How to find your arbitrage (from the guy who’s done it 3x) ft. Nick Kokonas

Database on how long it takes to become a millionaire: https://clickhubspot.com/tyvc Episode 876: Shaan Puri ( https://x.com/ShaanVP ) sits down with Nick Kokonas ( https://x.com/nickkokonas ) to talk about finding arbitrages and how to win an many different games. — Show Notes: (0:00) Intro (9:45) How I Became a Trader With $60K (18:15) Surviving Day 1 of Anything (20:35) The Comfort Trap (23:50) Finding Your Arb (32:00) No Boats. No Women. No Drugs. (34:55) Showing Up (43:15) Everything Is an Arbitrage (47:55) Greatness (55:55) Working Backwards (1:03:40) The Magic of Alinea (1:10:35) Controlling Attention (1:19:10) Remixing Old Mechanics — Links: • Alinea – https://www.alinearestaurant.com/ • Tock – https://www.exploretock.com/ — Check Out Sam's Stuff: • Hampton (joinhampton.com): My community for founders. Average member does $25m/year. Many of the guests are members. Get after it...apply: http://joinhampton.com/mfm — Check Out Shaan's Stuff: • Shaan's weekly email - https://www.shaanpuri.com • Visit https://www.somewhere.com/mfm to hire worldwide talent like Shaan and get $500 off for being an MFM listener. Hire developers, assistants, marketing pros, sales teams and more for 80% less than US equivalents. • Mercury - Shaan uses Mercury across all of his companies. you can too: http://mercury.com/ Mercury is a fintech company, not an FDIC-insured bank. Banking services provided by Choice Financial Group, Column, N. A., Members FDIC • I run all my newsletters on Beehiiv and you should too + we're giving away $10k to our favorite newsletter, check it out: beehiiv.com/mfm-challenge My First Million is a HubSpot Original Podcast // Brought to you by HubSpot Media // Production by Arie Desormeaux // Editing by Ezra Bakker Trupiano /

• 0:00Speaker 00

  If you wake up every day feeling great, you're not taking enough risk. If you wake up every day throwing up, you're taking too much risk. You need to feel a tingle of uncomfortableness.

• 0:08Speaker 01

  I started with 60 grand. I can't express to you how undercapitalized that is on the trading floor.

• 0:12Speaker 00

  Essentially, you were looking for arbitrages. You're looking for some sort of mispricing.

• 0:16Speaker 01

  I am now convinced that every arb is just about timescale.

• 0:18Speaker 00

  How much money were you making doing this?

• 0:20Speaker 01

  Well, I drove to my dad's house and I showed it to him. And he was kind of like, oh shit. He's like, is what you're doing legal? I genuinely believe that geofence, meaning localized, dynamic and variable pricing for time-slotted businesses is something that someone's gonna make hundreds of billions of dollars with.

• 0:36Speaker 00

  How does a guy who goes from trading and no restaurant experience create the best restaurant in America?

• 0:41Speaker 01

  Knowing what great is, is making mostly shit 99% of the time.

• 0:44Speaker 00

  Is it that you're actually seeking the anxiety and fear?

• 0:47Speaker 01

  It's exciting to be uncomfortable in the sense of...

• 1:02Speaker 00

  All right, today we're hanging out with my friend Nick Kokonas. He is one of the most interesting founders you have never heard of. He's the guy who started off trading options and then went and started one of the best restaurants in the world, then started a software company and sold it for hundreds of millions of dollars. So an entrepreneur who's played many different games that really he had no business playing and somehow found a way to win. So I came here to hang out and find out how he does it. I'm gonna read you a quote. "I'm motivated by fear, fear of not living up to the possibilities. If you wake up every day feeling great, you're not taking enough risk. If you wake up every day throwing up, you're taking too much risk. You need to feel a tingle of uncomfortableness."

• 1:38Speaker 01

  Yeah, or nausea was the actual quote, yeah. That was, I have to give credit where credit's due. Keith Goggan, good friend of mine, former business partner. We were traders back in the 90s, early aughts. And we had this ridiculous short position on Plug Power. Still a company, weirdly, but he told me that. Like, he said that to me, cuz I was like really on the verge of throwing up every morning. And he was like, "Perfect, that's right where we need to be. That's right where we need to be."

• 2:10Speaker 00

  He's like, "You haven't thrown up yet, correct?"

• 2:12Speaker 01

  Correct.

• 2:12Speaker 00

  All right, then we got a position.

• 2:13Speaker 01

  We're good, yeah. And so I do think that I internalized that at the time because then when I got comfortable, I was like, "Oh, we're not taking enough risk now. We're not learning. We're not pushing the edge of what the possibilities are." And the phrase in my own household, from my wife, also someone who pushes me, is AT&A. You know what AT&A is?

• 2:38Speaker 00

  So you, I was at your house.

• 2:39Speaker 01

  Oh, you know, I said that, I told you.

• 2:41Speaker 00

  You said it, but you said it in a hilarious way. You're like, you said it like a cop. It's like, we issued an AT&A this morning.

• 2:46Speaker 01

  Yeah, yeah, right, right.

• 2:47Speaker 00

  We have an AT&A.

• 2:48Speaker 01

  Yeah, so I mean...

• 2:49Speaker 00

  Explain, what is it?

• 2:50Speaker 01

  AT&A means all talk, no action. So you...

• 2:53Speaker 00

  But you'll do it to your kids.

• 2:54Speaker 01

  Well, we'll do it to everyone, each other, yeah, right. And, you know, with this place where we're sitting right now, for 30 years, this was a, like a North Star kind of thing. We came here every year since probably like 95 or 96, when we were very young. And we kept finding our way back here, like a couple of times a year. Why not? Like, it's beautiful. It's like a blue zone. It feels amazing. The weather's great, you know, all that.

• 3:23Speaker 00

  And you had the dream, you were like, one day...

• 3:24Speaker 01

  We had the dream. We had just the dream. And the dream is useful.

• 3:27Speaker 00

  The dream without the credit score.

• 3:28Speaker 01

  Yes, yeah, but that's useful, that's really useful. You know, you do have to have goals. And in many ways, this was an unrealistic goal, I think. And then we were here three years ago and rented a house and we had friends. And this place was for sale and I kept looking at it. And I always say I kept looking at it. I mean, I like looked at the video of this. They had like people in the pond, you know, the real estate like guy like pretending like he lived here with a canoe. And, and I watched that video a thousand times, right? And at some point, my wife just looked at me and go like, "Are you gonna pull the trigger or are you just gonna be AT&A on this one?"

• 4:02Speaker 00

  Hmm, like that it's like a slur.

• 4:04Speaker 01

  It is a slur.

• 4:04Speaker 00

  It's like derogatory.

• 4:05Speaker 01

  It is very much a slur. And, and I put in a super low-ball bid and they called me 15 minutes later, didn't even counter, and they, they hit the bid. Which also gives you concern. So because, you know, it's kind of like the Persian rug sale, like where they price the rug super high and then you go low and then they go like, "Okay, here you go. Here's, have more tea and we're good." And you've bid like three times too high, even though you got 70% off, kind of thing.

• 4:31Speaker 00

  You had buyer's remorse.

• 4:32Speaker 01

  Well, I don't know that I had buyer's remorse. I had fear because I didn't know how any of this worked. I know nothing of agriculture. I know very little of viticulture. I certainly didn't know how irrigation works, you know? I don't know pond management. Like, these are all things that we've learned in the last couple of years. But between the acceptance of that offer and the closing on this, I lost sleep. Because this is a real commitment. I was 55 at the time. And it was like, okay, is that, that's your next three decades.

• 5:07Speaker 00

  Right.

• 5:07Speaker 01

  You can't half-ass this. And, I mean, there's a lot of people who do, actually. I shouldn't say that. You can half-ass it. It just feels wrong. Like, it just feels like some people just buy a place like this and...

• 5:19Speaker 00

  So I wanna say two ideas and you tell me if these apply to you or what you think about these. The two brothers, actually, who told me this. So the first brother is the guy who started native deodorant, Moiz Ali. And when he decided he was gonna go start a deodorant company, his friend was like, "Moiz."

• 5:34Speaker 01

  Weird, yeah.

• 5:35Speaker 00

  No offense, but like...

• 5:36Speaker 01

  Yeah, yeah, right.

• 5:37Speaker 00

  When I think deodorant, you're not the guy that comes to mind. Like, do you know anything about the deodorant industry?

• 5:41Speaker 01

  Yeah, yeah.

• 5:41Speaker 00

  And he goes, "I know nothing about the deodorant industry, but I'll tell you what. In six months, I'll know everything there is to know about the deodorant industry."

• 5:48Speaker 01

  Yes.

• 5:49Speaker 00

  And he just had this sort of like, you know, A, self-belief, but also a bit of a practical approach to, "If I just obsess over anything for six to 18 months, I can get to the top of any, of almost every field..."

• 6:02Speaker 01

  Yeah.

• 6:02Speaker 00

  "...of knowledge just through sheer brute force." So that was one brother. And the other brother has this phrase where, you know, he's been very successful. I said, "Well, why are you doing this new thing?" And he said, "You know, I think a lot of life is find, it's like a Jerry Seinfeld quote, like finding the torture that you're comfortable with."

• 6:20Speaker 01

  Yeah, yeah.

• 6:21Speaker 00

  So, you know, being in the prison of my own making.

• 6:24Speaker 01

  Yeah.

• 6:24Speaker 00

  And he's just, he's like, "Every decade or so, I set up a new prison of my own choosing." And it's painful and weird and uncomfortable in lots of ways, but that's the only way I know how to live. Is that...

• 6:35Speaker 01

  I relate to that. I mean, we're done. Shut off the cameras, right? Like, like that is absolutely the case. Every 10 years, I've done an entirely new career.

• 6:44Speaker 00

  And we should say what some of them are. So you had a finance career, you were a trader.

• 6:48Speaker 01

  I was a trader.

• 6:49Speaker 00

  On a trading floor.

• 6:50Speaker 01

  On a trading floor.

• 6:51Speaker 00

  Do the, do the trading floor yell. Last time I was here, you were like, "28, 32, 50 up."

• 6:58Speaker 01

  You learn how to do that. You know, like, we had like a vocal coach come in.

• 7:02Speaker 00

  Really?

• 7:03Speaker 01

  And teach people how to do that without... Yeah, literally, like, we're right next door to Lyric Opera in Chicago.

• 7:09Speaker 00

  Cuz now it's not like that. Now you just...

• 7:11Speaker 01

  No.

• 7:12Speaker 00

  But you actually needed to communicate to a guy on your side.

• 7:14Speaker 01

  Oh, yeah, like, you know, from here 20 yards away and, you know, like the old, "This is bid, that's sell, this is price, this is quantity, this is tens, this is singles."

• 7:26Speaker 00

  Catcher in the daisies.

• 7:28Speaker 01

  Yeah, yeah, yeah, yeah. But like, to me, that was, like, I knew nothing about that. I was a philosophy major in college. I knew what I didn't wanna do. And I didn't wanna sit behind a desk. And I didn't wanna limit my upside earnings potential. I thought that like having a salary was the wrong kind of prison. Like, that was a prison of like predictability.

• 7:50Speaker 00

  Right.

• 7:51Speaker 01

  My dad's dad died when he was like 14 or 15. And my dad was what he called an entrepreneur by necessity. He got out of the Army and the Navy, drafted twice. And worked at the grocery store that he grew up working at from the time he was 12. And he bought that store when he was 28 or 29.

• 8:08Speaker 00

  Wow.

• 8:09Speaker 01

  And, you know, he was like, "Yeah, no one would hire me." But he didn't want me to go through that struggle. So he wanted me to go to law school or something like that. But I was looking at someone modeling behavior where he could come to my baseball games. He could come to my basketball games. Like, he was one of the only dads there. If it was at a two o'clock game, he could leave work.

• 8:28Speaker 00

  Right.

• 8:28Speaker 01

  And...

• 8:29Speaker 00

  His prison let him out there.

• 8:31Speaker 01

  Yeah, I mean, well, you know, look, if you own your situation, you have no one to blame. There's no boss man that's gonna, you know, say, "No, you don't get a bonus this year. We've had a bad year," or whatever. And so I just wanted to own my own situation is the best way to phrase it. I didn't know how to articulate that at the time. I just knew that when I went in for interviews at Goldman Sachs or SocGen or any of these firms, you could get a contract and you kind of knew not what your work would be because you kind of didn't even know what that really entailed.

• 9:01Speaker 00

  Right.

• 9:02Speaker 01

  But you had, you kind of knew what you were gonna make for the next five years. It was good. Like, it was a lot of money in one sense. In another sense, it was like really boring because you knew exactly what you were gonna...

• 9:12Speaker 00

  Right.

• 9:13Speaker 01

  ...do. And to me, that felt limiting and scary in the other way. But at the time, I was just, I floundered about for years. Because I was, I knew what I didn't want to do, but I had no idea what I wanted to do.

• 9:30Speaker 00

  Right, which seems common. I mean, I think that's the most common state.

• 9:33Speaker 01

  Of course.

• 9:34Speaker 00

  But when you're in that state, you don't think, well, this is common and normal. You feel like you're the idiot who doesn't know what to do and you feel uncertain. And everybody else around you seems like they know a little bit more about what they want to do than you.

• 9:45Speaker 01

  I just kinda had a little bit of a chip on my shoulder, but hadn't earned any reason to have that.

• 9:50Speaker 00

  Right.

• 9:51Speaker 01

  Which is the worst. Like that's the hubris of being like 23 years old and you know, testosterone fueled male with nowhere to put it, right? And so if you grew up in Chicago, you, you know, people who were traders. That was a thing, you know, New York was investment bankers. Chicago was traders. Those are not the same. Like you said, finance career. I do not consider it a finance career. It's, it's a trading career, which is very different, especially back then.

• 10:17Speaker 00

  Explain, what's the difference?

• 10:18Speaker 02

  Um. I think the best way to become successful is to see how other people did it, whether you're going to copy them or just use it as inspiration, because then now you know what's possible. So, starting at the age of 24, I did this relentlessly and I was very methodical about it. And I created a spreadsheet where I tracked roughly 50 people who were uber successful. And I looked at the year that they were born, the year that they started their apprenticeship. And then the year that they started the first thing that made them successful, finally, the year that they broke through. And I aggregated all this data, along with the stories of what they did to be an apprentice and what they did to finally break through. And I put it together in a database. And HubSpot went and found this thing that I frankly even forgot about, but it did change my life.

• 10:59Speaker 02

  And they resurfaced it. They made it even better and they put it into a thing that you can download for free right now. So if you click the link in the description or click the QR code right here, you can see this database that I made when I was 24 and it changed my life. And so if you're looking to become successful or you're already successful and just want some more inspiration, check it out.

• 11:17Speaker 01

  In finance, like you were working for investment banks and obviously like they, they had trading desks, but they also, you know, do, you know, deals on companies and, and, and.

• 11:28Speaker 00

  IPOs.

• 11:29Speaker 01

  IPOs and all this sorts of, you know, stuff. And as a trader, you're basically, especially as an independent trader, you basically have like a core nest egg, you know, of whatever, a couple hundred thousand dollars in those days. I started with 60, which is.

• 11:46Speaker 00

  Sixty grand.

• 11:47Speaker 01

  Sixty grand, like, you know, 40 from, 20 from me, 40 from a backer. I can't express to you how undercapitalized that is on the trading floor. And, you know, like you would make trades all day long, just like, you know, now there's day traders. But then you would lease a seat and you'd be on a trading floor. You'd get one of those colorful coats and it was all written down and you'd make a trade. And you'd trade futures, options on commodities, currencies, you know, yield curve, whatever it may be, cattle.

• 12:15Speaker 00

  And just to set the table, so you have this trading career. You then start what became the best restaurant in America. At one point, some people called it the best restaurant in the world. You created a software company that you sold. You've done on and on and on, right? And then each one of those, all these interesting little sub-stories that we're going to go to. So if we're looking at the trading side, my understanding is you basically applied to a job that you were overqualified for.

• 12:40Speaker 01

  In, yeah, that's right. I mean.

• 12:42Speaker 00

  So explain that.

• 12:42Speaker 01

  I wanted to get on the trading floor. And if you had my academic career and you went to the, like a clearing house to get a job as a runner for $5.25 an hour, they would go like, go work for Socran, go work for Goldman, go work for Merrill. Like they'll hire you. And so I did that. And then I looked at like the contracts and they, you know, I wanted to be a floor trader. And they'd be like, no, no, no, you're going to be on a, a bond desk somewhere selling bonds. I was like, no, no, no, it's not what I want to do. So in order to get that first job as a runner, which is exactly as described. You would take a piece of paper, someone would call, you'd call, you know, your broker, the broker would call the floor.

• 13:25Speaker 01

  The floor would hand the order to the runner. The runner would physically.

• 13:30Speaker 00

  Run it.

• 13:30Speaker 01

  Walk it fast. You weren't technically allowed to run, but you'd have to walk fast. And you would hold it up in the air for a broker who would grab it, read it, call it out to the pit, trade it, write it, hand it back to you, you'd go back. I mean, there's room for arbitrage. It was like a 30 second process, 40 second process. So I had to fake my resume in the wrong direction in order to get the runner job.

• 13:54Speaker 00

  So what'd you do?

• 13:54Speaker 01

  I eliminated all college, you know, like, you know, and, and, you know, they hired me for $5.25 an hour.

• 14:02Speaker 00

  And did you have the mentality at that point, like, okay, I'm going to take this job that's like, you know, sort of like, I'm overeducated for, overqualified for. I must take this runner job, but I have my eye on the prize. Like I'm going to be here in a certain amount of time. Like, did you have?

• 14:15Speaker 01

  I had a goal. My goal was I want to be trading in a year. So I need access to the arena. And this, this is like, you know, something Bill Gurley says, like, you know, like, move to the place where the shit's happening, right? So in this case, the arena was literally like an arena, like, you know, it was like, it was an octagon, like 30 octagons. This is in the trading floor, Chicago Mercantile Exchange, but they all work the same, you know? I needed access to the arena and you get down there and it's very opaque. Like you can't figure out how, it doesn't matter if you're smart, you know, or dumb or what, you just don't know how it works. And then after like running for a little bit, they were like, oh, you seem sharp. Like we'll put you on the phones. And then I became a phone clerk.

• 14:56Speaker 00

  Right.

• 14:56Speaker 01

  So now I'm the guy writing on the ticket. It is absolutely soulless, banal work, right? Like there's no, nothing to it. And so what I started doing is taking open outcry classes from a guy at, at, after the close, just learning the hand signals and this and that, which might get you to a pit clerk position next.

• 15:17Speaker 00

  Right.

• 15:18Speaker 01

  You know, you might get $8 an hour at that point. But I was starting to meet people that were independent traders. And I was very much like, I want to find someone who can teach me how to do this. And for like six months, I didn't find anybody, you know? Or I found some people, but I was like, ah, that's not the guy. I need someone that can exploit the things I'm good at. Like I was a philosophy major in college. I studied philosophy of language and logic. I grew up programming, you know, and I was watching this system that I felt was going to become digital. Really in an analog world at the time.

• 16:00Speaker 01

  And I was looking for a guy that would take me to what I call now the smallest, highest hoops.

• 16:07Speaker 00

  The smallest, highest hoops?

• 16:08Speaker 01

  Yeah, yeah. Like, so, you know, like if you've got a big hoop on the ground, it's easy to jump in.

• 16:13Speaker 00

  Okay.

• 16:13Speaker 01

  If there's something 30 feet in the air and it's tiny, you know, and you gotta figure out how to get up there, not a lot of people are going to follow you up there. So that.

• 16:20Speaker 00

  You want what? High, a good prize and less competition, basically?

• 16:23Speaker 01

  Yeah. And also difficult to understand. Like I felt like I was capable of understanding options and swaps and exotic options.

• 16:31Speaker 00

  Right.

• 16:32Speaker 01

  And as I was reading, but like, there is not a good option. There are like one or two, but there, all the options books that you get are academic books on like, this is the right, but not the obligation to buy by a certain time. And like, yes, you have to understand all that, but that doesn't get you anywhere in terms of actually, why do I buy this one or sell that one?

• 16:50Speaker 00

  That doesn't get you to making money.

• 16:51Speaker 01

  Or yeah, or how do they all interrelate and all that? So I read all those books and I felt no closer to understanding any of it. And I finally met a guy who was super geeky. And he had like a little HP calculators.

• 17:05Speaker 00

  Right.

• 17:05Speaker 01

  That had macros in it, like super cool, you know, 48K in it kind of thing. And he had just hired a clerk. And I was like, no, no, no, no, no. You're the guy I need, like, you are the guy. Like he went to the University of Chicago. He studied, you know, quantitative finance. And he had worked for Chicago Research and Trading and they didn't want to put him on the floor. They thought he was a quant. They thought he was too geeky. So he quit. And he, you know, put himself up on the floor, trading very small and very, you know? And as soon as I met him, I'm like, you're my guy. And he's like, oh, I just hired someone. And I was like, no, no, no. Like you're the only, like you're the only guy here that understands what I'm trying to get at and can teach it to me. And I literally said, I'll pay you to work for you. And that got his attention.

• 17:50Speaker 01

  Like, because he was like, that's weird. Why? And I explained it and he was like, okay, I'll pay you like 250 bucks a week. Like totally illegal, I'm sure, you know, by today's standards, right? And that was awesome. Like six months later, like I had a rudimentary understanding on how to make markets and options. And I put up $20,000, he put up 40,000 and I started trading Swiss franc options. It was almost a year to the day, which is a theme that we'll come back to. You asked at the beginning of the question, did you set a goal? And the answer was, within a year, I need to be on a badge in trading. And it was, I was a week late, but I was in process. So I knew I counted it, you know? But like, it was terrifying. There's nothing harder. I mean, I taught 30, 40 people how to do that after the fact.

• 18:34Speaker 01

  And the rule was on your first day in the pits, you had to make one trade. I cannot express to you how useful that is, because you have to go into a very zero sum, hostile, competitive environment, which was physical, loud, chaotic. And you have to open your mouth in front of all those people and risk looking like an idiot.

• 18:54Speaker 00

  Yeah. What is it about that day one? So I think Facebook had this too. Day one, any engineer, you will ship code to production. They did this for a long time.

• 19:02Speaker 01

  I didn't know that, but that's wonderful.

• 19:03Speaker 00

  Blasphemy back then.

• 19:05Speaker 01

  Yeah.

• 19:05Speaker 00

  My very first job was at a, very first business idea I had was a sushi restaurant. I went out to LA to train with the chef. And sushi is famous for this thing where you like spend years just mopping.

• 19:16Speaker 01

  Rice.

• 19:16Speaker 00

  And then, rice.

• 19:18Speaker 01

  Yeah, you're not going to get to the rice.

• 19:19Speaker 00

  Eight years. That would be incredible if you got rice. And so you would do all this menial work before you were allowed.

• 19:24Speaker 01

  Yes.

• 19:24Speaker 00

  The chef that I was going to work under, he's like, we're going to open this restaurant up. Can't do that. So the very first day, Daryl from the office walked in, came in as a customer, sat down at the bar. And he goes, you're up. I just watched him do like, you know, for an hour, I'd been watching him like try to pay attention. You know, I don't know if you know how to make sushi. You dip your hands in water first.

• 19:45Speaker 01

  Oh, yeah, yeah.

• 19:46Speaker 00

  Flap.

• 19:46Speaker 01

  It's hard.

• 19:47Speaker 00

  Then you do the seaweed, the rice, et cetera.

• 19:49Speaker 01

  Yeah.

• 19:49Speaker 00

  Uh, so I didn't understand at that time, the clap.

• 19:53Speaker 01

  So. Hands soaking.

• 19:55Speaker 00

  I thought it's just like a celebratory thing. Why are they clapping? They're just, I don't know. It's just a ritual. But it's to get all the water off. To leave only the perfect amount of moisture. Too little water. Rice is stuck to you.

• 20:05Speaker 01

  Yeah.

• 20:05Speaker 00

  Too much water, soggy, soggy sushi.

• 20:08Speaker 01

  Yeah.

• 20:08Speaker 00

  I didn't clap. I gave Daryl from the office some soggy sushi, but it was actually very beneficial to just absolutely [__] up.

• 20:15Speaker 01

  Yeah, you have to.

• 20:16Speaker 00

  Right away.

• 20:16Speaker 01

  You have to just, you know.

• 20:18Speaker 00

  Break the seal.

• 20:18Speaker 01

  Break the seal. And, you know, there was a guy who ended up becoming a very good trader, very good friend. And he went like three weeks.

• 20:28Speaker 00

  Performance anxiety.

• 20:29Speaker 01

  Yeah. I mean, Frank, if you're out there, like, you know, I remember. And every day, like he'd come back and I would just be like, dude, you know, you're a capable human. Just

• 20:39Speaker 00

  Right.

• 20:39Speaker 01

  Do it. And he would freeze. He'd lock up, you know? And everything else, every 10 years, I kind of did something different because it didn't produce that same anxiety.

• 20:50Speaker 00

  Is it that you're actually seeking the anxiety and fear? Or are you seeking something else?

• 20:54Speaker 01

  No.

• 20:54Speaker 00

  Anxiety fear is like the signal to you.

• 20:55Speaker 01

  Correct.

• 20:55Speaker 00

  I found it.

• 20:56Speaker 01

  Yeah, the latter.

• 20:57Speaker 00

  What is, what is it? What are you looking for?

• 20:58Speaker 01

  Um, we're here for whatever, decades, if we're lucky. And in order to keep learning and keep young and wake up, like you guys were coming today. They showed up at what? 6:30, 6:15, something like that. I get excited by that. It's exciting to be uncomfortable in the sense of, hey, we're doing something today. We're making this little thing here and who knows what that'll lead to and all of that. And if you just put yourself out to pasture, essentially, once you get good at something, it's very, very easy to fall into, well, I'm making good money and I know what I'm doing. I'm kind of an expert in it now. And expertise is such a trap.

• 21:39Speaker 00

  Hmm.

• 21:40Speaker 01

  Right? It's such a trap. And you know that a non-expert is going to come after you. Like, once you get to expert level, you're screwed. Because somebody who's younger, hungrier.

• 21:51Speaker 00

  Fresher eyes.

• 21:52Speaker 01

  More willing to break convention, to find the new way through, is going to kick your ass. So before your ass gets kicked, you should quit. Yeah, it's really hard to do. And then go find something new. And it's really hard. The older you get, the slower you get at doing that, the less incentive you have to do it.

• 22:12Speaker 00

  Right.

• 22:13Speaker 01

  Right? Like, there's very little incentive financially and otherwise, if you've had some success, to break it. To quit, to go do something new and lose money for a while, you know?

• 22:25Speaker 00

  What's the quote? You know, most men die at 25, they're buried at 75 or?

• 22:28Speaker 01

  Yeah.

• 22:28Speaker 00

  You know, I think Naval says as well, like the great, the great ones, the truly great ones. They're great because, not because they've reached the top of a mountain, it's because they are willing to go back to the bottom of the mountain and start again and find a new path. Nobody does that.

• 22:41Speaker 01

  One of the things my dad had on his desk was a little Sisyphus. I've got that, like, you know, always on my desk. I've had it on my desk forever. And, and for me, like, the Sisyphus thing is like, shit, we gotta wake up and, you know, I'm building a wine bar here. Like, I got out of the restaurant, but we'll get back to that, I'm sure. But I got out of the restaurant business. I was here for, you know, half the time for two years. And then all of a sudden, I'm walking by, I'm like, oh shit, I gotta rent that place. Build a new restaurant, you know?

• 23:06Speaker 00

  Bring out the boulder.

• 23:07Speaker 01

  Yeah, right, right, right.

• 23:08Speaker 00

  Found a new hill.

• 23:09Speaker 01

  Yeah, yeah, yeah. And, and I was very much like, you know, do I want to do this? And everything in me said, no, I, I don't want to do it. So that's why I should probably do it.

• 23:22Speaker 00

  Well, you're, you're a philosophy guy. You might know this. The story of Sisyphus is about like, it's a, it's the ultimate punishment, right? He's gonna push the boulder up the hill.

• 23:29Speaker 01

  Yeah.

• 23:30Speaker 00

  And then somebody, I forgot who, but they were like, we must imagine Sisyphus happy.

• 23:34Speaker 01

  Yes.

• 23:34Speaker 00

  Meaning that the, the work is the win. That, and so he had this sort of alternate take on the, the idea that this is like the cruelest punishment. And instead, it's like, no, he's in his element. He's doing exactly what he wants to do and must be doing. And where man is kind of at its best is, is when the work is the win.

• 23:53Speaker 01

  The work is the win.

• 23:54Speaker 00

  Yeah. Hey, let's take a quick break. You know that feeling when strategy is done, the brief is written, everyone's aligned, and you realize someone still has to sit down and actually create all the content? That someone is usually you, and it's due tomorrow. Well, the Breeze assistant from HubSpot can help. It works right inside HubSpot. You can draft a campaign copy, blog posts, emails, all in your brand voice, all using your actual customer data. So you don't create just content, you create content that converts. Check out hubspot.com, the agentic customer platform for growing businesses.

• 24:22Speaker 00

  So you talked about trading, how you started as a trader and you were, my understanding is that you're, essentially you were looking for arbitrages. You were looking for some sort of glitch in the system. You're looking for some sort of mispricing where you can come in and take advantage. And I think trading is a very pure way to do that. But even in your other businesses, I feel like in some ways you found an arb. Can we talk about arb? So like,

• 24:46Speaker 01

  Yeah, absolutely.

• 24:46Speaker 00

  What excites you about an arb? And then explain to me some arb stories.

• 24:49Speaker 01

  Okay, so, so here's, so I've said no to every podcast for like three years until I got to this one idea, right? And I said yes to this because I, because of you. And also because I am now convinced that every arb is just about time scale. Like, this is not something that I've come up with or whatever, but like, it's, it's evident, especially with AI coming in now and, and everything. Everything is time scaled. So at the time, we started talking that like, that piece of paper took like 30 seconds to go back and forth.

• 25:17Speaker 00

  Right.

• 25:18Speaker 01

  And I was a good trader, not a genius trader. I was certainly capable. And I was quasi decent at bringing what I called corporate refugees. So I'd meet someone like at a dinner party who was certainly bright, capable, outgoing, could probably do mental math quickly. And then I'd see that they're miserable being an attorney.

• 25:39Speaker 00

  Right.

• 25:39Speaker 01

  And I'd be like, I got a thing for you.

• 25:42Speaker 00

  Come with me.

• 25:42Speaker 01

  I'll, I'll, I'll pay you $7 an hour. And in eight months, you can, you can trade. And I did that dozens of times. That scaled kind of linearly. And made, I went from making, you know, $5 an hour to thousands of dollars an hour in five or six years. But I was looking around and there were companies making $10 million a day down there. More, you know, crazy money. And I was like, what we really need to do is figure out a way to bypass that piece of paper going. So if you're in New York, trading what was then nascent ETFs, triple Qs, spiders, all that.

• 26:27Speaker 01

  Those are just a basket of the NASDAQ 100 stocks. We know what those are. And we know their ratios. So if you have a thousand triple Qs, you can figure out exactly how many shares all that is. The natural hedge for that is the futures in Chicago, NASDAQ futures. And then it all comes down to, in the triangle, a cash position. You don't really need to understand it.

• 26:46Speaker 00

  Okay.

• 26:47Speaker 01

  In detail beyond that. But what I wanted to do is, you know, the guys trading the triple Qs in New York would have to pick up a phone or be on the phone constantly with someone who would give someone a piece of paper. And if I could just talk directly to New York from inside the pit, I've got a 20 second time window on Goldman Sachs. They can't beat me.

• 27:10Speaker 00

  Well, what does 20 seconds actually mean? And what does that worth? What does it allow you to do? How does that?

• 27:14Speaker 01

  Well, so a trade would take place in the triple Qs. And then the way, you know, if you just bought a million dollars notional in triple Qs, you would sell eight futures roughly in Chicago against it.

• 27:26Speaker 00

  Okay.

• 27:26Speaker 01

  And you'd lock in a little profit there. And you'd be left with a long position in New York and a short position there, but it's all one company. And now, that 30 seconds, if I make that trade there, and I can talk to the guy who's actually in the pit, bypassing that, I, I know the pricing information instantly. And with, like, the first day, it took me like a year to get this all done. So here's, here's another thing.

• 27:55Speaker 00

  Okay.

• 27:56Speaker 01

  Read the rules.

• 27:57Speaker 00

  Okay.

• 27:57Speaker 01

  It sounds like.

• 27:58Speaker 00

  Most people don't read the rules.

• 27:59Speaker 01

  It sounds like a dumb thing, but read the rules. There are laws. And the CFTC had regulations that were like this thick. And all of the people on the board at the Merck and the Amex and all these institutions probably never read them. They had lawyers.

• 28:14Speaker 00

  Right.

• 28:14Speaker 01

  And lawyers probably never read them. They went on case law, they went on practice, they went on what they're used to. And I went, well, if we're on the same tax ID in New York and Chicago, same firm, why can't I talk to somebody there? Like, I don't see the rule. Like, I've read the whole damn thing. I mean, I really did. It's really long. And this is not when you can just throw it in a computer and be like, find the thing, you know? And I'm like, man, I can't find this. And so I was like, great, I need to put up a, a partial T1 line for a dedicated phone line between New York and Chicago.

• 28:52Speaker 01

  And the Merck wouldn't run, you know, underneath this, these pits was like cabling back then. It wasn't wifi. And I needed AT&T to run fiber. And I put in permitting and they wouldn't let me do it. Because they kind of got that this would be bad for the broker groups. And who owned, who owned the Merck? The broker groups. So I bribed the union guys who did the work with cases of Jameson.

• 29:21Speaker 01

  For real. I can say that now. I'm not gonna get in trouble anymore.

• 29:24Speaker 00

  Do you remember the day you kinda had that idea?

• 29:26Speaker 01

  Well, I remember the day when we turned it on the first time. And it was basically like saying like, let's say, you know, there's apples here and there's apples on the other side of that pond. And that guy, there's someone who rolls up over there and is willing to pay $5 an apple. And this guy over here is willing to sell me apples for $3. And there's a guy about to run to the pond going like, do that trade over there. But meanwhile, we can, we can talk. We got, you know, the string and the, and the tin can. So we made a trade. I went, oh my God. And we made, I don't know, a couple hundred thousand dollars, like instantly.

• 30:00Speaker 00

  And you're taking, no risk at this?

• 30:02Speaker 01

  Zero risk. Yeah, yeah. And I immediately-

• 30:05Speaker 00

  Is that feeling just orgasmic when you find-

• 30:07Speaker 01

  No, it was terrifying. It was terrifying. And the reason it was terrifying was because it was so good that the powers that be would kill you. And I don't mean that as-

• 30:17Speaker 00

  It's not figurative.

• 30:18Speaker 01

  I don't mean that as figurative. Like, yeah, it really was. It really was at that time. I also knew that if we picked the pockets of the big investment banks and we made $2 million that day, that'd be the last $2 million we ever made. So in one sense, I was going like, oh, yeah, it is as I thought it was, you know, it's, there's this gap here.

• 30:40Speaker 00

  Right.

• 30:40Speaker 01

  But then I went, shut it down. And everyone was like, shut it down?

• 30:47Speaker 01

  We, you know, we've been working on this for seven months. What do you mean shut it down? I go, we can't be so blatant. We're much better off picking their pocket a little bit for years-

• 30:58Speaker 00

  Right.

• 30:58Speaker 01

  than we are just destroying them on day one, right? So I went back and reapplied for, hey, here's all the evidence that we're the natural hedge in Chicago and these are growing really fast, this product class, this ETF new innovation. You're gonna wanna do this kinda thing. So they gave me a pilot program, thinking that it would take me six to eight months to get everything wired up. Not, no, and then, once they gave me the pilot program, then I could do it in the open. And I could do it in a couple different pits. And I had partner, the guy, the nausea guy that-

• 31:32Speaker 00

  Right.

• 31:32Speaker 01

  That he was in the New York side and he, we went to college together. And he was a spreadsheet guru, you know, just great math mind. And we cranked that thing up.

• 31:43Speaker 00

  So you started where? And at its peak, what, what were you doing?

• 31:46Speaker 01

  We were doing a couple percent of the daily volume of the American Stock Exchange within six months.

• 31:51Speaker 00

  What does that mean in dollars? How much money were you making doing this?

• 31:54Speaker 01

  Well, we, I think that year we made over 100 million.

• 31:58Speaker 00

  In a year?

• 31:58Speaker 01

  In a year. Back when 100 million was a lot of money. And I, and I, and I had like not, I had a small-

• 32:03Speaker 00

  100 million is not a lot of money.

• 32:04Speaker 01

  Well, apparently not. I mean, like, it is for me, but it's not for, you know, the world.

• 32:09Speaker 00

  Yeah, I can-

• 32:10Speaker 01

  Yeah, it's nothing, right? You know, it's like, oh, 100 million. But like-

• 32:13Speaker 00

  That's profit? That's revenue? What does that mean?

• 32:15Speaker 01

  Well, it's trading.

• 32:16Speaker 00

  It's not like a GMV. That's like your tape. That's what you made.

• 32:19Speaker 01

  Yeah, it was arbitrage. Arbitrage profits. I mean, the overhead on that was relatively small. And obviously, we, we hired a lot of people and, you know, paid out a lot of salaries and-

• 32:28Speaker 00

  So did you call home like, hey, mom, dad had a good year?

• 32:31Speaker 01

  I, I-

• 32:31Speaker 00

  Need some money this year?

• 32:32Speaker 01

  So, so I had-

• 32:33Speaker 00

  Cause you didn't grow up rich.

• 32:35Speaker 01

  No, no, no. I had a minority, a tiny little percentage of that company because I needed the capital. The one thing I didn't have then was I probably had, you know, my first million probably happened when I was 28 or so. And all that money was at risk.

• 32:47Speaker 00

  And so what age are we talking about right now? When you figured-

• 32:50Speaker 01

  31, right? But all that money was at risk.

• 32:53Speaker 00

  Right.

• 32:53Speaker 01

  So I had it, but it very much felt fragile.

• 32:57Speaker 00

  Right. It was your bankroll to do this every day.

• 32:59Speaker 01

  To trade, yeah. And as we grew the company, you know, my first employee became my business partner, still my best friend, Jim Hanson. And we grew the company and we hired the corporate refugees and we built to like 35 guys. But in order to do this arb at scale, we needed capital. So we merged our firm with a firm in New York that had some more capital. No one knew how to run a company. Like, let's just be clear. Like, I had no idea how to manage people.

• 33:25Speaker 00

  What were you like back then?

• 33:26Speaker 01

  An asshole. I don't know. I was trying to come up with a good way. You woke up every day at 5:30 in the morning and I, I, you know, got on the floor at 6:30 and it was game day. And I was fueled by espresso and, and agitas and, you know, like, I was just like, like, you found this thing. Let's [bleep] and go, right?

• 33:45Speaker 00

  Right.

• 33:45Speaker 01

  And one of the things that, you know, my dad was still around then and, you know, you asked like, you know, did you call the parents? I remember like, whoever says rich people don't pay taxes, trust me, if people have figured it out, I have not. That year, I remember that I had like a giant tax bill, multimillion dollar tax bill. And had to then figure out like, well, I need to remove money from the trading firm and pay the taxes and all that. And I remember writing a check. You know, the biggest check I'd written before that was probably like $3,000 for like a down payment on a car or something. So I write this multimillion dollar IRS check. And I, I drove to my dad's house and I showed it to him. And he was kind of like, oh shit. He's like, is what you're doing legal?

• 34:27Speaker 01

  First question, like, yo, Greek guy who grew up like, yo, in a grocery store.

• 34:31Speaker 00

  Fair, fair question.

• 34:32Speaker 01

  Fair question. I said, of course it's, of course, yes. And he went, okay, it won't last. Like, you know, he was a product of, of the Great Depression. And he was like, it won't last. Put it away. No boats, no women, no drugs. Like, you know, give me that, like, we'll talk. And then he said, just like, remember that this is like the great country that your grandparents came to. Pay that. It's your patriotic duty to pay that. That's why I sacrifice. That's why they sacrifice. And I went, shit, I was hoping for a little, a little sympathy on the tax bill here, but I remember it vividly.

• 35:05Speaker 00

  Yeah, we need a name for that speech. It's like, we have the birds and the bees speech.

• 35:08Speaker 01

  Yeah, yeah, yeah.

• 35:08Speaker 00

  That's the, what's the money, son? No, no, pay your taxes, no boats, no liquor, no ladies.

• 35:14Speaker 01

  Yeah, yeah. I mean, really, that's, that's what he said. And then he's like, I will allow you to take me out to near this time. And, and that was it. Like, there was no like, hurrah, congrats. It was more just like a cautious tale of, of optimism in a way of like, save it, don't do stupid shit, go home. And wake up the next day and do it again. Like, one, the other thing that my dad really taught me was like, at the beginning, you were kinda like, oh, you have this great mind and all that stuff. And that might or might not be true. But what's really the case is that you show up. Like, my dad was just like, show up every day on time, early, early, you know, the old, the old adage, like, early's on time, on time is late, and the late means get the [bleep] out of here. And I literally feel that way.

• 35:59Speaker 00

  Most people don't show up. Most people don't follow through.

• 36:03Speaker 01

  Yeah, yeah. And showing up means not just showing up, like, look, there's two kinds of showing up. There's showing up prepared, and then there's showing up unprepared, but admitting that you're unprepared. Both of those count, by the way, like, but then like, show up late, don't show up, cancel, move it. Like, when, when you text me, how long does it take to get a text back?

• 36:26Speaker 00

  Almost instantaneous.

• 36:26Speaker 01

  Almost instantaneous. Because if you consistently do that, it's not very hard.

• 36:31Speaker 00

  Right.

• 36:31Speaker 01

  Like, I don't need to plan something three weeks out. Like, you text me, let's get on the phone right now. Let's hash it out. And if you do that consistently, it accrues so many benefits over time.

• 36:41Speaker 00

  Right. So you learned that from your dad?

• 36:43Speaker 01

  Yeah, 1,000%.

• 36:44Speaker 00

  And you have this amazing year. I assume these things don't last forever.

• 36:49Speaker 01

  Well, so the following year, you know, of course, any arbitrage is gonna be a window that closes. And they close quickly or slowly, but they're always gonna close. So the time scale of that kept getting shorter. Other people figured it out. We started

• 37:04Speaker 01

  adding computation onto it. What had happened is that some of the older partners in New York made so much money that year that they went, this is what I've been waiting for for 30 years. I'm out.

• 37:13Speaker 00

  Yeah.

• 37:13Speaker 01

  And at that time, we were taking, like, we'd see like a small trading company that was distressed in Boston. It's the Boston Stock Exchange. We'd be like, how much do they need to like, keep them in business? Okay. Next thing you know, I'm on a plane to Boston and some 30-year-old dude with a computer is telling these guys who've been there for 40 years, like, here's how we're gonna run your business now.

• 37:35Speaker 00

  Right.

• 37:35Speaker 01

  That did not go well. Like, you know what I mean? Like, so there was over-expansion, not because of anything other than like, oh yeah, well, we'll take what we've learned and we'll apply it to new things. But we didn't know how to build a business. We didn't know how to build a, a, a layer of management and accounting. And we were terrible at that. And some of the guys, the following year, made half of what they made in, call it 2000, 2001. So 2002 comes along, trading volumes go down. We're not doing anything wrong. We're just making a lot less money. So a guy that made $2 million, you know, he was making 50 grand when I met him. And he makes $2 million. It's like athletes or something.

• 38:17Speaker 00

  Now million feels poverty.

• 38:19Speaker 01

  Yeah. And then all of a sudden, it's like, they make $800,000 two years later and they're like, ah, this is bullshit.

• 38:24Speaker 00

  Right.

• 38:25Speaker 01

  And then you get the rock band syndrome, you know, where everyone's starting to, you know, get a little salty and all that. But we're all super fortunate. And I just got, like I, I've said eight times in the beginning, I was a terrible manager of people. I probably still am. And I just didn't enjoy it. Like, I got to the point where I had run really hard for 10 years. Um, my dad died in 01. I was very close with him. 9/11 happens. We had people that worked on Wall Street. Everyone was okay, but I definitely knew people who were not. And I left that year going, what am I doing? Like, I need to dial, dial this back. And I wasn't a good parent. I wasn't a good husband. I wasn't, I just wasn't being a good person.

• 39:09Speaker 01

  I go to dinner parties and I'm like, can we just move shit along, people? Like, you know, cause it's like, it just felt like, there's not-

• 39:14Speaker 00

  The trading floor.

• 39:15Speaker 01

  Yeah, yeah, I mean, the world felt slow. And I grew up caddying. I'm a lifelong golfer. So all of a sudden, I would find myself playing golf with ex-professional athletes who were in their 30s, who were famous, big time guys. And they were like miserable. And like, they took golf way too seriously and they played for big money. And I was like, there's no edge. Like, why are they gambling on golf? Like, you know, I don't understand what's going on. I didn't consider myself a gambler. I considered myself an arbitrator. And I just looked at them and I got the nudge from the wife, like, hey, you're, you're not pleasant to be around and all that.

• 40:01Speaker 01

  It wasn't really a nudge. It was a slap, slap in the face, to her credit, like, you know.

• 40:05Speaker 00

  Right.

• 40:05Speaker 01

  And.

• 40:06Speaker 00

  Deserved.

• 40:06Speaker 01

  Yeah. And I just remember one day going, waking up going, I think I'm out. Like, I think I need to, like, take a sabbatical. It sounds, I remember I called Keith and I was like, I think I need to take six months off. He's like, fuck that. You don't get six months off. Like, you want to take six months off and get paid? And meanwhile, the options group that you're building is not doing as well as the, you know, X, Y, Z, you know? I was like, man, what am I doing here? You know, like, I, I kind of figured something out. I'm not enjoying it anymore. I should quit. And I, and I did. I walked into like a group and they were all infighting one morning and I was like, guys, just so you know, like, this is my last week here and you're all getting paid out and some of you will get some equity and

• 40:51Speaker 01

  I'm, I'm gone. And people are like, what are you talking about? Like, this is bizarre, you know? And in hindsight, I probably didn't do a good job of, of that in terms of, like, I was with my partners, I was super communicative, but like, also like, you can't go, hey, I might be leaving in a month.

• 41:10Speaker 00

  Right.

• 41:10Speaker 01

  You know, that's just not something you can do. And so I did and, you know, we had a young son and, and now there's no game to play. Right? And all of a sudden, I was thinking about those athletes.

• 41:28Speaker 00

  Don't want to be them.

• 41:29Speaker 01

  And I'm going like, you know, what do they all, I'm gonna ask you, what do they all say when they retire? They say, I'm retiring to, I don't know, spend more time with my family.

• 41:38Speaker 00

  More time with the family.

• 41:39Speaker 01

  Yeah, yeah, yeah.

• 41:40Speaker 00

  Classic.

• 41:40Speaker 01

  Michael Jordan retires, he's gonna spend more time with the family.

• 41:43Speaker 00

  It's the best. CEO resignation. I've decided to spend more time with the family.

• 41:47Speaker 01

  Yes.

• 41:47Speaker 00

  And the board has decided you're not the CEO anymore.

• 41:50Speaker 01

  That's right. Yes, yeah. I mean, you know, when I, when I left Toc, like, you know, it's, or when I sold the Alenia Group, what do you, the statement you put out is, I'm allowing more opportunity for the people like in the organization or whatever. But the reality, of course, is that either, like, you sold for good reasons because something was not, you know, you were no longer a good fit. Or you got your ass kicked out of there.

• 42:13Speaker 00

  Did you ever read the Groupon CEO's letter when he did that?

• 42:16Speaker 01

  I don't think so.

• 42:17Speaker 00

  He's a Chicago guy.

• 42:18Speaker 01

  Lefkovsky, yeah.

• 42:19Speaker 00

  No, no, Mason, Andrew Mason.

• 42:21Speaker 01

  Oh, yeah, yeah, yeah, yeah.

• 42:22Speaker 00

  When he's like, I've decided to spend more time with my family. Just kidding, I got fired.

• 42:26Speaker 01

  I got fired, yeah.

• 42:27Speaker 00

  The second line of the thing was.

• 42:29Speaker 01

  That sounds like it. I, I've met him a couple of times. Yeah.

• 42:32Speaker 00

  By the way, when you're, you told the story to me once about how you crossed paths with the early Jane Street folks.

• 42:37Speaker 01

  Yeah, yeah.

• 42:38Speaker 00

  When you were doing arbitraging and they were the smartest guy. Can you tell that story? I thought that was awesome.

• 42:42Speaker 01

  Yeah, I mean, in 99, we started doing ADR arbitrage, American Depository Receipts. And I was not hugely involved with it. It was out of New York. But the guys who had built the best robo-box of doing that were the early Jane Street guys. And my partners were like, these guys are better, smarter, faster, you know, have these Dell boxes on a desk that are doing things. And of course, now, like, you know, you could see the Dorkish podcast and they've got, you know, the.

• 43:15Speaker 00

  Data center.

• 43:16Speaker 01

  This is the public, you know, I, I can't really say much about, about. The great thing about Jane Street is that, you know, it's like Fight Club. And, and I've honored that for 30 years. You don't say much about Jane Street. But I will say that they are incredibly smart, incredibly dedicated, fiercely independent of thought and high integrity. And I know some of, people are gonna watch this and they're gonna go, but the India thing that's public or this or, you know, it's like, yeah, okay, well, you know, again, read the rules.

• 43:49Speaker 00

  Yeah. You had an idea at the beginning. You said, three years, I haven't said yes to any podcasts, but I have a new kind of like thought or idea around everything, what'd you say, everything's an arbitrage, but it's just a question of the time scale?

• 44:00Speaker 01

  Yeah.

• 44:00Speaker 00

  Is that what you said?

• 44:01Speaker 01

  Yeah, roughly.

• 44:01Speaker 00

  What do you mean by that?

• 44:02Speaker 01

  Once I was in the restaurant business, the slow thing became, how do people make reservations? That was the equivalent of the, the 32nd piece of paper, right? And people still call restaurants. It's so weird. There's nothing worse experienced at a restaurant than going up to host stand, hearing a phone ring and getting this. I'll be right with you. And you're the customer and the first thing you see is.

• 44:30Speaker 00

  Right. Might as well be the middle finger.

• 44:32Speaker 01

  I'm on the phone, right? And then they hang up and they go, essentially, who are you? And do you belong here? That's terrible hospitality, but that's every restaurant. So we got into starting to build Alenia and I was like, we gotta get rid of that. And then, okay, well, how do you get rid of that? How do you know who's walking in the front door without them telling you who they are? Not, it's not that hard.

• 44:53Speaker 00

  Right.

• 44:53Speaker 01

  You know? How do you get rid of the host stand? So it doesn't feel off-putting. How do you then get, like, the analogy I used at the time was like, it's like going to a sweater store and you see all these different color sweaters and styles of sweater and you're like, hey, I want that blue cardigan cashmere sweater. Can't have it. What can I have? I don't know. Guess it. One of the other 300 sweaters. And that's what OpenTable was like in 2005. That's what, the software was dismal. They wanted to intermediate the relationship between the customer and

• 45:23Speaker 00

  Right.

• 45:23Speaker 01

  the restaurant. That's how they, that was their arbitrage. And so, you know, Toc was born out of my frustration with not knowing the customer. It was a, it was a KYC thing, you know, know your customer. Then it was overlaying the value of that customer, which is different on a Tuesday night at 9:00 PM in Chicago, when no one goes out to dinner, than it is on a Saturday night at 7:00 PM, when everyone goes out to dinner.

• 45:47Speaker 00

  Right.

• 45:47Speaker 01

  Those two things should be priced differently. And they're not.

• 45:51Speaker 00

  That was obvious to you, but was not obvious to the world.

• 45:53Speaker 01

  It's still not obvious to the world.

• 45:55Speaker 00

  Right.

• 45:56Speaker 01

  You know, I don't want to get political here, but Elizabeth Warren, a couple of months ago, tweeted, we need to make a law against dynamic pricing. Everything's dynamically priced. This table is dynamically priced. It's just really slow. This is dynamically priced. This water, everything is dynamically priced. Like, it's not.

• 46:14Speaker 00

  Nothing is fixed forever, yeah.

• 46:16Speaker 01

  And what she's really saying is, is that we don't want to squeeze people when bad things happen. Agreed. But the best way to do that is to dynamically price things as fast as you possibly can.

• 46:28Speaker 00

  Right.

• 46:29Speaker 01

  And so like Uber, when Uber did surge pricing, that is the dumbest way you could possibly name something.

• 46:36Speaker 00

  Right.

• 46:37Speaker 01

  And they got in a lot of trouble for it.

• 46:38Speaker 00

  Chose the wrong word for the right idea.

• 46:40Speaker 01

  Correct.

• 46:41Speaker 00

  And Travis tried to explain it. He was, they were like, how, you know, on New Year's Eve, you guys are gonna be gouging people with this surge pricing. And he's like, we need to get more drivers onto the road to meet the demand. We need the supply to rise to meet the demand. How do you get the supply to rise? You give it an incentive that you're gonna make more money.

• 47:00Speaker 01

  I will say that I, I was a little too autist on, like Travis was on that.

• 47:05Speaker 00

  Yeah.

• 47:05Speaker 01

  Like, I remember that. And I was like, dude, just call it dynamic. Like, get rid of the surge word. Like, you know, just. And, you know, my original pitches to restaurant was like, look, you're, you're paying people to sell to your rivals. Like, if you're full and you're really busy on a Wednesday, all they're gonna do is say, well, you should go to this restaurant down the street, you know, which is terrible. Like, you should just change your pricing.

• 47:27Speaker 00

  Right.

• 47:28Speaker 01

  But people are like, well, we print our menus once every quarter. So that time scales off. You should print your menu in some respect every day or every hour or every minute.

• 47:38Speaker 00

  So you still, even after Toc and selling Toc for hundreds of millions, you still see that this problem is like, you know, just fundamentally not solved, it costs the economy.

• 47:45Speaker 01

  I, I genuinely believe that geofenced, meaning localized, dynamic and variable pricing for time-slotted businesses is something that someone's gonna make hundreds of billions of dollars with. And I simply got tired of convincing people of it.

• 48:02Speaker 00

  Right.

• 48:02Speaker 01

  You know, it's like trying to convince a restaurant owner who every day is game, and I understand why, every day is game day. That's not their core business. That is what they self-selected out of when they got into the restaurant business. They want to do accounting. You need a, a big dumb button that you hit once that says, make more money.

• 48:19Speaker 00

  Right.

• 48:20Speaker 01

  And then the whole backend needs to do that.

• 48:21Speaker 00

  And now with AI, maybe we have that big dumb button.

• 48:23Speaker 01

  We do have that big dumb button.

• 48:24Speaker 00

  So, so let me ask you a question. How does a guy who goes from trading and no restaurant experience create the best restaurant in America? That, that's a mind blowing sentence that that happened.

• 48:34Speaker 01

  Yes.

• 48:35Speaker 00

  What is the explanation for that?

• 48:38Speaker 01

  Part of it is Grant Atkiss, great, great young chef who I met. Part of it is the willingness to go, man, like, it's really weird that, like, no one's seeing that, like, you know, Chicago should have the next Charlie Trotter. Trotters was, I don't know, open 15 years at that point or whatever he put Chicago on the map. And I was just like, that thing I said earlier, you know, every 15 years, someone's gonna come along and kick someone's ass.

• 49:03Speaker 00

  Hmm.

• 49:03Speaker 01

  And I met Grant and I was like, aha, we have the ass kicker. We have the guy who can do it.

• 49:09Speaker 00

  And this is kind of the same thing you said about trading where you met that guy and you were like, you're the guy.

• 49:13Speaker 01

  You're the guy.

• 49:14Speaker 00

  And you had this moment with Grant where you're the guy.

• 49:17Speaker 01

  Right.

• 49:18Speaker 00

  And I asked you, I go, how did you know? You go, you said something like, every bite of food the guy put in my mouth was the best thing I'd ever tasted.

• 49:23Speaker 01

  Yeah, yeah.

• 49:24Speaker 00

  But there might be more to it where like, there was something either entrepreneurial or creative or something about the person.

• 49:30Speaker 01

  The showing up part, it's, it is the showing up part because, look, I mean, for good and bad, he was me when I was a trader. He would show up and he would stay there till four in the morning and he would come up with the next thing and he would do the stuff, the hard work and grind it out. Everything's grind. Like, if you are a great songwriter, you write songs every day. You throw out 98% of them. I met, you know, I love Wilco, I love those guys. And I met Jeff once in the loft in Chicago and he doesn't like people being there much and I, he was writing a song and it was honestly not good, you know what I mean?

• 50:07Speaker 00

  Yeah.

• 50:07Speaker 01

  And it was a wonderful thing for me to see because one of my favorite songwriters. And so finally I mustered up the courage to ask him, like, why do you come in here every day? And he was like, I have to write like two or three songs every week because otherwise I won't have 12 good ones at the end of the year.

• 50:23Speaker 00

  Right.

• 50:24Speaker 01

  And I was like, oh, man. Like, you want that artistic thing to be, you wake up in the middle of the night and yesterday is just done, you know? And the answer is like, that might happen once in a while, but most people are Picasso. And what you do is you, you grind out a lot of shit to get to something that's great. And when you find people that do that, those are your folks. Chris Rock has a great quote on this. He's, he was talking to some young comedian and the comedian was like, hey, any advice for me to make it? And this is Chris Rock, you know? So he says, uh, what are you doing today? And he goes, I got two shows tonight, big day. I got two, two, two shows, uh, one at seven, one at nine. So I'm just getting ready for that.

• 51:09Speaker 01

  He goes, no, I said, that's tonight. I said, what are you doing today? He goes, well, I'm just getting, you know, getting some food, you know, and whatever. He goes, you want the advice? The advice is you write jokes every morning.

• 51:20Speaker 00

  The money is made in the day, we just happen to collect it at night.

• 51:22Speaker 01

  Yeah, yeah.

• 51:23Speaker 00

  And, you know, the stuff you're doing on the stage is the byproduct of the daily writing of bad jokes. If you're not doing the daily writing of bad jokes, like, that's the whole racket.

• 51:32Speaker 01

  That's the whole racket.

• 51:32Speaker 00

  There's nothing else to it besides doing that. And that sounds simple, but guess what? Even amongst the professionals, most are not doing that.

• 51:39Speaker 01

  I gave the commencement address at the Culinary Institute of America in Hyde Park years ago. And I was like, what do I tell, like, you know, these people are all, they all are chefs and it's in the era of TV chefs.

• 51:52Speaker 00

  Right.

• 51:52Speaker 01

  And, you know, I always liked the, the commencement address where they, you kind of tell three stories, right? Like, you don't really, they don't even need to seem to connect people or try to connect them.

• 52:02Speaker 00

  Steve Jobs.

• 52:03Speaker 01

  Steve Jobs, yeah, perfect. So I watched, you know, a couple of great commencement speeches and I was like, okay. And I finally thought of it, like, the morning of. And the day we were gonna open next, which is a restaurant that, the idea was every four months, we're gonna have an entirely new cuisine, entirely new menu, entirely new everything. We were opening with this Paris 1906 menu, time and place. You don't, the great thing about that concept was as soon as we had that idea, Paris 1906, I don't need to tell you anything more.

• 52:32Speaker 00

  Right.

• 52:32Speaker 01

  It's, it's like.

• 52:33Speaker 00

  Already has aura to it.

• 52:34Speaker 01

  It's got, you wanna go, like, what was, like, I like, I like French food? What was it like in the Scaffier 1906? So there was a sauce on the lamb dish that was off in the practice thing. And I had to go back early in the morning, like 6:00 AM to, like, I don't know, do vinyl tile in the basement to pass the inspection or something like that. And on the pass were like 20 small saucier pans, this big, with blue tape in front of them labeled like, you know, A through P or whatever. And I was like, what are you doing here? And Grant was there and he was like, I'm fixing that sauce that you emailed me about. Like, I knew it was off, like, you know, I didn't make it.

• 53:19Speaker 01

  And so I, in my head, I'm like, well, of course, he just knows how to make this classic sauce. And the reality was, he made the base of it in the middle. And then he made these a little sweeter and these a little more like salty and, and apathetic. And somewhere along that spectrum was the right one. But no one knows what it's supposed to taste like, it was from 1906.

• 53:41Speaker 00

  Right.

• 53:42Speaker 01

  And also, like, no one really knows how to make it. Those recipes were kind of miserably, you know, they went down to the gram, that's for sure. And that was what I told the commencement. I was like, if you wanna be a great chef, you show up at 6:00 AM and you make 25 sauces.

• 53:57Speaker 00

  Yeah, I better see 20 sauces on the counter with blue tape.

• 53:59Speaker 01

  You don't simply go like, well, here's the recipe and it should taste like this. You have to know what great is. And knowing what great is, is making mostly shit 99% of the time. And then you go like, oh, well, this one's kind of, I don't hate this one. That's probably actually really good, you know? And I get a lot of people that blind email me, my email's out there in the public and I'm fine with it. And I get a lot of, like, young entrepreneurs going like, hey, I've got this idea and I wanna do this or that. And I was like, cool, go do it, come back to me in five weeks. I don't care about your logo.

• 54:33Speaker 00

  Right.

• 54:33Speaker 01

  Like, everyone wants to make the logo. Right, you know, logo first, name first, I got a great name for a restaurant. Awesome, that's terrific. Make the 50 sauces, you know?

• 54:43Speaker 00

  Have you ever read that book, Art and Fear? I think they have, they use this, uh, the pottery class example, do you know this story?

• 54:48Speaker 01

  I don't, no.

• 54:49Speaker 00

  Perfect example for this of it. Story is, is a professor in Florida at university, I think he was actually teaching a photography class and they changed it to pottery, but story is the same either way. Splits his class in two and he basically tells the first, first group when they come in, hey, for this pottery class, uh, I'm gonna grade you on your pottery, but it's really simple. At the end of the semester, you turn in your best pot and I will grade you only on your best work. And you pick, you get to pick which one is your best, you get, you submit that one, I'll give you a grade. They leave. Group two, he says, you'll be graded based on the volume of pots that you make. So at the end of the, in the year, at the end of the semester, you're gonna give me a haul. Based on volume, I will give you your grade.

• 55:30Speaker 01

  Yeah.

• 55:31Speaker 00

  Easy enough.

• 55:32Speaker 01

  I feel like I know where they're going.

• 55:33Speaker 00

  So you know where they're going. At the end of the semester, obviously the volume, people made more volume, they also made the better pots.

• 55:39Speaker 01

  Of course.

• 55:40Speaker 00

  And like, you know, he basically, this is like, this principle is just everywhere and.

• 55:44Speaker 01

  It's so obvious and yet even I, who espoused this stuff.

• 55:49Speaker 00

  Wake up, try to make a great pot.

• 55:50Speaker 01

  When I, well, no, and also when I met, you know, Jeff that time, I left going, God, am I an idiot? Of course that's what he does every day.

• 55:59Speaker 00

  Right.

• 55:59Speaker 01

  Like, of course that's what he's doing. The weird part is, he's doing it after 30 years. Because for him, that's, that's the process, you know? I like to do that and I like to change it and I get miserable when I don't have pots to make, I guess. Like, I'm, I'm fearful of not finding more quests, side quests.

• 56:20Speaker 00

  So I've gotten to know you a little bit. One thing I think you're very good at is you're good at having an inspiring vision, which sounds obvious, but that's a skill to like, be able to do that. A vision that's compelling, that gets people excited, a story that you wanna be a part of, that will get you to jump out of bed every day and like, go do hard things, go do minutia bullshit, go make 20 sauces.

• 56:41Speaker 01

  Yeah.

• 56:41Speaker 00

  You're really good at the vision part and you're really good at working backwards. And I think the story of Alenia you told me that, I knew it was this great three Michelin star restaurant. What I didn't know was that before you made it, you declared, this will be a three, this will be a Michelin star restaurant.

• 56:56Speaker 01

  But Michelin wasn't in America.

• 56:57Speaker 00

  Michelin wasn't even in America. And you said something even better, you go, we need to make it so that it will look bad for Michelin. If they're not even coming to Ameri, like, us not being there will be bad on them.

• 57:08Speaker 01

  That's right.

• 57:09Speaker 00

  Which is, you know.

• 57:10Speaker 01

  That was a stated goal.

• 57:10Speaker 00

  Which is a stated goal that is, I would say, unusual. And you said you posted this on some forum on the internet, year before you even launched. Can you tell, so I don't think this is a well told story.

• 57:20Speaker 01

  Yeah, I, so like, so there was eGullet at the time, like, there was the, you know, the, the, what do you call it, boards, you know, like.

• 57:26Speaker 00

  BBS forum.

• 57:27Speaker 01

  Yeah, yeah, forum boards. There's a foodie one called eGullet at the time, you can still look at, I mean, like, the archives are up. And I was kind of fascinated with open source software at the time. And I do what I always do and I start like, reading how to run a restaurant, like Restaurant for Dummies. And I'm reading all these books, I'm like, just like with the options, I'm like, I feel like none of these actually is, they're, they're not teaching me anything on how to run a restaurant.

• 57:55Speaker 00

  Okay.

• 57:55Speaker 01

  So I'm now building a restaurant, but I don't know how to run a restaurant. I wrote this one spreadsheet that was, I, I call it the universal restaurant calculator. It was literally one tab with like 80 cells. So any input that I could think of, like, cost of insurance, like, that's a cell, right? And I couldn't think of any more cells. Like, at the end of the day, like, anybody listening to this could probably, if they sat in a restaurant long enough and really thought about it, you could come up with the cells, it's not that, it's not that big. And that's why restaurants fail because the actual bar to entry is really kind of pretty low, you know? Anyone who has a good dinner party or thinks they can cook something can start a restaurant. So I just started like going, okay, what, how can we learn from our customers?

• 58:40Speaker 01

  And maybe there's someone else out there that I can learn from. And so I was like, let's just open source the whole business plan. So I created this thing called the Alenia Project on eGullet. And it was like, hey, here's, here's how we're thinking about naming the place. And here are all the names we didn't take and here are the ones we did take. Here's the menu development.

• 58:59Speaker 00

  Like, these are foodies, these are chefs, who's in this forum?

• 59:02Speaker 01

  So it turns out it was a lot of people, I mean, we got hundreds of thousands of views. So suddenly the press was interested. So, you know, Food and Wine and Gourmet Magazine and, and, you know, the New York Times, the Wall Street Journal, we're all like, oh, this is interesting, like, these people are building a restaurant.

• 59:19Speaker 00

  And did you say openly, like, we're trying to build a Michelin star restaurant in Chicago?

• 59:22Speaker 01

  I didn't say, I don't think I said Michelin star, I think we're trying to build the best restaurant in America.

• 59:26Speaker 00

  Trying to build the best restaurant in America.

• 59:28Speaker 01

  Yeah, yeah.

• 59:28Speaker 00

  And you start.

• 59:28Speaker 01

  And it needs to be profitable.

• 59:29Speaker 00

  You start building in public or open sourcing your ideas. And you're saying you're doing it because you kind of want smart, smart people to be pushing back on.

• 59:36Speaker 01

  I wanted two things, I wanted, I wanted feedback from people that might come across it. And then I wanted to.

• 59:47Speaker 01

  Drum up future customers. Because when people have an engagement where they feel like, oh, I watched that and now it's open.

• 59:57Speaker 00

  Right.

• 59:58Speaker 01

  I feel like a little bit like the origin story is already known. Right? It's like one of my favorite documentaries of all time that I literally watch once a year is Hearts of Darkness. It's the making of Apocalypse Now. You want to talk about fear? Every time I'm like, oh, I'm doing too much. I watched Francis Ford Coppola, like, you know, with the, with the Philippine, you know, like Navy and Air Force, like actually going, you know, Fernando Marcos or whatever, going to like, you know, you know, get Dennis Hopper out of there. They're actually going to start shooting. You know, he mortgaged his house twice, all that stuff, right? So I'm not really taking much risk by doing a vineyard here compared to that. So it's very comforting.

• 1:00:38Speaker 01

  And I felt like by putting that out to the world, people would have this engagement of like, they see the process. They see how we're thinking about it. Like we would write, like, I read, I look back at some, like, there's so.

• 1:00:51Speaker 00

  You cringe always.

• 1:00:52Speaker 01

  Oh yeah, it's cringy. Like, you know, the purpose of bread, like, is it, you know, and the, why do you think that most restaurants give you bread? Well, it fills you up. They can give you less of everything else. Like, that could have been the whole post. It's Americans like fat and bread is a good vehicle for butter.

• 1:01:09Speaker 00

  Right.

• 1:01:09Speaker 01

  Or oil. And we can cut down on our portion size if we give them a big basket of bread.

• 1:01:14Speaker 00

  Right.

• 1:01:15Speaker 01

  That is literally why they do it. And it's delicious. Bread's delicious, you know? But like, we wrote like 4,000 words on the purpose of bread. But, you know, we had hundreds of thousands of people. And one of the coolest things was that the, Sean Brock, who's a very famous chef now, he was the first customer through the door on the first day.

• 1:01:33Speaker 00

  Wow.

• 1:01:33Speaker 01

  And he wrote on there.

• 1:01:35Speaker 00

  So did you have like a waitlist by the time you launched or?

• 1:01:37Speaker 01

  Yeah, we had, we had like, opening night, we had New York Times there, head food critic. Michael Rollman told us like, that guy is the head critic of the New York Times. So you didn't know what anyone looked like back then.

• 1:01:47Speaker 00

  So you couldn't know this, but if you hadn't been put publishing that stuff, but you opened the same restaurant.

• 1:01:52Speaker 01

  There's no chance it would have been this good. No chance. That was like such a marketing feat.

• 1:01:59Speaker 00

  And how do you think about product, marketing, storytelling? Like, what's your kind of theory or thesis or philosophy on this?

• 1:02:06Speaker 01

  The more open you can be about why you're doing it, as long as it's authentic, you win.

• 1:02:10Speaker 00

  Hmm.

• 1:02:11Speaker 01

  Period. Like, you can also lose on that. Like, look, like.

• 1:02:16Speaker 00

  You win, period.

• 1:02:17Speaker 01

  You can also. Well, I'm thinking of, I'm thinking of Dario and Sam right now. Like, you know, it's like, there are real concerns around AI. And, you know, if you run around saying.

• 1:02:29Speaker 00

  Everything you think.

• 1:02:30Speaker 01

  Everything you think might not be the best thing all the time.

• 1:02:33Speaker 00

  Fair enough.

• 1:02:33Speaker 01

  You know, at, at the end of the day, like a restaurant is a pretty benign thing. No one's going to live or die based on me opening a restaurant. Um, and, but so, why was I opening it? We had really pure reasons. Like, you know, do we have ambition? For sure. At the time, there was a real culture of people finding these things and there wasn't Instagram. And there weren't, you know, the social media outlets. And so this was novel to have that. Now, like, one of the problems, I think, is that, you know, if you're going to Paris, you're going to email, hey, where should I eat? Okay, I, I love La Mijan. You should go there. You're going to go on and look, you'll see all of it before you get there.

• 1:03:17Speaker 01

  It's really hard to be surprised in life right now.

• 1:03:19Speaker 00

  Hmm.

• 1:03:19Speaker 01

  And so, you know, a lot of what we were doing was creating desire and enough engagement that you felt like you knew people. People always want to buy from people. You always want to have an engagement. You know, one of the successes of, of this podcast is you. People see you and you're genuinely curious. That's authentic. That, that's, that's the secret. We could do so many bad things, like making dumb questions or dumb answers or. And as long as you're authentically like engaged. And so that's the marketing.

• 1:03:53Speaker 00

  Yeah.

• 1:03:54Speaker 01

  Finding that and being willing to put it out there is a little bit scary, a little bit invasive, a little bit, you know, like not everything you do is good. You know, you might not like the way you look or sound on camera, all that, but you have to keep doing it.

• 1:04:08Speaker 00

  You, you told me another thing that I thought was really awesome. Cause I've never been to Alenia. Most people who listen to this will have never been there, right? So like for 99% of us, we've never actually experienced what made it the best restaurant in America. But you've told me a little bit about like, kind of every detail. So, you know, how are you greeted at the door? Uh, you know, what was the experience like, you know, the balloon uh, for dessert, you know, where you're eating this, this candy apple or this green apple balloon for dessert? And you've talked about like, all the different elements of the experience. What are like three or four things where I, where you are proud of like, how you kind of rethought, reinvented? Or just even a small touch like.

• 1:04:48Speaker 01

  I think there are dozens of those. And what I would say is that we looked at it like a theater. Like, you know, if you write a great piece of theater or read a great novel or whatever, the term of art would be a callback, right? So like you write, you were talking about Chris Rock, like, the great thing about great comedians and whatnot is that they, they, they'll set something up at the beginning of their set. And then they go through a whole bunch of unrelated stuff and then somehow.

• 1:05:11Speaker 00

  There's a satisfying callback.

• 1:05:13Speaker 01

  There's a satisfying callback, which makes the beginning and the end funnier.

• 1:05:17Speaker 00

  Right.

• 1:05:17Speaker 01

  Right? And when you leave, you're going, oh, you know. So we viewed the experience from the time you got out of your car. So you walk down a hallway to you're at a table, which was a complete cop of David Byrne. Like, you know, like Stop Making Sense. I saw in 1984, I was at Harvard Summer School as a teenager and.

• 1:05:41Speaker 00

  I haven't seen it. What, what I've. Yeah.

• 1:05:44Speaker 01

  Stop everything. Really? Are you kidding? Oh my God.

• 1:05:49Speaker 00

  When you said the name, I had to decide.

• 1:05:50Speaker 01

  Oh dear God, you're generationally.

• 1:05:52Speaker 00

  Do I fake like?

• 1:05:54Speaker 01

  Oh my dear God. Well, I know.

• 1:05:55Speaker 00

  Do I ask them?

• 1:05:56Speaker 01

  I know, I know what I'm giving you for your birthday. So the great thing about Stop Making Sense, that concert, was that David Byrne walks out. No one else is on stage. He has a boombox which just plays.

• 1:06:13Speaker 01

  You know, before drum machines and all that. And so you have cassette tapes. And then he, you know, he starts playing the guitar. And then the stage builds. The stage builds. And then pretty soon he gets smaller and smaller because he starts wearing the bigger and bigger suit. You've seen the, that, and that big suit. That big suit is, as the world around him gets bigger, he gets literally smaller by stagecraft, right? It's brilliant. And I remember when we were building Alenia, Grant had said, like, why do, why do fancy restaurants have tablecloths? And the answer is because the table underneath is a piece of shit. And so he was like, we want great tables because you'll feel it, you know, and you'll see it and all that.

• 1:06:57Speaker 01

  And then we were like, well, start with nothing. You know, you, you go to a fancy restaurant and you got like 18 different.

• 1:07:02Speaker 00

  Right.

• 1:07:02Speaker 01

  Forks and knives and that's stressful because you're like, I don't even know like how to use them. I'm not, I'm not like a 19th century French aristocrat. And then, you know, and even then they have somebody with, so.

• 1:07:15Speaker 00

  Probably use the fish.

• 1:07:16Speaker 01

  Right. Like fork or whatever.

• 1:07:17Speaker 00

  Reprimand.

• 1:07:18Speaker 01

  Yeah, yeah, right, right, right.

• 1:07:19Speaker 00

  For bigger customer.

• 1:07:20Speaker 01

  Yeah, yeah, yeah. Soup away. Like, we didn't want any of that. And I remember thinking of, of Stop Making Sense and going like, let's start with a empty stage. And so when someone comes, you get, you know, something that hits the table. What's the point of that? What's the callback for later? So it could be, you know, a honeycomb. Or it could be, you know, what looks just like a flower arrangement. But as it turns out, there's edible things in there, but you don't find that out until hour two.

• 1:07:45Speaker 00

  Right.

• 1:07:46Speaker 01

  So these were all intentional things. Now, none of this sounds particularly revolutionary now because there's tons of restaurants that do that. I mean, that was the influence of not just Alenia, but like a lot of other restaurants that pushed that envelope. And so it's, we, we worked really, really hard to hone all of the little things that would make you feel something.

• 1:08:05Speaker 00

  Right.

• 1:08:06Speaker 01

  So if I said to you, I'll ask you, not your favorite meal in a restaurant necessarily, but what's your like most memorable meal of your life, you know?

• 1:08:14Speaker 00

  Uh, I, I know what came to mind right away.

• 1:08:16Speaker 01

  Great.

• 1:08:16Speaker 00

  I remember when I was 21, 22 years old, we were doing the sushi restaurant thing. I wanted to start a sushi restaurant. We went to Las Vegas. And my, my buddy Trevor's girlfriend, uh, her dad was wealthy and he said, take the boys out to Nobu and say the word omakase when you go in.

• 1:08:32Speaker 01

  Yeah, yeah, yeah.

• 1:08:33Speaker 00

  We didn't know.

• 1:08:34Speaker 01

  Yeah, sure. Right, of course. Why would you know?

• 1:08:36Speaker 00

  A school in North Carolina.

• 1:08:37Speaker 01

  Yeah.

• 1:08:37Speaker 00

  Not a great sushi scene.

• 1:08:38Speaker 01

  Right.

• 1:08:39Speaker 00

  Not a lot of omakase going on there. So we go to Nobu and we, and we say the word, magic word, omakase, and they say, we got you.

• 1:08:46Speaker 01

  We got you.

• 1:08:47Speaker 00

  Yeah. And they start bringing dish after dish. We don't even know what's happening. We're trying this like miso glazed cod. It's like, wow, every bite tasted, you know, unique and, and great. And the whole bill was paid for by this other guy, by, you know, the, the, her dad. And the whole thing just felt like totally taken care of and new and novel. I just remember also where we were at in life, like, it was just like a relief from like the stress of trying to build something and being broke.

• 1:09:10Speaker 01

  So now how do you make that happen every night for people? Like, you know, and that's, so that, that's a real thing. So we would ask staff.

• 1:09:17Speaker 00

  Best experiences.

• 1:09:18Speaker 01

  Best experiences. What, okay, we're coming into fall. What does that mean? Well, it means something very different. Like, we're in October here. We filmed really early today because it's going to be 100 degrees. In Chicago, the leaves are already down and it smells different and it's wet. And so as you're trying to craft these experiences, we just ask those very simple questions. And when we built software, there's a lot of different theories of software building. I like to build dead ends in software that every software designer hates. If you could hit every button at every page, I can't take you on the journey where I want you to go.

• 1:09:54Speaker 00

  Right.

• 1:09:54Speaker 01

  Right? So I kind of build like dead end caves that every, every software designer hates.

• 1:10:00Speaker 00

  Right.

• 1:10:01Speaker 01

  Like, you know, UX designer. Cause they want like the Microsoft version of, I want every button, every option at every time, right? My older son is very much like a Windows guy because he can tinker with everything.

• 1:10:13Speaker 00

  Right.

• 1:10:14Speaker 01

  But like, in a great experience like that omakase that you had, you had no choice.

• 1:10:19Speaker 00

  It's a defined.

• 1:10:19Speaker 01

  It's a defined thing.

• 1:10:20Speaker 00

  Yeah.

• 1:10:21Speaker 01

  And. Sometimes it's great to have a lot of choice and sometimes it's great to just be taking on a journey.

• 1:10:26Speaker 00

  Right.

• 1:10:28Speaker 01

  And so studying that was fun, you know, and that's what we did.

• 1:10:31Speaker 00

  You also study, so as I'm kind of deconstructing what you do, one of the things you do is you you learn, but not from only within the industry, you steal from the sort of adjacencies.

• 1:10:41Speaker 01

  Yeah, yeah, yeah.

• 1:10:42Speaker 00

  You don't look at a restaurant and say, well, how do the best restaurants do what restaurants do? You know, you say.

• 1:10:46Speaker 01

  In fact, you try very hard not to do that.

• 1:10:48Speaker 00

  You say, what do they do? And then what's the, how do we invert some expectation?

• 1:10:51Speaker 01

  Or what are they missing? Like, I'm fine with stealing the best stuff. What are they missing?

• 1:10:56Speaker 00

  Right. And then what do, if this was theater, how would a theater guy do this? If dinner was, was like a theater show, what would it be?

• 1:11:03Speaker 01

  Right.

• 1:11:03Speaker 00

  Right? So like taking these adjacent, you also told me about magicians and how you were studying magicians. And this kind of like some of this new stuff that we're doing. But you told me the story of selling a bottle of wine to a table.

• 1:11:14Speaker 01

  Yeah.

• 1:11:14Speaker 00

  And you were able to go in and you were able to sell a bottle of wine that maybe the waiter wasn't gonna do. And he was kind of asking you like, how'd you know how to do that? Today's podcast is brought to you by my friends at Mercury. They make the world's best banking product. I think you know this already. I use Mercury for all of my businesses. I think I have like maybe seven or eight businesses. We use Mercury as our business banking across all of them. And now they actually just launched a personal banking account. So I have my personal account there. I moved off of Wells Fargo and Chase. I'm just all in on Mercury. Why? I like products that are easy to use. I like products that get me and the problems that I have. So like very easy to make a joint account with my wife, very easy to spin up virtual cards. One click and I get savings yield. It just has all the stuff that I need in one place. So if you're looking for the best banking product on the market, it's definitely Mercury.

• 1:11:57Speaker 00

  I will fist fight anybody who disagrees with me on that. Go to mercury.com slash personal and learn more. Mercury is a fintech, not an FDIC insured bank. Banking services are provided through Choice Financial Group and Callum N A, members FDIC.

• 1:12:10Speaker 01

  So when I was a kid, like every kid, you get a, a, a box, a magic box that has like the rope that with the little peanut in it that like holds, yeah, the, the hidden coin thing, the, the roller that does the dollar bills on it. And there's somewhere exists a video of me that my mom put me in a little tuxedo and I did the show for like the, the relatives and everything went wrong. That's why, you know, it's so great. But of course I'm, I'm like doing the tricks and I'm like, oh, don't worry about that thing. Right? You know, and I'm like five or whatever. Right? And so like almost everyone, that sense of wonder and awe and all that is something that as you build out experiences for people, magic is a wonderful thing to study.

• 1:12:52Speaker 01

  But it's also a wonderful thing to study in everything else, marketing, sales and all of that. Because you know for sure that I can't change a $10 bill into a $100 bill. Right? You know that. Everyone knows that. And then when you do it, if you do it really well, it will appear as though you did it, even though intellectually you have to suspend your disbelief. And so how do magicians do that? Well, you know that they control your attention. And where they stand, where they look at you, where they look, you know, not at you. All of those things are cues that are incredibly practiced. They know exactly when they're working and when they're not.

• 1:13:37Speaker 01

  And as you're building out experiences for people in restaurants, anywhere else, if you read the books on restaurants, I just hate them. I don't like them at all. But if you read a book on, written by a magician, to say, the effect, they always start with the effect. The effect is that the bill will become a $100 bill.

• 1:14:00Speaker 00

  Okay.

• 1:14:00Speaker 01

  That's the effect. And then they go through the method. The method is, well, you've already got the hundred and you're gonna fold it like this or whatever. Then there's beyond the method, the craft of, of what you're doing. So.

• 1:14:13Speaker 00

  The presentation.

• 1:14:14Speaker 01

  The presentation. Yeah, yeah. If you read 150 year old books on magic from anywhere in the world, they have all of these wonderful things, like, well, if you want to gain people's trust, you don't sit across from them or stand across from them. You will stand next to them. So if I present this to you, and I'm standing here and I just go, this is the best water in the world, you know, whatever. Like you're gonna be going like, ah, the guy's selling me water. If I go around the other side and stand next to you, so we're both looking at it, first of all, I could be doing a lot of different things there. I could be signaling someone, hey, bring more water. He's a little low. I can be doing all sorts of stuff in a restaurant, you know? Your attention can't be on the water and behind me at the same time.

• 1:14:59Speaker 00

  Right.

• 1:14:59Speaker 01

  So I kind of own that space back there. So in, in reading these things and thinking about Alinia, it wasn't just the callbacks and it wasn't just, hey, we need to make a dish that transmogrifies into something else or whatever. We're going to start doing service in a way where we are on the side of the diner. We're gonna present some weird stuff. We're gonna present a dish that look, that's hanging at the end of a skewer that makes you uncomfortable because you know, you're supposed to kind of do that. And one of the things that we kind of realized was if you, if you're gonna have people eat something that looks like glass, you should put it on a plate.

• 1:15:42Speaker 01

  And if you're gonna have something at the end of a skewer that's bobbing around, it looks like you have to give it head, you probably should make it taste like cherry pie. You can't like challenge people in two directions.

• 1:15:52Speaker 00

  Right.

• 1:15:53Speaker 01

  But the way that you describe that should also not be adversarial. It should be like you're on the same team. Hey, and the waiter comes around to the side, they look at it with you and they go, look what he's putting out today.

• 1:16:08Speaker 01

  Oh, he might've been putting it out for three months.

• 1:16:09Speaker 00

  Right, right, right.

• 1:16:10Speaker 01

  But it, you know, it's like, and that was a very stayed thing. You have to be on the team, not team restaurant, team customer, team diner.

• 1:16:22Speaker 00

  Right.

• 1:16:22Speaker 01

  And with that story with the wine, you know, this one table of six, like we did wine pairings mostly, this one table of six wanted to buy all the wrong wine.

• 1:16:31Speaker 00

  Okay.

• 1:16:31Speaker 01

  So big red wines don't really go with our food. You're probably not gonna sell them a Riesling. If you're a som and you just go like, oh, you're, they're gonna buy a $1,000 bottle of the wrong wine. Well, you want to sell the $1,000 bottle, but where we're at, we're like, well, you probably shouldn't get that. That's not really appropriate for the food. You don't want to say that.

• 1:16:49Speaker 00

  Don't embarrass the person.

• 1:16:50Speaker 01

  You don't want to say that. And so, you know, I'm looking and I'm looking at their shoes. And the wife's wearing brand new Lebatons. How do you know they're brand new? Well, the red is absolutely perfect. Those things cost about 1,200 bucks. And that guy over there's got a watch. That's a $55,000 watch. That guy who's actually ordering the stuff is aspirational because he didn't have any of that. So he's either the really rich guy, because the really rich guys don't do any of that shit. Or he's trying to impress these people and it felt like that. So rather than say to them, you probably shouldn't get that, I walk over, I'm like, hey, I'm Nick. I love wine. I'm the owner of the place. What did you order?

• 1:17:35Speaker 01

  And I go, what would you drink on Tuesday with a pizza? Now I know he's probably not gonna answer honestly.

• 1:17:41Speaker 00

  Right.

• 1:17:43Speaker 01

  Right? And I go, oh, that goes really well with the pizza. I said, you know, like we've got a couple of like, you know, you could probably get two or three bottles for what you ordered, but they'll pair wonderfully, just like that, that Super Tuscan with that pizza, you'll get like a better value. And I didn't make it about him. I didn't cut down the spend at all.

• 1:18:00Speaker 00

  Right.

• 1:18:00Speaker 01

  And then the waiter was like, that's amazing. Like, how'd you do that? I'm like, she's wearing Lebatons, that guy's got a $55,000. Like you have to know what you're looking at.

• 1:18:07Speaker 00

  Right.

• 1:18:08Speaker 01

  And that's what magicians do all the time. They, they, they look at their environment, they assess their environment, and then they put themselves into that environment in a way that accomplishes the effect. And so I got really into reading that stuff. The theme here of going, okay, I see an effect that I really like. I, I'm gonna reverse engineer how I would do that. Not because I want to perform it ever, or I want to like know the trick.

• 1:18:36Speaker 00

  Right.

• 1:18:36Speaker 01

  But because I want to know how he got to understand all the positioning you needed, the sight angles, the psychology of, of the person seeing it. And then how can we apply that to our sales team at Tach selling software? Or how can we teach our waiters that standing in front of a table is not nearly as good as standing alongside a table?

• 1:19:05Speaker 01

  And these little things, like, you know, it's so like, I would not do training very often because a lot of the training is literally like, you don't backhand someone. Like, you know, if you're pouring wine and I'm pouring from here, I'm not gonna do this. I'm gonna use my right hand and open hand. It's in the labels there, like small things. And at that level, I'm not the person to teach that. But then I would show them a Darren Brown video. You know, and I'd be like, today we're gonna watch a magic trick. And it doesn't look like a magic trick. The great thing about Darren Brown is he's on the street and it doesn't look like magic. So I would then walk them through the anchoring and the wrist and the hold. And if you watch, this is what he's gonna do every time.

• 1:19:48Speaker 01

  And it seems like it flows like water. It just flows perfectly out of him. So it never feels like, you know, when he backs up and they're walking with him, hey, they're engaged. It's easy to assess engagement with people. So all of those things are studied in practice. And when you, when you kind of gamify that for your team, whether it's a marketing team, a sales team, whatever it may be, it becomes really fun, you know? And you could do that in a smarmy way, like the Jordan Belfort way, right? You know, sell me the pen. You know, and all that, like, yo, how long have you been in the market for a pen? That's not what I'm talking about. And so the great thing about magicians is that there's a suspension of disbelief

• 1:20:30Speaker 01

  that you're being sold a bill of goods. You know that. It's literally called a trick. And yet you're fine with it.

• 1:20:37Speaker 00

  That's where you want to get to.

• 1:20:39Speaker 01

  Right.

• 1:20:39Speaker 00

  You know, and that's why we studied it. And that's why I studied it. And that's why I'm still fascinated with it.

• 1:20:44Speaker 01

  So how would you use your brain on a podcast?

• 1:20:46Speaker 00

  So, uh, let's say you, let's say you're me and you're gonna try to do something, whether it's this podcast or a new podcast. What are some of the questions or some of the ways that you think about this? I'm just curious.

• 1:20:57Speaker 01

  Huh, that's a really great question and I, I don't know the answer.

• 1:21:00Speaker 00

  That's okay. You don't have a good answer. I'm curious to know.

• 1:21:03Speaker 01

  You know, I feel nervous all of a sudden. Stop. That's a good, that's a good question. Yeah, that's a good question. So I listen to podcasts. I listen to your podcast a lot and I think one of the things I would do is I would never send any questions ahead. You did not with me.

• 1:21:15Speaker 00

  Right.

• 1:21:15Speaker 01

  I don't know if you ever do or if people request it. But I have on a lot of podcasts where someone sent me a list of the questions before an interview. I never look at them.

• 1:21:25Speaker 00

  Right.

• 1:21:25Speaker 01

  Like if you're running a podcast, do not send out any information ahead. You know, because it will not feel real and authentic. Like I didn't know you were gonna ask that.

• 1:21:33Speaker 00

  Right.

• 1:21:33Speaker 01

  My response is, is much better because of that. Um, you've done a very good job of being yourself. And then the, the thing that I would say next is what's the next format? Like, I don't know what that answer is, but podcast.

• 1:21:46Speaker 00

  That's a thing you'd be thinking about.

• 1:21:47Speaker 01

  Oh, I need to know, like, how are, how do you get this down into something that's gonna be consumed in the next format? Because it went, it went from listening to podcasts, I mean, all in like the last 10 years. To now we're visually doing it to something here will be a soundbite that will get down to like the, the clip 15 second short video. That'll probably go, like, I do better. You know, a couple of the podcasts I've done have been long form and they've helped me immensely, uh, in business. Simply because people who I think wouldn't listen to it, did.

• 1:22:24Speaker 00

  Right.

• 1:22:25Speaker 01

  And then they feel like they know me because it's authentic.

• 1:22:28Speaker 00

  Have you seen the Hot Ones?

• 1:22:30Speaker 01

  I don't think so. Oh, yes. Yeah. You mean the wings. Yeah. I love it.

• 1:22:33Speaker 00

  So it's a simple mechanic where the guy basically says, well, for celebrities coming in and every celebrity's P, he uses like real Hollywood celebrity.

• 1:22:40Speaker 01

  Yeah, yeah, yeah. I've seen it.

• 1:22:41Speaker 00

  They're all PR trained and, you know, they do a thousand of these things. It's like, actually not that novel to have access to them anymore. But what, what do you not have access to in that person? It's like, you get to see him sweat.

• 1:22:52Speaker 01

  Yes.

• 1:22:52Speaker 00

  It's like, but in a likeable, understandable way. You're not like putting them under so much pressure.

• 1:22:57Speaker 01

  Right. And it's, it's also like.

• 1:22:59Speaker 00

  And it's relatable sweat. It's hot. It's spice.

• 1:23:02Speaker 01

  Yes.

• 1:23:02Speaker 00

  Everybody can kind of even imagine what it looks like. And there's a progression. So you kind of, wherever they start, there's a built in retention hook.

• 1:23:09Speaker 01

  And you also know it's coming.

• 1:23:10Speaker 00

  You know it's coming and you want to see what the finale is. How bad does it get? And they can use clips of them like drinking milk and gas. So you know, oh man, they're gonna, it gets bad.

• 1:23:20Speaker 01

  Yeah, yeah, yeah.

• 1:23:21Speaker 00

  So already it's like, that guy took interviews and with one mechanic.

• 1:23:26Speaker 01

  Yeah.

• 1:23:26Speaker 00

  Changed it. And if you look at our space, for example, like in the business space, nobody does that. Nobody does anything like that.

• 1:23:31Speaker 01

  I will say that I wanted to, because I'm a golf fan, it would be really fun if we were walking up the hill behind here. Like one of the things I thought of and got rid of was like, and I didn't know that you'd have like a production, so it wouldn't have worked anyway. But like, like doing some activity like that is super cool.

• 1:23:49Speaker 00

  Right.

• 1:23:50Speaker 01

  I've been very fortunate to golf with amazing people, not just like professional golfers, but just amazing people. And four hours on a golf course is a great filter.

• 1:24:01Speaker 00

  Right.

• 1:24:02Speaker 01

  Because they're, golf is a game of utter failure. Like no matter how good you are, you're gonna do bad. You're gonna do poorly. How they react to that is fascinating.

• 1:24:12Speaker 00

  And human.

• 1:24:13Speaker 01

  And human and all of that. Yeah. And some people are really enjoyable to golf with and some people are not. And it's unpredictable. Like I can't pre, so one of the things I want to do is like, you know, Bill Gates loves to golf. If I was gonna interview Bill Gates, I'd be like, cool, let's go to the Muni Golf Course.

• 1:24:31Speaker 00

  Right.

• 1:24:32Speaker 01

  And we're just gonna go and there's gonna be like a little handheld camera around and we're just gonna play golf. And we'll interview you about your history of software and AI or whatever, but we're gonna, we're gonna make, watch you look miserable in the middle. Cause he's not a very good golfer from what I hear. That's a really humanizing thing. Like it's great to talk about all the things I, I do well. Like thank you, but like, there's a lot of things I'm miserable at. Like, like let's, let's put a little trouble in the way, which I guess is what your point is with the Hot Ones.

• 1:25:02Speaker 00

  Yeah. Put a little trouble in the way. I think that's a good like principle. How, how might we put a little trouble in the way and then you can come up with 10 ideas? Another one would be, you know, you, you talked about like, if you want to learn how to manipulate, let's say attention or make immediately disarm people or be suggestive. We can learn from magicians or if you want to create a three hour experience, we can learn from theater. So I wonder like, who should I have been studying? Like, should I have been studying? You know, how does a kind of interrogators for the, you know, the CIA, what do they do to really get somebody to be honest?

• 1:25:31Speaker 01

  Yeah.

• 1:25:32Speaker 00

  And I'm not gonna interrogate somebody, but it'd be very useful to go to that level of extreme versus just listen to how podcasters like me do, what we do, right?

• 1:25:40Speaker 01

  Well, also you're trying to break down like for the audience, like, oh, you've had like four different careers. How and why?

• 1:25:46Speaker 00

  Right.

• 1:25:47Speaker 01

  How did that work? Why were you successful at it? What can people get out of it? It's a show, don't tell thing. Like here, we're forced to tell.

• 1:25:54Speaker 00

  Right.

• 1:25:54Speaker 01

  It'd be cool if we just could show it somehow, right?

• 1:25:57Speaker 00

  Like, uh, Steve Bartlett from Diary of a CEO, early on, the effect of every episode was the guest was gonna cry. And so how do we achieve that effect?

• 1:26:04Speaker 01

  Yeah, right, right.

• 1:26:05Speaker 00

  Method was, I'm gonna surprise you at some point with a photo of your mother who has passed away recently, but it's a.

• 1:26:13Speaker 01

  Yeah, yeah, yeah, yeah.

• 1:26:14Speaker 00

  Wonderful thing. And then I got your third grade teacher to write this letter.

• 1:26:18Speaker 01

  Yes.

• 1:26:19Speaker 00

  And I want you to read it here live. And then the effect was the guest would always get emotional and you never used to see that.

• 1:26:25Speaker 01

  Yeah, that person.

• 1:26:26Speaker 00

  The high achiever get emotional.

• 1:26:28Speaker 01

  Yeah.

• 1:26:28Speaker 00

  And that became a calling card for his show. And then it was like this flywheel thing where the guest kind of know, oh, I better open up.

• 1:26:36Speaker 01

  I watched, I watched, I watched that Bear Gryll show, you know, uh, you know, he's like that outdoor adventure guy, Survivor Man kind of thing. And he, he did a, a series where he takes celebrities and.

• 1:26:47Speaker 00

  In the wild.

• 1:26:47Speaker 01

  Takes them somewhere and talks about their career. And, and I love the concept of it, but the execution of it, even though I love when he does it. Obviously they can't put these people in actual danger. It feels dangerous, but like you know, they, they can't, they can't really suffer, you know, like Uma Thurman is not gonna go. I mean, she was one of the people. I'm a big Uma fan.

• 1:27:08Speaker 00

  I was gonna say, that was a random reference.

• 1:27:10Speaker 01

  I know, it wasn't that random. My wife's gonna be like, yeah, okay.

• 1:27:13Speaker 00

  Always Uma.

• 1:27:14Speaker 01

  Always Uma. So, but like, you know, I watched that and I went like, oh, that wasn't like, that wasn't all that interesting because she never felt actually.

• 1:27:22Speaker 00

  Right.

• 1:27:22Speaker 01

  Like emotional, I don't think.

• 1:27:24Speaker 00

  Yeah. And I guess the thing I take from it is, I consider myself a creative person. And it sounds like what I'm hearing about how you go to the restaurant industry or how you did, you found arbitrages or, you know, with talk, how you did talk. You know, I've, I've heard you tell some of these stories and I realize, oh wow, there's levels to this game of how to truly live in that kind of creative mindset. And, you know, there's common patterns, like where can we go, what adjacencies or like totally unrelated spaces could we go learn from? And pull one or two things that might be really.

• 1:27:56Speaker 01

  Well, I mean, and that's the philosophy training to me was like, figure out the first principles thinking. When we were building Linea, it was great customer experience, great business. Because then you've got a flywheel where if the restaurant's making money, you can reinvest in the customer experience, which makes you an even better restaurant, which means that you're.

• 1:28:17Speaker 00

  Making more money.

• 1:28:18Speaker 01

  That you make more money. Yeah. And I think that there's a lot of the garage band mentality among chefs. Even some of the famous ones. I mean, I almost broke my, my TV in my basement when COVID started. And they had famous chefs on CNN going, this is the kind of business where at best you make two or three percent and you pay. You know, this month's bills with next month's revenue and all that. And this very famous chef was on TV all the time saying that. And that we need to print $2 billion for the restaurant industry and all that. And I was like, this guy. I mean, I literally emailed him. I was like, stop saying that. That's not true. He's like, what part of it's not true? Like my restaurants make 2%. I'm like, well, that's because you don't actually, you haven't figured it out.

• 1:29:04Speaker 01

  Like you should be the last spokesperson on there. But he was a very successful TV chef, not a very successful restaurant owner. And those are two different things and the press doesn't get that they're two different things, you know?

• 1:29:15Speaker 00

  Well, for a lot of these industries that are like kind of art, craft based. Openly desiring, running it as a good business is sort of low status.

• 1:29:24Speaker 01

  Yes, it's low status.

• 1:29:24Speaker 00

  You lose some cool points.

• 1:29:26Speaker 01

  It's like, that's what I mean by the GarageBand thing, like, oh, you sold out, like, you know, it's like, for me, I'm really, really proud. I sold the Alinea Group three years ago. Our investors got quarterly distributions from the time I started it in 2005, all the way to when I sold it in 2023, and then they got 8X their initial investment walking out the door. Right? So I think overall, it was like 27 or 28X.

• 1:29:47Speaker 00

  Right.

• 1:29:47Speaker 01

  So if you put in $100,000 in 2005 into a restaurant that you thought was an art project, in 2019, you got about a quarter million back.

• 1:29:56Speaker 00

  See, this is why I got mad at you last time. I was like, dude, I used to always just say restaurants are a horrible business. And I realized, no, no, no.

• 1:30:02Speaker 01

  You were actually bad at it.

• 1:30:03Speaker 00

  I was horrible at the restaurant business. It's a skill issue.

• 1:30:07Speaker 01

  Well, and you know, look, I mean, we could have gotten lucky, but like, at the, at the end of the day, like, the N of whatever is relatively small. Like, you could say, like, well, you caught the right thing and this and that. But you know, the first year we did Alinea, I did about 5 million in sales and made like 8%, 7%. I was considered really good. And I'm going like, well, that's a giant downgrade from my previous career and a lot more work. And then at the peak, like, it was doing 20 some million dollars a year and making, you know, 18, 20%. And like, that was, I needed to build a software company to do that. We need to get rid of all the phone lines to do that. You know, Steve Bernacki, our CFO, came up with Merameco charts to do, to do all of the food costing.

• 1:30:48Speaker 01

  That wasn't me. That was, you know, a guy that I helped to mentor and then I learned from him. And, you know, it's like, all of those things, we disseminated freely to the industry. No one wanted to do them.

• 1:31:02Speaker 00

  Right.

• 1:31:03Speaker 01

  And so like, you find yourself during COVID, looking at the TV going, oh my God, like, it's so broken, the information that comes out. And then the thing that happens to me is I go, what else is like that? And as it turns out, probably everything. Like, you know, if, I, I do know awesome food reporters. I know awesome economic reporters and all that. But chances are that if you're going to write a book about trading, I'm gonna pick on Michael Lewis here. Great writer, great writer. Love his books, love reading him. When he finally wrote about something I actually knew about, I went, ah, this is all wrong.

• 1:31:41Speaker 00

  Right.

• 1:31:41Speaker 01

  Flash Boys is all bullshit. Because if you show up and start asking traders, hey, how did you do that? And you engender their trust in order to betray it, because they know you're gonna write a book. What do you tell them? Well, you tell them the shit that worked five years ago. If my arbitrage between the Amex and the Merc was working right now, we would not be sitting here talking about it. Right? I'd be going like, oh, really hard.

• 1:32:05Speaker 00

  Stay away.

• 1:32:05Speaker 01

  Doesn't work. Like, no, that's gonna work, right? And so, like, you read that and then you go, oh, man, that's, you know, and I think that's a lot of where the current frustration with the press comes from, is that when you have all of these people who can see information freely in each of their silos where they're really learned, all of a sudden you go, oh, that's not what I said, or that's not, you know.

• 1:32:27Speaker 00

  That's not how it is.

• 1:32:28Speaker 01

  I love doing these long form things, because if I put my foot in my mouth, everyone can see it. But it's really hard to take it out of context. Or if you did take it out of context, you go like, well, go look at the.

• 1:32:38Speaker 00

  Context is there, yeah.

• 1:32:38Speaker 01

  Look at.

• 1:32:39Speaker 00

  And it was direct. It wasn't filtered.

• 1:32:40Speaker 01

  Yeah, right. So, you know, I, I, I feel like that's part of the disconnect politically these days. That's part of the disconnect with all of that is that you have, again, different timescales of information. And I have a really good friend that gets all of his media consumption, for lack of a better term, filtered through three things. And I get it from the unfiltered messy versions of X and Reddit and boards and like, I'm a geek, right? So I'm in all that. And by the time he reads it, I'm like, that's two weeks ago, man.

• 1:33:17Speaker 00

  Right.

• 1:33:18Speaker 01

  Like, it also, it's wrong. That's actually not what happened, or not what was said, or you're not getting the context of that thing. And so I'm like, oh my God, I'm consuming, you know, for sure, I'm also consuming it wrong.

• 1:33:29Speaker 00

  Right.

• 1:33:30Speaker 01

  Because I'm not close enough to it to really fully get it. So what I try to do is, I'm fortunate enough being 58 years old that I just try to like, get to the person. Like, if I see something and I'm like, that probably doesn't seem right, I just email the person that.

• 1:33:45Speaker 00

  Well, one of my favorite stories you told me was when you were selling talk. And I've gone through M&A, and I think every entrepreneur should try to listen to more M&A stories, because if you ever get to that point, it's gonna be basically your life's work.

• 1:33:57Speaker 01

  Yeah.

• 1:33:57Speaker 00

  You know, five, 15 years, however long you've been doing this company. And then in this like, three to six month span, you're gonna have this huge swing in the outcome that you're gonna have. Price.

• 1:34:08Speaker 01

  Yeah.

• 1:34:09Speaker 00

  Maybe the deal falls apart, which happens all the time. And you're doing this thing where the other side of the table knows a hell of a lot more about this, has done this 10 times more than you have.

• 1:34:18Speaker 01

  Yeah.

• 1:34:18Speaker 00

  And so you're gonna go into the gunfight with a, you know, butter knife, trying to do this. And you told this great story that resonated with me about when you were selling talk and how you treated the lawyers and the diligence process, where you kind of like, took control of it entrepreneurially, rather than being a passenger to the process.

• 1:34:33Speaker 01

  We, we had incredible growth during COVID. And the trader in me was like, we are gonna lap this growth. And we're still gonna do well. But we're not gonna go 200% next year.

• 1:34:47Speaker 00

  Right.

• 1:34:47Speaker 01

  This is my moment. Like, it looks really good right now. And with technology, you know, you could have something that, that's, you know, growing 200% a year, and then all of a sudden you grow 50% one year. And even though that's amazing, the world of M&A and VC just goes, oh.

• 1:35:04Speaker 00

  Tries it.

• 1:35:04Speaker 01

  Like, you, you are, you are on your way down, and pretty soon you're gonna be like a legacy, you're Comcast pretty soon, you know, even though it's not true. So Steve Bernacki, Jeff Kaplan, my COO, myself, the lawyers would go like, well, we just got the diligence list. It's 896 questions. And we would convert it from Excel into Google Docs. And then Steve would go through and he would color code it all, and, and we would assign it to the people that could answer all the questions. And of course, like, the investment bankers and lawyers kind of thing would go, okay, well, this will take like, four to six weeks.

• 1:35:41Speaker 00

  Right.

• 1:35:43Speaker 01

  And I was like, we built dashboards for all this. I could have it in like, two days. But then they realized, they ain't getting paid if it's in two days.

• 1:35:50Speaker 00

  Right.

• 1:35:50Speaker 01

  Right? You know, it's like, they're billing hourly, and there's four of them.

• 1:35:53Speaker 00

  So they're incentive, yeah.

• 1:35:54Speaker 01

  You're at $3,200 an hour or whatever, every time that you get on a Zoom call with them. And then, you know, the investment bankers want whatever, 3% to 4% or whatever. So we just went, we don't need an investment bank. Like, there's nothing here that we can't figure out on our own. And of course, the board hated that idea. But we still had a controlling interest. And so I just said, like, awesome, we'll do it for 2%. Does that make you feel better? For real. And they.

• 1:36:23Speaker 00

  So you, your own, your own investment bank?

• 1:36:25Speaker 01

  Yeah. And I'm like, I wasn't gonna do that, but they were so adamant that it was hard. And I said, well, you know, like, look, they're getting paid 4%, I'll save you 2%, we'll take it. And that way, we'll be beholden. If we don't get it done, like, you can, you know, we won't get paid, which is weird. They should just say no to that. But they didn't say no, they said yes. And we did that whole list in three days. We just stayed up.

• 1:36:47Speaker 00

  Hey, just locked yourself in a room, right?

• 1:36:48Speaker 01

  Locked yourself in a room, did the whole thing in three days. There was like, you know, there was a lot of questions that were like, unclear what this, what you're asking here, you know, or irrelevant, but. And then they just went, what is this? And we're like, that's your diligence. It's done.

• 1:37:01Speaker 00

  You gotta tell the Spock, the Spock story.

• 1:37:03Speaker 01

  Oh, God.

• 1:37:05Speaker 00

  I'm not letting you up.

• 1:37:06Speaker 01

  Okay, yeah. There was a guy on the other side, we won't use his name or the firm. But, you know, there'd be, this is during COVID too, so they wouldn't be in person, and there'd be like, 30 people. I mean, I have screenshots.

• 1:37:17Speaker 00

  Zoom call.

• 1:37:18Speaker 01

  Zoom call of 30 people.

• 1:37:20Speaker 00

  All lawyers.

• 1:37:21Speaker 01

  All lawyers, our side, their side, a couple people from Squarespace, and then the three of us, basically. And we knew the answers to all this stuff, because we did it ourselves. There's no one to parse it through, whatever. And so then I would just ask a question, or Steve would ask a question, or Jeff would ask a question. And the lawyer would literally go, I will take that to my client. And I'd be like, your client's on the [bleep] I can see your client. Like, we're here, we've got two weeks left. Let's not leave it till, like, and it had to be done, one of the critical things. And, and the reason it got done is because they were gonna go public the following quarter, and all of their S1 information and whatnot need to be locked down end of Q1, which happened to be on March 31st.

• 1:38:04Speaker 00

  Okay.

• 1:38:05Speaker 01

  Like, it, it actually followed the calendar year. So March 31st, we had to be done. Otherwise, it was not gonna happen for six months to a year, and maybe never, right? And finally, I just looked and I was like, hey, Spock, shut the [bleep]. And everyone, even some people on his own team were kind of like, you know, kind of trying not to giggle, but you could see them, you know? And I was taking screenshots the whole time, because this guy.

• 1:38:29Speaker 00

  It takes guts to say that to the other side's lawyer.

• 1:38:31Speaker 01

  So angry, because like.

• 1:38:34Speaker 00

  Did he wonder why you were calling him Spock?

• 1:38:35Speaker 01

  No, no, no, no. This was, his entire strategy was simply to close at noon on the last day possible.

• 1:38:46Speaker 00

  Right.

• 1:38:46Speaker 01

  Because that's how they could get the most out of it.

• 1:38:49Speaker 00

  Right.

• 1:38:50Speaker 01

  And that's one of the, you know, you were, we were talking earlier, like, one of the superpowers is not a superpower, it's just, what, what is this person's motivation? If they're on your team even, are they, are, are your incentives aligned? I learned very quickly at Alinea that my manager's incentives on a Wednesday night were not to be full. And I learned it because this one guy said to me, Nick, if every day was Saturday, we would be so tired and burned out. Because I'd be like, we have 140 person waitlist, we're doing 80 people tonight and 94 people Saturday. Why is every day not Saturday? Why are we not doing 94 people every night?

• 1:39:24Speaker 00

  Right.

• 1:39:25Speaker 01

  And he said, I'm holding back those, because otherwise we'd be too tired. And I'm like, but you don't get that, like, we could hire 10 more people and you could work four days a week instead of five and get paid more.

• 1:39:36Speaker 00

  Right.

• 1:39:37Speaker 01

  He did not last much longer. Like, because I literally went into the primitive pre-talk talk and opened up 110 seats.

• 1:39:46Speaker 01

  For every day for the next two weeks. And we sold all 110. And I went in the kitchen and I told Grant, we're doing 110 every day for the next two weeks. And he's like, okay. And then I knew that they would make it happen. And then the guy just kind of walked off, like, you know? And so you just go like, okay, like, I, that was my fault in a lot of ways. Like in hindsight, I did not align the incentives. I did not explain that every day should be Saturday. And, you know, it's like, there's a certain group of people that'd be like, you know, yes, every day is Saturday, like it's game day.

• 1:40:19Speaker 00

  So I have this phrase that intensity is the strategy. And what I mean by that is, I spent a lot of my life searching for the better way, the better strategy, the hack, the shortcut, the whatever. As I hang out with enough winners, you realize like, the difference is not that they knew something I didn't know, or they had some magic formula, but like, they applied a greater level of intensity to a pretty visible strategy that I could have seen. And actually, the intensity almost changes the strategy over time, just like.

• 1:40:47Speaker 01

  Yeah, and also when you're wrong, you go like, oh, I was, I was really wrong. I mean, I just said, in hindsight, thinking about it, I did that wrong. He did not know why that was important to the business, or why it could make his life better. That was my fault.

• 1:41:00Speaker 00

  But do you think that you had, was the trading floor like the formative period where you?

• 1:41:04Speaker 01

  So I will tell you a great, I will tell you an exact thing that, that is a tautological stupidity that is in a book called Market Wizards. So this, this book called Market Wizards, it's one of the rare trading books that's great. Now, everything in it's out of date in terms of the, the process of like the floor traders and all that. But what's not out of date with the Market Wizards book, the mentality of the people that he profiles in there and interviews is great. And one of them was called One Lot Wonders. And so this guy would just trade one contract at a time, really small. And one of the questions, I remember this, and I think about it all the time, is that he asked the trader, what should a failing trader do to become a successful trader?

• 1:41:46Speaker 01

  And he goes, well, that's a dumb question because a successful trader will figure that out. And it sounds stupid, right? And all he's saying is like, well, no, like if you're a success, if you're gonna be a successful trader, you will stop doing all the stupid shit. And I don't know what stupid shit you're doing. You know, I can't know, and I can't put it in this book and in this interview, but it's a mark of a successful person that they will, at the end of every day, like kind of like you were saying about Chris Rock, at the end of every trading day, you do the postmortem or whatever, you know, that's the, the Google version of it, postmortem, you know, like something goes wrong, you analyze what went wrong. One of the things I tell people is like, no one likes getting punched in the face. But there's a certainly a lot of people that when they get punched in the face a lot,

• 1:42:30Speaker 01

  instead of saying like, maybe I should learn to bob and weave a little, they blame the puncher. Or they blame the referee, or they're like, maybe I shouldn't be in the ring, or whatever it is, right? And, you know, that's why, you know, that's the flip side of the Mike Tyson quote, right? You know, everybody's got a plan until they get punched in the face. Well, it's true, you got a plan.

• 1:42:50Speaker 00

  Tyson impression.

• 1:42:51Speaker 01

  Thank you. You know, and I love that too. You know, I used to show that to people because I'd be like, yeah, like, we have a plan, our plan is changing.

• 1:42:59Speaker 00

  Right.

• 1:43:00Speaker 01

  Because we, we are absolutely getting destroyed right now, and I was wrong. And one of the things I hate about managers, and when I have worked in other organizations, you know, I'd be sitting in a meeting for two hours and like, I'd be like, can we just all admit that this is stupid? Like, we should not, like, I don't care who's, who owned it or whatever, like, it's just not working.

• 1:43:21Speaker 00

  Right.

• 1:43:22Speaker 01

  Kill it. Like this one company bought this other small company. And I'm like, you have 14 different competitors now and it'll never be monetized.

• 1:43:30Speaker 00

  Right.

• 1:43:30Speaker 01

  Can we admit that that's never gonna make a dime? Now, you could keep it for strategic reasons, but you probably shouldn't spend $10 million a year developing. And everyone's like, everyone who had ownership of it, no one would just go like, yeah, we screwed that up, we shouldn't have bought that.

• 1:43:42Speaker 00

  I love that the successful trader will figure out.

• 1:43:45Speaker 01

  How to be a successful trader.

• 1:43:46Speaker 00

  Successful trader, which is that he will edit out the stupid shit he's doing.

• 1:43:49Speaker 01

  Yes.

• 1:43:49Speaker 00

  He'll just over time, every night, edit out, snip out some of the stupidity until there's not enough left.

• 1:43:54Speaker 01

  Yeah.

• 1:43:54Speaker 00

  And he'll be successful.

• 1:43:55Speaker 01

  Yeah, I mean, look, like, everything around us here, I'm not a viticulturist at all. I am, I don't know agriculture, I'm learning. But I got this place and got here and was very scared. I didn't know how to shut off the sprinklers in this lawn today because it all changed in the last couple of weeks. And you learn, you know, you start going around and you start learning. And I, I got asked to be the keynote speaker at the Napa Valley Grape Growers Association this past spring. And I said, oh, you, you've got the wrong person, you know? I, I don't know anything about grape growing really, and I'm learning and, but some of my heroes in this industry are the people who started that 30, 40 years ago, right?

• 1:44:38Speaker 01

  And so I'm like, I'm not, I'm not going in there and telling Randy Dunn like, anything about grape growing.

• 1:44:45Speaker 00

  Right.

• 1:44:45Speaker 01

  And they said, no, you're the only optimist left here. Like, you're building, you're planting grapes and you're building a wine bar in town. And you're, you bought property when everyone's selling property, we just wanna know your why. So I was like, okay, I'll show up. And the first thing I said is, I know nothing about grape growing, I, I hope to learn from all of you. They all, big smiles on their face because they thought I was gonna get up there and be like, new, new rich guy comes to Napa and tells people how to grow grapes, right? And then the software guy, because they all use Tach, the software guy's gonna tell us that the tasting rooms are doing great now, even though we know they're not.

• 1:45:22Speaker 00

  Right.

• 1:45:22Speaker 01

  Okay, and all that. And what I said was, you had 30 years up into the right and you thought you weren't gonna get kicked in the face at some point and prices weren't gonna go down? Really? Who told you that? Was it the hippies that came here in the 50s?

• 1:45:34Speaker 00

  Right.

• 1:45:34Speaker 01

  You know, and it's like, they couldn't have imagined $38,000 a ton. What makes you think that you, you're owed that? Walked out and people were like, yeah, like, let's go, you know? And this cycle is gonna be like any other cycle, this time scale is really long, these grapes won't be good until I'm 70. And so, like, that's weird, you can't yell at the grapes and have them grow faster. But the way that they run their businesses can feel different.

• 1:46:00Speaker 00

  Right.

• 1:46:01Speaker 01

  And I think I just gave a little hope in that. Like, you have copium or hopium? And I'm more of a hopium, like, figure it out, you know, kinda guy, right?

• 1:46:08Speaker 00

  It's like the, the Matrix, red pill, blue pill.

• 1:46:10Speaker 01

  Yeah, yeah, yeah, yeah.

• 1:46:11Speaker 00

  You choose one of these two.

• 1:46:12Speaker 01

  Yeah.

• 1:46:13Speaker 00

  We gotta talk about Strange House. So you gotta tell this story, because this is one of the coolest projects that.

• 1:46:19Speaker 01

  I hope it happens. Sean, are we gonna make this happen?

• 1:46:21Speaker 00

  It's gotta happen. I mean, you know, how can you listen, you should listen to this podcast and be like, that guy would make that happen, you know what I mean?

• 1:46:27Speaker 01

  Yeah, if anyone's listening to this, I'm gonna look at the camera for them. If anyone's listening to this.

• 1:46:30Speaker 00

  Down the barrel.

• 1:46:31Speaker 01

  We are building the weirdest, coolest thing. I say we, I, we are now, after like a couple of conversations, okay, like, where to begin?

• 1:46:40Speaker 00

  And it's, it's just another one of these, you have no business doing this.

• 1:46:43Speaker 01

  A thousand percent.

• 1:46:44Speaker 00

  But I'm gonna do it anyways.

• 1:46:45Speaker 01

  Yes.

• 1:46:45Speaker 00

  And I'm gonna shoot to the very top when I try to do this, and because of that, I'm gonna like, I'm gonna go figure this out. All right, I'm gonna, I'm gonna figure this out one step at a time. So, so tell the backstory.

• 1:46:54Speaker 01

  Okay, the backstory is, I was doing what I do on like a Wednesday night at 10 o'clock, and I, I opened up a bottle of wine too late. And everyone's like going to bed, and I start watching some random YouTube magic thing, you know? And there was a guy who I'd never seen, you know, comes up on the feed, Nate Staniforth, does the lottery trick. And the effect is that he's in an, he's in a theater, they throw around, you know, a beach ball or like a little crumpled piece of paper in this case. And six people call out a number, and at the end, the last person comes up, and in the wallet that's been sitting, you know?

• 1:47:29Speaker 00

  At the, at the beginning, he puts it on a stool.

• 1:47:31Speaker 01

  On a stool. There, you know, comes up on, on stage, and he opens up the wallet and he pulls out the lottery ticket from whatever state they're in. And the guy reads off the numbers of, of the.

• 1:47:45Speaker 00

  What the random people in the crowd.

• 1:47:46Speaker 01

  And they're, they're genuinely random, like you can tell that they're genuinely random, they're not stooges, they're not.

• 1:47:52Speaker 00

  Ball's bouncing around.

• 1:47:53Speaker 01

  And, and the people are clearly, you could see the audience going, by the time they named the third number, like you know that the lottery trick.

• 1:48:01Speaker 00

  Right.

• 1:48:01Speaker 01

  And Nate gives such, it's kind of like that, that stopped making sense, empty stage, just one stool, it's very elegant, he's very quiet about it.

• 1:48:09Speaker 00

  Not a big fog machine.

• 1:48:10Speaker 01

  There's no craziness. And boy, I like this effect a lot, but the thing that I didn't like was that he called out the numbers in the order that the audience called them out. And every lottery ticket, I thought, and then I had to look it up, if you buy, and I played lottery for no edge, so, um, they're an ordinal number, right? So if you go in and scratch off a Lotto ticket or call it in or whatever, it's always gonna go from 1, 3, 17, whatever, but in his, it would go 17, 3, whatever the audience called it up. So this upset me greatly, right? You know, I was like watching it going like, this is like one of the greatest illusions ever.

• 1:48:50Speaker 00

  Given my disorders. It bothered me to no end.

• 1:48:53Speaker 01

  This bothered me to no end because I thought he, he did such a wonderful thing, and then at the end, he just messed it up just like a hair, you know? And so I reverse engineered how I would make that lottery ticket appear in that wallet. And starting at the end, working backwards, which is kind of like, like, I look, I think of everything like, you know those mazes as a kid and there's like, the mouse in the middle and the, or the cheese in the middle and the mouse in the end, you have to like, do the maze. You know, I would always, like, you're, like, you're not supposed to in the classroom, but of course you start.

• 1:49:29Speaker 00

  Start with the cheese.

• 1:49:30Speaker 01

  Cheese and work your way out, right? So that's, that's it in a nutshell, start with the cheese and work your way to the mouse, right? And so I did that with this and, you know, had a reasonable solution, I thought, for how it would happen. But I was really bothered by this thing, so I'm like, well, you know, I don't think I'm giving anything away that like, everyone knows that the ticket couldn't have been in there the whole time, so clearly it's getting printed at some point here, I don't think Nate's gonna get angry with me on that. So I was just like, well, I could write like a little Arduino algorithm or however he's doing this for him. And so I wrote him this long, cold email, you know, as I'm wanting to do, saying, love your stuff, I've, I've watched all the stuff now and like, man, I love that effect. You gotta get the numbers right.

• 1:50:16Speaker 01

  And much to my amazement, like five minutes later, my phone rings. I expect to never hear from this guy, because magicians also are kinda like, who are you that you're reverse engineering my?

• 1:50:27Speaker 00

  Guy on YouTube.

• 1:50:27Speaker 01

  Yeah, yeah, some, yeah, right. And Nate was, who are you? And what, what's going on? And I was like, well, you know, I own restaurants and I'm, I'm, I kind of like look at magic. He's like, no, no, this is, this is a great email. This is a great, like, this is weird. Like, only one other person's ever noticed that. And I was like, and he's like, oh, like one of the best magicians in the world, like, you're not a magician? I go, no. This is, this is really weird. And then he said something to me that I was really mad at myself for not noticing, and that was, hey, I did it that way, of course, but the audience couldn't follow along.

• 1:51:05Speaker 01

  And because two people out of five million noticed the numbers wrong, doesn't matter. Matters to you, kind of mattered to me too, when I first did it. Not the best way to do the effect. And I went, of course it's not. Like, I just went, that's it. And I thought nothing more of it, right? But we exchanged books. He sent me a book he wrote called Finding Real Magic. He went to India and-

• 1:51:29Speaker 00

  I read it after you read it, it's unbelievable book.

• 1:51:30Speaker 01

  Wonderful guy, like, great thinker, great everything. And then he was working as a consultant on building magic for David Blaine. And I went and saw the Vegas show. Because I don't go to Vegas, I don't gamble. But my wife and I happened to have to go there and then we got stuck there for a night. And I was like, oh, I know that guy. I know the guy who's working on that. And we went to the Blaine show and that version of it, I didn't love. But when I had breakfast with Nate the next morning and he said, how'd you like the show? What am I gonna say?

• 1:52:02Speaker 00

  Two choices, be nice?

• 1:52:04Speaker 01

  I was nice.

• 1:52:05Speaker 00

  Okay.

• 1:52:05Speaker 01

  It's not, it's not typically me. But I was like, oh, it's great. And he just looked at me, he goes, Nick, I read people for a living. What didn't you like? Like instantly. And I said, well, I had done another email, but I didn't send it. And I pulled it out and he looked at it. He said, did Blaine put you up to that? And I go, no. Cause Blaine had been to Alenia a couple of times. I had never met him, but, you know. And I go, no, no, no, no. Like, I just, I wrote that like when I got back from the show last night. So it was fresh in my head. But I felt like a jerk sending it to you. And he goes, I gotta show you something. And he had written almost the same email to all the production team, like a week earlier. And he was like, that's extraordinary.

• 1:52:48Speaker 01

  And then we started talking about the business of magic, which I'd never really thought about before.

• 1:52:52Speaker 00

  Okay.

• 1:52:53Speaker 01

  And he was kind of lamenting the fact that the next David Blaine is not gonna get minted. That kind of TV doesn't happen. And he's gotten tons of views on YouTube and it doesn't monetize. And, you know, he's been doing magic and looks at it as an art form and a love of his, like many magicians. And there's this guild of people that do it, but they're kind of seen as outsiders.

• 1:53:16Speaker 00

  Right.

• 1:53:16Speaker 01

  You know, it's like, you're either the weirdo that does the kids, you know, birthday party with the balloons at the end or whatever. And a lot of people don't see the art of it. And I think he saw that I did see the art of it and the complexity of it. And then I just said to him, like, yeah, I had an idea years ago for a restaurant that would have a narrative arc through it. And people would move through it like Disney's Haunted House. Because one of the problems of the restaurant is you have 50 seats. They're gonna sit there for two hours. You're gonna get a turn, a turn and a half. Maybe you do 120 people at those 50 seats. Maybe you can only do 75.

• 1:53:52Speaker 00

  Capped by the turnover.

• 1:53:53Speaker 01

  Right.

• 1:53:54Speaker 00

  But I don't think you like caps very much.

• 1:53:56Speaker 01

  But the wonder, correct. And one of the cool things though about Disney is that the haunted house, you get 30 people. They have a very intimate experience. They go to the next room, they're having another cool experience. Next 30 people come in.

• 1:54:12Speaker 00

  Every 10 minutes, 8 minutes.

• 1:54:14Speaker 01

  Whatever it is, yeah, whatever it is. And I was like, you know, I wanted to do a restaurant that way, but the cogs were terrible. Like, too many variable costs, too many servers, too many rooms, too, it's just, is not gonna work. And we talked about it for years. I analyzed it to death and I'm like, the economic, you'd have to charge way more than it's worth to have it work. And that's true of all the pop ups. Like, unless you get an underwriter like American Express or whatever, the pop ups tend not to work either. Even though they're famous and they pop up all over the world. And people pay $500 to go to what XYZ pop up. They don't really make money. That's the weird secret of it, cause it's, the production's too high.

• 1:54:53Speaker 00

  Okay.

• 1:54:53Speaker 01

  But then I was sitting there going, it would work for magic. The theater scale needs to be different, you know? It's like when you go see Siegfried and Roy or whatever and a lion pops out. It's not that surprising because there's a giant stage and they can hide a lion. But if we're in a little room and a lion pops out, holy shit, that's something, right?

• 1:55:12Speaker 00

  That's new.

• 1:55:13Speaker 01

  It's new. And also, the kind of magic I like the best is close up magic. Because I know exactly what they're doing. I know, I know how all of it's done at this point in my life. A really great close up magician is a thing of beauty. It is an art form. It's like watching a great musician or a great ballerina or something like that. It's awesome. I mean, I'm getting choked up thinking about some of these people and what they do to make it happen. It's amazing. So I say that to Nate and leave. And then he starts calling me with questions. How much does insurance cost? What kind of room? How many square feet do you think we would be? You know, all these things and we email back and forth. And the day I closed on this and my wife was running, she runs women's hiking groups all around the world.

• 1:55:57Speaker 01

  She was on a hike somewhere, I think Portugal maybe, somewhere in Europe. And I was terrified of this whole thing. And I get a FedEx package and it's from Nate. And it says, hey, Nick, thank you so much. This is what I've been working on for the last eight months. Thanks for the inspiration, thanks for the questions. And here is my proposal for how to do that thing that you told me about. And I think it's the solution to everything. And take your time reading it. I'm on a 10 day trip to Canada with my family that I take every year and I'll be completely off the grit. So I'm sitting up there and I got a lot of shit to worry about here. And I read the whole thing. And every like 10th page, there was a QR code.

• 1:56:40Speaker 01

  And you'd look at it and it would be him in his studio with a scale model of a room.

• 1:56:48Speaker 01

  And the first one, when it first came on, I just assumed like, oh, these are videos he's done. And, but it would be like, hey, Nick, okay, room three is the car. And I would be like, oh my God, he made all of the videos for me. And then I got to the spreadsheets and the insurance and all that. And a lot of that was like verifiable, like kind of wrong. But here he was doing it all. Like, it wasn't just like a business plan of like the thing he was great at. It included all of the things to do a proof of concept that this would indeed be a great business. And I had put a limit, a bottom line, I said, look, if you build something like that, it can't gross under 20 million.

• 1:57:29Speaker 01

  Like, it sounds like a big number, but like when you do the throughput and the math, it's actually not that big of a number at a $120 ticket price or something. And that's what it is, you know? And I started going through like, whenever I go to like the Sphere, I'm like, what are the economics of the Sphere?

• 1:57:43Speaker 00

  Yeah, of course. You're not watching the show.

• 1:57:45Speaker 01

  I can't help myself, right? So it was a great business plan. And by the time he got out of the Canadian wild, I'd read it like three times. And my first thing I said to him was like, this is the last thing I need in my life right now. But there's no way we can't do this.

• 1:57:59Speaker 00

  Right.

• 1:58:00Speaker 01

  And that was three years ago. And in the past three years, we have scoured the world for real estate. Cause the real estate is the thing you get married to. It's like the Ray Kroc story, like they're not in the business of selling hamburgers. They're in the business of real estate. I learned long ago that the deal that you make for a restaurant or for a show or whatever. In this case, you are not renting a theater on Broadway. You are building a purpose built theater. That is a small high hoop.

• 1:58:25Speaker 00

  Right.

• 1:58:26Speaker 01

  There are very few people that are gonna do that. And I knew the guys for years who did Sleep No More.

• 1:58:31Speaker 00

  And Sleep No More was a similar idea where traditionally the theater is you sit in a chair. It's happening on the stage. You watch the thing, show's over. Sleep No More was like, you go to this hotel motel.

• 1:58:44Speaker 01

  Yeah.

• 1:58:44Speaker 00

  And the play is happening in and around you.

• 1:58:47Speaker 01

  And it makes no sense. It's not linear.

• 1:58:49Speaker 00

  Yeah, cause you go to a different room, a different scene is going on. You don't know what the hell's happening.

• 1:58:53Speaker 01

  They're dancing, not talking and it's Hamlet and like I-

• 1:58:55Speaker 00

  But the thing was like, it was sold out, made like hundreds of millions in revenue, right?

• 1:58:59Speaker 01

  Yeah. And it also like, the first time I did it, it was like nothing I'd ever seen. And while this is different, because it use, it utilizes illusion to create that sense of childlike wonder and awe that we were talking about earlier, right? And that's what we were trying to do with Alenia.

• 1:59:17Speaker 00

  That's the cheese.

• 1:59:17Speaker 01

  That's the cheese.

• 1:59:18Speaker 00

  That's the, the customer's cheese that they, a moment of wonder.

• 1:59:21Speaker 01

  And I would, I would say that as much as I love AI and I love, I'm, I live mostly here. I would like to connect my body more to my mind, like, you know, like, like I'm not as disciplined about exercise as I should be and things like that. But theater, great theater, great music is about human connection. And utilizing illusion now in an immersive thing that you cannot get any other way feels like it's gonna be more important two years from now than it is less important two years from now.

• 1:59:52Speaker 00

  Yeah.

• 1:59:52Speaker 01

  Because more and more and more things are going to go the AI route. They're gonna go in the non-person route, you know, they don't need to be person to person anymore. Agents are gonna be doing things. I love all that. I am all in on all of it. I still believe that sitting down to a table is important. I still believe that growing the wine in 10 years is important. And I want to create human connection among complete strangers because you don't meet, people don't meet each other anymore. And all the discourse is that's an other, that person's an other. And I guarantee you, you could take any two people, put them in the environment that we're creating. They could hate each other politically. They could be from opposite ends of the earth. And at the end of that, we need to make them love each other.

• 2:00:35Speaker 00

  Right.

• 2:00:36Speaker 01

  That's it. And so how do you do that? Well, creating moments of awe and wonder where you feel like you're five years old again, is what Strange House is about. And it's gonna be really hard to build and really expensive to build. And we found a space, 90,000 square feet underneath Wall Street in Manhattan.

• 2:00:56Speaker 01

  Six months of negotiating the LOI on the lease, because when you go to a REIT and you go, ah, I've got just the thing. It's kind of a magic show, but not really.

• 2:01:08Speaker 00

  Right.

• 2:01:08Speaker 01

  In fact, there's no magician and there's no stage. And it's kind of more like Disney's haunted house, but there's nothing haunted. And it's about human connection.

• 2:01:15Speaker 00

  Nothing like this has ever existed.

• 2:01:17Speaker 01

  Yes.

• 2:01:17Speaker 00

  And so there's no comparables.

• 2:01:18Speaker 01

  And they just go, yeah, well, we've listened to your podcast and we've seen that you're successful. But like, what do you know about doing this?

• 2:01:26Speaker 00

  Right.

• 2:01:27Speaker 01

  And so then you go like, well, Nate. And they're like, yeah, you know, he's got some YouTube views. He's a magician. Like, we don't really want to lease out 90,000 square feet to a magician. So then you start talking to the powers that be in other things. So like Alon Lee, who's a friend of yours who connected us, did Exploding Kittens. I actually playtested that at a thing called Ord Camp that was run at Google. And you meet these creators, these builders, and the people who build are the people like that, that One Lot Wonder trader guy who, you know, I sent this to Alon and Alon was like, this is what I've been waiting for my entire life. And he goes, he tells the same story about magic that I told. And when you watch his videos on how to build games and all that, they are about

• 2:02:12Speaker 01

  human connection and about getting a small group of people together and a family together. And my, my family, my wife and my younger son do the New York Times crossword puzzle every day. They do British cryptic crosswords that I can't remotely get to. And my wife builds puzzles for family Thanksgiving to like do things like that. So you meet Alon and he has passionately thought about these things and built amazing things. So we're trying to put together the dream team on this and we're running out of time

• 2:02:47Speaker 01

  because real estate only sits for so long.

• 2:02:49Speaker 00

  Yeah.

• 2:02:49Speaker 01

  So I don't know if it's going to happen. Is it going to happen, Sean?

• 2:02:53Speaker 00

  It has everything it needs, except for a lot of the things that you talked about earlier in this episode, which is basically if you look at when you were talking about building the arbitrage and you had to run fiber into the thing and they don't let you have the permit, you bribe the guy with the James. You figure out the way, you know?

• 2:03:08Speaker 01

  Figure out the way.

• 2:03:09Speaker 00

  It's like, okay, you do it with Alenia and you've got no experience or whatever. Okay, we're going to start posting about this. We're going to open source everything that we're doing. We're going to build this waitlist so that on day one, we have the right people who understand the story and are bought in. You've found the way. So like to me, the question of is it going to happen or not is always like a self referential question. It's like, well, make it happen or not.

• 2:03:28Speaker 01

  It's like, the dumb trader will, like the dumb theater producer will, will not get it done. And the good one, obviously it's going to get done, right?

• 2:03:36Speaker 00

  Exactly.

• 2:03:36Speaker 01

  I think.

• 2:03:37Speaker 00

  It's a choice more than it is like a question.

• 2:03:40Speaker 01

  Yeah, I think what we're trying to do that's challenging for people to wrap their heads around is it works at scale and not at not scale.

• 2:03:51Speaker 00

  Can't do a small.

• 2:03:52Speaker 01

  You can't playtest it.

• 2:03:53Speaker 00

  Right.

• 2:03:54Speaker 01

  Like a board game. And this is not Alon's problem. I'm just using it as a, as an analogy, you know? It's like some of the illusions that we've crafted and that Nate has done a technical guide that's hundreds of pages long that we don't want to really show to that many people, really smart people will look at it and go, how do you know it will work? And it's like, well, we've spent the last three years working on it. Like we have the best people in the world who build these sorts of things, building it. Like the people who built Taylor Swift's stage are going to build room three. For real. Like that's literally true. But until you spend a couple of million dollars to build room three, you don't have room three.

• 2:04:33Speaker 00

  Yeah.

• 2:04:33Speaker 01

  So you could, you could make walkthrough videos and VR things and all that. And, you know, part of me is, is a little bit pissy in that like, well, I didn't know anything about restaurants. They got 28x, you know? And the tech people that I talked to go, oh yeah, well, you know, technology, but you don't know theater. And I'm like, nah, you said no to me eight years ago and said I didn't know how to build a software company. So, you know, and I get that, like, that's part of human nature. And then they're kind of like, what's the point? And the point is it's going to be a great business. It has the throughput of Disney. It could be like Cirque du Soleil. You could build five of these things.

• 2:05:11Speaker 00

  Right.

• 2:05:11Speaker 01

  But the point is it's hitting the market at the right, with the right thing at the right moment. It's the Gretzky skate to where the puck's going to be. In-person experiences are going to be more important every single year from now till we hit deep, like the holodeck.

• 2:05:25Speaker 00

  Right.

• 2:05:26Speaker 01

  Like, you know, and this is a different one. It's not a concert. It's not a theater. It's, it's, it is its own thing, which makes it really hard to reproduce.

• 2:05:34Speaker 00

  Yeah, I think people will get it. I mean, I.

• 2:05:36Speaker 01

  You got it.

• 2:05:37Speaker 00

  In five minutes, it's like, oh, this is amazing. There's going to be a one in a, one in the world type of thing that exists. You read Nate's book, you're like, all right.

• 2:05:45Speaker 01

  Yeah, it's doable. Nate's wonderful.

• 2:05:47Speaker 00

  This guy is like, you know, he spent his whole life basically preparing for this. So you sort of figured that part out. Yeah, I think it's going to happen. I think we got to figure out the way.

• 2:05:54Speaker 01

  Yeah, I agree. I still feel that way. I'm like, this is the last thing I need. And then every time I pick up the phone, which is every day and we, Nate and I talk through something, I, you know, I'm often walking up the hill up there or whatever with the dog and I get off the phone and I'm like, man, I need to, like, we need to start, we need to get the next step.

• 2:06:11Speaker 00

  Yeah.

• 2:06:12Speaker 01

  Because if we don't get the next step, we're not going to get it done. And it deserves to exist.

• 2:06:17Speaker 00

  Yeah.

• 2:06:17Speaker 01

  Like it's a great enough thing that it deserves to exist.

• 2:06:20Speaker 00

  Well, you found your next boulder.

• 2:06:21Speaker 01

  We found, we found the next, we found the next boulder.

• 2:06:24Speaker 00

  Nick, thanks for coming on.

• 2:06:25Speaker 01

  Thanks, Sean.

• 2:06:25Speaker 00

  Appreciate you, man.

• 2:06:26Speaker 01

  Always good to see you.

• 2:06:37Speaker 00

  All right, let's take a quick break. I want to tell you about Marketing School. It is a podcast that is part of the HubSpot Podcast Network and it is run by Neil Patel and Eric Su. And these guys are both marketers who are running businesses. And so if you want real world tactics from practitioners who are actually out there in the field doing it, this is the podcast for you. Check it out wherever you get your podcasts.