So I wanna talk about restaurants for a minute one because I know there's at least one person that listens to all this stuff who owns a restaurant and two because it's a wonderful example of a general principle. And what's that principle? Well, it's something like in a complex system, you need to develop
the ability to generalize statistical examples that probably sounds more complicated than it is. So let's go through this example and hopefully it will make sense after that 11, I guess it's, it's even become a meme, it's so common. But one common situation when you're having conversations with people
and you're trying to paint a picture of the generic condition, they will push back and say, but not all blank are like that. In other words, they will take the general situation and focus on a minority of cases as if that proves that it's not the general situation, but it, it still is, you know, you
could point to a certain demographic and say more than half of them have herpes and they could say, yeah, but here's one person from that demographic that doesn't have herpes. Well, still more than half of them do. It doesn't change the math and it doesn't change the probability that, that you will get
herpes if you do certain things with someone from that group, do you get the point? And I'm making a visceral on purpose. So, what does herpes have to do with restaurants? Well, I'll tell you, um, so hopefully nothing other than this general principle. So it turns out that for years, I've been telling
you that many stores that you're familiar with are going to close down forever. Well, someone who's overly simplistic would say, well, if every store I use doesn't close down forever, then obviously he has no idea what he's talking about. Well, that's a very silly perspective. No one ever said that,
that every single store would close down. Right. Well, if the question is how many stores need to close down before it's a problem and the answer depends. Right. It depends which stores close down. What options do you have where you live? Do you go to those stores in the first place or not? And maybe
a really important question is, do you work at those stores or do you own them or does your business rely on them? I was having a discussion uh sometime within the last week with someone about how the inflation in hardware stores is, is more accelerated than it is in other places. And the, one of the
reasons for that is that these companies are obviously trying to compensate for the shoplifting that's happening in most cities in the country. And so rural people who don't necessarily see those problems where they live have to bear the cost of that because now we get to pay two or three times what
something ought to cost and what it used to cost a year or two ago. And so there's, there's really no other explanation for why, uh, a silly little hinge that used to cost a dollar two years ago now cost four. So we were talking about this, if your business relies on things that you have to buy at a
hardware store like hinges. Well, guess what? It's, it's going to impact you when that place closes because now you have to order everything online or you have to move or some other extreme thing. And does that have an impact? It sure does. If you can't look at something and try it out to see what its
particular qualities are, it makes it much more difficult to run the business that you're running. It incurs cost. Right. And you will only be able to recover part of that cost by passing it on to your consumers. They have a breaking point. They have a tolerance. And so at the end of the day, you're
gonna make less money and you're making less money in an environment where everything costs more. So that's fun. So anyway, let's get back to restaurants. Has every restaurant closed. No. But chances are that you live in a place where you could give me a list of places that have closed in your town.
I have a list of places that have closed in my town. And guess what? They're never gonna come back and they're not gonna be replaced with something comparable either. So, inflation and other factors, but let's just group it under that inflation has led to this situation where what remains is not worth
buying in some cases. And in restaurants in particular, it's, it's, it's a more egregious case because most of the inflation in restaurants comes from labor today, supplies have also exploded in cost. And in fact, this article goes into that and I'll share those percentages with you. But labor is the
driving cost of restaurants today. And so this push for higher minimum wage and the willingness for parents to support their adult Children. So they don't have as much pressure to work, makes it harder to find people. And the cultural decline of, well, I need a mental health day slash. I'm overwhelmed
with anxiety because my cat has a hair ball that makes it more difficult to get people to come to work and, and, and then you have to hire more people than you need because you're counting on the fact that only one and three will actually show up for the hours they're assigned and on and on and on. Right
. It's a labor problem primarily. And then there's also a big old secondary cost of supplies problem. Those are not going away as they get worse. More and more people are going to say, hey, that restaurant I used to go to, I'm not going there anymore because I can't justify paying five times what it
would cost me to make it home. Or the quality has fallen so far that I'm paying five times more for something that is one third is good and that's what's happening left and right. And so you, you can only, you can only continue this for so long. And the problem is it's the last one out. Leave the lights
or turn the lights off problem as more and more normal people see the trend, restaurant owners are gonna have a harder and harder time selling their business. And so it's time to pass on the hot potato before it's too late. No, someone might say, well, that doesn't sound like a very charitable thing
. Well, you could tell somebody that they shouldn't own a restaurant but if they are downright set on buying one, why not sell them? Yours, right? You can do both of those things because guess what? You might be wrong and if they want to take that risk upon themselves, that's how you make money in business
. You take on risks and you have a contrary perspective that happens to be right. You will get paid for that. And if you're wrong you'll lose your money. That's the way it works. OK. So reading down this list, some of the numbers are big, some of them are small. Some of the names are big and some of
them are small, but it's the composite that matters. The point is, this is a trend. And when you've got a trend, you can do a statistical analysis and say, look the writings on the wall, obviously, this is moving in that direction, even if you find an exception, the trend still persists. And so you need
to make decisions based on the probable outcome. If you don't have a good reason for having an alternate perspective, you're being irrational and that's not good. Ok, so we've got TG I Friday's Denny's Mod Pizza, Coco's Bakery, Caro's, I haven't heard of the last two. Maybe those are just in California
. I don't know. Outback Steakhouse, Carrabas, Italian Grill, Bonefish subway. We lost two subways in Missoula and I'm not sad about it. Applebee's also not said Buffalo, Wild Wings, Ihop Pizza Hut, Red Lobster Hooters Chillies. Um, and it says some of these partial, some of them entirely, right, and
it goes on and on. So the cost of materials has gone up since I'm trying to read fine print here. That's why I've slowed down for 2001 to 2024. The cost of veal has gone up by 25%. The cost of chicken has gone up by 24. Percent. The cost of potatoes has gone up by 13%. The cost of cheese has gone up
by 6.7%. The cost of lettuce has gone up by 18.5% and the cost of bread has gone up by 24.7%. So, on an annual basis, for most of these, that's north of 7% per year. So essentially what this is saying is that just off of supplies, the restaurant inflation is much higher than the national inflation rate
. If you add it in labor, it'd be astronomical. Meanwhile, there, it says that there is falling foot traffic, there are fewer people coming to these restaurants and because some of these companies or their suppliers are so fine tuned to tremendous economies of scale. When those throughput decline, the
companies go out of business, this is something you're going to see and I've warned you about this. I'm warning you again. You should not be surprised if a massive company like Walmart goes out of business. That would not be a surprise at all. All of the principles for that to happen, that the, the the
global circumstances for that to happen, they're already in place. They have been for quite some time when you have a massive company that that's that fine tuned to a specific circumstance. You can't be surprised when the circumstances shift if they cease to be in business or they massively uh close
a whole bunch of locations. That, that's not a surprise. It's not a surprise at all. You know, the president got shot at the other day and a former president and some people were surprised by that. I'm surprised that some people are surprised by that. The writing was on the wall, that, that sort of thing
could happen at any moment because that's where we are. And it's shocking to me that people are so thick that they don't and not in a good way that they thick headed that they don't understand. That's where we are. That it's surprising it hadn't happened before then. It's not surprising that it happened
. It's surprising, it hadn't happened until then. And that it's the same with these restaurants closing. I mean, who has gone to a restaurant in the last three years and thought, wow, this is such a great value. I'm so glad I'm spending my money and time this way. The only reason people go to restaurants
today is, is a relic of the past. It's this, uh, nostalgia for a time that is obviously gone and never coming back again. Same as the movies. And so of course, these places are gonna be shutting down left and right, they don't offer anything of worth anymore and it's obvious. So, anyway, uh, the article
goes on to talk about how minimum wage has increased by an average of 6%. And I think that's just from the start of 2024 if I'm reading this chart correctly. Well, guess what happens when your labor costs go up by 6% in one year. Your prices have to go up by that much. At least, at least because that
, that percent change doesn't include everything that tacked on to wages, which is workman's comp, unemployment insurance. All these other things that, that connect to that, uh, that are pegged to that I should say. But aren't, they don't show up on the, on the pay stub? But they're absolutely a, a pay
based charge. Ok. So that's probably enough on that. If you've got a restaurant, it is past time to do everything reasonable to get out of it. Now, I happen to know that there are people in situations where they're not the exclusive owner and so they're trying to get their partners to get out, but they're
, they feel chained to that. Well, it's time for you to sell your portion and if you have to do ridiculous things to make that happen, uh, legal things, you know, I'm not saying do something illegal, but if you have to really turn the screws to make that happen, bring in a replacement owner and just
sell your steak or reorganize the, the company in such a way that you have a portion that you can sell to your co-owner or someone else, whatever you need to do within the realm of what's reasonable. It, a much higher cost is becoming reasonable. With every passing day, the writing is on the wall. This
is not a good industry to be in. If you work for restaurants then, and if you own one too, in, in both cases, uh, besides just looking for something different, make the most of what you've got right now. So, um, if you knew that COVID was coming and you knew all the ways that, that would change things
, it doesn't mean that you wouldn't continue being a bartender. It might mean you'd pick up extra hours and save up your money though, right? Or do things that you could do to reduce your cost of living. So, a lot of the benefits that are in life right now that people interpret to be permanent or long
term would be much better interpreted as I have this windfall right now. That will not last. How can I best use it to make my future better? And that's that there are a million different things that, that you could do with that. So, in my case, for the last 10 years, I've spent an enormous amount of
sweat and money. Um, getting my land to a place where we can grow more of what we eat and it's not easy to do where I live. It's very hard. But, um, that has been something that would make sense for us, but everybody's in a different situation. And so for most people, it will not be that I'll just say