199 Comments

Comments

John Maxwell says ...
HI John, I would like to first thank you for responding to all the various individuals who post here. I know you are a very busy man, and just reading your responses (and their length) shows me that you truly do care very much about what you believe in! I think that shows so much about what kind of person you are. Thank You. John, I am currently reading a book that you recently recommended entitled "The Way We Eat: Why our Food Choices Matter" by Peter Singer and Jim Mason. I must say, this book has really opened my eyes and why I have even more respect for your Animal Compassion Foundation. Some of the ways that the animals are treated at the factory farms, really, really made me think. I was very saddened by what I read...it all so very unnecessary. Am I a vegan? No, not at this time. Will I stop and think before I eat or purchase meat, poultry or fish again? Yes. Will I continue to eat meat/poultry/fish for the forseeable future, yes, probably, but I must admit, after having read excerpts from John Robbin's book entitled "Healthy at 100" I musy say, I am becoming more and more a believer in less of a meat-based diet and more of a plant-based diet. I am very anxious to get my hands on a copy of John Robbins's "Healthy at 100", which by the way, I did notice on the back cover, that you have endorsed. I am truly amazed at these 4 groups of people Mr. Robbins writes about: the Abkhasians, the Vilcabambans, the Hunzans and the Okinawans and how they stay so healthy (body and mind) all the way to the century mark. I love to read and study about what makes for healthy bodies and minds, and I know it is not all based on what they eat. I know we cannot all live exactly like they do, but I sometmes wonder what would happen if people truly ate healthy for a week or two and got outside and enjoyed nature. I think many would be amazed and switch their dietary/persoanl habits....well, maybe one day. I really think people in the food/health industry underestimate what WFM and You have done to better the lives of many people now, and many people in the future, who do not even recognize or realize it. Without WFM and You, I seriously doubt it if Organics would be in the mainstream media or on the shelfs of retailers such as Walmart, HEB, etc.. Ok, they would probably be out there, but not in the way they currently are. Again, Thank You and WFM. I have come to realize that we all have a purpose while on this great planet, and I really think we all share an ultimate goal and responsibility to leave this Earth a better place than when we came here. Well, I did not mean to bounce from subject to subject in this posting John, so I guess I just want to say "thank you" for the Animal Compassion Foundation that WFM has started. Hopefully more people will become aware of what is going on out there, and other retailers will institute something similar. And oh yes, Congratulations on the #5 spot on Fortunes "100 Best Companies to Work For" list. Ya know John, as much as I like what WFM and what WFM stands for, I might very well be applying there for a job in the near future! Ya know, I think I will! Best Wishes! John M.
01/11/2007 1:22:42 PM CST
Greg Ford says ...
Dear John: Without question you and the Whole Foods team have built a dynamic, evolving organization most people, including economists, could only dream of. And from what I can tell it wasn't successfully built from an open text-book or a traditional mainstream business model. This upcoming weekend I look forward to reading your essay, "Conscious Capitalism: Creating a New Paradigm for Business" cover-to-cover. Fifty -plus pages will require a few hours. The first few pages have intrigued me so far. Having read the first four or five pages, an editorial in today's Wall Street Journal, "The Hardest Price in Capitalism," by James Grant, reminded me a little of what I have read so far. Mr. Grant writes: "You will scan the Forbes 400 in vain for the names of the captains of the interest-rate forecasting industry. The omission speaks volumes. Just answering correctly the simple question "up" or "down" over a couple of moderately volatile years in the financial-futures markets would put a successful forecaster in the way of untold wealth. Yet, try as they might, the economists can't seem to get fabulously rich" (James Grant, "The Hardest Price in Capitalism," The Wall Street Journal, Thursday, January 11, 2007). All the best, Greg Ford Houston, Texas
01/11/2007 3:27:11 PM CST
bob says ...
thanks for being so honest and posting not only positive blogs but also some that challenge us.
01/13/2007 5:01:51 PM CST
Robert says ...
Mr. Mackey, Great article, very interesting. In regards to those who criticize: Drop that jealousy BS. You are adults. Mr. Mackey made his money and his empire by putting the grey matter to work, not crying and complaining when a roadblock surfaced. As an end result he has gained financial independence. Chances are if you were as productive as he is, you would not be bothered by his success. But then again this is the real world and nothing is fair. We have a word for people who criticize others success but do nothing to enhance thier own: A**holes. Humans are hunter gatherers.If you hunt and gather more, you survive.We are also adaptive. If you adapt, you survive. So hopefully if the adaptation/evolution theory is correct maybe all the overly educated Moss Licking Anti-Capitalists will evolve themselves out of existance. Rock on John, thanks again for the article.
01/13/2007 5:35:34 PM CST
Dawn Mueller says ...
Very beautifully said John Mackey. I am a student in business and have been thinking deeply about things such as this myself. Up until I studied your organization I wasn't sure if there was a possible way to achieve what you are doing in corporate America. You have gotten yourself added to the short list of people I admire (right up there with Ani Difranco). I hope to meet you some day, and talk business. Peace and luv, dawn
01/13/2007 9:08:36 PM CST
Atul says ...
John I have been reading your blog "religiously" and agree with most of your thoughts on Conscious Capitalism. I am a senior executive of a healthcare company and your blog has answered many of my questions regarding the success of stakeholder businesses versus traditional stockholder businesses in the long run. I have also read with keen interest your thoughts on executive compensation. The key question I would love your insights on is regarding the ethics of creating personal wealth as a CEO while creating wealth for the investors in the company in a "conscious" fashion. It is hard to become wealthy on pure compensation, particularly if salary caps are applied. For instance, I just finished reading Mohammad Yunnus's wonderful book, banker to the poor, and the thought that I had was that would it have been appropriate for Mr. Yunnus to have become personally wealthy through options and stock grants in different Grammeen companies while doing all the good he has done. In short, I am interested in your thoughts on CEOs and senior executives creating personal wealth, not at the expense of others, while meeting the needs of all stakeholders within conscious capitalism. Also what are the best mechanism to do that within the framework of Conscious Capitalism Atul,Houston
01/13/2007 10:53:50 PM CST
Katy Levit says ...
Mr. Mackey, I am very interested in the idea of Conscious Capitalism. I opened a business (art school/community art space) about 3 years ago with the idea that if I provided a good product, worked hard, was fair to my customers, employees and suppliers and ran my business with integrity that profits would naturally follow. I have been very disheartened to find that this has not been the case (at least not yet). I see how a business the size of Whole Foods can have a conscience and still make money. But what advice do you have for a small, start-up business (assuming that the idea is good, the customer base is there, etc) that wants to be good to it's employees (fair wages, health insurance), good to it's customers (a fair price, a quality product) and still profitable. If real change requires (or at least is energized by) a grassroots movement, how can the small start-up entepreneur implement your ideas from the beginning?
01/15/2007 5:06:10 PM CST
Jennifer Bouani says ...
Firstly, I feasted on your blog post - just as I do whenever I stroll through the aisles of Whole Foods grabbing up free samples! It's always wonderful to find someone in the world as passionate as I am about capitalism. I completely agree with your argument about what makes an entrepreneur start a business, and that it's NOT to maximize profits. As I read and related to the thoughts in your blog post, the hairs on my arms stood up. I recently blogged about a related topic -- the move of GE's executive, Dave Calhoun, to become CEO of a private firm in the face of this hostile environment for public CEOs. I believe that companies who strive to achieve the higher ideals you mention "The Good", "The True", "The Beautiful", & "The Heroic" will naturally have a competitive advantage. If that's true, then by natural selection (in a Darwin-sense), these will be the companies who survive the times, while the others will fall behind. Where you are trying to shape the minds of the movers & shakers of the world, my focus is to encourage parents and teachers to teach kids about the basics & empowerment (and pure beauty) of entrepreneurship and capitalism. It's not as sophisticated as what you are doing, but our core convictions are the same. You asked for feedback. Here's my 2 cents: I recommend you add some language to invoke fire & emotion in the reader. Tell them WHY they should care and why they can't afford not to believe in your theory. For example, in the conclusion, you say "Corporations must rethink why they exist...then I believe that we would begin to see the hostility towards capitalism and business disappear around the world." That may not motivate all your readers, however, mentioning that America's economy and our way of life (or standard of living) is at stake in the face of a rising China, may wake up some people and earn you new supporters. I'd do this in the first paragraph, to envoke people to read it who might not otherwise. Congratulations to you for a lifetime of business success and thank you for sharing your insights on your blog. Jennifer Bouani Author of "Tyler and His Solve-a-Matic Machine"
01/15/2007 9:47:21 PM CST
Ian says ...
Hi John, On November 12 2006, in response to Don Schaffer, you said: "Regarding large businesses acquiring all the small businesses, the facts don't support your viewpoint. The Fortune 500 companies represent a much smaller percentage of the total United States economy in 2006 than they did in 1956." However I just came across a CNN article here - http://money.cnn.com/2006/03/31/news/companies/intro_f500_fortune/index.htm - in which it is stated that "Revenue from FORTUNE 500 companies as a proportion of GDP has risen from 39 percent in 1955 to 73.4 percent this year." This appears to be a direct contradiction of your statement. In the same vein, here is a quote from a speech by Bill Moyers on Friday in Memphis at the third National Conference on Media Reform: 'Nobel laureate economist, Robert Solow, not known for extreme political statements, characterizes what is happening as “nothing less than elite plunder,” the redistribution of wealth in favor of the wealthy, and the power in favor of the powerful. In fact, nearly all the wealth America created over the past 25 years has been captured by the top 20% of households, and most of the gains went to the wealthiest. The top 1% of households captured more than 50% of all the gains in financial wealth, and these households now hold more than twice the share their predecessors held on the eve of the American revolution.' (Full text here of the speech here: http://www.democracynow.org/article.pl?sid=07/01/16/159222) Ken Wilber's evolutionary metaphysics (a sort of curly elaboration of the ancient idea of the Great Chain of Being as far as I can see) might be applicable to purveyors of health food, cruelty-free cosmetics, boutique gardening equipment and so on, but I can't see oilmen, auto manufacturers, bankers, defense industry contractors, senior government officials, media moguls, - i.e. the power mongers and the money grubbers who have always ruled the world (be they American, British, Chinese, Japanese, Saudi, Swiss etc.), adopting these principles any time soon. For them, as myself and several other contributors to this forum have pointed out, the usual Darwinian evolutionary principles apply. (Whether or not they are aware of it.) Best wishes, Ian
01/16/2007 2:13:03 PM CST
Joseph R. Serrano says ...
Hello Mr. Mackey, I am 'criticizing by creating'... Earlier in this blog I provided a post regarding my attempt to fundamentally reinvent my awful industry of dry cleaning, and the desire to find investors with a leaning toward Conscious Capitalism as a case study for your theories. Please let me first expand on what I feel is this vital element to the movement, and then propose an admittedly self-serving argument for a way to catalyze the growth of CC (Conscious Capilalism) companies. First, the CC founder or entrepreneur will require capital to create their company. Just because they are 'good', 'true', heroic', or are attempting to create something beautiful does not mean they are independently wealthy or can relegate themselves to baths in their dishwasher (like you did in the beginning-- right?), or forgo a paycheck for three years (like myself) to make the vision happen. If you do not have the resources to develop and communicate your idea, you are finished and the CC movement is one company short of reaching it's potential. So investors, or enlightened investors are absolutely required to make the impact CC should have. Further, as you commented on Mr. Jacklin's last post, for CC to reach it's fullest potential, holistic enlightment from leaders to consumers will be required. I say leadership is the most important consideration to evangelize the movement faster. Educating, or enlightening, all of these elements will not be easy. Whole Foods has thousands and thousands of customers who resonate with the CC movement. So do other great CC companies. These pioneers should apprentice, or help develop other companies with similar philosophies. Whole Foods has certainly done this with many of it's vendors, but perhaps another medium is required for unassociated products and services. I know Rand's "Atlas Shrugged" has been mentioned earlier. Here the "creators" of the world removed themselves from society to prove a point. Rand contradicts her objectivist philosophy of the "self" here because it meant that the creators had to work together or their point was lost or less severe. The CC movement would do well not to remove themselves, but to act together. This means instead of giving philanthropically to non-sustainable not for profits they should create private equity funds for companies like mine that are trying to change an industry for the better with CC philosophies. OR, make a point to partner with companies like mine. If I had a LOI to roll out my concept in Whole Foods or Starbucks, I could attract the right capital and management team to catalyze growth and the CC movement. In fact, Mr. Mackey, if you believe my thoughts are founded, let me be the bold, heroic entrepreneur who is trying to create something beautiful and challenge you to create a chapter in your CC book on how pioneers of the CC movement (Whole Foods) wield the power to help others with similar aspirations get there faster. Whole Foods has several locations in Minnesota (new one in downtwon MSP soon), with a large overlapping target market as my industry. Instead of wasting valuable resources that can go toward product development or paying livable wages and benefits trying to enlighten more consumers to why my company is good for them and the planet, why don't you let Whole Foods speak for us and include my concept inside your stores to help us grow. This may sound self-serving, but after all, the company I am trying to create is a CC company and can potentially add thousands of new stakeholders waiting for the 'progress of humanity'. Why should the enlightenment wait for enlightened investors when together we can create them ourselves? Incidentally, I have done some research and found some sources for "do-good" capital: www.goodcap.net www.xigi.net
01/17/2007 11:12:32 PM CST
John Mackey says ...
To John Maxwell, Both Singer and Robbin's books are excellent, so I'm glad you are reading both. Singer and Mason's book gives some great insights into several of the current food issues such as organic, local, animal welfare, and fair trade and is definitely worth reading. Robbins' book demonstrates that the longest lived people tend to eat very few animal products (although all of them eat some). Their diets are built around fresh fruits and vegetables, whole grains and beans, and supplemented with small quantities of animal products such as goat cheese, eggs, fish, and meat. Robbins himself eats wild caught fish a couple of times a week, so he isn’t advocating a pure vegan diet in this particular book. There are no known historical or current examples of any tribes or cultures that were purely vegans—some animal products have always been eaten. However, the longest-lived peoples use animal products as secondary foods, not as the primary foods they consume. To Atul, There is no magical formula I can give you regarding creating wealth or how to create wealth while simultaneously having a "conscious business." You'll need to work through those issues on your own and achieve the balance that feels right to you personally. I will say that it is very difficult to get rich strictly through compensation without your pay coming at the expense of other people, however. If you pay yourself exorbitant amounts of money in compensation it is very likely to create envy throughout your top team and throughout your organization which may harm the business. IMO the best way to create wealth is through ownership--not through compensation. Save your money and invest it in your own business or in other growing businesses. Over time ownership in growing businesses produces increasing wealth (check out the book "The Richest Man in Babylon). Regarding Muhammed Yunus getting wealthy through Grameen: I don't think you understand what motivates this remarkable man. He doesn't really care very much about personal wealth--he has enough to support his life and his family--what more does he need? Yunus has dedicated his life to Service and to ending poverty on our planet. He is donating his entire Nobel Peace Prize proceeds to the Grameen cause. Yunus has embraced a Higher Calling within his own soul. He becomes more "Gandhi-like" with each passing year and our world certainly needs more people like him. He inspires me in many different ways. To Katy Levit, It is a common myth that if we are "good, work hard, and do the right thing" that we will ultimately be rewarded with material success. Often we are rewarded with business success for these virtues, but the reward isn't automatic (except for "virtue being its own reward"). No person or business is ever automatically entitled to be successful. No business ever "owns" their customers--at best the successful business merely "rents" them for a little while. Ultimately it is the customers who determine which businesses will succeed in the marketplace and which will fail and they vote every day where they choose to spend their money. My only advice to you is to redouble your efforts to give greater value to your customers--higher quality, better service, better customer experience, lower prices. Center your business around your customers at all times. In my life experience there are actually very few businesses out there who really genuinely care about their customers and exceed their expectations on a routine basis. What more can you do to create value for your customers? That thought should be at the center of your thinking each day because your customers will ultimately decide whether your business flourishes or not. To Jennifer Bouani, Excellent suggestion. I'll try to make the chapter more inspiring when I rework it. Thank you. To Ian, I read that CNN article and it does appear to possibly contradict what I said previously. It is puzzling and I'm not sure I have the answer to it. More research on this topic is necessary. I will say, however, that sales to GDP may not be the best measurement of true large company concentration. A better measurement I think is to see whether the largest companies have a growing or shrinking share of the total United States stock market. Here are some quotes from a couple of the books that I based my opinions on: This quote is from Jeremy Siegel's classic study of the stock market "Stocks for the Long Run", p.61-62 (Siegel is a renowned professor at Wharton). "As of May 1997, the value of S&P 500 companies was over $6 trillion, but this constituted about three-quarters of the value of all stocks traded in the United States, significantly less than the 90 percent from 40 years ago...Despite the perception that large companies are, through mergers and acquisitions, becoming ever more dominant in corporate America, the truth is quite the opposite. There is a clear tendency for the largest companies to represent a smaller fraction of the market value of all stocks. The top five firms constituted more than 28% of the market value of the index in 1964, but that had declined to less than 13 percent in 1997." From Johan Norberg's "In Defense of Global Capitalism"--a really wonderful book IMO: pages 215-216 "Freer, more efficient financial markets, which allow capital to spread to new entrepreneurs with fresh ideas, have made it progressively easier for small firms to compete with the big corporations. And things have been made easier still by advances in information technology. Between 1980 and 1993, the 500 biggest American firms saw their share of the country's total employment diminish from 16 to 11.3%. Even if we use the problematic measure of globalization's critics to determine the relative size of the 500 biggest firms--sales in relation to aggregate GDP--the myth is refuted, because that figure fell dramatically, from 59.3% to 36.1%. That's a drop of almost half in just 13 years...Half of the firms operating internationally in the world have fewer than 250 employees. Many of the biggest are being knocked out by their competitors. Of the companies on the 1980 list of the 500 biggest enterprises in the United States, one-third had disappeared by 1990 and another 40 percent had gone five years later." Regarding your comments about the concentration of wealth from the Bill Moyer's speech--that doesn't relate to anything I said in "Conscious Capitalism" or in my comments in this section so I feel no compunction to discuss it in much detaiI. For the record, I do not favor increased concentration of wealth because it usually creates envy and tends to lessen societal harmony. That being said I also don't favor coercive government laws, regulations, and taxes which punish the successful and lessen individual liberties. When liberty and equality are in tension my personal preferences are generally towards more liberty. However, I also favor individuals using their liberties voluntarily to express the virtues of generosity, responsibility, compassion, care, and love towards other people, animals, and the environment. I discuss some of these ideas in more detail in my previous blog posting "Winning the Battle for Freedom and Prosperity." Here is a quote by Milton Friedman that I really like: "A society that puts equality ahead of freedom...will end up with neither equality nor freedom." Thanks for sharing your ideas on this blog, Ian. I've enjoyed our exchanges. To Joseph Serrano, I wish you the best of luck with your "conscious dry-cleaning business." It sounds very worthwhile. However, I'm not personally interested in investing because I don't want to use my very limited time thinking about investments or other businesses. Regarding Whole Foods working with you to open these type of dry cleaning businesses within our stores--I think that it is probably too far away from our core concept. That being said, each of our 11 Regional Presidents is empowered to try various experiments that they believe will enhance our company. You are free to approach them with your idea. However, my intuition is that dry cleaning is unlikely to get them excited as a very synergistic business. I hope you and this business have much success.
01/18/2007 6:32:31 PM CST
Carol Birkes says ...
Mr. Mackey, I've only read the beginning of your blog about 'conscious capitalism' and I must say THANK YOU. I firmly believe we must change the way 'we do business' for our country to survive. It seems we have lost all sense of purpose (other than making more and more money) regarding why we are in business. Today it seems decisions are based solely on the effect on the bottom line, not giving any consideration to the implications on quality, customer service, or employees. I believe that businesses need to look for win/win resolutions. That they must find a balance between doing what is best for the customer, environment, employee and share holder. I believe with all my heart that when we focus on what is best for the whole, (not just on profits) that we will indeed be profitable. I question how much is enough? Where will it ever stop? I think when the large companies finally crash. We must find a balance. I appreciate the work you are doing not only with your company, but especially with writing your book. Awareness is the first step to change. God Bless you. Carol
01/19/2007 10:56:48 PM CST
Joseph Serrano says ...
Mr. Mackey, Thank you for your kind words. However, my point is not to get you to invest in my company, it is to acknowledge a problem with Conscious Capitalism (lack of enlightened investors and partners) and describe a possible solution. My company aside, the comment about lack of synergism in your reply is troubling. You are a personal hero of mine, but if you as the icon for Conscious Capitalism cannot draw the connections between your company and mine I have serious concerns for the Conscious Capitalism paradigm. In your chapter you explain: "..business is fundamentally a community of people working together to create value for other people, their customers, employees, investors, and the greater society." In essence you are trying to create a movement. If I am incorrect and you are merely espousing an academic theory, please let me know. Perhaps I have been remiss in describing my industry and how it affects the world. Dry cleaning is an over $30B dollar industry worldwide and includes over 100,000 establishments. Close to 98% of these establishments use a solvent that is considered a probable carcinogen by the EPA. Other studies show that it causes birth defects and nervous disorders, amongst other things. The solvent permeates through concrete and is present in over 75% of Superfund sights. It is a voracious ground water contaminant whose final destination is fish and wildlife in rivers, lakes, and the ocean. There are millions of tons of this bad stuff being used every year around the world and it needs to stop. Socially, working in a dry cleaning establishment is as close to sweatshop, worker-exploited conditions that you will find in our country. According to the DEA many proprietors are also notorious money laundering fronts for organized crime, and the cash nature of the business makes it perfect for under reported revenues. Users of dry cleaning are grossly misinformed about the dangers, and believe the government is on top of the situation. Wrong. Worse, the industry is a low-interest commodity, and cleaners have very little incentive to change as customers are definitely considered a means to an end. My company considers the customer an end in themselves. We will soon be using cosmetic grade solvents that are used in many body lotions, shampoos, and beach sand. The machines for the sustainable, renewable solvent I would like to use are still in development and cost as much as a Ferrari. I have grown over 100% in each of the last three years, but this is still not fast enough to to integrate more Conscious Capitalism principles. We require channel partnerships to do this.I am on my way to reinventing this industry, but the message is still very small and quiet. In your comments you said there was no synergy between our concepts. I strongly disagree. Let me elaborate: WF Core Value 1) Selling the Highest Quality Natural and Organic Products Available- Since my industry pollutes the water supply, this makes it more difficult for you and your vendors and ultimately all of your stakeholders. WF endorsement of an operation that does not do this would be in sync with this value. WF Core Value 2) Satisfying and delighting customers - Since many of my current customers recycle their hangers in Whole Foods shopping bags, I am sure they would be delighted to know their errands to Whole Foods included a dry cleaner that cared about them, their clothes, AND the world they live in. Moreover, there is precedence for dry cleaners inside grocery stores across the world. Thousands of them in fact—even a franchise devoted to it. WF Core Value 3) Supporting Team Member Excellence and Happiness- Many companies have onsite dry cleaning pick-up and drop off and consider it an employee benefit. Little do these employees know how much harm most of these cleaners cause. WF Core Value 4) Creating Wealth, Profits, and Growth- More profits per square foot with your share of dry cleaning sales or rent. CWF Core Value 5) Caring About Our Communities & Our Environment- You say: “The silent stakeholder that can never speak for itself is the environment.” I agree. The environment is now shouting. Your core values go well beyond what customers ingest as much as mine go beyond what they wear. It is about convenience, making a chore fun and inviting, quality--all WHILE protecting the health of stakeholders and the planet. Why let your customers wear carcinogens on their clothing when you can encourage them to use another safe alternative? Why let more fish die in the oceans when you can create demand for a service that vehemently against these pollutants? Dry cleaning is not going away, and most people use dry cleaners because they are convenient for them. What a high price to pay for convenience. I am sure the same goes for groceries and many Whole Foods customers. The difference is the Whole Foods customer who is not concerned with the environment does not contribute to polluting our planet and their bodies. John, you conclude the Conscious Capitalism chapter stating: “Let us each realize our potential for deeper love and extend it out into the world—let us together create this new business paradigm of Conscious Capitalism.” If you don’t see the synergy between my core concept and yours, what exactly do you mean by banding together to create the new paradigm? Please do not get me wrong. No one walks the talk more than you do. You mentioned your admiration for entrepreneurs over activists. The synergy of our two concepts is where the rubber meets the road. All great companies need partnerships, and unless I am missing a key premise, our concepts are united in mission. Is Conscious Capitalism a real movement or a theory to debate about amongst academics and activists?
01/20/2007 8:41:36 AM CST
Jarvis says ...
Mackey, I find it amazing that you have answered every comment with the same eloquence seen in your essay. A simple thank you,
01/23/2007 11:08:42 AM CST
TC says ...
John I am an avid reader of your blog as well as a shareholder of Whole Foods. Your thoughts always prove insightful and are often inspiring. Your essay raised a few questions: 1) Should the allocation of corporate philanthropy be determined primarily by shareholders? Warren Buffett and Charlie Munger offer well thought views on this question. In addition to their obvious intelligence and business success, they are also remarkably virtuous and sensible men. On this basis, I find their views always worth at least considering. In 1981, Berkshire Hathaway implemented a corporate philanthropy policy that seems very logical/fair. In short, Berkshire Hathaway’s corporate philanthropy reflects a fundamental principle of capitalism – stockholders, as legal owners of the business own the residual profits of the business. On this basis, Berkshire Hathaway developed a policy that ensures “contributions should reflect the charitable preferences of owners (i.e., stockholders) rather than those of officers and directors.” Each Berkshire shareholder can designate recipients of charitable contributions by the company (on a basis proportional to the number of shares of that he/she owns – Berkshire establishes a dollar amount per share that can be allocated to charity). Berkshire has had great success with this program as the percentage of participating shares always exceeds 95% and usually exceeds 97%. Berkshire officers and directors do retain responsibility for a portion of the annual donations considered to benefit the company directly in an amount roughly equal to the cost of the donation. In the case of Whole Foods, officers and directors could retain responsibility for donations that are important to the company’s broader mission and values. 2) Will stock based compensation prove effective over the long term? For a young/small company, stock options are often a highly effective incentive compensation tool as the success of a small company can lead to enormous percentage increases in the value of a business. However, the percentage gains in stock price will surely slow at some point in the future, owing to the law of large numbers. As the company matures, how effective will stock based compensation prove? How do you prevent the psychological tendencies of material self interest and envy from taking hold -- in a mature Whole Foods, could subconscious tension arise between long tenured employees (who are “rich” from previous stock price gains) and newer employees unlikely to realize similar wealth accumulation from a rising stock price? Do long tenured and skilled Whole Foods employees lose incentive to work when it becomes obvious that no matter how well they perform, the stock price will not go up as much as it did in the past? If a new employee emerges as a remarkable store manager or regional manager, shouldn’t they be rewarded proportionately? Without a consistent and meaningful rise in the stock price, does a stock based incentive compensation plan result in compensation not being commensurate with effort and ability, with star performers under-compensated and average performers effectively overcompensated? I think Buffett and Munger have thoughtful and logical views on this issue. Whole Foods is still far from maturing but it would appear important to at least consider how effective a shared fate compensation plan will be at mature company when the underlying incentive currency is stock options. 3) Are “happy” employees a driver or a consequence of a rising stock price? In your essay, you cite statistics showing the stock price outperformance of companies on Fortune’s "best place to work" list as evidence that happy employees have direct benefits for shareholders. I have no doubt that happy employees are good for everyone – society, shareholders, management, customers etc... But I wonder about the conclusion you derive from the data. The human psychological tendency of association would seem to be a powerful influence in this situation: stock price appreciation is associated with “successful” companies...which means they have good/successful employees...which means I am good/successful, which makes me feel good about myself and my job. Further, if stock price appreciation has meaningfully increased the wealth/financial security of employees, the rise in the stock price would seem likely to have a direct, positive impact on employee happiness. What happens when the pace of stock price appreciation slows or remains stagnant over a sustained period (years) through no fault of the company’s operating performance? Is it possible that your experience at Whole Foods has led you to underestimate the impact of a rising stock price on employee happiness? 4) Is Wal-Mart truly a “bad” company? While I view Whole Foods as a much better company than Wal-Mart, it seems hard to condemn Wal-Mart as a “bad” company. Sam Walton founded Wal-Mart with the goal of providing the best value proposition to consumers. Walton certainly represents an entrepreneur for which exclusively maximizing profits was NOT the primary reason he founded the company. Walton didn’t build Wal-Mart to profit at the expense of society. In fact, based on everything I’ve read, Sam Walton remained true to his values of hard work and a modest lifestyle despite becoming the richest man in the world. It would seem that Wal-Mart continues to operate according to the values outlined by its founder many years ago as consumer prices and company profit margins remain very low. What is so bad about a company that continually drives efficiency into its supply chain and passes along the subsequent gains to the consumer? Doesn’t this strategy reduce the cost of living for millions of consumers? Is Dell also a bad company because its business model is based primarily on offering the lowest prices? By leveraging its scale, hasn’t Dell played a major role in making personal computing more affordable, with the consequent growth in PCs having very positive benefits for society? Further, I don’t see how Wal-Mart can be viewed as bad for “small town” America and its employees. The “ideal” of small town America gets overplayed by the media and Hollywood – Andy Griffith’s Mayberry doesn’t exist. Wal-Mart invigorates many of the communities in which it operates, especially by providing employment, compensation, benefits, training, and upward mobility that would not otherwise be available. According to this month's Kiplinger Personal Finance magazine, 25,000 people applied for just 325 job openings at a newly opened Wal-Mart in the Chicago area. Sure Wal-Mart has its shortcomings (as with most companies) but how can the net effect of the company’s efforts (or similar companies focused on offering the most affordable prices to consumers) be viewed as anything but positive. In the May 1, 2006 issue of Business Week, Jack Welch writes a very compelling case about “What’s Right About Wal-Mart?” in response to a question about whether Wal-Mart is a force for good or evil in the world. With that said, one would hope that Wal-Mart (and all companies for that matter) would continually improve employee benefits/relations as much as possible within the framework of the company’s values and mission and without compromising long established responsibility to other stakeholders. Lastly, you cite Wal-Mart’s tepid same store sales growth as evidence that the flaws in its business model are becoming exposed. As Whole Foods may also now be experiencing, the law of large numbers will inevitably result in slowing growth for all companies. The sheer size of Wal-Mart is the primary impediment to faster growth. The merit of the Wal-Mart value proposition would appear to be supported by the fact that 110 million shoppers browse Wal-Mart's aisles every week.
01/23/2007 1:36:05 PM CST
Ian says ...
Hi John, May I respond to TC's question about whether Walmart is a 'truly a "bad" company'? According to the latest newletter from the Organic Consumers Association, they have 'announced a boycott against Wal-mart for refusing to respond to formal complaints that many of its stores are placing "organic" signs next to products that are not organic. The Cornucopia Institute filed a complaint more than 60 days ago, and neither the USDA nor Wal-Mart have taken any action to fix these problems. Six months ago, the OCA called on Wal-Mart to stop selling cheap factory-farmed organic milk from Horizon and Aurora, and to increase the amount of domestically grown organic products on its shelves.' http://www.organicconsumers.org/articles/article_3809.cfm That Walmart has so far failed to respond to this criticism will probably come as no surprise to anyone. However if Whole Foods behaved like this, there would be hell to pay. When it comes to food labelling, consumers will always hold Whole Foods to much higher standards of accountability. So in this respect at least, Walmart is a "bad" company, and Whole Foods is a "good" company. Regards, Ian
01/26/2007 12:34:16 PM CST
Ian says ...
Hi John, Some good news for all of us, particularly our friend in the dry-cleaning business, Joseph Serrano: http://www.msnbc.msn.com/id/16816627/ "California regulators on Thursday enacted the nation’s first statewide ban on the most common chemical used by dry cleaners, pleasing environmentalists but worrying some small businesses. By 2023, no more dry-cleaning machines that use the toxic solvent perchloroethylene, a potential carcinogen, will be permitted in the state. The regulation by the California Air Resources Board will phase out the fluid next year, banning dry cleaners from buying machines that rely on the solvent. The state’s 3,400 dry cleaners who now use it must get rid of machines that are 15 years or older by July 2010." Hooray for government regulations! Ian
01/26/2007 2:21:21 PM CST
Nancy DeFauw says ...
John, I am a loyal customer both because of the product and the mission of Whole Foods. Bravo on a great brand. I read Conscious Capitalism with great interest and in general, think you are articulating what many great business persons know in their gut and heart but have not put to paper. Well done there. In particular, I think your focus on the Paradox of Profits is spot-on. It is the difference between being driven by profit and creating value. I must express strong disappointment, however, regarding your statement: "In my opinion, most modern American non-profit organizations operate with a mentality that creates inefficiences...; most nonprofits are ineffective in fulfiling their mission". First, I would challenge you to critique your own work the way you do your bloggers - where are your examples? This statement must represent your observations but provides zero analysis. I would like to add that I think "most" nonprofits is a gross over-statement. Having worked with many closely, and the foundations who fund them, there is much great work being done. And, there are many nonprofit organizations for whom earned income is a significant part of their operating budget. Don't get me wrong, however - I agree with your premise that philanthropy as it has existed is a poor incarnation of the possibilities. You might wish to check out philanthromedia.org - a blog dedicated to the "end of philanthropy as usual." There are many others who agree that "businesses and nonprofits are potentially much more alike than they are different." They exist today, along the unifying theme of your "great purpose" concept. You may also wish to check out Jim Collins recent monograph "Good to Great for the Social Sector". You also need to lose that graphic of the "wall". It's so childish as to be a hairsbreadth from offensive. Also, you need a proofreader to edit this. There are a number of places where a sentence/concept is repeated several times in one paragraph. Such is the nature of drafts. I can point them out to you if you wish. Looking forward to more chapters. Best regards, Nancy DeFauw
01/26/2007 7:19:52 PM CST
Nick Theodosis says ...
Dear Mr. Mackey, I appreciate your response to my post several weeks ago regarding the Bill Gates Foundation. Although this forum may not necessarily be the most appropriate to discuss some of the issues related to our brief dialogue, I’d like to offer a few comments regarding some specific points you make in your response. 1. “Capitalism isn't perfect (what is?), but on balance it has overall improved the state of humanity tremendously… Of course many, many problems remain, but overall human progress is a historical fact which I believe a dispassionate study of long-term history makes very clear…Quite honestly there is no viable alternative to capitalism that doesn't involve some type of totalitarian government with massive losses of both human freedom and prosperity. The question isn't whether we'll have capitalism in the world or not, because we will.” To be clear, Capitalism is a relatively recent economic system, one that may or may not have been an inevitable step in our evolutionary social progress. However, there are numerous reasons for human progress, to which an economic system is but one component. I’m sure feudal farmers were pleased that animal domestication had relieved them of the duty to hunt and gather, and therefore, most would have agreed that feudalism “improved the state of humanity.” Of course, we now understand that feudalism was not the most compatible system for human progress. Capitalism is certainly responsible for numerous human advancements, but of course, this is a truism, not an argument for its continued existence. There are many possibilities for social organization which lie outside the frameworks of capitalism or totalitarianism. Limiting ourselves to such a narrow dichotomy suggests no need for creativity or freedom, just blind acceptance. It would have been quite naïve for feudal farmers to have believed in the permanence of their way of life; likewise, it would be silly to make predictions about the possibilities of our future social organization. 2. “The logic of this article is that the Gates Foundation is responsible for every negative thing that happens in every company that they invest in. Since corporations (and capitalism) are inherently evil, and the Gates Foundation invests in corporations, the Gates Foundation is also evil. If the Gates Foundation is responsible for all the "bad" things that the corporations they invest in do, then do they also get to take credit for all the "good" things that those corporations also do?" As you well know, a financial investment involves a choice to support a particular person, organization, etc. where there is the expectation of a profitable return. Where there is a choice involved, there is always some measure of responsibility. The greater influence a person or organization has, the greater the responsibility. It would be absurd to say that an oil or any other corporation is inherently evil and I don’t recall the article uses such terminology. Obviously, oil companies in particular, provide a natural resource that fuels the world. However, in this particular case,they are also destroying the lives of many people in Africa. Therefore, by investing in an oil corporation that is directly harming people the Gates Foundation is trying to help, the apparent contradiction warrants consideration and should be addressed by those responsible. 3. “By the way, if Bill Gates and the Gates Foundation are guilty by association through their investments in various corporations who sometimes do negative things, then I must point out that by this logic Mother Theresa was also guilty of heinous crimes. After all, Mother Theresa was a nun in the Catholic Church. Is she therefore responsible for the Spanish Inquisition, various Catholic wars and assasinations, or more recently sexual child abuse by various priests.” “For that matter, aren't you a citizen of the United States? Do you pay taxes to the United States government? Does that therefore make you responsible for many thousands of deaths in Iraq? Is there also a "Dark Cloud Over Nick Theodosis?" There is not a logical connection between an artificial entity like the Gates Foundation and a flesh and blood person like Mother Theresa, especially when discussing ethical commitments. Also, neither one can be held responsible for events such as the Spanish Inquisition, which occurred before their existence. I do think that if one belongs to a specific organization (religious, political, etc.) there is a certain level of responsibility for the actions of the group. Again, the more influence one has, the more responsibility involved. As an influential figure in the Catholic Church, I would have expected Mother Theresa to have condemned wars, assassinations, and sexual abuses conducted by or in the name of the Catholic Church, or any of its members. Similarly, as a tax payer and citizen of the United States, I assume a level of responsibility for the actions of my government.
01/28/2007 7:02:21 PM CST
Paul Frantellizzi says ...
Dear Mr. Mackey, Thank you for a insightful essay on Conscious Capitalism. I have for many years believed in the business values you discuss in your essay - my passion to do well, effect positive change, offer impeccable customer service, create partnerships and give back to my community has garnered my businesses positive cash flow and over time, great profits. I would like to offer one insight to the use of the word 'selfishness" in the context of your discussion as well as the broader world view. The most commonly assumed definition includes; "Excessively interested in oneself to the exclusion of others" - I would go on to say that a "Rationally Selfish" individual (one that has a balanced view of himself/ herself in the world, holds a strong sense of self confidence, and who's ideas and thoughts are congruent with reality), does care about relationships, giving back, mentoring, renewable resources, community, environment and....yes, profits. It is smart business to care, but it also ensures that the wonderful world we have experienced in our lives will be here for our children and loved ones - that is very selfish. Keep up the good work. Paul Frantellizzi
01/29/2007 6:19:14 PM CST
Mark Palmer says ...
John it has been great to watch your journey and I applaud your honesty and willingness to constantly challenge conventional thinking. Your decision to forego compensation speaks volumes about walking the talk and sets a great example of valuing work for the good we can do rather than simply by how much money we can pile up. Profit need not equal greed on a personal or a corporate level. The points in your essay are well taken, particularly regarding the unfortunate ineffectiveness of many NGO's despite the best intentions of their founders and operators. Whole Foods is continuing to set a great model for how to do good while doing well. You are great - continued success! regards Mark
01/29/2007 8:57:04 PM CST
LA says ...
When the CEO goes, does the culture go as well?
01/30/2007 2:52:34 PM CST
Amber Alkofer says ...
I thankful that you and your associates and everyone that upholds the Core Values of the Whole Philosophy has enabled myself and many like me to create a career and or involvement in the betterment of our earth and society. I breathe of your passion and of your values that mirror my own. Good for you Mr. Mackey. You have created a opportunity for myself to relish that my values and beliefs can be mirrored through my career. Through a well thought detailed intelligent approach to ethical business and beholding our environment, to say the least, what I give in my workday will not stop at the time clock it will continue to be a guiding force in the betterment (and sustainment) of a consensus of people for a: healthy, happy, and compassionate society. Best regards, Amber Alkofer
01/31/2007 3:24:12 AM CST
PhilanthroMedia says ...
I wouldn’t go as far as John Mackey, CEO of Whole Foods Market, Inc. who said in his essay “Conscious Capitalism”: "In my opinion, most modern American non-profit organizations operate with a mentality that creates inefficiencies...; most nonprofits are ineffective in fulfilling their mission" (check out his blog for the essay and a heap of commentary.) In fact, I challenged Mr. Mackey to put some examples out there. It’s a pretty flat statement, isn’t it? And it made me mad. No reply from him yet but I will point out that he is devoted to responding to those who comment…. Check out the complete entry at PhilanthroMedia.org, promoting dialog for discerning donors...
02/01/2007 6:14:57 AM CST
Dean Tucker says ...
Dear Mr. Mackey, In addition to reading your article “Conscious Capitalism” I also read the articles “The Upward Flow of Human Development” and “Declaration of Interdependence” from the Whole Foods web site. I have also read the book you recommended. Purpose, The starting point of great companies and I have the book “Firms of Endearment: the Pursuit of Purpose and Profit” on order. Also, I am a customer and stockholder of Whole Foods Market. First, let me say that words can not express how exciting I found your article Conscious Capitalism to be. I will explain my excitement later, but first I want to comment on several items in your article. Item 1.You posed the questions: “Do we need a new way to think about business? Do we need to create a new business paradigm?” With respect to those two questions, the answer is obviously a giant YES! Item 2.You posed the question “Have you ever asked yourself what is the purpose of a business?” Yes, I have asked that question, and I think that I have discovered an answer and here it is. Some companies have always known or discovered what Jim Collins terms their “Core Purpose” (Reference Jim’s book, Built to Last). However, for those companies who have not discovered their core purpose, the default purpose becomes the pursuit of profit. As a result of this, there are basically two types of companies in industry today. There are the companies who have not discovered their core purpose (the majority of companies), and they are profit driven. Then there are those few companies who know what their purpose is, and they are purpose driven. Item 3. The section titled “Great Companies Have Great Purposes” You are absolutely 100% correct in your conclusions regarding this segment, however I find Mr. Mourkogiannis’s model to be more complex then necessary to capture and communicate the concept of “management by purpose” which is really what he and you are talking about. At least that is my analysis. I also question some of his examples and conclusions. For example, he uses IBM and Tom Watson as an example of the “Discovery” category of purpose. Having worked for and retired from IBM, I have difficulty in accepting his analysis. For example, if Tom Watson did consciously know what the “purpose” of IBM was, why didn’t he codify it when he codified the company’s three basic beliefs? Item 4. Section titled “The Paradox of Profits” Kudos, 100% correct again!! I am impressed. However, I believe there are other books that substantiate the difference in financial performance besides Firms of Endearment. For example, all of the companies in the book Built to Last by Jim Collins are purpose driven companies. As Jim points out in the book, over the long term, the stock of these visionary companies as he calls them, out performed their peers by a factor of six to one. Additional data is out there, but you have to recognize it when you see it. For example, some authors call purpose by other names. It might be called “single big objective” or a “big hairy audacious goal” but in reality, those are just other descriptions for a company purpose that is something other than profit. Item 5. Section titled “The Whole Foods Business Model: Conscious Capitalism” The business model is a start, but I don’t think it will achieve the objective you are after. I must explain the last comment. After reading your blog, I have come to the conclusion that your reason for writing a book is to, in another term, assist businesses in moving from the Orange “Scientific Modernism” vMEME to the Yellow “Autonomous/Integrative” vMEME. If I am correct in my assessment, then we are both pursuing the same goal. To that end, I am in the process of writing a book in order to facilitate the migration. The key is to educate the management of America and the book is a tool to do that. The excitement that I alluded to earlier was because I was excited to find out that I was not the ONLY person who has this goal. Item 6. There are other items that I would like to comment on such as the relationship between leadership and purpose, but I will not do that at this time. I want to keep this short enough to be read. Item 7. You asked the question “Would you be willing to spend a few hours with me while reading and critiquing the following?” My answer is that I would be delighted to join you for a few hours to discuss your article. My daughter is a customer of Whole Foods Market in Austin and she has been raving about your new market at Sixth and Lamar. “Daddy, you just have to go there when you come to Austin…its amazing!” My daughter Kristen is an electrical engineer at the IBM plant there in Austin. I live in Houston so I can get to Austin quite easily. I would be happy to meet with you during the week or on a weekend. I think it would be very beneficial for both of us. I applaud your efforts and look forward to hearing from you. Respectfully yours, Dean E. Tucker
02/02/2007 10:16:05 AM CST

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