Conscious Capitalism: Creating a New Paradigm for Business
by John Mackey, November 9, 2006 | Permalink
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-fo
unded 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.
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 Control
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
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.
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
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
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.
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
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.
Categories: conscious capitalism, michaelpollan
November 9th, 2006 at 5:20 pm
As an organic consumer for over 20 years and a Whole Foods Ambassador, I applaud John’s vision.
I recently finished filming three days in New York for The International Spirit at Work Award.
The incredible stories we captured from the award-winning companies at this unique event were a testament to the power of creating meaningful work that engages the “whole” person.
50 years from now, the Mackay Model will be featured in all the business schools as the most successful way to run a company…large or small.
Thanks, John and all the best!
Thomas R. Clifford
Corporate-Conscious Filmmaker
November 9th, 2006 at 8:33 pm
I have read Mr. Mackey’s essay “conscious capitalism,” and I must dissent. The ethos of the health-food stores back in the 60s was not only ecological and vegetarian, but also anti-capitalist. I am in favor of deep ecology, animal rights, and socialism. The type of socialism most consistent with animal liberation and earth liberation is not Marxism, but rather bioregionalism, decentralization, workers’ self-management, and an economy and social order based on cooperation instead of competition. John Mackey may mean well, but it would surely be better that health food stores should be a network of independent, small cooperatives, not branches of a single corporate giant traded on the stock exchange. The health food business should be decentralized and imbued with a cooperative and anti-establishmentarian ethos, what one might call a “hippie” ethos, rather than that they should be recuperated into yet another octopus-like monopoly with horizontal and vertical integration. I would also question the validity of Whole Foods Market’s animal welfare standards, which apparently permit the de-beaking of poultry. Capitalism is based on exploitation of humans, animals, and nature, and it requires perpetual growth and perpetual profit, which are incompatible with the fact of living on a finite planet. Social justice cannot coexist with inequality, and capitalism creates and magnifies inequality by its very essence.
November 10th, 2006 at 12:42 am
Good Evening Mr. Mackey,
My name is Federico Rendon, I am an ISSC @ the Woodway Store in Houston. First off right on, I dig your essay. All the content is very interesting and hits home but what really got me was the part on our Core Values. As Team Members, we live them everyday. They are all equally important and crucial to our success. I wanted to comment about Core Value: Supporting Team Member Happiness and Excellence.
Happy Team members create a good positive vibe (you can feel the energy all around), it’s hard to explain. Kind of like a sound wave radiating from each Team Member throughout our Store. I can not count the number of times Guests young and mature have come in with a frown and left with a smile. This Core Value to me sparks the other Core Values into full forward motion.
John, take care and thank you for everything.
We know you have us on your mind and we have you in our heart.
Peace
FR
November 10th, 2006 at 11:20 pm
Big business indeed runs the world and I believe that’s the way the world wants it.Maybe not you and me but the bulk of society that feels their employers should be their caretakers. Most spoils of the good life are accompanied by a price tag only big business can afford. At professional sporting events, the bulk of the good seats are owned by large corporations and generally go unused.Team owners could care less as long as the seats are sold. They couldn’t care less if the Third Reich sits in the seats(they would probably increase beer sales if they did.)At some point big business will acquire all small business.That’s the way of the world. And I believe that’s the way the world wants it.
November 11th, 2006 at 2:39 pm
Dear John,
I was impressed by your essay, and am thinking about it in the context of having been a Bread & Cricus and then a WFM customer for many years, ever since B&C was founded in Brookline, MA. I like your analysis of business in terms of conscious capitalism, but I do have a couple of issues with/questions about the analysis.
1. I think that scale has a degrading effect on the ‘ecology’ of a mission-oriented business. You mention having a store-based team-based approach to running the business, but I’ve noticed, in my dealings with various stores in various cities/states, that the effect is often not optimal for a local market.
2. I think that the analysis may not take into account the stress on the mission-oriented business model from two factors
- having a founder leave/retire from a business. (Obviously WFM has not gotten to this stage yet.)
- the legal status of corporations in the US, defined as legal ‘persons’, with just about all the legal rights of actual individuals but almost none of the restrictions on behavior or requirements that human individuals are subject to.
Your model calls upon a business to operate as a responsible corporate ‘citizen’ within the community. In a standard publicly held corporation, unless the CEO and BoD have the vision and the authority to set the kind of direction you’ve set for WFM, the outside pressures of maintaining ‘market value’ can work against long-range business thinking.
In regard to the second factor, I think this skewed legal framework for capitalism, especially for publicly owned companies, undercuts the ability of business leaders to run mission-oriented businesses; it can be just too easy and seductive to do the expedient thing rather than the ‘right’ thing.
I’d be interested in hearing your take on the interaction between a change in upper management, pressures of public ownership and the maintenance of a mission-oriented business’s core values.
with best regards,
Nancy Harrison
November 12th, 2006 at 11:13 am
To Thomas MacGowan,
You offer your opinions about the way you think the world ought to be but offer no arguments, facts, evidence, or logic to support your viewpoints. I worked towards the decentralized co-operative world you believe in the early 1970s before I began Whole Foods Market. In my experience the decentralized co-operative world that you believe in isn’t realistic or achievable. You do your thing with co-ops and I’ll do my thing with Whole Foods and Conscious Capitalism. Let’s see who has a greater positive impact on the world over the long-term.
Also Whole Foods animal compassion standards don’t allow debeaking of birds, although our current natural standards do. Please read both sets of standards to better understand what we are trying to do with animal compassion. Here is the exact URL for broiler chickens: http://www.wholefoodsmarket.com/issues/animalwelfare/chickens_broiler.pdf
To Nancy Harrison,
1. I don’t agree with your point of view that scale necessarily “degrades the ecology of the mission driven business.” Do you have any evidence or facts to support your opinion besides anecdotes? I believe Whole Foods size has enabled us to accomplish far more good than we ever did when we were smaller. Organic agriculture would not be the success it is today and growing at such a rapid rate if Whole Foods had stayed small. Our work toward animal compassionate standards also wouldn’t be possible. Nor would the Whole Planet Foundation even exist which has already helped improve the lives thousands of really poor people in Costa Rica and Guatemala in less than 1 year of operation.
2. I can’t answer the founder succession issue until it actually happens at Whole Foods. I will say that the other 3 co-founders left Whole Foods in 1981, 1985, and 1998 and we have flourished despite their leaving. I believe Whole Foods will continue to flourish and fulfill its mission after I leave the company as well, but we’ll have to wait and see to know for sure.
What restrictions on behaviour do individuals have that corporations don’t have? I’m not aware of any. Please point 3 good examples out. Thanks.
3. I believe you are correct about the short-term market pressures from investors having a negative effect on many corporations making ethical and good long-term decisions. Many corporations do cave into those pressures. I don’t believe Whole Foods does, however, and this does tend to anger short-term investors when the stock price drops. Just read some of the comments on this blog entry and my previous one on raising the salary cap.
I believe we could completely eliminate short-term speculative pressure on corporations through some simple tax reforms. Here is what I propose:
Capital Gains produced for stock held less than 1 year–40%, 2 years–30%, 3 years 20%, 4 years 10%, 5+ years 0%.
This single tax reform would completely change the way investors think about companies and their stock prices and would put a premium on holding for the long-term.
To Don Shaffer,
I don’t agree with your world view. Certainly large corporations are powerful and have great influence in the world. However, I’m far from sure that is what people really want. Quite the contrary: people tend to trust small business and mistrust big business. Regarding large businesses acquiring all the small businesses, the facts don’t support your viewpoint. The Fortune 500 companies represent a much smaller percentage of the total United States economy in 2006 than they did in 1956. Entrepreneurs keep creating new companies which undermine the dominance of existing large corporations. Just look at what has happened in the last 20 years alone–Starbucks, Jet Blue, Dell, Apple, Google, Microsoft, Virgin, Amazon.com, EBay, Whole Foods, etc. New companies keep getting created and they change the world, undermining large corporations while they do it. Sure these companies have all grown large too, but their dominance will likely also prove to be short-lived as new entrepreneurs come along and undermine the dominance of the existing large companies. Google didn’t even exist 10 years ago!!
November 12th, 2006 at 3:14 pm
Hi John,
I ‘d like to second the point that Thomas MacGowan makes about the “perpetual growth and perpetual profit” of capitalism being “incompatible with the fact of living on a finite planet.”
Ironically, this “Growth is Good” paradigm has been programmed by Mother Nature into all living beings. Business-speak is full of positive, natural-sounding words like “grow”, “cultivate”, “thrive”, “flourish” etc. and business as a living organism is indeed an apt metaphor. The problem is that, in both the business world and the natural world, because resources are limited, survival and growth entail competition for these resources. Of course there are numerous examples of cooperation, interdependence, symbiosis and so on, nevertheless, the dominant principal in both worlds is competition. As Tennyson said, Nature is red in tooth and claw. And, as the Japanese say, business is war.
Until recently, this intense competition for limited resources wasn’t a problem, but now that the human population has reached almost 6.6 billion, we are clearly in trouble. There are too many people producing, consuming and polluting. If everyone aspires to enjoy the same standard of living as the average Wholefoods customer, the planet will soon be a sterile, smoking ruin. One quick statistic from p.6 of Lester Brown’s Plan B Version 2.0, founder of the (non-profit) Worldwatch Institute says it all:
“… Paul MacCready, the founder and Chairman of AeroVironment and designer of the first solar-powered aircraft, has calculated the weight of all vertebrates on the land and in the air. He notes that when agriculture began, humans, their livestock, and pets together accounted for less than 0.1 percent of the total. Today, he estimates, this group accounts for 98 percent of the earth’s total vertebrate biomass, leaving only 2 percent for the wild portion, the latter including all the deer, wildebeests, elephants, great cats, birds, small mammals, and so forth.”
In order to ensure the survival of both ourselves and the other residents of this remarkable planet we need to somehow transcend Mother Nature’s imperative of survival, growth and competition, but no business model that I’m aware of encourages people to slow down, produce less, consume less and give their competitors a break - in other words, to shrink. And how could it? Any business that followed these principles would be committing suicide.
Nevertheless, even though I think that warm, fluffy versions of capitalism such as “conscious capitalism”, “natural capitalism”, “eco-commerce” etc. are ultimately unworkable, I am happy to see Wholefoods growing and flourishing, especially when it’s at the expense of dinosaurs like Walmart, Safeway and Albertsons. Rip their hearts out, my furry little friends!
Kind regards,
Ian
November 12th, 2006 at 4:13 pm
Hello Mr. Mackey
Thank you for opening this important dialogue.
Conscious Capitalism is dependent on Conscious Consumerism.
I believe we are experiencing a shift in behavior, consumer behavior, and consciousness–that we are now reaping the rewards of the 1960’s and early ’70’s and the revolution of thought, medicine, science and technology that began then and fueled the utopian ideals of my generation.
Today I see a growing acceptance of the power of the individual. People are powerful–now they understand that how they choose to spend their hard earned dollars can indeed impact their direct surroundings, and the world at large.
People are now becoming aware of how their ideas and ideals matter—how important their beliefs are, and how their simple day-to-day decisions can impact the quality of their lives, and the lives of others whose voices might not be as easily heard.
Is it the responsibility of business to foster this understanding, this doable knowledge to so heightens the experience of being human?
I hope so—a great American once said, with great power comes great responsibility.
We are all very fortunate, and very powerful, how lucky we are to be responsible, too.
best
Lynda Fassa
November 12th, 2006 at 4:15 pm
Hi:
Can you please explain why earlier in the year, you stated that you would not give guidance about future quarters and same-store sales growth because day traders and speculators create a volatile trading environment for the company’s stock….Yet in the most recent conference call, you gave all kinds of dissapointing guidance…next quarter, next year, etc. In the annual meeting, you said that investors should just hold the stock for the long term and not worry about short-term volatility. I agree with you on this.
I am not a trader and I do not even own WFMI stock…however, I have had it on my watch list.
I believe that you are contradicting your own investor relations policies. You are either being conservative in your estimates only to report “blowout” numbers, or you misled investors.
This is why investors are upset, and angry. Yes, WFMI declined a lot on 1 day, but you are the one that advised invesotrs to just hold long-term, even as you present long-term estimates that are not what investors expected and not with historical levels. Yes, growth will continue and WFMI is a company with outstanding financials compared to competitors, but like the products you sell, your stock was trading at a significant premium (PEG ratio, price/sales, etc)
Bottom line: Most companies have mgt give guidance…while it creates short-term expectations and volatility, I believe that not giving guidance is far more riskier and jeopordizes people’s savings, IRAs, etc. Taking that untraditional approach of not giving guidance has more consequences than benefits for long-term shareholders who should just buy and hold the stock as you recommend.
All investors arent greedy and money-hungry. They merely want to invest in solid companies that provide good returns for their own future. Every stock has its own following of daytraders and speculators, but I believe quick money is not the primary motive of most investors.
Look at what becoming a public company has done for whole foods. It would not be where it is today without its investors, and they should not feel misled and mislabled.
Conscious capitalism is an interesting take on our society and investor ethics, interests, etc. I have read both Adam Smith books that you mentioned.
November 12th, 2006 at 4:16 pm
To Mark and other people asking about the stock price:
I’m not going to regularly talk about Whole Foods stock price or stock performance on my blog because I think it is a waste of my time to do so. Of course I’m sorry that our stock price dropped after our last quarterly results were announced–after all most of my net worth is in Whole Foods stock. However, our stock price had been bid up by various short-term speculators to an extremely high price at approximately 50 to 60 times earnings. This is an extraordinarily high PE ratio and wasn’t sustainable over the long-term for Whole Foods or any other company. With the slow down in our same store sales growth to our historical mean of 8% to 9% it was inevitable that the speculative bubble that had driven our stock price so high was bound to pop and that is exactly what has happened. Now our PE ratio has shrunk to approximately 30 times projected 2007 EPS–a much more reasonable and sustainable multiple. If you look back to our stock price 6 years ago you’ll see that it was trading at $13.94 and at approximately the same PE ratio that it has today. Over the last 6 years our stock price has increased at a CAGR of 23.3%, which is almost exactly the same as our growth rate in earnings over the same period. I expect that in the future over the long-term our stock price will continue to increase at approximately the same growth rate as our earnings and cash flow growth does. Whole Foods still has strong growth ahead for it over the long-term and as we grow sales, earnings, cash flow, and EVA it is highly probable that our stock price will grow with it. Whole Foods stock has been a great long-term investment in the past and I believe it will continue to be in the future as well. By long-term, I mean holding the stock for at least 5 years and preferably much longer so that compounding can work its magic.
Whole Foods stopped giving quarterly guidance a year ago and now only gives annual guidance, updating that annual guidance each quarter as necessary. Probably at some time in the future the company will stop giving annual guidance as well, but for the time being we will continue to give annual guidance, but not quarterly guidance. We gave no quarterly guidance on our press release, script, or Q&A on the conference call. Check the record. The annual guidance we gave for 2007 is based on our own internal estimates of what we conservatively expect to happen. However, the future is unknown and indeterminate so our guidance may turn out to be wrong.
Whole Foods management doesn’t try to manage the stock price. Our goal is to fulfill the deeper purpose and Core Values of the company as articulated in my blog about Conscious Capitalism. I believe we are successfully meeting our deeper purpose and Core Values. Regarding the investor stakeholder, our long-term policy has been to maximize EVA (net operating profit after tax minus the cost of capital). 2006 was a tremendous year for the company in terms of total EVA produced and the increase in EVA over the previous year. In fact, from the perspective of the production of EVA, 2006 was our most successful year.
November 12th, 2006 at 6:34 pm
Thanks John for the follow-up. I may not have been entirely clear in my question(s) but your response has answered them.
I would not recommend that you would consider not giving annual guidance in the future. This will create a negative effect on Whole Foods in the investor community. This will create more speculators than investors and result in a more hostile, volatile share price.
Most members of management do not even comment on the trading action of their company’s stock price. To suggest in the annual meeting that investors should hold the stock, yet you write above that the price was inflated and a bubble waiting to burst might raise some questions.
“Whole Foods management doesn’t try to manage the stock price”
This is good to hear, because management has little control over trading patterns, trends, etc. Special dividends like you have done in the past and increasing your share buyback to 200M are good ways to maximize shareholder value.
I wanted to conclude by saying how much I repsect and appreciate Whole Foods as a philosophy more than a brand. I am especially grateful for your company’s focus on animal compassion.
Thank You
November 14th, 2006 at 8:54 pm
I have just begun to read your beginning thesis. I have worked one whole day for Whole Foods. I am so impressed by the foundations and principles you have layed down here. (at least the first 10 paragraphs that I have read, but I can feel the direction) In a day and age when the top CEO, in America, makes approx. $25,000/hr - yes, an hour, based on a Wall St. Journal article that I read last spring, and you make $450,000/yr, and now $1 for the year. Your real viewpoint speaks. I am so impressed by the complete corporate attitude which filters down from above. The responsibility WF has for its community, market, suppliers, and total outlook for the way in which it does business. Certainly WF has a huge influence on the American busness place. I have worked in many companies, but have never found a place or atmosphere like WF. Hopefully the dramatic influence will be felt in other businesses. It’s a liberating thing to know that at least one company, WF has a corporate awareness of the market’s real needs - not just profits, not just selfish goals, but a real sensitivity to it’s community, and being a leader in a new way of doing business. Wow! My despair and lack of faith in the corporate world now feels some fresh air. Thanks, Mark and everybody else. I am so happy to be a part of this. I have never found my place in the corporate world, I guess now I do, and I am committed and hoopeful once again in what we can do, and in each of us as a team.
THANKS !!!
I’m proud to bag for Whole Foods. We all count, that’s the wonderful thing, from the bagger to the shift leader, and on up to the CEO. We count, we influence our world. Cool.
Anne
November 15th, 2006 at 12:40 am
Mr. Mackey,
I have been captivated by the things I’ve read about you as well as authored by you. After reading this article I couldn’t help but be reminded of an article that I read by you that appeared in the Orange County Register. In that article you shared that you hoped younger generations would be more inclined to grasp onto the philosophies of Rand in light of your opinion that the philosophies of the Left seem to be more suited or romantic (paraphrase, and apologies if it is a gross misinterpretation) in the eyes of a youth. I realize that there will be future installments to the Conscious Capitalism model and that the above is not intended to be super in depth, but as one who struggles with establishing and refinining a belief system, I couldn’t help but shake the feeling that there was no resolution after reading your article.
I definitely agree with your thinking that corporations are not machines but delicate organisms that strive to maintain/achieve some sort of balance among constituencies, but I still don’t see how the end result can’t be the eating of ones’ self. Maybe it’s the leftist in me. You mention that investors will want increased returns, and workers will want increased gains and maintaining the demands of said constituents is part of the corporation’s roles. I beg to ask the common sense questions (that I don’t feel were sufficiently answered in this installment), if constituents will always contend for a green arrow from the center how can this be sustainable? In what world is the investor ever satisfied with less returns, or declining returns? When is an executive management team member ever satisfied with less (hence the raising of the salary cap to maintain competitiveness and retainment)? I know that there are individuals such as yourself that have the ability to realize that enough can be enough. However, how can this model really work (for an extended period of time, say 50-60 years) in a world of corporations and constituents that operate without Consciousness or a different skewed Consciousness? Many of my concerns echo to some extent, those of the comments by Ian on November 12, 2006 03:14 PM.
I don’t argue with the results you’ve provided thus far via your company Whole Foods to which I am a loyal patron. After reading this article I am committed to investing in even more shares of your company. I am also very grateful that you also allow a platform for idea exchange. I hope that the later installments or future revisions will contain more real world examples that you yourself have faced in order to help bring more reality to this “New Paradigm for Business”.
As a closing thought, I found the statistic that you cited to be alarming. Out of all of the data presented this one struck a chord with me the most. The statistic that I am referring to is:
“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.”
I think that if this statistic/argument is to hold any water, it desperately needs an in-article reference and/or clearer definition on what is meant by: poor, lifted into middle class, poverty levels, and moving out of poverty and other deeply charged phrases utilized. I am certain that statistics 200 years ago on what was meant as “poor” is greatly different from the quantitative analysis done today and no amount of normalization would do justice to the notion presented in said paragraph. In my mind, the argument that, “things are better now than they were” isn’t enough. Who is to say that “being lifted into the middle class” is a positive thing? Slaves in the 19th century were treated better and were not as “poor” as the slaves of the 18th century, but that is certainly not an argument for slavery; just as the statistics stated above are not a sound argument for the existence of businesses/corporations let alone a justification of “wealth creation, prosperity, and additional capital”. The sweeping generalizations in the above paragraph need to be addressed.
This is not to mention at what expense these supposed positive things are being generated. “Wealth creation, properity, and additional capital” are being generated at the expense of the environment (The environmental destruction in India and China as a result of this much touted “explosion in the economies” is well documented and can be easily observed first hand today via a simple plane trip and tour), the extinguishing and exploitation of cultures (Tibetan railroad, Heavy corporate outsourcing into Bangalore), and not to mention increasing health problems as a result of new found prosperity (Statistics are readily available and still being compiled revealing the rising rates of obesity, diabetes, and other diseases of affluence in both China and India — obviously visible here in America). Corporations don’t seem to be bringing anyone out of poverty, but it seems that they are simply masking and exchanging. Maybe corporations are exchanging one set of diseases that are treatable for lesser sums of “additional capital” for another set of diseases that are more corporate friendly (Pfizer, Merck, Sanofi etc.). It is possible that corporations are supplanting wages that were earned via manual labour with wages earned at a job that is essentially still a menial and now a sedentary task that takes place in a nicer building fielding technical support calls for the corporations like Dell that you mentioned in your article. Is it just a case that nothing is new under the sun? Isn’t “indentured servant” a nicer way of saying “slave”?
But I digress…
I have very much enjoyed reading your articles and have definitely taken them to heart. I look up to the decisions that you have made on a peronsal and corporate level for inspiration. I apologize if the content of my response seems schizophrenic. I would very much like to read more first hand accounts of the difficulties that you encounter and the solutions you found in dealing with corporations/businesses that operate under different or even opposite protocols from you. Thank you again for providing a forum for me to provide a far from academic/scholarly responses to your extremely well thought, and always eye opening articles.
November 17th, 2006 at 4:36 pm
Well done! I was pleased to see your reference to “Built to Last” as I believe that book lends additional hard data as a result of incredibly intensive research, to why your concept of “conscious capitalism” in business does indeed work. Some of the companies referenced in the book have been around for decades focused on building a higher purpose than max profits.
Being in the (supporting multiple constituencies) grocery business you might appreciate one of my favorite business beliefs…”The fish rots from the head”. There are great examples of these companies out there as you said - Enron, Tyco etc. It is very evident to me and others that the “catch of the day” is always fresh at Whole Foods. Continued Success!
November 17th, 2006 at 8:38 pm
Dear Mr. Mackey,
I was extremely impressed by your argument about CONSCIOUS CAPITALISM, which I believe has the potential to transform our current model of capitalism.
I have run several for profit corporations and my current projects are non-profits and I intend to follow your lead here … paying even more attention to the points your outline.
For one, I totally agree that being a non-profit you need to sustain yourself and not only be dependent on “outside” donations … something we are aiming for.
All the best for WF and keep going with force to promote your CONSCIOUS CAPITALISM philosphy.
Best regards,
Johannes R. Fisslinger
president Intl. Meta-Medicine Association
and Heal Breast Cancer Foundation
November 18th, 2006 at 12:01 am
Mr. Mackey.
I am an investor and a customer. I invested in the company, the vehicle being stock. I am startled that you, in the face of real equity lost (my loss is still around 15,000.00US)to real people, have struck a righteous tone in your statement that you expect your investors to understand that they will probably watch the stock grow over five years. I didn’t plan on day-trading your stock but I am angered, and I wasn’t at the very real loss of $15,000.00US, that you sound rather offhand in your statement ” However, our stock price had been bid up by various short-term speculators to an extremely high price at approximately 50 to 60 times earnings.”
I think it would be more honest to speak of the things that you and WFMI do that continue to be innovative; the natural skincare line that will also be at Sephora, etc. The efforts to private label that should translate to having Whole Foods products in “normal” grocery stores. There are many things WFMI is doing that break the rules and are growth oriented; that is why I invested a large hunk of my life savings. And if one wants to profit from their investments, and I do, I would not want to invest in a company run by someone not grooving on the good stuff, even when doing the right thing and the smart thing, even something as sexy as Whole Foods.
Mr. Mackey, I believed in your company and your smarts and your understanding of how to grow and your statement that all that was an abberation is condescending and, I hope, misstated.
I am very cross and a lot poorer; until I read your essay, I was prepared to stay the course and trust your guidance.
I am so upset and unprepared for the loss of so much money that seems to mean so little to you - how can you resent that WFMI was a premium Golden Child. You assure on one hand that you WILL grow the business and open stores, even in Europe, and on the other, could it be, chastise the investors.
Oh, good night.
PS Either stock things other than milk in a serious way or stop it. Sometimes there’s natural bedding or robes, etc, and sometimes not. You forget that people learn what they want in store and if it’s too random, it can’t grow. And I need your company, I am an INVESTOR, to grow.
November 18th, 2006 at 1:49 pm
This article is good food for thought. I agree with the general premise of the article that doing business with good intentions and integrity to all constituents involved in it makes sense. Both in a human way and in a business way.
But my view is a bit more pessimistic. I think what you describe as the motive(s) of the founder(s) of a business being not just to maximize profits is valid in the majority of cases. Initially. However, businesses sometimes outlive their founder(s). This is especially the case with successful businesses. When that happens, the original motive and philosophy of the founder disappears. Maybe not immediately, as he/she may have instilled the same motives and principles in his/her successors, but over time this idea gets diluted to the point where the business does become totally focussed on maximizing profits.
Some years ago there was a nice analysis in the NRC Handelsblad, a Dutch daily newspaper of high quality, about limited corporations and partnerships. They are limited because the people who run the business are limited in their responsibility for the actions of the company. The article described how the idea of limited corporations was started in a different age by the VOC, the Dutch Far East Company. It was used to fund the highly speculative ventures of sending a ship across the oceans to trade for spices from the Far East. The ‘limited’ part of the limited corporation was invented to make it more accessible for investors to put their money at risk in such adventures. More often than not, the ship would never be heard of again after leaving port. But the rewards could also be tremendous, easily thousands of percent of the original invested sum. Hence the saying ‘my ship has come in’.
These limited partnerships lead to the first stock-market in Amsterdam and is what eventually resulted in the stock-markets today. The article argued that today’s society would be much more served if limited companies were outlawed. They served a purpose at the time but have no place in today’s global society any longer. Instead of having investor’s responsibility ‘limited’ to the amount they pay for the stock, to make them proportionally responsible for all the company’s actions to the amount of shares they own. So if a company did something really bad, instead of it going bankrupt, the damages would have to be paid for by the shareholders. A share could get negative value. This way investors would think twice before they invest in, say, an unscrupulous tobacco company. Suddenly investors would have to grow a conscience.
I’m afraid some law like that will never come to pass, but I’m also afraid that as long as corporations are allowed to operate with limited responsibility of the investors that, in the long run, big sucessfull corporations always have the maximization of profits as their main goal.
Mark
November 18th, 2006 at 6:28 pm
Hi Eugene,
Let me try to answer some of your questions:
1. How can there be more for everyone, if everyone always wants more? That is the beauty of Conscious Capitalism–more can be produced for everyone. It isn’t a zero sum game where someone’s gain is someone else’s loss. It is a win-win-win-win-win game.
2. How can that be sustainable? It can be sustainable because there is no limit to collective human intelligence or creativity. We are capable of creating an environmentally sustainable world where all humans flourish. That is the goal of Conscious Capitalism. Let’s do it!
3. A careful study of history produces overwhelming evidence of the continued collected progress of humanity. Here are 4 books to read: Max Singer, “Passage to a Human World: The Dynamics of Creating Global Wealth”; Stephen Moore, “It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years”; David Landes, “The Wealth and Poverty of Nations: Why Some are so Rich and Some so Poor”; Nathan Rosenberg, “How the West Grew Rich: The Economic Transformation of the Industrial World”. Of course many, many problems remain, but overall human progress is a historical fact which I believe a dispassionate study of long-term history makes very clear.
4. None of the environmental problems are intractable problems, but all are capable of being solved through entrepreneurial creativity and collective human resolve. The fact is that the environment has greatly improved in the United States over the past 100 years–the air and water are both much cleaner than they were 100 years ago, and total forests have grown by millions of acres. This is all well documented by Bjorn Lomborg in his book “The Skeptical Environmentalist”. Of course many serious environmental problems remain to be solved (such as Global Warming), but we are capable of solving them and I believe we will do so.
Eugene, obviously I’m a very optimistic person. Entrepreneurs tend to be that way. Our disagreements may simply be based on our respective temperaments and therefore we may not come to easy agreement. I do urge you to read the books I recommended above. There are many, many reasons to be both excited and hopeful about the future of humanity. Let me leave you with one last thought, a quote from Michelangelo:
“Criticize by Creating.”
November 18th, 2006 at 8:43 pm
Assuming that *if* these companies outperform the S&P *then* they have greater productivity is a fallacy. It only means that on average the market tends to underestimate “conscious” companies. For example for all we know, it may think that the profits will be disastrous and they are only terrible. I’m not saying that’s the case, I’m saying outperforming the index is no proof at all. Also there’s no analysis of sector concentration… it may be that a certain industry sector happends to have concious practices in general and had a good performance recently. Anyway this looks like an ideologicaly biased study and that’s a big red light.
November 20th, 2006 at 1:46 am
Dear John;
Thank you for your essay “Conscious Capitalism”. I thoroughly enjoyed reading it. I find your philosophy on business so refreshing. Looking after the interests of ALL the stakeholders is really common sense but sadly there are too many who only look at short term share holder value. We need people like you to save us from the lunacy of the overvalued, short term, blue sky rubbish of most financial markets.
November 20th, 2006 at 11:59 am
I am very impressed with your business philosophy and standards that Whole Foods upholds. I am very pleased to see that you are developing animal compassionate standards and have read through all of your criteria. The only question that I have is that I see the policies for the well-being of the animals up through transportation, but do not see any standard focused on animal processing, which should be just as important as the life of the animal. Do such standards exist? Being concerned with animal wellfare entails the whole journey from birth to how the amimals are killed.
Any comments would be greatly appreciated,
Laurian
November 20th, 2006 at 3:32 pm
Mr. Mackey,
Thank you very much for your responses. I will definitely read the books that you recommended.
Sincerely,
Eugene Kim
November 20th, 2006 at 7:19 pm
Madeline,
He apologized for stock drop in the second sentence, even though has absolutely no control over short-term swings in the stock price. You also come off like an individual who refuses to accept responsibility for their own actions. Anyway…
If you purchased WF stock in late October 2005, your paper gain was over 25% two months later; if you invested at that point, you lost 25% of your investment on paper less than three months later. If you invested at the bottom that day, you up a quick 20% in two months time, only to lose 40% over the next three months. If you invested at the low that day in August 2006, you would have been up over 40% by late October only to lose 30% of it by early November. That’s one year….pretty volatile for any stock, no?
The stock is now trading almost 8% higher than it was just three short months ago.
P.S. A. You don’t even have a realized loss, relax, you sound exactly like a retail investor who buys at the top and sells at the bottom.
B. Did you perform any Due Diligence before investing? Did you notice the stock was priced to perfection? Did you notice it trades at an expensive multiple compared to its sector, “normal” stores as you call them? Did you notice the violent swings in the stock price over the past several years? Did you notice it had risen 40% since August? Did you read past Annual Reports where the company stated that the double digit comps were not sustainable and would return to historical norms?
C. If you’re not a day trader, what’s your timeline for holding the stock? With what annual rate of return would you be happy?
November 21st, 2006 at 10:19 am
To Madeleine,
I am truly sorry that you have sustained a $15,000 paper loss (so far) on your investment in our stock. My own paper losses on the downturn were also quite substantial so I do empathize with your situation. However, I fundamentally agree with Ed’s comments above: Neither Whole Foods nor myself can control short-term volatility on our stock. Our stock has a tendency to swing wildly both up and down as Ed points out. Quite frankly it is too risky a stock to invest in if you have a short-term time horizon. However, the stock has performed extremely well over the long-term as the chart from the url below indicates:
http://finance.yahoo.com/q/bcs=WFMI&t=my&l=on&z=m&q=l&c=
It is important that you realize that Whole Foods posted very strong results for 2006. Sales increased 19%, same-store-sales increased 11%, net profits increased 50%, EVA increased $39 million, and we paid $358 million in cash dividends to shareholders. I believe we are managing Whole Foods very well and we have very strong growth ahead for us for many years to come. However, despite our very strong results, the Market collectively hoped for even stronger results and the slow down in same store sales from 9.9% last quarter to 8.6% in Q4, and to 6.8% for the first few weeks of Q1 resulted in the sell off and the drop in the stock valuation. I believe, however, that Whole Foods remains a good long-term investment for those investors who have long time horizons (5+ years). For those investors with short time horizons I encourage you to invest in another stock as Whole Foods will likely continue to show high volatility in the price of the stock.
To Arthur B.,
I don’t offer up as “proof” that stakeholder centered companies are more “productive” than profit centered companies. However, I do offer it as “evidence” that such companies have outperformed the S&P 500 substantially over the past 10 years. Read “Firms of Endearment” when it comes out in early 2007. It is a great book IMO and it offers several compelling arguments to support this point of view.
Do you have any evidence that stakeholder centered companies (”Conscious Companies”) tend to under perform traditional profit centered companies? If so, please provide the evidence here. Thanks.
To Laurian,
Your point about slaughter is well taken. I’ll make 4 points about it:
1. How slaughter is carried out is important, but not as important as how the animal lives up to the point of slaughter simply because of the differences in time–a few minutes versus several months.
2. USDA slaughter regulations have been improved over the last decade due to the important consulting work of Temple Grandin.
3. There are hundreds of times as many animal farmers as there are animal slaughterhouses. While Whole Foods can find farmers to raise animals to our specifications it is far, far harder to change slaughterhouse procedures to accomodate our needs and desires. Quite bluntly, we are currently too small a customer to have much impact on slaughterhouse procedures at this time. Hopefully this will change over the next several years as we grow.
4. Your concerns are historically well justified (read “Slaughterhouse: The Shocking Story of Greed, Neglect, and Inhumane Treatment Inside the U.S. Meat Industry” by Gail A. Eisnitz). Whole Foods is very concerned about slaughter and we will work to continually improve slaughter procedures over time. As the animal compassionate program grows in customer volume our ability to influence slaughterhouses will grow as well.
November 21st, 2006 at 3:21 pm
Dear John,
It’s one thing to be an optimist and a firm believer in progress. It’s another to be such a firm believer that it blinds you to the facts.
In particular I refer to the assertion you make that ‘.. total forests have grown by millions of acres. This is all well documented by Bjorn Lomborg in his book “The Skeptical Environmentalist”.’ Unfortunately, despite the rave reviews of this book in pro-business publications such as the Wall Street Journal, Economist etc., many of Lomborg’s statistics are wrong. What he says about increasing forest cover has been disproved by satellite data. And, as you of all people should know, it’s not just the quantity of tree cover that is important, but the quality. How can the planting of commercial conifer monocultures in temperate climates compensate for the destruction of the incredible biodiversity of tropical rainforests? I’m sure you’ve walked through both types of forest and noticed the difference - a rainforest is a 24 hour-a-day cacophony, while conifer plantations are deathly silent.
See e.g.
http://www.lomborg-errors.dk/example2.htm and http://www.mylinkspage.com/lomborg.html, the quote below is from the latter page:
“7. Why Lomborg is wrong to say that forested area is increasing
More recently, the FAO have re-analysed their data back to 1990 using a more standardised methodology and a separate study (PAGE) has integrated FAO data into remote sensing (satellite) data to obtain a clearer picture of changes over time. The PAGE study points out several problems with the FAO data methodology which would lead to an over-estimate of forest cover.
Both of these studies report reductions in overall forest cover in recent years (the FAO reports 0.2 percent reduction in forest cover per year during the 1990’s).
This average figure masks the fact that there have been small increases in forest cover in the developed world but bigger decreases elsewhere. The loss of forest in the developing countries is of most concern as this is typically older growth, mature forest with a higher biodiversity value. It has also been shown, so far in Brazil and Indonesia, that tropical deforestation rates reported by FAO for the last 10 years have been underestimates.”
While I respect your vision and optimism, I’m concerned that you may be wearing rose-tinted glasses.
Best wishes,
Ian
November 21st, 2006 at 10:57 pm
To Ian,
You are arguing against something I didn’t say. I didn’t say that total forestry was increasing everywhere in the world–just in the United States. Here is my exact quote:
“None of the environmental problems are intractable problems, but all are capable of being solved through entrepreneurial creativity and collective human resolve. The fact is that the environment has greatly improved in the United States over the past 100 years–the air and water are both much cleaner than they were 100 years ago, and total forests have grown by millions of acres. This is all well documented by Bjorn Lomborg in his book “The Skeptical Environmentalist”. Of course many serious environmental problems remain to be solved (such as Global Warming), but we are capable of solving them and I believe we will do so.”
Decline in total world forestry remains a serious problem, but it appears to also have been exaggerated by some environmentalists. However, my quote above refers only to the United States–not the entire world. Here is a quote from “It’s Getting Better All the Time” by Stephen Moore, p. 204.
“Currently, the Forest Service reports that the United States is growing about 22 million net new cubic feet of wood a year and harvesting only 16.5 million–a net increase of 36% per year. This contrasts with the situation in the early years of this century, when about twice as many trees were cut as were planted.”
“In this century, despite a fivefold increase in population, the percentage of land space that is covered by forest has remained remarkably constant at about 1/3 of the land area of the United States.”
“Economists Roger A. Sedjor and Marion Clawson of Resources for the Future have documented the long-term improvement in the inventory of U.S. forests. “As a result of dramatically higher wood growth in the United States, and as a result of timber harvest at a rate less than growth, inventories of standing timber have increased significantly since 1920. The popular view is that the United States is consuming its wood faster than it is growing and that we are denuding our forests. In fact, exactly the reverse is happening–we are building them up.”
Ian, in the United States the immigrants from Europe did in fact decrease forests in the United States significantly as they cleared lands of trees to plant crops and to graze cattle. This went on for several hundreds of years. However, the exact opposite is now occurring today. Much of the marginal farm and grazing lands in New England, Texas, and many other parts of the country are now steadily returning to forests as the land does not have adequate farming and grazing value to economically pay. On an anecdotal note, I see this happening all over the Hill Country in Texas where I live. The trees were cut down to graze cattle in the 19th and early 20th centuries. However, much of this land is no longer good cattle country (and probably never was) and so now this same land is being steadily recaptured by expanding forests.
Please don’t misunderstand me. I am not arguing that we don’t still have serious environmental problems. We certainly do and I’m very committed to increasing environmental protections throughout the United States and the world. My argument is that we are capable of solving these problems and in fact there are many examples of environmental problems improving rather than getting worse due to deliberate human actions. Air and water quality are tremendously improved in the United States over the past 50 years. For example, lead concentrations have fallen by more than 97% since 1976. During the same time period sulfur dioxides have decreased 58%, nitrogen dioxides by 27%, ozone by 30%, and carbon monoxide by 61% (Environmental Protection Agency–National Air Quality and Emissions Trends Report).
November 22nd, 2006 at 9:57 am
I would urge people posting comments to stick to issues raised in the essay. Buying stocks is a risky business - no wonder it comes with a disclaimer and it will be unfair for the WFM stock prices to hijack the good issues raised in the article.There are countless blogs discussing stock prices and thats the best venue.No normal human being would like the stock for his company to drop.
Admittedly, issues raised in the essay are beyond narrow analysis and call for careful dissection of facts and advanced research unlike just jumping on posting comments.
Being a Thanks Givng period, i wish WFM a great field period filled with serving people tasty, organic and pesticide free foods for this joyous period.
As a happy team member with keen interest in management research and academics, the organizational culture and management style of WFM gives me the rare opportunity to carefully reflect on what our CEO stands out for and shares in the essay- redefining certain business concepts because of the growth the company has experienced. Can we get that from the Publix/Safeway blogs, if any exist? Bet not!
The tenets of competitive environment is the quest for information flow and people interested in company operations are determined to get the information they need in one way or another and thats what we get from our CEO.
To John, keep that information flowing and a happy Thanks Giving day to all the great team members of WFM. Lets rock those numbers!
A question for John: Any deliberate plans to join the fight against AIDS especially in third world countries like Africa countries? I ask this question because i know certain countries in Africa which stand for the same reasons WFM promotes - A country called Zambia in particular rejected GMO food donations from industrialized nations- and opted for organic foods despite countless number of its citizens starving and living on less than a dollar per day if lucky.
November 22nd, 2006 at 8:53 pm
Dear John,
You’re absolutely right, in my haste to point out the deficiencies of “The Skeptical Environmentalist” I committed exactly the same kind of error that Bjorn Lomborg has been accused of. My quote was out of context and I apologize.
According to the Forest Inventory and Analysis National Program of the US Forest Service (http://www.fia.fs.fed.us/) “Since 1900, forest area in the U.S. has remained statistically within 745 million acres +/-5% with the lowest point in 1920 of 735 million acres. U.S. forest area in 2000 was about 749 million acres.” This same analysis says that this is about 33% of all land in the US. So, as you say, forests in the US do seem to be recovering.
One reason for this however is that imports of timber from other countries (particularly Canada) have been increasing - according to the Forest Service (www.fpl.fs.fed.us/documnts/fplrp/fplrp595.pdf - p.12)
“In 1999, lumber imports to the United States from all countries totaled 19.9 billion board feet, an all-time high (Tables 28 and 31). During the same year, exports from the United States to all countries totaled just 2.5 billion board feet (Tables 28 and 32). The difference, 17.4 billion board feet, was net foreign trade and represented lumber consumption in the United States in excess of that which was produced domestically.” On the bright side (particularly if you’re a tree) most timber in this country is consumed by the construction industry, and with the current downturn in new housing construction, tree cover in both Canada and the States should expand. And of course the situation is far better in the States than in Japan, which is covered in both old-growth and plantation forest from North to South, but hardly uses any of it because it’s cheaper to cut down the tropical rainforests of their SE Asian neighbors instead. The tried and true economic principle of comparative advantage, in other words…
The EPA statistics you mentioned are very interesting, I think what’s happened is that *emissions* of these substances have fallen drastically, thanks to the Clean Air Act passed under the Nixon Administration. Notice how it was government regulations that caused an improvement in the environment rather than companies voluntarily cleaning up their act. I’m sure that if Exxon Mobil, Chevron and the rest had had their way, it would have taken much longer for lead to be removed from gasoline. Nevertheless, as you say, air quality in the US is far better than it was in the ’70s. It would improve even more, and perhaps even mitigate global warming, if this country could make a quick switch to less polluting forms of transportation, but, if you’ve ever seen a documentary called “Who Killed the Electric Car” (http://www.sonyclassics.com/whokilledtheelectriccar/) you’ll know that there is very little interest from the corporations in making this switch any time soon.
Let me reiterate, I greatly respect your efforts to work within the “system” to make the world a better place for all living beings. Like many people who are concerned about maintaining the diversity of life on this planet, I have my doubts about whether corporations in general can have a positive effect in this regard, but since you are committed and honest enough to allow gadflies like myself to air their views on your forum, I am willing to suspend disbelief in the case of your company.
I wish you all the best!
Ian
November 24th, 2006 at 7:35 am
Mr. Mackey,
As an entrepreneur and CEO myself, I wanted to applaud your efforts, and philosophy as written here and elsewhere that I’ve followed for several years. I agree strongly with Conscious Capitalism as you’ve presented it here, and have been diligently working on promoting these same principles within my company. I appreciate your leadership on this subject, and have little to offer in criticism at this juncture.
Be assured there are businesses and leaders who agree with these very principles; find them as you do, tenants for managing within the new opportunities being granted in the Information age; and therefore supportive as well as demonstrative of the very principles you have outlined. I look forward to your next chapters.
November 24th, 2006 at 10:50 am
John you are a light in a very dark world. We are all searching for the meaning of life and we all at our core want to make a difference. The business you have created and the way it is attempting to help through Conscious Capitalism are admirable. You and Whole Foods are great examples how a persons heart can manifest through business into an action oriented endeavor that makes this world a better place to live.
You are a testament to how one person can make a difference and how you can use business to do a greater good!
Thanks for showing us the way!
November 24th, 2006 at 7:00 pm
World Poverty is declining:
People have asked me about my statistics concerning poverty reduction. Here are some statistics from the World Bank from 2004:
Global Poverty Down By Half Since 1981 But Progress Uneven As Economic Growth Eludes Many Countries
Available in: Arabic, French, Japanese, Chinese, Russian, Portuguese, Spanish, Russian
Press Release No:2004/309/S
Contacts:
In Washington:
Christopher Neal (202) 473-7229
Cneal1@worldbank.org
Cynthia Case (TV/Radio) (202) 473-2243
Ccase@worldbank.org
WASHINGTON, April 23, 2004 — The proportion of people living in extreme poverty (less than $1 a day) in developing countries dropped by almost half between 1981 and 2001, from 40 to 21 percent of global population, according to figures released today by the World Bank. But while rapid economic growth in East and South Asia has pulled over 500 million people out of poverty in those two regions alone, the proportion of poor has grown, or fallen only slightly, in many countries in Africa, Latin America and Eastern Europe and Central Asia.
This uneven progress raises concerns that the eight Millennium Development Goals (MDGs) approved by 189 nations in 2000, the first of which is to reduce the 1990 poverty rate by half by 2015, may be beyond reach for some countries. “Economic growth in China and India has delivered a dramatic reduction in the number of poor,” said François Bourguignon, the Bank’s Chief Economist. “But other regions have not enjoyed sustained growth and, in too many cases, the number of poor has actually increased. Although we are likely to reach the first Millennium Development Goal of reducing poverty by half worldwide by 2015, much more aid, much more openness to trade, and more widespread policy reforms are needed to achieve all the MDGs in all countries.”
The Bank’s annual statistical report, World Development Indicators 2004 (WDI), released today, shows a drop in the absolute number of people living on less than $1 a day in all developing countries from 1.5 billion in 1981, to 1.1 billion in 2001, with much of the progress occurring in the 1980s. Between 1990 and 2001, the global decline in the number of extremely poor people slowed somewhat, falling by about 120 million—from 1.2 billion to 1.1 billion people—while the proportion of poor people dropped from 28 percent to 21 percent of the total population.
Gross domestic product (GDP) per capita in all developing countries rose by 30 percent between 1981 and 2001. In East Asia, where GDP per capita tripled, with average annual growth of 6.4 percent, the proportion of people living in extreme poverty fell from 58 to 16 percent, and the absolute number pulled out of extreme poverty since 1981 was more than 400 million.
Dramatic progress against absolute poverty has been made by China, where GDP per capita went up five times since 1981 and the number of extremely poor fell from over 600 million to slightly more that 200 million, or from 64 percent to 17 percent. About half of this progress was in the first half of the 1980s.
In South Asia, a 5.5 percent average annual GDP growth rate in the 1990s helped reduce the proportion of extremely poor from 41 in 1990 to 31 percent. But because this economic expansion coincided with rapid population growth in the region since 1990, the absolute number living on less than $1 a day dropped by just 34 million since 1990, to 428 million in 2001.
In marked contrast to East and South Asia, poverty actually rose in Sub-Saharan Africa. Since 1981, a 13-percent contraction in GDP per capita in Sub-Saharan Africa resulted in a near-doubling of the number of people living on less than $1 a day, from 164 million to 314 million, a rise from 42 to 47 percent of the region’s population.
In Eastern Europe and Central Asia, too, high unemployment and declining output in many of the formerly centrally-planned economies drove extreme poverty rates up from near-zero in 1981 to six percent by 1999, but there is evidence of a recent decline in the poverty rate. The number of people living on less than $2 a day in Eastern Europe and Central Asia rose from eight million (two percent) in 1981 to over 100 million (24 percent) in 1999, dropping back to slightly more than 90 million (20 percent) in 2001.
In Latin America and the Caribbean, economic growth rose only slightly through the 1990s, and poverty fell only marginally. The proportion of poor in the region in 2001, including both those living on less than $1 and $2 a day—10 percent and 25 percent respectively—was roughly comparable to that in 1981, when they were 10 percent and 27 percent.
In the Middle East and North Africa, extreme poverty dropped by about half since 1981, from five percent to two percent in 2001, while the proportion living on less than $2 a day was down from 29 percent in 1981 to 23 percent in 2001.
Here is the url on the full World Bank Report:
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20194973~menuPK:34463~pagePK:64003015~piPK:64003012~theSitePK:4607,00.html
Humanity still has a long way to go to end poverty throughout the entire world. The important thing to understand, however, is that we are making steady progress towards that goal. Collective Human Intellectual Capital is rapidly growing–and spreading throughout the world. There is no reason to believe that this trend will not only continue but will likely accelerate and as it does, humanity will put an end to poverty–in this century. Please note, however, that there is one major exception to the overall upward flow of human prosperity–Sub-Saharan Africa. This is due to a multiplicity of causes–war, AIDS, the lack of good governments, the lack of entrepreneurial capitalism, the relative lack of trust and other forms of social capital–to name just a few. We won’t end poverty in the world until Sub-Saharan Africa fully participates in the upward flow of human development.
November 25th, 2006 at 10:00 am
Wilst I applaud your concept and look forward to your store opening in London next year, I find one gaping omission in your website, your blog and the responses to your blog. Nowhere do you or your correspondents mention the issue of FOOD MILES. One of the major causes of global warming is the growth of air travel. I am not one who will not fly to save the pollution of my flight. If I do not fly I cannot enjoy the pleasures of international travel and discovery. But I do try to purchase locally grown organic food. Some UK supermarkets already name the farmer on the produce package. Why should I buy tomatoes from Italy during the growing season in the UK? I am sure a similar question applies in the USA. If you would purchase locally grown produce wherever possible you would save the pollution and global warming caused by air or ground transportation from more distant producers.
November 26th, 2006 at 3:33 pm
Dear John-
I applaude your vision and your future book. I look forward to reading more. I have thought if it as Social Capitalism, but I like Conscious Capitalism better.
Under “Suppliers as Partners”, I ask that you elaborate considerably. Grameen’s success is relative to creating producers, the backbone of any economy. Your suppliers are most often producers, and their ability as such determines your or any business’s long term sustainable success. Artisanal production is often overlooked as a potential area for development, with the factory (scale is the really the point here) seen as the most efficient way to create goods. A network of micro-enterprises, micro-factories, micro-farms could create the foundation for a distribution system as created by Whole Foods, for instance. These micro-enterprises could be extremley efficient, as per each individual entrepreneur/producer sees fit. Freedom in production. The back story for all the goods in the store would then be very rich and deep, indeed.
While this suggestion can be assumed by WFM, it also has potential in other areas of distribiution. If ethics and transparency are foundational to a sustainable future, then production, the means of production and the inventors, creators, artists, and farmers who produce are also essential partners in your network.
Yours truly-
Mary Anne Davis
November 26th, 2006 at 7:53 pm
I was very pleased to read that recently (?) you have decided to not sell live lobsters at any of your stores. It is a long time coming that a policy such as you have implemented, not torturing live animals and treating them with a certain amount of respect,was put into place in a major way.
When we institutionalize cruelty, we give our tacit agreement on those methods, and the results.
And yes we are killing and eating the end product!
This does not mean we should treat these beings with any less respect.
I truly hope you and yours continue on this road.
Good luck and long life.
November 27th, 2006 at 6:46 pm
This essay has concepts straight from Michael Phillips curious little books it looks like: Honest Business and The Seven Laws of Money.
This is probably not an accident. I’ve enjoyed the ideas in these books and it is interesting to see the ideas in action.
November 28th, 2006 at 3:02 pm
Greetings John,
I am a young entrepreneur and a case study for Conscious Capitalism in my endeavor to reinvent the industry of fabric care (aka dry cleaning) into one that is in partnership with our planet and integrated into the fashion world.
My concept is underway, has won statewide business plan awards, and continues to earn interest in the business community. However, I need funding and a management team. My question revolves around finding the “right” investors, advisors, and partners for a “Conscious Capitalism” company.
I constantly make reference to you, Whole Foods, and other companies that have created tremendous long term value with the approach you articulate. It is in vogue these days to say you believe in these principles, but in practice it is rare. How do I keep it authentic as the Founder when I need capital, management, and all that comes with it?
My concept will take alot of capital and more time than 98% of companies backed with venture funds, but long term it can ultimately change an industry and create Whole Foods-like value to all stakeholders. I have just begun the search for capital, and other resources, but I suspect I would be laughed out of the room at most VC’s.
I know the “right” investors, advisors, and partners are out there to act as a catalyst for the Conscious Capitalism evolution–after all, you found them for Whole Foods. Where are they? Do Conscious Capitalism venture funds exist? How about angel investor groups that focus on Conscious Capitalism principles? These seem to me to be a vital component of creating the new paradigm.
I would love to hear your thoughts.
Kindest Regards,
Joseph R. Serrano
Vantagio
November 28th, 2006 at 7:54 pm
John,
Thanks a lot for the information on poverty reduction and your very perfect analysis of the situation especially in Sub Sahara Africa - where I happen to come from. AIDS, lack of proper accountable governance has hindered a lot of development in this part of the world.The most booming business is in the coffin making sector as the demand is so much higher as a result of so many deaths mostly due to AIDS. All the educated people are running away or rushing to join in looting the few resources at their disposal once they join government positions.
The World bank and major donors wrote off debts to most of these countries and that has not benefited the common man as millions of people wallow in serious poverty while the very few in government enjoy the sweet of power by driving the most expensive cars money can buy,spreading AIDS,corruption,etc. Look at the Swaziland king, he just bought a chain of top of the line BMWs for all his many wives and gets himself the most expensive mercedes benz. Our leaders have no priorities and are heartless.
Its so heart breaking to talk to people down there because every time you make a call, they will inform you that, “oh that person passed away.” As educated as you can get here, its again a waste of time and human capital to go down there and try to influence change without financial capital.
Micro Finance companies backed by the European Economic Union have tried to pursue microfranchising - networks of small, successful, locally-owned businesses, designed for replication, providing essential goods and services plus jobs in low-income communities; on the same premises as that one done by Muhammad Yunus, winner of the 2006 Nobel Peace Prize. This has not worked because of very high interest rates charged on these loans and lack of proper information management as the executives for these same micro financing companies get paid very high salaries and end up more like exploiting the very people they are supposed to help.
I have developed keen interest in studying and evaluating micro financing as pursued by Muhammad Yunus and see how best the same guidelines could be applied in Sub Saharan context and its an ongoing debatable subject with my peers working for the World bank and local banks down in Africa.
Thanks once more, at least people of your calibre and vision give hope to continue the fight for poverty reduction as seen from the many vendors spread across the world your company promotes and supports to better their living conditions through sustainable farming and your genuine concern for human kind, environment and social justice.
November 30th, 2006 at 1:25 pm
Dear Mr. Mackey,
I have read your Chapter and agree with all that you write.
I have just returned from Purdue University and it seems all the Business courses do not have a model such as this, rather a model to maximize profits. Sometimes maximizing these profits can come at the expense of other things that are neccessary to the working company, such as employee moral and customer appreciation.
Need we remind anyone that there would be no way to make any money without a customer and no need for customers if there was no market for such a great product e selling.
I am a TM at the DC in Munster, Indiana and look forward to working with this great company for a long time.
-mark
December 1st, 2006 at 9:33 am
John:
I am the operations manager of a smal lbut growing family owned organic dairy farm and creamery. We agree with the business philosophy espoused in your essay and are doing our best to make it a reality.
As an MBA minted in the 1960’s, it took me many years to see that the “conventional wisdom” of that era failed to account for the fact that business is a system that must deal with many complex interactions and serve many stakeholders. Also, the notion of managing for excellance and profits will follow, took a while to sink in.
In my opinion, those embarking on the journey to implement “Conscious Capitalism” face a long and often difficult road. A rosd on which the must avoid:
1) Losing their entreprenurial spirit.
2) Being seduced by money and selling out.
3) Succumbing to the instant gratification society we live in.
I believe your thoughts on employees are on target. I would like to know more about your selection process. An essential element of ours is making certain that potential employees are alligned with our corporate philosophy and mission. In other words, they are true believers. If they are, the pitfalls mentioned above will be easier to avoid.
December 4th, 2006 at 5:07 pm
Dear Mr. Mackey,
I just read the WSJ article regarding your reduction in salary, and to say the least, I am impressed. For a host of reasons, I think your action sends a signal to both employees and stockholders that you are sincere regarding the responsibility you bare as CEO, influencing perceptions and decisions. If more CEO’s took the posture you have, companies thorughout the U.S. might be saved from both economic challenges as well as poor perception from both employees and consumers, as well as society and that community.
On another note, I love your store. I was introduced to Whole Foods before the stores ruptured on the N.Y. scene. I only wish it were in my budget to do major food shopping in your outlets. But never fear, at any opportunity, I peruse the aisles, dreaming, buying delicious bread pudding from the prepared food sections, and thanking God, someone had the genius to create such a retail outlet.
December 4th, 2006 at 6:59 pm
Hi, I am a new team member in Prep. Foods. CSP in Florida. I just wanted to thank you becuase I have never worked for a compnay that is as postivie and cares about their employees as much as WFM does.
December 4th, 2006 at 9:32 pm
Hello again John,
I just noticed an article in Mother Jones by Bill McKibben about “corporate social responsibility” that you and other contributors to this blog might find interesting. Be warned however that he’s a well-known greenie, so his tone is somewhat skeptical.
http://www.motherjones.com/news/feature/2006/11/hype_vs_hope.html
Best wishes,
Ian
December 5th, 2006 at 1:26 pm
You are correct. Corporations are the most influential institutions in the world today. The key is the money behind it all. Yes, we need a new paradigm in business but will it be accepted? I don’t know. Capitalism is based on competition but it has decayed into avarice and unfair advantages. Because of the scandals you mentioned (ie Enron, Tyco, World.com, etc.), people do not trust big business, and do you blame them? That is why I was very impressed that you are willing to take a pay cut in your salary and try to make the Whole Foods idea take hold. In the world of business today, the small business man is usually the one who is forced out of the picture. I have seen it happen many times with different people I know who owned their own businesses. Big conglomerates seem to take over and just become bigger and continue to eat up the small business man and his company. It is not what is wrong with capitalism but instead what is wrong with man. Generally, we have warped healthy competition into selfish greed. That is why it is refreshing to see your position that you are taking. Bravo.
J Lowther
By the way, I love the Whole foods store, and I shop there. I love your concepts that you put into practice in the store. Instead of supplying a very limited variety of what can maximize your sales, you also supply the items one cannot find in the big grocery food chains and at a fairly reasonable price. Very innovative. Please keep up this focus.
I also agree with fritolay above and Harry Thompson who is running his small family owned creamery — go small business man.
December 7th, 2006 at 9:55 pm
Today i met the second most powerful man in Whole Foods Market AC Gallo and at the end of the store visit, i asked myself so many questions which i will never get answers to and some how got the insight and personal convinction that there is more to management than just putting on expensive suits and speaking in a loud voice annoucing that the boss is here.
Getting to interact with John on the blog was an eye opener but i really felt humbled to see with my owm eyes what it means to have the convinction that there is no such thing as busy executives without interacting with the very team members at the bottom of company rankings.
Indeed, you need to rewrite management thinking especially based on this successful WFM model.
December 10th, 2006 at 9:03 am
This open concept of comunication between the head of an organization and the public is either a very astute marketing strike, or it’s a genuine avenue for discourse; either way, the openness is very unusual in the food business, or any business for that matter.
I am a senior manager in a hog production company, Rocky Mountain Pork (5000 sows). We ethically raise swine for the retail food market in the west/northwest USA and even though we say words and phrases like “lean” and “ethical” and “whole food”, 99% of our production still ends up in the slice and dash meat trade where none of the extra work, care and value add means anything to the retailer and in the end, to the consumer; it’s business as usual. That said, it’s nice to see a company like Whole Foods open up to the public and deliver on what they say they will delvier on. Nice idea. Nice work.
Frederick Coykendall
Rocky Mountain Pork
inter@telusplanet.net
December 11th, 2006 at 4:08 pm
John:
Congratulations on the success of WFMI. I appreciate that you have been able to provide above market rewards for your employees and other stakeholders by charging your customers, a much higher price because they voluntarily buy into the WFMI experience, much like a Starbux customer. I think this is democracy, capitalism, and marketing at its best. As you have noted, it is a voluntary exchange. Bravo!
I read your blog and you are not defining a new paradigm for business. I did not read anything in Conscious Capitalism that could be considered new. It appears to be just another book by a successful executive cashing in on his success. I have no problem with this. Many will be interested in your views and experiences.
Every company I worked for during the last 20+ years had detailed mission statements and strategic plans that reflected an understanding that they were in partnership with their employees, customers, suppliers, environment, and local community. While I worked for a defense contractor, we had an outstanding recycling program and other environmental initiatives. Even WAL-Mart does an outstanding job of donating to thousands of local charities and school systems. My favorite company is the privately held Chik-Fil-A.
While I applaud your understanding of the complexities of running a company, I think most companies today see themselves as either (your terms) good, true, beautiful, or heroic.
Defense contractors have the most heroic business purposes I have ever read. They are the very protectors of freedom and democracy. They are in search of new frontiers (Boeing). Gambling casinos are in the world-class entertainment business.
I do not know of a single enterprise that defines itself in the business of making money. However, I have read many a mission statements that read (along the lines of) “we will return above average returns to our investors.”
The reason that most not-for-profits are not economically sustainable is that they will lose their not-for-profit tax standing (and many of their contributions) if they untertake economic activities that would sustain them longer term.
Wouldn’t it be great if every high school student attending public schools had to read “Atlas Shrugged” and gain an understanding that most good things come from business. Government sponsored programs are paid for by the taxes provided by companies and their employees. The standard of living improvements are the result of the activities of thousands of businesses.
I recognize that there are a few bad apples in the business world (as in every other area of life), that have helped tarnish the reputation of business. Instead of writing a book about a new paradigm, where none exists, I would rather you write a book about have we have become a paranoid state due to the 24 hour news channels bombarding us with negativity at an unprecedented rate.
After twenty plus years as a business executive, and after sitting on the boards of two small companies, I thought I would give back by becoming a middle school math teacher in the public schools just outside Atlanta. What I experieced in ten weeks provided enough for a book on the failure of our public school system.
Now there is a topic for a book.
Continued success and fair play to your stakeholders. Best wishes.
Bob Jacklin
December 12th, 2006 at 2:48 am
I just wanted to say that I’m 24 now and wish I could have read more on this subject when I was 14. I really enjoyed the essay. Thanks.
December 15th, 2006 at 9:48 am
To Walter Solomon,
I believe the virtues of Food Miles is greatly exaggerated by proponents of local foods. It is not the simple test of environmental integrity that many would have us believe. As is almost always the case, the issue of food and environmental integrity is highly complex. In addition there are other important issues besides environmental concerns, such as helping poor people in other countries, that should be taken into account. I want to quote extensively from Peter Singer and Jim Mason’s wonderful new book, “The Way We Eat: Why Our Food Choices Matter”:
“Food production, processing, manufacturing, distribution, and preparation consumes somewhere between 12 and 20 percent of the U.S. energy supply. Per capita, the U.S. uses more energy for food production, processing, and distribution than Asia and African use for all activities combined. Nevertheless, transportation of the food is, according to one study, responsible for only 11% of the total energy used in the food system, as compared with for example, home preparation, which uses 26%, or processing which consumes 29% of the total. Nor is all transport equal in energy use. Transporting a given amount of food by plane uses the most energy per mile, almost twice as much as road freight and 20 times more energy than sending it by ship or rail” (p. 145).
“If air freight is the most energy-extravagant way of moving food, sending it by sea or rail are the most economical ways. Rice is grown in California, under irrigation, but it takes a lot of energy to grow it there–about 15 to 25 times as much energy as it takes to grow rice by low energy input methods in Bangladesh. The energy used in shipping a ton of rice from Bangladesh to San Francisco is less than difference between the amount of energy it takes to grow it in California and in Bangladesh, so if you live in San Francisco, you would save energy by buying rice that has traveled thousands of miles by sea, rather than locally grown rice.”
“To put the energy involved in sea transport in perspective with other energy uses, taking the average car just five extra miles to visit a local farm or market will put as much carbon dioxide into the atmosphere as shipping 17 pounds of onions halfway around the world, from New Zealand to London” (p. 148).
“Driving 20 miles in a big SUV to pick up eggs from a local farmer and then heading off in a different direction to get fresh local produce would almost certainly be less energy-efficient than buying everything at a single supermarket, even if the food has traveled further to get there” (p. 149).
As Singer and Mason point out, transportation is only 11% of the total energy used in food production–a relatively small percentage. Food that is transported by ship uses comparatively speaking very little energy. We can actually reduce total energy useage by buying food from poor countries that use little energy in food production and then using ships to transport that food across the ocean and trucks from the ports to the stores. In addition, there is the very important truth that buying food from poor countries improves the standard of living of the farmers and the workers in those poor countries. Singer and Mason are again relevant on this issue:
“Today the Del Cabo cooperative (in Mexico) has about 300 small farms and earns $7 million a year in sales of organic vegetables. The farmers can send their children to school and feed their families more adequately than they could before. While many Mexican farmers are selling their land and going to live in the nation’s crowded cities, the Del Cabo farmers are staying on the land. The Del Cabo cooperative stands as an ethical alternative to the idea that we should only buy locally produced food. For those of us living in the United States, Canada, Europe, Japan, Australia, New Zealand, and other developed countries, a decision to buy locally produced food is a decision not to buy food from countries that are significantly worse off than our own. If Americans were all “locavores,” the small farmers of Del Cabo would still be living in poverty and almost certainly still using pesticides and chemical fertilzers–unless they had sold their land for tourist developments” (p. 151-152).
December 15th, 2006 at 10:30 am
To Mary Anne Davis,
I completely agree with your vision. Whole Foods has begun investing in artisanal producers and bringing them into our supply chain over the next several years. Thank you for the suggestion.
To Joseph Serrano,
Unfortunately I do not personally know of Conscious Venture Capitalists. We went the traditional route back in 1988 and sold 34% of Whole Foods for $4.5 million. It was enough money to get us to our I.P.O. in 1992 and we didn’t give up control of our business to the V.C.s. I wish I could help you, but I cannot. Good luck to you.
To CKM,
I share your concerns about Sub-Saharan Africa. The Whole Planet Foundation has begun thinking about places we can begin working in partnership with the Grameen Trust in micro-credit projects in Africa. However, this won’t happen for at least a few more years as our next countries to launch in will be India, Nicaragua, and the Honduras. We hope to get something going in Africa by 2009. By the way, I just returned from the Nobel Peace Prize ceremony in Oslo where I participated in the great honoring of Muhammed Yunus and the Grameen Bank. Professor Yunus is one of my personal heroes and we remain excited about our partnership with Grameen around the world to end poverty everywhere–including Africa.
To Frederick Coykendall at Rocky Mountain Pork,
Please contact Andrew.Gunther@wholefoods.com if you wish to try to sell your pork in our animal compassion system. Andrew will evaluate your program and see if there is a fit with our program.
To Bob Jacklin,
We will need to agree to disagree about whether the world needs a new business paradigm or not. Perhaps the ideas I discuss seem obvious to you, but unfortunately that is not the case for most other people. I have lectured to M.B.A. students at over a dozen universities and the ideas of Conscious Capitalism were warmly received by the students and usually attacked by the professors. These ideas are most certainly not yet mainstream ideas in academia, the media, with economists, or in the larger society. Here is a wonderful quote by J.B.S. Haldane:
“Theories have four stages of acceptance:
i) this is worthless nonsense;
ii) this is an interesting, but perverse, point of view.
iii) this is true but quite unimportant.
iv) I always said so.”
- J.B.S. Haldane
You seem to be in category 4 in the above list. Most of the other opinions I hear fall into the other 3 categories. I also do not share your very favorable views of Wal-Mart, gambling casinos, Chik-Fil-A, and defense companies–all of which have serious ethical problems IMO and are all far from practicing Conscious Capitalism. Wal-Mart has serious issues with the treatment of their workers (poor pay and health benefits as perceived by most people including myself), gambling casinos with customer gambling addictions resulting in bankruptcy and impoverishment, Chik-Fil-A with the horrible conditions of factory farm chickens which they use, and defense companies with developing ever more efficient ways to kill people. I also have mixed opinions about Ayn Rand. While I share many of her views regarding freedom, business, capitalism,and self-responsibility, I find her uncompromising hostility against all forms of altruisim–love, care, compassion–to be elitist and actively harmful to the larger brands of Business and Capitalism (see my previous blog on “Winning the Battle for Freedom and Prosperity”).
December 18th, 2006 at 11:32 am
John:
Thanks for your response.
Perhaps you misunderstood many of my comments. I was not passing a judgment on Wal-Mart, defense contractors, or even Ayn Rand. I was pointing out that the premise that you are presenting a new paradigm is inaccurate. I purposely chose controversial examples such as defense contractors, gambling casinos, and Wal-Mart as because even these companies define themselves and their missions in altruistic terms (ie good, true, beautiful, or heroic).
I believe “Atlas Shrugged” is an outstanding economic work that explains how the world works and how the government doesn’t. No judgment on the author is implied, other than how it relates to this work.
John Naisbitt wrote “Reinventing the Corporation” twenty years ago and introduced the concept of the Fortunate 500. A fortunate 500 company is not measured by its size and volume but rather by the level of service and quality provided to its customers and the quality of life enjoyed by its employees. “Managing By Values” (Blanchard and O’Connor) was written over ten years ago and discusses the need for company’s to share a common vision, purpose, and set of values.
The fact that many MBAs might find your views new or refreshing may speak more to your celebrity or to the fact that have very limited reading backgrounds.
Every transaction between Wal-Mart and its employees is a voluntary transaction and therefore I would never judge it. While Wal-Mart does not offer the pay and benefits that our (I am a shareholder) company does, it does offer food at prices well below WFMI. Many poor and economically disadvantaged simply cannot afford our prices and our stores are not located in their neighborhoods. I am glad that Wal-Mart offers low prices. Wal-Mart employees have the right to unionize or to seek employment at WFMI in order to get a better deal. I trust them to solve their problems.
Life is a series of trade-offs. The best we can hope for is an environment based on free choices, voluntary exchanges, and opportunities.
I recommend “The Quest For Cosmic Justice” by Thomas Sowell for your consideration. It will, at a minimum, have you re-think some of your views. It might also shake you to your very core. It and “Spiritual Man” by Watchman Nee are way up on my list.
Take Care,
Bob Jacklin
December 19th, 2006 at 10:49 am
To Bob Jacklin,
I think we are probably talking past one another and aren’t understanding the other person. I encourage you to reread my blog on Conscious Capitalism for I do not think you fully understand what I am trying to say here. You seem to understand and appreciate my point about deeper business purpose, but not my equally important point about the interdependent relationship between all the various stakeholders:
“If business owners/entrepreneurs begin to view their business as a 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.”
Wal-Mart indeed has a deeper purpose–”Always Low Prices–Always!” and they obviously understand the importance of taking costs out of their supply chain to fulfill this purpose, but the business is not being managed in a conscious manner to create value for the other interdependent stakeholders such as their employees, their suppliers, or the local communities they do business in. IMO Wal-Mart (despite its commitment to low prices to its customers) is not an example of a “Conscious Business” because it isn’t being managed to optimize the entire interdependent system that it participates in. At best Wal-Mart is trying to optimize well being for only 2 of its stakeholders–customers and stockholders. Wal-Mart’s strategy of strictly focusing on low prices as its only pupose has worked wonderfully well for them over most of the past 40 years, but today, in our increasingly transparent world, the flaws in this business strategy are beginning to become very apparent. Negative feedback loops have been created which are beginning to really hurt Wal-Mart. Despite their lower prices for their customers, their lack of genuine care towards their employees is now resulting in massive union attacks and various legislative efforts to force reform upon them (especially in health care). Various community activist groups organize to prevent Wal-Mart from opening in markets all around the United States. In addition, many, many suppliers voluntarily choose not to sell to Wal-Mart based on Wal-Mart’s tendency to continually use their dominant market position to extract additional price concessions from the suppliers each year or lose the business. All these negative feedback loops are beginning to negatively impact Wal-Mart’s business as their same store sales have dropped down to less than 2% in recent quarters. In fact, in the most recent month they actually reported negative same store sales. Look at Wal-Mart’s stock chart over the past 5 years. You’ll see that the stock is currently trading about 20% below what it was trading at 5 years ago. http://finance.yahoo.com/q/bc?s=WMT&t=5y&l=on&z=m&q=l&c= Things are not well right now in the Wal-Mart interdependent business system!
Your argument for voluntary exchange at Wal-Mart is of course a valid argument. No one is actually forced to work there against their will (they aren’t slaves) and the competitive market price system will always set the ultimate boundaries for employee pay. Any business which long ignores the competitive market price system will eventually go out of business. I’m not arguing for that. I am arguing, however, that Wal-Mart is a corporation that needs to rethink its ultimate purpose for existence and rethink its relationships to some of its key stakeholders–employees, suppliers, and communities. To its possible credit it may be rethinking its relationship to the environment as it has initiated some well publicized efforts to become more environmentally focused. So far, however, all its environmental efforts have been consistent with its primary business goal to take additional costs out of its cost structures to lower prices to customers and increase profits for its shareholders. It could be that their environmental commitment is no deeper than this and is simply being managed by the Public Relations firm they hired a couple of years ago to shore up their corporate reputation–”Greenwashing” in other words. Time will tell on this.
If Wal-Mart’s only purpose for existence is “Low Prices–Always Low Prices” and nothing more than this, then I predict it will increasingly struggle in the years ahead as our increasingly transparent world demands additional care and concern for employees, suppliers, communities, and the environment than Wal-Mart has historically provided. I encourage you to read “The Wal-Mart Effect” by Charles Fishman for a thoughtful and fairminded discussion of Wal-Mart.
Your comments on my blog have made me realize that I haven’t been clear enough in distilling exactly what I mean by “Conscious Capitalism”. I will need to substantially rework my paper to make it more cogent before publication in my book. Here are the key principles for my version of Conscious Capititalism that I want to underscore:
1. Entrepreneurs create &/or discover the purpose of the business that they create–not economists, politicians, or lawyers. Entrepreneurs today are also entrepreneurs of meaning.
2. Every business has the potential for much deeper and more comprehensive purposes than only maximizing profits for investors. However, maximizing profits for investors is a legitimate purpose and not unethical–just narrow and uninspiring by itself. Great businesses have great purposes.
3. Machine/engineering/industrial metaphors are no longer the best metaphors to understand how a business or an economy really functions. Systems theory, Hayekian spontaneous order, and complexity science are better tools and metaphors for understanding both business and economics today.
4. The Paradox of Profits. Profits are maximized or optimized by not making them the the primary purpose of the business. They are a by-product of other things–deeper business purpose, customer satisfaction, employee motivation, successful innovations, superior business strategy, optimum systems leadership, competitive adaption/evolution, and many other factors.
5. Business leadership will be most successful over the long-term if it optimizes the entire interdependent business system and consciously creates value for all of the constituencies of the business. This will also maximize long-term profits for the investors as well. Optimizing the interdependent business system is not done blindly or arbitrarily, however, but is always done within the context of the larger economy which provides the necessary price information for leadership to make good decisions. The price system is a necessary tool for leadership to use, but not a God for them to obey.
6. The metaphor of citizenship is appropriate for business to use to understand what its appropriate relationship to the communities it operates in–local, national, global, and environmental. Citizenship entails certain responsibilities as well as privileges.
7. We increasingly live in a transparent world where everything we do is seen and communicated to everyone else who is interested. Transparency necessitates greater awareness and consciousness about all of our decisions and actions.
Thank you, Bob, for the reading suggestions. I’ve read 10+ books by Thomas Sowell but not “The Quest for Cosmic Justice”. I just ordered it. Sowell books I particular enjoyed include: “The Vision of the Annointed”, “A Conflict of Visions”, and his wonderful 3 book series including “Race and Culture”, “Migrations and Cultures” and “Conquests and Cultures”.
Regarding Watchman Nee’s “Spiritual Man”–I read these books 33 years ago when I was a practicing Christian. While Nee has some interesting insights about inner psychology I found these books obsessed with fears about “Satan” everywhere. They are no longer useful books for me personally as my personal spirituality has evolved in different directions. Since you are interested in Spirituality let me recommend a few of my favorite books in this category for you: “Essential Spirituality” by Roger Walsh, “A Path With Heart” by Jack Kornfield, and “A Course of Miracles” by The Foundation for Inner Peace. I found great spiritual value in all three of these books. I believe Ken Wilber is the most important philosopher living today in the terms of creating philosophical models which reconcile spirituality and science and giving us a firm foundation to move past mythologically based religions into authentic 21st century spirituality. I heartily recommend almost all of his books, especially–”A Theory of Everything”, “The Marriage of Sense and Soul”, and “Integral Spirituality”. These are all good introductions to Wilber’s ideas.
December 20th, 2006 at 9:13 pm
John-
I applaud you thinking.
I worked as a managing executive at a fortune 100 company for 35 years. This company was one of the greatest success and innovation stories ever.
When we were profitable, our corporate attitude, and our culture I might add, were similar to yours. Our business model looked much like yours also. But just as Maslow outlined in his hierarchy of needs model, we started worrying about food, clothing and shelter (basic needs) as our profits shrunk. Our culture held tight but the competition was fierce, especially from the Japanese. Their goal was to put us out of business with an equal quality product but at a price our good people could not achieve.
When this happened things turned ugly. Shareholders were demanding higher returns and could care less what good corporate citizens we were.
I hope your model continues to produce favorable results, ours did for years. We even won the Baldridge Quality award several times but it failed to produce the revenue and profit we needed. The company is still around but I’m glad I’m retired.
Tony
December 21st, 2006 at 5:33 am
Hi John, I’ve really enjoyed reading your thoughts on conscious capitalism and noticing how the definition of that has expanded to mention spirituality and the interconnectedness of life. I was recommended to look at Whole Foods as an example of an organisation that is willing to seek ways of working that serve a higher purpose and yet are not seeking to be part of something that requires anyone to buy into their beliefs. It seems to me that you are offering an alternative model which demonstrates itself everyday through the existence of your business. It’s attractive to those who resonate with it, and for some the attraction is conscious, others don’t think about it they just keep choosing to work, shop or trade there.
It occurred to me that over the years you will have evolved your thinking and conscious understanding of the business model you’ve created. I wondered how you shared that initially when you started the business and how you have managed any resistance or challenge to that approach along the way. As it became clearer, and is “the way things are done around here” I imagine that it becomes a self generating approach because the results exist and people can feel it’s different. There must have been times where the choices to cap salaries, or any of the other approaches you’ve adopted, seemed to fly in the face of the way people believed business should run in order to be successful. How have you supported yourself and others through these times?
I am very interested in exploring ways of doing business that consciously recognise the movement of energy, the existence of universal laws and seeks to serve the bigger picture. I am in the process of gathering ideas and case studies that will support the creation of a book and study materials and I would really like to discuss this with you outside of your blog.
I look forward to reading more. Although I am open to other approaches I recognise that I’m used to viewing the world of business in a particular way. Reading your book is challenging me to realise how many fixed beliefs I currently hold.
Thank you
Lucy Palmer (from Norwich, England)
December 21st, 2006 at 3:40 pm
To Tony Manasseri,
I empathize with your competitive business experience. It is obviously much easier to have an expansive view of the world when a business is successful and prospering than when competition is beating it in the marketplace. I don’t know any of the particular facts about the business you worked for so I can’t comment specifically about it. I will say, however, that Whole Foods doesn’t lack for powerful and aggressive competitors, many of them much larger and better capitalized than we are. IMO competition should be viewed as an “ally” of the business because it is through competition that we are forced to get better–forced to reduce our costs, forced to innovate, and forced to create new value for our customers. Whole Foods success over the last several years has greatly increased the competition that we are facing and has caused us to accelerate our innovations, lower our prices, and discover new and better ways to better differentiate ourselves and to increase customer value. It isn’t easy to do this and we are not permitted to “rest on our laurels” for very long. We have to get better, get cheaper, or get out–same as every other business. It is this driving quest for continuous improvement fueled by competition from other companies that is the true source of the dynamism of capitalism.
To Lucy Palmer,
I can’t summarize 28+ years of business experience in a blog entry. You’ll have to wait for my book to come out–hopefully finished in 2007 and in print in 2008.
I will let you in on one little secret–we have figured it out as we went along. There was no “master plan”. We started out with very simple and easily understood values and built the organization around those values. The complexity that exists today has self-evolved over the past 28+ years. One other little secret–we are still figuring it out as we go along. We are still discovering our deepest purposes and still learning, growing, and evolving. Each day brings new discoveries and dozens and dozens of new experiments throughout the company. Whole Foods is a grand adventure that I believe has still barely begun.
We shall never cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.
T. S. Eliot
December 23rd, 2006 at 10:28 am
John-
I agree with you that competition can be viewed as positive, it does cause us to become sharper than we might otherwise be. Another challenge of yours will be to communicate that to your people, in a way that they will embrace it like you have.
What overtook us was the rate and velocity at which the competition came at us. That said, we were one of the few companies that were able to gain marketshare in the face of this stiff Japanese competition. It just took us a while. I don’t think our senior leadership was as aware and knowledgeable as you seem to be.
Later in my career I was involved with many successful change initiatives. If you are interested in knowing the formula we used I will be glad to share it.
My only interest in doing this would be to help you succeed. I love your stores and employees and want them to be around a long time. So much so that I have given several free seminars on organics at your stores.
Tony
December 25th, 2006 at 2:05 pm
I second the views of Thomas MacGowan and to Christopher Neal I would like to add that living on less than a $1 a day is not poverty, it is simplicity. Why should the way of life in wealthy nations be used as a yardstick for measuring poverty? If everybody could live on less than a dollar a day, it would be good for their souls and mother earth would smile! I live in the US, but am from India where a large percentage live on less than a $1 and if by your stats the level of poverty has reduced in India, it has definitely not made it a better place, in fact all the places I cherished growing up there have been turned into ugly meccas of capitalism and consumerism fueled by globalization.
Having more to spend doesnt make the world a better place, living on less does and thats not something capitalists favor!
December 26th, 2006 at 9:03 am
To Tony Manesseri,
My time is so scarce that I don’t believe we can meet in person to talk over your ideas. I invite you to share your ideas by posting them on this blog. Thanks.
To Kajal Nanaiah,
Given the opportunity to materially better their lives and materially better the lives of their children most people in the world make the choice to do exactly this. Most people don’t want to live on $1 or less per day and apparently neither do you, since you have chosen to live in the United States. Unless you are living homeless somewhere and eating out of trash dumpsters then I suspect you are spending more than $1 per day. How do you justify this? If you believe poverty (or if you prefer “simplicity”) is a good thing, then why don’t you voluntarily move back to India and live there on less than $1 per day? Any extra money you have you can give away to other poor people or donate it to The Whole Planet Foundation–www.wholeplanetfoundation.org. The Whole Planet Foundation is working with the Grameen Trust to end poverty throughout the world. We could use your money to loan to poor people through microcredit to help them climb out of poverty. I promise you that we don’t loan any money to any poor women (100% of the loans are to women) who don’t want to borrow the money. You might be surprised to discover that most really poor people don’t like being poor and have powerful dreams to better their lives and the lives of their families.
I believe in “voluntary simplicity” and personally follow that lifestyle myself. I believe each person must define what “voluntary simplicity” means for themselves and shouldn’t try to coerce others to adopt their own particular lifestyle. For example, I believe that following a vegan diet and lifestyle minimizes one’s environmental impact in many different ways, but I don’t believe in trying to force my particular dietary choice onto other people. Each person must choose for themselves if they have the opportunity to do so.
December 28th, 2006 at 7:13 pm
John-
This change formula came from Richard Beckhart at MIT.
Change = PxVxCRxTPL
__________
Resistance
Change will occur when people are faced with or are able to see the Pressure that requires the change. You could also call this UN for understanding the need. Pressure is not always bad like shrinking market share, it could be that you are very successful in the current model but need to change to grow the business or to get ahead of a new trend.
Once they understand the what and why of change they must have a clear understanding or Vision of where they are being asked to go. What will it look like? Example, I understand I have to loose weight because of my diabetes but how much?
Next you have to describe the Current Reality. Example, how much do I weigh now so I understand about how far I have to go to get to my vision? How bad is our Current Reality, how did it come about?
Last is a Transition Plan showing the incremental steps planned to get the organization towards the new Vision, and their role in its success.
Each of these has a multiplier between them indicating that every one must be addressed or the change will not be successful. 100 times zero is still zero.
All of this is underscored by Resistance. Resistance is normal and should not be viewed as something to defeat. People will go thru the stages of resistance, there are four, at their own pace. Normally, about 50% of the people in the organization will go willingly along with the change. These are the people who like change or have, “I want to please” personalities. Another 30% will show some stage of resistance and will be difficult to influence. Keep the 50% motivated while you work on the 20% in the middle who often need a little more information or are waiting to see if this is real. 70% is enough for a successful change initiative.
Frequent communication and plan updates will keep the effort from “rainbowing” and differentiates it from the latest management brain fart.
Tony
December 28th, 2006 at 8:21 pm
Hello Mr. Mackey. This is an interesting article, and poses an interesting contrast to the ideas of Milton Friedman, with which you appear to have some significant overlap, and some differences.
Here’s a few comments on your major points, which I hope may help you as you write your book.
>1. Entrepreneurs create &/or discover the purpose of the business that they create–not economists, politicians, or lawyers. Entrepreneurs today are also entrepreneurs of meaning.
I’m not sure if by entrepreneur you mean someone with an entrepreneurial spirit or a founder. I would argue that we all generate meaning by the acts and positions that we take. Sometimes we reinforce the meaning, sometimes we change it. Founders of a business often have significant potential to create the meaning of the business, but stewards of existing values or change agents who bring new values also change the meaning of a business. Also, I’d add that stakeholders make judgements on those meanings, and customers are the most significant judgement maker as to the meaning of a business; if the customer doesn’t understand the values of a business organization, it may have to change.
>2. Every business has the potential for much deeper and more comprehensive purposes than only maximizing profits for investors. However, maximizing profits for investors is a legitimate purpose and not unethical–just narrow and uninspiring by itself. Great businesses have great purposes.
I’m not sure great businesses always have great purposes. But I can see that creating great meaning can help immesurably in bringing together the set of voluntary exchanges needed to create a coherent and effective organization. Certainly as customers in our modern world become more materially satisfied, they tend to look beyond just material satisfaction, to greater meaning, in their purchasing decisions.
>3. Machine/engineering/industrial metaphors are no longer the best metaphors to understand how a business or an economy really functions. Systems theory, Hayekian spontaneous order, and complexity science are better tools and metaphors for understanding both business and economics today.
I’m not sure that any particular set of metaphors is best. Probably having multiple metaphors at hand is the most critical.
>4. The Paradox of Profits. Profits are maximized or optimized by not making them the the primary purpose of the business. They are a by-product of other things–deeper business purpose, customer satisfaction, employee motivation, successful innovations, superior business strategy, optimum systems leadership, competitive adaption/evolution, and many other factors.
I think profits are maximized by solving a great unmet itch, and then figuring out a way to monetize the solution effectively. That’s similar to what you said, but different.
>5. Business leadership will be most successful over the long-term if it optimizes the entire interdependent business system and consciously creates value for all of the constituencies of the business. This will also maximize long-term profits for the investors as well. Optimizing the interdependent business system is not done blindly or arbitrarily, however, but is always done within the context of the larger economy which provides the necessary price information for leadership to make good decisions. The price system is a necessary tool for leadership to use, but not a God for them to obey.
Agreed.
>6. The metaphor of citizenship is appropriate for business to use to understand what its appropriate relationship to the communities it operates in–local, national, global, and environmental. Citizenship entails certain responsibilities as well as privileges.
It is a useful metaphor, but it’s also clear that sometimes companies under the guise of being good citizens engage in behavior that takes a particular point of view that may not match those of their owners. Owners can of course vote with their feet, either leaving or entering a stock of a business they believe in. But it is just as critical that corporate officers ponder whether a decision they make is actually for the benefit of the owners. If it increases the meaning that the whole organization or customers feel, that’s probably not bad. But if it increases the personal meaning for the corporate officers, at the cost of company resources, without having real effect on the organization’s interdependencies or on customers, then it is likely to be a waste of resources.
>7. We increasingly live in a transparent world where everything we do is seen and communicated to everyone else who is interested. Transparency necessitates greater awareness and consciousness about all of our decisions and actions.
Agreed. It’s actually one of the big benefits of the information age that more scrutiny can be applied to all aspects of how things are done, if we care to apply it.
December 30th, 2006 at 3:41 pm
John,
I know where you stand in regards to organic foods. Just wanted to see your reaction from the latest issue on the latest findings by the U.S. Food and Drug Administration that Milk and meat from cloned animals is safe to eat. And also on the same level how safe organic meats will be once cloned meats enter the food chain?
January 1st, 2007 at 6:01 pm
John Mackey,
I think first before one can answer the question, what is the purpose of business, one has to ask, what is the purpose of human species. It seems to me human species has the same purpose as every other species from bacteria to primates and that is to evolve. After 100 million years of evolution reptiles like alligators are equipped with teeth and guts that keep it going despite inhospitable conditions like draught, ice ages, human encroachment, egg eating mammals and meteorites. 100 million years has taught them a valuable lesson that being patience. Animals need water and when they come for water alligators keep motionless below the water line at the right moment tear limbs off unsuspecting creatures. A real master at survival.
Science views mutations as random. Beneficial mutations will pass on to successive generations and unfavorable mutations will die along with less equipped bodies through natural selection. Random mutation it seems to me isn’t logical considering the exquisite speciality one observes in nature. Camouflage, intricate defense mechanisms, coloring, innate behavior, muscular structures designed for evasion or pursuit. I think there is likely a feedback mechanism from the environment back to DNA intelligence meaning mutation is not random but environmentally triggered. What is the trigger for future human evolution?
I think humans are in a state of arrested development. Human species is ready for mutation. The earth is fully populated and it is time for us to scrap old systems and ways and move on. There may be two prominent forces at work influencing human development. One force is negative all together too pervasive and that force emanates from all existing organizations, bureaucracies, governments, parents, churches, in other words all conditioning forces existing in modern society. These institutions namely want one thing, to stick their ideology in your head and keep homosapien right where he is. One gives up youth, vitality and autonomy, getting little in return, paper money.
What is the purpose of business? Whatever the owner wants it to be. Unfortunately most owners are primarily interested in money. In all probability CEO’s cannot define the purpose of their business once a company is public. Going public means a CEO is now controlled by Wall Street. But lets say you come across a high IQ visionary type CEO having enough confidence, brains and charisma to motivate its flock and appeal to single minded wall street types and a general public convinced they are making their own decisions but really are only selecting from a very limited number of choices offered by societies institutions. What might he do?
If the purpose of a species to evolve then he might direct his business to that end. Our CEO having a background in many disciplines including Buddhism realizes consciousness is not a static thing rather a very dynamic thing that can be programmed and reprogrammed at will. Adepts having such capability can render any reality they wish. So our CEO wants his workers to undergo persistent brain change. He is changing the whole damn paradigm of business and society.
He buys a 100,000 square mile parcel of land somewhere in Mexico (He is worth 50 billion). This space will house all workers and buildings. He builds a huge R&D center offering research capabilities from semi-conductors to outer space probes. Once complete he brings in the smartest scientists, programmers and engineers from around the world. His workers live rent free in 100 story buildings built for commune living. Workers own nothing but have access to everything they need. Schools are built serving kindergarden age children through college level. No grades are issued. Early schooling is geared to illicit creativity. College courses are geared to science, math, art, music and literature.
All schooling is free. Cars are not used inside the community. Instead horses are used for personal transport. Workers have no possessions. They use any idle horse. Everyone is a vegetarian. No animals are killed for food. Many types of fruits, vegetables rice, dates, nuts are grown supplying enough nourishment for all. There is no use for money. All physical and spiritual needs are provided for.
Our CEO tells his scientists and engineers he doesn’t want incremental change. He doesn’t want a better mousetrap. He wants quantum leaps in technology and invention. For example he tells his engineers he doesn’t want improvements made to the internal combustion engine, he was a new kind of engine. First task is to build a new car line. Cars are small and hydrogen powered with enough room for two. Cars however are designed to accept different body attachments. For example, somebody needing additional space whether it be space for passengers or cargo need only back up into the attachment module, press a button, and his two seat compact becomes a pickup truck or SUV or sedan. Modules are self-powered and conveniently available. When you no longer need the module you leave it at a dealer or Walmart or wherever. Warranty is 10 years 150,000 miles. Body design never changes. All engineering efforts go into functionality improvements.
Once his cars substantially penetrate world markets new initiatives are undertaken. Engineers design heavy construction equipment using the same modular car concept. No longer do builders need very expensive specialized equipment for specialized tasks. A navigation module contains the brains and driver designed to connect up to all sorts of other task modules like digging modules, grading modules, lifting modules etc. Caterpillar and Volvo’s market share take a major hit dropping to number two and three respectively. Pharmaceutical drug development is another major initiative. Intelligence drugs are introduced for dirt cheap and the collective human genome begins producing homosapiens with better brains. Software engineers develop programs that create a brain computer feedback loop creating higher and higher brain functioning. Gone are emotional neurosis and general stupidity. Profits run 1 trillion dollars annually.
No wages whatsoever are paid. Workers live, eat, socialize, work, do everything within the community. Every kind of animal runs free. All workers are guaranteed lifetime provisions. There are no laws and no police. There is no crime. All residents receive positive signals all day long. Music is played everywhere. Children run naked playfully chasing pheasant. Elephants immersed in large lagoons shoot water from their trunks. Eagles perch on window sills eating food out of a boys outstretched hand. Everything is in harmony with everything else. Classes are held in every kind of venue, along rivers, high in the mountains, around a midnight fire. Students learn ancient wisdom of China and India. They learn astrology and yoga from Indian masters. They learn magick from South American shamans.
The stock price doubles every six months.
All this effort is leading up to something really big, space travel for the average person. A space station is designed and built in space. In 2027 the station is ready for inhabitants. Ten people blast off every day destined for space living. There is indeed a trigger for human mutation and that trigger is zero gravity births. After several cosmic generations verbal language is thrown away like the club and spear. Communication is done by using telepathy. Bodies become small and light. Contact is made with other inhabitants of the universe. The human species finds its home at last.
January 3rd, 2007 at 11:40 pm
Dear Mr. Mackey,
Congratulations on your tremendous success and signficant contributions. I have been reading Conscious Capitalism and have learned a great deal from what you have written, so much so, that I felt compelled to chime-in. My husband and I are small business owners who are proud to manufacture an organic product that is sold on the Whole Foods shelves in Austin. I wanted you to know that recently we were approached by Wal-Mart to sell our product to a significant number of their stores and we found ourselves faced with a making a major business decision. It was a ‘moment of truth’ so to speak for us and we had to pause and ask ourselves again what kind of company we wanted to be. We swallowed-hard and made the decision that we would not become a company that was in business just to make a buck. We felt good knowing that what we worked hard at all day stands for more than just economic prosperity and if we agreed to do business with Wal-Mart, we would be nothing more than sell-outs.
We have adopted our own corporate causes, the biggest being, “Donate Life America” - due to someone in our own family being touched by the need for an organ transplant. After reading your essay, I am again excited and motivated about how even a small company like ours can use our business platform to give-back to our community in countless ways and educate consumers about important social issues. I applaud and thank you for this inspiration!
I find your company and the people who work for it truly enthusiastic, gracious and a pleasure to work with. Every single person we have come in contact with on your team has been a true joy to work with and this is solid proof of the corporate culture of values you have created within Whole Foods. I wish you nothing but continued success and I genuniely hope that one day when I am demo-ing our product in your store you walk by so I can shake your hand.
God’s blessings to you and yours in 2007.
Jennifer Davidson
January 4th, 2007 at 10:15 am
Again you make statements about animal welfare as one of your
driving forces and yet your corporation
continues to stock POM “Wonderful” despite that company’s
insistence on cruel and unnecessary animal testing, and despite the ready availability of alternative pomegranite drinks. How does this fit in with your stated animal welfare policies? I believe that WFM is actually POM’s largest distributor, which means that you are directly responsible for the unnecessary suffering of untold lab animals. How on earth does this square with your drive toward “unlimited love for all people and even for other sentient creatures” - in short, to the paradigm of Conscious Capitalism that you claim to be exemplifying. To me, this is pure
hypocracy; you need to either take this product off of your shelves immediately or stop the self-serving philosophical ramblings.
January 7th, 2007 at 1:34 pm
To Tony Manasseri,
Your comments about change pretty accurately reflect Whole Foods’ own approach to implementing change and integrating any acquisitions we make into our company culture. Some of the ideas you share seem very similar to Robert Fritz’s ideas in “The Path of Least Resistance.” Thanks for sharing.
To Ranjit,
Thank you for your comments. Regarding Milton Friedman, I consider him one of the greatest economists of the 20th Century and a true champion of both freedom and prosperity. I met him a few times and had very interesting conversations with him. I admire him greatly. However, I do differ with his ideas regarding the social responsibility of business. I refer you to my first blog entry, “Rethinking the Social Responsibility of Business” where I engage in a debate with Milton and T.J. Rogers regarding the social responsibility of business.
To Charles Mukuka,
Whole Foods doesn’t yet have any policies on cloned animals. However, we are discussing and debating it internally and will likely have an “official policy” to announce in the near future. I would also be very surprised if the Organic Standards Board allows cloned animals in their “official” definition of organic.
To Michael Antczak,
I don’t pretend to know what the purpose of the human species is. I’m far from sure that our species actually has any transcendental purpose. I believe that purpose is determined from “within” not from “without,” and that each individual must discover or create for him or herself what their own individual purpose is.
Regarding who determines the purpose of a business I vigorously argue in my blog posting that it is the entrepreneur(s) who create a business not the owner(s) who invest capital that determine the original purpose of the business. Frequently these overlap, but not always. In the case of a publicly owned corporation such as Whole Foods where tens of thousands of people have invested capital (millions of people when the individual owners of mutual funds are included) it is impossible to know what each individual owner desires the purpose of the business to be. I won’t repeat all the same arguments here again. In my opinion and in my own personal experience at Whole Foods it is the entrepreneurs who create the meaning and purpose of a business–not the investors of capital.
To Jennifer Davidson,
Thank you for producing quality organic products and thanks for your loyalty to Whole Foods. Our company is definitely interested in doing more business with local vendors and farmers such as you who don’t want to sell their products to Wal-Mart and other mass market retailers. I hope your business flourishes.
To Rueben Furly,
I’m sorry you feel so angry and judgmental toward both Whole Foods and myself.
1. Whole Foods has had several discussions with POM regarding animal testing. In fact POM itself does not actually do any testing on animals, but they do fund animal testing on pomegranate juice since that is required by the federal government in order for them to make nutritional claims regarding the product. Such animal testing is usually intellectually justified as being a tradeoff between the good of people and the good of animals, with people being more important. I don’t personally agree with this argument but that is currently the government’s position on the matter.
2. Is Whole Foods POM’s largest retail distributor? I don’t know. Possibly. We are the largest retail outlet for most of the products that we sell.
3. Our company has no official policy at this time regarding animal testing of grocery products, dietary supplements, and most other products that we sell. We are having internal discussions and debates about whether to implement such a policy. No decisions have yet been reached internally to change company policies. Here is our official answer at this time to complaints such as yours:
When determining whether a product meets our Quality Standards, we evaluate only the product being considered for sale within our stores. We look solely at the individual product in question and its ingredients. We do not include in our review any operational or management decisions of the company outside of the direct manufacture of the product in question.
Most food ingredients have long since been proven safe for human consumption, and fortunately do not currently require animal testing. However, dietary supplements, and certain foods that are marketed for their nutrition and health benefits, do occasionally use the results of animal research to substantiate claims or support the safety of a new ingredient. While we do not encourage unnecessary animal research, we cannot guarantee that it has not been used by our supplement and food manufacturers. Household cleaning products and personal care products sold in our stores have been proven safe without the use of animal testing.
We recognize that customers may have their own personal criteria for buying or not buying a product. Whole Foods Market provides the basic screen for ensuring our products are free of artificial ingredients: flavors, color, preservatives, sweeteners, as well as no hydrogenated fats. From there, we encourage each individual to make their own personal decisions incorporating any additional criteria that remains important to them when purchasing a product. For more information about a manufacturer’s policies, or to express your opinions directly to them, we suggest you contact them directly.
4. Whole Foods does sell hundreds, perhaps thousands, of products that result in significant harm to animals, including the death of the animal. All of our beef, pork, lamb, chicken, seafood, etc. result in the death of these animals. The great majority of the eggs and dairy products also involve considerable exploitation of the animals. These facts are true not only for Whole Foods Market but also for every food retailer of any size and scale in the entire world. Whole Foods is doing many things to lessen the pain and suffering of animals and to create viable commercial alternatives to animal factory farms that currently dominate almost all animal food production in the world today. I know of no other retail food company that is doing as much as Whole Foods is doing to try to lessen the suffering of animals. I challenge you to name even one other retail food company who has done as much as Whole Foods has done to try to help lessen animal pain and suffering. Can we do more? Sure. And we will. Wait and see.
5. It is important to make the intellectual distinction between “John Mackey” and “Whole Foods Market.” They aren’t the same thing. They are independent entities that have their own individual interests, identities, and destinies apart from one another. If you ever create an organization or a company that exists for many years you will perhaps discover this truth for yourself. I personally disagree with many of Whole Foods policies in terms of my own personal values. Whole Foods is an empowered community where many opinions, views, and values are expressed by many, many people (we have millions of customers, 43,000 team members, tens of thousands of suppliers, and millions of investors). We make the most important policy decisions of the company through a company leadership group of 24 leaders from around the company. I vigorously argue my viewpoints, but at the end of the day I am only 1 of 24 votes and I don’t always win. As the C.E.O. can I “overrule” the decisions of our leadership team? Legally I can overrule them, but in reality I never do because to do so would be to undermine the empowerment culture that is primarily responsible for our success. No one of real intelligence or talent wants to work for a “dictator,” no matter how well intentioned the dictator might be. I therefore support the decisions our leadership group collectively makes even when I disagree with them. Whole Foods will continue to follow its mission statement and to serve its multiple stakeholders into the future. Since the stakeholders have multiple interests and multiple desires it is quite simply impossible to satisfy everyone 100% of the time. We will always have some angry customers, team members, investors, suppliers, and communities who disagree with some of the actions and policies of the company. All the company can ultimately do is try to satisfy as many people as possible as frequently as possible–to seek win, win, win, win scenarios. If we do this well enough then the company will continue to flourish.
6. I follow a (near) vegan diet myself, eating only eggs from my own chickens because this dietary philosophy is consistent with my own personal values. These are not Whole Foods company values, however, and likely never will be. At this time about 7% of our customers define themselves as vegetarians and 3% as vegans (and these are much higher percentages than the United States population as a whole, where vegans number less than 1%). That is too small a population to build a successful food retailing business around. If you disagree, then go create your own food store and find out the hard way. I opened a vegetarian food store back in 1978 called Safer Way before I opened Whole Foods Market. It was just 3,000 sq. ft. and it wasn’t financially successful. Whole Foods was/is successful because we built the business around what our customers wanted–the highest quality natural and organic foods available, including animal products–instead of my personal dietary philosophy. On my own life path I’ve concluded that life is full of compromises and tradeoffs as we move through a world of infinite possibilities and infinite complexity. It is easy enough to be “pure” if you are willing to create nothing of substantive value. Real progress (both individual and societal) does happen, but it happens over time and it tends to move in an upward spiral instead of in a straight line.
7. Ultimately if you disagree with Whole Foods or don’t like us then you have the free choice about whether to trade with us. Many, many people in fact don’t like us for a multiplicity of reasons and don’t trade with us. You are free to do this as well. If you don’t like POM then don’t buy their products. If you don’t like Whole Foods then don’t shop there (or work there or buy the stock or read my blog).
8. It is the easiest thing in the world to criticize and judge other people. What is much harder to do is to actually create something that makes a real difference. I admit to being far more impressed and influenced by people who go out into the world and actually create something that helps people (and animals) instead of merely criticizing other people for not doing enough. I personally admire entrepreneurs much more than I admire activists. Entrepreneurs actually create things while activists usually just critize others and try to “bully” and “threaten” people to try to force the world to conform to their personal values. I love Michelangelo’s wonderful quote and will end this posting with it:
“Criticize by Creating.”
January 8th, 2007 at 9:05 am
In recent weeks there have been several articles written in business publications and the like regarding Wal-Mart’s interest in jumping on the organic bandwagon. I find it ironic that at the same time you recently posted a blog about headhunters wooing your executives, and staff to competitor’s businesses. All I have to say is this - Don’t let them John! Like a bucking bronco, you hang on to that saddle horn and ride it out! Anyone who has seen that Wal-Mart documentary knows that company certainly has no concept of “conscious capitalism”.
One other side note -I purchased Whole Foods stock 3 days after 9-11. Why? Because I realized in that moment that I too needed to have a bigger reason, than just making money. So thank you for giving the public an opportunity to invest in something meaningful…John, your company is helping to make this country better.
January 8th, 2007 at 9:49 am
John Mackey,
Thanks for your contributions. I found your ideas clear and your vision admirable. I wholeheartedly agree with your ideas.
I have two questions:
1. Are you aware of some of the material that has been written by Gary Moore on Ethical Investing? Gary has written about John Templeton at length and how he became the most succesful mutual fund manager from 1954-1992.
Templeton adhered to a philosophy of only buying companies that produced products beneficial for mankind and avoiding companies that preyed on human weakness. He outperformed the S&P 500 by 3% per year during that 38 year period after fees.
2. How much of your philosophy was shaped by your religious beliefs? You mentioned that you were a practicing Christian at one time. I am curious if your understanding of stewardship of resources came out of that or was developed later?
To expand on that, my understanding of biblical revelation is that God gave Adam in the Garden of Eden a stewardship mandate in Genesis 1:28 to cultivate, grow, take dominion of the earth. The biblical story moves from God taking man from a Garden- Genesis- to a City- Revelation.
I believe the point is that to the believer in biblical revelation, we are not to seek repristination- a return to the Garden. But rather progressive reformation- using the resources that God has entrusted to us to grow, cultivate and improve nature through conscious capitalism, technological innovation, etc… Did this understanding of stewardship shape your life philosophy?
I really enjoy your thoughts because I believe they are entirely consistent with a biblical view of the world. I respect that you are a voracious reader as well. You have a lot of great things to share and it obviously comes from a mind and heart searching for wisdom.
Best Regards,
Ashley Hodge
January 8th, 2007 at 1:30 pm
In reading your blog, I think of the adage: “sorry for the long letter, but I didn’t have time to write a short one.” I admit to only going a few pages into your blog because I found it overly simplistic and flat-out wrong.
You write: “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… All the constituents therefore exchange voluntarily for mutual benefit, and they are free to exit the relationship whenever they wish.”
What is “voluntary” about the need for sustenance, electricity, energy to heat the home, health care? If I find my health care provider to be too expensive, I am free to go to another competitor? When was the last time you comparison shopped for health care for yourself? How about for the typical “consumer”? Way overly simplistic, and you use it to form the foundation of your written piece. I take nothing away from your achievement with Whole Foods, but cannot take this as serious economic theory.
January 8th, 2007 at 1:43 pm
I’d like to thank John for opening up an important issue facing our society.
I wish you can build a strong global network. We can find many companies which agree with your vision and philosophy. We need a conscious, conscientious capitalism(CCC) movement to secure individual health and world peace.
Thank you very much again.
From Pusan, Korea.
January 8th, 2007 at 6:19 pm
Can Conscious Capitalism be used to stop Whole Foods from promoting a product that funds animal testing?
POMs has been funding testing on animals and this cruelty is being supported by whole Foods by carrying this product. I thought I could trust Whole Foods with their Animal Compassionate Standards but I suppose it is just a gimmick to get away with supporting companies that are cruel to animals.
Now I know I cannot trust the products that are sold at Whole Foods.
January 8th, 2007 at 6:31 pm
Mr. Mackey,
You have been quoted asking this rhetorical question: “who has done more good for the planet, Mother Teresa or Bill Gates?” In light of the following article (provided below) recently posted by the LA Times, I would be curious to know how you can remain steadfast in your promotion of the inherent contradictions which are deeply seeded and undeniably obvious in the modern capitalist system, regardless of “conscious” considerations on the part of board members and CEO’s.
Sincerely,
Nick Theodosis
http://www.latimes.com/news/nationworld/nation/la-na-gatesx07jan07,0,4205044,full.story?coll=la-home-headlines
A TIMES INVESTIGATION
January 7, 2007
Dark cloud over good works of Gates Foundation
By Charles Piller, Edmund Sanders and Robyn Dixon, Times Staff Writers
January 9th, 2007 at 4:56 pm
To Ashley Hodge,
I am not familiar with Gary Moore, but I’m very familiar with John Templeton who I consider to be a “great man” who has done much good in the world. I admire him greatly. I also admire the Templeton Foundation, which is doing wonderful work. I think the Templeton Prizes are a great idea.
I no longer think of myself as a “Christian” in the biblical sense although I’m a long time student of “A Course of Miracles” which is a form of mystical Christianity. However, I’m quite eclectic in my spiritual studies–Buddhism, Hinduism (Yoga primarily), Judaism, and Islam (Sufism primarily). I have also read quite widely in world ethical philosophy and that has influenced me a great deal. I have also found meditation, affirmations, visualization, holotropic breathwork, and prayer invaluable as spiritual disciplines for training the mind and opening the heart.
To Jeffrey Reel,
It is hard to respond in much detail to you since you only bothered to read a few pages of my writing before dismissing it as “overly simplistic and flat-out wrong.” Both of these criticisms may or may not be true, but you certainly present no good ideas, evidence, or logic to support your viewpoint. The fact that you may need or want something doesn’t give you any legal or ethical “right” to have it. No one owes you “sustenance, electricity, energy to heat the home, or health care.” The world doesn’t exist to take care of you. You will have to offer sufficient value to others in order to trade for those goods and services that you need to support your own life. Capitalism is ethical because you are not coerced to exchange against your will with any particular business alternative (except for governmental monopolies) and in a competitive capitalistic market system there are always alternatives to choose from. Your complaint would be valid only in the case where a monopoly existed and you had no competitive alternatives to choose from. Your example of health care is fallacious, partly because we are very, very far from having a competitive free market in health care, which is incredibly regulated and subsidized in numerous ways by various governments and bureaucracies, and partly because despite all these market interventions you still have a variety of health care choices, including many types of alternative health care.
To Gizelle,
I answered the POM criticisms a couple of days ago. Scroll back up to see my answer.
To Nick Theodosis,
It is beyond my scope or interest to defend Bill Gates, The Gates Foundation, or capitalism in general in my blog. I have read the critics such as Paul Hawken that the article refers to and I don’t find their critiques very convincing. Capitalism isn’t perfect (what is?), but on balance it has overall improved the state of humanity tremendously. In a previous posting here I recommended a few books to read to back up my claims as to the overall value that capitalism has had. Here they are again: Max Singer, “Passage to a Human World: The Dynamics of Creating Global Wealth”; Stephen Moore, “It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years”; David Landes, “The Wealth and Poverty of Nations: Why Some are so Rich and Some so Poor”; Nathan Rosenberg, “How the West Grew Rich: The Economic Transformation of the Industrial World.” Of course many, many problems remain, but overall human progress is a historical fact which I believe a dispassionate study of long-term history makes very clear.
None of the environmental problems in the world are intractable problems, but all are capable of being solved through entrepreneurial creativity and collective human resolve. The fact is that the environment has greatly improved in the United States over the past 100 years–the air and water are both much cleaner than they were 100 years ago, and total forests have grown by millions of acres. This is all well documented by Bjorn Lomborg in his book “The Skeptical Environmentalist.” Of course many serious environmental problems remain to be solved (such as Global Warming), but we are capable of solving them and I believe we will do so.
I will also say that I wasn’t impressed with the article which engages in systematic misdirection and guilt by association. It is a hatchet job, plain and simple. Here is their argument in a nutshell:
1. The Gates Foundation invests its assets in corporations all over the world.
2. Some of these corporations are oil companies which produce oil in Nigeria and there are negative environmental and negative health impacts from that production. Therefore The Gates Foundation is responsible for these impacts.
3. Some of these corporations are pharmaceutical companies and they charge high prices for their drugs in poor countries. Therefore the Gates Foundation is responsible for this.
The logic of this article is that the Gates Foundation is responsible for every negative thing that happens in every company that they invest in. Since corporations (and capitalism) are inherently evil, and the Gates Foundation invests in corporations, the Gates Foundation is also evil. If the Gates Foundation is responsible for all the “bad” things that the corporations they invest in do, then do they also get to take credit for all the “good” things that those corporations also do? After all the oil companies that the Gates Foundation invest in supply oil to the entire world and our entire modern civilization is today based on an oil economy. You might think our entire modern civilization is terrible, but I don’t. Overall I think it is a very, very good thing and I shudder to think how much more poverty and suffering would exist in the world without oil or the oil companies to efficiently produce it. Since the Gates Foundation invests in pharmaceutical companies and those companies are developing cures for many of the diseases that plague us, then does the Gates Foundation get credit for those cures? IMO corporations, on balance, do far more good in the world than they do evil. Therefore on balance the Gates Foundation, by investing in those corporations, is slso doing far more good than evil. The article doesn’t point this out. Why not? Because the article is neither balanced nor fair.
As always the issues the article discusses are very complex and don’t lend themselves to simple “morality plays” of “good guys” and “bad guys” or “good versus evil” thinking. A very good book to read which has a chapter dealing with ENI and Shell in Nigeria is “Empires of Profit” by Daniel Litvin. It portrays the complexities and difficulties of doing business in Nigeria. It is very balanced IMO.
By the way, if Bill Gates and the Gates Foundation are guilty by association through their investments in various corporations who sometimes do negative things, then I must point out that by this logic Mother Theresa was also guilty of heinous crimes. After all, Mother Theresa was a nun in the Catholic Church. Is she therefore responsible for the Spanish Inquisition, various Catholic wars and assasinations, or more recently sexual child abuse by various priests. Is there a “Dark Cloud Over Mother Theresa” too? If not, then why not? The Catholic Church is guilty of numerous crimes and horrible human rights abuses and she was a nun with sacred vows to the Church. Isn’t she therefore guilty? Doesn’t this massive guilt far outweigh any good she did? (disclaimer here–I love and admire Mother Theresa who was clearly a wonderfully kind and loving person. The above comments about her and the Catholic Church are used as a form of satire only for rhetorical purposes. No direct criticism of her or the Catholic Church is intended). For that matter, aren’t you a citizen of the United States? Do you pay taxes to the United States government? Does that therefore make you responsible for many thousands of deaths in Iraq? Is there also a “Dark Cloud Over Nick Theodosis?”
My argument for “Conscious Capitalism” is that capitalism can be improved. Quite honestly there is no viable alternative to capitalism that doesn’t involve some type of totalitarian government with massive losses of both human freedom and prosperity. The question isn’t whether we’ll have capitalism in the world or not, because we will. The question is whether we can evolve it or not to a higher level of consciousness. I think we can and I’m working to do exactly that. Let me finish by recommending Peter Barnes recent book, “Capitalism 3.0: The Next Stage of Capitalism (The Commons).” Barnes has a number of very interesting ideas here about ways we can evolve capitalism for the 21st century. I don’t agree with all of his ideas, but some of them are flat out brilliant and deserve a wide audience and much discussion.
January 10th, 2007 at 2:07 pm
Mr. Mackey:
Thank you for the reading recommendations. My 2007 reading list includes three of your suggestions. Perhaps a better understanding of your frame of reference will increase my understanding of your writings.
Please consider an additional principle when writing Conscious Capitalism (cc):
“An enlightened consumer is the cornerstone of successfully transitioning towards conscious capitalism.”
Rationale:
As long as consumers see their purchases in the framework of lowest price or best personal economic value, the transition towards cc will be delayed, minimized, or never occur. The ability to undercut pricing by shortchanging various stakeholders (suppliers, employees, the community, etc) will allow others to successful compete and destroy (economically) those that would attempt to implement cc.
Therefore an elightened consumer is necessary. Purchasing decisions made on a daily basis must be seen in a much broader framework that includes the goals envisioned by cc. Until buying is seen as a reflection of one’s values, goals, and aspirations for the world this will not happen.
This is a major challenge and successful transition might happen more rapidly in niche markets that serve customers that already share a strong value or belief.
An enlightened consumer must have a broad view that desires fairness towards all stakeholders. This is diametrically opposed to out current economic model that spends untold millions on advertising that seeks to make the buying decision all about meeting the need of the individual.
Best regards,
Bob Jacklin
January 10th, 2007 at 3:08 pm
I am a Team Member in the Meat Department of Whole Foods Market in San Rafael. I have been a Team Member for ten years there, as well as a stockholder due to Whole Foods Market granting me stock options. This is the best company I have ever worked for. The company atmosphere is very respectful, and this flows from the executives of the company on down. I am proud to work for a company where the chief executive officer regards conscious capitalism as an important aspect of running the business. I am also very proud to work for a company that is listed as among the ten best places to work in the United States in terms of how they treat their employees. I concur with the results of that poll, and think Whole Foods should actually be number one, instead of, I believe, number three.
January 11th, 2007 at 7:00 am
Hi John,
Thanks for taking the time to respond to my posting. Yes I agree with you, I should go back to India and live on less than a dollar a day and donate the extra. Unfortunately I have not found the courage to make such sweeping change and also enlightenent came a little late. It took coming to America to realize the problems of over consumption. To go back I would have to get divorced (my husband is american) and my child would grow up without a father. Every day I wake up and battle with this.
But on the other hand I have made tremendous changes to my lifestyle and diet.
Also I could live on less if whole foods would reduce its prices
Best of luck.
January 11th, 2007 at 7:47 am
To Bob Jacklin,
I think your insight about “enlightened consumers” is very valuable and important. Thanks for sharing and I will “upgrade” my chapter with this idea. However, I think for Conscious Capitalism to reach its highest potential it will also require “enlightened employees”, “enlightened investors”, “enlightened leadership and management”, “enlightened suppliers”, “enlightened media”, “enlightened governments” and “enlightened communities”, as well as “enlightened consumers”. All are important. I agree with you that “enlightened consumers” are very, very important because “enlightened consumers” will create the demand for more “Conscious Businesses” and the growth of “Conscious Capitalism”.
To Dan Maffei,
Thanks for your 10 years of service to our customers at San Rafael. I love your store too, which is one of my favorites. FYI–Whole Foods was ranked #5 by Fortune in its most recent list of “The 100 Best Companies to Work For”, behind Google, Genentech, Wegman’s, and the Container Store (all great companies). See you in the store. Take care.
John
January 11th, 2007 at 1:22 pm
HI John,
I would like to first thank you for responding to all the various individuals who post here. I know you are a very busy man, and just reading your responses (and their length) shows me that you truly do care very much about what you believe in! I think that shows so much about what kind of person you are. Thank You.
John, I am currently reading a book that you recently recommended entitled “The Way We Eat: Why our Food Choices Matter” by Peter Singer and Jim Mason. I must say, this book has really opened my eyes and why I have even more respect for your Animal Compassion Foundation. Some of the ways that the animals are treated at the factory farms, really, really made me think. I was very saddened by what I read…it all so very unnecessary. Am I a vegan? No, not at this time. Will I stop and think before I eat or purchase meat, poultry or fish again? Yes. Will I continue to eat meat/poultry/fish for the forseeable future, yes, probably, but I must admit, after having read excerpts from John Robbin’s book entitled “Healthy at 100″ I musy say, I am becoming more and more a believer in less of a meat-based diet and more of a plant-based diet. I am very anxious to get my hands on a copy of John Robbins’s “Healthy at 100″, which by the way, I did notice on the back cover, that you have endorsed. I am truly amazed at these 4 groups of people Mr. Robbins writes about: the Abkhasians, the Vilcabambans, the Hunzans and the Okinawans and how they stay so healthy (body and mind) all the way to the century mark. I love to read and study about what makes for healthy bodies and minds, and I know it is not all based on what they eat. I know we cannot all live exactly like they do, but I sometmes wonder what would happen if people truly ate healthy for a week or two and got outside and enjoyed nature. I think many would be amazed and switch their dietary/persoanl habits….well, maybe one day.
I really think people in the food/health industry underestimate what WFM and You have done to better the lives of many people now, and many people in the future, who do not even recognize or realize it. Without WFM and You, I seriously doubt it if Organics would be in the mainstream media or on the shelfs of retailers such as Walmart, HEB, etc.. Ok, they would probably be out there, but not in the way they currently are. Again, Thank You and WFM.
I have come to realize that we all have a purpose while on this great planet, and I really think we all share an ultimate goal and responsibility to leave this Earth a better place than when we came here.
Well, I did not mean to bounce from subject to subject in this posting John, so I guess I just want to say “thank you” for the Animal Compassion Foundation that WFM has started. Hopefully more people will become aware of what is going on out there, and other retailers will institute something similar.
And oh yes, Congratulations on the #5 spot on Fortunes “100 Best Companies to Work For” list. Ya know John, as much as I like what WFM and what WFM stands for, I might very well be applying there for a job in the near future! Ya know, I think I will!
Best Wishes!
John M.
January 11th, 2007 at 3:27 pm
Dear John:
Without question you and the Whole Foods team have built a dynamic, evolving organization most people, including economists, could only dream of. And from what I can tell it wasn’t successfully built from an open text-book or a traditional mainstream business model.
This upcoming weekend I look forward to reading your essay, “Conscious Capitalism: Creating a New Paradigm for Business” cover-to-cover. Fifty -plus pages will require a few hours. The first few pages have intrigued me so far.
Having read the first four or five pages, an editorial in today’s Wall Street Journal, “The Hardest Price in Capitalism,” by James Grant, reminded me a little of what I have read so far.
Mr. Grant writes: “You will scan the Forbes 400 in vain for the names of the captains of the interest-rate forecasting industry. The omission speaks volumes. Just answering correctly the simple question “up” or “down” over a couple of moderately volatile years in the financial-futures markets would put a successful forecaster in the way of untold wealth. Yet, try as they might, the economists can’t seem to get fabulously rich” (James Grant, “The Hardest Price in Capitalism,” The Wall Street Journal, Thursday, January 11, 2007).
All the best,
Greg Ford
Houston, Texas
January 13th, 2007 at 5:01 pm
thanks for being so honest and posting not only positive blogs but also some that challenge us.
January 13th, 2007 at 5:35 pm
Mr. Mackey,
Great article, very interesting.
In regards to those who criticize: Drop that jealousy BS. You are adults. Mr. Mackey made his money and his empire by putting the grey matter to work, not crying and complaining when a roadblock surfaced. As an end result he has gained financial independence. Chances are if you were as productive as he is, you would not be bothered by his success. But then again this is the real world and nothing is fair.
We have a word for people who criticize others success but do nothing to enhance thier own: A**holes. Humans are hunter gatherers.If you hunt and gather more, you survive.We are also adaptive. If you adapt, you survive. So hopefully if the adaptation/evolution theory is correct maybe all the overly educated Moss Licking Anti-Capitalists will evolve themselves out of existance.
Rock on John, thanks again for the article.
January 13th, 2007 at 9:08 pm
Very beautifully said John Mackey. I am a student in business and have been thinking deeply about things such as this myself. Up until I studied your organization I wasn’t sure if there was a possible way to achieve what you are doing in corporate America.
You have gotten yourself added to the short list of people I admire (right up there with Ani Difranco).
I hope to meet you some day, and talk business.
Peace and luv,
dawn
January 13th, 2007 at 10:53 pm
John
I have been reading your blog “religiously” and agree with most of your thoughts on Conscious Capitalism. I am a senior executive of a healthcare company and your blog has answered many of my questions regarding the success of stakeholder businesses versus traditional stockholder businesses in the long run.
I have also read with keen interest your thoughts on executive compensation. The key question I would love your insights on is regarding the ethics of creating personal wealth as a CEO while creating wealth for the investors in the company in a “conscious” fashion. It is hard to become wealthy on pure compensation, particularly if salary caps are applied. For instance, I just finished reading Mohammad Yunnus’s wonderful book, banker to the poor, and the thought that I had was that would it have been appropriate for Mr. Yunnus to have become personally wealthy through options and stock grants in different Grammeen companies while doing all the good he has done.
In short, I am interested in your thoughts on CEOs and senior executives creating personal wealth, not at the expense of others, while meeting the needs of all stakeholders within conscious capitalism. Also what are the best mechanism to do that within the framework of Conscious Capitalism
Atul,Houston
January 15th, 2007 at 5:06 pm
Mr. Mackey,
I am very interested in the idea of Conscious Capitalism. I opened a business (art school/community art space) about 3 years ago with the idea that if I provided a good product, worked hard, was fair to my customers, employees and suppliers and ran my business with integrity that profits would naturally follow. I have been very disheartened to find that this has not been the case (at least not yet). I see how a business the size of Whole Foods can have a conscience and still make money. But what advice do you have for a small, start-up business (assuming that the idea is good, the customer base is there, etc) that wants to be good to it’s employees (fair wages, health insurance), good to it’s customers (a fair price, a quality product) and still profitable. If real change requires (or at least is energized by) a grassroots movement, how can the small start-up entepreneur implement your ideas from the beginning?
January 15th, 2007 at 9:47 pm
Firstly, I feasted on your blog post - just as I do whenever I stroll through the aisles of Whole Foods grabbing up free samples!
It’s always wonderful to find someone in the world as passionate as I am about capitalism. I completely agree with your argument about what makes an entrepreneur start a business, and that it’s NOT to maximize profits. As I read and related to the thoughts in your blog post, the hairs on my arms stood up. I recently blogged about a related topic — the move of GE’s executive, Dave Calhoun, to become CEO of a private firm in the face of this hostile environment for public CEOs.
I believe that companies who strive to achieve the higher ideals you mention “The Good”, “The True”, “The Beautiful”, & “The Heroic” will naturally have a competitive advantage. If that’s true, then by natural selection (in a Darwin-sense), these will be the companies who survive the times, while the others will fall behind.
Where you are trying to shape the minds of the movers & shakers of the world, my focus is to encourage parents and teachers to teach kids about the basics & empowerment (and pure beauty) of entrepreneurship and capitalism. It’s not
as sophisticated as what you are doing, but our core convictions are the same.
You asked for feedback. Here’s my 2 cents: I recommend you add some language to invoke fire & emotion in the reader. Tell them WHY they should care and why they can’t afford not to believe in your theory. For example, in the
conclusion, you say “Corporations must rethink why they exist…then I believe that we would begin to see the hostility towards capitalism and business disappear around the world.” That may not motivate all your readers, however,
mentioning that America’s economy and our way of life (or standard of living) is at stake in the face of a rising China, may wake up some people and earn you new supporters. I’d do this in the first paragraph, to envoke people to read it who might not otherwise.
Congratulations to you for a lifetime of business success and thank you for sharing your insights on your blog.
Jennifer Bouani
Author of “Tyler and His Solve-a-Matic Machine”
January 16th, 2007 at 2:13 pm
Hi John,
On November 12 2006, in response to Don Schaffer, you said:
“Regarding large businesses acquiring all the small businesses, the facts don’t support your viewpoint. The Fortune 500 companies represent a much smaller percentage of the total United States economy in 2006 than they did in 1956.”
However I just came across a CNN article here - http://money.cnn.com/2006/03/31/news/companies/intro_f500_fortune/index.htm - in which it is stated that “Revenue from FORTUNE 500 companies as a proportion of GDP has risen from 39 percent in 1955 to 73.4 percent this year.” This appears to be a direct contradiction of your statement.
In the same vein, here is a quote from a speech by Bill Moyers on Friday in Memphis at the third National Conference on Media Reform:
‘Nobel laureate economist, Robert Solow, not known for extreme political statements, characterizes what is happening as “nothing less than elite plunder,” the redistribution of wealth in favor of the wealthy, and the power in favor of the powerful. In fact, nearly all the wealth America created over the past 25 years has been captured by the top 20% of households, and most of the gains went to the wealthiest. The top 1% of households captured more than 50% of all the gains in financial wealth, and these households now hold more than twice the share their predecessors held on the eve of the American revolution.’
(Full text here of the speech here: http://www.democracynow.org/article.pl?sid=07/01/16/159222)
Ken Wilber’s evolutionary metaphysics (a sort of curly elaboration of the ancient idea of the Great Chain of Being as far as I can see) might be applicable to purveyors of health food, cruelty-free cosmetics, boutique gardening equipment and so on, but I can’t see oilmen, auto manufacturers, bankers, defense industry contractors, senior government officials, media moguls, - i.e. the power mongers and the money grubbers who have always ruled the world (be they American, British, Chinese, Japanese, Saudi, Swiss etc.), adopting these principles any time soon. For them, as myself and several other contributors to this forum have pointed out, the usual Darwinian evolutionary principles apply. (Whether or not they are aware of it.)
Best wishes,
Ian
January 17th, 2007 at 11:12 pm
Hello Mr. Mackey,
I am ‘criticizing by creating’…
Earlier in this blog I provided a post regarding my attempt to fundamentally reinvent my awful industry of dry cleaning, and the desire to find investors with a leaning toward Conscious Capitalism as a case study for your theories. Please let me first expand on what I feel is this vital element to the movement, and then propose an admittedly self-serving argument for a way to catalyze the growth of CC (Conscious Capilalism) companies.
First, the CC founder or entrepreneur will require capital to create their company. Just because they are ‘good’, ‘true’, heroic’, or are attempting to create something beautiful does not mean they are independently wealthy or can relegate themselves to baths in their dishwasher (like you did in the beginning– right?), or forgo a paycheck for three years (like myself) to make the vision happen. If you do not have the resources to develop and communicate your idea, you are finished and the CC movement is one company short of reaching it’s potential. So investors, or enlightened investors are absolutely required to make the impact CC should have.
Further, as you commented on Mr. Jacklin’s last post, for CC to reach it’s fullest potential, holistic enlightment from leaders to consumers will be required. I say leadership is the most important consideration to evangelize the movement faster. Educating, or enlightening, all of these elements will not be easy. Whole Foods has thousands and thousands of customers who resonate with the CC movement. So do other great CC companies. These pioneers should apprentice, or help develop other companies with similar philosophies. Whole Foods has certainly done this with many of it’s vendors, but perhaps another medium is required for unassociated products and services.
I know Rand’s “Atlas Shrugged” has been mentioned earlier. Here the “creators” of the world removed themselves from society to prove a point. Rand contradicts her objectivist philosophy of the “self” here because it meant that the creators had to work together or their point was lost or less severe.
The CC movement would do well not to remove themselves, but to act together. This means instead of giving philanthropically to non-sustainable not for profits they should create private equity funds for companies like mine that are trying to change an industry for the better with CC philosophies. OR, make a point to partner with companies like mine. If I had a LOI to roll out my concept in Whole Foods or Starbucks, I could attract the right capital and management team to catalyze growth and the CC movement.
In fact, Mr. Mackey, if you believe my thoughts are founded, let me be the bold, heroic entrepreneur who is trying to create something beautiful and challenge you to create a chapter in your CC book on how pioneers of the CC movement (Whole Foods) wield the power to help others with similar aspirations get there faster. Whole Foods has several locations in Minnesota (new one in downtwon MSP soon), with a large overlapping target market as my industry. Instead of wasting valuable resources that can go toward product development or paying livable wages and benefits trying to enlighten more consumers to why my company is good for them and the planet, why don’t you let Whole Foods speak for us and include my concept inside your stores to help us grow. This may sound self-serving, but after all, the company I am trying to create is a CC company and can potentially add thousands of new stakeholders waiting for the ‘progress of humanity’. Why should the enlightenment wait for enlightened investors when together we can create them ourselves?
Incidentally, I have done some research and found some sources for “do-good” capital:
http://www.goodcap.net
http://www.xigi.net
January 18th, 2007 at 6:32 pm
To John Maxwell,
Both Singer and Robbin’s books are excellent, so I’m glad you are reading both. Singer and Mason’s book gives some great insights into several of the current food issues such as organic, local, animal welfare, and fair trade and is definitely worth reading. Robbins’ book demonstrates that the longest lived people tend to eat very few animal products (although all of them eat some). Their diets are built around fresh fruits and vegetables, whole grains and beans, and supplemented with small quantities of animal products such as goat cheese, eggs, fish, and meat. Robbins himself eats wild caught fish a couple of times a week, so he isn’t advocating a pure vegan diet in this particular book. There are no known historical or current examples of any tribes or cultures that were purely vegans—some animal products have always been eaten. However, the longest-lived peoples use animal products as secondary foods, not as the primary foods they consume.
To Atul,
There is no magical formula I can give you regarding creating wealth or how to create wealth while simultaneously having a “conscious business.” You’ll need to work through those issues on your own and achieve the balance that feels right to you personally. I will say that it is very difficult to get rich strictly through compensation without your pay coming at the expense of other people, however. If you pay yourself exorbitant amounts of money in compensation it is very likely to create envy throughout your top team and throughout your organization which may harm the business. IMO the best way to create wealth is through ownership–not through compensation. Save your money and invest it in your own business or in other growing businesses. Over time ownership in growing businesses produces increasing wealth (check out the book “The Richest Man in Babylon).
Regarding Muhammed Yunus getting wealthy through Grameen: I don’t think you understand what motivates this remarkable man. He doesn’t really care very much about personal wealth–he has enough to support his life and his family–what more does he need? Yunus has dedicated his life to Service and to ending poverty on our planet. He is donating his entire Nobel Peace Prize proceeds to the Grameen cause. Yunus has embraced a Higher Calling within his own soul. He becomes more “Gandhi-like” with each passing year and our world certainly needs more people like him. He inspires me in many different ways.
To Katy Levit,
It is a common myth that if we are “good, work hard, and do the right thing” that we will ultimately be rewarded with material success. Often we are rewarded with business success for these virtues, but the reward isn’t automatic (except for “virtue being its own reward”). No person or business is ever automatically entitled to be successful. No business ever “owns” their customers–at best the successful business merely “rents” them for a little while. Ultimately it is the customers who determine which businesses will succeed in the marketplace and which will fail and they vote every day where they choose to spend their money. My only advice to you is to redouble your efforts to give greater value to your customers–higher quality, better service, better customer experience, lower prices. Center your business around your customers at all times. In my life experience there are actually very few businesses out there who really genuinely care about their customers and exceed their expectations on a routine basis. What more can you do to create value for your customers? That thought should be at the center of your thinking each day because your customers will ultimately decide whether your business flourishes or not.
To Jennifer Bouani,
Excellent suggestion. I’ll try to make the chapter more inspiring when I rework it. Thank you.
To Ian,
I read that CNN article and it does appear to possibly contradict what I said previously. It is puzzling and I’m not sure I have the answer to it. More research on this topic is necessary. I will say, however, that sales to GDP may not be the best measurement of true large company concentration. A better measurement I think is to see whether the largest companies have a growing or shrinking share of the total United States stock market. Here are some quotes from a couple of the books that I based my opinions on:
This quote is from Jeremy Siegel’s classic study of the stock market “Stocks for the Long Run”, p.61-62 (Siegel is a renowned professor at Wharton).
“As of May 1997, the value of S&P 500 companies was over $6 trillion, but this constituted about three-quarters of the value of all stocks traded in the United States, significantly less than the 90 percent from 40 years ago…Despite the perception that large companies are, through mergers and acquisitions, becoming ever more dominant in corporate America, the truth is quite the opposite. There is a clear tendency for the largest companies to represent a smaller fraction of the market value of all stocks. The top five firms constituted more than 28% of the market value of the index in 1964, but that had declined to less than 13 percent in 1997.”
From Johan Norberg’s “In Defense of Global Capitalism”–a really wonderful book IMO:
pages 215-216 “Freer, more efficient financial markets, which allow capital to spread to new entrepreneurs with fresh ideas, have made it progressively easier for small firms to compete with the big corporations. And things have been made easier still by advances in information technology. Between 1980 and 1993, the 500 biggest American firms saw their share of the country’s total employment diminish from 16 to 11.3%. Even if we use the problematic measure of globalization’s critics to determine the relative size of the 500 biggest firms–sales in relation to aggregate GDP–the myth is refuted, because that figure fell dramatically, from 59.3% to 36.1%. That’s a drop of almost half in just 13 years…Half of the firms operating internationally in the world have fewer than 250 employees. Many of the biggest are being knocked out by their competitors. Of the companies on the 1980 list of the 500 biggest enterprises in the United States, one-third had disappeared by 1990 and another 40 percent had gone five years later.”
Regarding your comments about the concentration of wealth from the Bill Moyer’s speech–that doesn’t relate to anything I said in “Conscious Capitalism” or in my comments in this section so I feel no compunction to discuss it in much detaiI. For the record, I do not favor increased concentration of wealth because it usually creates envy and tends to lessen societal harmony. That being said I also don’t favor coercive government laws, regulations, and taxes which punish the successful and lessen individual liberties. When liberty and equality are in tension my personal preferences are generally towards more liberty. However, I also favor individuals using their liberties voluntarily to express the virtues of generosity, responsibility, compassion, care, and love towards other people, animals, and the environment. I discuss some of these ideas in more detail in my previous blog posting “Winning the Battle for Freedom and Prosperity.” Here is a quote by Milton Friedman that I really like:
“A society that puts equality ahead of freedom…will end up with neither equality nor freedom.”
Thanks for sharing your ideas on this blog, Ian. I’ve enjoyed our exchanges.
To Joseph Serrano,
I wish you the best of luck with your “conscious dry-cleaning business.” It sounds very worthwhile. However, I’m not personally interested in investing because I don’t want to use my very limited time thinking about investments or other businesses. Regarding Whole Foods working with you to open these type of dry cleaning businesses within our stores–I think that it is probably too far away from our core concept. That being said, each of our 11 Regional Presidents is empowered to try various experiments that they believe will enhance our company. You are free to approach them with your idea. However, my intuition is that dry cleaning is unlikely to get them excited as a very synergistic business. I hope you and this business have much success.
January 19th, 2007 at 10:56 pm
Mr. Mackey,
I’ve only read the beginning of your blog about ‘conscious capitalism’ and I must say THANK YOU. I firmly believe we must change the way ‘we do business’ for our country to survive. It seems we have lost all sense of purpose (other than making more and more money) regarding why we are in business. Today it seems decisions are based solely on the effect on the bottom line, not giving any consideration to the implications on quality, customer service, or employees. I believe that businesses need to look for win/win resolutions. That they must find a balance between doing what is best for the customer, environment, employee and share holder. I believe with all my heart that when we focus on what is best for the whole, (not just on profits) that we will indeed be profitable. I question how much is enough? Where will it ever stop? I think when the large companies finally crash. We must find a balance. I appreciate the work you are doing not only with your company, but especially with writing your book. Awareness is the first step to change. God Bless you. Carol
January 20th, 2007 at 8:41 am
Mr. Mackey,
Thank you for your kind words. However, my point is not to get you to invest in my company, it is to acknowledge a problem with Conscious Capitalism (lack of enlightened investors and partners) and describe a possible solution. My company aside, the comment about lack of synergism in your reply is troubling. You are a personal hero of mine, but if you as the icon for Conscious Capitalism cannot draw the connections between your company and mine I have serious concerns for the Conscious Capitalism paradigm.
In your chapter you explain: “..business is fundamentally a community of people working together to create value for other people, their customers, employees, investors, and the greater society.”
In essence you are trying to create a movement. If I am incorrect and you are merely espousing an academic theory, please let me know.
Perhaps I have been remiss in describing my industry and how it affects the world. Dry cleaning is an over $30B dollar industry worldwide and includes over 100,000 establishments. Close to 98% of these establishments use a solvent that is considered a probable carcinogen by the EPA. Other studies show that it causes birth defects and nervous disorders, amongst other things. The solvent permeates through concrete and is present in over 75% of Superfund sights. It is a voracious ground water contaminant whose final destination is fish and wildlife in rivers, lakes, and the ocean. There are millions of tons of this bad stuff being used every year around the world and it needs to stop.
Socially, working in a dry cleaning establishment is as close to sweatshop, worker-exploited conditions that you will find in our country. According to the DEA many proprietors are also notorious money laundering fronts for organized crime, and the cash nature of the business makes it perfect for under reported revenues.
Users of dry cleaning are grossly misinformed about the dangers, and believe the government is on top of the situation. Wrong. Worse, the industry is a low-interest commodity, and cleaners have very little incentive to change as customers are definitely considered a means to an end.
My company considers the customer an end in themselves. We will soon be using cosmetic grade solvents that are used in many body lotions, shampoos, and beach sand. The machines for the sustainable, renewable solvent I would like to use are still in development and cost as much as a Ferrari. I have grown over 100% in each of the last three years, but this is still not fast enough to to integrate more Conscious Capitalism principles. We require channel partnerships to do this.I am on my way to reinventing this industry, but the message is still very small and quiet.
In your comments you said there was no synergy between our concepts. I strongly disagree. Let me elaborate:
WF Core Value 1) Selling the Highest Quality Natural and Organic Products Available-
Since my industry pollutes the water supply, this makes it more difficult for you and your vendors and ultimately all of your stakeholders. WF endorsement of an operation that does not do this would be in sync with this value.
WF Core Value 2) Satisfying and delighting customers -
Since many of my current customers recycle their hangers in Whole Foods shopping bags, I am sure they would be delighted to know their errands to Whole Foods included a dry cleaner that cared about them, their clothes, AND the world they live in. Moreover, there is precedence for dry cleaners inside grocery stores across the world. Thousands of them in fact—even a franchise devoted to it.
WF Core Value 3) Supporting Team Member Excellence and Happiness-
Many companies have onsite dry cleaning pick-up and drop off and consider it an employee benefit. Little do these employees know how much harm most of these cleaners cause.
WF Core Value 4) Creating Wealth, Profits, and Growth-
More profits per square foot with your share of dry cleaning sales or rent.
CWF Core Value 5) Caring About Our Communities & Our Environment-
You say: “The silent stakeholder that can never speak for itself is the environment.”
I agree. The environment is now shouting. Your core values go well beyond what customers ingest as much as mine go beyond what they wear. It is about convenience, making a chore fun and inviting, quality–all WHILE protecting the health of stakeholders and the planet. Why let your customers wear carcinogens on their clothing when you can encourage them to use another safe alternative? Why let more fish die in the oceans when you can create demand for a service that vehemently against these pollutants?
Dry cleaning is not going away, and most people use dry cleaners because they are convenient for them. What a high price to pay for convenience. I am sure the same goes for groceries and many Whole Foods customers. The difference is the Whole Foods customer who is not concerned with the environment does not contribute to polluting our planet and their bodies.
John, you conclude the Conscious Capitalism chapter stating: “Let us each realize our potential for deeper love and extend it out into the world—let us together create this new business paradigm of Conscious Capitalism.” If you don’t see the synergy between my core concept and yours, what exactly do you mean by banding together to create the new paradigm?
Please do not get me wrong. No one walks the talk more than you do. You mentioned your admiration for entrepreneurs over activists. The synergy of our two concepts is where the rubber meets the road. All great companies need partnerships, and unless I am missing a key premise, our concepts are united in mission. Is Conscious Capitalism a real movement or a theory to debate about amongst academics and activists?
January 23rd, 2007 at 11:08 am
Mackey,
I find it amazing that you have answered every comment with the same eloquence seen in your essay.
A simple thank you,
January 23rd, 2007 at 1:36 pm
John
I am an avid reader of your blog as well as a shareholder of Whole Foods. Your thoughts always prove insightful and are often inspiring. Your essay raised a few questions:
1) Should the allocation of corporate philanthropy be determined primarily by shareholders? Warren Buffett and Charlie Munger offer well thought views on this question. In addition to their obvious intelligence and business success, they are also remarkably virtuous and sensible men. On this basis, I find their views always worth at least considering. In 1981, Berkshire Hathaway implemented a corporate philanthropy policy that seems very logical/fair. In short, Berkshire Hathaway’s corporate philanthropy reflects a fundamental principle of capitalism – stockholders, as legal owners of the business own the residual profits of the business. On this basis, Berkshire Hathaway developed a policy that ensures “contributions should reflect the charitable preferences of owners (i.e., stockholders) rather than those of officers and directors.”
Each Berkshire shareholder can designate recipients of charitable contributions by the company (on a basis proportional to the number of shares of that he/she owns – Berkshire establishes a dollar amount per share that can be allocated to charity). Berkshire has had great success with this program as the percentage of participating shares always exceeds 95% and usually exceeds 97%.
Berkshire officers and directors do retain responsibility for a portion of the annual donations considered to benefit the company directly in an amount roughly equal to the cost of the donation. In the case of Whole Foods, officers and directors could retain responsibility for donations that are important to the company’s broader mission and values.
2) Will stock based compensation prove effective over the long term? For a young/small company, stock options are often a highly effective incentive compensation tool as the success of a small company can lead to enormous percentage increases in the value of a business. However, the percentage gains in stock price will surely slow at some point in the future, owing to the law of large numbers.
As the company matures, how effective will stock based compensation prove? How do you prevent the psychological tendencies of material self interest and envy from taking hold — in a mature Whole Foods, could subconscious tension arise between long tenured employees (who are “rich” from previous stock price gains) and newer employees unlikely to realize similar wealth accumulation from a rising stock price? Do long tenured and skilled Whole Foods employees lose incentive to work when it becomes obvious that no matter how well they perform, the stock price will not go up as much as it did in the past? If a new employee emerges as a remarkable store manager or regional manager, shouldn’t they be rewarded proportionately? Without a consistent and meaningful rise in the stock price, does a stock based incentive compensation plan result in compensation not being commensurate with effort and ability, with star performers under-compensated and average performers effectively overcompensated?
I think Buffett and Munger have thoughtful and logical views on this issue. Whole Foods is still far from maturing but it would appear important to at least consider how effective a shared fate compensation plan will be at mature company when the underlying incentive currency is stock options.
3) Are “happy” employees a driver or a consequence of a rising stock price? In your essay, you cite statistics showing the stock price outperformance of companies on Fortune’s “best place to work” list as evidence that happy employees have direct benefits for shareholders. I have no doubt that happy employees are good for everyone – society, shareholders, management, customers etc… But I wonder about the conclusion you derive from the data. The human psychological tendency of association would seem to be a powerful influence in this situation: stock price appreciation is associated with “successful” companies…which means they have good/successful employees…which means I am good/successful, which makes me feel good about myself and my job.
Further, if stock price appreciation has meaningfully increased the wealth/financial security of employees, the rise in the stock price would seem likely to have a direct, positive impact on employee happiness. What happens when the pace of stock price appreciation slows or remains stagnant over a sustained period (years) through no fault of the company’s operating performance? Is it possible that your experience at Whole Foods has led you to underestimate the impact of a rising stock price on employee happiness?
4) Is Wal-Mart truly a “bad” company? While I view Whole Foods as a much better company than Wal-Mart, it seems hard to condemn Wal-Mart as a “bad” company. Sam Walton founded Wal-Mart with the goal of providing the best value proposition to consumers. Walton certainly represents an entrepreneur for which exclusively maximizing profits was NOT the primary reason he founded the company. Walton didn’t build Wal-Mart to profit at the expense of society. In fact, based on everything I’ve read, Sam Walton remained true to his values of hard work and a modest lifestyle despite becoming the richest man in the world.
It would seem that Wal-Mart continues to operate according to the values outlined by its founder many years ago as consumer prices and company profit margins remain very low. What is so bad about a company that continually drives efficiency into its supply chain and passes along the subsequent gains to the consumer? Doesn’t this strategy reduce the cost of living for millions of consumers? Is Dell also a bad company because its business model is based primarily on offering the lowest prices? By leveraging its scale, hasn’t Dell played a major role in making personal computing more affordable, with the consequent growth in PCs having very positive benefits for society?
Further, I don’t see how Wal-Mart can be viewed as bad for “small town” America and its employees. The “ideal” of small town America gets overplayed by the media and Hollywood – Andy Griffith’s Mayberry doesn’t exist. Wal-Mart invigorates many of the communities in which it operates, especially by providing employment, compensation, benefits, training, and upward mobility that would not otherwise be available. According to this month’s Kiplinger Personal Finance magazine, 25,000 people applied for just 325 job openings at a newly opened Wal-Mart in the Chicago area.
Sure Wal-Mart has its shortcomings (as with most companies) but how can the net effect of the company’s efforts (or similar companies focused on offering the most affordable prices to consumers) be viewed as anything but positive. In the May 1, 2006 issue of Business Week, Jack Welch writes a very compelling case about “What’s Right About Wal-Mart?” in response to a question about whether Wal-Mart is a force for good or evil in the world.
With that said, one would hope that Wal-Mart (and all companies for that matter) would continually improve employee benefits/relations as much as possible within the framework of the company’s values and mission and without compromising long established responsibility to other stakeholders.
Lastly, you cite Wal-Mart’s tepid same store sales growth as evidence that the flaws in its business model are becoming exposed. As Whole Foods may also now be experiencing, the law of large numbers will inevitably result in slowing growth for all companies. The sheer size of Wal-Mart is the primary impediment to faster growth. The merit of the Wal-Mart value proposition would appear to be supported by the fact that 110 million shoppers browse Wal-Mart’s aisles every week.
January 26th, 2007 at 12:34 pm
Hi John,
May I respond to TC’s question about whether Walmart is a ‘truly a “bad” company’?
According to the latest newletter from the Organic Consumers Association, they have ‘announced a boycott against Wal-mart for refusing to respond to formal complaints that many of its stores are placing “organic” signs next to products that are not organic. The Cornucopia Institute filed a complaint more than 60 days ago, and neither the USDA nor Wal-Mart have taken any action to fix these problems. Six months ago, the OCA called on Wal-Mart to stop selling cheap factory-farmed organic milk from Horizon and Aurora, and to increase the amount of domestically grown organic products on its shelves.’
http://www.organicconsumers.org/articles/article_3809.cfm
That Walmart has so far failed to respond to this criticism will probably come as no surprise to anyone. However if Whole Foods behaved like this, there would be hell to pay. When it comes to food labelling, consumers will always hold Whole Foods to much higher standards of accountability. So in this respect at least, Walmart is a “bad” company, and Whole Foods is a “good” company.
Regards,
Ian
January 26th, 2007 at 2:21 pm
Hi John,
Some good news for all of us, particularly our friend in the dry-cleaning business, Joseph Serrano:
http://www.msnbc.msn.com/id/16816627/
“California regulators on Thursday enacted the nation’s first statewide ban on the most common chemical used by dry cleaners, pleasing environmentalists but worrying some small businesses.
By 2023, no more dry-cleaning machines that use the toxic solvent perchloroethylene, a potential carcinogen, will be permitted in the state.
The regulation by the California Air Resources Board will phase out the fluid next year, banning dry cleaners from buying machines that rely on the solvent. The state’s 3,400 dry cleaners who now use it must get rid of machines that are 15 years or older by July 2010.”
Hooray for government regulations!
Ian
January 26th, 2007 at 7:19 pm
John,
I am a loyal customer both because of the product and the mission of Whole Foods. Bravo on a great brand.
I read Conscious Capitalism with great interest and in general, think you are articulating what many great business persons know in their gut and heart but have not put to paper. Well done there.
In particular, I think your focus on the Paradox of Profits is spot-on. It is the difference between being driven by profit and creating value.
I must express strong disappointment, however, regarding your statement: “In my opinion, most modern American non-profit organizations operate with a mentality that creates inefficiences…; most nonprofits are ineffective in fulfiling their mission”. First, I would challenge you to critique your own work the way you do your bloggers - where are your examples? This statement must represent your observations but provides zero analysis. I would like to add that I think “most” nonprofits is a gross over-statement. Having worked with many closely, and the foundations who fund them, there is much great work being done. And, there are many nonprofit organizations for whom earned income is a significant part of their operating budget.
Don’t get me wrong, however - I agree with your premise that philanthropy as it has existed is a poor incarnation of the possibilities. You might wish to check out philanthromedia.org - a blog dedicated to the “end of philanthropy as usual.” There are many others who agree that “businesses and nonprofits are potentially much more alike than they are different.” They exist today, along the unifying theme of your “great purpose” concept. You may also wish to check out Jim Collins recent monograph “Good to Great for the Social Sector”. You also need to lose that graphic of the “wall”. It’s so childish as to be a hairsbreadth from offensive.
Also, you need a proofreader to edit this. There are a number of places where a sentence/concept is repeated several times in one paragraph. Such is the nature of drafts. I can point them out to you if you wish.
Looking forward to more chapters.
Best regards,
Nancy DeFauw
January 28th, 2007 at 7:02 pm
Dear Mr. Mackey,
I appreciate your response to my post several weeks ago regarding the Bill Gates Foundation. Although this forum may not necessarily be the most appropriate to discuss some of the issues related to our brief dialogue, I’d like to offer a few comments regarding some specific points you make in your response.
1. “Capitalism isn’t perfect (what is?), but on balance it has overall improved the state of humanity tremendously… Of course many, many problems remain, but overall human progress is a historical fact which I believe a dispassionate study of long-term history makes very clear…Quite honestly there is no viable alternative to capitalism that doesn’t involve some type of totalitarian government with massive losses of both human freedom and prosperity. The question isn’t whether we’ll have capitalism in the world or not, because we will.”
To be clear, Capitalism is a relatively recent economic system, one that may or may not have been an inevitable step in our evolutionary social progress. However, there are numerous reasons for human progress, to which an economic system is but one component. I’m sure feudal farmers were pleased that animal domestication had relieved them of the duty to hunt and gather, and therefore, most would have agreed that feudalism “improved the state of humanity.” Of course, we now understand that feudalism was not the most compatible system for human progress. Capitalism is certainly responsible for numerous human advancements, but of course, this is a truism, not an argument for its continued existence. There are many possibilities for social organization which lie outside the frameworks of capitalism or totalitarianism. Limiting ourselves to such a narrow dichotomy suggests no need for creativity or freedom, just blind acceptance. It would have been quite naïve for feudal farmers to have believed in the permanence of their way of life; likewise, it would be silly to make predictions about the possibilities of our future social organization.
2. “The logic of this article is that the Gates Foundation is responsible for every negative thing that happens in every company that they invest in. Since corporations (and capitalism) are inherently evil, and the Gates Foundation invests in corporations, the Gates Foundation is also evil. If the Gates Foundation is responsible for all the “bad” things that the corporations they invest in do, then do they also get to take credit for all the “good” things that those corporations also do?”
As you well know, a financial investment involves a choice to support a particular person, organization, etc. where there is the expectation of a profitable return. Where there is a choice involved, there is always some measure of responsibility. The greater influence a person or organization has, the greater the responsibility.
It would be absurd to say that an oil or any other corporation is inherently evil and I don’t recall the article uses such terminology. Obviously, oil companies in particular, provide a natural resource that fuels the world. However, in this particular case,they are also destroying the lives of many people in Africa. Therefore, by investing in an oil corporation that is directly harming people the Gates Foundation is trying to help, the apparent contradiction warrants consideration and should be addressed by those responsible.
3. “By the way, if Bill Gates and the Gates Foundation are guilty by association through their investments in various corporations who sometimes do negative things, then I must point out that by this logic Mother Theresa was also guilty of heinous crimes. After all, Mother Theresa was a nun in the Catholic Church. Is she therefore responsible for the Spanish Inquisition, various Catholic wars and assasinations, or more recently sexual child abuse by various priests.”
“For that matter, aren’t you a citizen of the United States? Do you pay taxes to the United States government? Does that therefore make you responsible for many thousands of deaths in Iraq? Is there also a “Dark Cloud Over Nick Theodosis?”
There is not a logical connection between an artificial entity like the Gates Foundation and a flesh and blood person like Mother Theresa, especially when discussing ethical commitments. Also, neither one can be held responsible for events such as the Spanish Inquisition, which occurred before their existence. I do think that if one belongs to a specific organization (religious, political, etc.) there is a certain level of responsibility for the actions of the group. Again, the more influence one has, the more responsibility involved. As an influential figure in the Catholic Church, I would have expected Mother Theresa to have condemned wars, assassinations, and sexual abuses conducted by or in the name of the Catholic Church, or any of its members. Similarly, as a tax payer and citizen of the United States, I assume a level of responsibility for the actions of my government.
January 29th, 2007 at 6:19 pm
Dear Mr. Mackey,
Thank you for a insightful essay on Conscious Capitalism.
I have for many years believed in the business values you discuss in your essay - my passion to do well, effect positive change, offer impeccable customer service, create partnerships and give back to my community has garnered my businesses positive cash flow and over time, great profits. I would like to offer one insight to the use of the word ’selfishness” in the context of your discussion as well as the broader world view. The most commonly assumed definition includes; “Excessively interested in oneself to the exclusion of others” - I would go on to say that a “Rationally Selfish” individual (one that has a balanced view of himself/ herself in the world, holds a strong sense of self confidence, and who’s ideas and thoughts are congruent with reality), does care about relationships, giving back, mentoring, renewable resources, community, environment and….yes, profits. It is smart business to care, but it also ensures that the wonderful world we have experienced in our lives will be here for our children and loved ones - that is very selfish.
Keep up the good work.
Paul Frantellizzi
January 29th, 2007 at 8:57 pm
John
it has been great to watch your journey and I applaud your honesty and willingness to constantly challenge conventional thinking. Your decision to forego compensation speaks volumes about walking the talk and sets a great example of valuing work for the good we can do rather than simply by how much money we can pile up. Profit need not equal greed on a personal or a corporate level. The points in your essay are well taken, particularly regarding the unfortunate ineffectiveness of many NGO’s despite the best intentions of their founders and operators. Whole Foods is continuing to set a great model for how to do good while doing well. You are great - continued success!
regards
Mark
January 30th, 2007 at 2:52 pm
When the CEO goes, does the culture go as well?
January 31st, 2007 at 3:24 am
I thankful that you and your associates and everyone that upholds the Core Values of the Whole Philosophy has enabled myself and many like me to create a career and or involvement in the betterment of our earth and society. I breathe of your passion and of your values that mirror my own. Good for you Mr. Mackey. You have created a opportunity for myself to relish that my values and beliefs can be mirrored through my career. Through a well thought detailed intelligent approach to ethical business and beholding our environment, to say the least, what I give in my workday will not stop at the time clock it will continue to be a guiding force in the betterment (and sustainment) of a consensus of people for a: healthy, happy, and compassionate society.
Best regards,
Amber Alkofer
February 1st, 2007 at 6:14 am
I wouldn’t go as far as John Mackey, CEO of Whole Foods Market, Inc. who said in his essay “Conscious Capitalism”: “In my opinion, most modern American non-profit organizations operate with a mentality that creates inefficiencies…; most nonprofits are ineffective in fulfilling their mission” (check out his blog for the essay and a heap of commentary.)
In fact, I challenged Mr. Mackey to put some examples out there. It’s a pretty flat statement, isn’t it? And it made me mad. No reply from him yet but I will point out that he is devoted to responding to those who comment….
Check out the complete entry at PhilanthroMedia.org, promoting dialog for discerning donors…
February 2nd, 2007 at 10:16 am
Dear Mr. Mackey,
In addition to reading your article “Conscious Capitalism” I also read the articles “The Upward Flow of Human Development” and “Declaration of Interdependence” from the Whole Foods web site. I have also read the book you recommended. Purpose, The starting point of great companies and I have the book “Firms of Endearment: the Pursuit of Purpose and Profit” on order. Also, I am a customer and stockholder of Whole Foods Market.
First, let me say that words can not express how exciting I found your article Conscious Capitalism to be. I will explain my excitement later, but first I want to comment on several items in your article.
Item 1. You posed the questions: “Do we need a new way to think about business? Do we need to create a new business paradigm?” With respect to those two questions, the answer is obviously a giant YES!
Item 2. You posed the question “Have you ever asked yourself what is the purpose of a business?” Yes, I have asked that question, and I think that I have discovered an answer and here it is. Some companies have always known or discovered what Jim Collins terms their “Core Purpose” (Reference Jim’s book, Built to Last). However, for those companies who have not discovered their core purpose, the default purpose becomes the pursuit of profit. As a result of this, there are basically two types of companies in industry today. There are the companies who have not discovered their core purpose (the majority of companies), and they are profit driven. Then there are those few companies who know what their purpose is, and they are purpose driven.
Item 3. The section titled “Great Companies Have Great Purposes” You are absolutely 100% correct in your conclusions regarding this segment, however I find Mr. Mourkogiannis’s model to be more complex then necessary to capture and communicate the concept of “management by purpose” which is really what he and you are talking about. At least that is my analysis. I also question some of his examples and conclusions. For example, he uses IBM and Tom Watson as an example of the “Discovery” category of purpose. Having worked for and retired from IBM, I have difficulty in accepting his analysis. For example, if Tom Watson did consciously know what the “purpose” of IBM was, why didn’t he codify it when he codified the company’s three basic beliefs?
Item 4. Section titled “The Paradox of Profits” Kudos, 100% correct again!! I am impressed. However, I believe there are other books that substantiate the difference in financial performance besides Firms of Endearment. For example, all of the companies in the book Built to Last by Jim Collins are purpose driven companies. As Jim points out in the book, over the long term, the stock of these visionary companies as he calls them, out performed their peers by a factor of six to one. Additional data is out there, but you have to recognize it when you see it. For example, some authors call purpose by other names. It might be called “single big objective” or a “big hairy audacious goal” but in reality, those are just other descriptions for a company purpose that is something other than profit.
Item 5. Section titled “The Whole Foods Business Model: Conscious Capitalism”
The business model is a start, but I don’t think it will achieve the objective you are after. I must explain the last comment. After reading your blog, I have come to the conclusion that your reason for writing a book is to, in another term, assist businesses in moving from the Orange “Scientific Modernism” vMEME to the Yellow “Autonomous/Integrative” vMEME. If I am correct in my assessment, then we are both pursuing the same goal. To that end, I am in the process of writing a book in order to facilitate the migration. The key is to educate the management of America and the book is a tool to do that. The excitement that I alluded to earlier was because I was excited to find out that I was not the ONLY person who has this goal.
Item 6. There are other items that I would like to comment on such as the relationship between leadership and purpose, but I will not do that at this time. I want to keep this short enough to be read.
Item 7. You asked the question “Would you be willing to spend a few hours with me while reading and critiquing the following?” My answer is that I would be delighted to join you for a few hours to discuss your article. My daughter is a customer of Whole Foods Market in Austin and she has been raving about your new market at Sixth and Lamar. “Daddy, you just have to go there when you come to Austin…its amazing!” My daughter Kristen is an electrical engineer at the IBM plant there in Austin. I live in Houston so I can get to Austin quite easily. I would be happy to meet with you during the week or on a weekend. I think it would be very beneficial for both of us.
I applaud your efforts and look forward to hearing from you.
Respectfully yours,
Dean E. Tucker
February 2nd, 2007 at 2:41 pm
Mr. Mackey, Thank you for your educational essay and answers of clarification. Adam Smith, in his “THEORY OF MORAL SENTIMENTS” wrote that capitalism (economic freedom) and democracy (political freedom) can not exist in a country unless the people treat each other ethically and morally. We now have too much of lying, cheating and stealing by leaders at all levels of society. Smith says in absence of trust, society sinks first into anarchy and then into tyranny. George Washington, according to Jim Collins definitions, is a level 5 leader. He created a level 5 enterprise, the USA, which after over 200 years is still the freest, most prosperous, and finest country on earth. Otherwise, why would so many foreigners risk death to get here?
You also exhibit the qualities of a level 5 leader. WFM sets an example of honoring our founding fathers ethical principles. If all businesses and other institutions would follow your lead , we will survive as a free nation. Otherwise our way of life so cherished by us all will die. People will act ethically if convinced it is in their best long term interest.
“Visible hand” motives may be altruistic true but also are in the best selfish interest of the wealthy. For example, provide health care to the poor. If poor people get TB or some other contagious diseases they could infect the wealthy. If poor are severely undernourished, they would not be good workers. If poor get too desparate they may rise up and displace wealthy as in French Revolution. They may vote in demagogues who will tear down all private property rights.
Mr. Mackey, Keep up your good work of showing others a right path to prosperity. Jim Hodges, Bellaire, Texas
February 2nd, 2007 at 10:51 pm
Dear John,
I just stumbled upon your blog and was so impressed that I read it through and through. I spent 5 years in NYC and fell in love with Whole Foods before moving to Miami, where Wild Oats is a pale substitute… During my first visit, I asked one of your associates if the chicken was free of hormones… the response was shocked and full of enthusiasm at the same time! I knew I was in the right place… Whole Foods says it all, and your holistic perspective should not come as a surprise. Still, platonic ideals are seldom mentioned in a company’s business plan. Service to others, love, care, compassion: Rockwellian words in these Orwellian times… “Search for Excellence” usually sounds like a cliché, but your sincerity shines through. A capitalist with a conscience! A rare breed, but you are indeed in the company of people like Muhammad Yunus, for example. I envy your sense of purpose. I started out as an attorney in Switzerland, quit a bank to visit political prisoners for the Red Cross, manufactured whisky in Latin America and directed a shipping registry, before becoming a Realtor in Miami. I find satisfaction in helping others achieve their dreams, but I have yet to achieve my full purpose… You are quite an inspiration! So much so that after reading your blog, I purchased 100 shares… You’ve got a new friend in Miami!
February 4th, 2007 at 10:23 am
I am accepting your invitation to respond to your Conscious Capitalism article. I hope you will bear with me.
You have demonstrated that you are able to grow a company following the concentration of power corporate model exemplified by the likes of Microsoft and others. Is the “concentration of power corporate model” healthy for humanity though? Are people only worker/consumers?
I appreciate the efforts of companies like Whole Foods but I believe humanity is better served by cooperation at the lowest level possible rather than a consuming competition striving toward concentration of identity and power in the hands of a few or ultimately one.
Even a wise and benevolent dictator is still a dictator. Individual subjects of the best of dictators is still a subject. A large corporation ultimately is a dictatorship ruled by the majority stockholder(s). An association of smaller businesses on the other hand retain local identity and ownership but benefit from mutual support and exchange of insights and resources. For instance Whole Foods could have come along side at least some of the local businesses they bought out over the years and coached and helped them succeed in their own right. Power tends to corrupt; absolute power corrupts absolutely. The thrill of being the CEO of an every expanding empire is undoubtedly exhilarating but is it sustainable or desirable?
As a father I don’t want to raise my grandchildren even by proxy. I view success as a father to see my children become good parents and grandparents in their own right. Much less do I care to abdicate the upbringing of someone else’s children. I think humanity is best served by business operating in a similar manner. In my thinking a successful business man is one who reproduces himself and encourages and allows and finds his fulfillment in seeing his business “children” succeed and reproduce. His business “children” and “grandchildren” won’t be exactly like him but rather they will add their own qualities and strengths to what he imparted to them and the world will be richer for it.
February 5th, 2007 at 6:34 am
Nice work, John. Some of your comments provide further support of ours as posted here on Jan 6, and Jan 13 , 2006. These posted comments offer a glimpse of the work we at E2M began on Jan 1, 2000.
Becasue we are sharing the same beliefs, you might want to consider joining our E2M Economic Community rather than creating something similar but separate (FLOW), as happens so often in the left leaning progressive community. Until the progressives are as dedicated to supporting each other as are the right wing conservatives, our agenda will always risk being diminished due to its diffusiveness vs the concentrated inclusiveness exhibited by the right.
Good luck in your work.
Michael Garjian
Founder, E2M.org
February 8th, 2007 at 11:55 pm
Dear Mr. Mackey,
I also applaud your vision. After 7 years as a strategy consultant for a top NY firm, I believe that the business model you laid out in your essay goes beyond anything I have come across so far. More than an economic essay, I believe that your thoughts touch upon the philosophical and even the spiritual. The sad reality is that most corporations are only thinking of their own power as a constituency in order to extract the most financial value from other constituencies (i.e. putting pressure on suppliers to reduce their costs by “threatening” to switch to their competitors). Indeed, most corporations do not see the complete picture and thus invest very little in building truly positive relationships with their various constituencies.
Do you think that most CEOs would be receptive to the idea that their various constituencies could positively influence each other and thus create more wealth as a whole. Doesn’t the business world still views business as a zero-sum game: “My opponent’s loss is my gain”. That philosophy seems very valid when the only motivation of a company is generating maximum profits.
I have read through your blog with great interest and passion. I look forward to reading your book when it will be released. As far as feedback, here are my 2 cents: “to convince corporations that business is NOT a zero-sum game, I think you need to provide a substantial amount of practical examples on how value creation can be acheived through good corporate actions in between constituencies. For that, I would not only provide real examples of Whole Foods success stories but also I would provide examples of possible optimization of constituency configuration in other businesses or industries.
I personally get the chills reading some of your business concepts because I strongly believe in these concepts, but I think you need to respond to the CEOs and entrepreneurs that believe your model won’t work in their industry.
More than being a simple observer, I have very recently committed myself to start a company based on Conscious Capitalism. Thank you for inspiring me even further with your essay !!!
February 10th, 2007 at 2:17 am
Hello John,
I would like to express my sincere appreciation for not only your truly inspiring essay “Conscious Capitalism”, but also for your continued hard work and leadership with Whole Foods Market. You have made an incredible difference in the lives of millions worldwide with your positive visions and aspirations. I wish you the best for the future and, again, thank you for such wonderful contributions to our country and to our planet. I am anxiously awaiting the grand opening of WFM in Birmingham Alabama. Thank you.
February 21st, 2007 at 8:42 pm
John,
I want to thank you for the excellent insight into your current thinking on capitalism and stakeholders.
It is obvious to me as a former customer and a ten year investor in WFMI that your position on some of these issues has been evolving in the last year and a half, with the virtual elimination of your salary and the new and improved annual report which I have yet to read, but which I noticed has spared the color glossy photos- both sure signs of a true investor focused company.
I assume that you have been reading some writings of Warren Buffett or other investors, and have made rational changes as a result.
I pared back my Shares two years ago and in the middle of 2006 when the valuation of WFMI seemed unjustifiable, but held on to what for my portfolio is a still large position because no stock I own helps me feel as optimistic about the future of capitalism than Whole Foods.
As you mentioned, Business is one of the most powerful forces on earth, and I advocate investment and accumulation of capital by those who care about social and environmental justice as a potentially world-changing path. (that is an aside)
As an investor, however, I would like to question the conflict between WFMI’s dividend policy and its dilution policy.
You mentioned last year that dilution would be kept below 10%, which is to my opinion, an astronomical figure.
With a 1% dividend yield (now 1.6%) and any dilution greater than 1.6% WFMI management essentially forces me to pay taxes on a dividend while my ownership stake diminishes.
with an ill-timed dividend like last year’s special dividend, which you mentioned on a conference call that we could choose whether or not to reinvest, the results were horrid for investors like me who had our shares on automatic reinvest. (due to faith in the company I guess, but now I wonder what I was thinking.)
That’s all water under the bridge now, but for the future, let me give you my thumbnail valuation of wfmi in 2011:
you have estimated 12 B in sales for 2010 and have a 4% profit margin.
I’m a conservative investor, and so I’ll say that if we hit a recession, it might be more like 10 B, which makes for 400 million in net profit. At a 20X multiple - fairly reasonable for a high class grocer with reasonable growth prospects, WFMI would be worth 8 billion, minimum at the end of 2010.
With today’s new and improved market cap of around 6.8 billion, investors can look for a gain of 17% over just under four years, or about 5% per year, which is absolutely a conservative valuation for 2011 if everything goes right, and there is NO dilution.
So, WFMI as an investment today, even at a significantly lower price than early 2006 is a questionable investment if dilution is anywhere near 10% annually, in fact, if dilution is 17% or more over four years, we could be easily looking at a mid to high forties share price in 2011, or lower.
As you see, the dilution and dividend policies are in conflict, essentially robbing Peter to pay Paul, and forcing Paul to pay taxes at the same time.
The news of the wild oats buyout being funded with debt, not stock leads me to believe that perhaps you are thinking about this, and I hope that is the case. As for the conflict between dividends and dilution, I hope one or both activities will be curtailed as soon as possible.
(I said “former” customer because I live in Santa Cruz CA, and the anti-corporate wing of our community has evidently prevented Whole Foods’ entry into my community, but I expect you are working on that)
As I said, I love owning a part of a fabulous company, and I applaud you in continuing to make it better. Thank you for reshaping our world and the world of business. I look forward to being able to shop at Whole Foods again soon.—Keep up the acquisitions.
February 22nd, 2007 at 12:01 pm
I would like to applaud John and the entire WFM leadership team for the big Strategic and bold move on Wild Oats. As you declared on 60 minutes interview with Dan Rather - we now can see how compeititive you are and it does pay to be a spirited competitor. At least one competitor is down as the WFM faces rising challenges from conventional chains with refined and proven supply chains and distrubution networks and tries to defend and retain its competitive and market position especially in the organic segment. Working on run down Wild Oats stores will be a big undertaking especially if they are to meet the WFM standards.
Wall Street today is at least in favor of the move and hopefully this signals a move in the right direction.
All the best and look forward to shopping in the newly acquired stores under WFM banner…
February 22nd, 2007 at 6:39 pm
john-
hello. i am a vegan, as are you. and i just wanted to let you know that i dumpster dive your stores on a regular basis, and have been for years and years. it is insane to me to let good food go to waste. i’ve used the dumpstered food to make vegan meals for the homeless every week for over 3 years, as well as fed myself. i buy food that i don’t find in a dumpster, such as nutritional yeast, peanut butter, etc…
anyway, it has become MUCH harder to access your dumpsters in recent years, and that makes me sad. with your recent vegan transition, i thought maybe you’d be interested in the idea of trying to make it a policy to make dumpsters easily accessable for those without the money to buy all their food and/or the ecological consciousness to not let good food go to waste. the main problem is, in one word, compactors. those machines smash the trash and hold it hostage from those who could use it. i recognize it may be somewhat cheaper than a row of dumpsters, but it makes such a huge difference in many people’s lives. that is part of what i’d consider Conscious Capitalism.
I hope you take these comments seriously. i’d be happy to act as a consultant on this issue for free if it meant more access to whole foods discarded food for the people who depend on it and need it.
thank you for your consideration.
February 23rd, 2007 at 9:04 am
Mr. Mackey, I cannot find an email address to send a general inquiry to your store, so I will put my thoughts/comments on here.
I do shop at Whole Foods at the present time, and, in fact, probably spend around $5,000-plus a year at WF and other health food stores. I am bothered by a quote on one of your grocery bags, “Food in its purest form.” As far as I can tell, Whole Foods still sells meat and dairy/egg items. If you consider these items pure as in non-violent and non-exploitative, you are mistaken, and I hope you do research exactly how these items, “organic,” “free-range,” or not, are obtained. If you consider these items to be pure in that they are food in its most natural, beautiful, and nutritionally-balanced form, let’s not forget what these animals eat: plants.
This comment is not asking Whole Foods to stop selling meat and dairy items; however, let’s at least be upfront about what foods are pure and which cause harm to sentient beings.
February 23rd, 2007 at 1:09 pm
Hi John, a couple of comments:
I read the Tom Peters website regularly, and the current “Cool Friend” interview is with Rod Beckstrom, one of the authors of “The Starfish and The Spider: The Unstoppable Power of Leaderless Organizations.” Read the interview (and, if possible, the book). I think it’s very pertinent when you consider how Whole Foods organizes itself going forward.
I live in Santa Fe, NM, where the first Wild Oats outside Colorado opened in 1991. So my feelings about W.F.’s acquisition of W.O. are mixed. I’m glad it was you and not (say) Albertson’s. On the other hand, although I shop frequently at both stores, I’ve relied on W.O. for my staples (bread, granola, yogurt, fruit juice, etc.) because they’re usually pricier at W.F. If prices go up as a result of the merger, I’ll have to look elsewhere for them. We do have other options here (e.g., La Montanita Co-Op), so I hope you’re aware that you can’t count on picking up all the current W.O. customers.
February 23rd, 2007 at 2:51 pm
Mr. Mackey:
I am following up on part of a response that you gave on November 12, 2006, to the comments of Nancy Harrison that were posted on November 11. I read through the remaining comments to “Conscious Capitalism” and did not see any follow up to this by Ms. Harrison or anyone else.
You said: “What restrictions on behaviour do individuals have that corporations don’t have? I’m not aware of any. Please point 3 good examples out. Thanks.”
1. Individuals generally do not have the right to unilaterally modify the terms of written agreements in their own favor- with terms that apply retroactively. The obvious example is credit card agreements with upward modification of interest rates and penalty fees. The latest twist seems to be that when the companies reduce the rate after several months of on-time payments, they try to leave the penalty rate applicable to the balance with the lower rate applicable only to new purchases. So why wasn’t the same reasoning applicable when the penalty interest rate was imposed on the entire existing balance? I suppose that an individual could attempt to draft contracts with the right to unilaterally modify the terms, but it would be subject to the review of a court. The restrictions on the right to sue in agreements with consumers, such as those of the banking/credit card companies, prevents consumers from challenging fairness and legality of the unilateral modifications to the agreements.
2. Restriction on the right to sue. “Tort reform” seems to be an effort directed by corporations solely against individuals. Nominally, this is an effort by companies to prevent “frivolous” law suits. There does not seem to be a comparable effort to prevent corporations from pursuing frivolous claims, such as those which stifle potential competitors, or frivolous defenses to claims from consumers. Corporations expect to be able to avail themselves of all of their legal rights and defenses in a court of law.
3. Ability to discharge debt. The changes in the bankruptcy laws were intended to make it more difficult for individuals to relieve themselves of their financial obligations. Corporations are using bankruptcy and other methods to discharge their obligations to retirees for pensions and health benefits.
February 23rd, 2007 at 3:38 pm
Dear Mr. Mackey,
I have read your essay, and would like to offer my suggestions about your writing and ideas. It has been a few months since you offered your essay for consideration on your blog, and I have read the many replies to your work. I do not think that the suggestions that occurred to me have been offered yet, and if you are still interested in constructive feedback, I hope that my words will be worth your time to read.
I thought you might like this quote:
“Most successful business people do not start out in life thinking that this is what they want to do. Their entrepreneurial ideas spring from a deep immersion in some occupation, hobby, or other pursuit. Spurred by something missing in the world, the entrepreneur begins to think about and envision a product or a service. The entrepreneur is often the first one to spot the opening, and if things work out that person will have a successful business.
“When I started out in the natural food business, I believed that if I could see the wisdom of changing my eating habits, there were sufficient numbers of people who would also figure out the advantages of natural food. My business would grow in response to that awareness and be ready to serve those needs.
“People intuitively understand that a good business enhances the lives of all who work within it, and enriches the lives of all those who are touched by it. I opened my store in Boston because I needed good food– pure and simple. That operation was a vital part of me. Likewise, the business you can succeed with is distinctly and utterly you and yours. It is unlike any other business in the world. Being in business is not about making money. It is a way to become who you are.”
I love this passage for its warm tone. The ideas, similar to yours, ring true. Although I’ve never met him, I can visualize the man who wrote it, and I feel like he would be a good person to have join my family for dinner and conversation some night.
I bet that you are also someone who would make a good dinner companion, but the voice of John-the-Good-Companion was absent from this essay. Overall, when I read your essay I was troubled by the tone of your writing. This led me to wonder who the essay is primarily written for– who are you trying to reach? Is your audience really just the few people who “may create” “future businesses”? When you have defined your audience, what should that audience do with your ideas next? Although you slip in the line “build upon the Whole Foods Market model…as part of a new paradigm” into your first section, the impact of your essay’s conclusion is diluted. In the end, you share with your unspecified audience that “corporations must rethink”. Do you have a plan that will apply to both brand-new entrepreneurs and experienced corporate CEO in at the apex of their careers?
The author I quoted above spends most of his first chapter just on identifying his audience. Here’s an abbreviated sample of how he defines his audience and his end goal in writing a book:
“I want to demystify…with a book that illustrates how the successful business is an expression of a person.
“I do not arbitrarily restrict my focus to small businesses… the needs of and differences among large, medium, and small businesses are less distinct than we sometimes suppose. Within the structure of every company or conglomerate there are ten, fifty, five hundred, even a thousand units in the big business that function as small businesses… There’s no reason why every department in a corporation can’t be a well-run small business.
“This book is written for that corporate audience, too. Most of us in businesses large or small have the same problems and similar means at our disposal to solve them: energy, ingenuity, and common sense. Big businesses sometimes get bogged down in procedures, policies, and flow charts, but when the problems are solved as opposed to shuffled, I believe they are solved by people using their heads, not handbooks.
“We must learn how to grow our businesses– small, large, and small-within-large–more successfully and more humanely…”
Mr. Mackey, when your writing clearly answers the questions of who you are writing for, why you are writing, and what action you require of your reader, your tone may start to improve as well. As it stands, I found it veered toward the condescending, which is hard going on any audience you might care to reach. You yourself pointed out that the essay may take “extended time and concentration” to read. For me, it didn’t take concentration to read; it took the discipline of a student who reads to pass the exam. I suspect this has less to do with the complexity of your ideas than a failure to allow your natural voice to come through in your writing. (As for the time it takes to read your writing, what of it? Time is nothing to a hooked reader– just look at any Harry Potter fan. You can hook your reader far better with your true voice, subject matter notwithstanding.)
You wrote that your essay is but one chapter of what you hope to write. Depending on what else you intend to write and why, you may still want to keep this chapter, but you may want to revise your sections about a “new paradigm” and “the purpose of business”. There is a great deal of overlap in your “new” ideas with ideas already written about.
The passages above come from a book, published in 1986, that I think puts forward many or all of the ideas in your essay. As in your own essay, the author focuses chapters on the purpose of business, and how values steer and stimulate business.
The first chapter, from which the quotes I copied are taken, is titled “Something You Live to Do”. He is already into the “purpose of business” part of your essay with the chapter title alone, but with greater use of imagery. Like you, he uses his own companies as models for presenting his ideas, but then he goes on to write just as extensively about Patagonia, Ben & Jerry’s, University National Bank of Palo Alto, California, Midas Muffler, and many others. He makes no claims for a “new paradigm for business”, but illustrates how true-hearted ideals make it into business practice, and demonstrates how this translates into success.
The fact that he found many other businesses apart from his own to illustrate the ideas in his book provides the reader with more fun anecdotes, plus the reassurance that the ideas he offers the reader are not original to him exclusively, or proven only by him. The good business ideas he shares are out there in all forms. They really work.
You probably also can illustrate your ideas from your own experience and that of your friends and mentors, and summarize them for the reader’s application. Showing, not telling, is often a mantra in writing because being able to see the author’s experience stays with the reader so effectively. Word paintings would help mitigate the talking-down tone of much of your essay, and be far more fun to “look” at than actual corporate graphics: “To see the reward of commerce as money and the risk of commerce as failure is to see nothing at all. The bottom line is down where it belongs–at the bottom.”
How much work you want to put into revising this essay for publication may depend heavily on what else you intend to cover in your book. Ever heard of Paul Hawken? You may even have conducted business with the first company he founded, Erewhon, as one of your own vendors. He has written several books. I quoted from Growing a Business, which you might want to read as you think about what you would most like to accomplish with your books. It wouldn’t necessarily be a problem to overlap some of the same material, since you have your own story to tell, but if he covers all you wish to and more, you may find it hard to get published.
That you have a true a real voice to convey your ideas I do not doubt. I very much would like to read what you have to say, precisely because you are the CEO of Whole Foods. Your business achievement is like making the American Olympic Food Team. That I want to read your ideas well-crafted in your own voice, fresh, aware of what has come before, and a real contribution to the world is a mighty tall order. But I do want it. Like Micheal Pollan wants real reformation. If you decide to really go for it, we will all be cheering you, whether or not you bring home the gold, silver, or bronze.
February 24th, 2007 at 4:10 am
I’m always stuck between being a dentist and going into business, and articles like these make want to do the latter. Capitalism, is an ideal system of freedom, in which only mutual exchange takes place and your article explains it well. You are making a good to great business, environmentally conscious entreprise, and you run the business like a berkshire hathaway manager. I prophecies that Whole Foods will be one the great success stories of this decade and it’s people like you who make me think there is meaning in life. If you ever need employees in Flagstaff, Arizona - please send me an e-mail.
February 25th, 2007 at 10:02 am
Dear John and the community of readers and responders,
My comments have little to do with the ideas of Conscious Capitalism (CC) and more to do with the requirements to be able to think, feel and act according to the desirable possibilities inherent in CC.
40 years of working in the domains of consciousness raising, leadership development and organizational development brings a certain bird’s eye view into the difference between speaking about something abstract and being able to embody the truth of it.
I love what is said here, the context of authenticity and trasparency is inspiring. I feel honored to be inside the imagination, heart and soul of a distinguished American Conscious Capitalist.
But, how do you take these ides and make them real- what is it we are talking about- “conscious” and consciousness. I will advocate for three points of view in my response:
1. Central to Consciousness is skill development- in most consciousness raising disciplines there are practices that you study and repeat day after day to acheive a way of thinking, acting and being that is consistent with the philosophy and psychology of the field of study you pursue.
My advocacy is for those of us who are committed to this declaration of a movement of people to bring about a revolution in capitalism that integrates consciousness into business (NPO or For Profit) we embody a tool set and competencies that we can transfer to others so that the movement is not abstract but grounded in the flesh/earth as action.
2. I assert that the tools and skills that must be developed for this movement to be sustainable are both internal and external in nature. I believe that you must be able, as HH the Dalai Lama has spoken for, Tame our destructive emotions like greed and hatred while cultivating emotions as compassion, loving kindness and generosity. To be able to embody consciousness- in- action you must have tools and skills that cause you to be an excellent listener and to speak with respect, clarity and authenticity.
3. A key principle underlying the embodiment of consciousness in capitalism is collaboration. Integrated deeply in Whole Foods success is a worldview, a skill set, an attitude of collaboration but it is invisible to those who do not collaborate as a natural competency.
I want to draw attention to the foundation of true stakeholder involvement, passionate love for your company, shareholder delight in the financial results and the context for this blog- it is at heart a collaborative way of being.
Collaboration takes four forms in CC- the hands of collaborative action, the heart of collaborative attitude, the mind of strategic collaboration and the soul and spirit of collaboration in people’s desire to make significant positive contributions daily to the people around them, their communities and the world.
I would love to engage in any conversation about what you have found are the top few skills and tools that cause consciousness to be raised, collaboration to be firm and fundamental or any other reposne you may have to my contribution.
February 26th, 2007 at 10:35 am
Dear Mr. Mackey,
I have read your blog with great interest. I have a deep respect for Whole Foods and its vision. My family and I have been shopping at your stores for many years. I would like to echo Mr. Levinson in that I would love to engage further in this conversation. Our world and our work ethic is desperately in need of a deepening and ever expanding paradigm when it comes to consciousness, collaboration, and ethical entrepreneurial leadership.
I am a new vendor for Whole Foods in Ann Arbor. I am also an artist. I have had the most remarkable experience working with the staff at that store. I also enjoy shopping there.
Recently, however, I visited your store in the Palm Beach area. My family and I were so offended by the tone of the staff and the attitude of the Whole Body buyer that I felt that I must write. In general, they were uninterested, unhelpful and somewhat sarcastic. After years of shopping at your stores, we were shocked. And then we realized that this is a good thing! You and your company have developed a business model that reaches your customers by working with them, honoring them, and offering quality products that contribute to change in our world. It is entirely rare. Thank you for you efforts. We are very grateful for your stores.
The Palm Beach store must have been having a very bad hair day.
Sincerely,
Laureen Prophett
February 27th, 2007 at 4:31 pm
As a Whole Foods Customer, Shareholder and a transactional business lawyer for over 30 years I agree in principle with your approach to the topics addressed in your paper. If I were running a business I hope I would have the same attitude. Specifically, I agree that optimizing the health and value of the adaptive system is the key to long term value as opposed to a 100% “profit in this quarter” mandate which can be quite destructive. All in all I am with you but let me pass on a couple of tangential thoughts.
1. It has always seemed to me that a discussions of “corporations” sometimes is misleading because the corporate persona allows people to avoid personal responsibility for their actions. Corporations are sometimes a vehicle for great achievement and service, sometimes an excuse for unfeeling exploitation, you know, “the corporation made me do it” excuse, sometimes an excuse for employee theft and vendor fraud “who am I hurting ? Corporations don’t feel.”
As you rightly highlight during the foundation stage the corporation is the alter ego of a person, the entrepreneur, who likely was driven by many motivations, probably following a “great” dream that included more than $$$. However once that founder moves on many times a management stage follows and that is where once again the people in charge will do what is in their best interest. Those interests may be quite different from the Founder. Can you build a corporation with a culture so overwhelming that it will survive self centered management. Not easily that is for sure.
Corporations are only as good as the people involved with them. I think there is more than a growing distrust of business. There is a growing distrust of people.
2. Shareholders, as you say, from a legal perspective are entitled to profits and have some influence on management but would you agree that investors today in traded companies define their interest more in terms of the market value of their stock ? That to me leads to the pressure for short term profits (whatever “profits” means) and a Las Vegas approach to investing. I own Whole Foods because I feel I am somehow supporting a responsible organization and somehow a part of your team. However that is probably a minority approach. It would be interesting to know if more holistic investors can be targeted by more enlightened companies. Again I think the approach is a long term winner not a charity but some education is probably needed. I can’t be excited about a team until I learn how we are going to play the game the right way and win.
3. I think the overall approach works with branded products but can it work with fungible goods like those found in the apparel industry ? I am somewhat familiar with the sweatshop issue and an organization like the WRC will make credible arguments that a lowest price only wins, customer driven market, has driven reputable companies to do disreputable things.
Could you use a Grameen Bank type approach to develop a business paradigm for an industry that seems unable to deal with the negative impacts of globalization? Interesting huh ?
Thanks for giving me the outlet to ramble. By the way my Whole Foods needs more parking :).
Stan
February 28th, 2007 at 2:36 pm
I appreciate the sentiment of your argument, but it is flawed. There are too many assumptions and unstated premises. Let me point out a few. First, you state that a Doctor’s purpose is to heal sick people, and not maximize profits. This is a little tidy. Yes, the definition of a doctor is to practice medicine, but the unstated purpose for the practice of medicine, or law as you state as well in regards to a lawyer is to make money (profit) by practicing medicine or law. Would the doctor or lawyer practice their disciplines if it was run at a loss? Compensation is the engine of all business. The success of any businiss is defined by it’s ability to profit. I am sure that the entrepreneurs that you have met and speak of all share one commonality; they desired to make money doing what they wanted to do.
Also, being that you work in the grocery industry, I am sure that you are aware that food and water are necessary for life, therefore the theory of voluntary exchange does not factor in. People need to eat, which means that have to buy food. Now, the growing problem in the grocery industry is the loss of the alternative marketplace. Companies are consolidating to increase buying power to either offer lower prices to the consumer, or to maximize thier profits. The local grocery stores are being bought up by holding companies. Your company recently purchased it’s primary competitor. Why did you do this? How does this fit in to your ethical vision? According to the press, this purchase was made to increase your share in a competitive marketplace. And, what are the players in this marketplace competing for? To be the most ethical company? If your customer is not satisfied, where can he or she turn to? With no alternative, there can be no voluntary exchange.
Again, I appreciate the sentiment of your paper. You should be applauded for your success and how you handle your company. However, perhaps you should leave economic theory to the philosophers, or at least recognize that your actions may betray your theories.
March 1st, 2007 at 12:39 am
One thing I have always evaluated when looking at lifecycle costs of buying organic foods and eating healthy, is the reduction of health care costs. You are what you eat. Thanks for being sincerely interested and active in evolving concious capitalism!
Cheers.
March 1st, 2007 at 3:37 pm
Mr. Mackey,
I saw your conversation with Michael Pollan a couple of days ago. Very, very interesting, and inspirational.
A little background: Philosophically, I am what could best be described as a green libertarian. I am also an engineer, who switched from aerospace to renewable energy and green building design, based on my concern for the environment. Although my study of sustainability is strongly focused on technical solutions, I am interested in all the “system conditions for sustainability” (to borrow a phrase from the Natural Step), including those that apply to businesses.
As a green libertarian, I am in agreement with many of the things you say, and I believe that what you call “conscious capitalism” represents a path for business that is both morally and financially relevant in an era of shrinking natural resources.
However, I think that there is a very important aspect to conscious capitalism that you do not explicitly include, although you discuss it in other contexts. I am speaking of the entrepreneurial attitude, that which allows you to appreciate Pollan and your other critics because they keep you from becoming complacent and challenge you to grow, change, and improve.
I say that this attitude is essential to conscious capitalism because, looking around me, many (perhaps most) of the most environmentally, legally, and socially destructive behaviors perpetuated by large, established corporations appear to be motivated by a desire to avoid change and the associated risk. Why else do well-established companies hold on so tightly to outmoded technologies, products, and business models? Why do they seek to regulations to prevent innovation, rather than embracing the change as an opportunity for growth and market advantage?
It seems to me that entrepreneurial companies do, in fact, seek to maximize profit through innovation. But non-entrepreneurial companies do not seek maximum profit. They seek the path of profitable least risk. And they represent the majority, in terms of size and influence, if not in terms of number.
March 2nd, 2007 at 6:10 pm
Dear John:
I am creating a bank for “Conscious Consumerism” to grow regional “sustainable resiliency™” or SR.
Many elements of “Conscious Consumerism” are infused as part of my proposed Bank’s mission and approach.
The bottom line is that new forms of banking are required to amplify each individual’s environmental and social values through commerce.
Likewise, transparent accountability metrics for sustainability and resiliency are in their infancy, with innovations and standards lagging behind consumers’ demands for quality assurance and responsible corporate governance.
Grameen Bank is a fantastic example of banking’s power to enable latent in situ capacities and economies. There are many forms of “microfinance” [including what I've called "socially-responsive debt" (SRD)] that traditional banks have yet to offer.
If you or others want to talk about this further, please feel free to email me.
Best regards,
Bruce Cahan
(A loyal Whole Foods customer in Palo Alto!)
March 6th, 2007 at 4:44 pm
Dear John Mackey-
in the stock market and have more than one large house in which to be, to meditate, eat, and do yoga. If you do discern some sarcasm it is only because you too cannot deny this is all merely desciptive of incidental reality. I am saddened that you seem to spend no time any more (or if you do, its a tiny percentage) directing your considerable capacity for dabate and effort, drive and determination, vision and ability to garner for yourself influentiality (now I can coin a new word, not just some other bloke in the marketing and advertizing field) on protecing the hope of success in acheiving the protection of our food supply from non-organic contamination. You allow the status quo to be the 2002 FDA ruling on labeling things organic which is a ridiculous emasculation of the cause and need for success here. What does it mean that the USDA “organic” seal is so meaningless that it is not “mandatory” (huh? it should be a point of bragging to bear this seal)and is the only seal that can be affixed whether the goods are 100%, 95% or no less than 70% made of organic ingredients. And when not 100%, the rule for organic labeling (which would read “Organic” in case of the 70-95% foods, but only a fine print seeker would ever know that this does NOT mean that its “100%” organic–what kind of Orwellian newspeak deceptive garbage nonsense is THAT?) states that the remaining percentage of the ingredients of the foodstuff mustconsist of nonagricultural substances approved on the USDA’s National List, or consist of non-organically produced agricultural products that are not commercially available in organic form. Oh, but, it can all be labeled “Organic”. Who decided the public should be served by doing THIS? Or, who was it who had the more sway to see to it that some interests other than the public’s was what was deemed to have an importance superceding the interest of the person who wants to eat food that does not have any genetically modified anything, nor any pesticides nor herbicides nor hormones nor any thing unnatural as it was on the table for George Washington, whatsoever. Nope, that objective is not what has been achieved, and not only that, there is active deceiption: thepublic will read a label stating it has been inspected by an authorized certifying agent to be authorized to be labeled as organic, but it is not. Not organic. It has contaminated ingredients in it. And if there are 10 ingredients, is 70% seven of them, or is 70% 70 grams of 100 of the foodstuff? And are either one of these percentages really reflective of any measurement of the purity with regard to being farmed and handled without contamination from anything unnatural (as to be expressed as food the way it was before the technological “advances” brought unnatural farming practices into being–Abe Lincoln, my grandparents, even the hippies had produce at least that only cost pennies and was not genetically tampered with). And what pray tell does it really mean you are a certified store? You sell (and label, thank you) “conventionally grown” produce, so what is so “organic” about you? That you label it? But what does this label mean? ANd haven’t you sold out, because you do not CARE that the original meaning of ‘organic’ does NOT allow or permit obfuscation and contamination by gradients, admixtures of taints and degradings. So, while you fancy yourself a great Adam Smith of the new age, methinks you’ve just sold out no more. YOu want to satisfy who? Your stock holders? So you and they can get richer? Pray tell, are you materially satisfied personally, or is it now still very much a thing you like to do, to see your own personal net worth grow? Are you comfortable, do you have enough to eat? Do you have a roof over your head? Can you send your children to college. Can you pay your doctor if something bad should happen? Really? All that? Can you take a trip around the world, can you sponsor a charity of your choice, too? Well, do you have enough? What is your central goal in life? Is it to protect the food supply from degradation? Is it even to protect the soils, or the food animals? To what degree is this your goal? Are there other goals that supercede and call for compromise to your customers, who will not have another organic market to choose from because you have put them out of business? Is branding, as a tool of advertising and marketing an offensive word to be the one in use by an advocate at the forefront of business as an empowerment of social change and other change (healthy food, uncontaminated and fully organic)offensive because branding is unrelated to content or quality, but rather to the perception of these by the consumer. I posit that the consumer should be seen by you to be your fellow man, not as “the consumer” and that branding should have not already replaced the mission to advance the organic movement by recognizing the power of the popularity of the desire to eat only such food among the public at large. Its a no brainer, NOBODY wants to eat or feed their children anything BUT right food, and none of that awful garbage created for profits is right food. (Even the saffron rice they like to cite as stopping starvation because though GM it produces more per acre, is a flawed argument– because all the dangers of GM (they do not know that they change OTHER things that they do not intend to when they engineer genetically. This is clear in that they want a long shelf life, they want a tomato and a plum that they can transport and warehouse a bit more, that won’t bruise or spoil, and they want that fruit to be big in size and rich in colorful appearance, and they succeeded by GM-ing it. It was not their objective to make it taste like sawdust, or be mealy, but it IS. There are effects and chages - unwholesome - they do intend and don’t intend. They use the genes of bacteria and animals on plants. This is disgusting, and it tastes bad, but what is it lacking in nutrition? What is it lacking in the full God - engineered balance of micronutirents they haven’t even discovered yet? THey can identify the active ingredient in a medicinal herb, but often it needs the whole herb intact to be safe and balanced non toxic at higher dosages or what have you, because of other things in the plant, the whole plant. THose other things represent what is being genetically lost or altered or destroyed, or even at waht level something else could be now appearing that is insidious, harmful, cause obesity, diabetes, autism, you have to understand the dire importance of shutting them DOWN entirely, and as you, MIchael, gain in power and wealth and success, it is my wish that you will find your power able to stand stalwart in your idealism, the righteousness of what is right, no matter how big the Goliath don’t join them, be David, to the end. Work to make the whole WORLD organic once more. Prices willl come down, ways will be changed: it is not necessary to poison ourselves, our animals, our food, our environment, our ecosystems, our pollens. If I have been insulting, it is to provoke you to return and remain true, and if I have underestimated your commitment, be glad, I am on your side then, and you want the whole world to be on your side.
I apologize to give you the following critique while having read only portions of your general thinking. You have mentioned your “considerable” debating skills. The sheer volume of books you’ve read (and I have not)that you cite as foundation cornerstones for your belief system or as blocks of thought you reject and suggest are parts of the Left’s attempt and trendsetting outlays in its albeit anscent and young stage (much like you yourself when young were a part of it, long hair and all) . . . I cannot share nontheless with you the background you do, for I did not read what you did. I would likd to suggest that you are a layman-businessman at least as far as philosophy and economics are concerned. That is to say, as far as your understanding of ‘capitalism’ (e.g. as a polar opposite and enemy of ’socialism’, your perspective is that of a businessman. The new verb “to brand” is a strong part of your vocabulary and is a cornerstone of the rubric of your thoughts and ideas with regard to things like the “freedom movement” (which as I guess it, is the WTO movement to expand the liberalization of trade, a matter that relates 95% to tarrifs and trade, and the rest to standards of trade relations that are intended to stabilize and assist in allowing businesses to compete freely in an open marketplace with as little control or blockage or interference from local governments or regionally sovereign entities except as established and standarized by the WTO or other FTA (regional Free Trade Agreement (negotiated, in the the US, by the Dept. of Commerce which is responsive to and exclusively lobbied by, big business). You Michael, seem in you ideas on corporations to have gained most of your thinking from a process you have undergone in your life and times which can be called “if you can’t beat them, join them”. You may have been “idealistic” and thought you were a leftist, but you discovered that when you tried to run a grocery store that you were a man in business (perhaps your pre-hippy culture parents and others who formed you as a child, and were examples to you, taught you about business, gave you capital, and there is more to you anyway than having worn long hair for a few years; only some ‘hippies’ were educated AND political or qualified thinkers on the subjct of economics; nearly none were communists! Living on a commune had nothing to do with Mao Tse Tung; you were like your compatriots in your youth, idealistic, but just kids, and then went on with your life as a regular American. The movement was idealistic, but nobody found they could retain their allegiance once making a living became paramount as they got older, and the pendulum swung back, Reagan got two terms, the USSR and Berlin Wall fell, Hippy became a reviled word, as in “dirty hippy”, children of hippies grew up and rejected the nonsense and irresponsibility of that parent generation. But here is you, a businessman who knows his demographic of his generation and that there are values which were valid and which if tapped into are a consumer demand waiting to be capitalized upon. Here’s the thing: You say, Michael, that you want to change the world by leading through business. All very well and fine: Jobs are created, corporate culture when enlightened provides better living conditions for employees, better quality of life through making available great stuff, consciousness raising through information, a book section a personal care section, a yoga section, all in your organically certified store, the whole store certified, not the labeled produce any more. And this is your baby; you’re going like Starbucks gangbusters! By 2010 will do HOW many billions of dollars and with the best profit margin in the industry (but there is no greed here, no; recently you raised salary ranges - for your executive - to match that for executives in the business world, to be competitive so you would be able to attract and retain executive level thinkers and doers- all of whom are good at the newspeak vacabulary and can use brand as a verb with great fluidity- Whole Foods is undoubtedly a great success as a business and as a corporation. You are a millionaire. You have a large house and likely more than one house. You have a very nice car or two. They may even be hybrids, I don’t know. Arnold says he had his Hummer hybridized, a great idea for those who might just feel an SUV is what they want to drive. You are not greedy, though, not among OTHERS in your line of work, CEO and successful founder of a multinational corporation. But the values of the hippy idealistic as they are/were have fewer needs; a teepee will do. A kitchen garden will do. A quiet life will do. Ambition to be big, to gain more and more, do more and more is not so rationalized as the rational thing that must be done in life, once sustenance and quaint comfort is there. If there is ambition, it is spiritual, to do GOOD in the world; there is bad there the young idealist saw. The pretty forests falling, maybe the woods where you played as a child one awful day were razed and became a parking lot for a strip mall. Polar bears are going extinct. 60% of human beings in the world do not have clean uncontaminated water to drink. There are only 5 media companies left due to monopoly happening. There are only 5 strains of grains left or varieties of wheat and corn, all the others have been eliminated by agribusinesses putting corn farmers out of business and off their ancestral farms in Mexico and elsewhere, so they can profit off their high-yield (low pest resistance) bio-engineered seeds and farm the land with combines a hundred yards wide in a swath, remove the family farms and knock down the old farmhouses, rip out the windbreak hedgerows to let the big combines in, eliminate the molds and earthworms and salamanders and funguses that used to grow in the rich soils and streambanks and woodsy section in and around the farms where cattle used to graze on green fields and not on concrete or manure mudholes be “fattened” with antibiotic drenched foodstuffs such as the sweepings off of slaughterhouse floors - for a cow to eat! These things the idealistic kid who started to think something was real darn fishy about the powers that be that would also send him to war before he could vote no matter what he might feel about that because there was a draft. And so the idealism got all lumped in together in a general rebellious time against the system because it bit a little too close to home when it came to dying like that, too. So we had the crazy 60’s, because these kids were really clueless, and plus they dropped out of school and they experimented with psychedelics and mystical powers as they tried to flee from all these horrible things they saw in the real world. And ultimately they sold out, because they had no answers, or had some, but had to compromise on a lot of what they had felt when they rebelled and rejected the whole damn system lock stock and barrel. The issue of eating food that is healthy, that’s pretyy personal so as far as that goes, they stuck to it and maybe they let the rest of their beefs just go by the wayside, shrug, or vote, if its ever relevant, or give to Save the Children for a few years. Now you, MIchael are a better hero, you have made a difference and have a new track going: maybe we don’t have to throw out the baby (big business?) with the bath water, do not have to sell out completely. Maybe, you have a third way: Brand big free trade business as Healthy and Organic! As spiritual and transcendant! As compassionate and environmentally responsible! As socially ethical and jobs creating! Well, at least its an improvement, and its better by along shot than doing nothing, and plus, what is wrong with success? That’s right, getting rich. This is still a GOOD thing, and you play the game with becoming a publicly traded corporation, now with investors who run the show (they pretty much want to see their stock go up). So its all capitalist, capitalism. And is their anything WRONG with that? Is there any idealism there, really though? Or is it all (ALL) really, Michael,
about growth, money, pride (even), power (yes, soaring high on a high- a human thing to do when the wind is in your sails!) But whatever happened to the “issues” (a tiny little corner of your whole website, which is very brief to boot and then sends the surfer over to the FDA, known to be the great and honorable champion of safe drugs safe food additives, safe silicone gel breast implants, and protector of the self interests, selfish profiteering profit incentive driven driven individuals in the massive and gigantic corporate culture of executives and their wives who invest their fat figures (6, 7, even
March 7th, 2007 at 11:59 am
Dear John,
As I’ve followed this thread about Conscious Capitalism/Conscious consumption, I am prompted to write. While I give support to you that if we’re going to have a consumer economy—a conscious capitalistic system certainly is preferable to the current capitalistic model—or that of any of the other ‘consumer economies’ that get bandied about—communism, socialism, fascism, etc. All of these economies are consumption economies—really the only difference between any of them is the distribution methods—capitalism distributes on a supposed ‘free-market’, communism is a centralized government etc.
But what if a consumer economy—conscious or otherwise, isn’t the only option? In fact, what if we discovered it isn’t even our best option?
Yes, we are all well steeped in the consumer economy—so much so that it seems as if it is the only way to be. In the early 1900’s, the idea of ‘insatiable desire’ was implanted in our culture through the intense rise of advertising—because insatiable desire was considered a cure all for an ever rising/falling economic system that depended on consumers continuing to consume. When they were erratic in consuming, depressions/recession ensued—at least in the money flow. I can’t blame our forefathers because from their perspective this looked like the best choice. Consuming led to money flow which led to more consuming and if we could keep this going on a fairly constant flow, depressions, recessions and economic chaos would be a thing of the past. And consume we did and as we consumed the money flowed. Over the last 100 years we have perfected a consumer economy, efficiently setting up a supply/demand (insatiable desire + money = demand—please note, “demand” does not necessarily mean “need”). While this option looked like the best from a 1900’s view of the world—world population 2 billion and seemingly unlimited resource availability—who could ever imagine an end in sight. But now with almost 7 billion people and resources being maxed, things will have to change. As we all can see now, this direction has come at a huge cost. We’ve created a world that is good for the production of products, services and the flow of capital—but it is not a world that is good for all humans, the earth, water, air, animals.
In that efficiency of whatever makes money is good, we’ve also allowed businesses to externalizes the ‘costs’ on humans/earth/animals instead of insisting that they operate on a full cost accounting method—which had that been incorporated in the consumer economy would have surely shifted many of the business practices of the day.
To that, I then ask the question—what if instead of a consumer economy, we instead created a whole life economy? It would serve a primary need of ‘life’—relationships, species diversity, health, etc. instead of the current primary need of money. Yes, there would still be businesses and products—but only so much as is necessary for real life. What I’m suggesting is that we move into a new paradigm. The following is the best encapsulation of the old to the new paradigm that I am suggesting. It comes from Barbara Brandts’ book, Whole Life Economics.
…the central assumption of the modern economic paradigm is the belief that money represents value. According to this belief, the more money one has, the more things of value one can buy, leading to greater well-being. That’s why the modern economic paradigm defines economics in terms of such issues as the success of businesses in producing and selling goods and services in order to make money and the ways in which individuals make money. In the modern economic paradigm, the economy is defined by the movement and behavior of money and any activity that increase the amount of money by an individual, business or nation is considered economically successful.
…..the central assumption of the post-modern economic paradigm is not on money, business, interest rates, productivity or other conventional economic concepts. Instead, [whole life economics] the post-modern economic paradigm starts from such values as our physical well-being, mental and emotional health, our social relationships, our ability to meet our needs and the needs of those we care about, our connection to the natural environment and our need for spiritual meaning.
By contrast, the new paradigm recognizes that nature is not merely a collection of passive physical materials mutely waiting to be dug up or chopped down, but is a dynamic living system of plants, animals, soils, waters, weather and numerous other processes that constitute the ultimate source of all our economic activities and it assumes that an economic system that honors the Earth is also one that enhances human quality of life. The post-modern economic paradigm perceives human beings and the Earth, not as competitors but as participants in a mutually sustaining relationship.
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We already have an example of the new economic paradigm—the Grameen bank and its microlending system. Notice that these borrowers are pulling themselves out of poverty, improving their families, communities, relationships—but they are not obsessed about making more and more money. Money serves their values and the important values are those noted above: physical, mental, emotional well-being, relationships, meeting needs (vs. insatiable desires) and connection to the natural environment/need for spiritual meaning.
While I do congratulate WFM—if we’re going to stay stuck in capitalism, at least being conscious is a better option than what we have now, but it’s never going to be enough. It is an old, burdened system. For instance, the discussion around your stock price—your comment that stockholders ‘own’ the company is just unsustainable. With the exception of the IPO, any stock purchased after that does nothing for WFM—it is not an investment in your company in the least. It is actually a completely disconnected group of people ‘legally gambling’ on a supposed ‘value’. But as is obvious, that value can be hyper-manipulated by people who couldn’t care less about WFM at all. Yet we give these people ‘ownership’ of the company and like a puppet on the string, WFM and actually all companies publicly traded dance to the tune of ‘share price’ by these ‘owners’. The present system enables this small group of investors (speculators really) to have more power over your company than the people who actually work in it to make it the great company it is! No matter how conscious you may be John, this system allows very unconscious people to determine policies for their short term gain. My business friends in publicly traded companies bespeak constantly of the frustration of ‘dancing to the tune’ of the quarterly stock report. It forces them in to short term planning vs. long term. It is a tough world to work in and sadly so many of those who do work for you could lose their jobs because stock/speculators would force you into decisions that serve stockholders first, customers and employees second. For example, when ATT merged with Cingular, 7000 working people who had built that company lost their jobs. This brought a rise in the stock price for stock owners—but harmed 7000 individuals and families who had put their time, energy and effort into those companies. We call this normal in a capitalistic system—the current modern economic paradigm. This would be considered insane in the post modern economic paradigm.
Which ultimately leads to the elephant in the living room of a consumer economy—conscious or otherwise. The “unavoidable dilemma” when we consumers have had bought enough—but a business needs to keep selling stuff, making money and supporting the stock price. Then the business is forced to make more and more—even when its not necessary—and as is true with so many of the products and services that get created today. They’re not needed, but through advertising we have to create ‘insatiable desire’ (false need) and insist that we consume them. We are now consuming massive quantities of junk because businesses have to keep seeking more and more ways to get our dollars. In the food industry alone you can see the outcome of this junk production creation. While I love WFM, I worked in the natural foods industry in the early 80’s when we were all struggling to show people how to eat healthy foods like quinoa and whole wheat. Today however, I am amazed at how much useless food is in a health food store. Do we really need ‘natural cheese puffs’? Or are we producing them simply because people have been conditioned to want this and the business needs to find ways to increase sales?
Conventional wisdom’s response is, “well, people don’t have to buy them—in a capitalistic system is it supply and demand”. And perhaps if we actually had a true system you might be right. But everyone in this world now knows that to ‘stop consuming’ is to stop the economy and that just can’t happen. So we just keep shopping—knowing full well we need to stop but can’t because the ‘economy’ must go on. (recall what President Bush said after 9/11—Don’t let the terrorists win—go out and shop!). Deep down inside, the current Fed Chairman, the past chairman Greenspan, Wall street traders, citizens know that we can’t buy ourselves out of the ‘unavoidable dilemma’. Resources are running out—and if the world population ‘buys’ itself into the chaos that Americans have indebted themselves, we’re goners.
We’ve created an economy that serves products/services/money now let’s get conscious and create an economy that serves humans, families, communities, animals, earth, water and air. It is doable John, we need only change our minds and decide that the post-modern economy paradigm makes more sense—and then start consciously creating a world that supports it.
Daniel Quinn…who wrote Ishmael which won Ted Turner’s book award for ‘best solutions for the future’…recently wrote a new book called “When they give you lined paper, write sideways”. It challenges us to look at what we call ‘normal’ and really examine its ‘normalcy’ in context to the fact that much of our old patterns are on a path of eco-cide. It is time to invent something else.
Conscious capitalism is simply slanting the lined paper. It won’t get us where we need to be. Let’s have the guts to turn it completely sideways—and create the post-modern economic paradigm. When we do, shopping and working at WFM is going to be an experience so joyous because it will be part of an integrated whole—with the humans, family, community and the entire community of life—animals, air and water and earth being honored. It will be sustainable for us all and help us create a world that works for the community of life vs. money.
Best regards….
Ann
March 7th, 2007 at 3:16 pm
I am a long time member, former employee and avid supporter of food coops. I now live in California where I shop at Whole Foods (because there are no coops here and because Whole Foods is a good store in many ways). I heard your presentation at Berkeley and I can’t help but feel sadness for my Vermont coops. A primary basis of the coop movement was political. Of course, we wanted good and pure foods, but we were also interested in seizing control of the food supply. You have done that to a larger degree than we in the coop movement did. And that is the problem, WE are out of it. Yes, we can control you by what we buy, but there is an added level that we were trying to do away with by starting the coop movement. As I listened to what you were saying, I though that you and we could have more power and a clearer direction if we consumers were involved on a more intimate level. How about a community board in addition to the board that is involved due to finances/corporate control. A community board would go a long way in giving consumers a strong voice and in giving your voice more power. Also, I have always believed that if people knew more of the story of what a corporation deals with they would be gentler criticizers and stronger supporters. A community board could have a dual purpose working with you/stores and with the community.
March 8th, 2007 at 12:43 pm
Dear John Mackey,
Thank you very much for your willingness to dialogue with Michael Pollen in Berkeley. I did not have time to read all the previous comments yet, so please forgive me if this suggestion has already been mentioned. I am writing to suggest that Whole Foods open up a satellite Whole Foods store in a low income, underserved neighborhood in Oakland. The store would be considered a satellite because it would not have all the items a regular Whole Foods would have. The store would be much smaller, and a smaller selection of items would be offered. Also free classes in nutrition would be offered once a week. this satellite store could also be connected to different local groups already doing this type of education.
This note is in response to the question asked at the dialogue about Whole Foods and elitism. Without consciously intending to, I beleive Whole Foods does tend to reinforce elitist
standards. Your response was that a low-income person can, if they are a very careful shopper, and they are willing to cook most of their food, afford to shop at whole Foods. This is a good point, but it overlooks at least two aspects of poverty. One is access to transportation, and the other is access to information. A low income person in West Oakland who doesn’t have a car and is a single parent might have a pretty long trip by public transportation to get to Whole Foods. They might also have to bring their children with them if they can’t afford a sitter. They might also be tired after a long day at work. It is difficult, exhausting and time consuming for them just to get to a health food store, so they just purchase junk food because that’s what’s sold locally.
Second, many low income people may not have the education about nutrition and smart shopping to be able to successfully navigate a Whole Foods and get out without denting their wallets too badly. That is why the satellite Whole Foods would offer free classes in nutrition and be connected to local groups doing similar work.
Creating a Whole Foods satellite store in an area of Oakland that does not have health food stores addresses the issues of access and education. Many low-income people might start eating differently because they can actually get to the store conveniently. Secondly, providing free weekly classes on nutrition and smart shopping gives people the skills they need to be able to afford to start buying differently, without breaking their budget.
The new satellite could also provide products that serve different ethnicities in the area that it’s located in.
Finally, while low-income people may not have as much money as other people, they do have money. I think it would be possible to make a profit with these Whole Foods satellite stores, though perhaps a more modest profit than a regular Whole Foods.
I hope that you seriously consider this proposal. The Whole Foods satellite idea is an active way that Whole Foods can start breaking down the walls that prevent low-income people from accessing healthy food.
Thank you for your attention to this note, and I look forward to hearing your response,
Sincerely,
Julia Roll
March 9th, 2007 at 12:18 pm
BRAVO !! I just finished reading your paradox of profits. I must say I whole Heartedly agree with your analogy. The title of this section I think would be better titled “Profits, the underlying result”. As a supervisor in one of your stores departments, profit is realized by the many things we as team members due as a result of a well developed business plan. We strive to give better service to our customers as well as a stellar product. Since we are happy team members we generate profits for OUR store through a great connection with our customers. The end result thereby meets our core values of Whole Foods Markets on a whole.
I do have one question for you though.
What is the overall purpose of these writings and who is your target audience? Reason for my question is that if you are targeting a broad mass of people then I would much rather see a more simpler form of wording and writing on your part in order to better get your point across. Just a thought since at WFMs simplicity, I think, is the best way to better inform people about the goodness of WFMs product.
March 12th, 2007 at 2:08 pm
Mr. Mackey, I confess - I’ve regularly looked through your job listings hoping that the stars would align and I’d find a gig working with you at corporate hq in Austin. After today, however, I have to say that I’ll not be doing any more of that. In fact, I’ll be selling all my WFMI shares in the next week or so due to this blog (this is the first time I’ve looked through the site since becoming a shareholder). I am taken aback at how a CEO who works for shareholders, the owners of his company, feels that it is appropriate for him to use the company’s website to express his belief systems (first of all), and even more egregious - to use inflammatory language in doing so. You’ve read plenty of books, which is great. And you like to try all sorts of religious practices. But statements like, “a firm foundation to move past mythologically based religions into authentic 21st century spirituality”, are foolish. The CEO for whom I work would not say something like that because he knows that his job is to run a company and not to opine on his company’s website. Doesn’t mean that he has no opinions and that he can’t express them when the setting is right, it just means that he maintains a basic sense of propriety when speaking in public under our company’s banner.
While I don’t belong to any religious group, I read this and was somewhat shocked that people were not a bit more uneasy to hear you refer to “mythologically based” religion while replying to a person who was expressing belief in the bible.
Again, my decision to divest from the company has nothing to do with the specific content in your blog - though I find your tone self-righteous and your words somewhere between spurious and offensive - I just can’t trust a person with my money who acts more like Mark Cuban than an individual with any business running a corporation capped at $6455M.
March 12th, 2007 at 6:17 pm
I’ve been very busy lately and have been neglecting to answer questions and comments on my blog. I hope to catch up over the next few days.
To Joseph Serrano,
I see you have great passion about creating an environmentally sustainable dry cleaning business. I encourage you to keep seeking ways to fulfill your vision. I’m sorry that I’m not personally interested in it. Best of luck to you.
To TC,
While I respect Berkshire Hathaway’s approach to corporate philanthrophy I don’t think it is the “right” answer for all other corporations. Don’t forget that Warren Buffett owns a huge percentage of Berkshire so letting the shareholders designate their favorite charities still lets him designate a huge amount of money to his personal favorites, while doing it in a way that seems to insulate him from outside criticism. I see corporate philanthropy differently than Buffett does, however. I see it as another part of the business to be managed consciously and responsibly–just like every other part of the business. Should the shareholders designate what the retail prices of our products should be? Should they vote or designate employee compensation? Should they designate which suppliers the company does business with? Why should the community stakeholder be treated differently than all of the other stakeholders by the company? I believe that a company has responsibilities toward all of its stakeholders and should seek to optimize relationships with all of them–including the community stakeholder since the company is a “citizen” within various communities. I don’t think this responsibility should be delegated out to the stockholders any more than any of the other stakeholder relationships should be delegated out.
Your second point about share based compensation over the long-term in large companies is right on target. In fact, over time, share based compensation, including stock options, is necessarily diluted down by the law of large numbers. This is also true at Whole Foods. However, stock options are only one part of the company’s commitment to “shared fate.” Our gainsharing program, transparent salary information, and salary cap are also important programs to support “shared fate” at Whole Foods. Also, while stock options necessarily decline in importance over time with a larger company such as Whole Foods has become they are far from insignificant. While Whole Foods won’t be able to grow as rapidly in the future as we have in the past, we are still very much a growth company and likely will be so for at least another decade or so.
Your third point fails to understand that Team Member Happiness is far more than merely a rising stock price. Material prosperity is in fact only a relatively small part of human happiness as many psychological studies have shown. Maslow’s Hierarchy of Needs, for example, shows that human fulfillment has many levels beyond the satisfaction of basic physiological needs. Whole Foods team based system of empowerment combined with the deeper purposes for which our company exists (besides maximizing profits) are actually far more important for nurturing human happiness than a rising stock price.
At no time have I ever said that Wal-Mart is a “bad” company. In many ways Wal-Mart is a great company and I agree that it has done many good things. I admire many things about Wal-Mart, but not everything. However, I don’t see Wal-Mart as a “Conscious Capitalist” company at this time. They seem to me to be focused primarily on 2 of their stakeholder groups–customers and stockholders. They will need to begin creating more value for their employees and their communities before I would view them as a “Conscious Business.” Time will tell whether they have a sincere commitment to the environment or whether it is a PR effort to shore up their reputation.
March 12th, 2007 at 7:15 pm
To Nancy DeFauw,
I’ll modify my statement to say “Many non-profits” instead of most. Hyperbole on my part–sorry about that. Thanks for the feedback. In terms of examples: well you wouldn’t have heard of many of them, since many have now failed or are small local ones. I’ve served on the Board of Directors of many non-profits and have watched them struggle for effectiveness for years. Not one of them has been nearly as effective in the world as any of the for-profit corporations that I’ve worked with. They all have wonderful intentions, but that isn’t enough to make them effective. My criticisms of non-profits shouldn’t be taken personally. I meant no offense. I want non-profits to be more effective in the world and am devoting a great deal of time to helping several to be more effective.
Sorry you don’t like my “wall metaphor.” I like it myself and will keep it.
If you have suggestions to improve grammar or tighten sentence structure of Conscious Capitalism please send those suggestions to Anna.Madrona@wholefoods.com.
To Nick Theodosis,
I submit that more progress in improving human well being has been made in the past 250 years through capitalism than in the previous 10,000 years combined. All the objective indicators support this statement–increased lifespan in the U.S. from 49 to 78 in the past 100 years alone, decreased poverty from 85% of the world population in 1820 (less than $1 a day in 2003 constant dollars) to below 20% today, the elimination of slavery for the first time in history in all advanced, capitalistic nations, the empowerment of women and the waning of patriarchy in advanced capitalistic nations, and the expansion of freedom and democracy in all advanced capitalistic nations. Perhaps there is a “better” economic system than capitalism but so far I haven’t seen any evidence of it. I for one am not willing to discontinue capitalism–rather I want to expand human consciousness and create a more “Conscious Capitalism,” which my article advocates.
As I stated in my previous post I don’t think the Gates Foundation should be condemned for investing in oil companies–even if those oil companies have done some things we don’t like in Nigeria. Your ethical balance sheet on oil companies only seems to see the bad things that they sometimes do and doesn’t give them any credit for the good things that they also do. Is that fair? Shouldn’t your ethical accounting include both the good and the bad?
Your attempt to separate the Gates Foundation from Mother Teresa by calling the Gates Foundation an “artificial entity” and Mother Teresa a “flesh and blood” person isn’t logically compelling. If the Gates Foundation is merely an “artificial entity” then why should they be held responsible for anything at all? How can you hold an “artificial entity” responsible? However, you clearly do hold them responsible for their investments and their actions so please drop the “artificial entity” rhetoric.
Let me be clear on where I stand on The Gates Foundation, Mother Teresa, and Nick Theodosis: I don’t blame The Gates Foundation for anything bad that oil companies do and I don’t give them credit for any good that those oil companies also do. I believe the oil companies should be held responsible for their own actions (despite being “artificial entities”), but not their investors, employees not directly related to any “bad” actions, nor consumers of their products. I do not hold Mother Teresa responsible for the bad things that the Catholic Church may have done while she was alive nor do I give her credit for the good things the Church may also have done. I hold her responsible only for her own direct good and bad actions in the world. I hold the Catholic Church responsible for its own direct bad actions. I also do not hold Nick Theodonis responsible for all of the bad actions that the United States government does nor do I give him credit for whatever good it also does. I hold the U.S. government responsible for its own direct good and bad actions in the world. I do not blame its citizens.
I do not believe in infinite responsibility through association, which implies unlimited guilt since we are all connected to everything else. Instead, I believe we are only responsible for the direct harm (or good) that we do to others but that we are not guilty or responsible for the harm (or good) that others we are associated with may do.
March 13th, 2007 at 3:07 pm
To Paul Frantellizzi
Here is the definition of selfish from the on-line dictionary, dictionary.com. I believe this definition is also congruent with how most people think about selfishness–”caring only for oneself, regardless of others.”
self·ish
–adjective 1. devoted to or caring only for oneself; concerned primarily with one’s own interests, benefits, welfare, etc., regardless of others.
2. characterized by or manifesting concern or care only for oneself: selfish motives.
You try to redefine the meaning of the word selfishness when you say “Rationally Selfish” individual (one that has a balanced view of himself/ herself in the world, holds a strong sense of self confidence, and who’s ideas and thoughts are congruent with reality), does care about relationships, giving back, mentoring, renewable resources, community, environment and….yes, profits.”
Selfishness, by definition, doesn’t care about relationships, giving back, mentoring, community, etc. A person who cares about other people and factors their well being into his or her decisions is not behaving selfishly.
You are making the exact same mistake that Ayn Rand made when she argued for egoism and wrote a book called “The Virtue of Selfishness.” You are confusing “self-interest,” which can in fact concern itself with the well being of others, and “selfishness,” which by definition cannot.
Self-interest and selfishness mean very different things. I think we should use words the way they are defined and not try to change their meanings just to suit ourselves.
To Dean Tucker,
I enjoyed reading your post and see that we are pretty well aligned on many things. My goal indeed is to help American businesses evolve to the second tier level of consciousness. However, they will need to evolve past the Orange Meme through the Green Meme first to get there. My friends at FLOW (see http://www.flowproject.org)and at the Integral Institute (www.integralinstitute.org) and at Spiral Dynamics (www.spiraldynamics.net) are working with me to help move things along. You should contact FLOW about working with us. Maybe we will meet someday in person, but I just can’t meet with all the people who want to meet with me right now. Sorry.
To Craig Sullivan,
I believe you are confusing the coercive power of government with the voluntary nature of business. These aren’t the same things. Whole Foods has grown large and successful through voluntary exchange. We coerce no one to trade with us. Customers trade with us because they feel that they are getting a good deal through the exchange or the trade wouldn’t happen. All of our customers have many other competitive alternatives where they can purchase their food. We don’t have any “power” over them. They can walk out of our stores anytime they want to. Guess what, 98% of Americans don’t shop at Whole Foods.
Same with our Team Members–none of them are coerced to work for us, but willingly do so because of the particular combination of pay, benefits, working conditions, and unique business purpose that we provide. Each of them have many competitive alternatives in the marketplace where they can trade their labor. Team Members voluntarily leave our company for other jobs they prefer more every single day.
It is exactly the same with our investors–they own their stock voluntarily–and they are free to sell their stock 5 days each week.
Any different with our suppliers? Nope. They don’t have to trade with us. They do so because we are able to negotiate mutually beneficial terms of trade or no exchanges would occur. They’ve got plenty of competitive alternatives to trade with if they don’t like Whole Foods Market.
Does Whole Foods have the same kind of power that governments have? No way! Everyone trades with us voluntarily for their own self-interest. Not so with the government. Don’t pay your taxes and the government will come and forcibly take your money, property, and imprison you. You can always emigrate from the United States if you want to, but our government insists on taking a large chunk of your money and property in taxes when you do if they deem that you are emigrating in order to avoid paying taxes.
The government has coercive power–they have policemen, armies, and guns. Whole Foods does not. Our success and growth have come directly from satisfying our customers who have voted with their pocketbooks. Should we ever cease to adequately satisfy our customers needs and desires these same customers will voluntarily stop trading with us and our company will begin to shrink and would eventually go bankrupt. This very thing happens every single day for businesses all over the United States. That is the way capitalism works–through “creative destruction.”
If you don’t like large corporations don’t trade with them. No one is forcing you to. In my own opinion, large corporations have just as much potential to do good in the world as small businesses do, and probably much more. Why wouldn’t they? A corporation simply expresses the consciousness of its leadership and its culture. An enlightened business leadership, a “Conscious Capitalism,” would help evolve the world we know for the good. Since corporations aren’t going to disappear anytime soon (no matter how much you might wish them to) the best strategy to transform the world is to transform the consciousness of corporate leadership. That is what I’m working to do.
March 13th, 2007 at 3:59 pm
To Michael Garjian
Your E2M project sounds interesting and I wish you the very best with it. I think what you are trying to do, however, is substantially different than what FLOW is trying to do or what my vision of Conscious Capitalism is. I am curious to know how many public corporations are participating in E2M? Any Fortune 500 companies? It seems unlikely to me that very many would be willing to give that high a percentage of their profits or equity to another entity (5% to 20%) besides the government (which takes up to 40% of net profits and much more than this when all types of taxation such as employer, property, and fees are factored in).
To Sebastien Gault,
I believe that we are more likely to see entrepreneurs of younger companies embrace the principles of Conscious Capitalism before executives at large corporations do so. The entrepreneurs have less to lose and are usually more open to new ideas. Conscious Capitalism will spread through conscious entrepreneurs to the rest of the business culture over time. It will spread the same way most successful ideas spread in business–it works better. The Conscious Business will prove to be more successful over the long-term because it is simply a better, more robust business model. It will win through competition in the marketplace.
To Sam Clarkson,
I really don’t want to talk about our stock price or dividend policies on my blog. All I’ll say is that Whole Foods has a well publicized financial policy that is seeking to maximize long-term EVA for our shareholders. We aren’t seeking to maximize paper earnings, minimize share dilution, maximize dividends, or manipulate our stock price. Paying the special dividend increased EVA more than any other use we had for the cash–including buying back shares (since the stock was trading at over 50 times earnings). Maximizing long-term EVA is our one and only goal concerning our investor stakeholder. We believe if we are successful in doing this then our stock price will continue to trade up over the long-term. If you aren’t comfortable with our commitment to maximizing long-term EVA then we might not be the best company to invest in.
To Dylan,
I’m sorry but we can’t make it easy for people to dumpster dive for food. Unfortunately in such a litigious society we are bound to get sued by someone getting sick from eating our garbage, so we must make access as difficult as possible. Many of our stores are now beginning to compost their fresh food wastes and then selling that compost in our stores. I believe over the long-term that up to 95% of our fresh food waste will be composted and sold. Your store must not be doing it yet, but eventually it will.
March 13th, 2007 at 4:46 pm
To Patrica,
None of the examples you gave contradict my point that corporations don’t have any rights that individuals don’t have.
1. Credit card companies are following the letter of the contract that people sign with them when they voluntarily sign up for use of the card. Are some of these terms onerous? Yes. I don’t argue that corporations are always good or behave with the best of intentions. Many do not. Regarding credit cards. Pay them off each month and you’ll avoid getting entangled in the small print in their contracts that no one ever reads (I certainly don’t). Or if you don’t like the ethics of the credit card companies then don’t do business with them. No one forces you to. Just use a debit card for all your plastic transactions and you’ll never spend money that you don’t have or need to pay penalties or high interest rates to credit card companies.
2. Regarding tort reform. I certainly don’t want corporations to engage in frivolous lawsuits anymore than I want individuals to. Adopting the system of “loser pays” the legal expenses of both parties (which almost the entire rest of the world has already adopted) would end almost all frivolous lawsuits, both by individuals and by corporations. That we don’t adopt this simple tort reform that almost every other country uses reflects the power that Trial Lawyers exert on our political process. Did you know that Trial Lawyers are the single biggest contributor to the Democratic Party–even bigger than Labor Unions who rank #2? It’s true–but not well publicized.
3. Both corporations and individuals use lax bankruptcy laws to avoid paying the financial commitments they have made and discharging their debts.
To ieva swanson,
Thank you for your suggestions. I’m not sure I’m capable of writing as well as Michael Pollan does. After all Michael is a professional journalist who teaches at Berkeley. I’ve read all of Paul Hawken’s books and found value in all of them (even though Paul keeps publicly criticizing Whole Foods–I would love to debate him sometime). You will probably like the first half of my book much more than the second half. The first half is going to be a narrative with nothing but entertaining stories, anecdotes, and lots of homespun entrepreneurial advice. The rough draft of this part is now completed. The second half of the book is going to be far more abstract, however, and will likely appeal to a different kind of reader. I will do the best I can to make my ideas clear and understandable, but this part of the book won’t consist of stories or anecdotes, but rather of my business philosophy. This will necessarily appeal to a far smaller audience. However, I think the ideas I’ll convey in the second half of the book are important ideas and will appeal to a different kind of reader–readers like myself. I actually don’t really enjoy reading books with too many stories or anecdotes–they are boring to me. I want books with more abstract ideas and principles in them–ideas that I can wrestle with, dream about, and which expand my own consciousness and which help me to grow. I just can’t get that from very many books these days. I want my book (at least the second half) to be that kind of book, even if it doesn’t appeal to the same readers that the narrative portion appeals to.
Who am I writing my book for? I’m writing it for myself primarily. To articulate to myself what it is that we have collectively created with Whole Foods in such a way that I better understand my own heart and dreams and ideals and purpose–to feel more deeply the love that fills me and wants to extend out into the world in various creative ways. If my book helps or inspires anyone else, that will just be an extra bonus.
March 13th, 2007 at 5:20 pm
To Joshua Wallis,
Follow your heart. Life is too short to waste time on any other life strategy. Go for it!
To Elad Levinson,
Great stuff Elad! I look forward to collaborating with you (full disclosure–Elad is facilitating a Conscious Capitalism gathering for FLOW in October).
To Laureen Prophett,
Sorry for your bad experience in West Palm Beach. I’ve passed your entry on to the appropriate people in Florida who need to know. Thanks for sharing.
To Stan Bies,
Excellent and thoughtful post Stan:
I totally agree with your insights into mistrust for both people and corporations. Both are growing in our society. I believe that Conscious Capitalism is one partial solution to this greater problem, but much more will be needed. It is a growing cultural problem.
Short-term profit pressures are great. I’ve learned to ignore them and just keep making decisions that will create long-term value. This results in a great deal of criticism when the stock price drops, but I’ve learned to think long-term. The people who are booing right now will be cheering in another year or so. Markets are very fickle. It takes a bit of a thick skin to deal with them, but my skin has gotten thicker over the past 15 years as a public company.
I think the apparel industry has great potential for the principles of Conscious Capitalism. I would buy 100% of my clothes from manufacturers and retailers who are practicing ethical trade principles–good pay, good working conditions, right to organize, no child labor, and environmental sustainability. Unfortunately very little has yet been done in ethical trade in apparel–certainly on the marketing side. Tremendous potential here and some entrepreneurs are bound to pick up on it eventually.
Could a Grameen model work in the apparel business? Don’t see why not.
Almost all our stores need more parking. Unfortunately landlords don’t get paid any rent for their parking lots so they have no incentive to put any more parking in than the minimum that is legally required. Whole Foods fights for additional parking in each deal that we sign and in many cases have put in extra parking at our own expense–especially when we own and control the real estate.
March 13th, 2007 at 5:58 pm
To P.,
It will be necessary to deconstruct your argument paragraph by paragraph:
“I appreciate the sentiment of your argument, but it is flawed. There are too many assumptions and unstated premises. Let me point out a few. First, you state that a Doctor’s purpose is to heal sick people, and not maximize profits. This is a little tidy. Yes, the definition of a doctor is to practice medicine, but the unstated purpose for the practice of medicine, or law as you state as well in regards to a lawyer is to make money (profit) by practicing medicine or law. Would the doctor or lawyer practice their disciplines if it was run at a loss? Compensation is the engine of all business.”
The mistake you are making in your logic P. is believing that because something is necessary for survival it is therefore also the purpose behind the existence. For example, I can’t live without eating. Is therefore eating the purpose for why I exist? No it isn’t. Similarly I can’t live without breathing oxygen or drinking water. Is the purpose of my life therefore to breathe and drink? No it isn’t. The fact that doctors and lawyers need to make a profit in order to continue to practice medicine or law doesn’t mean that profit is the purpose why they practice these professions–profit is necessary for their continued existence in these professions. It is no different in business–profits are necessary for any business to survive, but that survival necessity does not equate to the deeper purpose behind the business.
“The success of any businiss is defined by it’s ability to profit. I am sure that the entrepreneurs that you have met and speak of all share one commonality; they desired to make money doing what they wanted to do.”
Sure all entrepreneurs want to make money, but that isn’t usually what is driving them to build their business. It didn’t drive me or most of the other entrepreneurs I’ve known well. I’m sure Michael Pollan wants to make as much money as he can selling Omnivore’s Dilemma, but I doubt that was his main purpose in writing the book. Surely his passion for the subject matter was his main purpose. Perhaps making a profit merely expresses your own motivations in life? Is it really fair to project your own life motivations onto other people?
“Also, being that you work in the grocery industry, I am sure that you are aware that food and water are necessary for life, therefore the theory of voluntary exchange does not factor in. People need to eat, which means that have to buy food.”
Sure everyone needs to eat in order to live, but they don’t have to buy food from Whole Foods in order to survive. Every American has dozens and often hundreds upon hundreds of competitive alternatives from whom they can buy food. Whole Foods has no monopoly on food and people are free to shop for food anywhere they want to.
“Now, the growing problem in the grocery industry is the loss of the alternative marketplace. Companies are consolidating to increase buying power to either offer lower prices to the consumer, or to maximize thier profits. The local grocery stores are being bought up by holding companies.”
You couldn’t be more mistaken! Competition continues to grow and grow and grow in the food retailing business. Whole Foods has never faced more competition than it is facing right now. Trader Joe’s, Safeway, Kroger, Fresh Market, Earthfare, Food Co-ops, Wal-Mart, HEB, Wegmans, Farmers Markets, Community Supported Agriculture, Fresh Direct, Peapod, and Tesco is entering the United States market from the UK. Our same store sales right now are the lowest they have been in over 10 years! Why? Competition, Competition, Competition! It is everywhere. Wake up and look around!
“Your company recently purchased it’s primary competitor. Why did you do this? How does this fit in to your ethical vision? According to the press, this purchase was made to increase your share in a competitive marketplace. And, what are the players in this marketplace competing for? To be the most ethical company? If your customer is not satisfied, where can he or she turn to? With no alternative, there can be no voluntary exchange.”
We issued a press release about the Wild Oats merger which details some of the reasons why we wish to acquire them. I refer you to the press release which can be found on this website under the Investor Relations section. I’ll say only 2 things about it here. Number 1–Wild Oats isn’t our primary competitor as you claim. Trader Joe’s is our primary competitor. It is far larger than Wild Oats is and is growing several times faster. It is a private company owned 100% by the 15th richest family in the entire world–the Albrecht family, who are worth tens of billions of dollars. Number 2–Wild Oats has lost $80 million in the past 6 years. Their company is struggling in the marketplace to be successful. Whole Foods can help them be far more successful than they have previously been and can greatly improve their stores. We believe that teaming up with Wild Oats will make us better able to successfully compete with Trader Joe’s, Wal-Mart, Wegmans, HEB, Safeway, Kroger, and the hundreds of other powerful competitors that we struggle with every day in the marketplace.
“Again, I appreciate the sentiment of your paper. You should be applauded for your success and how you handle your company. However, perhaps you should leave economic theory to the philosophers, or at least recognize that your actions may betray your theories.”
Thanks for your feedback. However, most philosophers don’t actually know that much about economics or business so I can’t leave it to them. I plan to keep on expressing my views and I believe my actions are congruent with my theories.
March 13th, 2007 at 6:15 pm
To Brent Eubanks,
I agree with your perspective on entrepreneurs. I’m surprised to hear you say that I don’t talk about entrepreneurs in Conscious Capitalism because I actually talk about them quite a bit. Entrepreneurs who create the business create the purpose. As an entrepreneur myself I’m a big believer in the dynamism of entrepreneurism.
The motto of FLOW is “liberating the entrepreneur spirit for good” (see http://www.flowproject.org). That is exactly my sentiments. I believe in multiple types of entrepreneurs, not just business, but also social, educational, spiritual, and political entrepreneurs. I believe in the limitless creativity of human beings to solve our collective problems, expressed through entrepreneurism with an open heart extending love into the world.
Entrepreneurial organizations eventually put the older, static businesses out of business. Just look around at Google (didn’t even exist 10 years ago), Jet Blue, Starbucks, Dell, Microsoft, etc. Entrepreneurs rule!
To Bruce Cahan,
Good luck with your bank. Can’t meet in person. Sorry.
To li an,
Sorry, but I found your post too difficult to read and my time is precious to me. If you resubmit it and break it down into paragraphs with your thoughts organized tightly, I’ll try to take another stab at it. Best wishes to you.
March 13th, 2007 at 7:55 pm
To Ann Kramer,
Your post is long, but I’ve copied it in order to deconstruct it paragraph by paragraph. My comments will be below yours.
“As I’ve followed this thread about Conscious Capitalism/Conscious consumption, I am prompted to write. While I give support to you that if we’re going to have a consumer economy—a conscious capitalistic system certainly is preferable to the current capitalistic model—or that of any of the other ‘consumer economies’ that get bandied about—communism, socialism, fascism, etc. All of these economies are consumption economies—really the only difference between any of them is the distribution methods—capitalism distributes on a supposed ‘free-market’, communism is a centralized government etc.”
I’m quite surprised and disturbed, Ann, to read that you believe that capitalism is very similar to communism, socialism, fascism, etc. because they are all consumption economies. These other economic systems are radically different from capitalism. Capitalism is the only economic system which puts the needs and desires of the customer at the heart and soul of it. The customer is King & Queen in capitalism and producers compete to best satisfy their desires. Socialism, communism, and fascism all locate the decision making power in the hands of governmental bureaucrats. The bureaucrats decide what will be produced, how much will be produced, and how much it will cost. If they don’t think something is needed or is very important then it won’t be produced. Want a computer? Too bad. Want an iPod–not necessary. Need a heart transplant–get in line and we’ll see if we think you are important enough to get one. The 20th century is a long nightmare on the failed attempts of these alternative economic systems to work. They failed miserably and reduced individual freedom and individual rights everywhere they existed. The communistic utopias of the Soviet Union, China, and Cambodia resulted in the murder of over 100 million of their own citizens. Think about that before you lump capitalism–the economic system which has created so much human progress– in with these other economic systems which have created so much human misery.
“But what if a consumer economy—conscious or otherwise, isn’t the only option? In fact, what if we discovered it isn’t even our best option?”
“Yes, we are all well steeped in the consumer economy—so much so that it seems as if it is the only way to be. In the early 1900’s, the idea of ‘insatiable desire’ was implanted in our culture through the intense rise of advertising—because insatiable desire was considered a cure all for an ever rising/falling economic system that depended on consumers continuing to consume. When they were erratic in consuming, depressions/recession ensued—at least in the money flow. I can’t blame our forefathers because from their perspective this looked like the best choice. Consuming led to money flow which led to more consuming and if we could keep this going on a fairly constant flow, depressions, recessions and economic chaos would be a thing of the past. And consume we did and as we consumed the money flowed. Over the last 100 years we have perfected a consumer economy, efficiently setting up a supply/demand (insatiable desire + money = demand—please note, “demand” does not necessarily mean “need”).”
Sorry but I don’t agree with your cynical view of the stupidity of people who you believe are so easily manipulated by advertising to buy things that they don’t really want. Who is going to define what people really need, Ann? Will it be you? Will you decide what everyone needs? Will some group of government bureaucrats decide in your economic system like they do in socialism and communism? Or will individuals make these choices themselves? Will people be free to make their own choices or will you or some other dictator decide what is best?
“While this option looked like the best from a 1900’s view of the world—world population 2 billion and seemingly unlimited resource availability—who could ever imagine an end in sight. But now with almost 7 billion people and resources being maxed, things will have to change. As we all can see now, this direction has come at a huge cost. We’ve created a world that is good for the production of products, services and the flow of capital—but it is not a world that is good for all humans, the earth, water, air, animals.”
The world has never been good for all humans or all animals at any historical time. It is better for human beings right now than it ever has been based on objective indicators such as longevity, disease, freedom, democracy, prevalence of slavery, and prosperity.
“In that efficiency of whatever makes money is good, we’ve also allowed businesses to externalizes the ‘costs’ on humans/earth/animals instead of insisting that they operate on a full cost accounting method—which had that been incorporated in the consumer economy would have surely shifted many of the business practices of the day.”
I agree with your ideas here–we do need to internalize the externalities of such things as pollution, carbon production, etc. This can be done within a capitalistic economy, however.
“To that, I then ask the question—what if instead of a consumer economy, we instead created a whole life economy? It would serve a primary need of ‘life’—relationships, species diversity, health, etc. instead of the current primary need of money. Yes, there would still be businesses and products—but only so much as is necessary for real life. What I’m suggesting is that we move into a new paradigm. The following is the best encapsulation of the old to the new paradigm that I am suggesting. It comes from Barbara Brandts’ book, Whole Life Economics.”
Ann–who is in charge of the “Whole Life Economy?” Who decides what gets produced and what doesn’t get produced? Will individuals have the freedom to decide for themselves what they want and will entrepreneurs be free to innovate and create to meet their needs? If not entrepreneurs and individual consumers–who?
“…the central assumption of the modern economic paradigm is the belief that money represents value. According to this belief, the more money one has, the more things of value one can buy, leading to greater well-being. That’s why the modern economic paradigm defines economics in terms of such issues as the success of businesses in producing and selling goods and services in order to make money and the ways in which individuals make money. In the modern economic paradigm, the economy is defined by the movement and behavior of money and any activity that increase the amount of money by an individual, business or nation is considered economically successful.”
“…..the central assumption of the post-modern economic paradigm is not on money, business, interest rates, productivity or other conventional economic concepts. Instead, [whole life economics] the post-modern economic paradigm starts from such values as our physical well-being, mental and emotional health, our social relationships, our ability to meet our needs and the needs of those we care about, our connection to the natural environment and our need for spiritual meaning.”
Those values already exist and are possible to embrace within a free society and a capitalistic economic system. They are exactly the values I’m freely choosing as an individual. Are you saying that these values will be forced upon other people whether they agree with them or not? How will you do this without creating some type of totalitarian state?
“By contrast, the new paradigm recognizes that nature is not merely a collection of passive physical materials mutely waiting to be dug up or chopped down, but is a dynamic living system of plants, animals, soils, waters, weather and numerous other processes that constitute the ultimate source of all our economic activities and it assumes that an economic system that honors the Earth is also one that enhances human quality of life. The post-modern economic paradigm perceives human beings and the Earth, not as competitors but as participants in a mutually sustaining relationship.”
Sounds wonderful Ann. I’m all for it. The key question is how will it be achieved in a free society? We can evolve our society and economy this way in a free society if we want to collectively go there. However, what if most people don’t want this vision? What if they want an Islamic Theocracy obeying the will of Allah? What if they want a Christian Theocracy with everyone forced to obey the Bible? What if people prefer the society that we have right now? Do they get to keep it or are you going to take it away from them for their own good?
“We already have an example of the new economic paradigm—the Grameen bank and its microlending system. Notice that these borrowers are pulling themselves out of poverty, improving their families, communities, relationships—but they are not obsessed about making more and more money. Money serves their values and the important values are those noted above: physical, mental, emotional well-being, relationships, meeting needs (vs. insatiable desires) and connection to the natural environment/need for spiritual meaning.”
I love Grameen and our Whole Planet Foundation is working with them in Costa Rica and Guatemala right now and will add projects in Honduras, Nicaruagua, and India in 2007 and eventually around the world.
“While I do congratulate WFM—if we’re going to stay stuck in capitalism, at least being conscious is a better option than what we have now, but it’s never going to be enough. It is an old, burdened system.”
Well the burden of proof is on you to show how your economic system is going to be achieved in the real world without massive governmental coercion creating a totalitarian state. Utopian societies always end up as dictatorships because human beings have a way of wanting to do what they want to do and not what the utopians think they should want to do.
“For instance, the discussion around your stock price—your comment that stockholders ‘own’ the company is just unsustainable. With the exception of the IPO, any stock purchased after that does nothing for WFM—it is not an investment in your company in the least. It is actually a completely disconnected group of people ‘legally gambling’ on a supposed ‘value’. But as is obvious, that value can be hyper-manipulated by people who couldn’t care less about WFM at all. Yet we give these people ‘ownership’ of the company and like a puppet on the string, WFM and actually all companies publicly traded dance to the tune of ‘share price’ by these ‘owners’. The present system enables this small group of investors (speculators really) to have more power over your company than the people who actually work in it to make it the great company it is! No matter how conscious you may be John, this system allows very unconscious people to determine policies for their short term gain. My business friends in publicly traded companies bespeak constantly of the frustration of ‘dancing to the tune’ of the quarterly stock report. It forces them in to short term planning vs. long term. It is a tough world to work in and sadly so many of those who do work for you could lose their jobs because stock/speculators would force you into decisions that serve stockholders first, customers and employees second. For example, when ATT merged with Cingular, 7000 working people who had built that company lost their jobs. This brought a rise in the stock price for stock owners—but harmed 7000 individuals and families who had put their time, energy and effort into those companies. We call this normal in a capitalistic system—the current modern economic paradigm. This would be considered insane in the post modern economic paradigm.”
I simply don’t agree with your very cynical views on stock owners. No one forced Whole Foods to sell stock to the public. We did so because we wanted to. We wanted to raise money to grow and to give our long-term investors a way to cash out on their investments. I’m glad we went public and I would do it all over again. It is true that I don’t like the short-term pressures that Wall Street puts out there, but it isn’t really that big a deal. Besides it could be easily reformed by creating tax incentives to hold stock longer through lower capital gains taxes for long-term holding. I am certainly no “puppet on a string” as you seem to believe. I feel much more pressure from unhappy customers, dissatisfied Team Members, and various journalistic critics such as Michael Pollan than I feel from our investors. The investors don’t like the stock to drop. What a surprise! Customers don’t like the price of bananas to go up a nickel a pound. The job of leadership is to satisfy all the stakeholders as well as possible–including the investors.
“Which ultimately leads to the elephant in the living room of a consumer economy—conscious or otherwise. The “unavoidable dilemma” when we consumers have had bought enough—but a business needs to keep selling stuff, making money and supporting the stock price. Then the business is forced to make more and more—even when its not necessary—and as is true with so many of the products and services that get created today. They’re not needed, but through advertising we have to create ‘insatiable desire’ (false need) and insist that we consume them. We are now consuming massive quantities of junk because businesses have to keep seeking more and more ways to get our dollars.”
You are back to your theme about the stupid consumer being manipulated by clever diabolical businesses to buy things they don’t want or need. Do you really believe this? Is it true about yourself? What are you being manipulated into buying that you don’t want? If it is Whole Foods Market, we offer a money back guarantee. Just bring it back to us and we’ll give your money back to you with a receipt of purchase. Heck I gave Michael Pollan $25 for organic asparagus from Argentina that he didn’t like, but I didn’t manipulate him into buying them. O.k.–maybe we did, we made them look as pretty and delicious as we possibly could, but we do try to do that for everything we sell. We depend upon people knowing their own best interests and if they don’t like asparagus we assume they just won’t buy them.
“In the food industry alone you can see the outcome of this junk production creation. While I love WFM, I worked in the natural foods industry in the early 80’s when we were all struggling to show people how to eat healthy foods like quinoa and whole wheat. Today however, I am amazed at how much useless food is in a health food store. Do we really need ‘natural cheese puffs’? Or are we producing them simply because people have been conditioned to want this and the business needs to find ways to increase sales?”
Anne, if you don’t want to eat natural cheese puffs then don’t buy them. No one is forcing you to. Other people like them, however, and want to buy them. Are you going to decide who can and cannot buy cheese puffs? What gives you the right to pass these judgments on everyone else?
“Conventional wisdom’s response is, “well, people don’t have to buy them—in a capitalistic system is it supply and demand”. And perhaps if we actually had a true system you might be right. But everyone in this world now knows that to ‘stop consuming’ is to stop the economy and that just can’t happen. So we just keep shopping—knowing full well we need to stop but can’t because the ‘economy’ must go on. (recall what President Bush said after 9/11—Don’t let the terrorists win—go out and shop!). Deep down inside, the current Fed Chairman, the past chairman Greenspan, Wall street traders, citizens know that we can’t buy ourselves out of the ‘unavoidable dilemma’.”
Trust me on this one: the United States economy won’t come crashing down if people stop buying cheese puffs from Whole Foods Market! In fact, if people change their consumption preferences to consume less the economy also won’t come crashing down–it will simply shift to satisfy the new preferences. If we consumed 1/2 as much then the economy would provide 1/2 as much. After all, we produced 1/2 as much as we do today only about 15 years ago and we did just fine.
“Resources are running out—and if the world population ‘buys’ itself into the chaos that Americans have indebted themselves, we’re goners. We’ve created an economy that serves products/services/money now let’s get conscious and create an economy that serves humans, families, communities, animals, earth, water and air. It is doable John, we need only change our minds and decide that the post-modern economy paradigm makes more sense—and then start consciously creating a world that supports it.”
The current capitalistic economy does serve the preferences of human beings, Ann. The problem is that you fundamentally don’t approve of the choices that most human beings in the United States are apparently making. I’m all for creating a more humane and sustainable world and economy. I’m just not prepared to create a totalitarian government to enforce those values or any other particular set of values–no matter how good and noble they sound. I believe in human liberty and I also believe that human beings are capable of evolving their consciousness. As consciousness evolves in more humane and ecological ways, then the capitalistic economy based on human liberty will evolve right along with it. Conscious Capitalism freely chosen by conscious and free human beings.
“Daniel Quinn…who wrote Ishmael which won Ted Turner’s book award for ‘best solutions for the future’…recently wrote a new book called “When they give you lined paper, write sideways”. It challenges us to look at what we call ‘normal’ and really examine its ‘normalcy’ in context to the fact that much of our old patterns are on a path of eco-cide. It is time to invent something else.”
I’m trying.
“Conscious capitalism is simply slanting the lined paper. It won’t get us where we need to be. Let’s have the guts to turn it completely sideways—and create the post-modern economic paradigm. When we do, shopping and working at WFM is going to be an experience so joyous because it will be part of an integrated whole—with the humans, family, community and the entire community of life—animals, air and water and earth being honored. It will be sustainable for us all and help us create a world that works for the community of life vs. money.”
Your vision sounds wonderful, Ann. Your path to get there isn’t very clear, however. I’m not prepared to get rid of human freedom or an economic system based on individual human choice to coerce people to live the way you want them to. That “ism” is well known. It is called “Totalitarianism.”
March 13th, 2007 at 8:31 pm
To Veronica Ciambra,
Don’t feel too bad about food co-ops because the movement is very much alive and continuing to flourish all over the United States. Check this site out–http://www.ncga.coop/. I met with the leadership of this organization recently and was very impressed with them. We brainstormed together about ways we might be able to work together in the future such as on animal welfare issues and ethical trade.
Regarding a “community board”: Interesting suggestion. I hope some of our stores experiment with such an idea. How would the “community board” be selected? Who gets to vote? Who gets to decide?
To Julia Roll
Interesting suggestion. We are considering the idea of opening some smaller stores. However, we’ll need to open the stores where they will be successful for the sake of our Team Members and investors. We aren’t going to deliberately open a store that we don’t think will be successful.
I find it very puzzling when people accuse Whole Foods of being elitist. For most our history the only people who shopped our stores were mostly alternative culture people who were the cutting edge for healthy and organic foods. As time passed the desire for healthy natural and organic foods began to penetrate into the more mainstream middle class. Much to our surprise we found soccer moms driving SUVs shopping our stores and wanting to eat quality foods. About the time that BMWs, Lexuses, and Ford Explorers began showing up in our parking lots along side the VW Beetles, Toyota Corollas, and Honda Civics we began to hear this accusation of being “elitist.” It is very puzzling to me.
Whole Foods doesn’t discriminate on the basis of gender, race, sexual preference, age, income, political party, car driven, or stock portfolio. Whole Foods are for everyone–even for Yuppies.
March 13th, 2007 at 10:10 pm
John, I hope you are finding time to spend with your family. Walking, laughing, working, fighting, hating, loving, questioning, supporting, eating and all the other beautiful things we can do together. Conscious capitalism is only part of your life; whole foods another; but those closest to us are the clearest example of how we spend our time… wishing you the best Your Friend
March 14th, 2007 at 6:59 am
Hi John,
DISCOVERY CONTEXT
Michael Strong’s discovey ( http://flowidealism.blogspot.com/2005_05_01_flowidealism_archive.html ) of my first essay regarding evolving capitalism ( http://www.well.com/~rb ) –
“Reed Burkhart has created a sort of mirror-image of FLOW”
– accelerated my discovery of you. Thanks to you, Michael and Jeff Klein for encouraging open dialogue on the strategic topic of business evolution, that I consider to be of immeasurable importance for my children’s future welfare.
APPLAUDING YOUR INNOVATIVE RECORD AND NEW IDEAS ON EVOLUTIONARY ROLE OF ENTREPRENEURSHIP
Your critique of (adolescent) capitalism’s positive and negative traits and practices I consider to be insightful, objective and innovative. You are a well-established innovator in business coming to be an innovator in culture.
Perhaps the greatest innovations (cultural innovations, business innovations, or “Aikido-meme” innovations that coactivate the former two) are those innovations oriented toward keeping wealth and vision together, a state of affairs persistently challenged by rogue capitalists.
Innovation could be considered the key metaphor permitting the differentiation of wholly fruitful business (integral, durable, sustainable, trusteeship-embracing conscious business/capitalism) from merely profitable business (amoral, accretive without particular regard for good corporate citizenship, rogue business/capitalism). Durable life processes always have a regenerative (innovative) component — so your focus on entrepreneurship and innovation can reference sound correlates from the life sciences (E.O. Wilson, et al.).
Consequently, I applaud your proposition to reward innovation above mere capital management/investment via tiered (inverse to hold time) capital gains tax rates; and hint that among the more integral thinkers in the life sciences, there is substantial opportunity to make an even stronger case for why:
“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.”
The Aikido metaphor that I raise in my essays “Aikido Activism” and “Integrated (Aikido) Entrepreneurship” provide vision out of the paradox of profit, because if in rethinking why corporations exist we proceed to make efforts to mobilize that we must deal with the difficult issues raised regarding the inertia of contemporary capitalist practices, which are not uniform from one industy to another — with food being far, far more transparent than many other industries that collectively set the tone of capitalist practice and culture with Whole Foods … and now more and more Chinese, Indian, Russian, Peruvian — etc etc — companies and cultures of capitalism (the global war of capitalist memes).
In particular, the Aikido metaphor, combined with the notion of evolutional business — durability, or natural selection — answers directly criticisms such as:
“I can’t see oilmen, auto manufacturers, bankers, defense industry contractors, senior government officials, media moguls, - i.e. the power mongers and the money grubbers who have always ruled the world (be they American, British, Chinese, Japanese, Saudi, Swiss etc.), adopting these principles any time soon. For them, as myself and several other contributors to this forum have pointed out, the usual Darwinian evolutionary principles apply.”
The reason for hope of evolution beyond the more roguish, adolescent practice of capitalism is exactly BECAUSE the inertia posed by the most rogue capitalists is subject to Darwinian/Schumpeterian business evolution including through the evolutionary vehicle of the perception of power, and the coming perception of how Aikido — when practiced successfully in business entrepreneurship (also remembering that traditional Aikido is practiced through both instruction and application, so business Aikido should have both mobilizational and educational elements) — transforms current powers or energies, even those energetic components with great inertia in untoward direction, to be in harmony with nature.
By this line of reasoning, the transition of even the most regressive, adolescent capitalist elements actually happens far earlier than otherise might be predicted, because as the power-focused adolescent capitalist mind encounters, experiences and understands the inherent power of innovating/inflecting the power vector of business practice (via Aikido as described in my essays), they naturally evolve their own understandings, objectives and trajectories.
The scale and growth issues are also nicely handled in the same proposed solution context of Aikido-meme based evolution of business by winning the game while truing it.
I have immense appreciation, John, for your leadership in visioning, communicating, and mobilizing what indeed is a need for evolving the practice of capitalism.
Regards,
Reed Burkhart
Walnut Creek, CA
http://www.well.com/~rb
March 14th, 2007 at 8:51 am
To Michael Barcellos,
My target readers are the ones willing to make the effort to understand what I’m trying to say. I try to communicate logically and clearly. I try to restrict my vocabulary to what most high school graduates should be able to understand. There is a limit, however, to my skill as a writer to communicate many of these ideas in terms so simple that anyone can understand them. In fact, most people will not be able or perhaps ready yet to understand much of what I’m saying. I don’t write for those people. I write for those people who are able and ready to understand what I’m saying.
If you both understand and agree with the ideas I am articulating on my blog entries then I encourage you to translate them to other people in simpler ways than I am apparently able to do. I am writing these ideas in as simple a language as I’m capable of writing without making the ideas simplistic and therefore worthless. I will leave it to other, more skilled writers than myself, to simplify some of these ideas even further.
To Mark,
Sorry you don’t like my communication style. Fortunately many other people do. Different strokes for different folks I guess. Here is the beauty of communicating honestly and clearly: it helps select in the customers, Team Members, and investors who align well with Whole Foods values and select out those who do not. By reading my blog and disapproving of it, you have been saved from working for a company where you might not have fit in well. It also eliminates you as an investor who disapproves of the way I’m leading the company and hopefully allows your sold shares to be purchased by someone else more aligned with our investor philosophy.
One leadership style doesn’t fit all situations or all businesses. I am who I am. The beauty of capitalism is that each of us gets to choose where to shop, where to work (or at least where not to work), and where to invest. Each of us can express his or her beliefs and values freely in the marketplace.
It was not my intention to offend you or anyone else with my writings–just to share what I’m thinking about and what is important to me. I’m very sorry that you don’t approve. Best of luck to you on all your future endeavors.
To Reed Burkhart,
Thanks for sharing. I looked at your website. Lots of good essays there that I look forward to reading and digesting leisurely. On first glance there seem to be many similar ideas to my friend Michael Strong. Look forward to meeting you sometime in the future.
March 14th, 2007 at 12:32 pm
Thank you John,
As a TM who sees the ins and outs of a living breathing WFM, sometimes i question the corporate atmosphere. in my 3 yrs i have seen many changes, though i can say for the most good. i have seen leadership change, which brought an increase in happiness for all TM’s (as well as significant wage increase). I have been a part of several new store openings, and have seen the welcome communities have for our new stores. there have been new rules set in place, new HR policies, new healthcare changes, but in the end, i really believe that every TM at my store has benefited from those changes. are we more “corporate” today than 3 yrs ago- yes, but i don’t believe that’s necessarily bad, as you so clearly outlined.
several TM’s have posted what it means, and feels to live and breathe the core values… its hard to explain, maybe we really are part of a “foodie cult” where the organics have been brainwashed into us. i know it’s much better than what this conventional world has to offer.
which leads me to ask you this John, i believe that the younger generations feel such angst and distaste for corporations because of the greed and corruption we have seen. however, it goes deeper than that, and i only once saw even the slightest mention- government responsibility? when big business is in bed with the administration, it’s hard to discern who is making the decisions. we hear that corporations are trying to get their emissions down to certain levels by 2012, but really, it won’t make a difference then. we hear more and more of corporations merging, and then positions being cut, or even more– corporations leaving the states to set up base in other countries. i think that this is what the younger generation sees when they see corporations… but they too have succumbed to it all (and they don’t even really know it)
how do you see us, those who support holistic living, organics, local agriculture and locally produced foods; rising up and shedding this paradigm? when mono-culture farming is getting subsidy from the govt, and gmo’s are promoted by the govt, how do we break through to reach those that have never eaten an organic apple (after all, don’t we all deserve to eat organic apples?)
and how do we form healthy relationships with the govt to grow organic and holistic living?
and this is why i am proud to work for a company that is socially responsible, and cares for the environment. i am on an active Green Team, and my store is active with recycling. we are proud to sell wind energy cards, and work hard to promote our 5% days. and so when i see a new posting, that something in the company is changing, and i begin to groan about working for a corporation– i remind myself, that i could be someplace else, where they have no recollection of where their product came from, and don’t really care who it’s going to.
thank you for caring for the community, the environment, the producers, the team members, the shareholders, the customers, and everyone else we care and touch.
peace love and compassion.
March 15th, 2007 at 5:18 pm
To jyl,
I urge you to read my blog entry “The Upward Flow of Human Development.” It gives one possibly helpful framework for better understanding these different value systems in our society. Mainstream corporate America very much operates in the Orange Meme framework. Most of the people in the organic and natural foods movement, as well as environmentalists, operate from the perspective of the Green Meme. These two Memes interpret reality very differently and frequently struggle with each other over which framework will dominate. What I’m trying to do at Whole Foods is lead us past this Orange/Green conflict, which is causing so much angst in our society and ground our values, structures, and culture solidly in the Yellow & Turquoise Meme frameworks. These Yellow & Turquoise Meme frameworks recognize the value and contribution of each of the other Memes, while encouraging and empowering people to grow past them.
My personal advice to you is to try to avoid getting caught up in the Meme power struggle between Orange and Green to dominate our cultural framework (not to mention Blue, which is also very powerful in American culture). This struggle will frustrate you and get you angry and upset. A better life strategy is to keep working to expand your own consciousness through concentrating on your personal growth, while simultaneously using your creativity and love in positive ways to make our world a better place. Don’t waste your life energies in judging and attacking other Memes. Such attacks don’t change anything and they cripple your own personal growth. Instead:
“Criticize by Creating”–Michelangelo.
March 17th, 2007 at 5:04 pm
Dear Mr. Mackey,
I fully agree that definitions of concepts are crucial to a healthy debate and a healthy society. The main point of my blog entry was that I believed you were falling into the same trap that our culture has for years, regarding selfishness – assigning a fully negative connotation to suit altruistic trends or just lazy thinking.
I was not trying to redefine the concept, but merely give it some context and once again develop a richer, fuller more textured vision of a selfish person.
Your blog is called “Conscious Capitalism”, how is that different from “Rational Selfishness”? Below is the definition also from http://www.dictionary.com -
cap•i•tal•ism –noun
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.
You have chosen to “re-define” capitalism because our culture has hijacked the concept and ascribed a very negative connotation to what once was a point of pride for our great country. Capitalism is merely an economic system. My point is that many people, and sometimes cultural movements hijack concepts to promote their own agenda – I believe this has happened with the concept of selfishness, (or self interest, ego, etc.) which is why I felt compelled to use the phrase “Rationally Selfish”.
You say; “Selfishness, by definition, doesn’t care about relationships, giving back, mentoring, community, etc.”
Well, neither does capitalism by definition – yet you wrote a wonderful article describing how capitalism as a concept could be applied in today’s world.
You say; “A person who cares about other people and factors their well being into his or her decisions is not behaving selfishly.”
If those people are important to their life and sense of happiness, goals, or promote their own well being, it sure is selfish. Selfishness and caring, mentoring, community are not by definition mutually exclusive, unless your concept of people is that they are shallow, thin cutouts that do not live in a social environment. Is it selfish of me to want the organic farmer down the road to succeed? If I buy his produce, and I want to see my son grow up in a rural environment, or he buys my computer services, or my 3 friends work for him and need the money to pay for our private school and keep it open so my son can continue to attend, or I care about the well water my family drinks, or I just don’t want to see another WalMart buy the farm, etc… as you can see, it gets complex – yet it is all based on selfishness. In general, we are complex social beings, not self centered automatons that spend our days looking in the mirror to build our ego.
I love what you are doing, yet, I am concerned when terms like self interest, selfish and capitalism are spoken like dirty words.
March 17th, 2007 at 9:40 pm
Dear John,
I also wanted to recommend reading (if you already haven’t) Ludwig von Mises, Socialism and Human Action.
Both books are brilliant and challenging reading – they speak to many of the questions/ discussions raised on your blog.
http://www.mises.org/books/socialism/contents.aspx
http://www.mises.org/humanaction.asp
Regards,
Paul
March 20th, 2007 at 7:14 am
To Paul Frantellizzi,
I have never found it very useful to argue for very long about the meaning of words. I’ll try briefly to do so, but will let it drop after this effort.
If you want to give new meanings to a word such as “selfishness,” that are the exact opposite of what the word means according to both the dictionary and according to common usage in our society, you are free to do so. However, don’t expect most other people to agree with your re-definitions or for your attempts at re-definition to become widely accepted.
My last post argued that you are confusing the word “selfishness” (which by definition does not concern itself with the well being of others) with “self-interest” (which by definition can concern itself with the well being of others). Putting the adjective “rational” in front of selfishness doesn’t magically make the word mean the exact opposite thing. To achieve this goal of transforming the meaning of selfishness to the opposite thing requires us to put “un” in front–un-selfishness. Unselfishness means acting the opposite of selfishness–concerning itself with the well being of others.
As to your claim that I am doing the exact same thing with “Conscious Capitalism”–I don’t think that I am. The dictionary definition that you gave for “capitalism” I am entirely comfortable with:
cap•i•tal•ism –noun
an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.
By putting the adjective “conscious” in front of “capitalism” I do not invert the meaning of the word capitalism to its exact opposite. “Conscious Capitalism” still is an economic system where the “investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations.” The word “conscious” doesn’t turn capitalism into socialism where the means of production are owned and controlled by the state. A system of “Conscious Capitalism” still has the means of investment and production owned and controlled by private individuals and corporations. The meaning of the word capitalism is still the same. What has changed is that Conscious Capitalism becomes more aware (more conscious) of:
1. The deeper purposes of business besides maximizing profits.
2. The interdependent relationships between all of the various constituencies of the business–customers, employees, investors, suppliers, communities, and the environment.
3. Value for the owners of each business will be maximized over the long-term by optimizing the entire interdependent business system which the owners are part of.
Paul, I also believe that “rational selfishness” is bad branding for the ideas that you are trying to promote because of the pejorative nature of the word selfishness. Rational self-interest, on the other hand, is consistent with those ideas and I urge you to use that phrase instead. You may also argue that capitalism is a word that is hopelessly pejorative. I don’t think that is the case. Besides, I’ve never been able to think of a better word to use instead. Hayek and Mises used the word “catallaxy,” as a substitute word but that word is awkward and never caught on. Have you any suggestions?
By the way, I did read “Human Action,” “Socialism,” “Omnipotent Government,, and “The Anti-Capitalist Mentality” by Mises. Mises was a brilliant man. I like Hayek even better and his vision of “spontaneous order” and “entrepreneurship as a discovery process” are key ideas in my vision of “conscious capitalism.” My major intellectual gripe isn’t with Mises or Hayek, but with Ayn Rand. I love Rand the novelist, but disagree with her ethical philosophy. However, no time today to go into that disagreement. Perhaps sometime in the future. Take care.
March 20th, 2007 at 2:32 pm
Dear John…..
My earlier post suggesting that it is time to move beyond capitalism into a ‘whole life economics’ model (and for those reading this if you go back to my post on March 7th and John’s response on March 14th)…What I’ve done is tried to simplify this posting—I put your comment first…and then the paragraph that starts with John is my response…
First let me say….we agree with each other on 50% of the equation: Consciousness. We differ on Capitalism—.
The comment that the King and Queen of capitalism is the consumer….
John if the King and Queen of capitalism is the consumer…then tell me, Who Killed the Electric car?….The consumers loved those cars and still GM removed, destroyed and refused to sell them. No John, …THE KING and QUEEN of capitalism is CAPITAL—MONEY. Anything that makes money is good. Money has achieved a status/myth of such high value that it drives so many of the systems we’ve created and decisions of what will or will not be produced. (read Divine Right of Capital by Marjorie Kelly).
As an example, it is why oil remains the primary fuel choice. As powerful, traditional corporations have effectively ensured that green or biofuels have not gotten the foothold consumers have desired— because there’s no CAPITAL or profit in them (due in large measure to gov’t policies enacted as a result of powerful corporate interference/control). As much as entrepreneurial businesses have tried create businesses using solar, biofuels, and alternative options—the CAPITAL issue—profits (or lack thereof) have effectively strangled them for the last 30 years. Only now, as global warming has been the outcome—have alternatives gotten a toehold into the systems now that it appears it may be profitable/ My argument John—is that in a whole life economic system—where life of humans/animals/air/water/earth are the primary value—we certainly would have “chosen” these alternative fuels/industries because of the difference in the values we’re interested in. (Look at China right now—fastest growing, “successful” economy on the planet—but in Beijing, you can’t breath the air—this is however considered successful in a capitalistic system—something they seem to be adopting. In a whole life economic system it would not be considered successful)
Which leads us to the issue of the unholy alliance between big business and big government (the military industrial complex that Eisenhower brilliantly warned us about 50 years ago is but one example). Subsidies for big oil, big farmers, protectionist legislation for the rich and well connected, trial lawyers, Halliburton, trillion dollar war on drugs and 2 million citizens in prisons etc. etc. none of this is freedom, capitalism or choice based. But it is CAPITAL driven.
Randy “Duke” Cunningham, Richard Ney, William “Refrigerator” Jefferson (these 3 are very small examples of the way the “system” we erroneously call capitalism actually works today - it’s not capitalism - fascism is the system where the state controls the means of production, aren’t we moving in that direction via the corporate - governmental alliance? Big corporations—51 of which are now bigger than any government and the governments these corporations are controlling/managing–have rigged the system. The amendment to the constitution that provided limited liability to corporations is a good historical starting point as to why this happened. It has allowed the ‘anything that makes money—even if it destroys human, animal, earth, water or air—to be viewed as acceptable in a capitalistic economy.
You responded that I have a cynical view that consumers are stupid….
John…I don’t have a cynical view that people are stupid…what I have is a real life experience of working with people over the last 15 years through my counseling office. I work with a holistic, self-responsibility, choice/conscious model that I created called the Life Puzzle. I created it to address my clients’ constant lament that they weren’t taught how to create healthy, whole and dynamic lives. A tool I use is called the Choosing Continuum. Simply put—0-5 is the reactive, unconscious, victim, fix it after its broke pattern of choosing….6-10 is the proactive, conscious, self-responsibility to create a whole life pattern of choosing. On the 0-5 side, people spend their lives reactive to problems, crisis—and generally see this as the way things work/the best they can do. On the 6-10 side, people understand themselves as potentially whole and choose to create a lifestyle to enhance that potential. When I ask clients (and I’ve taught this from welfare clients all the way up to corporate executives) where are you on the Choosing Continuum…0-5 or 6-10…..consistently 90-95% of people respond….0-5 reactive/unconscious. Then we look at why this is…and it’s because as children we grow up in a culture that generally teaches us to do this. We see our systems—medical, business, schools, law acting reactively and as children we grow up thinking this is normal. Reactive people create reactive systems which further creates reactive people. So, when I say that people are impacted by advertising and generally follow what’s presented—it is because I’ve had this validated for years by these very people. When I show them 6-10—they get excited about taking responsibility—but then realize that they’ve never been taught to do this—and that’s the work I do. So John, I don’t think people are stupid—I think people are unaware. And if you look at our schools—you can see how this happens. (A constant question I get from clients/groups is “Why weren’t we taught this in school [how to create a whole life]. I shrug and say—you weren’t, your children aren’t and the only option is to teach your SELF.
On the issue of ‘externalizing costs”…you agreed with me but said this issue could be fixed “this can be done within a capitalistic economy, however” .
John, technically perhaps…but it won’t happen in the current system because with CAPITAL being the most important value—the second we were to ‘internalize the externalities of such things as pollution, carbon productions etc”, “PROFIT/CAPITAL” will be seriously depleted—and stockholders would see losses that now are hidden. CAPITAL as the number one goal of a capitalistic system is set up to ensure this doesn’t happen (see earlier comment of the history of Limited liability of corporations) HOWEVER John…if we did do this…it would actually be a first step in the movement towards a Whole Life Economic system—which not only would allow this (absorbing externalized costs into the whole)—but would support it as a primary value.
“Ann–who is in charge of the ‘Whole Life Economy?’ Who decides what gets produced and what doesn’t get produced? Will individuals have the freedom to decide for themselves what they want and will entrepreneurs be free to innovate and create to meet their needs? If not entrepreneurs and individual consumers–who?”
John…YES….it would finally be the consumers and entrepreneurs—working off the post-modern economic paradigm– such values as our physical well-being, mental and emotional health, our social relationships, our ability to meet our needs and the needs of those we care about, our connection to the natural environment and our need for spiritual meaning.” That would drive our businesses…and in this case the ‘profits’ would be defined far beyond the limited value of money.
“the values of the [‘whole life economic system ] already exist and are possible to embrace within a free society and a capitalistic economic system. They are exactly the values I’m freely choosing as an individual. Are you saying that these values will be forced upon other people whether they agree with them or not? How will you do this without creating some type of totalitarian state?”
John…the key word in all of this is CONSCIOUS….And I go back to my earlier comment of working with my clients—few of us are truly conscious—we are mostly reactive/following. And right now, that means we’re “doing what everyone else is doing”….our schools ensure this, our systems reward it. Capitalism profits by it—for the few not the many.
[whole life economics]
“Sounds wonderful Ann. I’m all for it. The key question is how will it be achieved in a free society? We can evolve our society and economy this way in a free society if we want to collectively go there. However, what if most people don’t want this vision? What if they want an Islamic Theocracy obeying the will of Allah? What if they want a Christian Theocracy with everyone forced to obey the Bible? What if people prefer the society that we have right now? Do they get to keep it or are you going to take it away from them for their own good?”
John…with 6.6 billion people on this planet—it sure is tricky to do anything. And yet, CAPITALISM seems to believe it is the one right way……What if most people don’t want this vision…..Right now, it doesn’t really matter does it….because NAFTA, WMF, World Bank, Federal Reserve (which is a private organization—though if you asked the average American if the Federal Reserve is a government department—they would say, Yes…of course. They would be SHOCKED to discover it is a small group of people that controls the flow of CAPITAL)—are essentially espousing that CAPITAL is the most important thing of all. I wish we had a free society—but we don’t.
“I love Grameen and our Whole Planet Foundation is working with them in Costa Rica and Guatemala right now and will add projects in Honduras, Nicaruagua, and India in 2007 and eventually around the world.”
John…please do not think that in any of my writings I don’t have the utmost respect for Whole Foods Markets and all the wonderful things you all are doing in this world. This dialogue with you is about ‘conscious capitalism’….we are together on the ‘conscious’…it’s the Capitalism’ that I think needs further shift….
JOHN…as for your decision to go IPO…never questioned it for a moment—not many other options in the current system if you are going to get sufficient CAPITAL. I was highlighting the fact that the current system that bestows Ownership to the 2nd, 17th , 55th level of stock purchaser is akin to saying that owners get paid even if they don’t do anything! Putting our businesses in this system does little or nothing for the business because few of the stockholders care about what the business does. At this level of stock purchaser, the only thing most are interested in is whether or not the stock price keeps going up and up and up…..Not a healthy system at all…Trying to ‘satisfy’ this group of stakeholders does control every corporation….like or not.
“About the ‘unavoidable dilemma’ that the requirement in a CAPITALISITIC system—that growth must constantly increase–this growth results in creation of unnecessary products in order to keep stock prices going up…”
. John…you’re missing the point here—its back to Consciousness—as I mentioned before—that lack of awareness of how to keep our body healthy, how to create balanced lives is not something we’re taught. It has enabled a situation where people buy, buy, buy…..but aren’t necessarily consciously buying. Like the movie Affluenza showed—buying for Americans has become a national pastime. This fact married to the intense need by businesses to grow, grow, grow—put these together and we end up on the merry-go-round to the unavoidable dilemma—more and more growth requires more and more buying. When does it stop John? First stop—consciousness—second stop—revaluing to a post-modern economic paradigm where CAPITAL is a tool that serves the economy instead of its current status of the primary value of the economy.
“Well the burden of proof is on you to show how your economic system is going to be achieved in the real world without massive governmental coercion creating a totalitarian state. Utopian societies always end up as dictatorships because human beings have a way of wanting to do what they want to do and not what the utopians think they should want to do.”
John…when did I say anything about a totalitarian government? That rings like the Bush comment of ‘you’re either with the War in Iraq or you’re for terrorism”…You seem to be saying “You’re either with capitalism or you’re with totalitarianism. That’s not the only option….
JOHN….As to how its going to happen…well, act