The Distillation of Nick Kokonas – What Got You There With Sean DeLaney

The Distillation of Nick Kokonas

I asked Nick if he could leave his kids with one gift what would it be… Without hesitation he said “Intellectual curiosity”. This is the basis of everything Nick does in life. There are few people operating in the world today with as much of a unique blend of creativity, logic, philosophy and entrepreneurship as Nick Kokonas. Nick is a true polymath. He’s reached the pinnacle of a wide range of fields such as investing, restaurateur, entrepreneurship, technology and book publishing. If you’re wondering how it’s even possible to achieve excellence in all of these domains then get ready because that’s what I plan on uncovering in this distillation of Nick Kokonas.

Nick Kokonas is the the co-founder of the 3 of the best restaurants and bars in America – Alinea, Next, and The Aviary as well as the co-founder and CEO of Tock, a comprehensive booking system for restaurants which was recently acquired by Squarespace. Nick has been a entrepreneur and angel investor since 1996 and spent a decade as a derivatives trader, has co-written three books, and knows how to apply the lessons learned across all the domains he enters. Saying Nick has “conquered” multiple domains is an understatement and on this deep dive we uncover the mindsets of this modern day polymath.

“Own something, make lots of decisions that have outcomes, try to be right 51% of the time, do that often and repeat.”

Nick learned growing up as the son of Greek immigrants the way to create wealth in America was to own something. It’s very hard to create massive amounts of wealth just by working at a company, you need to own part of the business.
- “So for me it was always like, I want to own things for two reasons. One, because that’s a more likely path to wealth creation. And two, I want to own it because I want to have responsibility for it. Ultimately I don’t want my fate decided by someone else.”

Make decisions that have measurable outcomes

Too often in life we’re iterating on products or working on projects that have no measurement of the outcome. You need to get to a place of completion where you can measure the outcome of what you’ve been working on or the decisions you make.
- “I see a lot of people starting businesses and spending time drawing logos in a notebook so to speak. And that’s not a measurable thing. You haven’t produced anything. You haven’t tested it.”

Nick’s Recipe for Success

Own Something
Make lots of decisions
Make sure they have outcomes
Try to be right 51% of the time
Do that often
Repeat

You can be wrong an awful lot and still come out ahead

“It’s easy to get down very quickly in any business because you’re going to have a whole bunch of things that don’t work. I mean, we’re all human. No one likes to have their stuff not do well. No one likes to fail the test. Learning to be wrong and accept that as a process or indeed an inevitable outcome if you’re doing things correctly means that you can be correct and wrong at the same time.”

Fear as a motivator

“I’m motivated by a fear of not living up to possibilities, be it my own or the world…I really couldn’t imagine myself going to work in a 9 to 5 job.”
“I think all ego and ambition is driven by fear of just looking like an idiot. For me, it is.”
“I wrote about this in Life, on the Line. If you wake up every day and you feel great, you’re not taking enough risk. If you wake up every day and throw up, you’re taking too much risk. You need a nice even-level nausea. That’s the whole reason you do it, to feel a little tingle, uncomfortableness. It’s like anything in life. If you do something you’re not familiar with, you don’t really know what you’re doing, that’s exciting. I couldn’t imagine showing up every day and going, “Yeah, I know exactly what I’m going to do today.”
“That’s how Alinea started. I was terrified to build Alinea. That’s how Tock started. I was terrified to build Tock, but then I kept waiting for someone else to do it and it wasn’t happening.”
“I live really paranoid. I’m more comfortable that way.”

Self Doubt

With so many people saying the restaurant industry is challenging, did you ever doubt yourself? “Well, I was partnered with one of the best chefs in the world … I guess a lot of people may not have known that at the time. I felt very confident that that was the case. I guess I always want to back myself, so I’m willing to just fail as long as I’m failing because it was my own failure. You know what I mean? So, yeah. I was highly motivated to not screw it up, but people saying that just motivated me more. I heard the same thing when I was on the floor of the Mercantile Exchange [in my former career]. I had a lot of people saying, ‘You can’t do this. You won’t do this. It won’t work. It won’t be allowed’. That just motivates me to do it.”

Influences that shaped his view on work

Nick’s father was Greek and owned a restaurant in Chicago. His father was constantly saying “Look, go become a lawyer, go become an engineer or something like that. You don’t want to own a restaurant. It’s a terrible business.” But Nick noticed his dad was always present and the other fathers who owned their own businesses were there for their sons. Although his father encouraged Nick to get a regular job, like being a lawyer, because being an entrepreneur was very stressful, Nick admired the fact that his dad was his own boss and had the freedom to do as he pleased.
Nick’s Twitter bio for a while was “I’m not unemployed. I’m NSFW (not safe for work).
“My dad’s got a pretty good gig. He always showed up at my basketball games as a kid. All the other dads were flying around, and working really hard, and 60 hours a week, and my dad certainly worked hard but he also had the freedom. He could be there for us. That was a lure to me. It was like everything else felt like false prestige. You know what I mean? Is it really that prestigious to work at Goldman Sachs? Do I really want to do that?”

Key Lesson from Dad

“The key to success long term? Show up every time, on time. If you are expected but unprepared… still show up. Running late? Should have planned ahead, but let people know you’re late, your fault. My dad taught me that ages ago. Shocking how few people follow through.”

Positive Sum Games

“Societal success is not a zero sum situation. Your innovation improves our collective well being. That’s why I’m always rooting for the risk takers.”

Entrepreneurship

For Nick one of the most satisfying parts of being an entrepreneur is creating something new. Nick believes entrepreneurs see the world differently and their ability to imagine better products and work towards building that bring to life a better future. It takes a rare individual to be able to conceptualize something that doesn’t exist and then have the foresight and fortitude to bring it to fruition.
Nick’s first business was selling posters to college students.
- “Look, I didn’t know what to do and I was just floundering around. I worked at the Attorney General’s office here in Chicago, which was brain numbing. I thought I was going to go back to law school, so I should do that. Then I thought, like, well, what market do I know? I know college students. I was just out of college and going, well, what does every college student buy? I made a list. I literally wrote down a list of what every college student buys and they’re things like blue jeans and beer and I was like, oh, those are really covered. Somehow, I wrote down posters because they all have walls. You get in a new dorm room every cycle. I just remember one of the things that everyone did when they first moved in is that they grabbed a few posters and threw them on the walls and the guys would take anything. They would take Sports Illustrated or whatever, and just rip pages out, but the women had this aesthetic that they went for with their dorm rooms. I bet it’s still true. I haven’t been in a dorm room in a very long time, but it was like the Monet, Manet posters and Tuano with the kiss under the Eiffel Tower and all that. I started just looking at the bottom corner of those. They all said, either Bruce McGaw Graphics or Graffiti de France. This is pre-internet. What I found out is that all of those museum posters were all made by two companies, those two I just mentioned. I called them up, said I had a poster and framing shop, which I didn’t, they sent me two catalogs. I was like, holy cow. You can buy these things for $5 and sell them for $30. Like, dang. I just hired some reps at campuses at first. Basically, on move-in day at sororities in the Big 10, I had reps all over the place and they sold lots of posters. For every 10 they sold, they got a free one for their sorority house. It worked too well. It wasn’t like an ongoing concern, because it was only on move-in day, but I think the first day that I did it, we sold like $180,000 of posters, which at the time was roughly like what I would have made for a year working at Goldman Sachs.”
- Learning the basics of setting up a business from this experience was foundational and opened up the door for future entrepreneurial endeavors.

What “lights up” Nick inside

Creating something new and novel which happens infrequently is what Nick enjoys the most with regards to entrepreneurship and creativity.
“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 we 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.”

The ultimate freedom is self-reliance

“I think the ultimate freedom is self-reliance. For me, I always wanted to own my own situation. I just didn’t want to end up at a job or a place where I went like, oh, gosh, I have no control over this situation. Whether it succeeds or fails, I can’t have enough input.”
Nick went to work at The Chicago Mercantile Exchange. “It was a wild and wooly place, and the world’s biggest fraternity house for better and for worse. And holy cow. I saw things there that make Wolf of Wall Street seem tame by comparison. At the same time, owning your situation, there’s nowhere that you own your situation from day one more than you do on a trading floor.”

Faking his resume to take a job he was overqualified for in order to be in a scenario where he could learn the most

“I would apply to those jobs. They would say, ‘no, no, you’re way too qualified. Like you graduated Phi Beta Kappa from Colgate, you don’t want the runner job’. I started basically faking my resume in the wrong direction to get a runner job, got a runner job at $5 an hour and got down there and literally just held a piece of paper to a broker. Seemed like a really stupid decision at the time to a lot of people and that was reinforced to me daily but it was like exposure, and most of the time, it was a thoughtless job…. I like that weirdly because I got to look around me and learn.”

“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.”

Never put yourself in a position to lose everything and some of these lessons can’t be theoretically learned

“I remember– and it was probably good that I saw this when I was probably six months, seven months as a trader trading just one in two lots, really small, making a little bit of money every day, and learning how to do it. I watched this guy blow out, like fully, and he got there and you can see he looked pale. I was long gamma and having a great day, long volatility and I was learning that, oh, my gosh, your delta’s blow up too, and knowing that when the vol goes up, and all this stuff that you theoretically learned, you internalize in a crisis like that. What I also saw was that this guy lost everything, house, kids’ college funds, everything. He looked really pale. It was almost like he was like, there’s no point in covering this. Like, he had to close everything out. The clearing firm told him to close everything out, but he just was there and people were giving him condolences almost. It was like a funeral. Then he just threw up and walked off the floor. I was like, ‘Yeah, don’t do that ever!’ Even though you’re tempted to do that, and they expire worthless 99% of the time, you just can’t put yourself at that existential risk. I was very fortunate to also have a mentor on the floor who knew trading very, very well. He was a brilliant guy. Further, I watched people lose everything firsthand. It’s not a pleasurable thing, but it is definitely instructive.”

“I will pay you to work for you!”

Nick is great at understanding who and what can help him develop the most even if in the short term it seems counterintuitive. Nick did this early on when he identified Frank Serrino who he thought would make for an excellent mentor on the floor of the Chicago Mercantile Exchange.
“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.”

Most Businesses Aren’t Great Businesses

“What’s always interesting to me is that most businesses are not great businesses. If there is a great business out there with high margins, there’s something else about it that’s hard to get into. So it’s very interesting to me that everyone says, ‘Oh yeah, restaurant business is terrible.’ When we started building Alinea there was a suburban restaurant in Chicago and I really liked it. The guy was a good looking chef and he seemed like he had his stuff together. And I kind of knew him a little bit and I said, ‘Oh by the way, I’m embarking on building a restaurant.’ And he said, ‘Well, you don’t want to do that. It’s a terrible business and it’s all sorts of awful stuff and all that.’ And I said, ‘Why did you build four more?!’ If you build one and it’s such a terrible business, why did you build four more? Why is it that there are some celebrity chefs that have 35? It’s not because they like to get punched in the face. Clearly you can make money at it.”
Also, coming from a floor trader, a derivatives trader background, when Nick got down on the floor all anyone told him about was how terrible it is. “Oh my god, you’re going to get beat up. It’s a terrible environment. People are mean. 99 out of 100 people don’t make it their first year and then even the one out of 100 that makes it only 99 of 100 then fail afterwards. Only one out of a 1,000 ever becomes a millionaire or whatever.” And I was like, “So you’re saying there’s a chance.” “I like businesses that are hard because if I can figure them out, whether that be a great arbitrage in derivatives or that’s the restaurant business or publishing, which I think is an awesome business. I just go like, well people are full of shit. They’re defending their position. And the fact of the matter is that there are a lot of people in the restaurant business that are not in business so to speak. They did it out of passion or they did it, as you said, as a vanity project or they thought that they were great entertainers at home and they knew how to throw a dinner party so they decided to open a restaurant. I was accused of all of those things when I started building Alinea with Grant. So much so I would just drill into him, this will be run as business first. It’s not an art project, it’s a business. If we run it well as a business then we can invest more in the art and it becomes a virtuous cycle. I think that the barrier to entry to the restaurant business is actually relatively low compared to many other businesses, especially in terms of actual knowledge requirements. You can’t just start a software company as a sole proprietor if you don’t know how to program. So the barrier to entry there is fairly high. The barrier to entry to a restaurant is you sign a lease and build a kitchen and start cooking. It’s a lot but it’s doable. And consequently there’s going to be a high failure rate.”

All business is storytelling

“All business is storytelling. You need to be able to tell your story.”

Nick studied at Colgate and he credits that education for teaching him how to think and write clearly. He views the ability to write clearly and well as an invaluable and essential skill in business. He’s amazed at the number of really smart people coming out of school who don’t know how to write a good business email.
- What Nick recommends to improve your writing skills.
  - Read high quality books
  - When Nick interviews a potential employee he will often ask them what are the last few books they read. This is a filtering mechanism to extract out who the intellectually curious people are. He can quickly dig into the people who have just looked at the books at an airport book store vs the people who are voracious readers/learners and can’t even remember the last book because they’re constantly picking up a new one.
One of the exemplars of great storytelling is Steve Jobs and Nick attributes much of his success in his ability to tell the story of his products well. It is so important to be able to clearly express your thoughts and persuade others. “If you can’t inspire other people to do what you want, you’re probably not very clear.”
Importance of wording- “There are two words that we used in every interview and still do, fun and delicious. Because it’s so simple but so hard to find. Because when you go to a great restaurant, whether that be your corner bar or the best Michelin experience you’ve ever had while you’re traveling, I guarantee you it’s fun. It’s not snooty. It’s not someone looking down their nose at you. You feel like you’re part of this pageant that’s going on in fine dining. And you should be part of it. You should be one of the actors, not an audience member. And then delicious is obvious. It has to be delicious otherwise it’s just a farce. Every interview you ever see of us still to this day when someone asks about the science or the process or whatnot … And I’m doing it right now. Everything we do has to be fun and it has to be delicious or we will not do it.”

Importance of novelty

When creating Alina one of the questions Nick wanted to answer was, “When in your life do you feel like something’s new? The older you get the fewer new experiences that you have. And so when you have one you kind of crave that. You’re like wow that was really cool. At the same time you become more closed to them as you get older. It’s natural I think. We were like, how do you become more childlike? What is a way to make an adult feel like a kid again? A number of the dishes at Alinea came out of that question. One was the balloon dessert. It’s like an edible balloon. When you’re a kid you get a helium balloon and literally you could play with that thing for hours. It’s magical. It floats. That’s really cool. We sorted out how to make an edible helium balloon. It’s so simple. It’s just like a taffy. It’s nothing crazy delicious. But it’s wildly fun because you feel like a kid again. How in the world does a Michelin Star restaurant give you a floating balloon and then make a mess of yourself while you eat it? We were asking that question.”

Execution is everything

“I tell people all the time. You can have all the great ideas in the world. If you do not execute them at a high level it’s going to fall flat.”

Start with the end in mind and work backwards

Nick likes to set broad ambitious goals and understand the end in mind and then work backwards from there.
“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 in 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.”

Impact of studying Philosophy at Colgate

“I was actually a Wittgensteinian. That’s what I studied. Early Wittgenstein, very different from late. Early Wittgenstein was all Symbolic Logic. Yes, I got exceptionally lucky to have Jerry Balmuth at Colgate who is, I think, at one point, the longest running tenured professor in America was there from the time he was about 24 years old till he passed away at 94. He took me under his wing and taught me how to think and how to write and forced me to do well. When I say forced, I mean that very literally. He was pretty intimidating. I don’t know that he would survive very long on a campus in 2021. He was pretty harsh with folks. He didn’t suffer fools. He drove me really hard for four years. I feel very lucky that he did.”

What advice would you give 20-year-old Nick?

“I was listening to what other people’s expectations were of me, instead of just doing my own thing. I probably wasted five years in some respects because I didn’t have the confidence to do what I wanted to do. I kind of did small pokes into it. I got into University of Pennsylvania Law School and then deferred a year to just blow it off. I kind of just floundered for a while and wasted four years just trying to figure out how to say no to people. But yet it worked out so I can’t really complain … Doing what you love is really hard, it’s not easy. You’ve got one go around here. You might as well do what you love, but it takes a lot of courage. It takes a lot of failure and there are a lot of people who don’t like it when you go to do what you like.”

Making an impact with gifts and typewritten letters

What stands out is Nick’s understanding of quality and creating novel feelings for people. It’s the little things that you wouldn’t think about that stand out the most to people and everything Nick does he creates something that people will remember.
“At the end of the day, when I want to give someone something, I really want to make it a great gift. I try to get something that you can’t buy. So I bought an old typewriter, and when I write a thank you note, I type it up on the old typewriter. It is the most confusing thing to people. Because they look at it and they go, ‘How did you do that?’ I go, ‘On a 1922 typewriter.’ It’s like a personal, artisanal thing.”
“I tend to give away what I would call vintage art books. So, it’s not a book people can buy, I’m sorry to say, but occasionally I’ll be at a used book store and I’ll find some of these great old art books. I buy a few of them and then when I want to thank someone for something, I send them that.”

Intellectual Curiosity is Everything

“I think the hallmark of the people that I like as friends the best is what we try to instill in our kids, and the reason that I like my wife so much and all that, is that intellectual curiosity is everything.”
If Nick could get one message out to people it would be along the lines of “Pause,Stop, “Be Curious”. Nick know’s it’s cliche but he believes curiosity is the thread that ties everything together.

Nick’s Multidisciplinary Skill Set

Many people are “narrow and miles deep” but Nick describes himself as being multidisciplinary as “miles wide and shallow”. This allows him to achieve mastery across different domains faster as he’s able to understand the commonalities and requires principles that can be tied together.

Nick’s 1st day as a Runner on the floor of the Mercantile Exchange

“I’m standing there, and no one’s talking to me. Then they’re swearing at me, and they’re bumping me and they’re poking me with their pens on purpose, and all that. I remember one of the guys said to me, he goes, you’ll be out of here in six months. I said, you’ll be asking me for a job in two years. Like, that was my attitude. Now, every night I went home and was drained and ready to cry, but on the floor I got there, first guy in the morning. If someone arrived from my pit, they saw me and I would not go home. I wouldn’t leave, even if I were just doing a crossword puzzle on the desk, I wanted them to see me there as the last guy there every day. I did that for years. During lunch, they’d all go to the Merc Club for lunch, have a martini and a sandwich and all that. I’d go like, ‘cool, I got the pit to myself’. I would sneak in an espresso and shoot an espresso, and I wouldn’t use the bathroom for eight hours. I just grinded it out, and it worked.”

Looking for “Corporate Refugees”

“What I looked for are people that I called corporate refugees. I started looking around and noticing, hey, there’s people like myself, who became a lawyer. I had one guy literally bumped into, I knew him from college, my wife went to high school with him. I bumped into him at a 711. ‘What are you doing now?’ He said, ‘I’m a medical malpractice lawyer’, and I go, ‘wow. I never would have guessed that.’ He goes, ‘oh, I hate it.’ Six weeks later, he was working for me for 15 grand a year as a clerk. I would be at a cocktail party or something like that, or a barbecue, and I can just start sniffing out people that were leading lives of quiet desperation. I seek out those people who I thought were smart, but not smart, so much is dedicated and willing to grind and fast thinkers. You don’t need to be broadly intelligent to be a fast thinker. Then we just broke them down psychologically and built them back up. I had a guy punch me once. We used to do a thing where it was just rapid math, where I’d go, ‘five times four.’ You’d say ‘20’. Then I’d say ‘734 divided by seven’. That’s not hard, because it’s like 707 is 100. Then the 34 into seven, you can get it really close very quickly. We would practice that kind of math just very fast, no shortcuts. I got to the point one time where I had a guy– he was like a drill sergeant in like what’s that movie– Full Metal Jacket– we’d go full metal jacket on them. We’d have two guys yelling at them just doing basic math problems, to the point where grown men would cry. You go, well, that’s cruel and terrible. He was like, no, we’re your friends. This is just for pennies after work. When you’re in there, you’re going to need to do that and they’re not your friends. They’re going to try to take your money, and your money is going to be my money so I would like you to be able to do this. I had one guy that just broke down and he couldn’t do three times seven at some point and he just punched me in the face. Then he apologized, then he ran off the trading floor. I was just like, okay, we’ve got you, and now we’re going to teach you how to think clearly when things hit the fan.”

Work Ethic

“That’s when I went, yes, that’s what people don’t understand. The paydays that happen in any business are not based on that end cash out thing where the good event happens. They’re all the grind that you do every day to get there.”
“We would literally just wake up at five in the morning, trade all day, go out to dinner, have a great dinner, stay out till midnight, wake up at five in the morning and do it again, six days out of seven for years on it. Terrible as a businessperson then. I was not a businessperson. I was a trader.”

What do you consider your biggest failure that brought you to success?

“I don’t know that I have a massive business failure. I have lots of little personal failures that we all probably do. My biggest thing is I definitely let my emotions get the better of me at times. I get angry and I’ll make reactional decisions and that’s something that’s a personal failing, but it’s not a failure. I hate to use a golf analogy, but Jack Nicklaus was asked, ‘What’s the worst shot you ever took?’ He said, ‘I don’t know. I try to forget all of those.’ Whenever I start something that didn’t work, and I’ve got tons of them, I don’t dwell on it. I think the things that bother me are the interpersonal things– if something has gone badly or someone feels slighted or hurt in business or personal relationships.”

What Nick saw in Grant Achatz

“Grant had a ton of ambition. He was like the corporate refugee guy, but having never done corporate work, I could have hired him. If I were still trading, I would have convinced him to stop being a chef. Because he was just so driven, he was a winner. You can look at someone and just go, oh, this person is going to win. They’re going to figure out how to win. He had this emotional connection with the food, with the experience that people were having and all that. He was certainly very artistic, but you could also see that he was asking the right questions. He would really measure, and he wasn’t all those chefs that came in the dining room and shook everyone’s hands and had a glass of champagne and a cigar, and it’s like a party. He was asking people, why did you like this? What did you think of that? Why do we even serve bread? I’m just stuffing you up with bread and butter, why? We didn’t know each other well, and I just couldn’t get out of my head. This guy’s going to be one– he’s one of the best in the world at what he does already and no one knows it. Someone needs to guide him to a bigger picture because he grew up in St. Clair, Michigan in a diner, and he just hadn’t been around the world at all. He hadn’t had the opportunities to see these things. I think he wanted to be great, but he didn’t know how good he was.”
“What people don’t understand is that the only place I think Grant is fully comfortable and fully himself is in a kitchen. He’s an expert. He knows exactly what’s going on. He’s like a ballerina on stage. He’s just like an efficiency of motion and all that.”

“We’re Alinea because we do that!”

“There’s only one thing that really triggers me and that’s when people say, ‘oh, well, you can do that because you’re Alinea.’ What I say is, ‘No, we’re Alinea because we do that.’ What is that? Well, we got rid of phones, we got rid of tipping 10 years ago, we pay a 401k to our employees, like all these things that were risky are actually good business practice. When people say, ‘Well, you can get away with that because you’re Alinea’, I said, ‘No, a thousand small decisions like that made Alinea what it is.’”

Aligning the incentives to create urgency in your business

“I just started noticing weird, inexplicable things like we have a waiting list of 50 people. It’s Wednesday. On Saturday, at the time, we did 90 people, but on Wednesday we did 74, but we have a waiting list and I know we’re capable of doing 90, that 16 people is a massive difference. That’s your whole profit right there. I remember I went up to our GM at the time, and said ‘Why are we doing 74 people on a Wednesday but 90 on a Saturday? Tuesday is just a different name for Wednesday.’ He said, ‘Oh, you can’t begin the week with 90.’, ‘Why not?’ ‘Well, we’re just getting a rhythm, and we’re getting into it. The prep is a little different. We can have people come in and prep Tuesday, when we were closed then. We’ll just have them prep, and then we’ll do 90 on Wednesday, too.’ You can just see him going, ‘Oh, my lifestyle is going to suck’. Like 1,000%, there was not this urgency because I hadn’t aligned their incentives the same. My incentive was to do 90 people. If that 90 was our maximum we could do, we would do 90 every single day of the week that we were open. Their incentive was to go, okay, well, Saturdays are the busy day, where we all know that the whole staff is going to be tired and hustling and all that. I just said to him, look, if we did 90 people every day, we could hire another six people.’ ‘Now, some of the people that work there went like, but then we’ll lose money. I’m like, the last money in is the money you keep, because your fixed costs get to be a smaller and smaller percentage of everything. I’ll just say, the first year we opened Alinea, we did about $5 million in sales. In 2019, we did $23 million. Literally, from 2004, we are 10 x in 15 years. Same number of seats, same floor print.”

You need to truly understand what you’re selling

“For me, it’s like a marketing hook and this also goes back to the philosophy thing, if you understand something, you can write it really short. I could tell the story of that restaurant in three sentences, and that meant I really understood it. I understood what we were selling. I understood that people would understand it. I myself would want to go to it. I myself would go, yeah, let’s take the best chefs in the world and have them do different cuisine in the same space every four months. That’s an interesting problem but as a diner, that’s exciting. I can go back to the same place three times a year, and get totally different meals. Some of them will be great. Some of them maybe not, but it’s exciting. You want to see what happens.”

“All art is commerce, and all commerce is art”

“All art is also commerce, and all commerce is art. There’s this notion, especially in the restaurant business, that if you are this artist, you shouldn’t be great at the business side. It’s actually looked down upon like an indie rock band or something like that. What I always try to explain to young chefs when they call me is you either need to become partners with someone you trust desperately and intimately on all the spreadsheets and math and HR and all that, or you need to learn it yourself and love it. Because once you open your own restaurant, 60%, 70% of your job if you don’t have that person is going to be that. I see it time and time and time again, where they open a restaurant, they think they’re just going to do great food, great service, that’s all it matters. They forget all the other things that you need to do to– it’s like the Field of Dreams thing, like if you build it, they will come. No. If they don’t know about it, they won’t.”

Breakthrough Idea 💡 to build Tock

“I just couldn’t believe that people book reservations at Alinea and then simply ghost them. We had six to eight people a day that simply wouldn’t show up, or we’d have people book a table of six and show up as two and you can tell when they got there that they were just lying that other couples, ‘oh, they’re late. They’re not coming.’ They just booked that six at Tock because it was the only thing available. Over the course of a year, I literally kept track of it and we lost $580,000 of revenue in the year, and I started going, well, let’s call everybody. I did everything that every other restaurant owner still does. I called them ahead, I held the credit card, I did everything. The answer was none of it works. You might have little successes, but you also had people pissed off, and you weren’t keeping the credit card in a PCI compliant way. If you tried to charge people afterwards, they’d say, my grandmother died, my dog died, like I got a flat tire. They would come up with all these excuses, and then they would blame you and the person on the phone. They would say, you’re being terribly mean, you didn’t even serve me the food, why don’t you just give it to someone else. We’re like, well, we don’t have a bar there for people to just stand at hoping they’re going to get a table. I was at one point, I just blurted out, on the phone to someone, I was like, if you bought tickets to a Cubs game and you got a flat tire, you don’t call the Cubs and say, can I have my ticket back? The game goes on without you. I had in my head, we should just charge. If I go to the theater or a concert or a movie, you charge.Everybody, including Grant, told me it was a terrible idea. When we announced Next, we made like a little film trailer, which is actually a really cool thing to do at the time, too. Martin Kasner and I did the whole thing. I did the music for it and mapped out the visuals and storyboarded it and it said “Tickets, yes, tickets on sale soon.” Man, I painted myself into a corner there because I thought like I would get a theater ticket company or Ticketmaster or Open Table would give me access to their API, but I didn’t really realize how a concert starts all at once. You assigned seating, but there’s a go time that everyone leaves at once. The problem of configuring the tables and selling them started looking a lot like an options market to me. I realized that I would have to build it, I would have to build our own software. I hired a single programmer 12 weeks before opening, and it was hell. It was a great hell, but it was hell. Because I had to figure it out, had to map out the problem, had the flow chart and had to put it up on Rackspace, I’d never put anything on a cloud server before. Had to figure out how to use authorize.net and take credit cards compliantly, all this stuff needed to be programmed from scratch. In 12 weeks, we built the prototype to it. As soon as we turned it on, it broke because I thought there’s going to be 400 people, and there was 14,000 or so that were hitting the refresh button. We did the marketing too well, but finally got it going and sold $560,000 of tickets to a restaurant in the first day. It still is one of my most satisfying moments of my entire life. Because I looked like The Big Lebowski, I was walking around in Rome with pizza boxes and empty wine bottles, laying around my little office and hadn’t shaved in a week and I had become obsessed. I was completely obsessed with trying to make this work.”

“I was literally running laps around my house inside, going, I can’t believe this works. Then I also, six months later, went, ah, this is like a responsibility now. Almost like I knew something that other people didn’t and I felt like it was going to change the industry. Then I spun it in my head going well, if I don’t do it, someone else is going to do it. Because it’s an inevitable thing. It’s like when you discover something that always existed, I didn’t invent it, it was just there. I went like, oh, there it is.”

Nick’s epiphany moment that led to the largest cost savings in running a restaurant

“I saw a lot during COVID of restaurant owners, famous restaurant owners going on CNN and saying this is the business that you are paying for last month’s costs with next week’s receipts. I just kept going, well, you’re not running the business very intelligently. That was one of those things where we had money in the bank because we were selling tickets. I called a meat purveyor because we were going to go through 400 pounds of dried ribeye per week at Next and it was about $30 a pound because it was a small ranch and it was drying and all that. I said, well, what if I write you a check for $300,000 for the next couple months, and tomorrow? What discount do you give me? The math I had done in my head was option math. It’s like cost and carry. Like how much is that money worth for that month? Well, not much but something, the interest rates are super low. What is the default rate? How many people don’t pay him at all? What is the value of cash in pocket? What’s his waste? He’s not going to put as much on the rack to dry if he knows exactly what I’m buying. He called me back the next day. He said, well, no one’s ever asked me this before, but I’ll go down to 19.80 a pound, half, I was expecting 4% discount, if you give me a 5% discount, I would have been ecstatic. He went down to half. I said, I’ll tell you what, I’ll pay you 22 a pound if you explain to me in detail why. I was like expecting like a spreadsheet to come the next day and it was going to be work for him. He just went, oh, that’s easy. We slaughter the cows, we put them on a drying rack at between 15 and 30 days, that’s peak, I go to work to sell all that. At 45 days, there’s a few steak houses that want it. At 90 days, no one wants it and I sell for $1 a pound for dog food. Think about how, first of all, bad for the environment that is, bad for the animals, wasteful on every level, and that is the ag system for us humans. Not just that, because people don’t know what they need so there’s so much food waste built into the cost of restaurants. That was a moment where I went, we need to hire a person whose sole job it is to call our purveyors and say, what if we prepaid you? Now, for wine, meat, fish, like any of the high priced items, anybody who will talk to us on that and give us a discount, we do that. We have a person whose job it is to do that.”

How Nick responds to overwhelm and adversity

“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 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.

Calculating Risks

“Because you’ve seen it, you’ve seen these crises, all the train wrecks happen in slow motion. Like ‘08…There were 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 Talk. And all of a sudden I woke up. 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 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! 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.”

Not only am I not de-risked, I would like to go the other way. I’d like to win.

“When you’re building a business or building your own career, if you don’t take risk you know exactly where you’re going to end up”
“It was February 28th of last year, and I started getting this existential dread that I do not have risk protection. The three-standard deviation event is happening, and I am not de-risked. Not only am I not de-risked, I would like to go the other way. I’d like to win. I just remember going like, I literally said to my wife, I need to go into trader mode. Running a restaurant, running a software company is definitely not trader mode. I do not run through the place going, you do this, you do that I called Steve Bernacki who’s my CFO of Tock and COO of Alinea Group and I said, we need plans. I called some doctors that I know epidemiologists, I called everyone I knew who was a scientist and said, what do I need to do to do risk mitigation at my restaurant? They basically said the basic stuff, hand washing temperature checks, like everything that we all know now. When I told our staff, our managers that we do hourly hand washing, they went like, this is a guy who clearly doesn’t work in a restaurant because you can’t stop every hour and wash your hands in a restaurant. No one’s going to be working for us in two weeks, like they’re going to close down dining, and it’s all going to shit, we’re going to have to figure out what to do. We’re going to need to sell carry out, people are still going to need to eat, no one’s going to want a $350 luxury meal, and we’re going to need to do carry out. I was like, you got to sell it for 35 bucks, which means your food cost is $10 good luck.”
“The first night, I remember, Alex Hayes, one of our business guys, templated out the night for the same service, like 128 to-go meals, and then people are going to pick them up between 5pm and 9pm. I go, who else is eating dinner at 10 o’clock during a pandemic? I’m like we need 500 pickups between 4 and 5:30, because people are then going to take it home and cook it for dinner. This is not the same business as usual. We did 500 the first night and Grant was like, ‘oh, this is way easier than normal service’. I’m like, of course it is. You’re not doing– a normal day at Alinea is 20 course meals for 128 people, that’s 3000 dishes. Doing exactly the same thing, it’s boring but it’s easy. By day two, he’s like, take it up to 750. By the following week, we built software for two-way text messaging and we were selling 1250 a night. In two weeks, we hired back like 68 of 88 people there. Between March and December, we did 135,000 carry out meals out of Alinea alone, 65,000 supplements, thousands and thousands of bottles of wine, we replaced about 75% of our revenue for the year but all of our other costs went down because we weren’t open 10 hours a day.”
- This story displays Nick’s bias for action. He doesn’t wait around for things to happen to him, he makes them happen. By moving fast and staying ahead of the curve he was able to turn a potential catastrophic scenario into an incredible positive situation.

Studying your past to learn more

“I’m going through a process right now where we have to go back through all this journey of building Tock and everything, and even that’s been educational because you accrue so much knowledge, and you just know how everything’s done. In the process of going back through that, on gathering it, and organizing it, and all that, I was like, ‘wow, we’ve learned a lot in the last six years and that institutional knowledge that we’ve gotten, and not just myself, but a lot of the key people has been almost revelatory for me, because you build and grind every day. At the end, you go, ‘oh my God, look at all this stuff.’ It’s been a fascinating process. It’s one of those things, I have a 22-year-old son, and at 22 years old, you don’t want to listen to the old guy, and I certainly get that, but I wish I could hit the download button of all this experience knowledge, because they are three different kinds of businesses completely and they have a lot that they can learn from each other.”

“In hindsight it looks like a neat package but what people really need to understand is that some of these things are done out of a sense of frustration, desperation, all those things”

Looking back Nick’s path could look thought out and neat but he says that’s hardly the case and he spent a lot of time floundering around. He had so many transitions and unplanned paths along the way.
“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.”

Constraints breed creativity

Nick creates constraints as a forcing function to bring out his highest level of creativity. He does this by making his goals public so he has a social obligation to follow through on them.
“ 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. The opening 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.”

What has been the most memorable conversation or moment that took place over a drink in your life?

“When Grant and I got margaritas when he was diagnosed with cancer … He was diagnosed with cancer and about three days later we didn’t know the extent of it. At the time we thought it was the equivalent of skin cancer or something like that. You know, you go, you get it cut out, they watch you and that’s it. He asked me to go with him to the oncology EMT. We had that meeting and instead of being told, ‘What you have is minor and an inconvenience outpatient thing, you’ll be fine,’ they basically said, ‘We have to cut out your tongue, we have to replace it with part of your leg, we have to cut out your jaw, you’ll never eat again, you’ll never taste again, you’ll never talk again. And you should actually get a will together, because even after all of that, you have a 20 percent chance of living four years.’ At that point I said, ‘Let’s leave,’ because you’re not going to accomplish any of that at this point. At the time we had just been named best restaurant in America. All of his dreams were kind of coming true in a lot of ways. Right across the street was a dive Mexican bar that opened at noon. It was a Thursday at noon and he said, ‘What do we do?’ And I’m like, ‘We need to go have a drink.’ It was just a really, really horrifically emotional thing. We got in there and we ordered a pitcher of margaritas. We were the only two people in the whole place and we poured the drink and we just said, ‘Well, that was fun while it lasted!’ It was one of those life moments where things are really fragile. We didn’t have this morbid conversation. We just said, ‘Hey, we did a really good job with this while it lasted.’ It was the moment where you think, ‘Holy shit, I can’t believe that just happened,’ and then you decide the next six months are going to be really hard and we just had a pitcher of margaritas. We don’t ever go out. We’re like brothers, but if he has an odd Tuesday night free, he doesn’t call me up. We see each other every day. We work together, you know. That was probably one of the few times where just the two of us ever have had a drink with nobody else there. It was really weird and very difficult, but very profound.”
It Sounds Crazy, but Cancer has Made Me a Better Chef

https://whatgotyouthere.com/portfolio/258-nick-kokonas/

https://whatgotyouthere.com/portfolio/nick-kokonas/

KIRSTEN MICCOLI PHOTOGRAPHY

https://adrinkwith.com/nick-kokonas/

https://www.realvision.com/shows/the-interview/videos/nick-kokonas-derivatives-trader-turned-fine-dining-visionary

https://tim.blog/2018/10/18/nick-kokonas/

https://www.joincolossus.com/episodes/20135760/kokonas-know-what-you-are-selling?tab=mentionedcontent