Why Starbucks Coffee is a Bargain

 

(p. 161)  These coffee places, most of which didn’t even exist ten years ago, had several virtues.  They were always in convenient locations.  They permitted, even welcomed, patrons to sit and talk for several hours.  And they had tables for spreading out my materials and electrical outlets for plugging in my equipment.  In short, they provided a four-hour office rental for the price of a three-dollar latte.

. . .  

(p. 162)  Starbucks and its caffeinated cousins are part of what I call the free agent infrastructure.  The components of this infrastructure, which I’ll review in a moment, include copy shops, office supply superstores, bookstore cafés, overnight delivery services, executive suites, and the Internet.  Like America’s system of federal highways, the free agent infrastructures form the physical foundation on which the economy operates.  But unlike the federal highway system, which was planned and paid for by the government, this infrastructure emerged more or less spontaneously.  Like so many other aspects of Free Agent Nation, it is self-organized.  Nobody is in charge of it.  That’s why it woks.  It  works so well, in fact, that few people realize that this collection of commercial Establishments even constitutes an infrastructure.

 

Source:

Pink, Daniel H. Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live. New York: Warner Business Books, 2001.

 

Anti-Wal-Mart is Anti-Free-Choice

     Source of logo/header:  http://www.muddycup.com/mudlane/img/header.jpg

 

The article excerpted below reveals the soul of much of the anti-Wal-Mart movement.  It is not anti-big; it is anti-competition and anti-free-choice.

 

How in the world did a guy who started his first coffee shop on Staten Island six years ago and now runs five others in far-flung Hudson Valley towns become the moral equivalent of Wal-Mart and Starbucks? “Well, it’s now official,” he announced last month on the Web site that promotes his Muddy Cup coffeehouses. “I am now head of the evil empire.”

. . .

And now the talk of New Paltz has to do with something far more important than mere marriage — coffee. More specifically it’s whether Mr. Svetz is plotting an act of entrepreneurial imperialism by presuming to open one of his Muddy Cup coffeehouses next door to the ultimate green icon in town, the funky 60 Main coffee shop operated in conjunction with the nonprofit New Paltz Cultural Collective.

. . .

Little did he know. As word filtered out he began receiving a blizzard of e-mail messages from 60 Main proponents, reacting to an urgent appeal from the collective. The messages threatened a boycott and told him to stay home. “If we can stop Wal-Mart we can stop you,” said one.

“We do not want to become yet another small town taken over by huge corporations,” read another.

. . .

Mr. Svetz is still stunned by the whole thing, particularly his sudden status as a giant corporation. He says that just as lots of bars coexist in town, several coffee shops can too. Maybe he’s right. Maybe he’s not. He’s not Wal-Mart, but maybe it’s fair to ask how many artist-friendly coffeehouses the village can support. But it’s hard to argue when he says that even in New Paltz, businesses generally have to compete to survive, not find a way to build a Berlin Wall around town.

“When a community starts building walls and saying you don’t belong here or you don’t think like we do, that can’t be a good thing,” he said.

 

For the full story, see: 

PETER APPLEBOME.  "Coffee Puts Laid-Back Town on Edge."  The New York Times, Section 1  (Sun., March 4, 2007):  21. 

(Note:  ellipses added.)

 

We Need Caffeine

MohinderAndSylar.jpg   Mohinder on left; Sylar on right.  Source of photo:  http://www.nbc.com/Heroes/images/photos/scet/645/NUP_104904_0252.jpg

 

In the hit series "Heroes" episode "Parasites" Sylar (pretending to be someone else) unctuously thanks Mohinder Suresh for giving him hope.  I loved Mohinder’s response:

Hope is great; we need caffeine.

 

(The "Parasites" episode was first broadcast on NBC on 3/5/07)

 

Is Variety Good?

Chris Anderson has a stimulating and useful chapter in The Long Tail on why having variety and choice is good.

Not all agree.  My old Wabash economics professor, Ben Rogge, with wry amusement, used to refer us to Alvin Toffler’s Future Shock.  Toffler’s view was that choice was stressful—visualize the Robin Williams’ Russian émigré character in "Moscow on the Hudson," when he collapses in panic on not knowing how to choose amongst the variety of coffees in the Manhattan supermarket aisle.

What amused Rogge was the contrast between the old critics of capitalism, who criticized capitalism for providing too few goods for the proletariat, and the new critics, like Toffler, who criticized capitalism for providing too many goods for the proletariat. 

Although Toffler has recanted his earlier views, others, such as Barry Schwartz in The Paradox of Choice, have picked up the anti-choice banner.

Here’s my current two cents worth.  Sometimes we value variety for its own sake, and sometimes not.  I may find the variety of ethnic restaurants exciting, but not the variety of music on I-tunes.

But even when I don’t value variety for its own sake, I still may value it because it increases the odds that the product I can find matches the product I want.  Let me explain.

In the language of Clayton Christensen and co-author Raynor, in The Innovator’s Solution, generally what I want is a good that does well, a "job" that I want or need to get done.

Some critics of mass production descried the loss of the variety of products produced by pre-industrial craftsmen.  But what good did it do the peasants that no two chairs were quite alike, if all of them were too hard and misshapen for the job of comfortably sitting in them?

Mass production reduced variety, but increased quality, in the sense of bringing (cheaply) to market, products that were far better at doing the jobs that most people wanted/needed to get done. 

If the modern varieties of chairs are a response to differences in the jobs that different consumers need to get done, then I might generally, and accurately, presume that variety is usually good, not because I want to constantly sample a lot of different chairs (like I want to sample a lot of different ethnic foods), but rather because variety increases the odds that I will find the one or two particular chairs that allow me to do the job that I want a chair to do for me.  

Specifically, recently, we were looking for a chair that was firm, spill-resistant, would swivel to allow talking to someone in the kitchen, would recline for watching television, would be dog-chew resistant, and would have a color/fabric complementary to the rest of the furniture.  We shopped at Nebraska Furniture Mart, which is the largest furniture store in the U.S., with the greatest selection, because we hoped to find the one chair that would do all of these jobs.

We came close, but I wish there was a store with even greater selection.

   

Contra the Pundits: “Buy the Damned Coffee, if it Makes You Happy”

  Source of illustration:  online version of the NYT article cited below.

 

APPARENTLY, I’m an idiot.  Every financial advice columnist seems to be telling me so.

My crime:  buying morning coffee from Starbucks for my wife and me.

Avoiding the regular cup of overpriced coffee has become an easy cliché for financial advisers, a symbol of money frittered away.  The advice has appeared just about everywhere.  Drop the caramel mocha frappu-whatever, they say, or you’ll spend your retirement testing recipes that combine Hamburger Helper and dog food.  David Bach, the author of “The Automatic Millionaire,” pushes what he calls the Latte Factor, which he has defined as “the daily extravagances that drain your resources.”  Another guru, Paul Farrell, has estimated that skipping Starbucks and compounding the savings could save you an eye-popping $500,000 by retirement.  At my own newspaper, Damon Darlin, a financial columnist, has repeatedly brought up this issue.

Before bringing up a point of disagreement — what logicians call the “Big But” — it is common to bestow a few compliments to ease the sting.  So, as a preface to the Big But, let me say that Mr. Darlin is a fine journalist and, for all I know, a swell dancer besides.

Still, I disagree.  Buy the damned coffee, if it makes you happy.  When I show up back at the house after dropping off my high schooler in the morning and I have that latte in hand for my wife, she will sometimes refer to me as “my hero!”  After more than 30 years together, this is about the only time I am called that.

 

For the full commentary, see: 

JOHN SCHWARTZ.  "ESSAY; Skip the Coffee? What’ s Money for, Anyway?"  The New York Times, Section 3, Part 2  (Sun., October 8, 2006):  25.

 

“The world we have lost was ripe for rejection”

   The source for the image of the book cover is: http://img.textbookx.com/images/large/91/0521633591.jpg

 

Roche delineates minimal light and exiguous fires, chilblains and miasmas, the distinction of white linen, the rare treat of sweetness, the still rarer taste of coffee that made its drinkers sparkle, and the hankerings they inspired. Limited access to water affected drinking habits, cooking, hygiene, and sartorial practices. Housewives and laundresses coped with mountains of dirty linen by river or by pond; the great sent their laundry to the American islands for a whiter wash; the poor rioted for soap as well as bread. Society moved from an economy of scarcity and salvation to one of plenty and prodigality. But the move was slow and spotty. The world we have lost was ripe for rejection.

 

For the full review, see:

Weber, Eugen. "Recommended Reading." The Key Reporter 67, no. 2 (Winter 2002): 12.

 

The reviewed book is:

Roche, Daniel. A History of Everyday Things: The Birth of Consumption in France, 1600-1800. Cambridge University Press, 2000.

 

NGOs Throw Money at Poverty, and Then Declare Success

Mark Pendergrast, in his opus on coffee, tells us about Bill Fishbein, a coffee retailer from Rhode Island, who wanted to help small, poor, coffee farmers in Guatemala:

 

(p. 419) . . . , Fishbein wanted to do something to help.  At first, he worked with established nongovernment organizations (NGOs) but soon became disillusioned. Too often, the NGOs simply threw money at communities, then declared projects successful even without long-term improvements.  "It amounts to a network to move money around, to pull the heartstrings of donors," he complains.

 

Source:

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.

 

Specialty Coffee: How Does it Fit Christensen?

Christensen and Raynor:

(p. 55) Not all innovative ideas can be shaped into disruptive stategies, however, because the necessary preconditions do not exist; in such situations, the opportunity is best licensed or left to the firms that are already in the market. On occasion, entrant companies have simply caught the leaders asleep at the switch and have succeeded with a strategy of sustaining innovation. But this is rare.

 

Source: 

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

 

In several later chapters of Mark Pendergrast’s Uncommon Grounds, he documents how the major coffee retailers failed to perceive and respond to the threat posed to their business by the specialty coffee retailers.  In some ways specialty coffee firms would seem to be disruptors.  But they were neither "low end" nor "new market."  Wasn’t specialty coffee what Christensen would call a "sustaining innovation"?

 

Hayek Was Right: Free Speech is Fragile, When Property Can be Seized


For those who doubt the central message of Hayek’s The Road to Serfdom, something to ponder:

 

(p. 351) The Sandinistas called coffee farmers who cooperated with them "patriotic producers." Anyone who questioned their politics or policies was labeled a capitalist parasite. Throughout most of the 1980s, any farms that did not produce sufficiently, or whose owners were too vocal, were confiscated by the government.

 

Source: 

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.


Coffee Cartel Quotas: “someone always cheated”

In his comprehensive history of coffee, Mark Pendergrast discusses efforts of the coffee-producing nations to raise the price of coffee in 1977:

 

(p. 332) Quota restrictions without consumer country participation never worked in the past, since someone always cheated.

 

Source:

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.