How Bill Gates Saved Starbucks

How Bill Gates Saved Starbucks

Before there was the billionaire Bill Gates there was Bill Gates’ father, Bill Gates Sr.: a prominent Seattle lawyer. Before there was the billionaire Howard Schultz there was a man who was his father who nobody knew.

Howard grew up in the Brooklyn projects where his father worked several blue collar jobs trying to survive, to feed his family, to achieve the American Dream. One day, while at work delivering cloth diapers (before the advent of Pampers), he slipped on a patch of ice and broke his leg. There was no healthcare for him, no worker’s compensation, and there was no longer a job for Howard Schultz’s dad. The American Dream was shattered and, as a seven-year-old Howard watched on, his father was beaten once again by the world.

It was the cold hard truth of business. It was an entity versus a single man; reduced to a cog. Replaceable like a cog.

Flash Forward to 2008. Starbucks is on the ropes. Howard Schultz is brought back in as CEO – a position he resigned in 2000 with no intention of coming back. Starbucks though, is his baby, “I love Starbucks like I love my family.” He comes back to a mismanaged company that has expanded too fast and become more aligned with its shareholders’ desires than its customers’ desires. It’s January 2008 and Starbucks has 8 months left to live.

A prominent shareholder of the company calls up Howard on day one, not to welcome him back but to threaten him. It plays out something like this (without embellishment):

Shareholder: Howard you have to cut the free healthcare. It’s the only way to save Starbucks. Nobody is going to blame you, especially with the financial crisis going on. Everybody’s doing it.

Schultz: That’s not going happen.

Shareholder: Yes it is! You have to cut the healthcare expense. It’s too much. It’s bad business.

Schultz: Free healthcare is essential to what Starbucks IS. We cut it and you may survive a few more months but Starbucks will die without it. We ..

Shareholder: Starbucks is coffee! Anyone can sell a cup of coffee.

Schultz: Starbucks is its people, its employees, its customers. Starbucks is its Values: that’s what made and makes us great. The reason it’s dying right now is because we’ve moved away from that.

Shareholder: I’ll take my money and leave! You have to make the tough choice and you can’t because you’re weak.

Schultz: There is a choice and I choose to do the right thing, even if it isn’t the easiest thing. You can take your money and make like a tree! (okay maybe this part is embellished).

So where does Bill Gates come in?

He comes in a long time before this in the year 1982.

Starbucks was not always Schultz’s. They were a coffee roasting company that didn’t sell any cups of coffee. Schultz fought his way into a job here and then spent a year pounding his fist on the table to get the business into selling cups of coffee. After a valiant attempt where he succeeded in selling cups of coffee at one of the locations, with his hands spilling over in profits, the owners still said no. Howard quit. He set out penniless to open his own coffee shops and oddly enough his first investors were the Starbucks owners. The rest came from door to door business pitching. He had something special. He had big dreams. He had the will to succeed. Then he had three successful coffee shops.

In the years following it turns out Starbucks made some financial mistakes and the company is up for sale. They turn first to Schultz and give him the exclusive on the sale for 90 days. Schultz, barely making any money, needs now to raise almost four million dollars to buy Starbucks and make his dream come true.

How do you raise four million dollars? Howard cold calls and knocks on doors and gets rejected over 200 times. Most of the investors he already had for the previous shops turn him down first and then almost everyone else after that. Bummer.

Starbucks, 60 days in, comes back to Howard and says, ‘Sorry kid I just got a better offer and you don’t seem to be cutting it. But, since I like you, I’m going to tell you its Mr. So and So who just turned down your investment pitch the other day. He got the idea from you. Sorry kid, business is business’. Cold hard business.

Howard literally goes home and cries with his wife. His dreams are crushed, his ideas are stolen, and he is beaten by the world. The next day he’s out playing a cathartic game of basketball with a young attorney friend of his. He tells him the story of the wicked world kicking him down. The attorney friend says ‘That’s some story you got! You have to come talk to the partner at the firm’.

The next morning Howard finds himself in the law office of Bill Gates Sr. He had never heard of either of the Bill Gates before. Howard tells his story from the projects in Brooklyn right up to the So and So swooping in an outbidding him for Starbucks. Bill Gates asks him in a serious and dramatic moment ‘Son, is everything you told me true? Every word?’ Howard replies, “Heck yeah”.

What happens after this? Bill marches right into the office of this So and So with Howard following and he stretches out his finger across the man’s desk right down at his nose and gives him the good ole “You should be ashamed of yourself!” speech.

Bill takes Howard by the shoulder and says ‘Kid, let’s give you a shot at your American Dream’.

Howard Schultz carries this with him just like he carries the image of his father unemployed with a broken leg. He built a company (and then he rebuilt the company) to be the type of company that puts people and their families first. The type of company where profit is as important as the values that define them.

The big bad business world doesn’t have to be. There are other ways. Bill Gates senior had a direct effect on two of our biggest billionaire businessmen. He is also credited by Gates Jr. as the brains and heart behind the Bill and Melinda Gates Foundation.

If you are still reading this: remember that you always have a choice and that those choices to do what’s right, even in the face of the big bad world telling you that you can’t, can have a ripple effect that shakes the world.