Starbucks

What happens when they open a new one?

I wrote almost an entire book in a Starbucks.

This book, and this Starbucks, in Washington, D.C.

I was living in a small apartment at the time, and I needed another place to work. Advantages to this Starbucks were that it was close to home and that while it was busy, you could always get a seat.

What it lacked in cleanliness (seriously, not the cleanest Starbucks), it made up for in neighborliness.

Lots of other people were in there working on all kinds of other things. I sometimes wondered whether the people at the table next to me were working on their own books, or maybe dreaming up some kind of interesting startup.

It turns out I wasn't the only person wondering these kinds of things. Two professors at Columbia University set out to answer a similar question.

Their conclusion, spelled out in a recent working paper, is that when Starbucks arrives in a neighborhood that didn't have a similar coffee shop previously, the rate of entrepreneurship goes up.

Specifically, a new Starbucks leads to a seven-year neighborhood entrepreneurship boom: a rise of between 5 percent and 11.8 percent in the rate of "local entrepreneurship," according to Jinkyong Choi and Jorge Guzman of Columbia Business School and Mario L. Small of Columbia's sociology department.

That works out to between 1.1 and 3.5 new businesses per year that wouldn't have been created otherwise, with the increase normally lasting about seven years.

Researchers have long debated another version of the so-called "Starbucks Effect," which is the idea that new Starbucks locations are correlated with rising home prices.

Why? Well, maybe the presence of a new Starbucks sends signals to people about a neighborhood on the rise. Or maybe Starbucks is just really good at predicting which neighborhoods to move into.

But this new research heads in a different direction, suggesting that it's the Starbucks model -- and the thing that Starbucks has long proclaimed as one of its reasons for being -- that might make the difference.

In short, Choi, Guzman, and Small suggest that the idea of offering a "third place" for people to meet (besides at home or at work), might have been responsible.

Summarizing previous work on the question, they write:

When starting a company, entrepreneurs benefit from having others with whom to brainstorm and refine ideas, identify potential pitfalls, seek funders and other supporters, and navigate legal and logistical roadblocks.

Starbucks... was distinct in this respect, because, in the 1980s, when many coffee shops primarily focused on selling food and drink, Starbucks invested in a model inspired by European cafés, wherein the coffee shop would provide a social setting for individuals to interact...

A few interesting notes about how they gathered the data for their research:

• First, they found an intriguing control group: neighborhoods where Starbucks wanted to open new stores, but was stymied because of city planning, zoning, community organization, or other issues.

• Second, they took a special look at the partnership between Starbucks and legendary basketball player-turned-entrepreneur Earvin "Magic" Johnson. In neighborhoods where Johnson was involved, the effect was much greater: a 29.7 percent increase in the number of expected startups.

• Finally, in order to increase the number of neighborhoods they could examine, they looked at census tracts where Starbucks entered neighborhoods and compared them to "all census tracts that did not previously have a coffee shop." It's a truly massive trove of data.

We should note that this is a very long-term study; I suppose that might be obvious in that they say the entrepreneurship effect of a new Starbucks lasts seven years.

One of the proposed-but-rejected Starbucks cited in the study was from 2005, and the Starbucks partnership with Magic Johnson dates back to 1998.

Starbucks has changed a lot since that time. Frankly, it's in a difficult position now, and they're rolling out a lot of new changes to how they do business. Their stock price is down 28% since a year ago, and they have an earnings report out today that isn’t expected to contain good news.

But let's set that aside, and raise a glass -- or a paper cup, I suppose -- to the idea of the third place.

Give people a place to get together, meet, and work, and there's no telling what might grow out of it.

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7 other things …

• President Biden will call on Congress to impose term limits and a code of conduct on the Supreme Court while also drafting limits on presidential immunity. Biden was set to discuss the proposed reforms during remarks on Monday at the LBJ Presidential Library, in commemoration of the 60th anniversary of the Civil Rights Act, and also addressed his desire for Supreme Court reform in a Washington Post op-ed published Monday morning. (Fox News)

• Venezuela’s opposition and President Nicolas Maduro’s government were locked in a high-stakes standoff after each side claimed victory in a presidential vote that millions in the long-suffering nation saw as their best shot to end 25 years of single-party rule. Several foreign governments, including the U.S., held off recognizing the results of Sunday’s election. “Venezuelans and the entire world know what happened,” said challenger Edmundo González. (AP)

• Far-left extremists were likely behind last week's arson attacks on France's high-speed train network, heavily disrupting travel just hours before the Olympic Games opening ceremony, French Interior Minister Gérald Darmanin said Monday. All trains are now back up and running after teams worked around the clock over the weekend to fix the damage. (France24)

• Political and ideological differences are increasingly playing a role in Washington divorces and custody battles. Why it matters: Politics is no longer relegated to discussions about taxes or policy. It's become much more about identity and values, permeating American life — including marriages and parenting. And with partisan divides and animosity growing, it's affecting relationships. (Axios)

• More people are using cannabis daily than alcohol, putting more drivers using the drug behind the wheel—and people on the road at risk. The legalization of marijuana likely accounts for an additional 1,400 traffic fatalities in the U.S. each year, a 2023 study in the International Journal of Drug Policy found. Now, law enforcement is scrambling to identify drivers who shouldn’t be on the road. (WSJ)

• The oldest federal judge is fighting to keep her office as her fellow justices say she must be suspended due to concerns about her mental health. US Circuit Judge Pauline Newman, 97, was appointed by Ronald Reagan in 1984. Newman’s fellow justices on the US Court of Appeals for the Federal Circuit unanimously voted to sideline her in September, after she refused to undergo medical testing and provide medical records as concerns arose about her mental health. (The Independent)

• Halloween is still months away but retailers are promoting the spooky holiday earlier than ever and driving a new "Summerween" trend. Why it matters: There's a race to move out holiday merchandise early, aiming to get shoppers ready well in advance and, ideally, pushing them to spend more money. Halloween is big money for retailers and last year sales were projected to reach $12.2 billion, according to the National Retail Federation's annual holiday survey. (Axios)

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Thanks for reading. Photo by Athar Khan on Unsplash. I wrote about some of this before at Inc.com. See you in the comments.