The headline here is the $300 million butcher.
I'm in. It's just a reminder that if you're the best at anything, money will never be a problem for you.
All right. Pat LaFrieda. Do you know who this is? Pat LaFrieda. I feel like you definitely know who this is, because this is like... if there's two things that you like, it's red meat and denim jeans. So I feel like this is right in your alley. It's a family-owned business. You want to hear the story here?
Yeah. Oh man, I love the name of his website. Pat LaFrieda Meat Purveyor.
Can we change this podcast name to My First Million Business Purveyors?
And my hot dog stand. Its first logo was Southern Sam's. Purveyors of fine wieners.
Was it actually Purveyors?
Yeah. Yeah. If you Google Southern Sam's logo, you'll see the logo.
Oh wow. This is like a legit looking logo. Purveyors of fine wieners. Premium quality. And then you have the smoke and the hot dog with the smoke lines coming off.
Although there's something like wrong with like the beveling of these letters. Looks a little billy.
It was Billy from Nashville. I gave him 50 bucks and he gave me this logo. So this is not bad though as a branding thing. All right. So here's the story. The headline here is the $300 million butcher. This caught my attention because I didn't think a butcher could be worth hundreds of millions. But it's just a reminder that if you're the best at anything, money will never be a problem for you. You're the best plumber, money will never be a problem for you. It doesn't matter what you are. There's a guy in Dubai who's just the best at trimming what's it called? Split ends that women have. And people will fly to this guy to get him to cut their split ends. You know, you're the best at anything. Money would never be a problem. All right. So here's the story. Back in the day, early 1900s, 1909, there's a guy named Anthony LaFrieda and he migrates from Italy and he comes to Brooklyn and he opens up a butcher shop. And their idea is they don't want to just do hamburgers like everybody else. So the way a hamburger normally works, I think a hamburger and a hot dog, like they're basically the worst parts of meat mashed together. So it's like not the premium cuts of meat that you could sell separately, a steak, and they mash it together, and that's what a burger was, was the scraps. And he said, 'We're going to use whole muscle cuts only.' And he had this great line, which is, 'You can't hide your sins in the hamburger.' And he viewed that that's what the other butchers would do is they would just take, hide the sins, is all the bad parts smashed together. Hey, there you go. That's your hamburger. So that's the first LaFrieda blend. And it was like, you know, parts of different parts of the muscle. So business is okay. Normal butcher shop. 1950, New York butchers go on strike and restaurants have no meat and he decides to seize the day. So what does he do? He drives down to New Jersey. He goes and he buys up a bunch of the meat wholesale. He brings it back. He starts selling direct to restaurants and they open up LaFrieda Meats in the meatpacking district and it's going good but nothing spectacular. And in fact the grandfather then the father takes over the business. It's not growing. By the late 80s things are getting bad. Restaurants are switching to Sysco, which is like the sort of Costco for restaurants of how you get food delivered. And the company's kind of dying. And so the son was never allowed to be in the business. This is Pat Jr. And the father was like, 'Son, I want a better life for you. Don't stay here. Go to college. Get a good job. Don't be a butcher.'
Don't be like me.' And he says specifically, he goes, 'Why would you want to do this? You're going to be rubbing together pennies for the rest of your life.' And so he's forced out and Pat goes and he becomes a... he goes to a good school and then he goes and becomes a stockbroker on Wall Street for 9 months, but he hates it. And he just comes back. He begs his dad, 'Let me be in the family business.' And he petitions with the sister and I think the mom or the aunt or something like that like, 'Let Pat Jr. into the business.' And so the dad relents. He says, 'Fine. If you really want to do it, do it.' So here's where we're at. This is now like 1994, not that long ago. I think like Lion King came out in '94, okay? Like this is not like hundreds of years ago. And they had 44 customers. They had five employees, two drivers, the mom did the books, and the dad and the grandpa were still the only two butchers. Okay? So that's when he took over the business. All right. So he decides, I'm going to start reinvesting in the business like crazy. So he's buying new equipment. He hits the streets of New York. He's just signing up restaurants manually, door to door, right? Because you know how sometimes when you have a really product-focused organization, the sales side, that muscle never got developed. And so he decides to hit the streets. And he has this genius idea to start creating branded labels for specific cuts and blends that nobody else was doing. And so he takes a bet on an unknown chef named Mario Batali. And Mario Batali was a nobody at the time, but he liked him. And he desperately needed some veal. And he didn't have any money. And so Pat convinces the dad to sell this guy the meat on credit. Something they've never done. The dad was against it, but he's like, I just think this chef, he'll be good for it. I think we should support him. Let's do this. And Batali rewards this with loyalty. So for the rest of his career, they only buy LaFrieda. And as Batali's reputation as a star New York chef grows and he becomes a celebrity chef, he adds on the menu that he's not just serving meat, he's serving LaFrieda meats. And it helps him too because it sounds like it's a more exclusive premium high-quality product. And this was the key lesson that Pat Jr. figured out, which was don't sell a commodity. Create a brand and create a brand not just for him but for each of the chefs. So that the chef had their own brand. So we would create custom exclusive blends for every one of the hot restaurants in town. And so 50 restaurants got their own custom blend locked under an NDA that only they had. And this was kind of like a key growing thing for the business. Now,
Somebody you might know becomes a fan. Danny Meyer. So, Danny Meyer, who's got the upscale restaurant, Union Square Cafe, I think it is at the time, he's using LaFrieda, and he says, 'Hey, I got this idea for a more fast casual burger joint. It's going to be called Shake Shack, and can you give me like a burger for that?' He's like, 'Sure.' He goes, 'But here's the thing. Like, you got to make it where it's pre-formed patties, and because we're fast, we got to have that.' And the grandfather and the father were like, 'No, no, no. We don't do that. That's blasphemous.' So, the son secretly does this against the parents' will. He had sort of the right amount of rebellion to pull this off. He knew what to keep sacred. He knew when to rebel and he does it. And now he serves all of Shake Shack's locations with his meat only for his patty. And he took his dad to the first Shake Shack and they see 200 people in line and he goes, 'Dad, that's our burger.' And he said, you know, this is a classic, you know, a son trying to make his dad proud of like, you know, we did it. Look at this. And they just kept doing these counterintuitive business moves. So 2008, financial crash happens in New York. It's, you know, blood is in the streets and everybody's hurting. He does a pretty counterintuitive thing. Hey, I want to tell you about something pretty cool. We have a database of all of the unsexy business ideas that have been discussed on this podcast. So, hundreds of episodes the team at HubSpot went through, they pulled out all the unsexy ideas. So, not the super high-tech ones, but the simple, relatable, interesting, profitable ideas that we have brainstormed, and they're all available for download for free. Just click the link in the description below. Thank you to our friends at HubSpot for sponsoring this podcast and putting together this free resource for you guys. Back to the show. There's a chef who asked him to create the ultimate burger, and he says, 'All right, I'll give it to you. It will be a 30% dry-aged New York strip steak burger, but that black label burger, it's going to cost $28.' It sounds insane, a $28 hamburger, but they said, 'Let's do this. We want to have the best burger.' And that as a marketing thing played well. Everybody thinks he's crazy, but they sell like 15,000 of the black label burgers versus they had a cheaper burger. It outsold the cheaper burger by 2x.
Which restaurant was this?
This was Minetta Tavern. Minetta Tavern. Something like that.
But I feel like I remember like headlines. This is always an easy headline which is like, 'Wait, it's a $40 bagel? What the hell?' That's like, 'Well, let's see the hype. You got to know what makes this.' This happened with strawberries recently. You know, these like Japanese strawberries, like a $50 basket of strawberries, and you're like, 'I must know.'
We should talk about that company sometime. It's killing. There's a company behind it that's doing really well.
Yeah. By the way, I think it's great. I think there needs to be more premium, like somebody who just says I'm going to make the best thing for people who aren't cost-conscious, and I think there's always a market for that. So these guys did it. People would go to that restaurant, they would order it and share it as an appetizer. The burger they'd like chop it into six and be like this is amazing. We had to try it. So today, fast forward today, the company does $270 million a year. They make like whatever, like they feed like 100,000 people a day or something with their food. They bought their own facility and they have these huge, like the world's largest dry-aging room and their facility can hold $10 million of meat every night. It's like sitting in there like a Swiss bank account. They basically have just been scaling up, scaling up to the point where New York I think designated them as a... no actually not even New York, a presidential mandate that they are an essential service that they cannot close down.
And so they're essential food infrastructure at this point. And it's this lesson of like how you can take something that's just a commodity product and totally differentiate and build a multi-hundred-million-dollar business that by the way in the world of AI seems like the place to be. I'd rather own this meat business than, you know, tech businesses today. And so I just thought you'd get a kick out of that.
That's a great story. I'm looking at the guy. He seems like a guy who talks like this, like, you know, with his hands. This looks awesome.
I don't know what that means. I don't think I've been to New York enough to say, 'What is this? What is that?'
Like, 'Hey, hey, what are you doing? This is my meat.' You know, I don't know. This is awesome. We should like do like an in-person thing with this guy and like go and like look at his meatpacking setup because this is really...
Can we see and feel the meat?
This is awesome. I mean, this is... I think it's near where you're at. It's in your hood. I can't... I'm stunned you don't know this name.
I'm not like a food guy, you know? Like I like McDonald's, you know? I'll be fine going anywhere. It's all great to me. I always like have this joke that like when it comes to Mexican food, I'm like it's all the same to me. It's either a yes or a no. And it's mostly like avocado and like beef, like it's all the same. I don't know, man.
It's either yes or no. And it's a yes.
Yeah. I don't have like a wonderful palate, but this is pretty cool. I also think that like there's a romantic feeling about these things that obviously is not fully true. Like it was not fun to do that when it was not going well. And now that things are going great, it's probably only fun part of the time. But I do think that there's something like soulful about things like this. Like you and I actually talked about this. Justin Mayers was, I think he's an investor or helping get going or advising. Justin Mayers is like one of our health-conscious friends who started a kettle on fire and he loves like these healthy things and he talked about like a... he's like I want to do a better butcher and he has one going in Austin that it sounds like it's going...
He came on the pod and talked about it. I didn't know he launched one.
Yeah. The first location is down the street from my old house and there's a butcher there. I don't know how it's going but I just know that there's a butcher there. But my point is that it's kind of cool and there's actually been a lot of these large meat things. So for example, ButcherBox, the guy who started ButcherBox, he's pretty active on Twitter. It's a bootstrapped company that I believe is mid-9 figures. I think like north of 500 or right around their million a year. And there's a bunch of really cool ones. There was a guy who joined Hampton who had bootstrapped $100 million plus farm-to-consumer door butcher. And I think they're really awesome. And then Omaha Steaks. Do you know the story about Omaha Steaks?
Similar story where it had been around for a very long time but they really took off because them and Stamps.com were one of the early, early, early innovators of internet marketing and so Omaha Steaks, I believe, was north of a billion dollars a year in revenue because they were one of the first people to advertise on Google. Stakes mailed to you.
Oh, you've never had one?
No. Omaha Steaks, it's like one of those gifts that if you can't think of what to get your parents, you like give them an Omaha Steaks gift.
I don't think Indian people do that.
Yeah, there's maybe a cultural divide here.
Yeah, that's a great call. It's like the Harry and David gift basket. I think I've like defaulted to that many times just because it's like I don't know.
That's what you gave me when I had my first kid.
Who doesn't like huge pears?
Yeah. Or like edible arrangements. Yeah. I mean, it's just like I don't know. It just works.
And Omaha Steaks. They were one of the very first people to advertise on Google. And now if you listen to a lot of the early podcasts, do you remember early podcasts? It was like Stamps.com, MeUndies, and then like Omaha Steaks. These are like the early advertisers. And at this point, the company I think they have this massive marketing operation and it's incredibly sophisticated. It's been very fascinating to watch these guys grow. Maybe the best thing to do is just to follow Omaha Steaks and Stamps into what... just go look at their revenue, like their marketing mix, and then just go follow them because they just seem to find the new channel every single time and literally just copying their playbook is better than hiring like a great CMO who's going to come up with their own playbook. It's sort of like I remember when we were trying to do this the sushi restaurant, we were looking at locations and we're trying to run like these analysis on population and foot traffic and you know how many high-income households are within 2 miles and it was like oh wait Chipotle has a 300 person real estate team. Why don't we just go next to wherever there's a Chipotle? Like they did all the work and turns out that's actually how Burger King chooses locations. They just go if McDonald's does the research, they just go piggyback off McDonald's and go near there and you know you could sort of save yourself some breath. My other takeaway from hearing stories like this, there's so many people who are just building amazing, amazing, amazing companies. They're not particularly in the mainstream. They're not vocal about it and it's just fundamentally a pretty solid product and pretty solid marketing fundamentals. So, for example, I just hung out with a friend of mine who works at Element Salts. Is that what...
Wait, I don't know how you say it. I think it is. I think you say Element or I don't know if you say Elementy, but that's how it's spelled. L-M-N-T.
I remember seeing this business get started like it's only four or five years old and I remember seeing it get started and I'm like this is silly. Like who on earth is going to buy these like little packets of salt? It's basically electrolytes and salt. Well, they did a... they let their customers like invest in them and so a lot of the financials are public. You can like see the numbers. I think it's close to $200 million a year in revenue.
And they have a small team like 30, 40, 50 people.
And it's just like good fundamentals. Like I was reading the CEO puts these blog posts out on how he runs his company and he...
He's like one of my favorite. I've only met him once. He came to our basketball camp.
I just love this guy. He's so lovable. He's like super thoughtful, super well-meaning, really smart, obviously just like a killer good basketball player also. He was so nice, so kind, so humble, and yet had built like not only this killer business, but other killer businesses too in their portfolio. He is such a winner. I love that guy.
So, I've only heard about it from my friend Esther. She was telling me what it was like working for him and she only said good things and then I started researching him and there's all these cool blog posts where he writes about how they do these things where they run the company by doing three-week sprints, one week of planning. You know, most companies run off quarterly plans. He was like, 'No, we do three weeks where we go hard and then one week where we go a little bit easier and we could rest for a minute.'
By the way, that one week is really specific. It's three weeks like you're working like at an office or like you're online and then the one week is everybody's in think, rest, reassess, plan mode quietly by yourself, do whatever it takes for you to kind of step away. And he's basically shown that that works really well for them. But like giving people time and space to think and plan, you can have a high-performance team with that. It's not about just constant burnout of like pushing as hard as you can with no breaks whatsoever. It sounds amazing. And he has a blog post where he talks about like this process that he does, but he has all these other blog posts where my takeaway was like this guy is incredibly thoughtful. Which I think you actually described him as. So it's funny that we came to the same conclusion. You hung out with him. I just read about him. Amazing entrepreneur and they don't seem mainstream in the sense of like in our little like silly marketing like loud about it online internet world but they're just kind of building an amazing company that solves a real need. Customers seem to absolutely love. They have like all these weird like avatars. I think they have like a nurse's avatar so there's like nurses who actually use their product and then they have like a military one and then like a construction worker one or something like that. You know they have like all these and then of course like endurance athletes and all this amazing stuff. It sounds like an amazingly well-run company run by a guy who's not particularly loud, but is incredibly successful and thoughtful about running his business. There's another guy named Jason Cohen who I like. He had a blog post somewhat that wasn't entirely addressing this, but the phrasing is perfect and it was a bit similar called 'Be King or Be Rich' and he was like, do you want to be rich? If you want to be rich, there's like all these things that oftentimes the kings are unwilling to do. So the kings are oftentimes like the loud ones who raise all this money and do this or that. And then there's like the be rich, which is like a bootstrap and just quietly do it for a long time. It's like ask yourself, do you want to be king or you want to be rich? Because they require different things.
I think Naval has a funny one like that. He goes, if you want to be rich and famous, try getting rich first and just see if that does the trick.
Here's on that idea. So I saw this tweet today by this guy Renee Selomman. He was talking about Nick Sleep. Do you know who Nick Sleep is? He's basically like a legendary value investor. He's kind of in the Warren Buffett, Charlie Munger like lineage of investors. And I'll butcher the long story, but the simple way to understand Nick Sleep is that he crushed it so hard for like a very long period of time, made so much money for himself and his investors that just like was like, I think we're good. Let's just basically just like shut down the fund and was just like look, we won. And they had won by just holding like a very small number of obvious sounding positions. It's not like he found some niche thing. It's not like he was super ahead of the curve. He owned Costco, he owned Amazon, and he owned like one other thing. He owned four stocks and he just held them.
Berkshire, is it Berkshire Hathaway? Was that the other one that he owned?
I think he had Berkshire. I don't remember what it was. He had four stocks that were the core of his portfolio. It was super concentrated, but it was like four winners and they held it for a long time and that's all you needed to do. The game wasn't more complicated than that. And so he put this in one of his... and he has great letters to go read. It's like you'll be a smarter investor if you go read the Nick Sleep letters. And so here's one of his things. He says, 'Empty vessels and a quieter approach.' So I'm going to read this. He goes, 'Upon reflection, it is curious that this quiet attitude extends in its own way to the companies.' So he's talking about his own quiet attitude, but he's like this actually extends to the companies we invested in that we've entrusted your dollars. 'Amazon and Costco do not advertise. No shouting here. Berkshire Hathaway and Games Workshop do not provide earnings guidance which is popular to give to fund managers and stockbrokers. Amazon, Costco, AirAsia and Carpetright and parts of Berkshire give back margin to the customer. And we would argue this is a pretty humble strategy too. In other words, around two-thirds of the portfolio is invested in firms that in some major way shun the commonplace promotional activity and yet they are no less successful as a result.' So like Amazon and Costco not advertising. Tesla famously does not spend any money in marketing.
Amazon is a huge advertiser.
At this time, I don't know if they were doing like the Google performance advertising but I think he's talking about like kind of brand advertising anything like that.
And then he talks about Bezos has this quote which is, 'Advertising is the price you pay for having an unremarkable product or service.'
And he goes, if you look at the... he goes on the other end of the spectrum is the Razzle of General Motors. Now this was written a long time ago but he says which has the largest advertising budget of any company whose annual report we read this year and it went... not that title went to GM this last year, the year before and the year before their advertising spend was 5.3 billion in 2008 or $630 per car that they shipped. Like if you just took the advertising spend it would have retired half of the company's debt. 'It seems easier to call Madison Avenue than build cars that sold themselves. In our opinion, GM is very much the empty vessel making the most noise in that regard. Our portfolio takes a different approach.' So I just thought it was interesting like the idea of like people but also companies that like almost as a negative signal which companies advertise the most. Like I wonder if you actually like back test that idea. How many of them actually have, you know, either worst performance to their peers or the least durability, which is why they have to constantly be advertising because they have a commodity product and they have the least durability in the market or they have the smallest moat. And which forces them to continue to pay this tax.
Look, just to be a little devil's advocate on this one, I feel like Berkshire Hathaway's biggest company is Geico and they're like the biggest advertiser.
So, I don't know. I mean, I think that this guy is significantly smarter than me and significantly more successful than me. That said, I don't know. I feel like many of those companies are like huge advertisers, but I do think the sentiment is cool. And one would say that like even though Tesla doesn't advertise, Elon Musk bought a $38 billion social media platform. And I would say that that has benefited Tesla greatly.
