Annotations (18)
“Food costs money. I started calling big vendors and said, I don't want net 120 anymore. I want to prepay you for the next 3 months. They had never had that phone call. I called about dry-aged ribeye, $34 a pound wholesale, net 120. I said I want to prepay for 4 months, 400 pounds a week, about $300,000 of beef. What do we got? He called back: $18 a pound, half price. After 35 days drying, only a handful buy it. At 60 days, I sell it for $1 a pound for dog food. His waste was because of net 120.”— Nick Kokonas
Economics & Markets · Operations & Execution · Strategy & Decision Making
DUR_ENDURING
Prepayment removes supplier waste risk, captures savings
“Why can we not limit it to people who actually are willing to come in and take a bit of a deposit first? Baseball games, concerts, theater, every other form of entertainment does ticketing. I was told it was a terrible idea because restaurants are not entertainment. I was like, what are they? Because we are biological creatures that need to eat, people have emotional, cultural, and ethical baggage on what a restaurant is. You don't need to eat out. Eating out is a social endeavor.”— Nick Kokonas
Strategy & Decision Making · Psychology & Behavior · Economics & Markets
DUR_ENDURING
Redefine category, import solution from adjacent industry
“Know what you're selling and then actually sell it. Sounds incredibly obvious. I ask Gramercy Tavern what you're selling, they'd say food. No, you're actually selling 7 different experiences plus merchandise. You haven't categorized those experiences until after someone comes in. You haven't even informed the consumer they exist. People can't buy what you aren't selling. You have to have the information readily available where people live, and people live on the internet now on their phones.”— Nick Kokonas
Business & Entrepreneurship · Strategy & Decision Making · Economics & Markets
DUR_ENDURING
Most businesses don't know what they sell, so can't sell it
“Why do we have an empty table right now when we have 60 people on the waitlist? They just didn't show up. I go to a restaurant, have an 8 o'clock reservation, told to wait 45 minutes. Why? They lied to me and told me they had an 8 o'clock table when they knew they didn't have one till 9. Why would they do that? Because if they told me 9, I would have gone to the restaurant down the street that lied to me and told me 8.”— Nick Kokonas
Economics & Markets · Psychology & Behavior · Operations & Execution
DUR_ENDURING
Mutual lying equilibrium destroys million in value
“Publishing: if you ask an author how much did it cost to print the book, they will not know. Ask any literary agent, they'll think you're off your rocker. Ask any publisher to give you that information transparently, they will rip up your contract. A $50 retail book costs about $2 to print. You're going to get 10% of cover price. They're requiring you order 5,000 for your own list. They're going to give you a $250,000 advance. They've taken no risk at all.”— Nick Kokonas
Business & Entrepreneurship · Economics & Markets
DUR_ENDURING
Industry that won't tell you COGS is hiding huge margins
“Two words we avoided: avant-garde and science. Grant considered his cooking avant-garde. I was like, you automatically eliminate 90% of people. No one wants to eat science. Two words we used in every interview: fun and delicious. When you go to a great restaurant, whether your corner bar or the best Michelin experience, I guarantee it's fun. It's not snooty. It's not someone looking down their nose at you. You feel like you're part of this pageant, not an audience member.”— Nick Kokonas
Business & Entrepreneurship · Psychology & Behavior · Creativity & Innovation
DUR_ENDURING
Language controls market size: exclude or include
“How do you become more childlike? What makes an adult feel like a kid again? The balloon dessert: when you're a kid, you get a helium balloon and you can play with it for hours. It's magical. We figured out how to make an edible helium balloon. It's just a taffy, nothing crazy delicious, but it's wildly fun because you feel like a kid again. The table plate came from that same question. We should make everything giant to make you feel small again.”— Nick Kokonas
Creativity & Innovation · Psychology & Behavior · Business & Entrepreneurship
DUR_ENDURING
Ask: when do people feel novelty? Childhood memories.
“I don't understand the business until I can write about it on a single page. I have chefs all the time email me with business plans. I say, do me a favor, write up one page of what it's like as a diner to eat at your restaurant. I don't hear from them for 2 months, if ever, because they don't have a clear vision. They have a clear vision of what food they want to give to someone.”— Nick Kokonas
Strategy & Decision Making · Business & Entrepreneurship · Philosophy & Reasoning
DUR_ENDURING
Can't write it on one page means you don't understand it
“You have all the tools to know your consumer and interact directly with them. For the first 10 years of Alinea, every single day when I woke up, I emailed 2 people that were either diners or posted on their blog about dinner or on Yelp. Over the course of a year, I would email 700 customers. They'd be like, holy cow. That took about 5 minutes a day. As social media grew, that's an even more effective way.”— Nick Kokonas
Business & Entrepreneurship · Leadership & Management · Psychology & Behavior
DUR_ENDURING
5 min daily customer contact compounds into loyalty moat
“When we started building Alinea, this will be run as a business first. It's not an art project. It's a business. If we run it well as a business, then we can invest more in the art and it becomes a virtuous cycle. I set up the structure more like a startup: investor group LLC, the restaurant itself, and a management company. Three different companies to start one company. I made sure all interests were aligned for the long term.”— Nick Kokonas
Business & Entrepreneurship · Strategy & Decision Making · Leadership & Management
DUR_ENDURING
Business discipline funds artistic excellence, not vice versa
“No one multiplies it out by 7 days a week, 52 weeks a year. If you have something costing you even $20 a day, add it up. It's a low margin business because you're not looking at these chunks of revenue. Tuesday Is Not Saturday and 7 Other Things You Already Know But Are Doing Nothing About. More people eat out on Saturday night. What are you going to do about that? How are you going to get more people in on Tuesday? What levers are you going to pull?”— Nick Kokonas
Operations & Execution · Economics & Markets · Strategy & Decision Making
DUR_ENDURING
Small daily leaks become annual hemorrhages if ignored
“Make lots of decisions that have outcomes means not everything has a measurable outcome, but you need completion where there is an outcome that can be measured. I see a lot of people starting businesses and spending time drawing logos in a notebook. That's not a measurable thing. You haven't produced anything. You're the casino. You have thousands of outcomes. You're right more than half, you're going to win even though 49% of the time you lose.”— Nick Kokonas
Strategy & Decision Making · Operations & Execution · Economics & Markets
DUR_ENDURING
Volume of measurable outcomes beats precision on single bets
“When COVID happened, February 28th, there was evidence in Asia and Italy this was very serious. March 8th, Seattle had cases at senior facilities. That's when I went, the whole industry is totally screwed if this happens. Every time I saw senior officials on TV saying this is nothing to worry about, I worried more. They wouldn't be talking about it if it was nothing. If something has a 10% chance of happening, but if it happens it wipes you out, you need to mitigate that risk.”— Nick Kokonas
Strategy & Decision Making · Leadership & Management
DUR_CONTEXTUAL
Act on tail risk before consensus forms around it
“Everyone in my own company thought I was an idiot. I had to hire an outside programmer. We barely built it in time and it broke right away. The first day we sold $562,000 in tickets to a restaurant. For the first time ever. That was one of the happiest days of my life because I turned on this thing and people did it. Five, six, seven years of me looking at this going, I'm pretty sure this will work. Everybody in the industry telling me no and all my employees rolling their eyes at me.”— Nick Kokonas
Business & Entrepreneurship · Psychology & Behavior · Leadership & Management
DUR_ENDURING
Years of conviction vindicated in single day of data
“We instituted mandatory temperature checks, handwashing, mask wearing 2.5 weeks before Chicago shut down, before any guidelines. I could see on managers' faces: the guy who sits on his computer all day is telling us to wash our hands every hour, you can't run a restaurant that way. Instead of a nice explanation, I said: anyone who doesn't do it is fired, and you won't have a job for 2 years anywhere because that's how serious this is.”— Nick Kokonas
Leadership & Management · Psychology & Behavior
DUR_CONTEXTUAL
Crisis requires unilateral mandate, not consensus building
“Execution: the ideas are great. I tell people all the time, you can have all the great ideas in the world. If you do not execute them at a high level, it's going to fall flat. Grant wanted to show movement in food, bacon on a wire. Now there's a bunch of steakhouses that put bacon on a clothespin. They didn't really get the point of it. You have to figure out the core of why it's special.”— Nick Kokonas
Operations & Execution · Creativity & Innovation · Strategy & Decision Making
DUR_ENDURING
Copy the idea, miss the execution, miss the point
“We started serving $35 Beef Wellingtons out of Alinea. Newsworthy because why would a Michelin 3-star serve $35 food? By the following week, we were selling 1,000 a night, plus wine, plus supplements. We went from furloughing our employees to hiring everybody back in 4.5 to 5 weeks. On the Tock side, we massively undercut third-party delivery: 20% to 30% suddenly looked egregious when it became restaurants' only revenue source. We charged flat 3%.”— Nick Kokonas
Business & Entrepreneurship · Strategy & Decision Making · Operations & Execution
DUR_CONTEXTUAL
Crisis creates opening for disruptive pricing against entrenched players
“Own something, make lots of decisions that have outcomes, try to be right 51% of the time. Do that often and repeat. Own something means ownership creates wealth and autonomy. For Greeks in Chicago, ownership was the path: not law school or medicine, but owning a business. That's more likely to create wealth. And I want responsibility. I don't want my fate decided by someone else.”— Nick Kokonas
Strategy & Decision Making · Business & Entrepreneurship · Economics & Markets
DUR_ENDURING
Ownership plus decision velocity equals wealth creation
Frameworks (3)
Three-Entity Creative Business Structure
Aligning Investor and Operator Interests in Capital-Intensive Creative Ventures
Structure a capital-intensive creative business as three separate legal entities (investor LLC, operating company, management company) with aligned incentives across all three. Ensures investors capture economic returns, operators maintain control, and management earns performance-based compensation, creating a virtuous cycle where business discipline funds artistic excellence.
Components
- Create Three Separate Entities
- Align Long-Term Incentives
- Eliminate Investor Perks That Distort Incentives
- Run as Business First, Creative Project Second
Messaging Discipline Framework
Controlling Market Size Through Strategic Language Choices
Systematically choose words to avoid and words to emphasize across all communications to expand addressable market without diluting brand. Identify terms that alienate potential customers (even if technically accurate) and replace with universally positive terms that maintain quality signal.
Components
- Identify Alienating Language
- Replace With Universal Positives
- Enforce Messaging Discipline
- Monitor and Adapt
One-Page Business Clarity Test
Forcing Constraint to Reveal Strategic Coherence
Force entrepreneurs to articulate their business on a single page from the customer perspective. The constraint reveals whether the business vision is truly coherent or simply a collection of features. Most fail this test, exposing lack of clarity about who the customer is and what emotionally resonant experience is being created.
Components
- Set the Constraint
- Write From Customer Perspective
- Iterate Until Coherent
Mental Models (18)
Payment Terms Arbitrage
EconomicsProfiting from differential time preferences and risk profiles. Vendor with net-120 terms bears waste risk for months. Buyer with prepayment capital can capture vendor's risk premium by eliminating that risk. Both parties profit: vendor gets certainty and immediate cash, buyer gets massive discount.
In Practice: Prepaying beef supplier for 50% discount
Demonstrated by Leg-nk-001
Information Asymmetry
EconomicsWhen one party knows more than another, the informed party can extract rents. Publishers hide printing costs from authors, capturing massive margin. Solution: get the information yourself (call the printers) to eliminate asymmetry and capture the margin.
In Practice: Publishing economics and self-publishing decision
Demonstrated by Leg-nk-001
Working Capital as Weapon
Strategic ThinkingCompanies that collect payment before delivering value (subscriptions, deposits, ticketing) have negative working capital cycle. This float can be weaponized: use it to prepay suppliers at massive discounts, invest in expansion, or simply as interest-free loan for operations.
In Practice: Using forward ticket revenue to prepay vendors
Demonstrated by Leg-nk-001
Compounding Customer Relationships
Strategic ThinkingSmall, consistent investment in customer relationships compounds over time into durable competitive advantage. Five minutes per day emailing customers seems trivial on daily basis, but over a decade creates thousands of loyal advocates who feel personally connected to the business.
In Practice: Daily customer email practice at Alinea
Demonstrated by Leg-nk-001
Category Redefinition
Decision MakingQuestioning fundamental category membership to import solutions from adjacent domains. Is a restaurant hospitality or entertainment? The answer determines acceptable business models. By redefining restaurants as entertainment, ticketing becomes obvious rather than heretical.
In Practice: Justifying restaurant ticketing by redefining category
Demonstrated by Leg-nk-001
Precautionary Principle
Decision MakingWhen potential harm is severe and irreversible, act to prevent it even without certainty it will occur. Better to over-prepare for disaster that doesn't come than under-prepare for disaster that does. Cost of false positive (wasted preparation) is trivial compared to cost of false negative (ruin).
In Practice: COVID-19 preparation despite uncertainty
Demonstrated by Leg-nk-001
Constraint as Clarity Tool
Decision MakingArtificial constraints (one page, one sentence, one feature) force prioritization that reveals true understanding. If you can't describe business on one page, you don't understand it. Constraint exposes confusion masquerading as complexity. Most businesses are simple at core; complexity is symptom of lack of clarity.
In Practice: One-page business plan test
Demonstrated by Leg-nk-001
Opportunity Cost
EconomicsThe value of the next-best alternative foregone. By choosing ownership and autonomy, one forgoes the security and structure of employment. Understanding the true cost of any choice requires identifying what you give up, not just what you gain.
In Practice: Discussion of choosing ownership over employment
Demonstrated by Leg-nk-001
Incentive Design
EconomicsStructure compensation and ownership so all parties benefit from the same outcome. Misaligned incentives (investors wanting free tables, operators wanting artistic freedom without profit discipline) destroy value. Correct incentive design means everyone prospers together.
In Practice: Three-entity structure for Alinea aligning all stakeholder interests
Demonstrated by Leg-nk-001
Coordination Failure
EconomicsWhen parties fail to coordinate around mutually beneficial outcome despite common interest. Restaurants and diners both want full tables, but mutual lying (restaurants about availability, diners about party size) prevents efficient coordination. Solution requires mechanism (ticketing, deposits) that makes coordination in everyone's interest.
In Practice: Restaurant no-show and table mismatch problem
Demonstrated by Leg-nk-001
Annualization
MathematicsSmall daily or per-transaction amounts compound to massive annual figures when multiplied by frequency. $20 daily inefficiency seems trivial until multiplied by 365 days. Most businesses fail to annualize small leaks, allowing them to drain millions in aggregate.
In Practice: Principle that restaurant operators don't multiply daily costs by 365
Demonstrated by Leg-nk-001
Expected Value
Probability & StatisticsThe probability-weighted average of all possible outcomes. Being right 51% of the time with volume produces positive expected value even though any single outcome is nearly a coin flip. Success comes from systematically creating situations with positive expected value and then maximizing repetitions.
In Practice: Casino analogy for business decision-making
Demonstrated by Leg-nk-001
Tail Risk
Probability & StatisticsLow-probability events that, if they occur, have catastrophic consequences. COVID in February 2020 had perhaps 10% perceived probability but 100% consequence if it happened. Rational response: act as if it will happen even if most likely it won't, because the downside of being wrong is ruin.
In Practice: COVID-19 early response decision-making
Demonstrated by Leg-nk-001
Anchoring
PsychologyFirst piece of information received disproportionately influences subsequent judgments. By controlling language (avoiding avant-garde and science, emphasizing fun and delicious), Kokonas anchors customer perception in accessibility rather than intimidation.
In Practice: Strategic word choice to expand addressable market
Demonstrated by Leg-nk-001
Novelty Seeking
PsychologyHumans crave new experiences, but the rate of truly novel experiences decreases with age. Innovation that deliberately recreates childhood sense of novelty (helium balloon, giant table) taps deep psychological reward system.
In Practice: Design philosophy behind signature Alinea experiences
Demonstrated by Leg-nk-001
Commitment Device
PsychologyMechanism that locks in future behavior by making reversal costly. Deposit or prepayment for restaurant reservation is commitment device. Creates sunk cost that makes no-show psychologically and economically painful, dramatically reducing no-show rate.
In Practice: Ticketing system solving no-show problem
Demonstrated by Leg-nk-001
Social Proof
PsychologyTendency to look to others' behavior to determine correct action. Universal skepticism about restaurant ticketing was form of negative social proof. First day $562,000 in ticket sales created powerful positive social proof that immediately shifted industry perception.
In Practice: Next restaurant launch validating ticketing model
Demonstrated by Leg-nk-001
First-Mover Advantage (and Disadvantage)
Strategic ThinkingBeing first to market can create durable advantages (network effects, learning curves, customer lock-in) but also means educating market and bearing innovation costs. Kokonas demonstrates first-mover in ticketing for restaurants, bearing educational costs but capturing structural advantage.
In Practice: Discussion of pioneering restaurant ticketing despite universal skepticism
Demonstrated by Leg-nk-001
Connective Tissue (1)
Casino house edge model
Casinos don't need large edge on any single game to be profitable. They win through volume of hands played.
Core business philosophy around decision-making velocity and volume
Key Figures (4)
Grant Achatz
8 mentionsChef and Co-founder
Martin Kastner
1 mentionsDesigner at Crucial Detail
Alan Hamburger
1 mentionsMedia Director, Former Pixar/ILM
Sarah Hamburger
1 mentionsMedia Director, Former Pixar/ILM
Glossary (1)
avant-garde
VOCABULARYExperimental and innovative, especially in arts; ahead of its time
“Two words we avoided: avant-garde and science.”
Concepts (6)
LLC (Limited Liability Company)
CL_LEGALBusiness structure separating personal and business liability
Nash Equilibrium
CL_ECONOMICSSituation where no participant can gain by unilaterally changing strategy
Forward Contract
CL_FINANCIALAgreement to buy or sell asset at predetermined future date and price
COGS (Cost of Goods Sold)
CL_FINANCIALDirect costs of producing goods sold by company
Tail Risk
CL_FINANCIALLow-probability event with extreme consequences
GMV (Gross Merchandise Value)
CL_FINANCIALTotal value of merchandise sold through platform over time period
Synthesis
Dominant Themes
- Know what you're selling and actually sell it
- Structure incentives so all parties win together
- Constraints force clarity
- Speed of execution as competitive advantage
Unexpected Discoveries
- Publishing economics extraordinarily favorable for self-publishing
- Payment terms arbitrage can cut food costs 50%
- Daily 5-minute customer outreach creates compounding relationship moat
Cross-Source Questions
- How do other operators think about working capital as strategic weapon?
Processing Notes
Extremely high-quality source. Kokonas has clear first-principles thinking across multiple domains.
Synthesis
Extremely high-quality source. Kokonas has clear first-principles thinking across multiple domains.