Thursday, October 13, 2016

The Secret of Starbuck's Success

Back in the 50's 60's 70's when my father was an English teacher at a small liberal arts college, he was armed every day, smoked in the classroom while teaching, but would never dream of drinking coffee while lecturing.  None of that was uncommon.

The world has changed.

The image of drinking coffee from a paper cup was perfectly correlated with disaster.  When some storm or explosion brought death and dismemberment, the Red Cross would show up and start handing out coffee in paper cups.  The only other context in which drinking coffee was sane was with a meal.

In economics, the damage is done during the boom times, and the bust times are simply where the hegemon works out who pays.  Right now, the low hanging fruit, is pensioners and savers.

The boom times had a long run with a few hiccups.  Starbucks sold coffee throughout the disaster of the boom times.  Certainly people seeking fellowship in church basements got free coffee as usual in the disaster, but otherwise Starbuck's sold coffee to the victims of the disaster.

When those hiccups occurred, Starbucks stock price went down since the bust is correction, but this last correction was bailed out, so Starbuck's continues.

A true correction will wipe Starbucks out, since it depends on financial engineering, and the corner coffee shop does not.  The next era belongs to small business.

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