Episode 9

Host: Matt Hall

Guest: Danny Meyer

Matt Hall: 00:07 Welcome to Take the Long View with Matt Hall. As you know this is a podcast to help reframe the way you think about your money, emotions, behavior, and time. The goal? Helping you live richly. We're going to talk with the best thought leaders we know to learn from their meaningful experiences. And we're going to bury the vegetables of world class thinking and stories and conversation, helping you put the odds of long term success on your side.

Matt Hall: 00:34 That's my whistle Danny. When I walk into the office in the morning, I say I'm here. It's more for me than it is for anybody else, but that's what that is. So I like to do it to start a podcast. I'm in New York City with the great, and in my mind legendary, Danny Meyer. I love him for many reasons. But one of which is he's from St. Louis. Do you still consider yourself in some ways a St. Louisan?

Danny Meyer: 00:54 I will never ever, ever want to lose that part of who I am.

Matt Hall: 00:57 Okay good. Well I'm going to put your full bio in the show notes, but I want to mention a couple of other things just for people. To me, I think you're famous, but there may be some people who don't know a little bit about what you're famous for. So you have many successful restaurants in New York. You started Shake Shack, which is now a publicly traded company. You wrote a groundbreaking book, which I can't believe is 13 years old. That's a long time.

Danny Meyer: 01:21 Yeah. I remember when the book came out the Cardinals were marching towards the World Series in the autumn of 2006.

Matt Hall: 01:29 Wow. Yeah. So time flies but it's still very, very relevant to this day. I think it's timeless. And you've won just about every award there is to win. I mean I'll list them all out on the show notes, but it's pretty incredible. And you're married and have four children and you live here in New York City most of the time.

Danny Meyer: 01:47 Yeah.

Matt Hall: 01:47 When you're not on a plane or visiting some new place you're opening, a restaurant or-

Danny Meyer: 01:51 By the way a little known fact about the book you just mentioned, Setting The Table, is that I wrote it kind of in secret while I was flying back and forth to San Francisco. Back in those days I was on the board of directors of a company called Opentable.com. And happily, we did not have wifi on the planes in those days. And I wrote it on those flights because everybody at home said, "Dad, we're not seeing you enough," and everyone at work was going, "Danny, we're not seeing you enough." And I didn't want to tell anybody I was writing a book. So I just did it using that time. I will say it's probably one of the best uses of my time professionally that I've ever had.

Matt Hall: 02:32 Well yeah, that's a perfect segue to one of the reasons I am such a fan of yours is, you made a brave choice to document and capture your philosophy. And I guess a good place to start is, where did you get the idea that you could even do this? That you could have an approach or a philosophy or an outlook? So many people just make stuff. But not you. You developed this approach and this way of thinking, hiring, managing, and treating others. I love what you say in Setting the Table about your first experience with hospitality is when? It's when you're born.

Danny Meyer: 03:08 Yeah. It's literally within moments of being born, we all get the four gifts that I think we spend the rest our lives really craving. Think about it for a minute. Every transaction we have after that moment either does or does not measure up to the genuine sense of being seen. You know someone was looking at us, someone was smiling at us, so we knew someone was happy to see us. We got a hug which meant that the exchange of that emotional pleasure was mutual. And we actually got some pretty good food. And I think that if you think about every single transaction we have from that moment on, whether you're checking in for a flight or whether you're buying a cup of coffee, or whether you're going to the dry cleaner to pickup your clothes, you're either feeling those feelings on the other side or you're not. And if you don't, which I think is more often than not, because I think we live in a highly transactional society, you give me money, I give you food. But when you don't get those things I really think that something goes missing. And so by just naming it and trying to strive for it and trying to hire the kind of people who naturally would do that if only they knew that it was valued, I really think you set your business at a big advantage.

Danny Meyer: 04:26 We are literally in the business of serving pleasure and serving food. Everybody needs to eat and drink, but nobody really needs to some to one of our restaurants to do that. And so if we don't understand that the true reason we're in business is to make people feel better and to give people the opportunity to be with people around a table, which I think is so ... It's so important. I'm going off on a little tangent right here, but everybody in New York when you walk down the streets here ... I don't know how it is in St. Louis because a lot of people are in their cars. But if you walk down any block in New York City, you'll see 30 people. Of those 30 people, half of them are going to be talking to the air with earbuds in. The other half are either looking at a phone. We're fooled into thinking that we're actually connecting with people, but we're not. We're not really connecting unless we're in person. And I think restaurants uniquely have that gift for people.

Matt Hall: 05:28 But how did you figure out this idea that it could be different? You are famous now and I think ... Tell me if I'm overstating this. But I think your approach has gone way beyond the restaurant world. Hospitality is now bleeding into all kinds of businesses and I think you're the person at the center of that sort of change.

Danny Meyer: 05:47 I got to tell you something really cool. Just last night I got a text from a friend of mine. And he was in a group of ... He's a TV producer and writer, amazing guy. And he was in a group of 15 people and they were getting a talk from the great football coach, Bill Belichick. And in the middle of the talk, Bill Belichick starts talking about my book, Setting the Table. Saying that it had inspired him. And I'm going like holy St. Louis Blues. How did that happen? So it's pretty cool when you see that hospitality which we generally associate with restaurants and hotels, going home for Thanksgiving is truly a highly powerful organizational principle. And how people feel while they're trying to achieve the thing they're trying to achieve is I think the real alpha in what makes championship teams.

Matt Hall: 06:40 Well thank God you didn't become a lawyer.

Danny Meyer: 06:42 Oh my gosh, the world would not be happy with me as a lawyer. I would have been horrible.

Matt Hall: 06:47 Do you want to talk for a second about the family member who changed the game for you?

Danny Meyer: 06:52 Yes. My uncle, Richard Polsky, whose art to this day is in Union Square Café and we've got some of his pieces at Maialino as well. My uncle at that time ... This is back in the 1980s. He was an oral historian teaching at Columbia. He was one of the early writers at Children's Television Workshop for Sesame Street and an artist. And he just still to this day has a knack for getting right to the point. And this was the eve of my taking my LSAT's. I was a poli sci major at Trinity College in Hartford, Connecticut. And I knew that I was fascinated by issues of the day and that's why I was a poly sci major. And so the thing you're supposed to do at that point is become a lawyer. It's not that I wanted to be a lawyer. I kind of thought maybe I'd go into politics some day, which I'm happy I didn't do. But anyway, on the eve of taking my LSAT's I was out for dinner with my uncle and my aunt and my grandmother and I was in a foul mood. Everybody was having a great time and drinking a good Chianti and I had to be teetotaler that night because I had a crack of dawn appointment to take the LSAT. And my uncle looks and me and he goes, "What's eating you anyway?"

Danny Meyer: 08:08 And I said, "Well I got to take my LSAT." And he said ... And this was, I will say, the turning point in my entire professional life. Can't say my personal life. But he said, "You're a damn fool. You're going to be dead forever and relative to forever, you're going to be alive for two minutes. Why in the world would you do something that you don't want to do?" And I said, "Because I don't know what else I could do." And he at that moment said, "You're crazy. All I've ever heard you talk about your whole life is food and restaurants." He shoved it in my face and I still didn't see it because back in the 1980s, it just didn't seem like a valid career choice to really parlay a liberal arts education into becoming a restaurateur. Now today thankfully, it's a highly valued profession for entrepreneurs. But it was that moment. I took the LSAT the next morning. I don't even know how I did but I never applied to any one school. And the Monday following that Saturday LSAT, I applied to the New York Restaurant School to take my first restaurant management class. And thank goodness. That was a turning point.

Matt Hall: 09:27 So at what point in the early part of journey did you realize this idea of flipping the sort of hierarchy and putting employees first? Because that's ... I mean a lot of people identify that shift as one of the fundamental things you did that's so different that changes the context for everything else.

Danny Meyer: 09:48 Well I think I always had that kind of wiring. And I think that so much of my own journey is about taking things that had been intuitive and then giving voice to them. Giving words to them so that they can become intentional. So I do believe that there was a time when I was working as a $214 a week staffer for John Anderson's independent run at the 1980 presidential campaign. And I was living in Chicago and I got this big job, 214 bucks a week as the Cook County field coordinator. And in fact it was a big job because anybody with any experience was working either for the democrat or the republican at that point. But I was 22 years old and 100% of the people reporting to me ... It was about 25 people. First job, the first time I was ever anybody's boss. But 100% of the people reporting to me were volunteers not getting a paycheck. Doing it because they really wanted to see this guy get elected. And what I was learning and what did become highly intuitive to me was that as a leader, motivating people with purpose was a really powerful thing. Because I didn't have the alternative which was motivating people with pay. I couldn't give anybody a raise. Couldn't suspend anybody for not showing up for their shift as a volunteer.

Danny Meyer: 11:13 So all I could do as a leader was to say, you guys come first. I come to work for the purpose of serving you so that you can serve the candidate. And I think all of our early jobs and early experiences mark us in a way that ... Because we're so impressionable. And I think that they mark us in a way that can have really lasting effects. I'm just grateful that that one became really a hallmark of my own leadership style. And to this day, even with the benefit of being able to pay people, I still have not lost the notion that if you're somebody who's excellent enough to work in the Union Square Hospitality Group or at any of our restaurants, then you're probably someone who's good enough to have gotten at least 20 other jobs somewhere else. Job offers. And so I do try to maintain that mentality that everybody working for us is in a way volunteering. They're volunteering their gifts to our company. And what we owe in return is an opportunity for them to truly express those gifts, to have a meaningful path towards growth. It's hard. It's not always possible for everybody but you really want to look at the people who have those aspirations and gifts and determination and loyalty, and then invest in them.

Matt Hall: 12:36 There's so many things that you say or have written that I want to talk to you about. One of them is 51 percenters. You talk about hiring or finding 51 percenters or like the other stuff that makes sort of the special people that you look for fit with your culture. Can you talk about that a little bit?

Danny Meyer: 12:55 Sure. That's something that I learned from another mid westerner, Rich Melman who along with Larry Levy, former St. Louisans, each started their own restaurant groups in Chicago and it was a pretty impressionable thing for me. I had spent probably about a year and a half of my life living in the big city of Chicago. As I said earlier, part of it was working for John Anderson's campaign. But I also worked for a short time in an investment business owned by my late grandfather at that point. And what Rich Melman taught me ... I got a meeting with him at a very, very early stage of my career as a restaurateur. Because I said, he's really the only guy along with Larry Levy who had figured out how to scale fine dining restaurants. Because back in those days, if you had a really good fine dining restaurant, you had one. And if you had a lot of restaurants it was a chain. And they weren't generally quite as good as the fine dining restaurants. But these two guys in Chicago had figured out how to create a restaurant group where they could have several different restaurants all under the banner of one group. And I was fascinated by that because I had never seen it.

Danny Meyer: 14:11 And Rich Melman was the one who taught me that he hires for what he calls the 51 percent. Now I don't know if he drilled down quite the way we have in terms of describing what that means. So I'll tell you now that while he gave me the idea, here's what we've done with it. Just like a kid going to school, we want to get 100 on our test. We want to get 100 as employers and we want our employees to be 100% employees. And what we've determined is that the most possible points anybody can get for how well they do the thing they do is 49. So that's kind of bizarre if you think about it. Imagine how hard it is to be a great line cook in a restaurant. You've got tickets coming at you 20 at a time and you're trying to get the right food to be cooked at the right temperature for the right table. Imagine how hard that is. And if you did it all perfectly or if you're a server you get everybody's order right, you remember every position number. You pour the wine beautifully. You clear the plates beautifully.

Danny Meyer: 15:25 If you do all that stuff perfectly in our business you get a 49, which is a failing grade. That leaves 51 points. And the 51 points it leaves are all for how did you make the other person feel? And so by naming those things, by saying, you don't want to get a 51 on your test and you don't want to get a 49, you want to get 100. You got to do both. And it creates a recipe for success that allows us to let our team know, it's not only how good you have to be at what you do, it's who you are while you're doing it. And that's what we really try to measure and that's really what we try to reward.

Matt Hall: 16:02 So yeah, you've broken it down by optimistic warmth, intelligence, work ethic, empathy and self awareness and integrity. Breaking that part down is really hard. Hiring and finding those people is really hard. And somehow you've managed to scale it. To do it and do it repeatedly. But in the very first restaurant ... I remember in Setting the Table you talk a lot about feeling nervous about opening a second because you were sort of wondering if it was a one hit wonder sort of scenario and could you spread yourself out even and be in two different places. How did you get to the point where you could feel comfortable with restaurant number two and when did some of these ideas come into play for you?

Danny Meyer: 16:45 Well I think restaurant number two, Gramercy Tavern, which was just about a decade after Union Square Café, was one of the scariest, boldest, and silliest things I ever did in my career. And it was impetuous. I did it because I think at that point I felt some liberation because my father had passed away. He passed away at the age of 59. And I now know, because I really did a lot of introspective work, that I was holding myself back from expanding because I had seen him experience two different bankruptcies when I was a kid. And each one of the bankruptcies ... I didn't know anything about business, but I associated his bankruptcies with expansion of his travel business. And once he died I gave myself the liberty of number one saying, hey Danny you're not your father. Many businesses have expanded without going bankrupt. Why don't you try it? And I tried it with a really gifted chef by the name if Tom Colicchio. And that became Gramercy Tavern. And I wanted to prove to myself that I could do it and I wanted to prove to myself that Union Square Café had not been a fluke. That there was more excellence left. There were more stories to write. And it was really, really hard.

Danny Meyer: 18:14 And I realized that at that moment I was a pretty lousy manager. I was an okay leader and I was a pretty lousy manager. And the reason I learned that is that with two restaurants, even though they were only four blocks away from each other and I could run back and forth literally in four minutes, I had not been clear enough with language as to what my expectations were of how to make choices. I was very clear about how to do things like set the table and get the dining room ready for service. All the 49% technical things we had manuals for, we had great recipes. A kitchen is run on a manual called a recipe book. But I had not been clear about how to make choices. And so in opening Gramercy Tavern, it forced me ... Because wherever I was, I was not at the other place, it forced me to start to codify more of the leadership parts of my job. And it took some big blows and some pretty tough days in order to get to that point, but that's what did it.

Matt Hall: 19:26 And I remember in Setting the Table your dad wasn't at the opening. Was it of the first restaurant? And you had a very important relationship I think with your grandpa and your dad, but they were very different people.

Danny Meyer: 19:40 Right. Yeah, they couldn't have been more different. My mother had a very, very close relationship with her father. She and my dad had been divorced at this point. And what I learned over growing up was that my dad was always trying to compete to achieve the kind of business success that his father-in-law, my mother's father, had achieved. And it was a tough thing because he was a towering business giant, my grandfather, Irving Harris. And I think that my dad always assumed incorrectly that my grandfather had funded my first restaurant. And it was tough for him to attend the opening. It was a painful thing. It was hurtful that he didn't come to it. I purposefully did not get an investment from my grandfather because I didn't want to fuel that dynamic. The good thing by the way, and I would share this with any startup entrepreneurs that the less money you need to spend for your first venture, the better. Because the good news is that no one has any expectations of you. And so no one went to Union Square Café at the beginning and said, "Oh my gosh, why didn't they go for the nicer chairs or the nicer silverware or the better art? Why didn't they level the old wooden floor?"

Danny Meyer: 20:58 What they really go to a new business saying is, is my life better because this place exists? And we were doing everything we could to be nice to people and to cook good food. But I didn't spend a whole lot of money. I didn't have to spend a whole lot of money opening the first Union Square Café. As a matter of fact, when I look back on it, I can barely build a restroom in one of our restaurants today for what it cost me to open and entire restaurant in 1985. But yeah, that was the case.

Danny Meyer: 21:27 So, I think that in every family there are dynamics. Sometimes it's between siblings, sometimes it's between parents and kids, sometimes it's between parents and parents or grandparents and kids. And I think, the thing that I've learned over time is that the more you can understand what those strings are ... It's almost like the family dynamics are like a puppeteer and you don't have to spend the rest of your life being pulled by all those strings, if you're aware of what they are. And I'm just really grateful that I know what they are, I'm probably creating strings for our own kids right now that they'll have to deal with at some point. But it's a good thing when you can liberate yourself and dance to your own tune.

Matt Hall: 22:08 You know one of the things that I think was liberating is the story about how your grandpa wouldn't even give you money for one of the more expensive restaurants. I think the number was like 11 million you needed at some point to fund it.

Danny Meyer: 22:20 That was when we were building Eleven Madison Park and Tabla.

Matt Hall: 22:23 But he had a great reason for not just giving it straight away that ended up being beneficial.

Danny Meyer: 22:28 Well I wanted him to be one of our investors. I was not asking for $11 million. But I didn't really know what it was like to go out and raise money. With Union Square Café it was a combination of money that I had earned as a salesman where I was making a lot of commissions at a very young age with nobody to support other than myself. And I had put those commissions into that company's public stock, which I think had gone up seven times since I put the money in. And I got a little money from my mom and a little from my aunt and uncle. With Gramercy Tavern, at that point I did need to raise some money. And some of the money came from one of Tom Colicchio's investors and some came from some family members. And then with Eleven Madison Park and Tabla, which were restaurants three and four, the price tag to open those two restaurants was an eye popping $11 million. I had never seen anything like that in my life and it was one of these projects where the budget was just getting bigger and bigger and bigger and bigger and the delays were getting longer and longer and longer. And I did go to my grandfather and he said ... And I think I was asking him for a million dollar investment at that point.

Danny Meyer: 23:42 And he said, "I'm not going to put a penny in until you raise" ... I forget what the number was, but at least five times that much from other people. Because if it doesn't seem like an attractive investment to them, you're never going to have learned what it truly means to have the responsibility to investors. So I did it, I raised the money. And what I'll say about that experience, it was a really good one. Eleven Madison Park and Tabla were both incredibly challenging investments. It was incredibly challenging to make back that money. And Shake Shack is intertwined in this whole thing because Shake Shack is truly the reason that Eleven Madison Park stayed in business and then would one day go on to be number one restaurant in the world according to restaurant magazine. We ended up selling Eleven Madison Park. All of our investors got their money back and they all got to be investors in Shake Shack. So that story had a really happy ending. And then Tabla, which went out of business in 2010, all of our investors got their money back out of that as well plus a couple pennies on top of it.

Danny Meyer: 24:52 It was a tough lesson to learn. But if you look at Shake Shack as one of the outcomes and if you look at ... I think Tabla was a groundbreaking restaurant that produced a lot of talent. And Eleven Madison Park continues to this day, even though we don't own it.

Matt Hall: 25:07 So Shake Shack is very different from some of your other restaurants. Do you want to talk about the inspiration for Shake Shack and how intentional creating Shake Shack was versus accidental and how much inspiration maybe you got for Shake Shack from stuff you experienced in St. Louis as a kid?

Danny Meyer: 25:24 Well I'll start with your second question. There's no question that Shake Shack is inspired by the days when I turned 16 in St. Louis and that marked independence and that marked getting a driver's license. And what do you do with your car? You drive to a parking lot so you can see all your pals. And the best parking lots in town were usually connected to burger places or famously in St. Louis, frozen custard, milkshakes, that kind of thing. And when we had the opportunity to say, how do we populate Madison Square Park, which I had spent a lot of time thinking about. From the minute we signed our lease for Eleven Madison Park and Tabla, we were working with businesses like MetLife and New York Life and Credit Squeeze. We were working with the New York City department of parks and recreations to see how do we restore this park? And we created something called the Madison Square Park Conservancy. Raised, it seems like a magic number, $11 million to restore the park. We raised it philanthropically from stakeholders around the park.

Matt Hall: 26:28 And didn't I just walk past this park on my way to the studio?

Danny Meyer: 26:31 Yes you did.

Matt Hall: 26:32 Right here?

Danny Meyer: 26:32 Yeah, you're very, very close.

Matt Hall: 26:33 It looked alive. I it was happening.

Danny Meyer: 26:37 I'm proud of the contributions that that park has made to New York city as anything.

Matt Hall: 26:43 But it wasn't like that back in those days.

Danny Meyer: 26:45 No, no, no. At best Madison Square Park was a forgettable park that you pass by because Madison Square Garden is what people think about with Madison. People forget that the original Madison Square Garden was on Madison Square Park and took its name from Madison Square Park. But it was also a dangerous place. And we restored it and we made it beautiful and we made it a place that people want to be and it was always part of the vision that there would be good reasons for people to want to use the park. So before we could do food there, we did art. And one of the early artists that we attracted to the park was an artist from Thailand whose art was four taxi cabs on stilts. And he wanted to have a working hotdog cart go with it. And they asked if we would supply the hotdogs and the staff for the hotdog cart. And I said, "Yeah, we can do that up in our private dining room of Eleven Madison Park." My team looked at me like I was crazy. It's like we're too busy to be doing this, why are you doing it? Well part of it was because I was getting tired of people saying that hospitality is only for fancy restaurants. And I wanted to prove that you could actually use a hotdog cart to express hospitality by remembering everybody's favorite toppings.

Danny Meyer: 28:07 And the other part was, I love Chicago style hotdogs and I couldn't find one in New York. And I said, this is perfect. There's eight classic toppings on a Chicago hotdog. We can train our team to remember everybody's favorite. Everybody says, I want everything except the ... Fill in the blank. I hate neon relish, or I hate sports peppers, or I want ketchup and not mustard. And lo and behold, we did this hotdog cart to go with the piece of art, and the hotdog cart became even more famous than the art. And in that summer of 2001, which was right before 9/11, we were having lines of 100 people at lunch time to get one of these hotdogs. And I was putting my theory of enlightened hospitality to the test. We hired out of season coat checkers from our restaurants to give them some work. We remembered our guests. We were doing business with farmers from the Greenmarket. In fact one of them, the guy who made our pickles, Ricks Pick's to this day does the pickles for all of the Shake Shacks in the world and there's over 250 of them right now. So that guy's grown pretty well.

Danny Meyer: 29:17 And we said, and let's take care of our community. We were going to give all of our profits to Madison Square Park. Which was really easy because we lost a ton of money that year. But here's the thing. The next summer the community said, please bring back the hotdog cart. We did, even though the art was gone. Third summer they said, please bring back the hotdog cart. We did it. And in the fourth summer we converted the hotdog cart into a permanent kiosk. And I had just read this great book called, The Cathedral Within, by Billy Shore. Billy's the founder of Share Our Strength, which is a fantastic organization. I've been on their board for some time. That is really doing as much as any organization to alleviate childhood hunger in America. Share Our Strength. But his book, The Cathedral Within, posits that within each one of us, is a desire to do something bigger than anything we may ever live to see. The great cathedral builders would never see their cathedral built but they did it. They went to work every day for this higher purpose. And the book brought with it this notion that I had never heard about called community wealth as an alternative to A, philanthropy and B, just straight capitalism.

Danny Meyer: 30:35 And it was basically, how can you put capitalism to work for the purpose of building community wealth? With the understanding that philanthropic budgets are going to have to be cut at some point. Government budgets are going to have to be cut at some point. But if you could use the capitalist system to do things that are good for the community anyway, that could be a perpetuating thing that could actually spiral out. And so I'd read the book and that's what gave me the idea to go to my mother and a couple of the businesses around the park and say, together let's gift this kiosk to the park philanthropically. We will own the business but we're going to gift the building to the park so the park will become the landlord and own the building. And if it works, it will make the park safer, because people will use the park morning, noon, and night. It'll create life. It'll give people a reason to want to come visit the park. And I think most importantly, it will create a sustainable rent flow so that every time someone does use it, the park will actually find that their budget is enlarged. And wouldn't that be a great thing?

Danny Meyer: 31:48 No idea that it would become about big business, a public company, and certainly no idea that all these years later, the income that Madison Square Park generates from that one kiosk called Shake Shack, is just shy of a million dollars a year that goes right back into the park. So, it's a great story and it's a great story because it shows that when you pursue the things that matter the most to you for the long term, that's sometimes when success ensues. We were never pursuing success. We were pursuing the purpose of that park.

Matt Hall: 32:25 I mean obviously I love that story and what's amazing to me is, I think you always say things about being intuitive or just having this instinct. It's such a different frame from so many people. Like the way you looked at that. Even having the brave vision for how that could all work. I mean it's just really inspiring. Another brave decision I think is this whole no tipping movement. Isn't that all you? I mean haven't you been the force behind this sort of whole no tipping change that's happening for the ... Last night at dinner was the first I've ever received a receipt at dinner where I had no tipping.

Danny Meyer: 33:01 I want to ask you, how did that feel?

Matt Hall: 33:03 Awesome.

Danny Meyer: 33:04 Why?

Matt Hall: 33:04 I don't have to think. I enjoyed my experience. I'm not going to do any assessment of how great was this? Should I leave this much tip or that much tip? It was all just ... It felt easy and simple.

Danny Meyer: 33:18 So I'm grateful to hear that you felt that way. And we've now been doing this since 2015 when we converted the first of our restaurants to do this, which was The Modern at the Museum of Modern Art. And we learned a lot. And every handful of months we've converted an additional restaurant. Early on we realized there's a lot of forces in the word that would prefer the tipping system that had to be confronted. We made the change because what people don't see is that the tipping system is actually really antithetical towards a professional career growth of restaurant workers. It seems like you're doing something really nice when you leave a big tip. What you may not know is that half of the staff is ineligible to receive tips. And those are kitchen workers, those are the people who cooked your food. The person who carried the food that was cooked to your table is receiving a tip and generally, even the tipped employees are sharing the tips with one another. They're getting an adjusted down minimum wage. And the good news for tipped employees is they're making pretty good money. The bad news is that managers and restaurants make even less money than tipped employees.

Danny Meyer: 34:48 So once you're a tipped employee and you hit that plateau, it's really hard to take a 25% pay cut and become a manager which is really where your professional upward mobility is going to go. The other tough thing for tipped employees is that the only way to get a raise is to stay at the restaurant forever so that you get the more lucrative Friday and Saturday night shifts. And that may mean tough things for being a parent or for your own personal life et cetera. And then finally I would say that tipped employees have another challenge which is that they're working for thousands of different bosses every year. And most of those bosses have no idea what goes into making a great restaurant experience. You could get punished for slow food that has nothing to do with you. You could get extra money for serving risotto with black truffles on it when it didn't take any more effort to put the black truffles on than it would have to put shaved Parmesan cheese on it. So there's just so many different variables.

Danny Meyer: 35:55 And then I think from a guest perspective, we had to confront the notion that tipping is somehow actually related to performance. It's not. It's not. I think that people generally tip the exact same way wherever they go irrespective of how they were treated. If you're a 20% tipper, you just tip 20%, you don't actually grade it down to 18% because something happened. And so, it's a false system. Its been a really, really good system for restaurant owners. And restaurant owners are very stubborn about this because what the tipping system allows you to do is to present menu prices that appear to be all in and we all know they're not. You're going to take an additional 20% out of your right pocket once you get your bill. So we had to take that on. We had to also take on the notion that, I don't want to hire people that would only be nice to you in the expectation that two hours later you're going to put some extra bucks on the tip tray. So I just love the fact that you enjoyed it last night. That you didn't have to wonder is the only reason my server's being nice to me, because they think I'm going to give them a big tip?

Danny Meyer: 37:15 However you were treated last night, you were treated because that's their job. Their job is hospitality and their job is service, both.

Matt Hall: 37:24 Is it catching on?

Danny Meyer: 37:25 It's catching on incredibly slowly. I think that there are a number of restaurateurs who are doing it. There's a number who have tried it and have recanted. And there are some who are just taking a wait and see approach. And really for the reasons I just said. It's very, very hard to get the math right on this. When I say that, you basically have three stakeholders that all have to come out of this feeling good about it. And that is your staff, that's number one. Your staff has to feel good about it. Number two, your guests, and number three, your investors. If you charge enough money to do all the things we're trying to do ... We're not just trying to cover the compensation that would have been covered by tips. We're also trying to create a career path, which means that we give raises to our managers as well. Because we want our top servers to be able to be promoted into becoming managers. We're also giving raises to our cooks. Because cooks' income has been stilted for all these years. We're also giving family leave in a pretty generous way.

Danny Meyer: 38:38 So to do all those things that we're trying to do, to really professionalize this industry and not give you the opportunity to tip on top of it means, obviously the menu price has to be higher. It's got to be all in, just like when you go to the dentist. That's what it costs. You don't tip the pilot on an airplane. Whatever the cost is is what it is. And so we're trying to create pricing that remains competitive when I go on the internet to compare menu prices, even though it's not apples to apples. Because all the other restaurants that are going to charge you 20% more don't show that when they show you their menu price. So, it's a challenging thing and my guess is that you'll see a lot more places begin to convert as the adjusted tipped minimum wage goes up. Because once everybody's being paid the same minimum wage ... I just want to make sure your listeners know what I'm talking about. In at least 23 states in the country right now, the tipped minimum wage remains $2.13. The expectation being that the server's going to make their real money based on your tip.

Danny Meyer: 39:52 That in and of itself is problematic because what it means is that it gives all these patrons the opportunity to treat servers any way they want to, because they know the server has to put up with it in order to get the bulk of their compensation. So just as a matter of I think, doing the right thing, I think whatever the minimum wage is in the land, should be the minium wage for everybody. As that comes up, if restaurant workers in the dining room are making 13, 14, $15 an hour and they're getting tips on top of that, at a certain point you're going to see a lot more restaurants convert to a no tipping policy. And I think that'll be a healthy thing for everybody.

Matt Hall: 40:36 I guess for me personally, I feel like I make so many decisions during the day, it's just one less decision. I have decision fatigue. So if I can get to the end of a meal and I don't have to do anything else other than just sign my name ... I mean it's like when you get a massage. Who wants to do any kind of math after you get a massage? You just want to walk out.

Danny Meyer: 40:54 Yeah. How much fun do you have when you go to a coffee store and you get your already expensive coffee and then they flip around the screen and give you an opportunity to feel guilty for not leaving another $2 or $3 on top of it? And you feel bad if you leave the two bucks and you feel bad if you don't leave the two bucks.

Matt Hall: 41:15 True.

Danny Meyer: 41:16 Just like take that off the table.

Matt Hall: 41:17 Right. Okay one of the things I love that you say is constant gentle pressure. Constant gentle pressure.

Danny Meyer: 41:27 Sounds like you're still thinking about your massage right now. No, constant gentle pressure is something that somebody used to describe what they had heard about our leadership style. And I think that's true. I think as a leader you've got to be consistent and constant and continuous in the pressure to continue to improve. But, I also think that if it's just constant pressure, someone's going to say, okay, I'm going to work somewhere else. If it's constantly gentle, they're probably not going to improve so much. And if it's gentle pressure, but not constant, it's probably not going to be seen through to the finish. So I guess those three words together, I think can generally lead to a results oriented place that feels good to go to work at. And I really like fielding a team of people that hold each other to high standards. I think management is about holding people to compliance. And I think leadership is about taking people to a better place. And so I think what constant gentle pressure does, is it's a nice blending of compliance leading to a better place in a way that feels good for the team.

Matt Hall: 42:53 So you've somehow managed to scale excellence across many different restaurants and then you've also I think gone beyond the restaurant world and are helping other businesses with hospitality. And now you've got Enlightened Hospitality Investments. You want to talk at all about what you're doing there?

Danny Meyer: 43:11 Sure I think with Enlightened Hospitality Investments, we came to the realization, and I think this was right about the time that Shake Shack became a separate public company, that number one, it was really, really fun to be able to scale a business based on enlightened hospitality. And I think there's a good reason to want to do that. There is a higher purpose. If you believe that enlightened hospitality means that the people who work there are better off because they have that job, and the people who dine there or do business there are better off because they did business in the communities in which you opened are better off, and the suppliers are better off, and your investors are better off, who wouldn't want more of that? And I think we came to the realization that we'd like to find a way to do it again. It was so much fun with Shake Shack. But we also realize that there's just not enough hours in a day to create enough businesses ourselves to do it. But what if we could find other people's ideas that we wish we had come up with, and led by people we wish we had hired, that are really run with the same kind of culture that we call enlightened hospitality? Irrespective of what they call it.

Danny Meyer: 44:24 And so we raised a fund from limited partners to make growth investments in these businesses that we believe were scalable. And we're generally making these investments ... I guess it would equate to around B or B and half. It's certainly not around A, it's not venture capital. And we've made eight investments so far. And we're really, really excited about those businesses. One of them just had an exit, which was an online reservation company called Resy. Which was acquired by American Express recently, but we've got some other fantastic companies. One is a marketplace for iconic gourmet foods called Goldbelly. And you'll get a kick out if this. I was first introduced to Goldbelly when I got home one night and there was a package that I opened up with dry ice and six pints of Ted Drewes Frozen Custard that they had sent me overnight. You can get your favorite foods from anywhere in America on your doorstep the next day through Goldbelly. So that's a pretty cool one.

Danny Meyer: 45:28 Speaking of ice cream, we invested in a Portland, Oregon based company called Salt & Straw ice cream. Which is a just wonderful experiential ice cream business. And a fast casual restaurant, a chain here in New York called Dig. It used to be called Dig Inn. And we're just having the best time. We just invested in another company that is a little bit out of the realm of food, but very much in the realm of the hospitality economy. How they treat people. And it's called Madison Reed, which is a do it yourself hair coloring business based in San Francisco.

Matt Hall: 46:06 So cool. Well anything else you think people should know that you're excited about or proud of or that's coming in the future for you?

Danny Meyer: 46:13 Well I'm hopeful that it's a playoff appearance by the St. Cardinals and a return to the Stanley Cup for the St. louis Blues. Those two things alone will make me really happy.

Matt Hall: 46:24 You haven't converted yourself to being a Yankees or Mets fan?

Danny Meyer: 46:27 I root for the Mets every game unless they're playing the Cardinals. In fact I'll be rooting for them like crazy to night because they're playing the Cubs. And we serve food at City Field. The owners of the Mets love our restaurants. They know I'm a big St. Louis Cardinals fan and they're fine with that.

Matt Hall: 46:46 Okay great. Well thank you so much for all you've done. You are pretty humble. You've changed the game and changed the whole paradigm that has gone beyond the food world and into other industries. And it informs even the way I do what I do with my group. So thank you. And I'd recommend if you haven't read Setting the Table, 13 years later it's still pretty relevant. Can people follow you anywhere or at anyplace you want people to check you out?

Danny Meyer: 47:12 Sure. I'm on Twitter at @dhmeyer. I'm on Instagram as @dhmeyer. LinkedIn.

Matt Hall: 47:20 Awesome. Well think you Danny, you're the man.

Danny Meyer: 47:22 Thanks Matt.

Matt Hall: 47:23 All right. Okay Take the Long View listeners, thank you so much for tuning in to this episode. Check out the review section on iTunes. Leave a review. And I'll catch you next time.

Matt Hall: 47:46 What is it about having wealth that fulfills you? Please note, the information shared in this podcast is not intended as advice. The intent is to share meaningful experiences. I am likely not your advisor nor wealth manager, nor a financial planner. And my opinions are my own and not necessarily shared by Hill Investment Group. Investing involves risk. Consult a professional before implementing an investment strategy. Thank you.