Indiana's Thomas R. Marshall, who was America's vice president 100 years ago, voiced - he plucked it from a Hoosier humorist - one of the few long-remembered utterances to issue from that office:
"What this country needs is a good five-cent cigar," which would be $1.11 in today's currency.
A century later, what the country needs is a $12 twelve-ounce cup of coffee.
Or so Howard Schultz thinks. Betting against the man who built Starbucks to a market capitalization of $86 billion is imprudent.
Today, you cannot swing a dead cat without hitting a Starbucks store. There are 25,000 in 75 countries, with another 12,000 due by 2021, so Starbucks is not an elusive or exclusive experience. This poses a problem peculiar to affluent societies, and an opportunity.
Seattle, where the original Starbucks was opened in 1971, now has a Starbucks Roastery where customers can turn a cup of "small-batch" coffee into an experience - Starbucks sells experiences as much as coffee - of both conspicuous consumption and conspicuous connoisseurship. Bloomberg reports that for a pittance, a.k.a. $10, skinflints will be able to buy a cold-brew coffee, which presumably is an excellent thing, infused with nitrogen gas, which sounds like an acquired taste.
Many existing Starbucks are located to capture foot traffic in malls and shopping centers, which have been losing customers to online shopping. The original 30 Roasteries - Reuters says they will be "ultra-premium," not mere tacky premium - will be destinations where people will go to linger. So, by 2021, when there will be more normal Starbucks than McDonald's, the few Starbucks Roasteries scattered from New York to Shanghai will be Starbucks's entry into the positional economy.
Very pricey coffee is just a fresh-brewed variation on the familiar phenomenon of positional goods. They are necessarily, inherently enjoyments for the few. They exist because, particularly in the upper reaches of affluent societies, it is not love that makes the world go 'round, it is a compound of envy and pretentiousness.
Four decades ago, the economist Fred Hirsch distinguished between the material economy and the positional economy. Once a society has satisfied basic material needs (food, shelter, clothing), it turns yesterday's luxuries (cars, air conditioning, college educations) into necessities. Because these are mass-market commodities, such material prosperity is a leveling, egalitarian force. Positional competition is emphatically not.
In the competition for an "elite" education or an "exclusive" vacation spot, one person's success is necessarily a loss for many other persons because positional goods cannot be expanded indefinitely. Of course, Starbucks Roasteries could be expanded by the thousands, but this would make the "experience" banal and drain the stores of their positional power.
After elementary needs - food, shelter, clothing - are satisfied, consumption nevertheless continues, indeed it intensifies because desires are potentially infinite. People compare themselves to their neighbors, envy their neighbors' advantages, and strive to vault ahead in the envy-ostentation sweepstakes.
The political equality of democratic societies leaves ample room for, and incites, social inequalities, which are coveted because they counter the leveling forces of mass affluence. Furthermore, as inherited privilege has been replaced by social rationality - Napoleon's "careers open to talents," a meritocracy based on skills and education - there is a residual human urge for irrational distinction. Such as savoring a $12 cup not just for the - let us stipulate - divine flavor but for the sheer fun of showing that you can and that your palate is so refined that merely very good coffee would be excruciating.
In any American city large enough to sustain a social ecosystem of snobbery, there is a magazine to guide fastidious consumers to "the five best craft breweries" or "the five best artisanal cheese shops." Heaven forefend that anyone should have to settle for the sixth best. For discerning tipplers, there are artisanal ice cubes. In San Francisco, The Mill, a cafe and bakery, offers artisanal toast for $4 a slice. It is to die for, say the cognoscenti.
Where will the positional economy end? It won't. Stanford professor Francis Fukuyama notes that it is a peculiarity of human beings that they desire some things "not for themselves but because they are desired by other human beings." Hamsters have more sense. This characteristic of our species - the quest for recognition by distinguishing oneself from others - provides limitless marketing possibilities because for many wealthy people, "the chief enjoyment of riches consists in the parade of riches." So wrote Adam Smith in The Wealth of Nations, published in the resonant year of 1776.