Speaker 1: This is Masters in Business with very Ridholts on Bloomberg Radio. Hey,
Speaker 1: it's an extra special edition of Masters in Business. It's
Speaker 1: our Shelter in Place version of Good Friday. What we
Speaker 1: thought might be interesting to do was to reach out
Speaker 1: to a number of people in a variety of different
Speaker 1: fields and see if we could have a conversation about
Speaker 1: how the pandemic is affecting them in their business. So
Speaker 1: we spoke to a number of people, a real estate attorney,
Speaker 1: and meat purveyor and economist, a variety of folks who
Speaker 1: all explained how life has changed under the Shelter in
Speaker 1: Place provisions. Some of the things we talked about were
Speaker 1: really amazing and unexpected. Everybody is doing what they can
Speaker 1: to get by. Everybody's trying their best to get through
Speaker 1: what is obviously a difficult situation. And there is a
Speaker 1: lot of ingenuity and a lot of creativity, and a
Speaker 1: lot of people working to keep the gears of commerce moving,
Speaker 1: to keep food and essential services flowing. I think you'll
Speaker 1: find some of this quite fascinating. Some of it is
Speaker 1: very amusing. So, with no further ado, our special Shelter
Speaker 1: in Place Masters in Business. This is Masters in Business
Speaker 1: with very Ridholts on Bloomberg Radio. You're listening to a
Speaker 1: special Shelter in Place, Good Friday edition of Masters in Business.
Speaker 1: We thought, given the circumstances of everybody being forced to
Speaker 1: work from home if you're not in the medical field
Speaker 1: or providing some other essential services fire, police, grocery, what
Speaker 1: have you, everybody is trying their best to adapt to
Speaker 1: these circumstances, and I thought it might be interesting to
Speaker 1: talk to some people and find out how they are
Speaker 1: adjusting to these currents. And so my first guest today
Speaker 1: is Daniel Gershberg. He is a real estate attorney at
Speaker 1: Roma Devas working in Manhattan and Brooklyn. Daniel Gershberg, normally
Speaker 1: I would say Walton's Bloomberg, but welcome to wherever you are.
Speaker 1: Sheltering in Place. Yes, thank you so much for the
Speaker 1: distraction barrier, and thank you for having me so so, Daniel,
Speaker 1: tell us a little bit about your practice under normal circumstances.
Speaker 1: So under under a good month or a good day,
Speaker 1: I primarily practice in real estate transaction real estate someone
Speaker 1: buys someone's elves, and also consumer bankruptcy. So for the
Speaker 1: most part of the last i'd say five or six years,
Speaker 1: the majority of that was obviously devoted to to real estate.
Speaker 1: The market UM was doing incredibly well. Uh And so
Speaker 1: you know I would be involved in closing transactions. Someone's
Speaker 1: buying a place, so I'd get the closing or negotiating contract.
Speaker 1: I'd have, for instance, a desk in computers and a
Speaker 1: working for system, and I plod through those things UM
Speaker 1: with brokers do normal, normal things during the name. So
Speaker 1: were you you live in Brooklyn? Were you going into
Speaker 1: Manhattan on some days? Most days old days? I had
Speaker 1: my own firm for about twelve years before emerged was
Speaker 1: Rummer Divas a couple of years back, and I was
Speaker 1: working very close to home in Brooklyn. Many of my
Speaker 1: clients are based in Brooklyn, and so I didn't want
Speaker 1: to commute. Uh. And so I had an office in Brooklyn.
Speaker 1: About a year or so ago. I began UM going
Speaker 1: into the main office on Madison Avenue. And for the
Speaker 1: past year or so, i'd say four and there was
Speaker 1: five days UM i'd be in the city working from
Speaker 1: that office base itself. And Brooklyn was afterthought. I've lived
Speaker 1: now for about three or four years in Williamsburg, Brooklyn
Speaker 1: as well. So I live in and work there and breathing.
Speaker 1: So Williamsburg is a very hot neighborhood in Brooklyn for
Speaker 1: people were not familiar with it. A lot of condos
Speaker 1: and co ops, prices have gone up, a time of
Speaker 1: transactions have been taking place there until I'm gonna guess
Speaker 1: about a month ago. How has the practice of real
Speaker 1: estate law changed in this current environment? You know, I
Speaker 1: was practicing UM during two thousands where the market just
Speaker 1: sell UM. The market has essentially just stopped and any
Speaker 1: deals that were in contract, and again us this anecdotally.
Speaker 1: You can speak to other attorneys, maybe they have a
Speaker 1: different feel for it, but any deals that are in
Speaker 1: contract literally just time stopped. People are in near going
Speaker 1: through the contracts themselves, or they're taking a pause, they're
Speaker 1: renegotiating the prices UM and deals that are currently in contract.
Speaker 1: You know, when I represent a seller and the sellers
Speaker 1: are calling me and I'm having more zoom calls than
Speaker 1: I ever want to have in my entire life, where
Speaker 1: the sellers are calling me and saying, how do we
Speaker 1: make this deal happen? And on the flip side, my
Speaker 1: buyers are calling me and saying how do I get
Speaker 1: out of this thing? And so real estate just yeah,
Speaker 1: on on a sort of a large your level Brooklyn right,
Speaker 1: and again across New York City as well. We're in
Speaker 1: this sort of unstarted territory right now where um, frankly,
Speaker 1: there aren't any easy answers, and so people are trying
Speaker 1: to get out of deals. And and that's where I
Speaker 1: think of my day is right now, is navigating the
Speaker 1: ability for someone to get a better price, get out
Speaker 1: of a deal, or in the seller's side, to stay
Speaker 1: in the deal itself. So let's talk about the other
Speaker 1: aspect of your practice, which is Chapter seven and thirteen
Speaker 1: bankruptcy filings to discharge consumer debt. I'm going to ask
Speaker 1: you to I'm going to ask you to look forward
Speaker 1: and imagine that this goes on for two four eight
Speaker 1: weeks longer before things normalize. What happens in the consumer
Speaker 1: realm with people carrying credit card debt and auto loans
Speaker 1: and perhaps even mortgage debt if they lose some or
Speaker 1: all of their income, either temporarily or comin in what
Speaker 1: what is on consumer debt world looking like three months
Speaker 1: from now, I'm going to go out in a limb.
Speaker 1: And as my wife often reminds me, I'm wrong. Most
Speaker 1: of the time, I will say that I think Congress
Speaker 1: has to deal with this in a particular way because
Speaker 1: I think that, um, you're looking at a deluge of
Speaker 1: cases that the courts may not be able to handle.
Speaker 1: So bankruptcy to a certain extent is trailing. You don't
Speaker 1: file for bankruptcy is the first thing you do. You
Speaker 1: file for bankruptcy is the last thing. You pay your
Speaker 1: credit card minimums. You try your best to negotiate with
Speaker 1: your creditors, You do everything you can because there's a
Speaker 1: stigma attached. So people will be filing two months from
Speaker 1: now or three months ago. Remember there's in New York
Speaker 1: there's a moratory amount evictions and from closures for at
Speaker 1: least three months, so people are going to sort of
Speaker 1: stay in place, right, No one's gonna be thinking this way.
Speaker 1: I think what you'll see is if this continues for
Speaker 1: let's say three or four or five months, then you
Speaker 1: begin to see people filing because frankly, they won't have incomes. Um,
Speaker 1: they won't be able to make And remember again, O,
Speaker 1: wait was about people not being able to make their
Speaker 1: mortgage things. Now you have people that can't make their rent,
Speaker 1: and you you're bringing in this other section of the workforce,
Speaker 1: and that wasn't there before. You're gonna have a large
Speaker 1: number of cases. You're gonna have people that are living
Speaker 1: off of credit cards for a period of time. You're
Speaker 1: gonna have people that are taking personal loans or cashing
Speaker 1: out there for one case or getting for one K
Speaker 1: loans to the extent that they can. And then once
Speaker 1: all of that stops and they can't take any more
Speaker 1: credit out from anywhere else, only then do they come
Speaker 1: to have this sort of come to Jesus moment where
Speaker 1: they say, oh my God, I think I have to
Speaker 1: file for bankruptcy, right, And so I would say, trailing,
Speaker 1: you're looking at it rather than three months, you're looking
Speaker 1: at six to seven months from now. But I think
Speaker 1: you're gonna have an enormous number of cases. And I
Speaker 1: say this, I know it sounds ridiculous because you know,
Speaker 1: obviously in self interest, more clients is more money that
Speaker 1: comes in. I don't even want this. Um. You hear
Speaker 1: these worries sometimes of these people, and and Oheed O
Speaker 1: nine really changed me in a lot of respects. Um,
Speaker 1: I would rather people not filing and and there'll sort
Speaker 1: of be a way out because the emotional toll that
Speaker 1: this takes on people. Um is underappreciated when it comes
Speaker 1: to a lot of this stuff. So I think if
Speaker 1: you see anything, it's gonna be again half a year
Speaker 1: from now. But I'm hoping that Congress sort of brings
Speaker 1: some relief even within the laws themselves. Let's talk a
Speaker 1: little bit about life in a Brooklyn apartment. I'm assuming
Speaker 1: you're not on a a three thousand square foot giant apartment.
Speaker 1: You're in a fairly normal Williamsburg um apartment. Are you
Speaker 1: in a condo or a coh So I'm in a condo.
Speaker 1: I'm a renter in the condo, and by fairly normal.
Speaker 1: Just to give your audience some ideas to why it's
Speaker 1: resiuleous to live in the city. Um, I am in
Speaker 1: square foot which is big for the purposes of New
Speaker 1: York and a garage for the rest of the country.
Speaker 1: Squarefoot apartment UM with my wife, my almost three year
Speaker 1: old son, and a newborn daughter, which again really really
Speaker 1: great prior to a pandemic, as well as a seventy
Speaker 1: pound English bulldog. UM. So I try my best to
Speaker 1: leave that apartment as much as I can, then work
Speaker 1: out of my car downstairs. Your no, I kid you,
Speaker 1: not my my office. I have no problem deducting anything
Speaker 1: regarding my car, my taxes this year my car. I
Speaker 1: have a Nissan path funding that I that I that
Speaker 1: I got this year at least it, and I worked
Speaker 1: six hours a day out of this vehicle, because to
Speaker 1: try and get anything done in what is basically an
Speaker 1: insane asylum upstairs is impossible. I have one area of
Speaker 1: that apartment, which is my wife's closet um that I
Speaker 1: work out of sometimes, and I literally put a laptop
Speaker 1: on the footstool and close the door so there's no
Speaker 1: light anywhere there because if there's light, my sun will
Speaker 1: will rip the door open. So I'm two minutes away
Speaker 1: from a quill pen and a candle UM. So most
Speaker 1: of the stuff that that I do is is running
Speaker 1: downstairs taking calls UM, doing zooms again UM, and sending
Speaker 1: emails out from from my car. Is that where we're
Speaker 1: speaking to you right now? From your Nissan pathfinder. I
Speaker 1: am in my Niecean pathfinder as we speak, as as
Speaker 1: I like to say, my remote office, which see do
Speaker 1: you win? I'm trying to picture this. I So I'm
Speaker 1: in the driver's seat because God forbid the cops were
Speaker 1: to pull up. If I'm double parked or by hydrant,
Speaker 1: I would be able to to move and continue my
Speaker 1: zoom call. I would search the audio only, or I
Speaker 1: would stop the video itself. Um. Occasionally, when I need
Speaker 1: the laptop, I will go to the back seat. The
Speaker 1: pathfinder is wonderful and that there's there's a three row
Speaker 1: capacity here. Um. So I can basically go to the
Speaker 1: third road to take a nap if I need to.
Speaker 1: I haven't done that as of yet, Barry, but this
Speaker 1: is this is where my career has taken me. So so,
Speaker 1: I lived in the city for a long time. I
Speaker 1: lived on Lexon and St. And I remember what a
Speaker 1: pain it was dealing with parking. But I have to
Speaker 1: imagine that the New York City Traffic Enforcement Division, in
Speaker 1: the midst of a pandemic of which New York State
Speaker 1: is a hot spot and New York City is the
Speaker 1: hottest hot spot within New York State, have eased up
Speaker 1: on that sort of stuff. Are you Are you telling
Speaker 1: me alternates out of the street parking is still in effect. No,
Speaker 1: we're good. I'm just neurotic and I don't want to
Speaker 1: take it, even through a pandemic. Itself and has nothing.
Speaker 1: No one wants to get close to anyone Barry. So
Speaker 1: I'm working. Yeah, so I'm just interest me being theronic. Alright,
Speaker 1: So you're sitting in your front seat of the Pathfinder.
Speaker 1: You tell me a little bit about the technology you
Speaker 1: use to do your job. What what are you working with,
Speaker 1: and how are you communicating with clients and others? They
Speaker 1: sort of variety of sort of things. But obviously I'm
Speaker 1: taking calls on my iPhone. I'm zooming, doing the zoom calls,
Speaker 1: which to become this this new thing with with my
Speaker 1: elephone as well most of my files of course it's
Speaker 1: on a dropbox. I have access to those as well. Look,
Speaker 1: I've been remote and virtual for for a number of
Speaker 1: years prior to that, just because of again going from
Speaker 1: Brooklyn to the city and having two offices. So it
Speaker 1: hasn't really been that bad. The problem is you can't
Speaker 1: get a lot of work done um in the car itself.
Speaker 1: When you have to send emails out. I literally go
Speaker 1: up to the apartment, um when I know my son
Speaker 1: is either taking a nap or my wife has them
Speaker 1: in a different room, and I will hyper focus on
Speaker 1: sending an hour sort of email out um. In that closet,
Speaker 1: I mentioned that I have a newborn as well, So
Speaker 1: at some ungodly hour of let's say three thirty in
Speaker 1: the morning, when when my daughter is up, I'm also
Speaker 1: um as i'm as I'm feeding her, um sending out
Speaker 1: emails from the living room itself. So I leverage as
Speaker 1: much as anyone can at this point, my MacBook, my
Speaker 1: iPhone and everything else. Just to again this is you know,
Speaker 1: I'm not thriving just to survive. And I think what
Speaker 1: you're really seeing, to be honest with you, uh, maybe
Speaker 1: it's a left or interest in extent is every lawyer
Speaker 1: is dealing with the same thing, or every person I'm
Speaker 1: dealing with is doing the same thing. That famous skit
Speaker 1: where the guys giving an interview and his two kids
Speaker 1: running behind him. That's just that's just everyone these days.
Speaker 1: So you don't feel weird about it. Uh, you don't
Speaker 1: feel weird about someone showing up with a sweatshirt on
Speaker 1: on the video on zoom because you know that they're
Speaker 1: going through the same hell that you're going through on
Speaker 1: the daily BA which is good. That was a BBC
Speaker 1: broadcaster whose son came running into the room during a broadcast.
Speaker 1: He subsequently brought the whole family and during the the lockdown,
Speaker 1: and nobody even nobody even thought twice about it. So,
Speaker 1: so if you're using you're using a laptop in the car,
Speaker 1: are you using any sort of jet pack or or
Speaker 1: WiFi connection to the laptop or you just using your
Speaker 1: iPhone as a as a connection or do you not
Speaker 1: need that? You just use the iPhone for the Zoom
Speaker 1: conferences and you could deal with the laptop when you
Speaker 1: get back up to the to the apartment. I try
Speaker 1: my best to to separate those two things, because the
Speaker 1: second I do listen, my life resembles that of Larry
Speaker 1: David quite often. So the last thing I need to
Speaker 1: do is try and connect the hot spot, and I'm
Speaker 1: connected to someone else's WiFi and not this virus. I
Speaker 1: try my best to separate and do the iPhone thing.
Speaker 1: I have brought the laptop down, used it as a
Speaker 1: hot spot. You know, sometimes it's better than others. Sometimes
Speaker 1: emails are unfortunately go out very quickly. Um but I
Speaker 1: try and make it so that if I need to
Speaker 1: send that emails, I'm running upstairs to I can't believe
Speaker 1: I'm saying this on the radio. Interview to my wife's closet,
Speaker 1: and um, the rest of the time, I'm in my car, uh,
Speaker 1: doing calls and everything else on my iPhone and zoom
Speaker 1: on my own phone himself. So, so I'm picturing a
Speaker 1: street in Williamsburg with all these high rise condos and
Speaker 1: rows of cars parked. Are you the only person sitting
Speaker 1: in your car or do you see dozens of other
Speaker 1: people operating similarly? I am I am probably the only
Speaker 1: person sitting in their car. Half of this neighborhood has
Speaker 1: fled um to God knows where to second homes that
Speaker 1: I don't have to their parents place. And my mother
Speaker 1: lives in Miamily, my hives pens live in Europe, so
Speaker 1: we don't we don't have that option. Um. So there's
Speaker 1: no one in any cars really other than me. Um.
Speaker 1: I see sometimes the same cops going around and the
Speaker 1: same sort of people going around and walking their dogs
Speaker 1: and everything else. There's there's really not a lot of
Speaker 1: traffic in the street itself, So if you want to
Speaker 1: picture it, it's it's really just me running a vehicle
Speaker 1: inside a vehicle it self, doing some calls, sometimes with
Speaker 1: the windows open when when the weather actually allows me.
Speaker 1: Thank you. Daniel Gershberg of Rumor dubas real estate and
Speaker 1: bankruptcy attorney, My next guest on our special Good Friday
Speaker 1: edition of Shelter in Place, Masters in Business is a
Speaker 1: former m IB guest, Joe Davis. He is the chief
Speaker 1: economist and investment giant Vanguard, and I was surprised to
Speaker 1: learn that he is considered essential person l during a pandemic.
Speaker 1: Joe Davis, are you not sheltering at home? Are you
Speaker 1: actually in the Vanguard office? Uh? Hi, very thanks for
Speaker 1: having me. I am, although we uh, you know, for
Speaker 1: for some time, we've taken UM, uh you know, pretty
Speaker 1: pretty significant steps. I'm I'm the only one on my
Speaker 1: floor here, uh, in the building uh that I work
Speaker 1: at UM, you know, because I'm a part of the
Speaker 1: investment management group. UM. There's just very select personnel that
Speaker 1: UM maybe either in the building or and and what
Speaker 1: we call hot sites. So it's UM in one sense.
Speaker 1: Even though I'm I'm in the office, I'm actually alone.
Speaker 1: So it's uh, and you know, it's a question in
Speaker 1: my office where I can close the door. So it's
Speaker 1: the it's pretty much an isolated environment. Any meetings that
Speaker 1: we're having, clearly our our video, um even for a
Speaker 1: certain career that maybe on campus, which is, you know,
Speaker 1: fairly few. So so let me paint a little bit
Speaker 1: of a picture for those people who have never made
Speaker 1: it to the enormous campus that Vanguard has uh in Malvern, Pennsylvania.
Speaker 1: It is like a college campus with lots of three
Speaker 1: story brick buildings and here's a conference center, and there's
Speaker 1: an auditorium over there, and here's a parking garage, and
Speaker 1: it goes on for it feels like thousands of acres.
Speaker 1: I don't know if I'm overstating it, but it's like
Speaker 1: a giant, thousand student campus. And when I've been there
Speaker 1: many times. When you're there, there are cars coming and
Speaker 1: going and people walking around, and offices filled with people,
Speaker 1: and um various conference rooms and public facilities. It's a
Speaker 1: small city kind of in the woods of Pennsylvania. Is
Speaker 1: is that a fair description? Yeah, Berry, it is. I mean,
Speaker 1: it's it's it's actually a beautiful campus. We're in the suburbs,
Speaker 1: about a half power from Philadelphia Airport. So so given
Speaker 1: that this is normally a bustling city, how different is
Speaker 1: it today? When you walk in? Is it like a weekend?
Speaker 1: Is it how do you compare what you're experiencing today
Speaker 1: compared to the normal day to day operations of Vanguard. Yeah,
Speaker 1: I mean I think it's for uh, you know, for
Speaker 1: for for for I would imagine it feels similar to others, uh,
Speaker 1: in other industries maybe around the country. UM, you know,
Speaker 1: you're you at best, it feels like a weekend. Although
Speaker 1: I can see the highway from from my building, UM
Speaker 1: and you know, very little traffic. UM, so even that
Speaker 1: seems really out of place. UM, you know, but I
Speaker 1: think for you know, if I I lead a group
Speaker 1: of roughly sixty employees around the world, UM, I think
Speaker 1: the what we're fortunate is that we can do our
Speaker 1: jobs pretty much anywhere in the world. We have wonderful technology. UM.
Speaker 1: We're continuing to operate day to day as if it's
Speaker 1: best you can, as if uh, you know, we didn't
Speaker 1: have this, um, you know, unfortunate health crisis. UM. But
Speaker 1: you you try to you know, I think I think
Speaker 1: many of my team it's just trying to balance what
Speaker 1: goes on in your personal life with your work life,
Speaker 1: even more so because you're you're often you know, at
Speaker 1: home trying to navigate you know, those those two uh,
Speaker 1: you know those two worlds. You know, I'm isolated here. UM.
Speaker 1: So again, even if you have a meeting with someone
Speaker 1: else who may be in a different building, which again
Speaker 1: are few, and where they're or they're at home, we're
Speaker 1: just operating all Microsoft teams. And UM, it's been a
Speaker 1: it's been a real benefit. UM. You know, you get
Speaker 1: out some of the cadence, UM, you know, some of
Speaker 1: your habits. UM. But it's I've actually been pleasantly surprised, um,
Speaker 1: how productive you can be. UM. You know, if you
Speaker 1: have access to to really good technology into the you know,
Speaker 1: the information you need to do to do your job.
Speaker 1: You're telling me that a constant stream of people walking
Speaker 1: into your office to interrupt you with questions or issues
Speaker 1: or things somehow reduces your productivity. Is that what the normal, uh,
Speaker 1: the normal workflow is is? Yeah, well, I tell you
Speaker 1: know what that what that has been challenging is just
Speaker 1: keeping up with just the rapidity of events. And again
Speaker 1: we've we've been watching the the unfolding of this of
Speaker 1: this unfortunate health crisis. UM, you know, since since December thirtieth.
Speaker 1: I recall that in China because I recall that because
Speaker 1: it was my birthday. And you know we we've been
Speaker 1: you know, using alternative data sources for years and particularly
Speaker 1: applied them in this situation. And it's um, you know,
Speaker 1: I'm spending just as much time uh thinking about um,
Speaker 1: you know, what potential additional solutions we may need unite
Speaker 1: day from a policy perspective, um, you know, in terms
Speaker 1: of a public service, as much as I am importantly
Speaker 1: thinking about the economic conditions and what that may mean
Speaker 1: for the markets over the coming months and years. So
Speaker 1: I spend a lot of time with that, with some
Speaker 1: of my colleagues of Vanguard, you know, to try to
Speaker 1: help policymakers because because I think we're gonna need additional
Speaker 1: firepower applied to the situation. Joe, Let's talk a little
Speaker 1: bit about the impact so far of the coronavirus. We
Speaker 1: saw the initial unemployment claims two weeks ago at about
Speaker 1: four million new job losses. This past week it was
Speaker 1: six million. God knows what we're gonna get uh the
Speaker 1: week of April five already ten million job losses. That's
Speaker 1: more than we lost in the entire financial crisis of
Speaker 1: oh eight oh nine. How significant is the labor market
Speaker 1: damage today, Well, it's it is pretty significant barry and
Speaker 1: we're not I don't think we're I don't think we've
Speaker 1: seen the worst of it, not uh necessarily, which is unfortunate. UM,
Speaker 1: and I really my heart goes out. In fact, I
Speaker 1: have a family uh and friends who have who had
Speaker 1: to go on unemployment insurance. So it's, um, I mean,
Speaker 1: it's it's it's one of the sigma it's it's certainly
Speaker 1: we were projecting over over a month ago and yet
Speaker 1: we've had the revisor estimates. Um, it's it's the worst
Speaker 1: single quarter in terms of a rate of a change,
Speaker 1: a deterioration of labor market that that I think is
Speaker 1: ever on record. Um, you know, I think it's. Uh,
Speaker 1: it may not be we may not get to unemployment
Speaker 1: rights there that worth highs the Great Depression, although that
Speaker 1: played out over you know, three or four years. This
Speaker 1: is playing out in a matter of weeks and months,
Speaker 1: and so it's been a significant uh reversal in conditions. Again,
Speaker 1: it gets back to this, there's just a vacuum of
Speaker 1: cash flows for many businesses across the entire economy, and
Speaker 1: which which is why it's important to to really try
Speaker 1: to arrest that. But it's it's, Um, you know, it's
Speaker 1: most sectors are are impacted, and it's so it's broad based,
Speaker 1: it's significant, and it's been fast, and UM, you know
Speaker 1: we will. We are expecting at least five million uh
Speaker 1: additional job losses just from the just from the job's
Speaker 1: report UM over the next month. UM. I think we're seeing,
Speaker 1: you know, additionally, we are seeing claims UM elevated a
Speaker 1: little bit. UM. I don't mean to dismiss them, but
Speaker 1: they are elevated a little bit because the Cares act
Speaker 1: U makes unemployment benefits a little bit more generous and
Speaker 1: has changed some of the criteria by which you can
Speaker 1: qualify for unemployment insurance. It's to be very positive from
Speaker 1: A from A for the that have been affected right
Speaker 1: in terms of their job. But that is leading to
Speaker 1: even additional uh increasing claims over and above just those
Speaker 1: losing their job. So it's um. But it's I mean,
Speaker 1: it's I didn't think I might I would be in
Speaker 1: a place of my career where I'm projecting GDP declines
Speaker 1: as as large as we are and job losses as
Speaker 1: high as they are, and yet worrying that perhaps uh,
Speaker 1: we don't, perhaps there are actually too optimistic. So I
Speaker 1: know most economic data comes out with a bit of
Speaker 1: a lag. You're always looking backwards that would just occurred.
Speaker 1: But I keep hearing anecdotally that people who have been
Speaker 1: trying to file claims for unemployment they can't get through
Speaker 1: on the phones, the websites crashing. I'm curious how accurate
Speaker 1: is the data as to the true state of the
Speaker 1: labor market damage? Are things worse than the official data
Speaker 1: UH states or is it possible that we're just not
Speaker 1: keeping up with of the new job losses? Well, I
Speaker 1: think it is. I mean again, we're going to have
Speaker 1: a lag, there's no doubt about that, Barry. But we're
Speaker 1: trying to triangulate. When you triangulate on I think we're
Speaker 1: real time data, and we were doing this in China
Speaker 1: and doing it for Europe as well as the United States.
Speaker 1: When you look at I don't know the usage of
Speaker 1: of of credit cards, when you look at Google searches
Speaker 1: of of certain keywords, we were tracking that over a
Speaker 1: month ago. We started with airline cancelations, and now you
Speaker 1: look about unemployment search activity, it tends to correspond, uh,
Speaker 1: you know with our economic outlook, which is which is
Speaker 1: really called for a significant fall um, not only for
Speaker 1: the past quarter which just ended, but for the for
Speaker 1: the second quarter. UM. So, I I think you know,
Speaker 1: when you when you look at the distillation of of
Speaker 1: information and as well some more high frequency UH data,
Speaker 1: I think it. I think it's generally assistant with the headlines,
Speaker 1: which are not you know, which are concerning UM. You know.
Speaker 1: I think though, I will tell you is that we
Speaker 1: do see as our baseline UM conditions stabilizing and then
Speaker 1: modestly approving as we get to the back half of
Speaker 1: the year. Now that rests largely on the big assumption UM,
Speaker 1: which which we still have as as our most likely outcome,
Speaker 1: that at some point this year these needs for shelter
Speaker 1: in place UM dissipate over time. But that's really the
Speaker 1: key variable is really is the health variable more so
Speaker 1: than the economic one. Let me ask you a more
Speaker 1: speculative question that that requires you to use a little
Speaker 1: bit of your imagination. This has obviously been a wrenching
Speaker 1: and unprecedented experience for everybody who's been involved. What sort
Speaker 1: of lasting changes are going to come to the economy,
Speaker 1: how business is conducted. Just look across the board, UH,
Speaker 1: service sector, real estate, labor. How is the world changed
Speaker 1: on a permanent basis by the coronavirus. What's a really
Speaker 1: good question, Barry. You know, I think when I when
Speaker 1: I study world history, what at least what I've learned
Speaker 1: is that when there's profound shocks and crises, UM, it
Speaker 1: could be war, there's certainly economic shocks. And this clearly qualifies.
Speaker 1: It usually does two things. One is it accelerates a
Speaker 1: trend that was already in place before the shock began. UM.
Speaker 1: And then secondly, UM, there are typically i'll call them
Speaker 1: social or political reactions to very shock itself. So let's
Speaker 1: take the first one. I mean, I think things that
Speaker 1: we were already seen, you've talked about and documented uh
Speaker 1: in a number of times. I think both the need
Speaker 1: for UM, I think a revisit of some aspects of
Speaker 1: the global supply chain will be in order, and I
Speaker 1: think we may we may see more serious conversations of
Speaker 1: that from a risk perspective, UM, meaning you know, these
Speaker 1: shocks may occur every so often, and so from we
Speaker 1: may see more supply chain changes than we did UH
Speaker 1: from the trade war. Explain that a moment, how might
Speaker 1: the supply chain shift? Are you referring to the just
Speaker 1: in time delivery system or yep, yep, I think, I
Speaker 1: think so, I mean, you know, you know it's been
Speaker 1: it's been hugely UH. There's been a number of positive
Speaker 1: economic benefits of just in time. But you know, because
Speaker 1: when when when when the industrial economy, when the whole
Speaker 1: broad based global economy runs so lean for lack of
Speaker 1: a better word, there is a risk of that, the
Speaker 1: risk of that as you don't have capacity in the
Speaker 1: system or um. And we've seen these shocks before, but
Speaker 1: they weren't at the same magnitude and may you can
Speaker 1: go back to the unfortunate you know, earthquake in Japan,
Speaker 1: right and what that did two parts of the electrical
Speaker 1: can outer industry. So that that I think when you
Speaker 1: start to say no, they'll trick. You know, if you
Speaker 1: assign a certain probability to these events occurring ever so
Speaker 1: often with a very large negative economic loss, you then
Speaker 1: if you if you're in the in the in the
Speaker 1: seat of a chief financial officer or CEO, you may
Speaker 1: start to you know, assign a little bit greater um,
Speaker 1: you know, assets or investment into uh, adding redundancies into
Speaker 1: the system. Right then before it's just from a risk
Speaker 1: control perspective, So I think we'll see some of that
Speaker 1: in what magnitude. I don't know, but I think it's
Speaker 1: hard to imagine that in my mind that we'll go
Speaker 1: as lean as possible in just in time as we
Speaker 1: did before, because that opens up a business on operational risk.
Speaker 1: The secondly is that I think we'll see a little
Speaker 1: bit more. We certainly will see acceleration and automation, but
Speaker 1: again this was a something that was already occurring. UM.
Speaker 1: I think we'll also see uh, you know, it'll take
Speaker 1: some time for some sectors to come back from um,
Speaker 1: you know, like air travel and you know, things that
Speaker 1: really are our social you know, social interactions of human beings.
Speaker 1: I don't think though I think there will be a
Speaker 1: recovery in business travel. I think there will be a
Speaker 1: recovery in intervals, individuals going out to eat. I mean,
Speaker 1: I recall nine eleven there was a significant concern or
Speaker 1: future of air travel. UM. But it will take time.
Speaker 1: That's where I think to anybody tests and the ability
Speaker 1: and you and I and all of our human citizens
Speaker 1: baried to be able to know that if if I
Speaker 1: go into you know, a certain social setting, am I
Speaker 1: and my is my health at risk? I think when
Speaker 1: we get greater confidence with that right, I think we
Speaker 1: will eventually see a return to some of those sectors,
Speaker 1: but it will take a little bit longer um and
Speaker 1: until until that dissipates, but that we will see a
Speaker 1: recovery in some parts of the comment that are really
Speaker 1: on their dress right now. This is part one of
Speaker 1: our special edition Good Friday's Masters in Business talking to
Speaker 1: people how they are adapt don to the coronavirus and
Speaker 1: working at home. Our guest today is Pat La Frida.
Speaker 1: He is a third generation butcher from a family that's
Speaker 1: been in the meat business for over a century. Lo
Speaker 1: Frida's Meat Purveyors supply stakes to many of New York
Speaker 1: City's high end restaurants, including Minetta, Tavern, Spotted Pig, Union Square, Cafe,
Speaker 1: Blue Smoke, and Market Table. Perhaps most famously, Danny Myers
Speaker 1: tapped him to help create the unique shake Shack Burger,
Speaker 1: which became an immediate hit and is now a global chain,
Speaker 1: largely attributed to the success of the custom meat blend
Speaker 1: Pat La Frida created. Patla Frida, welcome to a work
Speaker 1: from home edition of Bloomberg. Thank you very much for
Speaker 1: having its pleasure. So your business really developed as a
Speaker 1: meat supplier to high end restaurants. Obviously, restaurants are on
Speaker 1: are incredible dress today. What are you hearing from your customers? Well,
Speaker 1: I'll tell you that the restaurant in the industries is
Speaker 1: really they're struggling. I would say that they're split between
Speaker 1: thinking of closing down completely or reorganizing. Um. But but
Speaker 1: the brighter side of the other fifty, I call it
Speaker 1: the positive fifty that many of them I've talked off
Speaker 1: the ledge, which is get off the couch, improvised, and
Speaker 1: we've seen so much of that. I've seen I've seen
Speaker 1: more ingenuity in original ideas for restaurants that I've ever seen.
Speaker 1: And you know, sometimes it takes a chaotic time like
Speaker 1: this to to to really get um, people's minds rolling.
Speaker 1: And you know, there are so many great examples. But
Speaker 1: I think restaurants that had never thought of anything like
Speaker 1: curbside delivery before thought they were above that. But we
Speaker 1: don't even wanted to do that. So when we talk
Speaker 1: about high end restaurants in New York City, they kind
Speaker 1: of looked down upon, uh, you know, a curbside pick
Speaker 1: up or take out. Um, they actually didn't permit it.
Speaker 1: And then but they wanted to um historically. Now this
Speaker 1: gives them a chance to actually take that that that
Speaker 1: leap and and to begin that part of this evolution,
Speaker 1: because that's what this is going to be. Restaurants are
Speaker 1: going to be different forever. UM. We hope that that
Speaker 1: there will be some you know, returned to normalcy, but
Speaker 1: for anything, for for foreseeable future, things are going to
Speaker 1: be different. We we already feel it, um. And when
Speaker 1: restaurants get to reopen, I think we're going to see
Speaker 1: the biggest surgeon and rebound in New York City. Um.
Speaker 1: You know, despite it being the epicenter of the of
Speaker 1: the coronavirus. UM, I disagree. I think it's gonna be
Speaker 1: We'll have more people that have contracted it and have
Speaker 1: gotten past it, um. And those are the people, the
Speaker 1: very people that we will be the first back to
Speaker 1: work at, the first to feel most comfortable in restaurants.
Speaker 1: But to have restaurants, I think, UM, like they have
Speaker 1: now to to create concepts um meal kits um. Again.
Speaker 1: The the car is pulling up to the restaurant, topping
Speaker 1: the trunk for orders that were already paid for with
Speaker 1: a credit card, confirming through the window a closed window
Speaker 1: as the who that customer is with customer that was
Speaker 1: picking up UH, and then the someone from the restaurant
Speaker 1: just putting the food in the trunk of the car
Speaker 1: and the car driving off. Talking about social distancing and
Speaker 1: restaurants are a place, it's New York City's golf course.
Speaker 1: It's where we do businesses, where we celebrate, it's where
Speaker 1: we spend time together. Um. But at the same time,
Speaker 1: six of New York City residents got their meals from
Speaker 1: outside of the home. So when you close that down,
Speaker 1: when you're closing a major part of not just food
Speaker 1: supply but culture, and you know, how will that culture
Speaker 1: change in the future. And UM, I certainly hope we
Speaker 1: get back more to a personal place where where those
Speaker 1: meals are unique and meaningful. And I really think it's
Speaker 1: going to take some time so between now and then
Speaker 1: the restaurants to survive that percent I was talking about
Speaker 1: those UH restaurants may not be making money right now,
Speaker 1: and that's really not what it's about. And no one's
Speaker 1: doing well right now, but it's certainly feels better to
Speaker 1: the operational in some capacity so that when it is
Speaker 1: time to come back online and it is time to
Speaker 1: get the troops back, that that it'll be that much easier,
Speaker 1: and that feeling of desperation of being on a couch,
Speaker 1: um watching more cable pay per view and Netflix, and
Speaker 1: you ever thought you you more to watch? Um? It
Speaker 1: just there's so much more of a of a life
Speaker 1: in feeling that. Um. You know, Yes, it's a virus,
Speaker 1: it's horredness, it's taking lives, but you know what, it's
Speaker 1: not gonna take my life. It's not gonna take all
Speaker 1: of our lives. And we need to fight it by living.
Speaker 1: We need decided by succeeding. That's a great philosophy path.
Speaker 1: When you say, of your client base, which tends to
Speaker 1: be middle to high end restaurants, how many are still
Speaker 1: operating today and doing either curbside or take out um
Speaker 1: service in New York and and in any of the
Speaker 1: other boroughs, Well that's I put that number at about
Speaker 1: fift are still closed from the day that the restaurants
Speaker 1: were asked to clothes. And that's really scary. That's not
Speaker 1: just fifty percent of my business. That's not just fifty
Speaker 1: percent of my receivables. Um, you know, that's fifty of
Speaker 1: our lives. We've built our lives around supplying restaurants. Um
Speaker 1: and and I'll tell you that. You know, we had
Speaker 1: to pivot ourselves and we had to change that our
Speaker 1: business model. But but and we were already diversified into
Speaker 1: supply retailers and and and you know our own home
Speaker 1: delivery service. But we really ramped up our production. Our
Speaker 1: production has been running six days a week, twelve hours
Speaker 1: a day. We have not taken a day off from
Speaker 1: this for during this entire pandemic. Because we are an
Speaker 1: essential part of the food chain. We were essential personnel.
Speaker 1: So we've been in the fight from the beginning. And
Speaker 1: and quite frank we like it that way. Um. We
Speaker 1: would want to be forced not to be able to
Speaker 1: come to work. Pat, I notice on your website that
Speaker 1: you are now delivering directly to consumers. Tell us about that.
Speaker 1: It's a sector that was always about one or two
Speaker 1: percent of our annual sales and now we'll probably account
Speaker 1: for about fifteen or um. And and it is really
Speaker 1: the access. What we saw in the first few weeks
Speaker 1: of the pandemic when it was actually called such, is
Speaker 1: that the run on supermarkets was extreme. And what what
Speaker 1: none of us want as Americans is panic. I think
Speaker 1: we can all agree upon that we don't want unnecessary panic.
Speaker 1: So when you when you don't own a meat company
Speaker 1: or a food company, and you know you're online for
Speaker 1: five hours in a supermarket to find out that they
Speaker 1: have nothing on the shelves that will cause panic, and
Speaker 1: and and the virus cannot break this country, cannot break
Speaker 1: our cities. So you cannot break these states. It cannot
Speaker 1: do it, but panic can. And that's what we felt.
Speaker 1: We made a statement to ourselves, among our family and
Speaker 1: among our teams, we need to start to think of
Speaker 1: how to alleviate this panic. How we are abridge the
Speaker 1: food between between food and people and we need to
Speaker 1: get me to people. And we are not going to
Speaker 1: um tolerate in anyone that we work with. So and
Speaker 1: I'll explain how we got others involved to help the
Speaker 1: distribute products. They will not tolerate a price guage by
Speaker 1: a penny. It's just it's not gonna happen. It's not
Speaker 1: who we are. This is really to stop panic. And
Speaker 1: I mean our lives are abridging food with people. And
Speaker 1: if we will eat with we're able to do that
Speaker 1: during this then we would have saved so many more
Speaker 1: um maybe not lives, we maybe lives. I mean, just
Speaker 1: we've got a lot of that feedback. I mean, we
Speaker 1: don't like to accept that, but we just save so
Speaker 1: much worried by staying. So let me ask you a
Speaker 1: little bit about the supply chain. How is your business adapting?
Speaker 1: Where are your what are your suppliers doing when they're
Speaker 1: making their delivery. How do the logistics work? Is this
Speaker 1: business as usual or have things really changed radically from
Speaker 1: the farm too? When you ultimately drop off a package
Speaker 1: of burgers and steaks to a restaurant or somebody's house, well,
Speaker 1: I have to say that the meat industry has become
Speaker 1: uh one of the most efficient systems food systems in
Speaker 1: the world, and it has not been broke. So they're
Speaker 1: still people still need to eat with girls if it's
Speaker 1: coming from a restaurant or a retail market, is just
Speaker 1: getting delivered to your house or getting curbside delivery. People
Speaker 1: still need to eat. For most people, they eat meat
Speaker 1: and and it's one of the staples they their family
Speaker 1: need to see on on that table. So just making
Speaker 1: sure that our suppliers and our suppliers from out west
Speaker 1: have been so I mean, they really still think it's
Speaker 1: it's it's an East Coast and and like New York
Speaker 1: Center problem, and I'm trying to explain what's happening here
Speaker 1: is going to happen there a hundred and any one
Speaker 1: countries in two months. I guarantee you it hit all
Speaker 1: fifty states. Um, but maybe they won't see at such
Speaker 1: a rate that work that we saw it. But we're
Speaker 1: in constant contact about restaurants and up again food were
Speaker 1: what they are telling me are about one third of
Speaker 1: the sales that they used to have. However, if you
Speaker 1: speak to a restaurant that's partially open compared to a
Speaker 1: restaurant that's completely closed, you'll hear a big difference in
Speaker 1: in in their voices. You'll you'll know and feel depression
Speaker 1: for those that haven't opened at all, and and and
Speaker 1: and boredom. And you'll hear triumphs in those that are
Speaker 1: going in every day and you know they're losing money,
Speaker 1: but but their customers are so happy that that that
Speaker 1: they've stuck it out and that they're providing food. Um.
Speaker 1: You know, it's it's it's a very strange time. But
Speaker 1: you know, as things changed in time and we all
Speaker 1: need to adapt to to to what's ahead of us.
Speaker 1: I I truly think if we stick to that abl
Speaker 1: thirtieth reopening, I really think New York is going to
Speaker 1: be one of the city that bound us back so
Speaker 1: quickly that we'll be talking for years as to why
Speaker 1: it was reported internationally that New York was crumbling. I've
Speaker 1: gotten bolans letters basically from friends and other countries like,
Speaker 1: I don't know if you guys have heard, but we're okay.
Speaker 1: The faster we can get through this, the faster we're
Speaker 1: going to rebound. Let's just talk a little bit more
Speaker 1: about how your day to day work life has changed.
Speaker 1: You're an essential service provider. Are you still going into
Speaker 1: the shop? Are you still supervising the distribution of meat
Speaker 1: to restaurants and homes? Yes. That's the one thing about
Speaker 1: being a part of you know, in essential part to
Speaker 1: the to the meat supply chain, is that as essential personnel,
Speaker 1: our schedule never changes, never changed. Through Hurricane Sandy at
Speaker 1: eleven we were we were very close to the tower.
Speaker 1: Unfortunately UM to have witnessed them, the tragic, the atrocity,
Speaker 1: UM and we will only close for one day then,
Speaker 1: so this we well, we haven't closed at all. And
Speaker 1: actually because of our pivot to to help retailers restop
Speaker 1: their shelves, and that being a more labor intensive process.
Speaker 1: My product production team has been working at full capacity
Speaker 1: ever since this begin Wow. So in my freezer, I
Speaker 1: have a couple of Australian racks of lamb that are
Speaker 1: shrink wrapped from La fred to meat distribution. Uh, how
Speaker 1: are you selling product directly to households? Is everything show
Speaker 1: up shrink wrapped or is it like going to a
Speaker 1: local butcher. Everything gets delivered vacuumed. But it's it's it's
Speaker 1: vacuumed fresh. It's never been frozen. So our product, it's
Speaker 1: just the way our culture as butchers has always been
Speaker 1: from my grandfather to my dad to me. UM meets
Speaker 1: always better fresh. So when we vacuum product where you're
Speaker 1: actually able to you make the decision if you'd like
Speaker 1: to freeze your product or run ahead and freezes it
Speaker 1: will be good for over a year. Um, if you don't,
Speaker 1: your product would be good in the refrigerator for about
Speaker 1: twenty one days. So you really have meat as fresh
Speaker 1: as as a restaurant. We would get it as fresh
Speaker 1: as a butcher's shop to getting Hey, Pat, tell us
Speaker 1: a little bit about how you're getting these products directly
Speaker 1: to consumers. So our product is shipped fresh and it's
Speaker 1: got ice gel packs in the in the boxes. In
Speaker 1: the boxes are insulated themselves, so although we ship overnight,
Speaker 1: that box is good in the temperatory. I think we've
Speaker 1: tested it up to five days without without having the
Speaker 1: temperature being compromised. But um, we we do all the
Speaker 1: fulfillment here and we work all night long. So um,
Speaker 1: after the virus of chaos, yes, our home delivery business
Speaker 1: has really shot up. However, um, you know, so has
Speaker 1: all reacha oil. So whereas most of our business, of
Speaker 1: our business with supplying restaurants right now, about of our
Speaker 1: business is supplying retailers to include Amazon, to include shop
Speaker 1: right Fresh direct, UM in Italy and and and just
Speaker 1: trying to help resupply the retailers so that we could
Speaker 1: avoid panic in the city and panic in the try state.
Speaker 1: We just don't want it to happen because there's no
Speaker 1: reason for it. The food supply chain has not been broken,
Speaker 1: and I'm I'm proof of it right here. Like I
Speaker 1: just said, we have not closed one day. We've been
Speaker 1: in production every day. I'm in constant contact with my
Speaker 1: growers out west and the harvesting facilities again out west.
Speaker 1: You know, everyone is in in in food supply has
Speaker 1: really been has come together like you see in all
Speaker 1: the parts of in other industries in our country. Really
Speaker 1: when when it needs to get together and binding together,
Speaker 1: it does. So let's talk a little bit about everybody's
Speaker 1: favorite barbecue item, the hamburger. You have been credited with
Speaker 1: stoking a giant burger boom in New York City prior
Speaker 1: to this whole current situation that's taking place. How much
Speaker 1: of that is hyperbole and how much of that is
Speaker 1: is true? How responsible are you for all of these
Speaker 1: lovely high hamburgers at all of our favorite restaurants in Manhattan? Uh?
Speaker 1: And gildous charged? And you know, uh, I'll tell you
Speaker 1: that that before we began making blends specifically for restaurants,
Speaker 1: specifically for the cooking equipment that those restaurants had in them,
Speaker 1: and specifically for the play buds of the chiefs in
Speaker 1: those restaurants, really shop beef or ground beef was sold
Speaker 1: in burger form or in bulk by its fat percentage.
Speaker 1: So you saw, we never really used those numbers. Those
Speaker 1: numbers are really in order to calculate those numbers if
Speaker 1: you didn't send that product to a lab. What you're
Speaker 1: doing is taking imported trimmings and um that that are
Speaker 1: tested for it's how lean they are, and then adding
Speaker 1: it with some domestic trimmings and maybe some mechanically bone beef,
Speaker 1: making the burger that we've all seen more gray and
Speaker 1: flavorless than it is a real steak experience. So my
Speaker 1: grandfather always said, you cannot hide your sins in the
Speaker 1: chopping machine. So what you put in there is what
Speaker 1: you're gonna get out of there. And and what he
Speaker 1: meant was when you use hole muscle only, so full
Speaker 1: hole cuts of beef, when you're using a whole chuck,
Speaker 1: and when you're using the clod which has the flat
Speaker 1: iron attached, which has many many retail cuts in there,
Speaker 1: you're gonna You're gonna get the flavors of ribbi, You're
Speaker 1: gonna get the flavors of New York strip um. And
Speaker 1: a big part of our recipe is to use whole briskets.
Speaker 1: Briskets have a buttery flavor um from that fat layer
Speaker 1: that separates the two muscle groups in a brisket. The
Speaker 1: brisket holds up thirty of the weight of an animal.
Speaker 1: So it's a it's a real tough, slow cooked, slow
Speaker 1: cooked type of beef. However, when you chop it, it
Speaker 1: has great flavor and it really holds back a little
Speaker 1: bit and give us the burger some fight so that
Speaker 1: you don't have a mushy, gray cafeteria burger that we
Speaker 1: had back in high school. And it says the very special.
Speaker 1: And actually how this started, Um, my grandfather always made
Speaker 1: great burger meat. And although we didn't sell to some
Speaker 1: of the really fancy restaurants like Les Banasa, to the
Speaker 1: Chef Delivier, yet during grilling season they stopped by our
Speaker 1: place for their burger meat to grill for burgers because
Speaker 1: my grandfather had such a great reputation for for that
Speaker 1: and that that really carried through so all of the disciples,
Speaker 1: So all of the chefs that spawned from from that group,
Speaker 1: when they move on to other restaurants, they know, um
Speaker 1: and they know where to get. They wanted the best caviat,
Speaker 1: if they wanted the best burger, then they know where
Speaker 1: to go. Let's talk about something that's a little bit blasphemous,
Speaker 1: and that is the black label burger. How did you
Speaker 1: ever decide to say, I know let's take the most
Speaker 1: expensive cut of dry aged meat in our refrigerators, and
Speaker 1: what the heck, let's just grind it up into hamburgers.
Speaker 1: A lot of people thought that was just blasphemous. Yes,
Speaker 1: And you know, as as I experimented with different blends
Speaker 1: for different restaurants according to what they wanted. I had
Speaker 1: met with a chef that was going to open a
Speaker 1: restaurant in six months and wanted something very different. And
Speaker 1: now have to remember, we were on the cusp of
Speaker 1: the financial bubble like it bursts them, so in the
Speaker 1: planning stages of you know, I guess you could say
Speaker 1: that the financial crash happened during the planning stage of
Speaker 1: this chef trying to find something special, and I just
Speaker 1: so happened to have been working run because of my
Speaker 1: love of dry aged beef, a portion of the burger
Speaker 1: having dry aged beef in it. I thought I would
Speaker 1: give a dry aged steak experience with you, not as
Speaker 1: expensive as a steak, but not as inexpensive as a burger.
Speaker 1: I was trying to reach somewhere in between, but I
Speaker 1: still have that great dry age flavor. So that restaurant
Speaker 1: wound up to be Minetta Tavern, and the chef riad
Speaker 1: had asked me for an agreement that we would not
Speaker 1: fell black label did that specific drage blend to anybody else,
Speaker 1: And we shook hands on it. And he is no
Speaker 1: longer adminant at tavern, but we still hold our problems.
Speaker 1: We've never given that blend to anyone else. What was
Speaker 1: the pushback like to a dollar hamburger in two thousand, Well,
Speaker 1: so when the restaurant opened the eight the crash had happened,
Speaker 1: so ownership and the chefs were really considering not not
Speaker 1: putting it on the menu. Black label almost did not
Speaker 1: exist because they thought the twenty six dollar hamburger as
Speaker 1: opposed to the sixteen dollar hamburger, which was a great burger.
Speaker 1: Also it's a short rim blend. Um. But they figured, okay,
Speaker 1: let's do it, and they got a little bit. There
Speaker 1: was a writer or two that that brought it to
Speaker 1: everyone's attention that you know, during these times, why is
Speaker 1: there a twenty six dollar hamburger from the menu. Yet
Speaker 1: they didn't complain about the coat the boof so a
Speaker 1: dry aged rib steak was ninety dollars, but the burger
Speaker 1: was twenty seven. After one year, Um, I remember, um,
Speaker 1: the chef colony and asking me, Pat, do you know
Speaker 1: how many black label burgers we sold in year one?
Speaker 1: I said, yes, sixteen thousand, five hundreds. Like, but how
Speaker 1: would you know that I saw you the beefy they
Speaker 1: ate iceburger. I know exactly how many ab because of
Speaker 1: trace ability we track you know, every pound um for
Speaker 1: our USBA guidelines in their own personal trace ability and
Speaker 1: of the less expensive short rib burger UM eight thousands,
Speaker 1: so slightly less than half of the twenty dollar burgers
Speaker 1: dollar burger is is three hundred a week. Is is
Speaker 1: back in the envelope calculations. That's a lot of burgers,
Speaker 1: a lot of burgers, especially a steak house. So so
Speaker 1: let's talk about some steakhouses, and I want to ask
Speaker 1: you about two specific ones that you're involved with. Tell
Speaker 1: us a little bit about the chop House at City
Speaker 1: Field where the New York Mets play. Well. I had
Speaker 1: become friends with, you know, the ownership of the Mets.
Speaker 1: There were big fans of Hours, as we were of theirs.
Speaker 1: And one day they asked me and they said, Pat,
Speaker 1: you know there's one thing that our ballpark does not have,
Speaker 1: and that's a steak sandwich. They had asked me if
Speaker 1: if it's something that we would consider if we had
Speaker 1: a steak sandwich in our family, and we did it
Speaker 1: had skirted steak, we had we had changed that because, um,
Speaker 1: you know, scool of steak is my favorite cut of beef.
Speaker 1: But it's just too um, I don't want to say tough.
Speaker 1: It's it's not tender enough for a sandwich in a ballpark.
Speaker 1: People would be ripping the lay at it because they
Speaker 1: don't know what the attributes of the scoop steaks. So um.
Speaker 1: They asked me to come cook our steak sandwich and
Speaker 1: I didn't think that I would be cooking it. I
Speaker 1: thought like the chefs and they would be cooking it
Speaker 1: and amount of three D and they loved it, and
Speaker 1: they act. They told me that the season would be
Speaker 1: starting in twelve days, and did I'd be operational in
Speaker 1: two locations in twelve days. And I'm not one to
Speaker 1: say no, I did. And they're still told today big
Speaker 1: Hits and and at the ballpark that if you haven't
Speaker 1: been there, to anyone listening, um, it's a ball parking
Speaker 1: in which there's no better food in any other large
Speaker 1: format capacity than city field. It's a giant upgrade. It's
Speaker 1: a giant upgrade from Chase Stadium, to say the least.
Speaker 1: But since you mentioned ballpark, I have to bring up MSG.
Speaker 1: You sell Patla Freda steak sandwiches at the Home of
Speaker 1: the Knicks. In fact, it's really the only reason to
Speaker 1: go to the garden these days. What what gave you
Speaker 1: the idea of saying, Hey, here's a venue where we
Speaker 1: can reach out to the public with a really high
Speaker 1: quality food experience at a place that usually sells not
Speaker 1: necessarily the greatest food. Yes, but unfortunately that building is
Speaker 1: under major renovation to the tone of one billion dollars,
Speaker 1: so our footprint the gardens will will be suspended until
Speaker 1: that construction is finished. What we did open, though, was
Speaker 1: in in the time Out building in Dumbo, which was
Speaker 1: a great food hall, un though it was closed recently,
Speaker 1: but we'll reopen when all the restaurants reopened. Is the
Speaker 1: same concept on the first floor on the fifth floor
Speaker 1: UM with an additional concept of the first floor. So
Speaker 1: we have three locations and one food hall that has
Speaker 1: twenty three concepts. We're the only concept that has more
Speaker 1: than than one under one roof uh and the most successful,
Speaker 1: So we're really proud of that, and it's amazing. As
Speaker 1: a kid, I'm born and raised in Brooklyn, and as
Speaker 1: a kid, I wasn't leaning allowed in that in those areas.
Speaker 1: And to see how it's changed in the amount of
Speaker 1: tour as people that you just you can't even drive
Speaker 1: them the streets down there on the cobblestone. I mean,
Speaker 1: it's just littered with with with tourists in a very
Speaker 1: good way. I don't know how tourists know to go there,
Speaker 1: but they have found a beautiful place that overlooks New
Speaker 1: York City at the base of the Brooklyn Bridge in
Speaker 1: the Manhattan Bridge, and right there overlooking the water is
Speaker 1: a gorgeous food hall called Time Out. And we really
Speaker 1: can't wait until we get back. We really can't wait
Speaker 1: till we get timing, I should say, uh. And and
Speaker 1: that's those are epic views over there from from the
Speaker 1: esplanade looking at the skyline of Manhattan. We we keep
Speaker 1: hearing that there's gonna be another round of stimulus coming
Speaker 1: out of Washington, d C. If congressional leaders called you
Speaker 1: and said, Pat, we're trying to figure out what we
Speaker 1: need to do for restaurants across the country, what sort
Speaker 1: of advice would you give them to help ensure the
Speaker 1: restaurant industry recovers when all this is behind us. That
Speaker 1: that really is a great question because even with this
Speaker 1: current loan that that they are, you know, they're all
Speaker 1: able to access this SPD loan. But what's the one
Speaker 1: thing that they can't do with it? They can't pay
Speaker 1: their mean prevyor they can't pay their product purveyor fish
Speaker 1: prevyor so, you know, not being able to pay bills.
Speaker 1: You see, the whole the whole system has to work
Speaker 1: from from the restaurant suppliers all the way through you know,
Speaker 1: the finished dish. But but let's just think of the
Speaker 1: restaurants for now. They're they're devastated, they don't know what
Speaker 1: to do. So when has any restaurant, you know, as
Speaker 1: a whole when when when has the country ever had
Speaker 1: forced restaurants to close? Never? Not, not in the history
Speaker 1: that we know of. I don't even believe it. In
Speaker 1: nineteen during the Spanish flu did they close all restaurants? Um,
Speaker 1: So it's it's a different difficult question. And I want
Speaker 1: to help the restaurants more than anyone, but where does
Speaker 1: it And then, because there are many industries that I
Speaker 1: don't know an industry that has been profitable during this
Speaker 1: time either. So um, it's again, I want to help restaurants.
Speaker 1: I know that the administration has met with some very
Speaker 1: um well known and celebrity chefs to get their input
Speaker 1: on how to help restaurants. But restaurants are in a
Speaker 1: lot of trouble. And I think that the biggest part
Speaker 1: of the Simbulist bill that helped restaurants in general was
Speaker 1: to help their employees get unemployment. To me, that was
Speaker 1: the most important part because again bell behole and now
Speaker 1: a small business owner is left with a huge chunk
Speaker 1: of of missing revenue. So yet they have read, yet
Speaker 1: they have expenses, Yet they have They've had no no
Speaker 1: incoming money for weeks and and and as opposed to
Speaker 1: what the general public things, restaurants don't make large profits
Speaker 1: at all if all. So it's a really tough question.
Speaker 1: At the same time, I'm a realist. This money was
Speaker 1: not just sitting somewhere in the back shelf. Get ready
Speaker 1: for a stimulus. We're borrowing this money from foreign countries
Speaker 1: and and we're gonna have to pay back as a
Speaker 1: country at some point. Also, so there's got to be
Speaker 1: some balance in there. I originally the stimulus was a
Speaker 1: billion a trillion dollars, then it went to two trillion
Speaker 1: with the idea that we may need more. Um. I
Speaker 1: think the idea of asking for non business related things
Speaker 1: during that time by by certain political leaders was just atrocious. Really,
Speaker 1: we need to learn about the businesses and to help restaurants,
Speaker 1: the administration would really have to have more of these
Speaker 1: small business loans that they could loan restaurants. I wouldn't
Speaker 1: say completely forgivable. I think that when restaurants built back,
Speaker 1: like any other industry, they would have to pay back
Speaker 1: these loans. And if they know, the interest rates right
Speaker 1: now are at all time lows the federal funds rates
Speaker 1: and all time loan so if they could have longer
Speaker 1: term loans, so these loans are two year loans, well,
Speaker 1: why not extend that for restaurants. If we're gonna kick
Speaker 1: a sector that really needs help, let's loan the restaurant
Speaker 1: money so that they could get back on their feet
Speaker 1: with a small interest rate and they pay that loan
Speaker 1: over a ken year period. I think that would be
Speaker 1: a great way to help restaurants, and that's what this
Speaker 1: thing was started. That ways but then it went to
Speaker 1: two years. It's not with forgiveness. I I say no forgiveness.
Speaker 1: I think that the restaurants will even happy to have
Speaker 1: a low interest loan for a longer period of time,
Speaker 1: and that would really make them sound Thanks Pat. We've
Speaker 1: been speaking to Pat Lafreda of La Freda Meat Purveyors
Speaker 1: on how restaurants and the food chain is actually being
Speaker 1: impacted by the coronavirus. If you enjoy this conversation, well,
Speaker 1: be sure and go to your favorite podcast host Apple, iTunes, Stitcher,
Speaker 1: Spotify and you could see any of the previous three
Speaker 1: hundreds such a conversations we've had over the past five
Speaker 1: and a half years. Be sure and check out my
Speaker 1: weekly column on bloomberg dot com slash Opinion. Follow me
Speaker 1: on Twitter at Ritholtz. I'm Barry Riholts. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio.