Howard Schultz


Welcome back to the court this week on the Corp.. We have two great interviews is Howard Schultz. You know him he created starbucks should probably drinking a starbucks right now so a couple of things. I WanNa get to hear a rod one. This was the first time that you allowed Hank and myself to fly on a rod corpse private jet. Were you nervous about leading us on their yes. I tell yeah 'cause no one talked to us and also I was worried. I smelled that he actually had week cleanse that up pretty good afterwards and I stacked the a lot of food because I knew you were coming. Yes no the the the flight attendant was being kept on coming up and it's like you guys want more food. More food also shout your daughter. Maybe the most power move I've ever seen in my entire life. We got sweet potato fries. She was walking by and she just took one. I was like there you go. That's I mean that's Rodriguez right there so it was fun though we really appreciate that it took it took a couple years of of like grinding new down but it was fun because we went out to to Seattle to interview Howard Schultz in person which was a great interview. We talked about all the you know starting starbucks his life as a poor kid in Brooklyn growing up and I wanted to do one thing here a little preview thing. We you know we throw in a nugget something. You've never heard so seattle going back to Seattle. Obviously a little bit of a homecoming because that's where you started your career so my question for you so when you do go back to. Seattle do you ever. Is there a small party. That's like kind of wish I had stayed here done my whole career here because you see guys do their whole career for one team at something a little different. Do you ever have that feeling. When you go back to Seattle and look there's always a romance about you know starting and finishing rushing I mean finishing what you started and for me started as an eighteen year old no further place domestically to Miami then Seattle diagonally across the country I knew that starbucks was the I knew. Boeing was there but I was like I'm one step from Alaska but playing it the kingdom was comforting plane with the greatest players in the world three hall of Famers Ken Griffey Junior Randy Johnson and now Edgar Martinez and in Hall of Fame Type Manager and Lupino. It was awesome. I A lot of that for me. Dan kind of went away when we cross the street to Safeco Field Griffey went to Cincinnati Lou Pinella. ended up leaving for me. It was like perfect timeline for me to go. Were you at all close like what was that contract negotiation like Seattle Seattle in the running. What do you remember they were close a dollar figure. They weren't close you know Pat Gillick who Hall of Fame General Manager The one with the Blue Jays twice and build up a Baltimore and just one of the best general managers he felt that he was gonna pay me a super premium but for a shorter period of time and at that time being twenty four and a free agent I was looking for the year right right so there was never was there ever never a moment where you almost did it where it was like. We were close to staying with Seattle but it just didn't work out or was always. I'm Outta here they did something very smart and I think more teams need to today is call it my junior year the year right before free agency nineteen ninety nine. I was a free agent. After the year two thousand thousand they handed me an envelope and that envelope had it was about one hundred and forty five million dollar offer. I'm twenty three years old. I'm like Holy Shit. How do I say no to this right and I roll the dice and and went to play my senior year interesting so yeah you could very well have taken that money because it is guaranteed teed money and you're like I'm set for life. No matter what you know if you get injured or whatever it may be an couldn't sleep for three sixty five. I'm like I gotta be the dumbest. Guy In the world right been happens. If I get a hurt I just let all this money go interesting interesting so that ties into Howard Schultz and he is in obviously in the fabric of the history mystery of the city of Seattle starting starbucks he owns a sonic show bit we got into that a little bit and he's also a diehard baseball fan so we talked a lot about baseball baseball with him very interesting interview really great talker and someone that if he was hiring you probably want to work for but you wouldn't be able to do it without linked in you like that. That was nice true. 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Howard Schultz was the chairman and CEO Uh-huh starbucks for almost twenty five years and Co founder of a consumer tech investment firm called Mavin former owner of the Seattle Supersonics in his also a proud husband of Sherry and a father of two hour grew up in New York Archie Bait baby projects in New York City becoming the first person is entire family to attend college and Northern Michigan University and started at Xerox after college becoming the general manager a Swedish drip coffee maker in Nineteen eighty-one visited a store called starbucks coffee company in Seattle and obviously the rest of great history so Howard first of all. Thank you so much for being on our show a great to be here thank you both. I've been a big Fan. I obviously I got here in one thousand nine. Hundred four arrived here a seventeen year old and I just knew the Seattle was the furthest place from Miami and the dodgers had the number two pick that year and truth truth be told. I was hoping that will go play for Tommy lasorda. We almost actually had deal done and the mariners drafted me God here and the entire city Eddie had cody of starbucks and obviously the culture you created here first of all. Just tell us a little bit about your childhood your New York sure so I grew up in the projects in public housing in Canarsie section of Brooklyn like so many the of us. My childhood experiences shaped my life. a number of different episodes produced a level of insecurity. Shame shame vulnerability of being a poor kid I when I was seven years old. My father was a truck driver picking up and delivering delivering cloth diapers before the invention pampers and he was a winter day he fell sheet of ice nine hundred sixty and basically if you're a blue-collar worker in nineteen sixty and had an accident you were dismissed fired soda with no health insurance no workers compensation and I at the very young age of seven kind of witnessed the fracturing of American family couldn't pay the ninety six dollars a month rent and went through a whole whole series of issues watching my parents struggle I never possibly imagined that one day I would be ambition to be part of a company build a company but everything I've done professionally at starbucks has been more or less to try and build the kind of company my father never got a chance the workforce so dignity and value and then twenty five years before the affordable care act providing companies have health insurance ownership for every employee and then three years ago free college tuition for everybody and so you know in the Environment Taurean now to hear people criticize vilify success or capitalism starbucks in so many ways is a I think emblematic of a company that's been built by balancing. Prophet and social responsibility and demonstrating that success can be shared so i WanNa talk about your college years and the fact that you're the first person in your family to go to college but before that sports growing up Yuccas because you know any I think we find when we talk to people entrepreneurs or people at the top of their profession. They have that competitive itch at an early age whether it be through through school or sports yeah. It seems like you were someone who had it through sports what we're sports like for you. When you were growing up so we had a school yard that was too small for all the buildings in the projects so from morning tonight there were three full court basketball courts and a school yard so all these kids came down at the exact same time eight nine o'clock in the morning to play one of those games and if you if you got in the game and you lost your basically. Siklie spent the next three hours sitting and waiting this is concrete so you did anything you possibly could to stay on that court and that drove a tremendous amount of competitive pressure. You did not want to sit for three hours. It was that kind of environment it was also an environment of a tremendous level community because the environment was very diverse so I grew up with kids very different than myself. We had one elevator in a building with eighty apartments very small. everyone shared the same kind of we were all in it together. we knew each other really well and then when I got to high school I was fortunate enough to play quarterback on a high school football team many many years ago and throw the ball. I was yeah I had a very good arm not not as strong as Alex's but that's another story yeah. and I was fortunate enough to be noticed one day by somebody who was looking it for another kid. It's really kind of weird story and that's how I got northern Michigan University. However when I went there to dream about a plane football I noticed that they were a little bigger Michigan. They weren't Brooklyn Yup and they wanted to move me to a wide receiver worse than that defensive back and I and I just not into that defensive stuff so I ended up not playing but I I went to school with Tom. Izzo and St Mary's right and so watching is the last week or so has been great yeah and can. I mentioned what I just told you say so you know my son Jordan and C. Game Com have this podcast call pull up and Izzo was on two weeks ago and he said something that was just so apropos for life and so the question was what kind of kids do you try and recruit and Izzo says streak kinds of kids kids like it kids who love it and kids will limit uh-huh I recruit kids will live that's awesome and and that you can take that and apply it to anything right business entrepreneurship sports and that is about sacrifice loving so something so much that you're willing to do anything and that also goes back to starbucks rex because the odds on nine hundred ninety seven when it had eleven stores one hundred employees today would be virtually impossible. Yeah it can only happen in America right so you would say you like sports. You like no. I loved it. I'm living he lives. starbucks live my family. I think yeah yeah you didn't live full. I did live the Yankees stone right yeah. Andrew tells about the Yankee. Look you own a sonics for well. We'll get there but baseball is one of your I love. I Love Baseball and your father yeah tell me about that yes so my father and I had a tough off relationship and he was very bitter came back from World War Two and never found his purpose but he was a massive Yankee Eh and so three or four times during the summer we would take the subway and go stadium and sit in right field and Roger Marris was right in front of a while so nineteen sixty one which we named the team yeah this sound crazy. I'm about the Yankees and so Whitey Ford number sixteens. He's pitching yeah Yogi Berra number eight or elston Howard number thirty two is catching Moose Karen. I base number fourteen Bobby Richardson Second Base Number One Tony Kubeck shortstop number ten clete Boyer Third Base Number Six the MIC is in center number seventy seventy Roger Marris in right field number nine and then left field is either blanchard or Tommy Trash fifteen manager manager three Casey stangl and Ralph Help Number Casey stangl thirty seven. Yes Ralph how this is. You know what this is. Can I just stop you for. This is very comforting because a lot of times. I think all the sports knowledge that I know has stopped me from being like really successful yeah because it's all just trash in my brain but hearing you rattle off the nineteen sixty one yankees yeah the person you are yeah look kids who listening at home. You can actually care about sports. It's and care about stupid statistics still making and there's so much about baseball strategically that applies to so much yeah because the game so much science game yes yeah in science and his failure. If you fail seven times okay right you you walk into the hall of fame and is really the gritty the the people that can actually persevere and deal with you know the negativity right and most people can't is is often not the most talented is people like Marino in jeeter and pettit. I mean there's probably a thousand pitchers that are better than Andy Pettitte yeah but if he's in the fall stadium knowing you will pick on top of anti pattern number forty eight forty six forty six. Ah would you buy the Yankees. They went for sale not for the price. They would be yeah. The only Yankees kicked the tires. Yeah it was a pretty last week and and talk to Reggie but the highlight you were in Tampa. I wasn't Wa the highlight for me. I I was just out of my mind talking Aaron. Judge and I could not believe the size of them. I mean to be that big and that athletic and so humble and such a gentleman ah what an x ray kid fantastic a lot of time I mean who brought him up through the minor leagues and he has not changed one bit. Here's a guy that's six foot. Seven two two hundred eighty pounds less than ten percent body fat as a thirty two inch vertical and can hit a ball five hundred feet. I told Major League baseball this week you should spend tens of millions of dollars marketing Aaron judge because he's the one guy that not only transcend sports but he's the one guy that you can build over the next couple of decades. He is is any place of the Yankees so so that's interesting. We'll get back to your business career but we alex and I always talk about it because I I love baseball but it's not my I love football more than anything and we always talk about baseball and image problem of having superstars. You grew up in a time when baseball players were they were like the American superstar Yankee Manager. Was the Tom Brady peyton manning or Aaron Rodgers like that. Was it bigger right. So where do you think baseball can do to kind kind of rectify. What spin a little bit of a slip last ten year round so why it's interesting when I was at spring training what I noticed is how old and most of the people there I guess one because Florida Tired People Florida but I I assume that the baseball audience the generations getting getting older. How does baseball market to millennials when the game is long slow? I don't have an answer for that. Yeah off and baseball unlike other sports in my mind is generational in terms of team you root for so if your parents or your father is not a baseball fan. You're not growing up in a house over you watching baseball baseball. I also think it's the issue that I can't really wrap my head around is it's so city specific you root for your team in baseball and that's it whereas on NFL Sunday you watch every game. It doesn't really interesting thought about it. You know like I don't care about what's happening in the Al West or the you know what I mean are the a central in the AL or something like that so it's hard to to care about other teams whereas basketball and football especially you can kind of watch any game and you can't really watch if you're not a fan of the Yankees. You can't really watch a Yankees. Orioles came in April so this is interesting so when we all grew up as suppose number one today's he's number three. Maybe four I think is a classic case of good as enemy of great. I mean good is the enemy of great and the reason why when I entered the major leagues I was eighteen years old right here in this city and Seattle now the industry nine hundred ninety four was a billion dollar industry. Today is ten billion baseball. Yes when it was major. League baseball was at a billion in dollars. The players took home sixty percent of the pie. Today is at ten billion owner are taking percent sixty percent of the pie a massive shift so because it's a ten billion dollar industry in many ways owners don't WanNa mess with the good right in many ways the best thing that can happen to baseball is to fall on their face a little bit and half to play aggressive to catch up like the NBA and like the NFL has done a fantastic job growing the game globally but also connected to the next generation because they can take more chances baseball is married to his history but you WanNa make that asset your biggest liability so also oh. I think little league is way down. in terms of how many kids are playing baseball now yeah. Can you tell you a hall of Fame Story About Baseball so my dear friend Tony. The getting inducted to the hall of fame. I'd never been a cooperstown. I went to Cooperstown with my son Jordan and at a in the the breakfast in the morning every every hall of fame player Iconic Player was walking through so Ernie banks before he passed away Hank Aaron Bob Gibson. I just I couldn't believe it. I was just in our this thinking myself. I've only my father was alive to see this but about ten minutes in a God walked in and I'm looking at him and I just I can't believe it's him and it was one of the ones like you just mentioned off. Stay stay before we got on about Michael Jordan when he when this guy walked in. I couldn't talk I was like starting to sweat and it was Sandy Koufax. Oh Wow and Colfax walked and I swear the whole room turned around everyone and he was so regal and so handsome and so a wrecked shape great shape and and I just couldn't I couldn't get off my chair and my son Jordan kept on saying you gotta go introduce yourself. I couldn't do it now. Of course I missed it for listener though because yeah if you say a little I don't really WanNa talk to you then. You lose that for our listeners. you know one of the things that people don't know about Colfax besides being greatest pitchers of all time he was even bigger icon in the Jewish community yes and wouldn't pitch and he would've pinched Shalom right. I mean it it was down for Chabad but I spent some time with him in the world series and I gotTa tell you he is probably the best left handed pitcher of all time and even a better person with unbelievable character there and like you said our incredible regal carries him. He's a good looking guy. This looks like the white hair ear and the Guy all right look. I'm feel find saying remember when he came out. When the dodgers in the world series last the world series a million times never won it but he comes out and it's like well kind of breathtaking Sandy Koufax. There is all right so those are baseball like little mini entrepreneur to be a great leader so let's let's start with the story of starbucks. Maybe walk us through you graduate. Ah College Xerox Yeah and by complete almost accident you walk into a starbucks store right. You tell us that story. I was working for a company that had sold a product to starbucks so I came to Seattle for the first time in eighty-one and I walked into the first store at the pike place market and was was swept away with just the essence of the experience and basically for a year I tried to convince the two founders to hire me and the and I was successful came out in one thousand nine hundred to my wife. Sherry and I and our dog Durham golden retriever drove three thousand miles kane the Seattle. We had six stores. When I arrived a year later I went to Italy for the first time to a trade show for starbucks and while I was there ran into hundreds of Italian espresso bars prior to that starbucks coffee company did not sell any beverage average just coffee for the home so when I saw the romance to theater at a sense of community I raced home to the founders and said I I think I've seen the future of the business we have to transform starbucks and bring out Espresso. They didn't think it was great idea so they didn't want to do it so to make a long story short. I left starbucks and started my own coffee company and open three coffee bars with Christine Day. Wow too in Seattle one in Vancouver. What what was it called illegitimately came after the Italian newspaper I don't know how long we have but I gotTA keep place. Okay okay so I don't have a salary. We're just really struggling and starbucks itself gets into financial trouble. After it acquires a company in California called Pete's coffee the company so pizza in starbucks one company. The founder of starbucks comes to me and says we're going to sell starbucks. We can't keep both companies. He's we think you're the right. GotTa buy okay. Two quick stories. The first one is as I said I had no salary and she was pregnant with our first. The child Jordan and Sheri's parents come and visit US insurance father says I like you. WanNa take a walk with you. Oh that's always is a problem yeah yeah okay so we go for a walk and he says listen my my daughter's eight months pregnant. She's she's still working You've you've got a dream but it's a hobby. You gotta get a job. Why I start crying. Thank crying embarrassed. I said well I I understand. Let me talk sharing so that night later that night there they go to bed. I share the story. She's outraged that her father would have said that to me. So at that moment of Sherry would have said I think he's right. there'd be no. I wouldn't be here. You'd be talking to somebody right. She says we're GONNA see the stroke and she supported me. We raised the money however in raising money to acquire starbucks something really dramatic happened and that is he gave me sixty days to acquire the company. This is the pizza owner yeah the original start regional starbucks yeah right and not so sixty days exclusive and he came to me and it was three point point eight million dollars to buy six stores in eighty-seven now. I didn't have three point eight million. I had to go out and raise. The money counts to me in thirty days and he says how you doing so so I got half of it raised. I'm sure I'll find the other half but I did not know if I could and he says to me. One of your investors from Ilter Nali has come to me. Four million dollar offer all cash no due diligence. We're GONNA have to take and I said no way. You can't do that right so here's the punchline I tell a friend of mine the story my whole life is about to end this is going to be a crushing blow and he says estimate you gotta go see the senior partner of our law firm tomorrow morning. I said Okay I will who is it and he says a name. I never heard Bill Gates senior. Oh my gosh senior right not gates right so eight o'clock in the morning. Go See Bill Gates senior. I tell them the whole story and he says digitally you left anything out. I said no everything you told me true. I said yes and he says come back in two hours literally okay so I I leave. I come back in two hours and Bill Gates senior says Howard come on. Let's go for a walk I said. Where are we going. He said we're GONNA. Go see the man. The man is trying to steal the company. Oh Wow so. I don't know if you call them. I don't know any is it okay so we my heart is palpable tasting. I don't know what's what's GonNa Happen. We walk in and he storms into the guy's office and he and sit Bill Gates Seniors six foot seven big man and at the time was the lawyer in town. This other guy was to tighten businessperson in Seattle at that time and eighty seven and he leans over his desk and he says you should be ashamed of yourself. I saw trying to steal. This kid's dream so this is what's going to happen. WE'RE GONNA Walk Outta here. Howard's going to buy the company and you're going to stand down and we walkout and I say I said Mr Gates what what just happened right and he said you're going to buy the company and I'm going to help you with my son. My son and I can help you now. Mike now listen to this day. Bill Gates senior never told a soul of the humble act of helping me never charged me nothing so year and a half ago at the Microsoft CEO Summit. I'm speaking and sought at the. NFL The CEO Microsoft who's on the starbucks sports is you've got to tell that story because bills in the front row I tell the story. I assume they'll knows if I get off stage and he says who was that who was the guy and I said you don't know he said my dad never told me the story story so the humility of brigade senior and having my back like that helping this kit so Sherry Schultz at night says we're in this we're sticking and Bill Gates senior. the reason at starbucks was able to build this company. That's fantastic. I mean that that believable unbelievable what I love about those stories I think a lot of people who glorify entrepreneurial like behavior haven capitalism which you built your company on think that it just someone who did it all now sells and they were better than everyone else but you're you what you just said it. Is it takes you know some help. It takes some lock. It takes like people too. I'm not the smartest room on the way but it's a team sport right it. So now we have a lot of young listeners that are in college going to school entrepreneurs and they all look up to you walk us through the exercise sure cise so now. How old are you at a time when I was in my mid thirties okay so your mid thirties your net worth is not very high zero. You've raised now to say three point eight million dollars's six doors at this point how much equity percentage is Howard Schultz owning a starbucks and then how do you go out to then grow from there yeah so at that time I probably owned half the company but all along I wanted to build at the time a national brand and I thought we if we had one hundred stores. I thought that would be the the goal aspirational but all along. I realized that what we were going to build in our stores was going to be an experiential brand and that what I mean by that is that the marketing of a consumer product was not going to be how we're going to build starbucks. It was going to be by the experience in our stores and the people who wear the Green Apron. We're going to be the equity of the brand so right from the beginning. I realized we realized that the culture the values to guiding principles of the company. We're going to define how we were. We're GONNA build starbucks and put people first and that goes back to what I said earlier about health insurance making everyone owner and free college tuition but basically basically when we started we said we have to exceed the expectations as managers and leaders of every single person who works for the company so that person can exceed the expectation of every customer. That's one thing second thing is I realized early on we we started raising money money from venture capital view and they had an I should say for every entrepreneur who is trying to raise money that raising money from ABC is as important as hiring a person gets. The money in a sense is fungible. If you have a good idea you're gonNA find people interested but make sure you find people who share your values and understand understand specifically what this business core purpose and reason for being is and want to come back to that so every business every enterprise every organization innovation must have core purpose and reason for being in everyone in the company must understand what that is to the point where if you have one hundred people you should be able to ask them what is our core purpose and reason for being and more or less should be able to tell you because that is what the business is going to stand for then the Lens in which you're GonNa make every decision especially the early ones that are going to define an imprint the brand behavior culture has to be through that Lens of what your core purposes and what your purpose is can't be only to make money. It's shallow goal. You will not attract rate people. You won't retain them because people want to work with something. A company an enterprise an endeavor that is has to be greater than the equity you've just profit and so everything we've tried to do is build a performance driven company through the Lens of humanity and along the way as we started becoming a little bit more successful. We began to realize that this is not trite. This is real that not every business decision should be an economic one that you've got to make long-term investments in things that really matter and what really matters this is not always the short term decision of what is the bottom line a and and there's there's so much pressure on the entrepreneur make money especially if you're backed and that's why it's so vitally important to get the VC in early to understand what the long-term vision is so that you're not arguing in a boardroom about all this right so speaking about that just just real quick so for the last almost forty years. We've had a leadership meeting every Monday and a board meeting every quarter now. I'm not in the company more. I've I've left the year right but for thirty six years I've had two chairs that were empty in that room to cherish and so does a room of ten hand fifteen twenty people and two empty chairs as a metaphor and a metaphor was this one here is occupied by starbucks customer and one is by a starbucks employees who we call partner because everyone is an owner and everyone understood those two chairs. We have to answer the question in the affirmative. Does this decision strategy tactic. Whatever we're GONNA DO GONNA make the customer and our people proud and if the answer is yes. Let's do it the answer there's no. Let's not the answer is grey. Let's keep debating it but there was always an opportunity to kind of refer back to ensure the fact that we were making decisions. I gotTa make our people. Can you think of like a decision you. Maybe didn't do because of that exact thing. You're saying like the decision that you you said you know what our employees or proud so early on and in the formative years of starbucks the trend in coffee was was artificially flavored coffee. It was vanilla cream and stuff. That was not the purity of what we did. we had research that suggests we would have a thirty percent incremental boost and revenue if we added that but that would have destroyed and diluted the integrity of everything we've done we wouldn't do if we roasted coffee lighter. We'd have a five percent increase in profit. We wouldn't do that so it was always about the quality and the integrity of what we stood what was the decision behind. I was reading up on the plane and what was the decision behind not doing any franchises the answer to the question of not franchising an easy one and that is going back to believing that the secret sauce of starbucks we have no proprietary technology is the culture and values of the company. I did not believe leave you. Could we could brill the kind of culture that we were spying to build a system that was franchise with independent owners. It would have been financially really been beneficial because it would require capital right and franchising great for lots of companies but not consistent with what we wanted to do interesting so all about the culture yeah give us an example. Give a little sneak peek at one of these Monday morning meetings of a how you start pretend like we have your your senior. Management Team name is here. You're talking about leadership and all week and you've been brewing on something. That's maybe just pissing you off. The you know is not right as leader. Tell us how you start and kind of give us a little button on employee's Yeah. We're bagels okay so first off every starbucks meeting every meeting starts off with coffee tasting every meeting and not just a coffee tasting but a French press of a coffee and someone in that room room has been assigned that day to take us through the coffee tasting the features and benefits of that coffee and you and the responsibility ability of describing with great acuity the balanced the acidity and flavor that coffee so we start out with the core purpose in reason for being where coffee company also sneaky gets everyone really alert. That's true smart by you and how many people are in the room could be ten or fifteen okay yeah eh we also would invite people who are not in the leadership team meeting to sit in and to learn and to witness what we're talking about and everything it was transparent. we start off with reviewing the sales of the past week now by the way when you're in the retail business you're living at number living two week yeah. You're living. You Know Day to day so at five. Am every single morning for the past thirty six years. I would get up at five. Am with a basically a printout of every stores sales revenue in the world versus our plan and how many stores at the time at the height where we have thirty thousand today but it didn't matter whether we had eleven thirty thousand right and so we had we had a blueprint of everything so we managed the company day to day and so there should never be a surprise as to how we're doing but in the Monday morning and we would review the sales of the week the past week versus plan how we doing for the month and as a public company were always concerned with we we got a report on a quarterly basis right we had an expression and starbucks have constantly trying to under promise and over deliver and starbucks stock prices done pretty well over over the years and I think one of the reasons is a real focus and discipline on making sure that we delivered to the sherline yeah but after after we review the numbers then we're talking about the next quarter we might be talking about innovation there could be a core subject that is coming up as a result of a problem we have and and like a fine tuned car. There's always something that's not exactly perfect that we're dealing with and it's also I think lessons to be learned. one of the things that happens along the way as you start thinking that you're better than you are. I'll give you an example so no innovation starbucks very innovative company if you think back on the things that we've done for example the mobile APP right now so that's the most ubiquitous mobile APP in America today and we were at the forefront of that very early on so innovation would be discussed in that meeting and the reason I would discuss it is people would get very excited about a line extension being so so successful new flavor new size great great but that is not innovation that is just the price of admission innovation is being disrupted and when you are the leader in your category like we were are you have to cannibalize yourself and so the entrepreneurial opportunity for all of us is you've got to constantly constantly kind of see around the curiosity to see around corners to anticipate things that no one else has sing and then have the courage to make a big bet so you have not seen the starbucks roaster. I know you're GONNA be in Seattle for how long leave tomorrow night after the game say you have have to do you have a treat for yourself. Is there one in downtown yeah okay. I can have my girls here so team must go to the rotary so we've we now have a roaster in Seattle Milan Alon Shanghai Tokyo New York City and we were getting ready to open up in Chicago at the crane barrel building North Michigan Yup so the row story three is a project that we dreamed about nine years ago. I know what it is yeah okay and and what was that you'll be shocked at what the the motivation and the the inspiration for this so literally it's the Willy Wonka chocolate factory and gene wilder so one one day I invite a group of starbucks people to my house so I'll watch a movie with you. What do you mean watch movie. I said we're GONNA put on the movie. We're not going to say a word and them to show you something so I bring the most creative people in the company to my house. I put on Willy Wonka. They think absolutely Johnny Depp One. No okay no no gene wilder. WanNa make sure we watch watch the movie and prior to that. I've been dreaming about this for nine years. He's ever ever lasting gop stopper and I just did not have it wasn't the right time and and for nine years I've been sketching and dreaming about this on the movie ends and I say we are going to build the Willy Wonka of coffee and where how what's it going to be. I said we are going to bring people into a space and they are gonna be swept away with just the kind of emotion and they're not going to believe what is going on and I've got the site and we're going to do it and so now this kind of thing took not not only imagination but the entrepreneurial ship of here's a company at this point. We're really successful but you've got to keep reinventing. This is the point you you can't sit like sports team. How many teams repeat right not many not many of them. I'm not you know the Red Sox can repeat this year. chances are. Uber sets in. You're not as hungry as you were. Jealousy envy whatever salaries so success has to be you have to recognize that success is not an entitlement it has to be earned every single day not only as an entrepreneur even been as successful as a business constantly reinventing surprising the lighting the customer and making people proud so we opened this thing up three and a half years go in Seattle now a typical Seattle. A typical starbucks stores like fifteen hundred square feet. This is almost thirty thousand square feet so it doesn't pencil out on paper because no one can figure out how we're going to. How can we afford this. No one's ever sold us much coffee. It doesn't make any sense I knew in my heart that this thing was going to be so successful. I just in my bones. Why why did you think that just instinctively. I just felt this was this was going to reinvent the company so before you leave this. Is your girls here Yeah Natasha now. They're right there and they love starbucks. GotTa go. GotTa go story okay so we'll we'll. Have someone take you yeah love that you'll you'll have a hot chocolate or a Frappuccino. That will knock you out there. We go there. We go okay anyway. Yeah so that love this is not an entitlement has to be earned every day and the entrepreneurial spirit of a company can't be only in the early stages right even when you're mature right and like a winning team. You can't rest Howard. I I would tell my teammates in New York. We will have a great game with score. Twelve runs seven home runs. I mean the team is cocky as a boys. You're only as good as what you do the day after greatness. That's true measurement great story. That's absolutely true we we're. We have a few more minutes but I wanted to touch on the sonics. Relocate sure regrets your side of the story. I know you talked about it in your book. Yes you know. Obviously the average fan is probably still mad at you. Yes so walk us through. Maybe mistakes or what you would happen in your mind well first off the thought of owning any professional sports team for me coming from where I came from was such a dream opportunity. the interesting thing is. I once had an opportunity to invest in mariners. There's but I wanNA be a minority in a small minority owner. Assuming the sonics came up it was a great opportunity now I didn't have enough money at the time to buy the team myself and there was a competing group and so we merged our efforts. We didn't really know each other and a lot of people people came together so we have like fifty investors two separate groups. I was the majority owner of the two groups but I did not have fifty one percent right right so so that made it somewhat difficult. we had the worst lease in professional sports. We could have sold out every game. and we and we lost money every single year. we started getting capital calls. Some of the owners. Were complaining about that because I I said. I don't think we'll have any capital. Calls will be fine but we did. I went to the city I went to the city council and went to the state legislator and and unfortunately the mariners here's in the seahawks had just gotten new baseball and Football Stadium City did not have the wherewithal nor the political desire to help us with the team so I decided in the best interest of me and my investors why don't we sell it to the other group uh-huh and the other group did not want to buy it so that was the first problem so then I went out to everyone in Seattle that I thought had the means to buy the team and and no one showed up then we had a high profile investor from Silicon Valley come and pay us one pass a big price but told us right out of the gate a move into team. San Jose and I said I can't do that so we turned him down. David Stern was commissioned Michigan time and he said I think I have a perspective owner who's willing to negotiate the city of Seattle but if he can't get a deal he might move the team but I can't imagine imagine if the city of Seattle knows that someone from out of town is going to buy the team they're going to negotiate with them right that was going in assumption yeah and and so I made the decision with the other owners but I let it I'm culpable. I'm responsible to sell it to this Oklahoma group who tried valiantly valiantly to negotiate the city and basically the mayor the city council told the pound sand and a year later with Kevin Durant left Seattle now do I regret regret it. I do when I see kids with supersonic uniforms on and jerseys yeah. I know that I have broken hearts and if I had to do it over again I would not have done it. It was a mistake and I can't turn the clock talkback. Well bring him back. I've talked to Adam silver about this a lot and yeah. I think now that Seattle is getting a hockey team yeah. There's a chance not for me would you would you help I told them so I would do anything right. and here's a lot of people in Seattle trying to get an MBA team yeah Seattle should have an NBA team. They will get one yeah. So how would you go back. I'M GONNA I'm obsessed with starbucks in the store and you only have a few minutes left but you have this conversation with your father-in-law other law. It didn't go well yeah. Sherry gives you a boost of confidence so you go for it. Then you run into an angel you know Mr Gates Bill Gates his father out of rent. People never told anyone one and then you take this company. I mean like the Yankees on a skyrocket. I mean it goes and it goes and then you decide like Michael Jordan. I'M GONNA stand that out a little bit and the company starts overbuilding and gets you know in their old loses his ways that you've created for many years two thousand and eight you come back. You make a really big decision to take ten thousand store managers and you fly everybody to New Orleans. Everyone said what the hell is. How we're doing right you go out and have an incredible meeting. I still remember the speech heard that speech in real time when it was when I hit the market and tell us why you think that's been one of the best investments of your career right so thank you for all that research and understanding the first thing is starbucks got into trouble because of a disease inside the company and the disease was Hubris. We had been honest magical carpet ride that everything we touched turned to gold and people allowed success in the growth of the company to cover it mistakes. I was chairman of the company not the CEO in the sense. I was still coupable and these were not bad the people but they fell into bad habits undisciplined habits of chasing growth and the stock price so I came back and just like you said and I did two things wchs one is I stood up in front of the entire company first day back and apologize to them and their families that we had let them down and all I asked of them was to once again believe in the core values of the company and to take everything personally but we had to rebuild trust in the company so a month later we decided we're gonNA close every single store because what we discovered while when I came back is at one of the decision someone made it was to change the chemistry of the coffee for more to make more money wow and I noticed that the quality of the coffee and how the coffee was being made made did not taste the same and I was one of the reasons why we had customer attrition so I closed every single store at an unbelievable price expense offense to retrain people and people said what are you retraining people on and I said we're we're retraining people on how to make coffee. People couldn't believe wow now and the honesty and transparency of that worked in our favor both with our people and with the market right then about a month or two later I said I I need an opportunity to be in front of ten thousand store managers and this was during the cataclysmic financial crisis with no company was traveling. It was just awful so we had three cities. Come in as a bake off municipalities trying to get us to come to their city and when the New Orleans people came in they were crying in the meeting about the causing the effect of Katrina and they said it would mean so much to the city. If you brought this meeting we need the revenue yeah well so we went to New Orleans so the first thing we did to restore faith in the value of the company is we committed that first day day fifty thousand hours of community service in the Ninth Ward in New Orleans that were so affected so all of us are working side-by-side everyone in the company and before we had minute one of the meeting which costs thirty million dollars money we didn't have and we were being questioned by the board and shareholders could could you spend thirty million dollars on a meeting people thought it was some kind of convention wasn't a convention. It was a restoration. It was a transformation and so we had the meeting we had workshops on the third day. I had to give a thirty million dollar speech. in the basketball arena wow now here's a lesson about the leadership about an hour before. I'm ready to go on stage a couple of colleagues of mine who I've worked with for twenty years. This is a team. That's been together all these years because I brought everyone back with me when I came back and people who had left come back. We're GONNA. We're GONNA do it again. Everybody silence okay so we're we're back together and they said what are you gonNA. What are you GonNa talk about so I showed him a little outline of my talk and they said Howard you you. You can't say these things. You can't possibly share this information. Why so people were so afraid because we know one in the in the company really knew how bad things were we had eight months left starbucks coffee company in Norway of Solvency eight months allow. If things continue the way they were. We were going to run out in eight months. Wow and if you tell these people if you tell that you're going to scare the hell a lot of them. They won't be able to handle the information so here's the question as a leader if you want followership if you want people to be to join join you in this 'cause how could they possibly join you in this. 'cause it's going to take so much sacrifice and asking them to live it if you don't share everything with them about what is going on in the company. You can't hold back. You must trust them with the same information so instinctively. I just felt absolutely okay. I'm GonNa give them everything I know and then I'm going to ask something of them and that is join me in this cause for you and your family yeah and everyone you represent to show the world that starbucks is would says it is that we can restore the glorious company by going back to what we know exceeding the expectations of every customer this all we have to do and if we do that everything will be fine well that eight months never happened and it wasn't because of that speech but if I did not tell the truth if I wasn't transparent. I didn't ask something of them. starbucks would not have transformed itself yeah and so leadership also is about having the confidence in your people to understand and being with with you. The other thing is I was very vulnerable in front of ten thousand people and I think leaders especially men have a hard time demonstrating inning vulnerability and I think it's a strength of character. Not a weakness and people come to come to you when you're vulnerable yeah I. I have two more but I know I'm reading right now. Yeah I agree. I have one. I have a bunch. I'm obsessed with it and so there and I'm talking for like the great young entrepreneurs when we do this podcast. That's my inspiration and they don't get to hear someone like you very often. You build an empire conglomerate and you build it through great people. How important a is people in an organization one and two if Howard Howard Schultz was twenty two at a B. School or just out of graduate you graduated from school and you're broke like a lot of our listeners. We all were broke right. What what advice would you give yourself or twenty two twenty three year old on how to impress someone a coward. If I want to get a job in your offices Seattle so so first off Alex I do not have a business degree. neither do I. I visited me three yeah so nice. Everything I've learned in a sense I learned learned growing up and and learn from others so what I've told my own kids. is first off. You have to find something that you really love and you can't fake and I got to be really curious about the world and put yourself selves in situations where you're uncomfortable. You're meeting. People were not part of your sphere of influence and be curious as possible about the world in terms so in coming into starbucks about interviewing for jobs when pressing me I'm not concerned about your resume. Away went to college. I want to know about your life. I want to know about your personal story. you know one of the questions. I I ask everyone. I've ever interviewed is tell me the book you're reading and I'm I'm not so sure they just want to know. I want to know more about you. I'm when I'm when I'm always looking for is people who are hungry people people who are willing to sacrifice for the company and every one of us is going to make a hiring mistake mistake and the hardest thing for an entrepreneur anyone one in business is to realize that you made the higher mistake because you convince yourself that you can change that person and more often than not you can't so one. One of the lessons of entrepreneurship in all aspects of business is if you're GONNA fail fail fast yeah and admit it and move on yeah and try not to make that that mistake again but but there isn't a business that I know of any business that is not skewed towards the values and behavior of people and the people must be aligned must be facing the same direction and everything about behavior matters and everyone everyone's is is on the leader and so live your life like the cameras on yeah. Did you have another question for you. Go last question Okay Alaska and maybe a short unbelievable. Oh you kidding me for your team. They're fantastic. We we love. We love our shows. We Love starbucks and homecoming for me so I'm happy to be here in a great mood Howard when you think about the early mid eighties thought about this dream that you had and by the way you didn't tell us that you had to convince Sherry to you. GotTa come with me honey to Seattle because there's something she's like. I'm not going to anyway. That's another conversation but when you thought about your performance you get your. Mba guys to right. Here's the three five seven-year performa you left something out and it was going into communities. African American Communities Hispanic communities like my community and for whatever reason to three or five dollar starbucks. Maybe wasn't in the plans a guy a six foot nine point guard comes into your office right. Magic Johnson says I can be your partner. You've never franchise at the point right. What about Magic's pitch right convinced you obviously it was a very successful hundred and twenty five stores then you bought back. My question is tell tell me about Magic's pitching what you thought. When you walk into your store sure so I had a mutual friend who said one day that that Magic Johnson wants to come to Seattle meet you so you mentioned the Michael. Jordan store said I'm absolutely worse you know so so Irvin Magic Johnson walks in and you know his personality he is a few yeah and and he had a genuine genuine concern for bringing quality premium products into underserved communities and he said I'm coming here to invite you to something I want to invite you to a movie theater owned in La and I said so we later we met magic. We had dinner We knew what he what he wanted to do. What the pitch was and he said I want to show you come to the movie theater so he was involved at the time. I don't remember the company Sony Anne Theater Okay so guber yeah so he took me there. and what I saw was the without question the fact that he and his understanding the African American community specifically skewed towards doing something for for them that they would not have had access to so for me it was it wasn't so much magic. Although it was it was an opportunity opportunity to bring starbucks to underserved communities in a way that at the time we didn't quite understand. We didn't have the the the knowledge of how to do UH. I think we have the license to do. We didn't so we needed. I think an ambassador and and magic turned out to be exactly what he said he would be. He showed up and he was real. we had a great partnership and then as we got bigger and more scale got into other businesses. It was just an opportunity. I think think to realize we did great things together. We're still friends today but magic opened up the door to some underserved communities for us and it was the only time we did anything like that and and Jordan's wedding and so I'm still friends with urban still we're both rooting for Michigan State yeah. I think we both probably be at that game on Sunday. If they play Duke I know Howard representing over sixty million Hispanics and having starbucks all over our community entities yeah. We love it and we thank you for. Can I come when we're starting so I was in Miami two weeks ago. Okay and you know I have a an endeavor. We're going on right now about thinking of running for president. I think I heard something about that Alice. Did you know that I did and then by the way the peoples of means thing. You got roasted for that you know. I think it'd be fantastic. Thank you so while I was in Miami. I gave a speech at Miami. Dade it college okay yeah and then after that I was invited to Vicki's bakery in the Cuban section of Miami okay and I had an extraordinary opportunity to talk to about one hundred people in front of this very famous Cuban bakery and all I heard all all afternoon was these greats American stories of Cuban Americans who had come from Cuba and realized great success and so when I hear the President President talking about the downside of Immigration what I experienced that day gave gave me great hope and understanding about the power of immigration and these wonderful cuban-americans. I love that that's been tasked love that yeah yeah all right you ready for a little rapid fire. New Yorker Matt Matt Your Mind. You're fine. I'll start easy what what's up with the sizes. I don't WanNa say I never say the names. Let's head to have its own land. You should actually run for president be like hey listen. If I become President I will change it back to small medium and large. I've vote for you. I have no involvement with starbucks but okay I mean we created a language in America but it's I mean I always say small medium. WanNa know what you mean right okay so they get your name right most. That's what name do you give. I always get my real name. Yeah yeah exactly I worry last-named cats. I'm a bigger guy okay and you're about to have a son. I understand yes so will he be little cat. Yes he will until big and then he will. I don't know what he'll be. Maybe Tiger Tiger okay yeah. What about Oh. I actually thought of this while you're talking about the roasters you talk about innovation with the row stories. What have we had a person at the front door. Who just made fun of you when you walked in the door and roasted you? You said you were in innovation a you. In the way you walk in. It's just he just urine ugly. You know and just yells at you and then boom. You're in the rosary. I I think we will pass on that. Okay all right. That's fine Alex Miss sometimes it tops don't fit and I still that's a problem. Okay said saw a problem. We've had that problem. I think I think it's been fixed but I apologize scheduled on your pants yeah every now and then yeah yeah next time it happens chimney cleaning bill okay there we go I actually have something door. Forego the the cleaning cleaning bill the ice ice coffee. It's not uniform so sometimes they'll be like a little luke warm and then sometimes it'd be too much ice. I need a uniform. I know how much I getting. How much ice would you like. I'd like a good amount of ice where it doesn't like sometimes it's at the end. You're drinking like this weird weird gross lukewarm. There's no one is left so we're. GonNa have to work in the okay the straws. Are you GonNa do pay us or you know we're. We're and actually doing that now. I believe what about Metal Strauss people don't like metal stores because they could hurt kids a metals if the future father. I'm I agree with you. There okay I don't even know how that works that this. The big straws are sometimes a little too big. They're like actually all the time because they're the same size they're like. Maybe half an inch too big so we're going to take that back Yep. Okay you got that one. Just keep that What about getting my dad brain dump literature okay. This one kind of doesn't make sense but it makes a lot of sense. Have you ever thought about serving McDonald's French fries starbucks. Take the best thing for me. Donald let me think about that starbucks. I know now okay. That's a good idea though that's a really good idea bulls. It's bull culture blows eating things get ahead of that and Macho matches big. Get ahead of that yeah. That's a big idea. That's a big one more Norah Jones in every starbucks big nor Jones it just set the mood feels like and then my last one what about J. Lo. What do you think about that. That'd be great to maybe maybe nor Jones Morning Jaylo afternoon. When you said chocolate chocolate or something the Coffee Space Jennifer would love for Shaw. She loves starbucks but she loves anything with chocolate flavor so we may bring one home girl. Yes yes all right last last one. I have a really good friend whose father collected a bunch of reward points and then. They said they expired so can I get them back for him. How many do you have like a million. I think he was like one of these coupon guy you know he like really making sure that he had all the reward points. I am not in the company. Okay but sorry. Maybe we can work something out where we give me his name. I'll send him yeah. We'll get the reward points but let let me save cats here but also questioned Howard our first of all you know just first of all in closing. I want to say thank you very much. Obviously the Scholtz family foundation is an incredible work and has been a force for moving homeless families ace into stable housing. Here's a guy that came from New York City the projects I didn't get an MBA huge Yankee fans with his father and has built a conglomerate Alama rate with thirty thousand stores around the world with great leadership great purpose and great core value Howard Scholtz. You're a great role model to my two daughters daughters and to me and he may also WANNA quickly mention we have a podcast at Barstool that three veterans three the three people who were in Iraq Afghanistan and they partnered with starbucks and you guys do great work for veterans and if you want to explain that real quick the veterans stuff asserts an unbelievable we've hired over twenty thousand veterans and their spouses directs the Family Foundation is now opened eighteen transitional training meaning centers on basis and you know one of my main concerns that I've is that the VA has a lot of good people but unfortunately the lot of post nine eleven veterans that don't feel like they're being treated with respect. They deserve a your viewers will be shocked to hear this at the. Va has a national budget of two hundred the billion dollars and it's vitally important that we do everything we can to to fix that yeah yeah. I mean like I said the podcast. We have with three veterans. Eh they've done a lot of stuff with you guys. It's been fantastic talking to different versions working really glad you brought that up. Yeah that's the kind of stuff and you know. There's been a great podcast but that kind of stuff like you said just from the beginning making it a mission and making it more than just money and just fixed the straws in my friend's. Dad's uh-huh. I have a feeling this'll be audiences favorite podcasts yeah. I thank you very much you all right. Thanks for being so prepared. Read your wicked pedia back and forth.

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