03 July 2005

In Defense of $3 Coffee

Every fundraising drive promoter and financial planner urging his or her clients to save more money has your $3 cup of expresso in his sights. Drop this expensive habit and you can move mountains you are told.

But, the reality is that Starbucks is one of the fastest growing franchises in America, adding almost 1000 new locations each year, despite the fact that it is already pervasive. There are probably eight places within a one mile radius of my house where you can buy Starbucks coffee, and another half dozen places, like this one, where you can buy similar products at a similar price in a similar atmosphere.

Businesses that don't maintain their cash flows die swift deaths. These businesses are thriving for the very simple reason that tens of millions of people, if not hundreds of millions of people, are ignoring their financial planners and the fundraising gurus. While tens of millions of people are often wrong (nearly a third of the people in the United States claims to be Young Earth Creationists, and most people who voted for President Bush thought that Iraq was behind the 9-11 attacks), people tend to be astute at making decisions about their daily lives based on their personal experiences, even if they are not wise at making decisions in matters that have only a slight impact on them and are outside the realm of their personal experiences.

The error that financial planners make, I think, is in failing to appreciate why people buy $3 coffees, something that I've done on an occassional basis since I started drinking coffee in law school.

Buying a $3 coffee is a bit like having fresh flowers in your house, or getting leather seats or an XM radio in your new car. It is a marker of whether you are living a life of "quiet desperation", in the words of Thoreau, or a life of quiet contentment. It is a quality of life issue. Expresso is better coffee than the Folgers and Maxwell House crap that my parents spent their lives drinking. A cappachino (frothed milk), latte (warmed milk), or mocha (chocolate and milk), which are the usual orders, add even more depth to the concoction. And, while you can brew good coffee at home, frothing milk at home is beyond the abilities of most of us.

Also, in the real coffee house experience, you aren't just paying for coffee. You are paying to enjoy a moment of peace, in an intellectually stimulating atmosphere (rather than the chaos of your own breakfast table) full of similarly prosperous people who value their quality of life, on the installment plan. A coffee house is the middle class answer to the country club, or the British style parlor clubs that at least one group in Denver tried and failed to replicate. You are paying rent for a small portion of a nice space, not just paying for a raw commodity. In the same way, people routinely pay two or three times the price of renting a movie to experience it in a proper movie theater shortly after it is released, rather than on your television set several months later. A $3 cup of coffee is an experience, not just a good.

The wealthy pay $10,000 a year or more to be part of a country club, plus healthy initiation fees. Joining the "expresso club" costs a mere $1,000 a year with no initiation fees for a full membership, and you can be an irregular two times a week member for a mere $300 a year. Yet, this modest price is sufficient to generate a much more pleasant environment than your local Burger King or Dunkin Donuts, both of which offer considerably nastier ordinary coffee and a rather depressing place to drink it in for about a dollar.

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