The Economics of Everyday Things - 88. Fortune Cookies

0:03At first glance, 37th Street in Long Island City, New York looks a little down on its luck. On one side of the road, there's a strip of dilapidated warehouses and auto body shops. On the other, there's a cemetery where mafiosi are buried. You can hear mechanics drilling out tire bolts and cars honking on the nearby expressway. But inside of a white brick building on the corner, you'll find a place where quite literally, fortunes are made.

0:35He who throws mud loses ground. A day without smiling is a day wasted. A clean conscience is a good pillow. People will always hunger to feel that they are part of something greater. The cookie you eat, it's over in a minute. But it's the message that stays in your mind. That's Norman Wong. He's the CEO of Wonton Food, the largest manufacturer of fortune cookies in the world.

1:07Between its New York factory and additional facilities in Texas and Tennessee, it produces five and a half million of them every day. If you laid out their annual output of fortune cookies end to end, it would circle the globe two and a half times. We are most of the market, so primarily Chinese restaurants. They are the typical mom-and-pops that you see, but also national food chains. But it's not easy to be king of the fortune cookie. To keep your business alive, you have to convince restaurants to pay for a product that they give away for free. And even when you land a big contract, the profits might be measured in fractions of a penny per cookie. Fortune cookies are actually relatively complex, right? Because you have to make the cookie, you have to get the portions, you have to put the fortunes inside the cookies, you have to put them in plastic, you have to put them in boxes. There's no margin in the generic fortune cookie. For the Freakonomics Radio Network, this is the economics of everyday things.

2:14I'm Zachary Crockett. Today, fortune cookies. It's estimated that there are more than 45,000 Chinese restaurants in the United States. That's more than all McDonald's, Burger King, KFC and Wendy's locations combined. These restaurants range from your small family run business in Wichita, Kansas to the Panda Express at your local strip mall. At many of these establishments diners expect a fortune cookie.

2:45at the end of the meal. So a modern day American fortune cookie is basically like if you imagine a Pac-Man and it became 3D. They're made in these little yellow disks and you just kind of fold them and inside are little pieces of paper. Jennifer Lee is the author of The Fortune Cookie Chronicles, a 2008 book that traces the history of American Chinese food. Like most of us, Lee, who is Chinese American herself, had always assumed that the fortune cookie's country of origin was obvious. I was born and raised in New York City, and so when we went to our local Chinese takeout, they would also give me fortune cookies. So I grew up thinking that fortune cookies were Chinese. Years later, Lee took a deeper look at fortune cookies, and she began to grow suspicious. Chinese food is actually generally terrible at desserts.

3:40We have mooncakes, which basically taste and look like hockey pucks, or these weird rice porridge things with a lot of stuff floating around in it. But it's like fungus and little berries, and it is an absolute disappointment. If you look at a fortune cookie and you look at the dessert tree of China, there is like no genetic ancestry, not even close. Lee embarked on a journey to track down the birthplace of the fortune cookie.

4:09And in the course of her research, she found evidence that they likely originated in Japan in the mid-19th century. They were called sujiura senbei, or fortune crackers. They have a much nuttier miso flavor, and they're bigger and browner. But if you see them side by side, you're like, oh, this is an unmistakable family resemblance.

4:33In the late 1800s, there were waves of Japanese immigrants that came to California, some of whom opened bakeries and made these things. How exactly those Japanese crackers ended up in Chinese restaurants in the United States is a little murky. A leading theory is that a Japanese bakery called Benkyodo sold them in San Francisco around 1906. One of their customers was Makoto Hagiwara.

5:02who ran the Japanese Tea Garden at Golden Gate Park. He started selling the cookies to local Chinese restaurant owners who were trying to cater to American diners' tastes. American just expected desserts, and fortune cookies emerged as the quintessential, quote unquote, Chinese dessert. During World War II, San Francisco was a major military port for ships to the Pacific. Soldiers came there from all over the country.

5:34And during their stay, many were exposed for the first time to fortune cookies at Chinese restaurants. And so when they went back to their local Chinese restaurants, they were like, why don't you have the fortune cookies like they do in San Francisco or California? And these Chinese restaurant owners through the word of mouth network, they basically figure out what these fortune cookies were and they become an expectation.

6:03Li says that when Japanese Americans were put in internment camps, Chinese business owners bought up many of the fortune cookie operations. By the 1960s, the government had introduced more favorable immigration policies that nearly doubled the Chinese American population. A wave of Chinese restaurants opened across the country. And that meant many more fortune cookies. They just really caught fire in the United States. Initially, Chinese restaurants had to place orders with small family-run fortune cookie factories in San Francisco and Los Angeles. The cookies were handmade, and a top-notch employee could fold around 750 cookies an hour. But eventually, the demand grew so large that humans could no longer keep up. You go from something that...

6:58Originally was handcrafted, made in mom-and-pop shops to the point where there's machinery and automation and industrial scale. No one chooses what Chinese restaurants are going to eat at by the fortune cookie, so it's basically a commodity product. It favors someone who can plug into a nationwide distribution network. Today's machines produce 8,000 fortune cookies an hour. Most of those family-run cookie factories have been put out of business.

7:28And the industry is now dominated by a few giants, one of which controls the bulk of the market. You basically have one really big gorilla that makes fortunes, which is wonton food. We're talking about millions of cookies a day. Again, that's Norman Wong, the CEO of wonton food. The company traces its roots back to his father, Ching Sun Wong, who immigrated to New York in the 1960s. This is a typical story.

7:59you know, came with very little money in his pocket, did the usual jobs, restaurant, laundromat, construction. I guess he wasn't really good at that kind of work because he kind of got fired and rehired and so forth. But Ching's son possessed a special skill. His family members in China had taught him how to make noodles. And his uncle said to him, as long as you hold on to this skill and craft of noodle making, you'll always be able to find a way to support yourself. He went around and...

8:27borrowed money from a lot of people, and that's when you started the noodle factory in Chinatown. Ching Sun later expanded his business by acquiring a small fortune cookie factory, and he began selling them to restaurants alongside his noodles. His son, Norman, took over as CEO in 2013. Today, it's still a noodle company. It's also the nation's leading manufacturer of fortune cookies. We do dried noodles.

8:55We do the fried crispy noodles that you put into the wonton soups or salads. Also the skins that we use for dumplings, egg rolls, spring rolls. The product that we're most famous for is fortune cookies. And those go out to Chinese restaurants around the country. We'll take a trip inside the Fortune Cookie Factory after the break. In the bowels of the wonton food factory in New York City, you'll find the Fortune Cookie version of Willy Wonka's Chocolate Factory.

9:31The fortune cookie process begins in a loading zone where 50 pound bags of dry ingredients are stacked up to the ceiling. The standard fortune cookie recipe is pretty simple. Flour, granulated sugar, vanilla flavoring, coloring agents, and water. These ingredients go into giant stainless steel mixers for around 20 minutes. That's actually one key part is the mixing, making sure that the batter has the right combination of viscosity and strength. The mixed batter travels down a series of pipes that lead downstairs to the factory floor. Down here a dozen rows of conveyor belts are in constant motion. The batter is squirted out from the pipes onto greased metal slabs as thin little pancakes. This process cooks the cakes and while they're still hot and malleable, a proprietary piece of machinery

10:29cuts a single fortune off a giant roll of pre-printed phrases. In one descending motion, it lays the fortune onto the pancake and folds it into the shape we all know. It's made out of food grade paper and ink because, you know, little kids might, you know... People eat them. They might forget there's a little piece of paper in there. So it's safe to eat. Oh, definitely, yeah. A fan cools the cookie and a different machine seals it in a wrapper with air. This whole process happens in a few seconds. And as you stand there, you see an unrelenting stream of wrapped cookies flowing down the line. They're packed 350 a piece into cardboard boxes and loaded up to be distributed all over the country. wonton food sell some of its fortune cookies white label to big national chains who put their own logos on the packaging. But most of its products are sold under its own brand, Golden Bowl.

11:29You might see the name on the fortune cookies at your local family-run Chinese restaurant Fortune cookies are usually free to us the diners restaurants take on the cost and Given the tight profit margins in the restaurant business typically three to five percent Wanton food faces a lot of price sensitivity from its customers They're only willing to spend so much on something they have to give away on its website Wonton Food sells boxes of 350 vanilla fortune cookies for $12.85 each, a little less than four cents per cookie. But for larger deals that go through a food distributor, the wholesale price is likely much lower. Jennifer Lee, the author of The Fortune Cookie Chronicles, says in some cases, fortune cookies may even be a loss leader. You have these companies, you know, whether or not they make Wonton.

12:27skins or they make noodles and which are selling to the Chinese restaurants. Anyway, once you have those sales accounts, it is not that expensive to then upsell and add additional products. One reason for the small margins is that fortune cookies are surprisingly labor intensive. You can automate the cookie baking process all you want. But the real product is that little slip of paper inside of it.

12:57And writing a good fortune is a process that cannot be rushed. Americans, if they don't like their fortune, they complain to the restaurant. The restaurant complains to the distributor. So there are all these pressures to only have happy, anodyne fortunes because otherwise there's a bad tip at the end. Decades ago, fortune cookie writers figured out that many traditional Chinese sayings didn't necessarily translate well for an American audience.

13:31The Chinese sensibility and American sensibility do not always line up. So even if you put things that Chinese people said into the cookies, I don't know what American audience would like them. So, for example, the American perspective, the squeaky wheel gets to grease. Speak up, right? Call attention to your needs. Chinese, Chiang maotu hounia, which means the bird whose head sticks out gets shot. And so, very different attitude.

14:00When fortune cookies first became widely popular in the 1950s many writers turned to the Chinese philosopher Confucius and they took some liberties with his work Confucius started saying things that he never said Americans just thought he was like a wise man and therefore Confucius said today's fortunes have evolved But the fundamentals of the message are still the same has to have a positive message. This is what comes at the end of the meal, right?

14:29So it's something that has to give customers a little bit of joy so that they'll be encouraged to come back to the Chinese restaurant. There's the typical category, which is the predictive type, you know, like something's going to happen to you in the future. There's humorous ones. There's one that are based on ancient Chinese philosophy. There's ones that are encouraging you words of inspiration. My favorite fortune I ever got all it said was someone is watching you from afar. Oh, yeah.

14:57Hopefully, it keeps you on the straight and narrow. Wanton Food has employed a few chief fortune writers over the years. They sift through quote books, philosophical texts, and social media to find short and snappy fortunes that fit the bill. Let me see. Where is the list here? Here we go. Trust in your dreams. They hold your potential. Embrace your destiny and let go of fear and doubt.

15:27No snowflake in an avalanche ever feels responsible. Even the greatest of whales is helpless in the middle of a desert. Wanton Food now has a database of more than 10,000 fortunes, which it rotates in and out of circulation. We make millions of cookies a day, and you know, we don't want a situation where you get the same message. We're constantly reviewing the database of fortune messages to make sure that it's something fresh.

15:57At times, the writers at Wonton Food have gotten a little too experimental. In the mid-2000s, they wrote a series of more ominous fortunes. Diners across the country were getting notes like, today is a disastrous day, or there might be a crisis looming. That one, by the way, debuted a few months before the Great Recession. There's cultural mores that evolve over time in our society.

16:23So whatever's going on in the site, guys, we have to make sure the cookies reflect that. Just as consequential is what's on the back of a fortune. If you flip one over, you'll often find a set of six lucky numbers. Wonton Food was the first company to do this. Wong says many people use those numbers to enter the lottery. And it's not uncommon for them to strike it big. Oh yeah, that happens like every month. We can't even keep track of it.

16:53In 2005, 110 people all over the country won $19 million in the Powerball Lottery by using the lucky numbers on the back of a wanton food fortune cookie. Wang says the company got a visit from skeptical lottery officials. They came here, interviewed us. Initially, they thought, what is going on here? Yeah. And then once they reviewed our process, they realized it was just the magic of fortune cookies. In recent years, Wang has tried to introduce the magic of fortune cookies to other countries. As Chinese immigrants have spread around the world, so too have Chinese restaurants. And by proxy, the international demand for fortune cookies. You can now find them in Europe, South America, Africa, and Australia. But one place that has resisted the fortune cookie is China. In the 90s, wonton food tried to introduce fortune cookies there, but they abandoned the project

17:51due to lack of interest. The cookies, as it turns out, were just too American. If you ever bring a whole bag of fortune cookies to China and you just give them to people, they'll pop them in their mouth and they're like, whoa, whoa, what's this? Americans are so strange. Like, why are they putting pieces of paper in their food? For Jennifer Lee, the answer to that question is clear. It's a non-religious, non-woo-woo way to believe that there's a larger cosmic framework.

18:24You can get a fortune and it feels like a personal message even though in reality that fortune was probably printed 10,000 times in the factory But it feels like it's a custom message from the cosmos to you delivered in a little cute package There's something about that whole ritual that makes you believe There's a pattern to the madness of the universe and Norman Wong is happy to keep the tradition alive. People put it on their computer. They put it on their refrigerators, put it in their wallets. It's a message that sticks with them. This little piece of paper that's been folded into a cookie dough brings so much joy and it gives people an opportunity to reflect and then also sparks dinner conversations. I think that's what people crave. They want something that's not just a physical product. They want something that inspires them.

19:22a message that they can share. Yeah, and they're fun. For the economics of everyday things, I'm Zachary Crackin. This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz Rapson. And thanks to our listeners, Liam Khan, Sean Gleason, and Jeff Frankel for suggesting this topic. Love is a warm fire to keep the soul warm. I don't know. I don't know. I'm not feeling that one so much. Warm twice?

19:58This is not the most elegant.