The Swiss take their watches very seriously. Strolling around Geneva, Switzerland's watch-making capital, there are Rolex, Patek Phillippe, and Tag Heuer stores on nearly every block, usually with a little gathering of people standing behind velvet ropes waiting to get in... like a club.
A very expensive club. These watches (or time pieces, as everyone in the industry calls them) traditionally appealed to older, wealthy collectors--connoisseur types who were willing to drop thousands of dollars on a watch.
This was a small, sleepy, very select industry.
But a couple of years ago, luxury watches got swept up in a strange combination of global events and market fads that took it on a wild ride. Fueling that wild ride — something one would probably never associate with an artisanal industry dating back more than four centuries: cryptocurrency. More on that later.
Watchmakers at Work
In the small Geneva-based workshop of luxury watch brand Maximilian Büsser & Friends or MB&F, a row of watchmakers is hunched over wooden desks, squinting through black jeweler's loupes at tiny networks of gears and springs.
Henri Porteboeuf, 36, is using a tiny vice to press yellow jewels the size of poppy seeds into a metal strip that will decorate a watch face. He says to do this kind of intricate work requires total focus.
"It's the flow," he explains. "I think that's how you say it in English. I like the flow."
To help get into the flow, Porteboeuf listens to jazz on his iPhone. Other than that, though, his job doesn't look much different than it would have more than 400 years ago, when the Swiss watch industry started.
Today he's working on a special watch, the Bulldog.
A wild looking watch
The Bulldog is a wild looking watch–a colleague of mine said it looks a little like the Millennium Falcon. The face is encased in a glass bubble, it has spinning domes that glow in the dark, little metal "legs," and even a tiny set of metal jaws that opens and closes.
However, there's nothing tiny about the bite the Bulldog will take out of your wallet. It retails for $100,000. It's one of the company's best-sellers and it almost never saw the light of day.
Is this good timing?
Charris Yadigaroglou is head of marketing at MB&F. He says the Bulldog had been in development for years, and had long been set to launch in March 2020. Just as they were getting ready to release the watch, lockdown started shutting cities down all across the world.
"We debated endlessly whether we should launch it or not," said Yadigaroglou. "It's like, the world was collapsing and are we going to launch a crazy watch called the Bulldog that costs $100,000? Right now? Is this good timing?"
As it turns out, they couldn't have timed it better. The Bulldog sold out almost immediately. Even as COVID was shutting the world down, the luxury watch industry was having a renaissance.
When the market really took off
For decades, luxury watches had been a shrinking market mostly catering to older, wealthy collectors. But in the early part of the pandemic, even as millions of people were losing their jobs, another group was coming into enormous wealth: cryptocurrency investors.
"They started to buy watches and that's when the market really took off," explained Oliver Müller, an analyst with LuxeConsult, who advises banks and collectors on luxury watches.
"I can tell you, never ever in the 25 years I have been in the watch industry, we have never experienced experienced such strong growth," said Müller. This is any industry's dream: an influx of young, wealthy customers sparking a global craze for your product.
Demand took off... and almost immediately hit a ceiling.
Watchmaking is slow
Here's the thing about luxury watchmaking: It's slow. Each watch has hundreds of parts, many sourced from different, independent makers. Each part is meticulously checked for quality by a special team before it goes to the watchmaker to be assembled by hand.
Demand for luxury watches was skyrocketing during the pandemic, but supply couldn't rise to meet it. The little artisanal industry was overwhelmed and couldn't meet the moment.
This seemed tragic: the luxury watch industry had this amazing growth opportunity but couldn't grab it because the very thing that made the watches valuable also made them difficult to mass produce.
12 year waiting lists
Even the big players like Rolex and Patek Phillippe started selling out of everything. A lot of the most desirable, classic watches (known as "Grail watches"... as in The Holy Grail) sold out many times over. "We had waiting lists of 5, 6, 7, 12 years," said Müller.
Waiting lists like that will often discourage would-be buyers. But in the case of luxury watches, the waiting lists drove them into a frenzy. "Rich people, if you tell them they can't get something, they're ready to pay any price to get it," said Müller.
The price goes up and up
When a lot of people want to spend a lot of money, you can bet the market finds a way to oblige.
"People get frustrated," said Müller. "They revert to a secondary market where they think they might buy, easily and quickly, the watch of their dreams and..the price goes up and up."
An industry of watch-flippers was born. Speculators were snapping up watches as fast as they could and reselling them for mind-blowing mark-ups.
One of the most striking examples of this was a watch that Patek Philippe made in collaboration with Tiffany. It retailed for around $50,000 and sold at auction shortly after its release for $6.5 million. Jay-Z was spotted wearing one.
Luxury watches were no longer a niche product for ultra rich collectors. They were a cultural force and a lucrative investment.
For the Swiss watch industry, this was a bittersweet moment. Its product was suddenly wildly popular and highly valued, but watchmakers were also leaving billions of dollars on the table.
A lot of the money that could have been going to Swiss watch companies was going to speculators and middlemen. A demand increase like this will come along once a century, if you're lucky. It arrived! And the Swiss watch industry could take full advantage.
Or so it seemed...
The crypto crash...
And then crypto crashed, the markets crashed and the demand for luxury watches cratered overnight.
But here's where things get truly interesting. The same thing that had held the watch industry back from expanding to meet the explosive new demand probably saved it.
If Swiss watchmakers had been able to ramp up production to meet the booming new crypto-fueled demand the market would have been flooded with luxury watches with no buyers when that demand suddenly vanished.
Instead, when the crypto buyers vanished the waiting lists just got shorter, said Müller.
"Even if some watches lost 30- 40% of their peak value, they are still at a very high valuation: three, four times the normal retail price," he said. "Watches have demonstrated that they are quite resilient."
Swiss watch exports hit a record $22 billion last year (up more than 30% from before the pandemic) and they are on track to set another record this year.
Müller does admit he's worried what will happen if there's a global recession. Watch exports are already down sharply to the all-important Chinese market and exports to Russia have almost stopped entirely since the war with Ukraine began.
Still, Müller says a new generation of people have discovered watches and he's hopeful that will pick up some of the shortfall.
Like a Heartbeat
At MB&F there's still a 6-to-18 month wait for the $100,000 Bulldog watch. But watchmaker Henri Porteboeuf is not rushing. He says finishing a watch is a very special moment. "It's like having a baby," he laughed. "Because the movement is like a heart beating. For me, it's like that."
That might sound overly sentimental, but the sentimentality and human-ness of watches is why MB&F's Charris Yadigaroglou thinks they have such a powerful appeal right now and why (I had to ask) people pay such astronomical amounts of money for something that does what all of our phones are already doing.
"The fact it tells time is not essential at all," said Yadigaroglou. "It's an excuse. The time on your iPhone is infinitely more precise. With a mechanical watch there are gears moving, it's analog. And this is something which I feel a human being needs to compensate all this super high tech stuff we have around us."
A small uptick
The last couple of years did not leave the company, or the industry, unchanged. MB&F is increasing production a bit to take advantage of the new demand. They will go from making 300 watches a year to about 350.
And prices do appear to be coming down. Recent reports say a lot of the opportunistic watch flippers are now unloading their supplies. That has pushed prices down as much as 20% for some of the most expensive models.
This is not to say luxury watches are approaching affordability.
I noticed as I was touring MB&F that nobody I met was wearing a watch. When I asked about this, the whole room erupted in laughter and everyone started talking over each other in French and English.
I finally realized people were saying they could never hope to buy the watches they spend all of this time and love creating, crafting, perfecting and selling.
"We cannot afford our own watches, honestly," laughed Yadigaroglou. "No, seriously. We're talking about watches that start at $50,000. We love the watches, but there's no way any of us could own them."