Interview with Marc Andreeson

There’s a great interview on Forbes today with Marc Andreeson, venture capitalist and internet pioneer. You should read the whole thing. I found the section below particularly relevant to the watch industry — friction that has been created and eventually the direction things will need to go in. No one yet has really used the internet to “charge consumers less” in the watch business. It will happen at some point.

Jeff Bezos has this line where he says there’s really two kinds of businesses in the world: those that try to charge consumers more, and those that try to charge consumers less, or try to save consumers money. I think about that more broadly. I reframe it as: There are businesses that have the mentality of adding value, and businesses that have the mentality of extracting value. And the Internet, I think, is an enormous benefit to the model of adding value, and it’s an enormous danger to the model of extracting value.

I think you see that across the economy today. The music industry is a classic case in point. The whole piracy boom of music on the Internet really arose when music buyers essentially rose up in protest and said, “I want one song. Why am I being forced to pay $16 for the entire CD when all I want is one song that I can listen to online.” That’s when you had an earthquake hit the music industry. It was when consumers viewed the pricing to be fundamentally unfair.

Car dealers are going through another version of this. Carbuyers have never liked the process. Maybe a few have, but most carbuyers have not liked the process of having to go in and really get raked over the coals by a car dealer who takes advantage of the fact that consumers have no idea what the wholesale price of the car is. Now, after a little research online, you can walk in armed with a car’s complete wholesale information and get a much better deal.

In traditional business circles that kind of transparency gets viewed mostly as a threat. I think that’s unwarranted. I think the opportunities are just as large and probably larger, especially for businesses that have this view that their role in the world is to add value, is to bring consumers benefits.

The Wearable Tech Threat

Recently I have been thinking a lot about the watch industry again. Do I want to get back in? If so, in what sort of position?

Part of this exercise has been to analyze the industry in its parts and as a whole. I’ll write further about my thoughts and I have touched on them in the past, but perhaps the biggest threat was not even on the horizon when last I was authoring this blog. It seems clear that wearable tech is going to be the next evolution of technology, and likely that it will be widely adopted.

Google Glass is already being tested by early adopters around the world. But the real interesting twist came a few weeks ago. Tim Cook, Apple CEO, gave an interview where he said:

“I see [wearables] as a very key branch of the tree.”

“I think the wrist is interesting. The wrist is natural.”

If a company like Apple were to make a must-have tech product that occupies wrist space, it could mean a truly abrupt end to the wrist-watch.

It may be hard to imagine right now, but think about how necessary it is in 2013 to have a smart phone. What if there were an iWatch that was just as necessary? An everyone-has-one type of device like the iPhone. Within a year or two, the watch industry would be decimated. The wrist watch would lose its real estate, just like the pocket watch lost its waistcoat.

I wouldn’t have seen this as a very real threat even a year ago. But when Tim Cook is making statements like that, you have to take notice. This could make the advent of the quartz watch look like a blip in the road. It would be a true extinction level event and it is right on the doorstep.

Vianney Halter Deep Space: I love it!!

For those of you who don’t know, Vianney Halter released his first new watch in many years today. I absolutely love it!!

I woke up to find these three pictures on Facebook.

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I don’t know anything about the watch yet, but I am in love and think it is fantastic for the industry. For those who don’t know, Vianney’s Antiqua could be said to be the watch that started all of contemporary horology. I know it was hugely influential to Max Busser and Felix Baumgartner.

But, it was not without controversy. The watch was designed by Jeff Barnes. Halter and Barnes later had a rather unceremonious split, but Vianney continued to produce mainly Barnes designs (or at least Barnes influenced). This Deep Space is really the first watch he has given us without Barnes DNA and moves him back to the top of the current Contemporary Horology scene.

So for all of these reasons I find it to be a very important watch. And DAMN it’s cool! Now I have to find out what the heck it is…

EDIT: I had to include this awesome video from Watchonista that I just saw

Grand Prix d’Horlogerie 2013 Jury: The Industry Gets Something Right!

I have been very critical of the watch industry in the past on this blog. I will be critical of the industry in the future. But I’d like to stop and point out something that they absolutely nailed.

The jury for the 2013 Grand Prix d’Horlogerie de Geneve (the Oscars of the watch industry) is absolutely fantastic and shows that at least some people have their heads screwed on straight.

First, the journalists. Ben Clymer, Elizabeth Doerr, and Carlos Alonso are three of the absolute best in the world. Sean Li is a very well known collector plus the editorial director for Revolution Hong Kong. Marcel Philippe is a very knowledgeable NY collector. Some of the others I do not know as well, but I assume they are great as well.

If that weren’t enough, the jury includes two major international celebrities. John Mayer is a superstar and huge watch collector. Philippe Starck is probably the best known designer in the world.

This jury shows everything I want to see from the watch industry: a focus on real collectors, the best journalists, and working with celebrities who bring credibility, not just a famous name.

Bravo! It’s going to be a fun event!!

I’m Back!

Hey everyone! Sorry for the extended absence. There are multiple reasons for it, some of which I will address in future posts, and some I will probably not. The main reason, however, is I didn’t have anything I wanted to write.

Well, the urge to write has hit me again. So I’m going to resuscitate this blog and attempt to fill it with musings once again. For this post I thought I’d simply share something I think is pretty amazing.

Beyond watches and tech, which I have covered well here, I also love cars. Living in traffic filled LA and having a kid, my current favorites are flagship luxury sedans. Recently I went to look at the Audi A8L. I chose it for the quality of workmanship and attention to detail. The interior fit and finish is simply incredible. However, I find the exterior styling a bit boring. In fact, while I was at the dealership, I saw an incredible S4 in special ordered bright orange paint that was peculiarly tempting.

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Anyway, I got myself the A8L. Quartz Grey on black interior. Perfect car for LA traffic and kids in the back seat

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But I couldn’t get that orange out of my head. It just seemed so fun! And that’s when I stumbled across something pretty cool. I had heard of cars being vinyl wrapped to change their color. Usually I’ve seen matte black or other matte colors. So I did some research and found out there is actually a huge variety of colors that can be chosen, and they are not all matte. To make a long story short, I found an awesome glossy bright orange color, decided to have some fun, and now have what I believe is the only bright orange A8 in the world. It’s fully removable if/when I get sick of it and is definitely fun! So if you see me around LA (and you won’t miss me), say hi!

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If I Were Running Audemars Piguet North America

Last week, news broke that Audemars Piguet was parting ways with their CEO, Philippe Merk and replacing him (supposedly in interim) with François-Henry Bennahmias, formerly head of AP North America.

AP is my favorite “big” brand.  In fact, the watch I wear most often is an AP.  They have great products, great history, and many great people who work there.  They have the resources to do some amazing things.  So I couldn’t help but think: if they hired me to replace Francois, what would I do?

First, I would listen to the chime of the minute repeater that I made them give me as a signing bonus.  Then I would get down to serious business.

My focus would be on service and value.  The two are intricately related.  I would push them to finally take the jump into online sales and create a technology platform that offered the best user/customer experience in the business.  I would invest heavily in the US service center to the point that NO SERVICE SHOULD TAKE MORE THAN 4 WEEKS, with the eventual goal to turn out routine services and minor fixes in less than 2 weeks.

I would promote transparency and open dialogue.  I, myself, would be available continuously through social media and email and also empower other employees to be as well.  I would answer the tough questions honestly and make my positions very clear.  I would be swift in rectifying any and all instances of poor service from us or our partners.  Any customer willing to spend $10k+ on an archaic instrument deserves to be treated with utmost respect – not propitiation but true fairness.  This has to be hammered into the culture from the top down.

Chris Dixon, tech entrepreneur and investor, posted a great piece over the weekend on how people are now focused on experience rather than product.  Luxury brands have known this for a while, but have lost their way.  They see people tire of the experience, and think they have to focus harder on selling the product.  That’s why you see all sorts of BS claims on materials, movements, complications, etc.  What they’re missing is that the experience is still what’s important, they are simply selling the wrong experience.  The typical arrogance and elitism of luxury is not as effective anymore.  What people want is a company that is committed to doing things in the best possible way, with the utmost integrity, and that treats its fans and customers like family, not suckers.

There are plenty of other things to do, but I believe that if someone were to truly implement these few points with passion and integrity, the brand would rise head and shoulders above the rest and set a fantastic example for the industry as a whole.  The US is different from the rest of the world.  Customers are very savvy, status is much less important, etc.  No watch company has gotten the message right here yet.  It’s not hard, but it can’t be faked and there is no shortcut.

For a nominal (7 figure) salary and a brownstone in the West Village, I’d be happy to do it for them without breaking a sweat.  But do you think they’d make me learn French?

Sunshine

Yesterday’s post was pretty pessimistic.  However, it’s not all doom and gloom.  So here’s some optimism.

  • Watches are made better today than they ever have been before.
  • The sheer volume and value of the watches sold in the last several years all but ensures that servicing them will be a viable job for many years to come.
  • So many fantastic watches have already been made that even if no more were produced, we could all have something nice.
  • The internet is still progressing in a direction that will make it fun to collect and talk about watches no matter how screwed up the industry itself gets.
  • Huge leaps, especially in sales and distribution but also in production, can still be made that can change everything in a very short period of time.

Ok that’s a few off the top of my head.  What do you guys think?

Are Watches Dead?

I mentioned in my post earlier this week that I thought very hard about whether I would want to stay in the watch industry or not.  Ultimately I decided not.  I thought I would share some of my thinking.

First, I love watches.  There are great companies, great pieces, and real magic that has come out of this industry, as you can clearly see from the rest of my blog.  However, there are some real problems with it.  I outlined a few of these in my post, An Industry in Danger.

Overwhelmingly, amongst the collectors I have known for a long time, I feel a sense of fatigue.  They are tired of the price increases, the gimmicks, the marketing campaigns, the retailer games, etc.   There are very few have-to-have or impossible-to-get pieces now, so even if something is wanted, they don’t have to put up with BS to get it.  In an extremely niche industry with a shocking small number of potential customers, the trend of killing off the most enthusiastic and supportive of them is incredibly worrying to me.

Next, creativity seems stagnant.  We have just come out of a golden era of independents.  The jump from the Lange 1 (which was groundbreaking when it came out) to an URWERK 103 or Vianney Halter Antiqua happened very quickly and spawned an incredibly important period.  Felix, Vianney, Max, Francois-Paul, etc will forever be historically significant and there pieces continue to be.  However, that period is over.  The new entrants are not bringing anything significant enough to change the paradigm.  Similar to art, the important artists of a particular movement will always be important.  The next important artists are not the ones who follow, but the ones who break completely new ground.  I fear that present conditions will not allow that to happen.

So are watches dead?  I don’t think so.  Rolex and Patek will be fine for long to come.  Felix and Max and the few other genius creators should be fine if the universe has any sense of true art and they are able, at some point to take control of the sales channel.  But there is no doubt in my mind that the watch industry as we know it is headed very quickly towards a brick wall (and this is not even taking into account the upcoming after-sales-service crisis!).  Are there opportunities to start a great, profitable business there?  Absolutely.  But in the end, I want to be in a sector with a happy, expanding customer base.  I don’t see much hope for the watch industry to get back to that place.  So I will watch from the outside hoping to see positive changes, but concentrate my effort elsewhere.

 

An Update

Hi everyone.  Thanks for all the emails, tweets, facebooks, etc saying how much you enjoy the blog and wish I’d post more.  I apologize for not keeping it up, blogging is hard!  I have a couple posts in the back of my head, so I’ll try to write some stuff soon.  In the meantime, people seem curious as to what I’m up to, so I’ll get that out of the way today.

After leaving MB&F in December, I wanted to take time off to clear my head and figure out what to do next.  First, I thought long and hard about whether I would want to do anything in the watch industry.  I will write up some of these thoughts in a later post, but the bottom line is that it’s not really where I see my future.  I fell into it with the best watch company in the world, and am happy to leave it at that.

That left me with a notebook full of startup ideas that I have compiled through the years.  To be honest, I ignored them all for a few months.  I read a lot.  I played with my son.  I spent time on all the things I know I won’t have time for once I start a new business.

Now I am 90% set on the direction I want to pursue.  I am working out the details and research now.  It is not watch related per se, but I think it will be of interest to many of you. I will update as I have more to share, and hope some of you will be great beta users for me.

Anyway, I hope that answers the questions for now.  Don’t forget about TickTocking.  There’s more to come…

An Industry in Danger

Next week in Geneva, SIHH marks the real beginning of a new year for the watch industry.  This will be my first year for a while not attending the shows.  As someone who is now on the outside looking in, I have a new perspective – and can also be more candid.  During my time in the industry, I gained a ton of respect for a few people, including my former team at MB&F.  Mostly, however, I was left disillusioned by the vast majority of the industry.

I believe the watch industry is in a condition of serious danger.  Ten years of incredible sales brought on by what we now know to be a completely artificial boom here in the US and now economic growth in Asia have made it too easy to think for the short term at the detriment of the long without realizing the effects.  Brands have not paid the proper amount of attention and respect to their collectors, their products or their business models.  Here is a short list of what I would like to see change for the health of the industry as a hole.

  1. Pricing is out of control.  We ALL know this to be true.  Walk into a retail store and try to buy a nice watch for less than $9000 retail.  It is incredibly difficult.  Watches that were in production 10 years ago now routinely cost double for the same piece.  10 years ago, a Patek perpetual chrono cost about $35,000.  Now $135,000.  Most of the interesting stuff starts at around $100,000.  This is insanity.  Brands need to control their costs better and maybe stop lining their pockets so thickly.  This can only continue for so long before a critical mass of collectors realize things have gotten out of control.
  2. Explore new sales channels.  The internet is the most power sales tool in history.  Sorry for my retailer friends, but why are retailers getting the same margins they were before that marketing and sales channel existed?  In many cases, why are they even necessary?  Want to cut costs to bring pricing back to earth?  Here’s a great place to start.  The sales pipeline is stuck in the past.  The answer is not just to open up fancy brand boutiques and keep the margin, the answer is to streamline and cut prices.
  3. Create products with soul.  Aside from a few independents and the occasional big brand release, most new watches have no soul.  A mechanical watch either has to be art or extremely practical.  If it’s over about $10,000 you can toss practical aside.  So what we have is an industry trying to make art, but 95% of the artists are untalented dilettantes who in most cases don’t even understand what art is and that it is their job to make it.  To make a watch for $200,000 where things flip around and at precisely 8am it shoots water in the wearers eye and says “I love you” is not art.  To make something just “because it’s cool” is not art except for a very very small number of true tastemakers who have such a solid grasp of the product that it works.   I’m sorry, but most of this stuff is shit.  The product people in the industry need to take a hard look at why mechanical watches exist and what they can truly offer of value – not repetition or novelty.

Will we see this at SIHH next week?  Of course not.  And so I wish my friends – the good guys – good luck at the show, and I will enjoy reading about it from Los Angeles.