Breaking a \"pay-it-forward" chain at Starbucks isn’t being a "cheap bastard." It’s good economics. by @heyfeifer

Breaking A "Pay-It-Forward" Chain Isn’t Being A "Cheap Bastard." It’s Good Economics.

Starbucks gets great PR when a chain of customers "pays" for each other’s coffee. But that’s not what’s really going on.

When you combine coffee with a poor understanding of economics, two things can happen: You feel smug and self-congratulatory, or you demonize the wrong person. Both happened at the same Starbucks this week, when a chain of 378 people "paying it forward" was supposedly broken by "some cheap-ass" in a white Jeep.

"Cheap Bastard Ends 10 Hours of Starbucks Customers ‘Paying it Forward’" was Gawker’s headline summary of the event. The news, which began in a local paper, even made the Today show.

Everyone seems to misunderstand what’s actually happening during these "pay-it-forward" chains, which occasionally develop at this and other coffee joints. So let’s break it down, at the end of which you’ll understand this: The woman in the white Jeep is innocent. And nobody involved in these chains should be overly pleased with themselves.

Here’s how these chains work: Some generous customer, feeling moved by whatever motivational book they just read, pays for a drink and then gives Starbucks some extra money and says they’re paying for the next customer’s drink. In this week’s case, the Tampa Bay Times explains what happened next:

People ordered a drink at the speaker. When they pulled through to the next window, the barista, Vu Nguyen, 29, leaned through and said with a smile that their drinks had already been paid for by the person in front of them. Would they like to return the favor?

Of course, this new customer—let’s call her Customer Two—doesn’t want to be the jerk that doesn’t return the favor. But this is also the easiest favor to return, because no favor is actually required. Customer Two already planned to pay for a drink; but now, given this scenario, when she pays for her drink, she can feel that she is technically paying for the drink of the person behind her. It’s charity for the same cost of treating yourself!

Here’s the thing, though: Technically, Customer Two was always just paying for herself. When Customer Zero started the chain and put down the original money, that person functionally set up the world’s smallest escrow account inside that Starbucks. The money then sat there unclaimed, as each successive customer opted instead to pay for their own drink.

What Vu Nguyen of that St. Petersburg Starbucks said: "Your drink has already been paid for by the person in front of you. Would you like to return the favor?"

What Nguyen actually means: "There’s five dollars sitting here. Do you want it, or do you want to just pay for your drink?"

So how did this chain get "broken"? Again, from the Times:

Then at 6 p.m., customer No. 379—a woman in a white Jeep Commander—pulled into the drive-through and ordered a regular coffee.

Nguyen leaned out the window. He told her about the chain that had begun that morning. Would she like to participate? The woman declined, saying she just wanted to pay for her $2.25 drink and not someone else's.

Nguyen said it appeared the woman didn't understand the concept of paying it forward.

Gawker’s portrayal of that: "The act of human kindness lasted about 10 hours until some cheap-ass decided to only pay for their own drink."

No! Wrong! Even if Customer 379 didn’t understand the situation, that woman didn’t actually opt to accept the $5 (or whatever) that had been sitting there, in a functional escrow account, since the beginning of this whole chain. Instead, the person just said "I’ll pay for my own drink"—which technically is the exact same thing as what all previous 378 customers did! The escrow account wasn’t depleted. The only way to be an actual jerk and break this chain would be to say, "Free drink? Sweet. Thanks." And then drive off.

I ran all this by economist Russ Roberts, host of the great EconTalk podcast and author of the upcoming book How Adam Smith Can Change Your Life. He agreed, and even took issue with the premise of the chain. "The whole idea that the person behind me at a Starbucks needs to be comped is a strange idea," he says. "Nobody’s in duress here. The real idea of 'pay it forward' is, I break down on a snowy night, I lose control of my car and end up in a ditch, four strangers come along and push me out. Then I’m driving along and I see someone else in a ditch, and I pull over and help them. That’s paying it forward. You made a sacrifice. Paying it forward for someone at Starbucks who’s already got $5 in their hand? That strikes me as a bizarre form of 'pay it forward.'"

And all that aside, Roberts says: What's the point of paying it forward if nobody ultimately benefits? A never-ending chain of people at Starbucks who believe they're accepting a gift, and then in turn give a gift of the exact same amount, isn't a benefit to anyone. The whole idea of paying it forward is that someone does break the chain. Someone ultimately has to benefit in a real way—which is what would happen if, say, someone at Starbucks used that spare $5 to buy a coffee, then ran across the street and gave it to a homeless person.

That never happened. At least, not here.

So, what is this chain? It isn’t people "paying it forward." It’s people congratulating themselves on employing a generous-sounding rhetorical device. The chain here was broken when a person said "I’ll pay for myself" instead of "I’ll pay for someone else," even though, economically, that meant the exact same thing. (And where does the leftover money actually go, once the chain is "broken" and $5 is still sitting in Starbucks? Unclear.)

The lady in the white Jeep didn’t understand the concept of paying it forward? Harrumph. This person, customer number 379, was the only one who really understood this thing at all.

[Image: Flickr user Logan Ingalls]

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  • Anyway, it isn't pay-it-forward in the original sense of the phrase at all, which was to do a nice thing for someone for nothing, and instead of expecting them to return the favour to you, you just tell them to pay-it-forward. The premise being that if you do a good turn to someone, they'll be in a better mood or more likely to be nice to someone else, and so on and so forth.

    The only way to be an actual jerk and break this chain would be to say, "Free drink? Sweet. Thanks." And then drive off.

    That's not being a jerk at all, that's accepting a pleasant surprise in the nature which it was given, to make someone else's day. In fact, if that puts the guy who took the free drink in a better mood and he then goes and helps a little old lady cross the street, or something., that satisfies the pay-it-forward premise completely.

  • I don't see the issue here. Sure, the lady didn't seem to understand the concept by wanting to pay for her own drink, but since she did so, she never actually broke the chain. You haven't actually given out the paid-forward coffee, so just offer it to the next customer and the chain keeps going?

    Also, assuming everyone "pays it forward" all the way to the end of the day, all they've actually done is pay for their own drink, except the first guy who's paid an extra cup of joe to Starbucks. If you don't let anyone actually accept the free coffee without pressuring them to "return the favour", it kinda defeats the purpose in the first place, which was Customer Zero simply being a nice guy and giving someone a free coffee.

  • Acer

    Also, I don't think a store should ask if you want to return the favor. They should allow you to accept, and make the decision for yourself. However, they are not doing anything wrong by asking. It may seem I'm going against my previous comment, but as I said there, some will do it out of guilt if asked, but it will still be a nice surprise for those behind. But to avoid the guilt, it should be left to the customer, not the store to bring up the next person. This isn't really complicated, but there are a lot of ways to look at it. But economics isn't one of them, where's the harm in accepting a gift, and passing it on, it's not going to drain your bank account, it's going to drain your connection with other people, it's about not wanting to be a nice person. But there's nothing wrong with that either.

  • davidtwhite

    For the record, I'd like to state that at a dunkin donuts one day last fall, I took the free drink (actually 2) and drove off, without paying anything at all. You're welcome.

  • Travis VanMatre

    I agree with the basic premise of your argument, but you're basically assuming every person ordered the exact same thing at the exact same price. If one customer had a tall black coffee, let's say valued at $2.00 and the person in front payed for their coffee, but the next person ordered Coffee for the entire office and planned on paying $20.00, then its different than just saying they really just paid for their own but got a feel good out of it. You also discount the motivation of the heart by boiling it down to a simple economics argument. That may have changed someones day, regardless of the fact they were planning on paying that anyway. It's the thought remember....

  • Edmond Dantes

    Wrong. The price for any given order necessarily had to be less than the previous order and/or what that previous person "paid forward" - or else the Starbucks employee would be giving away company property.

  • Justus Boyz

    Not true. Not true at all. We had no idea we were in a chain and 2 breakfast sandwiches, a croissant and three venti lattes were paid for. .... the person behind us ordered a latte... that we paid for.

    I don't think you understand the chain. The person in front pays for the order of the person behind them. The first order could possibly have been 5 dollars, but that doesn't mean the rest are....... There is no company property being given away, since the total bill is paid for by the person offering to pay it forward.

  • Justus Boyz

    Not true. Not true at all. We had no idea we were in a chain and 2 breakfast sandwiches, a croissant and three venti lattes were paid for. .... the person behind us ordered a latte... that we paid for.

    I don't think you understand the chain. The person in front pays for the order of the person behind them. The first order could possibly have been 5 dollars, but that doesn't mean the rest are....... There is no company property being given away, since the total bill is paid for by the person offering to pay it forward.

  • Actually, no. Unless you're there when the second order is made, the only way you can be sure of paying the whole of their order is by leaving credit details, either a credit card or a tab which you then come back and pay for later.

    What usually happens with pay-it-forward schemes is that Customer Zero orders a drink, then pays double its value and tells the cashier that he's paying for the next order. The restaurant then has options: (a) only offering it for an order of equal or lesser value, or more likely (b) writing off the negligible difference as it'll likely balance out over the course of the chain.

    PS. I've got no problem with the server asking if you want to return the favour, but it's pretty poor form to then complain and blab to Gawker or social media when it's declined. Seems like someone doesn't understand the definition of "favour".

    Also, if everyone took up the offer. at the end of the day, the only one who made $$ was Starbucks, to the tune of 1 drink.

  • kenverybigliar

    I'm proud to say I've broken the chain at least twice, maybe 3 times. Thanks for the free coffee and breakfast sandwich, suckers.

  • Really paying it forward is buying free drinks for the next 100 or so people. However, would the coffee shop honour your request or just charge everyone as usual and keep the change?

  • Of course Starbucks wants to promote this kind of touchy-feely PR. Not only do people walk away feeling good about themselves, but they make some money they wouldn't have ordinarily made at the end of the day. Let's say you donate $5 to pay for the car behind you, but the people in the car behind you only buy a $4.75 drink, and let's say that 10 cars go through the drive through each hour (statistical mean). So at the end of 10 hours, the poor down-trodden company known as Starbucks has made $25.00 on TOP of whatever profits they made selling their goods.

    Is it good economics? Not for the customers, but sure as hell is for the company. I don't know what the person who stopped "paying it forward" was thinking, but maybe contributing to the "world's smallest escrow account" didn't appeal to them?

  • Steve Rogers

    When Roberts says: "What's the point of paying it forward if nobody ultimately benefits?" he's catching onto the whole point of altruism. It's not about benefit for anyone, it's about shared sacrifice.

    "Why is it immoral to produce a value and keep it, but moral to give it away? And if it is not moral for you to keep a value, why is it moral for others to accept it? If you are selfless and virtuous when you give it, are they not selfish and vicious when they take it? Does virtue consist of serving vice? Is the moral purpose of those who are good, self-immolation for the sake of those who are evil?"

  • Over 300 people went to their office / school / home / wherever and told their friends that they were a part of something kind. Something big. Something spontaneous and fun and positive. Who knows how many random acts of pay it forward were inspired by that? Maybe someone in that line was coming home from a tough doctors appointment and for a minute, in that line, they forgot about the stress and anxiety and instead felt good and positive and happy. How many phone calls or text messages occurred right after someone got, then gave, coffee in that line? Messages of positivity, versus a traffic sucks / Starbucks was busy / I hate my outfit contact.

    More positive ions out into the world.

    Doesn't laughter and kindness and support have worth as well? It's not all about the checkbook.

    Positive energy is so valuable, so easy to find and share, and often hard to find. Don't shut it down when it's right in front of you. And do what you can to put it out there as often as possible.

  • Edmond Dantes

    How spiritually dead are you that you can't feel "positive ions" whenever you buy something? Or even simply when you're around things that are for sale? That's all proof that you're living among creatures who don't want to eat you, but simply to trade with you - to mutual benefit - so that you're both better off than you were before. I feel sorry for you that you can't feel that.

  • This is the sort of thing stupid people believe because it applies to them. The few of us that don't require social media and random yet fake acts of shit givery just go about our days amused by these sorts of displays. Ice Bucket Bullshit.

  • Carrie Geren Scoggins

    That's funny... This is a typical American. You don't get goody-goody with him! ha!

    "End Times Prophecy News Update Carrie Geren Scoggins Political Newsletter" program and webcast My program now on webcast and YouTube

  • Chris McVey

    Interesting that this website publishes an article pointing out how stupid a good portion of people are, but when you point out those same stupid people in the comment section your posts get removed.

    Good job, Fast Company, defend the stupid from the rest of us while you lambaste them.


  • Veronica Lane ッ

    Good topic idea, however I don't think that people should waste their time analyzing this! It will kill the game and then smart a$$es (who ARE really just being cheap) will have to put in their 'two cents' at the drive thru window as to why they won't pay for the car behind them (which is really only reiterating some article that they read online), and inevitably will only to hold up the drive thru line longer! It's fun, it gives you a feel good moment that usually encourages more good deeds through the day.