- “The absolute certainty that nobody was going to care about, read or buy Kitchen Confidential was what allowed me to write it. I didn’t have to think about what people expected. I didn’t care. As a result I was able to write the book, quickly and without tormenting myself. That was in many ways a very liberating place to be. I’ve kind of tried to stick with that business model since.” “At first, I was distrustful of what was happening. I say freely it’s an unreasonable attitude to think that you could ever make a living writing. And I’d been in the restaurant business long enough where there are so many failed writers, actors, performers, artists and playwrights. So even after the book came out, even after it hit the best-seller list, I was distrustful. I thought, I better keep my day job, and I continued making steak frites and salads and working in a busy kitchen until it just got crazier and crazier.” “Not giving a shit has been a very successful business model for me.” “[Not having] a reputation to lose, is a huge advantage.” “From Kitchen Confidential on I made a really determined effort to not fuck up. I was very aware of that tendency. I’m a little more organized, my work is a little more rigorous than it needs to be because that was a regular feature of my whole life up until that point.”
Since Bourdain is very open about the fact that he was an addict early in his life and is a very successful business person now, his life is an interesting example of the impact of what Nassim Taleb calls “skin in the game.” Taleb writes:
Bourdain was able to take his energy, ingenuity and intelligence and apply them in business settings after he beat his addiction. Once Bourdain had skin in the game business become a lot more interesting. He has taken his natural curiosity made himself into a focused, rigorous and organized business person by harnessing the power of skin in the game.
Bourdain is also talking about the importance of recognizing situations and placing bets when there is a huge upside and a small downside (convexity). When he was working in a kitchen he had nothing to lose in writing the book. While the probability of his book becoming a best seller was tiny, when he managed to “hit it big” he took advantage of that first success. That success in turn resulted in other opportunities, which snowballed. His escalating success in business was the inverse of his spiral into addition earlier in his life. Bourdain also now knows that when there is a big downside and small upside that is a situation which you should avoid wherever possible.
- “When Momofuku first opened, chefs brought other chefs there and they all realized, ‘Look at all the stuff I don’t need.’ It’s a really chef-friendly business model.” I’m always interested to see what he does next because he’s created a real game-changing business model. Pop-up restaurants where chefs from France who come in and do guest appearances for a night, that’s exciting. There’s this whole new democratization of fine dining that’s going on. New ways of getting reservations that were unthinkable before, using online lottery system, first-come-first-serve, social networking.”
In talking about David Chang’s innovative methods and practices Bourdain is bringing up the biggest theme of all in this blog and my new book: while there are no recipes for success, there are best practices. Some of these best practices and rules are always broken when an innovative business is created. Sometimes a person will ask me: “Why do you write so many profiles? Can’t I read one of two and figure out the formula?” The answer is clearly “no.” The point of looking at many case studies and examples is to find the patterns (some patterns are obvious and others are more subtle). As Michael Porter says: “Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different. The essence of strategy is choosing what not to do.” No one can tell you which rules to break, but you can acquire more skill in determining which rules to break given your talents and circumstances right now.
David Chang’s Momofuku restaurant significantly departs from what people thought were best practices. Chang does not break every best practice since that would be suicide for his business. The genius of Momofuku is which rules it breaks out of the many that were possible. Investing is actually very similar. Andy Kessler wrote recently in the Wall Street Journal: The core of investing is quite simple: Determine what everyone else thinks, and then figure out in which direction they are wrong. You can find the greatest story ever, but if everyone already knows it, there’s not money to be made.”
- “For much of the time as a chef I was unemployable by respectable businesses. The only people who would hire me would hire me for brunch shifts because most cooks hated doing brunch for very good reasons. I was good at it, but it was the only work I could get. I was a desperate man, often working under a pseudonym when I was cooking brunch. So I really hated it, and I also hated the whole concept of brunch. And later as a chef, I hated it because it was a huge profit center that caused problems for me as an employer because all my cooks hated to do it. But it was such a moneymaker because people are so foolishly happy to pay $22 for the same two eggs and bacon, you know, that they have during the week for $7 or even – or $3. You know, give them a free mimosa and a little strawberry fan and suddenly they’re happy.”
Bourdain is talking about how an understanding of human nature can result in a huge variance in the unit economics of a business. Why some customers will pay more for something called “brunch” or a Starbucks experience is part of the alchemy of business. The markups on liquor in a fancy restaurant vs a fried egg at a Waffle House are vastly different. Marketing is the most important but not the only factor at work creating this difference. Warren Buffett says about the goal: “We like companies which buy a commodity and sell a brand.” Eggs, bacon, milk, vanilla, strawberries and bread are commodities, but “brunch” as an event is a brand. As another example, just as in the story Jack and the Bean Stock, Starbucks convinces people to give them a cow for a few ground up magic beans mixed with water. Getting a cow for a few magic beans can be a very financially attractive business.
- “There is the advantage [quintessential Manhattan restaurants that remain have], an important one, in that they own the building.”
If you have been reading this blog you will recognize that Bourdain is talking about wholesale transfer pricing. This quote above is from Bourdain’s Disappearing Manhattan episode in which he pointed out that the old school restaurants that are left own their buildings. They are able to stay “old school” in the restaurant business only because they are their own landlords. If they had just been tenants, they would have been priced out of business in Manhattan long ago. In a Bloomberg podcast a restaurant owner once said: “the lease is everything in our business.” His approach to the wholesale transfer pricing problem was having the landlord be his partner in the restaurant and getting a landlord to agree that the rent will be as a constant percentage of revenue. This same restaurateur said “the golden number is rent at 8% of revenue,” but he said achieving that is usually impossible in a place like Manhattan.
- “For me, the business model is the same business model I have in all of my enterprises — if you produce really good content, someone will buy it. You don’t have to talk down to people, you don’t have to use television voice, you don’t have to dumb stuff down, and you don’t have to create stuff that makes you feel bad when you look at yourself in the morning.”
The motto of Y Combinator is essentially: make something people want to buy. If you do not make something that people value, nothing else matters. Some people like what Bourdain makes and some people don’t. I have seen his live show and clearly a lot of people do. His fans love it when he writes a sentence like: “Vegetarians, and their Hezbollah-like splinter-faction, the vegans, are a persistent irritant to any chef worth a damn.” Some people (e.e., vegetarians and vegans) undoubtedly will hate a sentence like that. Not only does Bourdain not care, but he knows having some people not like him it is great marketing. People love a rebel. Bourdain also knows if you try to please everyone, you will please no one and that an audience can smell a fake.
- “If I go to Mexico, I eat what Mexicans eat. Meaning that if there are a whole lot of Mexicans eating at a street food stall, I don’t really need to know what’s in it or where it came from. A whole lot of people from the neighborhood are eating it and seem to like it. This is a business model based on feeding your neighbors, meaning that no one’s running a successful small food business by poisoning their neighbors.” “Are the stalls busy? Are they popular with locals? Are they moving product? Those [observations] are key. Hawkers and street food people are not in the business of poisoning their neighbors. That’s a bad business model.”
Incentives matter. If you are trying to decide what to do in a situation consider the incentives of the people involved. Are you asking a barber whether you need a haircut? Are the incentives of you and the other people involved aligned? Charlie Munger has learned: “I’ve been in the top five percent of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. Never a year passes that I don’t get some surprise that pushes my limit a little farther.”
- “At its root, it is factory work in the sense that the religion of any successful or busy restaurant is consistency. You have to do the same dish the same way and on time. I was a happy dishwasher. I jokingly say that I learned every important lesson, all the most important lessons of my life as a dishwasher. I liked being the worst in the kitchen and struggling every day to earn respect, you know, and status within that hierarchy. If you let the team down, everybody crashes.”
Bourdain appreciates what starting at the bottom in a service industry did for his character and work ethic. For this same reason, Charlie Munger is a huge fan of McDonald’s. Munger believes: “They take people and give them a first job, which enables them to get a second job. They do a very good job of educating troubled young people to be good citizens, and they’re probably more successful than charter schools.”
- “I think a number of chefs are trying to figure out how to be good citizens of the world, and also serve the one percent. Trying to find a balance when their whole business model is built up around expensive markup of bottles of wine, only the very best parts of the fish, the rest has to be disposed of one way or another.” “A lot of chefs are trying to reconcile that. Chefs generally are good-hearted people. People like Eric Ripert, he works closely with hunger relief and they try to do the best they can and try to do the best they can for the best directly as well as give food to City Harvest and places like that. We’re seeing a lot of chefs go local for a lot of reasons, because it’s the good thing to do to try to keep the money in the area, because it’s hip, because it adds value, people like seeing it on a menu. It’s better to give your money to an independently operating person in your area than to be giving your money to air freight and someone far away from your area and not feeding money back into it, that’s preferable. I have no problem with people who get the best ingredients they can from all over the world, but I also admire people like Sean Brock, who are in a very real way trying to not just use local, but bring stuff that disappeared locally back, and to restore traditional food ways of the area that fell by the wayside as we entered the land of the tomato that was bred to travel.”
Giving back is good business and so is sustainability. More importantly, it is the right thing to do. Yes, sometimes assholes succeed financially, but do they really succeed overall? Not being an asshole is its own reward. My post on giving back is here: https://25iq.com/2015/12/12/what-are-charlie-mungers-views-on-giving-back-to-society/
- “I knew failure well because I was a failure for most of my career. This was a constant in my career. More often than not it was funny. I’m sympathetic to failure because I was such a fuck-up for most of my career. The line between tragedy and comedy is something I recognize and enjoy. Has there been anything funnier than Richard Pryor turning the most horrifying, painful anecdotes from his childhood and cocaine addiction right on the edge?” “Look, if you can’t make fun of hipsters, comedy is dead. That said, I think I’ve been pretty explicit in the show repeatedly that however much fun they may be to make fun of — and the group is a fat, easy, low-hanging target — it is a hipster-driven economy right now. It’s probably the salvation of the restaurant business.”
Learn from mistakes. I also suggest that whenever possible you try to turn them into comedy so other people around you can learn from them. My post on mistakes is here:
- “I’ll rummage around for something to feed them, for a ‘vegetarian plate’, if called on to do so. Fourteen dollars for a few slices of grilled eggplant and zucchini suits my food cost fine.”
Life is better in a business that has high gross margins. My post on gross margins is here:
- “Luck is not a business model.” “If anything is good for pounding humility into you permanently, it’s the restaurant business.”
My post on how hard it is to be financially successful in the restaurant business is here. It is a tough business with very little pricing power. When someone says “my restaurant failed since costs were to high” what they are really saying is that they could not raise their prices since they had no pricing power. Barriers to entry in the restaurant business are low and therefore competition levels are usually very high.
- “I urge you to travel – as far and as widely as possible. Sleep on floors if you have to. Find out how other people live and eat and cook. Learn from them – wherever you go.” “I learned a long time ago that trying to micromanage the perfect vacation is always a disaster. That leads to terrible times.” “I’m a big believer in winging it. I’m a big believer that you’re never going to find perfect city travel experience or the perfect meal without a constant willingness to experience a bad one. Letting the happy accident happen is what a lot of vacation itineraries miss. I’m always trying to push people to allow those things to happen rather than stick to some rigid itinerary.”
I have always believed that travel is not only the very best educational experience, but that it is a tremendous source of optionality. Mohamed El-Erian points out that resilience, agility and optionality are required to deal with a world that is increasingly uncertain and nonlinear. Travel helps teach you to live with uncertainty and change. For six years of my life I traveled 500,000 miles a year on business, mostly internationally. I have also lived for long periods in four different countries. Part of what travel and living abroad teaches you is how to be a traveler rather than a tourist. Travelers, unlike tourists, know that there is no certainty in travel. You can’t predict anything with certainty, but you can prepare and not take things too seriously. Unexpected stuff will inevitably and unpredictably happen and you need to learn to deal with that in a flexible and patient way. My blog post Heart Of Darkness illustrates how being a traveler and not a tourist is wise.