis.

The hosts agree that Hans was a true believer, a "total zealot." He was convinced the wristwatch would spread well beyond the colonies to Britain itself, because it seemed obvious to him that no one would want to reach into a vest for a pocket watch.

Hans believed he had a killer product and was first to market. He felt he needed a name that consumers would ask for, effectively coining a term for a new industry. His model was Kodak, a camera made by the Eastman company rather than a company called Kodak. David believes it was the first invented product brand name, a name that meant nothing. Ben agrees the emptiness was intentional: it was easy to pronounce and memorable after one sighting.

David lists Kodak's qualities: five letters, a good sound, and it worked in any language. Supposedly, Eastman created the name with his mother using an anagram set. Eastman's three principles were that a name should be short and easy to pronounce, work in any language, and not resemble any other name or be associated with anything else.

I tried combining the letters of the alphabet in every possible way. This gave some a hundred names, but none of them felt quite right.

In Wilsdorf's own telling, the name came to him on the upper level of a horse-drawn double-decker bus: "driving alongside Cheapside in London, that a good genie whispered in my ear, Rolex." David's dry comment is "He’s good at mythmaking," and Ben notes that many startups are named this way today.

A few days later, Wilsdorf and Davis filed and registered the Rolex brand in Switzerland, and a couple of years after that in London. David stresses that at this stage Rolex was a brand name, not the company name: it was "Rolex by Wilsdorf and Davis."

Ben argues the name goes beyond Kodak's criteria. Besides being short, pronounceable, memorable and the same in every language, "Rolex" suggests rolling a watch's crown, the knob used to wind it. The "X" has a ticking, timekeeping feel. In his view you can intuit what kind of product would be called Rolex.

With a name and a new category, Hans's next problem was credibility with customers. The hosts joke that he reused his "one cool trick" from pocket watches: official certification. In 1910 he sent the first wristwatch movement to the School of Horology in Switzerland, where it received the world's first wristwatch chronometer rating. Ben stresses why this mattered: people did not believe these small watches could be accurate, "And without Aegler, they weren’t."

David notes a limitation. A horology school is not an astronomical observatory, and its rating did not carry the weight of a body like England's Royal Observatory. Hans and Aegler kept refining the movements. In 1912 Wilsdorf asked Aegler specifically whether he could produce a wristwatch good enough for an observatory timekeeping certificate. The work took about two more years.

In early summer 1914, Hans took one of the movements (the transcript says "Geller’s," apparently meaning Aegler's) to the Kew Royal Observatory. The hosts explain Kew's prestige. It was where the marine chronometers of the British Royal Navy, then the greatest navy in the world, were tested. Its 45-day testing put chronometers "through the ringer." It was also affiliated with the Greenwich Royal Observatory, where Greenwich Mean Time was invented. David calls this probably the most important timekeeping institution in the world.

In a brief aside, Ben recalls the timekeeping-history museum at Greenwich, which he visited during a summer in London about 15 years ago. David says he wants to go, and they joke about stopping there on the way to Geneva.

On July 15, 1914, after the 45-day battery of tests, the movement passed. It received the First Class A Precision certificate, known as Kew-A, the first ever awarded to a wristwatch. The timing undercut the celebration: it came three weeks after World War I began. Between submission and certification, Archduke Franz Ferdinand had been assassinated in Bosnia by a Serbian nationalist, triggering Europe's "whole rat’s nest" of alliances.

Ben frames the paradox: with war breaking out, nobody cares about watches, and yet everybody does. David calls the war Rolex's first crucible.

World War I is truly the first crucible moment for Rolex because it’s the best thing that ever happened to the company in the industry. It made the whole world care about wristwatches.

It was also directly the worst thing, because anti-German sentiment in Britain soared. David gives two examples. The British began calling German Shepherds "Alsatians," and the royal family, which descended from Queen Victoria's marriage to the German Prince Albert, changed its name from Saxe-Coburg-Gotha to Windsor. David calls the anti-German racism "utterly ridiculous" given the royal family's own German roots.

Ben draws the business conclusion: in 1914 you could not build a strong British consumer brand called Wilsdorf. If the royal family was rebranding, Wilsdorf and Davis had to as well, even though Wilsdorf was a naturalized British citizen. Ben adds that Wilsdorf never in his life considered himself German. In 1915 the company was renamed after its brand, and the Rolex Watch Company Limited was founded.

Ben asks how Rolex became a Swiss company, and the hosts place the answer in the World War I years. David argues that anti-German sentiment alone probably would not have driven Rolex out. Wilsdorf was naturalized, his wife was British, and the company was now called Rolex.

The decisive factors were economic. Early in the war, Britain imposed a 33% import tax on watches. (The transcript has David say "World War II," but the surrounding discussion concerns the First World War.) David says this would kill an importing business. Ben is more measured: the tax was crippling, but tariffs are often passed on to customers, so the business could still run. The real "nail in the coffin," he says, came at the start of 1916, when Britain banned all gold and silver imports.

Ben describes the operation the ban disrupted. Wilsdorf often imported movements and cases, or put imported movements into local British cases, then exported the finished watches to the colonies. Without precious metals, and while "paying out the nose" for movements, running the business from Britain made no sense.

David assumes that Rolex's margins on precious-metal watches were, then as now, far higher than on other watches. Ben says a $10,000 watch becomes a $30,000 watch when gold or platinum is added, comparing it to Apple selling memory. He adds a contrast from 2020–2022: during the hype, precious-metal models were easier to buy because demand for $30,000 to $100,000 watches was much lower, while steel models sold out and drew long lines.

In 1916, Rolex first moved watch assembly to Bienne, near Aegler. That let it case Aegler's movements next door and export from Switzerland without going through Britain. In 1919, Hans moved himself and the official headquarters to Geneva. David says that even today, design, sales, marketing and (he thinks) final assembly happen in Geneva, while movements are still made in Bienne.

Ben sees both sides as rational: Britain needed tariffs to finance the war, and a business in Britain had reason to leave. He adds another motive. Hans wanted a globally renowned watch company, and that meant Switzerland, becoming "Rolex of Geneva, not just Rolex." Ben points to the "Swiss made" mark on Rolex dials and "Geneve" on every Patek Philippe as signs of that pride. David teases Ben over his pronunciation of Genève.

Ben steps back to explain Geneva's prestige, drawing on the master's thesis that Marc Bridge, a close friend of both hosts and founder and CEO of the jewelry marketplace At Present, wrote 20 years ago on the Renaissance of the Swiss watch industry. Ben says they will link the thesis in the show notes.

Ben gives four factors: (1) Religion: in the 1500s, Geneva was a center of Protestantism under John Calvin. Calvinism banned frivolous items such as ornamental jewelry, so goldsmiths and jewelers turned to watchmaking, which was permitted because watches served a real function. (2) Climate: long, harsh winters favored an industry that could be done indoors in a small space, and one valuable enough to make Switzerland an important player in the European economy. (3) Culture: établissage, a system in the Jura Mountains where small independent firms of one to ten people each specialized in one component and dozens of them together produced the finished watch. (4) Migration: in the late 1500s, after Catholics came to power in France, Huguenot refugees skilled in jewelry, metalwork and watchmaking fled to Protestant Geneva.