The other day I got an interesting e-mail from a former Starbucks middle manager. He said that he had read my book and brought it up at a lunch with two of the early driving forces behind the company’s growth. Specifically, he mentioned a section of the book where I talk about how Starbucks, especially in its opening phases of massive growth attracted a heterogeneous, largely up-scale crowd. When one of those early operators heard this, he scoffed:”I wish we’d been that smart.”
My contact, the former Starbucks middle manager, also brought up the recent New Yorker profile of Whole Food chairman John Mackey. In this essay, Nick Paumgarten paints Mackey as a mercurial and impulsive business leader, driven by his quirks and foibles as much as calculated acts of risk-taking and planning. The former middle manager suggested to me that the larger “net effect” of companies like Starbucks and Whole Foods was “significantly more dramatic and perhaps less intentional than it appears,” adding there was so much management by opportunity and aggressiveness — surprisingly little real strategy.”
This raises some fascinating questions about intentionality and agency in business decision making. Much of the stuff written about corporations, particularly critiques of corporations and corporate culture, presume a kind of cold rationality to the way business operates. It is a largely de-asethicized or personalized version of motives and intentions, where the only thing that matters is marketing reports – often based on sneaky ethnography – and spread sheets. Surely people like John Mackey and Howard Schultz, the chairman of Starbucks, are driven to make money, but they are also informed by their own creativity.
Still that doesn’t mean that they aren’t functioning within larger institutions and structures of knowledge (and knowledge production) that don’t shape their decisions and thinking.
Let’s go back to the idea of intentionality and the comment, “I wish we had been that smart!!” Well, maybe no one at Starbucks in the early to mid-1990s said explicitly, let’s put our stores where we will attract a homogenous crowd, but the way they went about their business, priced their products, and gathered knowledge made sure the homogenous crowd was, in fact, the outcome.
First Starbucks priced its coffee far ahead of the competition. Coffee never cost more than a dollar in the 1990s, but Starbucks priced its coffee at twice that figure. That meant that only people who had some money and wanted something better would go to the places. As I explain in my book, pricing acted as a filter keeping some people out and pulling others in (and thus narrowed the range of the crowd at Starbucks). Then, Starbucks, like Whole Food, quite wisely commissioned – or did so in house – its own market research. It located its stores at busy inter-sections and on the sides of the street where people walked on the way to work in the morning, but it also chose locations based not just on foot and car traffic but perhaps even more on average income levels of educations. Average income levels and home values these are social constructed numbers, the products of historic patterns of racism and class privilege that when combined tend to reproduce homogeneity. So led by this kind of knowledge gathering, Starbucks followed the money. The company intentionally did this because it made good business sense. They followed the data.
Of course, Starbucks’ decisions about where to put its stores speaks to the larger lie at the heart of the American Dream – for every Howard Schultz rising from public housing to the helm of one of the nation’s most dynamic corporations there are millions of poor kids who attend lousy, underfunded schools and end up in dead-end jobs and there are millions of upper-middle-class kids who favored by birth go to gleaming schools with sparkling science labs and rooms full of brand new computers. They go to college, move to up-scale neighborhoods because they have the best chances at getting the best job and that gives them a choice of any number of Starbucks to go to on their way to work.
Just to flesh this out a bit. Some of the first Starbucks stores were in Marin, California and in West Chester, New York, and not Prince George’s County, Maryland or Oakland. (And Marin and West Chester were largely homogenous places – certainly in class terms.) Today, just to flesh this out a bit more, there are more Starbucks stores in Marin County (21) than Bakersfield County (21) despite that fact that Bakersfield has three times the number of people. (About 250,000 vs. 820,000, but the average per household income in Marin is about three times that of Bakersfield.)
What I’m suggesting is that there just aren’t that many accidents in economic life – kind of like the suburbs – they didn’t just happen to develop the way they did. The logic of American consumer life produces largely predictable outcomes. High priced items start out in high-end neighborhoods. Once the upper-middle class adopts a product, it often becomes a status symbol. Once it does, those a few rung below start to consume the product, so that they look like they have some money. And then, the upper-middle class moves on to something new – another way to show off their wealth and status. That cycle – that cycle that Veblen pointed out over a hundred years ago — fueled Starbucks growth and undergirded the business moves of the company whether clearly articulated that or not.