What Swiss Watches Can Teach Us About Automation
On December 25th, 1969, after 25 years of development by the industry, Seiko, one of those prototypical Japanese conglomerates that does about everything, released the Astron, the world’s first quartz (battery) powered watch. The following year, the Omega Electroquartz debuted at Basel Fair (now BaselWorld), the annual Swiss Watchmaking convention. Immediately, American companies like Texas Instruments and National Semiconductor, who were astonished by this technical advancement invested in the mass production of quartz watches.
Quartz, unlike the complex mechanical movements that existed prior, were far cheaper to manufacture, simpler to mass produce, and were of greater time keeping performance. And so began a revolution in watchmaking. The price of watches fell substantially, making what was once considered an investment good into a cheap consumer product. The production of watches skyrocketed, with Japanese and American firms entering (and quickly conquering) the market. It’s a classic story of innovation replacing a stale industry with a more dynamic one.
But that’s not where it ends. The Swiss, who were instrumental in developing quartz technology, never quite embraced it wholesale as the future of watchmaking. For centuries, Swiss watchmaking had been a meticulous trade, passed down from master to apprentice. The craft was more than just about telling time — it was about making art, something that would outlive its wearer. Patek Philippe, one of the most venerable of Swiss watchmakers, has a slogan that captures the perennial nature of the manufacture: “You never really own a Patek, you merely look after it for the next generation”.
As the world abandoned the more costly mechanical watches for battery-powered quartz ones, the margins for the Swiss watchmakers collapsed. This period throughout the 70s and early 80s has become known in the industry as the quartz crisis. In 1970 there were nearly 90,000 employed in the watchmaking industry in Switzerland. By the mid 1980s, there were less than 30,000. The watch industry was in dire straits, and pressure by Swiss banks to consolidate led to the creation of Société de Microélectronique et d’Horlogerie, which soon became the Swatch Group.
In March of 1983, the first Swatch was released, which eschewed all the conventional ornamentation of Swiss watches. A plastic case, reduced components, and a fragile body that gave no hope of being repaired, meant that production could be automated. This meant they could compete on cost with the likes of Casio and Timex, salvaging what was left of the watchmaking facilities. This bittersweet story, however, would not leave many lessons if it was simply cost-cutting efficiency and consolidation that allowed watch manufacturers to hobble along.
A few companies, such as Rolex and Patek Philippe, had a different strategy in mind to save their industry. Instead of looking to cut down on quality and save on cost, they ramped up the luxury factor of their pieces, and significantly marked up prices. Companies like Audemars Piguet, which in 1972 released its luxury sports watch the Royal Oak, survived not on their classic models, but on new ones that started at 5 figures. In 1988, the Richemont Group was formed, a luxury holdings company that brought back from near extinction maisons such as Vacheron Constantin and Cartier. These companies have gained a new lease on life, and have become modern status symbols. “If you don’t have a Rolex by the time you reach 50, then you have clearly failed in your life,” the French advertising executive Jacques Séguéla once said.
Since 1998, exports to new markets like China have boomed, increasing the economic impact of Swiss watchmaking. Employment may not have reached 1970s levels, but is approaching 60,000 workers. The overall production of Swiss watchmakers is in excess of $22 billion a year.
The renaissance in Swiss watches that began in the mid-80s tells us something about current fears over the impact of Artificial Intelligence on jobs. Similar to the quartz revolution of nearly 5 decades ago, current innovations such as autonomous vehicles and advanced medical diagnostics, reduce the cost of production. While quartz reduced the time to produce a watch, the number of components needed, and the timekeeping accuracy, today’s advanced machine learning algorithms are prediction tools which lower the cost of generating and implementing predictions, while also improving their accuracy. As much of modern work involves in some way involves making some sort of prediction (which as opposed to judgement is about following clear rules to develop conclusions), there are many old industries that will experience their very own quartz crisis.
The lesson is that the march of progress does not destroy that which is good with the old; it simply makes it more luxurious. Crafts and techniques that have the potential to be automated do not have to become obsolete, but instead become a luxury item that cater to those that most desire it. An increase in the number of self-driving cars on the road does not mean that all car makers will move to automated driving, but would instead create the opportunity for more prestigious car makers to carve out certain niches, while the average consumer is satisfied with the more cost-effective and innovative means of transport.
There is often a sense of hopelessness that one cannot fight against the tide of innovation. This sort of pessimistic thinking obscures the real possibilities that changes in the market provide. By being able to tailor your business to niches that have increased value for your product as a result of changes in the median consumption, you can actually make it even more successful than it once was. Luxury is always an option.
