‘Mom, I Am Not Taking the LSAT’

Hello everyone. Welcome to the 21 Hats podcast. I'm your host Lauren Feldman. This week we bring you a conversation recorded at our recent 21 Hats live event in Ann Arbor, Michigan with Ari Wineswag, co-founder of one of America's most influential small businesses. Starting 43 years ago with a highly successful college town delicatessan that they could have replicated all over the country, including for Disney, Ari and co-founder Paul Sagena have instead built Zingerman's community of businesses, a collection of 12 Ann Arbor-based collaboratively businesses, each with its own leadership and ownership structure. Together, these businesses produce $80 million a year in revenue. They include a bakery, a coffee company, two event spaces, a roadhouse, a Korean restaurant, a mail order operation, an international food tour business, a publishing house that publishes among others, Ari Wineswag, and a training center, Zing Train, that has shared the Ziggerman's approach to business building with more than 10,000 other businesses. In 2003, Bo Burlingham pronounced Ziggerman's the coolest small company in America. O's article became the foundation of small giants, his book about companies that are more intent on being great than being big. The last thing we did at 21 Live was to sit down with Ari to talk about that philosophy. In his passionate responses to our many questions, responses I should note that include a few f-bombs. Ari explains how the Zingermanman's team decides whether to start a new business. How he and Paul made and remade an especially difficult decision about expanding, how he and Paul have managed to sustain their partnership for more than four decades, how they chose a succession plan, how they know if they're charging enough, why for many years Ahri's mother continued to believe he was a failure, and a whole lot more. Even in good times, owning and running a business can be a lonely pursuit. Our hope is that these weekly conversations will let owners know they are not alone in facing challenges. In fact, that's the whole idea behind the 21 Hats community, engaging with other owners to get the kinds of insights only another owner can offer. If you're interested in learning more, step one is to sign up for a free trial of the morning report, which highlights the most important news of the day for business owners, so you don't have to go looking for it. Step two is to get on our Slack channel where you can ask questions, get vendor recommendations, and tap the wisdom of a very impressive crowd. Just search the 21 Hats morning report to sign up for a free trial. This podcast episode is titled Mom, I am not taking the LSAT. where the ideas come from and what's the process for deciding if you're going to create a business? Well, it's evolved as we do more. We're not McDonald's, so we don't open 20 a month where it's literally the same. But, uh, we have a path to partnership that's imperfect, but basically gets adapted every time something goes wrong and then somebody tries to, you know, improve the process to pre prelude that from happening. But the businesses are the idea of the prospective partner. Is that usually someone from outside the company or inside the company? It's more from inside. It's not it that it can't be from the outside. Uh the ideas are cheap. I'll give you 40 right now in the next five minutes. The hard part's doing it. And although startups are a lot of work, the real hard work is 10 years later when the glamour is long since gone and the problems are the same mostly. uh you know and so it's who's going to keep working to make the quissant better 2530 years later not how do you get open and when it's somebody else's idea in my in our experience it doesn't last that long because they're excited for a year or two and then they get a good deal to move to Phoenix or move to Australia or whatever and then they're gone and then I'm here doing their the work and I didn't want more work so when it's their idea It's there's a lot more energy around it. So like where you're standing right now is because of Maggie's passion for training and that's why it is where it is. Now it doesn't mean the rest of the organization hasn't been part or me and Paul haven't been or whoever haven't been part of it, but it's it's really because of her love for training and deep desire to make it happen. But if somebody comes to you with an idea, you put them through the process, you agree to do it. Yeah. They they do they get an equity stake? they have an equity stake. Like if if we were to open a Polish restaurant and we go, Lauren, you're a really good sue chef. We want to promote you to be a key manager of this and you'll get a bonus on profit. If you're good, somebody else is going to offer, you know, it's easy to offer a lot of money to recruit. Whether it's sustainable or not is a different question. Just like in baseball or basketball where they pay a shitload of money and then they're freaking out two years later that they overpaid, you know. So some hotel group's going to open and they go, "Jay, man, you're you're awesome. We're going to triple your pay to come out here and we're going to pay for your family to move and buy you a house." And you know, two years later, the place is closed. But meanwhile, we're that doesn't help us. So yes, the point was they have equity and more than the financial equity is the emotional equity. I mean, the financial equity matters, but it's not enough. Have you started businesses that failed? Yeah. Uh, we had a produce market many years ago that didn't work out. Did you have a a a brew pub or No, there was there was not that I remember. No. Was it really just one then or That's a That's a remarkable record. You have 12 businesses, only one failed. Yeah, I mean I I guess I don't really those are like the macro failings that get in the news. I'm I'm far more focused on the small failings that are happening right now while we're sitting here. No, they don't get in the New York Times and they don't get in ink and whatever, but the failings are bad conversations. The failings are a seven and a half espresso instead of a nine espresso. the failings are the server who didn't quite go back to the table enough, you know, and they're they they don't get in there. They it gets in there seven years later when your business went broke because of those things, you know. So, that's what I'm always looking at are the tiny parts. One of the other things you told us the other night was that a big part of deciding on your vision and your culture is deciding what you will not do as opposed to what you will do. implicit in what you decide that you will do is what you won't do. And you gave an example which is that it took you I think you said 15 minutes to decide not 25 but yeah I I assume it was a deli for for Disney. Can you give us a that was an easy decision apparently very quick. Yeah. Give us a example of a hard one. Was there a no that you and Paul disagreed on? One example is the airport. Uh so uh this is 25 years ago really wanted to do something in the airport a deli something uh I really didn't because I feel like it's too far and uh it's a different culture and it's hard enough to get people to go from here to the deli or the deli to the roadhouse let alone a half an hour away and you got to park and you got to go through security and I'm like it's a [ __ ] half a day to check the espresso Like, no, no exaggeration. Like, by the time you drive there, get through all that stuff, say hi to three people, and get get the espresso and see if it's okay and drive back, it's literally your whole morning's going to be gone. Uh, but he really wanted to do something, and we went back and forth. And, you know, in his mind, it was going to be a really good financial thing, too, and a lot of exposure. And, you know, finally, you know, I was like, okay, we agreed. and it was going to be called Zingermanman's Land of a Thousand Flavors. So, it wouldn't be a replica of the Delhi. It would be something different. And then 9/11 happened. And I I I would say not because of 911, but they use 911 as an excuse because it's not even your business. You know, you license into the airport. So, it's really not even your own employees. It's somebody else with your name. Anyway, they pulled out after 9 the company, Compass Group, I think it is. Uh, so that saved my ass. Then again when they redid the terminal or whatever, then it came up again. And then I was like, I don't want to do it. And so what we finally settled on was uh we sell we wholesale to the people in there, but it's not ours. But it's because Plum Market likes to promote that it's us that whose product they sell. It often looks like us. But has that caused problems for you? Everything causes problems. Yeah, it does. But not life-threatening ones. Well, it's just, you know, whatever. Like you're a partner. You're trying to make a real a future that he feels, you know, it's it's it's all compromised. So, you and Paul have been partners for 40 43 years, and we've been working together for 47 years this month. That's pretty remarkable on its face. Seems like it. Yeah. Even being alive that long is an achievement. Yeah. Why did it work? Well, I don't think there's any one reason. I mean, I think it's a lot of things, but shared vision is absolutely part of it and we got lucky because we didn't write it down in the beginning, but we in our heads had reasonably shared vision, certainly shared values. uh and then now in the context of having done all this work on beliefs which you now have the book uh I would say shared beliefs also which are less are not about ethics but they're just beliefs uh and then you know all the other things that go into any healthy human like emotional resilience both of us working to improve our self-management a lot over the decades luck still alive and have survive, you know, gotten through whatever health issues that we've had and all that. You know, if an entrepreneur came to you and said, "I'm thinking about doing this project. I'm thinking about doing it with a partner." What's the best advice you could give them to about working with a partner? It's all in I mean a naturalizer business, one of them is strengths lead to weaknesses. So, it's it's it's whatever you're good at also tells you what your problems will be. So, uh, you know, like for us on a like our biggest differentiator in the marketplace is what maybe what you just said, really amazing food. What's the inevitable weakness? It's expensive. Like you can't make what you had for cheap. It's, you know, it just costs more to put better butter in. It costs more to make the bread the way we make it. It's just the reality. So, it's the same with partners. like I prefer the problem of having frustrating conversations around things like the airport because I would rather not do this alone. And that's coming from an introvert. So, you know, for people who just want to make decisions, don't want to [ __ ] deal with anybody else's opinion, it's much easier to do it on your own. And there's nothing wrong with that. I mean, it's just which problem do you want? Do you want to be alone and your significant other gets sick of hearing you talk about it or do you want to have people that you're gonna go, you know, when it when things come apart who that you call and that they're going to be in there with you working? You referred to that the other night as well, talking about the difference between voting on a decision or achieving consensus on a decision. What happens when you don't get consensus? How do you deal with that? You just keep talking. You always eventually get consensus. Well, sometimes you consent to not do something, but you because you can't get consensus, but it's really what Paul and I were doing informally as partners from the beginning, you know. So, that's one of the reasons the partnership worked is that informally we did that. Now, it's formalized. Uh so, this the backstory is when we opened the deli, you know, remember if you might remember, Paul had Monahan's seafood market. So the original thought was that the fish market was going to be bigger than the deli because it was already pretty busy and you know 5 years four years established and that Paul would come help me open the deli in the beginning and then he would go back to the fish market where it was going to be bigger. But of course that's not the way it played out. But so in the beginning the ownership was I owned half because I was the one who's going to work there all the time and they owned half together each a quarter. Then Paul came a day or two a week. Then it was three days a week. Then it was four, you know, but the fact that I own more just never came up. It didn't come up from me and it didn't come up from him. So it was just it wasn't relevant to our decision-making. So in essence, we just used consensus even though the typical model would have been on a tense situation. It's like, well, I own more. We're going to do it my way. And then when we rolled out the 2009 vision which is 94 uh and uh as we were working on it some you know resistance from outside people that we would ask for input is like well why would anybody like Maggie want to be a partner in zinc train if if you're going to own more of it you're just going to outvote them why would they want to be the partner and so we just intuitively said well we like consensus we'll just do that with them too. So we still use consensus at the partner level. So if it's uh you know at the roadhouse it's me and Lisa and Paul let's say you know and it's as Maggie always says it's implicit consensus. So it's not like Zinc Train calls every time they want to change the color of the name tag. But as she would always I like the way she described it which is you know if I in her gut she would she goes I feel like Paul and I aren't going to like this. They better pick up the phone. You know which I think is accurate. So anyway, we did that. And then the other I think really really big thing that we did sort of on instinct, but I'm in hindsight, it's one of the I think the best things we ever did is that it wasn't just consensus between the managing partner of that business and me and Paul, but from the roll out of that vision 94, the whole group was charged to run the organization by consensus. And that the charge was when you make a decision in that group, you always need to make it wearing the hat of what's best for the whole, not representing your own business. So the opposite of the American governmental system instead of what we have, which is this sucks for Iowa, so I'm blocking it, even though it's clearly better. No, no offense to Iowa, but clearly it's better for everybody else, but Rhode Island is bad. So we're going to stop the whole country from doing this. it needs to be well for my business it's not great but clearly it's better for everybody else now you know it's hard to do that but at least you know you're supposed to do it and so from the beginning of that vision in 94 every managing partner is part running the whole organization can you explain as briefly as possible what an employee ownership trust is why you chose it yeah uh so we as you're already uh extracting from our conversations. We created a fairly complex model. Not trying to make it that way, but it's just how it played out. So, we had uh from the beginning, we had buyout insurance on each other, fairly common. So, like if I would die, then he if I remember right, then he gets the benefit and then he's obligated to buy out my heirs because we didn't want to end up working with each other's heirs, which was fine. And then, you know, 15 years ago, he goes, "Well, what happens when the second one dies?" I'm like, "I don't know. We got the insurance like it pays out the heirs." But he goes, "Who owns the shares?" I'm like, "I don't know what." Anyway, it was a good I couldn't even really understand what he was saying, but it was an obviously good question, which is we're both dead. Who owns the business? You know, and so there were managing partners in each business already, but there was the intellectual property, the brand that we owned alone. And so that started whatever 15 years of conversations which were 90% done with. So it went all over the place. And you know, me for sure and really him too. Like I've never been driven to have this giant inheritance. Uh, and you could say it's because I don't have kids, but it's also I don't believe like I want to leave Tammy some money, but I'm not like I I socially I think that a big problem with wealth gap is not the person who worked their butt off and made it. It's the next and the next and the next and you know 20 generations uh down the road where they didn't do the work because the people who did the work are like you. They got a work ethic. you know, no offense, there's some kids that bust their ass, but then you get a kid who, you know, inherited six billion dollars and never did anything. So anyway, I wasn't trying to max it out. And then also, every company that I've looked at that sells, not every, almost every company that I look at that's sells it all of my friends, it goes down to tubes. They get a lot of money. Most of them become unhappy because they don't know what to do and they spend the rest of their life in existential wanderings. And then the company starts with this is awesome. We share all your values and maybe the CEO at the time did but then they get an offer to move to Australia and then they're gone and the next co's like why are we wasting all this money on Zingermanman's? It's barely profitable. What? Screw this [ __ ] Get rid of all these products. So I didn't like that. Anyway, the long story short, about five, six years ago, I was reading EF Schumacher's book, Small is Beautiful, which was written in, I think, 1973, but for some reason, I didn't read it till 5 years ago. Uh, and it's an awesome book. Uh, but anyway, in there, it's only like three pages of the book, but he tells the story of the Scott Bader Commonwealth in England. And, uh, Scott Bader was an immigrant from Switzerland to the UK right after World War I. Got a job as an hourly worker. uh didn't really like being an hourly worker. I don't blame him. Uh and started his own business, I think, in the chemical industry and did very well and they built it up and then like in the early 50s, so like 30 years after he started it, he converted it into what they call a commonwealth, what here we would call a perpetual purpose trust. So basically, he gifted the company to itself, so it could never be sold. the employees get the profit from it, but they don't really own it. Uh, and then if it is sold for whatever catastrophic reasons, I'm trying to recall from memory, but like threequarters of the proceeds from the sale would go to charity so that they weren't incented to sell it the second time. So, when I read that, I'm like, this is what I'm looking for. Because we spent all these years making Zingermanman's into this integral piece of the community. the last thing I need is, you know, Kroger buys it and then it's all over the country and it's nothing, you know. So anyway, then everybody said that was ridiculous and it would never work, which is the same story we've heard on everything meaningful we've ever done. And five years later, we have one and I believe it will become a bigger and bigger succession path. It's not for everybody, so there's no judgment, but in a nutshell, it's me and Paul gifting the brand to itself so it can never be sold. Our construct is a little different than other people's because of the complexity of what we have, but it can never be sold. And then each year we pass more and more ownership share in that to our employees that own a share. So that by our 2032 vision, half of the brand will be owned by the staff. Half of the brand meaning they own the intellectual property or correct, not the actual business. Well, they're all separate entities. Uh but like Zing train can't be Zing train unless the brand lets it be Zing train. So there's quite a bit of but in theory the ownership structure of one of your businesses could make a decision to sell the business would have to do it without the trademark the intellectual property. Well right now they can't because me and Paul own part of it and the last piece is who owns that last little part and we're working on that. Are you happy with the way it's gone so far? I know it's early. Very happy. Uh but here's so I started to look at succession in three broad categories like I like simple I like the framework it doesn't tell you what to do it gives you guidance on ways to think about it so I started to look at succession which in 1982 I didn't imagine living past 30 I wasn't that worried about succession wasn't high on my list of concerns but clearly in a good it's a good problem here we are so in no particular order there's governance succession there's uh uh cultural succession and then there's financial legal succession. That's what Paul was asking me about 15 years ago here because we have 30 years of governance that works by consensus of our partners group. It's well ensconced in the organization. Everybody's used to it. We know how to make it work. We didn't have that problem. Most organizations, not saying this judgmentally, are still run like monarchies. And most people of my friends, they're benevolent monarchs, so they super care about the subjects. But it's still most of the decisions run through the king and queen or the queen and well it's true. It's not a judgment. It's just the reality here. We weren't doing that. So we are far from perfect, but we created a more democratic way of working that was more inclusive. So governance wasn't a big issue. cultural. It's never perfect, but by teaching everyone to think like a leader, by being open book management, by having whatever we got 60 70 internal classes, by all these different things that we do, I feel like we have a fair shot at that. But where we didn't have it was the legal financial, and that's where the trust came in. Who's got a question? Have you ever seen the show uh Bear? No. There's an episode in there. all about it, but I don't There's an episode in there where um one of the guys that works at a sandwich shop. He goes to a fancy restaurant and they try to train him into doing different things. Part of the episode is they make him clean spoons for a week and he hates it. He understand why the Matri finally breaks it down and says, "This matters. This is the beginning of of of bigger things." And you mentioned like the espresso like that matters. Just send a note to the Zach at the Roadhouse. He does a weekly note to the staff and he asks the managers every week for input on what he should put in there. And I included one of my pet peeves, which is keeping the the server side of the dish line and the floor super clean cuz for them it's like where they dump the dishes, but I'm like the whole restaurant starts there. So if it's sloppy on the dish where you put the dishes, it's going to be sloppy everywhere else. So it's funny that well that that's the that was my question. your details aren't in the bigger picture of things like I want to be this successful or I want to get this much money. You're like I'm worried about these day-to-day details which is amazing and and and shows why you're successful I think but how do you infuse that into every team member? Is it through training? Is it through culture? Is it through hiring? Is it through all the above? It's not that I don't think about the big stuff. I I think my belief is we need to think big and we need to think small. If you think small in everything, it's micromanaging. If you don't think small in anything, it doesn't make sense because you got to where you are by thinking about things that most people aren't going to notice. So like the salt level, like in the food world, the salt level is super important. And I wrote an essay years ago called salt makes sense with a C because like one undersalted dish could cost you $300 because people think their belief is it's tasteless and terrible and actually all it was was slightly undersulted or conversely overs salted. So you need that. But at the same time, like thinking about perpetual purpose trust and how we create this community institution that you know in 2082 when Zingermanman has its 100th anniversary, I'm not going to be there. But the fact that it could still be enscconced in the community as this amazing old growth forest instead of one more industrial model replication is awesome. So it's a combination of the two. How do you get it in there? Yeah, all of those systems for sure. So, in a restaurant, they're supposed to quality check. They should taste the line. Each person should taste their station. The sue chef or the chef taste their station. I randomly taste stuff if I'm wherever. And then it still could go wrong. So, that's the system. Then there's the culture, you know, like do people take pride in what they're doing? Do they care about it? You know, will the server say something if it's not right? Because most restaurants like in the bear they get yelled at and then they're never going to say a word again. Jim Cal Tri components group. So if compromise is a way of no one getting anything but they really want it's a compromise between two parties and the trade-off is really someone getting something they always want some of the time. How do you fit in consensus into that? Well that's a that's a said with respect. That's a negative belief about compromise. uh because it depends on how you do it, you know. So, I guess I don't look at it as as just horse trading. It's how do we get to where as much as possible everyone gets what they want. So, what I've learned over the years is it actually can create healthy win-win creative outcomes that nobody thought of on their own. And so, what Congress does is compromise in horse trading and it doesn't work. But the visioning process because it's Stephen Kovi start with the end in mind is super conducive to like well what do you really want out of this you know and so it allows for much better like oh well what about this here's a true story so uh Paul loves Las Vegas we have a lot in common but not a lot that's not in common he loves Las Vegas I've never been and it's one of my negative life goals never to go no offense if anybody's from there. It's just not my thing. It seems like the antithesis of Ann Arbor. So, uh, he loves gambling. I I'm anxious just to go out of the house in the morning. So, uh, so we're different. So, you know, I don't know, six, seven years ago, like he really wanted to do something in Las Vegas. And I, I mean, there's reasons why, like his grandfather was in the Jewish G mob in Detroit, and he used to take him to gamble, you know, whatever. So, I really don't want to open outside Dan Arbor area. So it's sometimes just like why don't you just go open your own thing like I don't care you could have a solo album after 40 years you know it's fine the organization succession worked out we created that stewardship council five people that I'm on which is the meeting I just had and we're all still working well together like it's not a story like it's not in there's no drama well I hate to correct you Ari but on this point that's a story it's just a matter of whether the press is diligent enough to find out about If they know about it, they would want to write about it. Uh David Bilstrom, Flashing Red Light. So, Ari, um this is my first time here and a long time admirer. Where do you live? Uh Asheville, North Carolina. Oh, yeah. Ann Arbor in the mountains. Yes. And so, one of the things that's just so comprehensive and unrelenting is the vertical integration. Okay. And Chris pointed out the sign in the restroom says, "We make signs." So my question is from that strengths are also weaknesses. What are the weaknesses or the challenges of that level of vertical integration? What's vertical integration mean that we all we make different things at different this we make bread and then we sell bread. You make the card, you make the badge, you make the sign, you make the food. Oh, no wonder I'm confused. Okay. Uh well I there's no right answers. I mean, it's your vision tells you what you care about. Uh, number one. Number two, there's an essay in uh in a beliefs book that's about uh what we call oneplus 1 work. So, even if you hire for diversity, which I'm all for, most companies that have good diversity hiring work, which is important, then put people into non-diverse jobs. So, we hire a more diverse workforce and we put them in the same [ __ ] box that they were in when it was a non-diverse workforce, which is not that helpful. Like, it's better than hiring homogeneously, but it doesn't really. So, the reason for diversity, yes, there's historical reasons to replicate enormous inequities. And it's also because the healthiest ecosystems in nature are the most diverse. It's just true. You don't have to like it. It's just true. We have an ecosystem in our head, too. So the industrial model was created on getting rid of as much as possible and simplifying everything which isn't inherently evil but the weakness is boring as [ __ ] Like who wants to put a ratchet a screw for 40 years? Like it's I just the thought of you know now if you try to train everybody on everything that won't work either. But having people doing more than one thing creates a chance to tap the diverse skill set in their brain and give them different things. So, I'm not saying making that sign alone is that answer. But like Mara from Zing Train, who's out there, also runs a food tour. She's not the partner, but she runs one of the Irish food tours. Uh Kirsten, who's out there, is very active on the diversity committee. So, they're doing something else if they want. They're doing something else. So, I don't know. We don't have to do it, but I think that there's value to it being handwritten as opposed to printed. Yeah. So maybe the sign's a poor example. So I was thinking in terms of business model, okay, and if I'm going to open a restaurant and I make really good spaghetti, yeah, I'm probably not going to make the rolls, right? I'm going to outsource that to someone who's really great at making rolls, right? But this is clearly the opposite of that. This is it's just doing that within the organization. So the deli doesn't make the role. The Roadhouse doesn't make the role. Bake House does. Yeah. Yeah. That was exactly the point. And so is there a weakness to that? Yeah, I mean McDonald's has a lot of there's strength to McDonald's. They don't the staff's not worried about anything except when they get off work and hoping they don't get yelled at, you know, but I mean it's the same. So it's all decided at corporate, you know, and there's a big advantages to that. I mean it's a lot less stressful in the moment. You don't really have to abstract. Mars Chapman, Casey's New Orleans snowballs, Austin, Texas. Do they have a Austin snowballs in New Orleans? You know, I don't know, but I should probably go and investigate. [Laughter] Um, Ari, what is a what is a restaurant? Well, he asked me the other night, uh, and what what do you make? So, I still teach the new staff orientation class. Uh, be teaching it Sunday. If you're still in town and you want to come, you can. Uh there's an essay in the beliefs book about why I believe that's one of the best uses of a owners or leaders time is to teach the orientation class. uh when I teach that class and I will tell them again on Sunday if they take only one thing away from the class and I hope they take more because it's a long [ __ ] class for one thing but is to understand that we're ultimately only at work for one reason and that's to bring people a great experience and that everybody here is 100% responsible for the quality of the experience they give to every other human being period. Uh that's what we do. So I mean that's the nutshell. What's a restaurant or any business? I mean it's an ecosystem. I the next pamphlet is I'm working on well I'm working on two pamphlets at once but one is uh on this organizational ecosystem metaphorical model that started in the beliefs book and it's evolved a lot. So it's an ecosystem. Do you want to have a healthy ecosystem or do you want to have an ecosystem that somebody strip mined and they got a lot of wealth out of it but they left a mess behind or do you want to have a healthy ecosystem where all the parts of it are healthy it creates beauty it enhances the day of the person even who drives by the garden because they get beauty even though they didn't even go in you know so it's all of that does that help Jake Ols artists frame service Jason home and fellow molding you have partners in all these different things. I'm like, I don't have a partner. Not cuz I want to make all the decisions because I absolutely use very much the same thing you do, but I don't want to get stuck. Like I realize, oh my god, I'm stuck with this person. What have you done with I You and I have had this conversation. What have you done with people who you you did a partnership with and you realize, yikes, they're over their head or they're the wrong person and now they're your partner. How have you how much has that happened and how how do you unwind that and how much damage does it do? It's hard. It's hap I don't know how many time I mean less than 10 more than two. Uh it's hard. I mean you just but that's where the practice of learning to work with consensus and have conversations is super helpful because you learn how to as Paul always says learn how to disagree without being disagreeable. And it's just trying to keep coming back to the table until we can figure out like why is it not working and what does the other person really want? And often there's ways to get them what they want that isn't necessarily ideally what we wanted. But but legally if you got to the point where you realize they they need to move on how legally I mean well you got to we you got to get them to agree. But that's what consensus is anyway. So, so, uh, in a confrontational hierarchical setting, it's it's problem, it's very problematic because they're used to this, and now they're like, well, I have this, so you can't, you know, and, you know, everybody has those feelings, I think, but here it's just like try to keep coming back to the table with humility. Try to keep figuring it out. lawsuits in all these? No. Okay, good for you. So far, no. No. Good for you. That's a good As of as of as of 11 this morning. So, you're able to achieve a consensus where the person that you're referring to agrees it's time for them to leave. Yeah. I mean, they have part there's partnership agreements and all that, but you know, and I know you could, you know, you could sue me right now because the cup is too big or I don't, you know, or because you have no urinal in the bag. You you might Yeah, that wasn't my idea. But I just wanted to hear you say that. Thank you. It's not a bad thing. It's just this is what women got to deal with every [ __ ] day. It It's when you have a business that's 90% women and they're like, "Why do you need a urinal?" And it's, you know, it's it's good. It's good humility learning. Uh and you don't and you don't really need one. You don't really need one. Well, it's true, but they're better. It's true. Why do they got to read a book that's always saying like mankind all day, you know, like it's not anyway. Uh it's Yeah. I mean, in a culture where people are trying to get to agreement and trying to not dominate it, it's not perfect, but you can recover more effectively because culturally people have a lot of practice at it. Most places they don't have any practice at it. The news is filled with stories of domination. The video games are all about domination. Uh the sports stars are domination. And then then you want them to work well together. And it's a it's a it's a chasm. Excellent answer. Thank you. Ed Loveventhal, Velco Industries in Springfield, Ohio. curious how you've kept so passionate about what you do and your organization and your community for 47 years that you still want to come in every day and be better today than yesterday. Well, the green book is on managing ourselves and that's a lot of what I learned. Uh, everybody's different, you know, but whether you write it down or not, what's your vision? Like the writing down helps, but it's not critical. But what's your vision of your life? You know, what do you want to do? Uh, most people fulfill some part of their life's vision, but then they don't have a new one. And are you, you know, self-management, like are you learning? Like I like to learn, you know, so I'm always learning. I I I really mostly don't do things I don't want to do. And then I there's an essay in the third book about free choice, which really comes out of my anarchist stuff, but realizing going to therapy like 30 years ago that it was all my choice and that I don't need to do anything. And once I once I embraced that, it was really freeing because it's like I don't need to go to work. I don't need I don't mean because of money. I just mean I don't need to be nice to you. I could walk out of the room right now and you know so it's it's when I realized it was all free choice it really shifted my energy a lot um like I choose to deal with difficult customers I could ignore them I choose to have the difficult conversations even though I don't want to at one level I don't I choose to engage and then a lot is around energy uh so uh my friend Anise Kavanagh is who I learned the energy stuff from she lives in Sacramento Sacramento her work is very good and we've adapted it here. So a on a base level uh energy management is a job expectation here. That's a huge thing that also doesn't get written up a lot but it's part of the per it's a job expectation that you bring positive energy. Uh there's a lot of focus in the world on time issues and I did write an essay on time management that's in the managing ourselves book which I for some people works a lot. Uh but what they don't talk about is energy management. So they're trying to spend less time at work but it's like that's not the issue. The issue is what energy do you get from what you're doing. So I have this vivid memory of this many years ago now. Fourth of July, we're open. Like, I live with a farmer. We have dogs. I'm not religious. I'm an introvert. I don't care what day it is. I try to treat them all well. I don't want to go to a Fourth of July picnic. I'd rather bust tables. So, anyway, so I was at work, but I'm at work on a nice day like today. I'm sitting outside of one of those tables. I got a good pot of first flush Darilink tea, which is awesome. I'm working on some stuff about Emma Goldman, and I'm having a good day. And I know some people say not to, but I jump back and forth between multiple things all the time. So I'll be working on somebody look at email and I flip back and forth and might not work for others, but for me it works. Anyway, so I flipped in my email and there's this note from this friend of mine, you know, how's it going? And I said, "It's going good." And she goes, "Where are you?" And I'm like, "I'm at work." Da da. And I'm like, "Where are you?" She goes, "I'm at my in-laws. We've been here all weekend. You know, I got to get out of here. uh you know, we're about to get in the car with the two little kids and drive six hours. I'm like, "Wow, sounds [ __ ] fantastic." So, like, you know, by the world standards, she's got the weekend off and I'm like, "Okay." But I'm calm and learning at work, sitting in the sun, drinking really good tea, learning something, working on something I care about, and she's sitting at her in-laws trying to self-manage around that and about to get in the car with a whatever three-year-old and a six-year-old for five hours. I'm like, I don't I'd rather be at work. So, I'm not saying that's right for everybody, but for me, it's it's good. And so, I try to manage my life so that I have very few energy drains and almost everything I do increases my energy. So, if you look at it like that, it's regenerative. So, I'm I've been tired for decades. It just stopped bothering me. So like I self-manage to to raise my energy all the time so that I leave with more energy than I went in. Does that help? Yeah. Thank you. Sarah Seagull, Seagull Communications, San Francisco, California. I like asking simple simple questions that are open-ended that are open to your interpretation. Interview technique. I used to be a reporter. So my first question is um what do you regret in your career so far? Let's let's do one at a time because it'll be easier. I don't I don't know. I don't I try not to regret much like it's done is done. And I come from a worrying family, but it's un super unhelpful and it is what it is. Like I just try not to it's over. Any missed opportunities? Oh, a million. I mean every like I'm probably missing 20 by sitting here right now. Yeah. Every time I'm here, I'm not reading a book and learning something. I mean, every time I go running, I'm not, you know, checking the salt level. I mean, it's we're we're always missing stuff, but, you know, when it's free choice, then I just it's like I did the best I could. And I mean, other than the obvious like I picked what pants to wear today or whatever, but there's really don't make decisions here alone. So, you know, in the moment, you might have need deal with a customer situation like uh Nathan was talking about at the roadhouse the other night, but beyond that, it's all collaborative. So, you know, like when we have something that didn't go well, it wasn't just me alone. So, it was five of us or three of us or 12 of us that arrived at that decision. And if it was the wrong one, I'm responsible, but it's not like I'm going to, you know, like it is what it is. So, I try to train myself out of it. And the second question is a question I asked my table at dinner last night, and it's, are you successful? Do you consider yourself successful? And if you do, when did you decide that? I don't consider myself successful. It's the opening of the chatbook, which if you grab it, I could read it for you. But, uh, we grab we grab one of those little orange chatbooks. They're outside on the bookshelf, and I'll just read you the line because it'll just tell you the whole thing. I don't really like success. So in the in a hierarchical model, success makes sense. In an ecosystem model, it doesn't make any sense. Like is a forest a success? No, it's healthy. But there's failure in this in a healthy forest every 5 seconds. Like there's plants dying, there's birds fall out of the nest, baby birds and die. I mean, there's always, you know, trees are dying. So it's it's always happening at the same time. And I think that's true in life. So, whatever I've done, I Oh, no. It's a little tiny thing. Sorry. I wasn't specific enough. Those are good, too, though. Nice job. My mother considered us me a failure for many years cuz I wasn't a lawyer. Cuz I was wasting my education. I mean, every year my mother used to say like, I mean, this is how hard it is to be who you are, right? So, here's me anarchistic d every year. I don't know when you take the LSAT, but my mother I think in August or something, my mother would say like, "Why don't you just take the LSAT this year?" This is after we open the deli, you know. And I'd go, "Not this year, mom." And she's like, "Well, just take it in case you want to go." I go, "I don't know. Not now. Not now." So, finally, like, I mean, I swear this is true. Like, we were like 10 years in business. We've been in the [ __ ] New York Times gourmet blah blah. We have like 150 employees. We're doing $5 million. And my mother goes, "Why don't you take the LSAT?" and I'm, you know, I just feel like you're wasting your education. I'm like, mom, I have, we have 150 employees. I am not taking the LSAT. So, that's other people's judgment of you, you know, and this this goes with whatever, like, you know, goes around sexual preference, like you're a failure because you like men or you like women, you're a failure because you didn't make enough money, you're a failure because you didn't do X, Y, and Z. And they I mean it's judged on external like I don't really care about awards. Like it's nice for PR for the company but I'm not any better or worse the day before we get it or we didn't get it. Like G was a I don't know I've lost track. Finalist quarter fin, you know, for James Beard. Like the restaurant's no [ __ ] better if she got the award or no worse if she didn't get the award. And I've been to plenty of them that get awards and they're not that good, you know? So it's really not connected. Anyway, I'll just read you. What what is this a response to? This was a am I a success? Just a good answer for your question. Every once in a while it happens. In the middle of a conversation about the struggles of leadership or the challenges of running a small business, a curious person will shift gears and ask me something along the lines of, "How does it feel to be such a successful entrepreneur?" I usually smile and deflect the compliment with a bit of heartfelt humility. Thank you. You're very kind. time and mental space allowing though I might answer the question in a bit more depth. To be honest, I don't really think of myself as either a success or an entrepreneur. The typical response then is something akin to really how do you see yourself? For years, I fumbled around for an answer. Eventually, I realized I could just tell the truth. I feel like a line cook who's doing pretty well. So, not that there's anything wrong with being a line cook. I'm Shannon Kennedy. uh the Morgan Square out of Hayward, California. Uh so my question to you is you've been at this for 47 years. Is that what I've been hearing? Well, 47th year since I started washing dishes. 43 years since we opened. Long enough. So my question to you, given where you are right now, what is a piece of advice that you would give your younger self? Well, I'm not that big on advice, but uh I mean what I write about is all the things that I learned that I would have done differently if I would have known them. So, it wasn't like we thought it was a bad idea to write a vision. I never knew you could. It's not like we said we're never going to be open book management. I just never heard of it. It's not like I thought I shouldn't be mindful of my beliefs. I just didn't know you could be. So, I mean, what I try to write about is what I wish I would have known. Like, I'm not beating myself up about it because I wouldn't have learned it without going through what I went through. But, uh, but those are the answers. And there's a lot more. Like, you can't even if I give you all those books and read you read them all before you open, you'll forget 80% of it on the first day when the dishwasher breaks and six things fall, you know, whatever. But but at least it's there, you know, and that's what I would say. Ari, you mentioned that one of the challenges of serving great food is that it's expensive. It costs money to produce. You have to charge for it. What have you learned about charging and pricing that allows you to do that? Well, what I learned is, especially in our industry, there's a lot of people who are understandably afraid to charge what they need to charge. then they don't make any money. Then they burn out, they can't pay, and the customer still thinks you're charging too much. Anyway, one of the best pieces of advice or insight that I got, Paul and I got, we went to a seminar at Washington Community College, right up the road from where I now live, like 35 years ago, and this guy Tim Connor, who I think is still going in North Carolina, and we learned a number of things from him about it was about catering. He just said like if you're at the top of the market in quality and you're not getting, you know, 20 to 30% complaints about your price, you're not charging enough. No. And it's true because you can't hit it perfectly. And you know, if you charge so little that no one complains, then you're it doesn't work. And so the public's perception is the prices are made up based on what that you can get for it. And that might be true like with some high-tech thing where they're just like, "We could charge this and they do." But in our industry, those who work in it know it's mostly based on your food cost and what the cost of goods is. And then there's a little bit of flex, but not really that much. So, I mean, I heard you with tariff stuff like it is what it is, man. If the chocolate goes up a dollar, we got to charge more. Like, I don't you know, when they say they're going to absorb it, like dude, you must make a lot more money than we make. And what I learned is back to your question, if the experience is great, the price is not the main issue. And and also if we're making things that are not available everywhere, then it's also easier. If we're making stuff that everybody else makes at the same quality level, then we shouldn't be charging more, you know. But that's our work is to keep getting better all the time. to your question so that we're always improving what we do, not based on complaints. Not that we don't improve based on complaints, but if we're waiting for the complaints, we waited too long, you know. Did you have the biscuits at the roadhouse the other day? Yes, we did. Okay, good. So, they've always been good. Uh, so here's a I'll tell you a quick story and then we'll So, uh, because this is also about being in business for a long time. So when we opened the Roadhouse in 2003, it was still the norm. Those in the food business will be able to relate to this that you got free bread on the table like you got a basket of rolls or you got whatever and we have a bakery. So it only ma which makes awesome bread. So it was only made sense that we would do that. But the the industry has changed you know. So over the years like it became less and less common that you got free bread and as more and more artisan bakeries were opening and we were one of the early ones but as more and more were opening then people start charging for bread and then as gluten-free stuff became more an issue in Celiac then some places don't even have bread anymore. Meanwhile, you sit down, we bring you a basket of bread, and it's not cheap because we're whatever you said, integrated, and we pay a good price to the bake house, like triple what they would pay if they were buying from a mediocre bakery that made dinner rolls. So, we're putting down a three, four, $5 cost, whatever, $3 cost of bread on your table. Half the people don't eat it. Half the people are like, "This is great. I'll have a glass of water and order of fries." And so, we're like, but what do we do? because we have a commitment at the from the roadhouse to the bake house to support the bakeouses work. We're already trying to serve higher quality stuff. It's already expensive. You could build it in, but it's a couple bucks more. Whatever. What do we do? So, we spent a lot of years agonizing over how to start charging and then that would p piss the bake house off because it's going to reduce their wholesale sale because when it's free, you go through a lot. Anyway, we were kind of getting close. Then the pandemic came. It wasn't the number one worry. Then we stopped bringing the bread to the table because we were avoiding contact. So then there was no bread going out unless they asked for it, but it was still free. Anyway, long story short, after many years of trying to figure it out, we finally two years ago this summer agreed we would switch to charging. Uh, and we improved the bread service by going from a standard butter from the distributor, which customers liked, but actually wasn't that great to a butter from Vermont crearyy that's a old cultured butter. So, it's how they made butter 150 years ago. You let the cream ripen like yogurt or cheese. Way better flavor, local cream to where they are. Uh, much higher butter fat, French sea salt, whatever. So, of course, there's some push back, but mostly the push back is from people our age because they're used to free bread. And we did a lot of roll out with the staff and da da da. And then every time there would be a complaint, I'd go, I'll go over there, but I can guarantee you they're my age, right? And they're like, yeah, cuz nobody under 40, of course, you pay for bread. Duh. Like, it's like expecting free cocktails. Like, nobody would expect it. So, anyway, now it's ensconced in the way that they serve. And the butter is awesome, but meanwhile, we're still using the regular butter in the production. So then we made the switch to raise the price a little. Switch to use the cultured butter with the pancakes, the oatmeal on the table. Then we're like, okay, well now we really should raise it in the kitchen, too, because we're still using commercial butter in the biscuits, which everybody loves and nobody complains about. So 3 weeks ago, after 6 months of working on how to buy direct and not buy through the distributor so we could get it at a better price, we switched into biscuits to make what was already highly valued even better by by switching to that butter. So my point is it came out of internal drive to improve. Zero complaints. No one was bothered by how it was. We raised the price because it costs more, but we continue to differentiate ourselves in the marketplace. And what was really really good before will now become a signature item that people come there just to get. Along those lines, Ari, coming out of the pandemic, which you pulled the other night was very tough on Yes. your business on everybody. Uh there's a lot of talk about how the basic restaurant model just doesn't work. The margins are too thin. Um people don't want to pay what it costs. Those are beliefs. People employees don't get paid. No, there's they're self-fulfilling beliefs. So, we opened when people said they said nobody would pay for what we were selling. Do you have a better business model or do you just charge what it takes to make the model work? We just try to charge what it takes to make it work. And I'm like, if people don't want to pay, then we'll go out of business. But I'd rather go out of business charging what we need to charge than go out of business undercharging and never knowing whether they would pay what we need to charge. So, so I mean, here's another story from there, like from 10 years ago. I remember like the beauty of pouring water is you have these conversations that nobody would have with you. So, I'm pouring water and I don't know, there's a guy at that first little table when everybody in restaurants can remember exactly where you sat seven years later and what you had for dinner. I don't know why, but anyway. So, they're at that first little table and I'm pouring water and I'm like, you know, can I get you anything or how's it going? You know, and the guy's like, oh, it's really good, but the burger's too pricey like that, you know, kind of dismissive. And I'm like, you know, I'm sorry. It's just, you know, is it good? He goes, "Oh, it's awesome." And I was like, I was like, "Well, I feel bad, but that's what it costs for that burger." And he goes, "Yeah, but it's way too pricey." And I'm like, "Well, here's how it works." And I kind of knew him, so I was, you know, I'm like, "I could get, you know, whatever it was at the now it's more, but at the time I was, it was like a $16 burger." I'm like, "I could get you a $14 burger and it won't be quite as good, and I can get you a $12 burger and it'll be a little less good. And I can get you a $10 burger and it'll be less good still. and I can go all the way down to a $4 burger. He goes, "No, I want this burger." I'm like, "Well, if you want that burger, that's what it costs and that's what it is." And I'll I'll just, you know, open book uh helps because the staff understand the numbers. And so, if you have staff who don't understand the numbers, they're going with the public and no, not Lauren, but the press's general perception, which is worse now as people aren't really trained journalists. So they'll write stuff like Zingermanman's makes 80 million a year. No, we don't [ __ ] make 80 million a year. We could have lost 8 million last year. You have no idea. Our sales were 80 million. So the public's perception is we're, you know, we're making all this money. And so if the staff doesn't know anything about business, then their perception is we're making all this money. So when the customer goes, how could you charge $20 for that? The staff's like, oh yeah, you're right. It's really, and that's what happens in a lot of places. Well, when they see the numbers, they know what's going on. and $20, we might be losing a little money still, you know, so it changes their whole energy around it. And then over time, it's not like we promote the numbers to the community, but customers kids work there, you know, and so one time I was uh pouring water and this guy who worked there's family, his parents were in and I'm pouring water and they're like, you know, how how's it going? And they're like, "Yeah, we heard you guys had a really good week last week." And I'm like, "Oh, no." Like the customer knows our numbers. And I'm like, why not? They want us to stay in business. You know, it's healthy. And so changing the whole belief around it and that people will pay when they have a great experience. And that includes the food. It includes the service and the energy. Ari, I came here this week with very high expectations for a lot of things. And once again, you've exceeded them. Thanks for coming, man. You could have you could have gone anywhere and uh I mean it. You could go anywhere and it's an honor to have you all here. [Music] One thing before you go, everything we do at 21 Hats is created by entrepreneurs for entrepreneurs to help us all learn together. If you get something out of listening to these podcast episodes, consider joining the conversation. You can do that by joining the 21 Hats sounding board, a Slack channel where you can tap the wisdom of a very smart crowd, or by becoming a founding member and joining our monthly Zoom forum where you can be part of conversations much like the ones we have on the podcast. You can sign up for both by subscribing to the Morning Report. If you have any questions, you can email me at lauren21hats.com. And if you get something out of this podcast or out of the morning report, please tell a friend, tell an enemy, tell every business owner you know. Your word of mouth owner to owner will always be the most effective way to build this community for all of us. Thank you. It means a lot. This episode was produced by another entrepreneur, Jess Stubberon, founder of Blank Word Productions. Thanks for listening, everyone. [Music]