The Tim Ferriss Show – Nick Kokonas on How to Apply World-Class Creativity to Business, Art, and Life

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Key Takeaways
  • Don’t look at things as a success or failure, just make sure your pattern of decision making is correct
  • Read Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Taleb
  • Look for the high, small hoops – the “X out of every Y fail within Z” businesses
    •  What does Nick say about these? – “Great! That’s Perfect!”
    • “The higher and smaller the hoop, the more interesting it is to figure things out. There’s fewer people playing the game.”
    • “I always spend time looking for the high, small hoops. Then I spend my time learning as much as I can, and then I jump through that hoop.”
  • Rethink the why of everything. For example, in the restaurant business, you might ask:
    • “Why are candles romantic? Why do we need candles?”
    • “Why do tables have tablecloths?” – Because the table underneath is a piece of shit
  • More on the importance of asking why
    • “The people most entrenched in a system, have no idea why”
    • It is SO important to not just do things, but to ask “Why?” before you do them
  • Want a business idea? – Scratch your own itch
  • “If you’re serious all the time, you’re never going to get the actual serious work done. You’ll burn out before that ever happens.” – Tim
  • Intellectual curiosity is everything
Intro
  • Nick Kokonas (T: @NickKokonas and IG: @NKokonas) is the co-owner and co-founder of The Alinea Group of restaurants which includes AlineaNext, The Aviary, Roister (all in Chicago) and The Aviary NYC
    • Alinea has been named the Best Restaurant in America and Best Restaurant in The World by organizations and lists as diverse as The James Beard Foundation, World’s 50 Best, TripAdvisor, Yelp, Gourmet Magazine, and Elite Traveler.
  • Nick’s latest effort is The Avairy Cocktail Book
    • Nick expects to sell about 500k copies within 2-3 years
    • It costs $85
  • Nick was extremely helpful to Tim in the writing of The 4-Hour Chef
The Importance of Decision Making
  • Don’t look at things as a success or failure, just make sure your pattern of decision making is correct
    • This is similar to a poker player’s mindset – even if you make the best possible decision in a given circumstance, you can still “lose” – all you can do is make the correct decision at any given moment, but much of the outcome is still left up to chance
  • Everything we do in life (art, commerce, science, picking a mate) comes down to a whole bunch of decisions you make, without often really thinking about the decision itself
Philosophy
  • Nick studied philosophy as an undergrad at Colgate – “I can’t remotely imagine having not done that” – after a professor convinced him to pick this as his major
    • Studying this allowed Nick to better clarify his thinking, understand logic, and gave him the ability to look for parallels in different fields of though
  • Don’t be a business major
    • “I can’t think of anything worse than studying business”
      • “It’s how to do something, but not why to do it”
      • For example – if you got an MBA in 1992, the management style taught, would likely be irrelevant now with the state of the internet
  • Philosophy books recommendations
  • After finishing undergrad, Nick went to law school for…. a day and a half
    • He just knew it wasn’t for him
  • After dropping out of law school, he “floundered around for a while”
The Merc and Finances
  • In 1992 – Nick began working as an options/derivatives trader as a clerk on the floor of the Merc (Chicago Mercantile Exchange)
  • He was really drawn to it
    • It was all about making hundreds of decisions a day, knowing not all of them would be right, but still being able to keep a good enough mental state, in order to keep making ‘plus expected value’ decisions time and time again
  • Nick describes the floor of the Merc as similar to the movie The Wolf of Wall Street
  • A year or so later, Nick started his own company (an options analysis software company)
    • “I wanted to be the captain of my own ship”
  • What Advice would Nick have to anyone looking to become a better investor?
How does Nick think about risk, both in life and investing?
  • Looking at what Nick has done from the outside, it appears the failure rate is very high
    • For trading …. 1/100 people break even in the first year, and out of those “1s”… < 1/100 becomes a millionaire
    • 95% of all restaurants go out of business in the first two years
    • But Nick’s response to these – “Great! That’s Perfect!”
      • “The higher and smaller the hoop, the more interesting it is to figure things out. There’s fewer people playing the game.”
      • “I always spend time looking for the high, small hoops. Then I spend my time learning as much as I can, and then I jump through that hoop.”
      • “That’s where the fun is”
  • There’s tons of statistics  saying “X out of every Y fail within  Z”
    • But look at the model – can the model be changed? Why is it this way?
Alinea
  • Tim has always been told “If you want to lose money, go into the restaurant business”
  • After some success in trading, Nick knew he needed a break
  • One day, he meant Grant Achatz (@Gachatz) while eating at a restaurant Grant was the chef at
    • Grant was only 28 at the time
    • Nick and a group of kept going back, and would often bring Grant a book as a gift
    • Nick describes the kitchens at Grant’s restaurants as “similar to a watch making shop”
    • Nick and Grant got to know each other, exchanged a few emails, had some conversations, and then one day decided to build Alinea, which was completed only about a year after they had met
      • “I think Grant just thought I was rich”
  • In building Alinea…
    • “We wanted to rethink the why of everything”
      • “Why are candles romantic? Why do we need candles?”
      • “Why do tables have tablecloths?” – Because the table underneath is a piece of shit
        • How to fix this? – Buy nice enough tables where you don’t need tablecloths 
      • They asked many questions like these
    • “We designed the experience to create emotional responses from the moment that you walked in the front door”
      • “A good greeting should not feel like a computer in front of your face, with the hostess saying, ‘What’s your name?’
    • Alinea cost $2.2 million to build – Nick contributed about a quarter of it, investors the rest
      • In the first year they made about about $450-500k on about $1 million in sales
  • But why go into restaurants…?
    • It was kind of just a gut feeling that he should join Grant and build a restaurant
    • It helped knowing that Grant was the best in the world at what he was doing, “and the world didn’t know it yet”
      • Nick was intrigued by this
      • On Grant – “It’s interesting because you can tell when someone is fully committed to their craft. It’s not because they talk about it all the time, but it’s more that. If you look around, the vast majority of people are not fully committed to whatever. It was very clear to me that Grant was all in. If he wan’t going to do it with me, he was going to do it with someone else. It’s fun to work with someone like that.”
  • Watch the Chef’s Table episode on Netflix about the Alinea restaurant to get an idea of how Grant works in the kitchen
  • To get an idea of the type of person Nick is – “One of my favorite exercises, is to sit in a restaurant, and draw up a business on the back of a napkin or envelope”
More on Alinea
  • Alinea won Best Restaurant of the Year from Gourmet magazine in 2006
  • 6 months later, Grant was diagnosed with Stage 4 cancer and given 6 months to live – but he prevailed and beat the oods
    • During the chemotherapy, Grant only missed about 12 days of service
  • Looking at the financial aspect of the restaurant, Nick did two things:
    • To prevent no shows, and reduce lost income, Nick created the rule that a deposit is required when making a reservation
    • Dining at Alinea week nights (say Tuesday) is cheaper than doing so on a Saturday (when demand is higher)
      • 5pm on a Wednesday is cheaper by $80-100/person, compared to 8pm on a Saturday
      • Side note – Nick says Uber could fix their surge pricing issue, by just decreasing the price for an Uber when there’s no demand
  • Alinea sells a ton of Alinea books each day at checkout, when people go to make an online reservation
    • Nick estimates this accounts for about $400k in revenue per year
    • “People can’t buy what they don’t see, and people don’t want to be upsold inside a restaurant” – So they “upsell” the Alinea book as part of the online reservation process
  • A typical phenomena in the restaurant business, is that a new restaurant will open, and no matter what type of food they serve (or how good it is), it’ll get good traffic for 6 months. After that, however, it becomes a fight.
    • To take advantage of this, Nick and Grant came up with the idea of “changing” the restaurant every 4 months or so, and serving a whole new set of dishes
  • Nick developed a unique online reservation system for Alinea (now known as Tock)
    • “I didn’t really intend on making it a software product, I intended on fixing my own problems” – SCRATCH YOUR OWN ITCH
  • Nick has a talk he gives to people in the restaurant industry called “Tuesday is not Saturday, and 7 Things You Already Know But Are Doing Nothing About”
    • “There’s so many obvious things you could be doing to improve your hospitality, your booking system, and to get rid of food waste. But people tend to just kind of move along because it’s a really chaotic environment and it’s hard to make change in it – everyday is game day.”
    • “It’s not really about the return on one investment at one moment, it’s more like a thousand small improvement over time”
  • Alinea doesn’t do any PR, and doesn’t spend any money on promotions besides social media
  • Alinea pays all their interns
    • “If you’re not being paid, you’re not being valued”
  • They have about 300 employees
The Importance of Asking Why
  • “The people most entrenched in a system, have no idea why”
  • It is SO important to not just do things, but to ask “Why?” before you do them
  • So often, smart people do things without taking the time to ask, “Why are we doing this?” and “Why does this exist as a thing?”
How does Nick choose which problems, or black boxes, in life to tackle?
  • It’s really just a matter of what’s bothering him most
    • Almost like Elon Musk, and the Boring Company – Elon was bothered by the LA traffic problem, and is in the process of building underground tunnels for cars which would alleviate the traffic
  • One problem Nick wants to soon tackle – the truffle market
    • Alinea frequently buys truffles, and the price fluctuates by season, making it very hard to know if they’re getting a good deal or not – he wants to build some sort of online truffle exchange
      • Anyone who buys truffles on a consistent basis, will realize the problems associated with the market
  • “A lot of people have a lot of ideas, they just don’t dig down the rabbit hole”
  • “If you are going to be investigating black boxes as an entrepreneur, there are going to be periods of time where you are doing it in the evenings, you are doing it on the weekends, you are doing it without a road for immediate cash flow.” – Tim
Hiring
  • “Hiring is the hardest of all things to do. My style of interviewing people is totally different than it was 20 years ago.”
  • “It’s a big enough organization where there are people working here whom I don’t know, at all”
  • “I try to make them [potential hires] be able to say no, easier than they can say yes”
    • Nick will often ask potential hires – “What are the last 5 books you’ve read?”
      • This is a great filter because, it gauges very well for the intellectually curious
      • If they don’t read, the person will often talk about their hobbies
    • Another question he’ll ask – “Do you enjoy writing?”
      • “If someone doesn’t like to write, they’re not going to want to work for me”
      • Nick says he writes about 400 emails a day
        • He’ll often give email tips if he’s cc’d on en email (if he sees you say something wrong or vague – he’ll call you out) and “If you’re the type of person that doesn’t take feedback well or doesn’t want to learn, I’m lacking patience for that at this point in my life, and I let them know that”
How does Nick handle email and social media?
  • “I am terrible at it”
    • Not too long ago. Nick replied to any email he received, and used to have an autosign saying – “If I don’t reply to you within 5 minutes, I’m dead or asleep”
  • Jason Fried is a friend of Nick’s and Nick is envious of how well he handles email – check out how in these Podcast Notes
  • “I feel a weird moral responsibility to reply to the people who’ve taken time out of their day to write us a note, even if it isn’t critical business for me”
  • He does look at all of Alinea’s social media messages, he’ll often reply to a random few
    • Any complaints do get seen by Grant and him
  • When Nick goes on a vacation, he’ll often craft up insane (but not true) out of office replies
    • One in the past – “I’m going to a combination of a tantric sex and silent retreat to explore my inner and outer self”
    • Tim loves this – “If you’re serious all the time, you’re never going to get the actual serious work done. You’ll burn out before that ever happens.”
  • Nick has a line in his LinkedIn bio – “If you can find my email address, and cite this, I will reply to you”
    • Nick calls this a puzzle filter, or a mini-hurdle where a little bit of a barrier is created – “If you’re really into it, and really want to talk to me, you can find me pretty easily. I’m not that hidden”
Cocktail Talk
  • One of the most fundamental cocktails, for Nick, is a daiquiri
    • “There’s 3 ingredients and a million ways to fuck it up”
    • Lime, sugar, and rum
    • “Most bars you go into though, will make a terrible dairuiri”
  • Nick’s favorite drink is a “Half Mezal Margarita”
    • It’s 1/2 MezCal, 1/2 Reposado Tequila, along with some Grand Marnier or Cointreau equivalent, lime, and simple syrup
  • “Just like anything else, if you have a well constructed cocktail, it’s an additive thing. You can have it with a meal, and it will make the meal better.”
  • Check out more about Nick’s new cocktail book here
  • Tim also really recommends eating at The Aviary in Chicago
Rapid Fire Questions
  • Books Nick has gifted the most to other people
    • Fooled by Randomness – “Almost everyone in my office is forced to read it”
    • Nick likes giving vintage art books (none in particular)
    • “When I want to give someone something, and really want to make it a great gift, I try to make it something that they can’t buy.”
      • An example – Nick bought an old typewriter, and when he writes a thank you note, he’ll do it on this
  • What would Nick’s billboard say?
    • “Pause”
      • As in pause to think
    • “The hallmark of people I like as friends, what I try to instill in my kids, and the reason i like my wife so much – intellectual curiosity is everything”
      • So “Pause” or “Be Curious”
Random
  • Nick will often spend large amounts of time taking open college courses from sites like MIT OpenCourseWare
  • 15-18% of people don’t show up for restaurant reservations
  • “In some places, the “special” is just the old fish”
  • Try using a Marimekko Chart
    • This can be used for everything. It’s a great visualization utility for analyzing expenditures, analyzing the ROI of a social media or podcast advertisement etc.
  • “It is remarkable how much long term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent” – Charlie Munger
    • Tim returns to this quote often
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