by Jacob Taylor
Mom cut in suddenly sobbing, “We could lose the house, Nicky!”
“Don’t cry, dear,” my dad consoled in the background. “We just need to borrow a little money to get by until work picks back up. We figured since you have that fancy job at Big Stone...”
“Big Rock, Dad,” I said. If you’re going to ask for money, at least get the name right.
“Oh, Big Rock. Anyway, do you think you can help, son?” he asked. “It’s only temporary. We’ll pay you back in no time. Please, we don’t want to lose the house.”
Not that many months ago I had been worrying about myself having to live under an overpass. It was still a distinct possibility if the whole Big Rock thing didn’t work out. Turns out it might be a family reunion. It now made sense why they’d been weirdly relieved to hear about my corporate job.
“Honestly, I don’t have very much saved, but I’ll send what I can,” I said.
“Thank you, son,” they both said with genuine relief.
I hung up and just stared off vacantly. My god, how do I avoid becoming like my parents? Years of work and nothing to show for it.
Then it all clicked. I could kill two birds with one stone. I pulled out Cathy’s business card, the edges warn from my scheming fingers. I dialed her number.
“Hello? This is Cathy speaking.”
“Hi, Cathy. This is Nick, the student you offered the special project to.”
“Oh yes,” she said. “How are you? I was hoping you’d call.”
“I’m good, thanks. Are you still looking for help?”
“Yes, we are.”
“Great,” I said. “I’d love to hear more about the project.”
“Here’s what we had in mind. You’d fly out to Wichita every few weeks to spend the day interviewing Mr. X. He’d like you to write an in-depth profile. But that piece is really an audition for a bigger job: writing a full biography for Mr. X. There have been a few written already, but this would be the first authorized one with direct access. Mr. X can be reclusive, but he wants a book that finally tells his story and shares his business knowledge. He’d pay for the travel and offer a stipend for your time. I can handle all of the travel logistics for you.” Bingo, a stipend. I can gain access to the inner-sanctum of capitalism while also scraping some extra bread together to help my parents financially. I love it when a plan comes together.
“That sounds like quite the project. I’m honored you want my help,” I said. “I’d have to get it cleared with school and work before I could say yes. But I’m definitely interested.”
“OK, why don’t you find out in the next day or two and let me know?” Cathy said.
“Will do.”
Then she said something that gave me chills. “Can you keep a secret?”
“Yes,” I said. Probably truthfully.
“Mr. X isn’t in the best of health. He couldn’t join you guys for lunch last week because he was undergoing serious medical tests. We honestly don’t know how much time he has left, so we’d want to get started right away. And we’d appreciate your discretion.”
“Of course,” I said. “I’ll call you tomorrow with a firm yes or no.”
“Thanks, Nick.”
I called my academic advisor and relayed the opportunity. She was very encouraging and we worked out an independent study course which allowed me to get school credit for the project. Sweet, everything is coming up roses! I think the school was rubbing their hands together with the potential windfall of a big donation down the line. I wasn’t going to tell them that you don’t become a billionaire by giving it all away.
What about Big Rock? That was a cinch. They were an automatic yes and always ready to add a deep-pocketed client. What better way to land a Wichita billionaire than having an inside man? They also promised to shift some of my project responsibilities around to free up my time. That never happened in practice, but it was a nice idea in theory. Projects and deadlines still rained down on me with a torrid pace.
I called Cathy and informed her that I was in. She said she’d make the arrangements. I hope you have an iron butt, I said to myself, because you’re going to spending a lot of time wedged into an airplane seat.
CHAPTER 17
Around the time I was hired by Big Rock, I met a girl. (Yes, this is that kind of story--don’t roll your eyes.) She was a barista in a local coffee shop I frequented. According to the pin on her apron, her name was Stephanie. We flirted in three minute transactions for a few months. In that time, I figured out she poured coffee in the morning for extra spending money, but was really in a Ph.D. program at the local university. Her area of research was psychology, specifically decision-making. I didn’t understand half of the terms she used, but I nodded enthusiastically like I did. You’re right, I was doing a lot of nodding and pretending these days. She was the smartest girl I had ever been interested in, and being a sucker for girls in ball caps, I was smitten.
It took all of those months to work up the courage to ask her out. I imagined she was hit on more than a boxer’s speed bag at both school and work, so I expected her to say no. At least she’d know how to let me down easy with all the practice. Plus, there were plenty of other coffee shops I could go to after I’d sullied this one with unrequited love.
To my surprise she said yes, and we picked an evening later in the week to grab a beer. A coffee date seemed too on the nose.
Date night rolled around and I was nervous as all hell. Yet after a brief period of awkward small talk, we really started connecting. I loved hearing about her psychology research, and she didn’t seem to mind when I talked about what I did at work and school. It was the first time I’d felt this kind of chemistry--an electric intoxication. Toward the end of the date, there was a lull in the conversation and a clear eye-contact invitation... I couldn’t help myself from kissing her. Just kidding, you should know me better by now: I totally chickened out. Instead, we agreed to another date to see if the chemistry wasn’t a fluke.
Our next date had more great conversation. This time when the conversation lull occurred, she saved us both and kissed me before I could screw it up. Several more dinners ensued, our conversations getting deeper. I let my guard down. I started hearing cheesy love songs on the radio... and they were making sense! WTF?! This must have been what they were talking about. My previous interactions with the fairer sex had felt like acting out a confused cultural dance. Steph and I were just easy and natural.
After several more dates, I took her on my favorite mountain hike. We rock-hopped up a quiet stream that meandered its way through large granite boulders. The payoff is thirty-feet of waterfall grandeur. It was a beautiful hidden gem of a hike. There was a secluded grove of trees close by where you could still hear the waterfall purring in the distance. We made love for the first time on a blanket in that grove. The diffused light in the trees made for an ethereal experience.
We were in love and all was right in the world. For the time being at least.
CHAPTER 18
My first Wichita trip--I was stoked! A few days before my departure, I received a cryptic note from Mr. X in the mail. It had a printed quote with his hand-scribbled addendum:
Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous. When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as “widening the moat.”
-- Warren Buffett
Think about this quote on the flight out. See you in a few days.
- Mr. X
I didn’t know what to think and just prayed there wouldn’t be a pop quiz. Upon landing, I made my way through the now familiar Wichita Dwight D.
Eisenhower National Airport. Cathy was waiting for me as I exited the baggage area.
“Welcome back to Wichita, Nick,” she said smiling, her arms opening. “Just so you know, we’re big on hugs here. Well, Mr. X isn’t, but I am!” Caught off guard but not wanting to offend, I offered up a one-armed, side lean-in job. She smoothly pivoted me like her last name was Gracie and I found myself on the receiving end of one of the strongest, most authentic hugs of my life. Something inside me thawed and I found myself liking Cathy noticeably more than ten seconds earlier. Huh, maybe these cheerful Midwesterns were onto something? In today’s world of social media posturing, it’s hard to disrupt the feeling of a genuine hug.
“Thank you, it’s good to be back, Cathy.”
“By the way, we’re not going to the office. Mr. X has something… different in mind. You’ll be joining him for one of his favorite activities.” My mind immediately jumped to golfing, yachting, or maybe swimming in a giant bin of gold coins. Isn’t that what billionaires did for fun?
“And I hope you don’t mind getting a little greasy,” she said with a knowing smile. I played along, raising my eyebrows.
We walked to her nondescript American-made car and made our way through town. After several turns I was completely ensconced in my own little world. I was staring out the window at passersby, trying to imagine what it was like for them to wake up in Wichita every day. I remembered one of mom’s hippy friends once relaying the advice of a zen master: every stranger you see, in your head wish them happiness. Nothing more or less. I wish you happiness, frazzled-looking soccer mom yelling at her kids in the backseat. Nothing more or less.
We eventually pulled into the parking lot of a Cootie Burger. It was early in the afternoon. The lunch rush should have been over, but the restaurant was still hopping. There was a flurry of activity behind the counter. Young people in starched white attire and red aprons were preparing hamburgers and pressing raw potatoes into slivers of fries. If you didn’t know better, they looked like they were dancing with each other in their efficiency. Their music, the whir of the milkshake machine. In the customer seating area, I saw Mr. X dressed in a pair of chinos and a Cootie Burger polo. He was smiling while talking to a young family.
“This is one of our flagship stores,” Cathy said. “We use this to test different initiatives and ideas. Mr. X loves to come down here to see the latest developments.”
Finishing up his conversation, Mr. X made his way over to us and greeted me with a smile. “Hello, it’s nice to see you again, Nick. I hope you had a pleasant flight?”
“Not too bad,” I said. “I got a lot of work done.”
“That’s great. Welcome to what I call ‘The Lab,’” he said with a dramatic sweep of his hand. He was a bit of showman. Cathy had clearly heard this before as she wandered off to chit-chat with the store manager.
“Cathy was just telling me this is where you test new ideas,” I started. “I have to be honest, it looks like every other fast food place I’ve been in. I don’t see a lot of testing going on?”
“I’ll admit it’s subtle,” he said. “We can’t be too radical with any changes, especially if they go against our brand. A brand is like a promise of a specific experience. If we were to make big changes, it’d be confusing for our customers. You can’t come in for a hamburger and find only tacos on the menu.”
“That makes sense, I guess,” I said.
“I’m glad you accepted the offer, Nick,” Mr. X said. “Here’s how I want things to go: for the first few sessions, I’ll be covering some business basics with you. I want us to be speaking a common language. Then we can worry about the less interesting stuff like my life story. I usually prefer to ask more questions than give answers. But in this case, I imagine I’ll be doing a lot of the talking. Please, jump in with your own questions though. I want to make sure you understand the concepts. Is this an acceptable arrangement for you?”
“Yes, sir.” Perfect, the more he talks, the more rope he lets out to eventually hang himself.
“Good, because I’m old and rich and used to getting my way,” he said with a wry smile.
“I bet you are,” I said.
“Let’s dive right in,” he said cheerfully. “It’s been my observation that many in business are looking for a silver bullet. Something you fire once and it’s game over. It’s human nature to look for these shortcuts. My view is that there are no silver bullets. You’re either getting slightly better or worse every single day. There’s no stasis, and one percent change is barely noticeable in isolation. Did you read the note I sent?”
“I did,” I said. “I guess I didn’t quite understand.”
“Here’s a little quiz,” he said. Damn it. “If you could get one percent better at something every day, how much would you improve in one year?”
I knew this was a trick question and you couldn’t just add up one percent 365 times. “It’s more than 365% because of compounding, so like five times better?” I said.
“You’re right about the compounding,” he said. “But you’re not even close on the effect. The answer is thirty-seven times better by the end of one year. I know people your age are dependent upon calculators,” he said with a teasing wink. “All you have to do is plug in one-point-oh-one to the power of three-sixty-five. Here’s another quiz: if you got one percent worse every day, how much would you deteriorate?”
My first thought was -365%, but that made no sense so I simply guessed, “Umm, eighty percent worse?”
“I guess math isn’t your strong suit,” he said teasingly. “The answer is minus ninety-seven percent. Point-nine-nine to the power of three-sixty-five on your calculator.”
“Wow, so one percent better is a thirty-seven x and one percent worse knocks you down to three percent? That’s a big difference,” I said.
“Humans evolved in a linear environment, so we’re not wired to appreciate the power of compounding. In this lab, we’re looking for tiny one percent improvements that will echo throughout the rest of our restaurant system. Progress that is barely noticeable here starts to really add real value over millions of burgers, fries, shakes, and customer interactions.”
“How do you know if what you’re testing is adding more value?” I wondered aloud.
“That’s a very astute question,” he said. “I’m impressed. It starts with being thoughtful at every level of the company,” he said. “Every year, we sit down to do the company budget. At most organizations, they start with what they did last year and make a few simple adjustments. One study found that one-third of all companies change their budgets by one percent or less from year-to-year. How slow are you to change if only one percent of your resources are changing?”
“Glacial,” I said.
“We practice something called zero-based budgeting,” he said. “Basically, every expense needs to be justified each year. Nothing just rolls over mindlessly without passing inspection. What do you think is the primary filter that we use to evaluate these expenses?”
“Is it something like ten percent less than what competitors spend? That way you’re guaranteed to be more efficient,” I said. I’ll admit I was feeling a little proud of myself for such a logical answer.
“Not a bad guess, but you’re wrong,” Mr. X said. Swing and a miss. “Here’s the filter we use: Will this expense go toward delighting our customer? If the answer is no, then we’re ruthless about cutting it. We call these non-strategic expenses because they don’t advance our strategy of making the customer happy. We’ve found these expenses to be like fingernails; they always need trimming.”
I chuckled at his joke, but added, “Isn’t that close to what I said with spending less than your competitors?”
“Sort of, but here’s the catch,” he said. “We also have something we call strategic expenses. These expenses advance our strategy of delighting the customer. For strategic expenses, we seek to outspend the competition by a long shot. Strategic expenses build a moat around our castle so the custome
r only wants to do business with us. We aren’t afraid to spend in those categories. We view them as investing in the happiness of our customers.”
“So you only spend money if you think it will benefit the customer?” I asked.
“Yes,” he said. “We try to focus on things that are unlikely to change. Will customers ever want a less clean restaurant? Will they ever want longer wait times? Will they ever want lower quality ingredients? Probably not.”
“I think that Buffett quote you sent me makes a little sense now,” I said. “All that jazz about delighting customers and removing unnecessary expenses.”
“That’s right. An example might help. There are a couple of stories which have become Cootie Burger folklore. When I bought one of the first buildings when we were expanding, it was in really shabby shape. I knew it needed at least a fresh coat of paint if we were to have any customers. After all, who wants to eat in a dilapidated dump?”
“Not me,” I said.
“The building backed up to another complex so there were really only three sides of the structure that anyone would ever see. Being frugal, I only painted the three exposed sides, cutting my paint budget by twenty-five percent. There’s now a running joke in the company where people will tease each other by saying, ‘You’re trying to paint the fourth wall!’ The implication being what they’re advocating is a non-strategic expense. ‘Not painting the fourth wall’ is now ingrained in our culture.”
“I see,” I said. The light bulb was starting to brighten. “What was the other story?”
“Have you ever heard of pink slime?” he asked. “There were some news reports about it a few years back.”
“Sounds vaguely familiar. Was that some gross cow leftovers?”
“Close, the technical name was ‘lean finely textured beef.’ It was added to a lot of hamburger meat as a filler. Seventy percent of ground beef sold in US supermarkets contained it. As you can imagine, it was a way to lower expenses. And beef is one of your bigger costs for a hamburger restaurant. We had the option of doing what everyone else was doing to reduce costs and used beef that had pink slime. But at Cootie Burger, we believed that higher quality beef was noticeably better and made a difference for our customers, so we proudly outspent the competition. Higher quality beef was a strategic expense. When the pink slime news story went mainstream, many competitors saw their sales drop. We, however, experienced an upswing in sales, building our moat, to use Mr. Buffett’s term.”