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Rahul Ramchandani @Rahul_Ramc
, 11 tweets, 2 min read Read on Twitter
A thread on money, cash flows and why restaurants are not good businesses (for most people).

Not sure what prompted this train of thought but perhaps the opening of a new restaurant right next to my house has got something to do with it.
“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation.”
"Marketing and innovation define each other in yin-yang ways. Thinking about the fundamentals of this dual pair of concepts led me to a curious definition of the most important word in business: customer."
"A customer is a novel and stable pattern of human behavior."
"Inertia in business comes from predictable cash flows.
We think of cash-flow as a very present-moment kind of idea. It is money going in/out right now. But actually, major cash flow patterns are the oldest part of business."

They are ancient rivers of money.
"Buyers and sellers alike see markets as an illegible and turbulent churn of transaction opportunities. But really, they are landscapes carved out by great, ancient rivers of money and their tributaries. These rivers change course rarely."
"The nice thing about thinking this way is that the market is now a system of cash flows that exists independently of the specific set of businesses serving it in a given era. You can map the system and look for an unoccupied waterfront spot."
Now what has this got to do with restaurants being bad businesses?

Two things required for a business to become successful - marketing and innovation - are aimed at avoiding competition and are incredibly hard to do in the restaurant business.
The waterfront is too damn crowded with sellers and the customer is too fickle in his taste. Double whammy.
Good restaurant businesses do exceedingly well on one front at least.

Marketing - celebrity chefs, Michelin stars, etc.

Innovation - where it looks more like a manufacturing business than anything else. e.g Domino's, McDonald's.(h/t @BrentBeshore on invest like the best ep100)
Excerpts are from the book mysteries of money by Venkatesh Rao.
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