CONSCIOUS CAPITALISM. Raj Sisodia. FW Olin Distinguished Professor of Global Business &. Whole Foods Market Research Scholar in Conscious Capitalism. Conscious Capitalism movement by leading a Conscious Capitalism chapter! Capitalists who practice this philosophy in their business and educating the. Request PDF on ResearchGate | John Mackey's 'Conscious Capitalism' | This paper draws attention to social typology as a factor relevant to.
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have Panera Bread founder Shaich wielding the red pen. See page 12 for an introduction to Conscious Capitalism—. Shaich's chosen topic for. Conscious Capitalism—. A Worldwide Movement. People are choosing to download from and work for companies for that are “doing good” in the world, and. Capitalism has become a synonym for self-interest and greed. But are we seeing the whole picture? 'Conscious' capitalism is motivated by an awareness that a.
If investors in a public amounts of capital, labor, and land at the start. Prof- corporation such as Whole Foods Market are unhappy its then spit out on the other side of the metaphorical with the economic returns being generated, they are machine.
As most modern economists continue to see free to sell their shares and invest their money in some Copyright John Mackey All rights reserved other alternative. If suppliers want better terms or differ- participant in business who has the right to dene what ent product placement than we are willing to give they the purpose s of the business will be the entrepreneur are free to seek alternative outlets to sell their products. Entrepreneurs All the constituents therefore exchange voluntarily for create a company, bring all the factors of production mutual benet, and they are free to exit the relationship together, and coordinate them into a viable business.
Entrepreneurs set the company strategy and negotiate the terms of trade with all of the voluntarily cooperat- This voluntary exchange for mutual benet creates the ing stakeholders including the investors. When we ethical foundation of business and that is why business recruited our original investors at Whole Foods Market is ultimately justied to rightfully exist within a society. A business is still expected to behave ethically in its voluntary ex- Ive known many entrepreneurs in my life, and with only changes and to be responsible for any negative impacts a few exceptions most did not create their business pri- it may create, for example, environmental pollution.
So marily to maximize prots. Of course they wanted to voluntary exchange provides the ethical foundation of make money, but prot was just one of the reasons they business, but what is its purpose? The following are plausible sce- narios for why entrepreneurs create businesses. Perhaps The Purpose of Business the entrepreneur was unable to work for anybody else, Have you ever asked yourself what is the purpose had strong authority issues, and therefore need to be his of a business?
Most business people never ask or her own boss. Or they needed to be in charge of their themselves this interesting question. If you think own enterprise because that is how they derive their sense of self-worth, value, and self-esteem.
Maybe the about it, what is the purpose of a doctor or hos- entrepreneur has something to prove to their parents, pital? Is their purpose to maximize prots? This siblings, or friends and creating a successful business isnt what they teach in medical schools or what will exorcise unconscious childhood demons. It could most doctors advocate. A doctors purpose is to be that the entrepreneur is a very creative individual help heal sick people.
What about the purpose who has ideas that he or she wants to see tested in of a teacher or a school? Do they exist maximize reality to see whether they work. Possibly the entrepre- prots? No, their primary purpose is to educate neur is an idealist and wants to make the world a better the young and prepare them to live successful lives place and their primary motivation for creating a new in society. What about the purpose of lawyers or business is to improve the world.
Some entrepreneurs courts of law? All lawyer jokes aside, the purpose likely create a new business for the sheer fun of it. There are many, many reasons why people create businesses. All of the other pro- ence they are denitely a minority. Why doesnt The founding entrepreneurs determine the initial pur- business? Does the founding entrepreneurs original purpose right to dene it?
Economists routinely teach that the remain in perpetuity or can it evolve over time? I be- purpose of business is to maximize prots for the inves- lieve the purpose of any business can evolve over time. However, they seldom offer arguments to support This evolution of purpose is the result of the dynamic this point of view beyond asserting that the business interaction of the various interdependent stakeholders is owned by its investors who have a legal right to hire with each other and with the business itself.
Customers, and re the management, through the Board of Direc- employees, investors, suppliers, and the community all tors they elect, and who also have a legal claim on the inuence business purpose over time.
While the inves- residual prots of the business. Both of these assertions tors will have the ultimate legal claim on the residual are true, but these legal rights do not necessarily equate prots of the business, the purpose of the business itself to dening the purpose of a business why it exists and evolves over time through the co-creation of the inter- what its purpose and goals are.
In most cases the origi- dependent stakeholders. While the capital from This is a fascinating discovery Ive made about Whole investors is very important to any business, there is one Foods Market during the previous 28 years.
Whole Copyright John Mackey All rights reserved Foods Markets co-founders created the original pur- inputs and prots being the output. Prots from busi- pose of the company in , but the interdependent ness became the primary capital that investors and stakeholders have worked together to drive its evolu- entrepreneurs used to not only upgrade and improve tion over the years. We started with a few simple ideals existing enterprises, but also the capital used to begin and core values for the company and then created very new enterprises.
The progress of the larger economy simple business structures to help fulll those ideals. However, at the beginning of holders. Whole Foods Markets purpose has become the Industrial Revolution capital was quite scarce. The deeper, richer, and more complex as it has evolved over ability of successful enterprises to accumulate prots the years. Therefore it of business is always to maximize prots for the inves- isnt too surprising that classical economists became en- tors originated with the Industrial Revolutions earliest amored with the importance of prots, because prots economists.
How did this myth originate? The classical had historically been very rare and they were essential economists formulated their theories by observing and to the continued improvement and progress of society.
They observed correctly that success- perpetual motion machine, if effect, enterprises orga- ful businesses were always protable and that, indeed, nized to maximize prots, and through the reinvestment the entrepreneurs who organized and operated these of these prots, the promise of indenite continued successful businesses always sought to make prots. Businesses that were not protable did not survive for very long in a competitive marketplace because prots Great Companies Have Great Purposes are essential to the long-term survival and ourishing of all businesses.
Without prots entrepreneurs will If most entrepreneurs dont create their businesses for not be able to invest the necessary capital to replace the primary purpose of maximizing prots, what are their their depreciating buildings and equipment and wont primary goals?
The answer varies tremendously from be able to make the necessary investments to adapt to business to businessthere are potentially as many dif- the always evolving and competitive marketplace. The ferent purposes for businesses as there are businesses.
Having a deeper, more transcendent purpose the only important goal of business. They actually took is highly energizing for all of the various interdependent it one step further; the economists soon concluded that stakeholders, including the customers, employees, maximizing prots is the only goal they should seek. While these deeper, havior in which they observed successful entrepreneurs more transcendent purposes have unique expressions engage while operating their businesses, to prescribing at each business they also can be grouped into certain that behavior as the correct behavior that all entrepre- well known and timeless categories.
Philosophy credits neurs should always engage in all of the time. How did with expressing the timeless ideals of The Good, The they come to this conclusion? True, and The Beautiful that humanity has sought to create, discover, and express for thousands of years. If One possibility is that the classical economists became we add the ideal of The Heroic to the above three enchanted with the efciency and the productivity of we have the framework of higher ideals that most great the industrial enterprises that they studied.
Industrial businesses seek to express in some form or fashion. The and machine metaphors became the primary meta- following examples present these four ideals as created phors used to explain how the world really worked since and expressed by modern great businesses. Every The rst great purpose that great businesses express is business was seen as a type of machine with various The Good. The most common way this ideal manifests Copyright John Mackey All rights reserved in business is through Service to Others.
Authentic the world through heroic efforts. The heroic business service is typically based on genuine empathy for the is motivated by the desire to change the world, not needs and desires of other people. Genuine empathy necessarily through service to others or through dis- leads to the development, growth, and expression of covery and the pursuit of truth, or through the quest love, care, and compassion.
Great businesses dedi- for perfection, but through the powerful promethean cated to the great purpose of Service to Others also desire to really change thingsto truly make the world develop methods to grow the emotional intelligence better, to solve insoluble problems, to do the really cou- of their organizations, an emotional intelligence that rageous thing even when it is very risky, and to achieve nourishes and encourages love, care, and compassion what others say is impossible.
When Henry Ford rst towards customers, employees, and the larger commu- created the Ford Motor Company it could be viewed as nity. While any category of business can be motivated a heroic company. Henry Ford truly changed the world by the deeper purpose of Service to Others, we nd in the early part of the 20th century. Microsoft changed businesses that primarily depend upon the goodwill of the world in the later half of the 20th century.
In the 21st their customers to be the most likely to wholeheartedly century The Bill and Melinda Gates Foundation seeks to express this particular deeper purpose. Some of the solve many of the worlds major health problems, from great businesses that best express the great purpose AIDS to malaria. His heroic dedication to ending poverty in Ban- The Container Storeall of them retailers and service gladesh and throughout the world garnered him the businesses.
Whole Foods Market also aspires to express Nobel Peace prize. I recommend his book Banker the great ideal of Service to Others as its primary to the Poor for an inspiring tale of heroic enterprise. Devotion to Service to Others is a deeply Most heroic enterprises are begun by charismatic, heroic motivating purpose, one that provides tremendous entrepreneurs and the organizations biggest challenge emotional fulllment to individuals who truly embrace is to successfully institutionalize the heroic purpose af- this ideal.
Very few heroic enterprises have been able to do this over The second great purpose to animate great businesses the long-term. How very exciting to discover what no Finally, I recommend two books that present the impor- one has ever discovered before, to learn what has never tance of business purpose. The other, from which I has never before existed and that advances the well- have drawn heavily for this essay, is Purpose: The Start- being of humanity! Google, Intel, Genentech, Amgen, and Medtronic are The Paradox of Prots all examples of great companies motivated by the ex- citement of discovery and the pursuit of truth.
Through My thesis about business having important purposes their successful fulllment of this great purpose, all these besides maximizing prots should not be mistaken for companies have greatly beneted humanity. I do know something about maximizing prots and creating shareholder val- The third great purpose that we nd at the core of ue.
In , Whole Foods Market had the quest for perfection. Prots are one of the most important goals of the work of individual creative artists in music, painting, any successful business and investors are one of the lm, and artisanal crafts, we can also see it expressed most important constituencies of public businesses. Some great companies who ex- the primary goal of the business. True excellence expresses I will use an analogy to explain the best way to create beauty in unique and inspiring ways that make our lives long-term prots.
The analogy is happiness because, more enjoyable. A person who The fourth great purpose that inspires many great busi- focuses their life energies on striving for their own self- nesses is The Heroic, or changing and improving interest and personal happiness is often someone who Copyright John Mackey All rights reserved is also a narcissist, or someone who is self-involved and all of the stakeholders.
Instead they put the interests of obsessed with their own ego gratication. Ironically, their investors rst and they are also highly protable. Not at all.
Most goal of happiness pursuing happiness along this path. The purpose, meaningful work, great friends, good health, real question is, how does a traditional prot-centered learning and growing, loving relationships with many business fare when it competes against a stakeholder- people, and helping other people to ourish in their centered business?
The only study I know that tries to lives. If we have a strong sense of all of the above, its answer this question is Firms of Endearment: the Pursuit very likely that we will also experience happiness in our of Purpose and Prot by David Wolfe, Rajendra Sisodia, lives on a frequent basis.
The authors identify 30 companies that are managed Yet, happiness is a by-product of pursuing those other to optimize total stakeholder value instead of focusing goals and I think that analogy applies to business as well.
They track the long-term stock per- In my business experience, prots are best achieved formance of those that are publicly traded compared to by not making them the primary goal of the business. Figure 1 illustrates this comparison. Rather, long-term prots are the result of having a deeper business purpose, great products, customer satisfaction, employee happiness, excellent suppliers, community and environmental responsibility these are the keys to maximizing long-term prots.
The paradox of prots is that, like happiness, they are best achieved by not aiming directly for them. Long-term prots are maximized by not making them the primary goal. A business is best not thought of as a machine with various factors of production working in tandem to maximize prots.
A business model more in touch with our complex, post-modern, information- rich world is that of a complex self-adaptive system of interdependent constituencies. Managements role is to optimize the health and value of the entire complex, evolving, and self-adaptive system. All of the various Figure 1.
Investment Performance of Stakeholder-Centered constituencies connect together and affect one another. If business managers optimize the health and value of As the chart above indicates, companies that are man- the entire interdependent system and the well-being of aged to create value for all of their stakeholders have all the major constituencies, the end result will also be had extraordinarily high stock market returns both over the highest long-term prots for the investors as well.
This is no accident in my opinion. Rather, it is the result of all 30 rms creating Conversely, if a business seeks only to maximize prof- a superior business model the business model that I its to ensure shareholder value and does not attend to believe will become dominant in the 21st century.
However, neglecting or abusing the other constituen- Optimizing value for all the interdependent stakehold- cies in the interdependent system will eventually create ers does not mean, however, a loss of legal control of negative feedback loops that will end up harming the the business for the investors.
With- tation by management and by the other stakeholders. What piness and commitment, and community support, the do I mean by this? The customers get paid rst in their short-term prots will probably prove to be unsustain- relationships with the business in that they come in, able over the long-term. Copyright John Mackey All rights reserved nd products or services they desire, purchase those prots. Because they are paid last, investors must have products or services, receive those products or services legal and duciary control of the business to prevent fairly quickly, and often pay after the product or service management or other stakeholders from shortchanging has been rendered to them, for example, they eat be- them.
Investors usually demand these conditions as a fore they have to pay at a caf. Next, the employees requirement for investing their capital in a business. Whole Foods Market team members receive Management does have legal and duciary responsibil- their pay every two weeks. The suppliers get paid, ac- ity to maximize long-term shareholder value. However, cording to agreed up on terms and time frames, and the best way to maximize long-term shareholder value government taxes are remitted monthly and quarterly.
The one another. This is the most important business les- investors are entitled to whatever is left over, the residual son that I learned while creating and growing Whole The Whole Foods Business Model: Conscious Capitalism Figure 2.
Occasionally there are conicts of inter- Selling the Highest Quality Natural and Organic est among constituencies, but in general a harmony of Products Available interests exists between the different constituencies, since they are so dependent on one another.
The best Whole Foods Market is the leading retailer of natural way to maximize long-term shareholder value is to si- and organic foods in the world.
We developed strict multaneously optimize the value for all other constituen- and explicit quality standards, which we review regu- cies. The health of the entire system is what matters the larly.
We are very proud to have helped improve the most. Figure 2 below illustrates one example of what I health, well-being and longevity of millions of people, mean by the phrase Conscious Capitalism.
Whole Foods Market Whole Foods Markets Conscious Capitalism resists the continuous trend toward the degradation of the quality of our food through the industrialization of At the center of the Whole Foods Market business food production. While this industrialization of our food model illustrating holistic interdependence, youll nd supply has increased efciency and lowered the cost our Core Values and Business Mission. Everything else of many food staples, both of which are benecial to extends from the business purpose reected in the society, the process has also resulted in many negative Core Values.
Surrounding the central purpose are the unintended consequences. Several of the practices de- various constituencies: customers, team members, sup- veloped for the industrialized food system have resulted pliers, investors, and the community and environment.
Retail business provides environmental impacts such as pesticide contamination a simple model to illustrate that managements role is and concentrated animal waste products from CAFOs to hire good people, train them well, and do whatever Concentrated Animal Feeding Operations.
We see this it takes to have those team members ourish and be particularly in our animal foods production. Widespread happy while they are at work. The team members job, factory farm production of our animal foods results in a at least at Whole Foods Market, is to satisfy and delight tremendous cost to the well-being of the animals, along the customers. If we have happy customers, we will have with severe, negative impacts to food safety and human a successful business and happy investors.
Management health that are only recently coming to light in the pub- helps the team members experience happiness, team lic arena. To combat this assault on multiple fronts, and members help the customers achieve happiness, the to walk our Core Values, Whole Foods Market is very customers help the investors achieve happiness, and proud to be developing animal compassionate pro- when some of the prots from the investors are reinvest- duction standards, working in concert with concerned ed in business you end up with a virtuous circle.
I nd stakeholder groups in North America. But market analysis Satisfying and Delighting our Customers increasingly illustrates that the businesses with a sole purpose of maximizing prots, in other words, those The customer is our most important constituency, since that do not understand that their prots are produced with no customers, we have no business. We always by an interdependent system of constituencies, are less maintain awareness that our customers shop voluntarily successful over the long-term.
If they are unhappy with our business they will go trade someplace else. Because Core Values of the voluntary nature of business, we design our busi- ness model around the customer, who must be treated When businesses have a purpose beyond maximizing as an end and not as a means.
What I mean by this prots, this purpose is often expressed in the business statement is that the well-being of the customer must mission. Core values constitute the guiding principles be seen as the most important goal overall and not as the business uses to realize its purpose. Whole Foods a means to prot for the business. In my experience, Markets core values very succinctly express the purpos- businesses that think of customers as means to the end es of the business purposes that include making prots of prot do not have the same commitment to service, but also creating value for all of the major constituen- empathy, and understanding of customers well-being cies.
I want to talk briey about Whole Foods Markets as the business that treats customers as ends instead of Core Values. Our business talks and walks our values; means. Customers are very intelligent!
They know when we share them with our constituency groups, and invite someone is doing a sales job on them, and they know feedback in the form of dialogs. The core values are: when someone genuinely cares about their well-being. Copyright John Mackey All rights reserved In order to treat the customers as an end we have valued and rewarded in the organization so that they empowered our team members to satisfy and delight can know what to strive for with their own career objec- our customers.
I just want to contextualize what is likely a strong argument for a new paradigm of business. A few blocks from my house was a wonderful grocery story stocked from floor to ceiling with organic produce and other health food products.
It was a neighborhood store for me, but people came from all over the Monterey Peninsula to shop there. And then it was closed! Whole Foods was opening a new store in the largest shopping mall on the Peninsula and had bought out the neighborhood store. The owner of the small grocery store had been hired to manage the new and more elaborate grocery outlet. It was with some sadness at the loss of my neighborhood store and some joy that I embraced the Whole Food store in Monterey. And some surprise!
The prices were higher than I had been paying for the same or comparable products. But it was in the name of healthy eating and ecology that I was willing to spend my limited income on fresh and prepared products, as well.
John Mackey It was at this time that I began to pick up rumors that all was not right in this Green retail business. Mackey had an online alter ego. They lack a viable business model that they can replicate. They are floundering around hoping to find a viable strategy that may stop their erosion. Problem is that they lack the time and the capital now. But not everyone: Mr. He said the F. I posted on Yahoo! Mackey said the views expressed sometimes represented his beliefs.
He said no proprietary information on Whole Foods was disclosed. His purpose in doing this, it was charged, was to drive down the price of Wild Oats stock so that Whole Foods could acquire it at a lower price. Well, let us not belabor this. I am not proposing the casting of stones here.
I bring this up because the ideas of his new book may contain relevant material. He was also identified as a vegan and a libertarian. Thus he has been represented as a role model for CEO pay in a business climate in which some CEOs are paid times that received by their average wage earner. But they all omitted one thing: stock options. However, in this NPR audio statement, which he has publicly withdrawn on CNN and elsewhere, he clearly put his foot in his mouth, perhaps due to his lack of sensitivity to history and culture.
I mean, climate change is obviously occurring. Thus, we have a picture of a man who has tempted the fates by taking curmudgeon-like positions on a variety of topics, challenged those politically allied with him, tested the boundaries of his ethics, lived his life as a vegan, and the like. He still slaughters animals in the name of his capitalist business, but humanely.
We find this a contradiction that no vegan worthy of the name can support — and I must disclose that I am a vegan.
Thus, I reveal another of my biases, that is, that working class people need protection in collective bargaining and the right to strike without being replaced by scams or being fired from their jobs. So this is one of the biases I bring to the review of this book.
Most of these products can be found in a cluster of other stores in Tucson, often at lower prices. Thus, to get the same range of products we might have to go to four different stores — neither efficient nor ecologically harmonious. And, admittedly, Whole Foods had some products we could only find online at lower prices. He has found a way to practice a personal vegan way of life while using his talents to provide food to customers of many food persuasions.
Unfortunately, I have lost the source. Spiral Dynamics is also a useful model to better understand what is happening in the world today. In addition, Spiral Dynamics is a useful model for understanding organizations and businesses. Why are we different than most other corporations in the world? There are very few Second Tier Integral corporations. Here we have a statement that aligns integrally-informed folk with how Mackey sees the world.
Raj Sisodia And what of Dr. Rajendra Sisodia? He has authored seven books, including Firms of Endearment. Says Amazon. I also support Pratham, which offers educational programs for under-privileged kids in India. My hobbies include music old Hindi songs , writing and photography.
The clan claims that they descended from Rama, the hero of the Ramayana. The point of interest here is only that Raj Sisodia has come from a historically privileged clan. His position will be the Franklin W. He also purchased the Winchester Repeating Arms Company. Thus, he was a major arms manufacturer and built his wealth by supplying ammunition and weapons from the Spanish-American War through World War II when he retired.
Transition So what does all of this mean? Exploring this material as an introduction to the book review was interesting for me, and I hope for you. There is certainly more to discover about both men, no doubt. And the value of the book cannot be based on ad hominem arguments.
Nevertheless, particularly in the case of Mackey, how he has been managing his business, not just from a bottom line perspective, must be considered in relation to the credibility of his presentation. One thing is clear about the focus of their work: they believe that capitalism is the best system and conscious capitalism is the best approach to capitalism, because without consciousness the current capitalist system is unsustainable.
Politically, they are taking a conscious libertarian approach. Cognitively, they and others are seeking a more integrated, developmental perspective in and out of business.
But these may also be things many of us would readily align with him. Now it is time to take a look at the book and see what comes up. Other Reviews Any book by so noted an author as John Mackey on the subject of business is likely to gather a lot of attention from the media. And so this has. Rather they argue that the mathematical framework of free-market economics—developed by neoclassical economists in the 20th century—fundamentally mischaracterizes the true nature of capitalism.
Murray, a former deputy managing editor of WSJ thinks the book is overly optimistic about the possibilities of conscious capitalism and that it fails to point out the failures of such approaches, e.