CHAPTER 2
A Strong Legacy Makes You Sustainable for the Future

A hundred times every day I remind myself that my inner and outer life depend on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received.

—ALBERT EINSTEIN

Just as I didn’t create Starbucks, Starbucks didn’t introduce espresso and dark-roasted coffee to America. Instead, we became the respectful inheritors of a great tradition. Coffee and coffeehouses have been a meaningful part of community life for centuries, in Europe as well as in America. They have been associated with political upheaval, writers’ movements, and intellectual debate in Venice, Vienna, Paris, and Berlin.

Starbucks resonates with people because it embraces this legacy. It draws strength from its own history and its ties to the more distant past. That’s what makes it more than a hot growth company or a 1990s fad.

That’s what makes it sustainable.

IF IT CAPTURES YOUR IMAGINATION,

IT WILL CAPTIVATE OTHERS

In 1981, while working for Hammarplast, I noticed a strange phenomenon: A little retailer in Seattle was placing unusually large orders for a certain type of drip coffeemaker. It was a simple device, a plastic cone set on a thermos.

I investigated. Starbucks Coffee, Tea, and Spice had only four small stores then, yet it was buying this product in quantities larger than Macy’s. Why should Seattle be so taken with this coffeemaker when the rest of the country was making its daily coffee in electric percolators or drip coffee machines?

So one day I said to Sheri, “I’m going to go see this company. I want to know what’s going on out there.”

In those days I traveled a lot, all over the country, but I had never been to Seattle. Who went to Seattle back then?

I arrived on a clear, pristine spring day, the air so clean it almost hurt my lungs. The cherry and crabapple trees were just beginning to blossom. From the downtown streets I could see snow-capped mountain ranges to the east and west and south of the city, etched cleanly against the blue sky.

Starbucks’ retail merchandising manager, Linda Grossman, met me at my hotel and walked me to Starbucks’ flagship store in the historic Pike Place Market district. Once there, we walked past the fresh salmon stalls where hawkers were shouting orders and tossing fish across customers’ heads, past rows of freshly polished apples and neatly arranged cabbages, past a bakery with wonderful fresh bread smells wafting out. It was a showplace for the artistry of local growers and small independent vendors. I loved the Market at once, and still do. It’s so handcrafted, so authentic, so Old World.

The original Starbucks store was a modest place, but full of character, a narrow storefront with a solo violinist playing Mozart at its entrance, his violin case open for donations. The minute the door opened, a heady aroma of coffee reached out and drew me in. I stepped inside and saw what looked like a temple for the worship of coffee. Behind a worn wooden counter stood bins containing coffees from all over the world: Sumatra, Kenya, Ethiopia, Costa Rica. Remember—this was a time when most people thought coffee came from a can, not a bean. Here was a shop that sold only whole-bean coffee. Along another wall was an entire shelf full of coffee-related merchandise, including a display of Hammarplast coffeemakers, in red, yellow, and black.

After introducing me to the guy behind the counter, Linda began to talk about why customers liked the thermos-and-cone sets. “Part of the enjoyment is the ritual,” she explained. Starbucks recommended manual coffee brewing because with an electric coffeemaker, the coffee sits around and gets burned.

As we spoke, the counterman scooped out some Sumatra coffee beans, ground them, put the grounds in a filter in the cone, and poured hot water over them. Although the task took only a few minutes, he approached the work almost reverently, like an artisan.

When he handed me a porcelain mug filled with the freshly brewed coffee, the steam and the aroma seemed to envelop my entire face. There was no question of adding milk or sugar. I took a small, tentative sip.

Whoa. I threw my head back, and my eyes shot wide open. Even from a single sip, I could tell it was stronger than any coffee I had ever tasted.

Seeing my reaction, the Starbucks people laughed. “Is it too much for you?”

I grinned and shook my head. Then I took another sip. This time I could taste more of the full flavors as they slipped over my tongue.

By the third sip, I was hooked.

I felt as though I had discovered a whole new continent. By comparison, I realized, the coffee I had been drinking was swill. I was hungry to learn. I started asking questions about the company, about coffees from different regions of the world, about different ways of roasting coffee. Before we left the store, they ground more Sumatra beans and handed me a bag as a gift.

Linda then drove me to Starbucks’ roasting plant to introduce me to the owners of the company, Gerald Baldwin and Gordon Bowker. They worked out of a narrow old industrial building with a metal loading door in front, next to a meat-packing plant on Airport Way.

The minute I walked in, I smelled the wonderful aroma of roasting coffee, which seemed to fill the place up to the high ceiling. At the center of the room stood a piece of equipment of thick silvery metal with a large flat tray in front. This, Linda told me, was the roasting machine, and I was surprised that so small a machine could supply four stores. A roaster wearing a red bandana waved cheerily at us. He pulled a metal scoop, called a “trier,” out of the machine, examined the beans in it, sniffed them, and inserted it back in. He explained that he was checking the color and listening till the coffee beans had popped twice, to make sure they were roasted dark. Suddenly, with a whoosh and a dramatic crackling sound, he opened the machine’s door and released a batch of hot, glistening beans into the tray for cooling. A metal arm began circling to cool the beans, and a whole new aroma washed over us—this one like the blackest, best coffee you ever tasted. It was so intense it made my head spin.

We walked upstairs and went past a few desks until we reached the offices in back, each with a high window of thick glass. Though Jerry Baldwin, the president, was wearing a tie under his sweater, the atmosphere was informal. A good-looking dark-haired man, Jerry smiled and took my hand. I liked him at once, finding him self-effacing and genuine, with a keen sense of humor. Clearly, coffee was his passion. He was on a mission to educate consumers about the joys of world-class coffee, roasted and brewed the way it should be.

“Here are some new beans that just came in from Java,” he said. “We just roasted up a batch. Let’s try it.” He brewed the coffee himself, using a glass pot he called a French press. As he gently pressed the plunger down over the grounds and carefully poured the first cup, I noticed someone standing at the door, a slender, bearded man with a shock of dark hair falling over his forehead and intense brown eyes. Jerry introduced him as Gordon Bowker, his partner at Starbucks, and asked him to join us.

I was curious about how these two men had come to devote their lives to the cause of coffee. Starbucks had been founded ten years earlier, and they now appeared to be in their late thirties. They had an easy camaraderie that dated back to their days as college roommates at the University of San Francisco in the early 1960s. But they seemed very different. Jerry was reserved and formal, while Gordon was offbeat and artsy, unlike anyone I’d ever met before. As they talked, I could tell they were both highly intelligent, well-traveled, and absolutely passionate about quality coffee.

Jerry was running Starbucks, while Gordon was dividing his time between Starbucks, his advertising and design firm, a weekly newspaper he had founded, and a microbrewery he was planning to start, called The Redhook Ale Brewery. I had to ask what a microbrewery was. It was clear that Gordon was far ahead of the rest of us, full of eccentric insights and brilliant ideas.

I was enamored. Here was a whole new culture before me, with knowledge to acquire and places to explore.

That afternoon I called Sheri from my hotel. “I’m in God’s country!” I said. “I know where I want to live: Seattle, Washington. This summer I want you to come out here and see this place.”

It was my Mecca. I had arrived.

HOW A PASSION FOR COFFEE BECAME A BUSINESS

Jerry invited me to dinner that night at a little Italian bistro on a sloping, stone-paved alley near Pike Place Market. As we ate, he told me the story of Starbucks’ earliest days, and the legacy it drew upon.

The founders of Starbucks were far from typical businessmen. A literature major, Jerry had been an English teacher, Gordon was a writer, and their third partner, Zev Siegl, taught history. Zev, who sold out of the company in 1980, was the son of the concertmaster for the Seattle Symphony. They shared interests in producing films, writing, broadcasting, classical music, gourmet cooking, good wine, and great coffee.

None of them aspired to build a business empire. They founded Starbucks for one reason: They loved coffee and tea and wanted Seattle to have access to the best.

Gordon was from Seattle, and Jerry had moved there after graduation, looking for adventure. Jerry was originally from the Bay Area, and it was there, at Peet’s Coffee and Tea in Berkeley in 1966, that he discovered the romance of coffee. It became a lifelong love affair.

The spiritual grandfather of Starbucks is Alfred Peet, a Dutchman who introduced America to dark-roasted coffees. Now in his seventies, Alfred Peet is gray-haired, stubborn, independent, and candid. He has no patience for hype or pretense, but will spend hours with anyone who has a genuine interest in learning about the world’s great coffees and teas.

The son of an Amsterdam coffee trader, Alfred Peet grew up steeped in the exoticism of coffees from Indonesia and East Africa and the Caribbean. He remembers how his father used to come home with bags of coffee stuffed in the pockets of his overcoat. His mother would make three pots at a time, using different blends, and pronounce her opinion. As a teenager, Alfred worked as a trainee at one of the city’s big coffee importers. Later, as a tea trader, he traveled the far seas to estates in Java and Sumatra, refining his palate until he could detect subtle differences in coffees from different countries and regions.

When Peet moved to the United States in 1955, he was shocked. Here was the world’s richest country, the undisputed leader of the Western world, yet its coffee was dreadful. Most of the coffee Americans drank was robusta, the inferior type that the coffee traders of London and Amsterdam treated as a cheap commodity. Very little of the fine arabica coffees ever got to North America; most went to Europe, where tastes were more discriminating.

Starting in San Francisco in the 1950s, Alfred Peet began importing arabica coffee into the States. But there was not much demand, for few Americans had ever heard of it. So in 1966, he opened a small store, Peet’s Coffee and Tea, on Vine Street in Berkeley, which he ran until 1979. He even imported his own roaster, because he thought American companies didn’t know how to roast small batches of fine arabica coffee.

What made Alfred Peet unique was that he roasted coffee dark, the European way, which he believed was necessary to bring out the full flavors of the beans he imported. He always analyzed each bag of beans and recommended a roast suited to that lot’s particular characteristics.

At first only Europeans or sophisticated Americans visited his little shop. But gradually, one by one, Alfred Peet began educating a few discerning Americans about the fine distinctions in coffee. He sold whole-bean coffee and taught his customers how to grind and brew it at home. He treated coffee like wine, appraising it in terms of origins and estates and years and harvests. He created his own blends, the mark of a true connoisseur. Just as each of the Napa Valley winemakers believes his technique is best, Peet remained a firm proponent of the dark-roasted flavor—which in wine terms is like a big burgundy, with a strong, full body that fills your mouth.

Jerry and Gordon were early converts. They ordered Peet’s coffee by mail from Berkeley, but they never seemed to have enough. Gordon discovered another store, in Vancouver, Canada, called Murchie’s, which also carried good coffee, and he would regularly make the three-hour drive north to get bags of Murchie’s beans.

One clear day in August 1970, on the way home from one of those coffee runs, Gordon had his own epiphany. Later he told the Seattle Weekly that he was “blinded, literally, like Saul of Tarsus, by the sun reflecting off Lake Samish. Right then it hit me: Open a coffee store in Seattle!” Jerry liked the idea right away. So did Zev, Gordon’s next-door neighbor and a tea drinker. They each invested $1,350 and borrowed an additional $5,000 from a bank.

It was hardly a promising time to open a retail store in Seattle. From Day One, Starbucks was bucking the odds.

In 1971 the city was in the midst of a wrenching recession called the Boeing Bust. Starting in 1969, Boeing, Seattle’s largest employer, had such a drastic downturn in orders that it had to cut its workforce from 100,000 to less than 38,000 in three years. Homes in beautiful neighborhoods like Capitol Hill sat empty and abandoned. So many people lost jobs and moved out of town that one billboard near the airport joked, “Will the last person leaving Seattle—turn out the lights?”

That famous message appeared in April 1971, the same month that Starbucks opened its first store. At that time, also, an urban renewal project was threatening to tear down the Pike Place Market. A group of developers wanted to build a commercial center with a hotel, convention hall, and parking lot in its place. In a referendum, Seattle’s citizens voted to preserve Pike Place as it was.

Seattle in those days was just beginning to shed its image as an exotic, isolated corner of America. Only the adventurous moved here, thousands of miles from family in the East or Midwest or California, sometimes on their way to the mines and mountains and fishing grounds of Alaska. The city had not acquired the veneer and polish of the East Coast. Many of the leading families still had ties to the logging and lumber industries. Heavily influenced by the Norwegian and Swedish immigrants who came early in this century, Seattle people tended to be polite and unpretentious.

In the early 1970s, a few Americans, especially on the West Coast, were starting to turn away from prepackaged, flavor-added foods that were too often stale and tasteless. Instead, they chose to cook with fresh vegetables and fish, buy fresh-baked bread, and grind their own coffee beans. They rejected the artificial for the authentic, the processed for the natural, the mediocre for the high quality—all sentiments that resonated with Starbucks’ founders.

A market study would have indicated it was a bad time to go into the coffee business. After reaching a peak of 3.1 cups a day in 1961, coffee consumption in America had begun a gradual decline, which lasted till the late 1980s.

But the founders of Starbucks were not studying market trends. They were filling a need—their own need—for quality coffee. In the 1960s, the large American coffee brands began competing on price. To cut costs, they added cheaper beans to their blends, sacrificing flavor. They also let coffee cans stay on supermarket shelves until the coffee got stale. Year after year, the quality of canned coffee got worse, even as advertising campaigns made claims for its great taste.

They fooled the American public, but they didn’t fool Jerry and Gordon and Zev. The three friends were determined to go ahead and open their coffee store, even if it appealed only to a tiny niche of gourmet coffee lovers. Only a handful of American cities had such stores until well into the 1980s.

Gordon consulted with his creative partner, artist Terry Heckler, about a name for the new store. Gordon had pressed to call it Pequod, the name of the ship in Melville’s Moby Dick. But Terry recalls protesting, “You’re crazy! No one’s going to drink a cup of Pee-quod!”

The partners agreed that they wanted something distinctive and tied to the Northwest. Terry researched names of turn-of-the-century mining camps on Mt. Rainier and came up with Starbo. In a brainstorming session, that turned into Starbucks. Ever the literature lover, Jerry made the connection back to Moby Dick: The first mate on the Pequod was, as it happened, named Starbuck. The name evoked the romance of the high seas and the seafaring tradition of the early coffee traders.

Terry also pored over old marine books until he came up with a logo based on an old sixteenth-century Norse woodcut: a two-tailed mermaid, or siren, encircled by the store’s original name, Starbucks Coffee, Tea, and Spice. That early siren, bare-breasted and Rubenesque, was supposed to be as seductive as coffee itself.

Starbucks opened its doors with little fanfare in April 1971. The store was designed to look classically nautical, as though it had been there for decades. The fixtures were all built by hand. One long wall was covered with wooden shelving, while the other was devoted to whole-bean coffee, with up to thirty different varieties available. Starbucks did not then brew and sell coffee by the cup, but they did sometimes offer tasting samples, which were always served in porcelain cups, because the coffee tasted better that way. The cups also forced customers to stay a little longer to hear about the coffee.

Initially, Zev was the only paid employee. He wore a grocer’s apron and scooped out beans for customers. The other two kept their day jobs but came by during their lunch hours or after work to help out. Zev became the retail expert, while Jerry, who had taken one college course in accounting, kept the books and developed an ever-growing knowledge of coffee. Gordon, in his words, was “the magic, mystery, and romance man.” It must have been obvious to him from the start that a visit to Starbucks could evoke a brief escape to a distant world.

From the opening day, sales exceeded expectations. A favorable column in the Seattle Times brought in an overwhelming number of customers the following Saturday. The store’s reputation grew mostly by word of mouth.

In those early months, each of the founders traveled to Berkeley to learn about coffee roasting at the feet of the master, Alfred Peet. They worked in his store and observed his interaction with customers. He never stopped stressing the importance of deepening their knowledge about coffee and tea.

In the beginning, Starbucks ordered its coffee from Peet’s. But within a year, the partners bought a used roaster from Holland and installed it in a ramshackle building near Fisherman’s Terminal, assembling it by hand with only a manual in German to guide them. In late 1972, they opened a second store, near the University of Washington campus. Gradually, they created a loyal clientele by sharing with their customers what they had learned about fine coffee. Seattle began to take on the coffee sophistication of the Bay Area.

To Starbucks’ founders, quality was the whole point. Jerry, especially, imprinted his strong opinions and uncompromising pursuit of excellence on the young company. He and Gordon obviously understood their market, because Starbucks was profitable every year, despite the economy’s ups and downs. They were coffee purists, and they never expected to appeal to more than a small group of customers with discriminating tastes.

“We don’t manage the business to maximize anything except the quality of the coffee,” Jerry Baldwin told me that evening at the restaurant. By then we had finished our main course and begun dessert. The waiter poured us each a strong cup of coffee, and Jerry proudly announced that it was Starbucks.

I had never heard anyone talk about a product the way Jerry talked about coffee. He wasn’t calculating how to maximize sales; he was providing people with something he believed they ought to enjoy. It was an approach to business, and to selling, that was as fresh and novel to me as the Starbucks coffee we were drinking.

“Tell me about the roast,” I said. “Why is it so important to roast it dark?”

That roast, Jerry told me, was what differentiated Starbucks. Alfred Peet had pounded into them a strong belief that the dark roast brought out the full flavors of coffee.

The best coffees are all arabicas, Jerry explained, especially those grown high in the mountains. The cheap robusta coffees used in supermarket blends cannot be subjected to the dark roasting process, which will just burn them. But the finest arabicas can withstand the heat, and the darker the beans are roasted, the fuller the flavor.

The packaged food companies prefer a light roast because it allows a higher yield. The longer coffee is roasted, the more weight it loses. The big roasters agonize over a tenth or a half of a percent difference in shrinkage. The lighter the roast, the more money they save. But Starbucks cares more about flavor than about yields.

From the beginning, Starbucks stayed exclusively with the dark roast. Jerry and Gordon tweaked Alfred Peet’s roasting style and came up with a very similar version, which they called the Full City Roast (now called the Starbucks roast).

Jerry picked up a bottle of beer, a Guinness. Comparing the Full City Roast of coffee to your standard cup of canned supermarket coffee, he explained, is like comparing Guinness beer to Budweiser. Most Americans drink light beers like Budweiser. But once you learn to love dark, flavorful beers like Guinness, you can never go back to Bud.

Although Jerry didn’t discuss marketing plans or sales strategies, I was beginning to realize he had a business philosophy the likes of which I had never encountered.

First, every company must stand for something. Starbucks stood not only for good coffee, but specifically for the dark-roasted flavor profile that the founders were passionate about. That’s what differentiated it and made it authentic.

Second, you don’t just give the customers what they ask for. If you offer them something they’re not accustomed to, something so far superior that it takes a while to develop their palates, you can create a sense of discovery and excitement and loyalty that will bond them to you. It may take longer, but if you have a great product, you can educate your customers to like it rather than kowtowing to mass-market appeal.

Starbucks’ founders understood a fundamental truth about selling: To mean something to customers, you should assume intelligence and sophistication and inform those who are eager to learn. If you do, what may seem to be a niche market could very well appeal to far more people than you imagine.

I wasn’t smart enough to comprehend all of this that first day I discovered Starbucks. It took years for these lessons to sink in.

Although Starbucks has grown enormously since those days, product quality is still at the top of the mission statement. But every so often, when executive decision making gets tough, when corporate bureaucratic thinking starts to prevail, I pay a visit to that first store in Pike Place Market. I run my hand over the worn wooden counters. I grab a fistful of dark-roasted beans and let them sift through my fingers, leaving a thin, fragrant coating of oil. I keep reminding myself and others around me that we have a responsibility to those who came before.

We can innovate, we can reinvent almost every aspect of the business except one: Starbucks will always sell the highest quality fresh-roasted whole-bean coffee. That’s our legacy.

On the five-hour plane trip back to New York the next day, I couldn’t stop thinking about Starbucks. It was like a shining jewel. I took one sip of the watery airline coffee and pushed it away. Reaching into my briefcase, I pulled out the bag of Sumatra beans, opened the top, and sniffed. I leaned back, and my mind started wandering.

I believe in destiny. In Yiddish, they call it bashert. At that moment, flying 35,000 feet above the earth, I could feel the tug of Starbucks. There was something magic about it, a passion and authenticity I had never experienced in business.

Maybe, just maybe, I could be part of that magic. Maybe I could help it grow. How would it feel to build a business, as Jerry and Gordon were doing? How would it feel to own equity, not just collect a paycheck? What could I bring to Starbucks that could make it even better than it was? The opportunities seemed as wide open as the land I was flying over.

By the time I landed at Kennedy Airport, I knew in my heart that this was it. I jumped into a taxi and went home to Sheri.

That was the way I met Starbucks, and neither of us has been the same since.