Howard Schultz has been in the news a lot lately. He was on the short list for Hillary's pick as Vice President (could that have made a difference?). Last week he announced he would step down as CEO on April 3, handing over to his personally selected successor the management of the company he built into the world's largest coffee business, with over 25,000 stores in 75 countries.
Schultz made Starbucks part of the national conversation on issues such as health care, gun violence, gay rights, race relations, veterans rights, student debt, and now the homeless. He will remain at the company as executive chairman, focusing on the company's involvement in social causes and on growing Starbucks Reserve, the company's new super-premium brand and chain of high-end stores.
Howard, who hails from Brooklyn, has also been an ambassador and champion for Seattle, and I went to see him to ask about his love of the city. Here are some excerpts from the chat:
Richard:Seattle was not long ago a beautiful but somewhat provincial place. But just in the last few years, and you're one of the architects, I think, it's gone from a sleepy backwater into this extraordinary, world-class city, a leader in philanthropy and social responsibility and so many other categories, technology, innovation, etc.
Howard:Sure. Let's see, my wife and I moved here in the fall of 1982. At that time, you could not get a Sunday New York Times. Probably today you don't even need a Sunday New York Times, but that's a whole other story, but you couldn't find a retail store that had the newspaper. It's changed so dramatically in so many areas, but I think the primary reason, if you really press me, is that it's such a wonderful place to live that it has attracted people from all over the country and literally all over the world. It's a city that provides all of the attributes and characteristics of a big city in terms of culture, the outdoors, food, without many of the infrastructure problems, and I think it's a wonderful place to raise a family.
People have asked me what's in the air that has driven almost an entrepreneurial DNA, and of course I'd say it's coffee. But I think the primary reason is... it's just a great place to live.
Richard:There seem to be a couple of major elements. One is the destiny of geography, in which there is a permeable membrane between the urban environment and the wilderness, and that brings access to clean air and clean water and to all these great outdoor activities.
The other is the people themselves. There is a pioneering spirit that seems to come with the people here. This is a place where you can dare to be brave. You can embrace failure. Whereas so many cities around the world are steeped in tradition, and they penalize failure. My guess is that you could not have started Starbucks in any European country, even though you were inspired by Italy, and that Microsoft and Amazon could not have started in any European country because the mindset is so risk averse.
Howard:I would add something to that, because I think you're right and I've been asked that before. Could Starbucks have started somewhere other than Seattle and had this kind of success? We'll never know the answer to that, but I think it certainly would have been very different, and the reason is there is a set of values that is embedded or imprinted in the culture of the Northwest. Those values are not only the way people live but the way people act. The company that I think in a sense was the foundation of those values, in my mind, at least from a customer-facing point of view, was Nordstrom.
Nordstrom, early on, separated and differentiated itself from any other national department store by having a kind of elevated mission of customer service, and a compassion for the emotional experience for the customer. You remember early on, they said: "Whatever you buy at Nordstrom, you can return."
I think the culture, the values and guiding principles of Starbucks are threaded into the values of the Northwest. People ask me what the secret sauce is of Starbucks; it's the culture of the company. I think we would have had a hard time replicating and creating that in a different kind of city.
Certainly, in the last decade or so, the entrepreneurial DNA of this community, of this city, this area, is unparalleled when you look at the size and scale of other metropolises in the country or the world. You look at Seattle, you say, "God, how did all these companies get here at once? What's happened?" The other thing is its proximity to the Pacific Rim, the market opportunities, and the thread of technology. The outdoors, the clean air, the environment, the entrepreneurial DNA, the ability to attract and retain great people to the city, all have contributed to Seattle growing up.
Richard:That brings up a thought concerning the concept of size you mentioned. There is a theory that as far as national governance, about 4 to 6 million people are optimal manageable numbers, such as what you have in Norway, Switzerland, Costa Rica and New Zealand. And when you get beyond that size, there are too many divisions, too many agendas, and it's difficult to work together as a cohesive whole. I wonder, has Seattle, at about 700,000 people, reached some sort of optimal size as compared to L.A. or Shanghai?
Howard:I think the question for me would not be what is the optimum size; the question would be, "Have we done the proper infrastructure investment and planning necessary to absorb the growth and maintain the elegance of style, the intimacy that we've come to admire and enjoy."
The world had discovered Seattle and the Northwest. The question now is not whether or not the growth is going to continue. It's going to continue. The question is how are we going to absorb it and maintain the lifestyle and the work environment and this wonderful place that is such a jewel in North America. So that we don't look back and say we got it wrong. Because growth can cover up a lot of mistakes.
Richard:One advantage Seattle has is that people are cognizant of this, so greed and growth are not sneaking up and overpowering smart planning, in many cases.
Howard:People are cognizant, but I think there are tougher choices to make today than before. I'm acutely concerned about the homeless problem here in Seattle. That has to be solved in a way that is quite humane. America cannot sustain the promise of the country and leave all these people behind. Can't do it.
Richard:Let me ask about the make-up of neighborhoods and the topography, because there's another theory I think may have application here. It's the theory of direct democracy that seems to work when you have sort of a hilly landscape. Let me explain.
Places like Costa Rica, which has no standing army, is a series of pockets of individual farmers in a rugged landscape, a series of valleys and mountains too difficult for early overlords to conquer. All these different pockets then learned to work together to make a functioning whole. Switzerland is similar. The Hapsburgs created an empire all around Switzerland, but they never could subjugate Switzerland because it was so mountainous. People and their cantons learned how to communicate and cooperate together to create something better than the parts.
Seattle has a similar topography. It's got all these neighborhoods that are distinct from one another, but they all interconnect. It feels like you've got that same sort of dynamic happening here.
Howard:I think there's a harmony to Seattle. I think there's a sense of humility in Seattle, and I think that humility creates the balance where less is more. Again, I think it goes back to the humanity of the city and the values of the people who live here.
Richard:Do you think humility comes from access to Grand Nature?
Howard:I think the physical beauty, the environment, the water, the mountains, the snow and the proximity to all this creates a way of life that is very humane. I think we're all very conscious and sensitive and protective of it. I want to make sure that the city is providing our children, the next generation, with the same elegance of living in a place that we all love, and the future will be as good as it is today.
Richard:This is a city of diversity now, and to a large part, I think, because of what you've done and what Microsoft and Amazon have done, by bringing in talent from all over the world. And with that talent came fresh ideas, different foods, different customs and traditions. Much of the world right now is against diversity.
Howard:Right.
Richard:Yet Seattle really seems to embrace it, and the neighborhoods seem to connect and like that.
Howard:If you compare Seattle to any new American city, for lack of a better term, I think Seattle would probably be close to the top of the list of embracing people from diverse backgrounds and living in harmony together.
Seattle has gone through this major change, and the change is interesting because it has preserved the integrity of its roots, while at the same time embracing and moving forward, not only in terms of the growth and development, but as you say, in terms of the acceptance and the integration of people from very diverse backgrounds. I think certainly the companies that are home-grown are primarily responsible for attracting and retaining people who have come from all over the world. They help us compete on a national and global scale. We employ thousands of people, and they didn't all come from Seattle. The same thing is true for Microsoft and Amazon, and many other great companies that have been born here.
I think you make a very interesting point. The neighborhoods today where we have stores, and we have stores in almost every community in America, are filled with people from very diverse backgrounds.
Richard:It's wonderful.
Howard:Yeah.
Richard:I think you were one of the first companies not only to make an outreach for talent to come here, but also to nurture talent in local environments around the world. Coffee growers, farmers, brokers, dealers; you empowered all these sorts of jobs that require local talent.
Howard:Oh, we're buying coffee from 30 producing countries, and we've got operations in terms of agronomy offices all over the world, so yes, I think our people have been exposed to the importance of sustainability and most importantly building the kind of company that has a conscience and balances profit with benevolence. I think that's a large part of the reason we've been successful.
Richard:I think you've influenced the city with that sort of ethos as well. It's a very progressive city. It was one of the first in the country to pass gay marriage rights, to legalize recreational marijuana, and support a workable minimum wage, and other issues for which you've been an active advocate.
Howard:You know one thing we haven't talked about is the role and the impact of the university system in the Northwest and Seattle. The University of Washington deserves a lot of credit for attracting great teachers, attracting students from all over the world, and becoming and maintaining itself as a world class institution. I think if you go back in time, you'll look at those cities that have been able to emerge and maintain the standards that Seattle has, it is always linked to the education system, specifically universities.
Richard:There are a lot of lists Seattle seems to top. Seattle is the most literate city in the country, by some measures.
Howard:Yeah. Still got a great bookstore, the Elliot Bay Bookstore. Bruce Springsteen was just there with his new book, Born to Run. You should have seen the line.
Richard:Seattle loves Bruce Springsteen, but who doesn't? In fact, he should have won the Nobel Prize, I think. He'll get the next one. It's also been said Seattle is the fittest city in the country, largely I think because of all the outdoor activities. There is this concept that with fitness comes a clearer and more creative mind, a more balanced mind, and that allows a more open mind when it comes to disruption and innovation.
Howard:I would certainly agree with that. I'm an avid cyclist.
Listen, I think with the world today, whether we are running a company or acting as private citizens, we must be open and embrace innovation and allow an almost continuous self-renewal. Seattle, I think, has created an environment where entrepreneurs are welcomed; innovation is embraced; change, which is always difficult, is easier here, I think.
Richard: What's your take on the food scene here?
Howard:I remember 10 years ago, struggling with where to go to dinner because there was just a handful of great restaurants as good as New York or San Francisco or L.A.
Today, I don't think there's a city in the world with the culinary diversity of high quality food and surprise and delight, not to mention the experience you're going to have in these restaurants. You couple that with the great chefs that have emerged, the wonderful wine business that has been created in Eastern Washington and in Oregon, and the great Pinots we can drink here, it's unbelievable. And I'm a food guy.
Mamnoon, just to mention one. If you would have told me 5 years ago, that someone was going to open up a restaurant based on Middle Eastern food, specifically Syrian, in a location that has terrible parking, by the way, I would have said, "You know, I don't know about that."
Why has it succeeded? It succeeded because the food and its integrity exceeds expectations. It surprises and delights the customer. Also, the menu keeps changing and the quality and the service levels are great, and I think people are very open in Seattle to experiencing new food trends.
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With that, it's time to go, but before leaving, Howard offers up a gift. He retreats to a nearby room, and emerges with a sealed bag of coffee beans with the letters "SUM" drawn by magic marker on the front. He says the beans are from Sumatra, and the bag is from his private stash.
"It's the best coffee in the world," he says, "but, you have to grind it, brew it and drink it within a week."
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