Place a large skillet over medium heat. Add the diced bacon in an even layer.

Cook, stirring occasionally, until the bacon fat has rendered and the pieces are beginning to crisp, about 6 to 8 minutes.

Drain the bacon on a paper-towel-lined plate, removing excess grease. Carefully wipe out excess grease from the skillet if needed, leaving just a light coating in the pan.

Return the bacon to the skillet over medium heat. Sprinkle the brown sugar, black pepper, cayenne, water, and red pepper flakes if using directly over the bacon.

Stir continuously as the sugar melts and begins to coat the bacon. The mixture will bubble and thicken quickly.

Continue cooking for 2 to 3 minutes, stirring constantly, until the bacon is deeply caramelized and glossy, but not burnt.

Transfer the bacon to a parchment-lined plate or baking sheet. Spread it out into a single layer and allow it to cool completely so it crisps into individual pieces.