Maven: No Schizophrenia at Starbucks

It looks like Howard Schultz had reason for concern.
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On a morning when newspapers are teeming with obituaries of Thomas Eagleton, who gave up the 1972 vice presidential nomination because of revelations that he had undergone electroshock therapy, mental illness is in, uh, on my mind.

When

Starbucks'

(SBUX) - Get Report

resident uber-genius Howard Schultz put pen to paper to write a memo, soon leaked, about how the coffee company had lost its moorings and was in potential long-term trouble, the business media did the expected. They promptly flung themselves down on an armchair and went into pop psychology mode to deconstruct what deep-seated, underlying personality foible had driven Schultz to such lengths. Starbucks, obviously, is one of the great success stories of our age. Was Schultz a little touched in the head?

The New York Times

wrote that there were no fewer than two Schultzes. This schizophrenic chai latte in a corner office was torn between his coffeehouse self and his Wall Street-pleasing self.

The article all but postured it as a split between the softer, more maternal images in Schultz's mind and the demanding taskmaster of a father figure on top of shoulder no. 2.

Even The Business Press Maven, normally more of a patient than a psychologist,

pointed to the advantage of paranoia as a guiding force for a CEO. Too many, I wrote, are self-deluded, believing the best will happen because that's what they keep telling the public. The darker, more-textured mind, I thought, always wins.

Well, hold the medication -- unless you have some to spare for business media delusions.

Look to the Golden Arches

I laughed at myself and others (mostly others, it's easier) when I

read a story in

The Wall Street Journal

late last week that put Schultz's memo -- or at least the timing of it and his worried state -- in proper perspective.

Vas it his mother? Vas it ze father?

Nah, it was

McDonald's

(MCD) - Get Report

.

MickeyD's is offering cappuccinos, lattes and other forms of pretentious overpriced drinks at nearly 14,000 stores, at price points well below Starbucks, where The Business Press Maven once angered a barista by requesting to buy a drink on layaway.

Will McDonald's compete directly with Starbucks? Well, no -- or, not completely. It will compete more directly with Dunkin Donuts, a division of Dunkin Brands.

But Starbucks has, in a bit of understatement, had a decent amount of pricing flexibility. The more of a floor these players put into the pricing structure, the less flexibility Starbucks will have going forward.

This -- not schizophrenia or paranoia -- is what obviously scared the coffee beans out of Schultz and led to the most famous memo in the history of the overpriced hot beverage industry. Starbucks has, somewhat remarkably (even miraculously), been No. 1 in the sort of industry where there is always a

Burger King

(BKC)

, a national No 2. But it hasn't had much in the way of a No. 2.

That is changing in recent years, and McDonald's move is big from a future pricing standpoint. Starbucks must -- as Schultz realizes -- sell the experience more than it has been. If you are only competing on speed of service and price, McDonald's will give you a one-way ticket to the laughing academy.

Sugar Looks Sweeter

Speaking of the laughing academy, The Business Press Maven is fit for one every time he thinks about how the U.S. is unable to follow Brazil's truly successful, market-altering move into sugar-based ethanol because of tariffs on imported sugar, put in place to protect American farmers who sell corn. The problem, as I've noted many times, is that there ain't enough corn, it ain't at the right price and it ain't easy to move.

Other than that, we're pretty well positioned.

Anyhow, as President Bush ambles down to Brazil later this week, you are going to see several positive threads of thought in the business media, all wrong.

Business Week

does a decent job of giving a summary, but essentially anything you hear about America and Brazil forming some sort of OPEC of ethanol is fiction. As long as that tariff is in place, Brazil will go on to great success with sugar-based ethanol. America will fritter around the edges with the corn-based stuff.

As long as that tariff is in place, don't believe anything else.

All Bets Are ... On?

With Asian markets plunging again overnight, the public might start realizing that with one or two more of these "needed corrections," we all might be wearing cardboard shoes. In any case, luckily for The Business Press Maven, I have a good sideline income as a poker shark.

Since last year's surprise draconian ban on online poker in America (what is a nation without sugar ethanol and online poker, I ask?), I have not been willing to give up on the industry. Admittedly, however, I have been vague about what might arise to get around that ban.

But where there are degenerate gamblers, I know, there is a way.

Enter former Sen. Alfonse D'Amato, high-stakes poker partner of

Sirius Radio's

(SIRI) - Get Report

Howard Stern, among others -- and, as of

this morning's papers, apparently a lobbyist working furiously to overturn the ban.

The Business Press Maven wants to wish Senator Pothole, as he was known in New York for fixing small problems, Godspeed in fixing this big one. And, investors, keep an eye on his efforts. Armchair psychologists might have a field day with Senator Al, but he is effective.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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