Conscious
Capitalism:
A New Business
Paradigm
John Mackey, CEO
Whole Foods Market
Tulane University
October 2009
Do We Need a New Business Paradigm?
•
Historians will one day view the 20th century as the
great struggle between Capitalism and Socialism.
Capitalism won this battle decisively, but it did not
capture the minds of the intellectuals or the hearts of
the people.
•
Corporations: the most influential institutions in the
world, but they are widely perceived as greedy, selfish,
exploitative, & not trustworthy
•
Current financial crisis & recession being blamed on
“greedy” financial corporations & deregulation, rather
than bad government regulations & monetary policies,
combined with widespread governmental incompetence
and corruption
•
Corporations & capitalism have serious “branding”
problems & we appear to now be moving backwards
toward either government control of companies
(Fascism) or government ownership (Socialism)
•
What is needed instead in the 21st century is Conscious
Capitalism
What Then is Conscious Capitalism?
• Conscious Capitalism is based on
three primary principles:
1. A Conscious Business has a higher
purpose that transcends maximizing
profits. It is focused on fulfilling its
higher purpose, which evolves
dynamically over time.
2. The enterprise is managed to
optimize value for all of the major
interdependent stakeholders.
3. Conscious Leadership to the
enterprise & its stakeholders.
What is the Purpose of a Business?
• What is the purpose of most
professions?
• If all the professions have a
purpose that relates to the
public good, why doesn’t
business?
• Who defines the purpose of
any business?
• Surely it is the entrepreneurs
who create the business that
define the original purpose of
the business
?
Entrepreneurs Create the Original Purpose
• Entrepreneurs of the Conscious
Business are also entrepreneurs of
meaning
• Stakeholder community of customers,
employees, investors, suppliers, and
communities co-evolve the purpose of
the Conscious Business over time
• Businesses flourishing over the longterm evolve their purpose to higher
levels of complexity and meaning
Great Companies Have Great Purposes
• Service to Others: Expressing Love & Care
The Good
• Discovery & the Pursuit of Truth
The True
• Excellence & the Quest for Perfection
The Beautiful
• Changing & Improving the World
The Heroic
Which of these great purposes will be at the core of your own organization?
The Paradox of Profits
• Happiness is a by-product of other
things:
– purpose, service, excellence
– personal growth
– friendship, generosity, forgiveness, love &
compassion
• Profits are best when not primary goal:
–
–
–
–
–
higher business purpose
great products & services
customer satisfaction
employee happiness
supplier partnerships
Long-Term Profits are Maximized by
not Making them the Primary Goal
• Business is not a machine, it is a complex adaptive system of
interdependent stakeholders
• Leadership’s job is to fulfill the deeper purpose of the
business, optimize the health & value of the entire business
system, be a servant leader to the business
• Optimize entire interdependent system = highest long-term
profits & shareholder value
• The price system is a tool for leadership to use—a valuable
source of information
The Whole Foods Conscious Business Model:
Holistic Interdependence
Not Tradeoffs—Rather
Higher Synergies
Leadership at a Conscious Business means
thinking about the business very differently
It means focusing not on tradeoffs between
stakeholders, but on the potential synergies that
exist between them
One’s creative mind doesn’t think Zero Sum or
Win-Lose, but rather Win-Win-Win-Win-Win-Win
Different types of questions are posed and
therefore different types of solutions are
discovered and created
The human mind is infinitely
creative. Conscious Capitalism creates new
pathways to unleash human creativity.
Creative Entrepreneurs and Conscious
Capitalists can solve all the world’s problems
One example: The Whole Planet Foundation
Our Core Values
Whole Foods
Market’s deepest
purpose is:
Changing &
Improving
the World
1 Selling the highest quality natural and organic
products available 2 Satisfying & delighting our
customers 3 Supporting team member happiness
& excellence 4 Creating wealth through profits &
growth 5 Caring about our communities &
environment 6 Encouraging win-win partnerships
with our suppliers 7 We actively promote the
health, well-being, and longevity of our
stakeholders through education about healthy
eating
Selling the Highest Quality
Natural & Organic Foods Available
• WFM leading retailer of
natural & organic foods
• Improving health, well-being,
& longevity of millions
• Good health & pleasurable
eating = compatible goals
• Offering alternatives to the
industrialized degradation of
food
• Creating higher animal
welfare standards
Satisfying & Delighting our Customers
• Most important stakeholder—no customers, no business
• Customers shop voluntarily
• Customers are treated as “ends” not “means”
• Team Members are empowered to satisfy & delight customers
Happy Customers = Happy Investors
Team Member Happiness & Excellence
• Self-Managing Teams
• Open salary information
• Salary cap
• Benefits vote
• Gainsharing for all
• Stock options for all Team Members—93% to
non-executives
• Personal Wellness Accounts & fully paid Health
Insurance
• “100 Best Companies to Work For” 12 yrs in a
row, #22 in 2009
Rich Bosses—Not Conscious Leaders
U.S. CEO pay as a multiple
of average worker’s
In 2006, U.S. CEOs
received $364 for
every $1 the average
worker earned.
At Whole Foods
Market, the highest
pay is limited to $19
for every $1 the
average full-time
Team Member earns
Data Source: Business Week (1980-2000)
and Institute for Policy Studies-United for a
Fair Economy (2007).
Servant Leadership
requires modest pay
The Distribution of Options
Estimated distribution of
options outstanding as of
2005 in the U.S.
Distribution of WFM options
granted as of 2005
Top 16
Execs
7%
All Others
25%
Top 5
Execs
75%
All Others
93%
Data Sources: Institute for Policy Studies-United for a Fair
Economy (2006), Profits with Principles (2004)
Creating Prosperity through Profits & Growth
• Investors are the #3 stakeholder
• We are stewards: frugality is
important
• Profits created through voluntary
exchange--not through the
exploitation of people
• Profits create wealth, capital,
prosperity
• Capital is the fuel for technological
innovation and progress
Creating Prosperity through Profits & Growth
•Business has a
fundamental
responsibility to create
prosperity for society &
the world
•The percentage of
people living on less than
$1 per day has dropped
from 85% in 1820 to only
20% today
Percentage World Population
Living on Less Than $1 per Day
1820
1950
Less than $1
Less than $2
1980
2003
0
50
100
Source: World Bank (constant 2003 dollars)
Creating Prosperity through Profits & Growth
• Fastest growing & most profitable publiclyowned food retailer in the U.S. past decade
• $8 billion in annual sales--#324 on Fortune
500
• Same store sales averaged over 9% for the
past 10 years (including 2008 slowdown)
• Store ROIC over 35% for stores over one
year of age
• EBITDA CAGR of 30% since 1992 IPO
• Stock price increased 1500% since 1992
IPO
Encouraging Win-Win Partnerships with our
Suppliers
• Leading retail outlet for the
enormous growth of natural and
organic products in the last 30
years
• Success not possible without
dedicated supplier partners
• WFM’s success has helped our
suppliers to grow and flourish
Local Producer Loan Program
More than $2,780,000 loaned
out—54 total loans
Mudslinger’s Freestyle (NC)
Full Circle Farms (RM)
Holy Cow Beef (SW)
3L Farms (S)
Buzz’n Bee (FL)
Red Jacket Orchards (NE)
Laughing Giraffe Organics (SP)
Whole Trade Guarantee
•Helping poor farmers around the world
•Over $200 million in sales estimated for 2009 &
$2 million donated to Whole Planet Foundation
Partners: Rainforest Alliance, TransFair USA,
FLO, Institute of Marketecology (IMO)
Quality Guarantee
Price Guarantee
Labor Practices Guarantee
Environmental Sustainability
Guarantee
1% of sales to Whole Planet Foundation
Caring About our Communities & Environment
•
The citizenship metaphor is appropriate for
business
•
Local, national, and global
•
Businesses have responsibilities to
communities
•
Philanthropy consistent with citizenship;
managed prudently & efficiently
•
Contributes to shareholder value through
increased good will with customers, Team
Members, & communities
•
Philanthropy “win-win”, not “win-lose”
Caring About our Communities
& the Environment
• We donate more than 5%
of profits to non-profits.
• On a local basis we
support thousands of local
community events and
organizations
Whole Planet Foundation
Global Citizenship
• Create economic partnerships in
developing-world communities
supplying our stores with product
• Provide innovative assistance for
entrepreneurship through direct
micro-credit loans
• Unleash the energy and creativity of
every human being to contribute to
prosperity in emerging economies
Where We
Currently Work
Loans used for:
Agriculture & livestock
Indigenous handicrafts
Corner Stores
Prepared Foods
14 Countries Now
Costa Rica, Guatemala,
Nicaragua, Honduras, Haiti, Peru,
Queens, NY, Nepal, India, East
Timor, Thailand, Indonesia,
Kenya, Ethiopia
99% women
47,000+ Members
$16+ M loaned out
99% Repayment
Whole Planet Foundation
Where Are We Making a Difference?
Queens,
NY
Haiti
Guatemala
Costa Rica
Nicaragua
Honduras
Peru
Nepal & India
Ethiopia
Kenya
Thailand,
Indonesia,
East Timor
Caring About our Environment
• We strongly support organic, local, &
sustainable agriculture
• Sustainable seafood—Marine Stewardship
Council plus farmed fish standards with 3rd
party certification
• Commitment to recycling and alternative
energy: up to 100% Wind Energy Credits.
• Green Building, fuel cells and solar
installations
• Store & Facility Green Mission Teams
• Animal Welfare program for livestock
• Environmental strategy should be thought of
as win-win-win-win
Conscious Capitalism & Non-Profit Organizations
• Non-profits do understand the importance of deeper
purpose & mission—corporations need to learn from
them
• Are non-profits able to transcend self-interest
because they have an deeper purpose? Problem of
self-interested, self-perpetuating Boards.
• Anti-profit mentality frequently creates inefficiencies,
waste, & stagnation
• Many are not financially sustainable over the longterm—they need to learn from corporations
• Non-profit organizations also need to evolve to a
more holistic model
The Conscious Non-Profit Organization Model:
Holistic Interdependence
Good
Altruistic
(Non-Profits)
vs.
Evil
Greedy, Selfish
(Corporations)
Tear the Wall Down
Creative Love is the “Golden Mean” which ends the
false dichotomy between egoism & altruism
Love of self
Love of others
win-lose
win-win
lose-win
_
+
_
Corporate Social Responsibility is not Conscious Capitalism
Corporate Social Responsibility
Shareholder-oriented
Has nothing to do with corporate purpose
Adds ethical and financial burden to business goals
Consistent with traditional, mechanistic view of
business
Often an “add-on” – grafted on to traditional business
model—usually as a separate CSR Department or is
part of the Public Relations Department
Easy to meet as a charitable gesture—frequently just
another PR messaging strategy—green washing
Assumes all good deeds are equally desirable and
are not connected to company’s core mission
[1]
Conscious Capitalism
Stakeholder-oriented
Incorporates higher purpose
Reconciles caring and profitability through higher
synergies
Holistic, ecosystem view of business as a complex
adaptive system
Social responsibility is at the core of business model
and is the responsibility of the entire company—not
just one separate department
Requires genuine transformation
Requires that good deeds also advance the
company’s core mission[1]
Daniel Yankelovich, Profit with Honor: The New Stage of Market Capitalism
From Traditional Capitalism to Conscious Capitalism
From This
To this
Profit-focus
Only shareholders win
Short-Term
Zero Sum
Self-centered
Conflicts of interest
Parasitic
Exploitative
Trade-offs
Disliked
Not Trusted
Purpose-focus
All stakeholders win
Long-Term
Win-Win-Win-Win
Holistic
Harmony of Interests
Mutualistic
Creating Value
Synergies
Valued/Loved
Trusted
Conclusion
Conscious Capitalism—New Paradigm for the 21st Century
• A Conscious Business has a higher purpose that
transcends maximizing profits. It is focused on fulfilling its
higher purpose, which evolves dynamically over time.
• The enterprise is managed to optimize value for all of the
major interdependent stakeholders.
• Conscious Leadership to the enterprise & its stakeholders.
• This way of thinking about business transforms the
underlying ethics of the enterprise to win-win-win-win-winwin.
• The larger societal brands of business and capitalism will
evolve toward fulfilling the deepest ideals that humans
aspire to—all things Good, True, Beautiful, and Heroic.