Complications

Patek Gets It Right! - Delivering on the Service Equation

I was doing some research today on Patek's website and was impressed to see that service turnaround times and even the probable costs of a visit to the service department are now spelled out.  The spectrum of service quality that you can experience as a watch owner is quite broad.  There are some manufacturers that fail miserably when it comes to service after the sale, most do a fair but inconsistent job, and some really excel.  Patek Philippe service is the creme de la creme.

Most of Patek's marketing centers around the legacy you create when you own a Patek Philippe watch.  Certainly, if a watch is to survive for generations, timeless design alone won't guarantee it's longevity; it needs to be maintained!  Whether your Patek is in need of a routine check up or more substantial repair, a trip back to HQ will get things squared away.  All of Patek's watchmakers are extensively trained and extremely skilled.  If your watch is of the complicated flavor, you can be sure that the watchmaker who works on it will be someone who's experienced with both the complications involved and the repairs that are required.  You can also be certain that quality control and assurance are critical elements of Patek's customer-centric service philosophy.

I've sent watches to Patek probably a dozen times.  The cost has always been reasonable given the scope of work required, the turnaround time acceptable, and the work uniformly flawless.    

Greenwich, England - The origin of time and place...

Everything starts somewhere and Greenwich, England; on the banks of the River Thames, a few minutes from central London and the birthplace of King Henry the Eighth; is the origin for the calculation of time and location in our world.

The Greenwich meridian is the place where 'East meets West' - longitude 0 degrees.  Theoretically, noon 'Greenwich Time' is the moment when the Sun crosses the Greenwich meridian.  Because of the Earth's inconsistent speed in its elliptical orbit and its axial tilt, this moment can vary by up to sixteen minutes over the course of a year.  To establish a standard, a 'fictitious mean sun' was created by averaging the nonuniform motion of the true Sun.  For this reason, the word 'Mean' is included in Greenwich Mean Time... so, noon GMT is the moment when this 'fictitious mean sun' crosses the meridian.  It's worth mentioning that the difference between the 'physically observed' crossing of the sun on the Greenwich meridian and the artificial crossing of the 'fictitious mean sun' (GMT time Noon) is called the Equation of Time - a neat complication on a few high-end watches that has gained some traction among collectors recently.  Martin Braun has done a lot with this and several other 'astronomical complications', particularly interesting is his Notos collection which not only displays the raw equation of time data, but also shows it as a month display and indicates its declination.   

As the daily rotation of the Earth is slowing slightly over time, atomic clocks represent a much more stable timebase.  On New Years Day 1972, GMT was officially replaced by Coordinated Universal Time (UTC) as the international time reference.  Maintained by an ensemble of atomic clocks around the world, UTC is adjusted with leap seconds to keep it within .9 seconds of absolute accuracy consistently.  The terms GMT and UTC have since become interchangeable in practical use.

In the watch world, GMT has come to refer to a watch that has a separate hour hand or bezel modification that indicates, or allows you to easily calculate, the time in a second time zone of your choosing.  Rolex introduced the first GMT watch in 1955, the GMT-Master was designed to allow Pan Am pilots on transatlantic flights to simultaneously monitor GMT and local time. 

You probably aren't too concerned with the antics of the 'fictitious mean sun', but, if you travel a lot, and don't want to risk waking up your kids when you call home during an international 'road trip'; a GMT watch is not a bad thing to have on your wrist.       

    

   

The High C's of Haute Horology - COSC, Chronometers and Certifications

PERFECTION, n. An imaginary state of quality distinguished from the actual by an element known as excellence; an attribute of the critic.   Ambrose Bierce (1842 - 1914)

When you think about the inner-workings of a watch and the nature of the measurement of time; the level of accuracy that any mechanical watch achieves is remarkable.  Of course, the nature of perfection is that it never seems to be static and, as a result, watch manufacturers clamor to create watches that adhere to ever more stringent standards. 

With so many less moving parts than a mechanical watch, quartz watches naturally achieve a much higher level of inherent accuracy.  The most precisely adjusted mechanical movement consistently loses the precision contest to the most mainstream of quartz offerings.

Much is made of the COSC certificate that accompanies some of the best swiss watches.  COSC, the Controle Officiel Suisse des Chronometers, is the official Swiss agency responsible for certifying wristwatch movements.  Founded in 1973, and created by five watchmaking cantons (Bern, Geneva, Neuchatel, Solothurn and Vaud) and the Federation of the Swiss Watch Industry, COSC operates as a non-profit. 

More than 1,000,000 movements earn the COSC designation each year.  The fact that just three percent (3%) of all Swiss watches are COSC'd is remarkable in both what it says about the exclusivity of owning a COSC watch and how large the annual production of Swiss watches really is.   

While seven parameters of accuracy are tested for compliance with the standards required for a COSC certification, the 'mean daily rate' is the most publicized.  In order for a watch movement to qualify, it must maintain an accuracy of -4 to +6 seconds a day.  If you like math, taking into account the fact that there are 86,400 seconds in a day, the accuracy required for COSC certifications is 99.994%... very impressive for anything that's mechanical and bordering on incredible for something made up of dozens of moving parts contained in an area that might not be much larger than two nickles stacked on top of each other.

The other 6 parameters tested are: 'mean variation in rate', 'greatest variation in rate', 'greatest deviation in rates', 'rate variation due to temperature', 'resumption of rate', and 'horizontal and vertical difference'.  COSC takes into account not only accuracy, but the way that it varies as conditions do.

During the production process, the watch manufacturer sends just the movement to COSC for testing and certification.  If the movement meets the standards, it is awarded a 'bulletin de marche' (certificate of performance).  The watch that ultimately contains this movement can then be marketed as a 'Chronometer'.

The terms 'Chronometer' and the phrase 'Official Swiss Chronometer' are internationally protected trade dress reserved exclusively for watches that feature COSC movements.  'Superlative Chronometer' is a trademark of Rolex that it uses in the marketing of its COSC certified watches.

Experienced collectors know that the fact that a COSC certificate accompanies a watch means actually very little in terms of its current accuracy.  In the real world, watch movements are subjected to all sorts of forces that can easily have an adverse effect on their 'adjustment'. 

You might be surprised to find that a new watch bearing the COSC credentials that is still in a dealers case is dramatically out of adjustment and way outside of standards and that a non-COSC certified watch that you've been wearing for five years is actually well within them.  In the real world, the COSC certification is much more of an indication that a particular movement can be adjusted to a level of accuracy within the standard than that the movement is currently very accurate.

Since deviation can vary widely with position (crown up, crown down, dial up, etc.), wearing a watch can often have the effect of canceling out some hiccups in accuracy that might show up while the watch is off wrist.  Often, when we bench test a watch with a timing/regulating scope, we find that a watch that seemed to be keeping great time could actually use some adjustment.

It's easy to drive yourself crazy over the fact that a brand new watch is gaining more than 6 seconds a day or losing more than 4.  Don't!  Many times, accuracy improves over time as things settle in - and it's almost impossible to control the 'wearing environment' well enough to get any idea about what's really happening inside by just setting a watch to an atomic clock and then again comparing the indicated time to the A-clock sometime later.  If you find yourself early or late for things because your watch is 'fast' or 'slow', it's time for some fine tuning.  If that's not the case... you're watch is performing well.. no intervention required!   

    

   

   

Magnets and Watches

One of the most common maladies affecting watches is magnetism.   

When a mechanical watch becomes 'magnetized', the addition of a magnetic force to the micro parts, springs, and balance; the 'drivetrain' of the watch mechanism, creates additional resistances that cannot be completely overcome.  The result is usually a watch that runs faster than it is supposed to.

It's incredibly easy to magnetize a watch unknowingly.  While the refrigerator door is often called out as the usual suspect; the Bose Wave Radio, a sophisticated arrangement of magnets designed to look great on a nightstand,  has to be very high on the list as well.  Simply put, any time you get your watch very close to a small magnet or even a little close to a larger one, there's a pretty good chance that you are magnetizing it. 

Watches with stainless steel cases are the most protected from accidental magnetism; those with gold cases, the least.  Vintage watches are much more prone than their modern counterparts as watch manufacturers now consider the likelihood of exposure to magnetic fields when they design a watch. 

Not considering the possibility of magnetism as the cause for a sick watch makes it likely that you'll pay for a lot of 'routine maintenance' and repairs that really aren't necessary.  Not surprisingly, many watchmakers don't think of magnetism first when they hear about a watch that's functioning poorly... the 'surgeon' prefers to operate and replacing parts or rebuilding a movement is much more interesting than a quick and mundane demagnetizing. 

A small and inexpensive compass is the go-to tool for detecting a magnetized watch.  As you move the compass around the caseback, you'll be able to move the compass needle artificially if the watch is magnetized.  If it isn't, the direction of North will never change!

If the compass needle points to a magnetic watch, then you can either take your watch to a watchmaker for a quick demagnetizing procedure or, if you own a demagnetizer, have access to electricity, and can push a button; do it yourself.  The process is really simple.  First and foremost, be sure that the watch you are about to demagnetize is mechanical and not quartz.  Quartz watches should never be demagnetized!  Mechanical confirmation made, follow this procedure:  plug in the demagnetizer, place the watch, crystal side down on the middle of the 'target' area of the demagnetizer, push the red button... release.... push again... release, now turn the watch over (caseback down) and push the red button again.... release.... push again.  Demagnetizing complete!

Magnets are everywhere so it's easy to over think this and become overprotective.  Don't!  If and when your watch has an encounter with a magnet that leaves it hurting, the fix is quick, inexpensive, and completely effective.

   

Investing in Watches? Buy the Blue Chips and the 'Story' IPOs.

Much more exciting than mutual funds, some high-end Swiss watches are a very attractive investment that you can wear while you watch your fortune grow.

While many of us use the 'investment' angle to justify owning a silly number of watches, the truth is that most watches aren't going to appreciate in value anytime soon.  But there are exceptions!

If you want to increase your chances of picking a winner dramatically, you'll buy a Patek Philippe, especially one that has has some interesting complications or is limited in production.  It isn't just coincidence that the watches that consistently bring in the highest dollars at Christie's and Antiquorum are Pateks.  A robust and well heeled network of collectors routinely competes with the Patek Museum itself to propel the prices for rare and unusual Pateks into the stratosphere. 

The world's most expensive watch, a unique platinum Patek Philippe World Time Ref. 1415 made in 1939 sold for $4,026,524 in an Antiquorum auction. 

Surprisingly, the audience for a watch like this is a lot deeper than you might imagine.  Routinely bidding in the $750,000+ segment is spirited with sometimes as many as a dozen bidders competing for a particularly compelling example.  Many times these watches are pristine, include their original paperwork and packaging, and look unworn.  Sometimes they are obviously worn and include just a letter of authenticity from Patek.   

Christies too has established a firm footing in the top 5  watch auction results with the sale of a Patek Philippe "Grogan" single-button split-second chronograph made in 1925 and in a left-handed configuration. 

This watch sold for $1.9 million dollars and certainly made both the sellers and buyers day.  The original price of either of these watches has never been officially confirmed, but it's safe to say that rumors that neither set their original owners back more than a grand aren't far off.  Any way you analyze it, that's a spectacular return!

What can you do to turn the experience of owning a great watch into one that has a high likelihood of adding to your net worth?  Buy the Blue Chips or Pick an IPO with a great story. 

If you're searching blue chip watches, you really don't need to go any farther than Patek.  While Vacheron has certainly enjoyed some spectacular results of its own, Patek is really a much safer bet.

Find a Patek with a fair bit of complication and buy it in platinum so you'll be sure that the production numbers are fairly small.  If you have to order it and there happens to be a list that you need to know someone to get on to and even then you have to plunk down a substantial deposit a year before it's actually manufactured - you're definitely on the right track.  While you can expect to pay something very close to retail for these watches, you can also count on being able to sell them for more than you paid on the day that they arrive at the dealers and a year or two later, the appreciation will be dramatic.  Pass on the quick return and twenty or thirty years down the road, you might just be able to fund a serious lifestyle with the gains.

On to the IPO strategy.  If you have spent some time in the world of great watches and you can get a sense of the pulse of the collectors market by visiting the brand forums, you may be able to find a trend that makes a particular watch brand or model launch seem like a home run.  Such was the case when the small niche Panerai brand was acquired by Richemont in the late 90s.

Panerai is the perfect example of the 'story IPO watch'.  Trading on the rich history associated with this brand that originally served as the exclusive supplier of watches and diving instruments for the Italian Navy, Richemont created the perfect storm when it combined provenance and a unique look; a huge tool watch with a unique and prominent crown locking mechanism, that couldn't be mistaken for anything else on the market at that time. 

Initially, leveraging it's relationships with the Cartier authorized dealer network, Richemont began to distribute Panerai to a somewhat less than enthusiastic dealer audience. 

Seemingly forced to sell these over-sized tool watches in cases next to a much more refined and genteel selection of Cartier timepieces, dealers often discounted these 'A' series watches to levels close to actual cost.  The watch of the Italian Navy certainly wasn't 'flying off the shelves' in the early days. 

As the market evolved and the over-sized watch phenomenon took hold; dealers suddenly were clamoring to become Panerai authorized agents, customers were lined up and happy to pay full retail if they were lucky enough to find a watch, and authorized dealers were frantically trying to persuade Richemont to send them more inventory.  Just as quickly, anything Panerai became very collectible and the value of the watches themselves skyrocketed on the collectors market. 

The same can be said for small boutique brands like F.P. Journe and Richard Mille.  Watches from either of these well-respected houses are exceptionally well crafted, very attractively designed, and almost sure to be good long-term investments.  Again, there's a story associated with these brands and it's compelling and unique. 

Don't discount watches as investments.  It's nice to be able to enjoy something now that has the potential to appreciate in value over the long term.  In 'investment grade' watches, the worst case scenario is that you wind up with a great watch!      

   

Watch Leasing? Why not!

Joseph Lam, founder of Parcel Pro and previous owner of TimeZone, has launched First Watch Leasing, Inc. the world's first fine timepiece leasing operation. 

I know this project has been underway for some time and that the hurdles that needed to be overcome to bring it to fruition were sizable.  Joseph's contacts and experience in the insurance and risk management business (Parcel Pro) undoubtedly played a critical role in providing the necessary assurances for his funding sources to feel comfortable advancing money (up to $100,000) secured by very portable fine Swiss collateral.

The program is very new, but already some heavy hitters in the retail watch business have signed on.  Among the more notable are Armstrong Rockwell of Connecticut, LaViano of New Jersey, and Hing Wa Lee of California.  Since you'll be dealing with an Authorized Dealer, the manufacturers warranty applies.  Did I mention the free loaner watch if and when repairs are necessary?   

The process is very straightforward.  Visit the website, get approved in a few seconds, locate a dealer, pick out a watch (not all brands qualify but there's Lange, Rolex, AP, Patek, Blancpain, JLC, IWC, etc.), pony up a small down payment, sign on the dotted line, and enjoy!  Of course there's the matter of the monthly lease payment, but you'll preserve a lot of cash, keep your credit lines intact, and there may even be a tax benefit (creative accounting required).

At the end of your lease, you'll have the option of keeping the watch (and paying the balance) or turning it in and moving on to a sleek and sexy new model.  In this respect, it's much like a car lease.  The good part about leasing a watch though is that there isn't an odometer so you can enjoy unlimited 'miles' while she's part of your collection.

Maybe the best part of this whole program is that the next time your wife or husband asks 'Honey.... did you buy ANOTHER watch?', you'll be able to say 'NO' and be telling the truth!  Priceless!

Best wishes and much success to Joseph and his team at  First Watch Leasing.    

 

      

 

Grey Market Watches - Masterfully Veiled Price Discrimination!

I've thought a lot about the real dynamics of the so-called 'grey market' for watches and the degree to which the manufacturers have an interest in keeping it alive.   

Going back to some of the things that I learned about in B school; it seems like the luxury watch market would make the perfect case study for the clandestine and well executed practice of price discrimination. 

As the theory goes, it's advantageous to be able to sell the same product to various segments of the market at the highest price that they are willing to pay for it.  It's best, of course, if you are interested in preserving the integrity of the brand; to do this by convincing those who are willing to pay the higher price that they are getting something that's somehow different from those who are paying the lowest price.  Most people won't pay more simply because they can, they need to perceive some additional value in parting with the extra money. 

Certainly much is made about the importance of only buying from an 'Authorized Dealer' and there's a large segment of watch collectors who would never buy a new watch anywhere else.  A great deal of time and money has been spent to convince us that deviating from the officially sanctioned route for acquiring a new watch is fraught with all sorts of peril:  Will the watch be authentic?  Will the warranty be honored if there's a problem?  Is it stolen?  Is it really new?  Will it even arrive on your doorstep after you share you credit card details with a stranger who is a thousand miles away?   

To keep the dream alive and maximize the drama (and profit margin), there's the sometimes comical dog and pony show that you'll encounter when you venture down the discount path with your 'Authorized Dealer' (AD).  You know the one.... where they'll lose the whole line and the multi-million dollar inventory will vanish overnight if the manufacturer finds out that they gave even their best customer a 20% discount.  It's important for the maximization of the strategy to keep the premium buyer paying the premium price at the authorized shop so that the bargain hunter still feels like he or she is getting a deal when the Grey Market seller offers him or her a 25 or 30% savings.

It seems to me like that real charm of the arrangement in the watch business, at least from the perspective of the manufacturer, is that the dealers (both authorized and unauthorized) take care of all of the dirty work and absorb most of the grief.   

By requiring the Authorized Dealer to take on more watches than they can feasibly sell, the manufacturer all but insures the creation of an arrangement between the AD and a grey market vendor.  Obviously, while this can't be officially sanctioned or suggested, the manufacturer absolutely needs this 'off the record' distribution channel to move the most product possible.  While they remain unrecognized and sometimes even maligned, grey market 'dealers' do sell a lot of watches.   

In 'encouraging' the AD to hold the line on price with clients who see the value in the AD relationship and will pay a premium for it, the manufacturer sets up the value proposition that the grey market dealer needs to convince the clients that value the best price above all else that they are, in fact, getting a deal!