February 8, 2019 / 3:08 PM / 3 months ago

Breakingviews - Review: Howard Schultz, the author, is a winner

WASHINGTON (Reuters Breakingviews) - Howard Schultz, the author, makes for a political winner. The former Starbucks chief’s tough childhood and the way he fashioned an American corporate icon from a local coffee roaster makes for an inspiring tale in his new memoir “From the Ground Up.” Workers and veterans helped by the coffee chain’s generous and progressive benefits, including health insurance and college aid, are also stirring. But this message seems strangely missing from his White House rollout.

Former Starbucks Chairman and CEO Howard Schultz delivering remarks at the Starbucks 2016 Investor Day in Manhattan, New York, U.S. December 7, 2016. REUTERS/Andrew Kelly

Schultz has been eviscerated by many in the Democratic Party, to which he belonged, over the last few weeks for saying he might run as an independent to challenge Donald Trump for the presidency in 2020. There have been calls to boycott Starbucks from prominent progressives worried he could be the spoiler that hands Trump a second term. He has tussled publicly with left-wing stalwarts like Massachusetts Senator Elizabeth Warren, who called him a billionaire who thinks he can “buy the presidency.”

The criticisms distract from the American success story laid out in his book. He grew up in Brooklyn public housing and is the first person in his family to go to college. His father, at times, was physically abusive and he was often forced by his parents to ask neighbors for money. The stairwell in his building was his escape. He says he later tried to create this sense of a “third place” at Starbucks.

His experience gave him insights about the working poor. When he was seven, his father broke his hip while delivering and picking up cloth diapers, which caused him to lose his job. He didn’t have health insurance, worker’s compensation or savings and the family depended on food handouts for a while. He learned from his father that having a job didn’t automatically equate to dignity. It’s about “having a choice of a job.”

Schultz wasn’t the best student or a stellar athlete, and he lacked powerful connections. He attended Northern Michigan University through student loans and bartending jobs. He later found a knack for sales and eventually landed at a Seattle coffee bean wholesaler named for a character in “Moby Dick.” A work trip to Italy in 1983 led him to the Starbucks familiar around the world today.

Schultz says his father’s experience affected how he wanted Starbucks workers to be treated. In 1988, Starbucks became one of the first private U.S. companies to provide health insurance to most employees. Two-thirds of the staff worked about 20 hours a week. Investors opposed the move; Starbucks wasn’t yet profitable. Schultz argued that it would reduce turnover and training expenses. It cost $3,000 to replace each barista versus the $1,500 healthcare expense.

In 1991, Starbucks began issuing equity to workers, including part-timers. Schultz said since then, Bean Stock has produced $1.5 billion in pre-tax gains for baristas and others. He said it was personal to him because his parents had never owned anything. Some used the profit to pay for weddings, others left Starbucks to start businesses of their own.

Schultz compared the creativity needed to come up with these employee benefits to creating new products. “Innovation must happen behind the scenes, too, for people who work for the company.” He also shows his willingness to consider novel ideas, listen to problems, admit to and fix mistakes.

Starbucks’ college tuition assistance program for workers wasn’t an immediate success. The firm decided to partner with Arizona State University, which offered online courses. But not many people were signing up. Starbucks learned a six-month waiting period to receive tuition reimbursement, intended to incentivise staying in school, hurt the program. After making some changes, Starbucks marked its one-thousandth graduate in 2017.

Those programs gave Schultz exposure to some of America’s most vexing problems. His views on how corporations should act also puts him in a similar league as Warren, who has railed against a short-term focus on maximising shareholder value. Schultz repeatedly describes times when he pushed back on investor demands for the sake of workers. In 2009, when Starbucks’ share price had fallen by more than 80 percent compared to its 2006 high, a shareholder told him to cut healthcare. “Despite the immediate financial gains, not every decision we made could be economic,” Schultz writes. 

But on the stump, Schultz hasn’t emphasised his embodiment of the American dream or his vision for America based on his Starbucks experience. Besides saying Obamacare should be fixed and bashing a single-payer government system known as Medicare for All, he hasn’t laid out his own plans.

Part of the problem is that Schultz doesn’t have a dynamic personality. He comes across as a genial but boring corporate executive who probably went to an Ivy League school. His comments about billionaires make him seem out of touch. He talks in his book about how being poor is suffocating, but he hasn’t publicly described how he can use that experience to help America.

That’s unfortunate because Schultz has a point about Democrats and the broken two-party system. The leftward swing of the Democratic party is polarising, as is the populist tilt of Republicans. It leaves little room for compromise and pragmatic solutions that could tackle rising healthcare and education costs, and inequality.

Campaigns are about narratives and Schultz hasn’t created a compelling one yet. But his book provides an ideal road map. It may be time for him to sit down with a cup of coffee and re-read his very fine tome.

Breakingviews

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