Skip to main content

Origin Story

This will be one of my more brief posts on the state of the watch market. The punchline is that, when you review charts anywhere, always make sure to check if the publisher has included the origin in the chart. The origin is the point where both variables presented in the chart take on the value zero (the really important thing is that the origin for the vertical value is included).

Let me illustrate why this is important. In the first image presented below, I present data from a watch pricing analytics company. The data represents an "index" of Rolex asking prices on the preowned market. I think "index" is probably not a great way to describe this data, it really represents an average of some sort. In fact, I'm not really fond of this type of index for other reasons. A stock price index, for example, represents averaging of homogenous assets. It's true that stocks come from heterogeneous industries, but they are all subject to largely identical reporting and regulatory requirements. Stocks also all operate the same way in terms of dividends, etc. Watches are very heterogeneous, so averaging those is a bit more like averaging an apple and an orange. It just doesn't make sense.

Anyway, I used a helpful tool to recreate the data that the analytics organization publishes in graphs on Instagram. As as far as I know, they don't provide the raw data. I'll note that my data is an approximation of the original data because the tool I used to recreate the data isn't perfect.

A graph of average Rolex asking prices that omits the origin.
The graph published by the analytics company is designed with a vertical axis starting at a value of $12,000. In other words, the analytics company omits the origin from their graph. The resulting line reminds me of that mountain Richard Dreyfuss' character was obsessed with in the movie Close Encounters of the Third Kind.
Devils Tower in Wyoming, USA.
I've included a picture here for reference, the actual formation is called Devils Tower and it is in Wyoming. The end impression is that Rolex prices skyrocketed quickly, mostly during the pandemic, and now they are collapsing.

But what happens when we include the origin in the graph? Visually, we get a very different impression and it isn't nearly as dramatic. I present that image here.
Average Rolex asking price, origin included.
This graph is also more accurate. We see a slow increase in asking prices and then an almost equally slow decrease. If we use a ruler to measure the distances traced by the line, the first graph makes it appear that the Rolex index increased by over 600% in less than a year. This is absolutely not what happened to the index. In reality, the index increased by 29%.

Average Tudor Black Bay GMT asking price, no origin.
This is not an isolated distortion from the watch industry analytics company in question. I also recovered the data from a graph they published showing the asking price for the Tudor Black Bay GMT. Their published figure, which I recreate here, leaves out the origin and seems to suggest that the Black Bay has recently shown a fairly precipitous drop in its value.
Average Tudor Black Bay GMT asking price, origin included.
When you include the origin, the decrease looks far more modest, which is the true result when it comes to the reported asking price. If we believe the analytics company, the Black Bay GMT asking price decreased by roughly 10%. This is still a noteworthy decrease in value, but dollarwise it amounts to about $475. It is good to know this is happening, but it isn't really precipitous.

According to Mark Twain, British prime minister Benjamin Disraeli once said, "There are three kinds of lies: lies, damned lies, and statistics." This sentiment has, unfortunately, resonated with many. Really, though, it is not statistics that lie. Instead, when proper practice is not followed in data analysis and inference, the result is often misleading. The good news is that I've also seen signs that watch data analytics companies are responsive to feedback and trying to do better. Let's hope that trend continues.


My book on the history of Rolex marketing is now available on Amazon! It debuted as the #1 New Release in its category. You can find it here.

Comments

Popular posts from this blog

The History of the Radioactive Rolex with One Complication

My family and I have a tradition when we visit the beach. We search for sea glass. When jagged and sharp shards of broken glass land in the ocean the constant sluicing of sand changes them. Over decades or more the edges soften. Clear glass becomes cloudy. Given enough time the entire shape of the glass can morph, from rectangular to ovoid. Each piece of sea glass is inherently unique due to imperceptibly small forces which slowly accumulate, resulting in major changes. We know this is also true of vintage timepieces. After decades lume changes in hue. Dial faces crack, craze and fade. An object which was often mass produced consequently becomes a “pièce unique.” Watches are engineered to accurately and unchangeably mark the passage of time. We love and value vintage watches for the fact that they are altered by time itself. The story I offer here underwent similar changes. It began as an effort to understand more about an unfinished chapter in the history of Rolex. It b

Hot Take: Preowned + Vintage are the Greenest

I applaud the effort by watch manufacturers to minimize their contributions to climate change. Globally, we've made some progress towards "bending the curve" of greenhouse gas emissions, which is the good news. This figure from climateactiontracker.org shows that, even under an optimistic scenario, some increase in global temperatures is unavoidable. The bad news is that we clearly need to do a whole lot more to get to a point where we halt the growing cost of environmental degradation. As the graph I've presented here shows, existing policies are not enough to ensure a healthy planet for our children, their children, and all future generations. As Elizabeth Doer's outstanding coverage on Quill and Pad shows, the watch industry is discussing the challenges ahead and developing contributions to the fight against climate change. These include the use of recycled and recovered materials in manufacturing as well as requiring transparency in how raw materials are

Recessions and Watches: Insulated, Not Immune

I've read a variety of reports and commentators suggesting that, unlike the majority of businesses, the watch industry may be immune to economic downturns. The analysis of economic cycles is a specialized field and it is very tricky to assess how particular industries are impacted by fluctuations. Most of the claims I've heard about the business cycle and the watch industry could benefit from more careful inspection, so I'll try to do that here. I decided to use methodology that represents a solid "starting point" when it comes to business cycle analysis. The impact of a recession on any industry is not easily or casually measured, for reasons I will describe below. The TLDR on this is that the modern watch industry is not immune from the business cycle when we use generally accepted notions of what a business cycle represents. However, there are things that do reduce the impact of economic fluctuations on the industry: watch brands have partial immunity. I