A (0:00)

The book that I'm going to talk to you about today is nearly impossible to find. It was first published in 1946. There's only a thousand copies ever made. It's called Rolex Jubilee. And then the subtitle is actually in Latin, but when you translate it from Latin into English, it literally means go with me. And so it's a tiny four volume, like History of Rolex. And volume one was written by Hans Wilsdorf, who is the founder of Rolex. And so he tells the founding story of Rolex in his own words. There's a lot of things that'll surprise you in this story. The first one being that he was a sole shareholder of Rolex. But the second one was that he was an orphan. So he goes right into his early life and in one sentence he sets the entire stage for us. He says, I was born on March 22, 1881. My mother's early death was soon followed by that of my father's. And at age 12, I was an orphan. And there's a decision made by his uncles that is going to change the trajectory of Hans entire life. And they decide to sell the family business to pay for boarding school for the kids that are left behind. So he says, my mother's brothers decided that it'd be wiser to liquidate the prosperous business which had belonged first to my grandfather and then later to my father, believing that in this way we children could be better prepared for life without having to call upon anyone for help. His life would have been very different without his uncles. And that decision to actually liquidate the business and then take that money and actually send them to boarding school, which I'll get into, why that's so important for the founding of Rolex in one second. But he talks a little bit about the fact that one of the best things his uncles ever did for him and his siblings was that they taught him self reliance. Keep in mind the words I'm reading you. Hans is writing them. He is in his mid-60s. He's looking back at his life. And so he says our uncles were not indifferent to our fate. They made me become self reliant very early in life. Looking back, I believe that it is to this that much of my success is due. Now this part is really important. There's gonna be a few times where I'm gonna talk to you today about things that happen early in Han's life. He doesn't understand. So you and I talk about this over and over again. The idea that the world is a classroom like the books that you're reading, the knowledge and skills that you're acquiring, the relationships you're building, you have no idea that the opportunities that they unlock in the future, you just can't possibly predict it. And so they're gonna put em in a boarding school. So I'm gonna read this to you and I'm say why this is so important to the founding of Rolex. Highly likely that if he didn't learn all these languages at this boarding school that there wouldn't have been a Rolex or his, his career definitely would have been vastly different. I'll explain why in one second. Just says we're placed in a boarding school of excellent repute where we received that sound education so necessary to the man who has to make his own way in the world. I showed a particular liking for mathematics and languages. The languages is so important. And this inclination drove me to travel and work in foreign countries. So this education in multiple languages I would argue is maybe the basis for his entire career. It will lead directly to his discovery of the opportunity on which his life and career will then be devoted to. And it happens relatively early in his life because at the age of 19, he, Hans is going to start working in the watch industry at 19 and he will do so for the next 60 years until his death. Now when I say it's the watch industry, this is the thing that blew my mind because everybody knows the brand Rolex. Without a doubt one of the most valuable brand names in existence, right? But there was no such thing as a wristwatch industry for men at the time that Hans is, when he's 19 years old. This is the most, one of the most shocking things about me doing re doing all this reading and research. It's one I've been repeating all week to, to friends that I've been telling about Hans. And I believe it's to be one of the most inspiring parts of this entire story. And I'll, I'll go into that but. So at 19 years old, right, he goes to this little city in Switzerland to, he has a job. He's going to work as an English correspondence and a clerk with a Swiss company called Kuna Corton. Now watch how this all ties together. So Kuna Kortin, it's a Swiss company, all they do is they export Swiss pocket watches. The watch industry, like 99, maybe more than 99% of the watch industry at this time in history is pocket watches. And so this company, they act as import agents. This is really important because he spoke because at this point, Hong Kong. Han speaks English, German, French. I think there's a, there's a few other languages that he actually speaks. He gets a job where he handles the business correspondence of this relatively large import agent for swish watch manufacturers. This business is operating in a ton of different countries and a ton of different languages. So this helps him get a really good understanding of international strategic marketing. And I'm not sure there's a better form of education for a young person learning business. Like when I was reading this section, it reminded me exactly of what, like a young rocket. So Hans is 19, where we are in the story. Rockefeller gets a job when he's like 16 or 17 for this produce commission firm in Cleveland that's called Hewlett and Tuttle. And as a result of that job, Rockefeller learns so many valuable skills. He understands bookkeeping, he understands contracts, he's looking at shipping, he's learning about margins, he's learning skills that he's going to use for his entire career once he starts building his own company. And when you're in a position like Rockefeller was in Ohio or, or like Hans is in Switzerland, like, you can learn so fast. So in the case of Hans, like he's going to start working here at 19, by 25, he starts his own company. That's the company that's going to turn into Rolex. And so Hans describes his time of his life. He says it was a big concern, exporting about 1 million francs worth of watches annually. All grades of watches were dealt with, although only a small proportion was manufactured by the firm itself. So I need to translate that for you. In the late 1800s, early 1900s, when you hear the word concern, we would call that a company. Today they would call what we would call a product, they would call an article. So this import agents business for Swiss watch manufacturers was a pretty big business is what he's saying. And the next sentence is why I said that decision made by his uncles to educate him, to send him to the best school. That school teaches them multiple languages. Why the opportunity to found and develop Rolex was unlocked many years in the future. And he says my work there provided an excellent opportunity to study the watchmaking industry closely and to examine every type of watch produced both in Switzerland and abroad. So a few years later, he's going to switch to another firm and move to London. And this is what he said about this time. And he's only going to last two years before he starts his own company. Two things struck me most forcibly. That's interesting writing. Most Forcibly about my new employers. On one hand, their commercial competence, and on the other hand, their lack of specialization. And now, looking back after having done all this other additional reading and research, that sentence is really important to me because he's talking about they are very commercially competent, right? In other words, they have their shit together, they're running a great business. Hans will do the same. But then he says their lack of specialization. So this is something I've been talking about nonstop this week. That is, frankly, very inspiring to me. And you see it over and over again in the stories. I think that's why reading business biographies is far superior than reading just business books. Because in every single life of an entrepreneur, you, like, grope your way to what you're doing. There's all these, like, false starts, dead ends. You can just see as you go through not only Hans life, but everybody's life. It's just like they're trying to. They figure it out a little bit along the way. And they also ape and copy right? People that came before them, experiences they had before them. So when he starts out, this is the. One of the most inspiring things because, like, Rolex is so unbelievably focused today. They know what they're great at and they focus relentlessly on him. But in the very beginning, Hans had no idea. And what I mean by that is he had, you know, I don't know, 15 different brand names. He wasn't making watches at all, he was just reselling them. He was really a gifted marketer, which I'll get to in a minute. When you think about lack of specialization, is this like their focus on luxury, Royal excellence, focus on luxury watches? He was selling cheap watches, you know, mid grade watches, really expensive watches. He is constantly experimenting, using that action as a form of education, right? It gives him information back and then you see him adjust slowly over time. And it is through that process that he uncovers or discovers the. This phenomenal opportunity. And this is when he describes founding the company that's gonna turn into Rolex. I soon gained confidence in myself and in 1905, at the age of 24, I decided to set up in business, feeling that my training and education had prepared me to stand on my own. And so he starts this company called Wilsdorf and Davis. And he says they had, we had modest capital at our disposal. So Will, this is fascinating too, about again, this, this constant iteration that you see throughout the life of Hans Wilsdorf. So Wilsdorf and Davis was. They were not watch manufacturers. They purchased watches from Swiss Manufacturers. Think about his experience that he had. He worked for two firms that did exactly this. I was like, oh, I can do this too. Right? Let me draw another analogy to Rockefeller. Did Rockefeller jump from Hewlett and Tuttle, this produce commission house into Standard Oil? No. What did he do? He quit and started his own produce commission house. And then that opportunity led him to this accidental discovery of realizing, hey, I can actually become one of the first oil refiners. So, again, this is fascinating. So Wilsdorf and Davis, they're not watch manufacturers. They purchase watch watches from the Swiss watchmakers, right? From Swiss. I keep saying swish. I don't know why I'm adding an H on there. From Swiss manufacturers and then would sell them to retailers. But I love this idea where he starts out, he's just got an office. He's got no money. So what are you going to do? Like, you can't make them yourself. You just got to sell it. When they're talking about they're importing watches, they're talking about pocket watches. If you only remember one thing from this episode, the only one thing is this is like the power of belief. The reason Rolex is what it is today, the reason that we're talking about Hans, you know, what, 80 years after he died, something like that, it's because his belief, this belief in the wristwatch for men, which did not exist when he started believing in it. Hans is a huge collector of pocket watches, which I think is also important. He's working in the industry. He collects pocket watches. When you collect something, when you see something, you see its flaws and you see what should be improved. You see that with the way Hans was thinking about developing a new market for wristwatches because he saw the deficiency of the pocket watch industry, because he was he so intimately involved in it. And so he's describing what the state of this industry was when he was 24 years old, when he started his first company. Says at this period, the wristlet watch. So this is hilarious. They do not call them wristwatches, right? They called them either wristlet watches. They would also call them bracelet watches. And the reason they call them bracelet watches, because at this time, only women would wear wristwatches. And so he talks about this. The fact was, for men, the wristwatch or the bracelet watch was an object of derision. The idea of wearing a watch on one's wrist was at this time thought contrary to the conception of masculinity. One guy remarked that he wouldn't be caught doing such an unrefined thing meaning wearing a watch on his wrist. He said you'd be likely to catch him in a dress as you would to be wearing a wristlet. And this sentence says everything. Prior TO World War I, wristwatches for men did not exist. That blew my mind. Prior TO World War I, wristwatches for men didn't exist. And the reason that people that men in World War I in wore wristwatches, they were known as trench watches. And they did that so they could coordinate movement on the battlefield. That is the very beginning of the wristwatch industry for men. And so Hans talks about the fact that, hey, you know, of course, if the public is skeptical, then of course the existing players in the industry are going to be skeptical. I think this is why it's so important that he was somebody young. Usually people younger coming into industries, they, they see all the things that all the flaws that they could fix. So he says watchmakers all over the world remain skeptical as to its possibilities, meaning the wristwatch for men, and believe that this newfangled object was bound to prove a failure. Their argument against the wristwatch were the following. And they're legitimate arguments. These are essentially the way I. You would think about what he's describing. Here is something you and I have talked about over and over again. That problems are just opportunities and workflows. Business is problems. So the best companies are just effective problem solving machines. And so they're like, no, you have all these unsolved problems. First, the mechanism required by this type of watch must of necessity be small and delicate and could therefore never withstand the violent gestures of the hand and arm. Second, dust and water would rapidly spoil the mechanism. He's going to solve that problem too. Third, accuracy and regularity of working could never be attained with such small, so small of a movement. That's a third problem that he is going to solve. Back to Hans. In spite of all of this, I kept my faith in the wristlet watch and was determined to see what could be done. Now this is the crazy thing. So he's writing that as a 65 year old man I found a quote when he is 33 in 1914. This guy really believed in this. He says my personal opinion is that the pocket watches will almost completely disappear and that wristwatches will replace them definitively. I am not mistaken in this opinion and you will see that I am right. That is insane. He is 33 years old when he's saying that. So he says the task I undertook meant the overcoming of enormous difficulties. He just laid out all the Problems that were preventing other people from doing this. And yet today, after 40 years of striving, it seems to me that I have surmounted them. And I believe that in doing so, I've contributed to the development of the watch watchmaking industry in general. And then it gets even more fascinating because then you could tell he's thinking like an entrepreneur. You know, he wanted to build wealth, as you can imagine an orphan wanting to do so, right? And so such a he, he identifies like, well, this pocket watch, the pocket watch industry is never going to grow because how are we using it? At the time, pocket watches were passed down from father to son than from son to grandson. And they're also hidden in your pocket. And Hans is looking at this is like, this is a big problem. And so what he realized is like, if he could take it out of the pocket and put it on your wrist, right, there's going to be more wear and tear, but you're also going to see it. So he says the wristwatch was bound to bring about a certain revolution in the industry. It would have to cause an increase in sales, not only on account of its novelty, but also because by its very nature, it called for more frequent renewal, more exposure to damage than the pocket watch. That is actually really shrewd observation. It's just like, well, you're going to buy one pocket watch and it's going to last for 100 years. No one sees it. It's protected. Of course, this, this industry is going to be so much smaller than the wristwatch industry could be if we can just convince men to wear these damn wristwatches. And then he also had, like, this shrewd insight to human nature and human psychology because, you know, it's hidden in your. You don't see the product being used. But now if I take that product that, that was hidden in your coat and I put it on your watch, what happens becomes a fashion accessory. And so people see it. It helps the product spread. And so he says the wristwatch is the type of product of which each individual likes to have, not only one, but several. And then this may be the most important sentence I read from Hans or about Hans, because this is just an incredible sentence, because Hans had the highest order bit that other people in the watch industry didn't. And that was belief. And this is what he said. I had very early realized the manifold possibilities of the wristwatch. And feeling sure that they would materialize in time, I resolutely went on my way. Rolex was thus able to get several years Ahead of other watch manufacturers who, who persisted in clinging to the pocket watch as their chief product. This is something that cannot be skipped over. So Steve Jobs had this idea and I heard him say it right before he died. This is like two years before he died. He was giving this interview. I think he was on stage with Bill Gates, if I remember correctly. But he talked about the highest order bit. And so I actually had to look that up. What did that mean when I heard Steve said it? And he's using a computer reference, he says in computing, the highest order bit, also called the most significant bit, is the bit position in a binary number having the greatest value. And so in Steve's case, what he's talking about on stage is the fact that you gotta love what you're doing, you gotta have passion. Because if you're doing anything that's worthwhile, it's so difficult that if you don't love it, you don't have passion. You're gonna quit. Because the people that quit doing things that don't love, they're sane people. And that this love and passion for what you're doing can make you in some ways irrational. And that irrationality is rewarded because you just don't give up. You have this like dogged determination. So I understand. Who am I going to argue with, Steve? But I don't know. I obviously believe that I'm like completely obsessed with what I'm doing. But I think actually the highest order bit, it's belief. It's belief in yourself and it's belief in your idea and in Hans Story, that's certainly the case. It wasn't passion and love. It was belief that he saw an opportunity and he was willing to pursue it and to actually change the entire industry. And you know what I thought of when I read this section? The first thing, this, I mean, this happened instantaneously too, which is fascinating because this is one of the most important things. I thought of this paragraph in Ted Turner's autobiography. This is episode three 27. And it's just remarkable because Ted is looking at the landscape, right? He's, he's like, I'm going to make the world's first 24 hour news network. That idea led him to become a billionaire. But he's analyzing this, he's like, wait, I don't understand this. Why am I seeing the opportunity that no one else is? And so this is from. This is the paragraph that I thought of when I was reading this. Hans describing the opportunity that he saw. And this is Ted Turner writing in his Autobiography. Clearly, the companies for whom the economics of a 24 hour news network would have made the most sense were the big three broadcasters, right? So abc, cbs, NBC. Why? Because they already had most of what was needed. They had studios, they had bureaus, they had reporters, they had anchors, they had almost everything but a belief in cable. Ted Turner had the highest order bit. He didn't have a studio, he didn't have the bureaus, he didn't have the reporters, he didn't have the anchors. He'd have to go and collect and build that. But he had something they didn't. He had a belief in cable. And the crazy thing is like, there's a great description of this, I gotta read this story, cause it's hilarious. Ted Turner's 38 years old when this story happens. And this guy interviewed in his autobiographies saying that they just happened to wind up being on a plane together. They wind up sitting next to each other and he says, as soon as we get airborne. Ted pulls out a copy of the Delta Lines, Delta Airlines magazine. He turns to the map of the United States and starts explaining how he's going to become a billionaire. And he quotes Ted, here he goes, make sure you buy my stock. I'm going to be a billionaire and why. And he just lays out this entire thing. And then the story ends perfectly. He says his enthusiasm was so genuine and so infectious that I'll never forget it. So go back to that. This is what, what a sentence. I had very early realized the manifold possibilities of the wristwatch. And feeling sure that they would materialize in time, I resolutely went on my way. Rolex was thus able to get several years ahead of other watch manufacturers who persisted in clinging to the pocket watch as their chief product. If I remember correctly, Ted Turner had like 11 year head start on everybody else. It's absurd. Okay, so how does he start acting on this belief? I think one thing that's important to understand in the story of Hans Wilsdorf is the fact that he understood the opportunity better than anybody else and he would invest heavily in developing the technology that he needed to bring it to fruition. And so again, it goes back to this idea that the whole world is a classroom. That you never know how your previous experience, the things that you're learning will be used in the future. This, you know, knowledge, skills, relationships, all these things compound. So, you know, years before he founds his own company, he's working at that firm in Switzerland and he hears about this guy named Herman Egler and Herman's innovation that he made in 1902 was these movements that you need inside of a watch. He made movements that would work in smaller watches. And so Hans is going to learn this many years before he's able. He has actually the company to actually use it. But he says my interest had been roused by this innovation as the mechanism created by Aegler. Right. Had proved very successful from a technical point of view, as well as being accessible in price. So then after founding my firm in 1905, I go and place an order with Egler. This was the first step forward in our climb to success. So I need to bring. There's a bunch of other things I read to prepare for this podcast. I'll leave all of them linked down below. I pulled out a bunch of different books, but this podcast my friend Patrick did, it's one of the best business podcasts I've ever heard in my life. I don't even know how many times I've listened to it now. It is an episode of Business Breakdowns. I will link it down below. But if you just go on your podcast player, look for Business Breakdowns and then search, just search. Rolex. It has a great name, too. Rolex. Timeless excellence. My friend Patrick interviewed Ben Clymer. Ben's the founder of Hodinkee. He got access back in, like, 2015. He's one of the first people Rolex ever, because they're super, super secretive. But he was one of the first people to actually go and tour all of their four manufacturing facilities. So he wrote this fantastic article that I also reread. And then he talks a lot about the history of Rolex and then how they operate today. But the reason I need to bring this up is because Aegler is a very important name in the history of Rolex. From the very start of Rolex, Aegler is actually the one manufacturing the watches that were sold as Rolex watches. Buying these movements from Aegler is what Hans describes as his very first step forward in our climb to success. Now, the crazy thing, the reason I bring this up is because I also love, like, an old school, keep your word mentality. So Hans and the founder of Aegler had a handshake deal for 70 years. And the deal was that Angler would make movements solely for Rolex. And when they say there's a great line in the podcast episode when he's like, when I say an actual handshake deal, I mean a handshake deal. There was nothing on paper, there was nothing in writing all the way up until 2004, when Rolex finally buys Angular, undoubtedly, undoubtedly at that point in 2004, Rolex is already making, selling, you know, billions of dollars worth of watches. That's nuts. And I just love that, you know, two founders of companies coming together say, hey, we're going to work together. I'm a man of my word. We're going to seal this with a handshake. And that relationship and agreement was unbroken for seven decades. That's one of the coolest things I've ever heard. And so Hans is going to describe. So you have the manufacturing and the making of Rolex watches are what's going to be sold under Rolex brand, which I haven't even got there yet, is going to happen in Switzerland. He's still in London. So the design and the sales is separate from the manufacturing. And so he would travel from London to Switzerland several times a year. And he says, I would bring with my collaborators new and personal ideas, demanding that they be realized in this way. Hundreds of models were conceived and launched all across the world. He's selling this again. This goes back to the world's entire classroom. You have no idea how you're going to use all the experience you have. Remember, he was, he. He worked for an importer. They were taking Swiss watches and sending them everywhere. So he's just doing the same thing now with his own products. And as we'll see, he's a master marketer, which I'll get into in a minute. But he's having immediate success. This is how both a new fashion and a great commercial success sprang from an apparently foolhardy idea. He's referencing the fact that everybody around him thought what he was doing was silly. Men are never going to wear these watches. Soon we were placing orders for tens of thousands, and to the uninformed must have appeared extremely audacious young people. When I read that, I thought of one of my favorite things Winston Churchill ever did. He had a personal motto that he'd repeat. He would say aloud to himself, always, more audacity. Hans, when a young man was, he was at many things, but one of the things he was. He was definitely audacious. I love the idea. It's like, these guys are crazy. They are extremely audacious young people. And so at this point, I need to be clear about something. This is not Rolex. He's selling under a ton of different brand names. He's eventually going to realize, hey, I don't want to just be sit in the middle, right? I don't want to be A middleman. I want like all the value creation is going to be if I own my own brand. And he, this is what I meant about this, like constant iteration, this trial and error. I'm going to read some of the brand names he had. They're, they're fricking terrible. And so at this point, pre, you know, doubling down on this fantastic idea of Rolex, he hasn't discovered that yet. So what he's doing is like, there's a bunch of other brand names that he's, he's experimenting with. He had this idea. This is hilarious too. Cause I was reading about this because, you know, Rolex is now there's, I don't even think there's such thing as a cheap Rolex. Right. And so he had this idea. He's like, well, I can supply a watch for every pocket. And what that means is like, let's say you can order. You know, I'm making these numbers up, like a $5 watch or a hundred dollar watch or $2,000 watch. It's like, I want to, I'm going to serve every single aspect of the market, which obviously they don't do anymore. This is his iteration is like learning from experience. I thought the note of myself was actually made me chuckle because I've done a bunch of episodes on these, the early automobile industry founders and I go, oh, Hans was GM General Motors before focusing in on Ferrari. Like, that's the way I think about it. And so listen to some of these brand names. I love this because I, you know, you've heard me struggle with naming stuff all the time. And think about last week Steve Jobs or the week before Steve Jobs, thinking of calling the imac the Mac Man. Like, it's just terrible ideas. So I, I take solace and inspiration with the fact that like, oh, everybody struggles with this stuff. And so even, you know, Rolex is one of the best names I've ever heard. One of the best brands that's ever existed. And before that he had Unicorn, Rollco, Elvira, Roll Watch Company, Falcon, Gen X, lonex, Rolex, Rolexis, Lexus, Hoffex and Wintex. He even used different variation on the Rolex name itself. He had the Rolex Watch Company, he had the RWC Limited and he would even combine Rolex with other brand names. And this again, this is where he just realized, this is a terrible idea. I'm trying to sell every single price point on a watch. So there was one Marconi named after the inventor of the radio. And so he had one called The Rolex Marconi. And all that did was allow people to think that they're buying Rolex, but they're getting it at a cheaper price. And so it's through all this trial and error where Hans realized, like, oh, this is a terrible idea. I'm cannibalizing sales. Like, this doesn't make sense. I'm going to focus. And so this is where in 1908, he's like, okay, I'm going to have, like, one single brand name and a brand that I can invest in it for the long term. So he says it was time to think of giving our watches a name of their own, a trade name, what we would call a brand name, A brand name which could be inscribed on the dials. I was well aware that unless I succeeded in making our watch known under its own name, that my prospects would be limited. He would just be a middleman. Right. And so there's actually a letter that he wrote in 1958 where he's talking about how he came up with Rolex. He had a series of traits that the name had to have for him to select it. And so he said, I needed a short name. It had to be five letters or less because it has to be able to fit, it has to look good on the actual watch. It has to be easy to pronounce in every language, it has to have a good ring to it, and it has to be easy to remember. And so when I was thinking about this, it's like how great he did in selecting the name Rolex. If you listened to last week's episode about how Steve Jobs sold, one of the ideas, main ideas from how Steve Jobs communicated, how he sold his ideas to people was that if you can make them ideas easy to understand, then they're easy to spread. Ideas that are easy to understand are easy to spread. And I think you see an echo of that idea with Hans naming and actually picking like, this is the brand that I'm going to build and the one I'm going to invest in for the rest of my life. So now that he has a name, he does something that's really, really smart. Again, this is very uncommon for watchmakers to advertise directly to the public. Not only does he do so, but he Rolex continues to do so. So he says, I decided to launch the Rolex trademark by means of an intensive advertising campaign. This policy entailed an annual expenditure of more than 12,000 British pounds, not for one year alone, but for several in succession. So I want to go back to how important this is. I want to go back to that business breakdowns episode on Rolex called Timeless Excellence. So it says Rolex was effectively the first people to have real marketing dollars put behind a watch. Rolex did this in a concentrated way. And they have continued to do it in a way that is simply just unmatched by others in their industry. Rolex has been the number one brand for watches in the United States, historically speaking, from the 1950s to today. Now, I want to fast forward way ahead in the story many, many years after Hans died, because I think this, this idea is so important. And I'm going to show where I've seen this idea. Other people use this idea successfully as well in a different industry. So go back to the transcript from this episode. The financial crisis of 2008, all the other brands, the competitors, you know, Omega, Tag Heuer, all these other. The brands that are, quote, competitors to Rolex. When the financial crisis happens in 2008, they pull back on their marketing. Rolex did not. Rolex put the pedal down. And it was really 2008, 2009, 2010, which really elevated Rolex in the United States to a level that it is today. If you speak to them directly, meaning Rolex, the company directly, they'll credit that period as a turning point for them in the U.S. now, what is incredible is Izzy Sharp, who's The founder of Four Seasons, this is episode 184. Episode 184. If you haven't listened to it, you should. His autobiography is Incredible. Iz Sharpe did the exact same thing. This is what he says in his autobiography, right? Founder, Four Seasons. It's tempting during a recession to cut back on consumer advertising. At the start of each of the last three recessions, the growth of spending on such advertising has slowed by an average of 27%. But consumer studies of those recessions have showed that the companies that didn't cut their ads had, in recovery, captured the most market share. It's exactly what happened with Rolex in 2008, 2009, 2010. We did not cut back on our ad budget. This is now Founder Four season. We did not cut back on our ad budget. In fact, we raised it to gain brand recognition, which continued advertising sustains. It is much easier to sustain momentum than restart it. So think about how important that intuition was. He's like, well, I'm starting a new name. All these other watchmakers, they're not advertising. Like, why don't we. Why, why wouldn't we advertise? It doesn't make sense. Other Products are advertised. We should do that. And I'm going to do an intensive. Listen to the words he used. I'm going to do an intensive advertising campaign. And not just this year, but several years in succession. And then. This is nuts. I know I keep saying that because this whole story is nuts, because the industry today, in large part to the. To what Hans and Rolex did is completely different. So at this time, you have your own watch brand, but you don't have your own stores. So you're selling to retailers at the time. The watch brands don't have the names on the watches. The retailers would buy the watches and put their name on it. And so Hans talks about being one of the first people. Like, no, no, no. Like, I'm gonna sell you my. I'm gonna wholesale my watch, and you're gonna put my brand name on it, not yours. I think it was like a decade or a decade and a half, if I remember correctly, where he had to fight. So he said something like, you know, when I first started doing this, one out of six, they would agree, like, one out of six watches could have my name on it. Then it was 2 out of 6, then 3 out of 6, and then finally 5 out of 6. And insisting on doing this is actually really, really important because he also is a perfectionist. And so he realizes, like, oh, quality. I said in the Steve. One of Steve Jobs episodes I just did that quality was his survival strategy. I would say for Hans was this exact same thing. He's determined to produce the best wristwatch possible. And we'll go into how accurate and the ways. He was really smart, like, marketing around that too. So he thought that was the key to success, like, I just have to be the best possible. And he's not going to be able to do that unless customers demand that they get a Rolex. And not just same watch, which is just renamed by whatever shop they happen to be buying it from and insisting that the name is seen because before the brand name could be seen inside the watch. But no one, the customers are not opening up the watches. And so I think this idea is really, really important. I'm going to read a summary of this entire section to you. He also realized that he would get better orders and more control over the wholesale price of his watches if he could build up demand so that customers would go in the shop and ask for and insist on a Rolex watch by name. By his branding and advertising campaigns, Hans effectively turned the tables on the retailers. No longer would he have to approach retailers and Ask them to stock his watches. Customers would demand Rolex branded watches and the retailers would have to come to him. So as you already know, I'm obsessed by these people that identify hand pull handful of principles. They know what's important to their business and they just execute on those principles. They repeat them for decades. And that's exactly what Rolex did. That's exactly what Hans did. He had essentially three things that. And it took him. What I'm about to describe to you is going to, you know, take two decades maybe to actually fulfill to the degree that he wanted to. Remember, he starts his company back in 1905. The first waterproof watch is one of one of his three tenants. Isn't going to happen for 20 years after that and I think another six years after that till he gets to perpetual. So he has three things he wants. He goes, I want the watches to be precise. Which he, he handles that product, that problem. First, number two, I want them to be waterproof. And number three, I want them to be self winding. And so the first thing he does is like, okay, my watch is again, he's a perfectionist. They have to be the best in the world. So he goes to A and he's like, how can we improve the timekeeping of the watches? And one thing that Charlie Munger says in Poor Charlie's Dominac is that social proof is a form of leverage. And so what Hans does here is very smart. He insists he goes to Aigler and he's like, hey, I want to get certificates of performance from independent testing establishments. And so these are actually like astronomical observatories. They'll test how good these pieces are at timekeeping, essentially. And so there is a letter that Hans writes to Aegler in 1912 and he's like, hey, we need to produce a wristwatch that's capable of achieving an observatory timekeeping certificate. Two years later, in 1914, Aegler actually solves that problem for Hans. And so Rolex achieves the first Class A certificate ever to be awarded by an observatory for a wristwatch. This is what Hans says in his autobiography, Another Red Letter Day. The development of our firm was when a small Rolex wristwatch won a Class A certificate at the famous Q observatory. This was on July 15, 1914. And it was a day I shall never forget. And keep that in mind. He is writing about this 50 years later. And so the reason I brought up what Charlie Munger said is because he uses this social proof, right? Saying, what's funny is I read a bunch there's so there's so many fantastic old Rolex ads that, that were published when Hans was alive. And if you look at them, like a lot of their ads say, like the first, the only. So they'll say like the world's first self winding watch, the world's first waterproof wristwatch. Another ad I found that says the Rolex still remains the only wristwatch in the world to gain certificates at Q. And so if you think about that insistence on this idea to get, to become the first to get the certificate, what happens that makes your ads more effective? It's one form of leverage stacked on another watch. People are busy if they're in the market for a wristwatch, right. They want to have one that's most accurate. And guess what? There's only one brand in the world that has proven it keeps, it keeps time so precise. That went that extra step to get it tested, to get an observatory timekeeping certificate. That is another example of doing as much work as possible for the customers. We talked a lot about the last two weeks for Steve Jobs. Hans is doing the same thing. It just makes it your decision easier. Oh, okay. Oh, I want a precise, obviously you want a precise wristwatch. Oh, these are the most precise. Okay, cool. That makes my, my buying decision so much easier. And so that is in 1914. Now he wanted the, the second part. He's got that three part. He's like, I want him to be precise, I want him to be waterproof, I want him to be self winding. And so this goes back to what I told you about. One of the most important things to understand about Hans is the fact that he understood the opportunity better than anybody else and he would invest heavily in developing the technology to bring his ideas to fruition. And that means he didn't have to invent on himself. He would buy the inventions of other watchmakers and then combine their ideas with his efforts and look at how fast he would move. So there's two inventors, they're in Switzerland, they find, they file a Swiss patent and they create the world's first waterproof seal for a wristwatch. The patent is granted and published on May 1926. Hans buys the patent in July. Two months, 60 days later, he already owns the patent. And what does that mean? He owns the patent? So of course, now this new innovation is only, it's exclusive to Rolex watches. You see how he's stacking one advantage over another. He's like, hey, we have the most accurate wristwatch in the world. Here's proof. Oh, now we have this new technology. Guess who owns the patent? We do. You can only get it here. And so this is the creation of the oyster watch, which still the oyster classification is waterproof. And so in his autobiography, he's laying out like, this is all the problems I had to solve, and this is why I had to solve them in sequential order. And how, once they're solved, gives me just an unfair advantage that no one else has. So he says, on looking back into the past, I find that in developing and extending my business, I have always had certain aims in mind. This course from which I never deviated. Keep the main thing. The main thing is what he's saying. Perhaps these aims can be summarized as follows. Number one, I have to create watch designs suitable for both men and women. Done. Number two, I have to standardize a range of movements of different sizes. Done. Number three. To obtain a high degree of quality, that our watches, whatever the caliber, should be recognized as chronometers by the observatories. That's the Q Certificate. Done. Next. 1. To maintain this high degree of precision by protecting the movements against the penetration of dust and impurities, the danger to which the wristwatch is particularly exposed. And that was why he needed this, this patent, this waterproof seal that proved so important. It's going to unlock his ability to do the perpetual in a minute. But he talks about, he tells us in his own words why this is so important. This last point presented a problem which could only be resolved by protecting the movement against all outside influences. To my technical assistance, my refrain, my constant refrain, was from the very earliest days, we must succeed in making a watch case so tight that our movements will be permanently guaranteed against damage caused by dust or water, heat and cold. Only then will the perfect accuracy of the Rolex be secured. Why am I reading this all to you? Because he's going to tell us why this is so important. This seemingly insolvable problem has been solved. The waterproof case was finally created in 1926. This invention was applied exclusively to the Rolex watch. The fact is, like an oyster, it can remain an unlimited time underwater without detriment to its parts. The name Rolex oyster has become famous throughout the world. And I love that he said that the name becomes famous because it sets up for the next part. How did the name become famous? Well, remember, Hans is a gifted marketer. He takes an event and he's going to do this multiple times. He takes an event that's already getting a lot of attention and inserts his product and therefore amplifies and leverages that existing attention. And so there was a secretary named Mercedes who had swam the English Channel before she was doing it again. He hears about this. So he's like, okay, wear a Rolex oyster around your neck. And so she goes for another attempt. This time she actually fails. She. I think she's. She gets like 10 hours and then her. There's like muscle cramps or something like that. But the fact is, no one, since she'd already done it, that was like kind of irrelevant to the story because it's still being covered. The fact that she was in this freezing cold water in November swinging the English Channel and that the Rolex was around her neck, it survived and kept perfect time for the entire 10 hours. And even after the fact of when she was swimming the channel. So what does he do? He takes that it's being covered and then he runs this gigantic ad. And he has a great line when he describes it. He says that they found the watch was still running as perfectly as it had, as if it had never left dry land. And so he says the event caused a sensation at the time, for the waterproof watch was still unknown to the General Public. On November 27, 1927, I reserved the front page of the Daily Mail newspaper at a cost of a ton of money for an ad proclaiming the success of the first waterproof watch. This was the first step in the triumphant rise of the fame of, of the Rolex oyster. But look at how fast he moves. So this is invented in May 1926. He buys it in July 1926. The next year, he takes advantage of this news event. This, you know, this event that's going to get a ton of idea. Eyes on it. Anyways, amplifies his product. That same year in 1927, he goes and creates these window displays and all of the retailers that are now going to sell his watch. And so this is how he describes it. We devised special window displays that which gave the buying public great pleasure. The chief feature was an aquarium with other plants and goldfish. And in it was plunged an oyster watch, which was the only watch in the world that was as watertight as an oyster. The same year he gets one of the top British actresses and he starts running ads. The ad is one of the top British actresses. Her hand is in like a goldfish bowl, so half of her arm is in a tank. And then you could see that she's wearing the watch. And so he'll use this idea over and over again. And one of the things that Rolex does Is it's phenomenal. Is like they always associate themselves with the very, very best. So another British guy named Malcolm Campbell, he broke like the land speed record in a car like nine different times. And the last time that he did it, Hans learns that Malcolm Campbell had been wearing a Rolex when he broke the speed record. And so then he starts publicizing, he starts running ads broadcasting that during this record breaking land speed attempts, the driver was wearing a Rolex. So Hans is doing this in the 1920s. He does this until he dies. He does this over and over again. He wanted to place Rolex watches on the wrist of as many high profile people, like extreme achievers. He would go around and identify these leaders or these high achievers and he would gift them Rolexes and then they'd be photographed wearing them. Winston Churchill, Dwight D. Eisenhower, before and during that he got elected to the American presidency. And keep in mind, he's giving these watches to Churchill and Dwight D. Eisenhower. This is post World War II. He's aiming straight to the top. You know, the greatest leaders in World War II. There's an actual ad that's run around this time that was excellent. The tagline is men who guide the destinies of the world wear Rolex watches. Chuck Yeager, the pilot who broke the sound barrier for the very first time, he was wearing a Rolex watch. That was an ad. The expedition that first summited Mount Everest, some of the people on the team were wearing Rolexes. The same year they get to the deepest level, another team went to like the. At the time, the deepest level that a human had gone to in the sea I think was like 10,000 or 12,000ft underneath. And so they run an ad from the top of the world to the bottom of the sea. Rolex proves dependable. But this constant positioning of Rolex is the very top. We are only associated with the very best. You go and look at these taglines, they would say over and over again. Rolex, the masterpiece of watch craftsmanship. Sold exclusively by quality jewelers. So I'll come back to the ads because I really think the ad Studying the advertising and marketing of Hans, like he was a legit genius in this domain. But I want to, I'll come back to that. I want to go back to that third pillar that he was trying to do. So he starts off with number one, I want the watches to be precise. He's done that. Number two, I want them to be waterproof. He's done that. Now he says, I want them to be self winding. Which he's going to call perpetual. And so not only is this an example of him, him having to solve another long standing problem, but it is another example of something that pops up in the. That you and I talk about the fact that opportunity unlocks more opportunities in the future. So he talks about in his autobiography, he's like, listen. The creation of the perpetual watch whose movement is self winding and guaranteed to run without interruption. This idea of course had preoccupied many famous horologists of the past. I am not a watch guy. I don't own any watches. My wife has a hard enough time getting me to wear a wedding ring. I'm very minimalist, right? So I didn't know what the hell that word was, so I looked it up. All that is is a horologist is just a person or a company that makes or repairs clocks and watches. They're also referred to throughout history as a clock maker. So what Hans is telling us like, listen, this is not. I wasn't the first person to notice this is a problem. I was the first person to solve it. And I wouldn't have been able to solve it if I didn't solve the waterproofing first. He said the waterproof watch had in itself marked a great step forward towards the realization of this new achievement. An automatic watch can function with the utmost regularity only if the movement is placed in a waterproof case. What he's telling you is oyster unlocked. The opportunity for perpetual. It had been my belief that the watch of the future is the perpetual watch. In other words the automatic or self winding watch. In this field too, Rolex has been a pioneer. Without the waterproof watch, the perpetual could never have been discovered. And so I need to repeat that because it's so important. Without the waterproof watch, the perpetual could never have been discovered. Now something's also interesting. This is like a centuries old problem. They're going to run a fantastic ad talking about like, about how they solve this, this century old problem. And there's a great line that I found in this Rolex blog that talks about this as Inventing the automatic wristwatch that could wind itself was the dream of the ages in the watch world for centuries. Many famous watchmakers had tried to perfect the automatic or self winding watch but none were successful. There's an important principle here for that you and I can apply to our own work and the fact that the more work that you do for the customer, the easier you can make for the customer, the greater the market can be. So before I read this section about why this was so important because, you know, constantly winding a watch is a pain in the ass. It's not convenient. It's not as convenient as a perpetual watch. Steve Jobs put this best when he was talking about the difference of, you know, this hobbyist culture in the early, like personal computer industry. And he says, my vision was to create the first fully packaged computer. We were no longer aiming for the handful of hobbyists who like to assemble their own computers, who knew how to buy transformers and keyboards. For every one of them, there were a thousand people who would want the machine to be ready to run. In other words, if we can make this easier, we can expand the market by a thousand. Turns out he drastically under underestimated that probably expanded the market by 10 million or 100 million or whatever the crazy number is. And so when Rolex creates this perpetual automatic watch, it eliminates the need to ever wind a watch again. And so they run this incredible ad that the headline is Master Horologist's dream is realized 140 years after his death. And it tells the history of this guy, in theory, had invented the world's first self winding watch. But what he actually made was imperfect in practice. And now US Rolex, the only watch company in the world, has perfected. You know, they essentially honor him. They say he was a great watchmaker, maybe, you know, maybe the greatest ever. And now his dream is finally realized 104 years after his death. And it was realized by Rolex. Oh, by the way, do you want one? And then right before Hans dies, he gives this interview and I found a transcript that was translated from French. And I think he does a wonderful job summarizing the impact that his 60 year career had on the industry that he in large part created. I entered the watch business as a young man at 19 years of age. That was 60 years ago when wristwatches didn't exist. Wristwatches for men didn't exist at all. Men wore pocket watches which went from father to son and son to grandson. And the opportunity for the watch industry to grow was extremely limited as sales were very slow. As a young man, I understood it would be very difficult to obtain results in an industry that had little chance to make lots of money. Watches were cheap and the quality was not very good, especially since there was no factory able to produce small watches which was necessary for wearing them on your arm. The wristwatch was the peak of my career. As I foresaw the total development of the wristwatch for the Swiss watch industry, I can say I was one of the initiators in the whole watch industry. I was not only the first to understand the potential of the wristwatch, but I also made personal efforts which contributed largely to the development of the industry. I think it's absolutely incredible to be able to hear the words of somebody who had six decades of experience in this industry. And then the last idea I want to leave you with I think speaks to just how unique Hans and his story truly is. In 1944, Hans set up the Hans Wilsdorf Trust which owns and controls Rolex to this day. He brilliantly set up the bylaws of his trust so Rolex could never be sold or made public, so it would never have to worry about catering to anything but making timeless watches. If you think about it, this means Hans Vision is still very much alive and being executed on a daily basis despite the fact that that he passed away more than half century ago. How many people can you think of that build a world class business and 50 years after they pass away the company keeps going as if they were still running it. And that is where I'll leave it. As far as buying the book, there's I can only find one copy available. It's like $500. But there is a series of other sources that I use for this podcast that I highly recommend. I'll link all these Rolex enthusiast blogs which I thought were fantastic. I also use subjects or ideas rather from the book the Luxury Strategy which I highly recommend. It reads like a textbook, but it's actually fascinating. The subtitles break the rules of marketing to build luxury brands. I'll probably do an episode on it in the future. And then of course what I would do now is listen to that business Breakdowns episode on Rolex called Timeless Excellence. It covers the history of Rolex but also how they operate the business in present day. It'll blow your mind. So I will leave that link down below or you can just search Business Breakdowns Rolex and it'll come up in your podcast player. That is 351 books down. 1000 go and I'll talk to you again soon. I have a few quick updates before you go. If you're an existing subscriber to Founders Notes, you got a new feature. A new feature was added for you this week. I actually combined the Founders AMA private podcast feed with Founders Notes. So make sure that you log into Founders Notes and grab your personal private podcast feed. You'll find 50 short episodes waiting for you. I am likely renaming that Private Feedback to Sage Advice because the private podcast feed is going to be updated with new episodes. And all the episodes that I'm making for that private feed are going to be really short and focused on one topic. These are going to be extremely concise, much more scripted than like a normal founders episode ever is. I want them focused on one thing. So it could be like a subject like leadership. How did history's greatest founders think about leadership, for example, or about like a person, like the best ideas of James Dyson, for example. So you'll find instructions on how to easily set up your private feed when you log into Founders notes. And so there's an idea I want to tell you my thinking about this, how my thinking about this has been influenced by some of the books that I've been reading and obviously the podcast I've been making. And so over the last few weeks, and including the Rolex episode that you just heard, this idea that each product should have a single idea that is expressed clearly that describes why somebody should care. Always written from the point of view of the person using the product, the single idea express clearly should describe what the product does for them. And that two part series on Steve Jobs I just covered, it's like a masterclass in that because he was one of the best in the world ever at doing this and he did it intentionally. There's a lot of quotes in those episodes where he's like, no, you have to work. Start with the customer and then work backwards. And you see how much time and effort he took into just editing his thinking, just making sure that he had the single idea expressed clearly. We see Hans Wilsdorf was the same thing where he's just like, well, what was the most important thing that he wanted to convey to his customers? He's like, we have the most precise watches in the world. They're waterproof, so you don't have to worry about exposing them to elements because they're not in your pocket anymore and they're on your arm and they're perpetual, they're automatic. You never have to wind it. And then he just constantly drilled down and perfected on those three ideas, decade after decade after decade. And you fast forward 50, 60 years after he died. And Rolex is one of the most, the most valuable private companies in the world. And so of course the entire reason that Founders podcast exists is so we can use, we can learn from history's greatest entrepreneurs. Realize, hey, these, these, in Hans case he worked for six decades, turns out over six decades you come up with some good ideas and then take those principles and hopefully apply into what we're doing. So I think I've really narrowed that down and I'll keep working on it. But, like, why does Founders Notes exist? Like, why the hell? This is a private internal tool that I've been using for years. Why would I externalize that and make it available to other people? Like what? Why would you care about that? And the reason is also embedded in the main reason that founders podcasts exist. Because Charlie Munger hits on it. Just like Charlie Munger, just like almost every single person you and I cover, they all spent their very valuable time. These are some of the wealthiest people in the world. Spent their very valuable time studying and learning from great people that came before them. Why? And Charlie Munger said best, he said that learning from history is a form of leverage. And Founders Notes gives you the superpower to do this on demand. Founders Podcast is a fantastic tool, tool to learn from history, but it's pushed to you. Founders Notes give you the ability to control it. It gives you the ability to tap into that collective knowledge of history, entrepreneurs when you need it. And that's why I think it's valuable for you to have access to this giant searchable database of all my notes, all my highlights, all my transcripts. So if the single idea expressed clearly for Founders Notes overall is, hey, learning from history is a form of leverage. Founders Notes gives you the superpower to do this on demand. What is the single idea expressed clearly? Why does Sage, this new private podcast feed, why does Sage advice need to exist? In other words, what am I selling? And the more I thought about it is like, oh, I'm selling time. Because what I'm going to do with this private podcast feed that is now included with your subscription to Founders Notes is I'm going for a maximum insight to time ratio. I love this idea that you could have an entrepreneur that spends, let's say 40 years building their company. I can then spend 40 hours reading and researching their life and career and then distill that for you down to, let's say, 10 minutes. 10 minutes of audio that you can do on demand. Download those ideas into your brain while your eyes are busy. So that is my North Star. That is my goal. As with everything else, as my thinking evolves, I will keep you updated. If you do not yet have a subscription to Founder's Notes and you are spending hours and hours listening to the podcast, I highly recommend that you subscribe. And you can do so by going to Founder's Notes. That's Founder's Notes with AN S founders notes.com and the second thing that I want to tell you about is this founders event that I'm hosting July 29th through the 31st in Scotts Valley, California. It is this beautiful venue deep in the California redwoods. And the single idea expressed clearly around why do these events need to exist is because I want to help high value people build relationships with each other. I did this back at the first Founders eventually in March in Austin. And I'm doing it again July 29th through the 31st in Scotts Valley, California. And I'm doing this event in partnership with my friend Rick and Paul. They're the founders of Satyr Grove, which is this $500 million permanent holding company. They're also the hosts of this podcast called Art of Investing. But the reason I'm partnering with these guys is because they are world class at building relationships. They understand the direct link between building relationships and building value creation. And I know this because I know them personally as friends. I talk to them all the time. But you can also see this if you just, you can see this publicly. Look at their podcast feed. If you go to Art of Investing's podcast feed, listen to the one that they just did with Mitch Rails. Mitch Rales is the co founder of danaher. He is one of the greatest living entrepreneurs and investors on the earth today. In his 40 year career, Mitch had never given a single long form interview. And he chose to do his very first one, which you can listen to as a podcast with two of his most trusted collaborators and friends. Somebody he speaks to multiple times a week. That is Rick and Paul. Rick and Paul were at the first founders event in March. Multiple people that were at that event met them and have since built relationships with them. They did not know who Rick and Paul were before they went to the founders event in March. And I've heard from multiple people that are now calling, texting, getting on Zoom, going in person and meeting and spending time with Rick and Paul because they're learning from Rick and Paul how to build a permanent capital holding company. One of the breakout sessions that we're going to have at this event on July 29th through the 31st is going to be led by Rick and Paul. They're going to talk about how to build a new investment firm, a new permanent capital holding company, and how established firms can actually sustain excellence. Way before they were doing this, way before they founded their own company, they had studied and helped hundreds of the world's greatest investors. They literally wrote case studies on some of these. They wrote an incredible case study on One of the greatest compounders of all time, which is Julian Robertson of Tiger Management. And by going and looking at their podcast feed, you can see some of the people, they develop these really good relationships, like Todd Combs from Berkshire, my friend Ho Nam from Altos Ventures. Relationships run the world. And I think Rick and Paul are a great illustration of that. I think their session, I think the entire event will be hugely valuable for any investor. There's a ton of founders coming, there's investors, there's executives coming. But specifically, if you are interested in developing a new investment firm and learning more lessons from established firms that sustained excellence over multiple decades, highly recommend coming to the event and making sure you don't miss the breakout session taught by Rick and Paul. Another thing I want to mention to you about these events that's really important is they're all inclusive. That means if you get yourself to the event, you don't have to worry about anything else. I rent out the entire venue, every single person. There's nobody else that's on the property that's not part of the event. So every single person. If you attend, every single person you see there is there for the same reason as you. That person has the same interests. They're fellow business nerds. We're all business nerds. And so that's why we gather together again. That is July 29th through the 31st. It's a private venue deep in the California Redwoods. It is beautiful and the reason that it exists. Again, that single idea expressed clearly that you and I have been talking about for the last few weeks that I don't think I'll ever forget. Why does this exist? This exists to help you build relationships with other high value people. And that is important because that opens up opportunities in the future that you can never possibly predict. So I hope you come to this event and build relationships with other founders listeners, other high value people. The first thing you need to do if you want to attend, you go to founders podcast.com events and apply. And that's it for me. Thank you very much for listening. Thank you very much for the extra support and I'll talk to you again soon.