Hello and welcome to another episode of the All Thoughts Podcast. I'm Joe Wisenthal.

and I'm Joe Wisenthal.

Joe, I have a question.

Go on.

What is your favorite chain restaurant? It has to be a sit-down chain restaurant.

A sit-down chain restaurant. That's a really good question. You know, I actually really like Chili's. I think they have their fajitas are absolutely legit. And I say this as someone who has eaten quite a lot of Texmex fajitas from my time in Texas. And so I think I have credibility. And as a kid, and I haven't been there in years, but I still think my memory of the food is really good. I love Cracker Barrel.

Ooh, breakfast at Cracker Barrel is really, really good. Well, I bring it up because today we are going to be answering the question of where all of these restaurants actually get their food from.

That's a great question. I don't I don't know anything about I don't know anything about sitdown chain restaurants. I mean, I don't know anything about most chain restaurants, period, let alone fast food ones. But the world of sitown ones that are real restaurants or there's waiters, waitresses, etc. I don't know anything about

You're not interested in my favorite restaurants.

Oh, [laughter] this is how it works. I ask you a question and you reciprocate. I was going to and I was planning to and then you like turned a 90 degree angle to talk about how like to talk about we were going to start answering the question of where these come from. I was like, "Oh, okay. I guess we're going on to some new direction here." We could just keep talking about favorite restaurant. Tracy, what is your favorite restaurant to sit down in?

I actually have many. Okay, go.

Um, Red Robin.

Oh, I love that place. They had a salad that was basically just a plate of chicken tenders. It was so good, but Bill does a salad. Um, Fridays. Used to love that place. That's so American.

I know. And there was one in London and it was like my anchor to America in the early 2000s. And Chili's chili with my boys.

You like chili, too? Yeah.

Yeah. It's legit. Keep going. We're going to make up for the fact that I didn't ask you, but now I'm just keep going. Let's just

Well, one thing one thing I did realize recently, I've never been to an Olive Garden. I don't know why that is.

I've been a few times. It's not terrible. I don't think like I've been I've even been to the one in Time Square.

Yeah. Um,

I feel like it's very hard to make carbs badly, right? It's just pasta and bread.

Yeah. Uh, it's good.

Okay. All right. I am going to move the conversation on now.

Applebee's a bit of the one in Times Square there. Solid.

I do not like Apple.

Why do we have to move the conversation on? I don't get it. Why can't we just keep talking about sit down restaurants?

All right. Well, we'll get back to them. We'll get to our recommendations. But on a serious note, uh, one of the reasons we are interested in this subject is because we did a series last year called beat capitalism where we talked a lot about agriculture and the chicken industry specifically and antitrust and monopolies and things like that. And one of the things that stood out to me from that series was a comment from Doha who is the former assistant attorney general where she talked about the tyranny of the middleman in the economy. And I think this is something that people are, you know, perhaps just waking up to. There are all these companies out there that you have probably never heard of, but have massively dominant positions in the economy and charge a lot for their services. And one of those happens to be a very large company that provides food for all these sitdown chain restaurants.

You know, I'm going to play devil's advocate on this episode because, as you know,

because you love chili so much. cuz I love chilies and I love food production at massive scale and I love uh all of this. But it is true that there are all these companies that are really important that sort of sit between whether the retailer the customer or more in the case of food more frequently the farmer and the end retailer the farmer and the restaurant that we literally know nothing about and they're huge and they're massive and they don't get any attention. Um and so I am very interested in this topic.

All right. Well, we do have the perfect guest. It is someone who has been on the show before. Um I think maybe a year or two ago now. Yeah. Um wow, time flies. But we're going to be speaking with Austin Freric. He is an antitrust and agricultural expert and also the author of Baron's Money, Power, and the Corruption of America's Food Industry. It's a great book. Even if you're not interested in agriculture or antitrust specifically, it says a lot about the US economy. So, I would highly recommend it. And Austin actually has just written a new chapter for his book that is all about this particular company. And I guess I should just say what it is. It's called Cisco.

It's not the networking gear company.

Not the networking gear company. Although it does have the most generic origin story ever. So Cisco stands for systems and services company.

Yum. [laughter] Yum. Delicious.

All right, Austin, [clears throat] welcome back to the show.

Thanks for having me on again. And I just want to say um you guys having me on last year really changed the course of my book. So I appreciate that.

Oh, thank you. Well, it was genuinely excellent. I am not just saying that. I really enjoyed it. Okay. Speaking of which, how does it work when you decide to add a new chapter to a book? And why did you decide to do that?

Yeah. So, the funniest thing about this book was when I would do book talks, people kept telling me about Barons I missed.

Like I was in Idaho, they're like, "Let me tell you about a potato baron." [laughter] When I was in Indiana, they're

like, "We're going to get the name of the potato baron after the episode." Oh yeah, I have a whole purgatory folder that I just put this information into.

But Cisco kept coming up and it was the weirdest um place origin story where so I talk fast and I know it. So I purposely been doing book talks in nursing homes. [snorts]

So you have to slow down and practice. Okay.

I I blame it on I listen to podcasts like 1.5 2.5 and especially Midwestern older people, you got to take it down. And what kept happening when I was doing

you realize if you're speaking fast because you're used to it then people who listen to you on those podcasts are now listening to you at two and a half to 3x speed. Anyway,

it's bad because my husband listens to them on 2x too. We talk that way [laughter]

and it's the so um a lot of times when you do nursing home gigs, they'll invite you for dinner before and after and it was um people kept complaining about the food

and I mean anyone that's been to a hospital or nurs home in America, it's pretty bad. I mean we're serving our most farmable people the worst food. Um, and it kept coming up, but it's Cisco is one of those things everyone kind of complains about, but no one knows. And my mom used to be have a bakery and I write about that in my coffee chapter. And um, she had a broad liner and her broad liner disappeared. They got bought up by a bigger entity. And so I was just curious and then

that's broadline distribution, right?

Yes. Thanks for that's industry term. I think of them as grocery stores for restaurants.

They were Amazon before Amazon. They were the everything store.

This is really important because when we're talking about food distribution, so they're broadlininers. You get everything there from you know your huge jar of olives to cheese or whatever. But then also a restaurant might also have specialty distributors too that like just really focus on one thing, right?

If they have the option. Okay.

In certain markets, usually most rural communities there's very few options. But like for example, New York has one most competitive broadliner market. So restaurants here have a lot of different sourcing options.

Yeah. I should just say this is going to be a very oddloty episode because it brings together baking, warehouses, logistics, trucking, antitrust, all that good stuff. So, I'm very excited. Okay. Well, on that note, uh how did Cisco get to be a dominant player in this particular space?

I love this origin story. John Ba, he's a different type of character compared to the other Barons in my book. I really like him. Like, he's like um a model businessman where he's one of those people comes out of Waco, Texas. His brother and dad died young, dropped out of college, believe Baylor to support his mom, worked at AM, got transferred to the AMP in Houston. And he's one of those people you see in business history that just saw things before other people. He saw two important things. Number one, the rise of frozen food. We're talking like right after World War II and how that was going to then also frozen food mixed with women entering the workforce knowing that they want to make quicker meals. So, we thought, oh, people are going to eat out more. And thing to keep in mind here is our norm of eating out is a very new thing in America. Like historically, you used to like bring a dish to something. It was like a church function. Now we eat out about once a day.

So he saw that thing ahead of people and he didn't think was moving fast enough. So he founded a frozen essentially a frozen berry company. But um going back to this point you made Joe about all these different things. That's how the idea from Cisco came from where it literally some Irish oil man was opening a fancy hotel in Houston and he was working the loading dock that night and he saw in the day a frozen strawberry. It's a frozen strawberry. I don't have a competitive advantage but what I can do is this food buyer has like 30 different vendors for all these different things. What I can do is offer him as much as possible. So the origin of Cisco was he brought nine companies together to create it and he realized someone's going to fill this at some point. So even though they only did business in a few state, he registered in all 50 states. So that's how Cisco was created.

I am fascinated by this idea because it's just one of those things that hadn't really occurred to me until like I read your chapter. Just like Yeah. Like it's really weird how much we eat out, isn't it? Or it's just really novel in terms of the prevalence of restaurants. I mean, I eat out way more than I did like when I was a kid growing up.

I think about that all the time. We used to like Bonanza was like a buffet was like a special occasion once a week and now I do

like a sit down Pizza Hut. That's another one.

Oh, that was such a big deal.

Yeah. And now none. Yeah. Now I just You just do it now.

Well, let me pose a question to you. What do you think? And there's a new king.

The number one sitown chain restaurant in America is where you order off a menu.

Oh,

this is tough. And before I tell you, it's my favorite chain.

Your favorite chain? Maybe my husband

I'm worried that like I'm not going to know it and then I'm going to be really embarrassed at how out of touch because then you're going to say it and it's going to be really obvious. What is it?

Cheesecake Factory.

Nope.

No. Are we Are we talking about by dollar volume?

Dollar Volume.

Okay. Um All right. I

Yeah, you're going to have to tell us.

I think I'm having stage fright. What's the answer?

Texas Roadhouse.

Oh, I love Texas Roadhouse. Oh my god, they have the best um bread rolls. My mom brings ziplockc bags and like

I should have said that was my favorite. They had one of those. I' never actually been to one.

When I was living in Abu Dhabi, they had one and it was absolutely fantastic.

You want to understand America? Go to a Texas road house on a Friday night. I was in one Debuke, Iowa. I was on book tour last week and I got a steak, vegetable, and mashed potatoes, homemade $14.

Unirically, their steaks are really good. Like they're good. I always have the fillet.

Where do they get their Where do they get their food? Oh, I mean, who knows how they I mean, do you think

they get it from Cisco and they they only charge $14 because of the incredible miracle of capitalism and scale.

Joe, my hot take is two things. They do scratch cooking. Most chain restaurants now do frozen food. They actually cut up broccoli in the back. And number two,

volume.

Okay. Yeah.

Their servers only have three tables and they move you so quick.

I love that you're doing in-person research uh on the subject of of chain restaurants, but you know, you mentioned that we're not entirely sure uh where Texas Roadhouse gets its food from. How does it work um the contracts between a restaurant and someone like a Cisco? What do we know about those specific agreements?

So, a few things. One, we can kind of figure out what change Cisco does based on its website. So, it has a subdivision called Sigma.

So, if you go to Sigma's website, it will brag about its corporate clients. Some of them are Olive Garden, Red Robins one, you know, different chains like that.

Um, the agreements there's a I mean, what I do know from these agreements is what we see with public universities and even that are not transparent.

There's a famous one at the University of Iowa. Someone wanted to know what's the contract for food here and it went up the Supreme Court in Iowa and it was rejected which is kind of a weird thing like you think the agricultural state would have really good sourcing of food. You would know the contracts. There's not a lot of disclosure here

but they filed to see the actual contracts

to keep it closed.

Yeah. Okay.

So let's say a Red Robin is a or an Olive Garden is a uh client of Cisco. Would that be a national contract that would cover every Red Robin or Olive Garden or would there be any variation in red uh in regional distribution or anything like that? Like

I would think so I would contextualize Cisco as think of it as like FedEx for food.

Okay.

A lot of these companies have patent products and Cisco is just moving their patent patent and fries. You know what I mean? Like they all have their kind of that's what Cisco is there to do is um outsource that part or handle that. Is there some giant like Cisco food production center in like I don't know the wilderness of Wyoming or something or are they sort of like scattered around the United States?

Scattered around. I mean this is this is harder to understand. There was a good Wall Street Journal article like 20 years ago how a lot of your jalapeno poppers in a restaurant be all being made at one factory in Mexico.

You know it's cheaper to pay someone offshore essentially you know stuff it but then you are sacrificing taste at some point.

But Cisco doesn't own production facilities. It owned a slaughter house in Iowa at one point, but then it sold it off,

which I can't quite figure out why they got into that. My guess is is for most restaurants, people pick their vendor based on they call it center of the plate, the protein.

So, they were trying to probably do quality control.

Yeah.

Let me start using center of the plate [laughter] a restaurant to refer to whichever uh protein I ordered. But this is so they don't have production. What basically is, and you already said it's like FedEx, at its core, it sounds like it's a logistics company.

Yes. Most of their employees are truck drivers.

Huh.

Your dad was a truck driver, right? You talk about this in the book.

He is. He works for um a cornstarch company.

So, what did that experience of growing up with a truck driver uh teach you about a company like Cisco?

So, my dad used to be he first he used to be in the beer business. So, he's a beer truck driver and then he worked in beer sales. So that's actually where a lot of my um I look at looking at displays in grocery stores cuz my dad used to merchandise. So I love good merchandising. So like my favorite grocery store is HB in Texas.

Love HB.

No one merch. No one merchandises like them.

Yeah. This is a fact.

And so you look at that and so like my dad always taught me like he could he knew the type of demographics of of a grocery store based on the number one beer. Like oh this is a blue moon hy or this is a you know red u red dog hy. Um, so there's different price points and so my dad now does um corn products, but just understanding because there's independent truck drivers, there's in-house truck drivers and there's kind of a hierarchy to these different worlds,

all that kind of stuff. So let's talk about the competitive landscape because that's in addition to the fact that you know you are a big fan of the stakes at Texas Roadhouse. That's why we're here. What does the competitive landscape for sort of this sort of broadline or food distribution or restaurant really look like?

Um, so that I mean that's that's the big question antitrust market definition. I mean that is this is like my little pet peeve is how you define a markets everything.

So like Cisco tried to buy US foods back in 2015 and they argue their competition included Sam's Club. Hm. I think people like I just remember personally anecdotally my mom we only went to Sam's Club when she ran out of cups and needed to get cups between her next truckload. Most people would not include Costco and Sam's Club as a broad lineer.

I mean Texas Roadhouse isn't going to Costco to buy steaks.

But in theory a restaurant I mean I I take your point. It's not really a comp. But in theory there probably are restaurants that source from some of these wholesale.

Yeah. I mean, you can tell when you go into certain local restaurants, you'll you'll see Costco branded products in the back. My bigger thing here is right now a lot of what is a market is defined by highly paid economist and these things aren't publicly disclosed usually. I kind of I keep in mind I come out of the Treasury tax analysis office. The beauty of that world is you have Treasury doing tax revenue estimates, you have CO, CBO, and you have independent um academic institutions like UPUPEN doing revenue estimates. So, you have three different estimates coming at you for the same thing. I would love if we did something like this with market definition because here's the thing these markets are pretty stable.

Yeah.

Having like there should be a government agency doing market definition reports.

So based on how you so the the merger attempt was blocked it. So based on however the regulators at the time defined okay this is the market this is the circle we're drawing what are we talking about in terms of market share and so forth. So keep so at the time too there's basically three national broadliners and they were number one Cisco was trying to buy number two US foods that was rejected but what's really interesting here is basically even though Cisco got stopped two things number one number two is trying to buy number three right now um US foods is trying to buy I have to write it down performance food

um but then Cisco basically is is engaged in what people call rollups to my calculations it's bought over 216 companies so even though got it got stopped once for big merger. It's market dominance really comes from rolling up, you know, the a local Miami seafood place, local produce place in Anaheim, that kind of stuff. So, I know rollup strategies started to get more attention um under the Biden administration, but historically it does seem like regulators kind of go after the big M&A deals and they kind of ignore all the small ones. Even though once you add up all the small ones, it can get a company into a very very dominant position like with Cisco.

I think this is the biggest one of the biggest loopholes in modern competition policy in America. I mean, go back to my coffee bear and JB. Um, their second move they did was vet clinics because they, this sounds awful. They realize people are economically irrational with their pets when it comes to healthcare. So, they bought over like 1500 vet clinics they rolled up. Commissioner Khan helped put a stop to that. I generally think with big companies like this, once you reach a certain size, you basically don't allow them to acquire because you just know they're not buying a a company for pro competitive reasons. But a lot of this flies under the radar because the Federal Trade Commission, you know, it's very understaffed. They can't keep they they're not tracking a seafood provider in Miami and who's buying it. Talk to us more about what they rolled up or what they've been trying to rolled up. So, I take it these aren't other broadliners. Are these specialty? Are these niche? Are these regional? Like, what are they what are the fragmented assets that they're consolidating under the Cisco umbrella?

All the above.

Okay. I mean, they generally don't compete, they buy. So, like in Iowa, they came to Iowa because they bought a broadliner, a local broadlininer. That's essentially what they did for earlier their history. Now, they tend to buy more specialty. So, they'll buy like

hotel things, you like little soaps. They'll buy company that does like Asian food. They'll all these little things and they're starting to buy foreign like an Irish broadliner, um a Canadian broadliner, Costa Rica broadliner. Um it's just kind of a blob that keeps growing.

Am I a tomato broadliner? I brought Joe tomatoes.

Tracy brought me tomatoes. Yes. Thank you.

Really nice tomatoes.

You're a niche. I think you're a specialty distributor.

Yeah. Okay, fair enough. I certainly don't do it in volume, especially this year. Um, okay. Well, on that note, in your chapter, it says that Cisco has something like 27% market share.

It's unclear what the market share is. So, I originally,

this was going to be my question like when we say that, what do we actually mean?

We don't know. I originally in that chapter have a quoted as a 50% market share, but you sometimes you'll see 40, sometimes you'll see 30. It really comes back to that market definition. That's why I want to go back to having some public entity debate this so it's transparent. But also partly what stopped that um purchase of US foods is when the FTC looked into it, they started looking at metropolitans and they realized like in like Las Vegas and San Diego, it would have like an 80% market share. So even with food, we tend to talk national. Food is so local.

Food markets particular, we we really need to drill down regionally.

What do they use this power for? setting aside the fact that they want to make a lot of money like all companies do like when I think about the risk of anti-competitive abuse or why I wouldn't want one company to have such a dominant uh you know share of a given market. I think okay what is the potential for abuse? So maybe they say, "No, you're not. You can't get access to all of this stuff unless you buy our olives." Maybe could be one sort of thing. Or they tell a restaurant, "You can't buy X unless you buy our soaps." Like what is the fear or what is the reality of what Cisco currently does with the amount of power that they have?

Yeah. So two things. Number one, so it's it's not like you get a big sales book with the prices of Cisco. Those days are gone. Most of it's on an app. And this is a black box. Um, my understanding from people I've talked to is they always want to make their margin. So, they might sell you your center of the plate, the protein at a loss or cost to get you in the door, but then they'll make the margins up by tweaking the napkin prices.

Yeah.

Here's the thing. One could argue that's a in violation of the Robbins and Batman Act because in theory, you should charge everyone the same price for X amount of units, but we don't know because of

Oh, so we think it might be personalized uh pricing, but we're not sure.

We're not sure. That is what some people have accused. The other thing to keep in mind here and the biggest honestly part of the reason why I wrote this chapter is just the quality decline. I feel like most eating out in America, especially local places, it's all kind of eh because companies like Cisco, they don't want to buy from like a local beef provider. They want one entity to do a bunch. And so [snorts] it's just stifling out that kind of innovation, the quality. And especially in real America, Cisco doesn't want to deal with local things. And so especially in real I think an undercurrent too of my book I realized after the fact was the communities producing our food are actually being hit hardest by the food system. We saw in the Kroger and Albertson merger case failed merger that they're gouging the most in rural communities most the broad liner dominance tends to be highest in rural communities and rural communities tend to have the most fast food. So it's kind of getting the worst of all these worlds. So like New York has the best food. Like

it's kind of the more yepy you are in America probably the better food selection you have.

That that seems fair actually. Um seems right. And again like that's pretty ironic given that most of the food is grown outside of cities obviously. Um I'm going to ask the question that is very close to Joe's heart, but with market dominance tends to come pricing power. But on the other hand, with market dominance and scale comes savings from volume. Do we have any idea of like the net effect of a Cisco on food prices in restaurants?

We don't I mean kind of what I realized writing this chapter and just in general with this book is I just kind of view everything as Goldilocks and you you know there is there is beauty to scale but things have just gotten too far and things are out of whack. And I think with price, and I brought this up last time, and it's the first slide I show people anytime I talk anymore, is Americans spend more on average on food than most Western democracies. And I think, and it's like cliche to say, I went to Europe and had cheaper food and it was better. I think that's how you're seeing the system play out because you basically biggets big. You have all these big boys kind of like going at each other and it's just [music] kind of this race to the bottom.

talk to us more about the the food creator side of the business. If I'm I don't if I'm growing tomatoes or if I'm or if me and Tracy are growing tomatoes, to what degree does Cisco play us off of each other or squeeze our margins in order to get within the Cisco distribution system?

I think the best example of that's in seafood.

Okay, the seafood seafood in general America is just a dumpster fire to be to be blunt with you. There's a really and I'm going to make a comparison here. CNBC came up with a really good story the other day where Walmart, Amazon are this big fight right now.

Yeah.

And Walmart basically has very low standards for its third party platform. There's a lot of fraud, a lot of abuse going on that platform because it's trying to get market share from Amazon. I would compare Cisco to that where they don't here's the thing. They they don't really care how their seafood source. I mean, there's been so many allegations of the calamari coming from Chinese slave labor. Um fish that's saying it's Gulf shrimp from the, you know, from America. It's not just all these like these constant abuses in this seafood system, but Cisco not caring because all it cares about is price. Think of Cisco like the Walmart food distribution.

That makes sense. So, when you were reporting out this particular chapter, did you hear any specific stories from either restaurant owners or food producers about dealings with Cisco and what it's like to actually negotiate with them?

The biggest critique I've heard is just the lack of selection. Cisco has such a dominance in a lot of these markets. Local restaurant owners really don't have a lot of choices. That's probably the biggest critique I heard and just my favorite phrase and it's a subtitle of a chap of this chapter is uh tonight's dinner fell off the Cisco truck.

We've all had [laughter] those meals. You know what I mean? You go to a wedding, you can just tell it's like the lowest tier of Cisco

where it's just so blah and tasteless. But a lot of restaurants I mean that's kind of this whole undercurrent of this book, this chapter is I kind of think of this as my Frankenstein chapter. what started off as an aid to local restaurants to make their life easier is now undermining them because they're losing their specialness.

Oh yeah. On that note, didn't the founder at one point try to I I guess he retired but was still connected to the company and then he tried to correct some of what you're describing.

Yes. I mean, I can't say this enough. He is a model businessman. I mean, this guy, he retired in the late 80s. He stepped aside, donated the charities, kept coming into the office each day, didn't want to sign parking, and he always trusted his people, especially the he let basically each warehouse do its own thing. And I would compare it to like Whole Foods. Famously, Whole Foods let the managers do its own thing pre-Amazon. So if they saw a good thing at the farmers market, they could bring that producer in. He retires, a few CEOs come along. One comes along and the old man hated consultants. Number one, he's like, "They don't know my business. Number two, the poly chair even though they're not supposed to, they'll share my secret sauce with my competitors. New guy comes in, hires consultants, and what the first thing he says is centralized procurement,

you know, instead of having all these local different things, get all your berries from one person. And what John saw is he saw um changes in the numbers. So, he wanted to go to the board to talk about this. CEO time was kept being like, "No, no, no. This is a nine-year-old man who built this company. This is his everything." He went around and got it to the board. According to one executive, he wasn't escorted out the building. This broke the old man.

And did he like literally go into the building and like find the board and

No, he had a uh I could be a certain staffer get it to all the board members and he was shown the door.

This broke the old man. And you see the quality decline. you know, centralized procurement like you in I don't want to romanticize a jalapeno pepper or like this kind of stuff, but you are cutting corners at some point when you're doing these like not everything can be frozen and taste just as good as a fresh thing. Like a good example is actually a tomato like a good summer tomato. Like there's no reason in Iowa can't get a good summer tomato. It's so easy to grow a tomato there, but they're all the same blah tomato grown who knows where. And that's kind of the that kind of story. And part of it, the argument I'm making there is part of regulation, guarder rails, whatever you want to call them, is almost to prevent companies from themselves

to stop a race to the bottom. It's interesting this idea that the restaurants can't distinguish them themselves to the same degree because of the sort of decline in quality. And it strikes me, we did an episode with um some guys who actually opened up a pizza restaurant right around the corner from uh Bloomberg. And in that case, we were talking about the delivery apps. And the idea was like, you know, at one point in theory service, delivery, etc. might have been a restaurant's calling card, right? We have really good, we really know you, etc., and we have

we'll get to your house in under 15 minutes or the pizza's free.

But then everyone in theory, it's like this game theory thing where everyone feels compelled to, okay, we're going to distribute through the well-known delivery apps that everyone has heard about. And that's great. And on some level it makes markets more efficient perhaps, although they've gotten so expensive. I think it's some it for me it's more efficient often to just go pick it up. But that's besides the point. But the long-term effect is essentially this sort of elimination of the specialness of the place. And so maybe there is more efficient, maybe the food is cheaper, maybe it doesn't get too faster, maybe even gets too faster and hotter, etc. But this idea that we have this sort of textured economy with this sort of flora and fauna of businesses that are distinct that have texture sort of disappears once they plug into these giant platforms.

You just made a great neobrandise argument.

Oh great. I mean this might not shock anyone. I'm a neobrandise person but yeah that is

my critique of the current antitrust framework is not everything can be put into Excel. How many hogs one person shown? It's a question society is has to wrestle with and I make that kind of point in this chapter was um at my wedding um I'm part Czech and we serve colatches which colatches in Iowa are very different than the ones in Houston. Houston they put meat in them

but like you can't buy coalaches from Cisco.

It's like these local little things make a place a place and you're losing this the homogenization of American food system. Like everything's kind of the same. It's kind of blah

and that's what's it's hard to you can't that that's what's the thing that's missing. That's why

it is a little it does seem frankly a little hard to quantify this effect that everybody feels.

I I think of two little examples is my mom had her own coffee store and then she went worked at Starbucks and what drove her the nuts the most were something called planagrams. She was told where to put every single thing on the shelf and my mom worked next to a General Mills plant. She knew that audience and she knew how to merchandise but they didn't trust her. It's like the lack of trust in employee.

We learned about Plentagrams.

Oh yeah, that's right.

I think he was with the Celsius CEO and he was talking a good episode.

Yeah. I have since walked into uh CVS's uh looking at the shelf space very very differently than I used to.

Oh, I'll just add on the thing to keep in mind is no one gets no one opens a restaurant to get rich. Everyone it's a really really hard industry. you're willing to sacrifice incomes because you do it because what you love and you just you feel that pride in local places and they're just running they're running uphill more and more based on because of these structures.

You know, you mentioned frozen berries earlier and I know uh berry baronss are in your book. Do the dominant companies like a Cisco or a berry baron. Do they kind of like feed on each other you think? Like does Cisco naturally lean towards producers who are making stuff in huge volumes? I mean, I think it goes back to Walmart. I mean, part of it was people in negotiating power when they negotiate deals with these companies. So, you got to get big so you have some volume so you can negotiate. Like, I think of I go back to Walmart just because I think of Walmart as the closest thing America's ever had to a Soviet Union South Palro. That's the weirdest chapter people have reached out to me about is all these suppliers. Like, you don't negotiate with Walmart. Walmart dictates to you. I think with Cisco is they're just so big.

These are centrally planned internal economies. Absolutely. And it's I think the best example of the bad quality is actually the produce system in America. Partly is because of the farm bill. We subsidize corn. We don't subsidize carrots. So our produce system went offshore, you know, because you can exploit labor and exploit environmental stuff. So that green peppers coming from who knows where traveling long things. And so and it's also designed for durability, not for taste. And you're seeing this play out in your local restaurants where just the food's kind of

It's interesting you used the phrase earlier saving companies from themselves. I think even the companies seem to be aware of this and and you mentioned Starbucks is a great example. I forget what's the name of the Starbucks founder. He everyone

it's not Howard Schultz. That's who we think it is. Oh well, Howard Schultz every every few years his name is back in the headlines and he himself seems to rue the fact that this company which early on sort of had a local coffee shop vibe which I think he really liked has not been able to sustain that in part because of yeah the required playgrounds and stuff and he complains about that every once in a while like we got to get back to feeling like a real Italian coffee shop. It never seems to happen. Well, one of the Ben & Jerry's founders just quit as well because Ben and Jerry's was bought by Unilever.

So, the funding each chapter I realized there's they all had these like niche every commodity is different in America and they all like dairy is actually to me the most complex commodity. Um the whole dairy regulation in America is written in the 19 before we had refrigeration. So, it makes no sense. The joke in dairy is only five people understand the dairy program and four are dead. And I was uh kibbitzing with this dairy guy in Wisconsin last week and there's a glut right now in the butter fat market. We engineered soybeans to increase the butter fat. And the rumor right now on the street too is we're feeding palm oil to to cows.

Oh wow.

Speaking of dairy, you know, when we we did that episode with Mike Froman recently and you mentioned that you asked him what was the biggest surprise he learned as US trade rep. He's like, "Oh, there's 500 different things you could do with a dairy molecule and because of trade rules." Anyway, by the way, just just following up, I am currently in uh touch with someone from the big New Zealand dairy cooperative Fonta. So, I'm working on finding from Big Dairy. I am working on finding the dairy molecule specialist for that episode.

Oh, well that's very exciting. Maybe we'll end up doing a three-part milk series. Who knows? We better hurry it up since it's almost October. Um, okay.

Is there anything that can be done about this? Like now that a Cisco has rolled up all these different companies and it has substantial market share, although as we were discussing, we can debate what that actually means. Is there like what swings that dominance the other way?

Yeah, I mean to Joe's just I just want to add on to Joe's point earlier about the companies um not wanting to have to do this but if they don't engage this be like the system designed right now is they have to do this behavior and I actually think about that with farmers now in America [clears throat] the farm bill right now is designed to maximize corn so you have to overplant corn even though it's bad for the environment or else you go broke so everyone's behaving this way because we're we're in a lazair era um what to do about it and that's kind of why I profiled this woman named Ellen in that chapter She I think people crave heroes right now. They no one's really articulating hope on whatever your political party is. What is what is a positive food system? And Ellen Ellen's fascinating where she's a farmer. She has two kids. Um she opened her own restaurant and then she opened her own like Cisco because the problem she has with Cisco didn't want to take her product and sell to restaurants in Omaha De Moine. So she created a nonprofit got it up. They would basically pull different farmers in western Iowa to sell into these. It was using and they were also doing schools. That was a big one. But then they got really hard hit by the doge cuts. That to me is like maybe one possible thing is maybe extension. You have extension all across rural America. Maybe they can kind of get into that help this kind of procurement.

Yeah. Maybe you don't try to compete against Cisco on volume but you go like hyper localized.

Hyper local but also something we got to reign in Cisco. I mean looking at the the black box of the pricing strategy would be huge but also I think we should put merger acquisition freezes on these large entities at some point. It's like you can't buy anymore. Like you've hit your cap.

It's interesting Tracy like um the other great homogenizing effect of course on society is big digital platforms right Instagram etc. and everyone feels that they have to constrain whatever they do whether it's a restaurant or a media company etc in order to uh serve the Elgo god that is sort of capriccious and unpredictable in some way. And it feels like the story whether we're talking about the physical world or the digital world is that scale has this homogenizing effect which nobody really likes these conditions.

Yeah, I think that's right. But also there are these like hidden tiers of scale viz these middlemen companies. All right. Well, Austin, thank you so much for coming back on OddLots. Congrats on the new chapter and uh I'm sure a lot of [music] people will be looking forward to picking up the revised book.

Yeah, thank you so much for having me on again.

Joe, that was really enjoyable.

Yeah, I always love talking about food. Although I haven't had lunch today, so um me I'm a little bit hung. Can we go to Olive Garden in Time Square? Let's do it. Right.

Let's go soon. I'll go. I'm happy to go there soon.

Okay. Um I I actually would like to go to garden.

It's got great views. It's actually really fun and it's got great views.

Oh, you've been to that specific one?

Oh, I didn't realize. Yeah.

Um Okay.

So, there was a lot to pick out from that. Um I know you're on the side of cheap and plentiful food, but perhaps

perhaps I guess the homogeneity of the offering, maybe that concerns you.

It definitely concerns me. And this idea that no and this idea that restaurants if they you know so much of the preparation is done offsite etc for various things that you eat and so what is the restaurant anymore and so this is a thing where scale is great and cheapness is great and I'm all for this and I think food should be a lot cheaper than it is because we've had a lot of food inflation in this country and I think it's very worrisome and so food should be a lot cheaper and more efficient etc. than it is. But when we think about the things that sort of make a society nice, if if a restaurant is really just a sort of Cisco manufacturing Yeah. or a Cisco manu, right, a giant microwave that can connects a Cisco manu distribution system to a GrubHub delivery system. What world are we living in?

Yeah. And I think it gets back to the flora and fauna point that you were making. So maybe you could have, you know, uh, food that's cheap and maybe not of the highest quality, but it is plentiful um, and inexpensive, but then you should have, you know, more local options.

Well, you brought me those really nice tomatoes, so thank you for those.

And I grew up hating tomatoes because I thought that they were all really bland because I only got them in the

grocery markets. Yeah, it it is phenomenal how different a supermarket tomato tastes from a homegrown one. Anyway, shall we leave it there?

Let's leave it there.

This has been another episode of the Odd Thoughts podcast. I'm Tracy Aloway. You can follow me at Tracy Alaway.

And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our guest Austin Far. He's at Austin Ferk. And check out the new edition of his book Barren, which has the whole chapter about Cisco. Follow our producers Carmen Rodriguez at Kerman Arman Dashel Bennett at D-Bot and Kaleb Brooks at Kalebrooks. For more OddLots content, go to bloomberg.com/odlotss.

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