For Clues to Howard Schultz’s Leadership, Look Beyond Starbucks

SEATTLE — Howard Schultz faced a full-court press of troubles as 2006 began. That the Seattle SuperSonics were lousy, having their worst season in 20 years, was only the beginning.

Though the Sonics were a storied N.B.A. franchise, with a league championship in 1979, attendance was down at their Seattle arena along with points scored and revenues earned. As the team’s lead owner, Mr. Schultz was facing unrest from fans and partners alike. At the same time, Starbucks, the coffee company he had built into a global giant, was about to hit a bad patch, too, as the first ripples of the Great Recession began to rise into a flood tide.

You don’t have to be a basketball fan to know which problem Mr. Schultz was able to fix.

The Sonics no longer exist — sold by Mr. Schultz’s group that same pivotal year, and later moved to Oklahoma City and renamed, even the memorabilia packed away. Now, as Mr. Schultz mulls running for president as an independent candidate, his path through that moment says a lot about him — how he handles adversity and uncertainty, and how he grasped or did not the nettle of local politics as the Sonics were flailing, according to more than 20 people who have observed him, befriend him or worked with or against him over the years.

His basketball legacy has left many in Seattle outraged to this day, believing Mr. Schultz to be either duplicitous or duped by others. Yet his actions at Starbucks — including a raft of innovations introduced before and during the recession, like health insurance for baristas — became the stuff of adoring Harvard Business School case studies. In Fortune magazine’s ranking, Starbucks is the fifth-most admired company in the world.

The common thread — deeply familiar to people in the city Mr. Schultz has called home since the early 1980s, and now echoed in his talk of entering politics — is a kind of idealistic righteousness, combined with obvious conviction about his own abilities and insights. All of which worked like a magic wand in Seattle, except when it didn’t.

“There’s no question that he built an amazing business, one that Seattle has benefited from and one that has worldwide reach,” said Greg Nickels, a Democrat who was in his second term as Seattle’s mayor in 2006.

“The Sonics episode, I think, was different,” Mr. Nickels added. “I think he got into it and discovered it was not what he thought it was going to be.”

Mr. Schultz, 65, a self-made billionaire who grew up in public housing in Brooklyn, said in an interview — conducted, at his request, in a Starbucks — that he had not decided whether to seek the White House and had set no deadline for doing so. A self-described “lifelong Democrat,” Mr. Schultz said that he thought the Democrats were veering too far left, President Trump and the Republicans too far right, and that there was a hunger for a more centrist candidacy like the one he might put up.

But he also said, as he had repeatedly in recent speeches around the nation promoting a new memoir, that he would not run if he became convinced his candidacy could aid in Mr. Trump’s re-election.

Indeed, his announcement in January that he was “seriously” considering running brought an outcry from many Democrats who feared a split vote. The president chimed in, tweeting that Mr. Schultz, who had never sought public office, “doesn’t have the ‘guts,’” and Warren Buffett called a Schultz candidacy “a mistake.”

As a rule in American politics, independents fail to get elected. Since the Civil War, only four minor-party candidates for president have mustered at least 10 percent of the vote: Ross Perot, George Wallace, Robert La Follette and Theodore Roosevelt. Roosevelt, a Republican turned Bull Moose candidate in the 1912 election, couldn’t win despite having been a popular president only a few years earlier. But even getting less than 10 percent can make a difference, as Ralph Nader showed in the 2000 election, which put George W. Bush in the White House through an Electoral College victory even though Al Gore, the outgoing vice president, won the popular vote.

For his part, Mr. Schultz believes that an independent president could have a powerful mandate in governing, as a refutation by voters of the bitter and divisive “politics of revenge” that have paralyzed Washington. The example that it could be done would, in turn, draw out a surge of like-minded independent candidates who would reshape Congress, he added.

“The current trajectory we’re on demonstrates such evidence of a broken system,” Mr. Schultz said. “I’m looking at the situation and realizing that a large majority of Americans agree with me.”

If Mr. Schultz does run, his Seattle experience, combined with a back story of self-made success, would be the narrative he tells and sells. Starbucks started here, and is a different company, Mr. Schultz said, because of the culture that defines the Pacific Northwest. The Sonics failed here and were a Seattle story, too, for which Mr. Schultz has apologized. In his universe, it’s a venti-size place of success and failure.

When Mr. Schultz organized an investor group to buy the SuperSonics in 2001, he took the high road of rhetoric. Sounding like a civic patron out only for the city he loved — with the grubby business of moneymaking very much an afterthought — he promised to treat the team as a kind of sacred civic trust.

“This ownership group did not get involved to make a profit,” he said at one point in testifying before Washington State Legislature. “We wanted passionate people, about not only sports, but passionate people about our community.”

That language and imagery came back to haunt him in the aftermath of the team’s demise.

“Schultz became a pariah,” said Gary Washburn, a former Seattle sportswriter who now covers the N.B.A. for The Boston Globe.

In February 2006, Mr. Schultz drove to the State Capitol in Olympia, plunked down in front a microphone in a wood-paneled Senate meeting room and repeated what some considered a threat — that he might have to sell the Sonics if he didn’t get more than $200 million in public money for renovations to their arena.

He said the Sonics were losing money because they had a terrible, uncompetitive arena lacking in the profitable add-ons that other franchises had, like restaurants and stores. Public money had been lavished on other sports in Seattle in past years, he pointed out — with new play spaces for the Mariners, a baseball team, and the Seahawks, a football team. It was time to bestow some love on the N.B.A., Mr. Schultz said.

It did not go well. The Sonics bailout bill did not even come up for a final vote. The political appeal of financing athletic venues had faded after the 2000 dot-com economic bust, and a ballot measure aimed at reducing taxpayer money in professional sports was gaining favor even as Mr. Schultz testified. Initiative 91, as it was called, was approved that fall by a 74 percent majority.

Several people who were in the Legislature at the time said that Mr. Schultz, who had never been very involved in politics or lobbying, was treated like the outsider he was, and never appeared to understand the network of informal alliances that stood in his way. Calls were coming to legislative offices from people connected to the city’s other sports teams, saying they didn’t much like the idea of financing a lot of expensive new skybox seats.

“The Mariners and Seahawks people were not terribly encouraging — they had several back channels, and sort of front channels of stuff going on,” said James McIntire, a Democratic state representative at the time who later served two terms as state treasurer.

Art Thiel, a longtime columnist and sportswriter who covered the Sonics story, said Mr. Schultz simply didn’t understand the state capital. “He thought that he could do as a pro sports owner the same sorts of things that he could do as a successful business owner, which is either to charm the opposition or bully them,” he said. “He got neither done.”

Barely five months after hitting a wall at the legislature, Mr. Schultz made good on his warning, announcing that he and his co-owners had sold the team to a group based in Oklahoma, which moved it and renamed it the Thunder.

Mr. Schultz now calls that decision one of the major regrets of his life.

“My biggest mistake still reverberates,” Mr. Schultz wrote in a recent op-ed piece in The Seattle Times. In his book, he elaborates on what happened: “Almost everyone blamed me, and after some initial denial, I realized they were right to do so. I had squandered the very public trust that I had bought into.”

A longtime friend of Mr. Schultz’s, Howard Behar, a former vice president at Starbucks, said that while Mr. Schultz learned from the experience, he had been warned in advance that straying from the world he knew might be dangerous.

“When he bought that company, I had a quote in the local newspaper in Seattle. I said: ‘No good will come from this — I think he’s nuts,’” Mr. Behar recalled. “And I was right. No good came from it.”

The storied names of the Seattle business world roll off the tongue all over the world: Amazon, Boeing, Eddie Bauer, Microsoft, REI, Starbucks. And just as Microsoft is associated with its co-founders, Bill Gates and Paul Allen, and Amazon with its founder, Jeff Bezos, Mr. Schultz is Mr. Coffee, father of the Frappuccino and coffee sizes in butchered Italian. (The “venti,” for extra-large, which just means “20” in Italian, is a nod to the espresso culture Mr. Schultz fell in love with on a trip to Italy in 1983.)

Mr. Schultz, who handed off leadership reins at the company last year, came to Seattle with his wife, Sheri, in 1982, to take a job as marketing director of Starbucks, then just a modest local seller of coffee beans. Only five years later he organized an investor group to buy the company, and then built it — with two stints as chief executive — into a retail giant with nearly 30,000 stores around the world and more than 380,000 employees.

But like Seattle itself, with its vast wealth and abundant homelessness, its left-leaning social and environmental policies but no income tax on its considerable allotment of billionaires, the Schultz legacy is mixed.

At his first Seattle appearance after announcing his presidential considerations, protesters gathered outside a downtown theater where he was promoting his new memoir. The protesters waved signs about “venti egos” and failed billionaire politicians, while the audience inside cheered at almost every whispered hint of a presidential run.

In charitable civic work, the Schultz Family Foundation has been a force in homeless advocacy, working with shelter groups and youth-training centers in Seattle, with a data-driven approach to moving homeless families off the street quickly and into stable housing.

“The foundation piloted something and proved that it worked,” said Marty Hartman, the executive director at Mary’s Place, a nonprofit shelter provider that has received more than $4.5 million from Starbucks and the Schultz foundation.

But by other measures of civic engagement, like bothering to vote, Mr. Schultz has been less involved. Of 40 elections held since 2003 that he could have participated in as a Seattle resident, he voted only 12 times, according to King County records.

“I’m remiss, of course, that I did not vote in those local elections, but you know I travel so much,” Mr. Schultz said in the interview — though he quickly added that he had never missed a chance to vote for president.

Be the first to comment

Leave a Reply

Your email address will not be published.


*