Howard Schultz went to 242 investors to fund his vision for Starbucks.

217 of them said no.

Their reason was unanimous and reasonable: Americans would never pay $3 for a cup of coffee when they had perfectly good drip coffee at home for 10 cents.

They were right about the logic. They were wrong about the people.

That is the thing about consumer behavior that investors consistently underestimate. People do not make decisions based on what is rational. They make decisions based on how something makes them feel. Nobody needs a $7 latte. But they will wake up at 7am and drive to get one because of how the experience makes them feel about their morning.

Schultz was not selling coffee. He was selling a third place between home and work. The investors who passed were evaluating a coffee company. They were solving the wrong problem.

Today Starbucks serves 35,000 locations across 80 countries.

The 217 who passed were not stupid. They just could not see what they were actually looking at.