>> rose: welcome to our program tonight john chambers chairman and yeo o ceo of cisco systems. >> i think that's true of people and countries. i'm optimistic on the future of our countries but we have to reinvent ourselves and if we don't every three to five years we'll get left behind and that's true of most companies and most industries. >> rose: we conclude with danny meyer a man who has created many famous and popular restaurants in new york. >> the restaurant in my head or in an architect's hand is nothing but an enat mother object. a -- ina nu inanimate object. it's like a baseball, it doesn't happen until you play catch with someone. the people who work in our restaurants and the people who diane in our restaurants and the community that surround our

restaurants are what gives the glove its shape. >> rose: john chambers, danny meyer next.

dine johjohn chambers is the chn and ce of of cisco systems. he's the larger computer networking equipment. he predicts the future of internet technology is videoed platforms and cloud computing as it heads into a 23450 area cisco intends to direct that transition. i'm pleased to have john chambers back at this table. welcome sir. >> charlie we've been doing this off and on for almost 15 years. >> rose: wrot both at conferes and televisions. lots have changed. tell me what's changed since we

last talked in 2006. what has gone first in terms of the industry you worked and the specifics about cisco. >> okay. almost everything's changed, charlie. at that time the concept of the world is flat and the connective society was occur. if you look what's occurred over the last five or six years, we've become much more social in toample hosocial how we intercot through technology, video if you will, much more interconnected if you will within the society and much more virtual. your connectivity is often over long distances. how well a company or individual or country handles that can often determine their future. so if you think about what's occurring, it's almost the power of the internet to allow companies to interface or people who interface and you can do it on a scale and speed that's not occurred before. cisco's fortunate enough to be at the right time and right spot we think to participate in these. we get to see what the countries

in the world is doing and almost every company. >> rose: let's talk about the overall business. you mentioned the power of the social media. is it replacing for example search as a phenomenon of our time with respect to the internet. >> i think in many ways whether it's respect to the internet, you are more interested in the opinion of your friend than you are of an expert you look up on-line. and it does speak to how quickly this transition's occurring charlie and to go back to your earlier question, companies who don't change get left behind. the first time i think the interview was shortly after i became ceo. and at that time the fortune 500 list if i looked at it, you stayed on that list for 75 years. when i became ceo, 87% of the companies off the fortune 500 lists already. >> rose: today 75% of the companies were on fortune 500 when you became ceo are no longer there. >> correct. if you look at the duration of that list it's down to 15 years. by my children's time it may be

down to five years. what that says is companies who don't reinvent themselves will get left behind. i also think that's true of people and it's true of countries. i'm very optimistic on the future of our country but we have to reinvent ourselves and i'm optimistic on the future of cisco. we've had a run that's in the top dow performer over the time of our leadership. but if we don't reinvent ourselves every three to five years we'll get left behind and that's true of most companies and most industries. >> rose: did you wake up one day and say look cisco is not quite where it ought to be and we make decisions we didn't work out as well we thought and we need to replant ourselves, reset ourselves, we need to retool ourselves. >> charlie we've done that about every three to six years. sometimes we've done it very much by plan catching market transitions if you will, change in technology, going to the cloud or change inec togolhn tes where data would be over the internet. and i think that is perhaps what

has separated us from our peers over the last two decades. if you watch, our competitors of 15 to 20 years ago all are gone. our competitors of 10 to 15 years ago, only one exists today in a major way. our competitors just a decade ago, great companies like al ale alkatel are a quarter of what they were a decade ago. those who were tripped and going to beat us, hewlett packard and a number of start ups, at this time they're shrinking in terms of revenues and we're getting short at a very rapid rate. what we did charlie is realize we had to change. i had to do that on a positive note. there's nothing like a real imminent challenge to you to cause you to change the will. so as i alluded to, we've done this five or six times over my tenure. we know how to do it pretty well. we looked to see how much of it is macroinduced and how much is

self inflicted, how long you think it's going to last, how deep it's going to be, deeper than you think. take a picture of what's going to come out and stay close to your customers. it was realizing we were out of sync with the industry. >> rose: that means what. >> we were experiencing things that the rest of the industry hadn't seen. and as that occurred in hindsight ie government spending throwing down, all of our peers saw it three or four quarters after we did. that's true because 80% of our businesses knew every quarter. we tend to see the slow down in the financial industry in 2007. nine months later it really softened and in 2010 we said you could see business pick up and sure enough that's pretty good. last year we were very concerned and we almost got ourselves in dollars in terms of being more pessimistic. however having said that, some of the things are also our fault. we had to be realistic that we got to constantly change. we've gotten too fat.

you get fat you're slow in decision-making. it's been so easy to say we're the best known industry we don't need to change but that's exactly how you disappear off that list. >> rose: i didn't realize you're -- how do you realize you're too fat. >> my parents are both doctors i try not to look at the symptom but the issues. the symptoms are you make your decisions too slow. or your industry's changed where our customers no longer are buying boxes. they look at how you tie this together and how do you make it work officially with technology. and then they look to how you solve their business problems. and while we were moving that way fairly rapidly, we weren't struck k450rd thstructured the o either build the products or deliver it. it shows up when you're not going as fast as your peers. i'm not saying we're back completely. we're doing as well as our peers, picking up a lot of market share now. what we need to do however charlie is rather than hit this inflection point, this market transition every two to five years in a positive way or in a negative way and we've been through two negatives. we've got to reinvent ourselves

constantly. that's how you stay on top. >> rose: that's an important lesson for all of us here both personally as well as in the corporate context how you reinvent yourself meaning how do you make sure yuri volving and dheenging at the same -- how you are evolving and changing at the same and the cultures you believe in are being maintained and neuroissued. >> if i caneuroissued -- and nourished. >> as an individual average is over three to five years. as a company the same thing is true. go back to my example. when i talked about what had what had happened to our peers every five years the last 20 years no one's made it to the next level that could happen to cisco. when we tripped a year and-a-half ago if we can't change it could have happened to cisco. it's the willingness to reinvent yourself and realize charlie it's hard, it's hard for you to change, it's hard for ceo's to change. and yet as a company if you don't change you'll get off that fortune 500 list really fast.

>> rose: i've also read you have talked a bit about recognizing shareholder value. has more relevance to you today than it ever has, meaning what that you learned something about shareholder value? >> well charlie, there are a couple things that work. >> rose: had an increasing priority for you. >> an increasing focus. it's always been a high priority. if you watch from the time that i was fortunate enough to become part of cisco and become part of the dow, we've increased our shareholder value about a thousand percent. if you look at the average ceo on the dow i think three of them have increased it by over 100% and the average is about 40%. i've been in there a little bit longer. what changed for cisco is it used to be if i just grew revenues we had great margins, all the margins were the same on the products. it had translated into profit and you'd get rewarded for those profits. in the last decade we've increase the our revenues from 2000 to today by about 400%. well, 300% and we've increased

profits by over 400% yet our stock hasn't performed well. we've got to say what do we have to do different. how do we get the realistic predictability of earnings into our company. how do we share with the market. >> rose: if you increased profits more than revenue the return on investment must be high, what's the issue having to do with the price of the stock? >> well what happens is, many large companies know in our industry especially is when you achieve this growth, you get very high multiples in terms of the multiple of your earnings to get your earnings. so we had a very high multiple of like in the 70's. and today we have a multiple like in 12. now that's a very nice way of saying you would have had to increase your profits by 500%. >> rose: that happens to companies as well. >> i don't want to use that as an excuse. i need to say what do we need to do to get our stock up and moving. while it's nice to talk about a 200 to 400% increase in earnings

it's more about where you go in the industry how do you get your value for shareholders your customers. >> rose: you really want to say to the investment community the multiple you have for us is wrong. if it's at 12 you want it to be at some other level. >> the market's pretty good, charlie. i wouldn't say the investment community you're wrong. what we do is have to show kept earn -- consistent earnings. >> rose: you do say it ought to be better. >> that's true results. so you've got to share with the market just like you do with your own team when you focus on a turn around which is as i said we've done a number of times good and bad, you've got to say here's what we're going to look like to or three years out. you got to do what you said and we really have over the last 12 months. if you watch our stock over the last 12 months versus our networking peers we've up about, i don't know, 30 to 35%. our peers are almost all down. so the challenges they hit, however that's not the excuse. the excuse is we're fat, we need to change. the market is hyper connected and we had to change at a faster

pace than we were. we did that. we changed 120 days. we outlined a vision what it would look like on the other side. we restructured the company. we used to be organized by areas that were exciting to me but probably not to most people. it was over here, switching was over here, security was over here, data center service was over here. we now bring that all together to really structure how they work together to solve a customer's business problem. or to solve an issue of a country on the education, if you will. or to solve a healthcare issue. >> rose: and learn about acquisitions because that's been part of your growth and you continue to be. >> but charlie, i think most people in high tech would say, we learned how to do acquisitions extremely well. and it really expands what innovation's b the bus word around the world whether you're a company individual or country is how fast can you innovate. high tech use to innovated by doing it themselves. what we brought to the market was the ability to innovate by doing it yourselves including internal start ups but also by

acquiring and building on acquisitions. we've done about 150 acquisitions over the years. if we had just stayed in our original product area on the routers, we would be about one seventh the size we are today. we moved into areas called switching through acquisitions. that's 30% of our business. we moved into areas like data centers through acquisitions. we're growing 90% in this area, gaining market share. >> rose: what's interesting, you talk about acquisitions. what percentage of acquisitions do you believe will be and make the contribution you expect them to do. is it 60, is it 70, is it more or less? do you have a number. >> yes, i do charlie. when you first start to do something other people have not done you want to study it and understand what you should do differently. 90% of acquisitions and high tech fairld. if you de-- failed it. if you design it by did you increase market share after acquisition, did you get out your next generation product, did you keep your engineers because my industry not like

some industries that you're buying for customer preference or geography, i'm buying people to become part of our family and get the next generation product out. so 90% fail within the industry. if you use that definition and i think many of my peers would probably agree with that. and probably between 60 and 70% of ours have been successful. we have our rules and guidelines if we're going to be different than others is be smarter than other people. and see others who are not successful and how can we different than them. you cannot do it yourself. if you don't constantly innovate you're left behind. >> rose: let's talk about one specific acquisition. india. what was that about and how important is that to your future. >> when you do an acquisition charlie and maybe i can try to explain it in a way that the average person will understand who isn't in high tech, you want to say what are you trying to accomplish. well i think it's tough for us all to keep that. but you want to see where is the

market going. the market is going to this new concepts toward cloud. it's going more towards a software driven base. it's going more to the area of videos being the primary form not only of communication every device five years from now charlie will be video. that's how you communicate with your kids family work, your audience, etcetera. and what nbs allowed us to do and you want to say where the acquisition fit into your strategy paint that picture for the stock market paint it for your customers, paint it for your employees and the acquired company. what nds did is allow us to move into this video capability in large service providers or cable providers that provide our entertainment for us many which of course kerry you carry your d ability to do this out of a cloud. it allows you to do it faster and more software intensive. we combined it with our capability and the customers the action was extremely positive. e one you would appreciate it being close to boston the largest customer nds said this is a grand slam home run over

the green monster. our own customers -- you've got it. our own customers basically said this makes sense because you would help us move at a faster pace than the way you had it. the industry got it immediately, spoke market got up in a day or two and we're hitting new highs after. that's one off to a good start but charlie they all have this, some challenges and nds will be no different. >> rose: one was visible for you and the acquisition was the flip. you bought it for seven, 800 million. >> 600 million. >> rose: what happened to it? >> well charlie, let me start with the basic principles on that and then answer very specifically. one of the things that allows silicon valley to be successful is you want to not look to the past to determine your future. you want to imagine what's possible. and then you got to be willing to take the risk and if i were to quote a friend you and i both know sharron perez he would say think like a 13 year old. the reason silicon valley

companies have been successful is they're willing to take good business risks and by definition, you'll miss periodically. that's a good badge of courage as opposed to you don't know what you're doing. at the same time we did flip for 060 million, we did another acquisition that had to do with mobility and video at the edge of the networks. and a company called tanberg, each were $3 billion acquisitions. so we had two that did very well. we had one that we missed on. and flip we missed the transition. the transition was not about a device that could do cool video capability and shoot at another location it was about software back to the early premise that goes into this cloud the way you're going to really deliver information in the future. you don't know where it's from. it just shows up and you're able to access to it. we should have been developing our software for the cloud as opposed to the device. we missed that window of opportunity. now we had the courage to say we missed it, we stepped up to it and move on. >> rose: what did you do, close it down. >> you got to be willing to take

your losses. >> rose: you have said it's easy to do business and you ticked off a number of countries including china. it's easier to do business in these other countries than china and we talked about the same thing with china. what is it that makes it easy to do business in those countries than to do business in your own country. >> that's use the great example. the number one country in the world to do business is which one? it's canada. and that was a surprise to me when i first started seeing this occurring several years ago. but they have a government that partners with business issues. they had an education system instead of being 25th like ours is, it's number etch. number -- seven. they have an imgrition policy that brings -- immigration policy into their country and they're willing to work together to say what does it take you to keep your jobs here or bring more jobs here. that's true at the province level ie state and true at the national level. when i met with the prime minute

sphur he said what can we work together to achieve these goals. >> rose: what kind of policies do they have there. >> much more to get issues through. regulation is important to protect citizens and prospec the country. but we have become so regulatory heavy, we are one of the toughest. >> rose: more regulations here than in china. >> yes. but it doesn't matter. even in russia, you can build a silicon valley outside of moscow, take the leadership position for that which we are. envision how do you do this not to just create a silicon valley very need to create a middle class and they need another industry rather than an extraction industry. if your primary source of income is an centra central industry yt have a large middle class. we're looking how do we do this. same thing in china if you want to open a campus and what i want to do, they'll say what do we need to do. here's what you need to

consider. if you watch, they've also educated their leaders by business and government larysdz in a way that i think is much of the world is left to do. they literally bring them up almost like a ge mentality of working them through 360 reviews, they move them around from job to job. and we've had these leaders visit cisco home and away running from us for four years now. quality leaders have gone up dramatically and their quantity of business and government leaders have gone up dramatically. i think we have to think about not looking to the past in our country. imagine what's possible in your lives but right now. >> rose: speaking of china the appreciation of intellectual property going on? >> i think intellectual property in china is going up. i'm a huge believer as you know charlie that china and the u.s. in my opinion ought to be close to allies. i think we have the chance to learn from each other and i think we have a chance to learn at a very rapid rate and we're going to be the top two economies in the world.

think what we could do not just together but think what we could do as a society as a whole. the other thing is if you think about vice president to the u.s., he was very direct in terms of saying how do we work together. and he made 14 points that stuck in my mind. he said to work effectively together it starts with listening and communicating. then it starts once you communicate to understand each other's position. it doesn't mean you agree but to really understand each other's position. then when you understand each other's position, you have the ability to develop two strategic strution. trust -- trust. then business decisions open up. i've been doing business for 22 years. the chinese have tremendous pace, their ability to manage their way through economic challenges have been pretty dramatic and i think it's a country we can both learn from each other. >> rose: what percentage of your revenues come from overseas. >> over 55%. >> rose: over 55%.

>> and 70% of my growth will come from overseas and yet we still have the majority of our employees in america. probably the only company that is very large player been around for 25 years that does have the majority of the employees here, i want to keep them here. i'm an american company, i am very proud of it. and we'd like to keep the majority of our future hires here. >> rose: what's necessary for you to do that. >> there are a couple basic things. often people talk about concepts like repatriation bringing back your foreign earnings. that's the symptom. the underlying issue is our tax policy is broken. our job creation engine is broken. we don't get back to the basics. tax policy disease signed for microsoft in the public. you look at the ability to create jobs here. we grow so many hurdles from companies and especially small companies to locate here and the jobs. ipo's when you and i first met we did 500 in the u.s., china did less than a hundred today

we're closer to a hundred they're closer to 400. we make it hard for small businesses to hire here. we've got to fix our education system buzz when yo because whek around the world we're broken. we're not competitive in k through 12. the standard of living will go down and -- >> rose: we have no chance to be competitive. >> with healthcare we realize the system will break it. following europe is not the answer. how do we skip a generation. how do you have a visit to a doctor for $1 per visit. that's what india's going to do. to bring your doctor not only to the clinic but anywhere in the country or the world but to bring it into your home. >> rose: are you worried about a bubble at all in the industry. >> i think industries tend to swing a little bit too far and too far back. in terms of the basic tech industry that's probably never been healthier in terms of cash that they have, in terms of pe ratios. our pe ratio at one time was 70, today it's 12. we have $48 billion in cash

down. majority of them fortunately overseas which i would like to find a way to bring been back. >> rose: after repatriation or something else. >> all i'm asking is to treat in this country foreign earnings like every other developed country in the world does. they bring it back in 32%. every exporting nation knows this is the change we have to make. we're doing with the world charlie like it was with our father unless novatio's innovate were the job creator. this current generation we're no longer in that position. we have to be competitive in terms of our tax palm tease and job creations -- policies and job creations. think what would happen if you could bring back a large percentage of 1.6 trillion dollars overseas. >> rose: you know what they say less time that was a tax repatriation that money was not invested people paid it how the and dividends and other things. they did not use it to reinvest in their own company and create new jobs. >> well, let me maybe and i know you're challenging me and you're giving me a float that's down

the middle of the plate. let's use cisco as an example. we brought back $1.2 billion. in the next five years, we increase by 10,000 people our head count in the u.s. we acquired companies in the u.s. and wherever we acquire that's where my future job growth is. if i bring back stock, anything i buy back in the u.s., 82% of it goes to american shareholders, including unions and including other capabilities as well as individuals. tell what he what's wrong with $1.6 and we spent almost $800 million in 2009 for a stimulus package. >> rose: it's not a question what's wrong but it's a question of could those people who paid it out in dividends to their stockholders, could they have invested in a different way to create new businesses and new jobs rather than simply paying it back to their stock hoards. >> when you're out of step with every other major developed country in the world that brings

that pack to 32% there's something wrong. secondly and i have great respect and i thank our government leaders because we are also tough on them democrats and republicans. but to think that a government body can determine how capital ought to be applied for the benefit of future generations of both employees and health of the company, that's not what free enterprise it. >> rose: i'm not saying the government ought to do that i'm saying that would be a productive and positive thing to do for the american economy. >> i will commit to adding jobs so don't misunderstand what i'm saying. secondly we pay as a company pay 1% of total corporate american income taxes. 1% with only 40,000. >> rose: at what rate do you pay corporate. >> we pay at 33%. >> rose: you're higher than most. >> yes, we are. >> rose: most people could take advantage of deductions and it's down to 18%. >> and there's what do you do in america and what do you do globally. charlie it goes back to a more fundamental issue. we have to get back to the basics.

we have to be the best place to create a job. we have to be the best place to start a small company. we have to be the best place when the majority of our future earnings will come from outside the united states and we got to compete with those players outside. and if you were to bring back 1.6 trillion or even a trillion you tax it at 5%, that's $50 billion our country could get today to spend on infrastructure or however they wanted. >> rose: it's great to see you and thank you for coming and we will watch with great fascination what happens. not only at cisco but really a sense you get a feeling now that there is a kind of competition. certainly between the major players with apple being the largest company in the world, with facebook getting read to have a huge public offering, with amazon doing interesting things every day and then you've got google and there's a whole range of things, all of them it seems to me your example of this too, getting in different kinds of businesses so that the competition is getting keener and no one is simply sticking to

one particular aspect of technology. >> charlie i think you've nailed it. what we do as high tech is we reinvent ourselves all the time. one common theme with every company you mentioned, all of their capabilities is neighborhood by the internet. we're in the right not at the right time on that. but this is something i think our country does very well. i think we wanted to make sure we don't lose the leadership. >> rose: thank you for coming. >> measure always charlie. >> rose: chairman and ceo of cisco, john chambers. danny meyer is here he's a restauranteur and ceo of the hospitality group opened his first restaurant in union square cafe in 1985 and has been on a roll ever since the empire he created in new york city from gramercy tavern to the blue smoke. he's expanded over seas to the popular burger joint in miami, washington and d dubai. a recent profile says he's

created a new restaurant as if they were his first and only the singularity of a place always as important as the food. his looseness and precision quality is more reminiscent of an athlete or an artist. i'm pleased to have danny meyer at this table for the first time. welcome. >> thank you charlie. >> rose: does that ring true with you does what they say resonate with you in terms of your mind set about restaurants. >> i think what you're talking about is the notion that peach one of the restaurants is like a child. it's absolutely true. my wife and i have four kids at home. i can't make kids but i do know how of to make a restaurant. you love each one like you have a kid. >> rose: you didn't rush in and go right and do another one. you took it at a certain pace. what is that about. >> the first time i owned a second restaurant was ten years after union square fa kay opened and that was gramercy tavern. the reason it took ten years was really two-fold. back then if you wanted to be

taken seriously as a restauranteur, you had one restaurant. and if you really wanted to be taken seriously you lived up stairs like andre solt knelner. i was afraid a second restaurant meant that union square cafe would go down the tubes. the second thing was my own father back in st. louis had gone interrupt twice when i was a kid in my teens. and i was associating that with expansion. >> rose: seems to have been something that really had an impact on you your dad's interrupted see and thbankruptld on him. >> it d he was a brilliant entrepreneur. he had great ideas, he was a great writer, a great marketer. he was into food and wine and travel. he gave me lots of those gifts, cooking. but he didn't seem to know how to surround himself with a great team of people who could compensate for his weaknesses. >> rose: and a great business manager somebody who could sort of handle.

>> yes, i think that's absolutely true. so the first thing i did was to say i'll protect myself by just not growing. and then i realized that expansion itself wasn't really the problem. the problem was trying to overcome some of those things. so i really try to make a point of surrounding myself with amazing leaders and i've got lots of partners on my team. people think i did the whole thing myself that couldn't be further from the truth. >> rose: let me go back to the first restaurant. before you got there, give me the chronology here. you first were manager of a restaurant. then you went to france and studied cooking. >> yes. 1984, i had this bug that i had to get out of my system which was restaurants and this was not a time the guy from trinity college with a polysci degree was meant to become a restauranteur. so the only way i could tell my parents that i had this in mind was to first try to convince

them i was going to be a chef because it was semi acceptable to be a shelf but not at all acceptable to be a restauranteur. so i worked in a seafood restaurant here in the city called pesca and i worked in france for a while and italy for a while and my dad hooked me up with some of his -- >> rose: learning to cook. >> learning to cook. probably the best move i ever made was coming back in 1985 and actually believing i was going to be the chef of this new restaurant i wanted to open which would become union square cafe and i fired myself as chef and to this day -- >> rose: before you opened or after you opened. >> really before i opened. but i put on chef whites on at least two or three nights there which was one of the most ludicrous things. in enact one night i put on chef's white because i had given the chef and the sue so sue souf the night off and i thought it would be slow and it wassable. without having eaten lunch and

dinner they needed me in the kitchen. when i put on chef's white i was completely dizzy because i hadn't eaten all day. i got into the altercation that dining room a fist fight with a guess for the first and last time in my life. i said that's the last time anyone's ever seen me in whites. >> rose: what was the cause of the fight. >> the cause of the fight was this gentleman had had more than enough to drink. he was walking around the dining room with his tie tied around his forehead yelling that a good restaurant like ours should have baked potatoes which we didn't have. and i went up to him and i said you can't have another drink. and he said the hell i can't. and the next thing he said was give me another drink and i said here's your check, you're out of here. and he said you can't make me pay. and i said you're right, i can't make you pay but i can make you get out of the restaurant. and we went chest to chest through the dining room. he through a punch, i through one back he crammed my head between the door.

little do i know that one of the guests in the dining room was the restaurant critic for the daily news who was penning our very first revi for the daily news. >> rose: did that make the review. >> it did make the review and this was someone by the name of author shaawe airarthur schwart. he said i eight there one time and the food was pretty bad and the owner got into a fist cuffs but i'm saying good things for the restaurant. >> rose: the number of restaurants you have created from union square f cafe to gramercy and all of the ones that have taken place and in fact you got a new one coming up. what do you know about the creation of a restaurant that makes it a place that people want to come? >> i think that i've always wanted to create restaurants that i would want the eat in myself. and it's always started off with

a sense of something that i love that i want to explore further by adding good food and drink to the equation. so for example, are grammar see tavern, 199 -- gramercy tavern 1994 my wife audrey and i had been up and down the east coast collecting antiques and we had spent all kinds of time in american taverns. and i wanted to explore where do taverns which were the best restaurants in town 200 years ago have to just be about pabst blue ribbon. so gramercy tavern became an opportunity to say let's celebrate america caus awe amers my love of jazz. i was a jazz dj in college. love, i'm in love with art. we have an amazing privilege of creating a restaurant for the museum of modern part, the modern and another one for the

whitney museum. i could go on and on. horse racing. basically try to create restaurants around things that i love anyway. >> rose: what's the point? the point is that you're looking to find a theme, something that appeals to you so that the restaurant has a connection with something else that makes it a place. >> it becomes a place when people start using it. a restaurant in my head or in an architect's hand is nothing but an enat othe enat mother inanim. it's like a baseball glove. it doesn't become something until you play catch with someone. the people who work in our restaurants and the people who dine in our restaurants and the community that surround our restaurants are what gives the glove a shape. paul i do is do the stitching. what i love more than anything is to do the thing steve stephen

sondheim said to create a hat where there was not once a hat and see how many people love to wear it. to this day there's not a greater thrill i get when you come into the restaurant and just watching the joy that thomas when you're eating our food. -- that someone has when you're eating our food. >> rose: it's more than an eating experience. >> i learned that lesson in the hard days in the early days of union cafe i got a complaint letter about this or that. i couldn't understand how could this slight or this honest mistake too much salt on the risoto, too much cooking on the salmon, how could that make this person so upset. and then you realize there's very very few businesses out there where the very product we make is something you put into your body and you associate it with love. because it's what you either did or didn't get enough of growing up. >> rose: are the magic ideas about the seating and lighting and arrangement of tains and all that kind -- tables and all that kind of stuff to not do and

things to do. >> i think so. i think that hospitality, which is completely different thing than service, hospitality is how we make you feel. service is what we do to deliver the product. i think that the design of a restaurant can either be hospitable or inhospitable. here's an example. if you go to a restaurant and you see a bunch of bank kiptd table the reason most restaurants do that is the same reason why sardine manufacturers cram as many daughte sardines as possible. you side tables side by side with a couch and couch. inhospitable. why? because the table is narrow and they can fit in more tables. but if it's long this way so they can fit in all the plates. what it means is that the restaurant inhospitallably is putting me closer to the person i didn't come with and further from the person i did come with and we don't know whether to talk softly, to talk more loudly

or to get, you know, an indentation in our chest. i think noise is like salt. too little is strong and too much -- too little is wrong and too much is wrong. >> rose: you really do want to have a conversation. >> yes. >> rose: sometimes restaurants are too loud and you can't have a conversation. >> let's face it. you can cook at home. and you can listen to music at home and you can watch movies at home. but the one thing we should allow you to do here besides cooking and doing the dishes is be with the person. >> rose: you once, a woman came to you and tell me the story because i just remember reading this somewhere. she came to you and she wanted to write about the restaurant and your attitude. some of questions i assume you're asking now and you said to her come work in the restaurant for six months. what did she do and what was that about? >> well you're talking about a woman who is on our staff right now whose name is dr. susan salgado. she came to me about a week

after we opened 11 madison park. so back in 1998. and she said i'm doing a doctoral dissertation at nyu at stern and i'm trying to figure out for my dissertation why i feel differently when i come to your restaurants than i feel when i go somewhere else. she didn't say why the food is better, she didn't say why the design is better. why do i feel different and can i hang out with you. and i said all right, let's a deal. and she did. she worked as a reservationist as union square cafe she worked at the front door at gramercy tavern, she learned our floor worked and how they treated each other during the meal. she wrote her distairgs dissertd got a good grade and i said would you like to work for us. she's helped us to create a training curriculum so we can take this competency of how we make people feel and teach it to

people. >> rose: she understands the culture. she got the cul culture. >> she did and started a company called hospitality quotient. she's working with contreatz all over the country not restaurants already best in the world what she do, supermarkets, financial companies, medical companies, sporting goods chains, retailers. they're already the best what they do but now they want to learn in this hospitality economy how do we make our stakeholders feel good. >> rose: one of the mistake was tabla. >> you know i started with that question. i think -- >> rose: might not have been a mistake even though you had to close it down. >> i think tabla is the one restaurant in 27 years we've ever closed. and it lasted for almost 13 years. and i don't think it's a mistake. i think that the number of people that we made, friends we made, the chefs who have gone on to do other great restaurants in the city, oceana, abc kitchen,

restaurants all over the country. it was a great experience. if there was a mistake, i would never ever advise someone to open an indian restaurant with 283 seats. it was our largest restaurant and we struggled through the recession. >> rose: what's okay, 30 seats. >> i think if ta. bla -- tabla had 120 tables you couldn't get a seat. it's like sweetbreads. let's not enough people to like sweetbreads. >> rose: for many people that's what famous, what you do. tell america what it was about because you did not start it with a vision i'm going to create this kind of thing. >> absolutely not. >> rose: it was just let's sell some stuff across the street. >> well there are two stories to shake shack. why is shake shack, why does it exist and how did it get to be shake shack. >> rose: and how did it get to be first. >> how it got to be is that i was one of the leaders of the

madison square park conservancy and as part of the program, once you make a mark saf park save al you have to give people a reason to use it otherwise it will stop being safe and beautiful. for years we discussed this as a committee and the first idea was let's have great art in the park. and we created something called madison square park. and through the public art fund we curated a piece from an artist which he called i love taxi. as part of his art show and political statement in addition to having two huge taxicabs he wanted a working hot dog cart. his political statement basically was the two most democratic things in the world, small d, are hot dog carts and taxi kabtz becaustaxicabs becaue world wld has been able to afford a taxi ride, had to be the guy driving the taxi and everyone in the world has been able to buy a hot dog or had to be the guy selling it. they said we need someone to

operate the hot dog cart. we'll do it. and but if we do it, it's going to have to have something distinctive about it. so we came up with the idea to do chicago style hot dogs. why? love them from the mid west. they have nine different toppings and i thought that would give us a chance to have hospitality. we would know you're the guy who likes everything but neon relish and you like everything but sports peppers. we have 70, 78080, 90 in line. rather covered it, peter jects covered it. the show's done and they asked us to come back and we did. a third summer we brought it back and then they said that's create a kiosk in madison square park and see if the revenue generated by the rent can go back into the park and so we said let's blow up a hot dog cart. let's add burgers. i had grown up loving that in

st. louis. i grown up loving frozen custard in st. louis. we added that and i wrote out the menu on an envelope literally in six seconds and there it was. >> rose: but it is considered to be, if you're a new yorker, a great burger. what's the essence of a great burger? >> well a great burger has everything to do with what kind of mood you're in because you may sometimes want the kind that's big or the juice is running down your arms. you might sometimes want a little bun. we did a quarter pound burger for shake shack and we came up with that idea for one reason and that was that we had a sense that there would be lines. we had no idea they would be as long as they are but we didn't want the kind of shack where the doneness made a big difference. once you get beyond four ounces, the people who like rare, medium rare, well, that starts to matter. i happen to like my burgers medium rare. >> rose: me too. >> at four ounces, if there's the right blend of meat in

there, it really doesn't matter. so that's how that came about. i think the next question though is why was it that we opened a second one. and it took about six years believe it or not to open a second shake shack. >> rose: people came to you and said oh you've got a prang - franchise here, spread it around the world and you were not anxious to do that. >> not really. we did open in the middle east. >> rose: that was later wasn't it. you were first asked. >> first thing we did was we went to the upper west side and we thought maybe we can shorten the line in madison square park by cannibalizing by opening a second one and that didn't happen. >> rose: on columbus avenue. >> then the mets asked us to put one in their ballpark and we did one there. we got a call from somebody from kuwait saying we want this in the middle east. and i kind of went i haven't been to israel and i'm jewish. i'm going to put a shake shack in the middle east it doesn't really make sense.

we later learned that this company is so good at replicating brands. they work with starbucks and estatesesitestee lauder and dead deluca. we said what if we can get an education from someone that's great at it so far away while we make our own mistakes our patrons won't watch us doing that. and so we're using the international opportunity to actually allow us to grow a little bit more slowly domestically. >> rose: what's the new restaurant? >> the new restaurant is north end grill. north end grill is a happy ending for the chef lloyd cardos who had been the founding chef of tabla. and it's a terrific place, it's in the north part of battery park city and we're trying to find the soul of a neighborhood

in part of manhattan. >> rose: define it or find it. >>th. bo both. we opened three restaurants at once because we said that because new yorkers for whatever reason wouldn't cross from tribeca to battery park city. we have to do actually more rather than less so we opened a shake shack, we opened our second blue smoke and we opened north end grill. the north end grill is the one that we are defining and we're trying to make it a restaurant for its neighbors. we grill over charcoal and wood. lots and lots of seafood. there's a big scotch selection, 100 single small scawches which we sell -- scotchs which we sell by the nip the flask the fair mesh and the bottle. >> rose: you sold one of the restaurants to your chef and manage it perhaps i can't remember. was it both. >> it was both. 11 madison park. >> rose: why did you do that. >> that was a really really tough decision. maybe i would say along with

closing tabla, probably the toughest decision. earlier you asked me about each restaurant. they do feel like kids. and i can't tell you how much passion has gone into 11 madison park since it opened in 1998. it was a two star restaurant. from the "new york times" once. it was a two star restaurant for the "new york times" a second time. 13th most popular restaurant in the city and it was a survey and i looked at it one day and say this is not good enough. this restaurant shouldn't be a whelming restaurant, it has to be an overwhelming restaurant. the space is gorgeous. we went out and recruited one of the greatest chefs in the united states, young chef with his future ahead of him, a guy named daniel hume who is in san francisco. and we brought in one of our great managers from the museum of modern art will gadera and we said it's your job to make a restaurant that is worthy of

this gorgeous space. and in three years, they upped two stars to three, they upped three stars to four. they got a michiganland stars and three and a wine excellence. they said danny we want to start our own company. i can't be a prisoner of talent and i was faced with a really tough choice. >> rose: they wanted to start their own restaurant. >> they wanted to stay but start their own restaurant separately. >> rose: i see. >> i had learned that mistake with gramercy tavern several years ago because my partner tom, great chef, had wanted to start a business called craft. and then be a tv star. >> rose: and he did. >> and stay at gramercy tavern. and i learned that you can't have two relationships. so i had two choices with my colleagues from 11 madison.

i could either dismiss them or sell the restaurant to them. and i really felt that at the end of the day, that the restaurant is as good as it's going to get and to dismiss them was ludicrous. it would have served my ego but it would not have served our guests or our stf s staff so i t to them. >> rose: what's the most important trend in the restaurant business today. is it about food, al all al amb. >> it's sharing plates, loud no, sir, loud music, tattoos, peerings, all that stuff's going to come and go. i think the one thing that never leaves is that when people come to restaurant, they want to know your happiness even. >> rose: the most important thing for me when i go to a

restaurant someone makes me feel they're happethey're happy to s. not one who doesn't have an obvious interest not knowing you're somebody who might be known but generally as a human being. it's not trying to convince me that i'm lucky to be there. >> i think that the number one area in which we compete, people think it's in the restaurant itself. i think we really compete to get the staff members who in addition to being great cooks, in addition to being great bartenders are the people who have the emotional skills which we call a high hq. where their greatest pleasure in life, greatest pleasure is making you happy. hospitality question. someone whose got a high hq and we don't know how we could teach it any more than we can teach an iq, it's somebody who is even happier when they made you feel

good. that doesn't grow on trees. >> rose: suppose di somebody dd come along and make you an offer you didn't refuse. what would you do if in fact you said it is an offer i can't refuse. so give me the money and i'll give you the restaurants. suppose you could make that decision, what would you do? >> what would i do with my career thereafter or what would i done. >> rose: your life. >> so the decision got made for me. >> rose: you made it yourself because you found it so compelling and attractive. that ratified all the reasons you had perhaps refused to sell before. somebody come along and they could punch all the tickets that were important to you, an attractive time in your life to sell. you poured your life into building these restaurants so what do you do? >> the biggest reason i'd say yes is in so doing the people upon whose backs this business has been built got a nice check as well. that's one of my biggest goals. what i would do? spend a heck of a lot more time with my wife and kids than this

business has afforded. i would probably want to write another book. i love to write and i just, i wish i had more time to do that. and the next thing i would do would be to travel as much as i possibly could because i learned so much when i traveled. >> rose: thank you for coming. >> thank you charlie. this is great. >> rose: danny meyer, thank you for joining us. see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

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