If you think about the Apple Watch as a gadget, the product doesn't make much sense. You can't do very much with such a small screen. The device's battery life is rumored to be mediocre. Moreover, it's not clear what problem the Apple Watch solves.
But Apple isn't just trying to build a gadget. It's trying to build a luxury product. On Monday, Apple CEO Tim Cook revealed that the high-end version of the Apple watch will start at $10,000, making it one of the most expensive products Apple has ever sold. In this price range, a watch isn't a functional item; it's a fashion accessory and a status symbol. Luxury products operate according to a totally different set of rules than gadgets do.
It remains to be seen if a technology company can build a product that will fetch the same kinds of prices as watches from Rolex or Cartier. But if any company can do it, it's Apple. No other technology company has either the capability or the reputation for building elegant and stylish products.
But one factor that won't be important to the Apple Watch's success as a luxury product is its functionality. Because you don't buy luxury products for their functionality.
Luxury products are about style and exclusivity
High-end watches can sell for tens — or even hundreds — of thousands of dollars. Whatever reasons people might have for buying one, it's definitely not about knowing what time it is. High-end mechanical watches actually do a worse job of telling time than digital watches that cost a tiny fraction of the price.
When accurate digital watches started appearing in the 1970s, a lot of people thought they posed an existential threat to companies that made expensive mechanical watches. They couldn't have been more wrong. As digital watches became cheaper and more accurate — and, later, as more and more people started carrying cellphones with built-in clocks — the price of luxury watches actually rose.
The reason was simple: the function of a luxury watch wasn't to tell you what time it was; it was to impress people. Wearing a $50,000 watch sends a signal that you're the kind of person who can afford a $50,000 watch. As the rich have gotten richer, demand for that kind of status symbol has surged.
Of course, it's important to preserve a polite fiction about what's going on here. Few rich people are so crass that they'd buy an expensive watch for the explicit purpose of showing how rich they are. Customers want a plausible story they can tell their friends and family about why they bought a watch that costs as much as some people's cars.
This is why high-end watchmakers emphasize the precision craftsmanship of their watches and the many hours of labor required to make them. Of course, this is kind of silly since that $50,000 mechanical watch probably doesn't tell time as accurately as a $50 digital one. But that's not the point. The point is to help the customer believe his purchase demonstrates a sophisticated taste in timepieces, not just a bulging wallet.
How Apple could beat watchmakers at their own game
For the Apple Watch to succeed as a luxury product, Apple needs to provide people with a plausible story about why it's worth paying more than $10,000 for one. And here, focusing on the device's internals won't work.
The Apple Watch is a touchscreen computer built using mass-produced computer chips. The low-end Apple Watch Sport will likely use computer chips that are virtually identical to the high-end models. So far, Apple hasn't said much about these products technical specifications, but even if the high-end have better ones — putting 32 GB of storage space in the most expensive watch compared with 8 GB in the cheapest — that can't justify a 10- or even 50-fold difference in price.
So instead, Apple's marketing has focused on the outside of its watches. For example, in March Apple took out a 12-page ad in Vogue that looked like this:
The ad doesn't even try to explain the functions of an Apple Watch. Instead, it's being promoted like a piece of jewelry. It's a physical object that people are supposed to want because it's stylish and beautiful.
And as Jon Gruber points out, Apple is using its deep expertise in industrial design and materials science to convince people that the Apple Watch is a one-of-a-kind creation. Check out how Apple describes one of its high-end watch bands:
Crafted from the same 316L stainless steel alloy as the case, the Link Bracelet has more than 100 components. The machining process is so precise, it takes nearly nine hours to cut the links for a single band. In part that’s because they aren’t simply a uniform size, but subtly increase in width as they approach the case. Once assembled, the links are brushed by hand to ensure that the texture follows the contours of the design.
Apple has also been touting a new gold alloy that is "twice as hard as standard gold."
While these might be impressive engineering feats, if you're thinking about the watch as a gadget, it's still hard to see how these innovations could justify charging thousands of dollars for a gadget whose functions are virtually identical to the $349 version.
But the point of these flourishes isn't functionality — it's exclusivity. The intricate internals of a luxury mechanical watch aren't actually better for telling time than a quartz crystal, but their existence gives people a plausible rationale for spending what would otherwise seem like insane sums for a watch. The hand-brushed links and high-tech gold alloy on the Apple Watch serve the same function: they provide ways to differentiate the mainstream versions of the Apple Watch from the luxury versions. Whether they're "really" worth thousands of dollars is irrelevant.
It doesn't matter if the Apple Watch is useful
I was discussing the Apple Watch with a coworker who was wearing a traditional (non-luxury) watch herself. She told me she wears her watch almost every day, despite the fact that it's been broken for months.
The primary function of a watch — like any piece of jewelry or clothing — isn't to tell time, it's to make a statement about the person wearing it. For many people, it's just another fashion accessory, like a bracelet or earrings. For people with very expensive watches, it's a way of subtly signaling wealth and status.
Wearable computers also make statements about the people who wear them. The problem is that those statements have mostly been negative. People wearing Google Glass, for example, gained a reputation as "glassholes," aloof, out of touch, and socially awkward. Similarly, the bulky, cheap look of most of today's smartwatches has given them a reputation as something only nerds would wear.
In all of these cases, the message wearable devices send about people has more to do with how they look than what they do. A Pebble watch is indisputably more useful than any luxury watch on the market. But no one is going to spend tens of thousands of dollars on one.
The smartness of a smartwatch matters only to the extent that it helps the owner tell a story about himself. The advanced functionality of an Apple Watch will help its owner convince himself and others that he's a more forward-thinking person than those guys who pay thousands of dollars for a watch that only tells you what time it is.
There's a whole generation of newly minted millionaires in Silicon Valley and elsewhere who might not be interested in buying a traditional luxury watch but are interested in buying high-tech status symbols. And so far, this market is practically untapped — the most expensive iPhone is only a few hundred dollars more expensive than the cheapest Android phone. No one buys luxury laptops.
So a high-end smart watch can appeal to people who wouldn't be interested in buying a conventional luxury watch. But it doesn't have to do very much more than tell the time to serve its function as a status symbol. What people are buying is the idea of innovation and progress, which has only a tenuous connection to actual utility.