The Art of Selling Out

Starbucks popped up on campus this summer, and with it came the obligatory op-ed criticizing Stanford for selling out to a corporate behemoth. In the Daily, Tom Taylor laments the loss of a place to watch soccer and the choice of Starbucks over local options. But what he calls a “sell out” was really a smart business move by the university.

As a non-profit, Stanford needs money for all sorts of important things like financial aid and faculty salaries. Starbucks pays rent to the university, so every time someone purchases a coffee, they contribute to some university fund. It may not be the financial aid fund, but it will go to something that may alleviate costs for students elsewhere, like Stanford Dining, or that may result in new buildings or faculty or something of some benefit to the university. The people managing those funds may use them poorly, but ideally it will benefit students.

Earning more money for the university doesn’t mean Starbucks has to undertake the venture. But the national chain has proven its profitability and may provide more revenue for the university than a local coffee shop lacking Starbucks’ economy of scale. Also, campus visitors may be more likely to spend at Starbucks than they would at lesser-known places. All of this means more money for the university to spend on its principled positions: providing equal educational opportunity, advancing scholarship for the benefit of humanity, etc.

Taylor is concerned about forgoing a local, unique coffee shop for a corporate one. But Stanford already has local coffee shops. Coupa Cafe began in Venezuela and only branched out to Palo Alto when family members came to Stanford. The family grows their own coffee in Venezuela. Philz operates only in the Bay Area. And of course the CoHo has been a local favorite for years. Also, Starbucks will employ locals who probably appreciate the new job opportunity. Bringing one Starbucks to campus is not going to take away Stanford’s ability to be “unique and quirky.”

Some people prioritize choice in their coffee over the ownership of the shop. Just as Taylor wants the choice to watch soccer on campus, some people want the choice to drink Starbucks’ French roast. The addition of Starbucks probably increases the aggregate utility of students, faculty, and visitors to the campus.

In choosing to allow Starbucks on campus, the university had to carefully analyze what it meant to “sell out.” And it probably determined that Starbucks could raise more revenue and make the campus happier. It weighed one principle (supporting local businesses, soccer watchers) with another (lowering costs for students elsewhere, providing drinks many students wanted). There was no selling out of a principled position, as either position could be principled. Rather than calling it a “sell out,” it should simply be called good business. It would be great if non-profits and higher education didn’t need money to exist, but because they do, revenue must be a constant discussion.

Stanford made a great business decision a few years ago with an example Taylor uses in his op-ed: football. He argues that Stanford didn’t sell out on its football team when they performed very poorly, and that it paid off. But really, funding Stanford football was sort of a commercial sellout, as Taylor would define that term.

By paying for recruiting, training, and logistics, the university enabled Harbaugh and his talented team to turn Stanford football into a commercial behemoth. At the same time, money spent on the program could have gone to academics, financial aid, or other lesser-known athletic programs.

But sales of t-shirts, tickets, and TV contracts benefited other sports programs on campus. Even better, a successful football program probably drove increased donations to the university, and many of those donations directly benefited students receiving financial aid. In diverting resources that could have been spent on other sports programs or the university as a whole, Stanford has made a commercial investment that could be vastly more successful to everyone involved. Few would argue that investing in the football team, the most commercial of Stanford athletic teams, was a bad choice.

Stanford should continue to make smart business decisions, even in the face of people who claim some of them are sell outs. To be clear, there is such a thing as “selling out.” For instance, the university should keep commercial influence out of curriculum and faculty hiring. But when it comes to reasonable advertising or corporate food options on campus, a close assessment may reveal more benefit to more people than otherwise would be the case.

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