John Mackey’s Conscious Capitalism
The Whole Foods CEO talks about health care reform, veganism and his unstinting defense of free markets.

Additionally, Reason.tv talked to protesters, Mackey, and employees about “the Whole Foods alternative to ObamaCare.” Here’s that 5 minute video:

Natural Food Fight: Whole Foods and Health Care

I want to begin by thanking Bentley College’s President, Gloria Larson, for inviting me to be with you today and for Professor Rajendra Sisodia for recommending me as a speaker to President Larson. It is a great honor to be with all of you on this special occasion. I want to congratulate all of the students who are graduating. You have all accomplished something that I never have accomplished in my own life—finishing college. In the early 1970’s I attended two universities in Texas, Trinity in San Antonio and the University of Texas in Austin. I dropped in and out of these two schools a half dozen times over a 6 year period, piling up about 120 hours in various electives. I only took classes I was interested in, primarily philosophy, religion, and the humanities. To be perfectly honest with you, I spent my late teens and very early twenties primarily trying to figure out the meaning of life, or at least the meaning of my own life. I never took any business classes in school and if someone had told me back then that I was going to become a business entrepreneur when I was 24 and start my own business I would have laughed them out of the room.

Unfortunately I wasn’t able to discover the meaning of my life in college and I dropped out for the final time in 1977. My parents, especially my mother were very disappointed in me, but I had dropped out so many times before that they still had hope that I would eventually return and finish and make something worthwhile of my life.

In 1987, just before my mother passed away, it was her dying wish that I get a college degree, because she was still deeply concerned that without that college degree I would probably not have much success in life. At that time Whole Foods was still a very small company with only 5 stores and I felt badly about not being able to reassure her. However, I was doing something that I felt great passion about and know that I made the right decision for myself.

It has taken me 37 years but, Mom & Dad—I finally have that college degree that you wanted me to get so badly! And because it always meant so much to you, with love and respect I dedicate this degree to you and only wish you both could have lived long enough to be with me here today. Thank you Bentley College for fulfilling my mother’s last wish for me.

Honor Your Parents
My first message to the Bentley students today then is to truly honor and appreciate your parents. No one will ever love you quite like your parents do, and although they have no doubt made plenty of mistakes in helping you to grow up, they’ve also done the very best job that they knew how to do. They’ve also made far more sacrifices on your behalf than you will ever really know. Please forgive them for their mistakes and imperfections and fully love them and honor them while you can, because the simple truth is that you won’t always have them with you as you move further along your life journey.

Follow Your Heart
Hopefully many of the parents here today are feeling pretty good about me right now because my next message is one that can be a little bit scary to some people. However, it is also the major pearl of wisdom that I have to share today. The fact of the matter is that life is really very short and death is absolutely certain for all of us. It really is true that none of us are getting out of here alive and we should never forget this fundamental existential truth. Since death is real and inevitable for all of us, how then should we live our lives? For me the answer to this question has been clear since I was young: We should commit ourselves to following our hearts and doing what we most love and what we most want to do in life. This is how I’ve tried to lead my own life since I was about 19 years old. My decision to not finish college, but to start Whole Foods Market instead, was a decision that came from my heart. Although this decision proved to be upsetting for my parents and for many of my friends, for me it was absolutely the right decision.

Now that you’ve graduated from college and are about to launch yourselves in new directions, it is absolutely essential that you ask yourself what it is that you really care the most about? What are your passions? What are your deepest yearnings? If you could do absolutely anything in the world, what is it that you would do? Your heart knows the answers to these questions. It is whispering to you right now this very moment even as I speak these words to you. So listen to it and follow it. It will always be your best guide in life.

There are two important aspects to following your heart. First, we need to develop our self-awareness skills so that we can know when we are truly following our hearts and when we’ve lost our way. It is actually easier than it sounds because when we are truly following our hearts we are tapped into our deepest passions in life. We are doing what we most love and we find our lives full of increased energy, greater creativity, purpose, joy, and happiness. We simply feel more alive and we are moving within the flow of life. How do you know when you’ve stopped following your heart? When the opposite occurs—decreased energy, lack of creativity, no real sense of purpose and you aren’t particularly happy. You have stepped out of the flow of life and are just drifting along. When this happens the solution is simple: Choose again. Reconnect again with your heart. As long as you are alive, it is never too late. You are free in each moment to choose the path of your heart and it never stops whispering to you, urging you to follow it.

The second key to successfully following your heart is that you will need to learn how to deal with fear. It is fear which prevents most people from reaching their fullest potential in life—fear of failure, fear of rejection from people we care about, fear that we simply aren’t good enough, and sometimes even fear of our own potential greatness. Unfortunately no one else can overcome fear for us. Fear is something that you must learn to master on your own. Of course courage is the major strategy for learning to master fear for most people and we should certainly develop courage to the greatest extent we are able to. However, for me the insight that has personally helped me the most when dealing with fear has been to understand that fear is primarily a creation of the mind. I create it in my mind—it doesn’t really exist outside the mind. I can dissolve it there as well. So can you and you will need to learn how to do this if you really want to be free in life and stay connected to your heart.

The Cardinal Virtue of Love
My third message to the Bentley graduates today is to emphasize the absolute importance of love as the cardinal virtue to nurture and cultivate in your lives. I don’t believe there is anything more important in life than love. I’m not talking about romantic love here, or “eros”, which is a very wonderful state of intoxication, but which also tends to fade over time. Rather, I’m talking about love as care and compassion, which actively flows out of our hearts toward other people and sentient beings through empathy and appreciation. This type of love need not fade over time, but is capable of continued growth all our lives if we will consciously nurture it. When we are truly following our hearts we are very likely tapped into the flow of love as well. But love is also a virtue that we can consciously develop in our lives to higher and higher levels. Such efforts are well worth making for nothing enriches us, teaches us, or makes life more rewarding than developing our capacity for love. In cultivating love in my own life I’ve found practicing three other related virtues to be essential.

First is gratitude. Being alive is absolutely extraordinary and there are endless things to be thankful and grateful for. I try to take a few minutes early in the morning to be very quiet and to appreciate the people I love and to express gratitude in my heart for the many wonderful things that fill my life with joy. At Whole Foods we practice appreciations at the end of all of our meetings, including even our Board Meetings—voluntarily expressing gratitude and thanks to our co-workers for the thoughtful and helpful things they do for us. It would be hard to overestimate how powerful appreciations have been at Whole Foods as a transformational practice for releasing more love throughout the company. I enthusiastically recommend you try it in your own organizations and your future workplaces.

Second is forgiveness. Nothing stops the flow of love in our lives quicker than the various judgments we make toward others and the grievances that we allow to fester in our minds against other people. What we don’t fully understand is how much we harm ourselves with our judgments and grievances, because if we did understand we would stop indulging ourselves with them. Instead, we would see them for the poisons that they truly are. Fortunately, there is one virtue that we can practice that will eliminate them from our minds—forgiveness. Practicing forgiveness isn’t always easy, however. Our desire to be “right” is very strong and this usually requires us to judge others as “wrong”, and therefore not really forgivable. We also frequently make the mistake of believing that if we forgive others we are also condoning their harmful behavior. However, forgiveness simply means to relinquish our resentment and anger toward others, it doesn’t mean relinquishing our values and ethics. When we forgive others we free ourselves from the past and allow our hearts to be fully in the present moment, which is where love exists.

Third is generosity. It would be difficult to exaggerate the value of practicing generosity. The virtue of generosity does not merely apply to giving money, but primarily to the gift of ourselves—our time and our service to others. True generosity should not be thought of as some kind of self-sacrifice where what we give to others comes at our own expense—their gain is our loss. Rather it is an extension of love from our own hearts, which takes genuine delight in the flourishing of other people. In my life experience generosity is a virtue that is best cultivated at first with small steps—acts of giving and kindness that may stretch us a bit, but which do not feel like any kind of sacrifice. As we practice generosity over time we will gradually discover that we want to take larger steps and extend our generosity further, because our sense of who we are and what we care about has expanded as well.

Overcoming Life’s Challenges
My fourth message to the Bentley graduates today is that life has many, many difficulties and challenges—it isn’t easy. We all will face many disappointments, frustrations, losses, and injustices, as well as inevitable illness, aging, and eventually death. I believe the best way to deal with most of the difficulties and challenges that come our way are to see them as opportunities to help us grow—lessons that are presented to us to help us go further than we have gone before. I have not found it to be useful to ever see myself as a victim of either circumstances or of other people. Self-pity is a remarkably self-destructive emotion, which you should consciously work to eliminate from your emotional life because it dis-empowers you and moves you away from being able to follow your heart.

I have been particularly challenged over the past year. I’ve seen the Federal Trade Commission accuse Whole Foods of being a monopoly and try unsuccessfully to break up our merger with Wild Oats, been heavily criticized in the media for internet postings I did on Yahoo! about Whole Foods and Wild Oats, been investigated by the Securities and Exchange Commission concerning those same internet postings, and fought a proxy battle against activists who sought to remove me from both the Whole Foods Board of Directors and as the Chairman of the Board. I’ve seen an amazing number of negative articles written about me with remarkably inaccurate stories and outright lies being told. Perhaps the hardest thing of all was that I was unable to respond to any of these attacks as the Whole Foods Board imposed complete media and blog silence on me while their own Special Investigation and the SEC Investigation were taking place. I was not able to defend myself publicly in any way and therefore had no way to try to set the record straight.

It was a pretty difficult time for me. Many times I was tempted to lash out in anger at the injustice of the situation and self-pity was frequently a temptation that I had to struggle with. I did a tremendous amount of personal growth work such as counseling, meditation, and integrated breath work to try to appreciate and to understand what the lessons life was trying to teach me were. There were many. One very difficult lesson for me was to learn that I had to simply let go and trust the process that was happening, because I certainly couldn’t control it or stop it. That is not my natural inclination because I prefer to directly confront my challenges. A second lesson I learned was that a lot of people really do care about me and they provided amazing emotional support to me—that was pretty humbling for me and something that I am deeply grateful about. My most valuable lesson, however, has been about the importance of communicating with greater thoughtfulness and sensitivity. I believe that I’ve always lived my life with a passion for honesty—tell the truth as I saw it regardless of how that truth would be interpreted by others. I have always thought that there was far too little honesty and far too many lies in the world. While I still believe that, I’ve now come to realize how easy it is to be misunderstood and misinterpreted. A careless and thoughtless statement may be taken out of context and repeated over and over again—literally sent around the world through digital media. I saw this happen many times over the past year and it has burned itself into my consciousness.

I now apply a couple of very simple rules to everything that I say, write, or do:

1. How will this either help or hurt the fulfillment of my own deeper purpose in life, especially its impact on Whole Foods Market?
2. How would I feel if that was printed on the front page of the Wall Street Journal or The New York Times—because it just might be? If I feel good about the possibility of everyone knowing about it then it is o.k. However, if I would feel embarrassed or ashamed, then I’m going to have to change it. This has been a subtle lesson for me about the refinement of motivation and purpose and it has taken me many years to learn it. If you are able to learn it while you are young you may be able to avoid a great deal of unnecessary pain and suffering.

Conscious Capitalism
My final message to the Bentley graduates today has to do with the type of business organizations that we need to create in the 21st century. I believe that the 20th century will eventually be seen by historians as the great contest between capitalism and socialism with capitalism scoring a decisive victory. Capitalism may have won the war, but it has not captured the hearts of the people. Most people don’t love or trust corporations, who they often see as uncaring, greedy, selfish, dishonest, and concerned only with maximizing profits.

I believe that what the world needs now is the widespread creation of a different type of business organization, one that is a “Conscious Business.” A Conscious Business is one which has two major attributes that define it:

1. It has a deeper purpose beyond only making profits. Just like individual people by following their hearts can discover their own sense of deeper purpose, so can the business enterprise. I believe that great businesses have great purposes that inspire them to higher levels of success. Think for a moment about some of the greatest businesses in the world and ask yourself whether they exist to fulfill a greater purpose beyond only maximizing profits. Certainly Apple does, driven by its intense desire to create “insanely great” technology which transforms our lives in positive ways. Clearly Google does too with its passion for discovery and desire to operate an ethical company. One of the best examples in the world is Grameen Bank in Bangladesh founded by 2006 Nobel Peace Prize winner Muhammed Yunus, which exists to end poverty in Bangladesh and throughout the world. Every business has the potential to discover and actualize its higher purpose—it has the potential to become more conscious.
2. The Conscious Business also understands the interdependency of all of the major stakeholder groups—customers, employees, investors, suppliers, communities, and the environment—and the business is managed to consciously create value for all of these major stakeholders. Instead of viewing the stakeholders in terms of win-lose relationships with conflicts of interest dominating their interactions, the Conscious Business understands that there is a harmony of interests between the stakeholder groups and that by working together greater value can be created for all of them. At Whole Foods we understand that management’s most important job is to make sure the team members are well trained and happy at their work. The team members in turn understand that their job is to satisfy and delight the customers and happy customers result in happy investors through the prosperity of the business. A virtuous circle is created with all of the stakeholders flourishing together.

Who will create the Conscious Businesses of the 21st century—businesses that have deeper purpose and are managed consciously to create value on behalf of all of the stakeholders? Why not some of the Bentley graduates here today? Why not you?

I have personally found nothing more fun, more meaningful, or more rewarding than creating and growing Whole Foods Market. It was what my heart called me to do and I have followed that calling for 30 years now. To the Bentley graduates today I put forth this challenge: what is your own heart calling you to do? Whatever it is, have the courage to follow it. The grand adventure of your own life now lies open before you. Seize the Day!

Thank you. I have greatly enjoyed being with you today.

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.

²Sisodia, Rajendra, Wolfe, David, and Sheth, Jagdish, Firms of Endearment: the Pursuit of Purpose and Profit, (manuscript), Wharton School Publising, 2007.

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.

Much loud and sustained applause

Let’s hope you feel the same after hearing this speech. I went back and forth over whether to play it safe and give a typical keynote speech, but I decided to go for it and see if we can take Whole Foods Market to the next level—on our growing edge.

Today I’m going to paint a really big picture, a picture of “everything,” of how I think the world really works, and where Whole Foods Market and Grameen Bank fit into it. [Muhammad Yunus of Grameen Bank spoke immediately following this speech.] If I communicate this information in the way that I hope to, I guarantee you will never look at the world in the same way again. You won’t look at Whole Foods Market in quite the same way, either. So that is my goal.

My philosophy is that life is all about learning and growing, and that life can be a real adventure of learning, growing, compassion, and joyfulness. We all have the capability to grow all our lives—if we don’t get stuck—in emotional intelligence, wisdom, consciousness, ethical development, and love. And not only individuals are capable of growth. So are organizations such as Whole Foods Market and Grameen Bank, as well as larger collective societies, such as the United States.

One way to view human development is to see a decline in egocentrism. As Henry Gardner said, “The whole history of human development can be viewed as a progressive decline in egocentrism.” Consciousness development engenders a decrease in narcissism and an increase in caring and consciousness. Humans move from ego-centric to ethno-centric to world-centric as they develop in consciousness. The upward spiral of development is at the same time a spiral of compassion—from me to us to all of us.

Maslow’s Hierarchy of Needs

How many people here today heard my talk two years ago in Seattle on self-actualization? [light applause] Well, I’m not giving that talk today. [light laughter from audience] However, it does serve as a springboard for what I want to talk about.

You may recall that I introduced Maslow’s Hierarchy during that talk. Maslow identified a hierarchy of needs [see chart], which is one way to think about the upward flow of human consciousness. As we evolve upward we pass through levels of needs, from our physiological needs to our safety needs, next to our belongingness needs, then to our self-esteem needs, then to our needs for the good, the true and the beautiful, and finally to our self actualization needs at the very apex of the hierarchy.

Maslow’s hierarchy is a good reference point for the information that follows.

I now want to introduce another system from a man who was a peer and friend of Maslow’s and who influenced, and was influenced by, Maslow. This man, Clare Graves, created another system for understanding the way the world works. Graves developed models in “emergent deep value systems” that have been built upon by others, and we now call this model Spiral Dynamics.

Spiral Dynamics is a bio-psycho-social-spiritual framework (I love this word) for understanding core human thought processes. Spiral Dynamics helps identify how people change, organize, develop consciousness, make choices, create strategies, and communicate. This system helps to reveal the hidden codes that shape human nature, liberate global diversity, and drive or hinder social and organizational transformation.

Graves’ work was built upon by a student named Don Beck and his student, in turn, Christopher Cowan. They wrote a book called Spiral Dynamics. Ken Wilber of the Integral Institute has taken the Spiral Dynamics model and incorporated it into his Integral models as a next step. Both of these are the basis for the information I’ll be presenting today.

Spiral Dynamics Overview

Now I want to present a quick overview of Spiral Dynamics. Human consciousness evolves over time, both for individuals and for the larger society. This evolution of consciousness can be understood as a hierarchical spiral that evolves to greater levels of complexity. This hierarchical spiral doesn’t consist of rigid levels but can be rather likened to flowing waves, with much overlap and interweaving. We are not monolithic as we move through these levels.

Within this system model, different colors represent different levels or waves of development, each offering a viewing point for the “real world” according to unique perceptual filters. The colors, which have no significance in and of themselves, are a useful abbreviated tool, to help us quickly grasp the level of consciousness we are discussing.

I want to provide some additional background information to help us gain a common language. Spiral Dynamics uses the word “vMEME” with each color. The word MEME was invented by Richard Dawkins when he wrote The Selfish Gene. The little ‘v’ means “value MEME” to indicate that we are referencing value systems. The Spiral Dynamics model currently has defined eight levels of consciousness, but allows for the potential of new, more complex levels emerging. Ken Wilber’s Integral models address this in more detail.

A graphic depicting the levels of the spiral is shown below.

The vMEMEs are like invisible core intelligences. They are broad orienting paradigms that we use to interpret the world. They are structures of thinking in that you can’t see them.. Life conditions awaken vMEMEs which may emerge, surge, regress, or fade in response to those events that trigger change. No one vMEME is better or worse than another, they are simply less complex and more complex. As I mentioned earlier, the levels are not rigid.

All vMEMEs are good and necessary. To evolve to more complex vMEMEs requires experiencing/living the less complex vMEMEs first. The vMEMEs are not rigid levels but flowing waves, with much overlap and interweaving, resulting in a dynamic spiral of consciousness unfolding. The vMEMEs can express both healthy (for-better) and unhealthy (for-worse) qualities; sometimes it is more beneficial to the individual to be healthy at a lower vMEME than to be unhealthy at a higher vMEME. An individual’s vMEME can brighten and dim as life conditions change; each one of us experiences different things that set us off to the next evolution.

In general vMEMEs follow several trajectories as they evolve. They go from less complex natural, technological, and human environments to more complex. They likewise go from surviving in the bush through the awakening of new consciousness levels to surfing beyond the Internet to even higher levels of complexity, to understanding the entire global ecosphere. Finally, they go from a small piece of land via migrations across land and information terrains to the global village and cyberspace, where a complexity of development through shared information becomes possible.

The First Tier vMEMEs

Now I want to introduce the eight core vMEMEs. The first six are called First Tier vMEMEs, as opposed to the Second Tier vMEMEs, which I will explain later.

 Beige “Instinctive/Survivalistic” vMEME
The first is the Beige “Instinctive/Survivalistic” vMEME. This first arrived on the scene, or “awakened,” 100,000+ years ago. Its basic premise is: Do what you must to stay alive.

The characteristic beliefs and actions of the Beige vMEME are:

• An individual uses instincts and habits just to survive
• The distinct self is barely awakened or sustained
• Food, water, warmth, sex, and safety have priority over anything else
• Beige individuals form into family survival bands to perpetuate life

Where do you find the Beige vMEME expressed? Here is a representative list:
The first peoples, newborn infants, senile elderly, late-stage Alzheimer’s victims, mentally ill street people, starving masses, bad drug trips (if any of you ever had bad LSD trips, you were probably back in a Beige vMEME), and “shell shock.” This vMEME is well described in anthropological fiction like Jean Auel’s Clan of the Cave Bear.

The Beige vMEME includes approximately 1/10 percent of the world’s adult population and zero percent of the power.

 Purple “Magical/Animistic” vMEME
As human consciousness evolves, it next goes into the Purple “Magical/Animistic” vMEME. This second “awakening” occurred approximately 50,000 years ago. We’re tapping into this vMEME this weekend at the tribal gathering, because we’re tapping into the power of the tribe. The basic theme for the Purple vMEME is: Keep the spirits happy and the tribe’s nest warm and safe.

The Characteristic beliefs and actions of the Purple vMEME are:

• Thinking is animistic; magical spirits—both good and bad
• Obeying the desires of spirit beings and mystical signs
• Showing allegiance to chief, elders, ancestors, and the clan
• Preserving sacred objects, places, events, and memories
• Observing rites of passage, seasonal cycles, and tribal customs

Although some of this sounds benign, it wasn’t all good, because this was where slavery and human sacrifice came into the picture.

Where do you find the Purple vMEME expressed? Here is a sampling: belief in guardian angels and Voodoo-like curses, animism, blood oaths, Native American Indians were living primarily in the purple vMEME when the Western peoples arrived on the continent, chanting and trance dancing, good luck charms, mystical ethnic beliefs and superstitions, New Age beliefs—crystals, tarot, astrology, and Harry Potter’s magical world.

The Purple vMEME includes 10% of the world population, and only 1% of the power.

The following provides more detail about the typical qualities seen in the Purple “Magical/Animistic” vMEME:

• Characteristics
  • Mystical spirits, signs
  • Safe clans and nests
  • Powerful elders
  • Our people vs. “them” [Whole Foods Market against Wild Oats and Trader Joe's]
• Decision making
  • Custom and tradition
  • Elders’ counsel
  • Signs or the shaman
  • Clan gets the spoils
• Education
  • Paternalistic teachers
  • Rituals and routines
  • Passive learners
  • Family-like learning; oral history to pass down the stories
• Family
  • Extended kinships
  • Rites of passage
  • Strict role relations
  • Protects bloodline
• Community
  • Respects folk ways
  • Honors ethnicity
  • Lets group be itself
  • Guards magic places
• Life space
  • Old country ways
  • Focus on subsistence
  • Fearful, mystical, superstitious
  • Full of spirit beings

Just to explain the rhythm, the vMEMEs tend to alternate between individualistic and community-focused. The Purple vMEME was community focused. The next level is individualistic.

 Red “Egocentric/Narcissistic” vMEME
The Red “Egocentric/Narcissistic” vMEME, the third “awakening,” occurred about 10,000 years ago. Its basic theme is: Be what you are and do what you want regardless—”Nobody tells me what to do.”

Many teenagers are at the Red vMEME. Many of you in the audience probably remember going through this phase.

The characteristic beliefs and actions of this vMEME are:

• The world is seen as a jungle full of threats and predators
• The individual breaks free from any constraints to please self as self desires
• The individual stands tall, expects attention, demands respect, calls the shots
• The individual enjoys himself to the fullest, right now without guilt or remorse
• The individual conquers, out-foxes, and dominates other aggressive characters
• An overly developed ethnic identity can lead to genocidal wars, slavery, and racism
• The individual believes that: “I am special, I’ll live forever, I am immortal, not like the others.”

Where is the Red vMEME expressed? The following sample provides an overview: the “Terrible Twos,” rebellious youth, frontier mentalities, feudal kingdoms, street gangs, James Bond villains—the guys that conquer the world (I always wondered what the big payoff was if you conquered the world. Well, in the red vMEME these guys get all the women, the fast cars, and the money), epic heroes, soldiers of fortune, wild rock stars, William Golding’s Lord of the Flies, Sauron in Lord of the Rings, Voldemort in Harry Potter.

The red vMEME includes 15% to 20% of the world population, but only 5% of the power.

When adults are residing at the Red vMEME, we often think of them as “spoiled.” But you need Red energy to overcome restrictions and boundaries put on you by other systems.

The following provides more detail about the typical qualities seen in the Red “Impulsive/Egocentric” vMEME.

• Characteristics
  • Raw power displays
  • Immediate pleasure
  • Unrestrained by guilt
  • Colorful and creative
• Decision making
  • Tough-one dictates
  • What gets respect
  • What feels good now
  • Powerful grab spoils
• Education
  • Rewards for learning
  • Tough-love tactics
  • Work on respect
  • Controlled freedom
• Family
  • Gang-like battles
  • Builds us vs. them walls
  • Tests of worthiness
  • Struggles with the system
• Community
  • Predators in control
  • Danger to the outsiders
  • Forms fiefdoms
  • Turf wars and vendettas
• Life space
  • Unconstrained
  • Might makes right
  • Winners and dead losers
  • Attention-seeking

 Blue “Purposeful/Authoritarian” vMEME
After the very individualistic Red vMEME, the next level goes back again to the more community-focused orientation. The Blue “Purposeful/Authoritarian” vMEME, as the fourth “awakening,” began approximately 5,000 years ago. The basic rules for the Blue vMEME are: Life has meaning, direction and purpose with outcomes determined by an all-powerful Other or Order. This vMEME brings discipline to the spiral because you are now “following a higher order.”

The characteristic beliefs and actions of the Blue vMEME include:

• Sacrificing of the self to the transcendent Cause, Truth, or righteous Pathway.
• Allowing the Order to enforce a code of conduct based on eternal, absolute unvarying principles of “right” and “wrong”—there is one right way to live and deviations punished from the path are punished.
• Following the right path produces security now and guarantees future reward; if you don’t follow the path, well, you’ve made your choices.
• Displaying missionary zealotry, which can be short on evidence and long on belief and faith, as well as closed minds. When you run into people with very rigid thought structures, you are dealing with someone who is residing at the Blue vMEME.
• Engaging in pleasurable acts is seen as frivolous; humor is rare; actions are based in judgment not compassion, although there is a lot of talk about compassion.
• Operating from a fundamentalist, conventional, traditional, and conformist worldview.

Where do you find the Blue vMEME expressed? The following provides a sample:
Christian and Islamic fundamentalism, Puritan America, Dickensian England, Singapore’s strict discipline, witch hunts, codes of chivalry and honor, the Spanish Inquisition, the caste system in India, Frank Capra’s It’s a Wonderful Life, Boy and Girl Scouts, and patriotism.

The Blue vMEME includes 35% to 40% of the world population, and 25% to 30% of the power. The figures are somewhat lower in the United States.

The following provides more detail about the typical qualities seen in the Blue “Purposeful/Authoritarian” vMEME.

• Characteristics
  • Only one right way
  • Purpose in causes
  • Guilt in consequences
  • Sacrifice for honor
• Decision making
  • Orders from authority
  • Do right, obey rules
  • Adhere to tradition
  • Righteous earn spoils
• Education
  • Truth from authority
  • Traditional stair steps
  • Moralistic lessons
  • Punishment for errors
• Family
  • Seat of truths and values
  • Proper places for all, respect for parents
  • Codes of conduct
  • Teaches moral ways
• Community
  • Peace-and-quiet
  • Cautious and careful
  • Tidy, green, and neat
  • Born into society
• Life space
  • Law abiding citizen (this was the bourgeoisie that drove Karl Marx crazy)
  • Places for everybody
  • Seeks peace of mind
  • Rewards to come

The Blue vMEME is one the core constituencies of the Republican Party and comprises the “moral majority” in the United States today.

 Orange “Scientific Modernism” vMEME
The Orange “Scientific Modernism” vMEME, the fifth “awakening” began only 300 years ago. Its tagline is: Act in your own self-interest by playing the game to win.

Some of the characteristic beliefs and actions of this vMEME include:

• Strongly expressed individualism; Orange breaks away from the “herd” of the Blue vMEME.
• Developed human rights, legal freedoms, free markets, capitalistic democracies
• Strong faith in science and rationality, which eclipse superstition
• Seeking to live the “good life” with material abundance
• Believe that optimistic, risk-taking, and self-reliant people deserve their success
• Play to win and enjoy competition; very success driven
• Basing principles on ethics, not religion
• Ignoring of inner spirituality to a high degree; the subsequent loss of the sacred

The Orange vMEME is expressed in ways such as the following: The Enlightenment, “success” ministries (such as Napoleon Hill and Tony Robbins), American “Founding Fathers,” Ayn Rand’s Atlas Shrugged, Wall Street, Rodeo Drive, The Riviera, the cosmetics and fashion industries, breast implants, emerging middle classes around the world (in India and certain parts of China), Chambers of Commerce, corporate America, Forbes magazine, materialism, and the stereotypical yuppies.

The Orange vMEME includes approximately 25% to 30% of the world population. In the United States, the figure is closer to 50% of the population. Worldwide, this vMEME wields 45% to 50% of the power. Orange is the dominant vMEME in the U.S. today.

The following provides more detail on the typical qualities seen in the Orange
“Achievist/Strategic” vMEME.

• Characteristics
  • Competes for success
  • Goal-oriented drive
  • Change to progress
  • Material gain/perks
• Decision making
  • Bottom-line results
  • Test options for best
  • Consult experts
  • Successful win spoils
• Education
  • Experiments to win
  • High-tech, high status
  • How to win niches
  • Mentors and guides
• Family
  • Upwardly mobile
  • Demands attention
  • High expectations
  • Image conscious
• Community
  • Caters to prosperous
  • Displays affluence
  • Buys into society
  • Security for the elite
• Life space
  • Wants to prosper now
  • Competition always
  • Leverages influence
  • Seeks material things

A few people in this audience may relate strongly to this vMEME. I know I do.

 Green “Communitarian/Egalitarian” vMEME
The response to the somewhat singularly driven Orange vMEME is found in the Green “Communitarian/Egalitarian” vMEME, the sixth “awakening,” which first appeared nearly 150 years ago. The basic theme for the Green vMEME is: Seek peace within the inner self and explore, with others, the caring dimensions of community. Another way to think of this vMEME is as “The Sensitive Self.”

Some of the characteristic beliefs and actions of the Green vMEME include:

• Becomes more aware of the suffering of the world, of other sentient beings
• The human spirit must be freed from greed, dogma, and divisiveness
• Feelings, sensitivity, and caring supersede cold rationality
• Share the Earth’s resources and opportunities equally among all
• Reach decisions through consensus processes
• Anti-authoritarian and against hierarchy; establishes lateral bonding and linking
• All values are pluralistic and relativistic; no one should be marginalized
• Environmentalism becomes a socio-political movement
• A fundamental belief is “All people are good; it’s society that makes them bad.” Highly idealistic.
• Can create cults of victims and censorship through politically correct thinking; can also be politically dogmatic.

The Green vMEME is seen in the following: John Lennon’s music, deep ecology, Greenpeace, animal rights, Woodstock, single payer health care, ACLU, humanistic psychology, diversity training, multiculturalism, Boulder, Colorado, Ben and Jerry’s Ice Cream company (pre-merger—I have a feeling they are more orange vMEME after Unilever acquired them), The Body Shop, politically correct thinking, deconstructionism, postmodernism, The Utne Reader, Paul Ray’s Cultural Creatives, and the natural/organic foods movement.

I believe that the essence of the culture wars in the U.S. is the differences between the Blue, Orange, and the Green vMEMEs.

The Green vMEME comprises 10% of the world population, and holds nearly 15% of the power; in the U.S. you can double these numbers. The Green vMEME now has more power in the U.S. than the Blue vMEME.

The following provides more information on the qualities inherent in the Green “Communitarian/Egalitarian” vMEME.

• Characteristics
  • Seeks inner peace
  • Everybody is equal
  • Everything is relative
  • Harmony within the group
• Decision making
  • Reach consensus
  • All must collaborate
  • Accept any input
  • Communal spoils
• Education
  • To explore feelings
  • Shared experiences
  • Social development
  • Learn cooperation
• Family
  • Grouping of equals
  • Participative activities
  • Highly accepting
  • All feelings processed
• Community
  • Social safety-nets
  • “Politically correct”
  • Open for insiders
  • Invests in self
• Life space
  • Thrives on belonging
  • Needs acceptance
  • Sacrifice feels good
  • Renews spirituality

The Second Tier vMEMEs

Consciousness continues its upward flow. There is a huge gap between what we have been talking about, and the next wave of consciousness. None of the First Tier vMEMEs can fully appreciate the value of the other vMEMEs. Each believes that its worldview is the only true perspective. However, a qualitative leap in consciousness occurs when a person moves past the Green vMEME into Second Tier, which is also termed “Integral.”

Individuals who operate from the Second Tier are capable of fully appreciating the value and necessity of all the vMEMEs. They comprehend that the health of the entire spiral, or all vMEMEs, is essential. At the Integral level, fear and anxiety largely disappear from consciousness. At the Second Tier, systems thinking becomes the norm, and mental activity consists of joining, linking, and synthesizing in pluralistic systems. Individuals who have achieved the Second Tier find a greatly increased capacity for love and compassion. This is the “Self-Actualizing and Transpersonal” level in Maslow’s Hierarchy of Needs, as presented earlier.

I realize I’m giving you a lot of information. This is all background for what I really want to talk about. I want to provide you with an underlying structure for the discussion that follows. Bear with me, I have just a bit more background.

 Yellow “Autonomous/Integrative” vMEME
The first level within the Second Tier is the Yellow “Autonomous/Integrative” vMEME, which is the 7th “awakening,” and it occurred approximately 50 years ago. The Yellow vMEME’s basic tenet is: Live fully and responsibly with authenticity.

Some of the characteristic beliefs and actions of the Yellow vMEME are:

• Pursuit of learning for its own sake.
• Systems thinking.
• Viewing life as a kaleidoscope of natural hierarchies, systems, and forms
• Valuing the magnificence of existence over material possessions
• Prioritizing flexibility, spontaneity, and functionality (Here at Whole Foods Market, you have long seen that I have a huge bias toward flexibility.)
• Valuing knowledge and competency over rank, power, and status
• Integrating complex systems with ease

The risk at this level of the wave is what Darth Vader from Star Wars or Sauruman from Lord of the Rings faced, which is the risk of the fall downward.

The Yellow vMEME is expressed in the following: Carl Sagan’s astronomy, Peter Senge’s learning organizations, Stephen Hawking’s Brief History of Time, chaos theory, appropriate technology, eco-industrial parks (using each others’ outflows as raw materials), Fred Alan Wolf’s “new physics,” Deepak Chopra’s Ageless Body, the movie What the Bleep Do We Know?, Wired magazine, Gandalf the Grey from Lord of the Rings, and Dumbeldore from Harry Potter.

The only two companies I know that are operating frequently at the yellow level are Google and Whole Foods Market. There are probably many more, but those are the two that spring to mind.

This is a recent vMEME, and only 1% of the population is found in the Yellow, but it holds 5% of the power world-wide.

The following qualities typify the Yellow “Integrative” vMEME.

• Characteristics
  • Big picture views
  • Integrative structures
  • Naturalness of chaos
  • Inevitability of change
• Decision making
  • Highly principled
  • Knowledge centered
  • Resolved paradoxes
  • Competent get spoils
• Education
  • Becomes self-directed
  • Whole-day package
  • Tuned to interests
  • Non-rigid structure
• Family
  • Shifting roles
  • Expects competence
  • Takes each as is
  • Information base
• Community
  • Does more with less
  • Appropriate technologies
  • Power is dispersed
  • Integrated systems
• Life space
  • Life is learning
  • Intrigued by process
  • Freedom to just be
  • Rarely fearful

 Turquoise “Holistic” vMEME
Beyond the largely individualistic Yellow vMEME, the Turquoise “Holistic” vMEME, as the 8th “awakening,” began expressing about 30 years ago. This vMEME’s basic premise is: Experience the wholeness of existence through mind and spirit.

Some of the characteristic beliefs and actions of the Turquoise vMEME include:

• Experiencing the world as a single, dynamic organism with its own collective mind
• Acknowledging the Self as both distinct and a blended part of a larger, compassionate whole
• Viewing everything connected to everything else as incredibly beautiful ecological alignments
• Experiencing energy and information as permeating the Earth’s total environment
• Thinking that is holistic and intuitive, with an expectation of cooperative actions
• Synthesizing science and religion into a universal spirituality

The Turquoise vMEME is seen in: David Bohm’s theories, McLuhan’s “global village,” Rupert Sheldrake and morphic fields, Gandhi’s ideas of pluralistic harmony, Ken Wilber’s “Spectrum of Consciousness,” James Lovelock’s “Gaia hypothesis,” transpersonal psychology, Pierre Teilhard de Chardin’s “noosphere,” the White from Lord of the Rings, and Dumbledore from Harry Potter [if he isn't really dead-we are waiting to see what happens in book seven]. Whole Foods Market is evolving towards the Turquoise vMEME as an organization, working with Grameen Bank and our various foundations.

The Turquoise vMEME currently has around .01% of the population, but already holds approximately 1% of the power in the world.

Some of the differences to note are that the Yellow vMEME figures things out on an individual basis, and is very good at figuring out paradoxes on a one-up basis. The Turquoise vMEME goes back into the community orientation. It begins to connect on a global basis to other organizations and individuals that it harmonizes with to magnify the good we can do. With our partnerships with Earth University and Grameen, Whole Foods Market is recognizing that if we really want to help the world to evolve, we have to link up with other organizations with whom we harmonize to extend our influence.

The following qualities define the Turquoise “Holistic/Integral” vMEME.

• Characteristics
  • Scans the macro
  • Synergy of all life
  • Safe, orderly world
  • Restore harmony
• Decision making
  • Blend natural flows
  • Look up/downstream
  • Plan for long range
  • Life gets spoils
• Education
  • Access to world
  • Blends feelings and technology
  • Bring past to life
  • Maximize the brain
• Family
  • Global awareness
  • Grows consciousness
  • Broad interest ranges
  • Seeks outreach
• Community
  • Interconnected
  • Highly diversified
  • Not isolationist
  • Information rich
• Life space
  • Belong to universe
  • Fit into chain of being
  • Do something here
  • As one with life-force

Are there any vMEMEs beyond Turquoise? New vMEMEs will continue to be created as the evolution of human consciousness so requires. Beck and Cowan claim that a new vMEME, Coral, exists but that it lacks a sufficient number of people to be statistically meaningful. Likewise, Ken Wilber believes that vMEMEs beyond Coral also exist. He calls this the “Third Tier” of consciousness. He states that fully realized beings such as the Buddha and Jesus evolved to this Third Tier. Non-dual consciousness and universal love and compassion characterize this level of consciousness.

Spiral Dynamics and Whole Foods Market

We needed to go through all that background information to acquire some basic language in common. Now, how is Spiral Dynamics relevant to Whole Foods Market? Spiral Dynamics is a useful model to understand one’s personal values and one’s current level/wave of consciousness. Spiral Dyamics is also a useful model to better understand what is happening in the world today. In addition, Spiral Dynamics is a useful model for understanding organizations and businesses. Why are we different than most other corporations in the world? Most corporations in the United States are rooted firmly in the Orange vMEME; a few are in the Green vMEME, as are many non-profits. There are very few Second Tier (Integral) corporations. I believe Whole Foods Market is a Yellow, Integral organization. Finally, Spiral Dynamics is a useful model to understand the evolution of our agricultural system over the past 100,000+ years and where it is headed.

What are the limitations of First Tier business models? Large corporations are solidly grounded in the Orange vMEME. Corporations are the most influential institutions in the world today and yet most people do not believe they are “good” or that they can be trusted. Corporations are widely perceived as greedy, selfish, exploitative, and uncaring; they are only interested in profits. Poor, and very public, examples of ethical lapses include Enron, Tyco, NYSE, WorldCom, Mutual Funds, AIG, and Martha Stewart. The Orange vMEME thinks in terms of machine or engineering metaphors; for example: labor, land, and capital are “factors of production,” and are therefore merely means to the end of efficiency.

The Orange vMEME doesn’t grasp systems interdependencies and therefore largely lacks ecological consciousness or a sense of responsibility for other stakeholders. The anti-globalization movement is primarily a Green vMEME anti-corporation movement. Many people are afraid that corporations want to “rule the world.” Corporations and capitalism both have serious “branding” problems. These problems are inherent problems within the Orange vMEME, because it doesn’t communicate well with other vMEMEs, especially Green. It is my opinion that large corporations need to evolve to Green vMEME, and then to the Second Tier (and become Integral). That is why it is so exciting to see Safeway and Wal-Mart becoming more sensitive to their stakeholders besides their investors. They are beginning to recognize that they need to evolve.

What are the limitations of First Tier non-profit organizations? Most American non-profit organizations are grounded within the Green vMEME, creating inefficiencies, waste, and stagnation. I would argue that most are ineffective. Nearly 99% of non-profit organizations are dependent upon donations from the business sector of society in order to exist-they aren’t sustainable on their own. All institutions need inputs of resources, energy and money in order to fulfill their purpose. Ultimately all money is produced through business enterprise.

We need to be asking: “Are altruistic goals by themselves enough to make a non-profit organization “good” or “ethical?” Do these altruistic goals make them effective? Are non-profit organizations able to completely transcend self-interest simply because they have altruistic goals? I would argue they don’t. It is my opinion that non-profit organizations need to evolve to the Second Tier (become Integral), just like business.

We see a basic conflict between the Orange and Green vMEMEs; a perceptual wall between the “good” non-profits and the “bad” corporations. The wall needs to be torn down and the polarities integrated at a higher level, the Second Tier (Integral). Business needs to become “good,” with a deeper and more comprehensive purpose. Corporations must rethink why they exist. They must evolve past machine metaphors and learn how to think holistically. At the same time, non-profits must become economically sustainable and discover that money and profits are good, not evil, and part of the healthy holistic organization. Grameen Bank is a great example of an altruistic organization that has learned the importance of sustainable enterprise. We need to recognize the increasing importance of social entrepreneurship. This will continue to grow.

Once the perceptual wall is torn down, it becomes clear that business and non-profit organizations are much more alike than they are different. They both can become Integral. At the Second Tier, THEY AREN’T ANY DIFFERENT!!!!

Second Tier (Integral) holistic view of interdependence of all stakeholders

Second Tier (Integral) holistic view of interdependence of all stakeholders

When you fully understand the need to simultaneously satisfy the stakeholders, you’ll see that business enterprise and non-profit enterprise are far more alike than different, and they have much to teach each other.

A Quick History of Food Production

I’m going to paint a big picture of the entire history of food in the next few minutes, using Spiral Dynamics to help illustrate the talk.

The following is an overview of the evolution of food and agriculture from a Spiral Dynamics perspective:

• Beige vMEME
  Began 100,000+ years ago—hunting and gathering
• Purple vMEME
  Began 50,000 years ago—hunting and gathering plus early horticulture
• Red vMEME
  Began 10,000 years ago—transition to settled agriculture as main source of food
• Blue vMEME
  Began 5,000 years ago—traditional agriculture established; authoritarian cultures built upon agricultural surpluses
• Orange vMEME
  Began 300 years ago—industrial system gradually applied to agriculture; we began to apply science, technology, and industry to agriculture
• Green vMEME
  Began 150 years ago—in response to the industrialization of food, the natural and organic movement began evolving over the past 50 years in response to the industrial model of the Orange vMEME
• Yellow vMEME
  Began 50 years ago—”Deep Organic” and animal compassionate movements began about 20 to 30 years ago. These movements are still scattered and not well linked together. Part of the Whole Foods Market mission is to link these two together.
• Turquoise vMEME
  Began 30 years ago—its effects on food production not known as yet

Industrialization of our Food

I would now like to discuss the industrialization of our food production, which began with the Orange vMEME. I want to give the Orange vMEME full credit for the benefits this mentality has brought to our food systems before I critique it.

Over the last 300 years the Orange vMEME has steadily replaced the Blue vMEME approach to agriculture. As a result, an industrial model of food production has spread throughout the world. World food supplies have tripled in the past 30 years. World grain production requires only one-third the amount of agricultural land that it required 50 years ago for the same level of production. These massive increases in productivity have greatly reduced the price of food. Cheaper food has enabled individual and societal resources to be spent in other ways to enhance our quality of life. Americans now spend less than 10% of their disposable income on food. In 1950 we spent over 20%.

That being said, there are a lot of negative effects from this industrialized model. The large increases of productivity are primarily the result of massive chemical inputs. Each year about 3 million tons of farm chemicals are applied to the surface of our planet where they escape into the global environment. This has resulted in the degradation of both soil and water. Nearly one-third of the original amount of U.S. topsoil is now gone. Agriculture uses two-thirds of the world’s fresh water resources, and, in many cases, it is polluting and depleting groundwater supplies.

The creation of animal “factory farms” has greatly lowered the cost of all animal products, but it has come at tremendous cost in animal welfare. Most farm animals are now raised indoors in confined animal feeding operations, where almost all natural animal behaviors are denied. Over 12 billion farmed animals are now slaughtered every year in the United States.

Animal factory farms have huge negative effects on the environment. The volume of farm animal waste products is 130 times greater than human waste in the United States, and this material usually does not pass through sewage treatment plants. One big industrial hog operation produces more waste than the entire city of Los Angeles over a year.

Farm animals in the U.S. now consume 70% of all the grains we grow. Including the land used for grazing cows, this means that means that 80% of all agricultural land in the U.S. is used to raise animals for food. That is equal to almost one half of the total land mass of the continental U.S.

Our oceans suffer from the Orange vMEME approach, as well. 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 almost 50% in the last 50 years. We are fishing out the oceans, it is happening in our lifetimes.

Industrial mono-cultures are causing a loss of genetic diversity around the world. And the remaining genes in agricultural crops are being modified and introduced into the food supply chain at an alarming rate. Genetic engineering of our food crops has great potential and great risks. Unfortunately, it is currently being developed almost strictly from the consciousness of the Orange vMEME.

The current obesity epidemic is probably directly related to the industrialization of our food production system. The figures are staggering! Over 60% of Americans are classified as overweight and 26% are considered obese.

The success of Whole Foods Market in the last couple of years has extended beyond our core Green vMEME customer base and has attracted the Orange vMEME customer. This is certainly good in one sense, because it is extending our business mission further into the world. The success with this customer base is also now resulting in increased competition from Orange vMEME businesses—Wild Oats, Safeway, Super Value, Wal-Mart—who are chasing our customers. The integrity of our industry will be under increasing pressure. There will be a competitive pressure to “dumb down” the organic movement.

What are the causes of these negative effects from the industrialization of our food production? One effect is that the Orange vMEME lacks the perspective to think holistically or ecologically about agriculture. The environmental impacts of industrial agricultural production processes are not fully factored into cost models – the pollution of air and water and the degradation of soil. Next is the failure of the market to effectively communicate other values besides prices to consumers. Quality, nutritional value, and the environmental impact of products are not fully communicated to the consumer. The market system doesn’t communicate any values other than cost.

Farm animal welfare is completely ignored because livestock animals are seen as merely a “factor of production” instead of as sentient beings to be cared for. Factory farms are, for most citizens and business owners, “out of sight, out of mind.”

The negative effects of the Orange vMEME in agriculture are most clearly seen in our “Factory Farms.” With this model, all that matters is minimizing costs and maximizing productivity. That, in a nutshell, is the logic of the Orange vMEME in agriculture today.

If Whole Foods Market doesn’t work to correct the horrible abuses of farm animals, then who will? This is factory farming, so you can take a good look at it.

*[presentation of Meat Your Meat, a video prepared by PETA]*

click here to choose your player and download speed and watch the video

[The audience buzzes at the conclusion of the video.]

I hope I didn’t mess up your lunch today!

Evolving Solutions for Agriculture

What are the solutions to the industrialization of agriculture? Agricultural needs to evolve from the Orange vMEME to the Green vMEME and then make the leap to the Second Tier (Integral). Food producers need to evolve to systems thinking—holistic and ecological—optimizing the entire system, not just one part. The U.S. needs to eliminate all agricultural subsidies to agribusiness. Farmers and producers need to internalize the costs of environmental impacts. We need to more fully adopt the tenets of the “Deep Organic” agricultural movement. As a society, we need to support local agriculture. We need to demand the compassionate treatment of farm animals and the integration of farm animals into ecological farm systems.

Organic Solutions
Organic agriculture is certainly one of the solutions. Organic agriculture produces food without synthetic fertilizers and pesticides. The organic agriculture movement was originally activated by the Green vMEME, but now the Orange vMEME is co-opting organic agriculture. As a society, we are better served by adopting Deep Organic (Second Tier-Integral) versus Shallow Organic (Orange vMEME) agriculture. An example of shallow organic agriculture would be the labeling of certain brands of milk as “organic.” A factory farm can legally produce organic milk if it is feeding the cow organic feed, but otherwise maintaining factory conditions. By contrast, the Deep Organic world-view sees the farm not as a “food factory” but as a human-managed microcosm of the natural world. The Deep Organic world-view sees the soil as a living system to be nurtured and replenished instead of “mined” and exploited.

Whole Foods Market was instrumental in helping to develop the national organic standards into law. However, we have got to do a much better job of educating our customers and the media about the value of Deep Organic agriculture. We must not compromise our higher values, but maintain the very highest standards. We are going to have to stand strong and fight the corporate movement to dumb down organic agriculture.

Animal Welfare
Whole Foods Market Animal Compassionate Standards are a great leap forward over what exists now conventionally. But we have to do better. Our long-term goal is to develop compassionate standards for all meat, poultry, and fish species sold in Whole Foods Market stores. Duck, pig, beef, and sheep standards are completed and can be viewed on our website. Lobster, broiler chicken, laying hens and turkey standards are planned for 2006, and dairy cows, goats, and fish farms are slated for 2007. We are developing the standards as a multi-stakeholder process, involving major animal rights organizations: Animal Welfare Institute, Viva!USA, People for the Ethical Treatment of Animals, Humane Society of the U.S., Animal Rights International, and Farm Sanctuary. We are producing a living document that is subject to revision. Any future product that adheres to these standards will be clearly marked with soon to be developed Animal Compassion logo.

I want to talk briefly about the Animal Compassion Foundation.

Our intention with this foundation is to create a worldwide network of ranchers and farmers interested in improving humane treatment for farm animals. The foundation will search the planet for innovative methods to be studied and provide research money for scientific studies to improve the welfare of farm animals. The foundation will collect information for knowledge sharing on a worldwide basis. The foundation will be funded through a Whole Foods Market annual Global 5% Day.

Moving Forward

In conclusion, I want to say WAKE UP!!! Wake up! Learn and grow! Evolve your consciousness to a higher level. Open your heart wider and extend love, care and compassion further.

Fulfill the mission and core values of Whole Foods Market. Our company is making a real difference in the world. We are making it better. You are contributing to the evolution of the world, by fulfilling our mission.

Think in terms of creating value for all of our stakeholders simultaneously. All stakeholders are interdependent and connected together. When you do this, you are thinking with Second Tier (Integral) consciousness. As you practice this at Whole Foods Market, you are practicing Second Tier thinking. Sometimes it seems as if the Team Members are only thinking about the Team Member’s interests, although many are paying attention to the Customers. It seems like the only ones paying attention to the investors are the Team Leaders. Maybe that’s how they got to be Team Leaders. The trick is to think in terms of creating value for all stakeholders simultaneously.

The final message is Whole Foods Whole People Whole Planet. We are all connected together in an upward spiral flow toward greater health, happiness, peace, love, and ecological sustainability. That is our purpose, and that is what we are doing.

Here are a few resources if you’d like to learn more:

• A Theory of Everything by Ken Wilber
• Spiral Dynamics by Don Beck and Christopher Cowan
• Essential Spirituality by Roger Walsh
• Boomeritis by Ken Wilber
• www.spiraldynamics.org
• http://integralinstitute.org/
• http://www.itp-life.com/
• http://www.flowproject.org/

I’ll entertain a few questions:

Q: You used several terms: arrested vs. activated. What do those terms mean, and are these the only states you can be in?

A: When a vMEME is activated, that means it is starting to “light up.” If you are in a particular vMEME and it stops making sense to you, if something has happened in your life to make you question the values you hold, the next MEME will start to make sense, and will “light up.”

If you are arrested in a certain level, your growth has stopped, you’re not letting other input or information in, your thinking has become rigid.

Are there only two states? No, but can’t think of anything else to tell you right now.

Q: You referenced “power” and the percentages each level held several times in your talk. How were you defining power?

A: They weren’t my statistics (I got them from Don Beck’s book Spiral Dynamics), but I define it as power in society, economic/political/social power. Orange is most powerful level today in the United States. Green growing in power, and Blue is still pretty powerful, but is in gradual decline. You have to view the statistics on a world-wide basis. The figures are different in the U.S., because we’ve got more Green activated.

Q: You identified the need for the entire food industry to move toward a more holistic manner of production; do you believe enough people will embrace having to pay for the additional costs?

A: Yes, I do. Look at how much the industry has changed in 20 years. Many more people are buying organic food, even though it costs more. Look at Wal-Mart, selling organic produce. Who’d have thought that would happen 20 years ago?

Make no mistake, Whole Foods Market will be leading the way; especially if we become more conscious, we can then grow and evolve more quickly; as we network with evolving organizations around the world, such as Grameen Bank and Earth University, we’ll be helping to speed up the evolution into the Second Tier.

At Whole Foods Market, we have a great balance of Orange, Green, and Second Tier energy in an interesting mix. We have many challenges ahead, but let the fear go, people. WE ARE MAKING A DIFFERENCE.

Q: Is Whole Foods Market willing to address Population Control in its networking activities?

A: Maybe. I prepared this talk today because I wanted to challenge each level to understand the other. Some of the most important upward movements in the world today are in places like India and China, where people in the Blue vMEME are moving in great numbers into the Orange. As societies move into the Orange vMEME, populations tend to self-limit. I believe population will take care of itself. As economic power grows, the incentive to have many children lessens. I believe population will limit itself voluntarily, or internally by cultures, as a country’s consciousness grows. I don’t see a real need for external controls or programs. I think the answer is to make the whole world prosperous, fulfill Muhammad Yunnus’ vision for empowering the poor, on a world-wide basis.

Q: You talked a lot about Genetic Engineering and how its name would need to change, and how it needed to change. What would you change the name to, and what would it look like at the Second Tier?

A: Genetic Engineering is caught in the crossfire of the Orange vMEME vs. Green vMEME thinking. At the Second Tier, it could potentially become of great benefit to the world, many beneficial things could come from it, but it probably wouldn’t be called GE. If undertaken from a higher consciousness, and from a position of care, compassion and love, and an understanding of the complex systems involved, Genetic Engineering has the capacity to do great good. I reject the Green vMEME thinking that Genetic Engineering must be stopped at all costs. I think it needs to be implemented from a systems perspective, which isn’t currently happening, but could in the future.

I know I will be misquoted and misunderstood. I didn’t SAY that I favored Genetic Engineering. Let’s be clear about that.

Q: As the world goes through the evolutionary process, with half the world still in the beige/purple/red/blue vMEMEs, how much leap-frogging will take place? Must societies go thru each level?

A: Yes, but they may move through them more quickly. I wouldn’t even be doing this talk, except that I’m hoping to accelerate Whole Food’s evolution. If everyone here, if everyone in the company made a commitment toward growth, it could have an accelerating effect on our organization’s influence at the next level.

My generation, which includes the Boomers, was the first that activated the Green vMEME in large numbers. Unfortunately many of the Boomers got stuck there. They didn’t go any higher. You see a lot of the negative parts of the Green vMEME now manifesting in society and this has fueled the culture wars.

I’m most excited about the millennial generation, the young people born after about 1982. These kids are collectively very, very awake. Many of them are moving into the Second Tier already, and they are only 20 years old! The next generation will be moving into the Second Tier in significant numbers. I start to cry when I think about these young people, because they are so awesome and their potential for doing good is so great.

I think this is a good place to stop. Thank you.

What I hope to accomplish tonight is to challenge your thinking about the modern freedom movement. I believe the freedom movement has been its own worst enemy by foolishly limiting its appeal and impact with an overly narrow interpretation about the meaning and purpose of freedom. From a business perspective, the freedom movement faces major marketing challenges, the result of its poor job of branding itself to the world.

My Background
Let me tell you a few brief things about myself as background. Before I started Whole Foods Market I attended two different universities, where I accumulated 130 hours of electives, primarily in philosophy and religion, and ended up with no degree. I never took a single business class. I actually think that has worked to my advantage in business. I spent my late teens and early twenties trying to discover the meaning and purpose of my own life.

My search for meaning and purpose led me into the counter-culture movement of the late 1960’s and 1970’s. I studied eastern philosophy and religion at the time, and still practice both yoga and meditation. I studied ecology. I became a vegetarian (I am currently a vegan), I lived in a commune, and I grew my hair and beard long. I’m one of those crunchy-granola types. Politically, I drifted to the Left and embraced the ideology that business and corporations were essentially evil because they selfishly sought profits. I believed that government was “good” (if the “right” people had control of it) because it altruistically worked for the public interest.

With that background, I felt “well prepared” to launch my business in 1978. My initial business, a natural foods market called Safer Way, was a small 3,000 square foot store that I opened with my girlfriend, with an initial $45,000 in capital. We were very idealistic, and we started the business because we thought it would be fun. We were right-we had a blast then, and we’ve continued to have a great time during the last 28 years. The time has passed quickly.

Along with the for-profit business, I also created a business of “heart” and I think I have been equally successful with that venture. After running Safer Way for a couple of years, we decided to relocate to a much larger building and we opened Whole Foods Market in 1980. No pun intended, but we grew the business organically from there.

At the time I started my business, the Left had taught me that business and capitalism were based on exploitation: exploitation of consumers, workers, society and the environment. I believed that “profit” was a necessary evil at best, and certainly not a desirable goal for society as a whole. However, becoming an entrepreneur completely changed my life. Everything I believed about business was proven to be wrong. The most important thing I learned about business in my first year was that business wasn’t based on exploitation or coercion at all. Instead I realized that business is based on voluntary cooperation. No one is forced to trade with a business; customers have competitive alternatives in the market place; employees have competitive alternatives for their labor; investors have different alternatives and places to invest their capital. Investors, labor, management, suppliers—they all need to cooperate to create value for their customers. If they do, then any realized profit can be divided amongst the creators of the value through competitive market dynamics. In other words, business is not a zero sum game with a winner and loser. It is a win, win, win, win game—and I really like that.

However, I discovered despite my idealism that our customers thought our prices were too high, our employees thought they were underpaid, the vendors would not give us large discounts, the community was forever clamoring for donations, and the government was slapping us with endless fees, licenses, fines and taxes.

Were we profitable? Not at first. Safer Way managed to lose half of its capital in the first year—$23,000. Despite the loss, we were still accused of exploiting our customers with high prices and our employees with lower wages. The investors weren’t making a profit and we had no money to donate. Plus, with our losses, we paid no taxes. I had somehow joined the “dark side” — I was now one of the bad guys. According to the perspective of the Left, I had become a greedy and selfish businessman.

Abandoning Leftist Philosophy
At this point, I rationally chose to abandon the Leftist philosophy of my youth, because it no longer adequately explained how the world really worked. With my Leftist interpretation of the world now shattered, I looked around for alternative explanations for making sense of the world.

I stumbled into reading Milton Friedman, Friedrich Hayek, Ludwig von Mises, Ayn Rand—I read all of them. I said to myself, “Wow, this all makes sense. This is how the world really works. This is incredible.” Then I became Laissez Faire Books best customer for the next five years. I think I read every book in their catalog. If any of you in the audience have written books, I have probably read them.

I identify myself as a Libertarian. I am one of those people who actually votes Libertarian. I have voted strictly Libertarian since 1980. You sometimes hear that argument, “Why do you vote Libertarian? You’re just throwing your vote away.” I always say, “Gosh, if everybody had that attitude toward their vote, then the Libertarian candidate would get elected.”

What I love most about the freedom movement are the ideas of voluntary cooperation and spontaneous order when channeled through free markets, leading to the continuous evolution and progress of humanity. I believe that individual freedom in free markets when combined with property rights through rule of law and ethical democratic government results in societies that maximize prosperity and establish conditions that promote human happiness and well being.

Unfortunately, despite of all my enthusiasm and formidable debating skills, I have had little success converting people to the freedom movement. Has that been your experience as well? The freedom movement remains a small, relatively unimportant movement in the United States today. The question is, “Why?” I want the freedom movement to sweep the world. So how can we make the freedom movement a more vital and dominant intellectual and cultural movement in the United States?

Selfishness and Greed Are Not Good
I hope to do two things tonight. First, I will critique the freedom movement and highlight mistakes that have greatly lessened its impact and influence in the world. Second, I will challenge the movement to re-think its purpose and values. We need to evolve our paradigm along with the brand that we offer the world. As a businessman who knows something about marketing and branding, I can tell you the freedom movement is branding itself very poorly.

Let’s start with the critique. How many of you have read Ayn Rand? How many of you have been influenced by her? Atlas Shrugged remains one of the five greatest novels I have ever read. Who can ever forget characters like Dagny Taggert, Hank Rearden, Francisco d’Anconia, from Atlas Shrugged, as well as Howard Roark in The Fountainhead. These characters all demonstrated tremendous passions and drive, backed by high self-esteem. Each one inspired this young entrepreneur. I wanted to be just like those heroic characters in Atlas Shrugged.

However, despite her literary greatness and many positive contributions to the freedom movement, I believe that Rand has also harmed the movement. How? Ayn Rand was overly provocative. The “virtue of selfishness” is an oxymoron. Selfishness is not a virtue. Now, I understand all the arguments—I’ve read all the books. I know that self-interest channeled to the social good, as expressed through Adam Smith’s Invisible Hand, is the single most brilliant insight about social organization ever made in history. That being said, selfishness (as opposed to self-interest) is still not a virtue. It is something to be discouraged, and not something to be supported.

Similarly, I find insupportable the idea Ivan Boesky and Gordon Gekko made infamous, that “Greed is Good.” Well, greed is not good. Greed is not a virtue. Excepting a few people on Wall Street and some people in the freedom movement, almost no one else in our greater society will support selfishness and greed as “good” when they see it. So my question to you is, why doesn’t the freedom movement condemn selfishness and greed? If we don’t, we are inappropriately seen as supporters of selfishness and greed. In my opinion, this is a major branding mistake that continues to undermine our movement.

How many people in the audience believe that the only social responsibility that business has is to maximize profits? Before I make my next point, let me boast about Whole Foods Market for a moment. In 2005, we did $4.7 billion in sales and realized $136 million in net profits. With our current growth rates by 2010 we should do over $12 billion in sales. On a percentage basis Whole Foods Market is the most profitable public food retailing business in the United States, with the highest net profit percentage, sales growth, and sales per square foot. I make this boast to prove that (a) I believe in profit and (b) I am quite competent in producing it. I love profit. Profit is good and it is socially necessary. However, some people in the freedom movement have long argued that the only social responsibility that business has is to maximize profits. I believe that profits are an essential purpose of business, but I would argue that they are not the sole, or even most important, purpose of business. Profit is the most important purpose to the business owners. But owners do not exist in a vacuum. I believe the best way to think about business is as an interdependent system of constituencies connected together in a “harmony of interests.”

Is maximizing business profits a goal that customers have when they patronize a business? Are customers coming in thinking, “I’m so glad I’m in Whole Foods today because I want to help you maximize your profits.” What about the people who work for a business? “I took a job a Whole Foods because I was seeking to maximize the profits of the company.” Or the community: “We’re so glad you came to our community and we want you to maximize your profits.” This is ludicrous, right?

Free-market economists, in their legitimate defense of the value of business profits, have often harmed the value of the larger brand of business in our society. These economists have not created a paradigm of business that will ever be fully accepted by society as “good.” Business instead continues to play the role of the bad guy in our society. Selfishness, greed, worker exploitation, consumer rip-offs, and environmental destruction, all in the name of maximizing profits—this is the reality of the brand that business is burdened with in the world today.

I believe that business has a much greater purpose. Business, working through free markets, is possibly the greatest force for good on the planet today. When executed well, business increases prosperity, ends poverty, improves the quality of life, and promotes the health and longevity of the world population at an unprecedented rate. This audience understands these truths, but how many people in our greater society comprehend it?

The freedom movement has also poorly defended the social legitimacy of both business and free market. A new paradigm for business and the free market is necessary—one that accepts the importance of profits of course, but also one that recognizes that business has legitimate social responsibilities that go far beyond merely maximizing profits. That’s all I’m going to say on this issue tonight because it’s a “teaser.” My talk tomorrow focuses entirely on how to create a new business paradigm.

Positioning and Branding the Movement
How many people in the audience believe drugs should be legalized? What about pornography? How many of you believe that prostitution should be legal? I believe all three should be legalized—within certain parameters which protect children. Who among you believes that private ownership of guns should be made illegal? I certainly don’t. Gun ownership is protected by the Second Amendment of the Constitution. It is an important right.

I believe, however, that all four of these issues are far less critical for improving our society than creating educational choice, privatizing social security, de-regulating health care, and enacting meaningful tort reform. The legalization of drugs, pornography, prostitution and guns, as issues, are all too closely associated with the freedom movement. Aligning ourselves with these issues has hurt our brand tremendously, by associating the freedom movement with cultural decadence. Parents don’t want their children’s lives ruined by drug experimentation; or their innocence prematurely lost to pornography and prostitution; or their lives ended with a bullet.

These four freedom issues need to be de-emphasized by the freedom movement if we hope to successfully create a mass movement, and continue to evolve our society in positive directions. How many of you believe that lessening the power of government over our lives is the most important goal of the freedom movement? I believe that the freedom movement’s biggest mistake today is focusing primarily on freedom “from” government coercion as its primary goal. Obviously this is a very important goal for the freedom movement, but I strongly believe it must also be accompanied by an equally important goal: the freedom “to” take responsibility for our own lives; the freedom “to” take responsibility for our own communities and our planet.

Freedom from government coercion is clearly a very, very important goal. But unless you live in a country like China, North Korea, Cuba or Iran that lacks many personal liberties that we Westerners take largely for granted, freedom is not usually a very important goal. American citizens mostly take their liberties for granted. Unlike the people in this audience, most Americans forget that vigilance is the eternal price we have to pay for protecting liberties.

Once we are free, or relatively free, to live our lives in the manner we choose to live them, we must next answer the question, “How then shall we actually live our lives?” Will we live our lives as hedonists, indulging ourselves with various amusements, diversions, and pleasures? Or will we choose the more difficult path of personal development and acceptance of social responsibility?

The freedom movement needs to reposition itself and re-brand itself. Personal freedom may be the first goal we work towards—but we can’t stop there; it isn’t enough. There is so much more to life. Using our freedom to take on greater social responsibility, as well as striving to reach our fullest potential as humans need to be goals that we support just as much as freedom from government coercion. When I was a naive (some people in the audience by this time probably think I’m still naive) and idealistic young man, I migrated to the Left for my value system. Why did I do that? Because the Left provided an idealistic vision of the way the world could be. However, the reality of the Left’s vision proved to be terribly flawed. Its socialist economic system not only didn’t work very well, but in its communist manifestation it justified monstrous governments directly responsible for the murders of over one hundred million people in the twentieth century. Despite the unbelievable horrible track record of Leftist ideology, millions of young Americans continue to migrate to an intellectual bankrupt Left because the Left still seems to be idealistic, and that idealism is magnetic to the young. Idealism will always be magnetic to the intelligent and sensitive young people of the world.

Inspiring Idealism
How sad that the freedom movement often refuses to be idealistic. We usually don’t even attempt to compete. We simply forfeit the field to the Left because we pride ourselves on our “realism” and “toughmindedness.” We talk about freedom and prosperity – and that is about it. We have no real theory of either the good life or the good society except the fundamental belief that if people have sufficient personal and economical liberties (such as in Friedrich Hayek’s spontaneous order) we will create a prosperous society.

Freedom and prosperity are important goals, but they must be only the beginning goals for us. If we are to win the allegiance of the young people of America then we must dare to be more idealistic. We must create a vision of the good life and the good society that is irresistible to the young. How many of you here are familiar with Abraham Maslow’s “Hierarchy of Needs?” For those of you who aren’t, Maslow was a psychologist who did most of his work in 1950’s and 60’s. His theory of human nature is that we can understand human motivations with a simple model. There are various “need” levels and they arrange themselves basically in a hierarchy. At the bottom of the hierarchy are the physical needs: such as food, water, and sex. Once those needs are relatively well met, you move up to the next level in hierarchy: safety needs, such as security and physiological safety take precedence. Next you move into belongingness and love needs: affiliation, acceptance, affection, community and family. Once those needs are met then you tend to move to self-esteem needs: feeling competent, gaining approval and recognition from others, and garnering a sense that you are a worthwhile human being. The next level would be the attainment of aesthetic and cognitive needs, which can be summarized as the pursuit of the good, the true, and the beautiful.

Finally at the top of this hierarchy is self-actualization which (and the Army’s advertising firm must have read Maslow) is “be all you can be.” This means reaching your fullest potential as a human being. I believe that one of life’s purposes is fundamentally about learning and growing. If we move up Maslow’s hierarchy and don’t stagnate at lower levels, life becomes an adventure of learning, growing, loving and joyfulness. If we are not growing as human beings then we are diminishing.

The freedom movement, in my opinion, needs to embrace the ideal of not just economic growth, but personal growth as well. If we use Maslow’s hierarchy of needs as our criteria for evaluating the freedom movement, we see that it is primarily focused on the lower need levels: meeting the physical needs and safety needs through increased prosperity. To be perfectly blunt about it: the freedom movement is largely materialistic in its approach to life, stuck in the lower levels of Maslow’s hierarchy. The higher need levels, love, self-esteem, the good, the true and the beautiful, and self-actualization, are either taken for granted or simply ignored.

Study after study shows that material prosperity, by itself, does not create happiness. We have higher needs as expressed on Maslow’s hierarchy and the freedom movement needs to stop ignoring them. The freedom movement needs to consciously create a vision that addresses meeting the higher needs of Americans, beyond basic physical and safety needs.

That is the secret of the success of the Left, despite its bankrupt economic philosophy. The Left entices the young with promises of community, love, purpose, peace, health, compassion, caring, and environmental sustainability. The Left’s vision on how to meet these higher needs in people is fundamentally flawed. But the idealism and the call to the higher need levels is magnetic and seductive, nonetheless. The irony of the situation, as I see it, is that the Left has idealistic visions of higher human potential and social responsibility, but has no effective strategies to realize their vision. The freedom movement has strategies that could meet higher human potential and social responsibility but lacks the idealism and vision to implement the strategies. I assert that the freedom movement can become a successful mass movement today if it will consciously adopt a more idealistic approach to its marketing, branding, and overall vision and embrace a vision of meeting higher human potentials and greater social responsibility.

Changing the Face of Health Care
Now let us discuss some of the ideals and goals that I think we should embrace as a movement. Who among you believes that socialized medicine is the answer to the health care crisis in America? The Left believes this is the answer: equal access to the health care system for all Americans—no one denied for financial reasons, in a single-payer system. Socialized health care seems very idealistic, and as such, appeals to many people. However, as Milton Friedman taught us, there is no such thing as a free lunch—in health care or anywhere else. We know the single-payer system means health care rationing through queuing up in long lines for expensive treatments and denial of some services to many of the elderly as too expensive. We know that uncaring government bureaucrats will run a single-payer system and without the discipline of competitive markets won’t provide quality customer/patient service. We know that health care innovation and progress will slow down tremendously, because much less money will be dedicated to medical research since such research is long-term by nature and easily sacrificed to current budget limitations.

The United States continues to steadily move toward socialized health care partly because the freedom movement has not articulated an idealistic vision of what would be possible if we deregulated health care in America. We have fought a strictly defensive battle on this issue, and that strategy needs to change.

First of all, health is not merely the absence of disease. It is vitality and a sense of well-being. Health is partly about eating a healthy diet. (Therefore please shop at Whole Foods Market!) Also, regular daily exercise and minimizing the poisons we take into our bodies such as sugar, alcohol, nicotine and caffeine are also very important. Health is about getting adequate sleep, and also about having a sense of personal life purpose, and maintaining an optimistic and positive attitude. Most importantly, our health and well-being are our own responsibilities. Our doctors cannot accept these responsibilities. Nor can the bureaucratic “experts” controlling a health care system. The freedom movement must first advocate the ideal of self-responsibility for health. We own our own bodies, don’t we? This is no minor thing because the Left, by supporting socialized medicine, demonstrates a belief that common citizens are too stupid to take responsibility for our own health and therefore need the “experts” to step in and control things for our own good.

Next we must advocate the ideal of free markets and competition in health care. The monopoly that medical doctors largely have in medical treatment must be broken. They should have to fully compete with other practitioners such as chiropractors, acupuncturists, naturopaths, and yes my skeptical friend, John Stossel, even homeopathists. Competition is beneficial in every market and it will be so in the health and wellness market as well. Doctors don’t compete on quality or price right now. They don’t post their prices and it is almost impossible to get any real idea of the quality of their services except through trial and error. We don’t currently have an efficient, competitive market in health care.

The final thing we must do in health care is to change the tax structure. Eliminating tax incentives for health care would change everything. Most companies (like Whole Foods) would stop offering free or subsidized health insurance if the benefit wasn’t tax-deductible. Individuals would no longer receive “free” health care and would start spending their own money. The power of the markets would increase both the efficiency and effectiveness of our health care system enormously. Try to imagine for just a minute how much we could improve the health of Americans if we embrace the ideals that I outlined here: self-responsibility, competition, deregulation, and tax incentives. Let markets truly work in health care and I have little doubt that the health of Americans would improve immensely. I predict that we would see an increase in longevity to nearly 100 years within just a few decades- true freedom and innovation. Are good health and increased longevity worthy ideals for our movement to embrace? I think they are!

Global Peace
Peace. Why should the Left own the peace ideal? Why should the idealistic young turn to the Left to find peace? Global peace is within our reach for the first time in history. Let me quote from Johan Norberg’s wonderful new book, In Defense of Global Capitalism.

“The number of wars has diminished by half during the last decade. Today, less than 1% of the world’s population is directly affected by military conflicts. One reason is that democracies simply do not make war on each other. Another is that international exchange makes conflict less interesting. Cross ownership, multi-national corporations, and investment in privately owned resources make it hard to tell where one country really ends and another one begins.”

Despite the war in Iraq, which looms large in our minds, the truth is that wars in the world are actually in decline. The majority of the world’s nations are now committed to democratic governments and market economies. As this global network strengthens, peace increasingly becomes the world norm. The freedom movement should own the peace ideal; we do not own it now. Let us retrieve the peace ideal, because we know the truth: Democracy + free markets = peace between nations who share these social/economic/governmental structures.

Education Reform
Who in this room believes the United States has an excellent Kindergarten through 12th grade educational system? Who here believes that the way to improve education in the United States is to increase bureaucratic control by the government? Socialism doesn’t work. This was proven beyond a doubt in the 20th century. Nation after nation tried to replace capitalism with socialism and without exception their efforts to improve the quality of their citizens’ lives failed. Most Americans know that socialism doesn’t work as an economic system. We allow competitive markets to produce our food, our housing, our clothing, our transportation and most of the goods and services that we consume. Why then do so many people embrace socialism in health care and education? Because we have not created an idealistic vision of the way things could be if they were grounded in freedom instead of governmental control. What is the alternative to socialism in education? The free-market alternative is competition, innovation and choice. The monopoly of the government over education needs to end. The domination of our children’s education by the teacher’s unions needs to stop.

What other reforms are needed? The following reforms are old news to people in the freedom movement: school choice, through vouchers and tax credits, along with privatizing public schools and selling off their assets to the private sector. What would happen with true competition in school choice, with students and parents becoming truly empowered consumers instead of virtual prisoners and slaves as they are now in the socialized system that exists today? We would have an explosion in educational innovation, and unprecedented improvements as competition and choice systematically eliminated poor teachers and poor schools. In the marketplace, a series of successful educational organizations would grow and spread throughout the nation. We would see incredible diversity in types of schools and styles of education meeting the diverse needs and desires of students and parents, instead of the dictates of the educational bureaucracy and teachers’ unions.

Educational empowerment is a noble ideal and one that I believe mainstream Americans will embrace, once parents understand how their own children will be the true beneficiaries of these reforms. Where the freedom movement has failed is in creating and articulating a vision to promote this ideal. We’re too afraid to be seen as utopian or near-utopian in our thinking. There is so much cynicism in response. You have all heard “it’s not realistic,” and “it’s a fantasy, you’ve got to be realistic.” But for people to give up ideals like socialized education and medicine—equal access for everyone to schools and health care regardless of income—they need to believe the replacements are going to be substantial improvements. The way to lead them to support change is to create an idealistic vision of what is possible. Next, you need to evangelize this vision to create a sense of excitement. Then they will agree to travel down that road with you to create the necessary changes. If there is no exciting, idealistic vision of what is possible, most people won’t bother to join the struggle. Life is simply too short and most people have better things to do.

Environmental Sustainability
Who among you has read Bjørn Lomborg’s book, The Skeptical Environmentalist? I cannot recommend this great book to you more highly. It convincingly demonstrates that the doom-and-gloom, apocalyptic crowd has greatly exaggerated the decline of the global environment in many important areas such as air and water quality and the decline in natural resources. With that qualifier said, I still believe the freedom movement has erred strategically by letting the Left own the ideal of environmental sustainability.

The ideal of environmental sustainability is certainly going to grow in importance over the next several years. It isn’t going to fade away. I personally think it is the “Achilles heel” of the freedom movement and until it is proactively embraced as an important ideal by members of the freedom movement, the movement will become less and less relevant to the idealistic young in American society.

My company currently employs over 39,000 people. I estimate that nearly 100% of them care greatly about environmental sustainability. I know that I personally do. At Whole Foods, Team Members drift to the Left primarily because of the environmental issues.

Maintaining environmental sustainability is in the collective best interest of everyone. No one will argue that premise. The real question is, “What are the best ways to do it?” What are the trade-offs we need to make? When the freedom movement ignores the issue of environmental sustainability, the Left will dominate the discussion of the issues. Remember that the Left’s goal remains to either destroy or cripple capitalism. The freedom movement must embrace the ideal of environmental sustainability, but must bring to the debate its commitment to property rights, markets and proper incentives to effectively resist the inevitable Leftist arguments for more bureaucratic controls and regulations.

Love, Caring and Compassion
Why should the Left own the ideals (and they do own them right now) of love, caring and compassion – especially with their track record? How can a movement that in its extreme form is responsible for the murders of more than one hundred million people, slaughtered in the name of their ideals own these three words? What the Left has done is create a world of victims and a cult of victimology. Then the Left accuses everyone who disagrees with them as lacking in love, caring and compassion. What a bunch of baloney! The freedom movement must embrace the ideals of love, caring and compassion and return these words to their true meanings. Love, caring and compassion do not equate with guilt, and they do not mean pandering to the demands of the various victims of the world. Spreading freedom through the world is the most loving and compassionate thing we can do for people. True freedom allows people to create prosperity and gives them the opportunity to move up Maslow’s hierarchy of needs towards self-actualization. True freedom gives us the opportunity to take social responsibility and to work towards making the world a better place.

The freedom movement needs to support economic globalization. Globalization is the most caring and compassionate strategy we can implement to help the developing world lift itself out of poverty. This is the simple truth. But how many people understand this truth? The Left has convinced the idealistic young that globalization is harming the developing world – a plot by greedy corporations to rule the world. The freedom movement has a responsibility to explain the wisdom of globalization, and to hold it up as a noble ideal to the world.

I began my talk tonight by telling you that I spent my late teens and early twenties searching for meaning and purpose of my life. My strategy was really a very simple one: I decided to follow my heart wherever it took me. My heart has led me to distant places and to great worldly success. What I have learned on this journey is that in the core of my inner being there is endless creativity and there is limitless love. I believe if each of you look deep within your own inner being, you will likely also discover these two passions within yourself.

It is my belief that we should act in this world with open loving hearts, and that we need to channel our deepest creative impulses in a loving way toward other living beings. Do we really want to win the battle for freedom and prosperity in the world today? If we do, then let us bind these words together, as tightly as we can, with the words love, care and compassion.

Freedom belongs together with love. Prosperity belongs together with compassion. This is the vision I hold for the future; this is the world I strive to create. I urge you to join me. Together we can create a world where people have lives full of purpose, love, adventure, a world of freedom, prosperity and compassion.

F.L.O.W.
Now, I have a brief commercial. Along with a few friends, I am starting a new initiative within the freedom movement. We call this initiative “FLOW”, for Freedom Lights Our World. What we envision will bring the idealistic young that are being lost systematically to the Left into the freedom movement. Many of the ideas I’ve talked about tonight are core concepts of FLOW. If you’re interested in learning a little more about FLOW, we have a web site: www.flowproject.org

I am going to end my speech tonight with a quote by Johann Wolfgang von Goethe. This sentiment should be memorized by every aspiring entrepreneur in the audience:

“What ever you can do, or dream you can, begin it.
Boldness has genius, power and magic.”

Thank you very much.

SUNNI: Hi, John, and thanks for letting me play my version of “20 Questions” with you today. How are you?

JOHN: Great!

SUNNI: Glad to hear it! I have a lot of things I’d like to touch on with you, and I don’t want to take too much of your time, so let’s jump right in. In doing some research, I found you being referred to as an “ex-leftist libertarian”. I thought that a very odd phrase, since many individuals come to the freedom philosophy from a left perspective — and lots of pro-freedom people are more concerned with personal and social issues than economic ones; that’s generally considered to be a “leftist” slant. What do you think of that phrase? Does it fit you?

JOHN: I think that depends upon how “leftist” is defined. Usually people who define themselves as “leftists” are opposed to capitalism, economic freedom, and believe that the coercive power of government should be used to create more equality and social justice in society. Usually people on the left have sympathy for democratic socialism. When I was in my very early 20’s I believed that democratic socialism was a more “just” economic system than democratic capitalism was. However, soon after I opened my first small natural food store back in 1978 with my girlfriend when I was 25, my political opinions began to shift. Operating a business was a real education for me. There were bills to pay and a payroll to be met and we had trouble doing either because we lost half of our initial $45,000 of capital in our first year. Our customers thought our prices were too high and our employees thought they were being underpaid, and we were losing money. Renee and I were only being paid about $200 a month and the business was a real struggle. Nobody was very happy and Renee and I were now seen as capitalistic exploiters by friends on the left who believed we were overcharging our customers and exploiting our workers — all because we were apparently selfish and greedy.

I didn’t think the charge of capitalist exploiters fit Renee and myself very well. In a nutshell the economic system of democratic socialism was no longer intellectually satisfying to me and I began to look around for more robust theories which would better explain business, economics, and society. Somehow or another I stumbled on to the works of Mises, Hayek, and Friedman, and had a complete revolution in my world view. The more I read, studied, and thought about economics and capitalism, the more I came to realize that capitalism had been misunderstood and unfairly attacked by the left. In fact, democratic capitalism remains by far the best way to organize society to create prosperity, growth, freedom, self-actualization, and even equality.

I no longer think of myself as a leftist, but I definitely don’t think of myself as from the right either. For the past 25 years I’ve thought of myself as a libertarian, but I’m now beginning to move away from that label as well. I have a number of intellectual problems with libertarianism as a political philosophy as it currently exists. I believe we need a new social/political/economical/environmental movement in the world today and I’ve got some definite ideas what this movement should look like.

SUNNI: You sure seem to be popular in the libertarian community, despite having arrived here through a side door, so to speak. How do you account for that? [laughs]

JOHN: I’m not aware that I’m popular in the libertarian community. On the contrary, I’ve frequently found myself criticized for lacking sufficient doctrinal purity by many in this movement.

SUNNI: Perhaps it’s the celebrity element at work, then, John … In doing background research for this interview, I came across mentions of you at several libertarian sites — Advocates for Self-Government and several blogs. I don’t recall seeing any critical comments. But I’m sure that you’d get them after a speech — the movement doesn’t suffer a lack of critics. [laughs]

JOHN: It could be the celebrity element. I’m not shy about telling the media or anyone else that I’m a libertarian. I suppose I’ve brought some favorable publicity to the libertarian movement. I hope so anyway.

SUNNI: I’m sure you have. One of the Conspirators who blogs with me is a huge fan of Whole Foods Market — she’s a stakeholder in more than one meaning of the term — and I know a number of loyal Whole Foods Market customers in the pro-freedom community. I know that some wouldn’t bat an eye at its Declaration of Interdependence, for example, but others might be surprised to see how often the word “collective” and its variants show up on the Whole Foods Market web site … or to see ideas like “shared fate” and “community citizenship” in its core values statement. How do you square all that with being libertarian?

JOHN: I personally don’t see any contradictions here. Human beings are highly social animals and we evolved over hundreds of thousands of years living in small hunting and gathering tribes. I believe that much of our fulfillment as human beings comes from our participation in the various social organizations that we belong to. Today we are raised in families, live in neighborhoods and communities, and are members of a number of greater collectives. For example, I am a member of the following collectives: Austin, Texas, The United States, Homo sapiens, vertebrates, DNA-based life forms, planet Earth, Milky Way Galaxy, etc. I’m also a voluntary member of a number of organizations including my marriage with Deborah Morin, Whole Foods Market, various long-distance backpacking groups, various animal welfare/animal rights groups, and various libertarian organizations, plus many others. Even my physical body is a collective consisting of many billions of cells working together in various organs to stay alive and pass on its genetic material into the future.

I think the reason why many libertarians object to the words “collective”, “shared fate”, and “community citizenship” is that they associate those words with coercive, involuntary organizations such as the forced collectivization of Soviet agriculture under communism or other totalitarian political organizations. Needless to say I don’t use these words in these contexts. I believe in voluntary cooperation as the key principle for organizing any collective organization. Whole Foods Market is a collective based on voluntary cooperation between all the various stakeholders. No one is forced to cooperate against their will and all are free to withdraw from the collective organization anytime they wish to. A collective without freedom is by nature coercive and is therefore unlikely to lead to human flourishing. However, collectives based on freedom and voluntary cooperation can lead to very high levels of human flourishing. Indeed, I seriously doubt that high levels of human flourishing are even possible without voluntary cooperation from millions of various communities and collectives.

SUNNI: It sounds to me like you aren’t a libertarian of a Randian persuasion — wholly profit-driven and focused on the self; is that accurate?

JOHN: That is correct. I was very inspired by Ayn Rand’s novels like millions of other people have been. However, I don’t agree with some of her philosophies. For example: I don’t think selfishness is a virtue and I don’t believe that business primarily exists to make a profit. Profit is of course essential to any business to fulfill its mission and to be successful and to flourish and I will defend the goodness and appropriateness of profits for business with great passion. However, profit is not the primary purpose of business. Renee and I didn’t begin Whole Foods Market to maximize profits for our shareholders. We began it for three main reasons: we thought it would be fun to create a business; we needed to earn a living; and we wanted to contribute to the well-being of other people.

As the business grew we created our mission statement back in 1985 and have tried to fulfill it ever since. That mission very clearly articulates that we have collective — there’s that word again — responsibilities to all the various constituencies who are voluntarily cooperating with the company. In order of priority these constituencies or stakeholders are: customers; team members; investors; vendors; community; and environment.

We measure our success on how well we meet the needs and desires of all of these various stakeholders. All must flourish or we aren’t succeeding as a business. I’ll email you a graphic that represents how Whole Foods views the voluntary cooperation between the various stakeholders:

We call this a “New Business Paradigm” because it puts the Business Mission and Core Values at the center of the business model — not maximizing profits. Profits aren’t the primary goal of the business. They are an important result of fulfilling the Business Mission and meeting the needs and desires of customers. I’m writing a book on Whole Foods philosophy of business right now so it’s hard for me to do justice to all the ideas and answer all the standard objections in this interview. My more complete statement on this will need to wait for the publication of the book. I’ll share two ideas as food for thought here though.

Free-market economists have done a major disservice to capitalism and to business by making profit maximization the supposed primary goal of business. The terrible reputation of business in the world today is a direct result of the belief that business has no other purpose besides maximizing profits. The average person believes that business should care about its customers, employees, society, suppliers, the environment — as well as its investors. The fact that business philosophers and economists articulate a philosophy that business should only care about maximizing profits and shareholder value (and has no other compelling ethical responsibilities to any of the other stakeholders) has done incalculable harm to the reputation of business. The “brand of business” in the widest sense is pretty terrible throughout the world. Read David Korten’s book
When Corporations Rule the World to get a good perspective on how many intellectuals see corporations and big business today — a threat to the well-being of the entire world. The anti-globalization movement is actually an anti-corporation movement and it is a direct result, in my opinion, of the faulty logic of the shareholder value maximization model. You and I know that business and capitalism are helping increase prosperity throughout the world. Too bad the economists have done such a poor job of intellectually justifying the intrinsic ethical nature of business and the capitalist system. Both business and capitalism have terrible reputations as a result. Socialism, communism, and anti-globalization are all reactions to this philosophy. I sometimes wonder whether any of these horrible philosophies would have had much of a following except for the intellectual failures of our economists to properly understand the real purpose of business.

Second, there is a fundamental paradox that I call the “paradox of shareholder value”. The best way to maximize shareholder value is to not make maximizing shareholder value the primary purpose of the business. Why not? Because it is the business that satisfies customers best that has the most customers, the highest sales, and the most profits. The best way to satisfy customers best is to organize the entire business around satisfying the customer. Every communication the business makes towards its customers, its employees, and the media should be about putting the customer first. Ultimately the best way to satisfy customers’ needs best is to actually put those needs first. If profit is the articulated primary goal of the business then it is unlikely that the employees or management of the business will dedicate themselves to customer satisfaction to the same degree they would if customer happiness was seen as more important than investor profits. In the first case customer happiness is merely a means to an end — maximizing profits. In the customer-centered business, however, customer happiness is an end in itself and because it is it will be pursued with greater interest, passion, attention and empathy than the profit centered business is capable of.

Let me give you an analogy that may make this point better: What is the key to happy marriage? Is my wife’s happiness an end in itself for me or is her happiness merely a means to a different end — my own personal happiness? It has been my experience that I am happiest in my marriage when my love for my wife causes me to place her needs and desires first — ahead of my own. When my wife is happy then I am happy. When she isn’t happy, then I’m not happy. I achieve my personal happiness in marriage best by not focusing directly on it, but by focusing on her happiness as the primary goal for me in the marriage. That is the way love works, in my opinion. The beloved’s happiness is an end in itself — not a means to some other end. Paradoxically by seeking to maximize my wife’s happiness, I also maximize my own. However, that is a secondary by-product of my desire for her personal happiness. Fortunately for me my wife shares my philosophy of marriage and reciprocates my dedication to her happiness with an equal dedication to my own happiness as well.

Similarly to a happy marriage, the most successful businesses put the customer first — ahead of the shareholders. They really have to have this dedication to the customer to maximize customer happiness. Customers aren’t stupid. They know when they are being misled or merely being used. It is also difficult to impossible to truly inspire the creators of customer happiness, the employees, with the ethic of profit maximization. Maximizing profits may excite shareholders, but I assure you most employees don’t get very excited about it even if they accept the validity of the goal. It is my business experience that employees can get very excited and inspired by a business that has an important business purpose (such as selling the highest quality natural and organic foods) and teaches them to put the needs of the customers first. People enjoy serving others and helping them to be happy — when they know this is their primary goal and are also rewarded for successfully doing so.

The customer-centered business is usually the most successful and the most profitable, while the shareholder centered business usually underperforms over the long-term. I suggest reading Jim Collins’ two books
Built to Last and
Good to Great for empirical evidence to this viewpoint. The ultimate test of these two business theories, however, is in the marketplace — not in theoretical arguments. My company, Whole Foods Market, is a mission-driven business that puts the customer first, the team members second, and the shareholders third. We are winning competitive battle after competitive battle in the marketplace against businesses which adhere to the philosophy of maximizing profits and shareholder value as their primary goal. Whole Foods has never had a store we open ever fail in the marketplace. We have never lost a competitive battle in 27 years of business! Why not? Because the profit-centered businesses we compete against cannot beat us in the marketplace. Our customer and team member-centered business model beats them every single time.

You may or may not agree with my business philosophy, but it doesn’t really matter. The ideas that I’m articulating result in a more robust business model than the shareholder-maximization model that it competes against. They will triumph over time, not by persuading intellectuals and economists through argument, but by winning the competitive test of the marketplace. Someday businesses such as Whole Foods which adhere to a stakeholder model of customer and employee happiness first will dominate the entire economic landscape simply because it is a more robust business model. The old shareholder model that most economists believe in will not successfully compete over the long-term with the new paradigm that Whole Foods represents and that I’ve tried to articulate here. The better business model will win in the marketplace and it’s the Whole Foods model. Wait and see!

SUNNI: [laughing] Geez, John, you’re getting ahead of me — answering questions I haven’t asked yet! So, what does it suggest to you about this country that two very different types of retailer — Whole Foods Market and Wal-Mart — are both so profitable?

JOHN: It means that the mass market is segmenting in food — just like it is doing in every other category as well. Some people want the cheapest food and some people want the highest quality food with high levels of customer service. Wal-Mart meets the first group of people and Whole Foods meets the needs of the second group.

SUNNI: You’ve mentioned your management style, and I would like to explore that more. It’s certainly worked very well, but it doesn’t seem to be a very libertarian one. Do you see your management style as paradoxical given your libertarian philosophy?

JOHN: Most corporations in the United States are hardly the epitome of libertarian utopias. In fact, most corporations in the United States are organized as top-down, command & control, hierarchical systems. Very little personal freedom exists in these corporations. Their employees are often managed through either pure financial incentives — greed — or through fear — “my way or the highway”. Whole Foods is very, very different. Our mission at Whole Foods can be summed up by our slogan “Whole Foods, Whole People, Whole Planet”. We put great emphasis at Whole Foods on the “Whole People” part of this mission. We believe in helping support our team members to grow as individuals — to become “Whole People”. We consciously use Maslow’s hierarchy of needs model to help our team members to move up Maslow’s hierarchy. As much as we are able, we attempt to manage through love instead of fear or greed. We allow tremendous individual initiative at Whole Foods and that’s why our company is so innovative and creative. Most retail companies create a prototype retail store format and then cookie-cutter reproduce it across the country. Think McDonalds. Not Whole Foods. We have no prototype store. All our stores are unique. Why? Because our team members are constantly innovating, experimenting, and improving them. Whole Foods is very much committed to a Hayekian discovery process and our team members — both as individuals and as members of teams — are leading this Hayekian discovery process. As our team members learn and grow as individuals, as they become self-actualized, as they become “Whole People”, our company better fulfills its mission to all of its stakeholders.

The seeming paradox that you keep hinting at is no paradox at all. Human beings are both individuals and members of communities (or collectives). We learn and grow best through relationships and our growth will always be limited without them. I haven’t met anyone that I consider to be self-actualizing who did it all by themselves. Freedom as an ideal is a very, very incomplete ideal when it lacks love. Freedom is my highest “political ideal”, but love is my highest “personal ideal”. We need both. There is no paradox and there is no contradiction here. Freedom and love: let us marry these two together!

SUNNI: [laughing] Now that sounds like a marriage made in heaven, John! And thanks for not taking my pushing here too personally; I actually don’t see it as a paradox either, but I imagine that you know of people in the pro-freedom community — I sure do — who seem to have an almost phobic reaction to anything that moves beyond the individual level. I’m an individualist, but I’m no idiot — we’re social animals, and one of the things that interests me most about libertarians — especially as a psychologist — is how they approach those two aspects of human nature.

JOHN: Some libertarians may be using their political ideology as a psychological defense to avoid the challenge of further personal growth. From a psychological standpoint the challenge for all of us is to simultaneously continue to individuate as individuals while also integrating closer to our communities. In my experience, libertarians are more enthusiastic about the individuation part than the integration part. However, psychologically healthy, self-actualizing people need to be doing both.

SUNNI: A very interesting observation, John … and of course, if the individuals aren’t psychologically healthy, it’s very difficult to create a vibrant, pro-freedom community. This reminds me: I’ve seen people call you an anarchist, but in other places I’ve read others who claim you think some government is necessary, which would make you at the very least a minarchist. Which is it?

JOHN: I’m not an anarchist. Of course government is necessary. Without a monopoly of force by some institution — let’s call it “government” — we will have various violent gangs and private armies struggling for political control and the winner will become the de facto government. While government is necessary the never-ending political challenge is to find ways to keep government in check. “Who guards the guardians?” remains a huge philosophical issue. The United States has done better than most other countries in this regard with the creation of the Constitution and Bill of Rights, and the various governmental checks and balances. Unfortunately, as we both know, government has been steadily gaining in power ever since the United States came into being. What is the solution? There is no simple solution–just the ongoing and continual quest by people who care about freedom and individual rights to work to expand them and lessen governmental power. Progress can be made. For example, there is much more freedom in Eastern Europe than there was 30 years ago.

SUNNI: Yes, there’s been a lot of progress, but I think many would say that’s in spite of the kind of government you’re speaking of. I don’t want to focus on this too much, but I’m curious about how you might think a monopoly of force by any institution can be genuinely limited, short term as well as long term. It seems to me to be the nature of powerful institutions to always work to retain, and gain, more power.

JOHN: Competition is the best way to limit any power — economic, social, political, or military. For example, it is good that our states have to compete for businesses and citizens. To some extent this puts a limit on their ability to tax their citizens because many will vote with their feet and move to a different state. California has been driving business to move to other States for a couple of decades now. Our federal government could obviously use more competition as well. As financial capital becomes more and more liquid and mobile it will be
increasingly easy to move it to more favorable tax homes and more free locales. That may be illegal, but it will increasingly happen anyway if
our federal government becomes too oppressive. Breaking the federal government’s monopoly on money is obviously very important. I think we are pretty near to doing that right now with increasing competition to the dollar from the euro and eventually the yuan. People and businesses will be able to denominate their investments and assets in whatever currency they have the most faith in.

So competition with other nations will become increasingly important as a check on our federal government’s power. Obviously Constitutional amendments could be very powerful checks as well, but are difficult to get into law. Probably the most important thing we can do, however, is continue to fight the good fight for more liberty. Citizen activism can make a huge difference in the world and frequently has.

Liberty has always fought an uphill battle throughout history. You can pretty much name any period of time in history that you wish to, and if you study it carefully, you’ll see that liberty was always very constrained. There never was a golden age for liberty. I would argue, in fact, that right now there probably exists more absolute personal and political freedom across the entire globe than at any time in history. Even here in the United States. We tend to forget how little freedom that women and minority citizens have had in America throughout our history. There has been tremendous progress made in these 2 areas within my own lifetime. We tend to forget the progress we have collectively made and instead focus more on what has been lost or not yet gained. Progress tends to advance in more of a spiral fashion
than a straight line upward.

SUNNI: Hmm. I’ll have to think about that, John; I’m not convinced that competition is a sufficient check for an institution with a monopoly on force. It seems to me that decentralizing force is the best course. But, back to Whole Foods Market. I read that you were pretty upset after the Madison Wisconsin Whole Foods Market voted for a union — not surprisingly, since most unions aren’t private or voluntary organizations these days. Yet I know some libertarians who are pro-union. Can you give me the short version of why you think unions aren’t beneficial?

JOHN: I’ve written a 17-page pamphlet (a chapter in my upcoming book) called Beyond Unions. In it I outline my philosophy towards unions. I can’t do complete justice to all my ideas briefly. Let me just make a few points.

The right to collective bargaining (unionization) is an important legal right. It is important that employees, when they wish to, should have the legal right to form unions. In countries where unions are outlawed we see massive totalitarian exploitation of workers. Solidarity in Poland was a very important force to liberating that country from communism.

No employee should be forced to join a union against their will. Unfortunately in many states in our country, such as California, once a union is voted in by a majority of the employees, employees no longer have free choice in this matter. This closed shop means they must join the union and pay dues to the union whether they wish to or not. If they don’t join then they are fired. I believe open shops should be legal in all states and no employee should be forced against their will, as a condition of employment, to join a union.

SUNNI: Yeah, that’s what I find most objectionable about union practices.

JOHN: It’s illegal in the United States for there to be company unions — special unions which are formed and controlled by the employees and managers of the company to represent their interests and collectively bargain on their behalf. These type of unions are legal in many countries such as Japan, but are illegal in the United States. Instead the law requires that all unions be outside unions. I believe this law should be repealed and that company unions should be as legal as any other kind of voluntary association. Why shouldn’t employees and employers have the legal right to form this type of voluntary association if they wish to? Preventing company unions is a form of monopoly protection from competition for outside union organizations.

Unions as they evolved in the United States became very adversarial, untrusting, and opposed to the success and prosperity of the business. This is my major objection to unions today — they harm the flourishing of the business for all the stakeholders. Instead of cooperation between stakeholders, they focus on competition between management and labor. Instead of embracing the notion of the “expanding pie” vision of capitalism — more for everyone, or win-win — they frequently embrace the zero-sum philosophy of win-lose.

The Whole Foods store in Madison, Wisconsin was organized in the summer of 2002 by a group of young union organizers who hired into the store to organize it. Most of them quit right after the election. The union election was a wakeup call for Whole Foods leadership to refocus on the team member stakeholder. We had gotten out of balance and the pro-union vote was a symptom of it. We made major changes in 2003 to improve our benefits to our team members throughout the company. I’m happy to say that the team members in Madison collectively petitioned to remove the union from their store just over one year later and Whole Foods is once again 100% union free despite a few other union organization attempts over the past three years.

Our experience with unions in Madison and in other cities has helped make our company a better company. I think this illustrates one really valuable function that unions play in our society. They are a form of competition for the hearts and minds of your employees (team members). If you make the mistake of taking your team members for granted, treat them poorly, or have inferior pay and benefits then you are vulnerable to the competition from unions. The threat of unions can help a company improve, just like any other competitor does.

SUNNI: I don’t know if you know that I’m part of the consumer privacy group CASPIAN. In addition to exposing the reality behind supermarket “loyalty” cards, we also challenge the increasing surveillance of consumers, through technology like RFID chips and the increasing databasification of every transaction. Whole Foods Market used to have a card, but it was discontinued — what brought about its end? Are there any plans for a new one?

JOHN: We tried a card, but it was expensive to administer and wasn’t popular with our customers. There is no plan to bring one back anytime soon.

SUNNI: What’s your view on consumer privacy? Is it okay for companies to mine and crosslink data from people, then sell it to others? Is it okay for that information to be turned over to government agencies or contractors? Where do you see a line between providing good customer service and invading customers’ privacy?

JOHN: I believe in consumer privacy. It is about basic trust between the retailer and the customer. We want what is best for our customers. Respecting their privacy comes with the territory, in my opinion.

SUNNI: Whole Foods Market is known for its excellent customer service. Many retailers see datamining and customer relationship management — which involve differing types of customer monitoring — as ways to provide better customer service. How does your company provide such good service without the snooping cards?

JOHN: We believe in treating all our customers with respect. Our team members are taught to give good service to everyone and not single out differing groups for special services. All our customers are equal and all should be respected. No discrimination.

SUNNI: You know, John, respect’s a word that I don’t see much in the supermarket industry news and literature I follow. And when I go shopping, I often don’t feel like my business is respected — it’s more like I’m being tolerated, if that. It seems to me that many retailers have shifted away from providing quality goods and services toward raw consumerism. And in that environment, things like respect and customer service and privacy don’t seem to matter. I don’t think customer service itself is endangered — Whole Foods Market is a good indicator it isn’t — but what about consumer privacy? Do you see any way for meaningful privacy to remain in today’s computer-based marketplace?

JOHN: Not unless stringent privacy protection laws are passed.

SUNNI: I’d prefer that the market take it on, rather than more laws. Libertarians love to extol the virtues of free markets — if people genuinely want certain things, a market will spring up to meet that demand, the thinking goes. But, the shackles of state regulation aside, the reality seems a bit more complicated than that. For example, I know that many individuals would happily exchange some degree of shopping convenience for greater privacy — slower, old-fashioned cash registers that don’t allow data-gathering, for example, or maybe needing to pay by cash instead of checks or credit/debit cards. But it’s a very small market, that’s also spread over the country. I think part of the small size is that many people simply aren’t aware to what degree they’re being tracked. What might it take for these ultra-niche markets, for lack of a better word, to start being served?

JOHN: That’s the way capitalism works: entrepreneurs identify unmet market desires and needs and then fulfill the needs. Since needs and desires continually evolve there is always room for new entrepreneurs. Maybe there’s an entrepreneurial opportunity for you here? Go for it!

SUNNI: [laughing] I think the last thing I need right now is another project! Or maybe I’m just having a hard time seeing myself as an entrepreneur. But, speaking of markets, you rode one — the organic food niche — on its rapid rise, both here in the U.S. and worldwide. How did you become interested in organic farming? What convinced you it’s a better means of food production than the traditional — not corporate — farming methods?

JOHN: That question cannot be answered simply or persuasively to skeptics in only a couple of paragraphs. It would involve a detailed critique of our entire food production system and I’m not willing to do that today. Let me just make a few points on it and leave it.

SUNNI: Fair enough.

JOHN: The United States agricultural system is based upon the industrial model. It has adopted industrial techniques to maximize efficiency and productivity of agricultural production, which are the only values that are recognized within this particular system. If chemical fertilizers and pesticides increase productivity and lower costs, they are therefore “good”. I’m not going to argue here or anywhere that increasing productivity and lowering costs are bad things in themselves. Producing food at lower costs is obviously a good thing. However, that is not the whole story here. There are other values in food production that are not recognized or valued in the industrial model. Some of these values include: the long-term health and fertility of the soil, the nutritional value and “life force value” of the food produced, the long-term sustainability of agriculture, the long-term effects on our health from small, but continual inputs of synthetic pesticides, the health and well-being of the farm workers, the purity and quality of our ground water, the health and well being of our livestock animals, and many other values. These other values are not seen or recognized in the price of the food produced under the industrial agricultural model. There is an information failure going on here. Many people intuitively recognize that organic agriculture partially corrects some of the flaws of the industrial system, even if they are not able to articulate well their reservations with the industrial model.

Defenders of the industrial agricultural model usually accuse organic proponents of being anti-scientific, irrational, against progress, etc. They seem to see themselves as Galileo standing against the Inquisition! I’m personally very pro-science and I’m happy to let science decide some of the arguments between the proponents of the industrial agricultural model and the organic agricultural model. Science is the best way we have to discover the truth. However, it is very important to realize that scientific knowledge often lags intuitive, experiential knowledge — sometimes by many decades.

Let me give you just two examples on this: 1. Cigarettes. It took several decades for scientific knowledge to catch up to what the average person intuitively knew — cigarettes are deadly and will eventually kill you. 2. Mad cow disease — science initially said that the rendering process eliminated any risk of danger to livestock animals from eating the dead remains of other animals. However, intuition and common sense tell us that feeding ruminant animals (vegetarians) the dead remains of other livestock animals might have potentially unforeseen negative consequences. Turns out it did, and it’s possible that millions of people have been exposed to mad cow disease this way. Alzheimer’s disease and other forms of dementia have very similar symptoms to mad cow disease.

I believe that over the long term — within my lifetime — many and perhaps most of the claims that proponents of organic agricultural make will be vindicated by scientific research — research which is now in either its very early stages or currently lacks the scientific methodologies to determine, such as the life force value or “chi” of various foods. Other claims that are intuitively obvious to me and many others will likely be proven, however. I fully expect science to show the importance of the connection between soil fertility and nutritional value of food. I expect science will eventually verify that organic foods are more nutritious, that continual inputs of low-grade synthetic pesticides have negative long-term health consequences, that eating factory farm livestock animals does not support long-term health and longevity, that farm workers at organic farms outlive farm workers at industrial farms, that pesticide runoff, and waste waters from livestock factory farms have deadly negative impacts on the water quality and the local ecosystems, etc. Consider the last one already scientifically proven. Livestock factory farms are environmental disasters.

Some of the criticisms of the industrial agricultural model will not be resolved by science. These are ethical criticisms. The best example is what we are doing to our livestock animals on the industrial factory farms. In the United States alone we slaughter over 10 billion livestock animals for food every single year! The great majority of these animals are raised in incredibly inhumane ways because this type of treatment maximizes productivity and lowers costs, and thus lowers costs to the consumer. But what about the animals? Do they count for nothing? Is it ethically right for a chicken or a pig to live its entire life in a very small cage, never seeing the sun or getting outdoors? I don’t think it is right — no matter how high the productivity is. Productivity and lower costs are not the only values that matter to me and to most other people.

In general, my answer is to let the market decide some of these questions. If people want to buy organic foods because they believe they are better for their personal health and better for the environment then they should have the right to do so. Whole Foods isn’t seeking to make the industrial agricultural model illegal, but we do believe that there are millions of people who prefer the organic model for numerous reasons. We exist to fulfill those needs and desires of our customers. At the end of the day it isn’t Whole Foods’ duty and responsibility to prove anything about organic methods of agriculture. We’re retailers and we exist to serve our customers to the best of our ability. Let the marketplace decide consumer preferences and let science continue to do its research to answer the unanswered questions.

SUNNI: A lot of food for thought there, John. What’s your view of genetically modifying foods, both plant and animal? It seems to me that some opponents are overstating its potential danger, since many of our now-essential foods are the result of much more primitive genetic engineering — going back thousands of years, sometimes.

JOHN: Another very complex question, Sunni. You’re asking me the most difficult and complex questions that I have ever been asked in any interview before.

SUNNI: Thank you, John — I take that as a high compliment!

JOHN: There are no simple answers to these questions. Just a few points here.

I disagree with the argument that the type of genetic engineering that is going on today is qualitatively the same as the evolution of various species through selective breeding in the past. Selective breeding always had built-in biological safeguards. There was always a certain kind of biological integrity to the species (the species barrier) that limited the ability to alter it. Genetic engineering changes this. Scientists are now able to combine genes from completely different species together with unforeseen, unknown, and unintended consequences. The risks definitely escalate now that the species barrier has been breached.

Should genetic engineering be illegal or banned? Many think so. I do not. However, there are serious ethical issues with genetic engineering that can’t simply be dismissed as “anti-scientific” or “neo-Luddite”. I don’t believe we can allow just anything to go here. However, a detailed discussion is simply beyond the scope of this interview.

SUNNI: Sure; I understand that.

JOHN: Whole Foods has had a very consistent position on genetically engineered foods. Label them. Consumers, whether rightly or wrongly, are very concerned about GMOs. Don’t they have the right to know whether they are eating them or not? We think they do and we support mandatory labeling so that consumers can make informed choices in the marketplace.

SUNNI: Some people see a significant portion of the environmental movement — especially organic/sustainable farming and the position against genetic modification — as being anti-technology or anti-progress. Another good example would be the relatively new elimination training idea — that it’s better for babies to go without diapers. The claim is that this method eliminates all the waste associated with diapers — but it overlooks the increased likelihood of spreading disease, which of course is still a real problem in many third-world countries. Do you think the green movement is inherently anti-technology or -progress?

JOHN: Some greens are anti-technology and anti-progress — don’t forget anti-capitalist and anti-corporations too — but I don’t think this defines the entire movement. Mostly greens are concerned about environmental integrity and are deeply fearful about what the future may/will bring. Rather than seeing the future optimistically, they see it through the eyes of fear and of environmental decline. Virginia Postrel caught it well with her fabulous book
The Future and its Enemies. There are in fact many things to be very concerned about and environmental integrity is certainly one of them. For those of us who love the natural world, who love farm animals, love whales, and who want to conserve and preserve wilderness around the world — count me as yes on all of the above — there is much that is going on that is very upsetting and needs to be changed. What sets me apart from many of the greens — although I share their love for nature — however, is that I believe that human freedom and free markets are critical components to the solution to our collective environmental challenges, while many of them believe they are the primary causes of our environmental problems. I believe a new paradigm is needed — one that places freedom and capitalism as core values, but also recognizes that responsibility, care, and love must be core values as well. Many of our current environmental problems are simply the result of seeing nature through the eyes of the industrial metaphor — lifeless and without intrinsic value, to be manipulated as we please. However, when we look through the eyes of love at other living beings, nature, and the larger-world environment we realize that we wish to conserve, nurture, and protect them — and stop exploiting, manipulating, or destroying them.

SUNNI: Are there elements of it that you think are too extreme?

JOHN: Any element which uses violence to achieve its objectives is too extreme, in my opinion.

SUNNI: While visiting your ranch last year for a FLOW conference, I came across an article which described your transformation from vegetarian to vegan — FastCompany has a very similar article online. I was impressed by a quote attributed to you, in which you said the best way to argue with an opponent is to completely understand his or her point of view. How often do you engage in that kind of pursuit, as you did with the duck woman?

JOHN: I continually do it. I’m committed to understanding, realizing, and experiencing truth. It is essential that we read books that disagree with our own personal viewpoints — that challenge us, stretch us, upset us, and break us out of our comfortable world views, whatever they may be. I’m far less interested in being right or belonging to some school of thought than I am in personally learning and growing. Most people are afraid to open themselves to new ideas and new viewpoints because they are afraid it will require them to change. And they’re right — it will cause them to change. However, I enjoy this kind of change because I see it as personal growth. I became a vegan — or almost a vegan, since I still eat eggs from my own chickens — after I read the literature on animal welfare and animal rights. Many of my friends are unwilling to read these books because they literally don’t wish to know what is going on. Why not? Because the knowledge may require them to change their diets and they aren’t willing to take this risk. I desire to take these risks because I want to learn and grow.

SUNNI: It seems to me that many libertarians fail in outreach in part because of a failure to understand the opponent’s view, and that a large part of that originates in discounting the importance of emotions. Would you agree? Got any ideas for improvements there?

JOHN: I definitely agree! Libertarians would be well served to develop their Emotional Intelligence (check out Daniel Goleman’s
book with this same title). Many — not all, of course — libertarians are hyper-rationalists, who have not yet gotten in touch with their deeper feelings. Their hearts have not fully opened to the reality of love. They’re afraid of their emotions, afraid to be lose control, and to be overwhelmed by their feelings. I personally agree with the philosopher David Hume who said, “Reason is and ought to be the slave of the passions.” Of course, the passions that I believe reason should be the slave of are love-based — compassion, generosity, joy, and forgiveness — not the fear-based emotions of envy, resentment, revenge, anger, and hatred. I believe that reason should be the slave of love. That’s how I’m trying to live my life. This is a very difficult idea for many libertarians to accept because it means a shift in their consciousness. It means going beyond our ego-based reason, and most people are deeply addicted to their egos. When our hearts are open to the reality of love we are literally in a different — I would argue higher — state of consciousness. Love cannot be fully understood or grasped by the rational mind. It can only be experienced and when the rational mind is analyzing it and trying to understand it, then the actual experience of love is no longer present.

SUNNI: Yeah … and I think fear plays into this, too. Many people have a fear of losing control, of indulging in feelings; some see that as weakness, while others probably think that if they give in, they won’t be able to regain control. It’s a hard balance for many people — and especially for many libertarians, as you said. Speaking of balance, it wasn’t that long ago that Whole Foods Market launched a new type of store that sounds to me like a blend of grocery shopping and entertainment. How’s that effort going? How many more stores do you anticipate to upgrade?

JOHN: Our new store in downtown Austin is the largest and best store we’ve ever opened. It is doing very, very well for us. We will learn from our experiences with this store and continue improving both our new and existing stores. We constantly strive to continuously upgrade all of our stores. We try to improve every one of them continuously.

SUNNI: I don’t remember whether it was in a news story or a personal email, but someone characterized that new store in Austin as being “scary”. And I’ll be honest, John, it doesn’t sound like a store I’d like much. The Whole Foods Market press release, with its comment about the seafood department being “theater”, doesn’t have me eager to visit a store like the Austin one. Am I an old-fashioned curmudgeon who’s going to be left behind with this new wave of shopping experience, or is this your vision for a new niche in the supermarket industry? [laughs]

JOHN: Well, you should visit the store first and then tell me what you think. I’m biased, of course, but I believe it is the finest food store in all of the United States. Sure, some people think it is too big and preferred the smaller old store. I first heard that 25 years ago when we relocated Safer Way — 3,000 square feet — to the first Whole Foods Market location — 10,500 square feet. The best indication of customer satisfaction and dissatisfaction, however, is not anecdotal, but how people vote with their pocketbooks. They are voting very positively for the new larger store, which has broken a number of company sales records since it opened 2 months ago.

SUNNI: You’re right — can’t argue with that! And I don’t know when I’ll be back in Austin, but when I am I’ll check it out for myself. Guess your marketing copy just didn’t work for me that time.

JOHN: Let me know when you next come to town so I can tour the store with you.

SUNNI: Will do — and that’s a very tempting justification for a road trip. The drive to Texas from here is mostly very scenic. I know that in addition to your corporate activism with Whole Foods Market, you recently started a new foundation, the Whole Planet Foundation. How’s that going? I tried to find a web site for it, but was unable to … is one forthcoming?

JOHN: The Whole Planet Foundation hasn’t gone public yet. We will be doing our official public launch next October with a Global 5% Day at Whole Foods to initially fund it and the unveiling of the web site. All I’ll say about it now is that we’ll be working with the Grameen Bank and EARTH University to help empower poor people in all the communities that Whole Foods is currently trading with, beginning in Central America. I recommend reading Muhammed Yunnis’ book
Banker to the Poor, which tells the story of Grameen Bank in Bangladesh.

SUNNI: I remember hearing about that at the FLOW conference — it is a fascinating and inspiring story. What sorts of things will the foundation be focusing on?

JOHN: Empowering poor people to better their lives and the lives of their families.

SUNNI: John, you’re an excellent example of a pro-freedom person who’s following his dream while apparently operating within the confines of a system that restricts many liberties. What advice would you give to other freedom-minded entrepreneurs who are just getting started?

JOHN: My advice is to follow your heart wherever it takes you. Choose love instead of fear. If you do, a wonderful life adventure awaits you!

SUNNI: Do you think working outside the state’s channels — not paying taxes, not bothering with licenses and inspections and such, among other things — is a viable means of being effective?

JOHN: I think it is an excellent way to be fined, put out of business, and put in jail. I’m an entrepreneur and I don’t wish to waste my limited time and energy fighting against issues that are less important to me. However, that’s just my personal preference. Others may wish to resist idiotic regulations and laws more directly. To each his or her own.

SUNNI: What’s your view of the short-term prospects — 5 to 10 years — for liberty?

JOHN: I’m not sure about the short-term prospects. However, the long-term prospects are excellent. Consider how the world was just 150 years ago. 150 years ago there was only one democracy in the entire world — the United States. And the United States had legalized slavery, was committing genocide against the Native Americans, and women didn’t have the right to vote. Now 150 years later, 60% of the nations of the world are democracies, slavery has been outlawed throughout the world, and women are increasingly empowered almost everywhere. Liberty has been on the rise. Look at Eastern Europe today versus 30 years ago — liberty is well-rooted there now and that certainly wasn’t the case when these countries were under the thumb of totalitarian communistic governments.

SUNNI: Yep, that’s been amazing to see. Largely through ISIL, Lobo and I have made several friends in that part of the world, and although challenges are still there, it’s always inspiring for me to think about what’s happened — and largely through peaceful activism. Here, a number of pro-freedom individuals think that Bush’s actions are helping our cause, in that they’re waking up a lot of people to the loss of liberty he’s presided over. Do you see it that way?

JOHN: Bush has been a mixed bag for liberty in my opinion. The Patriot Act is a step back, of course. On the other hand I think it is difficult to argue that Afghanistan or Iraq had more liberty under the Taliban or Saddam than they have today.

SUNNI: Do you have any regrets regarding what it’s taken for you to get where you are today?

JOHN: Not too many regrets. My life has so far been an incredibly wonderful adventure and it’s getting better all the time. I am truly living a happy dream and wish the same for everyone else.

SUNNI: I believe you once told me that you enjoy hiking. What’s been your best hiking trip so far?

JOHN: I through-hiked the entire Appalachian Trail in 2002. I took off 4.5 months from work to do it. That was the most fun. In terms of the most beautiful hike, I would have to say that last summer when we hiked the High Sierra portion of the Pacific Crest Trail wins the prize.

SUNNI: Wow … both sound great. What other kinds of things do you enjoy in your leisure time?

JOHN: Besides long-distance hiking I love hanging out with my wife and my friends. I love reading and discovering and playing with new ideas. I love to play games of all types. I love music. I love cooking and eating good food. I love children. I love animals. I love a lot of things!

SUNNI: [laughing] I never would have guessed, John! No wonder you have few regrets. Who are some of the people who inspire, delight, and/or motivate you?

JOHN: That depends greatly upon the category of activity we might be talking about. The person I admire most in the world is my wife, Deborah. She is my main inspiration. When I was younger, my father was my mentor in business and in life. There are many, many others.

SUNNI: I know I’ve taken a lot of your time, John, and I appreciate every minute of it … Before I go, is there anything else you’d like to share with my readers? Other projects I didn’t mention, words of wisdom …?

JOHN: The same advice I gave above: My advice is to follow your heart wherever it takes you. Choose love instead of fear. If you do, a wonderful life adventure awaits you! Carpe diem!

SUNNI: Thank you very much for all your time today, John. It’s been very stimulating and thought-provoking talking with you, and I hope our trails cross in person again soon.

JOHN: It’s been fun. Take care.

Thirty-five years ago, Milton Friedman wrote a famous article for The New York Times Magazine whose title aptly summed up its main point: “The Social Responsibility of Business Is to Increase Its Profits.” The future Nobel laureate in economics had no patience for capitalists who claimed that “business is not concerned ‘merely’ with profit but also with promoting desirable ’social’ ends; that business has a ’social conscience’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of re formers.”

Friedman, now a senior research fellow at the Hoover Institution and the Paul Snowden Russell Distinguished Service Professor Emeritus of Economics at the University of Chicago, wrote that such people are “preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting pup pets of the intellectual forces that have been undermining the basis of a free society these past decades.”

John Mackey, the founder and CEO of Whole Foods, is one businessman who disagrees with Friedman. A self-described ardent libertarian whose conversation is peppered with references to Ludwig von Mises and Abraham Maslow, Austrian economics and astrology, Mackey believes Friedman’s view is too narrow a description of his and many other businesses’ activities. As important, he argues that Friedman’s take woefully undersells the humanitarian dimension of capitalism.

In the debate that follows, Mackey lays out his personal vision of the social responsibility of business. Friedman responds, as does T.J. Rodgers, the founder and CEO of Cypress Semiconductor and the chief spokesman of what might be called the tough love school of laissez faire. Dubbed “one of America’s toughest bosses” by Fortune, Rodgers argues that corporations add far more to society by maximizing “long-term shareholder value” than they do by donating time and money to charity.

Reason offers this exchange as the starting point of a discussion that should be intensely important to all devotees of free minds and free markets. Subscribe to Reason.

Putting Customers Ahead of Investors
-John Mackey

In 1970 Milton Friedman wrote that “there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” That’s the orthodox view among free market economists: that the only social responsibility a law-abiding business has is to maximize profits for the shareholders.

I strongly disagree. I’m a businessman and a free market libertarian, but I believe that the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders-for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.

My argument should not be mistaken for a hostility to profit. I believe I know something about creating shareholder value. When I co-founded Whole Foods Market 27 years ago, we began with $45,000 in capital; we only had $250,000 in sales our first year. During the last 12 months we had sales of more than $4.6 billion, net profits of more than $160 million, and a market capitalization over $8 billion.

But we have not achieved our tremendous increase in shareholder value by making shareholder value the primary purpose of our business. In my marriage, my wife’s happiness is an end in itself, not merely a means to my own happiness; love leads me to put my wife’s happiness first, but in doing so I also make myself happier. Similarly, the most successful businesses put the customer first, ahead of the investors. In the profit-centered business, customer happiness is merely a means to an end: maximizing profits. In the customer-centered business, customer happiness is an end in itself, and will be pursued with greater interest, passion, and empathy than the profit-centered business is capable of.

Not that we’re only concerned with customers. At Whole Foods, we measure our success by how much value we can create for all six of our most important stakeholders: customers, team members (employees), investors, vendors, communities, and the environment. Our philosophy is graphically represented in the opposite column.

There is, of course, 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.

Many thinking people will readily accept my arguments that caring about customers and employees is good business. But they might draw the line at believing a company has any responsibility to its community and environment. To donate time and capital to philanthropy, they will argue, is to steal from the investors. After all, the corporation’s assets legally belong to the investors, don’t they? Management has a fiduciary responsibility to maximize shareholder value; therefore, any activities that don’t maximize shareholder value are violations of this duty. If you feel altruism towards other people, you should exercise that altruism with your own money, not with the assets of a corporation that doesn’t belong to you.

This position sounds reasonable. A company’s assets do belong to the investors, and its management does have a duty to manage those assets responsibly. In my view, the argument is not wrong so much as it is too narrow.

First, there can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors. For example: In addition to the many thousands of small donations each Whole Foods store makes each year, we also hold five 5% Days throughout the year. On those days, we donate 5 percent of a store’s total sales to a nonprofit organization. While our stores select worthwhile organizations to support, they also tend to focus on groups that have large membership lists, which are contacted and encouraged to shop our store that day to support the organization. This usually brings hundreds of new or lapsed customers into our stores, many of whom then become regular shoppers. So a 5% Day not only allows us to support worthwhile causes, but is an excellent marketing strategy that has benefited Whole Foods investors immensely.

That said, I believe such programs would be completely justifiable even if they produced no profits and no P.R. This is because I believe the entrepreneurs, not the current investors in a company’s stock, have the right and responsibility to define the purpose of the company. It is the entrepreneurs who create a company, who bring all the factors of production together and coordinate it into viable business. It is the entrepreneurs who set the company strategy and who negotiate the terms of trade with all of the voluntarily cooperating stakeholders—including the investors. At Whole Foods we “hired” our original investors. They didn’t hire us.

We first announced that we would donate 5 percent of the company’s net profits to philanthropy when we drafted our mission statement, back in 1985. Our policy has therefore been in place for over 20 years, and it predates our IPO by seven years. All seven of the private investors at the time we created the policy voted for it when they served on our board of directors. When we took in venture capital money back in 1989, none of the venture firms objected to the policy. In addition, in almost 14 years as a publicly traded company, almost no investors have ever raised objections to the policy. How can Whole Foods’ philanthropy be “theft” from the current investors if the original owners of the company unanimously approved the policy and all subsequent investors made their investments after the policy was in effect and well publicized?

The shareholders of a public company own their stock voluntarily. If they don’t agree with the philosophy of the business, they can always sell their investment, just as the customers and employees can exit their relationships with the company if they don’t like the terms of trade. If that is unacceptable to them, they always have the legal right to submit a resolution at our annual shareholders meeting to change the company’s philanthropic philosophy. A number of our company policies have been changed over the years through successful shareholder resolutions.

Another objection to the Whole Foods philosophy is where to draw the line. If donating 5 percent of profits is good, wouldn’t 10 percent be even better? Why not donate 100 percent of our profits to the betterment of society? But the fact that Whole Foods has responsibilities to our community doesn’t mean that we don’t have any responsibilities to our investors. It’s a question of finding the appropriate balance and trying to create value for all of our stakeholders. Is 5 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 0 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 requires the legitimacy of investor approval. In my experience, most investors understand that it can be beneficial to both the corporation and to the larger society.

That doesn’t answer the question of why we give money to the community stakeholder. For that, you should turn to one of the fathers of free-market economics, Adam Smith. The Wealth of Nations was a tremendous achievement, but economists would be well served to read Smith’s other great book, The Theory of Moral Sentiments. There he explains that human nature isn’t 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, most people grow beyond this egocentrism and begin to care about others-their 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. Whole Foods gives money to our communities because we care about them and feel a responsibility to help them flourish as well as possible.

The business model that Whole Foods has embraced could represent a new form of capitalism, one that more consciously works for the common good instead of depending solely on the “invisible hand” to generate positive results for society. The “brand” of capitalism is in terrible shape throughout the world, and corporations are widely seen as selfish, greedy, and uncaring. This is both unfortunate and unnecessary, and could be changed if businesses and economists widely adopted the business model that I have outlined here.

To extend our love and care beyond our narrow self-interest is antithetical to neither our human nature nor our financial success. Rather, it leads to the further fulfillment of both. Why do we not encourage this in our theories of business and economics? Why do we restrict our theories to such a pessimistic and crabby view of human nature? What are we afraid of?

Making Philanthropy Out of Obscenity
-Milton Friedman

By pursuing his own interest [an individual] 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, The Wealth of Nations

The differences between John Mackey and me regarding the social responsibility of business are for the most part rhetorical. Strip off the camouflage, and it turns out we are in essential agreement. Moreover, his company, Whole Foods Market, behaves in accordance with the principles I spelled out in my 1970 New York Times Magazine article.

With respect to his company, it could hardly be otherwise. It has done well in a highly competitive industry. Had it devoted any significant fraction of its resources to exercising a social responsibility unrelated to the bottom line, it would be out of business by now or would have been taken over.

Here is how Mackey himself describes his firm’s activities:

1. “The most successful businesses put the customer first, instead of the investors” (which clearly means that this is the way to put the investors first).
2. “There can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors.”

Compare this to what I wrote in 1970:

“Of course, in practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.

“To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government.

“In each of these…cases, there is a strong temptation to rationalize these actions as an exercise of ’social responsibility.’ In the present climate of opinion, with its widespread aversion to ‘capitalism,’ ‘profits,’ the ’soulless corporation’ and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest.

“It would be inconsistent of me to call on corporate executives to refrain from this hypocritical window-dressing because it harms the foundations of a free society. That would be to call on them to exercise a ’social responsibility’! If our institutions and the attitudes of the public make it in their self-interest to cloak their actions in this way, I cannot summon much indignation to denounce them.”

I believe Mackey’s flat statement that “corporate philanthropy is a good thing” is flatly wrong. Consider the decision by the founders of Whole Foods to donate 5 percent of net profits to philanthropy. They were clearly within their rights in doing so. They were spending their own money, using 5 percent of one part of their wealth to establish, thanks to corporate tax provisions, the equivalent of a 501c(3) charitable foundation, though with no mission statement, no separate by-laws, and no provision for deciding on the beneficiaries. But what reason is there to suppose that the stream of profit distributed in this way would do more good for society than investing that stream of profit in the enterprise itself or paying it out as dividends and letting the stockholders dispose of it? The practice makes sense only because of our obscene tax laws, whereby a stockholder can make a larger gift for a given after-tax cost if the corporation makes the gift on his behalf than if he makes the gift directly. That is a good reason for eliminating the corporate tax or for eliminating the deductibility of corporate charity, but it is not a justification for corporate charity.

Whole Foods Market’s contribution to society-and as a customer I can testify that it is an important one-is to enhance the pleasure of shopping for food. Whole Foods has no special competence in deciding how charity should be distributed. Any funds devoted to the latter would surely have contributed more to society if they had been devoted to improving still further the former.

Finally, I shall try to explain why my statement that “the social responsibility of business [is] to increase its profits” and Mackey’s statement that “the enlightened corporation should try to create value for all of its constituencies” are equivalent.

Note first that I refer to social responsibility, not financial, or accounting, or legal. It is social precisely to allow for the constituencies to which Mackey refers. Maximizing profits is an end from the private point of view; it is a means from the social point of view. A system based on private property and free markets is a sophisticated means of enabling people to cooperate in their economic activities without compulsion; it enables separated knowledge to assure that each resource is used for its most valued use, and is combined with other resources in the most efficient way.

Of course, this is abstract and idealized. The world is not ideal. There are all sorts of deviations from the perfect market-many, if not most, I suspect, due to government interventions. But with all its defects, the current largely free-market, private-property world seems to me vastly preferable to a world in which a large fraction of resources is used and distributed by 501c(3)s and their corporate counterparts.

Put Profits First
-T.J. Rodgers

John Mackey’s article attacking corporate profit maximization could not have been written by “a free market libertarian,” as claimed. Indeed, if the examples he cites had not identified him as the author, one could easily assume the piece was written by Ralph Nader. A more accurate title for his article is “How Business and Profit Making Fit Into My Overarching Philosophy of Altruism.”

Mackey spouts nonsense about how his company hired his original investors, not vice versa. If Whole Foods ever falls on persistent hard times-perhaps when the Luddites are no longer able to hold back the genetic food revolution using junk science and fear-he will quickly find out who has hired whom, as his investors fire him.

Mackey does make one point that is consistent with, but not supportive of, free market capitalism. He knows that shareholders own his stock voluntarily. If they don’t like the policies of his company, they can always vote to change those policies with a shareholder resolution or simply sell the stock and buy that of another company more aligned with their objectives. Thus, he informs his shareholders of his objectives and lets them make a choice on which stock to buy. So far, so good.

It is also simply good business for a company to cater to its customers, train and retain its employees, build long-term positive relationships with its suppliers, and become a good citizen in its community, including performing some philanthropic activity. When Milton Friedman says a company should stay “within the rules of the game” and operate “without deception or fraud,” he means it should deal with all its various constituencies properly in order to maximize long-term shareholder value. He does not mean that a company should put every last nickel on the bottom line every quarter, regardless of the long-term consequences.

My company, Cypress Semiconductor, has won the trophy for the Second Harvest Food Bank competition for the most food donated per employee in Silicon Valley for the last 13 consecutive years (1 million pounds of food in 2004). The contest creates competition among our divisions, leading to employee involvement, company food drives, internal social events with admissions “paid for” by food donations, and so forth. It is a big employee morale builder, a way to attract new employees, good P.R. for the company, and a significant benefit to the community-all of which makes Cypress a better place to work and invest in. Indeed, Mackey’s own proud example of Whole Foods’ community involvement programs also made a profit.

But Mackey’s subordination of his profession as a businessman to altruistic ideals shows up as he attempts to negate the empirically demonstrated social benefit of “self-interest” by defining it narrowly as “increasing short-term profits.” Why is it that when Whole Foods gives money to a worthy cause, it serves a high moral objective, while a company that provides a good return to small investors-who simply put their money into their own retirement funds or a children’s college fund-is somehow selfish? It’s the philosophy that is objectionable here, not the specific actions. If Mackey wants to run a hybrid business/charity whose mission is fully disclosed to his shareholders-and if those shareholder-owners want to support that mission-so be it. But I balk at the proposition that a company’s “stakeholders” (a term often used by collectivists to justify unreasonable demands) should be allowed to control the property of the shareholders. It seems Mackey’s philosophy is more accurately described by Karl Marx: “From each according to his ability” (the shareholders surrender money and assets); “to each according to his needs” (the charities, social interest groups, and environmentalists get what they want). That’s not free market capitalism.

Then there is the arrogant proposition that if other corporations would simply emulate the higher corporate life form defined by Whole Foods, the world would be better off. After all, Mackey says corporations are viewed as “selfish, greedy, and uncaring.” I, for one, consider free market capitalism to be a high calling, even without the infusion of altruism practiced by Whole Foods.

If one goes beyond the sensationalistic journalism surrounding the Enron-like debacles, one discovers that only about 10 to 20 public corporations have been justifiably accused of serious wrongdoing. That’s about 0.1 percent of America’s 17,500 public companies. What’s the failure rate of the publications that demean business? (Consider the New York Times scandal involving manufactured stories.) What’s the percentage of U.S. presidents who have been forced or almost forced from office? (It’s 10 times higher than the failure rate of corporations.) What percentage of our congressmen have spent time in jail? The fact is that despite some well-publicized failures, most corporations are run with the highest ethical standards-and the public knows it. Public opinion polls demonstrate that fact by routinely ranking businessmen above journalists and politicians in esteem.

I am proud of what the semiconductor industry does-relentlessly cutting the cost of a transistor from $3 in 1960 to three-millionths of a dollar today. Mackey would be keeping his business records with hordes of accountants on paper ledgers if our industry didn’t exist. He would have to charge his poorest customers more for their food, pay his valued employees less, and cut his philanthropy programs if the semiconductor industry had not focused so relentlessly on increasing its profits, cutting his costs in the process. Of course, if the U.S. semiconductor industry had been less cost-competitive due to its own philanthropy, the food industry simply would have bought cheaper computers made from Japanese and Korean silicon chips (which happened anyway). Layoffs in the nonunion semiconductor industry were actually good news to Whole Foods’ unionized grocery store clerks. Where was Mackey’s sense of altruism when unemployed semiconductor workers needed it? Of course, that rhetorical question is foolish, since he did exactly the right thing by ruthlessly reducing his recordkeeping costs so as to maximize his profits.

I am proud to be a free market capitalist. And I resent the fact that Mackey’s philosophy demeans me as an egocentric child because I have refused on moral grounds to embrace the philosophies of collectivism and altruism that have caused so much human misery, however tempting the sales pitch for them sounds.

Profit Is the Means, Not End
-John Mackey

Let me begin my response to Milton Friedman by noting that he is one of my personal heroes. His contributions to economic thought and the fight for freedom are without parallel, and it is an honor to have him critique my article.

Friedman says “the differences between John Mackey and me regarding the social responsibility of business are for the most part rhetorical.” But are we essentially in agreement? I don’t think so. We are thinking about business in entirely different ways.

Friedman is thinking only in terms of maximizing profits for the investors. If putting customers first helps maximize profits for the investors, then it is acceptable. If some corporate philanthropy creates goodwill and helps a company “cloak” its self-interested goals of maximizing profits, then it is acceptable (although Friedman also believes it is “hypocritical”). In contrast to Friedman, I do not believe maximizing profits for the investors is the only acceptable justification for all corporate actions. The investors are not the only people who matter. Corporations can exist for purposes other than simply maximizing profits.

As for who decides what the purpose of any particular business is, I made an important argument that Friedman doesn’t address: “I believe the entrepreneurs, not the current investors in a company’s stock, have the right and responsibility to define the purpose of the company.” Whole Foods Market was not created solely to maximize profits for its investors, but to create value for all of its stakeholders. I believe there are thousands of other businesses similar to Whole Foods (Medtronic, REI, and Starbucks, for example) that were created by entrepreneurs with goals beyond maximizing profits, and that these goals are neither “hypocritical” nor “cloaking devices” but are intrinsic to the purpose of the business.

I will concede that many other businesses, such as T.J. Rodgers’ Cypress Semiconductor, have been created by entrepreneurs whose sole purpose for the business is to maximize profits for their investors. Does Cypress therefore have any social responsibility besides maximizing profits if it follows the laws of society? No, it doesn’t. Rodgers apparently created it solely to maximize profits, and therefore all of Friedman’s arguments about business social responsibility become completely valid. Business social responsibility should not be coerced; it is a voluntary decision that the entrepreneurial leadership of every company must make on its own. Friedman is right to argue that profit making is intrinsically valuable for society, but I believe he is mistaken that all businesses have only this purpose.

While Friedman believes that taking care of customers, employees, and business philanthropy are means to the end of increasing investor profits, I take the exact opposite view: Making high profits is the means to the end of fulfilling Whole Foods’ core business mission. We want to improve the health and well-being of everyone on the planet through higher-quality foods and better nutrition, and we can’t fulfill this mission unless we are highly profitable. High profits are necessary to fuel our growth across the United States and the world. Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must a businesses live just to make profits.

Toward the end of his critique Friedman says his statement that “the social responsibility of business [is] to increase its profits” and my statement that “the enlightened corporation should try to create value for all of its constituencies” are “equivalent.” He argues that maximizing profits is a private end achieved through social means because it supports a society based on private property and free markets. If our two statements are equivalent, if we really mean the same thing, then I know which statement has the superior “marketing power.” Mine does.

Both capitalism and corporations are misunderstood, mistrusted, and disliked around the world because of statements like Friedman’s on social responsibility. His comment is used by the enemies of capitalism to argue that capitalism is greedy, selfish, and uncaring. It is right up there with William Vanderbilt’s “the public be damned” and former G.M. Chairman Charlie Wilson’s declaration that “what’s good for the country is good for General Motors, and vice versa.” If we are truly interested in spreading capitalism throughout the world (I certainly am), we need to do a better job marketing it. I believe if economists and business people consistently communicated and acted on my message that “the enlightened corporation should try to create value for all of its constituencies,” we would see most of the resistance to capitalism disappear.

Friedman also understands that Whole Foods makes an important contribution to society besides simply maximizing profits for our investors, which is to “enhance the pleasure of shopping for food.” This is why we put “satisfying and delighting our customers” as a core value whenever we talk about the purpose of our business. Why don’t Friedman and other economists consistently teach this idea? Why don’t they talk more about all the valuable contributions that business makes in creating value for its customers, for its employees, and for its communities? Why talk only about maximizing profits for the investors? Doing so harms the brand of capitalism.

As for Whole Foods’ philanthropy, who does have “special competence” in this area? Does the government? Do individuals? Libertarians generally would agree that most bureaucratic government solutions to social problems cause more harm than good and that government help is seldom the answer. Neither do individuals have any special competence in charity. By Friedman’s logic, individuals shouldn’t donate any money to help others but should instead keep all their money invested in businesses, where it will create more social value.

The truth is that there is no way to calculate whether money invested in business or money invested in helping to solve social problems will create more value. Businesses exist within real communities and have real effects, both good and bad, on those communities. Like individuals living in communities, businesses make valuable social contributions by providing goods and services and employment. But just as individuals can feel a responsibility to provide some philanthropic support for the communities in which they live, so too can a business. The responsibility of business toward the community is not infinite, but neither is it zero. Each enlightened business must find the proper balance between all of its constituencies: customers, employees, investors, suppliers, and communities.

While I respect Milton Friedman’s thoughtful response, I do not feel the same way about T.J. Rodgers’ critique. It is obvious to me that Rodgers didn’t carefully read my article, think deeply about my arguments, or attempt to craft an intelligent response. Instead he launches various ad hominem attacks on me, my company, and our customers. According to Rodgers, my business philosophy is similar to those of Ralph Nader and Karl Marx; Whole Foods Market and our customers are a bunch of Luddites engaging in junk science and fear mongering; and our unionized grocery clerks don’t care about layoffs of workers in Rodgers’ own semiconductor industry.

For the record: I don’t agree with the philosophies of Ralph Nader or Karl Marx; Whole Foods Market doesn’t engage in junk science or fear mongering, and neither do 99 percent of our customers or vendors; and of Whole Foods’ 36,000 employees, exactly zero of them belong to unions, and we are in fact sorry about layoffs in his industry.

When Rodgers isn’t engaging in ad hominem attacks, he seems to be arguing against a leftist, socialist, and collectivist perspective that may exist in his own mind but does not appear in my article. Contrary to Rodgers’ claim, Whole Foods is running not a “hybrid business/charity” but an enormously profitable business that has created tremendous shareholder value.

Of all the food retailers in the Fortune 500 (including Wal-Mart), we have the highest profits as a percentage of sales, as well as the highest return on invested capital, sales per square foot, same-store sales, and growth rate. We are currently doubling in size every three and a half years. The bottom line is that Whole Foods stakeholder business philosophy works and has produced tremendous value for all of our stakeholders, including our investors.

In contrast, Cypress Semiconductor has struggled to be profitable for many years now, and their balance sheet shows negative retained earnings of over $408 million. This means that in its entire 23-year history, Cypress has lost far more money for its investors than it has made. Instead of calling my business philosophy Marxist, perhaps it is time for Rodgers to rethink his own.

Rodgers says with passion, “I am proud of what the semiconductor industry does-relentlessly cutting the cost of a transistor from $3 in 1960 to three-millionths of a dollar today.” Rodgers is entitled to be proud. What a wonderful accomplishment this is, and the semiconductor industry has indeed made all our lives better. Then why not consistently communicate this message as the purpose of his business, instead of talking all the time about maximizing profits and shareholder value? Like medicine, law, and education, business has noble purposes: to provide goods and services that improve its customers’ lives, to provide jobs and meaningful work for employees, to create wealth and prosperity for its investors, and to be a responsible and caring citizen.

Businesses such as Whole Foods have multiple stakeholders and therefore have multiple responsibilities. But the fact that we have responsibilities to stakeholders besides investors does not give those other stakeholders any “property rights” in the company, contrary to Rodgers’ fears. The investors still own the business, are entitled to the residual profits, and can fire the management if they wish. A doctor has an ethical responsibility to try to heal her patients, but that responsibility doesn’t mean her patients are entitled to receive a share of the profits from her practice.

Rodgers probably will never agree with my business philosophy, but it doesn’t really matter. The ideas I’m articulating result in a more robust business model than the profit-maximization model that it competes against, because they encourage and tap into more powerful motivations than self-interest alone. These ideas will triumph over time, not by persuading intellectuals and economists through argument but by winning the competitive test of the marketplace. Someday businesses like Whole Foods, which adhere to a stakeholder model of deeper business purpose, will dominate the economic landscape. Wait and see.

Read comments at Reason’s Hit and Run blog.