#429: Nick Kokonas on Resurrecting Restaurants, Skin in the Game, and Investing

Nick Kokonas on Resurrecting Restaurants, Skin in the Game, and Investing | Brought to you by ShipStation https://www.shipstation.com/ and Helix Sleep http://helixsleep.com/tim. More on both below. "It remains to be seen, of course, whether or not this works. But what I didn't want to do was wait to see what happened." — Nick Kokonas Nick Kokonas (IG: @nkokonas https://www.instagram.com/nkokonas/, TW: @NickKokonas https://twitter.com/nickkokonas) is the co-owner and co-founder of The Alinea Group https://www.thealineagroup.com/ of restaurants, which includes Alinea, Next, The Aviary, Roister, St. Clair Supper Club, and The Aviary NYC. Alinea https://www.alinearestaurant.com/ has been named the Best Restaurant in America and Best Restaurant in The World by organizations and lists as diverse as The James Beard Foundation, World's 50 Best, TripAdvisor, Yelp, Gourmet Magazine, and Elite Traveler. His restaurants have won nearly every accolade afforded to them. Nick has been a subversive entrepreneur and angel investor since 1996. He spent a decade as a derivatives trader, has co-written three books, and believes in radical transparency in markets and business. As an outsider to the restaurant industry, Nick's approach to the business of restaurants is markedly innovative, and he has been featured in Businessweek, Fast Company, The New York Times, Forbes, and Crain's Chicago Business, among other publications. He has given talks on innovation, entrepreneurship, and experience design across the country. He is also the founder and CEO of Tock, Inc https://www.exploretock.com/, a reservations and CRM system for restaurants with more than 10M diners and clients in more than 30 countries. Tock also recently launched a to-go platform https://www.exploretock.com/, which has helped restaurants pivot to fulfill pickup and delivery orders. This episode is brought to you by ShipStation https://www.shipstation.com/. Do you sell stuff online? Then you know what a pain the shipping process is. Whether you’re selling on eBay, Amazon, Shopify, or over 100 other popular selling channels, ShipStation https://www.shipstation.com/ was created to make your life easier. ShipStation lets you access all of your orders from one simple dashboard, and it works with all of the major shipping carriers, locally and globally, including FedEx, UPS, and USPS. The Tim Ferriss Show listeners get to try ShipStation https://www.shipstation.com/ free for 60 days by using promo code TIM. There’s no risk and you can start your free trial without even entering your credit card info. Just visit ShipStation.com https://www.shipstation.com/, click on the microphone at the top of the homepage, and type in TIM! This podcast episode is also brought to you by Helix Sleep http://helixsleep.com/tim! Helix was selected as the #1 best overall mattress pick of 2020 by GQ Magazine, Wired, Apartment Therapy, and many others. With Helix http://helixsleep.com/tim, there’s a specific mattress for each and everybody’s unique taste. Just take their quiz—it takes just two minutes to complete http://helixsleep.com/tim—that matches your body type and sleep preferences to the perfect mattress for you. They have a 10-year warranty, and you get to try it out for a hundred nights, risk free. They’ll even pick it up from you if you don’t love it. And now, to my dear listeners, Helix is offering up to 200 dollars off all mattress orders and two free pillows at HelixSleep.com/TIM http://helixsleep.com/tim. *** If you enjoy the podcast, would you please consider leaving a short review on Apple Podcasts https://podcasts.apple.com/us/podcast/the-tim-ferriss-show/id863897795?mt=2/iTunes? It takes less than 60 seconds, and it really makes a difference in helping to convince hard-to-get guests. 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• 0:01Speaker 00

  At this altitude, I can run flat out for a half mile before my hands start shaking. Can I ask you a personal question?

• 0:08Speaker 01

  Now would be an appropriate time.

• 0:12Speaker 00

  I'm a cybernetic organism, living this year over metal endoskeleton.

• 0:24Tim Ferriss?

  This episode is brought to you by ShipStation. I've been super impressed with these guys. ShipStation is the shipping software with the most five-star reviews. Now, speaking as a former e-commerce CEO, back in a previous incarnation, when I was shipping tens of thousands and then hundreds of thousands of products, this is what I wish I had way back in the day. As folks adapt to this changing world, these strange times, we are all going to be buying more stuff online than ever before. And if you're an e-commerce seller, or if you want to be selling more online, you have to ask yourself, are you ready to meet the demands of our new delivery economy?

• 1:05Tim Ferriss?

  You can be ready with ShipStation, and lots of my friends use them. So why ShipStation? When you're selling online, getting a lot of orders, out fast, can be super hard. I've experienced this firsthand. How do you keep track of who gets what? Which shipping carrier should you use? How do you process refunds? How do you process returns? How do you do all of that? Are you getting the best rates? ShipStation helps online sellers of any size get orders out quickly, save money on shipping costs, and keep customers happy. They do a few things really, really well. You can import more orders from more places. So no matter where you're selling, Amazon, Etsy, Shopify, eBay, your own website, wherever, ShipStation brings it all into one simple interface,

• 1:47Tim Ferriss?

  making it really easy to manage from any device, including your cellphone, your smartphone. You can instantly rate-shop your favorite carriers. And this is a huge deal. As a ShipStation user, you can get access to discounted rates that are typically reserved for much larger companies, like Fortune 500 companies that meet certain minimums. Just as an example, ShipStation just to go- negotiated a new deal with UPS in which rates are discounted as much as 62%. That has a huge impact on businesses and on your bottom line, your profit margin. And in Amazon Prime world where people are used to free shipping, small businesses or smaller businesses can struggle to stay competitive with high shipping costs. ShipStation can help with that. You go way beyond ordinary tracking.

• 2:32Tim Ferriss?

  So there's a self-serve portal for people who want to know where their order is, when they're going to get it, et cetera. Returns, ditto, self-serve. It just makes everything easier. That's why ShipStation is the number one choice of online sellers today. You ship more product in less time with the best rates available. And right now, my dear listeners, you can try ShipStation free for 60 days when you use offer code TIM. T I M. There's absolutely no risk. You can start your free trial without even entering your credit card info. Just visit shipstation.com, click on the microphone at the top of the homepage and type in TIM. That's shipstation.com, then enter offer code TIM. Shipstation.com. Make ship happen.

• 3:17Tim Ferriss?

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• 3:26Tim Ferriss?

  This podcast episode is brought to you by Helix Sleep. Sleep is super important to me. In the last few years, I've come to conclude it is the end all be all that all good things, good mood, good performance, good everything seem to stem from good sleep. So I've tried a lot to optimize it. I've tried pills and potions, all sorts of different mattresses, you name it. And for the last few years, I've been sleeping on a Helix Midnight Luxe mattress. I also have one in the guest bedroom and feedback from friends has always been fantastic. It's something that they comment on. Helix Sleep has a quiz, takes about two minutes to complete, that matches your body type and sleep preferences to the perfect mattress for you. With Helix, there's a specific mattress for each and every body.

• 4:11Tim Ferriss?

  That is your body, also your taste. So let's say you sleep on your side in like a super soft bed. No problem. Or if you're a back sleeper who likes a mattress. That's as firm as a rock. They've got a mattress for you, too. Helix was selected as the number one best overall mattress pick of 2020 by GQ Magazine, Wired, Apartment Therapy, and many others. Just go to helixsleep.com/tim, take their two-minute sleep quiz, and they'll match you to a customized mattress that will give you the best sleep of your life. They have a 10-year warranty, and you get to try it out for 100 nights, risk-free. They'll even pick it up from you if you don't love it. And now, my dear listeners, Helix is offering up to $200 off of all mattress orders and two free pillows at helixsleep.com/tim.

• 4:55Tim Ferriss?

  These are not cheap pillows either, so getting two for free is an upgraded deal. So that's up to $200 off and two free pillows at helixsleep.com/tim. That's helix, H-E-L-I-X, sleep.com/tim for up to $200 off. So, check it out one more time. Helix, H-E-L-I-X, sleep.com/tim. This episode is brought to you by AG1, the daily foundational nutritional supplement that supports whole-body health. I do get asked a lot what I would take if I could only take one supplement, and the true answer is invariably AG1. It simply covers a ton of bases. I usually drink it in the mornings and frequently take their travel packs with me on the road.

• 5:40Tim Ferriss?

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• 6:20Tim Ferriss?

  Hello, boys and girls, ladies and germs. This is Tim Ferriss and welcome to another episode of The Tim Ferriss Show, where it's my job to deconstruct world-class performers from all different fields, to tease out how they do what they do, the thought processes, the favorite books, the habits, et cetera, that make them so good at whatever they choose to focus on. And my guest today is Nick Kokonas, K-O-K-O-N-A-S, on Instagram @NkoKonas, on Twitter @NickKokonas. Nick is the co-owner and co-founder of the Alenia Group of Restaurants, which includes Alenia, Next, The Aviary Royster, St. Clair Supper Club, and The Aviary NYC. Alenia has been named the Best Restaurant in America and Best Restaurant in the World

• 7:03Tim Ferriss?

  by organizations and lists as diverse as the James Beard Foundation, World's 50 Best, TripAdvisor, Yelp, Gourmet Magazine, and Elite Traveler. The list goes on. His restaurants have won nearly every accolade afforded to them. Recently, Alenia had to shut its doors due to COVID-19 right alongside restaurants everywhere, all over the world. So, you can imagine my surprise when, just a few days ago, Nick told me that Alenia had a record-setting day. In fact, its highest revenue day ever within the last two weeks. That's part of the catalyst for recording this episode, and we dig into the strategies and tactics that made it possible. And even if you have no interest in restaurants, there's a lot that you can gain from this episode as it relates to frameworks, thought structures,

• 7:47Tim Ferriss?

  contingency planning, all of that. And if you are in the hospitality industry, the restaurant biz, I recognize that Alenia is a somewhat unusual case, but still, there are things to be learned from how Nick and his team have responded to this and adapted and innovated in other places. So, I suggest listening. Nick, as a bit of background, has been a subversive entrepreneur and angel investor since 1996. He spent a decade as a derivatives trader, has co-written three books, and believes in radical transparency in markets and business. As an outsider to the restaurant industry, Nick's approach to the business of restaurants is markedly innovative, and he's been

• 8:29Tim Ferriss?

  Featured in Businessweek, Fast Company, The New York Times, Forbes and Crain's Chicago Business, among many other publications. He's given talks on innovation, entrepreneurship and experience design across the country. He is also the founder and CEO of Tok Inc., that's T-O-C-K, a reservations and CRM system for restaurants with more than 10 million diners and clients in more than 30 countries. Tok has also recently launched a to-go platform which has helped restaurants pivot to fulfill pickup and delivery orders. You can find more on that at exploretock.com. And without further ado, please enjoy a very wide-ranging and tactical conversation with Nick Kokonas.

• 9:09Tim Ferriss?

  Nick, welcome back to the show.

• 9:11Nick Kokonas?

  Thanks, Tim. Great to be back.

• 9:13Tim Ferriss?

  And this is an episode that I've been looking forward to. We've been chatting over the last handful of weeks and you've had a few dozen people request that you go back on my podcast. I've had a few people request the same. And a lot has happened in the last year and a half, but certainly in the last month and a half. And before we get into the current state of affairs and how in some ways, many ways, you've zigged instead of zagged and approached things differently, let's zoom out to a concept that we discussed in your first appearance quite a bit.

• 9:55Tim Ferriss?

  Maybe you could just define it for us. And that is asymmetric bets or asymmetric opportunities. Could you define what that is and then perhaps just describe what kind of follow-up questions you've been getting and how you would speak to those?

• 10:13Nick Kokonas?

  Yeah, well, I mean, we covered a lot of ground. I think that first podcast was three hours or something like that. And, you know, the overarching theme was about decision-making, not outcomes, right? So we try to measure, I try to measure myself and my business life and personal life on making the decisions, not whether or not they sort of paid off or not. And in business especially, you're investing.

• 10:50Nick Kokonas?

  What you're looking for is an opportunity where if you make the wager or you make the investment, that you get paid off eight X, but you can only lose one X or two X. It's just that simple. And that doesn't mean also that the odds are actually eight X. It's like a 50/50 odds chance that pays off more than 50/50. Right? Or there are unknowable odds, and this is probably more often the case, but if something does happen, it's really consequential, as opposed to if it doesn't happen, it doesn't

• 11:35Nick Kokonas?

  really matter. So without getting technical or mathematical about it, if you take an action and X happens and it doesn't really affect you at all, but if Y happens, it's either really, really great or really, really bad. That's the asymmetry that we're looking for. And you want to take the action, which either hedges you in case that that outcome is really terrible, or you invest in it if the outcome's really great. And then knowing that you did that is the right path. Like you don't, the outcome is what it is.

• 12:18Nick Kokonas?

  You can't really control it most of the time. And so consequently, you just go, yep, I made the right decision. I'm going to live with that. And

• 12:28Tim Ferriss?

  I was just going to say, and I don't want to pull you off your train of thought, but could you give perhaps an example, not necessarily the current example, which we will get into, but are there any examples that you could use just to illustrate this for folks who are listening?

• 12:43Nick Kokonas?

  Yeah, of course. You know, occasionally, I'll use an investing example. Occasionally, you see a situation where

• 12:57Nick Kokonas?

  A company is very, very solid, has a great balance sheet, is doing business steadily, and they're not going to go out of business anytime soon. But they have an opportunity that if it happens, if it works, it's going to go skyrocketing. The example I could think of is actually similar to our current crisis. And that is in 2008, I remember watching the CEO of Ford on TV, and all the other guys were talking about the bailout and the TARP money and all that, and they looked really nervous. And he got up there and was like, "Yeah, we're not going to take the TARP money, we don't need it."

• 13:41Nick Kokonas?

  And Ford was trading at like, I want to say it was like a dollar eighty a share or something at the time, it had been dragged down. And you could just see that they felt that their business was solid, their business overseas was fine, their business in China was growing, and they had planted the seeds for that. And it felt to me like Ford wasn't going to go down to a dollar, but it could easily go to five. That's it. It's not overly complicated. And knowing what I did about the overall sector at the time, because I was studying it, that was kind of all I needed to go to say, "Hey, this is a really asymmetric situation."

• 14:25Nick Kokonas?

  I think what's interesting, after our last talk, where we got into it in more depth, a lot of people on Twitter started threads saying, "Hey, a lot of these people that are on podcasts and people who think about these sorts of things that I like, Naval or whoever it may be, talk about asymmetric risk or Taleb. And let's make a list of everything that's asymmetric." And people were like, "Reading a book is asymmetric," or "Spending time with your family is asymmetric." And that's not the point. It was like, "Yeah, those are great investments of your time, and they're linear."

• 15:03Nick Kokonas?

  What we're looking for is something that is multiplicative, that is logarithmic. And I certainly think reading books is awesome, and spending time with your family is awesome. But it's not asymmetric.

• 15:20Tim Ferriss?

  And let's jump into asymmetric risk, because there's asymmetric...

• 15:26Tim Ferriss?

  Risk or opportunity to the upside, right? Where maybe you can invest very cheaply, I'm just making this up, in a drug development company. And it's going to be worth nothing, but your downside is capped and very minimal. But if it does in fact clear the regulatory hurdles and ABC, it's going to be a 20 or 100x, right? Something like that. There are those examples. Then there are downside risks. And you are a participant, and you wear many hats, but certainly one of those hats is in the food and beverage or restaurant world.

• 16:05Tim Ferriss?

  And many people would argue that no sector has been so swiftly decapitated as the arena of restaurants. And I'd just be curious to know, if we travel back in time, when did you start to assess this risk?

• 16:26Nick Kokonas?

  So it is April now, and I think we're six or seven weeks into a quarantine, mostly national. I'm the CEO and founder of Tach, which is a reservation system. And we operate in 28 countries. And one of those countries where we have about 20, 30 restaurants, small presence, is Hong Kong. And when the virus hit China and then Hong Kong started shutting its borders, we could rapidly see the reservations going from, you know, 95% capacity at most of the restaurants there to zero, like actual zero.

• 17:06Nick Kokonas?

  Like, they were open-ish, but no one was going. That certainly woke me up to the possibility that zero was

• 17:18Nick Kokonas?

  Was plausible. Now, it's a funny story is that about three years ago, we were assessing our clearing risk. So Tock not only does ordinary reservations, but we sell tickets to events for restaurants or special tables like chef's tables or prefix menus. And we sell about thirty to forty million dollars a month of those for restaurants around the world. And one of the things that we have to assess is the risk of how we pay those restaurants out. You can imagine that if you have a concert or something like that and you sell the tickets to the concert, like, you know, it's the Fire Island scenario, right? So you sell all the tickets to the concert. And then everyone pays their money.

• 18:01Tim Ferriss?

  Okay, got it. Just to be clear, that's the F Y R E, not the F I R E.

• 18:07Nick Kokonas?

  Yeah, yeah, yeah, yes, that's correct. The Fire Festival, right? Yes, F Y R E, not the other one. And so you pay out the money to the concert promoter ahead of time. And then if the concert doesn't take place or that guy just goes to Jamaica with the money, we're left holding the bag in the case of the restaurants. So we were trying to assess that risk. And it's a bit like running a clearing firm.

• 18:34Tim Ferriss?

  What is a clearing firm? Just for clarity.

• 18:37Nick Kokonas?

  A clearing firm is the middle position in a commodities market. So they're a buyer to every seller and a seller to every buyer. So if I make a transaction with you for a futures contract, we don't actually make it directly, even though you're the buyer and I'm the seller. I actually sell it to the clearing firm and you buy it from the clearing firm.

• 18:58Tim Ferriss?

  I got it. So it's kind of like a title company in a home transaction.

• 19:02Nick Kokonas?

  Right. So I remember our CFO, Steve Bernacki, really bright guy, very conservative, saying to me, you know, we shouldn't pay out X, Y, Z restaurants this far in advance because there's a risk that they can default and all that. And I said, and I have this in an email. I said, it's not like every restaurant in America can close all at once. And that was three years ago. I was wrong about that. You know, I never imagined a scenario that this could happen. And then in February, I could imagine it. I could imagine it, given what's happened. I still thought the probability of it happening was very low. It wasn't like I was.

• 19:47Nick Kokonas?

  You know, prescient in the sense of like, yes, for sure, this is going to be a pandemic that sweeps America. And even if it had been, you, I probably wouldn't have thought that it would result in the kind of lockdowns that it has. So, but I did think, if it happens, we are completely screwed. Right? So there's an asymmetric risk to the downside where you go like, look, there's a, there's a 90% chance this doesn't happen at this point, or maybe even a 95% chance. But if it does happen, we have a load of problems. We have a load of problems for our restaurants, for our employees, for Toc. And they're existential in nature.

• 20:31Nick Kokonas?

  They are the kind of problems where you go, I have blowout risk. I can wake up tomorrow and have no businesses and Toc could be on, on, on the hook for, you know, five to 10 million dollars, which would blow Toc out. So I became very aggressively paranoid with people in my circle at saying, hey, look, what's going on in Hong Kong could happen here. This is into February. And

• 21:05Tim Ferriss?

  Just, just, just so I understand, in your circle, you mean within the company? Employees, managers, colleagues within the company?

• 21:12Nick Kokonas?

  That's correct. Yeah. Yeah. And, you know, I, I called in our general counsel and said, Emily Groden, a really bright young woman, and I just said, I need to understand everything about unemployment. I need to understand everything about furloughing people. I need to understand all the benefits. I talked to our HR people, like, how much can we pay people and they can still get benefits? And I remember them looking at me going like, are, why are you asking these questions? Like, you know, are you, are you about to like sell the company? Like, they weren't thinking negatively, they were thinking like, something must be up, but it was probably a good thing. Right?

• 21:53Nick Kokonas?

  And then I called in Steve and I was like, we need to come up with, with methods of tracking the inflow and outflow of, of payments to, to our companies by the hour, not by the day. Like, things like that. And in terms of the restaurants, you know, I I had pulled in Grant Achetz and and our, you know, our management team and and just said, I I think there's a reasonable chance we don't have any restaurants in a couple of weeks.

• 22:27Tim Ferriss?

  And for those who don't know, since it's not in your bio, can you give two or three lines on on Grant?

• 22:34Nick Kokonas?

  Yeah, sure, absolutely. Grant Achetz is is my business partner. He's also one of the best chefs in the world, renowned for modernist cuisine, we like to call it. Some people call it molecular gastronomy. We built Alenia together in 2005, and he's won, you know, Best Chef U.S. and he's been on all the the TV shows. And if you want to learn more about him, the best way to do that is Chef's Table, the Netflix series, season two, episode one. Really, really talented, dedicated, amazing person, who also survived stage four cancer 10 years ago.

• 23:15Tim Ferriss?

  Grant is is incredible. So I second that recommendation. Last name spelling A C H A T Z. Also, both you and Grant appear quite heavily in The Four Hour Chef, for those people who might already have that. Okay, so you called in Grant and...

• 23:33Nick Kokonas?

  Yeah, and I just said, I think there's a reasonable chance that we don't have any restaurants in a couple of weeks. He could tell I was very serious. Alex Hayes, our business development manager, could tell I was very serious. So they weren't looking at me saying like, you know, you're crazy, but they also were looking at me like, you know, I I think you've kind of lost it a little bit, or maybe you're overstressed these days. And I I just kept saying to them, like, look, I I hope I'm wrong. But if I'm right, we need to do a lot of things very, very quickly and very well. And if we don't, we're going to be in a world of hurt.

• 24:18Nick Kokonas?

  I think that because I was a trader on the floor, which doesn't exist anymore, you know. The thing about a trading floor is that the markets work the same as they do now, a lot slower. And you could watch people, though, and their positions. So the difference, you know, in the 90s and early 2000s is that when someone was losing a tremendous amount of money and was stressed out, you could watch them. And people had different reactions. Like, one reaction was to blame everyone else around them. It wasn't their fault, you know, the world conspires against them. And they would lash out and get violent or something like that.

• 25:00Nick Kokonas?

  Some people would, what we called turtle, like, they'd put their shell up and tuck their head in and just kind of like sit there and watch the world fall down around them. And it wasn't a pleasant thing by any stretch, but it was the kind of thing that you saw fairly often. And so what we always tried to train our people to do was, hey, you know, the market's much bigger than you, the world's much bigger than you, and it is what it is. Like, you have to see it as you see it. Assess it, and then doing nothing is a choice. Doing nothing is holding tight to your current position. It's like buying your position again.

• 25:42Nick Kokonas?

  And so if you're better off selling your position and getting out, you have to do that very quickly. And one of the things that any trading book will tell you is that you're supposed to let your winners ride and your losers, you're supposed to lock in. But most people do the opposite, of course, in every aspect of their life, because when you lock in a loser... You have, you have ended that, that outcome in a negative fashion. You've reinforced it, like you, you've lost the game, the game is over.

• 26:14Tim Ferriss?

  And by lock-in, what do you mean?

• 26:17Nick Kokonas?

  Well, I mean, um, in the, in the case of trading, like if you buy a stock at a hundred dollars a share and it goes to eighty. If you hold it, you go like, well, there's a chance it could go to a hundred and ten, right? Um, if you sell it at eighty, you've locked in a twenty dollar loss. It's done, like the game is over of that particular trade. And so I think a lot of people, um, tend to do the opposite of, of what you should do, which is when you buy the stock at a hundred, it goes to a hundred and ten. They sell it and they lock it in because why? Hey, I made a good decision and I won and that one's over. Um, it's the converse and it's the exact opposite intuitively of what, of what you should be.

• 26:57Nick Kokonas?

  Uh, it, it's intuitively exactly the right thing that your brain's telling you to do. It's saying, you know, lock in the, the feel-good, get the, get the serotonin release or whatever. And, and ignore the, the bad shit, like, like, let's just let it ride because like it'll probably turn around. You know, or it's cheaper, like I loved it at a hundred, I gotta love it at eighty, right? And you can ride that all the way down to zero. And it's no different with our restaurants when, when we were looking at the possibility. Let's just say that, that we didn't do the lockdowns in America, but demand went down forty percent.

• 27:39Nick Kokonas?

  Demand goes down forty percent in a restaurant, you're probably losing money every week. Um, and you're going to have to make really hard decisions about staffing, about hours, um, about food purchasing, all those things. And so that day, and it was, I can tell you it was March fourth.

• 28:01Nick Kokonas?

  We. I basically said, we need to get like contingency plans together. Like, nothing happens, no problem. Business as usual. If it's regional and people can't travel and our demand is down 20 or 30%, what's our plan for that? What's our staffing plan? What's our, what's our purchasing plan? What's, what's our, our PR plan? For lack of a better term, like what is our messaging to the world? What should our menu items be? What feels appropriate? How do we message that to our teammates and our staff? Who may not understand the situation? And then, of course, you know, what happens if we're mandated to shut?

• 28:46Nick Kokonas?

  What do we do? And by making all those decisions at a time where it wasn't yet a panic, when events started to unfold, you, you're kind of like, you know, dust off Plan D. And then you just execute. Because the decision making is much easier to make when you're not, when you're not in the throes of battle, so to speak.

• 29:12Tim Ferriss?

  So if we, if we then look at the play by play. So you call all your teammates, your staff together. What, what message do you sort of deliver to the? You've spoken with management, you've spoken with Grant, or presumably you've spoken with management, but what, what, what is the message that you sort of deliver when things start to go, either before they go sideways or when they start to go sideways?

• 29:39Nick Kokonas?

  Yeah, so just before, you know, things were really going sideways. And you could see that in Seattle, specifically, you could see that there is both an outbreak and the restaurant business was starting to go down the tubes. And on March 8th, I tweeted that the hospitality industry in the United States is about to be decimated. It's 4% of GDP. And then hotels and airlines are, are, are coming right after. And that's, you know, March, March 8th. That same day, I brought in, I think we have about 25 managers between front of house and back of house at our five restaurants.

• 30:22Nick Kokonas?

  And we brought them all into a meeting and I just said,

• 30:27Nick Kokonas?

  This is coming and we need to institute new rules as to how everybody works. And so we instituted mandatory temperature checks, hourly hand washing, both of which are logged. Normally if there's like a 1pm or noon call time for front of house to do side work. People kind of can come anytime between, you know, 12 and 12:30 or whatever. I was saying if someone's not there within five minutes of call time, exactly 12 o'clock to get their temperature checked, they can't come into the building. If they've traveled from Europe or Asia in the last two weeks, they have to quarantine for 10 days.

• 31:09Nick Kokonas?

  And all that sounds fairly normal now. At the time, what I was relying on are two things. One, I was looking at what they were doing in China to to combat this at businesses. It wasn't hard to find information on that. And then I also talked to a doctor here in Chicago about, you know, is it safe for employees to go in with this? Like what precautionary measures can we take for their safety and the safety of our of our customers? And mind you, this is when we were still open, like we were not closed at that point. And I I do know that there was a bit of cynicism on this because they were kind of going like, oh, Nick's the owner guy and he's not here during service.

• 31:52Nick Kokonas?

  And there's no way we can stop our service in the middle of of of, you know, a busy night serving 300 people. To have all 55 people on the staff wash their hands every hour, it's just not going to happen. And I can see that look on a few of their eyes, like, man, he's out of touch and doesn't get it. And as soon as I saw that, I shut it down hard. I basically just said, like, there will be no jobs in four weeks and we need to get way ahead of this curve. And anybody who doesn't take this seriously is just out the door. No HR calls, no anything, we are in, we are in a wartime footing. And

• 32:39Nick Kokonas?

  The smiles kind of went off their face as I went down the line. And I just said, we are going to work as hard as we possibly can for all of our mutual benefit and for our community's benefit. And we're going to feed people and we're going to feed each other and we're going to get each other jobs and we're going to pay you and I'm not going to take any money and Grant's not going to take a salary and all of the management team, the ownership team is not going to take a salary. That's how seriously we take it. And by the end of that meeting, all those procedures were in place the next day. There were one or two people who did not want to do it and they were asked to leave.

• 33:21Tim Ferriss?

  And this is pre tsunami, right? I mean, you're sort of seeing, based on the canary in the coal mine of Seattle and Washington, the tide kind of flowing out, so to speak, right? Like, okay, this is not, this is not normal.

• 33:38Nick Kokonas?

  Yeah, and we were still doing business, you know, we were still open. And I thought that there was a chance that, you know, again, I thought it was like, well, we're at like 60% now or 70% that this is going to come to Chicago. But even if it doesn't come to Chicago, even if it just stays on the West Coast, it still affects us tremendously, right? So, you know, day by day, I think it became very evident that we were going to be mandated to close. And that's when I went from restaurant mode, like, of like, okay, well, the restaurants, we kind of know what we're going to do, we've got these plans, to the talk mode of, holy

• 34:23Nick Kokonas?

  cow, if every restaurant in America shuts, Toc has no business. Like, we're a four-year-old, five-year-old startup with 100 employees.

• 34:35Tim Ferriss?

  May I pause you for one second?

• 34:36Nick Kokonas?

  Yeah, of course.

• 34:37Tim Ferriss?

  So you have the startup with 100 employees, but you also have all these restaurants. So you said you had the plans in place. What were the plans for those restaurants? I mean, if...

• 34:48Nick Kokonas?

  Yeah, for the plan for the restaurant was if if the governor's office mandated that they close, we would, well, first of all, let me back up. We we run the restaurants very differently than a lot of folks. We eliminated tipping 10 years ago in order to accomplish a lot of the things that I think the industry needs. We try to treat all of our employees as the professionals that they are. So what I mean by that is that a lot of people think of a waiter or waitress as embodying this this role in society of servitude. And certainly, we're in service of our customers, but in trying to give them

• 35:29Nick Kokonas?

  great hospitality. But for for many of our employees, you know, most, I would say, this is their chosen profession. They are highly skilled at what they do. We create a unique environment and experience for our guests, and that's why we're we're so successful. And the more successful we are as a team, the more successful these folks are as professionals. We have servers that make, you know, well into 150 plus thousand dollars a year, but we don't do it with tips. And so we also provide a 401k with 4% matching benefits. We also have healthcare benefits that people vest into after just, you know, a month or

• 36:11Nick Kokonas?

  two of work. We have Family Medical Leave Act, you know, paid paid parental leave, all these things that I think, and we'll probably get to it in a little bit, but all these things I think that that people are aware of now because the industry, you know, was forced to close. And, you know, you're talking about 11 million workers in the United States that are in the hospitality business and that aren't going to be displaced by robots anytime soon, you know. We ran that very, very differently. And so the considerations that I had was, okay, if if we're not doing any business and we have no revenue coming

• 36:50Nick Kokonas?

  in, what is the best way over the short term, month or two, to ensure that these folks have healthcare, ensure that they're taken care of? What does a furlough look like? What does unemployment insurance look like? What kind of capital reserves do we have that we can pay stipends to them? What other work could we give them? That could produce revenue that isn't our core business? You know? And so all of those things were considered. And when the shelter in place order came, I was watching on my computer.

• 37:28Nick Kokonas?

  And I heard the governor, Governor Pritzker, say that he's ordering all the restaurants closed. And I closed that window and I immediately called our HR and our general counsel. And I said, I'm going to draft a letter furloughing all 300 people. But what we're going to do is we're going to pay the benefits out at the level at which we can keep them on that they can get unemployment insurance, but can also retain their health care. We are going to pay a $300,000 stipend to all the employees. So $1,000 for every employee on their paycheck as a bonus to tide them over. So last paycheck comes this Friday, everybody gets an extra $1,000.

• 38:13Nick Kokonas?

  And then what we're going to do is we need to understand the rules on how to hire everybody back and what the timing of that looks like. And certainly at that point, we didn't know what that, how successful we would be in the plans I'll tell you about in a second. And I wrote that letter to the employees and I have to tell you, like, it was, it was super emotional. I was at home and it was really tough. Because in some ways, I felt like I knew the plan and I knew what we might be able to accomplish. But I also thought that there was a really high chance that we'd fail at it.

• 38:58Nick Kokonas?

  And also there was, you know, it's a sense of helplessness, like there's not much you can do. So I knew, I think what I said to my wife was, I knew I was making the right decision, both ethically and strategically, and yet it still felt terrible. So, so that was really hard. And then I sent that off. And I probably wallowed for like an hour and then I went, okay, we need to start feeding people. We're in the business of selling food and selling emotional connections with that food and, and cultural connections. And we're gonna start doing that. And so, um, you know, we had already decided that we were gonna try to do carry out,

• 39:43Nick Kokonas?

  which is the farthest thing from what we do normally. And

• 39:50Tim Ferriss?

  Yeah, just to paint a picture for people.

• 39:52Nick Kokonas?

  Yeah.

• 39:52Tim Ferriss?

  So Alenia is like MoMA meets immersive theater meets uh, hear a pin drop quiet kitchen

• 40:09Tim Ferriss?

  with art pieces being brought out to you. It is as far from takeout as you could possibly imagine, right? Or carry out.

• 40:17Nick Kokonas?

  Yeah, it's, it's as far from carry out as you can imagine. And, um, you know, I, I said to Grant, I'm like, we gotta do thirty dollar comfort food and we need to do it at volume.

• 40:32Tim Ferriss?

  Now, as a, as a contrast, what would you say the average sort of ticket per, per person or per table prices normally?

• 40:40Nick Kokonas?

  Yeah, it's, it's, uh, you know, with, with wine, food service, about three hundred and fifty dollars a person. So.

• 40:46Tim Ferriss?

  You're, you're going to one tenth of that.

• 40:48Nick Kokonas?

  Yeah, I mean, like, let's, we can talk a little bit of numbers. Like, we do a hundred and twenty eight people a night at Alenia. And we have a staff for sixty four seats. We have a staff of about eighty five people that make that happen. They get there at four in the morning, five in the morning for the morning prep team. And they're there till two in the morning. Um, so the cost, as you might imagine, of running all of that labor for twenty hours a day. And then the night cleaning person, there, there's, the door doesn't lock three hundred and sixty five days a year. It's a twenty four seven operation to keep that going. And we do about $20 million in revenue a year. It's a, it's a very successful business. And we built that up from our first year doing about four and a half million in sales.

• 41:33Nick Kokonas?

  It's really, really hard work to make. It's like running a theater, like you said, it's, it's like every night is showtime. If the fishmonger doesn't show up with the fish that morning, the people are still showing up at, at 6:00 PM. And there's just no excuse not to have excellence because everybody's coming there expecting a transformative experience. And if we fall even a little bit off of a really high mark, they consider that horrific because it's their special occasion. You know, it's the one time they're going to go to Alenia and see that. It's like going to see the stones and if the stones suck, you're like, oh God, I waited 30 years to see the Rolling Stones and they were no good.

• 42:18Nick Kokonas?

  No, they bring it every night. It's hard work, you know? I mean, they're like 80 years old and they're still doing a great job. So we have that attitude of make it happen. Just do it, like figure it out.

• 42:31Tim Ferriss?

  Just as a side note, because I think it'll, I think it's kind of entertaining. So good food, like good tasting food. Again, we're going to, we're going to segue back to comfort food and just what a transition that is. And you and I have not spoken about this in depth because I wanted to save it for this conversation in terms of making that hop in the specifics, but there, good tasting food is table stakes, right? At Alenia, could you, what is the, I think it's embroidered, is it not? It's on a wall. What is the expression? Flavor is for...

• 43:13Nick Kokonas?

  Well, yeah, Grant, yeah, I don't even want, should I say that? I think at one point, actually, when you were doing Four Hour Chef, you got a kick out of this. Grant had a napkin that someone embroidered that said, "Flavor is for pussies." And I think, I mean, it's not, it's not exactly PC, but I, I think it's like, yeah, that's, that's given. Like, making food taste good at that level, it better damn well taste good. And honestly, that, for, for people at that level, that's not the hard part.

• 43:53Nick Kokonas?

  That'd be like telling Picasso, like, you know, "Hey, you know, can you do a portrait of my daughter and make it look like her?" And the answer, of course, is, "Of course he can." Like, you know, that's, like, he was doing that when he was 12, and it was unbelievable. He was a prodigy. What are you gonna do when you're 60 to do something new, different, interesting, better? How are we gonna, to, through food and through your experience and, and sitting down there, create an emotional experience for you with food and service as the medium? And that sounds like, that sounds like pretentious bullshit. Like, I get that. Like, I get that that sounds like, potentially, like, the worst art house project in the world, which, which means it's even harder to pull off.

• 44:38Nick Kokonas?

  You know what I mean? So, what we always tell people, in any interview you'll ever hear with me, you'll hear, when people say, "Well, what's the point of Alenia?" And I say, "Fun and delicious." And everyone's like, "Yeah, but what about the science? Or what about the art house? Or what about the pin drop in the kitchen?" And I'm like, "Nope, fun and delicious." Like, if you're not having fun at Alenia, if you don't get the joke, if you think that we are making fun of you, we fail miserably. But if you go there and you're laughing with us, and you are surprised and excited, we all win. It's, it's meant to be that. And by the way, we fail all the time at it, but we try really hard to keep it approachable.

• 45:19Tim Ferriss?

  So, let's, let's flash forward then, because now, all of these things that make Alenia, Alenia, many of them are gone, right? I mean, it's just that the palette of colors has been reduced to...

• 45:33Tim Ferriss?

  Carryout or

• 45:35Nick Kokonas?

  Yeah, I mean.

• 45:36Tim Ferriss?

  Something like that.

• 45:37Nick Kokonas?

  We didn't know what we were gonna do and I think everybody on our team, the the close in team, as we were trying to figure this out, kept going back to things we knew. And we were on a chain text message, um, because there's so much going on. Um, and one of our, our employees kind of was modeling in talk like, well, we can do 125 meals a night and we can do it between a six o'clock pickup and a nine o'clock pickup and, and we'll have this many employees and this many dishwashers and all that. And I remember I replied, there are no chefs, there are no dishwashers, there are no cooks,

• 46:22Nick Kokonas?

  there are no owners and there is no restaurant. Get it through your fucking heads. Like, none of what we had last week exists. We're doing something completely different. We have to do it inexpensively because no one's gonna wanna spend $200 on a pickup meal. It's also tone deaf, we're in the middle of a frickin pandemic, right? Um, it's gonna have to cost like 30, 35 bucks. It's gonna have to be comfort food because it's still kinda winter here. It needs to be highly delicious. It needs to be transportable and it needs to beat the shit out of ordinary like delivery food, pickup food. And then we need to do it at a scale that the revenue makes sense. If we're doing 100 of them at 35 bucks a night, that's $3,500.

• 47:07Nick Kokonas?

  With the scale of our employee level and our lease and the kind of ingredients we buy, $3,500 a night is fine if you, if you have a small sandwich shop, it's probably great. You probably have two or three employees. We have nearly 100 at that restaurant. Um, our annual payroll there is, you know, six and a half, seven million dollars. So you're guys, you're not getting the scale of the problem, you know? And I remember I called Grant and, and he was like, well, we could do like a beef Wellington because that's always delicious and we could do them individual size. And we buy at the, currently we buy beef from a ranch in Colorado called 7X Ranch, which makes a great product.

• 47:49Nick Kokonas?

  And, uh, you know, the Wellingtons would have to be 50 or 60 bucks each. And I was just like, it's gotta be thirty five bucks. Like, you have to come up with something that's thirty five bucks. And he said, well, I could do a short rib. Beef Wellington, because short rib is way less expensive than tenderloin. It'll still be really delicious. The sauce will be the same.

• 48:10Nick Kokonas?

  And all of a sudden, you know, three days later, we turned on Talk, which we built this other thing, which I can tell you about in a minute, Talk to Go. And we put up five hundred for sale for the weekend on Friday, Saturday, Sunday. And they sold out in like five minutes. And we also offered wine to go with that. And we sold like a couple hundred bottles of wine. And suddenly, we're like, oh, like, hey, we brought in like twenty thousand dollars of revenue a night. We can hire back like thirty people. And by the way, we need to, because we gotta produce five hundred beef Wellingtons.

• 48:49Nick Kokonas?

  The first day was was tricky because the pickup, we'd never done a pickup before, but we kind of went like, well, it's the smoothest way to do a contactless pickup. So we built two-way text messaging into Talk. And people just pulled up and we had an iPad out front and people had masks on and gloves. And they popped their trunk and we put the food in the trunk and off they go. And lo and behold, by seven thirty the first night, we had served all five hundred. And people were posting them on Twitter, saying, wow, this is a really joyful thing in the midst of all this craziness. And what always happens with with us in a good way and with Grant, God bless him, like, you know, guy's a frickin fighter. On Sunday, he was like, you know, I think we could do seven fifty tomorrow.

• 49:34Nick Kokonas?

  Like, five hundred is easy. And by the following weekend, we were doing one thousand two hundred and fifty a night. And we had re-employed about half our staff in a week.

• 49:46Nick Kokonas?

  And then we kind of looked midweek and we went, okay, what do we do it next? Now we know how to do this, like, hey, we got five under our belt. I think it's safe to to get Next and Royster, our other, two of our other restaurants going. And by the way, we have a cocktail bar. Let's start doing cocktail prepaid cocktail packages, um, cocktail kits out of aviary, and then offer them up with these meals. So we started engaging.

• 50:11Tim Ferriss?

  Nick, may I jump in for a second?

• 50:12Nick Kokonas?

  Yeah, please.

• 50:13Tim Ferriss?

  So a question that I'm sure some listeners are wondering is how do you produce that number of meals safely without packing employees together?

• 50:23Nick Kokonas?

  Yeah, absolutely. Um, that's certainly part of the trick. First thing you have to understand is that on a normal night at a Linea with 128 people, you're looking at about 2,200 to 2,500 plates going out of the kitchen.

• 50:38Nick Kokonas?

  We have a big open kitchen. It doesn't look like a traditional French kitchen. It looks more like a, um, like a lab or something like that. And, uh, so what we did is we took all the dining room space and we, we spaced all of that out. Prep kitchen next door, um, that we use all the time during the day. And the, the, the important thing to remember is that the intricacy of what we do at a Linea normally with those 2,000 plates that goes out is highly complex. You've got 15, 16 different dishes, each with 15 or 16 different components, um, very precise. By doing 500 to 1,000 beef wellingtons that are all identical to one another, along with

• 51:23Nick Kokonas?

  the sides and the rubbish on mashed potatoes and all of that, it's actually much simpler than what we do normally. And so what we did was we did the temperature check, the mandatory hand washing, the masks, the gloves, but we spread it out throughout the entire restaurant.

• 51:40Nick Kokonas?

  So that the space where diners normally are wasn't being used. So we used that as staging for all of the boxing of the food and whatnot, right?

• 51:49Nick Kokonas?

  So we were able to do it in a way that, um, was safe. And it's really important to remember too, and this is something I think a lot of people early on, um, didn't think about. In, in Chicago, we have 82 major grocery stores for 5 million people.

• 52:05Nick Kokonas?

  If one of those nodes goes down, like if you think about a computer network, if you have a network of sixteen computers and one of those nodes goes down, you notice, right? But if you have one with sixty-four thousand nodes and one of them goes down, you don't really notice. You know, that's the internet in a nutshell, right? That's computing in a nutshell.

• 52:29Nick Kokonas?

  Early on, there were some folks in the industry that were calling for restaurants to not be allowed to do carryout at all. And is it one hundred percent safe? Well, it seems to be the case, and there's broad consensus on this, that food is safe and packaging is probably safe, like ninety-nine percent safe. Now, the mail is still being delivered and we're all getting Amazon packages. So what we were left with is really the safety, not of our customers, which seem to be very, very safe, but the safety of our employees. And so that's what we took very, very seriously. And first, I should also add, anybody who didn't want to come into work didn't have to, right?

• 53:13Nick Kokonas?

  Anyone who felt unsafe or was in giving care to elderly parents and it was a bad risk reward, no one had to work. Their reemployment is in no way contingent on whether they decide to work during this time. What we found, though, is that most people wanted to work. And in addition to being reemployed, we put everyone at fifteen dollars an hour. We did not know, you know, so if you were a dishwasher, you made fifteen bucks an hour. If you were the head chef of Linea, the sous chef, a manager who was making a hundred and fifty thousand dollars a year before, you were getting fifteen dollars an hour. And we did that to make everyone equal. And then we said, if we make money doing this, we're going to take the profits of that money

• 53:58Nick Kokonas?

  and we're going to distribute it amongst all the employees and a recapitalization fund for the restaurant. And

• 54:05Tim Ferriss?

  Could you

• 54:06Nick Kokonas?

  Everyone felt like

• 54:07Tim Ferriss?

  Sir, just

• 54:08Nick Kokonas?

  Everyone felt like part of it, yeah.

• 54:09Tim Ferriss?

  I'm the, I'm that guy who interrupts, I apologize, but the, because I know people are gonna wonder, recapitalization, could you just explain that, uh, real quickly? We don't have to spend too much time on it, but what does that mean?

• 54:21Nick Kokonas?

  Yeah, no, I, I mean, basically, we're gonna need runway to keep everyone employed after we reopen. Uh, one of the things that people don't realize, I think, um, in the industry and in, in public in general, although it's, it's certainly dawning on everybody, is that, okay, Congress passed the CARES Act, and that's certainly a huge help to small businesses across the board. They did so very, very quickly, and consequently, the, the, uh, there's a June 30th deadline as of the time we're, we're recording this, and it may be changed. But basically, you can, you can apply for the payroll protection program, rehire everybody, but you gotta spend all that money, if you want it to be forgivable, by June 30th.

• 55:07Nick Kokonas?

  But restaurants won't be reopened for ordinary business by June 30th. And even if they were, how many people are gonna show up and feel safe, right? So, it's one thing to hire everybody back, but then what happens on July 1 when your, your demand is down 70%? And all of a sudden, you have ordinary expenses and ordinary payroll again, and your lease that you signed in 2016. So, what we wanted to do was try to make enough money now that we could have, you know, a capital pool where we could weather the storm, not now,

• 55:49Nick Kokonas?

  but over the six months after we're allowed to reopen. And it remains to be seen, of course, whether or not this works. But what I didn't want to do was, was wait to see what happened. Like, every step along the way, I kept saying, Great, I'm glad Congress is doing this. I'm working with the Independent Restaurant Coalition, but I also want to keep working. Like, you know, I don't want to rely solely on, you know, Congress or the, some guidance in the SBA, whether or not they change this June 30th date or not. Like, I can't really control that, even though they should change it, and I want them to, and we've, we've pushed them to, because it'd be good for the industry as a

• 56:31Nick Kokonas?

  whole and for the economy as a whole. I can't personally, as an individual, rely on that. And so, we, we've been working really, really hard to scale up all of our operations so that we actually make money during this time. And then, we're going to pay out that money to the staff so that they, they can, you know, take care of themselves and all that. But then, we also said, like, "Look, we want to guarantee your employment even when it doesn't make sense come September." That's the goal.

• 56:56Tim Ferriss?

  Let me ask you another question, or just dig into one aspect of this that, that may be a dead end, or it may be interesting to people. You were just mentioning a few minutes ago about repurposing the dining space. In other words, the space is outside of the kitchen, but still within the restaurant for this takeout, right? For the meals that you were delivering for, say, $35 a pop. Was part of your ability to execute that, the use of induction stove tops that could be moved around and put all over the place? Because that's something I remember noticing very, very obviously when I walked into the, sort of, the main, and I know you have multiple spots, but within a linear, so the sort of

• 57:39Tim Ferriss?

  main alien autopsy sterile cooking environment, where the induction stove tops, these, I mean, if you imagine, for people who have no idea what this is, like, like a very, a very thin boxed board game, I mean, something roughly that size that you can plug in anywhere and boil a huge pot of water within a matter of minutes using, my understanding is some, some type of, of, sort of, I guess, well, magnetic induction, I suppose. But, did you use those in the dining space, or was that primarily a prep and kind of packaging area?

• 58:15Nick Kokonas?

  Yeah, though, it's a good thought, but we didn't really need to. We were able to... To do everything we need to do between our prep kitchen and our main kitchen. Again, like, keep in mind, like, it's a lot of food. If you look on Grant's Instagram, you'll see some pictures where, you know, there's, you know, the packaging for 500 of them across all the, the, the pass. And, you know, they're plating it up, you know, for packaging. But in terms of the cooking, we didn't need to do that. It was more in terms of the packaging and staging for pickup and whatnot that went out into the dining rooms. Again, it's a ton of food, but it's less than we normally do.

• 58:56Tim Ferriss?

  Did, I, I'm not in the restaurant world, but I imagine that, and to correct me if I'm wrong, but that on top of low or no, I shouldn't say demand, but rather ability to service customers in the usual way, that there are some supply chain disruptions. Did you guys not run into any supply chain issues?

• 59:20Nick Kokonas?

  You know, we're starting to now. But early on, all the food that you might imagine that would normally be distributed to thousands of restaurants, almost everybody was buying nothing. So, early on, we actually found that, that we had some distributors who would call us up and say, "Hey, I've got 800 pounds of XYZ that's about to go bad in four days. Do you want it?" So, we were, yeah, so, you know, we, I remember like, probably like day five or six, we, you know, we didn't want to be selling wine out of our cellar because it would, again, a little tone deaf trying to sell,

• 1:00:05Nick Kokonas?

  you know, like, "Hey, it's a pandemic, buy a $250 bottle of wine," right? So, we were going out into the market and buying wine from distributors. And when we would reach, you know, the distributor and they would email us back, they would be like, "What do you mean you want to buy wine?" And we're like, yeah, we, we need to buy like, you know, 50 cases for the next couple of days. And they would go like, what are you, what are you doing? You know? And, and so, so again, like, I mean, you know, sounds bad, but from a trading perspective, when you're the only buyer, it's like the in-scene in trading places with Eddie Murphy going like, you know, he's got all the frozen concentrated orange juice, right?

• 1:00:51Nick Kokonas?

  If you don't know the movie reference, it's worth watching, old, old movie, there's time now. But, uh, you know, it's like, we would just go like, well, you know, they're asking $22 a bottle, offer them 12 and we'll buy it all. And, and still doing that, you know, it's like, we put in a wine order this morning. Most restaurants are not, are not buying wine right now. They're, they're, they're wine sellers. Again, about the asymmetry of things, like you want to be a buyer when everyone in the world says that there's, it's totally not worth buying, as long as the thing you're buying has some intrinsic value. And, and vice versa, you know?

• 1:01:33Tim Ferriss?

  Yes, let me, let me hop in because I, I want to try to put myself in the, in the shoes of, of some listeners who are going to say, my God, like, these guys have huge cash surpluses. They're generating incredible revenue. Of course they can weather the storm. Now, if, if we just take that as a, as a, as a position, right? Which I think all, it seems

• 1:01:54Nick Kokonas?

  Yeah, that's fair.

• 1:01:55Tim Ferriss?

  For people to take, right? What I'd love to talk about is, or to hear you talk about really, is number one, what types of restaurants you think will make it? And that could be intrinsically because they have certain characteristics or because they adapt in certain ways. And then what are some of the things you wish restaurants would do more of and less of, right? For instance, a lot of restaurants are, are using gift certificates. I don't know how you feel about that, but I'd be interested in hearing the, to the first point, like who's going to survive? You and I were chatting last week, or maybe it was time, time space has collapsed, so it's hard for me.

• 1:02:35Tim Ferriss?

  To say maybe it was a few days ago and I it was a few days ago and a friend of mine was playing as he called it meet Santa Claus. Thank you, Matt, and delivering Franklin's barbecue to his friends in Austin, which is an incredible gift. Franklin's barbecue, for those of you don't know, is this iconic barbecue spot where normally you would have to wait hours and hours and hours. There's a line that will take you three to four hours if you are lucky enough to get to the door before it sells out completely. It is incredibly popular, right? And I remember you were like, yeah, Franklin's will be fine, which I would tend to agree with, right? It's kind of like if people are looking at distressed debt and real estate, it's like, yeah, like Pebble Beach probably will be fine.

• 1:03:19Tim Ferriss?

  Maybe like the B tier, C tier, like who knows, right? And I'm not Pebble Beach is just a hypothetical, but it's a name brand in that respect, which I'm sure has some value in terms of resiliency, but who do you think is gonna gonna make it through? And what are the characteristics of the things that they might do?

• 1:03:39Nick Kokonas?

  Yeah, so one of the things that was interesting in a in a difficult way when this all happened was that as much as I was scared and to be clear, I was very scared as to what would happen, just as much as everyone else is like, you know, yeah, we have pretty good capital reserves and whatnot, but we chose to do that, you know? During the good years, last couple of years, we always held money back. We didn't pay it all out to our investors or ourselves and we did that because when things were going really well, you know, we expanded over 15 years to five restaurants.

• 1:04:20Nick Kokonas?

  I watched other groups during that time expand to 20, 25, 30 restaurants and thought to myself, there's no way that that they can be managing all that well. I don't think unless they're doing something in which case I need to learn from them, you know? But we were always very conservative in keeping those capital accounts and whatnot, but more than anything else, we're scrappy. Like people don't realize, people think I wrote a check and built a linear and then like retreated to some island somewhere. Like since the day we opened a linear, which is 15 years ago, coming up May 4th, I have been engaged every single day. With with that restaurant, with Grant, with our team, as has Grant, um, personally,

• 1:05:05Nick Kokonas?

  as have Steve Bernacki and other key people that we have, um, it is not glamorous. And then we're scrappy, like, we'll, we'll just get in there and do shit ourselves. Um, I'll tell you what kind of restaurant will survive. Um, Eric Rivera used to work for us and he has a place called Addo, A D D O, in, um, in Seattle, and he is very vocal on Twitter right now, um, in, in, in not always a, a totally positive way, um, because he sees a lot of big companies and big hospitality people saying, you know, that the industry is going to get bailed out and this and that. And Eric's just like, fuck it, I'm selling burgers.

• 1:05:50Nick Kokonas?

  And next week, we're going to do a steakhouse. And then, by the way, um, if you want to pay it forward, we'll sell a thousand bowls of soup every week for, you know, uh, people who are in need. And, uh, anybody can buy one of those. And he has created in the last three or four weeks, probably 20 different concepts of carryout delivery. Um, he's doing his own delivery fleet already. He's figured that out. Um, and he was a development cook for us and moved to the West Coast.

• 1:06:25Tim Ferriss?

  What is a development cook?

• 1:06:27Nick Kokonas?

  Yeah, he just basically like, he started off in our kitchens and then he didn't really, didn't really love or thrive in the environment of, of just grinding out a deal in your kitchen every day. And so what he did was he, we, when we did research on something or we would try to figure out new products or new ideas or new dishes or whatnot, or you just needed someone to go like, get me 42 different kinds of grass-fed beef and we're going to figure out which one we're going to serve it next for our steakhouse. I mean, he would do all that sort of stuff. So he was a research chef, basically. And you look at what he's managed to do and what he says on Twitter is like, look,

• 1:07:07Nick Kokonas?

  I've got eight employees. I don't have a ton of money. And I know for a fact, there's no chance that I won't be open in two years because I just wake up every day and do whatever it takes to make my payroll and make enough money to keep my place open. Now-

• 1:07:27Tim Ferriss?

  What was, what was his name again? One more time?

• 1:07:29Nick Kokonas?

  Eric Rivera.

• 1:07:30Tim Ferriss?

  Eric Rivera.

• 1:07:31Nick Kokonas?

  And, you know, it's like, he's really vocal on Twitter and I think he's pissing a lot of people off and he's gotten into-

• 1:07:38Tim Ferriss?

  At Eric Rivera Cooks is his handle on Twitter. That's what I was trying to find. The restaurant is at Auto Seattle.

• 1:07:46Nick Kokonas?

  He even gets into it with me at times because, you know, early on, like in this, like, I, I feel like I need to, I have enough of a platform in the industry where I have to be a, a little bit careful on, on balancing my criticism with my encouragement, you know? And so I think he was kind of like, you know, hey, Kokonas, why are you, you know, why aren't you supporting this or that? And yet, I, I watch what he's doing as opposed to some other folks who, who turtled, to get back to our earlier conversation, where they just

• 1:08:26Nick Kokonas?

  kind of went like, well, it's a hopeless situation. There's nothing I can do. So there's a bit of this, this misery porn going around with all, not just the hospitality industry, but with, with everything, every industry, every business, saying, you know, woe is me, we'll never make it, kind of thing. And this is a terrible situation. But I have a huge belief in human ingenuity and the ability of people to be resilient. And things people make are never as structurally sound as the people themselves. Like, this is not a unique situation, as much as we'd like to think it is.

• 1:09:11Nick Kokonas?

  Pandemics have been going on throughout human history. It's just that none of us walking around has lived through one before. And so if you study history and if you if you read accounts, which I did right at the beginning of 1918 pandemic, and what happened in 1920 through 1928, it was the roaring twenties. People partied their brains off afterwards. And but right now, if you pick up a newspaper and you read, all you read about and all that anyone wants to hear about is how hopeless and awful the situation and how broken society is. And we have massive problems. But we could look at that and say, wow, this has really put a lens up to the things we need to fix.

• 1:09:56Nick Kokonas?

  Let's get fixing. And so the kinds of places that will will do that, you know, the Franklin's Barbecue story is perfect. Like, that guy didn't, he wasn't like, he didn't grow up like barbecuing. He figured the shit out, made a brand for himself. There's no chance that Franklin's Barbecue doesn't exist in two years. And then also, the other thing that will happen is, just like when you have a forest fire and then the forest reblooms, you know that there's some 25-year-old chef out there and she's been itching to do her own restaurant, but she couldn't afford the leases and she couldn't find the backers and all of that. And a year from now, there's going to be some empty restaurant that's with a perfect kitchen that she's going to be able to get at half price.

• 1:10:42Nick Kokonas?

  And all of a sudden, she's going to kick our ass. Like, the new Alenia is going to come a year and a half from now to kick our butt. And that's a good thing. Like, that's the stuff that that we need to start focusing on, I think.

• 1:10:56Tim Ferriss?

  So if we're if we're looking at, I mean, I think the, I agree with you that I think the the hope is important to Kindle and highlight whenever possible because it is so easy. And I've certainly struggled in the last few weeks. I'm not trying to compare myself to anyone who's who's out of work, but everyone is fighting battles. We know nothing about a lot of people in my life also. Family members who are in the service industries have been laid off. And it's it's a tough time. And it is very easy to succumb, to despair, particularly if you are only ingesting news that highlights hopelessness, if that makes any sense.

• 1:11:41Tim Ferriss?

  If we look at the, if we look at the tactical, so I totally agree with you. I mean, the opportunity is just going to be incredible for that 25 year old woman or any up and comer or person who's simply been waiting in the wings, looking for opportunities. I mean, within the next year or two, there are going to be a lot of opportunities. If we're looking at tactics right now, what are some of the things that you think are not a good idea? What are bad ideas that people in the restaurant world are pursuing? And what are some of the good ideas?

• 1:12:16Nick Kokonas?

  So you mentioned the gift certificate thing. And I know that, like, week one, people love their their neighborhood restaurants. And I'm glad they do. And I do as well, by the way. I'm a frequent diner and I've got all my favorites. And so people wanted to know what they could do. And there was this whole movement about gift certificates. And someone in New York set up a site that they called Restaurant Bonds, which showed that they don't really understand what a bond is. They were just basically a Groupon. And it was not only a gift certificate, but it was a gift certificate that was at a 25% discount.

• 1:12:59Nick Kokonas?

  All the GoFundMe started Yelp did a terrible thing with GoFundMe to like create, you know, a hundred thousand automatically generated GoFundMe pages for restaurants, including my own, which I I I shot down and they killed the program.

• 1:13:15Nick Kokonas?

  You know,

• 1:13:17Nick Kokonas?

  it makes people feel good to give to support other people. And I certainly don't want to ever discourage that. A gift certificate is a liability on your balance sheet. And if you take, say, twenty five thousand dollars from people for a GoFundMe or gift certificate. First of all, in the scale of your payroll and, you know, if a restaurant has forty or fifty employees, you can just do the math on on the back of your hand, you know, like, you know, they're making, just call it fifteen dollars an hour, ten hours a day, like multiplied by fifty.

• 1:13:56Nick Kokonas?

  You're going to cover like a day of payroll with a with a gift certificate drive or a or a GoFundMe. Maybe two days, maybe three. You know, if you're hugely successful, maybe every employee gets a few hundred dollars. And of course, you could say, like, Nick, while you're being really cynical, like, that's a few hundred dollars they didn't have. But what I'm saying is that you're much better off channeling that to other organizations that can leverage it more more impactfully, you know, World Central Kitchen, for example, the work Jose Andres is doing.

• 1:14:31Nick Kokonas?

  If you want to help your local restaurant buy food from them, because if you buy the gift certificate and then you go use it in four months, they spent that money four months ago. You know, one of the big problems that a lot of restaurants had is that they were paying for food that they bought four weeks ago with next week's revenue.

• 1:14:52Nick Kokonas?

  And the gift certificate just exacerbates that problem. It just, it's like mortgaging their future. What's interesting is that when I criticize the gift certificates, a lot of restaurants didn't understand how the finances on that work. They didn't understand how that shows up in their, in their balance sheet and were very much thinking that I was trying to hurt them. I was not, I was actually trying to, trying to help.

• 1:15:20Nick Kokonas?

  So it's, again, it's very tricky how in, in the midst of a, a crisis, you, you try to, you try to be positive and educate the public and, and even your fellow business owners.

• 1:15:34Nick Kokonas?

  Similarly, there's, there's a really high end push to sue insurance companies

• 1:15:43Nick Kokonas?

  for business interruption insurance. And, you know, that's a five-year process. That's not going to save your restaurant next week.

• 1:15:51Nick Kokonas?

  And it's not going to help your employees next week. So all these things are, are thoughts that people had really, really fast. And again, I think that's why it went to the planning ahead. If you're acting as a reaction to a really bad situation, it's very easy to make bad decisions quickly. If you've considered the various possibilities that can occur and what you will do at that time, it's, it's like being an athlete that goes, okay, well, if we get to this part, this is the play we run. And you just do it. It's not a hard decision and then you, you act it out. That's, those are the folks that are, that are going to make it in every, in every business

• 1:16:36Nick Kokonas?

  through this sort of thing. And, and also that's of course the problem with our government too, right? We had some of these, these playbooks in place and we were spending money on them every year and then people said, well, why are we spending money on something that never happens, right? Maybe we should just save that money or spend it on something else or, or give people tax cuts with it. That's the sort of failure of leadership that is happening nationally, internationally, but also locally and on a small basis with many businesses. And I don't know how you change that globally, I really don't.

• 1:17:17Tim Ferriss?

  Well, I think, I think we can start with those, with people listening and how they implement things. And so I had a clarifying question, but I also want to maybe underscore one thing, which is many people listening will say, well, that's great if you had the foresight to plan and determine contingency A, B, C, and D before all of this hit. But a lot of people didn't do that. And I would just say, and I'd love to hear you add to this after I ask a clarifying question, that it's, it's not too late because there's still so much uncertainty in the next two weeks, four weeks, two months, fill in the blank. You can still ask yourself, what if this happens versus that?

• 1:18:02Tim Ferriss?

  And think about what you will do in those situations in advance, right? That's, that's still very much a possibility for a lot of people. But the quick clarifying question I had might seem superficial, but you mentioned that a lot of restaurants are paying for the food they bought four weeks ago with the revenue from the following, from, from next week, let's just say, right? So I imagine that's something like net 30 terms. Does that mean that you guys do not pay your vendors using terms like that? Or just that you have such a cash reserve, you have such a margin of safety in that, that

• 1:18:44Tim Ferriss?

  buffer that you don't have to depend on next week's income to pay for what you bought four weeks ago?

• 1:18:50Nick Kokonas?

  The answer is actually both. About five or six years ago, we realized that if we called

• 1:18:59Nick Kokonas?

  The vendors of our more expensive items, meat, fish, wine, that sort of thing. And we said, hey, we'll make you our exclusive vendor for the next three months and we'll probably spend about $220,000 during that time. What sort of discount will you give us if we prepay for that? Almost like a futures contract, right? So instead of getting net 90 or net 60, which is what every restaurant tries to get, we actually negotiated a discount by prepaying that and then, you know, sort of truing up afterwards. So for our big ticket items, we try to stay a couple of months ahead on payments in order to get more favorable terms and better products.

• 1:19:41Nick Kokonas?

  And that's something that when I, when I talk to even big restaurant groups about that, there are certainly some that do that. It's very rare. You know, you're looking at some big hotels that do that and whatnot, but not that many. And then the other part is exactly what you said, which is, you know, for the, for the vendors that just are small or they won't do that, or we just sign the standard terms. We have a capital account that we keep, which is, you know, accounts receivable, accounts payable, and our accounts payable, we're always going to be able to cover that. We're never going like, well, if business goes down 30% next week, we're not going to be able to pay for four weeks ago. Now, of course, everyone can say like, well, that's because you're a busy restaurant or

• 1:20:26Nick Kokonas?

  whatever. But when we first started, that was, you know, my dad used to run his own business. He was only high school educated and he was like, every time I tried to complicate things when I was in college and I'd talk to him about his business, he would be like, it's three shoeboxes, Nick. It's the money in, the money out, and then the third box is what paid for your college. It's the money that's left over. And he is like, so, so you hear, if you worked with me, you would hear me say that a lot. Like, I will get some very complicated models sometime. And if there isn't a three shoebox tab on that spreadsheet, like money in, money out, money left over, I don't even want to look at it.

• 1:21:08Nick Kokonas?

  And it's not that hard, you know? And if, if you can't figure out, if, if that third shoebox isn't going to have anything in it, you need to reassess what, what you're doing and, and iterate. And boy, so much of of things would be less complicated. So we always get down to the three shoebox method and we always make sure that there's something left over in that third shoebox. And if there isn't, we we change. We we change our what we're offering, what we're selling and all that. And after 15 years of doing that, the hardest part is to keep that attitude when things are going well.

• 1:21:53Nick Kokonas?

  You know, we ripped apart Alenia after a record year in 2016, raised it to the ground and rebuilt it because we had maxed out of that footprint. It wasn't going to improve at all. And right now, like you said, it's not too late. Like, I want to pick up on that. It is very much not too late. We are at the beginning of the beginning of some unknown, terrible, weird thing that's happening. Your listeners may, a year from now, listen to this and go, God, Nick was so full of shit, he's out of business. It could happen.

• 1:22:29Nick Kokonas?

  Like, you know, it's like, like, my, what I live in fear of right now is, hey, in September, when when all of the government, like, you know, look, we can't keep printing trillions of dollars. We can't bail out every single business in America permanently. I mean, it seems like we can because we just did. But if we keep doing that, you run into things like hyperinflation and, you know, at some point, we're going to probably issue a 50-year bond at 1% and the Chinese government will probably buy that bond. But at some point, the the ability of the rest of the world to to to want to consume our debt will will slow down.

• 1:23:13Nick Kokonas?

  And so consequently, all of us are going to be left to our own devices sooner rather than later, you know? So. September or so, I reopened my restaurants and we've got people wearing gloves and we're practicing social distancing and our occupancy is 50% of what it used to be and demand is down 70 or 80% and my revenue has gone and plummeted by 75%. That's what I spent yesterday modeling out and at some point you just go like, nah, it's not really worth being open, you know. So at that point, I go like, well, what would we need to do to make it worth

• 1:23:55Nick Kokonas?

  being open? What would we do to be able to save 95% of the jobs and still make money as a son of business and rebuild it over the next two or three years? And I don't have those answers yet, but we're kind of going like, well, what do we do experience wise? What will people want emotionally then? Well, they'll certainly want safety in the short term. They'll want a release of some sort. I think humor will be important then. But what is that in terms of a dining experience? I haven't the faintest idea, right? So these are the conversations we're having now and I was talking to Grant about it yesterday

• 1:24:38Nick Kokonas?

  and trying to come up with ideas for instead of looking at the distancing as a limitation or the occupancy as a limitation, what kind of weird idea can we have to make that an asset instead of a liability? So I have no idea what we're gonna do. I don't know if it'll work or not, but that's the part that's gonna be really hard. It's actually not right now. Right now, the limitations are so great that all we can do is carry out. Like, they extended the stay at home order through May in Illinois yesterday and I just went, oh, okay. Well, for the next four weeks, we kind of know what we're doing.

• 1:25:21Nick Kokonas?

  After that, it's a wide open slate and very scary, to be honest.

• 1:25:26Tim Ferriss?

  People listening who want to improve, and I want to come back to talk because we didn't really pick up, that's my fault, but pick up on the, here's a business that also entirely depends on restaurants and it's not like you're only servicing a Linea so you can make up for it, right? I mean, we're going to come back to that, but for people listening, whether they are in restaurants or otherwise, are there any particular books or resources that you have found helpful or would recommend for improving your thinking and strategic planning?

• 1:26:11Tim Ferriss?

  They don't have to touch on it directly. It could be, for instance, you like Dune, I think has a lot of great leadership lessons. It's not a book about leadership, but nonetheless, is, does anything come to mind, just for people who are saying, goddamn, I wish I studied more economics, which I did not, but you might have. I wish I studied derivatives. I wish I studied this. I wish I studied that, but I haven't. How can I hone my thinking? Do you have any suggestions?

• 1:26:38Nick Kokonas?

  They're the same ones from the last podcast we did. I think there's a list on there and it's funny, you know, Nassim Taleb on Twitter can be very pendentic and kind of a jerk sometimes, but Fooled by Randomness, not the Black Swan as much. This isn't actually a Black Swan event, I don't think. Fooled by Randomness is, over and over again, a book that I come back to and have suggested to people to read during this.

• 1:27:14Nick Kokonas?

  Or to reread because both that and skin in the game are fascinating. And what's been interesting in this is that, you know, he, he has the generalized Ruben principle, which is, is kind of funny, which is basically like all the airline CEOs have no skin in the game, right? So many of the leaders of our, of our big companies are custodians of those big companies and they get paid more if the stock price goes up. And so if they take their capital reserves, if they take that third shoebox and they spend it to get the stock price going up and they don't hold, you know, billions of

• 1:27:59Nick Kokonas?

  dollars in reserve, they only do that knowing that they're going to get bailed out if shit hits the fan, like oh eight, like oh one, like eighty-nine, like now. And so Talib is, this is stuff he's been writing about for twenty years. And I have to say that like, you know, what people don't realize is that the airlines, you know, I tweeted something like they're too few to fail, like they've, they've all merged together, there's not that many of them and we, we certainly will need air travel in the future. And so consequently, everyone's like, well, yep, gonna have to bail out the airlines. But, but you really don't, like those planes aren't going anywhere.

• 1:28:43Nick Kokonas?

  And someone will buy those assets and the airlines will still run and the employees will still have their jobs. So I, I keep coming back to a lot of his, his thinking on that. Because the people that I know that are looking for the bailouts in any industry, including hospitality, including software, both of which I'm in.

• 1:29:08Nick Kokonas?

  Are the ones who themselves generally don't own the things. They may look like they do. And they may, you may think that they've got their skin in the game, but they don't. They have licensing deals. Which is very different. The people who've built their own businesses from scratch and have bootstrapped them and whatnot. I think you'll find that a lot of those folks were like my dad, and my dad was a product of the Great Depression. My dad didn't carry a credit card his whole life. He was like, if you can't pay for it, you can't afford it. You know, and that's been beaten into me. And that, I tweeted, you know, after this all happened, like,

• 1:29:50Nick Kokonas?

  we ran talk in a very capital efficient manner while some of our competitors grew at a pace. We're growing 300% a year, which isn't shabby, right? It's VC eyebrow raising worthy, right? That said, some of our competitors grew faster by giving their product away by burning through 60, 70 million dollars and then selling the company for a couple hundred million. Those are all the companies now that are laying off 50% of their employees. And so, running a fiscally cautious and intelligent company, whether that be your restaurant, or your software company, or your airline or whatnot. You know, like, biggest example of that's Apple. How many companies does Apple buy a year?

• 1:30:34Nick Kokonas?

  How much money do they have in the bank? 100 billion plus? And there's been times where people are like, oh, Apple should buy Uber, not Uber, Tesla, or Apple should buy this, or Apple should buy that. Apple's product development cycle is slow as hell. They wait and see what works in the market, and then they just make a better version of it. And, you know, is anybody worried about Apple right now? I'm not, right? So, and yet, like, there are companies like, like, my favorite, like Yelp. What did Yelp do? Well, they laid off 50% of their workforce right away. That, Taleb goes through all of that in great detail 20 years ago,

• 1:31:15Nick Kokonas?

  and has been right on the money with a lot of his prescriptive writings.

• 1:31:21Tim Ferriss?

  What are, what are some companies that could be in his hospitality, or they certainly could be outside, that you admire a lot right now or in general?

• 1:31:32Nick Kokonas?

  Oh, that's tricky.

• 1:31:35Nick Kokonas?

  Certainly, they're out there. I think some of the remote learning, I follow a guy named Austin Allred on Twitter, who has an online programming school. And the model of that, I started following him about a year ago, and I think it's called the Lambda School. And the model of that, which is so great, is simply like, you don't pay for the school until after you get out and we get you a career. So if we do our job right, we'll take some money, you know, for, I don't even know what the deal is, five years after you graduate or whatever. And then if during that time you become unemployed again, you

• 1:32:17Nick Kokonas?

  stop paying us, right? What's fascinating now is that these universities, the great part of an elite university, and I think you and I have both been fortunate to go to two of them. A lot of what we learned, I bet, took place outside the classroom amongst our peer group. What's interesting is that I have a 21-year-old son, and he is at a wonderful liberal arts college, and he hasn't been feeling that he was getting that same experience that I got. And I honestly thought it was a failure of him, like, you know, or maybe if I was gonna be in a generous mood, I'd blame the school or something,

• 1:33:00Nick Kokonas?

  right? But I think what happened is that he associates a lot of his relationships to be online and virtual, you know? And so he stayed in touch. Like, when I went off to college, I couldn't be in touch every day with my high school friends, or I couldn't be in touch with people that I met on the other end of the world who had similar interests to me. He does. And I think if you look at what Austin's doing with the school is that...

• 1:33:28Nick Kokonas?

  He's taken the best, most important parts of the school and realized that some of the the community aspects can be done virtually. Now, I still, I'm not totally sold on that. I'm fifty-two years old, though. I bet my kid agrees with that a hundred percent. Like, I think that, I think that he just thinks, you know, he's like telling me, you know, get over it, old man. So, you know, you look at companies like Zoom, which is really hot now. We started using Zoom a year and a half ago. If you had told me five years ago that, like, that would be a company that would grow like that when, hey, you know what? Like, Skype video has existed for years. Google Hangouts is free. There's all these

• 1:34:10Nick Kokonas?

  free options, right? Why would you build a video conferencing company? Well, it's because all those video conferencing things suck. All the ones I mentioned aren't that great. They're free, but they're not, they're not differentiated. When we started TALK, we started TALK competing against OpenTable, which was completely ubiquitous. And I've had hundreds of people tell me, both in our industry and investors and whatnot, you are completely out of your mind, starting a company, competing against someone who has a monopoly. And so the companies that I like to look at are the ones that go into a very established industry and just go, hey, it's ripe to be blown up and done better, you know?

• 1:34:55Tim Ferriss?

  Yeah.

• 1:34:56Nick Kokonas?

  And so Slack is another version of that.

• 1:34:57Tim Ferriss?

  I feel like another people gave that, a lot of people gave that line to Google with respect to Yahoo.

• 1:35:04Nick Kokonas?

  Yeah, a thousand percent. And, you know, I mean, like, Google seems impenetrable now, right? Facebook seems kind of impenetrable, but yet, like, TikTok still came along, you know? Not something I use, but still, still, there's, there's always room for, for a positive change. And, you know, it's an interesting question. I, normally, I'd probably go on and on about that question, but I'm so in my own weird space these days because everything's happening. I mean, we've probably done, for TALK and the restaurant group, I bet we've done, what, two years of work in eight weeks?

• 1:35:47Nick Kokonas?

  Like normally what we accomplished in eight weeks, in two years, we did in eight weeks.

• 1:35:51Tim Ferriss?

  Well, you had to completely, I don't know if completely is the right modifier. Just a quick aside, Austin Allred, you mentioned at Austin, A U S T E N. And it is Lambda School. Lambda School is super interesting. You had to kind of redesign the business, if I'm not mistaken, or at least do a hell of a lot of coding and product upgrading because, as you mentioned, open table or kind of analog to open table, but better reservations and CRM system for restaurants. And you, how long did it take you to create the To Go platform?

• 1:36:25Nick Kokonas?

  Six days. Yeah. And, and, and, you know, it was, we have a hundred person company and we service about 3,000 hospitality clients between wineries and restaurants in 28 countries. As I mentioned, we were growing about 300% a year. And as this year started, we had come off a year where we grew by 300% almost across every metric. Revenue, we added 40 employees to get to just under 100. And we, we really were getting traction for bigger groups and more casual restaurants and whatnot. And then this happened and just at the same time where I was saying that I could see that my restaurants

• 1:37:09Nick Kokonas?

  were going to go to zero, I had this, this company with 100 employees that were making really innovative software for the hospitality industry. And it was going to go, our revenue was going to go completely to zero, you know?

• 1:37:26Nick Kokonas?

  And, you know, we have a high, high payroll because we have really highly skilled individuals. And so Canlis Restaurant in Seattle, which was a couple of weeks ahead, quote unquote, you know, of the problem, they were like trying to modify the way that we handle tables, which is unique to Toc, to make it into carryout meals.

• 1:37:52Nick Kokonas?

  And Brian called up Jeff Kaplan, who's the COO and a really great guy at Toc. And I really couldn't run the company without him. And Jeff called me and said, you know, we're gonna go to zero. And I'm like, yeah, yeah, I know. And he's like, I think we should just do this carryout thing. He's like, you're doing it for Alenia. You're already talking about it. Canlis has already started doing it.

• 1:38:19Nick Kokonas?

  And the third-party delivery apps charge 20 to 30%. Like, that's, we don't need to do that. These people aren't gonna be sending food out the back doors. This is gonna be the only option in America. So we got a group together of about 12 to 15 design engineering people. And we got on a video call and we just said, we gotta do this in a week. And everyone kind of like, you could see the discomfort because this is the kind of project that normally we would take six months to build. And we're very particular about the UX. We're very particular about testing. You're talking about payment processing, all these things. And Robin Anil, who's our head of engineering, who is just an extraordinary guy. He was a machine learning guy at Google and whatnot.

• 1:39:05Nick Kokonas?

  He got off the call and he called me on the phone and he just said, we can do this. I got it. There's a couple of people who were like, that's not really possible. And they're said, you know, we're not gonna be able to test it. Like, it would take weeks to test. And I'm like, yeah, we're not gonna test it. We're just gonna throw it out into the world. And six days later, Canlis was using it. And we had five restaurants by day seven. We're adding 50 a day now. So we went from processing over a million dollars a day in gross merchandising value for events and prepaid reservations. And then, you know, 50,000 to 60,000, 70,000 reservations that were free besides that to zero.

• 1:39:48Nick Kokonas?

  And now we're at a million two a day in four weeks. And we've completely changed the way that the restaurants can manage the inventory on the dashboard, the backend side of Toc. In a way that we're getting emails every day from restaurants saying not only is this a lifeline to to the other side of this crisis, but we are employing people. We like, there have been several restaurants, including Alenia, by the way, which has had its record revenue day during this time. And so what we were, what we managed to do and what our team managed to do is is have

• 1:40:31Nick Kokonas?

  the urgency of a startup circa 2002. Yep. And we now are working seven days a week. We we hired another person yesterday, our first hire since this all began, to be in our account management team to help onboard restaurants because we're adding, we're literally working, someone is working 24 hours a day for Tock right now, just onboarding restaurants and then teaching them how to do this. And then this is the kind of thing also that expands, Tock was always about dynamic and variable pricing for a time slotted business. Now, what that means is that your dentist should cost less on Tuesday than Saturday, right? Dentists have time slots.

• 1:41:16Nick Kokonas?

  Suddenly, furniture stores have time slots, grocery stores have time slots. There are going to be reasons to gate in a time slotted way, a whole bunch of different kinds of businesses. So now we are talking to all sorts of businesses that have nothing to do with the restaurant industry about time management for reservations. And because we built those data structures in that way five years ago, and we thought about those time slots almost as derivatives, that's now flexible enough that we can apply it to, say, a furniture store, which we just signed yesterday.

• 1:42:00Nick Kokonas?

  So again, very interesting outcome, unintended of a terrible situation. But I have to say that our team, man, I, we've never felt more productive, more connected. We haven't been in an office in six weeks. I personally don't like remote work. I like to be in an office, but.

• 1:42:27Nick Kokonas?

  We have been more productive in the last six, seven weeks than we have in the last year and a half. At an extraordinary pace, with really high quality, too.

• 1:42:35Tim Ferriss?

  That's incredible.

• 1:42:38Tim Ferriss?

  And you have a lot of skin in the game, just to bring that phrase back.

• 1:42:43Nick Kokonas?

  Yeah, you know, I would like to emphasize that I've lost 10 pounds. I'm stressed out. I'm 1,400 emails behind. You're always on the email zero thing, right? Like, I'm not managing all of this well. It's chaotic. It's not fun. I'm drinking more wine than I should in the evening. But, you know what, like, you know, it's like, a sense of purpose is what we all want. And I think it's very easy to have a sense of purpose right now.

• 1:43:15Tim Ferriss?

  Well, Nick, this has been yet another wide-ranging and fascinating conversation. I appreciate you coming back on. People can find Toc at ExploreTalk, T-O-C-K dot com. Is that right?

• 1:43:31Nick Kokonas?

  Yes, and please, please do support your local restaurants through there.

• 1:43:36Tim Ferriss?

  And they can find you on Twitter. That's probably, is that where you're most active? At Nick Kokonas on Twitter?

• 1:43:42Nick Kokonas?

  Yeah, Twitter and Instagram, and Kokonas at Instagram.

• 1:43:46Tim Ferriss?

  Excellent, and I will include links to everything we discussed in the show notes for everyone. Tim.blog/podcast, or just go to Tim.blog and search Nick, or Alenia, or Kokonas. And you can find everything that has been covered. Is there anything else that you would like to say or comment on before we wrap up, Nick?

• 1:44:07Nick Kokonas?

  Not at all. Thank you so much. You know, I'm sure that much of what I've said here is gonna be wrong, and that's fine, too. And send me some Franklin barbecue next time you have a meat fairy, a meat angel coming by, because I would love some of that right now.

• 1:44:24Tim Ferriss?

  That is my plan for lunch today, is leftovers. Can't wait. Thanks again, Nick. Always, always a great time. And to everybody listening, until next time, thanks for tuning in.

• 1:44:37Tim Ferriss?

  Hey guys, this is Tim again. Just a few more things before you take off. Number one, this is Five Bullet Friday. Do you want to get a short email from me? Would you enjoy getting a short email from me every Friday? That provides a little morsel of fun before the weekend. And Five Bullet Friday is a very short email where I share the coolest things I've found or that I've been pondering over the week. That could include favorite new albums that I've discovered. It could include gizmos and gadgets and all sorts of weird shit that I've somehow dug up in the world of the esoteric as I do. It could include favorite articles that I've read and that I've shared with my close friends, for instance. And it's very short.

• 1:45:19Tim Ferriss?

  It's just a little tiny bite of goodness before you head off for the weekend. So if you want to receive that, check it out. Just go to fourhourworkweek.com. That's fourhourworkweek.com all spelled out and just drop in your email and you will get the very next one. And if you sign up, I hope you enjoy it. This podcast episode is brought to you by Helix Sleep. Sleep is super important to me. In the last few years, I've come to conclude it is the end all be all that all good things, good mood, good performance, good everything seem to stem from good sleep. So I've tried a lot to optimize it. I've tried pills and potions, all sorts of different mattresses, you name it.

• 1:46:00Tim Ferriss?

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• 1:47:28Tim Ferriss?

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