That's true, but then you don't get notifications or anything, since it's essentially off.

Presumably for a watch use case, you'd plan to deep sleep (ULP) or hibernate (RTC) 98+% of every minute and turn the radios on as infrequently as you could stand to get external notifications. I don't need split-second precision on my notifications if the alternative is a much longer battery life.

True, I guess the watch must have some sort of external circuitry that can wake it up every so often.

You can use the ESP32 onboard RTC to do periodic wakeups. (You can also use external stimuli via GPIO pins, but you don't need anything extra if all you want is a periodic wakeup.)

It has an onboard RTC? Very nice, I missed that (and the ESP8266 didn't have one).