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What exactly is Conscious Capitalism? Join us for this introductory episode to this exciting new podcast, where we introduce ourselves and describe this key concept.
Sisodia, R., Sheth, R., Wolfe, D.B. Firms of Endearment (2003). Pearson FT Press.
Freeman, E. Stakeholder Theory on Wikipedia.
Timothy Henry: So welcome, everybody, to this, which is our first podcast of The Conscious Capitalists. Your hosts for today will be myself, Timothy Henry, one of the co-founders and a co-author of a book on conscious capitalism called The Conscious Capitalism Field Guide. And with me is my partner in crime, Raj Sisodia.
Raj Sisodia: Hi, everyone. Welcome to this new podcast. We hope to have a lot of fun discussing these ideas and hopefully sharing some enlightenment and inspiration along the way.
Timothy: Raj, maybe just as a way of introducing people to us and to you a little bit more, what are some of the things that were really important to you around getting involved? We were both there at the beginning of this movement. What was important to you at the beginning?
Raj: Well, for me it was the beginning of a new chapter in my life. I’d been a business professor at that point for about 21 years or so. But I had just published a book called Firms of Endearment, which is, as I recall, how you and I met. You came to a talk I gave in downtown Boston on that. And that really was a revelation for me, because I had been, I would say, part of that old narrative of business. I had been teaching that; that was what I had been taught. We’re all kind of market warriors in a way, just out there trying to capture market share and maximize profits and defeat our competitors. And all of that mindset. And then this book, Firms of Endearment, really opened my eyes to another way of being, businesses that operate with purpose, with love, with compassion, inclusiveness, caring, etc. Dramatically more successful while they’re spreading tremendous amounts of wellbeing, which is very important. So along that journey, I kind of discovered my purpose and my purpose found me. And then that led me to meet with John Mackey. One of the companies featured in that book was Whole Foods. And I had a vision for what I was calling the Institute for New Capitalism, or Inc. And I shared that with John at the end of our day together, and he looked at that and said that’s my vision as well. But I like the phrase conscious capitalism. So that’s kind of how all of that came about. And then as you and I and a bunch of others met at John’s ranch in February 2008 and said let’s try to do something. And we created that event later that year. So for me, it was really connecting to my heart and soul when it came to my work. Before that, I’d only been sort of intellectually engaged in it. And for the first time, I experienced tears of joy connected to my work I had previously experienced a lot of frustration and anger.
Timothy: Oh. Beautiful. Yeah.
Raj: I said, wow, this is something that speaks to me.
Timothy: I love it. I love the way you put it. I can relate totally to two things that you said. One is that it was a turning point in my career. I was at a point I’d been a consultant at that point for a good on 20 plus years. I remember when I first left University at Oxford in England in the mid-80s. I said I’m going to go live in the belly of the beast for a while because I understood there was something going on with this thing called business. And yet at the same time, there was a really bad perception of business, not being a force for good in the world. And I thought there’s got to be a better way. And I started off my career as a consultant and got a lot of exposure to a lot of businesses and began to see that there was a better way. But only a very few selected companies seemed to get it. And so it was really great when you and I remember having lunch at Bentley College and you saying there’s this retreat going on in a week or so at this guy John Mackey’s ranch. Do you want to come? I was like, yeah, absolutely. And so that was great. And then that second piece, connecting it to purpose. To me, it’s really important at some level. I know part of my purpose is how we create and catalog organizations and leaders that are as human as the people who work in them. And for me, conscious capitalism and the pillars that we have really articulate what that begins to look like at a practical level, and hence, why you and I co-authored the book on the field guide is starting to lay out how people might actually do that stuff. So I love it. It’s hard to believe that was February 2008.
Raj: So a lot of synchronicities happened. I’m a big believer that there are ideas that are floating around and they’re looking for a place to land. And I think this was something that was meant to emerge. I think we and others were sort of the carriers in a way. We were trusted with that mission to bring that to the world. And I think if I reflect on this last year, or even before the current crisis, 2019 felt like a bit of a tipping point year and kind of our Berlin Wall moment. 30 years, almost 30 years to the day after the Berlin Wall came down, which marked a new chapter in our human history. I think 2019 could have been that moment in the evolution of business.
Timothy: Yeah. Yeah.
Raj: Because the business roundtable in the US issued a new statement about the purpose of business after decades of not only focusing on economic value. And then of course Davos had their Davos Declaration in December about stakeholder capitalism. So I think our ideas, which seemed radical at one point, are becoming mainstream. And soon they might become obvious to people. And so, yeah, why not. How could you not do this, you know.
Timothy: Yeah. It’s funny you bring up the Berlin Wall, because in 2019 in September, you may recall we had the Conscious Capitalism Europe Summit. And after the summit was over, I had the opportunity to run a workshop the next day based on our book. Now this will date me, but I was in Berlin the weekend the wall fell. So, I remember being there with the crowds, a million people coming into West Berlin that weekend. A mass incredible party and everything. But what was really weird was that here I was September 2019 giving a workshop on conscious capitalism in the former headquarters of the East German communist party in Berlin. And that gave me goosebumps. What we’re trying to do with this podcast is we’re going to try to make this contemporary in the sense that at least initially every two weeks we’ll get together and we’ll talk about something that’s in the news that’s relevant and some of our thinking on some of the various tenets of conscious capitalism and how they’re being applied well, or maybe not so well where there’s room for improvement. I think that’s what we’re going to be trying to do over the next few months with this podcast. And, Raj, as you think about that, what comes to your mind as what you think is important for us to convey in these short, sweet moments of connecting with people?
Raj: Well, I would say that if we’re calling it the conscious capitalists, and I think we’re both optimists, but we’re also realists. We recognize the damage that has been done, what needs to change. But we also believe in the fact that human consciousness is rising, that we are infinitely adaptable and creative. And deep down we are caring and compassionate. All of that has to be awakened. And when we do all of that, there is nothing that we cannot achieve. And business is the instrument of change in society. Governments, obviously, have an important. Nonprofits do noble work. But unless we turn around the world of business, it’s almost like we’ve got a leaky boat and we keep worrying where water is still leaking. We have to stop the leak so business cannot be adding to the problems that nonprofits and governments have to deal with. We actually have to be part of the solution. So I think that’s what we’re going to explore, these extraordinarily moving, touching, inspiring stories of businesses and what they do for people, for communities, for the future, for the environment and all of that. And really hope to then trigger sort of a process of change in our listeners and in the businesses that they run. And I think we’re trying to start kind of a positive virus here, infecting people with hope and inspiration. And as we did in our books, a practical way of how you do this. Intrinsically, I think we’re entering the realm of not whether to do this, but how to do it. Although we will still talk about why it’s important to adopt these principles, but also we’ll be talking about how do you actually put them into practice.
Timothy: Yeah. Well, I love that. But maybe we should begin by talking a little bit about what those four principles are. That will be maybe the last piece that we do in this podcast. There are four pillars of conscious capitalism around purpose, stakeholder culture and leadership. Raj, maybe you start with maybe talking a little bit about purpose.
Raj: Sure. So I think if you, again, look at why those four. It really addresses the four fundamental questions you would want to ask about anything. It’s like why, what, who and how, right. Now there was a lower consciousness answer to each of those in the past. Why does a business exist to make money? What do we do? We basically generate returns for our shareholders. So for that we have to serve customers. Who are we? We are leaders who get the job done that realize or achieve the numbers. And then how do we operate? It’s all about numbers, efficiency, productivity and so forth. But today with higher consciousness, we have different answers for those. Starting with why.
Businesses have to be profitable to make money, but profit is not the purpose. The purpose of the business is to find a profitable solution to the world’s problems. That’s really the purpose. And to do that, each of us in our unique way. Our friend, Ed Freeman, who was the father of Stakeholder Theory, uses the analogy of red blood cells. We all need red blood cells in order to survive, but that doesn’t make the purpose of our life to produce as many red blood cells as possible. And, likewise, businesses need profits to sustain and to actually exist and survive. But that is not the purpose. Profits are one of the outcomes and one of the enabling outcomes that enables the company to continue to realize its purpose and do so at scale. The more you grow, the more you evolve. And when Whole Foods started, they could only achieve their purpose in that one tiny community in Austin. But today’s it’s close to $20 billion revenues and 110,000 employees and 20 million to 30 million customers. So their purpose is being achieved at a much higher level.
Timothy: A much higher scale. I love it. The second principle is one that we call stakeholder orientation. And when we think about stakeholder orientation, you referred to Ed Freeman as the father of the whole idea of stakeholders. And fundamental to that idea are a couple of things: that you’re focused on long-term relational connections to your stakeholders rather than short-term transactional ones. So there’s this sense of short-term versus long-term relationship building versus transactional.
Second piece around that is really around taking a systems view of the business, not looking at it as individual win/lose transactions with particular elements, but rather looking at the whole and saying how do we create, in a sense, a healthy ecosystem for our business. And if we have a health ecosystem, then ultimately, our shareholders will get higher returns than if we’re trying to play whack a mole in a sick ecosystem. And the thought experiment I love to have is, say, listen, if your customers don’t like you, your employees don’t like working here, your suppliers hate working with you, the communities don’t want you in your backyard and you have a horrible reputation for what you’re doing with the environment, good luck with what the returns will be to your shareholders in that model. So on one hand, that’s sort of obvious. But we believe it’s one of the critical elements of creating a conscious capitalist company is looking at how we create this win-win opportunities with all our stakeholders over the long-term in a relational framework rather than a transactional framework.
Raj: And then you start to see how these things are connected, right, because one of the things that binds the stakeholders together and to the enterprise is a sense of shared purpose and shared values.
Timothy: Yeah. I love it.
Raj: That becomes the glue that holds all of them together. And it aligns them together. So now without a purpose, your stakeholders would literally be at cross purposes. You want to have a shared purpose. So the CEO said I want to maximize profits and employees would essentially say I want to maximize my profits, which means get paid as much as possible and work as little as possible. And customers want to maximize their profits which means get the lowest price every time and not have any loyalty to any one company. Suppliers want to maximize their margins, which means cut corners where they can. And society wants to tax you as much as possible. So everybody becomes a taker from the system. And if every participant in the system becomes a taker, that system will eventually bleed and die
Timothy: Yes. Yes.
Raj: Whereas when you have shared purpose and values, everybody becomes a giver. And I think one of our principles is in order to win, win, win, we all have to give, give, give. And the more we give, the more we receive. And that’s really kind of the magic of this way of being in business.
Timothy: Yeah. And I also thinks it’s really interesting that when I get into a dialog with an executive team around how are you making purpose matter, one of the first things I ask is how are you living your purpose with your stakeholders? So how does that manifest itself with your employees? How does it manifest itself with your customers? And with the other stakeholders as well. So it’s always interesting. If you want to make purpose be more than just a statement, but make it matter, you look at what’s our relationship and how are we living this and making it matter with our stakeholders.
Well, then that plays, like you said, into the third element, which is around culture. And maybe you want to share your thoughts on that.
Raj: So this addresses how. How do we do things and how does it feel to work here? How does it feel for our customers to be on our premises and so forth, right. And, again, if you look at traditional cultures, there’s a lot of fear and stress inside of most corporate cultures. I know we use the metaphor of carrots and sticks to incentive people. Give them a motivation to achieve something or the fear of a punishment if they don’t. And what animal belongs between a carrot and a stick?
Timothy: Wait a minute. An ass. No, a donkey. Yeah.
Raj: Yeah. And the sad reality is that we’ve used that approach. That’s almost kind of management 101. Right. This is how we get people to do what we want them to do, right. But the fact is that cultures don’t have to operate in that way. And we believe that cultures can be filled with love and care and trust. So we talk about trust and authenticity and caring and transparency and integrity and so forth as being the qualities of a conscious purpose, so that people don’t say thank God it’s Friday and I’m out of here.
Raj: The reality is that heart attacks are 20% higher on Mondays and people hate their time at work. Globally, employee engagement is only 15%. So our cultures, and as Peter Drucker, the famous management thinker, said, culture eats strategy for lunch. Culture is very important; it’s an invisible thing, and yet most people don’t even pay attention and they get a culture which is typically toxic and filled with all kinds of disharmonies within it. But when you get it right, it’s magical. People like being there. People like going to work. They are inspired; they are creative. They are highly productive. And there’s just a lot of mutual care.
Timothy: Yeah. Yeah. I loved the concept we used in the book about the volunteer premium, that in a sense, somebody comes to work. And if they’re doing just the minimum amount of work so you can’t fire them, okay, they came in. They did their job. Congratulations, you get a paycheck. But then if you really want people to be passionately engaged, you want their best thinking; you want them to care about what they’re doing and about the business, that premium I think we call the volunteer premium, because you can’t pay them for that. That’s something you’ve got to inspire and motivate people with. And when you get an organization where people do feel inspired and motivated and they really care about the outcomes and what they’re working on and about the people they’re working with, and they feel cared for, then you get this volunteer premium. And that’s what really drives the performance in the business versus somebody who’s coming in and watching the clock.
Raj: Right. Exactly. The phrase I like is that human beings are not a resource, we are the source. But we don’t have access to that unless we are operating in that mode, right. We feel grateful; we have a sense of purpose. So culture is an incredibly and yet mostly neglected aspect of business.
Timothy: Yeah. Yeah. Well then I think that plays into the fourth, which is around leadership. So often when I’m giving a talk on conscious capitalism, somebody will inevitably ask, what’s the most important thing to actually executing as a conscious capitalist organization? And I say, well, there’s three things that are really important. Number one is leadership. Number two is leadership. Number three is leadership. And so, this whole journey begins with having leaders who have raised their awareness to a high enough level to understand that there is a different and a better way of running your business. Now to do that requires you to be a different kind of leader, what we call a conscious leader, more akin to what we’d call a servant leader than the Gordon Gecko greet is good model that maybe was popular at one point in the business narrative.
Raj: Yeah. So we say you cannot have a conscious business without having a conscious leader. And you cannot be a conscious leader unless you’re a conscious human being. So big part of this journey is working on yourself as a leader and becoming more conscious, awakening to the reality of what lies in front of us and what we are called upon to do. So this is an incredibly important journey that we all have to be on, I think. It’s a neverending journey for us. And I think that’s one of the great truisms about conscious businesses is that they are continually focused on deepening the consciousness. And there’s no limit to how far that can take us, you know. And one of the important points I think to remember about all of these found pillars. We call them pillars; we also refer to them as tenants. A tenant is a pillar, a fundamental belief. In other words, you have to do these things because you believe in them. These are not tactics. These are not tactics to make more money. We will show later on in this podcast we go through this the business case and why this results in substantially greater financial performance over time. But there are companies who look at that and say, that’s why we will do that. I say, these are not tactics. If you do these only to make money, they probably won’t work. You do them because you believe in person. You believe that we should take care of all of our stakeholders. That it matters what kind of experience people have at work, etc.
Timothy: Yeah. Yeah. And then the incredible thing is that inevitably these companies that are the pillars or the poster children for conscious capitalism happen to be the most profitable businesses in their industries. So it’s an interesting paradox that if you live into this, if you lean into it in a real, genuine, and authentic way, ultimately, you hit higher performance. Now there’s one thing you mentioned which I want to come back to which is around this idea of conscious leadership. Often people say, well, my CEO doesn’t get it. He or she. My response is, anybody in the room a human being? Okay. All the human beings here, do you have a level of consciousness? How do you want to show up as a leader? What’s your legacy? So you can create a pocket of conscious capitalism within your organization where you are today. You don’t have to wait until there’s approval from the top to begin this journey. Wherever you are, if you have people you’re working with and you have an opportunity to create a different kind of business narrative and a different kind of business environment by beginning to apply and live these tenants. And I think that’s really important because I think too often they’re thinking, well, that wouldn’t work here because my boss doesn’t believe in this. It’s like, well.
Raj: Yeah. So I think creating these islands of consciousness within an organization eventually can accumulate and hopefully inspire change at the top as well. But, ultimately, I found in the long run for the entire organization to transform, leadership has to improve, ultimately.
Timothy: Oh. Yeah. I think that’s right. And I think the narrative I’ve seen at some of the organizations I’ve worked with is people will eventually start saying, wow, they’re really outperforming some of the other units. What are they doing over there? And it creates this curiosity of like, wow, they’re really performing at a significant level above some of the other units in that area. What’s going on? And then they go and look.
Raj: And some of those people may eventually get promoted into the CEO role. So then they can promote it.
Timothy: Yeah. Well, so that’s the baseline of what we’re going to be trying to do over the coming weeks and months. Thought we’d just introduce you to ourselves and to the idea of conscious capitalism. Hope you enjoyed this. Stay tuned for our next episode. On whatever service you’re using to view this, there is a subscribe button. And you can also connect with us at our website called theconsciouscapitalists.com. Thanks so much for your time and attention. If you have any feedback or thoughts or questions, feel free to reach out to Raj or I, and we’ll try to address these as we go forward. Thanks for your time and attention. Be well.
Raj: Thank you all and see you along the journey.