Saturday, April 01, 2017

Conscious Capitalism

Conscious Capitalism is part business book, part history of Whole Foods and part political philosophy. The book is written in the voice of the founder and former CEO of whole foods, John Mackey. He has experienced both the the Austin-style socialism as well as free market capitalism. He has grown to be not too fond of socialism, and instead views capitalism as the force that can provide the greatest benefit for mankind. However, modern capitalism has often strayed from its positive roots and evolved to be more crony-capitalism. Many of the complaints from the left can be better addressed by a conscious form of capitalism than by socialism.

Conscious Capitalism can not be a whitewashing of a "mainstream" capitalism. It requires different values and commitments to value all the stakeholders. Suppliers, customers, employees and the community all have a say. When everyone feels valued they work better together and can achieve better results than can be achieved with command and control. Because conscious companies work together with their employees there is no need for unions. (Mackey gave an example of store in Madison that unionized. The union made many promises. Due to rules, the company was unable to make promises or implement changes on its own. However, at the non-unionized stores, the company was able to increase benefits, leaving the Madison store behind. They eventually voted to remove the union.) Advertising is also minimized. Customers can relate to the company and share their positive experiences. This word-of-mouth advertising is stronger and less costly.

Conscious companies still value profits. However, they are a means to delighting stakeholders rather than an end goal. When times are tough conscious companies have a chance to show their true commitment to stakeholders can be shown. All parties need to work together to make the appropriate stakeholders. They all have a say in things, rather than having something dictated from above. If done well, it can pa significant dividends over the long run.

The book describes many companies (such as Southwest Airlines, REI, Costco, Trader Joe's and Tata Group) that act as conscious companies. An empirical study also showed they significantly outperformed the stock market. (However, is this really causation? Or is it that high-performing companies chose to be more conscious?) It takes work to be a conscious company. Everyone can benefit, however, people may not want to make the change. The sacrifice can be greatest for those on top who will no longer be able to enjoy some of the "perks" of the position. It also may appear to be doing poorly in the short run. The past reputation and inertia may take a while to overcome. It also does not produce the instant results that Wall Street likes to see. In the long run, however, it encapsulates many of the important principles of good leadership and society. It is one of the ways that business can save itself from the anti-business climate permeating society.

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