Tyler Cowen Dishes on the Business of Dining, Eating, and Fooding
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Which restaurant is a “work of genius” – and which is the one closest to Hell?
An Economist Gets Lunch extols the virtues of ugly tomatoes, explains why good barbecue is hard to replicate (but why it can be found not only in Texas but also in the Pacific and the Sahara), and gives tips on how to discern the best Thai restaurant in Greenland.
Professor Tyler Cowen’s recent book is his latest success at illustrating “markets in everything” – and like his wildly popular blog, Marginal Revolution, the engaging read’s ideas and insights are also directly applicable to making discerning choices in stocks, partnerships, and other investments.
Slepko: You write that this book is about, “finding the right food at the right prices.” Is it safe to say you are a “value eater”?
Cowen: Absolutely, food is a great way to get in touch with what is going on around you, and very often the cheapest food is better than the most expensive. There is often a negative correlation between price and quality, both around the world and within a country.
If you are living in the United States and you eat ethnic food, it is typically cheaper, and cooked by people who know what they are doing and are really focused on that type of cooking. Also, they tend to be cooking for an informed clientele who know the difference between high quality and low quality. That all makes for good food.
If you look at more expensive food, it tends to be paying higher rent and they are trying to maximize value, and they are selling to less well-informed customers. That’s true in a lot of economic areas, including finance.
Slepko: As a Seattleite, I appreciated your examination of how the prices at Starbucks (NASDAQ: SBUX) are in part a surcharge for use of their space. I also enjoyed your observation that their earlier stronger brew gave way to the need for higher profit margins and sales volume, and their offerings are more about, “the idea of coffee” and are mostly sweet, milk based beverages which are the ones that essentially pay for the store’s infrastructure. Your full analysis gives investors who still think the bean is the chain’s dominant factor something to think about when considering the commodity inputs that go into Starbucks’ bottom line.
Clearly your food obsession dictates how you invest your personal time and personal income – but what about your investment income? Do culture and cuisine influence you in your investing?
Cowen: I think you can use cuisine to think about things like how good a country will be in expanding its productivity in the service sector, or determining which countries might be on the rise. It could certainly help with your international investing because a knowledge of food supply chains gives you some insight into how the economy works as a whole.
Slepko: Examples you use throughout also help explain why one successful product like Wonder Bread can fail in other markets that don't seem too different at first glance. While Wonder Bread is a cash cow for its producers in Canada (Weston (TSX: WN)) America (Hostess), and Mexico (Bimbo), you point out it doesn’t do well in Europe because, “Many Americans treat Wonder Bread as a normal taste, but few Germans will as they are expecting hard, and stronger tasting breads.”
In order to better understand these surprising cultural and culinary divergences, your book does a good job of describing how to solicit constructive feedback on a meal you’ve just prepared, or extract recommendations from wait staff. These techniques also seem like they could be helpful in discerning the right investment or partner. The book is particularly pointed on how to go about getting deferential (and a bit secretive) foreign wait staff to give you the good stuff.
Cowen: If you cook something for people, the problem is that they are going to try to tell you what they think you want to hear, even if you tell them not to. So you need to force them to tell you something negative. In general, if you are trying to track down good food, the most important skill is not knowledge of food, it’s an understanding of your own limitations and who it is you should be listening to. I think this has applicability in other areas of life, not just food.
Slepko: International celebrity chef Anthony Bourdain (the poor man’s Tyler Cowen) is famous for using local variations on hot dogs (Chicago good, Finland bad) as a common touchstone when he takes stock of a place. Personally, I use sweet and sour pork (Singapore good, Iceland bad). Is there any food you use as a baseline or benchmark to take a quick assessment of a region’s cuisine, and possibly as a starting point for learning more about a region beyond food?
Cowen: Anthony Bourdain has been great in getting people interested in the wider world. Also, when you consider the wider world, I think you have to disaggregate the world into two parts: dairy and non-dairy. If it’s a dairy part of the world, you could use pizza for instance. It’s not going to work for China and a lot of Asia where I think quality of rice is a good place to start. I wouldn’t apply that to Europe where you are talking dairy.
Slepko: In your wildly popular Tyler Cowen’s Ethnic Dining Guide your masthead proclaims, “All Food is Ethnic.” Reading the insights and observations that come from the menus (or lack of menus in some cases), and your experiences with the proprietors (and even other diners), I can’t help but think that the Romney campaign should have put you and your guide in charge of their minority outreach. On a broader level, what have you observed about American companies' ability to tap the minority and niche markets – and why do foreign companies have such a hard time breaking into the food, grocery, and dining market in America?
Cowen: America has strength in a number of sectors (also in culture and entertainment) because from early on in our history we were used to our domestic market being in some ways a match or mirror to the broader world market. When Hollywood and New York were trying to sell movies in the 1920s they were already marketing to the world. So, the United States has become very good at that. Of course, we are also a large country, and a lot of us don’t have passport or engage in foreign travel, so that mix of things makes it hard for foreign suppliers to make in-roads here – but it is by no means impossible.
Off shoots of Mexican food have done very well here, such as Chipotle (NYSE: CMG). More salsa is sold in America than ketchup – and by no means is all of that being sold to Latinos.
The entertainment and food markets in America reflect the underlying strengths of the US economy, and it is hard to think of any other country that can match those across the board – even though for any particular foodstuff you could probably buy it better somewhere else. But across the board, the US (and Canada and Australia) looks pretty strong.
Nick Slepko (hukgon) has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Chipotle Mexican Grill and Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Chipotle Mexican Grill and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.