Thank you... Starbucks!!!

For much of the 20th century coffee was America's drink. According to a 1939 study, 98% of country's households drank coffee and after WWII consumption steadily rose until the early 60's when the average American was drowning in almost 50 gallons of coffee a year. Then coffee went cold. Younger consumers began to regard it, like Scotch, as a pallative for parents and squares. The arid blends sold by Maxwell House and Folgers lost ground to Coke and Pepsi. Coffee consumption plummeted.

Along came Starbucks. Starbucks proved that you could sell "gourmet" coffee to the masses, and in the process, turned itself into a seemingless recession proof enterprise. Despite the weak economy, its profits were up 9% for the year. (Perhaps rising unemployment suits Starbucks just fine, delivering an exodus of time killers and resume polishers to its comfy chairs.) The real measure of Starbuck's success, however, is that it has helped turn Americans into a nation of coffee junkies again. During the 90's, the number of coffee drinkers rose by almost 40 million and more than 7000 new coffeeehouses have opened since 1996.

Starbucks invented its own heeding the advice of the economist Joseph Schumpeter, who wrote in 1939, "It was not enough to produce satisfactory soap, it was also necesssary to induce people to wash."

In the late 1880's George Eastman invented Kodak - the first point and shoot camera. Most Americans didn't see a need for a camera; they had no sense that there was value in visually documenting their lives. Before long, it was more or less considered a patriotic duty to commemorate the notable - and not so notable - moments in your life on a roll of Kodak film.

Around the same time George Eastman came up with Kodak, Will Kellogg introduced Corn Flakes and popularized the idea of the healthy light breakfast and Colgate insisted the brushing your teeth every day with Colgate toothpaste, naturally was as necessary as sleep. Gillette persuaded men that it was proper to shave every day and that you didn't need a barber. McDonald's convinced the suburban mothers that it was O.K. not to put a homecooked meal on the table every night. Similarly, Starbucks changed not just what people drank but how they drank it. Instead of gulping down gas-station swill on the fly, people learned to desire the experience of leisurely sipping a grande latte, while eavesdropping on job interviews, at one of Starbuck's 6000 convenient locations worldwide.

The economist William Baumol estimates that innovators and their investors keep less than 20% of the economic benefits that their innovations create. The rest just spills over. This is why there are thousands more independent coffeehouses today than when Starbucks started and why Dunkin' Donuts, Maxwell House and Folgers now sell premium coffee. It is also why pretty much everyone you know has clean teeth and shoeboxes full of snap shots.