How We Made The World’s Best Coffee* Affordable For Anyone…Without Losing Money
In 2010, my wife and I were inner-city teachers who decided to spend a year abroad. We settled on Costa Rica and — through dumb luck — found a coffee farm with an amazing story.
You can read more about it here, but the quick version: The farm — El Toledo — had a long and arduous journey, but discovered a way to farm sustainably without any artificial inputs.
Because El Toledo has such a diverse ecosystem, it produces a very high quality coffee.
For seven years, we spent months on the farm, enjoying their coffee. When it was time to return stateside, we always packed our bags with as much as we could.
After a while, we decided it was time to share this coffee with our (broadly-speaking) neighbors in Milwaukee. We decided we’d pack our bags with green coffee, roast it in our garage, and find a farmer’s market to brew it and sell it at.
There was a problem.
The market that accepted us has a very diverse clientele: over the years, we’ve given coffee to the Mayor of Milwaukee and former National League MVP Ryan Braun…as well as countless homeless people.
Our goal was simple: we wanted everyone to have a chance to try our coffee. We weren’t looking to make a killing. But we also didn’t want to lose money.
The price we set would be the major determining factor, but we found ourselves stuck between a rock and a hard place.
- If we priced the coffee at less than $1.00, we’d be sending the signal that it was low quality — and we’d lose money on the venture.
- If we priced the coffee at more than $3.00, we wouldn’t lose money, but we might price many of our customers out of the purchase.
It seemed like an intractable problem.
In his brilliant 2019 book Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business and Life, British marketing executive Rory Sutherland highlights a potential way forward:
There are hundreds of seemingly irrational solutions to human problems just waiting to be discovered, if we only dare to abandon standard-issue, naive logic in the search for answers.
…
The spreadsheet leaves no room for miracles.
In search of a miracle, my wife had ingenious idea:
What if we don’t charge anything at all? What if we let the customer choose what to pay?
We were already O.K. with not making a killing. We had wiggle room to give it a try. Three years later, it has exceeded all expectations .
Here’s how a visit to our stand works:
- “Here’s the story about where the coffee comes from…”
- The person usually follows up with some questions.
- “Oh, and we do funny things, like offering you to choose what to pay.”
This is usually followed by one of two reactions: awe (“this is amazing”) or terror (“what in the world should I pay?”). The customer is forced to determine the value — which is something most aren’t used to.
With the cash box facing them (we never even touch it, other than to take bills out when its filling up), each person has to do some complicated math in their head:
Here’s how much money I have…Here’s what this cup of coffee tastes like… Here’s what I think about where the coffee comes from…Okay — this is the amount I want to pay.
The results, like Sutherland points out, are a form of magic that defy traditional economic logic:
Each customer chooses what to pay. Some pay a lot. Some pay a little. Some pay nothing. But everyone leaves happy. And somehow, we end up getting more per cup of coffee than we’d ever ask for
Walk into just about any Econ 101 class and they’ll tell you this isn’t possible. “Eventually, you’ll be taken advantage of! Then you’ll be out of business.”
If you’ve ever heard of it, the “Tragedy of the Commons” might explain why those professors would be so suspect. Here’s the definition from Wikipedia:
A situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users, by depleting or spoiling that resource through their collective action.
In other words, if there’s something available for everyone to use, it will quickly be depleted. Everyone acting in their own self-interest will ruin the situation. In this world, people would buy ten cups of coffee at $0.01 apiece.
But there’s a twist — an entirely human, cooperative, and heart-warming twist. This doesn’t happen on much smaller scales**. When the people using the commons are in small enough groups, this tragedy doesn’t occur. People take care of the commons.
In a way, we’ve unintentionally created a “Commons.” People don’t take advantage of us. On average, they pay more than they otherwise would because we give them the power to choose.
In the end, our sales pay for our tickets back to Costa Rica each year and not much more. But that’s ok.
There’s magic in offering something up without knowing what you’ll get in return. Work on a small scale, do something meaningful, and you’ll get to enjoy that magic.
*Our humble opinion
**Thanks to the work of Nassim Nicholas Taleb for bringing this to my attention.
