Conscious Capitalism: Creating a New Paradigm for Business

Hi Everyone,

 

I've been very gratified and impressed with your responses to my dialogue exchange with Michael Pollan over the last six months. The following lengthy essay is something I have been working on for several months; the ideas have been gestating for many years. The topic is Conscious Capitalism and I encourage you to read this material with your mind open to the possibilities inherent in these ideas. The essay is long and it may take extended time and concentration on your part to read. However, I think the ideas I articulate here are important ideas and they deserve to be read by an intelligent and critical audience.

 

Some of you may be aware that I am in the middle of two book projects. The Whole Story will relate my business and life philosophies along with my version of the story of Whole Foods Market, the company I co-founded 28 years ago. The second book, The FLOW Papers, includes several of my essays on topics related to the purpose of FLOW, a not-for-profit group I co-founded with Michael Strong in 2003-see www.flowproject.org and www.peacethroughcommerce.com. The following essay will appear in both books in modified forms.

 

I want to offer every regular reader of my blog an opportunity to co-create these ideas with me. I'm very interested in your constructive feedback. Specifically, I want to know what you like about the essay and the ideas presented within. I would also like your well-considered suggestions on how to improve the essay. Would you be willing to spend a few hours with me while reading and critiquing the following? As you may be aware, I do actually read your responses and often answer specific postings. I would like to begin a pro-active discussion of the ideas presented in the Conscious Capitalism essay.

 

I believe in the power of healthy systems to disseminate new ideas quickly. The internet is a great system for supporting co-creation of projects, ideas, and social movements. I invite you to help me provide an excellent example of just how powerful a collaborative tool this social networking system can be to help change the world. If I get valuable feedback on this essay that challenges my thinking and helps improve my presentation of the ideas via my blog, then I anticipate doing the same thing on all the other non-narrative chapters I'm writing for the book. I anticipate placing an additional chapter on the blog about every 3 to 4 weeks until my book is finished and ready for publication.

 

With love and in great anticipation of your helpful responses,

John

 

Conscious Capitalism: Creating a New Paradigm for Business

Do we need a new way to think about business, corporations, and capitalism for the 21st century? Do we need to create a new business paradigm? Corporations are probably the most influential institutions in the world today and yet many people do not believe that they can be trusted. Instead corporations are widely perceived as greedy, selfish, exploitative, uncaring-and interested only in maximizing profits. In the early years of the 21st century, major ethical lapses on the part of big business came to light including scandals at Enron, Arthur Anderson, Tyco, the New York Stock Exchange, WorldCom, Mutual Funds, and AIG. These scandals have all contributed to a growing distrust of business and further eroded public trust in large corporations in the United States.

 

Increasingly, many people believe there must be something wrong with both corporations and capitalism in the world today. The anti-globalization movement is primarily an anti-corporation movement. Many people have come to the conclusion that corporations want to dominate and control the world-in fact David Korten wrote an interesting book called When Corporations Rule the World. While many critics, including myself, take issue with Korten's assertions, the book does reflect this relatively common belief that corporations are slowly, steadily taking over the world. Since they are greedy, selfish, and uncaring, along this line of reasoning it follows that this corporate hegemony is not a good thing for the world. In short, corporations and capitalism are not generally in favor, and both have serious branding problems in the larger world today.

 

Our first theories of economics were developed during the Industrial Revolution. Prior to that, economics did not exist as a discipline. Economics was created as an explanatory response to the Industrial Revolution and initial economic models were based on industrial models of the economy. Although economic theory has evolved since Adam Smith wrote The Wealth of Nations in 1776, many economists continue using industrial and machine metaphors to explain how the economy works. Now that we are well into the post-industrial Information Age, these metaphors have become outdated and mislead our thinking about business. For example, recall the trinity of labor, land, and capital as "factors of production", and therefore as merely a means to the end of efficiency and profits. According to this model, business operates like a machine—various amounts of capital, labor, and land are inputted at the start, and spitting out on the other side of that machine are the profits. According to this model, the purpose of business, as most economists see it, is to transform factors of production into profit for the benefit of the investors.

 

The world has become much more complex since those simple machine metaphors were first developed. Unfortunately, current business thinking does not easily grasp systems interdependencies, and therefore often lacks ecological consciousness or a sense of responsibility for other constituencies, or other stakeholders, besides investors. Large corporations are still grounded in a theoretical model that does not acknowledge the complex interdependencies of all of the various constituencies. For business to reach its fullest potential in the 21st century, we will need to create a new business paradigm that moves beyond simplistic machine/industrial models to those that embrace the complex interdependencies of multiple constituencies. This is the reality in which corporations exist today and our economic and business theories need to evolve to reflect this truth.

 

I intend to raise several questions about current business thinking and practice in this chapter. Because my experience as co-founder and CEO of Whole Foods Market is in the retail grocery business, many of my examples, especially of new business thinking, will feature innovations and standard operating procedures at my own company. I encourage you to use your creative imagination to see the possibilities that exist for current business to escape outdated thinking and action, and build upon the Whole Foods Market model in future businesses youmay create as part of a new paradigm.

 

Voluntary Exchange

In a capitalistic market economy business is ultimately based on voluntary exchange; all the main constituencies of a business (such as customers, employees, suppliers, and investors) voluntarily exchange with the business to create value for themselves and for others. No constituency is coerced to exchange against their will. This voluntary exchange for mutual benefit is the ethical foundation of business (and capitalism). For example, if customers are unhappy with the prices, the services, or the selection of my business, Whole Foods Market, they are free to shop at another competitor. If our team members are unhappy with their wages and benefits, or the working conditions, they are free to seek a job with a different firm that provides more of what they seek. If investors in a public corporation such as Whole Foods Market are unhappy with the economic returns being generated, they are free to sell their shares and invest their money in some other alternative. If suppliers want better terms or different product placement than we are willing to give they are free to seek alternative outlets to sell their products. All the constituents therefore exchange voluntarily for mutual benefit, and they are free to exit the relationship whenever they wish. This voluntary exchange for mutual benefit creates the ethical foundation of business and that is why business is ultimately justified to rightfully exist within a society. This ethical foundation of business doesn't necessarily mean that everything any particular business does is always ethical, but only that voluntary exchange for mutual benefit is itself an ethical process. A business is still expected to behave ethically in its voluntary exchanges (not lie, steal, or cheat) and to be responsible for any negative impacts it may create (for example, environmental pollution).

 

The Purpose of Business

Have you ever asked yourself what is the purpose of a business? It is an interesting question that most business people never ask themselves. If you think about it, what is the purpose of a doctor or hospital? Is their purpose to maximize profits? Well, this is certainly not the purpose that they teach in medical schools or most doctors advocate. The doctor's purpose is to help heal sick people. What about the purpose of the teacher or the school? Do they exist maximize profits? No of course not. Their primary purpose is to educate the young and prepare them to live successful lives in society. What about the purpose of lawyers or law courts? All lawyer jokes aside, the purpose of a lawyer would be to pursue justice and our law courts exist to settle disputes in our society and to bring wrongdoers to justice. All of the other professions put an emphasis on the public good and have purposes beyond self-interest. Why doesn't business?

 

What then is the purpose of business and who has the right to define it? Professional economists routinely assume and teach that the purpose of business is to maximize profits for the investors. However, they seldom offer arguments to support this point of view beyond asserting that the business is owned by its investors who have a legal right to hire and fire the management (through the Board of Directors they elect) and also have a legal claim on the residual profits of the business. Both of these assertions are true, but these legal rights do not necessarily equate to defining the purpose of a business—why it exists and what its purpose and goals are. In most cases the original purpose of a business is decided prior to any capital being received from investors. While the capital from investors is obviously very important to any business, there is one participant in business who has the right to define what the purpose(s) of the business will be in the world—the entrepreneur who creates the business in the first place. Entrepreneurs create a company, bring all the so called "factors of production" together, and coordinate them into a viable business. Entrepreneurs set the company strategy and negotiate the terms of trade with all of the voluntarily cooperating stakeholders—including the investors. At Whole Foods we recruited our original investors and they freely invested with the understanding that Whole Foods had other purposes besides maximizing profits. Entrepreneurs discover and/or create the purpose of a business—not investors, or politicians, or lawyers, or economists.

 

I've known many entrepreneurs in my life, and with only a few exceptions most did not create their business primarily to maximize profits. Of course they wanted to make money, but profit was just one of the reasons they started their business. It may be that they were unable to work for anybody else, have strong authority issues, and therefore need to be their own boss. Or they need to be in charge of their own enterprise because that is how they get their sense of self-worth, value, and self-esteem. It could be that they have something to prove to their parents, siblings, or their friends and creating a successful business will exorcise unconscious childhood demons. It could be that they are very creative individuals who have ideas that they want to see tested in reality to see whether or not they work. It could be that they are idealists and want to make the world a better place, and their primary motivation for creating their business is to improve the world. It could be that the entrepreneurs create their business for the sheer fun of it. There are many, many reasons why people create businesses, and while I cannot deny that there are certain entrepreneurs who create their business primarily to maximize profits, I would say that in my life experience they are definitely a minority.

 

The founding entrepreneurs determine the initial purpose of their business, but eventually these entrepreneurs will retire or leave the businesses that they created. Does the original purpose that the founding entrepreneurs established remain in perpetuity or can it evolve over time? I believe the purpose of any business can evolve over time. This evolution of purpose is the result of the dynamic interaction of the various interdependent stakeholders with each other and with the business itself. Customers, employees, investors, suppliers, and the community all influence business purpose over time. While the investors will have the ultimate legal claim on the residual profits of the business, the purpose of the business itself evolves over time through the co-creation of the interdependent stakeholders. This is a fascinating discovery I've made about Whole Foods Market during the previous 28 years. Whole Foods Market's co-founders created the original purpose of the company in 1980, but the interdependent stakeholders have evolved it over the years. We started with a few simple ideals and core values for the company and then created very simple business structures to help fulfill those ideals. However, over time as the company grew a process of self-organization took place and layers of organizational complexity evolved year after year after year to fulfill the original core values. As the original core values were expressed over time, deeper meanings of those core values were discovered and/or created by the interdependent stakeholders. Whole Foods Market's purpose has become deeper, richer, and more complex as it has evolved over the years.

 

The "myth" that the ultimate purpose of business is always to maximize profits for the investors originated with the Industrial Revolution's earliest economists and is an idea that has remained with us ever since. How did this happen? The classical economists formulated their theories by observing and describing the behavior of various entrepreneurs and their businesses. They observed correctly that successful businesses were always profitable and that, indeed, the entrepreneurs who organized and operated these successful businesses always sought to make profits. Businesses that were not profitable did not survive for very long in a competitive marketplace because profits are essential to the long-term survival and flourishing of all businesses. Without profits entrepreneurs will not be able to invest the necessary capital to replace their depreciating buildings and equipment and won't be able to make the necessary investments to adapt to the always evolving and competitive marketplace. The need for profit is universal for all businesses in a healthy market economy.

 

Unfortunately, early economists went far beyond merely describing how entrepreneurs always seek profits as an important goal, to concluding that maximizing profits is the only important goal of business. Actually they went even further; the economists soon concluded that maximizing profits is the only goal they should seek. The classical economists went from describing the behavior in which they observed successful entrepreneurs engage while operating their businesses, to prescribing that behavior as the correct behavior that all entrepreneurs should always engage in all of the time. How did they come to this conclusion? I can only speculate here.

 

One possibility is that the classical economists became enchanted with the efficiency and the productivity of the industrial enterprises that they studied. Industrial and machine metaphors became the primary metaphors used to explain how the world really worked since this reflected the Newtonian scientific world-view that came to dominate the consciousness of the age. Every business was seen as a type of machine with various inputs and profits being the output. Profits from business became the primary capital that investors and entrepreneurs used to not only upgrade and improve existing enterprises, but also the capital used to begin new enterprises. The progress of the larger economy was dependent upon this capital accumulation, through the profits of enterprise being saved and reinvested.

 

In the United States today, we take for granted the availability of large pools of capital to invest in new businesses because our economy has been producing them for more than 250 years. However, at the beginning of the Industrial Revolution capital was quite scarce. The ability of successful enterprises to accumulate profits and the redirection of accumulated capital by the entrepreneurs and investors into new promising opportunities was largely unprecedented in history. Therefore it isn't too surprising that classical economists became enamored with the importance of profits, because profits had historically been very rare and they were essential to the continued improvement and progress of society. Industrial Age entrepreneurs had discovered a "perpetual motion machine"—enterprises organized to maximize profits, and through the reinvestment of these profits, the promise of indefinite continued growth.

 

Great Companies Have Great Purposes

If most entrepreneurs don't create their businesses for the primary purpose of maximizing profits, then what are their primary goals? The answer to this question varies tremendously from business to business—there are potentially as many different purposes for businesses as there are businesses. Entrepreneurs create their businesses for a diversity of reasons. However, I believe that most of the greatest companies in the world also have great purposes which were discovered and/or created by their original founders and which still remain at the core of their business models. Having a deeper, more transcendent purpose is highly energizing for all of the various interdependent stakeholders, including the customers, employees, investors, suppliers, and the larger communities in which the business participates. While these deeper, more transcendent purposes have unique expressions at each business they also can be grouped into certain well known and timeless categories. Philosophy dates back to Plato the timeless ideals of "The Good", "The True", and "The Beautiful" that humanity has been seeking to create, discover, and express for thousands of years. If we add the ideal of "The Heroic" to the above three we have the framework of higher ideals which most great businesses seek to express in some form or fashion. The following examples present these four ideals as created and expressed by great businesses in the world today.

 

The first great purpose that great businesses express is "The Good". The most common way this ideal manifests in business is through "Service to others". Authentic service needs to be based on genuine empathy towards the needs and desires of other people. Genuine empathy leads to the development, growth, and expression of love, care, and compassion. Great businesses dedicated to the great purpose of "Service to others" also develop methods to grow the emotional intelligence of their organizations, an emotional intelligence that nourishes and encourages love, care, and compassion towards customers, employees, and the larger community. While any category of business can be motivated by the deeper purpose of "Service to others", we find businesses that primarily depend upon the goodwill of their customers to be the most likely to express this particular deeper purpose and to devote themselves to it wholeheartedly. Some of the great businesses that best express the great purpose of "Service to others" include Southwest Airlines, Jet Blue, Wegmans, Commerce Bank, Nordstroms, REI, and The Container Store—all retailers and service businesses. Whole Foods Market also aspires to express the great ideal of "Service to others" as its primary purpose. Devotion to "Service to others" is a deeply motivating purpose that provides tremendous emotional fulfillment to individuals who truly embrace this ideal.

 

The second great purpose that animates great businesses is "The True"—the "excitement of discovery and the pursuit of truth". How very exciting it is to discover what no one has ever discovered before; to learn what has never before been known; to create a product or service that has never before existed and that advances the well-being of humanity! This great purpose is at the core of some of the most creative and dynamic companies in the world today. Google, Intel, Genentech, Amgen, and Medtronic are all examples of great companies motivated by the "excitement of discovery and the pursuit of truth". All these companies have greatly benefited humanity through their successful fulfillment of this great purpose.

 

The third great purpose that we find at the core of great businesses is "The Beautiful", which can best be expressed in business through the search for "excellence and the quest for perfection". A company that expresses beauty in the world enriches our lives in numerous ways. While we more commonly experience "The Beautiful" through the work of individual creative artists in music, painting, film, and artisanal crafts, we can also see it expressed through certain special companies who have tapped into this powerful purpose as they pursue perfection in their chosen endeavor. Some great companies who express this purpose include Apple, Berkshire Hathaway, and Four Seasons Hotels. True excellence expresses beauty in unique and inspiring ways that make our lives more enjoyable.

 

The fourth great purpose that inspires many great businesses is "The Heroic"— changing and improving the world through heroic efforts. The heroic business is motivated by the desire to change the world, not necessarily through "service to others" or through "discovery and the pursuit of truth", or through "the quest for perfection" (all three motivations that can have definite "heroic" impulses), but through the powerful promethean desire to really change things—to truly make the world better, to solve what appear to be insoluble problems, to do the really courageous thing even when it is very risky, and to achieve what others say is impossible.

 

The Ford Motor Company was once a heroic enterprise when Henry Ford first created it. Henry Ford truly changed the world in the early part of the 20th century. Microsoft changed the world in the later half of the 20th century, and so now will Bill Gates' foundation as it seeks to solve many of the world's major health problems from AIDS to malaria. One of the best examples of a truly heroic enterprise is the Grameen Bank in Bangladesh begun by Muhammed Yunus. His heroic dedication to ending poverty in Bangladesh and throughout the world resulted his winning the 2006 Nobel Peace prize. I recommend reading his book Banker to the Poor for an inspiring tale of heroic enterprise. Most heroic enterprises are begun by charismatic, heroic entrepreneurs and the organization's biggest challenge is to successfully institutionalize the heroic purpose after the founding entrepreneur dies or moves on. Very few heroic enterprises have been able to do this over the long-term.

 

I recommend two books that present the importance of business purpose in great detail are Built to Last by Jim Collins and Jerry Porras, and Purpose: The Starting Point of Great Companies by Nikos Mourkogiannis. I have especially drawn on Mourkogiannis's ideas for this section and heartily recommend his book.

 

The Paradox of Profits

My thesis about business having important purposes besides maximizing profits should not be mistaken for hostility toward profit, however. I believe I know something about maximizing profits and creating shareholder value. When I co-founded Whole Foods Market in 1978, we began with $45,000 in capital; we only had $250,000 in sales our first year. In 2006, Whole Foods Market had sales of more than $5.6 billion, with net profits of more than $200 million, and a market capitalization over $8 billion. Profits are one of the most important goals of any successful business and the investors are one of the most important constituencies of the business. Paradoxically, the best way to maximize profits over the long-term is to not make them the primary goal of the business.

 

I will use an analogy to explain the best way to create long-term profits. The analogy is "happiness" because in my life experience happiness is best experienced by not aiming for it directly. A person who focuses their life energies strictly on striving for their own self-interest and personal happiness is often someone who is also a narcissist, someone who is self-involved and obsessed with their own ego gratification. Ironically, chances are good that they won't actually achieve their goal of happiness pursuing it in this way. In my experience, happiness is a by-product of other things; happiness comes from having a strong sense of purpose, meaningful work, good friends, good health, learning and growing, loving relationships with many people, and helping other people to flourish in living their lives.

 

If we have a strong sense of purpose, good friends, loving relationships, meaningful work, and good health it's very likely that we will also quite frequently experience happiness in our lives. Yet, happiness is a by-product of pursuing those other goals and I think that analogy applies to business as well. In my business experience, profits are best achieved by not making them the primary goal of the business. Rather, long-term profits 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 profits. The paradox of profits is that, like happiness, they are best achieved by not aiming directly for them.

 

Long-term profits 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 profits. A business model more in touch with our complex, post-modern, information-rich world is a complex self-adaptive system of interdependent constituencies. Management's role is to optimize the health and value of the entire complex, evolving, and self-adaptive system. All of the various constituencies connect together and affect one another. If we optimize the health and value of the entire interdependent system and the well-being of all the major constituencies, the end result will also be the highest long-term profits for the investors as well.

 

Conversely, if a business seeks only to maximize profits to ensure shareholder value and does not attend to the health of the entire system, short-term profits may indeed result, perhaps lasting many years (depending upon how well its competitor companies are managed). However, neglecting or abusing the other constituencies in the interdependent business system will eventually create negative feedback loops that will end up harming the long-term interests of the investors and shareholders, resulting in sub-optimization of the entire system. Without consistent customer satisfaction, employee happiness and commitment, and community support, the short-term profits will probably prove to be unsustainable over the long-term (assuming its competitors manage their businesses to create value for all of their stakeholders).

 

The most common objection to the above argument is that several thousands of businesses are highly profitable that are not actively managed to optimize the value for all of the stakeholders. Instead they put the interests of their investors first and they are also highly profitable. Doesn't this disprove my argument? No, because most businesses are simply competing against other similar businesses that are organized and managed with the same overall values and goals—maximizing profits. The real question is, how does a traditional profit-centered business fare when it competes against a stakeholder-centered business? The only study I know that tries to answer this question is Firms of Endearment: the Pursuit of Purpose and Profit by David Wolfe, Rajendra Sisodia, and Jagdish Sheth (2007 by Wharton School Publishing). I highly recommend this as one of the best business books I've yet read. The authors identify 30 companies that are managed to optimize total stakeholder value instead of focusing strictly on profits and track long-term stock performance of those that are publicly traded compared to the S&P 5001. The chart below shows this comparison.

Conscious Capitalism Figure 1

As the chart above indicates, companies that are managed to create value for all of their stakeholders have had extraordinarily high stock market returns both over the short-term and the long-term. This is no accident in my opinion. Rather it is the result of all 30 firms creating a superior business model-the business model that I believe will become the dominant business model of the 21st century.

 

Stockholders Maintain Legal Contro

l Optimizing value for all the interdependent stakeholders does not mean, however, a loss of legal control of the business for the investors. The owners/investors must legally control the business to prevent their exploitation by management and by the other stakeholders. However, the owners/investors do get paid last. What do I mean by this statement? The customers get paid first in their relationships with the business—in that they come in, find products or services they desire, purchase those products or services, receive those products or services fairly quickly, and often pay after the product or service has been rendered to them (for example, they eat before they have to pay at a café). Next, the employees render their services and get paid on a short-term, periodic basis. Whole Foods team members receive their pay every two weeks. The suppliers get paid, according to agreed up on terms and timeframes, and government taxes are remitted monthly and quarterly. The owners/investors are paid last, after everyone else has received goods, services, wages, or payment. The investors are entitled to whatever is left over, the residual profits. Because they are paid last, investors must have legal and fiduciary control of the business to prevent management or other stakeholders from exploiting them. Investors usually demand these conditions as a requirement for investing their capital in a business.

 

Management does have legal and fiduciary responsibility to maximize long-term shareholder value. However, the best way to maximize long-term shareholder value is to simultaneously optimize value for all the major constituencies, because they are all interdependent upon one another. This is one of the most important truths that I have learned while creating and growing Whole Foods Market. I cannot deny that occasionally there are conflicts of interest among constituencies, but in general a "harmony of interests" exists between the different constituencies, since they are so dependent on one another. The best way to maximize long-term shareholder value is to simultaneously optimize the value for all other constituencies. The health of the entire system is what really matters. The following graphic model illustrates one example of what I mean by the phrase "Conscious Capitalism".

 

The Whole Foods Business Model: Conscious Capitalism

WFM Model

 

Whole Foods Market's Conscious Capitalism

At the center of the Whole Foods Market business model illustrating holistic interdependence, you'll find our Core Values and Business Mission. Everything else extends from the purpose of the business reflected in the Core Values. Surrounding these central purposes are the various constituencies: customers, team members, suppliers, investors, and the community and environment. All are linked interdependently. Retail business provides a simple model to illustrate that management's role is to hire good people, train them well, and do whatever it takes to have those team members flourish and be happy while they are at work. The team member's job, at least at Whole Foods, is to satisfy and delight the customers. If we have happy customers, we will have a successful business and happy investors. Management helps the team members experience happiness, team members help the customers achieve happiness, the customers help the investors achieve happiness, and when some of the profits from the investors are reinvested in business you end up with a virtuous circle. I find myself continually astounded about how few business people understand these linkages. But market analysis increasingly illustrates that the businesses with a sole purpose of maximizing profits, in other words, those that do not understand that their profits are produced by an interdependent system of constituencies, are less successful over the long-term2.

 

Core Values

When businesses have a purpose beyond maximizing profits, that purpose is often expressed in the business mission. Core values constitute the guiding principles the business uses to realize its purpose. Whole Foods Market's core values very succinctly express what the purposes of the business are—purposes that include making profits but also include creating value for all of the major constituencies. I want to talk briefly about Whole Foods Market's Core Values. Our business talks and walks our values; we share them with our constituency groups, and invite feedback in the form of dialogs. The core values are: selling the highest quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence, creating wealth, profits, and growth, and caring about our communities and environment.

 

Selling the Highest Quality Natural and Organic Products Available

Whole Foods Market is the leading retailer of natural and organic foods in the world;. We have developed strict and explicit quality standards, which we review regularly. We are very proud that we have helped improve the health, well-being and longevity of millions of people, and that we have proven that good health and pleasurable eating are compatible goals. Whole Foods Market resists the continuous trend toward the degradation of the quality of our food through the industrialization of food production. While this industrialization of our food supply has increased efficiency and lowered the cost of many food staples, both of which are beneficial to society, the process has also resulted in many negative unintended consequences. Many of the practices developed for the industrialized food system have resulted in lower nutritional quality for our food and negative environmental impacts such as pesticide contamination and concentrated animal waste products from CAFOs (Concentrated Animal Feeding Operations). We see this particularly in our animal foods production. Widespread factory farm production of our animal foods results in a tremendous cost to the well-being of the animals, along with severe, negative impacts to food safety and human health that are only recently becoming better known in the public arena. To combat this assault on multiple fronts, and to walk our core values, Whole Foods Market is very proud to be developing animal compassionate production standards, working in concert with concerned stakeholder groups.

 

Satisfying and Delighting our Customers

The customer is our most important constituency, since with no customers, we have no business. We are always aware that customers shop voluntarily—they are not coerced to shop. If they are unhappy with our business they will go trade someplace else. Because of the voluntary nature of business, we design our business model around the customer, who must be treated as an end and not as a means. What I mean by this statement is that the well-being of the customer must be seen as the most important goal overall and not as a means to profit for the business. In my experience, businesses that think of customers as means to the end of profit do not have the same commitment to service, empathy, and understanding of customers' well-being as the business that treats customers as ends instead of means. Customers are very intelligent! They know when someone is doing a sales job on them, and they know when someone genuinely cares about their well-being.

 

Supporting Team Member Happiness and Excellence

In order to treat the customers as an end we have empowered our team members to satisfy and delight our customers. New team members are trained to do whatever it takes to satisfy our customers. Happy customers create happy investors. In order to have happy customers we also need to have happy team members because the team members are primarily responsible for creating happy customers. When team members are frustrated, dissatisfied, and unhappy in their work they are unlikely to give the high levels of customer service that the business needs to flourish.

 

Within a complex interdependent self-evolving system, team members must also be treated as ends and not means. Their well-being and happiness must be an end in itself, not merely a means to the profits of the business. Our internal business model within each store is the self-managing team. These teams are the organizational cells of the business. The teams do their own hiring, work scheduling, and product procurement. They are running their own small business within the store, and they have full responsibility for the business. Each team is empowered on many levels, not only in customer satisfaction.

 

I also believe that it is absolutely essential to trust team members, and one way to show that trust is through open information. Whole Foods provides open financial information—on all levels since want to be as transparent an organization as possible—without making ourselves overly vulnerable to our competitors. I think it essential that the team members have a sense of shared purpose and power. If team members can align around the values and purpose of the business, they are going to have a greater commitment to the business. They will likely unleash greater energy and creativity through that sense of alignment and shared purpose. At Whole Foods, we consciously reject the command and control management style. This top-down, "Do It My Way" approach is the opposite of team member empowerment. We also teach the importance of "shared fate", and by shared fate I mean that the better the company does, the better the customers do, the better the team members do and the better the investors do. Once again, I reference the interdependent nature of the relationship of all the constituencies: happy team members create happy customers, happy customers create happy investors.

 

Another innovative practice at Whole Foods is the sharing of salary information, so that what everyone gets paid is open information. I believe this is the best way to deal with envy, which exists as part of human nature and in any organization. To deal directly with envy, a business must open up and becoming more transparent. When unjust employment compensation exists, the situation will be noticed and a feedback mechanism will develop to correct it. Conversely, by having such transparency, people can see what skills and qualities are most highly valued and rewarded in the organization so that they can know what to strive for with their own career objectives. We also have a salary cap at Whole Foods, which is currently 19 times the average pay (raised from 14 times average pay on November 2, 2006); more about that in just a second.

 

Conscious Capitalism Figure 3

 

Yet another innovation is our benefits vote, wherein we let team members vote every three years on what benefits they can enjoy. After fielding repeated and ongoing requests for various benefits as I traveled around to our stores to meet with team members, I realized that I was not smart enough to figure out the right mix of benefits for Whole Foods. Our team members were forever asking me if they could have this or that additional benefit. Requests for addition benefits are endless. But this is also true for every stakeholder—the desire for a better deal. Every stakeholder is always looking for more. Customers are always looking for lower prices and higher quality. Investors want higher profits. Team members want higher pay and additional benefits. The government wants higher taxes, and the community wants larger donations. I realized that I was not smart enough to figure out the right mix of benefits for Whole Foods team members; instead the executive leadership now decides what percentage of the total revenue will go toward benefits for the company, and then assigns a cost for every potential benefit. Every three years our team members prioritize and vote on the benefits that they most prefer. This process results in benefits that reflect the needs and desires of the majority of the team members in the company.

 

I also believe in promoting gain-sharing to the largest extent possible. Gain-sharing means creating incentive and compensation for every team member working at a company. Through this process, a team member basically receives his/her just rewards for efforts expended and teamwork is critical to success. A business should clearly define what it is that it wants to reward and then set up an incentive program around those criteria.

 

We also grant stock options to all team members in the company, and 93 percent of our stock options go to non-executives. We have instituted fully paid health insurance for all of our full-time (30 hours per week) team members, or close to 90 percent of all the people that work for Whole Foods. The remaining 10 percent part-time (less than 30 hours per week) team members are encouraged to buy our discounted health insurance if they wish. We also offer personal wellness accounts that allow team members many additional options for their health spending, and health saving accounts. These allow team members to cover the deductible for the health insurance plan or to pay for health services that are out of coverage, such as acupuncture and chiropractic. Money not used rolls over to the next year's wellness account or into a health savings account. We also grant stock options to all team members in the company, with an unprecedented 93 percent of our stock options going to non-executives.

 

 

The Distribution of Stock Options

Conscious Capitalism Figure 4

 

Our emphasis on team member happiness is working and when team members provide us with feedback, we respond. We are very proud of the fact that Whole Foods Market has been named by Fortune Magazine as one of the 100 best companies to work for during the last nine consecutive years through 2006. Does an emphasis on team member happiness pay off for investors? In a zero sum world it would not. Team member gains would necessarily mean investor losses. Fortunately we don't live in a zero sum world. Rather, we live in an interdependent world where the flourishing of the various stakeholders creates mutual benefits for each other. The chart below clearly shows that creating a great place to work and employee happiness does not necessarily come at the expense of the investors in the business. The companies comprising Fortune Magazine's list of the 100 Best Companies to Work For have significantly outperformed both the S&P 500 and the Russell 3000 indices since the list was first created in 1998. This is strong evidence that supports the ideas I'm articulating in this chapter.

 

Fortune's "100 Best Employers" vs. Stock Market 1998-2005

Conscious Capitalism Figure 5

Creating Wealth, Profits, and Growth

While creating value for both customers and team members are very important, so is creating value for the investors. All three stakeholders are interdependent upon one another. All must flourish together. As one of our core values, we feel that Whole Foods Market has a responsibility to create prosperity through profits and growth. We consider ourselves stewards of the investors' money and because of this, frugality is important. We strive never to waste the investors' money. Profits are created through voluntary exchange for mutual benefit, not through exploitation of people. This very important truth reveals as false the many critiques of capitalism, such as Marxism, which argues that all profits should belong to labor because labor creates all of the value of the business. However, this Marxist theory of labor value isn't true. All value is not created through labor in business, although of course labor does create a significant portion of value (and also receives the appropriate share of the value it generates). Management also creates value with strategic direction, proper resource allocation, and through organizing the business in effective and efficient ways. Investors create value through the capital they have invested. Without sufficient investment capital businesses are unable to buy necessary equipment or invest in necessary leasehold improvements to operate the business or make investments in research and development for the future. Investors deserve competitive returns on their business investments; otherwise they will withdraw their capital from the business and redirect it to alternative investments which give them higher returns. The different suppliers trading with the business also deserve fair returns in exchange for the goods and services they provide to the business, as do the landlords who provide the real estate to operate the business. Everyone trading with a business is trading voluntarily and their own profits are created through exchange with the business. Any money left over from the myriad of voluntary exchanges is justly owned by the investors in the business. This is their profit. They have been paid last after every other trader has completed their exchanges.

 

Profits create wealth, prosperity, and additional capital. Capital inputs fund most technological innovation and progress. For example, 200 years ago 95 percent of the world's population was considered poor. Today about 60 percent of the global population is still poor. In the last 200 years we have seen the poverty rate drop from 95% to 60%. At the current rate of growth, we are going to see world poverty drop considerably in the next 50 years; by the year 2050 only about 25 percent of the world's population will remain below the poverty level. We are seeing this happen right now with the explosion in the economies of two of the most populated countries in the world-China and India. These two economies are growing at extremely rapid rates and hundreds of millions of people are being lifted into the middle class and moving out of poverty. This illustrates one of the most important purposes of business. Business has the fundamental responsibility to create prosperity for our society and for the world.

 

The Whole Foods Market system of Conscious Capitalism and managing the business for the benefit of all its stakeholders works very well and it creates tremendous long-term shareholder value. Whole Foods is the fastest growing and the most profitable public food retailer, percentage-wise, in the United States. Our same store sales have averaged close to 10 percent for the last 10 years. If you compare that to conventional supermarket companies such as Kroger's, Safeway, Albertson's, Wild Oats or Wal-Mart you'll see that our same-store sales are somewhere between 300 and 500 percent greater than same-store sales at conventional markets. Our sales per square foot currently exceed $900, more than twice as high as any of our previously identified competitors. Our store return on after-tax invested capital is 34 percent overall, and higher for stores that have been open for more than one year. Whole Foods Market's stock price has increased almost 3000 percent since our IPO in 1992. The sum of $10,000 dollars invested during our IPO would be worth nearly $300,000 today.

 

Suppliers are Partners

The fourth stakeholder group consists of thousands of suppliers who provide us with invaluable goods and services. Without our suppliers we wouldn't have anything to sell and the business would quickly cease to exist. I believe the best attitude toward the various suppliers of any business is to view them as essential partners in the enterprise. To keep the system of interrelated stakeholders healthy, most of the suppliers of a business should also flourish through their voluntary trade with the business. While in the competitive marketplace it is impossible for all suppliers of a particular business to simultaneously succeed—inevitably some will fail through a lack of quality or efficiency—it is essential that most suppliers successfully flourish in order to have the capital to improve their quality and the efficiency of their products and services. Honesty, fair trading, and an attitude of helping one's suppliers to learn, grow, and continuously improve are valuable attitudes to have in relating to the vendor stakeholder group. As suppliers improve the quality and efficiency of their goods and services, this will also improve what the business can offer to its own customers. I've watched the suppliers in the natural and organic products marketplace continuously improve for almost 30 years. A large part of Whole Foods Market's success has been the result of the continuous improvements and countless innovations of our vendor community.

 

Caring About our Communities and Environment

The fifth constituency is our community and the sixth is the environment. I believe that business is best thought of as a citizen existing within the communities where it does business. Business even enjoys the same legal status as a person. As citizens, businesses have responsibilities to their communities just like every other citizen. These responsibilities are not infinite, just as we do not have infinite responsibilities as individual citizens to our government or to the local communities in which we live, but we do have some. Most community responsibilities are met through following all the laws that exist in the communities and by paying all the taxes assessed on the business. However, just as individuals may choose to give additional community support beyond simply complying with all laws and paying their taxes, so may business. Vital dynamic communities need philanthropic support from both individuals and from businesses that participate within the community.

 

I believe philanthropy is consistent with citizenship and should be managed prudently and efficiently just like every other aspect of a business. Philanthropy, executed properly, can also contribute to shareholder value through increased goodwill with customers, team members and communities. In my experience, philanthropy is not a win/lose situation, where money is being taken away from investors and shareholders and given to someone undeserving. Instead, with business viewed as an interdependent system of various constituencies, if you manage the business for the health of all the constituencies, optimizing the community constituency provides positive feedback effects on the shareholder constituency. For example, when our stores do the right thing by our communities, we create goodwill with our customers and team members, so that they both feel good about the business. We also tend to generate good public relations by doing the right thing in our communities, leading to positive media attention. We are enhancing the long-term brand and viability of our business and all of the above ultimately pays benefits to our investors.

 

In meeting our responsibilities as citizens, Whole Foods Market donates five percent of our after tax profits to non-profit organizations, with nearly 75 percent given away on a local basis. Whole Foods Market supports various food banks, local community events, school functions, and Boy and Girl scouts, whose families might also patronize our stores. We likewise support health initiatives such as fighting AIDS, and breast and childhood cancers. With 188 stores currently, we give to thousands of local organizations. Many of our customers belong to or volunteer with the organizations we support, and as they trade with Whole Foods Market, we are in turn supporting them in the communities in which we live and do business. Many of our stores also compensate team members for community service work, either on an individual basis, or as a group.

 

Whole Foods Market trades throughout the world and we recognize our responsibilities as global citizens, as well. Poverty remains one of the most serious global challenges, and one of the ways we are trying to be good global citizens is through the creation of Whole Planet Foundation. Our mission with Whole Planet Foundation is to create economic partnerships with the poor and developing world communities that supply our stores with products. Through innovative assistance for entrepreneurship, including direct micro-credit loans, as well as intangible support for other community partnership projects, we seek to support the energy and creativity of every human being we work with in order to help create wealth and prosperity in emerging economies.

 

Whole Planet Foundation's current efforts center in both Costa Rica and the Lake Atitlan district of Guatemala, in villages from which Whole Foods purchases pineapples, bananas, and coffee. Additional projects are being set up in India and Nicaragua, and eventually we will have micro-credit projects throughout the world. Whole Planet Foundation partners with Grameen Bank, which pioneered micro-lending to the poor (both Grameen Bank and its founder, Muhammed Yunnus won the 2006 Nobel Peace Prize). Most loans will go to women, who tend to be the most economically and socially marginalized constituents in many rural communities. Grameen's work in other parts of the world has shown that women have a huge impact on their communities when given access to credit with which to start small businesses. The system Whole Planet Foundation employs is consistent with Whole Foods Market's long-standing internal philosophy of empowerment. For more information on the Whole Planet Foundation go to http://www.wholeplanetfoundation.org/

 

The silent stakeholder that can never speak for itself is the environment. All of our other constituencies can speak up when they are unhappy about something. We consider the environment as linked to our community constituency. As a business, we exist within both a local and global environment. Whole Foods wants to be a responsible citizen in the environment in which we live. We do this by supporting organic and sustainable agriculture and by selling sustainably-harvested seafood.

 

From its start in 1978 as Safer Way, Whole Foods Market has promoted organic food and the agricultural systems from which it derives. By helping to develop markets, customers, distribution networks, and even the national standards for labeling for organic foods, Whole Foods has also promoted the environmental benefits that accompany the increasing number of organic farms, dairies, ranches and sustainable agricultural practices. For example, organic farms utilize no synthetic fertilizers and pesticides, resulting in reduced usage of fossil fuels, and less chemical contamination entering food chains and water supplies. While some products are transported long distance to meet consumer demand, Whole Foods Markets also stock as many locally-grown and/or manufactured products that meet our quality standards as are available in our market areas.

 

Organic and sustainable agricultural methods, in addition, build healthy, vital soil rich with microorganisms and nutrients, featuring superior moisture retention and a resistance to erosion. Other benefits include increased biodiversity when compared to the vast mono-cultural fields found on industrial farms, and the maintenance of food safety and the integrity of soil and crops by prohibiting the use of genetically modified organisms. Organic agriculture typically acknowledges the role food animals have in our foods systems and preserves the integrity of meat and dairy products by prohibiting the use of antibiotics and artificial growth hormones.

 

Whole Foods Market is working towards animal compassion with livestock animals and eliminating cruel practices in commercial livestock production. Whole Foods Market refuses to sell commercial veal from tethered calves, foie gras from force-fed ducks, or live lobsters, feeling that the methods used to produce and transport and display before sale these animals are too inhumane. Helping create alternatives to the "factory farm" methods of raising livestock is a goal that Whole Foods Market is strongly committed to and we have created animal compassionate standards through a multi-stakeholder process to try to raise the bar. Our standards can be seen in more detail at: http://www.animalcompassionfoundation.org/standards.html.

 

Industrial pollution and over-fishing cause tremendous damage to our oceans. Coral reefs have declined by 30% in the last 30 years. It is estimated that the total number of whales in the world has declined 90% in the last 100 years. World supplies of cod, swordfish, marlin, halibut, skate, and flounder have been reduced by over 50% in the last 50 years. We are fishing out the oceans, it is happening in our lifetimes. Whole Foods refuses to sell seafood species such as blue fin tuna that are considered to be endangered species by a consensus of seafood experts. We have long supported The Marine Stewardship Council, both financially and through participation on their Board of Directors.

 

Whole Foods Market addresses its energy usage in several ways. We track our energy use by store, and are moving that analysis down to the equipment level, so that we can track when outdated appliances need to be replaced. We utilize solar energy and other green building practices in our newer stores, and harness the idealistic energy of many of our younger team members in our Green Mission teams. Our Green Mission team members throughout the company are empowered to work together to systematically lessen our environmental impacts. Our Green Teams have been highly effective in moving the company forward to greater and greater environmental integrity through numerous reusing, recycling, and re-education initiatives.

 

Finally, in 2006, Whole Foods Market took the lead as the largest corporate purchaser of wind energy credits in the nation as we offset 100% of our building energy needs with wind energy credits. Each store and office has a comprehensive recycling program, and we open up many of our recycling initiatives to our customers.

 

In summary, Whole Foods Market meets its responsibilities to both local and global communities, often with innovative programs, and has led by example in many pro-environment initiatives. Whole Foods is also aware that its operations provide many opportunities for improvement in the future. As with our other constituency groups, we have no intention of becoming complacent.

 

Creating a New Paradigm for Non-Profit Organizations

I want to briefly discuss the limitations of the current non-profit models that exist in the world today. In my opinion, most modern American non-profit organizations operate with a mentality that creates inefficiencies, waste, and stagnation; most non-profits are ineffective in fulfilling their mission. Fully 99 percent of non-profit organizations are dependent upon donations from the business sector or private citizens in order to exist; they're not sustainable on their own. Most non-profits feel pretty good about themselves because they have idealistic, altruistic goals—they have stated purposes beyond maximizing profits. They are do-gooders, trying to do good things in the world. But these good intentions beg the question—are these altruistic goals enough by themselves to make non-profit organizations good and ethical, and do these goals also make them effective? Are the noble purposes by themselves enough? And just because the goals are idealistic does that mean that a non-profit organization is able to completely transcend self-interest? I argue, probably not.

 

It's my position that non-profit organizations also need to evolve to a more holistic model, just as business needs to. Below we have a great graphic depicting a common view of the good, altruistic non-profit organizations versus the evil, selfish greedy corporations.

 

Conscious Capitalism Figure 6

A wall exists between the non-profits and for-profits consisting partly of the stereotypes that exist in our society today. Non-profits are viewed as good because they have altruistic, idealistic goals. As you can see on the graphic, non-profits often believe that money "grows on trees", and because their ideals are altruistic, they are seen as "angels". Non-profits sponsor idealistic events like AIDS walks and they have an environmental consciousness. On the other side of the wall you see the clear contrast with the for-profit sector of business. You see the stereotype of the greedy businessman with dollar signs in his eyes, grasping after money, and smokestacks popping up all around the world. The world is plastered with high-rise buildings and the environment is being destroyed, with the angel being transformed into a devil because again, the only goal is to maximize profits and that it is seen as simply selfish and greedy.

 

I think these stereotypes have outlived their usefulness. As a global society we need both non-profit and for-profit organizations to become holistic and integral, the wall that separates them needs to be torn down, and the polarities integrated. Corporations must rethink why they exist. Corporations need to become more conscious, and identify deeper and more comprehensive purposes for why they exist. They must evolve past machine metaphors and learn how to think holistically in terms of creating value for all there interdependent constituencies. Likewise non-profits must become economically sustainable and must discover that money and profits are good, not evil, and that they are a necessary part of a healthy holistic organization. A great example of this is Grameen Bank.

 

Grameen Bank is a non-profit organization begun in Bangladesh by Muhammed Yunus that has not only helped millions of people lift themselves out of poverty, but it has also become financially sustainable. Grameen Bank provides a great model toward which other non-profits should aspire. Started in 1983 by Muhummad Yunnus, in his native Bangladesh, Grameen Bank offers small, collateral-free loans to (predominantly) poor women who pass certain criteria. Founded on the basis of trust and solidarity, Grameen (Village) Bank works with its customers on their business plans, and requires a particular code of conduct that emphasizes community building behaviors and actions. Principal and interest from the loans, typically repaid by small weekly installments, go back into the borrower's local operating funds, to fund new loans. By providing financial opportunity to traditionally underserved clients, Grameen Bank has realized a repayment record of more than 97% (one of the best bank repayment records in the world). This contrasts with a repayment rate of less than 60% over the same timeframe in the traditional Bangladesh banking world that caters to middle and upper class clients. In the 20+ years Grameen Bank has been in business, the income of more than 50% of the families of Grameen borrowers have risen above the poverty level.

 

In Bangladesh today, Grameen operates 1,084 branches, serving 2.1 million borrowers in 37,000 villages. On any working day Grameen collects an average of $1.5 million in weekly installments. Of the borrowers, 94% are women. Although operating in the realm of philanthropic organizations in that it has altruistic goals and ideals, Grameen Bank employs a model that is self-sustaining. Although it welcomes donations, the alternative bank does not rely on the business or private sector for its operating expenses, and provides a sustainable model toward which other non-profits should aspire. Grameen methods are now applied in projects in 58 countries, including the US, Canada, France, the Netherlands and Norway.

 

Once the conceptual wall separating non-profits and profits is torn down, it becomes clear that businesses and non-profits are potentially much more alike than they are different. They both can become holistic, and at a higher integral level, non-profits and for-profit businesses look remarkably similar. An ideal non-profit's organizational model looks very similar to the Whole Foods Conscious Capitalism model introduced earlier. The non-profit expresses core values and it has similar constituencies to a business: employees, customers, suppliers, and investors/donors. The donors want the organization to achieve its societal mission, and if it does the donors will be happy, and will send increased financial resources to the non-profit organization. Just because it has a social mission does not exempt the non-profit from community and environmental responsibilities. The holistic non-profit has a very similar model to the holistic business, an important point I want to underscore. The following graphic illustrates the holistic model for non-profit organizations.

 

Non-Profit Business Model: Sustainability

NonProfit Model

 

Conclusion

The old paradigm of maximizing profits and shareholder values as the sole purpose of business has created negative unintended consequences. Businesses and corporations are seen as greedy, selfish, and evil. Business is seen as despoiling the environment and causing harm in the world. Business has a very bad brand. We can remove most the hostility toward business and capitalism if we can change the way we think about it and if businesses work on becoming better citizens. Business needs to become holistic and integral with deeper more comprehensive purposes. Corporations must rethink why they exist. If business owners/entrepreneurs begin to view their business as an complex and evolving interdependent system and manage their business more consciously for the well-being of all their major stakeholders while fulfilling their highest business purpose, then I believe that we would begin to see the hostility towards capitalism and business disappear around the world.

 

In summation, business is fundamentally a community of people working together to create value for other people, their customers, employees, investors, and the greater society. Business interacts within a harmony of interests. At the same time non-profits need to become economically sustainable and discover that money and profits are good, not evil, and necessary for them to fulfill their purposes. A holistic perspective is essential for non-profits. A new Conscious Capitalism paradigm will improve the effectiveness of each type of organization. But on a basic philosophical level, why try to "do good" in the world? Why isn't the pursuit of our own self-interest enough? Perhaps we need to look more closely again at what Adam Smith wrote. The Wealth of Nations was a tremendous achievement, but economists would also be well served to read Smith's other great book, The Theory of Moral Sentiments. There he explains that human nature is not just about self-interest. It also includes sympathy, empathy, friendship, love, and the desire for social approval. As motives for human behavior, these are at least as important as self-interest; for many people, they are more important.

 

When we are small children we are egocentric, concerned only about our own needs and desires. As we mature, we grow beyond this egocentrism and begin to care about others—our families, friends, communities, and countries. Our capacity to love can expand even further, to loving people from different races, religions, and countries—potentially to unlimited love for all people and even for other sentient creatures. This is our potential as human beings, to take joy in the flourishing of people everywhere. 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.


1The publicly-traded companies included in the study include: Amazon, Best Buy, CarMax, Caterpillar, Commerce Bank, Costco, eBay, Google, Harley Davidson, Honda, JetBlue, Johnson & Johnson, Progressive Insurance, Southwest Airlines, Starbucks, Timberland, Toyota, UPS, and Whole Foods Market. 2Sisodia, Rajendra, Wolfe, David, and Sheth, Jagdish, Firms of Endearment: the Pursuit of Purpose and Profit, (manuscript), Wharton School Publising, 2007.


Let me try to clear up a few misunderstandings about the ideas expressed in this chapter via the questions posed at previous presentations of this material:

 

Q: Why am I opposed to profit?

 

A: I am not opposed to profit. As I have pointed out, Whole Foods Market is a highly profitable company. Profits are good. Profits are an important part of what business is about, but profits are not the sole purpose of business. Business has other purposes than merely maximizing profits. Entrepreneurs who create businesses rarely create businesses solely for the purpose of maximizing profits and entrepreneurs are the ones who ultimately define, in my opinion, the purpose of the businesses they create. Most businesses have purposes besides maximizing profits, because entrepreneurs create them for other purposes. There may be certain occasions where an entrepreneur creates a business and is only concerned with maximizing profits; he or she is entitled to do so, it certainly is not unethical. But strictly profit based business probably won't be as successful or profitable a business over the long-term as it could be. I do not think it will compete well head-to-head with a more holistic and integral business model, if the business strategy and all other things are equal. I am not arguing that a business cannot operate solely for profits, I'm merely stating that many, if not most, businesses are not that way when entrepreneurs first created them. If business leaders become more conscious of the fact that their business it is not really a machine but part of a complex interdependent and evolving system with multiple constituencies, they will see that profit is one of the important purposes of the business, but not the sole purpose. They will also begin to see that the best way to maximize long-term profits is to create value for the entire interdependent business system. Once enough business leaders come to understand and accept this new business paradigm, I believe that Conscious Capitalism will reach a takeoff point and the hostility toward business will largely dissipate over the long-term.

 

Q: Does philanthropy equal social responsibility?

 

A: No, philanthropy is actually just a small part of the social responsibility of business. The social responsibility of business is about creating value for all of its constituencies. If you are creating value for your customers and employees, acting with integrity toward your suppliers, if you are a good citizen paying taxes, if you take responsibility for your environmental impacts, you'll fulfill most of your social responsibilities. However, if a business is responsible to its investors, employees, customers, suppliers, and the environment but refuses to contribute toward philanthropic organizations, it would be neglecting the important community constituency. It would be a stingy neighbor to have, but it could still be creating value in the world through the value it creates for its customers, employees, suppliers, government, and the environment. The contrary is also true: a business could be highly philanthropic to its communities, but if it is creating shoddy or harmful products, exploiting its employees, cheating its suppliers, and doing significant damage to the environment it can hardly be considered an ethical or socially responsible business no matter how great its philanthropy is.

 

Philanthropy is not primarily what social responsibility is about, but it is also not "theft" from the investors if a business chooses to contribute some money to the communities where it has a presence. That would be part of its responsibility as a citizen and such donations will not only help the community, but will simultaneously create good will with customers, employees, the media, and other citizens in the community. I believe that while philanthropy does not equate to social responsibility by itself, philanthropic donations are certainly consistent with being a responsible citizen in the community in which business exists.

 

One common objection to philanthropy is where to draw the line? If donating five percent of profits is good (as Whole Foods does), wouldn't 10 percent be even better? Why not donate 100 percent of our profits to the betterment of society? But the fact that a business has responsibilities as a citizen in the various communities it exists in doesn't mean that it doesn't have any responsibilities to investors or other stakeholders. It's a question of finding the appropriate balance and trying to create value for all of the stakeholders simultaneously. Whole Foods donates five percent of its profits to the community stakeholder (in addition to the taxes we pay). Is five percent the "right amount" to donate to the community? I don't think there is a right answer to this question, except that I believe zero percent is too little. It is an arbitrary percentage that the co-founders of the company decided was a reasonable amount and which was approved by the owners of the company at the time we made the decision. Corporate philanthropy is a good thing, but it ultimately requires the legitimacy of investor approval, and the investors as the owners of the business have the right and the authority to withdraw their approval if they wish. In my experience, most investors understand that modest philanthropy can be beneficial to both the corporation and to the larger society. They understand that philanthropy is consistent with creating long-term profits for the investors because of the interdependent nature of the business enterprise.

 

An argument that I frequently field is that corporations or businesses don't have any special competence in philanthropy; therefore corporations should stick to what they do best, which is maximizing their profits and allowing the individual shareholders to engage in philanthropy. This is a deceptive argument for a couple of reasons. Number one is that this line of reasoning overlooks the fact that business is legally treated as a citizen of the community in which it exists. If you want to maximize shareholder value in an integrated holistic system, philanthropy can be part of that strategy, and it is the responsibility a citizen has in his or her community in any case. The same people who argue against corporations engaging in philanthropy frequently argue that government is also incompetent in engaging in civic activities. As their argument develops, now they assert that business is incompetent and government is incompetent, so that puts all civic responsibility onto individual citizens. I ask you, are individual citizens inherently more competent in philanthropic endeavors than businesses? I would argue that because business taps into more complex feedback loops and may enjoy the results of more detailed research on the effectiveness of its investments, business probably has the potentiality to be more competent in philanthropic practice than could most individuals.

 

From my perspective, we need to acknowledge civic responsibility at the individual, corporate, and governmental levels. Civic responsibilities cannot be completely met by the voluntary individual sector of society. Corporations have great contributions to make in philanthropy. Perhaps some corporate philanthropy is misguided and money is wasted, however, I will point out that corporations make investments all the time that do not work out. Corporations make mistakes all the time, and they can make mistakes in philanthropy, just like they can make mistakes in other areas of their business such as the people they hire and promote or their investments in new equipment or facilities or their mergers and acquisitions. . Not everything a business attempts will succeed, but that simple truth does not negate the business process. Corporations may not always be successful in the philanthropic arena either; they will occasionally make mistakes. These mistakes do not negate the worthwhile value of most philanthropic efforts. In most cases business philanthropy creates beneficial social value.

 

Q: Who should control corporations, stockholders, or stakeholders?

 

A: One of the objections I hear frequently is that I am advocating for stakeholder control of corporations, replacing stockholder control. I am certainly not arguing for that. As I have already pointed out, stockholders own the corporation, they get paid last based on residual profits left over from the business and it's essential that they have the final say on who comprises company management through the Board of Directors. They need to have the ultimate power to fire management through the Board of Directors if they are unhappy with the performance of the company. Without that power it is inevitable that the stockholders will eventually be exploited by the management or some of the other constituencies of the business. I am not arguing, and have never argued, for anything that weakens the property rights of the investors and stockholders. That line of reasoning is a misunderstanding.

 

Q. What about conflicts between various stakeholders? How do you create balance between all the conflicting desires and demands of all the different stakeholders? For example: if more is given to the employees doesn't that necessarily result in less being available to the other stakeholders such as the investors and vice versa? How do you avoid conflict and keep all of the stakeholders happy?

 

A. Conflict between the various stakeholders in a business is inevitable from time to time simply because each stakeholder wants more. Customers want higher quality and lower prices, employees want higher wages and better benefits, investors want higher profits, governments want higher taxes, and community groups want greater donations. The potential for conflict is always there. However, the fundamental mistake that most people make when thinking about this issue of conflict between stakeholders is that they create analytical separations between the stakeholders and leave it at that. They see them as separate from each other and the business-each pursuing their own interests. When this type of analytical separation is done it also engages in a form of reductionism-it ignores the relationships between the stakeholders and the business and with each other. The business is more than just the sum of the individual stakeholders. It is also the interrelationship, the interconnection, the shared purpose, and the shared values that the various stakeholders of the business co-create and co-evolve together. No complex, evolving, and self-adapting organization can be adequately understood merely through analyzing its parts and ignoring the greater system that also exists. This is a very important idea to understand because while the analytic mind will focus on the conflicting interests of the stakeholders it will tend to ignore or fail to see what the intuitive systems mind understands-that the stakeholders are interconnected together in a "harmony of interests". In a healthy complex, evolving, and self-adapting system this harmony of interests between stakeholders proves to be far more important and resilient than the various conflicts of interest that the analytic mind focuses on.

 

A holistic business creates value for all of its stakeholders. Given the desire of each stakeholder for more how is the value divided between the stakeholders to keep them happy? There is, of course, ultimately no magical formula to calculate how much value each stakeholder should receive from the company. It is a dynamic process that evolves with the competitive marketplace. No stakeholder remains satisfied for long. It is the function of company leadership to develop solutions that continually work for the common good. It is the art of excellent leadership to seek the win-win-win-win-win solutions in the context of competitive market processes that optimize the value of the entire business system, and for each of the stakeholder participants within that business system.

 

Q. My final point of clarification is the quote from Adam Smith that is frequently used to try to negate my point of view. The quote is "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good." Adam Smith in The Wealth of Nations.

 

A. To me this quote has two parts to it, the first one is a reinforcement of Adam Smith's famous 'invisible hand' metaphor (which I think was the most profound insight into social history ever made) which implies that through a voluntary exchange people acting in their own self interest, pursing their own good create value for the greater society. That is true! I am not arguing against that. I believe in the invisible hand. Period. The second part of the statement, however, is what I disagree with, "I have never known much good done by those who have affected the trade of the public good." The fact of the matter is that much of the good that is done in this world is done by people who intend to do the good. The invisible hand metaphor correctly points out that much good is done for the public accidentally, so to speak, by simple pursuit of self-interest. Through voluntary exchange, acting in self-interest, parties both voluntarily exchange, and both parties benefit or the exchange wouldn't happen. That process creates a social good, true, but it is also true that very much good is done because people have an intention to "do good". All the "good" is not done accidentally.

 

I believe that the 'invisible hand' of Adam Smith should be supplemented by the 'visible hand' of intentional "do-gooding", and that individuals, governments, and businesses have endless opportunities to attempt to do-good in the world. Business has the opportunity to "do good" and create value for all the various constituencies that trade with the business voluntarily. I also believe that supplementing the 'invisible hand', with a 'visible hand', if done consciously, on an ongoing basis by individuals and corporations around the world, would help push humanity into an era of accelerated progress that would be unprecedented in world history. That is what Whole Foods Market is trying to do, and that is what Conscious Capitalism really means.

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Comments

Michael Barcellos says …

Mr. Mackey, I have read this blog over and over again only to find something new to change my way of thinking in the business world. Because of this I have hunted down many definitions and thought I'd share one I found in the Christian Science Monitor. This is from a book by Patricia Auburdene, Megatrends 2010,in which she states, "many are beginning to practice a form of "conscious capitalism," which involves integrity and higher standards, and in which companies are responsible not just to shareholders, but also to employees, consumers, suppliers, and communities. Some call it "stakeholder capitalism."" I pass this along to you primarily because it is thru you and this blog that i feel a new awakening in how I work in today's business. Even though i do work at a Whole Foods, the opportunity to get a clearer overall picture of what we are trying to accomplish is always a help to me. With so much to read i feel more enlightened and more encourage that thru change we can have a better planet. The one thing that I am finding in all I am reading is the word "HUMANITY". Just wanted to thank you and I look forward to reading YOUR book when published. Sincerely Yours, Michael Barcellos PFDS Hingham Massachusetts

Ann G. Kramer says …

Dear John…. This has been fun and you’re right…we will have to agree to disagree and move on! I did however have to correct your comment about the 14th Amendment. The 14th Amendment has been used by corporations to give corporations the rights of citizens. (A great book that details the history of this is Thom Hartmann’s “Unequal Protection”.) This has enabled the limited liability of corporations. Technically you’re correct—I would agree with you that the 14th Amendment does not give corporations the rights of citizens—however the interpretation by the Supreme Court since the late 1880’s has set this ‘flaw’ in motion so that today, corporations have argued successfully over and over again that they have the rights of citizens—and this enables the ‘limited liability’ factor. You and I agreed earlier that this ability for corporations to ‘externalize costs’ (such as pollution, watershed destruction, etc.) is a flaw—and should be corrected. This will not be corrected as long as the 14th Amendments’ manipulation by corporations remains the law of the land! But John…you know, if this did happen—I would actually be able to agree with you so much more that ‘conscious capitalism’ is the next step on the path….. All in all I don’t think we’re that far apart….so I will end this process with a quote by Robert F. Kennedy in March of 1968. His points are essentially what I’m trying to say—that we expand the view of capitalism beyond that of primarily profit and cash flow and redefine our economy on whole life….Businesses will still be happening….and I believe they’ll more vibrant than ever possible under the current system. “Our gross national product now is over $800 billion dollars a year, but that gross national product, if we judge the United State of America by that, counts air pollution, and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic squall. It counts napalm, and it counts nuclear warheads, and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifles and Speck’s knives and the television programs which glorify violence in order to sell toys to our children. There are also important things that only measuring the flow of cash misses. Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom, nor our learning, neither our compassion nor our devotion to our country. It measures everything in short, except that which makes life worthwhile.” (excerpted from Unequal Protection by Thom Hartmann, page 39) Be well John and continued success for Whole Foods Markets!

Veronica Ciambra says …

I made a comment on March 7 to which you responded on March 13. In your response of March 13 you asked me a few questions to which I respond below. I have not read all the postings on this site, so may say something that has already been beaten to death. First some feedback, I appreciate the changes I have noticed in the store. I shop in Palo Alto, but visit other locations from time to time. You are obviously trying to do things that you said you were going to do. For that, particularly the emphasis on locally produced items and those items being labeled as such, I want to thank you. Also, most of your employees I have spoken with say very good things about their experience as employees and about the food they are involved in selling. They obviously feel good about what they are able to tell me when I ask questions. Though, at times, I still have to go to the computer at home and do more research to get all my questions answered. I know that food coops are alive and well, just not near where I live in California. I know of 18 food coops in CA and I know there is a worker owned market in SF. I just moved here in November and shopped at coops on the East coast up until that time. I do shop at the Farmer’s Markets out here but that doesn’t solve all the problems either. This is also a good coop resource http://www.coopdirectory.org/. I am really happy that you can see ways of working with coops. I can think of a few more than the ones you state. Coops have changed a lot over the years. The Park Slope Coop in New York is the only one that I know of that allows only members to shop. There was a time when this was more the rule rather than the exception. Today the coops I have shopped at (and I have visited coops all over the US) allow anybody to shop, discounts for members are a lot less than they used to be, membership fees are a lot more and stores are more similar to non-coops natural food stores than they used to be, just not in their business form. Coops were a way to bring together people with the same ideals about food and food politics. Times have changed and I feel the way to do that needs a new beginning, maybe many new beginnings. But, you asked me “How would the "community board" be selected? Who gets to vote? Who gets to decide?” I think you could get volunteers for a community board to submit a short statement stating their reasons for wanting to be on the community board and their background that makes them appropriate for the position. Management would invite people they thought most suited to the position. You’d need people willing to do some work, and you’d want people willing to talk to others in the community. You’d want to keep the number small. I think the way you could work it to make it uncomplicated would be for management, with suggestions from the community board, who would be in touch with others in their community, to decide the issues the community board would work on. Maybe one issue at a time depending on the issue. These would be things that would be important to shoppers and less important maybe to investors. But, in the long term, of importance to the future finances of the company and therefore important to the investors. The community board would simply be advisory. I think it would be best to brainstorm and figure out all the “rules” before doing anything and maybe do some market research to test out the idea. Hope we exchange ideas more about this.

Lord Westfall says …

Wow, this blog cleared up a lot of concerns I have about becoming a Wholefoods investor. To me it has always been obvious that focusing on growing the whole metaphorical pie makes more sense than creating a situation where all groups waste valuable resources trying to ensure they get a larger slice percentage wise relative to the other groups. Perhaps a company that was focused only on the profits of its shareholders would act in an almost identical way to Wholefoods, if management were wise enough. That is to say that a company whose sole goal is maximizing profit would probably be more effective at achieving that goal if, as a means to the end of that goal, they focused considerable attention to the needs of their customers, workforce, community, etc. After all, shareholder profits would be reduced to nothing if not for the support of the other stakeholders. I was opposed to Mackey's management views, but my opposition was based on ignorance--incomplete information. When I researched Whole foods as a potential investment, I discovered that his approach is far more effective at maximizing shareholder profits than the more conventional strategies most companies employ. I wish all of the businesses I invest in were managed with the same philosphy. Regards, Lord Westfall

John Mackey says …

To Ann Kramer, I'm not sure that you understand what corporate "limited liability" means. It doesn't mean that the corporation has no liability for its actions. That certainly is not the case and can easily be verified by thinking about the explosion of litigation and lawsuits that every public corporation has to struggle with every single day of its existence. No, limited liability refers to the fact that the investors in the corporation are not individually liable for the actions of the corporation. The corporation remains liable, but not the investors. If you owned a share of Enron stock, limited liability means that your risk is "limited" to the total value of your investment and nothing more. You couldn't be sued or held responsibile for the actions that the corporation might do. However, the corporation doesn't escape responsibility or liability for its actions, which is exactly why Enron is now bankrupt and some of its executives are now in jail. Ann, I encourage you to read my blog entry on the Upward Flow of Human Development. Your criticism of modern American society is very much in the spirit of the Green Meme consciousness criticizing the dominant paradigm of the Orange Meme. Think about what I have to say about the Memes beyond Green--Yellow and Turquoise--and see if either of those Memes resonate with you. Thanks for sharing your thoughts with me. Take care.

John Mackey says …

To Veronica Ciambra, Thanks for your suggestions. They are good ones. Take care.

Letha Hadady says …

Dear John, You said it all when you wrote: "Long-term profits 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 profits." Bravo for your and Whole Foods' sense of environmental responsibility. I wrote about that on my blog www.asianhealthsecrets.com in my recent article "Whole Foods Market & Riverkeepers" best wishes for your books. Letha

Brendan says …

Thanks John for sharing your valuable vision and business information with us all. We'd love to see Whole Foods in Australia. I miss the great experience and food. Brendan O'Keefe

Chris Belchamber says …

Comments on Conscious Capitalism I would first like to congratulate you on your leadership of Whole Foods. It is a great accomplishment to develop such a successful business, but and even greater achievement to do this with your unique form of capitalism. I also find it exciting that this could form the basis for a new model for other companies to copy, or at least use as a guide to their own development. I have a number of points that I thought might be worth considering. They are ordered, more or less, as they emerged as I read through the article. 1. I think you state too emphatically that economic theory started during the Industrial Revolution. Murray Rothbard wrote a 500 page book called “Economic Thought Before Adam Smith”, citing many instances of economic thought going back thousands of years. I would agree that perhaps most economic thinking has occurred in the last 250 or so years. 2. There may be many reasons, other than the ones you site, as to why capitalism has got a bad name. Firstly, many managers simply do not walk their own talk, or fail to behave in an ethical manner. This most likely will, unfortunately, always be the case. It is only natural that this breeds cynicism or at least skepticism about corporate culture. The question is not whether skepticism should exist but how companies can show that they are more trustworthy and reliable. Here I applaud your transparency and openness. Trust and credibility can only be earned day by day and by consistent demonstration over time. 3. I believe your arguments in favor of capitalism are well made through your “voluntary exchange for mutual benefit is the ethical foundation of business (and capitalism).” However, I believe you could also further reinforce this with a simple practical example. How else would you set the price for tomatoes? The market mechanism is surely the only one that works, and historically all attempts at price fixing have failed before very long . No self-appointed or elected groups dictating prices on a continuous basis have ever survived the test of time? The burden of proof here clearly rests on the critics of capitalism. 4. Another reason for the initial analysis of corporations being based on profits is that profits are the most obvious and externally observable evidence available for objective analysis. So it is no wonder that this became the initial preoccupation. Philosophical considerations and the complex interactions that are also highly important are much more difficult to quantify and analyze. Furthermore, materialism and capitalistic progress were perhaps far more necessary in the initial phases of the industrial revolution and indeed, to a great extent, have continued to be. However, we may now be reaching a different phase, where this perspective has now become more one dimensional, and perhaps insufficient. Perhaps this is a transition to a more multi-dimensional model that we are only more recently beginning to collectively need. 5. I very much enjoyed your discussions on purposes and have little to add. This leads to the paradox of profits and the philosophy of happiness and I share your perspective. I very much liked your “humanity first” approach. This shows up in a healthy respect for others regardless of outcome. Period. If you are genuinely interested in the best outcome for others, this is a different behavior than a conditional self-interest motivation, and people soon recognize the difference. Again I applaud this philosophy but wonder how widespread this philosophy can be as it seems to require significant maturity and self-development. 6. I tend to agree with you that we probably do need a new business paradigm, and I can appreciate why your model looks much more attractive. The question that I have is that although I very much like your approach, it is also seems much more complicated to manage. Although you have gone into a great many details of how your run Whole Foods, I am still left wondering that there is a great deal more to this that could be explained through more insight of the history and development of Whole Foods. The challenge it seems to me is twofold. It seems to me that it requires a greater level of complexity in managing such a company and self-development on the part of the people involved in managing it. 7. I believe the discussion on Non-profit organizations is an important one. This boils down, it seems to me, to whether a sustainable for profit company derives its validation through voluntary demand for its products, and whether non-profit companies really do the “good” they intend. Clearly, there are no simple answers here, but I have a great deal of sympathy for your idea that we should not become too obsessed with the differences but instead find the common ground in a more holistic model. Indeed many of these issues seem to dissolve if we can begin to transcend “first tier” dogma, and move towards “second tier” perspectives and inclusiveness, to use the language of spiral dynamics. In summary, I find your ideas and achievements wonderfully inspiring and very much hope that you will be able to reach the widest possible audience. These are issues, subjects, and possible solutions whose time has come. I believe, however, that the challenge is to help people with the complexity of your model as well as to gain the maturity and self-development it requires. I had believed that the purpose and meaning of “Flow” was to take on this task, at least in part. I had hoped that the “Flow Papers” would spell out these issues and make them accessible to a much wider audience and easier to implement in practice. I have read a great deal of what is on the “Flow” website and have signed up to comment on the Flow papers. So far I believe your “curriculum for good” section is excellent, and certainly inspirational. However, this is just one aspect and I was hoping that the “Flow papers” would fill in the remaining gaps. I am still hopeful that the Flow Papers will, in the end, begin to demonstrate the clarity and purpose of the ideas you have discussed in “Conscious Capitalism”. I accept that this may be the hardest part of getting your ideas across, but given the importance of this project I very much hope that this area will receive the attention that it deserves. The primary questions that remain for me are: Are the “Flow Papers” supposed to build on your ideas of “Conscious Capitalism”? If not what is their purpose? What is the current status of the Flow Papers? Many thanks for your vision and leadership. Your achievements and writing have been an inspiration to me and many others. Chris Belchamber.

Wyatt says …

Concepts of Sustainability: Much of this discussion has to do with THREE primary concepts: 1.The concept of Sustainability, 2. The concept of Responsibility, 3. The concept of Efficiency. All three of these concept or inner-dependant on one and other! ONE of the aspects of large, corporate culture is that it offers and economy of scale, which translates into efficiency. Efficiency is the backbone of sustainability. Responsibility (however you describe it) is a human intension. Mix the three together in business, and you are the road to creating a respectable, sustainable business model. Mackey is on this road. Macro-Markets vs. Micro-Gardens I for one cannot see how a regional, micro-business model for “health food” stores, long-distance travel or consumer electronics (by example) could ever be considered sustainable. The costs of producing goods and services on a micro-scale, to service a macro-market is entirely unsustainable. Even if a majority of our global population wanted to live responsibly (less stuff/less waste), this objective would need to be addressed by a highly efficient, macro-business and macro social/political action-model. Capitalism and Intention: Capitalism, like any other social/cultural/political engine can indeed be corrupted. Capitalism is not what is flawed though. People’s intentions in capitalist markets are what create problems. Without an efficient, capitalist market, much of what even the hippest hippies would like to have become a reality would not ever be possible. There are simply too many people, in too many locations, with too diverse a set of needs. Needs: Art/Recreation, Food/Water/Medicine, Freedom to explore our universe- These are what all humans need to survive, both physically and intellectually/emotionally! Technology, capitalism, socialist ethics, all mixed together with hard work and sustainable intentions may be the only way to address these basic human needs, on a global scale. The US cannot be used as a baseline comparison either. China and other poverty-stricken, growing populations are the demand-factor markets and cultures that need to drive this social, political and economic objective of sustainability. Thoughts?

Eric Novikoff says …

John, I read your postings on Conscious Capitalism and have found myself very energized and uplifted both by what you had to say as well as the courage you have to say it in public and associate it with your company (not that it isn't apparent from how it's run, of course.) The question I have for you revolves around finding investors for a company committed to Conscious Capitalism, or even going beyond it in ways that place it further from the "usual" and therefore easily understood paradigm of operating a company. In the case of Whole Foods, it appears that the capitalization came first, then the public declaration of your business philosophy. However, in my case, I'm starting a company whose founding principles are based on heart-centered practice: essentially a commitment to *equality* (or equal power) in all relationships we engage in (equality does not imply equivalence, however.) Like you, I haven't found that this practice in any way repudiates having a profitable business, but it does bring a sense of joy, purpose, and rightness to my life and my relationships with customers, vendors and stakeholders, as well as building a collaborative community among them. In fact the commitment, once understood, actually helps to bring us customers and connect us with the community in amazing ways. However, investors are another story. Essentially, people who invest in the initial phase of a company (and hence get a large share of ownership) are accustomed to and feel entitled to a large share of control. The rub, of course is that control, sometimes called power-over, is not equality. Investors with this expectation are a poor match for a heart-centered company and we choose not to engage with them since at best I would expect disappointment or conflict as a result. Instead, what appears to flow from our commitment to heart-centered business is the requirement to have investors who collaborate with us as equals, bringing their experience and expertise to the company and enhancing its value as a result. One could think of them as board members or executive council members but ultimately they are truly partners because they have embraced the company's heart-centered intent. They fully share in the risk, choices, and rewards that the company will create. However, I don't know how to find and communicate with these types of investors. Like many other aspects of the company I'm founding, I'm expecting I have to re-invent how to do things differently than I learned to in my years of experience working in other companies. As you pointed out, committing to Conscious Capitalism does not eliminate the required due diligence in creating a well-designed business plan and addressing other fundamental requirements of a successful business, but it does add another dimension. That's OK with me, since this is *supposed* to be an adventure, but I could certainly use ideas on how to find this kind of investor. It seems a necessary prerequisite for expanding the adoption of Conscious Capitalism. If you have any comments, I'd love to hear them. Eric Novikoff

Jacob says …

Hi John, > The world has become much more complex since > those simple (machine) metaphors were first > developed. I agree that deeply ingrained metaphors can continue to influence us long after they've outlived their usefulness. This suggests the limitations of adpoting any metaphorical stance no matter how compelling it seems. That being said, if we agree that you can change how people think (and act) by changing the metaphors they live by, what new metaphor can you offer us in place of business-as-machine? Perhaps your essay could be improved by articulating a replacement for the tired economic models. You mentioned we could look to complex systems theory for a more appropriate metaphor. Do you have anything specific in mind? Thank you for this inspiring essay. I have two young sons. Your work makes me hopeful for their future. ~ Jacob Liberman Austin, TX

Chris Belchamber says …

John (and Eric Novikoff) I would like to respond in large part to Eric's comment, but believe that there are wider issues here about the development of Conscious Capitalism. Like Eric I am moved by the ideas presented by conscious capitalism, and want to integrate it into my own activities and business. I have simply reached the point where purpose, principles, and heart are the most important part of how I want to live and interact with others. Conscious capitalism provides an initial blueprint for moving in this direction. Nevertheless, I believe that there is still only a small minority of people that have reached this point, or are open to these ideas. It would be a great service to people like us to know how we can contact other like-minded individuals who would like to take conscious capitalism to the next stage, or help with each others development. I would be grateful if you could give this some thought. Many thanks for your consideration. Chris Belchamber.

Paul Raymond says …

I am glad that you warned readers that it will take some time to read the whole "Conscious Capitalism" article. I started to read it for about 15 minutes but have to run out the door and have not finished it. Nor have I read the blog--and do not know how to blog yet. Look forward to reading it in its entirety. Have just finished working as a sales rep for national accounts for 23 years and do not want to work for a big corporation. I do not mind working with a corporation though--and like people some are good and some are bad. Simple as that. Read your core values. Agree with them. Will check back here and see if any response and to finish the article. Later, Paul

Ryan Orrock says …

The comments previously are exactly on target. We have done some of the worst damage that could be imagined in the world by allowing corporations to have *at least* as many rights as natural persons without being able to hold them responsible (prison) for their actions. Thus, persons can do things "through a corporation" that would be illegal or morally reprehensible, yet not be held responsible for those actions (larger than the bankrupcy of the corporation involved). There is no need for corporations, if the need to exist at all, to shield individuals from immoral or illegal behavior

Carlos Müffelmann says …

Dear JOHN: I not only agree and are very impresed by reading that there in the world people interested in topics like this ( consiusness ) specialy when we are talking to a very successful enterpriser like you are. As you where at the begining of your disertation asking, I'm here trying to give a maybe more ununderstandable theory, but I'm thinking on this also for many years and I guess it is a good time to share! On my point of view the basic problem is indeed "money" when acaparadores startet to exist then no "sharing" but instand "profiting" begun to exist. I can write long about this, but maybe is not the moment for doing it but still want to say that changing our consiusness for a sharing one instand of a competitional one and of course ending this "money", all our projekts (talking as the humankind) could bloom nice, easy, quikly and joyfuly!

Zoe says …

Dear John, First off - thanks for your inspiring vision and democratic (small D) openness. It's amusing that many of your critics seem much more self-righteous than you are, despite probably having personally done far less to help the world. I'd like to draw attention to an issue I see missing from this debate - global warming. The IPCC report is out (http://www.ipcc.ch/) and there is a rock-solid scientific consensus that climate change is happening, it's caused by human behaviour, and the whole world needs to change its behaviour very soon or face unpredictable disruption to agriculture, sea levels, the spread of disease, and many other effects we just aren't smart enough to predict. (For example, climate change probably led to droughts in Africa, leading to fights over farmland greatly contributing to the tragic conflict in Darfur. How many more such wars will we see as the world heats up?) In economic terms, climate change is the biggest negative externality ever. People seem to finally be waking up to the scale of this issue, but I still notice a lot of denial in the public debate about what should be done. Some studies suggest that to avoid the worst effects of global warming, rich countries need to reduce their emissions by more than 80% by 2050. I believe it can be done, and without as much pain as people claim, but it's still a gigantic challenge that needs to be risen to. Maybe there will be a miraculous scientific innovation that will provide free clean energy in the next 30 years without the need to change our economy, but can we really afford to gamble on that chance? This leads to some interesting questions when one is talking about the nature of capitalism. What do you see as the role of government in this situation? With an issue requiring such widespread global action, a "conscious" response from just one company regarding their carbon footprint isn't enough. Yet so far, governments seem so slow and fearful that we can't depend on them. It's ironic that in the U.S., far more is being done to combat climate change on a local level than on the federal level, even though it's a problem where the costs are local and the benefits are global. How can companies show more leadership in looking at their energy footprint and their connection to the global energy status quo in a holistic way? What is the appropriate role for "conscious capitalists", government, and individual people in a massive issue like this? To bring the debate closer to home, what is Whole Food's current carbon footprint? Where do stores source their electricity and do they buy any offsets? I don't pretend to be smart enough to know all the answers to these questions. I just know that I'm 26, and absent some coordinated global effort, I'm going to be seeing some bad stuff in my lifetime - and my children certainly will. Thanks again for your effort and inspiration. Zoe

Jymmi Sparkz says …

I love everything you are doing and saying and I've Loved Michael Pollan for at least 8 years since I read The Botany of Desire. You are true leaders in a world lead by capitalist imbesils. I've applied to the Seattle/Rosevelt Square store in hopes of spendinding the next 15 years in retail as a positive impact participant. I applaude you and your stance. You are awesome!With much love and respect, Jymmi Seattle, WA

Kelly says …

I'm having a hard time feeling "good" about Whole Foods in spite of all this "Conscious Captialism" diatribe. I was just in the flagship store this morning and I'm not impressed any longer. The sheer volume of PLASTIC in every aisle of the store is horrific. I had to laugh as I passed a sign on a display saying "Are you walking in a sea of toxins?" I certainly was this morning with all those plastics surrounding me. And what percentage of the ingredients in all those Whole Foods pre-packaged prepared foods is actually organic? How many LOCAL organic farms are you supporting in the Austin area? It's not okay to continue shipping product 1,000 or 2,000 miles. This is not helping us solve our energy or pollution problems. I can only find 3 or 4 local organic famrs - and one of the oldest is desperately trying to "grow" more because they cannot fill the demand. Supporting local farming through monetary measures and purchasing is not dictating. And evne if it were, we may need to dictate a bit to get people to realize the true importance of supporting local agriculture. Otherwise we will continue to see the mess of pollution we are dealing with right now. Most great civilizations declined due to food shortages and the political strife caused by fighting over resources. It's not okay to grow a company and kow-tow to the "usual" status quo of plastics, prepackaged foods and junk - even if it IS eco junk. I was a shopper at the original store - for years. Selling out to the money machine is not conscious capitalism no matter how you try to sell it. Your recent choice to provide a fund of $10 million a year in low interest loans to support local farmers around the nation seems like a start. But it's a small start for a company that has done so well for so long. I hope you'll do more. A lot more.

Lord Westfall says …

"Long-term profits are maximized by not making them the primary goal." John, I completely see what you're saying about how the pursuit of profits/happiness directly, results in less of the desired profits/hapiness than an indirect approach that pursues other things such as the well-being of others as its own end (rather than as a means to one's own hapiness/profits). I have lived my life directly pursuing happiness in a direct & admitedly selfish manner, and while I am quite happy, I often feel as though others, who appear to have not acted out of rational selfishness to maximize their own happiness are indeed more happy. (they're able to maintain a relationship for more than a few months for example). It appears as though most companies, though their sole pursuit of their own self-interest are in many ways similar to a sociopath. However, I would argue that profits not being maximized by making them the primary goal is more an issue of ineffective planning. If a company could earn more profits by focusing on higher team mebemer pay, charitiable contributions, more customer care, etc, then it should do these things maximum profits. That is, if your thesis is correct that a conciously capitalistic company is more profitlable, the profit-maximizing company should immitate the alturustic company insofar as it maximizes profits...but not in the ways that do not maximize profits. If it is more effective to pursue profits indirectly, then that is what management should do, but sharehodler profits should remain the only goal...after all, it is the company belongs to the shareholders. For example, a company might do several of the things WFM does, but decide not to donate 5% of profits to chairty (which I, as a stockholder am opposed to WFM doing). This company would be more efficent & more likely to survive than WFMI, because they are able to reinvested that 5% and grow faster...or discount their products more, etc. This would give that company an advantage of WFM, which handicaps itself by effectively throwing away 5% of its profits. Of course, overall I am very pleased with the way WFM is managed. Lord Westfall

Ian says …

In response to Kelly's comment of May 25: If you're shopping at a Wholefoods market in San Francisco in the near future, you will be pleasantly surprised - the City of San Francisco has banned the use of plastic bags by all big retail stores. Yet another example of government stepping in to solve a problem which our capitalist friends find too difficult to deal with. (Indeed, SF has also banned bottled water in some restaurants, also Styrofoam takeout containers, and is now starting a program to convert waste vegetable oil from restaurants into biodiesel for the city's buses. See http://www.greenoptions.com/blog/2007/04/30/san_francisco_to_turn_restaurant_oil_into_biodiesel) All of which leads me to wonder, could it be that the Mayor of San Francisco, Gavin Newsom, despite his party animal reputation, is actually operating at the level of the yellow vMEME, or even - gasp - THE TURQUOISE vMEME?!

Jeff Mowatt says …

Dear John, I'd like first to pick up on an earlier comment, suggesting an inconsistency between capitalism and the ideals of social justice. From our own efforts in the former Soviet Union, it's more than once we've heard the comment that this kind of conscious capitalism is the communism they should have had. Like yourself, we started before my involvement, with the question - What is the real purpose of business. I think we're very much aligned, though our efforts have been more focused on taking such a paradigm overseas, where it might target extreme poverty. Hence our begginings in Russia. For the past few years we've been directing our resources toward leveraging development aid to seed the social form of capitalism where it has already proven effective, in a full cost recovery initiative managed by USAID leaving a flourishing microcredit bank as a legacy. I read much which appears congruent - your own efforts, Muhammed Yunus' advocacy for social business enterprise and Jed Emerson's blended value approach. You'll probably also know that something along the same lines exists in the Community Interest Company that we here in the UK have incorporated in law. Like yourself, I'm a former coop advocate, seeing the benefits and limitations of mutual enterprise and you may be interested to know that the UK cooperative movement have also recently introduced a CIC form. So maybe that's progress in acknowledging the need for a new paradigm, but regrettably in practice it's not borne out by support. My strong impression is of so many singing from the same hymn-sheet, yet refusing to communicate with each other, particularly from an advocating government whose response varies from dismissal to plain hostility. We find it very difficult to communicate the global case, when so much interest is focused on local activity. There's a perception I detect, that more than being inconsistent with social justice, it's fraudulent even ungodly to suggest an alternative to charitable endeavour. We should communicate more, I believe. Jeff Mowatt People-Centred Economic Development UK

Matt Holbert says …

Dear John- One of the problems with the current paradigm is that it is difficult to be flexible. For example, the supermarket industry is ineffective in that the system requires large parking lots, lots of packaging, and lots of people stocking shelves and operating scanners. There is a better model of providing quality food. The system would operate similar to a spa with kitchen gardens and fresh food. Team members -- I prefer the term partners -- would be involved in the hands-on production of food and the gourmet preparation of the the same. I would like to see someone like Whole Foods come out and say that we need to re-think the entire system. Instead, we are able to only nibble at the edges of the comprehensive changes that are required. If Whole Foods said tomorrow that they were going to get into the spa business, stock prices would probably plummet. Notwithstanding the initial shock, it is the right thing to do. Best regards, Matt Holbert

Lord Westfall says …

Well John, we got looted by the community-via the FTC/goverment (which the community elects). It would be nice if shareholders, employees, customers, suppliers, and the community worked together for the greatest utility of everyone involved as productivity would certainly increase. But the problem with this unrealisticly idealistic philosphy is that in reality each individual collective group acts selfishly (or will begin to do so). If shareholders are acting in the interest of all stakeholders (via management), and the other groups are acting in their self-interest, the shareholders lose. They are wasting resources on the well-being of the other groups, but the other groups are selishly using their resources on themselves...This is problamatic. I am disapointed that you're opposed to Rand's ethical philosphy, as I think this is the best approach for a person or corperation. And as a shareholder I would hope that you, as CEO, would adopt this strategy. I would also like to point out that someone could be selfish in caring for something else as a means to ones ownself. For example, I used to not tip, now I do, but I am never tip out of concern for someone else's well-being, I merely do so selfishly as I realize it serves my long-term best interest. Likewise, a company can be rationally selfish and care about it's customers/employees as a means to greater profits. In fact, it would be irrational not to do so, because without happy customers & employees, long-term profits will suffer. Are we as shareholders obligated to expend resources for the well-being of other groups beyond what would be in our self-interest? If so, are the other groups morally obligated to do the same for us? Please note: My commentary here is entirely philosophical, I am not claiming WFM devotes more resources to non-shareholder groups than would be rationaly selfish to do, with the exception of the community as we are clearly not getting a good return on our alturistic contributions. Despite the efforts of the community to loot us, you and your team are doing a good job--in fact a better job than most, at maximizing long term shareholder value...despite the anchor of your alturism-infested approach. Lord Westfall p.s. When can I expect to see a Wholefoods in Arkansas?

cantubury says …

Americans want a "McDonalds" type convenience and standardization in a healthy context. I wonder if a drive up order by computer or phone text mail would work. the commentators seem to think whole foods is a fad that will not last. I love the store but there is a lot of merchandise that is hard to navigate. We have gone from the 50's black and white to billions of non-nature colors and I wonder if we have so many choices that we are going to yearn for a less bloated mini mart inside the mega foods store. "Ethops(military style ethical applications of business models to fair play" is the byword for this decade as is the decade of the brain. I wonder if the new "green" will succeed with the increase in prices of our food stocks.

John LaVigne says …

Dear John, In 1993 Rich DeVos wrote a book titled "Commpassionate Capitalism". In it he expresses many of the same thoughts and visions you have stated in your essay. I believe you have kicked it up a notch though. My concern is that we in MA are not fully benefitting from your vision. How can TL's cultivate your insight and vision to us who are on the "firing line" every day.

Jon Roland says …

This topic is embedded in a larger field which examines several things that provide a context and should be understood to make these issues clear. There is not enough space in this forum for a complete discussion, but I recommend the following: 1. Behavioral economics

SR says …

John, I had some skeptical concerns (which turn out to be unsupported) about WFMI and happened upon your website. I am a professional analytic philosopher, and let me tell you that while I don't share your libertarianism, I am very impressed by some of what you write here. Much of your argument for "Conscious Capitalism" is an adaptation and extension of Socrates' classic arguments against Thrasymachus in The Republic, Book I, and your replies to critics here who say that all that a corporation can be *really* interested in is profit follow the lines of the (very standard and convincing replies) to the claim that all people are *really* interested in is their own happiness/desires/interest. Excellent stuff! One worry I have about your Conscious Capitalism is that it clearly requires a sacrifice of short-term gain for long-term interest on the part of investors. For example, a Conscious corporation might grant the workers extra benefits, or make a change to a more environmentally sustainable production practice, with long term goodwill and positive feedback in view. Unlike WalMart, they will therefore run at quite high costs. The trouble with this is that the entire business/investment world is not thinking that way. Aren't your Conscious Capitalist businesses always going to be vulnerable to takeover from, for example, unscrupulous private equity firms who will sacrifice long-run goals for short-term cost reduction and a better-looking bottom line? Those sorts of takeovers can result in policy changes which are not transparent and can therefore generate the appearance of improving the company while doing no such thing. Nevertheless, the end result is that private equity firms or the like take the cash to the bank after a short-term selloff, while corporate consciousness has slipped out the back door.

Tory Gattis says …

Mr. Mackey, I recently shared some thoughts (below) on capitalism with Michael Strong and Jeff Klein of FLOW after Michael's recent FLOW newsletter on the moral purpose of capitalism. It's an excerpt from a white paper of mine exploring how the "next generation" of organizations might operate (or "Management 2.0", as Dr. Gary Hamel describes it). I hope you find it interesting, and, if you find any of it helpful, you're more than welcome to use any or all of it in your writings (as per your co-creation request). I'm very much looking forward to your June 12th FLOW event on Conscious Capitalism in Austin. HIghest regards, -Tory Gattis Founder, President, and Social Systems Architect OpenTeams LLC - Talent Unbound www.OpenTeams.com ------------------------------------------------ The Economy and Organizations People have needs. A common articulation of these broad needs would be Maslow’s hierarchy of needs in order of priority (see http://chiron.valdosta.edu/whuitt/col/regsys/maslow.html). People grow and mature up through Maslow’s hierarchy through repeating cycles of contentment -> discontentment -> aspiration -> achievement -> contentment, i.e. as they satisfy lower level needs they aspire to meet higher level ones. In a capitalist economy, people specialize their skills and then trade their services to meet these needs. Organizations act to coordinate large numbers of people and their skills toward creating a set of products and/or services for customers to meet their needs. Money can be thought of as “tokens of gratitude” that people give in exchange for having their needs met. Profit is a measure of value creation: input resources are transformed into output goods and services, and the difference (profit) represents the amount of value created (i.e. items with less total value to people have been transformed into items with more total value to people). High profits act as a signal to attract additional capital to grow to meet the market need, both to the organization itself and to its competitors. Competition keeps a lid on profits. Creativity/innovation enables the meeting of more needs with fewer resources, which can also be expressed as maximizing return on assets (RoA) or improving productivity. A more productive/efficient economy allows a broader portion of society to evolve faster through Maslow’s hierarchy. Since relatively fewer resources are required to meet a need, it becomes more affordable for more people. It also frees up society’s resources for meeting higher-level needs (i.e. fewer resources required for housing and transportation allows more resources for education, therapy, and meditation teachers). A new type of asset that has risen to prominence in recent years holds tremendous promise for vastly improving the productivity of our economy. Traditional assets, like land, physical equipment and employees’ time, have a one-time acquisition fixed cost, ongoing variable cost, and limited utilization (i.e. they can only be used for one function at a time). We might refer to these as “scarcity assets.” On the other hand, this new asset type still has a substantial one-time fixed cost, but little or no variable cost and unlimited utilization/duplication. Examples include intellectual property, databases, knowledgebases, software, medicines, brands, processes/methodologies, and educational and entertainment content. We might refer to these as “abundance assets” - once they have been developed and investors have received a return on their investment, their availability to society should be unlimited and their long-term price should move towards zero. Abundance assets have the potential to dramatically improve productivity, increase global wealth, and accelerate the evolution of society through Maslow’s hierarchy. So the net economic, social, and even moral purpose of organizations becomes clear: · help more and more of society evolve up Maslow’s needs hierarchy · by meeting customers’ needs · using fewer and fewer resources · through investing in abundance assets · to improve productivity. (aside: this works with Spiral Dynamics as well as Maslow, but I used Maslow since it seems to be more broadly known, understood, and accepted)

Tory Gattis says …

A version with the graphics can be found here: http://www.flowidealism.org/2007/Downloads/Conscious-Capitalism_JM.pdf

chris macrae says …

Working at coopers & lybrand in the early 1990s I began wondering what is the number 1 flow that corporations -and sustainability investors - wholly value. There may well be a dozen synonyms -over the last 20 years my 2 favourites have become goodwill or trust-flow. If we can agree on the list of synonyms, we can then search out a theory of probability that helps interested people, as well as hi-trust leaders, see which exponentials up or down a particular organisation system is compounding into the future. I am assuming that we agree that by definition: a system of productive and demanding relationships is spiralling sustainability exponentials up or down. Therefore so much of the quality of this has already been humanly invested in relationships system that the forward exponential currently being travelled is largely knowable if we audit the right stuff as far as flow is concerned. Mathematically we need to be prepared for metrics that tangible non-flow systems don't audit to inform the boardroom -let alone the organsiation-wide.

Ed Freeman says …

I just read this and its really terrific. I'm sure these comments are way too late, but I'll make them anyway. I would only add an example that sometimes helps. I need red blood cells to live, but it doesn't follow that the purpose of my life is to make red blood cells. Even after surgery, when I might need to focus explicitly on making red blood cells, it still doesn't follow that the purpose of my life is to make red blood cells. Likewise with profit. Businesses must have profits, but profits and purposes are just different things. Most great companies I know are oriented and managed around purpose. To the question of stakeholder conflict, I've come around to the idea that conflicts among stakeholders, conflicts among values, and conflict generated by critics are all opportunities to rethink the value creation model. You may have to make tradeoffs, but perhpas not...creativity and innovation often kick to dissolve the conflict, and create more value for each stakeholder.

Sinan Gurman says …

Dear John, I have been observing Whole Foods over a period of time and I would like to start with applauding you for the great company and vision you have created. I red the blog and my constructive feedback and ideas on improving the essay and the sustainability of conscious capitalism business model are below. In the “Voluntary Exchange” section, you are mentioning that voluntary exchange of information between all the main constituencies of an organization for mutual benefit is the ethical foundation of business (and capitalism). I agree with your definition and would like to point out a few important facts on how information technology and tougher economic conditions have been impacting these voluntary exchanges within the concept of conscious capitalism. Information technology has transformed and is continuing to transform the way most industries operate. The amount of information access we have is directly proportional to our bargaining power. When a shopper buys a product, her level of satisfaction with the price is relative. She may not be getting the best deal but she may be happy with her purchase if she did not know that the same product was at half price at a retailer down the street. She would be un-happy if she knew she paid more. Given the improvements in information technology, we have more access to the information we need and at the right time we need it. Therefore, the rules of the voluntary exchange are getting tougher. If price is the most important element in her decision tree, she will always figure out where it is the cheapest and buy it from there. For a business to be able to continue its operations, voluntary exchange between customers, employees, suppliers and investors should create incremental value for all as a result of these exchanges. The value conscious capitalism emphasize is NOT through large scale purchasing power and lowest prices. Conscious capitalism emphasizes the value created through efficient operations, service and selection. This is how Whole Foods defines value and its business model. However, the challenge during tough economic times is that the definition of “value” in consumers’ minds tends to shift due to changes in their ability to satisfy more basic needs. Consumers tend to become more price conscious. I support the Conscious Capitalistic Business Model; however, I find it difficult to sustain during rough economic times. I support it primarily because I can still afford to pay more for better service, selection and quality knowing that I directly or in-directly made a meaningful contribution to myself, the environment and the economy. Supporting environmentally friendly products and helping small businesses, which are the most significant elements of an economy are just few examples that Whole Foods provides through the conscious capitalism business model. Every time I shop at Whole Foods, I know I am in-directly impacting a good cause. On a separate note, one risk I see for conscious capitalism is a potential change in leadership during difficult economic times. I get the impression that you may also have the same concern John. There are multiple sections in which you are mentioning the potential change of the business purpose after the founding entrepreneurs retire or leave. I tried to provide my constructive feedback and my well-considered suggestions on how to improve the essay. I hope this voluntary exchange would be valuable. Moreover, I also have another suggestion to improve conscious capitalism business model. As I mentioned above, I see efficiency through the use of information technology and a differentiated customer service and selection as the most critical elements to support Whole Foods business model. When you have some time, I would like to tell you more about how I can help support this model through an innovative information service. I appreciate your attention to consider this voluntary exchange and I would be delighted if you can reach me directly at the e-mail address I provided. You can also get an introductory view at the web site I provided. Sinan Gurman

James Smith says …

The president of the interfaith clergy group stood and spoke for the group saying "The force be with you." It was his inspiration of the moment in 1999; it was the response to seven years of my paradigm shifting efforts toward supporting finding people's purpose, hope, and meaning which I had championed in that New York State community. The phrase was my farewell as I journeyed into the business world on my own self-commissioned mission to find how to engage in productive conflict which translates into meaningful lives for everyone. Nine years later, standing in the Crossings, having already chosen my path, I realized that the road is indeed integrated, life is whole, and the difference between business and meaning, purpose, and hope, is an arbitrary and potentially harmful distinction too often made. I knew from years of counseling and community leadership that business was falling far short of its potential in pursing simply profit, growth, and market leadership. Most of my friends in business disagreed. I was told, "You will be eaten up." I just disagreed and saw brighter horizons. Then I did as I always did; I followed them. It was this love and engagement with human potential and human experience that propelled me on this journey of discovery. It propelled me to a Jesuit College, Canisius, to learn business jargon and history while earning an MBA. This vision lifted me further to the campus of Cornell University in Ithaca where I focused on conflict in Industrial Labor Relations and became convinced that the concepts associated with empowerment, diversity, and conflict management were inadequate to apply fairly in the business system. But flashing back for a moment to standing in the Live Oak Auditorium at "The Crossings" in Austin Texas, surrounded by interfaith symbols, art and aesthetics exemplifying beauty, and with people who not only shared this holistic, connected vision, of business, of life, and of fun, I realized I had crossed back to a human home. That is the home in my heart, the home I knew, yet still wanted to build or be a part of building. The challenge to define purpose and pursue it more enthusiastically, with the emotional and mature support of like minded and hearted souls, was held up among us as a trophy or degree of accomplishment to envision and embrace. The "force", conveyed upon me at that interfaith meeting, has been, and now is, visibly, with me. That force is purpose. That force is human and universal. We are that force. I am happy The journey, like Michael Gelb points out in his biography on his "Mind Mapping" brochure, has some areas that are supposed to be educational but really teach us nothing. I have focused on the areas they teach but in significantly different ways which empower each person to pursue their own purposes. Michael Gelb made a clear observation about the usefulness of what is taught in much higher education, to which I would like to add, "The teachings in schools all over America are designed to support the "industrial system" of business and the society that it supports and, unfortunately, perpetuates. I have taken what I consider the very basic or essence of what people need to know to follow after their purpose and crafted a life time of experience and study and feeling into it. My purpose is to set the pent up productive power of people free to work in everyone, everywhere I can. How did I come to these conclusions, dimensions, and insights (if you find them insightful)? Part of the foundation of them is from my continuing pursuit of excellence in life long learning demonstrated by my inclusion in a PhD program on Human and Organizational Systems at Fielding Graduate University. I've earned my third Master's degree from there en-route to my PhD. Our entire society is based on dynamic interactions that tend to reinforce themselves in a way that seems "real" rather than "created" by leaders and followers who follow them. My goal has always been to make everyone a leader by supporting them to lead themselves with confidence, insight, and honor. I call my core ideas, "Executive Education for Everyone". Entrepreneurs, including educators and trainers, move this "dynamic interaction" in new and mostly healthy directions. I am both an educator and entrepreneur who proudly associates with Conscious Capitalism. It is the embodiment of both who I am and who I wish to become. It represents the world I wish to leave, through ideas and ideals, to my grandchildren and beyond. This event of gathering and starting the movement of Conscious Capitalism will best be benefited by momentum maintenance. Inertia is on our side. The present crisis is a challenge, but in Akido style we can turn the power of this crisis toward our own ends of inter dependence and a "business school of human relations", which we are. This effort requires all of us, a big "we", and a "super society" when compared with what we have been. It is time for the next level of social evolution that recognizes how developed human kind has become and how powerful we are yet to become as we head toward freedom, intuitive happiness, and even singularity of growth and purpose in living life. One clear distinction that allows for human evolution is the different type of system represented by conscious capitalism. Conscious Capitalism is an open system, always taking feedback from the wider system of human existance, including stakeholders and the environment. Capitalism, as it is now generally practiced is a closed system looking only on the internal factor of "profit" as feedback. Closed systems tend to implode without an external source of energy. The earth is a closed system except for the sun, which keeps it going. Capitalism needs to open up to the entire system of human life and living with positive expectation and embrace. Short term profits easily lead to defection and short sighted "cut and run" defection. Those in for the long run have more net present value than those with a "do what you must for profit" mentality. This distinction is crucial and form the basis for an improved business model. Our lives are long and depend on society to survive and thrive. Conscious Capitalism leverages this to a point of profit maximization through sustainability. Which would you rather have, an annuity (conscious capitalism), or deal to deal profit (capitalism)? With my deepest happiness and appreciation, James Smith Managing Member i4 Advantage, llc

Dean Bouch says …

Hi John , Message from South Africa . I have never stepped inside a Whole Foods store, nor do I own stock. I'm a part time student at the Graduate School of Business in Cape Town, South Africa busy with an entrepreur assignment. This is my comment to you personally after reading your essay ; It appears your life task was not starting Whole Foods Market , nor redirecting an ethical means we ( humans )view and produce food, but possible pioneering a new direction in corporate and invester consicousness. You must have done something wrong to be this unlucky in this mission ........... ;-) While you, nor I , will probably live to see a 180 degree change in corporate capitalism, dont give up your quest to question, challenge and write what most people on this planet are grapping with. I dont have any suggestions on how to fix the worlds growing dissatisfaction with corporate greed, while we all apply double standards by asking for better returns on our savings. Goodluck , I hope you successed in setting a new moral standard which generations from now will look back at, and regard you as an ethical corporate pioneer who help make the Western world more balanced.

Eddie says …

God Bless You Mr. Mackey! You are a true Patriot, and I commend you for speaking the truth even if it goes against your liberal customer base. I think you need to run for office!

Veronika Cerritos says …

I enjoyed your article and the ideas that are provided. There are plenty of recommendations out there that are both savvy and bad. If you have any more ideas concerning natural health or simliar topics, that would be great. Keep up the good writing!

chris macrae says …

exciting to hear your simulcast today; I was wondering if you have an update on how closely your model flows with the social business and future capitalism partnering that revolves round muhammad yunus who was recently voted genius economist by us congress for his win-win-win models; I realise wholeplanetfoundation emerged with some early inputs from Grameen Trust but these days Grameen has more explicit brand partners in win-win-win capitalism such as Grameen Intel and Grameen Danone - why no Grameen Whole Foods?

Chuck Blakeman says …

Mr. Mackey, Great manifesto - thanks. The chart from Firms of Endearment not surprisingly shows 30 companies making bigger profits because they had a "Big Why" that was bigger than just making money. There have been conscious companies doing that long before "social" "conscious" or "creative" were stuck in front of "capitalist". And they prove what I say all the time - Making money is not an empowering vision. However, I'm not sure we get the traditional capitalist on board by telling them they shouldn't focus on investor return. Wouldn't it simply be better to tell them (which you do later in your article), that they will make a lot more of it by not focusing on it? Maybe we don't need to convert them (at least not at first). Maybe we simply need to appeal to their existing world view and help them see how conscious capitalism is a better path to their own objective - making money. Celebrate it with them. In my new book "Making Money is Killing Your Business" )www.makingmoneyiskillingyourbusiness.com), I don't expend energy on converting to truth, beauty and goodness although I think these three have made the world go round since the dawn of man. I simply ask early stage business owners to grasp the idea that people who focus on something bigger than making money always make more of it. (Almost) everyone goes into business thinking they did so because they needed or wanted to make money. Although I believe no one actually has that motivation, I'm going to meet them where they are at, not where I want them to be, and first solve the issue they think they have (making money). If I help them solve their felt need, from there I have their ear and can say anything I want and they will listen. So I love that you demonstrate clearly that there is a better way to make money than focusing on making money. I would encourage you to lead with it and keep focusing on how much more money an investor-focused capitalist can make if they aren't focused on making money. Their hearts will come around in the process. Let's meet them at their point of felt need, since it's really so easy to do. Thanks for your leadership in the process.

Marshall Engelmeyer says …

Hmm:D I read blogs on a similar topic, but i never visited your blog. I added it to favorites and i will be your constant reader.

yam says …

Thank you for your article/post and thank you for your information you gave me. I Love your blog very match.

Tammy Allen says …

When I was creating the business model for Do Good Get Rewards, a volunteer rewards program 2 years ago, I found out about Conscious Capitalism on the web. I began using the term and even included it in our business model description. I had the pleasure of joining a conference call where you defined what the differences are between a typical for profit business is and a business that has at the core of it a mission of doing good and making an impact. Even before I knew of the term or the philosophy that is what I wanted to create with Do Good Get Rewards. Creating the web site the unique program and then bringing our company to life has been the most thrilling adventure of my life. I get to see first hand how much good is going on the world. So many great Non Profit programs large and small that really make a difference in peoples lives. There are huge numbers of people volunteering. Over 63.8 million people volunteered last year according to the National Service. We have over 100 Non Profits signed up from the Metro Atlanta area after only one year. None of them report to National Service,including Girl Scouts, American Cancer Society and many more. The numbers of volunteers must be 2 or 3 times that. Our countries heart would have to be softened to hear that. Thank you John for being so passionate about spreading the message that businesses can do good and create a profit at the same time. I can tell you from personal experience creating Do Good Get Rewards is the most fulfilling, rewarding for me I have ever done and I am no spring chicken. Keep up the good work and if you ever want to have an event in Atlanta to spread the word about Conscious Capitalism, I would love to help organize it. Warm Regards, Tammy Allen Founder Do Good Get Rewards

Shonna Penfield says …

You made a number of fine points there. I did a search on the matter and found most people will go along with with your blog.

Daniel Latch says …

Welcome to my world. Thank you for coming into my scope of awareness as a like minded soul. In response to your statement above: " Requests for additional benefits are endless. But this is also true for every stakeholder—the desire for a better deal. Every stakeholder is always looking for more. Customers are always looking for lower prices and higher quality. Investors want higher profits. Team members want higher pay and additional benefits. The government wants higher taxes, and the community wants larger donations. " I envision charities as an underlying infrastructure emerging to new prominence on the power of new resources. With the direct support of the economy aided by my technology it is possible to deliver 1% and more of the U.S. retail economy to the charities people wish to support at the local, national and international level. With proper support, we can create a new norm that will spread like a virus around the world. I see local and regional networks rapidly developing from centralized competitive nodes of social goodwill issuing cards and since the only change in behavior is to use another swipe a card, one that shows you care every time you use it. I'm after sending just 1% to charity as a portion of our national retail spend. I am very curious to know your assessment of this virtuous triangle concept of connecting consumer, merchant and charity. Merchants control the rebate down to 1% and consumers choose to shop participating merchants. This system is in operation and I am happy to share more at your request.

Bill Spiropoulos says …

Dear John, Greetings from New Jersey, where I am a proud team member of 2 1/2 years at the Millburn/Union store. I ran across your article on Conscious Capitalism and find it very inspiring. As a lifelong working-class lefty, I admit it is still hard for me to trust the conformist, money-hungry corporate world in general, but I appreciate that you've articulated an alternative paradigm for business and have successfully put it into practice with WFM. I most especially appreciate that WFM's "green-ness" and commitment to improving the environment and combating poverty doesn't seem to be a cynical PR ploy or bandwagon-hopping, but a sincere value that somehow--somehow!--isn't at odds with WFM's status as a for-profit corporation. I spent seven years at a large public-service non-profit which helped forge my opinions about the relative merits vis a vis for-profits, but my time at WFM (and your very intelligent writings) has helped steer me in a different direction. I should point out that I do have ambitions to someday start my own business--probably something related to my first loves, music and/or the arts--and I expect I will take some of what you've taught me to heart when I do. Thanks for everything! :-) cheers, Billy S.

Susan lanesey says …

Thank you for this great post and great blog. You have shared incredible ideas here and as a student and customer, I appreciate the ideas you share.

juan yi says …

John, Food for thought (see what I did there?), no, seriously, there is a lot of clear thinking out there, and this is some of the best, I started a business 6 years ago, inspired by the Slow Food Manifesto, and also by the Fortune at the Bottom of the Pyramid, living in a "3rd world country"... I really believe that there is still more to it, in terms of crating the new inclusive business models, but I am also certain that this discussion is the right path to get there. Thanks for sharing. Juan

Nicholas Foran says …

The Value of Educating Stakeholders to See Value??? Thanks for these encouraging thoughts. I am a young entrepreneur on a team that is trying to take on the employee health and engagement crisis. Stakeholder value is now at the front of my mind and some questions have come up... Our product is in an industry that has always been a little sideways (similar to the grocery business back when you started I assume). People's health should not be tied to money and untruthful influence but this seems all to often the case. We have found that part of the value we provide is educating stakeholders to see value where they once did not. Sometimes this goes well and other times it is a very hard and long road. It seems to me that this is an obstacle you were up against as well when you started whole foods. How did you navigate educating the client or employees or the community when they did not seem to understand? Do you believe this is a part of the value entrepreneurs provide to the stakeholders? Do you address the company purpose of "Heroic" any where else? Is there any literature available on whole food's approach to an organization's emotional intelligence? I gathered a little bit from the Quality Standards and the Multi-Stakeholder Process blog post but was wondering if there was more. I've included a short description of our business for a point of reference. Ironically, your approach to capitalism (love the adjective "conscious" by the way) is very much needed in our corporations to have the health challenges confronted. Our organization believes technology coming alongside the power of social networks will rescue the health and well-being of today's employees. Healthy activities will become socially contagious and create a wholesome corporate culture. Paradoxically, we see a health and wellness industry that is full of novelty and quick fixes but lacks sustainable cultures of health. We aim to be stakeholder-centered but find they are highly influenced by these forces. There are good guys our there Dr Kenneth Cooper, Dr James Fowler (one of our team members and author of the book Connected), but all of us seem to be scrambling to understand how to interact with businesses to create lasting change. PS I love the flowproject/radical entrepreneurs website. I just got back from a new peace making initiative in the middle east that aims to use technology and social networks to better communicate the human narratives of both Israelis and Palestinians. Thanks, -- Nicholas Foran

Bob says …

I am doing a project on Whole Foods Market and was wondering if you can tell me what you think are Whole Foods Market Core Competencies? Would you say its about giving back to the community, or being green conscience or having the Whole Trade program.

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