Transcript

Introduction: Disrupting Time and Industrial Combat Espionage

Music

Jake:
[0:04] Welcome to Hub History where we go far beyond the Freedom Trail to share our favorite stories from the history of Boston, the hub of the universe.
This is episode 2 84 disrupting time, industrial combat espionage and the downfall of a great American company with Aaron Stark.
Hi, I’m Jake in just a few minutes. I’m gonna be joined by Aaron Stark whose new book chronicles an attempt by a foreign power to infiltrate emulate and eventually annihilate a great American company, in the late 19 th century.
Watches were at the forefront of technological innovation and the Waltham Watch company made some of the finest watches in the world.
Unlike their Swiss competitors whose products were fancy handcrafted works of art.
The Waltham company specialized in mass produced affordable and reliable watches for the masses.
At an 18 76 world’s fair, they announced their arrival on the world stage and the world in turn took notice.
The Swiss in particular took notice and they took it by sending spies to steal the secrets of Waltham success.

[1:17] But before Aaron Stark tells us about an active industrial espionage that changed global manufacturing.
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[2:24] I’m joined now by Aaron Stark. I got an email from Aaron a while back that was sent through the contact form on hub history dot com.
He said I’m a former grad student at Harvard Business School and recently published a book on industrial espionage that took place in Waltham in 18 76 by two Swiss spies, disrupting time, industrial combat espionage and the downfall of a great American company details the story of these spies who are sent to America to steal the secrets of America’s technology sector, the watch industry, the book then details how the Swiss used this information and how it ultimately led to the downfall of the Waltham watch company.

[3:10] Aaron really had my number with that email when I used to live in Watertown.
I loved riding my bike up the Charles River paths to Waltham.
This was a while ago. So some things have probably changed. But at the time, Moody Street was a great place to get a cup of coffee or lunch on a Saturday.
I think it probably still is. But I don’t ride my bike to Waltham from Hyde Park.
There’s a large dam at Moody Street that harnessed the power of the Charles for some of the first textile mills in Massachusetts.
But from Aaron’s book, I learned that the Waltham Watch Factory was powered by steam, not water power.

[3:49] The watch factory building still stands a few more blocks up the river on the left side as you face upstream.
It’s a low rambling building, four stories tall and about three blocks long.
It’s spilled out of brick with lots of windows and towers poking up to give a character today.
It’s mostly offices and loft departments, but a century and a half ago, it was the seat of one of America’s most technologically advanced industries.
I’m gonna have Aaron tell us why watchmaking was so important in the late 18 hundreds.
Give us a little bit of background on the Waltham Watch Company itself and then get right into the tale of industrial espionage that he hooked me with in that email one little note before we get started, I had an issue with our recording service, so I had to use the backup recording of Erin.
I also forgot to shut off my window unit ac until about halfway through our conversation.
Those are two rookie mistakes that mean that the audio quality in this interview isn’t quite up to our normal standards.
I think you’ll agree that the story of the infiltration and downfall of a great American company more than makes up for it.

Interview: The Downfall of the Waltham Watch Company

 

[5:06] Aaron Stark, welcome to the show.

Aaron:
[5:07] Yeah, thanks for having me. It’s great to be here.

Jake:
[5:10] So your new book is Disrupting Time.
Industrial Combat Espionage and the downfall of a great American company, which I’ll just go ahead and give the spoiler that the Great American company is the Waltham Watch company.
So the book starts out in sort of the last quarter of the 19th century.
And I, I wanted to start by asking why watchmaking was so important at that time.
What was driving America’s growing obsession with timekeeping in the 18 seventies.

Aaron:
[5:43] Yeah. So watches at the time, like we think of them now as jewelry or kind of a luxury item.
Um But at the time in, in the 18 fifties, when the book kind of begins its coverage through the end of the 18 nineties, watches were truly the technology of the era.
They were this emerging technology, the beginning of that period, almost nobody owned a watch.
Only the wealthy and the concept of time didn’t even really matter.
Uh And then of course, you know, there are public clocks but then, um, kind of coming out of the American Civil War, a lot of soldiers leave, um, having watches or having bought watches and, uh as they shift, uh leaving the military and go back to society, people begin to want to know what time it is. They begin to schedule times.
Uh And we kind of see by 18 70 about one in 20 Americans owns a watch.
But by the end of this period, around 18 90 it’s about one in five Americans own a watch.
So they’re increasingly time focused and it’s truly a revolutionary product at the time that makes it the emerging technology company of the day.

Jake:
[6:55] A minor comment in the first chapter really stood out for me saying something along the lines of that before watches and clocks were commonplace.
There wasn’t really a concept of punctuality as we know it today because how could you agree on an exact time to meet if you didn’t know the exact time?

Aaron:
[7:16] It’s really um during this period that like, you know, people would just kind of set a standard time and everybody would look at public clocks and people might have access to a, a cheap pocket watch, but it’s definitely not gonna be accurate.
They’re not gonna be able to set this time.
Uh And then, uh by about 18 80 there’s a uh historian named Michael o’malley who’s done a lot of great work in this area and really demonstrates that through advertisements and billboards and whatnot, that people begin to have this idea that punctuality actually means something and you’re expected to be somewhere.
Uh And I think we kind of take it for granted now, but of course, you know, you and I set a time to meet and we’re both here, you know, plus or minus 30 seconds and we’re both able to arrange, but, you know, prior to, you go back 100 years or especially 100 and 50 years, the whole concept is, is completely foreign to people.

Jake:
[8:10] The book focuses on sort of the industrial competition between American watch companies and especially the Waltham Watch company and Swiss watchmaking.
And today, you know, Swiss watches are, you know, we consider them fine time pieces bordering on works of art as the American watchmaking industry was getting off the ground.
How do we think about Swiss watches then?

The Origins of Swiss Watchmaking

Aaron:
[8:34] Yeah, I think it’s kind of important to, to start early in the, this watch history if you will.
And you know, our understanding of Swiss watches is they’ve always been the world’s best watchmakers.
Uh but this wasn’t actually the case. Um, in fact, before the Swiss, even in the 18 hundreds, it was the Germans, the English, the French, they were kind of the world’s best watchmakers and, you know, they had their rises and their falls and then their, the Swiss kind of emerged by about the, the mid 18 hundreds is considered the world’s watchmaking culture, which of course, that endures today.
But um in 18 50 they were known for mostly making luxury watches.
But as I mentioned, there was this transformation in society ongoing at the time where people increasingly wanted watches and the Swiss at the time, like any good economy responded to that with all sorts of watches.
Uh Unfortunately, most of them were not known for being good watches.
And the Swiss developed a reputation very similar to, you know, some emerging economies later in the 20th century where they produce a lot, but it’s not necessarily known for quality and in fact, there’s plenty of advertisements from the 18 sixties and 18 seventies that warns consumers to, like, if you buy these watches, you need to watch out.
It’s gonna be, you know, most likely break. It’s, it’s a little more than a trinket.

[9:59] And so most Swiss watches had a reputation for being the worst watches out there.
And in fact, there’s a Swiss judge at the 18 76 World’s Fair, the centennial exhibition that we’ll talk about who actually acknowledges like we sent the worst trash, like we have nobody to blame but ourselves for this reputation because it’s us who, you know, hoisted this on, uh, American consumers and notion away.

Jake:
[10:24] So on our side of the pond, then the, the American watchmaking industry is a little bit more of an upstart it sounds like.
And one of the leading companies is eventually based in Waltham.
But how did the Waltham Watch company end up in Waltham?

Aaron:
[10:39] New England originally um was known for mass producing clocks.
Uh And so this was an early industry in New England in the 18 hundreds.
And uh people had figured out how to mass produce clocks. Um And there was this idea that maybe this could be done for watches too.
And so a gentleman by the name of Aaron Denison founded the Waltham Watch company uh in the 18 fifties and it was originally in Boston.
Uh They found that being in the Boston area uh was not necessarily conducive though, it’s too dusty.
And so they, they moved the company out to Waltham down the river.
And at the time, it was kind of uh known for being an industrial town.
Of course, the Boston manufacturing company was there and this was a, a great spot for them to set up shop.

[11:30] Unfortunately, uh Aaron Denison’s idea was to basically just bring a bunch of watchmakers together to produce watches in the same building.
It wasn’t really mass production as we know it now.

[11:42] And he wasn’t exactly a great businessman. He was a very good inventor, but he knew he could mass produce these watches to some extent, but he didn’t know how to sell them.
And he was also interrupted periodically by economic panics that struck throughout the 18 fifties.
And so by 18 56 he declared bankruptcy and he sold his company to a gentleman named Royal Robbins, who Royal Robbins is the one who becomes known for Waltham going into the future.
And I kind of consider, you know, truly the father of the company.
Uh I know there will be many passionate people who they know it’s Aaron Denison.
Uh but Royal Robbins is truly the one that comes in.
The interesting thing though is he knows absolutely nothing about watchmaking.
He owns uh an import, export business or mostly import business where he, so he knows something about the jewelry business and he has great uh inroads to sell watches, but he doesn’t know anything about making them.
So he buys this company and he kind of has to figure out now what do I do with it?
And he hires a guy named Ambrose Webster who came from the Springfield Armory uh where they were automating production of firearms.
And Ambrose Webster comes in as a mechanic but helps and invents basically all the processes that Waltham needs to succeed as a company.

[13:07] And Ambrose Webster is truly the one that begins by the late 18 fifties allowing Waltham to produce hundreds of watches, uh increasing to about a million watches by 1900 in a single year.

Jake:
[13:22] On the eve of this 18 76 centennial exhibition in Philadelphia, where so much of the action of the book starts out as we’re about to come to that moment after Robbins has his way with the wealth and watch company.
How is the Swiss system at that moment different from the American system of watchmaking? What really differentiates the American system?

Aaron:
[13:43] So Swiss watchmaking at the time was truly what you might envision as like people making it in their houses.
There’s plenty of accounts of its, its families.
There was, you know, the father, the mother, the Children, they would all make watch parts.
Uh They’re truly doing this by candlelight in the mountains of the Jura region of Switzerland.
They’re making pieces and parts. They don’t actually know how to make watches.
They just know like my job is to make the screws, I just make the screws and I make thousands of them over the winter.
And their sole goal was to be able to make these pieces and parts.
And then the actual watchmakers would come around in the springtime and collect up the parts and pay them.
And then they would use that money to put back into their land as it was primarily an Aquarian society.

Jake:
[14:29] That really surprised me to, to hear that, you know, this Swiss watch industry that we think of today as the finest in the world.
It was just a diversion from farming to do in the off season.

Aaron:
[14:40] Yeah. And it was literally driven by the extreme poverty that many people lived in at the time. They didn’t have anything.
Uh And so this idea of making spare parts was simply just like a side job of, I need to do something during the winter time.
Uh And so these watchmakers would distribute the task to all these people throughout the mountains and they would make these parts and then the wa the parts would come together in the springtime and the watchmakers would begin putting them together to make watches and is what’s really amazing is when you think like that many parts fitting together in a tiny little watch. Um.

Jake:
[15:14] Right. And they’re never seeing each other to test fit them or anything like that.

Aaron:
[15:17] So the idea that they’re not necessarily reliable at the time should be not shocking to anybody. Um When you’re truly making all these parts by hand.

Jake:
[15:26] And it sounds like Dennison almost took that same model of individual workshops and just brought them under one roof.
But then did Robbins move on to something more like an assembly line?

Aaron:
[15:37] Yeah, so Robbins basically begins organizing the factory much like we might think about a modern company where it’s basically you have different workshops that are focused on making different parts.
So rather than have a bunch of different people scattered across the country making screws, Robbins would actually bring all those people together in a single room and they’d be using machines to do it.
Um But the genius thing is they didn’t need skilled people. There’s a um a character I highlight in the book who’s a real person named Eliza Putnam and she works for Waltham.
She comes in 18 74 to work for the company.
She’s just a, a single woman um knows nothing about watchmaking.
She’s not an artisan by any stretch.
She comes and she uh makes a significant amount of money uh especially compared to what people in Switzerland are making.
Uh She lived on Adams Street in Waltham and in fact, the house she lived in is still there.
She uh generally is her pay compared to men that worked in the factory was right on par.
In fact, it was really close to the average uh male that worked in the factory.
Waltham was known for having a, an equal work for equal pay policy.

[16:48] And so she comes in knowing almost nothing about watchmaking and many people like Putnam leave Waltham 20 years after beginning working there.
Uh and are known to have made their fortune uh and lived very great lives.
Uh And so that’s kind of the genius thing about what Robbins does is he takes this guy Ambrose Webster who is the one who invented all the machinery and, and well, you know, Webster figures out all these processes.
And then he takes people like Eliza Putnam who can now come work in the factory with little or no training.

Waltham’s higher labor costs and expensive watches

Jake:
[17:18] What was interesting for me to read was that going into this period of, of sort of higher productivity, at least as late as the 18 fifties.
The Waltham method required more labor than the Swiss watchmaking industry.
And it was, he was paying a higher wage. So you have more labor at a higher wage. So the Waltham watches were much more expensive.
How did Robbins and sort of the reforms he put into place allow Waltham to compete on price.

Aaron:
[17:46] Yeah. So when Waltham transfers to Robbins, um he begins publishing annual reports which are still in the archives of Harvard Business School, you can go make an appointment to go look at them.
And in those, he actually tells us all about his takeover of the company.
And he also tells us all about the production of watches per year.
Um And we also know how many employees he had. So we’re quickly able to figure out productivity metrics and under the Denison period before Robbins buys it, it’s about 17 person days to produce a watch.
Meanwhile, the Swiss are able to do that in about 7 to 8 person days.
So the Swiss are able to do it much more efficiently than Waltham is.
Uh and a lot of this is just by the division of labor. You know, the, the Swiss have divided the labor up so heavily that people are just pushing out tons of parts quickly.

[18:39] When Robbins brings in Ambrose Webster and they begin automating the processes.
Waltham quickly rides down its learning curve and it’s able to produce watches by about three or four days. Uh by the end of the civil war.
So it’s quickly cut the cost, their cost of watch for production at Waltham by about a quarter or it’s now about a, it’s a quarter of its previous cost.
And so they’re quickly able to do cheaper than the Swiss. Meanwhile, under Denison, uh it was significantly more expensive than the Swiss.
And then the next thing Robbins has to figure out to do is now that he’s producing watches so quickly, he’s got to figure out how to sell them.
And this is where having experience in sales and distribution is a significant advantage for uh Robbins who is now able to get his watches.
You know, as far west as Saint Louis, he gets them out to Chicago.
He even quickly begins getting into the international markets and his watches are quickly being sold uh throughout the world and his country as far away as China and India and Russia by the 18 seventies.

Jake:
[19:46] But it sounds like still by the 18 seventies they had the capacity, I don’t know if they were actually producing more watches than they could sell, but they at least had the capacity to.
And then that may be where the centennial exhibition comes in.
That Robbins and the company had a plan to solve their sales problem through this uh sort of global stage.
What, how did they approach the centennial?

Aaron:
[20:09] Leading up to 18 76 Waltham can produce about 100,000 watches a year.
However, they can’t sell that many in that year. We know they only sold about 80,000 watches.
Now keep in mind as context, this is the panic of 18 73 is on going from 18 73 till about 18 79.
So the centennial kind of finds itself right in the middle of that.
So people don’t have nearly as much disposable income yet Robbins is still selling 80,000 watches a year which is remarkable when you think the Swiss at the time, their imports are excuse me, their exports of watches to America um have dropped significantly by about 80% during that same period.
So while Waltham is on the rise, the Swiss are on the decline and they know something’s wrong.
But Robbins knows, hey, I can’t max out my capacity.
So he begins looking for opportunities to increase sales.

[21:05] And the centennial exhibition becomes this great opportunity that every good marketer would love to have.
And we don’t really have anything comparable to the centennial anymore.
It was a world’s fair that took place in Philadelphia to celebrate America’s 1st 100 years.
It followed on the um coat tails of the Crystal Palace exhibition in London uh in the 18 fifties, America has this great world’s fair that they put on 10 million people would visit this.
This is at a time when only 40 million people lived in America.
So, you know, per capita attendance at this is about one in four, obviously, many of those are international visitors.
But, you know, it’s a one in four per capita for an American event.

[21:49] Um And this is where all the new technology is coming in just to like put yourselves into the frame of mind of what a visitor would have seen.
First of all, the buildings were, you know, 70 ft high made of glass and iron and they extended over a quarter mile in length.
Uh And so they’d walk in and you’d have these orchestras and these fountains that are firing gushes of water and there’s just thousands and thousands of people everywhere and you can actually go visit the ground.
Still. There’s, there’s only one or two buildings remaining.
But if you go to Fairmount Park in Philadelphia, you can walk the grounds and you’ll see the old sidewalks.
Uh, and I have some pictures on my website, Aaron stark books dot com where you can actually kind of see before and after where I’ve superimposed what the, it looked like at the time versus what it looks like now.
And so these people would go and they would show up, they had arrived by train, they would see the first telephone.
They, they might even have seen Alexander Graham Bell debuting his telephone when nobody even knew what it was yet.
And he’s like showing these judges for the very first time what they are, in fact the same judges that would judge the telephone and kind of introduce it to the world.
Those are the exact same judges who are also gonna judge Waltham machines because it’s the persistence instrument category.

[23:00] And so these exact same judges are gonna see Waltham. They’re gonna see Alexander Graham Bell on the telephone.
We’re gonna see the typewriter for the first time. We’re gonna see the sewing machine, we’re gonna see the combustion gas engine.
Uh And then we can also ride a monorail across the grounds. So it’s a brand new concept.
Um and all these things that we kind of take for granted now are debuting there.

[23:22] Uh And then of course, America brings in all these people from all around the world that come to experience the centennial exhibition.
And Robin sees this as an opportunity to market his watches to the world.

[23:35] And so his goal is not necessarily to go there and you know, give everybody his technology.
He actually is very calculated in his letters leading up to the centennial and in his annual reports, he actually indicates that people were very concerned that he was planning to show some of his machinery at the centennial.
But Robbins in his annual reports, he gives a very calculated plan and he says, no, no, no.
It’s only gonna be 16 machines that we’re gonna show.
Uh and it’s only gonna be certain pieces and parts of the watch.
And he indicates that his goal is to scare off the competition at the time.
We have the Elgin National Watch Company has come onto the scene.
There’s other companies uh that are coming onto the scene and Robbins wants people to know they’re nothing compared to what we are. Nobody can compete with us.
And he didn’t even view the Swiss as a relevant factor.
He just viewed it as like they are so far irrelevant. By this point, the centennial is only gonna prove this to the world and I’m gonna show this assembly line exhibit where I’m gonna operate my machines in front of people and they’re gonna see that I can mass produce watches.

Jake:
[24:40] But it seems like maybe some of his shareholders weren’t quite as confident that showing off their manufacturing techniques, even if it wasn’t the whole assembly line, then maybe that wasn’t such a great idea.

Robbins’ Assurances and Respected Reputation

Aaron:
[24:51] Yeah. So Robbins actually indicates in there, he’s basically says, you know, a lot of people have expressed that they don’t think this is a good idea, but I’m gonna assure you this is, you know, here’s the things that we’re gonna do and it shouldn’t be a concern.
It’s gonna show to the world that we produce the best made machine watches and there’s nobody who’s going to be able to compete with us.
And Robbins was an extremely well respected businessman at the time.
He served on the board of the Union Pacific Railroad in the early 18 seventies.
Uh his buddies were on that board. Uh Andrew Carnegie and George Pullman.
So he knew, you know, he was at the pinnacle of the business world at that time.
Uh And Robbins was also the highest taxpayer in Boston. He was the wealthiest business man that was, um you know, earning money in Boston at the time.
So Robbins was definitely a well respected and trusted businessman.
So think of it as you know, our leading business leaders today telling us.
No, no, no, no, you guys gotta trust me.
Uh That was exactly what Robbins was doing.

Jake:
[25:51] There was an interesting note in the book that Robbins and as the company was organized under Robbins relied more on secrecy than on patents to protect their, their trade secrets. Why do you think that was?

Aaron:
[26:07] Patents are one of America’s oldest institutions, but Waltham did not rely heavily on patents.
They did it a lot for their watch, the watches themselves, not so much for machinery.
In fact, we don’t really see Waltham dive into heavy patenting of its machinery and methods until the 18 eighties.
And a big reason for this was, is improvements were being made so fast that filing a patent actually disclosed the designs and they were quickly and constantly changing.
But it’s actually what we find now is even in modern research, there’s a, a very good study uh out of mit that shows that even now a lot of companies, we assume everybody patents everything, but it’s only about a quarter of industries uh is patenting preferred to trade secrecy.
There’s a very, a lot of, um, practical reasons for this and it’s because you have to disclose your design. Right.
Yeah, exactly. Versus if you don’t uh disclose it, you get to hang on to it.
And a great example of that is, is Coca Cola’s recipe is probably the most famous trade secret that has not been disclosed.

Jake:
[27:11] So we have Robbins and the Waltham Corporation relying heavily on secrecy, but also bringing a selection of machines.
I think you said 16 machines that they use in manufacturing to the centennial exhibition in 18 76.
And one of those machines, a screw making machine catches the eye of a fellow watchmaker named Theophilus Greeby.
If I’m getting the pronunciation somewhat close to correct.

Aaron:
[27:36] Yep, Grubby, Grubby. There we go.

Jake:
[27:40] Who was this Gibby? And why did he pay special attention to this never before seen manufacturing method?

Aaron:
[27:48] Yeah. So Gri was sent by the Swiss watchmakers from Western Switzerland.
Uh they it was a trade industry, uh the Inter canal or Inter Cantin society of Jira industries.
So you can think about it as a modern trade association or chamber of commerce type thing.
And they send to help with the judging of watches at the world’s fair.
So I mentioned that there’s judges that are overseeing precision instruments, countries were asked asked to donate experts to help judge.
So Rebbe is one of the people that is um sent by Switzerland to help with the judging and Gray is an experienced watchmaker.
He actually spent much of his early life living in America as a watchmaker at a jeweler.
And he comes and he sees this um machine uh this Waltham Watch company assembly line machine.
And he actually writes down in his journal which I’ve actually been able to see a photocopy of his journal.
He actually writes in there, the calculation of figuring out how many screws this thing can produce.
And you know, we think a screw making machine now doesn’t, doesn’t strike us as anything crazy.
But I’ve actually got to see one of these things in operation that a collector has.
And, and in fact, if you um head out to the Charles River Museum, they actually have on there as well.

[29:03] So seeing this um automatic screw making machine in operation captured the minds of visitors.
In fact, there’s a San Francisco newspaper article I found where they actually talk about this thing being surrounded by morning till night uh to see the, the delicate fingers of the women that are running the machine and cutting the screws.
And, you know, it’s like, it’s a uh to them, it’s remarkable a that there’s, you know, women operating this, that was, you know, almost unheard of at that time.
And then b you have this screw making machine that’s just able to put out 10,000 screws a day.
And is what’s most remarkable to Gri is a woman is operating uh 10 of these things all at the same time.
And he’s like, wait a minute, that’s like 80,000 screws. And he’s like, I only know, you know, the, the person that I know, you know, would only be able to do like 1000 of these things at the most.
So he realizes this is completely going to transform watchmaking.

[29:56] And the Swiss had heard of Waltham, but they didn’t understand how good it truly was.
And so simultaneously, uh Grabby has been asked to Judge Waltham watches and he begins to test them and he realizes he, he writes, he’s like they are altogether superior to anything.
I’ve tested, uh whether it be American Swiss or anything else.
So he’s acknowledging Waltham is making the best and most accurate watches in the world and they can do like, you know, eight times what the Swiss can produce.
And so he writes back to Switzerland with alarm and he says, hey, guys, we, we have a big problem here and we have been left behind and this is what catalyzes everything that is to follow.

Grabby’s Alarmed Letters and Orders from Switzerland

Jake:
[30:39] So, based on his alarmed letters back to, to Switzerland, what orders does he get from the Watchmakers Association there?
And, and what sort of help does he get, uh, in the short term?

Aaron:
[30:52] Yeah. So Grabby is sent uh a gentleman by the name of Jacques De who is a mechanical engineer and he’s also a watchmaker.
Uh and he was an early advocate of mechanized production and watchmaking.
But of course, being in Switzerland, he was kind of viewed as a kind of a ahead of his time or uh irrelevant to the modern forms of watchmaking in Switzerland, which are, you know, everything is by hand.
And so David comes over and joins Rebbe and they have explicit orders if you will from this trade association, the SI IJ and it basically tells them to acquire anything they can about American operations, how they produce their watches, how they operate their companies, uh their finances, how they manage employees.
Uh And it is truly basically like learn everything you can about how to run and manage a watch factory.
And so David joins Grabby about halfway through the centennial exhibitions run.
Uh And he joins them in Philadelphia, and then they quickly proceed on to Waltham, which is where our story with Jacques De really takes off.

Jake:
[31:59] So while Greeby and Jacques De are deciding how to respond and realizing they need to get themselves to, to Waltham, the Swiss are also entrance into the centennial exhibition.
How did their showing fare compared to the American showing there?

Aaron:
[32:18] So the Swiss were very reluctant to even attend the centennial.
They viewed it as a showing for America and just in general, not just the watchmakers, the country of Switzerland as a whole, viewed this as a um, a fair that favored the Americans.
And the Swiss viewed Americans tariffs on Swiss products is put a bad taste in their mouth.

[32:40] And so in their letters that they write to the Centennial Committee, which are actually in Philadelphia’s archives and you can read those, they talk about this reluctance.
They like, hey, we, we went and talked to local businesses and they don’t have any desire to attend.
And it’s really only the last couple of months. They’re like, ok, fine. We’ll, we’ll attend, we’re gonna come.
Um But then we see that they uh the records of their uh exhibit, the newspaper accounts talking about it being the plaintiff in the building.
Uh They show watches, but it’s literally just kind of like a display case.
They put out some watches and it is nothing compared to Waltham assembly line.
And Waltham also has a secondary exhibit which uh is in the main building which shows 2000 watches.
And they say this is the production of one week.
And the Swiss look at that and they’re like, oh my gosh, like you could do 2000 watches in a week with less than 1000 workers.
Uh And meanwhile, the Swiss, you know, are showing, you know, a few watches here and there in the display case and this just con uh contributes to the the optics of the situation between those visiting the centennial.

Jacques De’s realization and need for factory information

Jake:
[33:49] So that’s sort of the point at which Jacques De realizes that they need to, to gather some information pretty soon he’s gonna get access to the factory in Waltham.
You know what I pictured when I read the beginning of this passage was that he was going to go in and sketch the actual machines and figure out how each individual watch part is made.
Well, that’s not really what he was going for. What, what information was he trying to gather and why was it important for him to at least at first get access to the factory himself and not just send somebody in his place?

Aaron:
[34:23] Yeah. So David ends up writing a report that is about, it’s, it’s actually two reports, but you know, combined together, there are about 100 and 30 pages and you can actually read the English translation.
I I linked to it on my website aon stark books dot com and you can go there and check it out.
But it is amazing uh at the level of detail that he goes into and he actually focuses mostly on the financial operations of the company.
He focuses on the operations management, how they pay their workers, how they run their factory, how the workshops manage how parts run between different parts of the factory.
So he’s more focused on the processes and less on the machines themselves, which again does surprise a lot of people because they think no, no, no, it’s the technology that he needed.
He didn’t need the technology, he needed to know how to actually operate a factory, running a factory at that time was especially if that many people of 1000 people was almost unheard of the railroads were only beginning to do this uh is, is a decentralized form of controlling a a business.
Uh, before that, you know, large businesses were only, you know, 5, 10, 15, 20 100 people, not 1000 people.
So Robbins, well, he wasn’t entirely novel in his ability to do this.
It was definitely something David would have wanted to know. Like, how do you do this?

[35:44] Uh, and so he needs to be able to get into the factory. He needs to understand how it works.
He also was, like, marveled at how do they pay for all this stuff?
Where do they get the money? How do they, how are they able to pay people so well? Uh And so all these things are going through his head.

[36:00] And so he does go in the factory, we know he goes into the factory, you know, people since then have said, oh, well, you know, David was, he was a, a tourist, he was a friendly person.
Waltham invited him in and he, you know, they freely and naively shared this information.

[36:16] When you read the report, there’s indications that that’s probably not the case.
Uh But I didn’t have any definitive proof.
Uh And it wasn’t until I came across this letter that deed writes back to Switzerland during his time where he actually says all the quiet parts out loud and he actually talks about sneaking into the factory.
So his exact quote translated is I sped through quickly and incognito and I saw the poor arrangements I already knew about.
I did not really have time to have a good look around nor to ask questions, but we have inside sources and we shall soon have the information we want.
And then he goes on to say something that is absolutely remarkable, which he talks about this guy who’s helping him.
And he’s the former director on the mechanical side.
Mr W which as you remember, I told you about Ambrose Webster, who is the person who helped Robbins basically invent the Waltham factory.

[37:17] Webster actually begins working with David and working with the Swiss to give them information.

[37:23] And anybody who is familiar with the Waltham company, uh or even if you are a resident of Waltham, you probably see the Webster name still around town.
He is a, you know, he is very well respected, but he actually begins working with the Swiss.
And in de final report, he actually tells his watchmakers like, hey, you all should work with Webster.
He’s, he makes great equipment and Webster actually leaves Waltham and starts his own company that year, uh in which he begins selling watchmaking uh factory equipment to the Swiss.
So this is kind of a watershed moment for learning about how does devi get all of this stuff.
And so in his report, we can actually take the finances and he basically, you know, creates an income statement, a balance sheet for Waltham as well as its payrolls.
He estimates how much different types of workers are paid if we compare all that to the records in Harvard’s uh archives where it’s kept, we find that David was off only by about 1 to 5%.
So he was extremely accurate.
Uh And so he definitely had somebody who was helping him and I have to tell people just to give like a concept, like just think to yourself now could, wherever you work would, you know, your own company’s finances within 1 to 5%.
And my guess is probably not. So this is how accurate he is able to devise how Waltham operates.

Jake:
[38:49] And that goes a long way to explaining why he needed an inside source, like a Webster rather than just what he could gather from his eyes and ears on a brief and incognito I think was the word used visit to, to the factory.
You mentioned how well paid the employees are and that’s part of the information he’s developing.
Can you tell us a little bit about life in the factory? And Waltham was like for a factory worker and maybe what life outside the factory was like as well.
I I think a lot of us will probably have an image of like a gilded age textile mill from a, a little bit later or like the Triangle Shirtwaist fire and the, the the conditions there. But Waltham was different.

Aaron:
[39:27] Yeah, and I cannot emphasize how different Waltham was relative to other factories of the era.
You know, we have Jacques Devi who provides this kind of the unbiased spies view.
And he’s completely amazed at how remarkable the the factory operates, how it treats its workers.
The he talks about the cleanliness and how nice it is inside.
He talks about, you know, the workers have made their fortunes, they’re living in these nice houses.
Uh So he’s one perspective and of course, we have lots of factory worker accounts and we could expect those might be biased.
Uh But then we also have this labor reformer in the 18 eighties who visits Waltham and his name is John Swinton.
And at the time, he would have been a very well known reformer.
Uh And he, he was known for openly indicting industrialists and people who did not take care of their workers.
And he actually titles Waltham as the most remarkable factory establishment ever built.
Uh And so he is, he thinks it’s completely amazing. So we have all these different sources uh that we, you know, could look to and say how remarkable was Waltham.
Uh And I think it’s, it’s safe to say it was extremely remarkable just to give you a few quotes, uh, for how well Robbins took care of his workers and how well they were taken care of, uh, living in the city.

Waltham’s Progressive Workplace: Equal Employment Opportunities

 

[40:48] So this is a quote from Swinton. He says they will find that there’s not the slightest barrier against the employment of anyone on account of race or birth.
And this is in 18 87.
And Waltham was known they hired for, they were known for hiring um, many women, they had about 40% of their workforce was women.
And actually by the late 18 hundreds, there’s actually a photo from Waltham of a day nursery to support child care for working mothers.
The second thing is Waltham was known for equal pay. The, um, and this is a quote from the centennial judges.
They say the amount of wages paid by the company is determined by the skill and experience required, not by the sex of the operatives.

[41:29] And then Waltham was also known for hiring people with disabilities.
One quote from a employee in the 18 nineties says there’s many individuals who are not in enjoyment of vigorous health who find work at the factories within their ability.
And in fact, Robbins was known for um, hiring a when the civil war broke out, he encouraged his workers.
Hey, if you wanna go, go fight, well, hold your job when you come back and there’s actually an employee that returned, who was so severely wounded that he couldn’t work as a watchmaker anymore.
So Robbins employed him as a janitor, but actually paid him a watchmaker’s wages uh for the rest of his career.
So Robbins was extremely generous.
Uh And many of these employees then began to go buy land from the company.
The company owned a lot of the land in the area.
They would buy cheap land, they would build excellent houses.
They were known for, you know, uh having many social events, uh they talk about ice skating and going on steamboat rides and train rides and having a mug of beer and it’s all the things that you might look at and I’ll be like, man, that sounds great.
How do I go to a company like that? A lot of people say, man, it sounds like our modern tech company, you know, modern Google or something where they encourage employees to explore uh innovative ideas.
And yeah, that’s how Waltham survived for the 1st 25 years of its existence was encouraging employees to pursue innovations.

Jake:
[42:51] How did that compare to life in and out of the home workshops that drove the Swiss watchmaking industry.

Aaron:
[42:58] Yeah. So the Swiss were obviously, you know, some people might view it as they, they actually had a better deal in the sense that they don’t have these strict schedules.
They’re own, they get to working and they, they’re working from home, they’re, uh, they’re managing, um, their own lifestyles versus the worker has to be very punctual.
They’re there at seven in the morning, uh, if they’re not there exactly on time, then they lose a half a day’s wages.
Meanwhile, you know, the Swiss kind of get to come and go as they please.
Um, so they’re two very different lifestyles. So, I guess it kind of depends on which side of the coin you’re on.
But Waltham definitely, um, was able to provide for its workers and many of them were partial owners of the company.
Many of them held stock and this was, you know, a company that paid dividends at the time of around 20%.
So many of them truly made their fortunes working for the company.

David’s Report on Waltham’s Model and Swiss Watchmakers’ Reaction

Jake:
[43:46] Jacques Devi is bringing that perspective to the report that he’s compiling through the centennial exhibition and then especially through his industrial espionage.
And Waltham, how is his report received by the watchmakers back home?
You, you draw a parallel between Microsoft, Ceo Steve Ballmer’s reaction to the first iphone and the way some of it, the, the Swiss watchmakers reacted.

Aaron:
[44:11] David returns to Switzerland and he writes this report and he is expecting that everybody is like gonna be shocked and he finds that nobody really cares.
They’re kind of like, yeah, whatever.
Those of you who have not heard the story. Um, Steve Ballmer, the Ceo of Microsoft at the time.
And he’s admitted that he laughed when he first saw the iphone and Steve Jobs presenting it like thinking this thing could never be a viable threat.
Uh It was never gonna take off and of course, you know, now we look back like that’s just silly and it was the same type of concept that deed runs into.
So Dave truly has to not only present this information.

[44:50] But he also has to, he has to know what to do with it. And this is where David is kind of a genius.
He takes this information and he tells the watchmakers, I’m not gonna tell you to do everything like Waltham does.
I, I know that’s not realistic. You’re never gonna do it.
And so he focuses on emulation. And so this is one of the themes that I draw out in the book is this idea of imitation versus emulation.
So imitation is like you’re trying to do it exactly like if you were to follow Waltham and you try and do it exactly like that. This isn’t what he does.
He follows something very similar to what Francis Cabot Lowell does with the Lowell Mills.
When he steals technology from the British is he, he brings it to ironically to Waltham and establishes his, his mills there.
Uh Before they move on to Lowell, he establishes the, the mills in, in Waltham and he makes a better system.
He basically looks left and right sees what’s around him. He devises a new system, figures out how to make it better.
And then he begins out competing the English in textiles.
David suggests something very similar. He says, hey, you all don’t have to go work in big factories. I’m not asking you to do that.

[46:01] I’m asking us to standardize our procedures. We’re all gonna standardize on the same model.
So, you know, if you’re gonna make screws, they gotta be all at the same angle.
They all gonna be standard sizes. If you’re gonna make, you know, wheels for the watch, they are gonna be a standard size, the teeth of the gears are gonna be at the, you know, standard sizes so we can interchange them.

[46:22] Uh And then he begins saying we should use some machines.
We don’t all have to use machines, but like there’s certain precision parts that need machines, other things, I don’t care if you have a machine, but if it needs a machine, we’re just gonna set up small factories.
They’re gonna be in little towns. It’s like I need like 20 of you in each of these factories and your job is to make those precision parts.
Um And so he begins making a very similar system to Waltham, but I almost like to think of it as like a Waltham factory spread out across a town uh or across a region.

David’s System: Waltham Factory Spread Across a Region

 

[46:54] Everybody begins producing their pieces and parts and it’s very similar to uh a modern computer manufacturer now.
So whatever computer you’re watching or listening on or, or surfing or checking out uh the website it’s, they probably did not make every piece in part in that computer.
They got a microchip from somewhere, they got a keyboard from somewhere, they got the case from somewhere.
And really the computer, the only thing they’re responsible for is putting it all together, testing it, making sure it works and then they put the warranty on it.
And this is very similar to what watchmakers then begin doing in Switzerland.
There’s all these factories that are producing individual pieces and parts, the watchmaker is then putting them together, they’re casing a movement which are now all standardized sizes uh and then they are selling these.
And so this system begins to take off in the 18, late 18 seventies, probably about 18 78 is when David really starts to get traction.

[47:52] And then by the mid 18 eighties, um the Swiss are firmly moving towards this factory system.
Uh And so we find throughout the 18 eighties and 18 nineties, these factories are springing up.
The Swiss are um beginning to use machinery in their production and they’re beginning to make a much better watch.
But David’s true leadership is also suggesting where they need to make strategic changes.

Jake:
[48:16] It almost seems like the Swiss and Robbins and the Waltham Company took very different lessons away from the expo in Philadelphia in 18 76 where, you know, the Swiss came away more or less with their hair on fire.
What lesson do you think that Robbins took away from that same exhibition?

Aaron:
[48:35] Robbins sees the centennial as a referendum on his cheap and reliable watches.
Waltham market strategy was to be the cheapest producer and to mass produce, but a reliable product and he viewed it as everyone was running away and he owned the market.
Uh And there’s many newspaper articles and he accounts his own letters to shareholders.
He talks about, you know, there was no success in Philadelphia greater than our success.
Uh And I think it’s kind of ironic because during that summer was when news arrived of Custer’s defeat at Little Big Horn.
And that would have arrived in July a couple days after.
And, you know, the whole kind of takeaway of what we know then and even in accounts, then they talk about, you know, Custer thought his enemy was running.
So he started going after him and it turns out he wasn’t running and he’s actually, you know, quickly overwhelmed.
And this was kind of a similar metaphor for what actually happens with Robbins is he views the Swiss as like they are gone.
He even writes, you know, we’re going to Switzerland and where we stay or where we go, we stay and multiply.
So he’s like, he’s very arrogant about this. We’re gonna go and we’re just gonna completely eliminate them from the market.
He just completely ignores the Swiss and says, you know, they’re irrelevant.

Robbins’ Ignorance of Luxury Market Opportunities

Jake:
[49:52] He also seems like he ignored some of the most important awards that he got.
He was very focused still on, like you said, cheap and reliable watches, but he was honored for, you know, the finest time pieces.
But he doesn’t capitalize on that to get into the luxury market, which seems like a mess.

Aaron:
[50:10] Yeah, Robbins sees the luxury watch market is like not the future of a successful industry and it’s not so dissimilar to Henry Ford and the early Ford bottles where Ford’s art is, you know, a Ford in every driveway or every garage.
This is Robbins. He sees it as like a waffle in every pocket.
And so moving towards luxury is kind of the opposite of that.
He doesn’t want to be a luxury maker.
He wants to be the cheap and reliable watch that everybody can afford and everybody wants one.

Jake:
[50:38] The Swiss look at the same thing and, and they realize, oh, we can’t chase the Americans on price. What direction do they go instead?

Aaron:
[50:46] Yeah. So if you’re into business strategy at all, the Swiss strategy coming out of this is like the definition of scale and scope and choosing your market and where to compete.
It is an amazing series of choices so highly recommend it if you’re into business strategy at all.
But it’s what the Swiss do is they come back and they realize we’re never going to compete in the cheap and reliable market, especially not in America.
They look at tariffs in America, they’re high. They say Waltham has got this.
There’s just no way we’re gonna compete.
So they actually choose to exit the market.
They exit the American market and the cheap and reliable segments.
When I say the Swiss, you know, keep in mind there’s hundreds of producers.
So it’s not just like there’s a coordinated decision to leave the market.
All these cheap and reliable producers are choosing to exit the American market based on Devi’s recommendations and they choose to focus on international markets.
So they begin saturating international markets with cheap and reliable watches.

[51:42] Meanwhile, Waltham begins looking overseas in the late 18 seventies and 18 eighties and they quickly realize like, wait a minute, something is not right.
We are now being out competed in these international markets.
And so Walt’s growth markets are no longer available to them and the Swiss are saturating them.
And so Robbins, even by the early 18 eighties begins writing somewhat alarmingly to shareholders that all these markets that we thought we were gonna go to and stay and multiply like we’re, we’re not having some problems because we have this competition from the Swiss.
And then he talks about, you know, in American markets, we have this even more competition from domestic producers.
So he starts to realize there’s a problem.

[52:24] But then the Swiss also did this other thing there say, hey, you know, we have all these great watchmakers who know how to make really beautiful watches.

[52:33] We can’t just like make machine watches and get rid of them.
Like we gotta do something like what if you all made machine made watches, but then made them beautiful and made them complex and made them luxury.

[52:46] And these luxury watchmakers are like, yeah, that sounds great.
So the Swiss began focusing on luxury watchmaking, but David Provo proposes some reforms that actually forces them to comply.
So the first is, is he says, hey, golden, silver content, if you’re gonna have a gold or silver watch, it’s gonna be hallmarked and it’s gonna be certified by the government, and we’re gonna get rid of this fraudulent hall marking that is like making our name a terrible name across the world. So that’s the first thing he does.
The second thing is he says, hey, we can’t make our watches unreliable.
If they’re gonna be machine made watches, they need to be reliable watches and we’re gonna officially certify them.
So they have to be tested. Uh, and we’re gonna make sure that they actually are able to, to perform at the standard that we’d expect.
And so then the Swiss begin officially certifying their watches.
And if you happen to be wearing a Rolex watch, you might look down and notice it says officially certified. This is the origin of that system.
And then the most interesting thing is what David required them to do to be officially certified is actually like our, our watches perform about that same standard today.
So it’s not like these watches were terrible. Once, once they became officially certified, they were highly accurate.

Jake:
[54:06] As the Swiss are tooling up to sort of compete in the reliable watch segment, both in the sort of affordable, reliable watch segment.
And then eyeing the high end, what sort of changes are getting made in American manufacturing, not only the, the Waltham company, but also their domestic competitors.

Aaron:
[54:24] So Waltham um begins to realize there’s a problem.
So if you keep in mind by 18 83 Robbins has been at the company since 18 56.
So when he bought the company, he was already 33 years old. So he’s beginning to get along in.
And so they keep him at the company, but the stockholders actually bring in a new CEO if you will. And his name is Ezra Fitch.

Jake:
[54:48] So he starts out as a superintendent role, which isn’t exactly the CEO yet.
What’s that first role of superintendent? Like?

Aaron:
[54:59] So the superintendent is like the person who’s, uh you might think of him as like a plant manager.
They’re in charge of all like short term production decisions and you know, making sure that the company is meeting its production goals versus like the, he eventually becomes the president of the company by 18 86.
And during this time, he also understands there’s a problem Fitch’s true issue that he ends up having is he views the only way out of this is to become cheaper and more reliable.
And eventually those two things become in conflict.
Waltham continues to produce many good watches, but overwhelmingly they produce mostly cheap watches.
And so they’re producing a million watches a year, almost all entirely cheap watches, uh which is amazing to a lot of people because if you’re familiar with Waltham, you think of the nice watches, but those are only a small fraction of what they actually produced.
This begins to weigh on the company because ultimately, the Swiss begin capturing this luxury market, which they find is highly profitable and during this time is the Gillet age.
So people now want what other people can’t afford and the Swiss find that this is a great market to be in.
Meanwhile, Wham admits that they would love if they could get into the luxury market.
But they just say, oh, you know, people just don’t buy them from us.
So we’re not gonna focus on it.

The rise of the wristwatch and its impact on Waltham

 

[56:21] They continue to focus on this cheap and reliable. They buy more and more automatic machinery and then this big change begins happening in the 18 eighties.
It’s called the wristwatch and the wristwatch. I’ve heard of those. The Swiss, yes.
The Swiss introduced the wristwatch. I mean, the concept itself wasn’t novel but it became, you know, a mass production item.
The Swiss were just retooling at the time so they can quickly adopt this new system uh to make wristwatches.
Meanwhile, Waltham is investing millions of dollars in heavy machinery to build packet watches and so it becomes too costly to shift to this new wristwatch.
Well, the wristwatch quickly overtakes the market by World War One.
Everybody wants wristwatches.
A lot of people will say, well, wha makes wristwatches. They do.
They’re about, you know, the size of a pocket watch and they, um, go on a wrist.
Meanwhile, wristwatches at the time are actually very small.
And the Swiss are known for this, like small wristwatch and that’s what the wealthy people want on their wa or on their wrist.

Jake:
[57:26] So we have the Waltham Corporation plowing good money after bad into what’s an outgoing trend in wa watch fashion while the Swiss have sort of correctly predicted where watches are gonna go.
So how does both the change in management and just the change in fashion trends affect the Waltham company’s competitive position or sort of its market position between its appearance in 18 76 in Philadelphia under Robbins and then its appearance at the 18 93 Columbian Exposition in Chicago under Fitch.

Aaron:
[58:03] Early in Rob or in Waltham history, innovation is what drove the company and most interestingly under Fitch, we see that he quickly kind of stifles that culture.
There’s a really interesting before and after snapshot. So in 18 76 we have Dave’s report tells us how Waltham manages its factory.
And in 1921 Harvard Business School does a study at Waltham and they talk about in the early 19 hundreds, a lot of these procedures that we would consider like, scientific management and some of these trends they talk about Waltham is a slow adopter.
Nobody wants to use these procedures, they don’t even know how to time cost their parts.

[58:42] Meanwhile, Devi describes the system that Waltham and he talks about, they know how to time cost their parts exactly back in the 18 seventies.
And so we find that this like regression in managerial trends and then Fitch also forced the company to really focus on what would sell versus, you know, where the kind of the new innovations were headed.
And Wham’s biographer, in the 18 forties, a guy named Charles Moore, he actually writes that, you know, this is kind of the end of the golden age for Waltham, when Fitch took over, we can see that, you know, in the 18 seventies, Waltham was the product that everybody wanted to own.
And by the 18 nineties there’s actually a really interesting in 18 92 a newspaper article in the Brooklyn Daily Eagle that I came across and it appears on page two of the, the newspaper.
And so Brooklyn New York and, you know, kind of the who’s who of Brooklyn New York.
It literally takes up almost the entire page and it lists all these people and what watches they own and how much they’re worth.
So you kind of think of it almost as like watch, uh, media today where they’ll, you know, show who’s wearing what watch or whatnot, think of this as like for all of the prominent people of Brooklyn.

[59:57] And almost, uh, an overwhelming majority of these are expensive Swiss watches.
And meanwhile, you know, 20 years prior, everybody wanted a Waltham watch, they don’t want a Swiss watch.

Waltham’s decline and the Swiss dominance in the market

 

[1:00:08] Uh, and so we see this kind of this changing in the Guard and we go to the 18 93 Colombian exhibition, which is again a great world’s fair.
And if you’ve read the book, The Devil In the White City, uh, it actually takes place at this world’s fair.
It’s like kind of the many people consider it the greatest world fair that took place in America.
And their wham does basically the exact same thing they did at the previous one, they bring a mini assembly line, they bring a display of watches and they basically just do it all on a grander scale.
But the judges, there are kind of like these guys are just doing the same play they did 20 years ago.
And meanwhile, you know, 20 years ago, they were like, literally the thing everybody was talking about.
There’s newspapers all over the world talking about Waltham, but not at the Colombian exhibition, Waltham, uh demonstrates that they’re kind of devoid of these innovative ideas.
Meanwhile, the Swiss show up and they show up with massive exhibits.

[1:01:03] And their exhibits are seen for their luxury and they, they um bring all these certified and officially certified watches, then they just show that we can do these things in mass.
And the judges actually say, you know, one might find it hard to find an officially certified watch, but not here.
They’re in abundance. And so they’re showing that we could do all these things.
And it’s what’s amazing is they basically the, the Swiss or the judges at the exhibition wouldn’t have known who Jacques Devi was.
But they talk about all the things Jacques Devi recommends.
And they basically say the reason for the Swiss resurgence is all these things that, uh you know, the Swiss have done and we can trace all of those directly back to David’s report.
So we’re able to see how much of an effect David truly had on the transformation of the Swiss and ultimately in their ability to kind of cut Waltham out of the market.

Jake:
[1:01:56] And you note in the book that the Waltham Watch Company went bankrupt for the, the final time, I think in 18 49 or 18 48 the late 18 40 or sorry.
Yes, thank you in the late 19 forties.
Um, but that it wasn’t really a global player in a big way after about 1900 how much of that can we cha chalk up to David’s report?
And how much was mismanagement or some other external factors?

Aaron:
[1:02:24] Yeah. So, um I think one thing that surprises a lot of people is when they think of industrial espionage, they think of it as kind of like a direct cause and effect, you know, competitor steals technology, makes knockoff version of product and, you know, drives them out of the market.
That’s not what happens. It’s typically a process that lasts, you know, over five years, 10 years, decades.
Um And a lot of the research into industrial espionage shows that these cause and effects literally last over decades.
And it’s because one company has kind of the playbook, they get to see into the other side of, of their competitor and they’re able to see exactly what their competitor is gonna do.
So we know David maintained sources at least uh six months after he returns to Switzerland, he may have kept them longer, but he mentions being in communication with sources and we know Webster continued to work with the Swiss through the 18 nineties.
So it’s very plausible. David is getting information from them continuously.

[1:03:24] But the Swiss are able to use this information to choose where to compete and how to compete and that has an effect on Waltham because as Waltham strategies.

[1:03:35] Begin to show their, their flaws, Waltham doesn’t have anywhere to go.
If the Swiss had not recovered, the Swiss probably would have ceased to exist as an industry providing Waltham plenty of runway to move.
But no, the Swiss begin to reform their industry, they begin to choose new markets and probably where they cut Waltham off first is saturating the international markets.
Waltham had already basically saturated the US market by 18 76 to truly find new places to sell watches.
They had to look overseas and it only took about 10 years for the Swiss to truly cut them off in these international markets.
And then Waltham realizes like, hey, the gilded age is here, be great to move up market.
But again, the Swiss have cut them off there as well. And so it’s true, it’s literally the Swiss kind of knowing the playbook and then deciding what to do is where it has a direct impact on Walt’s decline.
And as you mentioned by about 1900 is where I’ve like, I’ve applied some modern financial analysis techniques to kind of show how Waltham was no longer performing as a strategic threat uh against competitors.
And while they do continue, they uh they continue to operate in America.

[1:04:55] They’re not a strategic player uh As far as the Swiss are concerned and the Swiss begin totally dominating the market.
And thus is the the rise of kind of the, the final rise of the Swiss as the world’s best watchmakers, as we know them today.

The Mysterious Disappearance of Jacques Devi

Jake:
[1:05:10] Well, if the act of industrial espionage that Jacques Devi managed to pull off had such a huge impact on global manufacturing.
Why has nobody heard of him? And this impactful report that he created?

Aaron:
[1:05:25] Yeah. So there’s a couple of reasons for that. The first is when David returns to Switzerland in 18 76 he knows that if the Americans get a hold of this work, you know, a he’s got sources, he’s still getting information from.
Uh but b he also thinks they’re going to use it as a marketing opportunity to advertise that the Swiss are, you know, alarmed.
And so he’s very wise in that sense. So he demands that it be kept secret.
So it’s limited to eight copies and distribution is limited and it doesn’t really, it kind of fades from history.
And the first mention that I’ve been able to find of it anywhere or even really of Jacques Devi is in 18 80 or 1987.
There’s a Swiss academic who mentions Jacques Devi’s name and he calls him a real industrial spy.
So somewhere in Swiss academia in the 19 eighties, somebody knows about Jacques Devi, but his report gets released in 1992 as kind of a facsimile coffee table book uh by the Long Jeans Company.
And it’s a fascinating piece of watch industry history.
But again, David has always been viewed as, you know, he’s just a, a interesting guy who visited America and Waltham freely and naively passed this information.

[1:06:41] Uh But once David’s name kind of becomes known, people begin to recognize David as a truly central character in the resurgence of the Swiss watch industry.
And so is kind of a good anecdote in 1983 there’s a book written on the Watch Industry called a Revolution In Time by this guy named David Landis, who’s a, a Harvard history professor.
Everybody who is interested in a watch industry history has probably read this book. There’s no mention of David or his report.
Fast forward to the most prominent watch industry history of our era.
Uh a gentleman by the name of Pierre Yves, Donze.

[1:07:19] Uh and he’s a academic out of Switzerland and he currently works in Japan and he, his book is called The History of the Swiss Watch Industry from Jacques de to Nicholas Hayek.
So David has gone from being basically an unknown person to he’s now actually part of the title of the book, Nobody questions Devi’s role in, you know, providing the Swiss with kind of the roadmap forward.
What has never been known though is where the information came from.
And that was kind of the blockbuster of this research as I was doing, it was realizing like this truly is industrial espionage.
Uh We’ve never known it, we probably never would have known had David never written the letter uh where he actually tells us about going incognito and working with Webster.
We probably would have never known that David was uh truly an industrial spy.

Jake:
[1:08:10] Well, it’s a fascinating and mostly untold story that our listeners should go and check out.
Uh, if people want to follow you and learn more about your work online, where should they look for that?

Aaron:
[1:08:22] Yeah, as I mentioned, you can go to Erin stark books dot com.
I have tons of photos on there.
A lot of the things that we’ve talked about today. You can see original photos of those.
You can even see a photo of Jacques de and one of the, as well as the screw making machine.
We also the Waltham Historical Society even recently tracked down a photo of Eliza Jane Putnam.
So you can check out her photo. Uh It’s kind of a common ordinary worker.
It was an exciting moment. So please go there, you can check it out.
You can find the book on Amazon also on audible.
Uh If you like listening on audible. I uh the the narrator for the book is a gentleman by the name of Will Damron.
He’s a multi award winning um narrator for, for books and has won uh multiple awards.
So definitely encourage you to check that out if you like audible.

Jake:
[1:09:12] Well, we will definitely link to Aaron Stark books dot com in the show notes as well as linking directly to a purchase link for the book.
The book again is disrupting time, industrial combat espionage and the downfall of a great American company, Aaron Stark.
I just want to say thanks again very much for joining us today.

Aaron:
[1:09:33] Yeah, thanks for having me. It was a good conversation.

Jake:
[1:09:36] To learn more about Aaron Stark or the Waltham Watch Company.
Check out this week’s show notes at hub history dot com slash 284.
I’ll include pictures of the Waltham Watch factory from back in the day and today and I’ll link to Aaron’s website there.
You can learn more about him and his work and you can find historical pictures in primary sources including the lost and rediscovered intelligence report by Jacques de vide and a picture of factory worker Elijah Putnam.
And of course, I’ll have a link where you can support the show by buying Aaron’s book disrupting time.
If you’d like to get in touch with us, you can email podcast at hub history dot com.
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Music

Jake:
[1:10:56] That’s all for now. Stay safe out there listeners.