Barry Ritholtz Discusses WFH’s Impact on the Economy (Podcast)

how the pandemic is affecting them in their business. So we spoke to a number of people, a real estate attorney, and meat purveyor and economist, a variety of folks who all explained how life has changed under the Shelter in Place provisions. Some of the things we talked about were really amazing and unexpected. Everybody is doing what they can to get by. Everybody's trying their best to get through

what is obviously a difficult situation. And there is a lot of ingenuity and a lot of creativity, and a lot of people working to keep the gears of commerce moving, to keep food and essential services flowing. I think you'll find some of this quite fascinating. Some of it is very amusing. So, with no further ado, our special Shelter in Place Masters in Business. This is Masters in Business

with very Ridholts on Bloomberg Radio. You're listening to a special Shelter in Place, Good Friday edition of Masters in Business. We thought, given the circumstances of everybody being forced to work from home if you're not in the medical field or providing some other essential services fire, police, grocery, what have you, everybody is trying their best to adapt to these circumstances, and I thought it might be interesting to talk to some people and find out how they are

adjusting to these currents. And so my first guest today is Daniel Gershberg. He is a real estate attorney at Roma Devas working in Manhattan and Brooklyn. Daniel Gershberg, normally I would say Walton's Bloomberg, but welcome to wherever you are. Sheltering in Place. Yes, thank you so much for the distraction barrier, and thank you for having me so so, Daniel, tell us a little bit about your practice under normal circumstances.

So under under a good month or a good day, I primarily practice in real estate transaction real estate someone buys someone's elves, and also consumer bankruptcy. So for the most part of the last i'd say five or six years, the majority of that was obviously devoted to to real estate. The market UM was doing incredibly well. Uh And so you know I would be involved in closing transactions. Someone's buying a place, so I'd get the closing or negotiating contract.

I'd have, for instance, a desk in computers and a working for system, and I plod through those things UM with brokers do normal, normal things during the name. So were you you live in Brooklyn? Were you going into Manhattan on some days? Most days old days? I had my own firm for about twelve years before emerged was Rummer Divas a couple of years back, and I was working very close to home in Brooklyn. Many of my clients are based in Brooklyn, and so I didn't want

to commute. Uh. And so I had an office in Brooklyn. About a year or so ago. I began UM going into the main office on Madison Avenue. And for the past year or so, i'd say four and there was five days UM i'd be in the city working from that office base itself. And Brooklyn was afterthought. I've lived now for about three or four years in Williamsburg, Brooklyn as well. So I live in and work there and breathing. So Williamsburg is a very hot neighborhood in Brooklyn for

people were not familiar with it. A lot of condos and co ops, prices have gone up, a time of transactions have been taking place there until I'm gonna guess about a month ago. How has the practice of real estate law changed in this current environment? You know, I was practicing UM during two thousands where the market just sell UM. The market has essentially just stopped and any deals that were in contract, and again us this anecdotally.

You can speak to other attorneys, maybe they have a different feel for it, but any deals that are in contract literally just time stopped. People are in near going through the contracts themselves, or they're taking a pause, they're renegotiating the prices UM and deals that are currently in contract. You know, when I represent a seller and the sellers are calling me and I'm having more zoom calls than I ever want to have in my entire life, where the sellers are calling me and saying, how do we

make this deal happen? And on the flip side, my buyers are calling me and saying how do I get out of this thing? And so real estate just yeah, on on a sort of a large your level Brooklyn right, and again across New York City as well. We're in this sort of unstarted territory right now where um, frankly, there aren't any easy answers, and so people are trying

to get out of deals. And and that's where I think of my day is right now, is navigating the ability for someone to get a better price, get out of a deal, or in the seller's side, to stay in the deal itself. So let's talk about the other aspect of your practice, which is Chapter seven and thirteen bankruptcy filings to discharge consumer debt. I'm going to ask you to I'm going to ask you to look forward and imagine that this goes on for two four eight

weeks longer before things normalize. What happens in the consumer realm with people carrying credit card debt and auto loans and perhaps even mortgage debt if they lose some or all of their income, either temporarily or comin in what what is on consumer debt world looking like three months from now, I'm going to go out in a limb.

And as my wife often reminds me, I'm wrong. Most of the time, I will say that I think Congress has to deal with this in a particular way because I think that, um, you're looking at a deluge of cases that the courts may not be able to handle. So bankruptcy to a certain extent is trailing. You don't file for bankruptcy is the first thing you do. You file for bankruptcy is the last thing. You pay your

credit card minimums. You try your best to negotiate with your creditors, You do everything you can because there's a stigma attached. So people will be filing two months from now or three months ago. Remember there's in New York there's a moratory amount evictions and from closures for at least three months, so people are going to sort of stay in place, right, No one's gonna be thinking this way. I think what you'll see is if this continues for let's say three or four or five months, then you

begin to see people filing because frankly, they won't have incomes. Um, they won't be able to make And remember again, O, wait was about people not being able to make their mortgage things. Now you have people that can't make their rent, and you you're bringing in this other section of the workforce, and that wasn't there before. You're gonna have a large number of cases. You're gonna have people that are living

off of credit cards for a period of time. You're gonna have people that are taking personal loans or cashing out there for one case or getting for one K

loans to the extent that they can. And then once all of that stops and they can't take any more credit out from anywhere else, only then do they come to have this sort of come to Jesus moment where they say, oh my God, I think I have to file for bankruptcy, right, And so I would say, trailing, you're looking at it rather than three months, you're looking at six to seven months from now. But I think

you're gonna have an enormous number of cases. And I say this, I know it sounds ridiculous because you know, obviously in self interest, more clients is more money that comes in. I don't even want this. Um. You hear these worries sometimes of these people, and and Oheed O nine really changed me in a lot of respects. Um, I would rather people not filing and and there'll sort of be a way out because the emotional toll that this takes on people. Um is underappreciated when it comes

to a lot of this stuff. So I think if you see anything, it's gonna be again half a year from now. But I'm hoping that Congress sort of brings some relief even within the laws themselves. Let's talk a little bit about life in a Brooklyn apartment. I'm assuming you're not on a a three thousand square foot giant apartment. You're in a fairly normal Williamsburg um apartment. Are you in a condo or a coh So I'm in a condo. I'm a renter in the condo, and by fairly normal.

Just to give your audience some ideas to why it's resiuleous to live in the city. Um, I am in square foot which is big for the purposes of New York and a garage for the rest of the country. Squarefoot apartment UM with my wife, my almost three year old son, and a newborn daughter, which again really really great prior to a pandemic, as well as a seventy pound English bulldog. UM. So I try my best to leave that apartment as much as I can, then work out of my car downstairs. Your no, I kid you,

not my my office. I have no problem deducting anything regarding my car, my taxes this year my car. I have a Nissan path funding that I that I that I got this year at least it, and I worked six hours a day out of this vehicle, because to try and get anything done in what is basically an

insane asylum upstairs is impossible. I have one area of that apartment, which is my wife's closet um that I work out of sometimes, and I literally put a laptop on the footstool and close the door so there's no light anywhere there because if there's light, my sun will will rip the door open. So I'm two minutes away from a quill pen and a candle UM. So most of the stuff that that I do is is running downstairs taking calls UM, doing zooms again UM, and sending

emails out from from my car. Is that where we're speaking to you right now? From your Nissan pathfinder. I am in my Niecean pathfinder as we speak, as as I like to say, my remote office, which see do you win? I'm trying to picture this. I So I'm in the driver's seat because God forbid the cops were to pull up. If I'm double parked or by hydrant, I would be able to to move and continue my zoom call. I would search the audio only, or I would stop the video itself. Um. Occasionally, when I need

the laptop, I will go to the back seat. The pathfinder is wonderful and that there's there's a three row capacity here. Um. So I can basically go to the third road to take a nap if I need to. I haven't done that as of yet, Barry, but this is this is where my career has taken me. So so, I lived in the city for a long time. I lived on Lexon and St. And I remember what a

pain it was dealing with parking. But I have to imagine that the New York City Traffic Enforcement Division, in the midst of a pandemic of which New York State is a hot spot and New York City is the hottest hot spot within New York State, have eased up on that sort of stuff. Are you Are you telling me alternates out of the street parking is still in effect. No, we're good. I'm just neurotic and I don't want to take it, even through a pandemic. Itself and has nothing.

No one wants to get close to anyone Barry. So I'm working. Yeah, so I'm just interest me being theronic. Alright, So you're sitting in your front seat of the Pathfinder. You tell me a little bit about the technology you use to do your job. What what are you working with, and how are you communicating with clients and others? They sort of variety of sort of things. But obviously I'm

taking calls on my iPhone. I'm zooming, doing the zoom calls, which to become this this new thing with with my elephone as well most of my files of course it's on a dropbox. I have access to those as well. Look, I've been remote and virtual for for a number of years prior to that, just because of again going from Brooklyn to the city and having two offices. So it hasn't really been that bad. The problem is you can't get a lot of work done um in the car itself.

When you have to send emails out. I literally go up to the apartment, um when I know my son is either taking a nap or my wife has them in a different room, and I will hyper focus on sending an hour sort of email out um. In that closet, I mentioned that I have a newborn as well, So at some ungodly hour of let's say three thirty in the morning, when when my daughter is up, I'm also um as i'm as I'm feeding her, um sending out

emails from the living room itself. So I leverage as much as anyone can at this point, my MacBook, my iPhone and everything else. Just to again this is you know, I'm not thriving just to survive. And I think what you're really seeing, to be honest with you, uh, maybe it's a left or interest in extent is every lawyer is dealing with the same thing, or every person I'm dealing with is doing the same thing. That famous skit where the guys giving an interview and his two kids

running behind him. That's just that's just everyone these days. So you don't feel weird about it. Uh, you don't feel weird about someone showing up with a sweatshirt on on the video on zoom because you know that they're going through the same hell that you're going through on the daily BA which is good. That was a BBC broadcaster whose son came running into the room during a broadcast. He subsequently brought the whole family and during the the lockdown,

and nobody even nobody even thought twice about it. So, so if you're using you're using a laptop in the car, are you using any sort of jet pack or or WiFi connection to the laptop or you just using your iPhone as a as a connection or do you not need that? You just use the iPhone for the Zoom conferences and you could deal with the laptop when you get back up to the to the apartment. I try my best to to separate those two things, because the second I do listen, my life resembles that of Larry

David quite often. So the last thing I need to do is try and connect the hot spot, and I'm connected to someone else's WiFi and not this virus. I try my best to separate and do the iPhone thing. I have brought the laptop down, used it as a hot spot. You know, sometimes it's better than others. Sometimes emails are unfortunately go out very quickly. Um but I try and make it so that if I need to send that emails, I'm running upstairs to I can't believe

I'm saying this on the radio. Interview to my wife's closet, and um, the rest of the time, I'm in my car, uh, doing calls and everything else on my iPhone and zoom on my own phone himself. So, so I'm picturing a street in Williamsburg with all these high rise condos and rows of cars parked. Are you the only person sitting in your car or do you see dozens of other people operating similarly? I am I am probably the only

person sitting in their car. Half of this neighborhood has fled um to God knows where to second homes that I don't have to their parents place. And my mother lives in Miamily, my hives pens live in Europe, so we don't we don't have that option. Um. So there's no one in any cars really other than me. Um. I see sometimes the same cops going around and the same sort of people going around and walking their dogs

and everything else. There's there's really not a lot of traffic in the street itself, So if you want to picture it, it's it's really just me running a vehicle inside a vehicle it self, doing some calls, sometimes with the windows open when when the weather actually allows me. Thank you. Daniel Gershberg of Rumor dubas real estate and bankruptcy attorney, My next guest on our special Good Friday edition of Shelter in Place, Masters in Business is a

former m IB guest, Joe Davis. He is the chief economist and investment giant Vanguard, and I was surprised to learn that he is considered essential person l during a pandemic. Joe Davis, are you not sheltering at home? Are you actually in the Vanguard office? Uh? Hi, very thanks for having me. I am, although we uh, you know, for for some time, we've taken UM, uh you know, pretty

pretty significant steps. I'm I'm the only one on my floor here, uh, in the building uh that I work at UM, you know, because I'm a part of the investment management group. UM. There's just very select personnel that UM maybe either in the building or and and what we call hot sites. So it's UM in one sense. Even though I'm I'm in the office, I'm actually alone. So it's uh, and you know, it's a question in my office where I can close the door. So it's

the it's pretty much an isolated environment. Any meetings that we're having, clearly our our video, um even for a certain career that maybe on campus, which is, you know, fairly few. So so let me paint a little bit of a picture for those people who have never made it to the enormous campus that Vanguard has uh in Malvern, Pennsylvania.

It is like a college campus with lots of three story brick buildings and here's a conference center, and there's an auditorium over there, and here's a parking garage, and it goes on for it feels like thousands of acres. I don't know if I'm overstating it, but it's like a giant, thousand student campus. And when I've been there many times. When you're there, there are cars coming and going and people walking around, and offices filled with people,

and um various conference rooms and public facilities. It's a small city kind of in the woods of Pennsylvania. Is is that a fair description? Yeah, Berry, it is. I mean, it's it's it's actually a beautiful campus. We're in the suburbs, about a half power from Philadelphia Airport. So so given that this is normally a bustling city, how different is it today? When you walk in? Is it like a weekend? Is it how do you compare what you're experiencing today

compared to the normal day to day operations of Vanguard. Yeah, I mean I think it's for uh, you know, for for for for I would imagine it feels similar to others, uh, in other industries maybe around the country. UM, you know, you're you at best, it feels like a weekend. Although I can see the highway from from my building, UM and you know, very little traffic. UM, so even that

seems really out of place. UM, you know, but I think for you know, if I I lead a group of roughly sixty employees around the world, UM, I think the what we're fortunate is that we can do our jobs pretty much anywhere in the world. We have wonderful technology. UM. We're continuing to operate day to day as if it's best you can, as if uh, you know, we didn't

have this, um, you know, unfortunate health crisis. UM. But you you try to you know, I think I think many of my team it's just trying to balance what goes on in your personal life with your work life, even more so because you're you're often you know, at home trying to navigate you know, those those two uh,

you know those two worlds. You know, I'm isolated here. UM. So again, even if you have a meeting with someone else who may be in a different building, which again are few, and where they're or they're at home, we're just operating all Microsoft teams. And UM, it's been a it's been a real benefit. UM. You know, you get out some of the cadence, UM, you know, some of your habits. UM. But it's I've actually been pleasantly surprised, um,

how productive you can be. UM. You know, if you have access to to really good technology into the you know, the information you need to do to do your job. You're telling me that a constant stream of people walking into your office to interrupt you with questions or issues or things somehow reduces your productivity. Is that what the normal, uh, the normal workflow is is? Yeah, well, I tell you know what that what that has been challenging is just

keeping up with just the rapidity of events. And again we've we've been watching the the unfolding of this of this unfortunate health crisis. UM, you know, since since December thirtieth. I recall that in China because I recall that because it was my birthday. And you know we we've been you know, using alternative data sources for years and particularly

applied them in this situation. And it's um, you know, I'm spending just as much time uh thinking about um, you know, what potential additional solutions we may need unite day from a policy perspective, um, you know, in terms of a public service, as much as I am importantly thinking about the economic conditions and what that may mean

for the markets over the coming months and years. So I spend a lot of time with that, with some of my colleagues of Vanguard, you know, to try to help policymakers because because I think we're gonna need additional firepower applied to the situation. Joe, Let's talk a little bit about the impact so far of the coronavirus. We saw the initial unemployment claims two weeks ago at about four million new job losses. This past week it was six million. God knows what we're gonna get uh the

week of April five already ten million job losses. That's more than we lost in the entire financial crisis of oh eight oh nine. How significant is the labor market damage today, Well, it's it is pretty significant barry and we're not I don't think we're I don't think we've seen the worst of it, not uh necessarily, which is unfortunate. UM, and I really my heart goes out. In fact, I have a family uh and friends who have who had

to go on unemployment insurance. So it's, um, I mean, it's it's it's one of the sigma it's it's certainly we were projecting over over a month ago and yet we've had the revisor estimates. Um, it's it's the worst single quarter in terms of a rate of a change, a deterioration of labor market that that I think is ever on record. Um, you know, I think it's. Uh, it may not be we may not get to unemployment rights there that worth highs the Great Depression, although that

played out over you know, three or four years. This is playing out in a matter of weeks and months, and so it's been a significant uh reversal in conditions. Again, it gets back to this, there's just a vacuum of cash flows for many businesses across the entire economy, and which which is why it's important to to really try to arrest that. But it's it's, Um, you know, it's most sectors are are impacted, and it's so it's broad based, it's significant, and it's been fast, and UM, you know

we will. We are expecting at least five million uh additional job losses just from the just from the job's report UM over the next month. UM. I think we're seeing, you know, additionally, we are seeing claims UM elevated a little bit. UM. I don't mean to dismiss them, but they are elevated a little bit because the Cares act U makes unemployment benefits a little bit more generous and has changed some of the criteria by which you can

qualify for unemployment insurance. It's to be very positive from A from A for the that have been affected right in terms of their job. But that is leading to even additional uh increasing claims over and above just those losing their job. So it's um. But it's I mean, it's I didn't think I might I would be in a place of my career where I'm projecting GDP declines as as large as we are and job losses as high as they are, and yet worrying that perhaps uh,

we don't, perhaps there are actually too optimistic. So I know most economic data comes out with a bit of a lag. You're always looking backwards that would just occurred. But I keep hearing anecdotally that people who have been trying to file claims for unemployment they can't get through on the phones, the websites crashing. I'm curious how accurate is the data as to the true state of the

labor market damage? Are things worse than the official data UH states or is it possible that we're just not keeping up with of the new job losses? Well, I think it is. I mean again, we're going to have a lag, there's no doubt about that, Barry. But we're trying to triangulate. When you triangulate on I think we're real time data, and we were doing this in China and doing it for Europe as well as the United States.

When you look at I don't know the usage of of of credit cards, when you look at Google searches of of certain keywords, we were tracking that over a month ago. We started with airline cancelations, and now you look about unemployment search activity, it tends to correspond, uh, you know with our economic outlook, which is which is really called for a significant fall um, not only for the past quarter which just ended, but for the for

the second quarter. UM. So, I I think you know, when you when you look at the distillation of of information and as well some more high frequency UH data, I think it. I think it's generally assistant with the headlines, which are not you know, which are concerning UM. You know. I think though, I will tell you is that we do see as our baseline UM conditions stabilizing and then modestly approving as we get to the back half of

the year. Now that rests largely on the big assumption UM, which which we still have as as our most likely outcome, that at some point this year these needs for shelter in place UM dissipate over time. But that's really the key variable is really is the health variable more so than the economic one. Let me ask you a more speculative question that that requires you to use a little bit of your imagination. This has obviously been a wrenching

and unprecedented experience for everybody who's been involved. What sort of lasting changes are going to come to the economy, how business is conducted. Just look across the board, UH, service sector, real estate, labor. How is the world changed on a permanent basis by the coronavirus. What's a really good question, Barry. You know, I think when I when I study world history, what at least what I've learned is that when there's profound shocks and crises, UM, it

could be war, there's certainly economic shocks. And this clearly qualifies. It usually does two things. One is it accelerates a trend that was already in place before the shock began. UM. And then secondly, UM, there are typically i'll call them social or political reactions to very shock itself. So let's take the first one. I mean, I think things that we were already seen, you've talked about and documented uh

in a number of times. I think both the need for UM, I think a revisit of some aspects of the global supply chain will be in order, and I think we may we may see more serious conversations of that from a risk perspective, UM, meaning you know, these shocks may occur every so often, and so from we may see more supply chain changes than we did UH from the trade war. Explain that a moment, how might

the supply chain shift? Are you referring to the just in time delivery system or yep, yep, I think, I think so, I mean, you know, you know it's been it's been hugely UH. There's been a number of positive economic benefits of just in time. But you know, because when when when when the industrial economy, when the whole broad based global economy runs so lean for lack of a better word, there is a risk of that, the risk of that as you don't have capacity in the

system or um. And we've seen these shocks before, but they weren't at the same magnitude and may you can go back to the unfortunate you know, earthquake in Japan, right and what that did two parts of the electrical can outer industry. So that that I think when you

start to say no, they'll trick. You know, if you assign a certain probability to these events occurring ever so often with a very large negative economic loss, you then if you if you're in the in the in the seat of a chief financial officer or CEO, you may start to you know, assign a little bit greater um, you know, assets or investment into uh, adding redundancies into the system. Right then before it's just from a risk control perspective, So I think we'll see some of that

in what magnitude. I don't know, but I think it's hard to imagine that in my mind that we'll go as lean as possible in just in time as we did before, because that opens up a business on operational risk. The secondly is that I think we'll see a little bit more. We certainly will see acceleration and automation, but

again this was a something that was already occurring. UM. I think we'll also see uh, you know, it'll take some time for some sectors to come back from um, you know, like air travel and you know, things that really are our social you know, social interactions of human beings. I don't think though I think there will be a recovery in business travel. I think there will be a recovery in intervals, individuals going out to eat. I mean, I recall nine eleven there was a significant concern or

future of air travel. UM. But it will take time. That's where I think to anybody tests and the ability and you and I and all of our human citizens baried to be able to know that if if I go into you know, a certain social setting, am I

and my is my health at risk? I think when we get greater confidence with that right, I think we will eventually see a return to some of those sectors, but it will take a little bit longer um and until until that dissipates, but that we will see a recovery in some parts of the comment that are really on their dress right now. This is part one of our special edition Good Friday's Masters in Business talking to people how they are adapt don to the coronavirus and

working at home. Our guest today is Pat La Frida. He is a third generation butcher from a family that's been in the meat business for over a century. Lo Frida's Meat Purveyors supply stakes to many of New York City's high end restaurants, including Minetta, Tavern, Spotted Pig, Union Square, Cafe,

Blue Smoke, and Market Table. Perhaps most famously, Danny Myers tapped him to help create the unique shake Shack Burger, which became an immediate hit and is now a global chain, largely attributed to the success of the custom meat blend Pat La Frida created. Patla Frida, welcome to a work from home edition of Bloomberg. Thank you very much for having its pleasure. So your business really developed as a meat supplier to high end restaurants. Obviously, restaurants are on

are incredible dress today. What are you hearing from your customers? Well, I'll tell you that the restaurant in the industries is really they're struggling. I would say that they're split between thinking of closing down completely or reorganizing. Um. But but the brighter side of the other fifty, I call it the positive fifty that many of them I've talked off the ledge, which is get off the couch, improvised, and

we've seen so much of that. I've seen I've seen more ingenuity in original ideas for restaurants that I've ever seen. And you know, sometimes it takes a chaotic time like this to to to really get um, people's minds rolling. And you know, there are so many great examples. But I think restaurants that had never thought of anything like curbside delivery before thought they were above that. But we

don't even wanted to do that. So when we talk about high end restaurants in New York City, they kind of looked down upon, uh, you know, a curbside pick up or take out. Um, they actually didn't permit it. And then but they wanted to um historically. Now this gives them a chance to actually take that that that leap and and to begin that part of this evolution, because that's what this is going to be. Restaurants are

going to be different forever. UM. We hope that that there will be some you know, returned to normalcy, but for anything, for for foreseeable future, things are going to be different. We we already feel it, um. And when restaurants get to reopen, I think we're going to see the biggest surgeon and rebound in New York City. Um. You know, despite it being the epicenter of the of the coronavirus. UM, I disagree. I think it's gonna be We'll have more people that have contracted it and have

gotten past it, um. And those are the people, the very people that we will be the first back to work at, the first to feel most comfortable in restaurants. But to have restaurants, I think, UM, like they have now to to create concepts um meal kits um. Again.

The the car is pulling up to the restaurant, topping the trunk for orders that were already paid for with a credit card, confirming through the window a closed window as the who that customer is with customer that was picking up UH, and then the someone from the restaurant just putting the food in the trunk of the car and the car driving off. Talking about social distancing and restaurants are a place, it's New York City's golf course. It's where we do businesses, where we celebrate, it's where

we spend time together. Um. But at the same time, six of New York City residents got their meals from outside of the home. So when you close that down, when you're closing a major part of not just food supply but culture, and you know, how will that culture change in the future. And UM, I certainly hope we get back more to a personal place where where those

meals are unique and meaningful. And I really think it's going to take some time so between now and then the restaurants to survive that percent I was talking about those UH restaurants may not be making money right now,

and that's really not what it's about. And no one's doing well right now, but it's certainly feels better to the operational in some capacity so that when it is time to come back online and it is time to get the troops back, that that it'll be that much easier, and that feeling of desperation of being on a couch, um watching more cable pay per view and Netflix, and you ever thought you you more to watch? Um? It just there's so much more of a of a life

in feeling that. Um. You know, Yes, it's a virus, it's horredness, it's taking lives, but you know what, it's not gonna take my life. It's not gonna take all of our lives. And we need to fight it by living. We need decided by succeeding. That's a great philosophy path.

When you say, of your client base, which tends to be middle to high end restaurants, how many are still operating today and doing either curbside or take out um service in New York and and in any of the other boroughs, Well that's I put that number at about fift are still closed from the day that the restaurants were asked to clothes. And that's really scary. That's not just fifty percent of my business. That's not just fifty percent of my receivables. Um, you know, that's fifty of

our lives. We've built our lives around supplying restaurants. Um and and I'll tell you that. You know, we had to pivot ourselves and we had to change that our business model. But but and we were already diversified into supply retailers and and and you know our own home delivery service. But we really ramped up our production. Our production has been running six days a week, twelve hours a day. We have not taken a day off from this for during this entire pandemic. Because we are an

essential part of the food chain. We were essential personnel. So we've been in the fight from the beginning. And and quite frank we like it that way. Um. We would want to be forced not to be able to come to work. Pat, I notice on your website that you are now delivering directly to consumers. Tell us about that. It's a sector that was always about one or two percent of our annual sales and now we'll probably account for about fifteen or um. And and it is really

the access. What we saw in the first few weeks of the pandemic when it was actually called such, is that the run on supermarkets was extreme. And what what none of us want as Americans is panic. I think we can all agree upon that we don't want unnecessary panic.

So when you when you don't own a meat company or a food company, and you know you're online for five hours in a supermarket to find out that they have nothing on the shelves that will cause panic, and and and the virus cannot break this country, cannot break our cities. So you cannot break these states. It cannot do it, but panic can. And that's what we felt. We made a statement to ourselves, among our family and among our teams, we need to start to think of

how to alleviate this panic. How we are abridge the food between between food and people and we need to get me to people. And we are not going to um tolerate in anyone that we work with. So and I'll explain how we got others involved to help the distribute products. They will not tolerate a price guage by a penny. It's just it's not gonna happen. It's not who we are. This is really to stop panic. And

I mean our lives are abridging food with people. And if we will eat with we're able to do that during this then we would have saved so many more um maybe not lives, we maybe lives. I mean, just we've got a lot of that feedback. I mean, we don't like to accept that, but we just save so much worried by staying. So let me ask you a little bit about the supply chain. How is your business adapting? Where are your what are your suppliers doing when they're

making their delivery. How do the logistics work? Is this business as usual or have things really changed radically from the farm too? When you ultimately drop off a package of burgers and steaks to a restaurant or somebody's house, well, I have to say that the meat industry has become uh one of the most efficient systems food systems in the world, and it has not been broke. So they're still people still need to eat with girls if it's coming from a restaurant or a retail market, is just

getting delivered to your house or getting curbside delivery. People still need to eat. For most people, they eat meat and and it's one of the staples they their family need to see on on that table. So just making sure that our suppliers and our suppliers from out west have been so I mean, they really still think it's it's it's an East Coast and and like New York Center problem, and I'm trying to explain what's happening here is going to happen there a hundred and any one

countries in two months. I guarantee you it hit all fifty states. Um, but maybe they won't see at such a rate that work that we saw it. But we're in constant contact about restaurants and up again food were what they are telling me are about one third of the sales that they used to have. However, if you speak to a restaurant that's partially open compared to a restaurant that's completely closed, you'll hear a big difference in

in in their voices. You'll you'll know and feel depression for those that haven't opened at all, and and and and boredom. And you'll hear triumphs in those that are going in every day and you know they're losing money, but but their customers are so happy that that that they've stuck it out and that they're providing food. Um. You know, it's it's it's a very strange time. But you know, as things changed in time and we all need to adapt to to to what's ahead of us.

I I truly think if we stick to that abl thirtieth reopening, I really think New York is going to be one of the city that bound us back so quickly that we'll be talking for years as to why it was reported internationally that New York was crumbling. I've gotten bolans letters basically from friends and other countries like, I don't know if you guys have heard, but we're okay. The faster we can get through this, the faster we're

going to rebound. Let's just talk a little bit more about how your day to day work life has changed. You're an essential service provider. Are you still going into the shop? Are you still supervising the distribution of meat to restaurants and homes? Yes. That's the one thing about being a part of you know, in essential part to the to the meat supply chain, is that as essential personnel,

our schedule never changes, never changed. Through Hurricane Sandy at eleven we were we were very close to the tower. Unfortunately UM to have witnessed them, the tragic, the atrocity, UM and we will only close for one day then, so this we well, we haven't closed at all. And actually because of our pivot to to help retailers restop their shelves, and that being a more labor intensive process. My product production team has been working at full capacity

ever since this begin Wow. So in my freezer, I have a couple of Australian racks of lamb that are shrink wrapped from La fred to meat distribution. Uh, how are you selling product directly to households? Is everything show up shrink wrapped or is it like going to a local butcher. Everything gets delivered vacuumed. But it's it's it's vacuumed fresh. It's never been frozen. So our product, it's just the way our culture as butchers has always been from my grandfather to my dad to me. UM meets

always better fresh. So when we vacuum product where you're actually able to you make the decision if you'd like to freeze your product or run ahead and freezes it will be good for over a year. Um, if you don't, your product would be good in the refrigerator for about twenty one days. So you really have meat as fresh as as a restaurant. We would get it as fresh as a butcher's shop to getting Hey, Pat, tell us a little bit about how you're getting these products directly

to consumers. So our product is shipped fresh and it's got ice gel packs in the in the boxes. In the boxes are insulated themselves, so although we ship overnight, that box is good in the temperatory. I think we've tested it up to five days without without having the temperature being compromised. But um, we we do all the fulfillment here and we work all night long. So um, after the virus of chaos, yes, our home delivery business has really shot up. However, um, you know, so has

all reacha oil. So whereas most of our business, of our business with supplying restaurants right now, about of our business is supplying retailers to include Amazon, to include shop right Fresh direct, UM in Italy and and and just trying to help resupply the retailers so that we could avoid panic in the city and panic in the try state. We just don't want it to happen because there's no reason for it. The food supply chain has not been broken, and I'm I'm proof of it right here. Like I

just said, we have not closed one day. We've been in production every day. I'm in constant contact with my growers out west and the harvesting facilities again out west. You know, everyone is in in in food supply has really been has come together like you see in all the parts of in other industries in our country. Really when when it needs to get together and binding together, it does. So let's talk a little bit about everybody's

favorite barbecue item, the hamburger. You have been credited with stoking a giant burger boom in New York City prior to this whole current situation that's taking place. How much of that is hyperbole and how much of that is is true? How responsible are you for all of these lovely high hamburgers at all of our favorite restaurants in Manhattan? Uh?

And gildous charged? And you know, uh, I'll tell you that that before we began making blends specifically for restaurants, specifically for the cooking equipment that those restaurants had in them, and specifically for the play buds of the chiefs in those restaurants, really shop beef or ground beef was sold in burger form or in bulk by its fat percentage. So you saw, we never really used those numbers. Those numbers are really in order to calculate those numbers if

you didn't send that product to a lab. What you're doing is taking imported trimmings and um that that are tested for it's how lean they are, and then adding it with some domestic trimmings and maybe some mechanically bone beef, making the burger that we've all seen more gray and flavorless than it is a real steak experience. So my grandfather always said, you cannot hide your sins in the chopping machine. So what you put in there is what

you're gonna get out of there. And and what he meant was when you use hole muscle only, so full hole cuts of beef, when you're using a whole chuck, and when you're using the clod which has the flat iron attached, which has many many retail cuts in there, you're gonna You're gonna get the flavors of ribbi, You're gonna get the flavors of New York strip um. And a big part of our recipe is to use whole briskets. Briskets have a buttery flavor um from that fat layer

that separates the two muscle groups in a brisket. The brisket holds up thirty of the weight of an animal. So it's a it's a real tough, slow cooked, slow cooked type of beef. However, when you chop it, it has great flavor and it really holds back a little bit and give us the burger some fight so that you don't have a mushy, gray cafeteria burger that we had back in high school. And it says the very special. And actually how this started, Um, my grandfather always made

great burger meat. And although we didn't sell to some of the really fancy restaurants like Les Banasa, to the Chef Delivier, yet during grilling season they stopped by our place for their burger meat to grill for burgers because my grandfather had such a great reputation for for that and that that really carried through so all of the disciples, So all of the chefs that spawned from from that group, when they move on to other restaurants, they know, um

and they know where to get. They wanted the best caviat, if they wanted the best burger, then they know where to go. Let's talk about something that's a little bit blasphemous, and that is the black label burger. How did you ever decide to say, I know let's take the most expensive cut of dry aged meat in our refrigerators, and what the heck, let's just grind it up into hamburgers. A lot of people thought that was just blasphemous. Yes, And you know, as as I experimented with different blends

for different restaurants according to what they wanted. I had met with a chef that was going to open a

restaurant in six months and wanted something very different. And now have to remember, we were on the cusp of the financial bubble like it bursts them, so in the planning stages of you know, I guess you could say that the financial crash happened during the planning stage of this chef trying to find something special, and I just so happened to have been working run because of my love of dry aged beef, a portion of the burger

having dry aged beef in it. I thought I would give a dry aged steak experience with you, not as expensive as a steak, but not as inexpensive as a burger. I was trying to reach somewhere in between, but I still have that great dry age flavor. So that restaurant wound up to be Minetta Tavern, and the chef riad had asked me for an agreement that we would not fell black label did that specific drage blend to anybody else,

And we shook hands on it. And he is no longer adminant at tavern, but we still hold our problems. We've never given that blend to anyone else. What was the pushback like to a dollar hamburger in two thousand, Well, so when the restaurant opened the eight the crash had happened, so ownership and the chefs were really considering not not

putting it on the menu. Black label almost did not exist because they thought the twenty six dollar hamburger as opposed to the sixteen dollar hamburger, which was a great burger. Also it's a short rim blend. Um. But they figured, okay, let's do it, and they got a little bit. There was a writer or two that that brought it to everyone's attention that you know, during these times, why is

there a twenty six dollar hamburger from the menu. Yet they didn't complain about the coat the boof so a dry aged rib steak was ninety dollars, but the burger was twenty seven. After one year, Um, I remember, um, the chef colony and asking me, Pat, do you know how many black label burgers we sold in year one? I said, yes, sixteen thousand, five hundreds. Like, but how would you know that I saw you the beefy they

ate iceburger. I know exactly how many ab because of trace ability we track you know, every pound um for our USBA guidelines in their own personal trace ability and of the less expensive short rib burger UM eight thousands, so slightly less than half of the twenty dollar burgers dollar burger is is three hundred a week. Is is back in the envelope calculations. That's a lot of burgers, a lot of burgers, especially a steak house. So so let's talk about some steakhouses, and I want to ask

you about two specific ones that you're involved with. Tell us a little bit about the chop House at City Field where the New York Mets play. Well. I had become friends with, you know, the ownership of the Mets. There were big fans of Hours, as we were of theirs. And one day they asked me and they said, Pat, you know there's one thing that our ballpark does not have,

and that's a steak sandwich. They had asked me if if it's something that we would consider if we had a steak sandwich in our family, and we did it had skirted steak, we had we had changed that because, um, you know, scool of steak is my favorite cut of beef. But it's just too um, I don't want to say tough. It's it's not tender enough for a sandwich in a ballpark. People would be ripping the lay at it because they don't know what the attributes of the scoop steaks. So um.

They asked me to come cook our steak sandwich and I didn't think that I would be cooking it. I thought like the chefs and they would be cooking it and amount of three D and they loved it, and they act. They told me that the season would be starting in twelve days, and did I'd be operational in two locations in twelve days. And I'm not one to

say no, I did. And they're still told today big Hits and and at the ballpark that if you haven't been there, to anyone listening, um, it's a ball parking in which there's no better food in any other large format capacity than city field. It's a giant upgrade. It's a giant upgrade from Chase Stadium, to say the least. But since you mentioned ballpark, I have to bring up MSG. You sell Patla Freda steak sandwiches at the Home of the Knicks. In fact, it's really the only reason to

go to the garden these days. What what gave you the idea of saying, Hey, here's a venue where we can reach out to the public with a really high quality food experience at a place that usually sells not necessarily the greatest food. Yes, but unfortunately that building is under major renovation to the tone of one billion dollars, so our footprint the gardens will will be suspended until

that construction is finished. What we did open, though, was in in the time Out building in Dumbo, which was a great food hall, un though it was closed recently, but we'll reopen when all the restaurants reopened. Is the same concept on the first floor on the fifth floor UM with an additional concept of the first floor. So we have three locations and one food hall that has twenty three concepts. We're the only concept that has more than than one under one roof uh and the most successful,

So we're really proud of that, and it's amazing. As a kid, I'm born and raised in Brooklyn, and as a kid, I wasn't leaning allowed in that in those areas. And to see how it's changed in the amount of tour as people that you just you can't even drive them the streets down there on the cobblestone. I mean, it's just littered with with with tourists in a very

good way. I don't know how tourists know to go there, but they have found a beautiful place that overlooks New York City at the base of the Brooklyn Bridge in the Manhattan Bridge, and right there overlooking the water is a gorgeous food hall called Time Out. And we really can't wait until we get back. We really can't wait till we get timing, I should say, uh. And and that's those are epic views over there from from the

esplanade looking at the skyline of Manhattan. We we keep hearing that there's gonna be another round of stimulus coming out of Washington, d C. If congressional leaders called you and said, Pat, we're trying to figure out what we need to do for restaurants across the country, what sort of advice would you give them to help ensure the

restaurant industry recovers when all this is behind us. That that really is a great question because even with this current loan that that they are, you know, they're all able to access this SPD loan. But what's the one thing that they can't do with it? They can't pay their mean prevyor they can't pay their product purveyor fish prevyor so, you know, not being able to pay bills. You see, the whole the whole system has to work from from the restaurant suppliers all the way through you know,

the finished dish. But but let's just think of the restaurants for now. They're they're devastated, they don't know what to do. So when has any restaurant, you know, as a whole when when when has the country ever had forced restaurants to close? Never? Not, not in the history that we know of. I don't even believe it. In nineteen during the Spanish flu did they close all restaurants? Um,

So it's it's a different difficult question. And I want to help the restaurants more than anyone, but where does it And then, because there are many industries that I don't know an industry that has been profitable during this time either. So um, it's again, I want to help restaurants. I know that the administration has met with some very um well known and celebrity chefs to get their input on how to help restaurants. But restaurants are in a

lot of trouble. And I think that the biggest part of the Simbulist bill that helped restaurants in general was to help their employees get unemployment. To me, that was the most important part because again bell behole and now a small business owner is left with a huge chunk of of missing revenue. So yet they have read, yet they have expenses, Yet they have They've had no no incoming money for weeks and and and as opposed to what the general public things, restaurants don't make large profits

at all if all. So it's a really tough question. At the same time, I'm a realist. This money was not just sitting somewhere in the back shelf. Get ready for a stimulus. We're borrowing this money from foreign countries and and we're gonna have to pay back as a country at some point. Also, so there's got to be some balance in there. I originally the stimulus was a billion a trillion dollars, then it went to two trillion

with the idea that we may need more. Um. I think the idea of asking for non business related things during that time by by certain political leaders was just atrocious. Really, we need to learn about the businesses and to help restaurants, the administration would really have to have more of these small business loans that they could loan restaurants. I wouldn't say completely forgivable. I think that when restaurants built back, like any other industry, they would have to pay back

these loans. And if they know, the interest rates right now are at all time lows the federal funds rates and all time loan so if they could have longer term loans, so these loans are two year loans, well, why not extend that for restaurants. If we're gonna kick a sector that really needs help, let's loan the restaurant money so that they could get back on their feet with a small interest rate and they pay that loan

over a ken year period. I think that would be a great way to help restaurants, and that's what this thing was started. That ways but then it went to two years. It's not with forgiveness. I I say no forgiveness. I think that the restaurants will even happy to have a low interest loan for a longer period of time, and that would really make them sound Thanks Pat. We've been speaking to Pat Lafreda of La Freda Meat Purveyors on how restaurants and the food chain is actually being

impacted by the coronavirus. If you enjoy this conversation, well, be sure and go to your favorite podcast host Apple, iTunes, Stitcher, Spotify and you could see any of the previous three hundreds such a conversations we've had over the past five and a half years. Be sure and check out my weekly column on bloomberg dot com slash Opinion. Follow me on Twitter at Ritholtz. I'm Barry Riholts. You're listening to Masters in Business on Bloomberg Radio.