Freakonomics Radio - Amazon Was Supposed to Kill the Bookstore. James Daunt Had Other Plans | Better in Person

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0:29My guest today is James Daunt, a name you may not know, but after listening to this episode, I think you will understand why I was so excited to speak with him. As always, thanks for listening. I think 30 years ago, all the bookstore chains were ruling the world, and the idea that I would then be running them all is, yes, fanciful. And indeed, I may wake up at some point and find it was all some sort of weird mushroom that I ate last night.

1:02Did you have a mushroom last night? I did not well not that sort anyway This is better in person with Steven Dubner and James Daunt James Daunt is not a household name at least in most households But he always has been in mind Years ago. He opened a small independent bookshop in London Daunt books which many people consider their very favorite bookstore from their he somehow went on to revive two of the biggest bookstore chains in the world, Waterstones in the UK and Barnes & Noble in the US. You could argue that James Daunt helped save the very idea of the bookstore, maybe the printed book itself. So how did that happen? I wanted him to start from the beginning. So I asked what his sales pitch was when he first opened Daunt Books. This is going to be an amazing bookstore. We're going to

1:58Absolutely nail it and we're gonna go and take over every other bookstore in the Western world. No But we it was the idea was to create a nice bookstore and that hopefully it would work. I love that it came out the way it did I don't understand how you could have such confidence at opening a bookstore in 1990 it was deeply foolish and born of naivety and You know those who thought it would end in tears were nearly right. I left university with zero plan. What did you study a history?

2:28Oxford? Cambridge. Cambridge, sorry. That's a very UK, you know. But I had no idea what I wanted to do. But there were these things called banks, no idea what they did. But one of them was hiring, and you could come and live in New York, and that seemed really quite exciting. So I joined JP Morgan. And so what were those four years of work like? Did you enjoy it? Did you think about a career in banking?

2:54I thought it was completely fantastic. It was engaging. It was compulsive. It was really interesting. But it turns out only interesting to other bankers. My then girlfriend really didn't find it interesting at all. She thought it was boring beyond belief and said no. Wait a minute.

3:17I was under the impression that the girlfriend who said that is your current wife or is that a different one? You know, I've only had one girlfriend and one wife. You only have one girlfriend even? Yes. Okay, so... I'm really dull. So, no, I'm not passing any judgment at all. I think it's very... I think it's wonderful. But you quit...

3:39the job you love that was exciting because your girlfriend ultimately your wife thought it was a boring job. And then she wasn't wrong. Really having sort of left to try and think about what to do. I love reading a lot of books. I love traveling, but that I couldn't quite see how to parlay that into a future. But a bookstore I could see, so I thought I'd give it a go. Was it a hit from the beginning? No, it took.

4:08maybe five years to really get going. To begin with, I took a lease on in 1989 when everything was up and I opened in 1990 when everything was down. There was the first Gulf War, there was a big recession. Actually, that helps me now as somebody running a company because I really remember what bad is like. But it didn't work for a long time and we got through really with hard work and tenacity.

4:34One thing I notice as I get older, I feel like what you could generally call experience, but particularly in business, is massively undervalued, I find in the market and in life. But as it turns out, there are some principles that you learn along the way if you pay attention. And I'm curious what principles you've learned that you feel are really valuable now. Yeah, I've stayed in a very narrow world, so I hesitate to think that my principles apply everywhere. But mine is the quality will out.

5:04And that one should never sacrifice the medium and long term for the short term. Everything has to be done for the long term, hold to quality, dig in, work very, very hard, and ultimately you'll be okay. That sounds so old fashioned. It is very, very, very old fashioned. I mean, I'm not gonna lie, I love it. I've spent my life as a writer. I like to think that if you don't apply all that to your writing, then it can't be good.

5:33I feel like the current economic culture goes against that, in part because so much leverage has been gained by the financial engineering industries where it seems like they're not really producing or making anything and yet becoming fabulously rich. And so the principles that you just noted, an appreciation for well-made things, for well-curated stores, it feels like nostalgia. Yeah, well, I certainly think that people goosing up short-term gains or short-term glory at the expense of the long-term is something that has bedeviled our industry. Hugely, one can see it going on elsewhere. The people who ran order stands before me, the people who ran Barnes and Noble before me were not idiots, but they did destroy the business. And they did so, I think, by always pursuing the short-term and getting fixated on the short-term and then being locked into an ever.

6:26A spiral of downward short-term decisions to try and fix what required long-term decision making. Were they driven by short-term results because of their ownership? Partly the ownership, partly I think a pursuit of glory. And if you are constantly trying to achieve the maximum in the present, you will do badly in the medium and long-term. Let's go back to Don. You opened this bookshop.

6:53You say it took about five years for it to become successful? For it to become not unsuccessful. How successful did it become then once it were you making good money? In time, yes. I mean we opened more stores and it's a great bookstore or sales have gone up every month actually since it opened. So it is one of, it's a great, great bookstore, very small.

7:17But great. When I heard that you went then from being the inventor and proprietor of these wonderful independent book shops to being the CEO of the big chain in Britain, Waterson's, I imagined that what had happened is that this big chain came to you, independent bookstore owner, and said, here's a very large check so that we can take over your shops and meld them with our failing shops and put you atop the whole thing until you fail. But that's not exactly what happened.

7:46You retain ownership of the independent stores. How did that work? That sounds like a very unusual arrangement. Well, the purchase was extremely unusual in that I did feel it was a tragedy for Waterstones to disappear, which it was obviously going to do. At that point, how long do you think it had? An hour. When the markets were opening, it was...

8:18They were announcing it was going into administration. I see. Administration essentially bankrupts the US. Chapter 11, but it's worse in the UK. It's worse in the UK. It really is. Yeah, you don't mind here about bankruptcy. It's just like, oh, we're going bankrupt. It's fine. But in the UK, there's a huge stigma attached to it. And one of the reasons our economy is much less dynamic than the US is that there's a massive stigma and rigmarole around bankruptcy and nobody comes out of it.

8:44I've heard this said by people before, which is that one of the secret drivers of our dynamic economy is you can go bankrupt and then just the next day open up the shop. So why has that not been copied more, do you think? Why hasn't it been copied in the UK, for instance? I think it's a cultural thing and it's, you know, we do have limited liability and the rest, but there's a massive stigma attached to personal bankruptcy or business bankruptcy. You can't have a bank account, you can't set up another. And people never...

9:12rise from the ashes of bankruptcy, either as individuals or as corporates. Okay, so you at this point are a successful independent bookshop owner, and you think, well, Waterstones is a national chain of booksellers, and therefore it would make sense for me to buy them. That was your plan originally, was to raise some money to buy Waterstones and run it yourself? But I failed to raise any money to be able to back me to buy it, and then was introduced to a Russian entrepreneur.

9:40Alexander Mammut. Alexander Mammut, who did put up the money. And he was highly agreeable because he just handed over the money and said, get on with it. And we got on with it and we sort of got to work just trying to understand what this very strange business was. So just walk me through those first few days. What was it like procedurally? Where were you living? What were you doing? And how did you assume this? What I was working in my bookstore every day.

10:10And then I had to go to an office, which I hadn't been in an office for 22 years or something. I took a friend with me from Dawn Books. You're walking into the corporate headquarters of Waterston. Corporate headquarters. And what did these people think of you? Well, obviously, to my face, they're very polite. Clearly, they're thinking somebody's just turned up. He's got six bookstores. Little.

10:36bookstores and thinks he has any idea about how to run this huge business of ours. And did you have any idea how to run that huge business? I knew how to run a bookstore and I knew that there were 300 bookstores that if I allowed the bookstores themselves to run themselves so rather than have a home office which was immediately apparent was dedicated to telling each of those bookstores how precisely to run their business that we needed to change that.

11:06immediately, which is the euphemism for I fart a mole. So you fired them all? Most. Most of them. And what did you do then? How did you find the right people? They were there. We just dropped down. And the people who were running it now were the people that we dropped down to then. So the people that were running it that were no good, they were... Well, not no good. I mean, that's the interesting thing. They were actually very good, but they were trying to do the wrong thing.

11:33They're trying to run these stores. They're trying centrally to dictate precisely operationally in their visual merchandising in every small part what exactly each store should do and that all stores should do the same thing. It was all centralized. It was all centralized. And what's the problem with that for bookstores? You end up with very boring bookstores because they're uniform. We've got bookstores all over in different communities in different sizes, different shapes, different...

11:57booksellers within them. It makes the job of being a bookseller in that store very dispiriting and it makes the stores themselves in their sheer uniformity very boring and it's really expensive to run a business like that and it was pretty difficult initially but we sorted it out, turned the business around and then sort of fast forward to 2018 and we were looking with some trepidation of what was going on in the United States where it was clear that BNN was heading downhill pretty fast and we really, really didn't want BNN to go under. Because why? Because the publishing industry is headquartered in New York City by far and away the largest market for English language books. And whatever the structure of the market is in the United States will be applied elsewhere. And if BNN had gone under, then publishers would have been effectively in a duopoly with Amazon.

12:56and that wouldn't have been very good for us in the long term. They're not going to maintain warehouses and distribution and all the things that we require as bookstore operators, be us independent or a chain. So we did need to be an enterprise. In 2018, Alexander Mahmoud sold Waterstones to the hedge fund Elliott Management. So when Barnes & Noble came up for sale the same year, Elliott, which was already confident in the leadership of James Daunt, was a natural buyer.

13:26I asked Daunt to meet me at the Barnes & Noble on Broadway in 82nd Street in Manhattan. This is my local store, I don't know if you know, and I love it. It's improved enormously and continues to improve. Yeah, so that's what I'd love you to just show us around a little bit. I follow James Daunt's up the escalator to the second floor. So I can see science and I can see business. And then into world history. Booksellers need to know.

13:53The chronology, they need to know every single nonfiction section is now not organized by alphabet but organized by the sensible theme. Each store will do it differently as long as it makes sense. It's almost as good as an Amazon algorithm. No, no, no, an Amazon algorithm can't even begin to do this. Absolutely can't even begin to.

14:17But there was a time, if you go back to the origin of Amazon, I felt like Bezos persuaded a lot of people that it didn't really matter for books, that a book I could buy here is exactly the same as there. So, if that's the case, and this involves a lot of real real estate, not warehouse real estate on the outskirts of, you know, Western New Jersey, how was a survival business proposition? If this arrives in a little...

14:47Smiley envelope. It's not as good a book. It's the same book, but you won't enjoy it as much. And you get pleasure walking out of here. And then when you read that book, you've still got that lift. The kid who chooses their own book upstairs is definitely emotionally more invested in reading that book.

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16:11I mean, there was a period during early Amazon peak when most people that I knew in publishing, I don't know so many people in bookselling, but most people in publishing were pretty sure that Amazon was going to put all other booksellers out of business. What was that period like for you as a bookseller? Yeah, I mean, I think that that was a lazy narrative, but it was one that people believed and then there was a lazy narrative that Kindle slash Nook was going to supplant and at the physical book itself. And we were all going to be having our Kindles and our Nooks, and that's the end of the game. Again, very lazy thinking. I knew that if the bookstore was a good bookstore, people would want to shop in it. Why would you not? I feel like I'm in some Twilight Zone. I feel like everything you're saying about this endeavor, which has been successful, by the way, goes against what

17:08American business schools at least teach, and a lot of any kind of leadership preaching would entail. So do you feel like you're a little bit of an outlier, or are there more of you out there that I just don't know about? I suspect it's a little different. For example, we do know marketing. Join companies which have huge marketing budgets, and I set the marketing budget on Day 1 at Orkston's, which I think then was 30-ish million at.

17:36zero, and it's been zero ever since. What were they spending 30 million on? TV ads, social media advertising, blah, blah, blah, blah, all of that marketing and advertising. What persuaded them that it was worth it? I have no idea. They're too frightened not to do it. Why were they... I mean, I'm just asking, were this conventional wisdom comes from? Because I think it... Well, because everybody does it. I don't think there's a single retailer that has a marketing budget of zero. We have a marketing budget of zero. You've met my PR department.

18:08their ghosts, apparently. Well, it's dead. It's AA, an assistant who is also my assistant, but is also the executive team's assistant. We don't have a PR department. It seems to work fine. Booksellers today have a new form of marketing in Book Talk. Have you ever been scrolling on Book Talk and feel like everyone is talking in code? Don't worry, I got you. That's where TikTok users make book recommendations and react, often very emotionally, to what they're reading.

18:37book talk has become a real cultural force it can turn an obscure title into a best-seller and it can resurface books that have been forgotten how do you feel about book talk generally it's fantastic yeah do you collaborate individual stores do I think it's come across as being slightly patronizing it's not meant to be but we say until you just leave it to the guys with the blue hair and They do a fantastic job. We don't put any controls on them. We have a single guardrail. Please use your common sense. And then periodically somebody strays the wrong side of that. What's an example of straying? You can promote something that shouldn't be promoted. And, you know, people are idiots, so these things happen. And we then need to not overreact and apologize if that's necessary and reset and move on.

19:37Would you care to say more about people are idiots? People are idiots, you know, we all know that. Are present company included? Yeah, absolutely present company included. But from our perspective, vanishing me rarely is it anything other than innocent stupidity. And that's why if you just let people get on with it, they have a lot of fun. And they really do have a lot of fun. And it's sort of kind of brilliant what they're able to achieve.

20:07So do you think it means anything significant that an old-fashioned business like yours, hand-selling books on paper, says anything about our general cultural digital trends, which seem to be moving fast in the opposite direction? There's a real worth to the book. If your kids read, they will have better educational outcomes. Oh, hang on a second. Do you have proof for that, sir? I mean, there are. Helpfully.

20:36academic studies that seem to reinforce this, but we also know it to be true. The parent who brings its child into a bookstore and selects books and goes away is going to have a happier child. It's a great way to spend the time. Now you're starting to make me think that you're not just some very lovely bookseller, but that you have an agenda to actually improve society somehow.

20:59I think bookstores do do that, and we think of ourselves as being vocational. I do. I mean, we are vocational. It's really hard work. You've got to come in, you've got to have your brain switched on. You've got to be highly intellectual. You've got to be prepared to work your socks off. You've got to be very social. You've got to engage with people. All of those attributes will allow you to do almost any other job. But you choose to be in a bookstore, and you choose to be in a bookstore because you're getting something else from it, and that is considerably a vocational commitment to what that bookstore is doing within its community.

21:29Barnes & Noble is on track to open dozens of new stores this year. There are now more than 700 across the US. We will never be a massively profitable business, but we should be and have been now for some time a very consistently profitable business. An editor, a senior editor, who'd also been with Amazon, she'd been around the book industry, and she said that the biggest change for B&N from her perspective is that B&N can make a hit again. The best seller lists what?

21:57almost wholly static. They were the same names. Patterson, Flipper Gregory, and on it goes. These are not saying they're bad writers or anything, but it hadn't changed for a decade. Michael Connolly, each had the same people. And why is that a problem? It's boring. It's really boring.

22:19We can still sell and do sell those books so that we're not snobbish But you need new people to come through and in creating these this is sort of excitement around new voices and we also uncover some really great great writers and The the people who were doing it for the book clubs so Oprah was doing it Reese was doing it. So there are other people doing it, but but it abrogating that sort of responsibility for creating new authors and new books to a TV host. I mean, come on. You said something about how the bookstore can or should be a sort of a third place. Like a public space, like a library, but different plainly. Just talk for a minute about that philosophically. What do you mean by that? I think we are very embedded within our communities. Obviously communities vary, but it is a space, a retail space that everybody enjoys, young, through to very old.

23:17And a lot of the people who use bookstores have no real intention or expectation of buying books within them, but they do very much enjoy being in them. It's true of all the kids who pile in here after school. They're just coming in to flirt. The boys go in one corner, the girls go in another corner and they do their thing and they chatter and yabber away. But it's very safe and it's very nurturing and it's very civilizing. The old people who come in the carers, a lot of carers in here, different times of the day you get your different populations coming through and then amongst that all, particularly if it's a happy store, those people have been respected and looked after and then the people who are actually buying books, which is the rest of the community, enjoy the energy that comes from that. Right now AI is taking a lot of the oxygen out of every room.

24:09But I feel like anytime there is a disruptor, whether it's a firm that does things differently or a new technology, the assumption is often that it will replace the old thing entirely and the old thing will die. And what's so interesting to me about your story of turning around Waterstones and Barnes and Noble is that the Amazon will beat out everybody story did not happen. But also the old fashioned ink on paper.

24:37was going to go away. We heard about the paperless office argument many, many, many years ago, and I think that proved to be wrong for a while because people started printing and printing. But now you do see among some cohorts, some people, I feel, live their life without any paper. I think that's right. And I think the bit that I've always felt that preserves the book as a truly covetable and collectible item is reading them is a pleasure.

25:04collecting them is a pleasure, and they're hugely decorative. So the book is more than the book. And we know that if you read a physical book, you remember it much more easily than if you read a... Same as if you hand-rate something versus type it. And reading, after all, most reading is for pleasure. But it's also no surprise to me that reading where there is no expectation of retention has gone digital.

25:33Well, the digital market is huge, but it's concentrated in sort of generic romance, for example. Massive volumes there because people read one, two a week. Well, isn't that a little bit snobbish? You're thinking that they're not reading to retain. Well, they're not. It's just in the moment to entertain. Yeah, it's in the moment to entertainment. And that has gone on to...

25:57judging it, I'm just saying that's what it is, and that has gone that way. Whereas, you know, literary book, particularly non-fiction, has remained rooted in the physical book. And as a major retailer of vinyl, which we are, and DVDs, and amazingly also now CDs, which are on the up, there is a market for the physical object, but obviously the market that remains is but a fraction of the overall music market.

26:26You're selling all those at Barnes & Noble's final records and what share of your business is that? It's a relatively small one but it's something where we've invested a lot of time again in the curation of it and in the assortment of it.

26:39And in consequence of doing that, we've had ourselves going up pretty dramatically. So whether it's with Waterston's or Barnes & Noble, you did a lot of things that worked. You gave the individual shop managers more authority. You changed the culture of the bookselling. You changed the culture of how customers come in. There must have been some things though that you tried and failed, I assume, that you're not flawless. Yes. One example is we had very large pine tables with a riser on in all our stores, which is a wonderful piece of furniture and quite expensive. And I said they were terrible. The table I was looking at was terrible because it was low single copies, curling up covers, terrible selection. And in 650 stores, all the pine tables and their risers were dumped in there.

27:34trash and garbage and we're gone within and now we're spending an enormous amount of money buying them and putting them back in. So there's that kind of sort of thing happens very easily. Well luckily I said one of my key principles is never to look in the rearview mirror. And you also said you like looking at things and seeing what's not working and getting rid of it. There's a very very good reason for that is because we make endless mistakes and I do think one should try and do things. And yes, it's sort of more like a zigzag upwards, not a linear progression. These businesses also just change very, very slowly. And you can only move at the pace that the business is prepared to go. And we do move very slowly. And if you do try and go too fast, it ends in tears. OK, cliche question, but the dinner party where you can pick the guests.

28:29Anyone from antiquity till now, who do you want at that dinner party? Hmm. Are you looking at me with the hatred that I asked you this question? No, I mean, I was sort of thinking, because some of the most interesting people I've ever, to go to a church, I mean, it would be amusing to observe them. I don't think either would be friends. And the trouble is the best dinner party is the one with friends. So I'm not a, you know, assemble.

28:59the great and the famous type person. Yeah. What about writers whose books you've loved that you would like to just chat with over an evening? Can you name a few of them? I think there are writers who are just fabulous company and interesting people. And some of them I know, Compto Bean, for example. I mean, you couldn't want for a nicer person or better company. Others just...

29:24sticking with the Irish Sally Rooney. I rather admire for her sort of pugnaciousness, but I don't know her. It'd be fun to meet her. How do you feel about the split between commercial and literary? I know that you're more of a literary reader. There was a phrase I heard once, mass with class. That's the idea. That's what you want to achieve. I'm just curious how you think in that realm. Well, we are in the game of curation. Publishers, you know, if you throw enough, Darts at the wall, Sunlight will stick. At the end of the day, good publishing with good editors will out. And it's all of the assembly of elements which makes a good book with a huge dose of luck added onto it. Does it get the good review? Does it get visibility? Does it catch the zeitgeist? Does it order those things? But publishers are getting better at it. And certainly in my

30:23Very long time in which I've been selling books. Yeah, you know, it's funny I I wrote books for a long time and Then I started doing other things not just because I liked the other things but because I didn't like being in the book world that much The American publishing industry is not a lot of fun. I'll be honest with you and bookselling It just it didn't feel like a great place to be anymore But I might need to write another book now to branch another work just to get something back in the a new Barnes & Noble. Thank you so much. Pleasure. Really appreciate it. Thank you. James Dot. Thanks for checking out this audio episode of our new TV talk show Better in Person. And remember, you can also watch it along with all the other episodes in the first season of Better in Person. Just go to the Freakonomics YouTube channel or look for Better in Person on Apple podcasts. And let me know what you think. Our email is radio at freakonomics.com.

31:24We will be back soon right here with more Freakonomics Radio. Until then, take care of yourself. And if you can, someone else do. You've seen the Seinfeld episode where George brings a book into the bathroom with him. You're familiar with that one? And then it's tagged. You can't return it because they knew somehow that it had been in the bathroom. You ever run into that in real life? You're familiar with that one?

31:54Thanks again to ChatGPT for sponsoring today's episode of Better In Person. ChatGPT can help teams move from goals to real outcomes. Put ChatGPT to work on your most ambitious ideas and projects. Download the new ChatGPT desktop app today.