Commoncog This Week
This week's Commoncog piece is members-only; next week's piece will be free.
The Creation of Four Seasons, and the Asset-Light Luxury Model (members only) — Earlier this year, I was about to travel with my baby for the first time, and I reached out to a few friends for advice. One of them, Eric Nehrlich, shared his Tips for Travelling with Young Children with me (because he's an expert in this; I met him and family as they were travelling through Singapore and got a taste of how he and his wife does it).
Eric mentioned that one trick they do to mix things up is to go to an expensive hotel or resort with a kids club, and then just drop their older kids there for the afternoon, in order to decompress. To be clear, they do this in the context of a much longer trip (they travel for weeks) and the resort stay is a 'reset' to recover.
"What a genius idea!" I thought. And so I fell down a rabbit hole on fancy hotels.
As a new parent, it quickly became obvious that fancy hotels with kids clubs served a very particular, very strong form of demand. If you're travelling with a baby, you can't really go very far from the hotel (yay nap schedules). And so since you're tethered to your hotel, the hotel better be a destination in itself. Long gone were the cheap Airbnbs and hovels that I used to stay in my 20s.
Of course, after researching hotels that I wanted to stay at, I began looking at the business side of things. Because of course I would.
And here things became a little interesting. I think it's obvious to anyone who's looked into it that hotels are not great businesses. Also, luxury hotels are less profitable to run than four star hotels, and four star hotels less so than three star hotels (a sentiment that we saw in our case about Kwek Leng Beng). To cap it off, hotels are extremely cyclical — if there's a downturn or travel scare of any kind, occupancy rates take a nosedive.
So:
- Why do so many rich people want to own hotels? In particular, Asian families and Asian conglomerates — why do so many want to have a hotel brand associated with their name? (cough, status)
- Why are luxury hotels such terrible businesses?
- Why do multiple hoteliers say "the real money in this business is owning hotels, not running hotels?"
- Also: what the hell is this 'branded residences' thing about, and why is every luxury hotel chain going after it?
- And, finally: why is the Four Seasons the only luxury hotel brand to have not been sold under duress?
That last one is the really interesting thing, to me. Most famous luxury hotel brands do not actually make much money, and were sold under conditions of duress. Adrian Zecha, founder of Aman Resorts, lost control of his company in a board fight. He had diluted himself out of control over the preceding decade. Horst Schulze, the founding member of Ritz-Carlton and Capella, sold Capella to the Kwees of Singapore in 2017. (Capella's expansion plans had collapsed after the Global Financial Crisis.) In 1994, a year before Marriott began buying up the Ritz-Carlton — eventually acquiring it outright at a fire sale — the Wall Street Journal reported that only six or seven of the 30 hotels it ran were profitable. Schulze disputes this, but it was clear that the company's debt load was unsustainable. In 1992, BusinessWeek reported that Ritz-Carlton had a debt load of about $1 billion, and Schulze said that it had defaulted on a $70 million loan and was actively restructuring other debts.
In a way, this is a very unusual state of affairs. Luxury businesses are usually lucrative. (See our Swatch case for an example). Like many luxury brands, luxury hotels have a cachet and a mystery to them. Take the Mandarin Oriental in Bangkok, for instance, or the Raffles Hotel in Singapore, or the Okura in Tokyo — all storied hotels with remarkable pasts. For that matter, take the Plaza Hotel in New York, the purchase of which contributed to Donald Trump going bankrupt in the 90s.
Now, after a few months of casual digging, I think I've figured out the answers to all of these questions.
This week's case is not really about the answer to these questions, though. It's about the one luxury hotel brand that scaled, created a service model the envy of the entire industry, and never sold under duress. Four Seasons Hotels is now mostly owned by Bill Gates. But for 47 years, founder Isadore Sharp ran the company, braving three recessions and creating something that had never existed before: an asset-light luxury hotel brand known for its consistency of service. (He then sold it off in order to retire.)
Sure, there are other hotel brands that have better service (Aman, for instance). And there are other hotel brands that are more curated, more premium, more expensive. But no luxury hotel brand is as well run, with such consistency, at such a scale, as The Four Seasons.
This case runs long, and took a full week to edit. But it is rich with concept instantiations:
- How Sharp effectuated his way to the asset-light model, in response to a disruptive change.
- How he figured out how to scale the service model.
- What capital expertise looks like in the face of an extremely cyclical business.
I hope you'll get as much out of this as I did, especially given how many disruptive shifts Sharp had to navigate. We'll publish a case specifically on how he dealt with recessions next week.
Note: members may leave comments at the bottom of the case.
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An Ask
My friend Tom Kerwin runs a boutique consultancy called Crown & Reach that specialises in dealing with high uncertainty business problems. (His website reads “If you're pouring effort into a new product or service and something's not working as well as it should be, talk to us” — but what they’re really good at is getting leadership teams unstuck when they’ve been circling a high uncertainty strategic decision for months.)
Most of my conversations with Tom are about what he calls an ‘Uncertainty Bubble’. (Click through that link for a case study). He and his business partner Corissa help create a politically-protected ‘container’ in a host organisation so that innovation can occur within the container, and then later get integrated back into the rest of the organisation. In my view, coming up with that politically-acceptable boundary is Tom and Corissa’s superpower; this is not easy to do … and I’m certainly not able to do it — or at least not consistently.
Anyway, Tom has an ask! He and Corissa are doing a listening tour to learn about how people are thinking about launching new products or services in this current era.
It's just research, absolutely NO sales, and everyone who takes part will get a write up of what they find across the whole set.
If you’re interested in talking with them, Tom says you may grab a time here: https://tidycal.com/tom.kerwin/candr (or ping [email protected] if those times are no good.)
Member Events
Two bits of news here:
- I'm organising a Commoncog meetup in London at the end of October (I'll be there for a few days then). I haven't been on top of the planning, but I'll firm up details by the end of this week. The full discussion is available in the forum here; all updates will be there..
- Details to be confirmed but John Schmitt and his team at Shadowbox has agreed to run a Tactical Decision Game design workshop in November. This will be capped at 20 participants, and will be priced accordingly. Commoncog members get first dibs before registration is opened to the public. If you'd like to learn how to design TDGs for your specific context, and would like feedback from the folks who invented it, look out for an announcement here.
Member Discussions
The Commoncog members-only forum is a private place for sensemaking on business and markets.
Here are a couple of members-only discussions I'd like to draw attention to:
- There's some discussion about Jev in the AI Field Reports thread.
- A member recommends Jason Cohen's podcast in the 2026 podcast recommendations thread; another member recommends Ester Perel's podcast, which is a series of recorded sessions of couple's therapy as a way to learn empathy for product management.
- The Real Deal about Rick Rubin (and His 'Vibes') and His Amazing Business Sense — exactly what it says on the tin.
- If you haven't introduced yourself yet, consider doing so in the Q3 2026 intro topic!
- How to do Sales — a member asks for advice on how to do sales, and folks are helpful. Chime in if you have thoughts!
- Designing Information Systems for Experts: Research Suggestions or Tips? — the question here is exactly what is being asked, but there's some interesting discussions given AI. Said member argues that expert users need rich, contextual information rather than oversimplified interfaces, and that current AI applications miss this by hiding the underlying data experts rely on to make decisions.
- A Possible Causal Explanation of Not Nots ('Not Nots' being the term of art for conceptualising demand, from Heart of Innovation).
- Articles or references on good hiring for businesses — a member who is an experienced manager asks for references on good hiring. Some of these recommendations are not the normal ones.
- Folks (well, I) am worried about Bending Spoon's acquisition of Miro, given that Miro bought Reforge and I like Reforge.
- I pre-register my concern about Bending Spoons's debt load.
- There's more discussion about the 'Far Transfer Problem' (that is, does skill in one domain lead to skill in other domains) that might be interesting to expertise nerds.
- What's Your Custom AI Dev Harness?
Note that you'll have to be logged in as a member to view many of these threads. You may login here.
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Elsewhere On The Web
Don't Get Addicted to Painkillers — Dinesh Raju is a business mentor, and he's got a new one.
It's particularly easy to get addicted to painkillers in the modern media environment. We demand immediate relief from the tiredness of not knowing what happens next. A market is created for explanations that provide that relief. Some authors are genuinely trying to help you get better, but many publishers benefit when you keep coming back for another dose. Sellers have an incentive to produce stories and explanations that make the audience feel certain now, long before anyone finds out if the model actually works. The marketplace pushes for repeat consumption rather than recovery.
The most stubborn painkillers are the ones that can't be meaningfully tested. These are particularly common in domains that have a lot more spectators than participants, like business and politics. You might read a convincing account of why a company failed and come away certain that the founders couldn't delegate. But if you're only watching from the outside, you don't get to change those decisions and see what happens. The fact that the company failed doesn't by itself validate the explanation, since many different explanations can fit the same outcome.
You can keep consuming these stories and feel increasingly sure that you understand how companies work, without learning which parts of your understanding need to change. It can take a long time to purge these opiates from your head, and in the meantime, they still affect who you trust, whose advice you repeat and who you vote for.
John Schmitt on Formulating the Problem — This is an old one from back in 2021, but it's profound in ways that I didn't fully appreciate. In particular:
Since the problem formulation points directly to the proposed solution, if you formulate the problem in the same old way, you’re bound to get some variation of the same old solution. If you’re looking for a breakthrough solution, you need to figure out a new way to conceive the problem. I would suggest that most breakthrough ideas throughout history, in practically any field, have resulted from someone who was able to turn the problem on its head and see it in a completely new way. Schmitt was the dude who introduced Tactical Decision Games to the US Marines, an accelerated expertise training approach. We've talked about them in the past. Those who have experienced a TDG would know that half the challenge is just conceptualising the problem in a good way.
This lies at the heart of expertise.
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Just two links today. I'm back from a break where I happened to read a fair bit, but most of it was for cases, and of the pieces that I read that weren't for cases, I don't think I can recommend them.
I hope you're safe, sane and healthy. I'll see you next week.
Warmly,
Cedric
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