Wednesday, October 22, 2008

The Starbucks Economy

This from Daniel Gross:

"I propose the Starbucks theory of international economics. The higher the concentration of expensive, nautically themed, faux-Italian-branded Frappuccino joints in a country's financial capital, the more likely the country is to have suffered catastrophic financial losses . . .

" . . . At first blush, there's a pretty close correlation between a country having a significant Starbucks presence, especially in its financial capital, and major financial cock-ups, from Australia (big blowups in finance, hedge funds, and asset management companies; 23 stores) to the United Kingdom (nationalization of its largest banks). In many ways, London in recent years has been a more concentrated version of New York—the wellspring of many toxic innovations, a hedge-fund haven. It sports 256 Starbucks. In Spain, which is now grappling with the bursting of a speculative coastal real-estate bubble (sound familiar?), the financial capital, Madrid, has 48 outlets. In crazy Dubai, 48 Starbucks outlets serve a population of 1.4 million. And so on: South Korea, which is bailing outs its banks big time, has 253; Paris, the locus of several embarrassing debacles, has 35.

"But there are many spots on the globe where it's tough to find a Starbucks. And these are precisely the places where banks are surviving, in large part because they have not financially integrated with banks in the Starbucks economies . . . "

The full story here.



Blogger Ken Houghton said...

When I was first looking at topics for a thesis, I realized that the rise of SBUX stores correlates rather well with the return to an increase in American productivity (this grew until the Reagan Era, was flat for a while, and then started again in the Clinton Era—but that is surely coincident).

If you view Starbucks correctly—it's a caffeine-delivery device; Caroline Spector described the coffee itself perfectly here—then the "amount of stimulation to the body and brain" (gads; sex and Shriekback references in the same aside) leads to the question of sustainability.

Fortunately, someone else will have to do that work. But there is a reason that race car drivers are not allowed to have too much caffeine in their systems, and impaired judgment when you're dealing with multimillion-dollar portfolios is odds-on to be A Problem.

This is not to blame everything on SBUX, which filled a need and has engendered competition from the likes of Dunkin Donuts and MickeyD's. So really it's proof that correlation is not causation. But if the impaired judgment is a direct result of SBUX (just as the 80s were cocaine), then eliminating the stores in the Era of Red Bull still wouldn't solve the problem.

6:51 AM  
Blogger Ralf the Dog said...

The problem is not stock traders doing caffeine. The problem is stock traders doing crack (and or meth). I think dosing their coffee with lithium might not be a bad idea.

8:44 AM  

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