economics of horology

[freddyfred89]

Hi Everyone -

I'm an economist by training but I've recently become very interested in the watch industry. Just bought my first Tudor (North Flag) to celebrate an important personal milestone. I've taken a class and attended lectures at Horological Society of NY.

I've started a web page where I publish articles applying economics to horology. The first article is on the Rolex steel sports shortage and the second is on one of the reasons that watches are an unconventional product from a pricing perspective.

Thanks if you have a chance to read and enjoy!

https://www.horolonomics.com

[mrarchiegoodwin]

Thank you. This topic seems to be topical now.

[DJTOSUB]

Originally Posted by freddyfred89

Thanks if you have a chance to read and enjoy!

https://www.horolonomics.com

I enjoyed both articles - especially the potential motivation for Rolex to create the shortage. Much has been discussed in the past but a good read nonetheless.

[Cooper33]

Very interesting read, thanks!

[dtwer]

Interesting analysis, thank you for sharing.

My question is, if Rolex is constricted by the Swiss labor laws and unable to increase production, then this really does not make the rationing manufactured or intentional, right?

[freddyfred89]

Originally Posted by dtwer

Interesting analysis, thank you for sharing.

My question is, if Rolex is constricted by the Swiss labor laws and unable to increase production, then this really does not make the rationing manufactured or intentional, right?

You are right about this. I need to be clearer about who is causing it. I'm working on revisions and I'll make sure that is one.

Thank you for reading!

[teck21]

Thank you for the write up and explaining in simple economic terms what is happening.

The benefits Rolex gets from the rationing as you said, are indirect, because from a direct perspective, they are losing money. Likely a ton of of it, even just 200,000 watches sold at $5,000 lost to the rent seekers works out to $1bn. Halve that number and it’s still massive.

And as you are aware, Rolex SA has a single shareholder that does not expect the company to maximise profits. That shareholder appears to care far more for all the indirect benefits that accrue from rationing.

Ultimately though, the problem I’ve always found with economists is that economists tend to be very rational creatures.

Most human beings are simply irrational, especially when it comes to love and money.

And there’s a high level of irrational demand for the SS sports watches now driven purely by emotion rather than any objective cost benefit analysis.

It’s like telling everyone they should be happy when everyone gets richer. The reality is that it’s not enough for me to be rich, my peers need to be poor.

This manner of thinking makes no sense, but it is true of human behaviour.

It is not enough for me to obtain a desired SS model, it actually makes me feel good that I have one and you don’t.

Many owners feel this way but won’t admit it lol.


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[PeterC4]

Originally Posted by freddyfred89

Hi Everyone -

I'm an economist by training but I've recently become very interested in the watch industry. Just bought my first Tudor (North Flag) to celebrate an important personal milestone. I've taken a class and attended lectures at Horological Society of NY.

I've started a web page where I publish articles applying economics to horology. The first article is on the Rolex steel sports shortage and the second is on one of the reasons that watches are an unconventional product from a pricing perspective.

Thanks if you have a chance to read and enjoy!

https://www.horolonomics.com

Great article and very revealing. Thanks. I would hope that Rolex executives read it.

[PeterC4]

Originally Posted by teck21

Thank you for the write up and explaining in simple economic terms what is happening.

The benefits Rolex gets from the rationing as you said, are indirect, because from a direct perspective, they are losing money. Likely a ton of of it, even just 200,000 watches sold at $5,000 lost to the rent seekers works out to $1bn. Halve that number and it’s still massive.

And as you are aware, Rolex SA has a single shareholder that does not expect the company to maximise profits. That shareholder appears to care far more for all the indirect benefits that accrue from rationing.....

I don't agree with you. Rolex is Trust with professional management. In my view, the CEO has the same fiduciary responsibilities as anyone else in a similar role. There are no indirect benefits from rationing. It's a flawed strategy.

[PeterC4]

"There is no practical reason to buy a Rolex. Time is better kept with a phone or a smart watch, each of which is less expensive. But rationing does not appeal to the practical or emotional reasons for buying a luxury watch. It has more to do with money. Even the most tight-fisted clients will see the logic of earning 25% on a watch purchase ($2,000 rent / $8,000 MSRP). Rationing is a marketing strategy. It overcomes the disappearing practical reasons for buying a luxury watch. "

Absolutely agree. It is about the arbitrage and not the intrinsic value.

[Nikrnic]

Very interesting read, Thank You!

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[NYCWATCHCREW]

Great Read thank you!!!

[teck21]

Originally Posted by PeterC4

I don't agree with you. Rolex is Trust with professional management. In my view, the CEO has the same fiduciary responsibilities as anyone else in a similar role. There are no indirect benefits from rationing. It's a flawed strategy.

A strategy is a plan of action designed to achieve an overall objective.

What do you believe the company’s overall objective is that leads you to believe it is flawed?






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