1: Panera Bread founder Ron Shaich prides himself on being a contrarian.
“If everyone is in favor of something, I’m probably headed in the opposite direction,” Ron writes in his terrific book Know What Matters: Lessons from a Lifetime of Transformations.
“When others are celebrating, I’m worrying, and when others are worrying, I’m looking for the silver lining.”
Does he just enjoy being disagreeable?
Nope. That’s not it.
“It’s not because I’m trying to do the opposite of everyone else for its own sake,” he reflects. “It’s because I’m trying to live into the future when everyone else is fixated on the present moment.
“I’m not focused on what is happening today,” Ron explains. “I’m trying to discover what will matter tomorrow. I’m thinking future back.”
As leaders in our companies, we know what is happening behind the scenes. We also know that organizations will always perform better or worse than expected.
“So I know, at least to some extent, what the future will look like,” he writes. “And that knowledge gives me the confidence to make decisions against the grain.”
2: When markets are hot, and everyone is investing, be cautious. Conversely, when everyone is selling, it might be a good time to buy.
“This is an underlying principle of value investing, espoused by leaders like Warren Buffett and Charlie Munger,” Ron notes. “But it’s wisdom that rarely seems to make it into business operations.”
The basic idea? Conserve in a boom; build in a bust.
A textbook example occurred during the “boom years” of the early 2000s, followed by the “bust” of the Great Recession.
“During the boom years of the aughts, Panera grew with caution,” he notes. “We tried to be realists, knowing that this era of irrational exuberance couldn’t last forever. . .
“We applied discipline and safeguarded our resources,” Ron recalls. “We protected and harbored our debt capacity. Real estate was sky high, along with with construction costs, so we curbed our growth, not wanting to get locked into lengthy leases at inflated prices.” What were Panera’s competitors doing? They were building “as if there was no tomorrow,” he writes. They overleveraged themselves in order to secure the best locations.
Then, in 2008, the economy collapsed, triggering the Great Recession. Their only option was to cut costs.
Who suffers when companies reduce labor and food costs? The customer.
Which brings about a downward spiral. “Longer waits, dirty tables, slower service, and more frazzled team members all add up to a negative customer experience,” Ron observes, “that will undoubtedly undermine already falling sales and intensify a cycle of decline.”
Contrast this situation with the one Panera was in when the recession hit. They had a popular concept and a strong balance sheet.
In a word, they had “opportunity.”
“I wasn’t lacking compassion for the economic pain or trying to capitalize on others’ demise,” he notes. “I was seeing an opportunity to create value where others were temporarily unable to do so—value for the company and its shareholders, yes, but also value for the customer and the struggling economy.”
3: What specifically did Panera do?
“First,” he writes, “we used the recession to recruit A-level talent,” Ron shares. “While many companies were issuing pink slips, we were hiring. Truly exceptional people, many of whom worked for competitors, were ground down by the uncertainty that comes with store closures and staff cutbacks. As a result, many flocked to Panera. . .
“Second, we doubled our growth rate. As our competitors hunkered down and simply tried to survive, Panera bulked up by building more bakery cafés.”
Ron explains: “Real estate and construction are priced on a spot market basis, but leases and investments are often locked in for fifteen or more years. So, we leveraged the recession to lease more desirable properties and build them out at lower cost.
“The result was that some of some of the highest ROI cafes of Panera’s last two decades under my leadership were built during the recession.”
These strategies had one big goal: “Build that moat,” he suggests. “Shore up competitive advantage and create bigger barriers to entry. The recession gave us the opportunity to leapfrog competitors.”
After selling Panera for $7.5 billion in 2018, one of the largest deals in restaurant history, Ron used the same strategy again during the Covid-19 pandemic.
“Today, I’m an investor in several powerful restaurant companies,” he writes. “What did we do when the lockdowns began, when restaurants were forced to close their dining rooms and fight for survival?
We expanded,” Ron writes. “We leased real estate, hired more people, and invested in cafés when everyone in the industry was acting like no customer would ever want to eat in a restaurant again.”
Ron is not the only leader who uses this strategy. “Such thinking is by no means unique to me or the companies I’ve led,” he says.
“But it’s rare,” Ron notes. “In retrospect, the wisdom of this contrarian approach seems obvious. But in the moment, it is neither obvious nor easy.
“In the midst of a bust,” he observes, “it’s hard not to retreat into a risk-averse mindset.
“And it’s even harder, in the midst of a boom,” Ron says, “not to get caught up in the party. When lenders are throwing interest-free money at anyone who asks, it’s tough to stay disciplined.”
That’s the big takeaway. “In my view,” Ron notes, “the worst time to grow is in a boom. The best time to grow is when everybody is retreating and costs are down.”
More tomorrow!
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Reflection: When the “crowd” is either euphoric or panicked, do I tend to follow the mood—or pause, think future‑back, and intentionally choose a different path that will matter most in five, ten, or fifteen years?
Action: Look at one area of my life or work where everyone seems to be either rushing in or rushing out, and make a simple plan to do the opposite wisely.