AI Hustle Talk
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AI Hustle Talk
The man who faced 217 rejections created the world's coffee giant.
You know, it still gets me every time I see one. That green siren logo on a Starbucks cup. It's just everywhere.
Speaker 2:It really is. Over 28,000 stores, what 77 countries now? It's staggering.
Speaker 1:A true global behemoth.
Speaker 2:Yeah.
Speaker 1:And it all started well, not exactly there, but the vision, the drive behind it, howard Schultz, his story begins so far from that world. Canarsie Public Housing Projects in Brooklyn.
Speaker 2:Yeah, and that contrast is exactly what makes his story so compelling, I think. How does someone go from that kind of background, facing real financial hardship, to building this massive global company? That's changed how so many people think about coffee. What's the secret sauce there?
Speaker 1:And that's precisely what we're going to dig into today. We're not just looking at stock prices or expansion strategy, though that's part of it. Later, we're really diving deep into the personal journey of Howard Schultz, from his childhood, those early struggles, to the moments that really sparked his vision for what Starbucks could become. And for you, the learner listening in, this, isn't just a biography.
Speaker 2:No, not at all.
Speaker 1:It's packed with insights, real actionable stuff about overcoming obstacles, about the kind of mindset shifts needed to build something truly extraordinary. We want to unpack those lessons you can actually use.
Speaker 2:Exactly. Our mission here is to pull out those key moments, those underlying beliefs, how a success, especially big success, often comes from pushing through really tough times. We're looking at details from his Wikipedia page for the facts, the timeline and also this incredibly revealing in-depth interview he did with Graham Bensinger. That gives us a lot of the emotional context, the personal side of the story.
Speaker 1:Okay, so let's start right there. Early life Schultz talks a lot about poverty in the Canarsie projects, but then you see, in the Wikipedia entry, some people who grew up there around the same time remember it differently.
Speaker 2:Yeah, that's interesting, isn't it?
Speaker 1:They describe it more like middle class, even calling it the country club of projects. How do we square that?
Speaker 2:Well, I think it really highlights how subjective experience can be. You know, the objective facts of the neighborhood might have been one thing for some families, but his family's specific financial situation, his internal experience of that, clearly felt like poverty to him and that feeling, whether it was relative or absolute poverty, became this powerful motivator.
Speaker 1:So the external description doesn't necessarily negate his personal reality.
Speaker 2:Exactly His perception of hardship fueled him. It kind of makes you reflect, doesn't it, how our own early experiences, how we interpret them, shape who we become and what drives us.
Speaker 1:Definitely and regardless of the exact label. Those years clearly left a mark.
Speaker 2:We know he was very involved with the Boys Club of New York.
Speaker 1:Still involved, actually, still involved with the alumni network. Yeah, that tells you something, doesn't it, that it must have been a really positive, maybe even essential influence for him back then.
Speaker 2:Oh for sure, Places like the Boys Club can be lifelines. They offer structure, mentorship, a sense of belonging, especially when maybe things are tough elsewhere. His continued connection really speaks volumes about the impact it had.
Speaker 1:Then there were sports. Football was his thing. He was good enough to get an athletic scholarship to Northern Michigan University.
Speaker 2:Right, that was his ticket initially.
Speaker 1:But then a really bad injury, a broken jaw, and apparently it led to long-term spine issues, multiple surgeries down the line neck fusion Just awful.
Speaker 2:Yeah, devastating for a young athlete.
Speaker 1:And that injury, combined with, as he says in the Bensinger interview, this gut-wrenching moment of realizing he just wasn't good enough to go pro, that sounds like a real crossroads moment.
Speaker 2:Oh, absolutely defining. I mean imagine tying your identity, your future, to being an athlete and then physically you can't continue and you have that moment of clarity about your ultimate potential in that field.
Speaker 1:Humbling, as you put it.
Speaker 2:Yeah, steeped in humility at 19. That's a powerful phrase. It forces a complete reevaluation. It's a tough lesson, but sometimes, you know, having a door slam shut forces you to find other doors you never would have looked for.
Speaker 1:That's a great point. How often do we just fixate on one path?
Speaker 2:Right Until something forces us off it.
Speaker 1:He did finish his degree though, Got a BA in communications from northern Michigan. That education must have laid some groundwork.
Speaker 2:Definitely. Communication skills are never wasted, especially in business. And then he jumps into the working world, starts in sales at Xerox.
Speaker 1:Classic starting point for a lot of successful entrepreneurs, isn't it Sales?
Speaker 2:It really is. You learn how to pitch, how to persuade, how to handle rejection, which is huge Resilience.
Speaker 1:Absolutely. Then he moves to Hammerplast, a Swedish kitchenware company, becomes general manager, and this is where the coffee connection starts to percolate, so to speak.
Speaker 2:Right, because Hammerplast made coffee makers. Among other things, he was running their US operations for those, and that role led him straight to a small coffee bean company in Seattle.
Speaker 1:Called Starbucks. This was 1981. He was their supplier for plastic cone filters.
Speaker 2:Just a supplier Seems so mundane. Looking back, Totally OK.
Speaker 1:so this is the pivot point. What was it about this particular client, this little Seattle coffee company, that grabbed him so intensely?
Speaker 2:From everything I've read, it was the sheer passion of the founders, Jerry Baldwin and Gordon Bacher, their incredible knowledge and just obsession with the quality of the coffee beans themselves.
Speaker 1:So it wasn't just a business to them.
Speaker 2:No, it was a craft. Schultz, coming from more general management, was apparently just blown away by their focus and their dedication to this one thing Great coffee. It lit a spark, made him think differently.
Speaker 1:Makes you wonder, doesn't it, when you encounter someone else's deep passion, how it can sometimes ignite something in you.
Speaker 2:Totally. And it clearly did for him, because just a year later, 1982, he makes a big move. He's only 29. He joins Starbucks, becomes their director of retail operations and marketing. That's a big leap of faith. Joining this small niche company, huge leap.
Speaker 1:Shows he really saw something there, but the real lightning bolt moment, the vision that came later, right On a trip.
Speaker 2:Yes, 1983, he goes on a buying trip to Milan, Italy, and that trip that changes everything. Can you imagine what that must have been like?
Speaker 1:I mean, you read about it and it sounds like an epiphany. He walks into these Italian espresso bars and it's not just about grabbing a coffee and running, it's the whole culture, the buzz, the conversation, the barista knowing your name.
Speaker 2:Yeah.
Speaker 1:They were like community living rooms, the social hubs.
Speaker 2:Exactly, he saw people connecting, lingering, this sense of community all built around the ritual of espresso, and the light bulb goes off.
Speaker 1:He thinks why don't we have this in America?
Speaker 2:Precisely, he sees this huge untapped potential to bring that experience, that sense of place and connection back home, anchored by high quality espresso.
Speaker 1:Yes, but the focus shifts from just the beans, which was a Starbucks thing back then, right.
Speaker 2:Yeah.
Speaker 1:Selling beans, tea spices for home use.
Speaker 2:Right. His vision was totally different. It was about creating these spaces. It's a fantastic example of seeing a possibility others miss translating something successful from one culture to another.
Speaker 1:So he comes back to Seattle buzzing with this idea let's bring in espresso machines, let's create these gathering places. But the original owners, baldwin and Boker they weren't immediately sold, were they?
Speaker 2:No, that's a really crucial part of the story. They were intrigued, sure, they'd even experimented with a small cafe concept themselves earlier. But Schultz's grand vision, they had serious reservations. Well, cost was a big one. Those fancy Italian espresso machines were expensive to import, expensive to maintain, plus who in America knew how to fix them? Back then, Good point.
Speaker 2:And they worried Americans just weren't ready for espresso. It wasn't really a thing here. Yet their focus was still laser sharp on the quality of the whole bean coffee. They saw his idea as maybe diluting the brand and definitely risky financially.
Speaker 1:That tension the visionary employee pushing for change and the established owners being more cautious it happens all the time.
Speaker 2:It does. And faced with that resistance, schultz makes another incredibly bold move in 1985. He decides OK, if I can't do it here.
Speaker 1:I'll do it myself. He leaves Starbucks, starts his own coffee house, il Janel. Wow, that takes guts.
Speaker 2:Serious guts and conviction. He believed in this idea so much he was willing to walk away from a good job and bet on himself. But starting a business isn't free.
Speaker 1:No kidding, he needed money. How much was it?
Speaker 2:He needed to raise four hundred thousand dollars, which back then was a significant amount for a startup like this.
Speaker 1:And getting that money. That wasn't easy either, was it.
Speaker 2:Far from it. It's actually a pretty brutal fundraising story. Interestingly, starbucks themselves his former bosses actually put in $150,000.
Speaker 1:Really so they saw some potential.
Speaker 2:And a doctor, Ron Margolis, put in another $100,000. So he had some early believers. But then then rejection after rejection how many Get this. He pitched 242 potential investors OK. 217 of them said no.
Speaker 1:Whoa 217 rejections, that's I mean. How do you keep going after that?
Speaker 2:That's the resilience piece, isn't it that absolute, unwavering belief in your vision when almost everyone else is telling you it won't work? It's a huge lesson for anyone starting something new Prepare for the no's and find the strength to push past them.
Speaker 1:Incredible. So the first Il Giornale opens and it sounds quite different from today's Starbucks.
Speaker 2:Very Italian. Apparently it even served ice cream, had limited seating. Opera music, playing Opera music. And the name Il Giornale means the daily in Italian named after a Milanese newspaper. It was his direct attempt to recreate that Milan experience.
Speaker 1:Trying to bring Italy to Seattle.
Speaker 2:Pretty much. But then comes another twist, 1987. The original Starbucks owners decide they want to focus their energy elsewhere on Pete's Coffee and Tea, which they also owned Right and they make Schultz an offer Want to buy the Starbucks retail unit, the actual Starbucks stores and brand name.
Speaker 1:The chance to take over the company where his dream started. But wait, the price tag. Wasn't it huge?
Speaker 2:It was $3.8 million.
Speaker 1:And Schultz definitely didn't have $3.8 million just lying around.
Speaker 2:Not even close. So now he's scrambling again. He has to raise this massive amount of money and fast, like 60 to 90 days fast.
Speaker 1:And the original owners are talking to other buyers too. The pressure must have been unbelievable Off the charts.
Speaker 2:A real ticking clock. And then, just to make things even more dramatic, what happened? He finds out one of his own investors, someone already backing Ilgernal, is secretly trying to go around him and buy Starbucks out from under him.
Speaker 1:No way A potential betrayal like that that could have killed the whole thing.
Speaker 2:Absolutely. It highlights how tough and sometimes frankly ruthless, the business world can be, especially when big deals are on the table.
Speaker 1:So how did he pull it off?
Speaker 2:Yeah.
Speaker 1:This is where the story gets kind of legendary right. Bill Gates Sr gets involved.
Speaker 2:Yeah, it's an amazing anecdote. Apparently, a friend of Schultz's, a young lawyer who worked at Bill Gates Sr's firm, basically insisted Schultz go talk to the senior Gates, tell him what was happening.
Speaker 1:And he did.
Speaker 2:He did. He laid out the whole situation, the deadline, the competitor trying to steal the deal, and Bill Gates Sr this pillar of the Seattle community, apparently listened asked him just two direct questions.
Speaker 1:Do we know what the questions were?
Speaker 2:The sources don't specify the exact questions, unfortunately, but whatever they were, gates Sr clearly saw something he liked, or maybe just saw the injustice of the situation. He stepped in.
Speaker 1:Did he invest himself?
Speaker 2:Again, the details aren't explicit, but the strong implication is that his intervention was crucial. Maybe he made some calls, maybe he offered strategic advice, maybe his backing simply gave Schultz the credibility he needed to secure the rest of the funding from others. Whatever it was, it worked. It really does. It defined the whole approach. It wasn't just about the product. It was about the experience, the connection, the feeling people had when they were in a Starbucks.
Speaker 1:And that philosophy drove major decisions like refusing to franchise Right. He wanted company owned stores.
Speaker 2:Exactly. He felt franchising would dilute the culture and make it harder to control that consistent customer experience he was aiming for. He wanted every store to feel like Starbucks. It says a lot about prioritizing core values, doesn't it, even if franchising might have meant faster growth initially.
Speaker 1:Definitely and that focus on creating the third place.
Speaker 2:Yeah.
Speaker 1:You know, that comfortable spot between home and work, that really tapped into something people were looking for.
Speaker 2:It absolutely did. It became a huge part of the second wave of coffee culture in the US. People needed a reliable, comfortable place to meet, to work, to just be Starbucks, provided that it wasn't just a coffee shop. It was filling a social need.
Speaker 1:That differentiation was key. Then came the IPO in 1992. Going public that must have been a massive moment.
Speaker 2:Huge. It raised $271 million, which they immediately plowed back into expansion, basically doubling their store count, right in the middle of the so-called coffee wars, as competitors were popping up.
Speaker 1:For someone maybe not deep into finance. What does an IPO really do for a company at that point?
Speaker 2:Well, the obvious thing is the cash infusion right $271 million lets you build a lot of stores, hire a lot of people, but it also raises the company's profile massively.
Speaker 1:OK.
Speaker 2:Suddenly, you're on the stock exchange, analysts are covering you. There's more prestige, more credibility. It signals you've arrived, which is important when you're fighting for market share.
Speaker 1:Makes sense, then in 2000, he steps down as CEO. Why then?
Speaker 2:He wanted to focus on the bigger picture, specifically global strategy, and one market in particular was on his radar even then China.
Speaker 1:They'd opened their first store there just the year before, in 1999.
Speaker 2:Right and he saw the massive long-term potential. His decision to build a company-owned network in China, not just licensing the brand out, was incredibly forward-thinking and, ultimately, wildly successful.
Speaker 1:The growth there has been insane, hasn't it? At one point they were opening like what? A store, or two a day?
Speaker 2:Yeah, In the late 2000s, early 2010s, the pace was just phenomenal. A real testament to that early strategic focus.
Speaker 1:But things weren't always smooth sailing. He had to come back as CEO in 2008, right During the financial crisis.
Speaker 2:He did. The company was struggling. The stock price had tanked. There were criticisms about maybe losing focus. Employee morale wasn't great. Jim Donald was CEO then and Schultz stepped back in.
Speaker 1:And he made some tough calls when he returned.
Speaker 2:Very tough. He wasn't afraid to shake things up. There were mass firings of executives, closing underperforming stores.
Speaker 1:Didn't he close all the US stores for an afternoon?
Speaker 2:He did Temporarily shut down thousands of US stores simultaneously for retraining on how to make espresso properly.
Speaker 1:Wow, that sends a message.
Speaker 2:A huge message. We need to get back to basics. The quality of the coffee, the core experience matters most.
Speaker 1:He also doubled down on fair trade coffee purchases around then, didn't he? And brought in tech leadership.
Speaker 2:Yes, a real focus on ethical sourcing, doubling fair trade purchases and appointing the first chief technology officer showed they were looking ahead, adapting to how technology was changing retail and customer engagement.
Speaker 1:And then in 2014, the Starbucks College Achievement Plan with Arizona State University. That felt like a game changer for employee benefits.
Speaker 2:Absolutely groundbreaking, offering full tuition coverage for eligible employees to get a bachelor's degree online. It showed a real investment in their people, beyond just the day-to-day job. You have to think his own experience being the first in his family to go to college maybe influenced that commitment to education.
Speaker 1:Good point. It connects back. He stepped down as CEO again in 2016, became executive chairman and even did another stint as interim CEO more recently.
Speaker 2:Yeah, 2022, 2023. It just shows his connection to Starbucks, his passion for it. It runs incredibly deep. Even when he's not in the top job day to day, he's clearly remained a central figure, a guardian of the culture he built.
Speaker 1:Looking back at that whole arc, the mindset piece is fascinating. That sheer determination, especially early on, overcoming the financial hardship, being the first to go to college paying his own way, that kind of drive is immense.
Speaker 2:It really is that kind of internal engine often forged in those early struggles wanting something more, something different. It's incredibly powerful.
Speaker 1:And the passion for coffee wasn't just a business tactic, was it? Yeah, it seems genuine, that initial spark from Baldwin and Boker, then the Milan trip, it fueled everything.
Speaker 2:You feel that authenticity. When a leader genuinely believes in the core product or experience, it resonates through the whole organization and customers feel it too.
Speaker 1:Then there's the visionary aspect seeing the potential for the Italian coffeehouse in the US when the original owners, who were coffee experts, didn't fully grasp it. That's remarkable.
Speaker 2:It's that ability to see around the corner, isn't it, to spot an unmet need or desire and have the courage to chase it, even if it seems unconventional at the time?
Speaker 1:And the resilience my gosh, the 217 rejections for Il Journal funding, the near loss of the Starbucks acquisition those are moments that would make most people just give up.
Speaker 2:Absolutely. Those are crucible moments. They test your resolve to the absolute limit. His ability to navigate those, to keep pushing, says so much about his character and his unwavering belief.
Speaker 1:And while our main sources here don't go deep into it, we know Starbucks, under his leadership, was one of the first big US companies to offer health care to part-time workers the baristas. That hints at an empathy, doesn't it?
Speaker 2:It does. It suggests a recognition that taking care of your employees, especially frontline staff, is not just the right thing to do but it's also good business. It ties back to that people business serving coffee idea. Happy, secure employees create better customer experiences.
Speaker 1:He's also incredibly candid in that Ben Singer interview about how feelings from his childhood shame, insecurity about poverty were actually major motivators. He talks about feeling like he always had something to prove. That's quite vulnerable.
Speaker 2:It is, and it's powerful, acknowledging how those deep-seated feelings, even negative ones, can be channeled into intense drive and ambition. It makes a success story feel more human, more relatable, perhaps.
Speaker 1:He also contrasts his own work ethic with his father's, mentioning a complex relationship there, and says his drive came from survival, wanting more, but he gives immense credit to his mother.
Speaker 2:Yeah, her belief in him, her hope that he'd be the first to go to college. He describes that as a huge source of confidence and self-esteem when he really needed it.
Speaker 1:Those family dynamics. They shape us so profoundly. His mother giving him that belief, maybe offsetting some of the difficulties with his father.
Speaker 2:It seems like it. And then there's the partnership with his wife, cherie. He emphasizes how crucial her support was, especially in those early, incredibly uncertain, ill journal days.
Speaker 1:He mentions her father questioning his career choice.
Speaker 2:Right, like what is this coffee thing you're doing? But Cherie's belief was unwavering Having that kind of support system at home someone who believes in your crazy dream when maybe others don't it's often make or break for entrepreneurs.
Speaker 1:Absolutely vital, and their continued work together on the Schultz Family Foundation shows that partnership endures.
Speaker 2:It does. Shared values extending beyond the business.
Speaker 1:He also admits he's super competitive, calls himself a pressure player, someone who thrives when their back's against the wall and that constant feeling of what's next.
Speaker 2:Enough is never enough, that restlessness, that constant striving it's a hallmark of so many successful entrepreneurs. They reach one summit and they're already looking for the next mountain to climb. Complacency isn't really in their vocabulary.
Speaker 1:But it wasn't all just straight up success. He had some bumps, the Seattle Supersonics ownership. That didn't end well.
Speaker 2:No, that was a tough chapter for him and for Seattle. He bought the team in 2001, faced criticism for maybe running it too much like a business, not a community trust, clashed with star players like Gary Payton.
Speaker 1:And then the sale in 2006, which led to the team moving to Oklahoma City. That caused a lot of bitterness in Seattle.
Speaker 2:Huge amount and, to his credit, Schultz has been very open in recent years about his regret over how that went down. He admits he was maybe too young, too inexperienced as an owner and that it conflicted with his Starbucks duties. He's taken responsibility for the team leaving.
Speaker 1:That Tom Izzo anecdote is funny, but telling Izzo asking why he sold the team before Izzo could coach them, it shows Schultz maybe wasn't fully equipped for that world.
Speaker 2:Yeah, it seems like a case of maybe biting off more than he could chew at that time and learning a hard lesson. Very publicly Interestingly, the women's team, the Seattle Storm, which he also owned for a bit, was sold to a local group and stayed. Maybe lessons learned there?
Speaker 1:And then, more recently, exploring a run for president in 2020 as an independent. That didn't get very far either.
Speaker 2:No, he tested the waters and faced immediate, intense backlash really from all sides. He talks about the emotional toll of that, the vitriol. It sounds like it was a really humbling, maybe disillusioning, experience for him.
Speaker 1:Realizing the political arena is a whole different beast than business.
Speaker 2:Very different. His idealism about running as an independent maybe didn't quite mesh with the political realities, but stepping back, recognizing it wasn't the right path, takes its own kind of strength.
Speaker 1:Definitely. But let's swing back to the global stage. That success in China really is remarkable, especially doing it mostly with company-owned stores.
Speaker 2:It's huge, and he's quick to credit the local leadership, particularly Belinda Wong, the CEO of Starbucks China. He talks about needing to be locally relevant, understanding the culture while still carrying that American brand identity. It's a tricky balance they seem to have navigated incredibly well.
Speaker 1:That emphasis on local leadership seems key, empowering the people on the ground.
Speaker 2:Absolutely. You can't run a global empire effectively from Seattle alone.
Speaker 1:And even after all this building this global icon, he still sounds like he has that itch, that entrepreneurial fire. He talks about wanting to paint another canvas.
Speaker 2:Yeah, hints about maybe a food-focused brick and mortar concept. It's like that enough is never enough thing again. The drive to create, to build something new, it just seems embedded in him.
Speaker 1:And finally the Schultz Family Foundation. It's not just a side project, is it? He seems deeply invested in tackling big issues, helping marginalized groups, veterans.
Speaker 2:It really seems like a core focus now, leveraging the resources and platform he's built to try and make a significant difference in areas he cares about. Working with people like Darren Walker at the Ford Foundation suggests a very serious strategic approach to his philanthropy.
Speaker 1:Using his success to fuel something beyond profit.
Speaker 2:Exactly A sense of broader responsibility.
Speaker 1:So, wrapping this all up, howard Schultz's story, it's just packed, isn't it? It's this incredible testament to having a vision, first of all, Definitely Seeing something others didn't. And then the sheer resilience to make it happen, pushing through hardship, rejection, near failure.
Speaker 2:And learning constantly from the wins and the losses.
Speaker 1:Right From Brooklyn Projects through that life-changing trip to Italy, the high-stakes deals he built this global thing, always coming back to that idea of human connection fueled by this love for coffee.
Speaker 2:It's genuinely inspiring and it really drives home that point when you start doesn't have to limit where you end up. His journey fueled by ambition, sure, but also by trying to overcome those early insecurities. It's a powerful example of what determination and a clear vision can achieve.
Speaker 1:So here's something for you, the learner, to maybe chew on after listening to all this Think about those times in your own life, maybe right now, where you've hit a wall, faced something that feels really daunting. How can you maybe channel some of that Schultz-like resilience, how can you tap into that visionary thinking, looking beyond the immediate obstacle to see the bigger possibility? What's that next canvas for you, that idea that excites you, that you want to bring into the world?
Speaker 2:That's a great question to leave people with. This has been a fascinating deep dive into Howard Schultz's journey. Hopefully it's given you some things to think about, maybe some inspiration and perhaps a little more appreciation for what went into your next Starbucks order.