Wanna Buy a Watch?
By: Josh Dean
It is quite possible that Michael Kobold is one of those inexplicably lucky people, one for whom good things just seem to happen, the kind of guy who wins the lottery twice. Let me give you an example. One day in 2003 he's sitting at his desk at Kobold Watch, where he and three employees make and sell high-end mechanical wristwatches from a quiet industrial park in Pittsburgh. The phone rings, and Kobold answers it. The man on the line is from New York and he's gruff; he apparently owns a Kobold watch and likes it enough that he wants another one. Kobold, thinking the guy with the gruff New Yorky voice is a cop, offers the guy his standard 10 percent police discount. "Finally," Kobold will later recall, "he told me he was an actor and that he was in something called The Sopranos." Keep in mind here that Kobold does not watch TV. He could not name a single artist in the Billboard Top 20 and would be hard-pressed to recognize a film actor who isn't Tom Cruise or Mel Gibson. Pop culture references sail wildly over his head.
So Kobold says, "This Sopranos thing--is it a musical?" And the guy, who by now recognizes that, for whatever reason, this European fella on the phone honestly has no idea who he's talking to, answers back: "It's a show about a big fat guy, and I'm the big fat guy."
By now you've figured out who the man was: James Gandolfini.
Kobold hand delivered the watch to Gandolfini on set in New York City--a service he sometimes performs for celebrities and other important buyers--and the two hit it off. The first thing Kobold said was, "You're not as fat as I thought you'd be." To which Gandolfini replied, "You're not as old as I thought you'd be." Today Kobold weekends at Gandolfini's Jersey beach house, shacks up at his New York apartment, and refers to him as "one of my best friends." Gandolfini is not an easy man to reach. He loathes the media and doesn't even bother to employ a publicist to reject interview requests. But after six months of cajoling, Kobold finally managed to get him to speak to me for about a minute, by phone from the set of The Sopranos. "I saw one of the watches in a magazine and I called the number," he told me. "I just liked him. He was this odd guy."
Kobold's first call from Gandolfini has since become so much more than a good story; it was the third random but crucial encounter of Kobold's young life and a pivotal moment in the history of Kobold Watch. Because not only does Gandolfini not talk to journalists, he also doesn't endorse products. With one huge exception: He is now Kobold's most famous brand ambassador, as the official faces of the company are known. And, like all the others, he does it for free.
It's a crazy story, but the sort of thing you keep hearing when you spend time with Michael Kobold, 27, of Pittsburgh via Frankfurt. He's a handsome fellow, slim with short hair, good posture, and excellent diction. To hear him talk you'd know he wasn't American-born but you'd have a hard time placing the accent; it might put you in mind of those movie villains who sound like they come from a place where all the European borders come together. Kobold drives a 15-year-old Porsche and lives in a $700 one-bedroom apartment a short walk from the University of Pittsburgh. He is the founder and president of the company that bears his name. As for the watches that bear his name, they now start at $2,450.
I am by no means a watch collector--I own seven watches, not one of them worth more than $200--and so, before I set upon the mission to understand this man and his marque, I had never once heard mention of Kobold Watch. Practically speaking, most Americans have never heard of it either. Kobold is a microbrand, producing a maximum of 2,500 watches per year and residing in the rarified air of mechanical timepieces, a niche of the market based almost exclusively in Europe.
And yet, slowly and almost impossibly, with a number of missteps and a healthy dose of luck and circumstance, Michael Kobold has fashioned a brand that competes with esteemed names such as Omega and Tag Heuer (OTC:LVMUY). Granted, no one at either company is quivering in fear at the name Kobold, but the fact of the matter is that thousands of men willing to spend $2,000 and up (way up) on a watch--a well-studied constituency that does not waste time or money on poor quality--are buying from a quirky immigrant who sells watches from an industrial park in Pittsburgh.
I don't know why watches," Kobold says, by way of explaining of how he got here from there. "But at 12, I got my first good one, from my dad. It was the first year he didn't spend Christmas with us, so he got me a Cartier. I loved that watch. It was mechanical. It was high end. I thought this was my one watch for the rest of my life. But that got me thinking--which is the problem with me. I'm compulsive. I thought it was the perfect product. You buy one for life. I liked that it was built by a human. The robot thing freaks me out."
Young Kobold, whose father ran a powerful company called the Kobold Group and thus was not exactly around to nurture his son's hobbies, set about writing fan letters to watch gurus, saying, essentially, Teach me. Only one responded personally: the legendary Gerd Lang of Chronoswiss. This would be the first Random But Crucial Encounter. "To me, that was like a superhero calling," says Kobold. "Of all the watchmakers, I idolized him most."
It's a hard thing to get your head around, that a teenage boy would obsess over the idea that he had to learn the art of watchmaking. If this were a movie, he'd be sort of pathetic and would live in a tiny room under the stairs. But Kobold was a child of privilege who traveled between homes in Germany and Florida and studied at the best private schools.
"Mr. Lang taught me everything that I know today about design," Kobold says. The boy would drive back and forth to Munich from the family mansion outside Frankfurt whenever he got the chance, shadowing Lang and eventually becoming something of a surrogate son. Lang taught him the basics of watch design and also of running a watch company.
Eventually, Kobold set off for the U.S. to study economics at Carnegie Mellon in Pittsburgh. It was during one of the first summers back home that he had Random But Crucial Encounter No. 2. Because he was schooled in tactical driving--a skill he picked up at his father's request; Herr Kobold feared that Michael or his brother could be a kidnap target--Michael was often asked to pick up VIPs when they visited Frankfurt to lecture at the International School, his alma mater. One day, he was dispatched to pick up the famous English adventurer Sir Ranulph Fiennes, a man the Guinness Book considers "the world's greatest living explorer." It was raining and they were late, so the kid put his skills to the test. As Fiennes recalls, "The person they sent was a 19-year-old who looked smart and drove far too fast and that was Mike.…We just clicked completely." A friendship was born.
The birth of Kobold Watch, on the other hand, was essentially a byproduct of boredom. Kobold so loathed college that he needed a distraction. Lang told him to start a company, and so in 1999 he did, with $5,000 in cash, Lang's personal warrant (particularly useful with suppliers), and the confidence of the well born and likable. He began with a single watch: a simple design, black and sturdy, known as the Professional. On the advice of Jack Roseman, his college entrepreneurship professor, he placed an ad in a watch magazine, registered a URL, and put the Professional online for the price of $575, becoming, accidentally, one of the first--perhaps even the first, as he claims--Internet-based factory-direct watch companies.
Kobold ran the company from his apartment, keeping stock in a tiny safe. If he had an order when he came back from class, he would attach a strap to a watch, box it up, and dispatch it by mail. That first year he grossed $85,000.
The company has since grown exponentially in sales, but only incrementally in terms of personnel and office space. It occupies a single room adjacent to Kobold Instruments, the American office of his dad's company, from which he rents the space for $750 a month and borrows some corners of the factory for storage. There are just three full-time employees: chief operating officer Dan Scioscia, watchmaker Ed Cruz, and bookkeeper and jack-of-all-trades Bryan Satchell. Kobold also relies on a master watchmaker who works when needed and a third watchmaker who can be called into duty when things are especially nuts. (Later this year, Cruz will head to Switzerland to further his studies; eventually he will be certified as a master.) In a pinch Kobold still assembles watches, as he did until he hired his first employee in 2003. He keeps a jeweler's monocle at his desk for visitors who might expect to find someone more befitting the part of watchmaker than a guy in white sneakers and a polo shirt.
"We tell people we're a bunch of misfits cast away on like a desert island," Kobold says, standing outside, in a blacktop parking lot not far from the Pittsburgh airport. Down the hill is a bread company that lets him wander freely on the factory floor, snatching loaves intended for the shelves at Whole Foods (NASDAQ:WFMI). He has memorized the baking schedule, so that he knows what breads exit the oven at what times. (Cranberry pecan arrives Thursdays at 4 p.m.) Food is Kobold's only obvious vice. He is never far from a box of chocolates and at one point, back in college, he often ate a pound a day. Among his many plans is one to launch a line of Kobold chocolate bars.
It's incongruous to picture the maker of expensive watches commuting to work here, in a bland office that doesn't even have a receptionist, but it's core to Kobold's business philosophy. "I don't believe in hiring more, more, more people," he says. "That's the mistake a lot of companies make. They hire people and then lay them off. It's cyclical. I'm against that. Around Christmas, we just work harder."
Kobold pays himself a low-six-figure salary. Everything else goes back to the company. Because so much of the watch business is image and exposure, his ad budget is the largest line item after manufacturing costs. You can find Kobold watches in expensive titles like The Economist, Men's Vogue, and the Robb Report, magazines that get up to $50,000 per page. In 2007, Kobold will spend just over a half-million dollars on advertising.
Perhaps the smartest thing Kobold ever did was to ask his celebrity buyers for permission to list their names on the company website. His friendship with Sir Ranulph Fiennes expanded into business when the explorer agreed to leave Rolex, his longtime sponsor, and become the face of Kobold under its new slogan, "Embrace Adventure." (A roster of adventurers who wear Kobolds, including the likes of mountaineering legend Reinhold Messner, is prominently featured on the website.) Fiennes is not the company's most famous fan, however. Bill Clinton owns at least three Kobold watches and has chosen some very high-profile spots--Larry King Live, a Super Bowl halftime show, the cover of Ladies' Home Journal--in which to wear them. As an ex-President, Clinton cannot officially endorse anything, nor can his likeness be used in an ad, but you better believe it's a topic Michael Kobold loves to bring up.
But Kobold's biggest break of all circles back to Gandolfini. One day in late 2003, the actor was posing for the cover of GQ magazine in a Manhattan studio. Kobold was hanging around with his friend and started to snap a few photos with the idea that maybe one of them would work out as an ad. "Hey, Jim," he said, "look over here." Gandolfini looked over, smiled, and then, as actors often do, he improvised; he raised his middle finger to the camera. That shot would become an ad that has since run in dozens of magazines. The tag line: "James Gandolfini thinks Kobold is No. 1."
One of the first magazines to run the ad was the trade publication International Watch. Editor in chief Gary George Girdvainis was hesitant to take it at first. This is a staid old business; your typical watch ad is just a beauty shot of a timepiece on seamless. You might get a shiny luxury car in the background or maybe Pete Sampras in a blazer. To Girdvainis's surprise, he got no complaints. "People were offended, affronted, amused, whatever," he says. "They paid attention."
Another brand ambassador who turns up in ads is Prince Mongo, a wealthy real estate investor from Memphis who insists he is a 333-year-old envoy from the planet Zambonia. He dresses like a homeless person and never wears shoes. But he does wear a multithousand-dollar watch.
Once, Kobold was in the office alone when the king of a Middle Eastern country that cannot be named rang up. His Eminence had seen an ad for the Phantom--a matte black chronograph created for special ops soldiers--in the back of the DuPont Registry and sought to understand why, exactly, one would need a bezel that turned.
"Do you cook?" Kobold recalls asking the king, who lives in a gilded palace and controls oil reserves that yield tens of thousands of barrels a day. "Okay, ridiculous question." He tried again. "Say you're putting money in a parking meter…Oh, right. Never mind."
The king paid $22,500 for a custom gold version of the Phantom--a good deal, at the end of the day.
"It's customer service," Kobold says. "We have a margin. I'm not going to argue with the king over $1,000."
In the hierarchy of watches, the ultra high end is made up of your Pateks and your Audemars Piguets. Chronoswiss, Jaeger-LeCoultre, IWC, and some others would fall just under the top end. Below that would be the likes of Panerai, Rolex, Omega, and little old Kobold. "Compare us to Rolex," Kobold himself says. "Don't compare us to Patek."
Michael Kobold, though, has very distinct ideas about luxury. He believes in scarcity and in micromanaged quality control. His company does very limited productions. Kobold, he says, will never produce more than 2,500 watches in a year. Rolex, by comparison, makes upward of 600,000, which isn't to say it's not a brand that commands respect. If you were to check the wrists of 100 Wall Street traders, it's a virtual certainty that Rolex would predominate. It is the only watch brand to appear on the Interbrand (NYSE:OMC) "100 Best Global Brands" list.
Kobold admires the company and its watches; he just takes issue with the numbers. That level of production "runs counter to the idea of luxury," Kobold says. "It becomes a commodity. Bigger companies overproduce and discount. We do the opposite." He will build only 250 of a new watch he's developing with British racing car legend Stirling Moss. Another new model will bear the name of Philippe Cousteau, and again, only 250 will be made. With a few exceptions, Kobold retires a watch after a limited production, which not only creates demand but protects the value of his customers' investments.
Virtually every piece of a Kobold watch is made in Europe, but Kobold is proud to base his operations, and most of his assembly, in the U.S. (He's a bit of a patriot--he's stingy about discounts except to law enforcement and military personnel, and nothing makes him happier than selling a watch to a Navy Seal or a Secret Service agent.) The few other notable American watch companies are either much smaller--the tiny Montana Watch Co. and RGM Watch are developing names--or much larger and not purely makers of mechanicals, Fossil (NASDAQ:FOSL) being the most prominent example. "There's really nothing on our level in America," Kobold says. "But my theory is that when a guy collects watches, eventually he's going to end up with one of each. So in a sense there is no competition."
That may be partly true, but it's mostly just indicative of Kobold's optimism. Certainly it's expensive to start a high-end watch company, but in crucial respects the barriers to entry are low. Most important, the movement, the beating heart of a mechanical watch, is available off the shelf. (See "Very Tightly Wound,") "Anyone with a design can make a watch," says Girdvainis, of International Watch. "You can start the project on a napkin and bring it to fruition. It's basically marketing.
"There are 200-plus watch brands at Basel alone," he says, speaking of the annual Basel watch show, the industry's preeminent showcase. "And every year they pop onto the scene and then disappear as though they never existed."
And when Kobold popped onto the scene?
"I was surprised he was still here a few years later."
Just about the only thing Michael Kobold is circumspect about is money. There seems to be a watch-business code of omerta regarding sales figures--extending even to a company that sells direct to the public, publishes its prices online, and rarely discounts. But the math is simple. If you assume (conservatively) that the average sale of a Kobold watch is worth about $2,500, and if the company sold (conservatively) about 1,500 watches in 2006, then Kobold is coming off something like a $3.75 million year.
David Bowling, the associate publisher of WatchTime magazine, likes to call Mike Kobold "Big Fish," after the Tim Burton movie in which a dying father tells his son a string of exaggerated tales. As the father spins outlandish stories, they play out onscreen in wild Technicolor fancy, so that it is never clear where reality ends and fantasy begins. Bowling, who has been observing the watch industry for nearly a decade, says he has never met anyone like Kobold. They first met, he recalls, when Gerd Lang introduced him to the then 19-year-old German at the Basel watch show. Kobold had yet to produce a watch but was not shy about announcing his intentions to do so.
Over the intervening years Bowling has come to know Kobold well, as his magazine has reviewed Kobold products and run the company's ads. (In the trade magazine world, the line between ad and edit is thin and hazy and ultimately matters little since watch people mostly just like to look at the pretty pictures anyway.) Bowling says Kobold used to pop in with a bag of watches, sometimes having sold one out on the street--and often with a fanciful tale or two about his larger-than-life endeavors. Explorer, Nazi hunter, tactical driving instructor--Bowling has heard them all. He'd say, "I'm gonna run a marathon with Ranulph Fiennes…" and Bowling would find himself thinking, "No way. This guy tells some tall tales!"
"Then I turn on the television and there's Michael, and under his talking head, the words 'International Explorer.' I thought, 'Oh, my God. This is just like Big Fish.'"
And by that he means, maybe reality never really ends at all.
"Ever since then, everything he tells me I believe."
Truth be told, it's not that simple. The reason Kobold is now known to viewers of the Outdoor Life Network as an international explorer is that, yes, he did run a marathon with Ranulph Fiennes--the 2003 New York City Marathon. It was Fiennes's seventh marathon in seven days, a remarkable feat for anyone, even the World's Greatest Explorer, but even more so for a man who had undergone double bypass surgery just three and a half months prior. Kobold was by then Fiennes's good chum--he had even helped Fiennes track down a Nazi war criminal. His primary role was as a translator of old German documents, which isn't exactly James Bond stuff, but--you know--Big Fish, right?
Anyway, Kobold ran with Fiennes as an act of camaraderie and probably also, you have to think, as a smart little bit of self-promotion. After the race, the media were clamoring for Fiennes, but he quickly returned to England, leaving Kobold to answer questions. An Outdoor Life producer called Kobold and asked if he could, in fact, stand in for Fiennes for some segments being taped. One, for instance, was about polar exploration. Kobold has never explored a pole, nor seen much of any wilderness, but when asked if he'd ever been anywhere cold or forbidding, he said he had been to Alaska. Good enough! And so Kobold imparted some frosty wisdom and was forever imprinted in television history as an international explorer. He also taped a bit about mountain gorillas. He has never seen one outside of a zoo.
The trip to Alaska? It was a cruise.
This may all sound like extraneous color, the kind of life detail that fascinates mostly magazine writers, but in fact it's entirely central to Michael Kobold's success as a watchmaker. Who Kobold is and claims to be cannot be separated from his product. Without the former, there is no latter. In the opinion of his mentor, Gerd Lang, Kobold's watches aren't really that special. This is not a knock on his watches. It simply means that they aren't any more remarkable than Tag Heuers or Omegas or any other big chunky manly watches crafted of steel, adorned with tickers and dials, and sold for four figures. They all fly high, go deep, and last long. What's remarkable is that most of these companies are gigantic concerns based on the Continent and backed by vaults of cash. Kobold is owned by a 27-year-old who lives in a $700 apartment.
Kobold, of course, doesn't agree with any of this. He'll tell you all about his special Soarway case or the fact that he uses screws where others use pins, but really, what's exceptional about a Kobold watch is the way it is marketed and sold. Companies like Rolex and Omega spend millions on celebrities and ad campaigns and end up with photos of Jim Nantz in a mock turtleneck. Kobold shoots his ads himself and pays nothing to his brand ambassadors. Because he sells mostly over the Internet or by phone (a small network of authorized retailers accounts for 15 percent of sales), nearly every dollar from sales goes to his top line.
It's possible that even Kobold doesn't necessarily think his watches are better than the competition. As long as they're equal and people want to buy them, who cares? Isn't it a reality of marketing that it's all about massaging the truth? Did clutching a Bud Light (NYSE:BUD) ever actually make a man more fun to hang with?
"Some people do think he's a con man," says Jack Roseman, who chuckles at the idea. "But there's always enough truth there that you can't deny him."
Which brings me back to Big Fish. I was talking to Gary George Girdvainis a few days after speaking with Bowling. We got onto the topic of Kobold's elaborate tales, and he said this: "I saw him on TV once commenting on gorillas. I asked him, 'What the hell were you doing talking about gorillas?' He said, 'I'm not sure. They never asked if I was a gorilla expert.'"
By the way: You know what Kobold means in German?
Mischievous little gremlin.
One summer afternoon in Pittsburgh, Kobold stands up from his couch and walks me to the door that separates his company from his father's. On the other side of the wall from Kobold Watch is a large and immaculate room where a woman in goggles is doing something noisy with a pneumatic tool. Around the room are valves and gauges and oddball steel concoctions for trucks, ships, and space shuttles. "A lot of U.S. attack subs have Kobold instruments," Kobold says. "It sounds exciting but it's quite boring. Whereas we sound boring but we're quite exciting."
"I suppose if I stuck with the family I'd be the heir to all this," he says, pointing at a dim room full of doodads and thingamajigs. "I walked away from it. My father was upset. He didn't believe you could sell anything over the Internet or that anyone would buy a Kobold watch."
The only other room in the watch company offices is a space resembling a walk-in closet. It holds a large safe, some file cabinets full of parts, a number of automatic winders running 1,000-hour tests of completed watches, and the workstation of Kobold's in-house watchmaker, Ed Cruz.
Cruz sits hunched over the workstation in a white lab coat, peering through a magnifying device and making delicate modifications to a watch that will go out to a customer later that afternoon.
"Not only assembled in America; modified in America," Kobold says happily.
He opens a drawer filled with movements for the Spirit of America, the newest of his watches. He's about to release it to commemorate the fifth anniversary of September 11. For the first few months, it will cost just over $1,000, making it by far his most inexpensive model. A number will be worn by celebrities like Gandolfini, architect Daniel Libeskind, CNN talking head Glenn Beck, and Bill Clinton before being auctioned off for charity. (Kobold would eventually raise $27,000 for the USO of Metropolitan New York.)
Kobold pulls a blue crocodile band (retail price $330) from a cheap aluminum shelving unit and attaches it to a red-faced Spirit of America. Red is an unusual color for Kobold, whose signature look is solid and masculine, but with the blue band especially, this one really pops.
"This is so sexy," he says, moving the watch around on his wrist. "So beautiful!"
Dan Scioscia summons him to take a phone call and for several minutes Kobold and a customer chat about a watch. It sounds like a discussion between old friends. There is talk of food.
Kobold hangs up and moves to a computer. He clicks on an e-mail and reads it aloud. "Nicolas Cage wants to wear a Kobold in his next movie."
He smiles impishly. "I swear, it's not normally like this."
But it sort of is, even if Cage didn't end up wearing a Kobold. (At any rate, Kiefer Sutherland wore one last season in 24, and Gary Sinise wears one in CSI: New York.) In early December, I hear from Kobold again. He is back in New York to talk some business with Gandolfini, who is busy filming the last season of The Sopranos. When the final nine episodes begin to air in April, it will bring to a close one of the most popular and critically lauded programs in television history. It is sure to be a momentous pop cultural event. Anyway, Gandolfini summoned Kobold to talk shop; he had an idea. He was going to buy watches for the entire cast and crew--400 special edition Soarway Divers in titanium (retail price $3,850) for the crew, 40 of the same watch in gold (retail price $14,500 for the women's white gold; $10,500 for the men's red gold) for the cast. Even at a discounted rate, it's well over a million dollars in watches, and an almost priceless amount of publicity.
Meanwhile, the Spirit of America continued to fly out of Ed Cruz's watch safe. The first 300 for which Kobold had movements were long gone and soon the price would rise to $2,750. Land Rover had just signed for 150 custom watches to hand out at a charity event for dealers.
Kobold is celebrating as he often does--by eating. A TV producer told me that when he took Kobold to a steakhouse, Mike ordered a second cut of meat for dessert, and after I recommended a great bakery for croissants in New York, he called to tell me he'd eaten six. But on this morning, not even huge forkfuls of huevos rancheros at a Tribeca restaurant can cover up his smirk. "This is a monumental order," he says. "On top of our regular orders"--the week before he had shipped 120 watches, mostly Spirit of Americas--"we have to deliver 600 watches by March." I tell him that this all points to blowing past his annual sales cap of 2,500 watches in, like, six months. He extends his hand for a shake. "I tell you now that I will never sell more than 2,500 watches in a year." He says he will raise prices by 8 percent in April. "If I have to, I can stop advertising or put people on a waiting list."
Soon, men with sledgehammers will arrive to quadruple his office space, and none of this is the news that excites him the most. Quite recently, Gerd Lang had asked Kobold to meet him in Los Angeles for a chat. Lang had come into possession of what Kobold says is a 15-year supply of German movements from the 1960s. Kobold is giddy. He says that he can modify them as much as he needs to; each one will be disassembled, cleaned, polished, decorated, modified, and engraved, becoming, in essence, a Kobold movement--which is important not just for prestige but for the company's future. The world's largest maker of movements, ETA, has announced that it will soon produce only for brands owned by its parent company, Swatch.
"You need a couple million to make your own movements," he says. "We just saved a couple million."
Of course, I say, this means he'll have to take "Swiss Made" off the dials--nothing Swiss will remain.
"With the Spirit of America, we said that it's modified and assembled in America--and people loved it," he says. "I did that to commemorate America's resolve in the years after September 11, and also because we're based in America. Customers absolutely loved it."
By 2008, the new Kobolds will begin to appear.
"In the next five years, if predictions are right, several watch companies will go out of business because they can't get Swiss movements anymore. The fact that we have our own movements means that we're safe."
And with that he stands up.
"Let's go get croissants."
Josh Dean is a writer who lives in New York City. He last wrote for Inc. about snowboarding mogul Jake Burton.
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