Category: Insights

By Evan Flaxman, JD, MBA.

Most people view a luxury watch as an expensive way to tell time. After years of studying the luxury watch market, I came to a different conclusion: luxury watches provide one of the clearest real-world demonstrations of economics I have encountered.

They illustrate supply and demand, scarcity, pricing power, liquidity, and the psychology of buyers and sellers.

Rarity and Scarcity Are Not the Same Thing

A watch can be objectively rare and still have limited market value if relatively few people want it.

Conversely, a watch produced in greater numbers may be difficult to obtain if demand consistently exceeds available supply.

That distinction is fundamental. Rarity describes how many examples exist. Scarcity describes availability relative to demand.

The luxury watch market makes the difference unusually visible.

Retail Price Versus Market Value

Consider a highly sought-after watch that authorized dealers cannot supply in sufficient quantities to meet demand.

The manufacturer’s suggested retail price may have little relationship to what buyers are willing to pay for immediate availability.

The secondary market becomes a form of price discovery. Buyers and sellers establish prices according to actual supply, demand, expectations, and willingness to transact.

But those prices are not permanent. Changes in production, consumer preferences, interest rates, and economic conditions can alter the balance between supply and demand.

The price someone is willing to pay today does not necessarily establish what an item will be worth tomorrow.

Different Brands, Different Economics

Rolex, Patek Philippe, Audemars Piguet, Richard Mille, and F.P. Journe illustrate how differently luxury watchmakers approach their markets.

Craftsmanship matters, but so do production strategy, distribution, marketing, brand reputation, and the confidence buyers place in a manufacturer’s long-term stewardship.

Two exceptional watches can behave very differently in the secondary market.

Understanding the product is only part of understanding its economics. You also have to understand the market in which it is bought and sold.

Liquidity Matters

Collectors and investors frequently approach watches with different objectives.

A collector may place enormous personal value on a particular design, mechanical movement, or historical connection. An investor must also consider the ability to sell the watch, the price buyers are actually offering, and the costs involved in completing a transaction.

An advertised asking price is not the same thing as a completed sale.

A watch may appear valuable on paper while having a relatively small pool of buyers at that price.

The willingness to pay and the ability to sell are two different sides of the same transaction.

The Cost of Being First

One recurring feature of luxury markets is the premium buyers sometimes pay to obtain a newly released product immediately.

Early enthusiasm can push secondary-market prices well above retail. As supply increases and the initial excitement subsides, those premiums may narrow.

Patience can be economically valuable, particularly when buyers distinguish between wanting an object and needing to own it immediately.

A Living Economics Lesson

Luxury watches have taught me that value cannot be understood through craftsmanship, production numbers, or brand recognition alone.

You must also consider demand, liquidity, market psychology, and the price at which a transaction can actually occur.

In the end, I see a luxury watch as more than an object of craftsmanship. I see a living case study in economics.

By Evan Flaxman, JD, MBA

The more time I spent studying investments, the clearer one pattern became: the asset class may change, but the questions that matter rarely do.

What creates value? What could permanently destroy that value? How liquid is the investment? How much capital will remain tied up? And, perhaps most importantly, what assumptions must remain true for the investment to make sense?

The specific investment changes. The analytical framework does not have to.

Price Is Not the Same as Value

One of the most important distinctions in investing is the difference between price and value.

Markets are remarkably effective at producing prices. Buyers and sellers continuously process information, respond to changing conditions, and form expectations about the future.

But a market price is not necessarily a definitive measure of underlying value. It can also reflect emotion, liquidity needs, interest rates, institutional constraints, and assumptions that may eventually prove incorrect.

I have always considered market price important information rather than a complete answer.

Before committing capital, I want to understand why an asset possesses value independently of its recent price movement.

Understanding What Creates Value

Different investments have different economic characteristics.

A business may derive its value from its customers, profitability, competitive position, and ability to generate sustainable cash flow.

Real estate introduces different considerations, including location, operating expenses, financing costs, market demand, and the potential for future development.

Financial securities have their own structures, obligations, and risks.

Yet the fundamental challenge remains remarkably consistent: identify what creates value, determine whether the price reflects that value, and understand what could undermine the investment.

Outstanding management cannot permanently overcome a fundamentally weak business model. Likewise, an attractive asset can become a poor investment if its purchase price depends on unrealistic expectations.

Risk Comes Before Return

It is tempting to concentrate on what an investment might earn.

I believe the more important starting point is understanding what could go wrong.

Liquidity matters. An investment that appears attractive on paper may create serious difficulties if substantial capital remains tied up when it is needed elsewhere.

Leverage also requires careful consideration. Borrowed money can amplify returns, but it magnifies losses as well.

An investment thesis should account for unfavorable outcomes, not merely assume that everything will proceed according to plan.

Good analysis also requires sound execution. Identifying a risk is of little value if an investor fails to take the steps necessary to manage it.

Knowing When to Change Your Mind

An investment decision should not become a permanent commitment to the assumptions that originally supported it.

Circumstances change. Costs rise. Markets evolve. New information emerges.

When the underlying facts change, the original investment thesis deserves to be reconsidered.

There is nothing inherently inconsistent about changing your mind when the evidence supports a different conclusion.

The objective is not to prove that your initial judgment was correct. It is to make the most informed decision possible with the information currently available.

A Consistent Framework

If I had to summarize my investment philosophy, it would be this: take your time, perform your due diligence, understand how an investment creates value, evaluate its risks as carefully as its opportunities, and remain willing to reconsider your assumptions.

Preserving capital should take precedence over pursuing exceptional returns without understanding the potential consequences.

The asset changes. The questions do not.

By Evan Flaxman, JD, MBA

I started working in my father’s medical-equipment company when I was about 11 years old.

My first job wasn’t analyzing financial statements or deciding where the company should expand. I cleaned and disinfected used commodes, walkers, wheelchairs, hospital beds, and mattresses. I learned how oxygen concentrators worked and helped clean out sieve beds.

That was how I started.

My father was an orthopedic surgeon who, after retiring from practicing medicine, started a durable medical equipment company in Miami Beach, Florida. The business supplied everything from wheelchairs and hospital beds to mobility scooters, oxygen equipment, and other medical supplies.

At 11 years old, I began learning the business from the equipment room up.

Learning a Business From the Ground Up

Over time, I learned inventory, the computer system, and the cashier system. By 16, I was driving myself to the store after school and working Saturdays. Before I turned 17, I sold my first mobility scooter entirely in Spanish.

There is something valuable about learning a business from its least glamorous parts.

Before I ever analyzed a profit margin, I knew what the equipment looked like, how it worked, how it was maintained, and how it moved through the business. Inventory wasn’t simply a number on a financial statement. It was actual equipment that had to be purchased, stored, tracked, delivered, and ultimately paid for.

As I got older, my responsibilities changed. Throughout college, I helped with the accounting and bookkeeping and came home during some summers to work.

Eventually, my father entrusted me with the company’s books and financial records. He believed I was capable of performing the financial analysis myself rather than hiring an outside business adviser.

That gave me an opportunity to study the economics of a real operating company—with actual employees, patients, expenses, and financial consequences.

By the time I graduated from the University of Florida, I had helped my father grow the company from one location to nine.

But the most important conclusion I reached wasn’t simply about opening additional locations. It was about understanding where we were actually making our money.

Finding the Business Within the Business

Our company carried an enormous range of medical equipment and supplies. We served customers with very different needs and generated revenue from numerous product categories.

I went through the company’s computer system and analyzed every line item.

What I discovered was that, under the Medicare reimbursement structure at that time, the oxygen side of the business generated our highest returns.

That changed how I looked at the entire company.

I recommended that my father stop thinking of the operation primarily as a durable medical equipment company that also supplied oxygen. Instead, I believed we should build the business around oxygen, with the broader medical-equipment operation supporting it.

That became our strategy.

The underlying financial lesson was straightforward: not all revenue is created equal.

A company can be extremely busy selling hundreds of products while one particular segment accounts for a disproportionate share of its financial success.

The important question wasn’t simply how much we were selling.

It was where we were generating our best returns—and what we should do once we knew the answer.

What the Numbers Actually Tell You

There is a difference between looking at financial statements and understanding what they are trying to tell you.

Numbers don’t make decisions. They provide information. The challenge is determining which information matters, what it means, and what decisions should follow.

In our case, analyzing every line item led to a strategic conclusion. Oxygen wasn’t merely another product category. Its economics were strong enough that I believed it should become the center of the company’s strategy, with the broader medical-equipment operation supporting it.

That experience taught me something I’ve carried into other business and financial decisions: understanding how a company operates is only part of the equation. You also have to understand what drives its financial performance.

I started by cleaning wheelchairs and learning how medical equipment worked.

Years later, I was examining every line item in the company’s financial records and using that information to help change its direction.

Both experiences mattered.

Learning the business from the ground up helped me understand what the numbers actually represented. Learning to analyze those numbers helped me understand what the business could become.

Related reading: What Teaching Thousands of Students Taught Me About How People Actually Learn

Living in Colorado mountain communities means wildfire preparedness is not optional—it is a shared responsibility.

As Committee Chair of the Wildfire Mitigation Committee at Warm Springs Ranch, I have seen firsthand how important proactive planning, community awareness, and responsible property management are to reducing wildfire risk.

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Strong communities understand that mitigation is both an individual and collective effort. Homeowners play a critical role by maintaining defensible space, reducing fuel loads, and understanding the unique risks of living in high-elevation forested environments. At the same time, community leadership and HOA governance help create consistent standards, communication, and long-term planning.

Preparedness is also about education. Many wildfire risks can be reduced through simple awareness and practical action. Clear communication, realistic expectations, and consistent follow-through often matter more than complex plans sitting on paper.

Leadership in wildfire mitigation means helping communities move from awareness to action. It requires balancing safety, responsibility, and long-term stewardship of both property and shared resources.

Protecting mountain communities requires cooperation, discipline, and a commitment to prevention rather than reaction. Wildfire mitigation is not a one-time project—it is an ongoing responsibility that protects homes, families, and the future of the community itself.