In my experience, cheap Chinese watches almost always have more precise timekeeping than Swiss and Japanese... AKA, how Baumol's Cost Disease affects watch pricing
[Begin aside #1]
Final charity watch auction of the year going on now! Bid now to win the @Ichibunz “Sea of Clouds” GMT!
[Begin aside #2]
PSA: Do yourself a big favor right this very moment, and go to https://theescapementroom.com/
There you will find many articles written by fan favorites @DeeperBlue @Porthole @Aurelian and @celinesimon. My god, I can't remember the last time I've laughed so hard. Their posts are eff'ing brilliant.
[End aside]
So, I messed up and accidentally bought a Chinese super rep, even though I said I was totally over them.
Ever since @Max’s video on the Cartier Santos…
https://www.youtube.com/watch?v=FIaVWew28ck
… I’d been looking everywhere for a Santos Medium homage watch, which I could long-term test drive, in order to decide whether I want the real deal or not. Unfortunately, no one makes a homage of the Santos!!! So, you see, I was forced to buy a Chinese replica - forced like this…
And, wouldn’t you know it, literally 1 day after I’d clicked “buy” on the Chinese rep website, there was this post on WC by our esteemed @Pallet_Fork!
https://www.watchcrunch.com/Pallet_Fork/posts/specht-sohne-222563
The Chinese super rep arrived, and after a couple of days of wearing it, I came to the conclusion that the medium was way too small. I mean, come on! I need something that is at least this big for my 6.75” wrist…
My wife, on the other hand, liked the look of the watch and started wearing it.
Me: Honey, if you like it, I’m happy to get you the real watch.
Her: Oh, really? How much is the real one?
Me: $7,050
Her: And how much was this fake?
Me: Uh… roughly 1/20th of that.
Her: How about I just keep this fake, and take the difference to buy books?
She made good on her promise….
I am now the proud co-owner of the complete plays of Shakespeare. So, you know, any time I feel like reading “King Henry VI”…
… I can bust out the good old Folio Society Complete Plays of Shakespeare.
Apparently, the reason these books cost an arm and a leg is because they have special illustrations painted in molten platinum, they’re hand bound using the leather of an extinct species of wombat, and some unicorns shook some magical pixie dust on the cover, or some such. Now I know how my wife feels when I talk to her about the dual-impulse escapement and the tri-synchro regulator. Anyway, I now own all of Shakespeare’s plays, even though I think the worship of Shakespeare is nothing more than social desirability bias and the desire to signal one’s learnedness, when in reality there are far far superior works of art being produced on a daily basis these days… like Bullet Train, for example…
Anyway, I’ve been checking the timekeeping on the super rep, and in any given week, it will run about 3 seconds fast. Let me say that again… a fake Chinese watch with a Miyota 9015 movement inside - which unregulated runs -10/+30 spd - is running more precisely than many of the real Seikos, Omegas, Breitlings, and Grand Seikos that I’ve owned! At this moment, the Santos super rep is running about as well as my beloved GS SBGJ255!
My reaction…
Well, it really got me thinking about William J. Baumol - this guy…
Baumol is the economist who first described the eponymously named effect, “Baumol’s Cost Disease.” Wikipedia does a great job describing it…
Increases in labor productivity tend to result in higher wages. Productivity growth is not uniform across the economy, however. Some sectors experience high productivity growth while others experience little or negative productivity growth. Yet wages have tended to rise not only in sectors with high productivity growth but also in those with little to no productivity growth.
The American economists William J. Baumol and William G. Bowen proposed that wages in sectors with stagnant productivity rise out of the need to compete for workers with sectors that experience higher productivity growth, which can afford to raise wages without raising prices. With higher labor costs, but little increase in productivity, sectors with low productivity growth see their costs of production rise. As summarized by Baumol in a 1967 paper:
If productivity per man hour rises cumulatively in one sector relative to its rate of growth elsewhere in the economy, while wages rise commensurately in all areas, then relative costs in the nonprogressive sectors must inevitably rise, and these costs will rise cumulatively and without limit...Thus, the very progress of the technologically progressive sectors inevitably adds to the costs of the technologically unchanging sectors of the economy, unless somehow the labor markets in these areas can be sealed off and wages held absolutely constant, a most unlikely possibility.
[Check out where there is and isn't any productivity growth!]
The canonical example that everyone always uses to describe Baumol’s Cost Disease is that of a string quartet. Productivity has not gone up one iota over the course of centuries with regard to string quartets playing live music. And, yet, wages for members of string quartets has steadily risen over the centuries. If string quartets were paid according to increases in productivity, they would eat plain bread with gruel in 2023, as they did back in 1742 or whatever year string quartets came into existence!
But, since I obviously know nothing whatsoever about music - I don’t even know what a string quartet is - the Santos Chinese super rep has helped me to finally, fully, and viscerally understand Baumol’s Cost Disease.
The regulation of mechanical watch movements is almost an entirely manual process
Some “watchmaker” has got to sit there and fiddle with the gubbins of the movement to try to hit COSC or METAS or whatever other certification or guaranteed accuracy
And that watchmaker has then got to fiddle with it in 5 or 6 different positions, and measure over and over again for each position
That is A LOT of manual effort, and productivity in this activity has experienced “little or negative productivity growth"
And, these days, if you use the manual labor of someone from Switzerland or Japan for this kind of time-consuming work, well, it’s gonna cost you a pretty penny
Meanwhile, Chinese manual labor is going to run you much less…
You know how every 4th post about Seiko is someone decrying the fact that Seiko only offers +/- 180 spd precision on their watches? And then proceeds to state that they will never again buy another Seiko because Seikos are bad “value”? And they reasonably and calmly state it all like this…
Well, there’s a reason that Seiko offers +/- 2,562 spd on their watches - if they offered anything more accurate, the watch would cost a heck of a lot more, and Seiko is producing their watches to hit a certain price point. If you want an accurate watch, go buy yourself a Chinese watch - the Chinese can afford to sink a ton of labor into manually regulating their watches.
And, that is precisely why I ended up ordering these 3!
Less than $99 each off Aliexpress!!!
Here's another mind-blowing way to think about it: We enthusiasts LOVE the Hamilton Khaki Field!
Invariably, whenever we see a post about the Khaki Field, it is accompanied by plaudits extolling the fact that you can get such a high quality Swiss-made watch with an incredible ETA 2824-2 movement for only $695. And, yet, here is what I found online about the movement’s accuracy in the Khaki Field…
Hamilton uses ETA movements in their watches. In the Khaki Field, they are using the ETA 2824-2. The 2824-2 is a “workhorse” movement used by a variety of manufacturers from all over the world. It is widely considered a reliable automatic movement.
In the Khaki Field, the 2824-2 is accurate to an average of +/- 7 seconds per day, with a maximum deviation of +/- 20 seconds per day.
So, if you’re an accuracy nut, are you gonna jump on the Chinese watch bandwagon? More importantly, are you a member of a string quartet, and if so, what in the world do you actually do? And, like me, do you consider Shakespeare the preserve of overwrought pretension?
The Artist formerly known as @HotWatchChick69 and formerly-formerly @Omeganut
More from Mr.Dee.Bater
Add to it the increased quality and amount of automation, with its concomitant decrease in labor costs and you see the upheaval going on in every manufacturing industry (of which watches are but a small part).
The English caught the French, and in turn, were caught by the Swiss, who were out-automated by the Americans, but then regained the advantage due to neutrality, and who then lost the labor war to Japan, and now to China. The next evolution will be a Chinese company opening a fully automated factory in Vietnam producing "Swiss" watches.
Fantastic article as always my dude.
Sadly I don't play anything strong related, and have only danced when I have ants in my pants, or taking incoming fire....🤏🏻😂🫣🤪.
Don't get me started on Shakespeare.....🤐....I prefer Tolkien...🧙♂️
Me, just buy Wise. There's a reason why Citizen Fugus run nice with entry level workhorse movement; Thai workers labour cost.
Argh!! Sounds important … I’ll read it while on 🚽…
Add to it the increased quality and amount of automation, with its concomitant decrease in labor costs and you see the upheaval going on in every manufacturing industry (of which watches are but a small part).
The English caught the French, and in turn, were caught by the Swiss, who were out-automated by the Americans, but then regained the advantage due to neutrality, and who then lost the labor war to Japan, and now to China. The next evolution will be a Chinese company opening a fully automated factory in Vietnam producing "Swiss" watches.
Yeah, over time, the Chinese will learn how to do marketing, hopefully. At that point, they'll start to craft narratives around heritage, they'll come up with pithy slogans about taking care of the watch for the next generation, etc., etc., and Chinese watches will be as desirable as Swiss and Japanese.
They're already beginning to understand that consumers want European-sounding brand names, instead of "Agreceloper" or "Momommokobako" or whatever other funny monikers they have on Aliexpress.
Fantastic article as always my dude.
Sadly I don't play anything strong related, and have only danced when I have ants in my pants, or taking incoming fire....🤏🏻😂🫣🤪.
Don't get me started on Shakespeare.....🤐....I prefer Tolkien...🧙♂️
YES!!!
LOTR for the win!!!
Me, just buy Wise. There's a reason why Citizen Fugus run nice with entry level workhorse movement; Thai workers labour cost.
I wanted to win @Edge168n's Wise Adamascus 8 - I don't have any red dial watches...
https://www.watchcrunch.com/Edge168n/posts/make-a-donation-to-charity-win-a-wise-adamascus-ad8-229906
But, I'm sure he purposefully took my name out of the lottery!
Really nice points illustrating how most watch buyers are just subsidizing inefficient production in Europe and Japan for no material gain. Watchmaking seems like another perfect example- not sure if CPI is the best proxy for productivity gains but interesting to see how the breakdowns changes in the past couple decades
Argh!! Sounds important … I’ll read it while on 🚽…
Important? That's the least of it!
I wanted to win @Edge168n's Wise Adamascus 8 - I don't have any red dial watches...
https://www.watchcrunch.com/Edge168n/posts/make-a-donation-to-charity-win-a-wise-adamascus-ad8-229906
But, I'm sure he purposefully took my name out of the lottery!
Same here, my friend. Knowing my luck I just buy one instead.
Add to it the increased quality and amount of automation, with its concomitant decrease in labor costs and you see the upheaval going on in every manufacturing industry (of which watches are but a small part).
The English caught the French, and in turn, were caught by the Swiss, who were out-automated by the Americans, but then regained the advantage due to neutrality, and who then lost the labor war to Japan, and now to China. The next evolution will be a Chinese company opening a fully automated factory in Vietnam producing "Swiss" watches.
#timestheyR_a_changin
Yeah, over time, the Chinese will learn how to do marketing, hopefully. At that point, they'll start to craft narratives around heritage, they'll come up with pithy slogans about taking care of the watch for the next generation, etc., etc., and Chinese watches will be as desirable as Swiss and Japanese.
They're already beginning to understand that consumers want European-sounding brand names, instead of "Agreceloper" or "Momommokobako" or whatever other funny monikers they have on Aliexpress.
Again spot on, they’ll learn to play ball eventually but their advantage is clear. I’d be pretty down with Chinese names on the dial over spam email level fake european ones
Really nice points illustrating how most watch buyers are just subsidizing inefficient production in Europe and Japan for no material gain. Watchmaking seems like another perfect example- not sure if CPI is the best proxy for productivity gains but interesting to see how the breakdowns changes in the past couple decades
Totally gonna geek out!
That CPI chart comes from the Wikipedia article on Baumol's Cost Disease. I think the idea behind it is that in industries in which there are productivity gains, "real" prices come down. But, "real" measurements are problematic, as you have to apply either GDP deflator or whatever other deflator to the nominal prices. But, these deflators are aggregated through all industries and products and services, so not a good way to show relative price changes in different industries. So, if you just show the nominal price increases of particular industries / goods / services, you can see differences between the industries very easily.
So, for example, we know that there's been TONS of productivity improvements in apparel and electronics - we pay less for a 55" screen OLED smart TV today than we paid for 13" black and white TV 30 years ago - but college...?
There was a time where "made in Japan" was used in reference to inferior workmanship. Well, look at Japan now and the plethora of watch/car/stereo/computer owners with products hailing from the land of the rising sun. I have a few watches which were manufactured in Hong Kong, zero issues other than their lack of "proper regional pedigree". Excellent post, presented with hard numbers. While you probably won't dissuade people away from the big names, there's still food for thought here.
Really nice points illustrating how most watch buyers are just subsidizing inefficient production in Europe and Japan for no material gain. Watchmaking seems like another perfect example- not sure if CPI is the best proxy for productivity gains but interesting to see how the breakdowns changes in the past couple decades
Well said, agreed.
It's pretty much my conclusion as well. I noticed this morning that my PT5000 powered "Absolutely not an Explorer" San Martin SN-021G gained a bit more than 30 seconds since I wore it last time, which was the 18th of September, or about 39 days ago.
Lets round this deviation upward to 40 seconds, so that nobody can accuse me of favoritism, and it means that the daily deviation of the PT5000 in my watch is about 1 second/day, probably even less.
One second per day. From the factory. For a watch that is sold for a bit less than 300$.
My wife is a Tolkien fan, I’ve been annoying her with this thought (and many other things) for ages now.I feel vindicated now that I can back up my argument with memes.🤣
I wanted to win @Edge168n's Wise Adamascus 8 - I don't have any red dial watches...
https://www.watchcrunch.com/Edge168n/posts/make-a-donation-to-charity-win-a-wise-adamascus-ad8-229906
But, I'm sure he purposefully took my name out of the lottery!
I love WISE...they make some beautiful watches and the price is very good...
Who else is producing watches in 904L stainless steel...hmmm...
I don't know...
If I really need an accurate watch, I would wear a Citizen A-T series. They sync time over radio wave daily. Never more than a second at most wrong.
If I am wearing a mechanical watch, a few (dozens of) seconds off ain't a big deal, particularly if it's early (and when I adjust, I adjust my watches a minute or two early). So the whole accuracy is kinda a wash for me.
I can imagine that a great deal of the manufacturing is outsourced to China, but probably not the final QC and assembly. There are all sorts of ridiculous rules about how of the watch's value must come from Switzerland in order to have the "Swiss made" and "Japan made" marks on the dial. So I can imagine a bunch of the low cost component manufacturing comes from China, but not the regulation. Probably, the Swiss guys need to say, "Well, a high cost Swiss employee spent 6 hours on regulation and inspection, at a cost of $100/hour. And since this watch sells for $1,000... Oh, look! 60% of the value comes from Switzerland; therefore we can stick the 'Swiss made' label on it!"
That does sound about right. We do, after all, already know that some movements are totally made in places like Malayasia, HK, China, etc etc so far as Miyota and Seiko off-brand movements are concerned. (What is made by Swiss and other companies is a little more opaque)
But that maths approach makes perfect sense — especially once you consider how much of the ‘value’ is the name on the dial, and how much of it is marketing. I am sure there is an argument that as long as it’s stuck in its box in x country, and has a little security engraving added, and that the advertising exec who makes the glossy adverts is in the same… then a large chunk of the value is from x….
Waiting for a video on multitasking 6 watches at once, Vostok style:
I always enjoy your thought-provoking essays Brian. 👏
And I definitely resonate with your comment on people whining about Seiko accuracy, while regulating the entire production would add three times the cost of regulating an NH at my local watchmaker to the final price of the watch. No thanks!
Buying my first Merkur watch, should land mid novembre. Will compare the movement accuracy to my Sellita equiped FORMEX Essence and report
The even funnier thing is that our ENTIRE family tree funnels down into our two daughters. All the grandparents, great aunts and great uncles, aunts and uncles… ALL funnel down to those 2! So, even if my wife and I decided to completely disown them, our 2 daughters are going to inherit a lot of eff’ing money from the rest of the family.
As a result, every time I say that I’m not sending them to college, my wife says, “I don’t think you’ll have much of a say in the matter.”
I always retort, “Sure I will - I’m not paying for their college.”
It’s at this point, my wife likes to point out that even if I’m totally unwilling to give them a single dime for college, they’ll have so much inheritance money from the rest of the family, they’ll be able to do whatever the heck they want!
Nice, they sound set up for life.
I don't know...
If I really need an accurate watch, I would wear a Citizen A-T series. They sync time over radio wave daily. Never more than a second at most wrong.
If I am wearing a mechanical watch, a few (dozens of) seconds off ain't a big deal, particularly if it's early (and when I adjust, I adjust my watches a minute or two early). So the whole accuracy is kinda a wash for me.
It's funny, but I used to set my watches a couple of minutes early too! And I would always think, "Why is everyone on the forums so obsessed with how precise their mechanical watches are?"
But, I guess I somehow got infected with the accuracy infection too! It just gives me something else to do. You know, trying to synch the seconds hand perfectly with atomic time...
I always enjoy your thought-provoking essays Brian. 👏
And I definitely resonate with your comment on people whining about Seiko accuracy, while regulating the entire production would add three times the cost of regulating an NH at my local watchmaker to the final price of the watch. No thanks!
Thank you so much, sir!
Buying my first Merkur watch, should land mid novembre. Will compare the movement accuracy to my Sellita equiped FORMEX Essence and report
Do it for science!
Nice, they sound set up for life.
Ha! Yeah, but just now they were arguing over a Lego set and who gets to build what, because they haven't had breakfast yet and are just hangry. They may be set up for life, but that doesn't mean that they're not going to grow up to be complete a$$hats.
I really don't think people really care about accuracy that much. Otherwise they wouldn't buy a mechanical watch in the first place. (That ship has sailed during the quartz crisis )
I agree that the standard movements don't differ that much in what they deliver, and their methods of regulation are similar. (We are not talking about coaxial escapements, or regulation through set screws on the balance wheel, Breguet overcoils and all that jazz.)
The points about productivity are valid, but automation and outsourcing also factor in. The Swiss Made label is not that strict. I would expect the degree of automation of the Swatch group to be much higher compared to their direct competitors.
I would also give the main manufacturers a bit of leeway in regard to design and marketing, as well as maintaining retail stores. Using the Swatch group as a reference again, their marketing is very creative, and they know how to defend a price point.
Similar story with the audio IEM market, Chinese companies produce some of the best gear out there and for a fraction of the made in USA equivalents. They also produce turds though, which somewhat colours their image.