Motley Fool Money - The Tastes That Change and Stay the Same

Episode Date: December 22, 2023

It’s our annual best-of interview show! (00:21) Best-selling author Morgan Housel talks through his book Same as Ever the timeless lessons from history that endure, no matter how the world changes. (19:11) Restaurateur, investor, and chairman at Cava Ron Shaich talks about Cava’s path to becoming a public company, and why you might not want to bet against him in the restaurant industry. Stocks discussed: GOOG, GOOGL, X, META, CAVA, SBUX Host: Dylan Lewis Guests: Morgan Housel, Ron Shaich Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Some things never change, and the things that do only get tastier. Motley Full Money starts now. That's why they call it money. The best thing. Global headquarters, this is Motley Fool Money. It's the Motley Full Money Radio Show. I'm your host, Dylan Lewis, and we're coming to you with a special episode for this holiday weekend. Each week on the Motley Full Money Radio show, we air an interview segment, but that's just a small sliver of the interviews we do for the Motleyful Money podcast and for all of our member content over the course of the year.

Today's radio show is our best of for interviews that aired in our daily podcast, but didn't make it out to our radio audience. Our first one up is with a full favorite and best-selling author, Morgan Housel. Morgan's latest book, Same As Ever, came out this fall, focused on the timeless lessons from history that endure, no matter how the world changes. He talked me through how so much of history is just the same story playing over and over again. I want to kind of immediately get into one of the last things in the book that you mention, if you don't mind me going to the last page. as you wrap, you talk a little bit about how you had a concerted effort about a decade ago to start reading more history and start reading fewer forecasts. And I'm curious, just given the nature of the book and how it is very historical,

is that kind of where the genesis for the book started? I think a lot of it, that's true. And really this started when I was at the Motley Fool, and I started realizing and it really bothered me how bad people were at forecasting. What's the stock market going to do next? When's the next recession? The whole industry is terrible at it. And there's kind of two things you can do with that observation.

You can become a cynic and just say nobody knows anything, why even try? Or you can just focus on what's never going to change, the behaviors that never change. One of the big kind of like lightning bolts moments that I had for this to get to your question about the historical aspect of it. One of my favorite economics books is called The Great Depression, A Diary. It was written by this guy in the 1930s during the Great Depression who just kept a very extensive diary about what he saw during the Great Depression. And as I was reading it, it was like an entry from 1932, like the bottom of the Great Depression. And I started thinking to myself, if you change the dates on this from 1932 to 2008,

it would fit exactly in. Like what he's describing is exactly what happened in 2008. And then like two pages later, he writes, he says, if you change the dates from 1932 to 1893, it would fit exactly in. And then it was just like, yeah, it's the same. story over and over again. Those things never change. How people respond to a financial crisis has been the same since the 1800s as it is today. It'll be the same in the future. The details always change, but the more history you look back at, the more you see, it's just like it's the same movie playing

over and over again in investing and economics, but like all kinds of things in life. We can't forecast the change, but history is filled with the same movie over and over again. So it's like, all right, let's just focus on that. One of the things that reminds me of is you have this discussion of the different types of information in the book. And you get into basically information that has a shelf life and information that does not have a shelf life. And this idea that it's interesting to know some of these things, but you're not going to remember them five years from now where information with a much longer shelf life is worth holding onto, worth building on because it will serve you so much better in the long term.

Yeah. I mean, so if you look at something like Microsoft's earnings last quarter, it's not that it's not irrelevant. It could be very relevant and it could be like important information to pay attention to. But then if you ask the question, are you going to care about that information a year from now or five or 10 years from now?

For a lot of these things, the answer is very obviously no. And I try to use that filter when I read the news. I read a lot of news, but if you always ask yourself, will I care about this a year from now? And sometimes when the answer is no, but it's like, oh, but it's entertaining.

I want to read it for another reason. But having that filter is really helpful. And I think about that as a writer too. Will this article be relevant a year from now? Will I care about this article and want to read this article 10 years from now? And if the answer is no, you might want to question the relevance at all. I've always thought if it's not relevant a year from now, it's not relevant at all.

For my style of investing, that tends to be how I think. Now, there is a lot of news and information that will be relevant one year from now about competitive advantages and management and whatnot. There are a lot of things. but when you start viewing it through that lens, you see how much of the news cycle is very short term. I was, when I was at the Molly Fool for a period of time, I was a columnist for the Wall Street Journal.

This was about 10 years ago. And virtually every column I wrote, the editors would say, how is this relevant to this week's news cycle? And I would always say, it's not, and I think that's great. I think that's the point is that it's not relevant to anything that happened in the last 24 hours. But they always wanted it tied back to the news cycle.

So there's definitely that bias, I guess, for lack of a better word, in the news media, of like, everything has to be relevant to something that happened in the last seven days. And understanding the irony between that and the idea that most people want to be, or at least think of themselves as long-term investors, is a big part at having a healthy news diet as an investor. You mentioned the financial crisis there. I think one of the great points in making the book is you talk about how you can philosophically be a long-term investor. You can think, okay, I am going to be willing to endure a 30% drop in my portfolio. And in the abstract, that's something that people are capable of holding their heads.

The problem is that when they do that, they're not always putting it in the broader context of all of the other things that happen when a 30% drop in the market happens. Right. So it's easy to say, when everything is going well, everybody thinks they have a high-risk tolerance. And if I were to say, how would you feel, Dylan, if the market fell 30%. When things are going well, most people would say, oh, that's an operational. opportunity. That's great. I would use it as an opportunity to buy more. And that's great. That's the correct mindset. But what you're missing is that the reason the market falls 30% is because there's a terrorist attack on 9-11. Lehman Brothers is threatening the entire financial system. And we don't

know if the ATM machine is going to work on Monday. COVID is shut down your kids' school and you don't know how to work from home. It's all these things that in that context, you realize that it's actually scarier than you thought. So it's one thing to say, I have a long-term mindset and volatility doesn't bother me. It's another thing to actually experience it in real time. And because of that, I think most people have a lower risk tolerance than they assumed. It's way easier to quote Warren Buffett than it is to have that kind of mentality. And so, A, I think part of this is you really don't know your risk tolerance and your investing mindset

until you've been through the trenches, until you've lived through some of these big declines. And one of the problems, I guess, of the modern financial system is that we have fewer declines than we used to. It used to be, for most of financial history, we had a recession every two or three years. And now we kind of have one every decade, every eight to ten years, is kind of how it's been over the last generation or so. So we have fewer opportunities to understand how we react to these events. And you can see if somebody started investing in 2010, it really took until 2020, before you. you got tested. So you had someone with a decade of experience who, in terms of understanding volatility, was still a novice and really had no idea how they experienced. So that slow feedback

time can really throw a lot of investors for a loop. I feel very seen with that example. As someone in his early 30s, I mean, that's absolutely true, right? That's the lived experience. I mean, spread that out even more. Think of someone who's been investing for 25 years. You've had really three events that kind of shook you. 9-11, Lehman Brothers and COVID. it's not that many. Like three attempts to kind of learn who you are in a quarter of a century is really. And so, you know, compare that to like if you're a basketball player and you play 130 games a year or whatever it is.

You're constantly testing how you respond to loss, how you respond to victory. Whereas investing is just a much slower feedback period. And even if you are, I would say even if you are an investor, one of the things I write about in the book is that we have good economic data since the end of World War II, since the 1940s. And since then, I think we've had 10 recessions, which is not that many. Like, we really don't know that. There's a lot that we don't know about the economy, only because these things happen so infrequently. We've got more Morgan Housel and more interviews coming up after the break.

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we're bringing you some of our favorite interviews that never made it to radio from the past year. 2023's bingo card has been full of interesting topics, including miracle drugs and tech that seems like the future is already here. Up next, we've got more of our conversation with best-selling author Morgan Housel, where he weighs in on generative AI, weight loss drugs, and Elon Musk's X.

In the book, you talk about optimism and pessimism and kind of the power and the value of both of those things, and you actually dedicate the book to the realistic optimists. Is that where you land yourself? Yeah, I don't know if I came up with this term, but I started thinking about this term, reasonable optimist a couple years ago, which was in my definition, it was someone who knows

that the future will be better than it is today. People will solve problems and become more innovative and more efficient, but the path between now and then is going to be a constant chain of setback and disappointment and crises and recession and bear market and pandemic. But if you can endure all of, those, then the rewards for those who can stick around are going to be great. That's what I think

is reasonable optimism. And I would contrast that with complacency, which is people who just think everything is going to be great in the future. And so if you think everything is going to be great in the future, that's not optimism. That's just complacency. So that's what I think reasonable optimism is. And I think that's really a core of what I try to think about. Like, I'm very optimistic about the next 50 years in the U.S. and around the world and as an investor. but with 100% certainty, I know that the path between now and then is this going to be a constant chain of landmines. And therefore, like, in order to get there, like in order to benefit from optimism, you have to have this mindset that is constantly expecting there to be bad news all the time and terrible news occasionally.

Can, if you'll indulge me, can I get the reasonable optimist take on a couple different topics? Let's do it. All right. First one is generative AI. I think what's so interesting about AI is that the first time you used it, you knew it was magic. And I think the only thing that I've experienced like that in my own life, I think a lot of people can relate to this, was like the first time they used AOL Instant Messenger in the 1990s. And all of a sudden, you're like, I understand what the internet is. It's this thing. I can do this magical thing that I could not do before.

I can talk to my friend in New Zealand in real time. And that feels like magic to me. And the first time most people use chat GPT, their eyes bugged up and they were like, oh, I get it. This is amazing. This is going to be huge. And Josh Brown made this contrast of that between that and crypto. Whereas in crypto, and I'm not necessarily a crypto bear. I don't really have a dog in that fight, but he contrasts that with crypto of 13 years in,

we're kind of still trying to figure out what the purpose is and what the use case is going to be. And if you contrast that with like, what's the purpose of Chad GPT? it's obvious. Within two seconds of using it, you know what the purpose is. And I think that kind of technology is pretty rare when it's so obvious how great it is. And this is version one. And so to imagine if version one feels like magic, what is version 150 going to feel like? That's what I think is so great about it. But the reasonable optimistic take, you know, that's the complacent take. The reasonable optimist is you can have amazing life-changing technology and still have a very hard go making money at it. Like the internet, if you were bullish on the internet in the 1990s, that was the

correct take. The internet did change the world. And it's also true that the vast majority of dot com investments went to zero. And the vast majority of dot com investors lost everything in the late 1990s. The same was true for the railroads in the 1800s. Like completely and utterly transformed the world. And almost all railroad investors lost everything. Most railroads went bankrupt. Car invest, I always make the point in the early 1900s, there were 2,000. car companies, and only three of them survived, GM Chrysler and Ford, two of which one bankrupt eventually. And so there can be a massive gap between this technology is going to change the world and being right about that and saying, here are the companies that you should buy in order to

get rich doing it. The gap between those two can be a mile wide. Yeah, the trend is humongous and directionally accurate, but the details are very hard to figure out. Right, right. I mean, if you think about what companies won the Internet? Well, in hindsight, only saying this with hindsight, it was Facebook, Google, Netflix, and a few others. But if you go back to the 1990s, I mean, a lot of those companies didn't even exist yet. And the companies that were the obvious winners in the 1990s, like AOL and Excite and those kind of companies, either don't exist or are shells of their former selves. So you can easily imagine a world in which AI completely and utterly transforms the world over the next 20 years,

but the biggest winners don't even exist today. And so that's a pretty constant theme throughout. out in history. All right. You might be able to borrow some for this answer, too, from what you just said. But second one is O-Zempic and other weight loss drugs or the intervention of medicine into weight loss. I love this question. I was thinking about this yesterday. I'm pretty sure I might be wrong about this by a few years, but I think pretty sure Prozac came out in like the late 1980s. And I'm making this up, but you can easily imagine a world in the 1980s where you said, oh, because of this miracle drug, Prozac, in the future, nobody's going to have anxiety or

depression. We're going to eradicate it. And the irony of that is like, no, anxiety and depression is exploded. It's like it's gone vertical over the last 30 years. So there can be a gap between like the miracle drug and actually really transforming society. So of course, without knowing any technical details and obviously without being a doctor, when you see the early results from those Zempic, not just for weight loss, but what it's done to like all forms of addiction, like smoking and gambling and alcoholism, you're like, that looks like a miracle drug. But the history, of miracle drugs not exactly eradicating the problem that they look like they are they are targeting. Like that, that history exists there too. You know, or do you think about something like,

like antibiotics, you know, made a massive, massive change to society. But did we eliminate bacterial infections? No. It's just, it was like, it's just a little bit better at managing it. So you can imagine a world in which OZempic really moves the needle, but you still, but not to the black and white degree that it's made out to be today. All right, my last one for you on The Reasonable Optimist Take is X, formerly known as Twitter. You're active there, so I have to ask about that one. I think Twitter is the greatest communication device created in modern times. That's a big statement, but I think that's true.

But it's in a sense a commodity. It's just a way to put your thoughts out there. And as it stumbles, threads and other forms and other social networks that pop up, could have a very reasonable chance of taking it over in the sense that Facebook ran roughshot over MySpace and whatnot. And Google ran roughshot over all the other, you know, by Yahoo. So just because somebody is entrenched and has a big network, if they really lose what made them great, other people can and inevitably will just come in and take what they had. And I think that's fine. I think people who built a big following on Twitter will be able to build a new following on threads,

if that's what they want to do. So I think that's just kind of the normal course of how these things work. You start with a scrappy company that builds a competitive advantage, and the prosperity that comes from that competitive advantage makes them kind of fat and lazy, and then it starts selling wine from there. It seems like we've seen a mix with X and with Twitter, where it is both the legacy of what it has been and the new start of what Musk wants it to be, and maybe some of the culture and the tension that we sense with that company is those two things kind of budding up against each other a little bit.

One of the things that worries me a little bit, too, is that a big downfall of so many successful companies is that they wanted diversify into new fields. So Sears was very good at retailing, and then they said, hey, we should become a bank. We should become like a financial service. And it's just like you, they lost focused on what they were supposed to do. Same with General Motors. We're really good at building cars. We should start a lending arm that makes like mortgages to people. And of course, like that was part of why they fell. So now Twitter and X wants to become a financial app. They want to become your bank and a payments processor. Once you just move the vision away from the thing that you're actually good at and that you have a skill at doing, there's such a long history

of that being the start of the downfall of the company. So is that a cautionary tale, then? Just getting too wide as a business, getting away from what it is that made you good to begin with? Yeah, because for most companies, it's two things. Either they make a ton of money doing what they're good at, and they don't know what to do with that money. They don't want to just give it out as a dividend. So they're like, oh, we got all this money laying around. We should start a, a new line of business. Or it's just a form of boredom. They get kind of bored doing the same thing, and they want something that's exciting.

Or the CEO wants to build an empire, which I think is probably more the case with Twitter here. That wraps our conversation with author Morgan Housel, but there's plenty of interview nuggets ahead. There's a 99% chance you've eaten at one of our next guest restaurants. Stick with us to hear about where the world of food is heading from one of the industry's biggest tastemakers. Stay right here.

This is Motley Full Money. Welcome back to the Motleyful Money Radio Show. I'm Dylan Lewis, and this is our year-end holiday special, where we air some of our favorite interviews from 2023. If you're like me, you haven't eaten at one of Ron Shake's restaurant concepts. You've eaten at several of them. Jake is the former CEO of Panera and Albamp and the current chairman at Mediterranean Fast Casual Concept, Kava.

Back in October, he joined us at our one NYC member event to talk about the trends he's seeing in food, the historical path to Fast Casual, and how he prepared the team at Kava to go public earlier this year. So you have fed a lot of people in your lifetime. I kind of consider you an observer of the American eater in a lot of ways. And I'm curious, as you look out to this room of eaters, many people who have eaten with you before. What do you see? What kind of trends are you interested in?

What are you noticing from the American eater right now? I think people want things that help elevate them. They want things that help them relative to their diet. They want things that are flavors that engage them, that excite them. They want things that are new and different, but more than anything else, they want things that are quality. I think at some level over the long period of time, there's a rejection of heavily processed commercial food and desire for things that feel like real food and served by real people in environments that engage them and that ultimately elevate them.

In the book, I think you call that a drive for specialness? Yes, I think in some ways. Yeah. So that in a lot of ways, as my reading was, kind of gave birth to the fast casual movement, as we know it now. Yeah, I mean, I think if you take it back, we're going to do 200 years of restaurant history in the next 30 seconds. And everything, as investors, I'd say this to you. Everything is about understanding the deeper trends and trying to separate the wheat from the chaff, the signal from the noise. So here it goes. Up until the 1950s, from the 1500s on, if you wanted

to open a restaurant, you and your spouse opened the restaurant. It was an independent. One of the spouses was in the front, one was in the back, and that's what you did. That occurred up until the 50s. In the early 50s, people began to wake up and say, I could take one product. I could industrialize it.

I could produce it. I could chase the interstates. I could take hamburgers. I could take pizza. And I could serve a lot of food. for not a lot of money. At the beginning, those were specialty products. And that was the evolution of fast food, which was, in essence, a niche of the broader independent restaurant movement.

And that took us from 1950 up until the early 90s. And by that point, in the early 90s, we had 60,000 fast food restaurants in America. There were essentially self-service gasoline stations for the human body. You know, it's 4 o'clock in the afternoon. You're on a roadshow or you're hungry. It's the quickest way to inject nutrition into your system. Hit the drive-thru, right? That's what that had become.

And people began to wake up. I was really one of them. And began to say, you know, people wanted something more. Because fast food had become so dominant, people wanted to feel special in a world in which the only choices was fast food and fine dining. And that led to somebody like me coming along and saying the deeper trend was a desire to feel special in a world in which nothing was special. And you began to see the development of specialty categories. Specialty beer.

Anise of Bush and Miller lent itself to Sam Adams, specialty coffee. Felger's and Maxwell House lent themselves to Starbucks and Pete. You saw it in beverages, Coke and Pepsi, Adwaldo to Snapple. We said the same thing was going to happen in food service. McDonald's and Burger King, we're going to lend themselves to specialty food. Now, that's what I called it. The world eventually called it fast casual. Here's what happens next.

Now specialty food fast casual has been built out, and that niche will continue to occur. Fast casual is simply a niche of fast food, which was a niche of independent restaurants. The next major niche, where it's going to go from here, is into specialty fast casual. So just like it occurred in specialty retail, where in essence, Sears brought the general store to America, And behind it became the big box specialty retailer. People, specially food, fast casuals been brought to America. And behind that will become specialty-randed products that define their category. Kava is a great example of it.

Yeah, I want to hop in there for a sec. I mean, I heard you talk through that, and that was about as succinct and perfect a timeline of food as I've ever heard. What do you think? Was that good for 500 years? I think that was a TED talk right there in about three minutes. And as a card-carrying millennial with craft beer and craft coffee interests, I appreciate all of that evolution. I do look at a lot of the fast casual concepts, and I wonder if this continued push is in part because I look at a lot of what I see, the places that were supposed to be these third places in fast casual, and they start to feel a lot more like fast food. You wouldn't be talking about Starbucks. I'm not putting any names to it at the moment, but it does seem like, as we've seen expansion in a lot of those concepts, they start to get.

a little bit more into throughput, into getting people in and out relatively quickly, into mobile ordering, and a lot of things that are a little antithetical to the third place concept. You know, I think there's a challenge in building a multi-unit chain. Ubiquity breeds contempt. And what ends up happening is something that's once special becomes every day. And unless, as the leader, you are very sensitive to that, unless you're very careful about that, you can fall prey to allowing efficiency. to trump effectiveness.

You know, I have a view of the world, and this is a view of what happens to companies. When they first start out, somebody discovers something better. It's so hard to get a company off the ground, nearly impossible. All the scale economics are against you, but you get it up. And once you get it up, you begin to attract capital. And capital pours in, and it says, you know, we need a little more efficiency. And you start to bring in the delivery people, as I call them.

The delivery people are coming from a different kind of place. And delivery is about efficiency, prove it to me. And the language of this delivery, which is what begins to come to bear, works. It actually helps the place. But over five years, 10 years and 20 years, the delivery people drive out the discovery people. How did they do that? Because delivery is about the language of spreadsheets. It's basically pros.

It's about prove it to me, numbers. The language of discovery, what formed that business in the first place is saying, this is what customers want. Imagine this. Imagine if we could do that. And it's not as precise and mathematical. And what's so important for a public company CEO is protecting that discovery. Because what ends up happening and has happened in my industry over and over and over. These companies get to be a billion dollars.

They're wonderful at delivery. at delivery, but they've lost all the discovery capabilities, and frankly, they're focused on what the customer wanted yesterday and not today. So it sounds like there's some benefits to the efficiency that happens? There's absolutely benefits. But it also, in the book you talk about this notion of the growth monster, this monster that needs to be appeased in order for Wall Street to be happy. Is that part of where things start to turn?

Growth makes it that much harder, and running a public company makes it infinitely harder. we can talk about the why of that, but both are conditions that you need to be prepared for if you're undertaking. And if you're not prepared for either of those, what it means to provide growth, if you're not prepared for what it means to be a public company, it becomes a very unhappy experience for investors and ultimately a very unhappy experience for the folks running that company. We've got more of our conversation with Ron Shake up ahead, including his advice for investing in the restaurant industry. Stay right here. This is Motley Full Money. This is the Motley Full Money Radio Show. I'm your host, Dylan Lewis, and we are continuing our holiday tradition of playing some of our favorite interview tape as the year comes to a close.

2020. 23 was not a huge year for IPOs, but we did see one big name in restaurants come public. Kava. At our one NYC event in October, restaurateur, investor, and chairman at Kava, Ron Shake, talked me through Kava's path to becoming a public company and why you might not want to bet against him in the restaurant industry. You are now in the investor seat with Act 3. Yeah. How has a lot? the time as an operator informed how you invest and the way you work with the people you invest with? Well, first, let me tell your listeners, the folks in the room about Act 3. So after we sold Panera, I began doing a fair bit of speaking around the country on the pervasive short-termism in our capital markets. It's a real problem. It forces management teams to do a lot of the wrong things, but it's the way it is. And as I was speaking about it, I began to say to myself,

I need to put my money where my mouth is. And we began with a couple of partners to decide to set up an investment vehicle, all our own money, no LPs, evergreen funds, and to invest. And again, my whole view of business and investing is it doesn't work unless you have competitive advantage. If you don't have something distinctive, some point of knowledge that's distinctive, you don't add value to the situation. And I can tell you, we know the restaurant industry,

We know consumer-facing businesses. We know how to build businesses. So what Act 3 is, is this investment vehicle that invested in Kafa, helped it, hyperphase, made a bet on the Mediterranean niche. Secondly, we invested in a company called Life Alive. Life Alive is positive eating, mostly vegetables. Again, the same thing. It's built to be the dominant brand in that category. We invested in another company called Tate, which I mentioned.

If you're in Boston or D.C., you know what it is. It's powerful. It's got authority in bakery, authority in coffee. It's also got chefs in every cafe. It brings an Israeli, Lebanese, Turkish attitude to food. Again, it's a powerful niche, much more upscale with a chef in every establishment. We've got 38 of those, and then we've got a couple of public companies that we've that have asked us to come in and provide strategic advice, and we come in and basically take

warrants, the institutional investors who we've helped make billions. But so when we go in as Act 3, we've got three commitments. The first one is founder-friendly capital. What does that mean? We're not there essentially looking at our opportunity to get out, the next liquidity event. We're in it for the long term. When we're in it, we're in there to provide all the follow-on rounds of capital. I think the greatest fallacy for most smaller companies is the idea that fundraising needs to be an annual event like a birthday party.

It's crazy, right? It's something that you really want to be cautious about. So we come in as founder-friendly capital, generally common stock, take all the follow-on rounds of capital and make a commitment to the company. Second, we practice what we call Sherpa Management, not venture capital. What does that mean? Every one of my 25 team members and partners are invested in this with their own money, but more importantly, only one of them is a financial person. Happens to be the activist that attacked Panera at one time.

I couldn't tell anybody at the time, but I grew to like them. But at any rate, he came in as a partner with us. But everybody else is an operating guy. And when we sit in that boardroom, we're about not figuring out how to get out of the business. We're about helping them figure out how to grow. You know, there's an expression. Climbing Mount Everest is a very difficult process. Building a nationally dominant company is tougher than climbing Mount Everest.

Nobody goes up Mount Everest without a Sherpa. Our role in the boardroom is to help guide them. So we allow all of our companies. We give them the right to draw on any of our capabilities. We have strategic capabilities, real estate, technology, operations, and we help them. We help them accomplish what they want to accomplish for their business. And then lastly, we only invest where we have competitive advantage. What do I mean by that?

We only invest in food and consumer-facing businesses. Frankly, if you're investing against me, I know where the world is going. And otherwise, I'm giving my money to professional managers, and I'm letting them manage it because they're going to beat me every time. So with everything you were just saying about the Sherpa mentality, what were the conversations like when Kava went public? and decided to go public. Well, you know, it's really interesting.

This idea of what was the conversation. We had talked about Kava going public for years before Kava went public. The key to going public, for 90% of the CEOs who go public ultimately live to resent it, resent the fact that they went public. It turns out to be a bad experience for lots of different reasons. Their nature of their constituencies change, the nature of their life changes, their ability to think long-term goes down. Kava was fully prepared to be a public company.

The CEO of Kava, Brett Schumann, is extraordinary. It's a business in which we are in a category that has tremendous tailwinds and will have it for the very foreseeable future. We have a brand that we have built to be the dominant player in that category, without exception. It's the largest and most successful. In fact, I was very instrumental in helping them buy a public company called Zoe's. That's how I originally got involved. I helped them buy a public company five times their size, the hyperface.

But as well, they've been prepared to be public. We've been doing quarterly earnings reports for a year and a half internally, and we've actually had our own internal conference goals. They know what it means and what it takes to deliver as a public company. And it's really one of the reasons I think it's going to be a very, good experience for both our management team and for our investors. You mentioned Zoe's, and that was a really big part of how Kava expanded and has expanded so far. There are some gaudy location growth estimates being thrown out there.

The goal is to get to 1,000 locations, I think, in the next decade. What does that look like? Well, you know, I find these goals of 1,000 stories or whatever, you know, a little crazy. What I think really matters in a public company is do you have the units to feed the growth monster for the next three years? That's really long-term thinking in a public, not in a public company, but long-term thinking by investors. That barely makes our investment criteria, by the way. I'm with you, but here's the point.

Kava has clarity on where its growth is coming from for the next 10 years. The key to Kava's growth is it's not something that hasn't already been done. We're in 24 states. We're in urban locations. We're in suburban locations. We're doing strong volumes and all of them. And you don't have to be too bright to understand what drives Kava is the number one diet in America, the Mediterranean diet. What drives Kava are these flavors, these powerful flavors that are both familiar and somewhat more exotic.

This is what people want. And it's very clear looking at the consistency of the volume. What I saw in Panera, when I made the bet on Panera, was, consistency of volume from Portland, Maine to Portland, Oregon. And Kava has those same characteristics. Very stable volumes, very strong margins, and it has the potential really to be one of the industry defining brands. Now, we could still mess it up, but if we stay true to our game, if we focus on execution and operations, we've got the tailwinds at our back, and this will fulfill its possibility. If the line outside Kava in Columbia Heights and D.C. is any indication near me?

I think you guys are doing okay. I think you're on to something. For folks that haven't seen that concept, maybe aren't as familiar, you mentioned some of the punchy flavors. What's one of your favorite things on the menu? I'll go in and I'll have specialty greens. I'll have some lentils. I'll put on something we call Crazy Feta, which is really to die for. Then I'll have these grilled lamb meatballs on top or falafel.

I can have a half and half, and I'll top it with a little Greek. vinegar rad or something akin to it. I mean, this is great stuff. It tastes good. I can have it for lunch. I also can have it for dinner. Now, I'm trying to say to you, I'm not here to pump up coffee at all. I don't come from that. It's not my world. What I believe is look at the deeper trends. Doesn't take too much to figure out Mediterranean is really real. It doesn't take too much to really understand that that company that dominates in that category usually wins. It doesn't take too much to see the lines outside of the door. Make sense of it yourself. And then ask yourself, if it's working in Alabama, if it's working in Fredericksburg, Virginia, how's it going to be? How's it going to work

in markets all over America? And that's really the question, not where is it at today, but where will it be at three years and five years and seven and why is it going to be a sustaining better competitive alternative alternative at that point? I just want to share with your listeners and the folks in the room something. I think one of the biggest mistakes made in business is people don't understand the difference between means, ends, and byproducts. It's one of the things I talk about in the book. And the difference is this, I'll tell you by way of a story.

I have a friend who's a type one diabetic. His goal in life is to stay alive as long as you and me. But he can't make that happen. It's a byproduct. What's it a byproduct of? His end. Keeping his blood sugar between 80 and 180. When he does that, he has longevity.

Like happiness, you can't make it happen. It's a byproduct. What's his means? Diet exercise and insulin control. Business is the same thing. Value creation is not something I can make. When a CEO gets up here and tells you he's creating value, When he's manipulating it, you want to run.

Value creation comes out the other end, by what? By the end of having a better competitive alternative. In my industry, what's a better competitive alternative mean? It simply means customers are going to walk past our competitors and choose to come to you. That's it. Now it's hard to do, but that's the objective. Ron Shakespeare's book, Know What Matters, is out now,

as is Morgan Housel's same as ever, just in case you need a last-minute gift for the business-minded reader on your holiday shopping list. That's going to do it for this week's Motley Fool Money radio show. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis. The show is mixed by Dan Boyd. We both hope you have a wonderful holiday, and we'll be back next week with our 2024 preview episode.