Founders - #20 Danny Meyer (The Transforming Power of Hospitality in Business)

Episode Date: February 6, 2018

What I learned from reading Setting the Table: The Transforming Power of Hospitality in Business by Danny Meyer. This is not a typical business book (0:30)Why don't you just do what you've been thinking about doing your whole life? (4:00)How Danny learned from other founders on what to do and what to avoid (8:00)The smartest business decision I ever made (18:00)Optionality as a non-negotiable (20:00)Inadequate focus on core product (23:30)The founding of Shake Shack is an example of this great quote from Jeff Bezos: "We know from our past experiences that big things start small. The biggest oak starts from an acorn. If you want to do anything new you’ve got to be willing to let that acorn grow into a little sapling and finally into a small tree and maybe one day it will be a big business on its own." (27:00)Advice from Stanley Marcus (Neiman Marcus): "The road to success is paved with mistakes well handled." (38:00) ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

I was born to go into business for myself, and I was destined to find a business that would allow me to share with others my enthusiasm for things I find pleasurable. My cravings for the adventures of travel, food, and wine is what first compelled me to do what I do. In fact, like so many other entrepreneurs I've met, I'm not even sure I had much of a choice. A career in the restaurant business was going to tap me on the shoulder even if I hadn't found it first. This is not a typical business book, and it's certainly not a how-to book. I don't enjoy being told how or that I ought to do something, and I'm equally uncomfortable doling out advice without having been asked for it. What follows is a series of life experiences that led me to a career in restaurants, which has, in turn, taught me volumes about business and

life. Along the way, I've learned powerful lessons and languages that have allowed me to lead with intention rather than by intuition. In the process of writing this book, I've done no research, gathered no evidence, and interviewed no one else. But I hope that admission won't stop you from enjoying it. You may think, as I once did, that I'm primarily in the business of serving good food, although food is secondary to something that matters even more. In the end, what's most meaningful is creating positive, uplifting outcomes for human experiences and human relationships. Business, like life, is all about how you make people feel. It's that simple and that hard. So that was an intro from the book I want to talk to you about

today, which is Setting the Table, the Transforming Power of Hospitality and Business by Danny Meyer. So even though I read this book about a year ago and I really enjoyed it, I kind of hesitated doing an episode of Founders on it just because I'm not sure how many people know who Danny Meyer was. As much as I'm interested in the subject of entrepreneurship and founders, I didn't know who he was until a friend of mine who was also a restaurateur recommended that I read this book. And it's really fantastic. So for the people that don't know who Danny Meyer is, people in the restaurant industry knew him as somebody that created gourmet restaurants. He owned, I think, 10 or 11 restaurants in New York City. And he's influenced a lot of the thinking about restaurant design and how to run a restaurant. And a lot of other restauranteurs look up to him, for lack of a better word.

But how I was introduced to him, because I've never eaten, I don't think I've eaten in any of his restaurants other than uh shake shack so like last week when i talked to uh talked about steve jobs on the becoming steve jobs podcast um steve jobs created one of my favorite products of all time obviously the iphone and danny meyer also created one of my favorite products of all time and that's the shack burger after the ipo shakeack had a few years ago, it increased his net worth, Danny Meyer's net worth, by about $350 million. So it's by far his greatest business success. So this book, however, was published almost 12 years ago, 2006.

And at that time, Shake Shack only had one restaurant. And so now, fast forward 10 years later, it's a public company. I think there's over 100 Shake Shacks all over the country. So in this book, like he said, there's a lot of things that he learned from building restaurants that are applicable to any kind of business. And that's why I want to talk to you about it today. So let me jump to this part and it's why don't you just do what you've been thinking about doing your whole life? And this is Danny Meyer talking about how he finally made the jump and got involved and became an entrepreneur. So at the time he's in his early 20s, he's living in New York City and he is a very successful salesperson for a large company

called Checkpoint and he'll reference it here. So let's go right to the book. The joy I was experiencing each day by setting my own personal and professional agenda made it increasingly clear to me that I would never go to work for someone else. Even at Checkpoint, where I officially reported to sales directors, I worked for myself out of my own walk-up apartment on the east side. I had built my own little business within a business, creating my own schedule, plotting my own tactics, and exceeding whatever goals were set for me. My dad and both my grandfathers had worked for themselves, and they were all presidents of their companies. My mother had owned her own art gallery. I had an uncontainable drive to win that was now in high gear. We're going to talk about the influence that his dad and grandfather had on the way he approached business too, because he mentions it a bunch of

times throughout the book. In late 1983, Checkpoint asked me to lead the launch of an office in London. I was at a crossroads. Working abroad was a tempting opportunity, but my dream as I was growing up had never been to catch shoplifters on any continent. Checkpoint created hardware and I think hardware that made it easier for retail companies to stop people stealing merchandise from the store. My years at Checkpoint had been a period of great personal growth. I had learned that it was important to me and hugely enjoyable to compete in the business arena. I had learned how it was important to me and hugely enjoyable to compete in the business arena. I had learned how good it felt to earn, have, and spend my own money and not have to ask or feel obligated to anybody else for it. I had gained a world of independence and a new

self-confidence. I was in my early 20s making $125,000 a year with no obligations except to myself. Each year, I invested a good chunk of the commissions I had earned in Checkpoint's publicly traded stock which during my tenure there soared from around two dollars to nearly twelve dollars per share. I was earning money for and from the company and that had felt great but it was time to move on to something different. It was time to grow and pursue my life's career. I enrolled in Stanley Kaplan's prep course for the law boards. My new plan was to practice law as a prelude to a career in politics or public service. That was my fantasy. In reality,

I was lost. The night before taking the LSAT, I had dinner at Elio's on 2nd Avenue with my aunt and uncle, Virginia and Richard Polsky, and my grandmother, Rosetta Harris. I chose not to drink wine because the test was being given early in the morning. I told my uncle, I can't believe I'm doing this LSAT thing tomorrow. I don't even want to be a lawyer. So why are you? Richard Polsky asked in an exasperated tone. You know you don't want to be a lawyer. Why don't you just do what you've been thinking about doing your whole life? What's that? I asked him. What do you mean what's that? Since you were a child, all you ever talked about or thought about is food and restaurants. Why don't you just open a restaurant? The idea felt at the time both foreign and like an absolute bullseye. The next morning, completely relaxed, I took the LSAT

and then I never bothered to apply to a single law school. From that moment on, I was off to the races. It would be nearly two years before I would have a location, a name, or a menu for my restaurant. But instinctively, I knew how I would run the business. It would reflect the confluence of interest, passion, pleasure, and family dynamics that had shaped my life. So I'm going to go backwards in the book because that line where he just talked about the family dynamics that shaped my life. Like I just mentioned, he talks about his grandfather and dad a lot throughout the book. And his grandfather was somebody he extremely looked up to for his business acumen, and his dad was more of a cautionary tale.

So I want to spend a little bit of time explaining to you why that is. And I'm not going to read all the parts that he references because it is a lot. But at the beginning of the book, this introduction gives you a good idea of what's going on. And this is Danny talking. My three most important male role models were businessmen with profoundly different business philosophies, personalities, and styles. Irving Harris was a singular man whose combining of social consciousness with business acumen was an enormous influence on me as a human being and ultimately as a restaurateur. So this is his mother's father.

He graduated from Yale and he made his first fortune before he was 40 years old, having co-founded the Tony Home Permanent Company with his brother Nelson. They sold it to Gillette, the safety razor people, the Gillette Company in 1948 for what was then an enormous sum of money, $20 million. Grandpa Irving's piercing analytical business mind was radically different from my father's intuitive entrepreneurialism. Morty, as my dad was known, always had an abundance of new imaginative ideas for companies that he would run or try to run by himself. Irving, on the other hand, invested in or acquired other people's businesses, especially when the ideas that define these companies were compelling to him. His passion wasn't to operate the companies, but rather to bet on the quality of their senior leadership. Evaluating human potential was every bit as important to him as any other business idea. Evaluating human potential is something that Danny Meyer credits with success he has too. And he considers the people that work in the restaurant way more important than the concept of the food. And that's why he wrote a book about hospitality and how you make

your customers feel. Back to the book. I adored Grandpa Irving and I was awed by his otherworldly business success. Through him, I became aware of my own competitive zeal and began to believe in my own potential for winning. But for many years, I suppressed my love for him and also muffled my own self-actualization out of misguided deference to my father. Irving and Morty may have once loved each other, but as the years went by, they grew to dislike each other intensely. If pressed for his true opinion, Irving would have described Morty, so that's his grandfather describing his dad, as an unpredictable, irresponsible riverboat gambler. For his part, my dad considered his father-in-law an overbearing tyrant who couldn't loosen his all-controlling grip on his daughter, or for that matter, on anyone else in the family. My father was unquestionably my childhood hero, a hedonist, a gastronome, and a man who cherished and passionately savored life.

Dad also took risks as a businessman. He was always coming up with exciting new ideas based on his love of travel and food and on his constant drive to share his finds with others. At one point, this is his dad's business, open road tours had offices and staff in Chicago, Los Angeles, New York, and Paris. Later, it opened offices all over Europe. I never fully understood how or why, but sometimes in the late 1960s, when I was still a young boy, open road tours went bankrupt. I remember abundant tears and shame, but few details. I heard comments like, we expanded too quickly. And I had thoughts like, my hero failed.

This was another confusing and painful consequence of the failed business. My mother was anguished and her disappointment and disapproval were apparent. Business details So he's talking about not only did they suffer financial consequences from the business collapsing, but it winds up tearing his family apart too. I was 12, my father leaped into the hotel business in Italy. Despite the pleas of my mother and with Irving's begrudging help in the form of a $1 million loan, he committed himself to long leases on one hotel in Rome and another in Milan. Remember that long lease part because he's going to talk about it, how Danny does the opposite now. He was certain that becoming a hotelier would be his ticket to fortune. I don't know if I said that word correctly. My mom correctly maintained that it promised nothing more than protracted absences from home.

There was always some reason my dad had to go to Italy. Keep in mind, they're living in St. Louis, Missouri at the time, and he decides to open a business and run it from halfway around the world. Each time the hotel workers went on strike, he flew to Rome or Milan to help make bets. Business flagged and lagged, and although he was spending half a month of time away from Each time the hotel workers went on strike, he flew to Rome or Milan to help make beds. Business flagged and lagged, and although he was spending half a month of time away from his family to address problems, it inevitably proved impossible for him to operate a hotel business across two continents. At an enormous financial cost and an even greater emotional cost, my father finally found a buyer for his two leases. He then went on to his next idea. In 1972, still optimistic, my father created another new business called Caesar Associates. This new company would sell packaged group tours at a deep discount for a very narrow niche of travelers known as interliners.

Interliners were airline employees and their families. As members of the International Air Transport Association, an industry trade group, interliners could fly standby at unbelievably low rates. Dad's business model was simple but original. He aggregated all the discounts to which members of AITA were entitled and packaged trips lasting up to two weeks. In addition to low airfares, he negotiated rock-bottom rates for hotels, ground transport, sightseeing, shopping, and dining. Caesar Associates actually thrived for many years with outposts in London, Paris, Copenhagen, Madrid, and Rome.

But this success wasn't enough for my father. Having failed to learn some critical lessons from his earlier business failures in the 1960s and 1970s, he gambled the fortunes of his entire business on another new one, involving risky and questionable real estate and hotel hotel deals back in st. Louis he eventually owned two hotels in st. Louis one of which was a failure on every count my father had leveraged his entire company to purchase these hotels and also purchase a medical building in Clayton Missouri which he planned to reimagine and redevelop into something big.

However, by the time he had emptied the building of its existing rent-paying tenants, the bottom had fallen out of the economy. His funders dropped out, but not before suing him. Although dad may have been an inventive entrepreneur, he did not have the necessary emotional skills or discipline, and he failed to surround himself with enough competent, loyal, trustworthy colleagues whose skills and strengths would have compensated for his own weaknesses. By 1990, shortly before he died of lung cancer at the age of 59, he was once again bankrupt. Once again, he had to inform his family, his second wife Vivian, obviously the business troubles caused Danny's parents to separate a

few years earlier than that. So once again, he had to inform his family, his second wife Vivian, and his three children and their spouses about a failure. We all had a painful sense of deja vu. Looking back, I realized that gambling is a metaphor for how my father ran his businesses, and my deep fear of repeating his mistakes has always colored the way I run mine. Because each of his doomed experiences was marked by overly rapid expansion, I have always been afraid to expand my business too quickly. I'm not risk adverse, but I have tight self-control and I am not a gambler. So I want to bring that up

because he's writing these words in 2005, 2006. And throughout the book, he's constantly faced with that. So the book tells the stories of how he found all his restaurants. And it goes into really a lot more detail I'm going to go into here but it's constantly referencing the lessons he learned from his grandfather's successes and comparing contrasting that to his father's failures and this thing where he talks about that he doesn't that he

90 leverage himself so then throughout the entire book Danny Meyers really really um hesitant to grow because he doesn't want to wind up repeating his dad's mistakes and becoming bankrupt. And then he talks about here where he says his dad had failed to surround himself with enough competent, loyal, trustworthy colleagues that Danny always constantly hires and then partners with people that are smarter than Danny is at a specific thing that they need for that restaurant. So when I was doing research for the podcast, in addition to reading the book,

I was seeing if in the 10 years this book has been released, if Danny keeps, if he still talks about these principles. And I found a video on YouTube where he talks about that he, it's not, now he realizes with a lot more experience that growth in and of itself is not a bad thing. But before you grow, you have to have the infrastructure and the people that he considers the people, the infrastructure to help you grow. And he talks about, he's been a restaurateur for over 20 years, or excuse me, for 30 years. And the first 10 years, he only had one restaurant.

Then he talks about how with Shake Shack,'s you know over 100 locations now and for their first five years they just had one restaurant so he was very very hesitant in the past few years since the book has come out he's he's obviously built out and now has a system to grow but he didn't have that then and he was very weary to do any growth before he did I think that's one of the best things I took away from this book. So let's skip ahead a little bit. I want to talk about... okay so there's two really interesting things that are on pages next to each other. The first is what he credits as one of the smartest business decisions he ever made. And then I love this idea of optionality as a non-negotiable.

So let me go to the one of the smart business decisions he ever made first. At this point, he hasn't opened his first restaurant. He's doing market research and he's traveling and eating and trying to figure out what kind, like what is going to be French cuisine, what kind of restaurant is he going to make. So he spends a few months abroad eating and learning. All right, and he's talking about that here. My time in Italy and France had provided a crucial introduction to the real work of restaurants, and nothing I had seen or learned had dissuaded me from continuing to follow my passion.

I liked the kind of people I kept meeting in the business, felt blessed being around so much good food and wine, and was intoxicated with the idea of taking an unexpected career path. In my many solitary moments during those hundred days, I had an ample opportunity to contemplate, feel, and envision the kind of restaurant I now knew I had to open. One role I decided not to play myself with chef, though I had fantasized early on about leading the kitchen and in fact had seen being a chef as the only legitimate avenue into the business, it increasingly dawned on me

that as much as I love to cook, I was much more suited to become a restaurant generalist. My culinary education in Europe had provided the necessary foundation with which to communicate clearly about food with chefs in their own language. Firing myself as chef turned out to be one of the smartest business decisions I have ever made. And indeed, realizing that he's a restaurant generalist and a founder of restaurants where he's obviously thrived at. So this is the second part. So this is right after he realized, hey, I'm going to fire myself. I'm not going to be a chef. I'm going to find a chef and I'm just going to run

the business. So my flight home, and this is where he gets into something he learned. Again, you're going to see echoes of what he learned from his father. My flight home from Rome was a scribble fest. There were barely enough minutes within the eight and a half hours for all the notes I was making of my time in Europe and my plans for New York. I scoured the city, sometimes with brokers, but more often just hunting on my own for unlisted places, seeking the right place in the right location. I had two non-negotiable needs. I wanted to open in an emerging neighborhood, and I wanted to have the right to sign my lease to someone else if my restaurant should go out of business. Having experienced my father's bankruptcies and knowing something about how many new restaurants went belly up, I was soberly aware that failure was a real possibility.

To this day, getting an assignable lease is the first piece of advice I give any new restaurateur. And on a few pages later, he continues this idea of optionality. So this optionality part two, despite all the uninspiring spaces I was seeing, I continued to reject the prevailing maxim, location, location, location. This is the idea that you somehow need an upscale address to be considered a great restaurant. But to afford an acceptably swank location, restaurants have to pass on their huge overhead to the guests, charging way too much money for lunch and dinner. Back then, an excellent restaurant was too often confused with an expensive restaurant. I was determined to go against the grain. I was no expert in New York real estate, but I understood on a gut level that if I had handicapped the location correctly

and could successfully play a role in transforming the neighborhood, my restaurant, with its long-term lease locked in at a low rent, could offer excellence and value. This combination would attract smart, adventurous, loyal customers, in turn giving other restaurants and businesses the confidence to move into the neighborhood until a critical mass had been reached and the neighborhood itself changed for the better. Moreover, were I to go belly up after a few years

in such a neighborhood, I was confident that I could find someone else who would be eager to pay for my below market rent on the remaining years of my lease. I sensed a lot of upside and felt protected against the downside. Okay, and here's a paragraph that reminds me of this theme that a lot of the books on this podcast in their own way reference and it's what Tim Urban calls cook for chef and here's Danny Myers take on it I suppose at the time he's he's figuring out what kind of restaurant he wants to do and he's talking about what it's what it's gonna look like the architecture and so Warren and Larry the people helping him do that

I suppose I could have picked my favorite Trattoria in Rome and instructed Warren and Larry to just go there and simply reproduce it in New York. Other restauranteurs have done this brilliantly. Years later, Balthazar in Manhattan's Soho district became such a perfect reproduction of a brasserie that I don't know if I pronounced that correctly, that it would almost rather go there than to half a dozen authentic brasseries I know of in Paris. That is an awesome accomplishment, but replicating something already in existence isn't where my own business or design sense has ever guided me. And skipping ahead, at this point he already owns a few restaurants. He's starting a new one called Eleven Madison Park.

And I like this idea he has about inadequate focus on core product. And here's the story of how he realized what he was doing wrong, a mistake he made and then how he fixed it. Next door, 11 Madison Park had gotten off to a decent enough start. But the public knew that in just four more weeks, we'd be launching a groundbreaking restaurant called Tabla. So many people saw the more classic Eleven Madison Park as the warm-up act for the main event. Eleven Madison Park would have to succeed by virtue of its architectural beauty, hospitality, and solid kitchen. Conceptually, nothing about it was breaking new ground. In these early days, our lunch business at Eleven

Madison Park was lagging far behind our optimistic projections. But rather than explaining the sluggishness as a natural challenge of building a business from scratch, we convinced ourselves that people didn't have the time to leave their desks for lunch. We decided that the solution was to deliver beautifully designed box lunches to their office. We targeted Credit Suisse First Boston in particular, since its world headquarters were upstairs at 11 Madison. We offered a choice of three exquisite sandwiches, homemade potato chips, a bottle of water, and a homemade cookie. Unfortunately, very few people bought this concept or the box lunches. We had made a

fundamental mistake of trying to extend an original brand without first having established the core brand. It wasn't so much that people were tied to their desks. It was that they had no clear idea what Eleven Madison Park represented as a dining experience. Was it a bistro or a grand restaurant? Was it inexpensive or for special occasions? Was it French? Was it a place for sandwiches a grand restaurant? Was it inexpensive or for special occasions? Was it French? Was it a place for sandwiches, potato chips, and cookies? Until we had answered all those questions for ourselves, we couldn't avoid confusing our potential customers. Also, we hadn't done our homework. Credit Suisse First Boston already had a first-rate

company-subsidized cafeteria for its employees, run by an outside food service. And creating the boxed lunches had kept our chef, Kerry Hefferman, and the management team from focusing on what we should have been doing all along, which was improving the restaurant itself and doing the hard work necessary to build our lunch business one guest at a time. We abandoned the box lunch program very quickly and ended up with a costly inventory of 3,000 unused boxes. This is the main point. The experience was a vitally important illustration of inappropriate brand extension, wrong-headed priorities, and an inadequate focus on a core product.

Fortunately, by working on the basics, our lunch business doubled within six months. We had found a wonderful maitre d' who was expert at recognizing guests. We worked on presenting a menu that offered enough light choices to encourage frequent dining, and we worked on speed and understanding that at lunch,

time is everything. Okay, so skipping ahead, I want to talk about the start of Shake Shack, which is really interesting to me. And this whole section reminds me of this quote that Jeff Bezos is famous for saying. He's referenced it a few times. And it's his idea about the biggest oak, everything starts with an acorn. I'm just going to read the quote that I found. And this is Jeff talking. He goes, we know from our past experiences that big things start small.

The biggest oak starts from an acorn. If you want to do anything new, you've got to be willing to let that acorn grow into a little sapling and finally into a small tree. And maybe one day it'll be a big business on its own. So while I'm reading this part to you, just keep in mind, Shake Shack is now over a billion dollar company with locations all across the country. And it starts out as a hot dog cart as part of an art installation. So the inception of Shake Shack actually began with a humble hot dog cart. So there's a sculptor that is doing an art installation

in Madison Square Park in New York City and it's talking about taxis and hot dogs. And to extenuate the art installation, they're looking for people to actually serve food and serve hot dogs while this is going on. So he talks about, he goes, we volunteered to give life to the project by actually operating the sculpture's hot dog cart. Small as the project was, or seemed to be, I took this cart quite seriously. I was eager to use the project as a test of enlightened hospitality. I was asking myself, whoever wrote the rule that you can't push the envelopes of excellence and hospitality

for something as ordinary as a hot dog cart? Could a hot dog cart be anything more than just a hot dog cart? So he talks about, there's an entire chapter called who, uh, who wrote the rule or whoever wrote the rule. And so Danny uses it, um, a lot in the book. And basically it's just another way of saying we should be operating from first principles, which, uh, I've talked about on the podcast a lot through, uh, the words of, uh, entrepreneurs like Elon Musk and Jeff Bezos and Steve Jobs and all these other guys. And so what he, what he, what Danny Meyer, this is Danny Meyer's version of that. And so when he's starting something, he always asks like whoever wrote the rule that you can't serve really good food and not, and not be expensive, or you can't serve wine at a hamburger shack and all these

other things, basically just saying, Hey, we can do whatever we want as long as it makes sense. Let's let's think what is the best way to make this this business, this restaurant and not just copy what other people are doing. So you'll see he's he's like, I'm going to do a hot dog cart. And you know, anybody's visit New York or any other big city you're familiar with. You know, there's a bunch of crappy hot dog carts everywhere. You know, hot dogs are just sitting there in the gross colored water. You can get, and they're basically all the same, whether you're, whichever corner you're on, the product,

you know, it's just a mediocre, something to stuff your face for with if you're hungry. So this is his take on it. My team and I decided to feature Chicago style hot dogs from a Chicago vendor, Vienna Beef. And we boiled it in water spiked with garlic, coriander, and bay leaves. We would serve the hot dogs on poppy seed buns shipped excessively from Chicago with the requisite toppings, celery, salt, onions, green peppers, tomatoes, mustard, pickles, spicy short peppers, cucumbers, and neon relish. Our menu was limited, but we'd also serve bags of homemade beet-stained potato chips, fresh verbena lemonade, salty chocolate truffle cookies, and iced tea. It turned out that there was some

risk. By the time this hot dog stand closed in early September 2001, we had actually lost nearly $5,000 operating the cart. While demand had been high and lines were always long, we addressed my requirement for excellence and hospitality by hiring too many people and working in a very inefficient system. So, okay, he does it. Again, it's a temporary art installation. He's just doing a hot dog cart. Doesn't think it's going to turn into Shake Shack. Let's skip ahead. He realized, crap, man, I lost $5,000 on this.

And he's identified what he did wrong. And so they come back. He does it the next summer and then the summer after that. And by the time he's fixing it little by little and he's finally making a little bit of money on it. And now they're talking about doing a permanent location in the park. Because remember, the art installation started out in Madison Square Park. So now we're jumping ahead to that.

Around that time, so in Jeff Bezos metaphor, we're now going from a little acorn seed to now we're going to – this is the little sapling part. Around that time, the city's Department of Parks and Recreation had solicited proposals to create and operate a permanent kiosk in Madison Square Park. We were game, and we decided to expand on the hot dog cart and make our dream of a drive-in come alive for good and for the good of the park. So what he's talking about there is when he was a kid in Missouri, he spent almost all his weekends at Steak and Shake, which was at the time like a drive-in or drive-up, whatever you call it, hamburger place. And he just absolutely loved it. So he wanted to make something like that for Madison Square Park, but obviously not driving because it's in the middle of New York City.

And here's some of his ideas. As we imagine our new kiosk, we thought about a lot more than food. We understood that people just don't go out to eat. They also select restaurants in order to be part of the community experience. Starbucks took the notion of drinking good coffee and standing in line to buy it

and figured out how to make the experience of drinking coffee with a community of other other like-minded people become the real star of the show the company also learned to superimpose its blueprint onto thousands of locations north south east and west while also conveying the sense that each Starbucks belonged to its particular community it was brilliant entrepreneurship to grasp that selling excellent coffee is secondary to creating a sense of community. Coffee sells, but performing a daily ritual with a self-selected group of like-minded human beings also sells. A business that doesn't

understand its reason for existing is fostering a community will inevitably underperform again he's taking this part at this time he's writing the words there's only one Shake Shack but you can see that he's learning from other businesses he's talking about how brilliant you think Starbucks was about how they actually scaled the business while retaining each like individual characteristics of the neighborhood so now they're back to the bidding process as soon as'd won the bid, I'd set off to study burger and shake stands all across the country. We started out, of course, at Ted Dews and Steak and Shake in St. Louis, continued on to Kansas City, where they went to Sheridan's, and individually made stops in Michigan at Culver's,

Los Angeles at In-N-Out Burger, Napa at Taylor's Automatic Refresher, Chicago at Gold Coast Dogs, and Connecticut to visit Super Duper Weenie, Clamps, and Sycamore Drive-In. Always in search of the best of breed. It was funny when I was rereading this. The first time I read this book, I don't think I had Founders as a podcast yet, but now rereading it, his search of the best cheeseburgers going all over the country kind of reminds of what we're doing here is learning from the best, or not the best, I hate using that word, but learning from people that have built companies, like great company builders. Going back to the book, using the kitchen of 11 Madison Park's private dining room as our laboratory for Shake Shack, we worked hard

to come up with just the right mixture of freshly ground beef. So again, he did the research first. Now he's in the lab trying to figure out what am I going to take from all the stuff I like and how am I going to put my own unique spin on it for Shake Shack. So let me say that sentence again. We worked hard to come up with just the right mixture of freshly ground beef, tasting many variations until we landed upon what we thought was the perfect ratio of ground sirloin steak to brisket. The fat-to-meat blend yielded a juicy, intensely beefy result. We debated what the precise size of the burger should be to the half ounce. We argued over the choice of buns, soft potato buns. Tomatoes, plum, lettuce, bib, and sauce are a secret. We chose every one of our ingredients with extreme care and with an eye toward authenticity. Shake Shack was an instant

success when it opened in July 2004. So again, the first Shake Shack opened in 2004. The first idea, using, going back to Bezos' idea this uh this an oak starts from an acorn the little acorn seed was back in the summer of 2001 with just a hot dog cart right then year after year turns into sapling now July 2004 first Shake Shack in Madison Square Park is open and it's a small tree okay and just so you know if you have a Shake Shack in where you live, you can download the Shake Shack app, and it's a way to skip the line because there's famously long lines

on almost every Shake Shack around lunch and dinner time. But something I thought was really interesting about the app is you can permanently see they have a camera sitting out at their first location in Madison Square Park. And so they embedded that in the app. So if you wanted to see like a live feed of what was going on there, that's there to this day. So, okay. So we're into the small tree section, Shake Shack's success, July, 2004. But as is often the case, the unanticipated degree of success

brought new challenges. That first summer saw our team struggling to assemble and serve more than 500 different items per hour at the pickup window in a nine-hour day. That's a lot of dogs, fries, floats, cups, cones, lemonades, sundaes, concretes, burgers, iced tea, soda, beer, and wine. Yes, beer and wine. Building on our blue smoke experience, that's his barbecue joint in New York City, there was no way we were going to pass up the opportunity to add something to the possibilities of what one might drink with a double burger, hot dog, or bratwurst. Again, that's going back to whoever wrote the rule that you can't serve wine or beer at a basically a fast food burger place which he still

does to this day before long new york magazine was calling shake shack burger heaven and wrote that our shack burger was the city's best burger a thing this is a quote from the article a thing of simple beauty swaddled in a wax paper jacket i never assumed that the shake that the shack that shake shack success was going to be defined by someone saying, this is the best burger I've ever had. And I definitely echo that. It is the best burger I've ever had. But I would love for it if we were fortunate enough to stay in this business long enough and continue to execute consistently well so that today's young people might one day be in a burger joint

somewhere with their kids and say, the best hamburger I ever had when I was growing up was at Shake Shack. So going back to Jeff Bezos metaphor, again, when this book was published, there's only one Shake Shack. That little tree in 2004, 2005, 2006 is now a giant oak. It's over a billion dollar business and growing with over a hundred different locations. So I think that story is really, really interesting as a way to visualize, if you will,

the metaphor that, that Bezos uses a lot. The last thing that I want to share with you, and again, this book is relatively short. It's only like 300 pages, really like reads like a story, really easy read. So this is not going to be one of my longest podcasts, but there was this great,

I want to leave you with this great story from the founder of Neiman Marcus. And I've used this term where I don't know where to attribute it to. I can't remember. I think it was from the founder of Brain Pickingings blog that said on a podcast one time that books are the original hyperlinks. And so reading this book, I learned about, which you're about to learn too, about the founder of Neiman Marcus. And then I looked him up on Amazon. It turns out he has a book. So I just got a sample delivered to my Kindle. If the sample is interesting, then I'll order the book,

and maybe that appears as an episode down the line. All right, so let's close out on this. And this is advice from Stanley Marcus. This is Danny talking. In September 1994, I traveled to Dallas, Texas, to begin a tour promoting the Union Square Cafe cookbook. During a dinner hosted on my behalf by the owner of the San Saba Vineyards, Dr. Mark Lemon, at the mansion at Turtle Creek, I had a chance to sit

next to Stanley Marcus, the department store mogul whose family had founded the luxury department store Neiman Marcus in Dallas in 1907. Marcus was then nearly 90, and for more than half a century, he had used his genius as a marketer and retailer to expand the Neiman Marcus chain and burnish his reputation for extraordinary service. It turned out that he was interested in meeting me too. Although he had dined at Union Square Cafe through the years, we had never had a chance to connect one-on-one. It should have been a wonderful evening. Here I was, seated next to a legendary figure whose company I admired greatly. But I was preoccupied. Gramercy Tavern had just opened in late July, and in part because of all the early media hype, it was getting knocked

around in the press. I was deeply troubled by this, and also by Union Square's cafe's performance. That's his first restaurant, which was wobbly. Union Square Cafe wasn't used to operating without me at the helm every minute of the day. I had betrayed my own commitment to expand only if I was certain I could do so without compromising quality there. I confessed all this to Stanley and told him that I felt guilty for traveling out of town so soon after opening Gramercy Tavern. Opening this new restaurant, I said, might be the worst mistake I ever made. Stanley set his martini down, looked me in the eye and said, so you made a mistake. You need to understand something important and listen to me carefully. The road to success is paved with mistakes well handled. His words remained with me throughout the night. I repeated them over

and over to myself and it led to a turning point in the way I approached business. The problem wasn't that I naively believed in perfection. This is another important part. Perfection is impossible in business. As a company policy, the notion of perfection can be dangerous, and the folly of pursuing it can stunt playing it safe by trying to avoid mistakes. Stanley's lesson reminded me of something my grandfather Irving Harris had always told me. The definition of business is problems. His philosophy came down to a simple fact of business life. Success lies not in the elimination of problems, but in the art of creative, profitable problem solving. The best companies are those that distinguish themselves by solving problems most effectively. Indeed, business is problem solving. As human beings, we are all valuable.

You've got to welcome the inevitability of mistakes if you want to succeed in the restaurant business or in any business. It's critical for us to accept and embrace our ongoing mistakes as opportunities to learn, grow, and profit. And this is a great way to end the podcast. Baseball's top hitters can make seven mistakes out of every 10 at-bats and still ride a 300 lifetime batting average into the Hall of Fame.