Nick Kokonas

Nick’s New Experiences During The Pandemic

Sean: [00:04:27] Nick, welcome to What Got You There. How are you doing today?

Nick: [00:04:29] I’m good. Thanks. How are you?

Sean: [00:04:30] I’m doing really well. So during our last conversation, one of the things that came up is you love discovering new things. And one of the questions you love is when’s the last time in your life you felt like something was new. So I’m wondering if you have come across anything, let’s just call it the last year that it just felt like a new experience for you with something so different?

Nick: [00:04:49] I think we all did. I’m going to go with a product and an experience. And obviously, the COVID experience was new for all of us and it was too soon to talk about it in some ways, but it was very interesting when it became evident that there would be lockdowns and whatnot. I remember my wife and I sat down one evening and we were watching the news and we were like, wow, this is just surreal. And we looked at each other and were like, let’s embrace this.This could get very stifling, very fast, so let’s figure out ways of being productive in our house. Let’s figure out ways of dealing with each other, we’re the only people, we’re going to stay and all of that. 

I will say that for both of us, it was a really positive experience. I’m not saying that it was a desired experience. Obviously it’s terrible. COVID was terrible, but we chose to sort of dive into new things and new experiences within the constraints we had. And sometimes when you’re constrained, that’s when you’re most creative. We got a lot done in the last year. That was a really unique experience. I can’t say that it was bad for our family or for ourselves. It was terrible for society and for the economy and for all of that, but we chose to embrace that limitation and got a lot done.

Sean: [00:06:40] You mentioned a product, believe me, I will dive back into this.

Nick: [00:06:44] I got an email from a friend saying, “I’m sending you some meat from Maui” and that was all it said. I get a million food products because of Alinea and Tock and whatnot. I’m very fortunate that purveyors from all over the world send me interesting stuff. And the reality is, most of it isn’t terribly unique, some new salt or something like that. I got a box of venison from Maui and watched the video “>Maui Nui Venison and was instantly like, wow, it’s a USDA certified product that is actually wild. And this guy, Jake, used 10 years to get all that done and certified. And there’s 50,000 axis deers in Maui just decimating ranches, farms and the environment.

So, it’s ecologically sustainable to harvest these animals. But what’s really amazing is because they’re wild and they eat the vegetation of Maui, which is fertile soil, everything like that. It was mind-blowingly good. So much so that even though I didn’t know the producer of the guy or anything about him, other than the video on his website, I emailed him and said, that’s one of the greatest products I’ve ever had.  Immediately we had some shifts in Alinea. It was on the menu two weeks later. And now I’m an investor in his business, that doesn’t happen very often. That’s why I say it’s a bit self-serving but the reality is, that product came to me six months ago, eight months ago. And I was instantly in awe of the quality and the mission that he put together, which is really amazing. 

Sean: [00:08:41] You’ve got me salivating over here. For the last year, probably a year and a half, I’ve heard about just how delicious axis deer is, I have not tried it yet. So now, without a doubt, I’m jumping on the website, going to order some here… 

Nick: [00:08:50] It’s a wonderful place.

How Additional Constraints Breed More Creativity

Sean: [00:08:52] Well, one of the things you brought up a minute ago around the constraints that COVID put on us, and then those constraints, they breed creativity. I’m wondering, knowing that you’re such a creative person. We’re gonna talk a lot about creativity. Is there anything you do in your own environment to add on additional constraints, to help bring out some more of that creative nature?

Nick: [00:09:10] I think one of the mind tricks I play on myself is that once I feel like something should be done, I sort of announce it to friends, family, publicly, whatever it may be because then I feel a greater sense of obligation or even like a social contract to deliver it. When I was first going to do Tock and I wanted to force the function of having to sell tickets to a restaurant in 2010, when we announced the restaurant, we did a little movie trailer for it that I did with Martin Kastner. And it said tickets, yes. Tickets on sale soon. 

And I had no idea how I was gonna make that happen. That was like the opening. It was nine months away or something like that. So I knew I had nine months to do it, but I would never have opened without doing it. And so I forced myself by announcing it publicly to finish the job. And I think that’s true. Like people who go on diets sometimes do that, or workout programs or whatnot. And it’s just a way of keeping yourself accountable, at least for me. Like if I told you on this podcast, I’m working on this project and six months from now it’s going to launch, I would feel a sense of obligation to do that.

Sean: [00:10:35] These mind tricks to help you get going, is that something you’ve always done throughout your life? Just built in these mechanisms to help force you to develop creativity or even around entrepreneurship in business?

Nick: [00:10:47] Yeah. I guess I was always the kid that wanted to do well, even in school and whatnot. Probably because I felt like my parents didn’t have the same opportunities, so I felt a sense of obligation to excel, try my hardest, do well, all of that. And that probably lingers on with me into my adult life. 

Sense of Obligation

My sense of obligation has shifted from myself to my employees and to other people who are supported by the businesses we create. But it’s definitely the case where if you have a sense of obligation, you tend to get things done. And the creativity is just like, when you’re resource constrained, you kind of go up, you got to figure some shit out here. I think that’s all creativity is, just like it’s iteration. It’s a result that ends up being surprising even to you, right?

Sean: [00:11:51] Absolutely, I find that really intriguing. You mentioned that shift from me to the people that work for me, I’m wondering when did this shift happen? Because you started being in Chicago, as a derivative trader, which is much like a zero sum game where all of a sudden, now you’re spreading all this positivity towards other people with the restaurant, great meals. How does that transition happen for you?

Nick: [00:12:13] For me it happens as you get employees and you realize that as a business grows, … it’s one thing if you have five or 10 people as employees and you know them all personally, there’s a sense of mutual obligation there and whatnot. But now with having hundreds and hundreds of employees and literally thousands over a 15 or 20 year period, many of whom have gone on to do other interesting things, you end up realizing that the decisions that you make actually affect hundreds of families. And that they don’t always have insights into, even if you have the best intentions of the world, it’s impossible to adequately communicate all of the reasons why something is being done.

One of my great frustrations is that, and I’m looking at Twitter less and less because of it is that you do things in your business and then somebody picks apart one little piece, even if it’s another business owner or someone who has an agenda for their particular business or their particular life, their particular city. And they don’t realize that, Hey, first and foremost, there’s 300 employees. Even if you don’t understand why I’m making the decision, that it benefits them. And even if you think it doesn’t benefit them, you have very little information of what’s going on here. I think that shift is just a sense of responsibility.

It’s no different, honestly, than if you become a parent, everyone says like you become a parent and all of a sudden you have this child and instantaneously your priorities shift. I think with growing your business, that shift happens more slowly. It’s not like you birth a business, a single holy cow, but eventually you wake up one day and you go, oh my gosh, I have this profound sense of responsibility. Not only to our clients, but even more so to the people who decided willfully to join this group of people and work on something. So, that’s about creating new opportunities for them as much as it’s for yourself.

Sean: [00:14:22] Yeah. I love the point you bring up having like the complete encapsulation of what this business is. And so many people only see these small subsets and they don’t understand the complete picture. And as the leader of that business… 

Nick: [00:14:33] I see the press do that all the time, where they call a business leader and they get their headline, their headline statement or their headline thought or initiative or whatever. And then they don’t understand more broadly like, oh, well that’s performative because it actually isn’t going to do anything for the employees or the customers, or yeah that looks good for the industry, but it really will never be implemented widely. And so I see that on a daily basis, I suppose, if you’re not a business owner, if you don’t have skin in the game, you can’t understand what that’s like. So if you’re just a reporter, for even a prestige magazine or newspaper or something like that, if you don’t own that newspaper, you have no idea what a busy, small business owner is going through. It’s tricky and you can’t let it frustrate you, but it is tricky.

What Lights Nick Up

Sean: [00:15:36] Which part of running the business do you enjoy the most, what just lights you up inside?

Nick: [00:15:41] It’s always about creating something that is new or novel. Which happens very infrequently. If you think about it, if you are creating a new restaurant where you were building Alinea and we open it, like the minute we opened, it was very cathartic, but probably wasn’t until like the end of year one where I felt like, Hey, we’ve created something, a new experience here, a very novel experience. It takes them a long time to do that. And then you might go four or five years before you transform something again enough to do that. I will say that like the very first day I turned on the predecessor to Tock and at first it broke and then we kind of fixed it. And that started running the minute I saw that people were actually prepaying for a reservation at the next restaurant in 2011.

I got on the phone and walked around the block and said, it’s going to take 20 years, but this is going to change the way people buy things in the future. Dynamic and variable pricing in real time for service oriented businesses is an inevitability. It has nothing to do with me or Tock or anything. Of course, that’s the way it should be. But that realization that, … very few people realize this. It seems inevitable. It’s almost like discovering a new mathematical axiom or something like that. And then, I actually bothered to build enough of it to try it and test this little thing that already exists in the universe. I can measure. It’s like if you can measure something that exists like a radio frequency or something like that, and all of a sudden you go, oh, I’m tuned into that. And then you start looking around and it’s like, oh, that thing is everywhere, but I never had a way of measuring it before. 

So for me, that can be a piece of music or it could be a piece of software and they end up feeling very much the same over time. As you kind of get a couple of these little self discoveries and try to get them out into the world, it’s just a normal process. Like if you read other people about how they’ve built or discovered things or whatnot, they’re like, oh, it was there all along. I’m just having to tune into it. And I never really understood that. I like to write music occasionally and I’m terrible at it. And I haven’t figured out how to tune into that just yet. But if you listen to great songwriters, they understand that process of tuning into whatever it may be. And they say afterwards, oh yeah, it was like that melody was there all along, I just kind of picked it out. And of course that’s not true, but it feels that way. So that to me is the exciting part of creating anything.

Sean: [00:18:44] I’m thinking about just that mindset overall. It almost seems like you’re extremely good at that delayed gratification. So, for you, is it really like that intellectual stimulation is all throughout the process? I’m wondering when the end moment comes when the business is launched… 

Nick: [00:18:59] Oh yeah. The weird part is that, that’s the worst part.

Sean: [00:19:04] It’s almost like this feeling let down, right? 

Starting With The End In Mind

Nick: [00:19:06] Yeah. I always set goals that seemed pretty, pretty broad. I kind of work with the end in mind and work backwards. 

Sean: [00:19:17] An example of what that might look like.

Nick: [00:19:18] Yeah. I can tell you that in the first year I was trading as a floor trader. Now you have to remember, this is like the Eddie Murphy trading places kind of days, right before your time where you were on the floors, screaming and yelling and all that. And it was very primal. And the saying on the floor used to be that, if you break even in your first year you have a future. And I thought that was a terrible goal because if you have a goal of breaking even, you’re probably going to break even,right? So I set a goal of making $200,000 dollars profit trading the first year. And it seemed very daunting, especially because that is an intimidating place, like you down there and people just want to eat their young there. Like I am the competition, like you said, it’s a zero sum game. 

I was mercilessly made fun of, I was super skinny at the time. And at the end of the day, I was very, very much driven to make this work because I didn’t know what I was going to do with my life. But I was fascinated by the evidence and the process and the sort of the primal nature of the game that was being played there.  And $200,000 sounds insurmountable, but then you break it down and you say, well, there’s 250 trading days a year. That’s like $800 roughly a day. And if every tick, which is like the minimum fluctuations, $12 and 50 cents, I need to make about 60 of those a day. And in the course of eight hours, that only means I need to make like one or two winning single tick trades per hour. That seems very doable. And indeed I did it. It was very, very intimidating and very difficult. 

But in my first year I made just about $200,000 trading and I had a backer, so he got 40% of that or something like that. But I made a very good living in my first year of trading. And so immediately as I recognized that that was coming, I was like, oh, I need to reset this goal. And I went for four x that the following year. Now, again sounds like a lot, but it’s not. It’s the same thing. All I have to do is four times the size on any given trade. So instead of doing one contract at a time, you do five at a time, but do the exact same thing. 

Nick’s Frustrations With Public Discourse

So where people break down is that they start thinking about the money being a lot  or something and it always frustrates me. And a lot of things that are frustrating me to stay in public discourse is that people want to drag down the billionaires or something like that.  Like Bezos going to space or Branson or whatever. And what you have to look at is the interviews of him 25, 30 years ago. And he’s tuned into the internet 1995, so much so that he quits a very lucrative job and takes the proverbial door, makes a desk, off the wall because he’s saving money. He’s got his one little warehouse in Seattle and it’s really easy to go like, oh, this guy’s evil now or whatever. 

But that was a 30 plus year thing where he took those little incremental steps along the way. Now you can argue about whether a guy should have $200 billion or whether, … but that wealth wasn’t taken from someone else and entirely new, it is not a zero sum game like derivatives. And so like he didn’t take that from either his employees or from us or from anywhere else. It was created out of whole cloth. It was a brand new thing. So there are things that Amazon has done that I disagree with in terms of labor practice or whatnot, and fine let’s argue that. But you can’t argue that he took money from anyone else. 

Sean: [00:23:20] Yeah. It’s a really good point there. I think there’s a funny arm. I think it was 60 minutes, like in 2001, he was already a billionaire and that they’re doing the piece and he’s driving this like Toyota Corolla from the early 90s.

Nick: [00:23:30] Here’s the other thing, is that most people who shout about the billionaires don’t know any. I’ve never counted. I’m guessing I know a dozen to 20 people who are worth a billion dollars or more. Every one of them is not sitting. None of them are sitting on a yacht somewhere, traveling around, doing stupid shit. They all get up early and work their asses off and are interested in doing interesting things and creating new things and whatnot. And that’s how they got their money. And what people don’t get is that the money was a byproduct of those things. I don’t know one of those people whose goal was, I’m going to make and hoard a billion dollars. What they said is that I’m going to make some amazing stuff that’s going to empower a lot of people.

And I remember one of the arguments, I was a philosophy major and I was taking a business ethics class and we were studying and reading Marxism, which a lot of folks who claim to be Marxists actually probably haven’t done. And we said, well, what if we reset everybody to exactly the same level tomorrow. Like everybody’s starts off exactly the same and you’d have this wonderful equality and whatnot. And then Michael Jordan comes out of retirement to play basketball and 50,000 people show up and they each want to give two of their dollars to see him play. All of a sudden Michael’s got a hundred grand and he can do that every day. So Michael Jordan, this is at the time, he was your base basketball player.

Michael Jordan is going to be very unequal, very quickly. And not because of anything other than the fact that he is incredibly driven to be that skilled. And everyone is going to take a tiny little piece of what they’ve got and give it to that person. And so even within a Chinese system or a Russian system, when that happens, it happens sort of naturally. It’s a tricky thing to figure out the right balance for that. But I also think it’s pretty inevitable that certain people are just highly driven to become exceptional at what they do.

Maximizing Risks

Sean: [00:25:39] So speaking about being highly driven, I want to go back to your early days as a derivative trader and something you did, which I have to unpack and figure out from you, where you essentially faked your resume in the wrong direction and end up taking five bucks to be around. What’s going through your head, young Nick Kokonas?

Nick: [00:25:58] Well, I was fortunate to grow up with a dad who worked really hard, certainly, both the army and the Navy drafted into both, which is crazy. He was part of the Greek community in Chicago. He didn’t go to college. His dad died when he was really young. He worked at a grocery store from a young age. And I knew a bunch Greek second cousins and whatnot that were doing really, really well financially with small businesses ownership. We’re talking about the Greek hotdog stand kind of thing. And I had a second or third cousin, who was a really good beer and hot dog sales guy in the summers during his college years at Wrigley Field. And he made a ton of money, all cash. And I remember hearing about how much money he made and I don’t know the number, I just remembered that it was more than my buddies who were going to Goldman Sachs were making out of college. And that was his like four-month summer job. And I just went like, wow, Goldman Sachs is more prestigious and it’s almost like if you make it through the hazing, essentially of your first five years there, you’re almost guaranteed to make a very good living. 

It’s like being a dentist or something like that. You may not like digging in people’s mouths, but you’re for sure going to make four or $500,000 a year. I don’t know anyone who wakes up, I’m sure they exist, but you show me a 25 year old who’s like, yeah, I love mouths. It’s like no, they just want a very secure livelihood. And of course everyone needs a dentist, that’s probably some of what’s going on there. But when I got to school, I’d gotten into a joint JD PhD program at Penn and everyone was encouraging me. And this is kind of the false currency of elite institutions. And believe me,I’ve poked it, my alma mater for this. The way that they measure themselves is the average graduates earnings five years out, and the number of people that graduate as a percentage and the number of people that get employment right away and all of that, which I get, I totally understand that. 

But for me, I was like, okay, I’ve got this wonderful degree, it’s taught me how to think. I feel like I’ve gotten a tremendous amount out of it, but now that I have to actually make money, the best way to make money is not to become a lawyer. That’s the best way to minimize risk. And I had no interest in minimizing the risks because all of my dad didn’t have a choice to minimize risks. And so I was basically looking to maximize risk at a young age when you can afford to live on ramen, have a little one bedroom and not have the trap. You don’t need much when you’re 22, you just get out of a dorm room. Why do I want to take a job with Goldman Sachs and then eat shit for five years so that I can sell bonds? For me, the trading floor was the kind of place where it seemed like the riskiest thing to do. I knew people doing really, really well there financially. They didn’t seem that highly educated. So it seemed doable. That was like an actual doable thing. And then in order to get down on the floor there, what did I do? 

Well, I started interviewing at Societe Generale, Goldman Sachs and Merrill Lynch and all that, because that was the pathway that I was pointed to, to get down to a trading floor. And I had done well enough academically. I was five beta caps, I’d always get the interview. I would do well on the psych test. I would do well on the math test. I would do well in the logic test. I would get down to the final interview and I would be like, what kind of job am I applying for? And they said, well, we don’t know yet, essentially, but you’re coming into this prestigious firm and we’re going to find the best place for you. I was like, no, no, no.I want to get down on the trading floor and I want to be a trader. And they said, well, sure, you’re going to go through this year and a half, two year program, and you might end up there, but you might end up being a better bond salesman. And I was just like, well, this is the wrong path, but I didn’t know the right path to take. So I went to try to just apply for a job as a clerk on the trading floor, just so I could see what it was actually like. And when I would apply to the clearing firms, they’re kind of the middle men between every trade.

Being a clerk back then in a yellow coat just meant that you held up an order and ran it to the pit. It was a completely unskilled job. I literally went there with resumes, papers and knocked on doors and handed them out. Finally one guy told me the reason you’re not getting a call back is because you were hugely overqualified. You should go talk to Goldman Sachs. I gotta get rid of all my academic achievements. I just got rid of everything good on my resume and went there and took a $5 and 35 cents an hour job.

Sean: [00:31:32] What’s the thinking? I would love to know how you’re projecting into the future.

Nick: [00:31:37] All I knew was that you need to get a foot in the door. And the foot in the door I wanted was not a traditional one. I wanted to go down there and figure out what was happening down there. I just wanted to be in the environment and look around. It’s like becoming a bat boy, and just to figure out what managers do in baseball anyway. Or a water boy, so you can watch the NBA from on the floor. All I wanted to do is get up close and I couldn’t, and so this was tedious, mind numbing, stupid work. I worked my way up from runner to clerk, to phone clerk in about two and a half months, which normally takes like a year and a half, but they were just like, oh, you’re really smart.

And finally, once I was in there, I told the guy who was my boss what I did. And he was just giggling, he thought that was funny as hell. My peer group were literally drug dealers. And I’m not saying that in a negative way,  they dealt drugs, they took jobs down there from the gangs to deal Coke, to a bunch of Coke-addled traders that’s flat out like who three of the four of my literal peer group was. It’s mind blowing, right?

Lessons From The Trading Floor

Sean: [00:32:54] No, this is great. I love the analogy of the bat boy. I’m wondering, obviously like elite education, there’s so much in theory you can read about. What do you have to just fully live and experience? What’s the lesson you got out of there that can only happen if you’re actually in the arena?

Nick: [00:33:11] Look, for the restaurants that I own now, no one kind of works for us probably knows what I do day to day. But when Alinea first opened and Grant got sick, I went in there and polished glasses. You have to do the work that is going on in your business. And so for me, going down on the trading floor and seeing how the clerks were, seeing how the runners worked, meeting dozens of traders then I could, … when it was downtime, there’s a lot of slow times there. There’s a lot of time or nothing’s going on. It’s not all screaming eight hours a day, every day. So I started going, oh, that guy looks interesting. And I would literally just poke him and start talking by saying, how did you get to be a trader? Or do you seem like you’re a good one? What’s going on here?

And that was invaluable. You have to meet the players so to speak. So how do you meet the players? Well, if you’re a bat boy, you probably meet all the players and you don’t show up day one going, hey Mr. A-list player. But over time you establish some sort of rapport and respect from them, and then you can start asking questions and that’s all I did. Six months in, I was really concerned that it was a dumb decision. And then I met a trader that was super geeky, and seemed different than the other guys. He was trading options for his own account. It’s trading very small, and he had gone to the University of Chicago, studied math. He just seemed different, more intellectual, and different than the other guys.

And when I finally identified him, I was like, I want to work for you. And he was like, oh, I just hired a clerk two weeks ago. I don’t need one. And I was like, I would pay to work for you literally. I’ll pay you $500 a week to work for you. And he was like, why? So I explained everything I just explained. And he was like, oh, that’s really weird. Okay. Well, you don’t have to pay me. I’ll pay you 400 bucks a week. And then I got to stand next to this guy and learn options theory. And he was a really good teacher. And when it was downtime, I’d go like having the computer upstairs, it’s stupid. We need to get computers down here.We need better software. You got the software side. 

So it became this mutual thing where I was highly energized by learning this very esoteric stuff. Hands-on said, my goal is to get down here and be a trader within a year. I got six months left, man. I need a full download and he’s like, nah, no one does that in six months. And I’m like, I’m going to do that in six months. To his credit, he was like, if you want it in six months, here’s everything that we’re going to have to do. He ended up becoming one of the largest or the largest independent bond traders in the world. A couple of years later after I started trading, he offered me a partnership. I didn’t really like the terms. I wanted to go out on my own. So I did but I feel a huge sense of debt to him even now, even though we don’t chat much or anything like that. We’ve gone in totally different directions, but Frank Serrino, if you’re out there, thank you. He was a great mentor. A great dude. 

Sean: [00:36:39] You become so much clearer with that story. This is why I love talking with you, Nick, you are unique, you’re different, the way you approach things. And so you are actively seeking out someone, that you go, you know what, this guy is doing something a little bit different. I’m wondering, have you thought about this? Like just a unique blend where you’re highly analytical, data-driven, logical, but then you’ve got this beautiful artist’s creative nature. And you perfectly blended the two… 

Prestige

Nick: [00:37:04] You go on about these things and people want to say that and stuff, but you also have to know that I floundered around for a year or two before I figured out how to get down on the floor. These things all seem like neat little packages. But meanwhile, my now wife, then girlfriend fiance was working at Citibank to enable me to take these risks. So in hindsight it looks like a neat package, but what people really need to understand is that some of these things were done out of a sense of frustration, desperation, all those things. They sound like you just decided one day to fake your resume in the wrong direction.

But what you have to remember is that, that was like a four, six month process of failure and trying to figure out why am I getting offers from Maryland but I can’t get a shitty job. Like I want this shitty job. And I guess wanting the bad job is the thing that seems novel. I go back over and over again to Paul Graham. He has an essay, which I read long after all of this called How To To What You Love. And I get from podcasts like this, people email me and they say, I would like some life advice, or I’m 23 years old now, and I want to take similar risks. And I send them that Paul Graham essay, because it’s better than anything I can articulate. In there, what he says is that prestige is just fossilized inspiration.

The most interesting businesses to me are often the least prestigious. And so I guess, the reason I mentioned my dad is my dad owned a temporary labor office, which was in a terrible part of Chicago because it had to be because that’s where people wanted temporary labor. And I remember this juxtaposition of going to an Ivy covered school in upstate New York and studying philosophy and all of that, and then going back in the summer and seeing my dad get up at four in the morning, and go to work. But he was the guy who was at my basketball games when I was in high school at three in the afternoon, but the dentists weren’t, and by the way, he was making twice as much as a dentist.

And no one knew because he’s a little Greek guy and everyone would just assume that he’s not very bright. And I internalized that prestige was bullshit very early on. I look at a lot of businesses now and the people that I like to invest in, like Maui Nui Venison, amazing businessperson, amazing business, positive ecological impact. I don’t think there’s anybody in college right now, who’s going like “I’m going to be out there at three in the morning shooting axis deer”. So I look at that and does he care about prestige at all? No, he’s got a mission, and that’s everything. That’s why it seems novel, I guess.

The Overwhelming Factor

Sean: [00:40:05] I don’t know, I almost feel like it, it doesn’t seem so neat. Like on the surface it might, but then you start uncovering some of the layers to you and it’s like, oh no, no, you were grinding it out. And you were taking extreme risks and you were working your ass off where like, I don’t know. It’s just like… 

Nick: [00:40:20] In the last year it has taken a real toll, even though the outcomes were great. Because when COVID hit, I was basically like, okay, we don’t have any restaurants anymore.The restaurants are gonna get shut in two weeks and Tock at the time was doing reservations and experiences, prepaid experiences for restaurants. And they’re all about to shut. So both of the businesses at once, we’re going to go to zero and that’s what I’ve worked on for the last 17, 15 years.

There was a moment where I went, oh God, this is overwhelming. I am in the wrong industry for this. And then I remember the moment I was sitting in my office at home and I just went, well, time to suck it up again, like what can we be doing to take advantage of this and in the true Chilean sort of way. Like never waste a good crisis. And I remember that our very, very famous chef called me and they’re going to have to process a lot of refunds. And like, it was just a cluster. There’s a lot of this counterparty risk that Tock had, all this stuff.

And by then I had fired myself up, you have no idea, like there’s going to be like 2% of the people in this whole industry that think new shit up right now. And you’re complaining to me, and I quoted that Churchill quote to him and he was offended by it. He was genuinely offended.  He’s like, this is a real crisis. And I said, absolutely, it’s terrible. Can you shut it off? You can’t shut it off. Okay. What are you going to do about it? Stop going on TV and saying how terrible everything is and actually fucking do something. I remember I sat my wife down and I was very emotional, and I just said, this is terrible, all that. 

I’m going to need a very wide berth for next year. I’m going to need some latitude and I’m going to kind of disappear for a while. And she said, you already have more latitude than any husband I know. I’m like, I need even more and what was really interesting is that, like six or seven months in, she came up and she is just like, holy shit, like you killed this. And it was really good. I mean, it was really tough, but it was really good.

Sean: [00:42:56] A few things I would want to dive a little deeper on first, that overwhelming factor. I kind of wanna know the progression of that. How long does that last and is it just like a flip of the switch?

Nick: [00:43:07] I think it lasts less every time once you’ve gone through it a bit. I could go through the five stages and spread that up for like eight months or whatever. Or I could just get over myself and get to work. So when I mentioned the counterparty risk at the time that COVID hit and we’re talking about weeks before any shutdowns happened or whatnot…  

Sean: [00:43:37] Well, that’s because you’re highly attuned to this type of stuff. You sense changes in markets, I’m assuming. And so you can … 

Nick: [00:43:46] Because you’ve seen it, you’ve seen these crises, all the train wrecks happen in slow motion. Like ‘08…  

Sean: [00:43:53] It’s such a good line. Yeah. 

Nick: [00:43:56] There was plenty. There are plenty of times, you have time in a way to hedge your positions and to get out. But people see the crisis, and instead of going like, wow, this is serious. This is bad. Most people at first just want to go, “it probably won’t happen”. So if something has a five or 10% chance of happening, but it is catastrophic, you have to turn a hundred percent of your attention to that 5% or 10%. And so that’s what I did. Like when Seattle COVID numbers came up, I talked to a doctor that I knew and who was a very bright, broadly read doctor. And he was like, yeah, it’s pretty low risk, but it’s non-zero, it’s probably 15% that this goes nationwide. If they don’t do something and it doesn’t appear that they’re going to do anything about it.

And I went, wow,15%. That’s a lot more than I thought. That might be everything. I woke up the next day, I was thinking all about the Alinea group and the restaurants and what we need to do to protect our staff and our customers. And how do we continue on and all that. And then I went, oh my God, there’s $30 million of prepaid reservations that we’ve sent out to restaurants and they’re going to have to return all that money. And I don’t know if they have it. And there was an email that I sent to our CFO when we decided to send out like, almost like Kickstarter, where you send out the money before the product’s delivered back then, not now, we can’t do that anymore.

I sent an email where he was saying, we don’t want to take that risk if we have to hold the money back and all that. I said, this is a huge benefit to restaurants and wineries. We need to send them the money ahead,and that will be a differentiating feature of Tock. And all of a sudden I woke up, well, I sent him an email at the time because he’s very conservative. And I said, look, it’s not like every restaurant in America could close at once. We’re going to have some restaurants close. Sometime we’re going to lose a hundred thousand dollars or $200,000. That’s inevitable, but it’s not like 5,000 restaurants are all going to close at once. And all of a sudden I woke up and I went, oh my God, 5,000 restaurants are all going to close at once.

And we have $37 million. That’s going to vaporize if they can’t do their refunds. So I called him up, Steve Bernacchi is his name. And I said, Steve, we have a lot of counterparty risk. And you could almost hear the silence where he was like, “yeah, what do you think I’ve been thinking about for the last 24 hours”? And I was like, okay, we need to measure this. And then we need to figure out what… we just need to stack rank our risk. You know, the 80-20 rule, the 80% of your risk is probably 20% of your clients. Let’s figure out those 20%. Let’s start calling them personally. Let’s get the refunds, let’s get some engineering work done so we can batch process refunds.

And within a week we had solved that problem. In our total loss that $30 million was $8,200. $8,200. Yeah. But at the time, I didn’t know that. So you say, how does that happen, in what sort of timeframe and all that? And the answer is like I woke up, realized I had a serious problem or potential serious problem. This is before shutdowns, easier to do before the total crisis hits. And immediately, instead of going, we’re going to be shut. We’re going to go out of business. You instead go, this is an existential risk. How do I figure it out? And we did, we did so very quickly.

Sean: [00:47:39] I’m just trying to think about how the past year, of course, has been a crazy year for everyone. Just the ups, the downs, even Tock becoming acquired, how do you encapsulate this past year?

Nick: [00:47:54] There’s a bit of a cliche that some people have said that it accelerated natural trends. You know, like retail online commerce went up, it was going up whatever, three or 4% a year. And it got to like 20%, and then all of a sudden during COVID, it went to 35% a year and people are like it will revert. It’s probably not because it’s going to get to 35% anyway. For me personally, it accelerated my own path as well. Partly because I did a bunch of stuff that just got stuff done that accelerated all of those things you mentioned into a year, instead of over a course of four or five years, because people had to make decisions.

And then also like for me personally, man, it was tiring. I’m old now. I can’t run at the pace I used to run at when I was a 25 year old trader. But I had that muscle memory of doing it. It was interesting to get into that mindset and mode of working really fast. You didn’t have time to test the batch refund thing. Like normally we go through QR, quality control testing, and we’re gonna roll out a new software product to one or two clients so that they can test it in the wild. They’re going to get feedback back to us and our account management team and all that.

And this was like, “hey, is the batch refund thing ready? Yeah, we get something. Hit go”. And boy, I did that. The downside of running a larger company and now a publicly traded subsidiary of Squarespace, which has been pretty wonderful, is that like that pace of like, yeah, let’s give it a shot, see what happens, you can’t really do that. That’d be irresponsible. But I miss that and that was kind of an interesting part of things. It’s tiring and scary.

Sean: [00:49:54] I’m wondering, you said that that’s kind of irresponsible. I think about this like those are major decisions of consequence. Could you speed that up in your own progression, doing things like that? Just so that muscle memory is highly condensed in these rapid, like iterative feedback cycles.

Nick: [00:50:12] Yeah. I think you have to know when to do that and when not to do it. And so when you have something that’s an existential risk or an asymmetric risk or an opportunity where the window is closing very quickly, for whatever reason you have to be willing to jump at it. And so like every rule, there’s an exception to the rules. I look at people who are rigid and rule followers and I never relate to them. 

Sean: [00:50:44] I’m right there with you. 

Nick: [00:50:46] I don’t mean ethical, ethical, or moral rules either. I’m talking about rules that are more tradition than a rule, like for no good reason. I think that sometimes if I’m talking to a CFO or a finance person or something like that at a company, and I’m talking to the marketing team and I’m talking to them, you have to be aggressive and crazy and take risks. And if you blow it, you blow it. Don’t worry about it. And the CFO is sitting there going, like, I don’t want any part of this guy. I’m like, dude, I’m not talking to you. You’re the CFO. Of course, we’re going to do the accounting down to the penny. 

Like I’m not telling you to be unethical and take risks with the accounting. Of course, not. That’d be stupid, but that’s not marketing.  You should not be talking to the market building department and telling them to not take risks or the design development department or something like that.That’s really it. I don’t want my heart surgeon taking undue risk on me, right? Or the dentist or whatever. Those are just different roles. But when you’re building a business or building, in my mind, your own career, if you don’t take risks, you know exactly where you’re going to end up. 

Nick’s Best Skills

Sean: [00:52:02] Yeah. You mentioned this past year, it’s just like such a steep learning curve even about yourself. Just being able to step back, analyze for a bit. I mean, you had to do so much. Where do you think your skills are best? Like where is Nick Kokonas? Like just the top 99.99% of people.

Nick: [00:52:18] I don’t want to say I have a unique ability to look across disciplines. There’s some people that are very narrow and miles deep and I’m kind of shallow and miles wide. So I can often see something that someone’s doing and go, oh, that’s just like this. And people are like, well, you studied philosophy and then you became finance and then you ran restaurants, then software. That’s a really weird progression. And I’m like, no, no, these are all the same things. To me they all seem very, very related. 

Sean: [00:52:56] What do you mean by that? 

Nick: [00:52:59] Well, look, derivatives trading is about probability and statistics, right? Booking a restaurant is about probability and statistics. Building software is about probability and statistics and probability statistics is based on the fundamentals of logic and math. And when I was at college taking philosophy, which people think like Descartes or, I think therefore I am, or what, what they’re trying to get at is what are the fundamental first principles of thought or language or logic or math. So if you read Bertrand Russell or Vichtenstein… 

If I showed you some early Vichtenstein, it’s symbolic logic, it looks like math. He’ll say a couple of lines and then he’ll prove it with axioms that are written out in symbolic logic. So studying philosophy and studying derivatives, perfect shit. I got down there, and once I started understanding how options relate to each other, I was mesmerized because you have all these contingent probabilities based off of a single origin. And then you have layers of derivatives in the mathematical sense. And I would go like, oh my God, this goes miles deep. There’s curves upon curves and everything’s logarithmic and nonlinear. It was just really exciting to see it all. And then you start building software and it’s the same thing. 

Sean: [00:54:34] So, is that ability to spot those things…  

Nick: [00:54:36] Yeah, I think so. And I also think that I hate when I see what I hear…  I remember there was a governor saying we should get rid of all humanities studies and just have our students study STEM. Now I am obviously pro science and engineering and all of that, and I think the US lags in that. But if you don’t know how to apply those things, if you don’t have people going well, we’re in humanities, should we be applying these resources and this engineering you want, you have nothing. So you need both. And I think that the people that I’m most fascinated by, which by the way, are the people that both get vilified and held up.

Like if you listen to old Steve jobs interviews, he went to design school, dropped acid and dropped out. You know what I mean? But he was smart enough. He wasn’t an engineer, but he was smart enough to understand engineering, and understand that music can be on your phone. That seems obvious now, it seemed very cool and weird when he announced it. But he was also vilified, you know, terrible leader, demanding, all of that. It probably wouldn’t cut it nowadays. And I look at people like that and I just go like, oh yeah, like they didn’t study just STEM or just humanities. They did both. You have to do both.

Great Thinkers Nick Admires

Sean: [00:56:09] You mentioned Jobs. I’m wondering who are those thinkers that you’re just like, I would just love to just like nerd out with, for a few hours, really expand my thinking.

Nick: [00:56:17] Oh, they’re all philosophers for me. I don’t read business books, ever. I have read some business books, there’s not many of them. But they’re all dead, Bertrand Russell, Wittgenstein. I did get to meet Murray Gell-Mann whom I had dinner with a couple of times who discovered the quarks. And right now I’m friends with Richard Thaler who won the Nobel Prize in economics. What’s fascinating about Thaler and Gell-Mann who ended up winning a prize in physics and all that, is that you meet a Nobel prize winner and you expect everything out of their mouth to be a work of genius, right? Like when you’re growing up, you’re like, I will never meet anybody who won a Nobel Prize.

And I remember that I had read one of Gell-Mann’s, Dr. Gellman’s books, which all of a sudden the name’s escaping me. It’s called like the tiger in the center anyway, quark and the tiger or something like that. Quark and the Jaguar, that’s it. It’s got a cat in there somewhere. And finding it wonderful. And now after I met him, he was bananas, crazy and fun. I got out of that dinner party. He was so frustrated by the other people there that I sold my house and moved out of the neighborhood for real. Because I don’t want my kids growing up amongst these people. Because they were bigoted towards him because he kind of had this thick Jewish accent. 

But meanwhile, I was going like this man who discovered the quark won the Nobel Prize, did this work when he was in his twenties, like many mathematicians, do they do amazing work, you know, early on in their life. And I have this opportunity here to chat with him and to learn about him. And all he wanted to talk about was San Francisco, global warming, and this was 20 years ago. And Cormac McCarthy, who was his office mate, the writer, the great writer, he just wanted to talk about literature. And I was just going like, oh my God, this is so amazing. And then when I published or wrote a blog about the predecessor to Talk and said, dynamic and variable timing for prime time, slotted businesses is the norm or whatnot, Richard Sailor started reaching out to me on Twitter.

But I had no idea who he was. And it’s finally someone said, Hey, like this guy’s, this guy’s the real deal. You need to respond to them. And we went golfing and we went out there and we were talking about football probabilities. Now neither of us is crazy into football, but he was basically like, the decision-making of coaches is based on minimizing their personal liability of getting fired, not winning the game. And I was like, yes, of course, except for that guy in high school who had his team do four downs every time, no matter where they were on the field. And he knew all about that, of course. And we became great friends and he became an investor and advisor to Tock. And the thing you learned from interacting with those people is that if you did get a chance to talk to Vichtenstein or Plato probably, they’d probably want to talk about their dinner. It’s not like you’re writing the manifesto every day.

You’re living and learning and being human. And all of these people that I’ve met and others are multi-faceted individuals, which is the most fascinating thing to me. And I think the thing that our leaders miss the most, even within cabinet positions and the administrations and whatnot, instead of hiring generalists, they hire highly regarded specialists. And that to me is a very tricky, siloed approach to the world.

Sean: [01:00:17] Yeah. I was even just coming across this sports article, a research project. And it was about how the best athletes long term actually start out as generalists and then focus later and they develop those foundations on those broad skills. Speaking of just unique things that you go deep on, I know you put a ton of thought into the design of your kitchen. I love design. I love cooking. 

Nick: [01:00:39] Oh no, no, we need to pause, credit to my wife. I did almost nothing for my kitchen. So let’s just be very clear. I’m going to point to this part of this tape: Dagmara Kokonas designed 95% of that kitchen. I did the sink and the floor, and the stove, not much else.

Sean: [01:00:57] But doesn’t that stove cook at double the temperature of any new normal stove?

Nick: [01:01:01] No, it’s a wonderful Lockport new, which is a great product. And I worked with them to do some cool stuff for it. The stove is kind of a normal stove. Everything is a little bit different and better. But most of that does accrue to my wife. I will say that the reason I mentioned the sink is because a lot of sinks have two compartments. And the reason that they have two compartments, if you have a bigger sink in your house, is because one’s for the soapy water, and one for the rise. Now, I don’t know about you, but I don’t hand wash dishes anymore because we have dishwashers, but I do wash pans. 

And the way I do it is I just put a little soap in there and I scrub them down and then I just dry them right away, right? Well, those pans don’t fit in the sinks that have the two compartments. So that was something that was designed in the 1950s or earlier. And so I was just like, I want the biggest possible sink, single compartment. And I kept wanting it. I think it’s 48 inches wide. It’s huge. So I want to be able to put big stock pots in there and all that. And that’s because we have dishwashers now, like why do we have two compartment sinks?  So we did go to that level of detail, but it’s really true that my wife did 99% of it.

Sean: [01:02:20] What’s the favorite thing that we can give complete credit here to your wife that got installed? 

Nick: [01:02:26] This is easy. So we did a sink that mounted a Sous Vide Immersion Circulator, and the sink is like a bar size sink, and there’s a little piece of metal welded on, so you can drop in a poly science immersion circulator. And the beauty of that is if you’re using a pot or a Canberra or something like that, to do immersion circulation, you then have to clean all of that and all that. But the beauty of it is you can fill up the sink, it’s insulated and you can just mount. It’s a normal sink.

It works normally the rest of this time, but then we can mount and just drop proteins or our vegetables in there. And we can just use a sous vide immersion circulator. So that’s very efficient. That was her idea. I honestly can’t believe that no sink manufacturer is offering that. If you’re a sink manufacturer and you’re listening to this, sous vide sink.  You can use it all the time, super simple. When you want to clean up, you just pull the drain and clean up.

Deconstructing and Distilling Down The Lessons

Sean: [01:03:33] Yeah, I love it. Back to the originality of  thought there. I know we’re going to wrap up here in a couple, but I’m wondering, it’s just such a unique year, just a trajectory all around. Have you started deconstructing and just distilling down some of the lessons? I know you love writing. I’m just wondering if any of that it’s coming to paper.

Nick: [01:03:51] No, I haven’t had time to write and honestly, I’m trying to figure out my next set of goals. As I said, things accelerated so four years or five years went into one. And so I need to recalibrate what my goals are for the next 10 years. And I am thinking about that now. I don’t know what those are yet. And I really haven’t had time to properly distill all of that. I will say that I do love writing and I’ve got three outlines, four books, all fiction. And one of them, I have about a hundred pages written. I haven’t worked on it in a little while, but that’s something I do want to do. And will do if I live long enough. I have a ton of responsibilities and we’re not out of this yet. The restaurants and the economy are in all sorts of turmoil right now across the industry. And we’re not out of COVID yet, right?

The Possible Future Of Restaurants

Sean: [01:04:59] Yeah. Say my wife and I are going out to dinner in 10 years, what’s that going to look like? How different from today?

Nick: [01:05:05] I have no idea. It’s impossible to know, 10 years is a long time. The answer mostly is, not very different. I think at the low end, everything would get automated right down to the cooking.  If you’re going to a QSR in the future, why are humans flipping burgers at this point? Like, shouldn’t happen. It’s not like those jobs are gonna go away. And that also means that ordering will be digital and payment will be digital and payment on Egress even in fancy restaurants will be digital. It is stupid that anyone hands you a check, still there’s a lot of inefficiencies around that. 10 minutes extra per table taken out over the course of a year is a lot.  And we all have that frustration of trying to flag down a waiter and then give them a piece of plastic.

It’s all stupid. Like that’s going to go away. The reason is because there’s inherent friction in the credit card business. The credit cards just want to charge more and they can do so right now with a card, not present transactions. So if you do a digital transaction with humans, with biometric data, they get an extra 0.8% typically on average. So the reason you can’t go into a restaurant and just pay with apple pay has nothing to do with apple pay or anything like that has to do with all the POS systems and credit card, wanting to keep the old stuff. So they can charge the restaurants more, so that’ll go away. But the actual experience of having a great meal and celebrating your life with your friends, that’s human. That’s not going to go anywhere. 

Sean: [01:06:38] You know who you remind me of is the comedian, “>Jerry Seinfeld. He just walks around the world and just sees, and he gets frustrated by so many things and he sees how… 

Nick: [01:06:50] I’m turning into a crotchety old dude. I watched Larry David on some of those things and like the internal dialogue, I guess I’m far off of that at this point. Why that show is so good, I think that’s a lot of people’s internal dialogue. 

Sean: [01:07:08] I love “>Curb Your Enthusiasm. Larry David, yeah, I would love to have him on. But Nick, I want to know so much that you’ve experienced, so much you’ve learned, if you were going to leave your kids with a gift, this could be mindset, skill, or anything like that. What would you love leaving them with?

Nick: [01:07:20] Oh, that’s easy. Intellectual curiosity, that’s it. That’s all we try to do. People say, oh, I want my kids to do this or do that. And the answer is I want my kids to figure out what they want to do on their own. And I don’t have any expectations. But the only requirement I have is being intellectually curious. If you’re not trying to figure stuff out and learn, then you’re not really living. That’s the most fundamental aspect for me of the human condition. And fortunately my wife did a good job of that too. She raised two great boys and they’re both men, I should say at this point. And they’re both very intellectually curious, and curious in very different ways.

Sean: [01:08:00] Nick, I love it. You know, you’re one of my favorite thinkers. I always love getting to talk with you, learn so much and expand my mind. I want to make sure the listeners can stay connected with you. Obviously we did round one back in episode 119. Where can we send them? Where can they stay up to date with what you’re doing, what you’re working on with Tock, Alinea, all the restaurants?

Nick: [01:08:16] Yeah. You can always go to my Instagram which I believe is in Kokonas. So I always get confused, if it’s Twitter that’s Nick Kokonas… 

Sean: [01:08:25] I think that’s Instagram and we’ll have them linked up. 

Nick: [01:08:29] Yeah. Instagram is probably where I post stuff up the most, Twitter a bit, but less and less. The discourse there is getting worse and worse in my opinion. I’m on Tock HQ. People email me, like I was a guy who emailed me yesterday asking for how to do an event for his team, to motivate them, and do a team building exercise and what works and what doesn’t. And I emailed him back inside of like, 45 seconds saying, well, I know nothing about you or your team. So it would be impossible for me to comment. 

And he wrote back, holy shit, I cannot believe that you replied at all, let alone within a minute. So my thing is, I like meeting people. I like learning. I like looking at other people’s businesses. I can’t do it for everyone all the time, but I’ve gotten a couple of cold emails in the last year from doing these podcasts and whatnot where I’m like, oh wow, that’s interesting. Oh, that’s rare. And it’s like one out of a couple hundred, but what a gift that is to like to get that thing in your inbox in the morning and be like, wow, this is really cool.

Sean: [01:09:52] Well, hopefully we send some interesting projects your way. But Nick, I can’t thank you enough for joining us on What Got You There. 

Nick: [01:09:58] Thanks Sean. Good to speak with you again.

Sean: [01:10:01] You guys made it to the end of another of What Got You There. I hope you guys enjoyed it. I really do appreciate you taking the time to listen all the way through. If you find value in this, the best way you can support the show is giving us a review, rating it, sharing it with your friends and also sharing on social media. I can’t tell you how much I appreciate it.

Looking forward to you guys, listening to another episode.

 

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