Podcast Summary: Invest Like the Best w/ Patrick O’Shaughnessy — Nick Kokonas, “Know What You Are Selling” [Replay]

Episode Theme:
In this episode, Nick Kokonas—co-founder of Alinea, Next, The Aviary, and TOCK—shares deep insights on entrepreneurship, business model innovation, the economics of restaurants and publishing, and how first-principles thinking has allowed him to disrupt conventional wisdom in traditional industries. The conversation is rich with anecdotes, actionable lessons, and a focus on the core philosophy: Know what you’re selling—and actually sell it.

1. Introduction & The “Own Something” Philosophy

[04:34]

• Main Idea: Building wealth and agency requires ownership and responsibility.
• Nick’s Background: Grew up in a Greek immigrant family where owning a business—no matter how modest—was the main path to success.
• Quote:

  “For me, it was always like, I want to own things for two reasons. One, because that's a more likely path to wealth creation, and two, I want to own it because I want to have responsibility for it. Ultimately, I don't want my fate decided by someone else.” — Nick Kokonas [05:02]

2. Decision-Making, Outcomes, and Embracing Failure

[06:10]

• Key Insight:
  • Business progress is made by making many decisions that create measurable outcomes.
  • Accepting that being right “51% of the time” still creates an edge, akin to running a casino.
• Quote:

  “You could be wrong an awful lot and still come out ahead... Learning to be wrong and accept that as a process or indeed an inevitable outcome... If you're right more than half, you're going to win.” — Nick Kokonas [07:33]

3. Restaurant Business: Myths, Realities, and the Alinea Approach

[08:52]

3.1 Traditional Restaurant Wisdom Challenged

• Many see restaurants as “bad businesses,” but Nick notes that most businesses aren’t great by default; what matters is how you approach and operate them.
• Quote:

  “People are full of shit. They're defending their position. ... I like businesses that are hard because if I can figure them out... I just go like, well, people are full of shit. They're defending their position.” — Nick Kokonas [10:42]

3.2 Running Alinea as a Business First

• Structured Alinea like a startup: three entities (investor group, restaurant, management company), aligning interests for sustainability.
• All investors pay for meals, no free rides—aligning incentives and focusing on financial health.
• Parallels Picasso:

  “I show a picture of five artists, Picasso and da Vinci and all these... Four of five of these guys died rich on their art and one... cut off his ear. ... They're not mutually exclusive. That’s the attitude we took right at the beginning.” — Nick Kokonas [13:46]

3.3 Branding & Customer Experience

• Avoided alienating terms—never used “avant garde” or “science;” instead, focused on “fun” and “delicious.”

  “No one wants to eat science... The two words that we used in every interview and still do: fun and delicious.” — Nick Kokonas [16:16]

3.4 Memorable Restaurant Experiences

• The famous dessert plated on the table—originating from rethinking how to create childlike wonder for adults, bringing fun and novelty to high-end dining.
• Origins of the latex tablecloth:

  “Martin Kastner at Crucial Detail was like, well, why does it need to be a rigid plate? ... He found it at a sex shop in Paris.” — Nick Kokonas [18:30]

4. Innovation in Pricing, Ticketing, and Customer Experience

[23:38]

4.1 Challenging Legacy Reservations

• Questioned standard industry practices: why overbook, why allow empty tables, why trust unreliable reservations?
• Derived from trading background—why not take deposits or use pre-paid ticketing?
• Against overwhelming skepticism, pioneered restaurant ticketing (pre-paid reservations), likened to theater or sports ticketing.

4.2 Results and Impact

• Despite industry backlash, prepayment/ticketing worked:
  • Sold out a year of seats, >30% margins, happy customers and staff, more efficient operations.
• Quote:

  “First day, we sold $562,000 of tickets to a restaurant for the first time ever. I remember that as one of the happiest days of my life.” — Nick Kokonas [29:04]

5. TOCK: Building a Restaurant Tech Company

[33:16]

5.1 TOCK’s Origin

• Frustrated by legacy systems intermediating customer relationships (e.g., OpenTable).
• Built TOCK to let restaurants own their data, relationships, and revenue streams.
• Tools based on behavioral economics and dynamic, variable pricing for time-slotted businesses.

5.2 Early Playbook & Scaling

• Started with high-end, risk-tolerant restaurants (the “Tesla approach”).
• Refused to offer a “free” product, focusing on feature completeness and customer experience.
• Engineers worked as hosts to deeply understand user needs:

  “All of our engineers went and worked in restaurants as hosts... so they suddenly had empathy for the end user.” — Nick Kokonas [42:12]

• Grew carefully:

  “There are restaurants and restaurant groups that... I just went, we’re not quite ready for you yet... When we're ready for you, I will call you and then I want you to take me seriously.” — Nick Kokonas [43:24]

6. Understanding (and Improving) Restaurant Economics

[46:33]

• A single restaurant sells multiple experiences: bar, casual, a la carte, tasting menus, private dining, merchandise.
• Most inefficiencies are from not specifying and not actively selling these revenue streams.
• Small operational changes (e.g., prepayment, reducing no-shows, dynamic pricing) can have dramatic impact on margins.

7. Generalizable Business Lessons

[51:16]

7.1 “Know What You’re Selling”

• Restaurants (and all businesses) must consciously define what they’re offering and make it easy for customers to buy.
• Apply basic pricing, merchandising, and data strategies from other industries to hospitality and beyond.
• Quote:

  “Know what you're selling and then actually sell it, which sounds incredibly obvious. ... People can't buy what you aren't selling.” — Nick Kokonas [51:16]

7.2 Leverage Data and Own the Customer Relationship

• Collect customer emails, measure behaviors, and maintain direct communication for remarketing and loyalty.
• Avoid intermediaries who “own” the customer.

8. The Covid Pivot & Resiliency through Technology

[62:20]

• Early recognition of COVID-19 as an existential risk led to proactive measures before mandates.
• Transitioned to carryout and delivery model in days using TOCK’s adaptable system.
• Undercut delivery apps (3% vs 30% fees), kept staff employed, and enabled >3,000 restaurants to adapt.
• Quote:

  “We were able to massively undercut the third party delivery applications... we charged a flat 3%... Since March we’ve signed up over 3,000 restaurants.” — Nick Kokonas [67:07]

9. The Power of Direct Customer Relationships & Process as Art

[71:47]

• Constant, authentic, direct communication with customers builds loyalty and business durability.

• Recognize that process, not just product, is artistry—and communicating that to consumers adds value.

• Writing and first-principles clarity are essential for vision and execution.

• Quote:

  “Knowing your customer, literally who is it, and then having the ability to interact with them in an authentic way is the key to all business.” — Nick Kokonas [72:14]

10. Actionable "Obvious, But Unapplied" Lessons

[57:26]

• Food costs money. Prepaying suppliers can yield discounts, improve margins, and reduce waste.
• People can’t buy what you don’t sell; make offerings clear and available.
• You must know your customers—not just demographics, but individual behaviors and preferences.

11. Notable Quotes & Memorable Moments

• On barriers to restaurant entry and why many fail:

  “The barrier to entry to the restaurant business is actually relatively low compared to many other businesses...” [10:42]

• On the restaurant table dessert:

  “We should send the chefs into the dining room... and we should just have them plate on this giant plate.” [18:30]

• On executing innovation:

  “If you're going to try to do this very risky, kind of potentially polarizing thing, you have to make it elegant and beautiful, too. Execution. The ideas are great... If you do not execute them at a high level, it's going to fall flat.” [22:34]

• On publishing and transparency:

  “If you ask questions of an industry and they won't tell you the answer, that's always a good sign that someone's getting very wealthy in publishing...” [55:35]

• On COVID-19 decision making:

  “If something has a 10% chance of happening, but if it happens, it wipes you out. You need to mitigate that risk even if you're wrong...” [63:45]

12. The Power of Kindness

[75:49]

• Recognition and gratitude—sometimes delayed—are the most impactful acts of kindness.
• Memorable moment: An employee returned a stolen restaurant napkin embedded in a hand-forged knife handle as a thank-you—embodying creativity and gratitude.

13. Closing Lessons & Takeaways

• First-principles thinking reveals opportunities where convention sees none.
• Discipline in customer selection, product development, and cash management is key to durable businesses.
• True innovation in traditional industries is more about asking "stupid" obvious questions—and acting on the answers.
• Run your business so well that you enable ever-greater creativity and experiences, for both the team and the customer.

Key Timestamps

• [05:02] — Kokonas on ownership and responsibility
• [07:33] — Managing decisions and embracing being wrong
• [13:46] — Alinea as business first, not art project
• [16:16] — Branding by word choice: avoiding “avant garde”, focusing on “fun and delicious”
• [18:30] — Story of the latex tablecloth for dessert, and process innovation
• [29:04] — First success with restaurant ticketing
• [42:12] — TOCK’s team works as restaurant hosts to build empathy
• [51:16] — “Know what you’re selling and then actually sell it.” (Episode’s core message)
• [55:35] — Transparency and margins in publishing
• [67:07] — Pivoting TOCK during COVID to enable restaurant survival and growth
• [71:47] — Direct customer relationships as strategic asset

“Know what you’re selling. And then actually sell it. It sounds so obvious... There should be a business course on that.”

— Nick Kokonas [51:16]

For entrepreneurs, operators, and investors—this masterclass in first-principles business building, owning the customer, and executing iteratively is not to be missed.