Best Columns: Business

Who’s afraid of the big, bad Starbucks?

Taylor Clark

The Week

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To Herb Hyman, who owns a handful of coffeehouses around Los Angeles, the Starbucks representatives sounded like heavy-breathing Mafiosi, said Taylor Clark in Slate.com. “They just flat-out said, ‘If you don’t sell out to us, we’re going to surround your stores,’” Hyman recalled. That’s just what they did, Hyman said, “and it was the best thing that ever happened to us.” Hyman isn’t alone. Coffee-shop owners around the country have discovered that “the corporate steamroller known as Starbucks” is actually good for their business. It turns out that when a Starbucks comes to the neighborhood, the result is “new converts to the latte-drinking fold.” When all those converts overrun the local Starbucks, the independents are there to catch the spillover. In fact, some independent storeowners now actually try to open their stores near a Starbucks if they can. That’s certainly not how the coffee behemoth planned it. “Starbucks is actually trying to be ruthless in its store placements.” But as rivals such as Hyman can attest, “in its predatory store-placement strategy, Starbucks has been about as lethal a killer as a fluffy bunny rabbit.”

After the dot-com bubble popped in 2001, brokerage houses pledged to make their stock analysts “more honest and less compromised,” said Geoffrey Colvin in Fortune. A cleanup was definitely in order. Brokerage analysts are supposed to give individual investors their objective opinions on individual stocks. But as the bubble inflated, many analysts shamelessly hyped loser companies, just to win their investment-banking business. Such blatant wrongdoing is mostly behind us, thankfully. But as recent events have shown, analysts “are still awful at their most important job: predicting bad news.” Only now, for example, are analysts warning that 2007 fourth-quarter corporate profits will be weak. Gee, what tipped them off? Was it the housing crisis, the credit crunch, or high oil prices—all of which were in evidence well before the quarter began? It’s no mystery “how these nonsensical situations arise.” Analysts habitually fall in love with the stocks they follow. They can accept that the overall profit picture looks bleak, yet remain convinced that “their” companies “are special and will beat the trend.” It’s maddening, really. Eight years after they helped inflate the dot-com bubble, “we again have to question whether analysts do retail investors any good.”