Heat your Dutch oven or heavy-bottomed pot over medium heat. Add diced bacon and cook slowly until crispy and golden, about 8-10 minutes. Remove bacon with a slotted spoon and set aside, but keep the bacon fat in the pot.

Pat beef cubes dry and season them with salt and pepper. Working in batches, brown beef pieces in the bacon fat over medium-high heat for about 12-15 minutes until they develop a caramelized crust.

Remove beef and add sliced onions and carrots to the same pot. Cook until they soften and caramelize, about 8 minutes. Stir in the tomato paste and garlic for a minute until fragrant. Add flour over veggies and cook for another 2 minutes to remove the raw taste.

Slowly pour wine into the pot, scraping up browned bits from the bottom. Add beef broth and herbs, then return beef and bacon to the pot. Ensure the liquid barely covers the meat; add more broth if needed.

Bring to a gentle simmer, cover, and transfer to a 325°F oven. Braise for 2 to 2½ hours, checking occasionally and adding liquid if necessary, until the beef is fork-tender and the sauce coats the back of a spoon.

In the last hour of braising, sauté pearl onions in butter until golden, about 15 minutes. In a separate pan, cook mushrooms until golden brown and moisture evaporates, about 10 minutes.

Remove bay leaves and herb stems, then gently fold in sautéed onions and mushrooms. Let the bourguignon rest for 10 minutes before serving.