Does Starbucks really smell the coffee on staff training?

If Americans had an urge to pop into a certain ubiquitous coffee chain yesterday afternoon for a caramel cocoa cluster frappuccino, a pumpkin spice latte, or just an espresso, they would have been disappointed. Every single one of the 8,000 Starbucks shops in the US was closed. The Seattle-headquartered caffeine peddling phenomenon has not gone bankrupt. Nor has it been affected by some catastrophic nationwide sanitary crisis.

The shops were all shut because the entire 175,000-strong US workforce of the company was undergoing “diversity training”. The cost of the great Starbucks shutdown in foregone profits has been estimated at around $12m (£9m). That may sound like rather a lot of “bucks” to spend on staff training. But that figure needs to be put in the context of the chain’s $2.9bn of global profits last year. Starbucks can afford to make this expense. Arguably, it can’t afford not to.

The company’s US training day was prompted by a public relations disaster last month, when staff in a Philadelphia branch called the police to arrest two black customers, one of whom had merely asked to use the toilet. Such a reaction would be outrageous in any country, but in America, with its shameful history of racial segregation (including “Whites Only” restrooms) and a current president who describes white supremacists as “very fine people”, one can easily see why it’s especially toxic.

The Starbucks training day, we’re told, will encourage workers to talk about their implicit biases and stereotypes when encountering ethnic minority customers. To understand the underlying economics of this story, it’s necessary to grasp the nature of Starbucks’ business. Starbucks doesn’t hold a patent on coffee. It doesn’t own the majority of the world’s coffee plantations, or enjoy a global monopoly on the supply of beans.

For all those inventive recipes, it doesn’t have a secret formula that cannot be emulated. Its coffee-making equipment is essentially no different from what can be found in most other coffee outlets. Nor does Starbucks own the freehold of those tens of thousands of shops in prominent locations in cities and towns around the world. Nor do its staff have any kind of unique training that enables them only to work in Starbucks; they could just as easily ply their trade for one of its many rivals.

Add up all the cash, property and sacks of coffee on Starbucks’ balance sheet and one comes to a figure of $14bn. Yet the company’s stock market valuation is closer to $80bn. What explains the difference? The value of its brand. If the Starbucks brand is harmed, all those revenues, all those profits, risk melting away like foam on a cappuccino. Of all the associations that the multinational Starbucks brand wants to avoid, racial bigotry must rank pretty highly. Protecting that brand is paramount. And $12m is, in this context, a pretty small price to pay.

However, that’s not the end of the financial considerations. Research suggests that top-down, mandatory, one-off diversity training exercises often fail to deliver results, with any lessons learnt rapidly fading.

Voluntary programmes, and training designed to build a genuine sense of engagement, and to directly expose workers to different social groups, seem to do much better.

The greater financial risk for Starbucks lies not in the size of the outlay, but in the danger that this training is ineffective; if it represents a cosmetic public relations exercise rather than a serious operation to educate its workers and managers in how to treat customers. It’s not enough for a firm to wake up and smell the coffee when a brand is in jeopardy. It needs drinking too.

#brandvalue #coffee #Starbucks #training

Dog bites man and driverless Tesla crashes

Are journalists innumerate? Elon Musk and Steven Pinker think so. A range of news outlets reported earlier this month that one of Musk’s Tesla cars, in “autopilot” mode, had crashed into the back of a fire engine in Utah at 60mph.

The vehicle’s technology apparently failed to prevent the collision, as it ought to have. Thankfully, no one was seriously hurt, although the driver broke her ankle.

Musk took to Twitter to vent his frustration at the fact that what he regarded as a minor traffic accident had been considered “news”.

“It’s super messed up that a Tesla crash resulting in a broken ankle is front page news and the 40,000 people who died in US auto accidents alone in past year get almost no coverage,” he grumbled.

The popular Harvard psychologist Steven Pinker has endorsed this, tweeting: “Elon Musk is absolutely right about this. Journalistic innumeracy is damaging in many ways, and editors should put an end to it.”

In some ways Musk is talking nonsense, and self-serving nonsense at that. Driverless vehicle technology is consistently presented as one of the revolutionary innovations that will transform our lives in the coming decades, not least by Elon Musk.

But will it be a beneficial revolution? Putting one’s life in the hands of a fast-moving machine feels risky and people naturally want to know if it is actually safe or not. That will be determined by the reliability of the kind of sensors used in Tesla’s autopilot technology. The idea that the media were excited by the Utah crash because of a broken ankle rather than the apparent failure of the technology is obtuseness squared from Musk.

And then there’s the self-serving element. Tesla, and Musk’s other projects, as my colleague Jim Moore has pointed out, have benefited hugely from obsessive media coverage and a lot of hype. To lap up all that free publicity when it’s commercially useful but then to complain about the massive media interest when it’s more problematic represents a monumental cheek.

As for news values, as the old saying goes “dog bites man” is not a news story, whereas “man bites dog” is. Those multiple daily car crashes are not news precisely because, as Musk notes, they are so common. Crashes by driverless (or autopilot) cars are news because they are so rare.

All that said, the thrust of the Musk/Pinker critique has some validity. The media’s obsession with “man bites dog” stories can distort the public’s sense of risk. As the behavioural economist and psychologist Daniel Kahneman has documented, we are all prone to recall what comes easily to mind (the “availability heuristic”) when making judgements about danger.

Because plane crashes get far more coverage in the media than car crashes, many people wrongly assume air travel is far more hazardous than driving. In fact, the fatal accident rate for large commercial airlines is one for every 16 million flights. Last year was the safest for aviation on record.

The automobile, on the other hand, as John Thornhill of the Financial Times has pointed out, has a claim to be the most deadly human invention ever, with around 1.25 million road traffic deaths a year globally. Musk is right to suggest that this is the correct statistical context in which to view the development – and indeed the risks – of driverless technology.

The media has a proven ability to create “availability cascades”, creating panics and scares based on not very much. Think of the News of the World’s notorious “name and shame” paedophile campaign in 2003, which gave the impression that there was a child molester on every street and prompted mobs to attack innocent people.

Consider Donald Trump’s recent claim that London is“like a war zone”. Does media coverage of the recent spike in youth violence in the capital – in particular, the failure to put the deaths in the appropriate statistical context – help to stoke that kind of malevolent hysteria? Think of the recent ubiquitous claim that London has a higher murder rate than New York.

There’s also reason to believe skewed media coverage tears at the social fabric. Surveys suggest British people think a fifth of the UK populations are Muslims, when the true figure is 5 per cent. We think a quarter of the population are immigrants, when the actual figure is around 14 per cent. Those grossly distorted perceptions are due to distorted media coverage – and not just from the shameless right-wing propaganda corp.

Pinker claims in his recent book, Enlightenment Now, that too little attention is given by the media to the major global health advances of recent decades, such as falls in childhood mortality and rising longevity, and that this omission contributes to an unwarranted sense of demoralisation. His overall case is overstated and flawed in some respects, but he’s right to claim that a sense of balance is often lost.

Should Tesla’s Utah crash be considered news? Yes. Should journalists think more carefully about statistics and consider whether their news values in general are sound and genuinely serve the public interest? Also, yes.

Journalists on autopilot have done far more damage than Teslas.

#driverlesscars #statistics #Tesla #StevenPinker #ElonMusk

Europe’s symphony of complacency over Italy’s economic disaster

Italy has a new coalition government. One wing of it aligns with France’s Marine Le Pen, admires Hungary’s Viktor Orban and is determined to forcibly deport half a million migrants over the next year and a half. The other wing is stuffed with antivaccine conspiracy theorists and is so chaotic that it makes Ukip look like New Labour in the 1990s.

Both wings are sympathetic to Vladimir Putin and are pushing for European sanctions on Russia to be lifted. Their puppet prime minister is to be an obscure law professor who appears to have embellished his meagre academic credentials.

As if all this wasn’t bizarre and depressing enough, both Five Star and The League have campaigned in the past for Italy to ditch the euro.

Though quitting the single currency does not command majority support in Italy, many suspect the strategy of the two movements is to provoke a clash with the rest of the single currency area’s member states and to profit electorally from the ensuing chaos. In other words: these populists relish playing with fire.

And with a study by the European Council on Foreign Relations think tank suggesting that levels of EU cohesion in Italy have plummeted over the past decade, there is plenty of combustible material around.

Perhaps it’s the fact that the anti-establishment Five Star was founded by a comedian, Beppe Grillo, that has led to financial markets struggling to take its tie-up with the xenophobic League seriously.

Despite a selloff of Italian bonds over the past week, the country’s interest rates are still very low. At around 2.35 per cent, they are no higher than they were even a year ago. These are not levels that scream “emergency”. Those 7 per cent-plus Italian interest rates, which almost destroyed the entire single currency in 2011 and 2012, are nowhere in sight.

The assumption seems to be that Italy’s populist experiment will be contained by the country’s domestic institutions (particularly its strong presidency), the backstop bond-buying of the European Central Bank and the unflappable statecraft of Brussels, Paris and Berlin. The Eurogroup and the European Commission successfully faced down the kamikaze far-leftists of Syriza in Greece in 2015, goes the logic, so they can do the same to the Italian populists.

A lot of traders have lost money over the past five years wagering on the demise of the single currency.

Perhaps it’s not surprising that few seem to want to make that bet again now.

Yet whatever the dance playing out in financial markets, the mood music from Europe’s mainstream leaders over the populist takeover in Rome has been a symphony of complacency. The most they have roused themselves to say in public is that there will be no relaxation of the eurozone’s rules, whatever the Five Star/League programme demands.

A generous view would be that they are carefully working out their next move. But Europe’s leaders should not really be asking themselves how to handle Five Star and the League but questioning how it came to be that they will soon be sitting across the table from them in the first place.

The answer is surely that Italy’s economy is a disaster zone. We talk, with good reason, about a lost decade of growth here in Britain in the wake of the financial crisis. But compared with Italy we have been in an emerging market-style boom.

Per capita GDP in Italy is still more than 8 per cent lower than it was when Lehman Brothers went bust in 2008. Quite incredibly, it is even lower than it was when the country joined the eurozone back at the turn of the millennium. Unemployment stands at 11 per cent, down from a peak of 13.1 per cent in 2014, but still double the 5.8 per cent low seen in 2007.

This story of economic failure must surely be a large part of the reason why Euroscepticism has taken hold of this once supremely enthusiastic member state and why the country’s mainstream political parties have collapsed, letting in a bunch of populist cranks and xenophobic authoritarians.

Much of the new coalition’s programme is misguided. Some of it is repellent. But the call for a reconfiguration on the eurozone’s fiscal and monetary rules is justified.

Italy certainly needs market reforms. But it also needs more public investment. And the eurozone’s policymakers have undermined Italian domestic reformers by keeping the macroeconomic environment far too restrictive and ignoring the polite calls of successive waves of technocrats in Rome that they need support.

The calls now will be less polite. But the great fear is that the eurozone’s leaders, like the Bourbons, have learned nothing and forgotten nothing.

#eurozone #FiveStar #Italy #LegaNord