Wednesday, March 27, 2019

Who ate the Swiss cheese?

It is said that in the 1980s the Columbian narco business was bringing in so much cash into the country that drug lords ran out of secure storage space. One cartel alone spent over $12,000 a month just on rubber bands and more than 10% of all dollar bills were eaten by rats.   Indeed, oversupply is as bad as undersupply, and in either case the logistics of running a business can be a nightmare.

From the 1940s to 1960 the Swiss were manufacturing more watches than all other nations combined. An army of watchmakers, brands, machinists, technicians, assemblers and tool makers worked in a bubble. The thirty golden years of Swiss watchmaking was the result of a perfect storm: two world wars, the need for an accurate watch, technical advancements in manufacturing, an endless supply of money looking for shelter, and cheap eastern and southern European labour.

The bubble burst in the early 1970s when the Japanese entered the global high tech economy in a mighty way - the world had enough of outdated pre-war technology: we wanted brand new Sony TVs, video recorders, Seiko quartz watches, Nikon cameras.  We wanted the cool stuff at a price almost
everyone could afford - and we got it all. The Japanese ate the cheese of Swiss horology; and the Chinese picked at the last few crumbs.

Swiss watchmaking reinvented itself in the late 1990s when big brands and fund managers figured out that there was still money to be made in watchmaking. But the 'new' industry focused on luxury, not volume. The only question the Swiss were desperate to answer was a weird one: what was the absolute lowest quality product that the luxury market would accept as a 'luxury watch'? A typical question asked by a fund manager - not a watchmaker. The answer was: really anything - as long as it had 'Swiss made' on the dial.

Vertical brand integration and the Internet took care of the rest: the Emperor's new clothes never looked better. Once aging, the Swiss got back into the cheese making business: the same Emmental, just larger holes, and a bigger box allowing more room for the brand's logo.  Everyone was happy.

But like the rat problem in Medellin, the 'new' Swiss watchmaking business plan failed to foresee one small detail: the new mass-produced 'Swiss' mechanisms no longer needing the army of technicians, tool makers, specialists, and even watchmakers to assemble new watches. Most of them were now obsolete, replaced by modern CNC machines and robots. The end result: an industry which had very little demand for quality, Swiss-made traditional watchmaking hand tools!

Here is just one example: a humble watchmaking staking set. For hundreds of years this was an essential tool for both watchmakers and watch repairers. The precision made punches are a work of art; the tool was used daily and would last for generations - but in 2019 modern Swiss brands need no skilled hands outside their own workshops. The restriction on supply of spare parts means less work for independent watchmakers. Less work means no future, no plans to invest, and no plans to employ or train apprentices. Consequently, the Swiss tool makers who need the volume to stay in business are the ultimate victims in 'the new Swiss horology'.

Yes, you can restart watchmaking of a luxury brand, but you cannot restart fine Swiss toolmaking without the support of hundreds of small independent watchmakers.

In December last year I placed an order for four staking sets and one jewelling tool. The two sets from Bergeon arrived promptly, but the two from Star are still on back order. The Seitz jewelling press is apparently on its way. And with each and every order of Swiss tools, it is obvious that we are dealing with remnants of what was once a mighty industry. As I type this, we have more tools on back order (fully paid for!) than tools in stock.

And then, there are some amazing, unexpected developments: in less than three months we have sold over 300 watchmaker's loupes, hundreds of screwdrivers, cleaning cloths and plexiglass polishers. Thanks to the support of enthusiasts - not professionals - our tool import business is growing; and quite frankly, Swiss cheese never tasted better.


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