Speculation vs. Passion — A dialogue of mixed messages

“Buy what you love! Just buy what you are passionate about!” he told me passionately.

A few minutes later…

“Yes, I think that the market for xyz is soft. It’s a buyer’s market right now” he encouraged me.

Similar dialogues take place everyday across the globe between watch buyers and sellers. You’ve had it. I’ve had it. Everyone from auction houses to retailers to collectors participate in what is a display of mixed messages:

Encourage passion. Encourage speculation.

While there is nothing inherently contradictory with this dialogue (surely wanting to speculate does not disqualify someone from being passionate?), it is a very convenient dialogue for anyone in the business of selling watches.

Increasing talk of vintage watches becoming an “asset class” has created unavoidable conflicts of interest. Much like a wealth manager, sellers are reassuring new participants that their watches will hold or increase in value – downsides are limited and upsides are substantial. At the same time, mature participants are told (or often tell themselves) that it is all about “the passion” in order to rationalize pursuing what are increasingly costly watches to acquire and maintain.

But what happens if there is a significant market correction? What happens if there’s a crash? The consequences for more established participants will likely be minimal. It may test the supposed “passion” of some, but I suspect most will continue enjoying their watches regardless.

True fanatics might even cheer the discounts!

The situation will be entirely different situation for new participants. Having unrealized gains and realized losses, these unsuspecting buyers will lose faith in those who had encouraged speculation. Who knew watches were such a volatile “asset class”? Who knew that it was even possible to lose money on a steel Rolex Daytona? There is a very real risk that they may eschew buying watches at best, or feel cheated at worst.

This situation was best explained by Max Busser (Owner & Creative Director of MB&F) in a recent interview with Tim Mosso with WatchBox Studios. When asked what has been the “biggest change” in the industry, he responded by identifying what he saw as the biggest threat to the watch industry:

“Up until a few years ago, anyone who bought a beautiful mechanical watch, knew he would lose money. It was part of the fact. Because it was about pleasure. It was about owning an incredible piece of art […] Suddenly, the whole fact of pleasure is being skewed by “I can actually make money” […] It has bought a lot of new players in the market who don’t understand watchmaking, don’t give a damn about watchmaking.”

— Max Busser

Mr. Busser is absolutely right – this won’t end well. It is not a question of if but rather when this trend will reverse.

It is clear that a new approach is needed. Inspiring more passion. Discouraging outright speculation. Improving education. Unfortunately, some of this conflicts with the inherent “bullish” bias of sellers (retailers, dealers, auction houses and collectors) who have benefited financially since this change in perception has occurred.

For those that rely on this mixed dialogue of passion and speculation to make a living… Well, I cannot imagine many would want to start a sale pitch like this:

“Yes, you will likely lose money but here is why that does not matter.”

A hard sell indeed.

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