Conscious Capitalism

Why capitalism needs to evolve:

Capitalism has improved income, quality of life, literacy, and lifespan, but most people don't trust businesses. The invisible hand of Adam Smith has worked to increased income for many people through the industrial revolution and other changes and improvements, but the idea of shareholder maximization has had the opposite effect of decreasing efficiency and productivity.

John Mackey, CEO of Whole Foods pushes back against Milton Friedman's assertion that businesses should only be looking out for maximizing returns for their shareholders. Whole foods considers a range of stakeholders that should benefit from a company's existence - customers, employees, suppliers, investors, vendors, communities, and the environment.

Mackey discusses what a common answer would be to the question about the purpose of business. The first answer is always to make money. At the same time, a doctor who is very well paid will not say healthcare's purpose is to make money. It is to help people become healthy. Of course, a hospital or doctor's office is still a business and one that shuffles a lot of money through it, but there is still an overarching purpose beyond just the money itself.

He argues that legacy companies with a different mindset will have to evolve or else they will be replaced by start-ups to have a conscious capitalism approach.

What is conscious capitalism?

The metaphor is given of a caterpillar who simply consumes as much as possible, adding no value. Eventually nature takes its course and the metamorphosis to a butterfly results in a creature of light and beauty that gives back as much as it takes.

The four tenets are higher purpose (why), stakeholder integration (what), conscious culture (how), and conscious leadership (who).

Conscious capitalism goes beyond corporate social responsibility, which only mitigates some potential negative impacts without significantly building beyond that. Other concepts such as sustainability, triple bottom line, and shared value capitalism likewise do not go far enough in terms of who can benefit from the company and how.

Raj Sisodia presents conscious capitalism as a philosphy of doing business rather than a business strategy or business model. Such a philosophy will create value rather than extract value, leading to a Win-Win, rather than a Zero-Sum result. The key is patience. Such a metamorphosis cannot happen overnight, and there will be failures along the way. Companies trying to practice conscious capitalism may fail, but that does not mean it wasn't a good idea. It just means they need to keep trying.

Just like a doctor or hospital is still a business but working towards a greater purpose of improving health, really any non-profit is at the end of the day a business. The local humane society can't fulfill its mission of taking care of pets if they don't have the money from adoption fees or donations. The thrift store can't keep the lights on if no one donates their used items. Individual owners and employees can still be paid decently personally while the organization gives back to society.

The CC Credo:

We believe that:

Business is good, because it creates value.

It is ethical, because it is based on voluntary exchange.

It is noble, because it can elevate our existence.

It is heroic, because it lifts people out of poverty and creates prosperity.