This week, Timothy and Raj discuss with Doug Rauch, former President of Trader Joe’s and former CEO of Conscious Capitalism Inc., his journey to Conscious Capitalism, personally and at Trader Joe’s.
Listen to this episode on Apple Podcasts, Spotify, Stitcher, or wherever you get your podcasts.
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References:
Mackey, J., Sisodia, R. (2014). Conscious Capitalism: Liberating the Heroic Spirit of Business. Harvard Business Review Press.
Sisodia, R., Henry, T., Eckschmidt, T. (2018). Conscious Capitalism Field Guide. Harvard Business Review Press.
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Episode Transcript:
Timothy: Hello everyone, and welcome back to Episode number 10, that’s number 10, can you believe it, of the Conscious Capitalists and I’m here today with my partner in crime, Raj Sisodia. Hi Raj.
Raj: Hi Timothy, good to be with you again.
Timothy: Good to be with you, and today is a breakthrough even for us because for the first time we’re actually going to stop boring you with Raj and I. We’re bringing in a special guest and he really is a very special guest, a good friend of ours and a colleague in the Conscious Capitalism movement, Doug Rauch. Hey Doug.
Doug: Hey guys. Great to be here.
Timothy: So, Doug has worn many, many hats in his career and one of them that he’s probably most famous for is being married to his wife, Mikela, but that’s another story. He’s been President of Trader Joe’s and was really the person responsible for bringing Trader Joe’s out to the East Coast and there’s millions of East Coasters who are eternally grateful for that. And he also has been CEO and then Co-CEO of the Conscious Capitalism, Inc., which is the nonprofit that acts as the sort of holder of the flame for the Conscious Capitalism movement. So, Doug, thank you for all of that and welcome.
Doug: Great to be here with you guys.
Timothy: Now Raj, you were saying earlier, the synchronicity in the universe that sort of connected us all. Maybe you want to say a little bit about that?
Raj: Yes. So, this would have been around 2007, I think. I had just published the book Firms of Endearment in which we raved about Trader Joe’s of course. I have yet to meet, by the way, a person who does not like Trader Joe’s. I don’t know if they exist around the world. But I had written that and then I was at the faculty dining room at Bentley University, where I was teaching then, and our Chief Marketing Officer, Sandra King, was sitting there, and as I walked by her with my tray she said, “Raj, there’s somebody I’d like you to meet. This is Doug Rauch, President of Trader Joe’s.” I said, “Oh my god, he’s one of my heroes without even knowing it. That’s a really good company.” So that’s how we met and of course it was around the time soon after we were starting the Conscious Capitalism movement and as soon as I could I invited Doug to be part of that and I still remember, Doug, when you and John Mackey first met, at the first Bentley conference that we did, I think in 2008, and they of course had known of each other and competed with each other for a long time, but never met, and their first words to each other, if I recall, were identical. They said, I hate you, but I love you. Or the other way around, right?
Doug: Something like that, yes.
Raj: Can you talk about what you meant by that? Both of you, I think, kind of meant the same thing by that.
Doug: Well, I think that we were fierce competitors. I mean obviously Trader Joe’s and Whole Foods are fierce competitors and I know that John has shared that he doesn’t like seeing any grocer come to town as much as he doesn’t like seeing the Trader Joe’s come because they’re fierce competitors, and Trader Joe’s knew that Whole Foods was both doing really good product development but also had that deep sense of purpose around bonding with their customers, having a clear sense of product quality standards, and they pushed Trader Joe’s on a lot of fronts. So I used to…and I recall the very first time John and I went to an event together we got to speak, I was able to get to him, I think, quite honestly, initially begrudgingly to admit publicly that Trader Joe’s had made Whole Foods a better company and I was there to say that in my opinion Whole Foods had made Trader Joe’s a better company. That’s what competitors do, if they’re noble competitors, is they keep pushing each other to a higher standard. But we had a long talk at that very first event there in Bentley and have continued on for 10 years plus.
Timothy: Wow, I love it.
Raj: It’s such an important point because we get competition, the idea of competition, quite wrong, I think, in our society. We view them as enemies to be conquered, right? And it’s like a zero-sum game out there and if they’re doing well, that means I must be doing worse. It becomes a race to the bottom. And I think what you pointed out, it can be and should be a race to the top. We inspire each other to be better and we admire each other while we compete with each other.
Timothy: Well, the great competitors, I think, in any sport or any event, they want to play against the best. It’s no fun…maybe it’s fun the first time to win 100 to 20, but after a while you want that game to come down to the last play and the last second and be really pushed to your limit and it makes you a better competitor. It makes you a better team. And I love the fact that you and John found that place together, Doug.
Raj: And you continue to do more good in the world. That’s the key thing. You continue to, in your own way, add to our collective knowledge.
Timothy: So Doug, maybe it would be good to start with a little bit about what was your journey to Conscious Capitalism? How did you find your way to it? Maybe as much from a personal point of view as anything.
Doug: Yeah, well, I think that I’ll quickly share my story. I do think that each of us have our own unique and specific way in life and our path and so for me I guess it goes back to being a kid of the 60s. I got very interested in eastern religion, meditation, basically trying to deepen my spiritual life. I looked at it, at the time, my successful parents as a professor and teacher and the world around, and kind of said, I don’t want that life. It felt, at the time, typically, stereotypically I should say, 60s shallow. I wanted something more meaningful. I wanted to get to the deeper side, the meaning behind the meaning, so to say, and started a very serious spiritual practice and frankly, out of that came my relationship to work. As compared to many people, through their work and things develop an approach to either a spiritual or a deeper growth and personal development. For me, it was around I don’t want to engage in work in a way that’s going to be contrary to my values and my practice every day. I don’t want to sit in mediation and then have to go to work and then come back and have to take an ethical or spiritual shower every day because at the end of the day it would feel a little bit like…who’s the famous Sisyphus, who keeps rolling that rock up and then it just rolls right back down. I wanted to know that work was actually, and I do believe this of course, when applied rightly is a magnificent tool for our own personal development, let alone society and the good of others.
So that was really kind of a foundation for me was approaching work, and I happened to get lucky, as I would say, better luck even good, but I happened to run across Joe Coulombe and I had started to sell to him when I was with this little natural food company called Erewhon and we started selling product to this company called Trader Joe’s. Trader Joe was Joe Coulombe who turned out just to be an incredibly bright, really smart, but also deeply values-oriented, very tuned into the customer, very much interested in “we’ve got to make money, but let’s make sure we know how we’re doing it”, which is by doing the things right. Money is the result. It comes by having the products and the services that customers want by treating people the way they want, et cetera. So for me, it was really a breath of fresh air to find a company that I never once was asked to lie. I didn’t feel I had to misrepresent. I could feel proud of what I was doing, and I remember at one point in my career there, waking up one day and going, oh my god, I’m a grocer. How did that happen? Like I thought I was going to, after college, go off and do research on something or do something that I thought would be, in my mind, more meaningful than just selling milk and eggs and bread, et cetera, which of course, as it turns out, I’d like to think that Trader Joe’s does something much more meaningful than just selling milk and eggs and bread, which just highlights just about basically any business, even one so fundamental as hocking your wares or product that have been around forever can be done in a way that’s meaningful and can contribute both through your employees and the community that you serve. So it’s just once again an indication that there is almost no job too mundane that it can’t become something transcendent.
Timothy: I love that. That’s a beautiful way of putting that, Doug, beautiful way of putting it. Thank you. And for a lot of the people that are out listening to this, they’re wondering, where do they start that journey. You guys have convinced me. Being a conscious capitalist is a good thing. How does one start to say, okay, I want to go on that journey? What are your thoughts and what do you tell people when they ask you that?
Doug: Well, first thing is unto thy self be true. Don’t try to be me or Raj or Timothy or John Mackey or Kip Tindell, or any other 50,000 people that are interesting in espousing Conscious Capitalism. You want to be the best example of Conscious Capitalism that you can be. So the first thing is unto thy self be true, which is to know where is it that you engage in this? What part of this work attracted you? What part of this movement? What part of this concept about how to do business better as a force for good drew you? And I would start with that. Compared to trying to eat the whole enchilada in one bite. I look at where is it that I’m most attracted to it? And I’d start to get involved there. But what I’d say, just…I jumped right in, but in essence, the answer is first of all, just start with yourself. It’s hard to bring about changing an organization if you haven’t changed as a leader. You don’t hold…and when you start talking about it people start looking at it and it doesn’t feel congruent with your values and your actions and who you are, then there’s always going to be that cognitive dissonance people have, like well he talks this game but he acts this other way and it’ll be completely undermining of what you wanted to have done.
So the first thing is to make sure that you’ve got congruency, which starts with you as a leader about what do I believe, what do I hold, and I’ve said many times that I think that Conscious Capitalism is a big tent, in the same way that Christianity in the early days was on Catholicism, and what they did is just absorbed what we would call now a sect after sect, whether you’re Dominican, Benedictine, Jesuit, et cetera. It’s like, well, you’re just various different points of view within a big tent. But I think Conscious Capitalism is a big tent and it can have very different points of view on some things in the same way that I supposed that the Jesuits and Dominicans and Benedictines argues doctrinal points loudly with each other. People in Conscious Capitalism can disagree with each other on certain points. We hold core tenets, which have been addressed in the previous nine podcasts. There are some core tenets, but within that there is tremendous expression and variations.
So for me, I think you start with yourself, you start with make sure that your own understanding, your own development, that these are congruent inside of you, and then what you do, in my opinion, is look at the team and you look at do I have a team of my inner suite or my senior top advisors or et cetera that are going to be aligned with this? Where is it that…for some this is like a step too far. I’m not interested. I’m not going to support that. And there are times in organizations, as they grow anyway, look, you have to do assessments and sometimes the people that help get you there aren’t the people that are going to take you where you’re going next. These are just the natural developments of any company, but in Conscious Capitalism as well, if you’re going to try to bring about something that is, in my opinion, as profound and as broad, Conscious Capitalism isn’t a superficial…I don’t think you can have a department of Conscious Capitalism in an organization. Heaven help the organization that puts together the Conscious Capitalism department and heaven help the people trying to run that to bring it out. This is talking about…something has metabolized through the roots and up through the leaves. This is something that you have to metabolize and bring it and make it part of every cell, so to say, in the organization to ever really be effective.
Timothy: Yeah.
Doug: And by the way, this isn’t something highfalutin. It’s like, oh my god, everyone’s got to learn the quadratic equation and then be able to quickly espouse. No. It’s pretty basic stuff. You’ve got to act with integrity. You’ve got to have a sense of what your purpose as an organization is. You’ve got to express care, and care isn’t just everyone walking around with big hugs but it’s around treating people like people, not positions, treating people like people, not objects, and other simple things. It’s not really the sort of thing we go, oh, I don’t know if my team can really get all this. There’s really not a lot to get. It turns out, in my opinion, and the same way…when I brought Trader Joe’s to the East Coast, as you said, back in 1996, I remember being interviewed by the Boston Globe and we were about to open up in Brookline on Beacon and Harvard, and also in Cambridge, and she said, “So tell us how you’re different than the local supermarket.” And I said, “Well, we have these products. We go out and find these interesting things.” I said, “And we try to deliver a high level of customer experience, customer satisfaction.” A little quiet on the other end of the line. She goes, “How are you going to do that?” I said, “Well, we do this, we do that,” and she goes, “Well, good luck.” And I said, “Well, thank you. What do you mean?” She said, “Well, have you been in Boston?” And I suddenly realized, uh oh, this is a trap. If I started going, yeah, people here are so rude and they’re this and that in the Boston Globe. So I said, “You know, I’ve been coming here for several years now looking for real estate and doing stuff and I’ve stayed in hotels and ate out at restaurants and I’ve had both some wonderful service and some service that was not so wonderful. We’re going to try and hire the people who gave us wonderful service.”
And what I think is true, and I think this is true that any organization finds that when we hire people that…many people over the years would then say, where do you find these great people at Trader Joe’s? They’re always so friendly and they want to help you. And the answer, of course, is these are ordinary people that can do extraordinary things when the culture basically brews that. It’s sort of like a probiotic. When you take something, and you let the healthy cultures brew something that becomes all healthy and helpful so that pretty soon you’re the standout if you’re not treating someone well. And then, of course, there are many other things about how you actually then reinforce that in evaluations and compensation and shout-outs to the team, et cetera, so there’s ways you reward it, but I’m just talking about just basically attracting the right people and assessing do you have the right people. It’s so critical as a next step.
Timothy: Well, I love your starting point that it begins with the person and the individual, and Raj, I’m wondering what’s your point of view? What helps get a person to that place where they say, okay, I’ve got to…there’s something inside of me that needs to come out into the world in a different way? What’s your perspective on that, Raj?
Raj: Well, you mean as a leader or as an employee?
Timothy: Yeah, no, as a leader, as a leader, what gets you to that point where you decide, yeah, this is something I…not that I’m sort of kind of interested in, but really something I’m really called…I mean this is my path.
Raj: Well, I think it goes back to what Doug talked about, right? I mean one of the things I’ve discovered is you have to be on the journey and there’s a sequence. We don’t always do it in the exact same sequence, but you have to know who you are and I think I kind of discovered that as an unusual kid growing up interested in Hinduism and so forth as a high school student, but you kind of have to know who you are and come to love and respect that and then be that in the world and figure out how to manifest that, and I think that’s a minority of people, unfortunately. Most people are confused about those very questions all through their life and they don’t have the guidance and they don’t have the hunger, perhaps, in some cases to go on that journey and I think that’s what distinguishes conscious leaders and more conscious human beings from others who are merely surviving and just going through the motions. I think there’s something about the level of development that you are at. We’re all capable of rising to higher levels of development, but many of us don’t get that opportunity, we don’t get that nudge, we don’t get these disequilibrating experiences or that mentor that enables us to go on that path.
Timothy: I also think, when people ask me about the Conscious Capitalism movement more broadly, the little parable I like tell is like you’ve got a lot of people sitting on the beach looking out at the ocean and they’re told there’s this thing called conscious business or Conscious Capitalism and it’s a better way of doing business and they’re looking at the ocean and they’re going, actually, I have no idea how to get into the water. So there’s this first step of like, here’s how you get in and you wade in a little bit. You get your feet wet, you get up to your knees, and then there’s another stage, which is now that I’m up to my knees and I’m not as afraid of the water and I can see that I’m getting a little confidence, how do I got to that next level of, okay, now I can go snorkeling, and I get into the water and I’m starting to see the world differently because I’m doing something, but as I do the snorkeling, I suddenly look and I go, oh my god, there’s a whole other world down there, and now I want to go scuba diving. So how do we help you go to that next level, because now you want to go scuba diving, and then for very few, as Doug said earlier, now I want to go deep diving. I want to make this a whole life journey and I’m going to focus my whole life on the things that help me go be a deep free diver and it’s a different thing. So, I think it’s interesting.
Doug, you sort of set that up a little bit by saying it’s a big tent at some point and yet there are some people who are, you know, hey, they’re at this stage but they’re doing something and then there’s this other group that wants to go even further. And Doug, when somebody comes to you and says, yeah, I’ve just been at this CEO Summit, Conscious Capitalism CEO Summit, which by the way, we have once a year and usually in October. This year we’re not going to have it for a bunch of reasons but stay tuned for next year. Doug, when somebody does approach you at one of those conferences and they say, hey, help me. What do I do? What do you tell them?
Doug: Well, what I tell them depends upon some questions you ask. Tell me about yourself. Tell me how familiar are you? Where are you in this path? Are you the first step? Like you say, are you just dipping your two in the water? Or it’s like, no, I’m already swimming around. Now I want to…I’ve been snorkeling, now I want to scuba dive. I mean so the advice is it depends, but again, I think it really does get back to, Timothy, we complicate things too much. I mean at the end of the day, business is kind of simple and we as human beings engaging in commerce, particularly if we start to raise an awareness that I’d rather leave a legacy of something good than a trail of train wrecks behind me. I’d rather have my energies go towards something that at the end of the day I feel good about. I think the starting spot for me with people that come and say, and I did get this at Conscious Capitalism all the time, hey, the principles all sound great but how do I actually do that? And of course, the question is very simple. Are you a publicly traded company? Do you have a Board? Well, you’d better get the Board involved and you’d better get them aligned and understanding at least why you believe this is the best way for the business to move forward. This is actually the best way to long-term profitability and sustainability. This shouldn’t be looked at as what do I have to give up to be a conscious capitalist from an economic business standpoint?
Timothy: Doug, I think that’s a really important point and I think it’s an important point around two dimensions and I think that one dimension is the why of Conscious Capitalism, like why is that important and how do I help my Board or help my team understand there’s this thing called Conscious Capitalism that’s inspiring to me and means something to me and I’d like us to go on the journey. And then, in my experience, then there’s sort of like two or three levers that you go look at first. You sort of say, well, do you have a purpose and do you have a well-articulated purpose? And then is that purpose connected to your strategy and how your business is operating? So there’s sort of an onramp around purpose and do you have one and how do you bring it to life in your business. And then I think the second big one is around culture. To what extent are you a great place to work and is that something you’re aspiring to? To your point about you’ve gone beyond just a worker for hire versus someone who feels like this is a place where I can bring my whole person and contribute in a meaningful way. And if there’s a third way, it’s probably around leadership development and do you have a leadership development program? Are you trying to develop leaders who are conscious leaders? I find those first two, particularly around purpose and culture, being one of the areas that becomes an onramp into the journey, and I’m curious what your experience has been with that.
Doug: Well, I think they’re essential. I think it was that I had the opportunity while I was with Trader Joe’s and after I woke up and realized I’m a grocer. Well, I’d better go get some education in business, and at the time, out where I’d gone to high school in Claremont, Claremont University was Peter Drucker still teaching, so I had the chance to go out and get my executive MBA with Peter Drucker, who it turned out was a big Trader Joe’s fan and shopped at the Upland store and we had a number of conversations around what we should and shouldn’t be doing, et cetera. But Drucker is famous of course. We’ve all probably heard the phrase that culture eats strategy for lunch or for breakfast, or nowadays it probably does it first thing in the morning while it’s checking its email before it gets out of bed. It’s so critical because when he said that, I think for a lot of business leaders, like what? Culture? I mean culture is getting to be a phrase we’re a lot more familiar with now, but still, it is one that is difficult for most leaders and it’s difficult because it’s so intangible. So many of us want things that we can measure, right? It’s that old idea that you can’t manage things you can’t measure sort of stuff.
Culture is difficult to measure. Not impossible, but I mean it’s a tricky one. You can sort of measure by its effects and measure various other things, indicators of it, but it’s a tricky one. So I think that most leaders don’t spend enough time and certainly the Conscious Capitalism movement emphasizes that it’s almost impossible, and I would dare say near impossible, to have a conscious company with a completely unconscious culture, that no matter how good your culture is, unless you are in some way driving it consciously, you’re probably not getting the most out of your organization or your team that you can, or yourself.
So I do agree with that. It sort of is…I thought where you were going with this, Timothy, was you were going to talk about the why, like the purpose, and then you were going to talk about the how, which I think is critical also, which to some degrees the culture is, like how are things really done? How are promotions really given? What’s the tone that you have when you’re off the record talking to somebody about somebody? To what degree is there a feeling of we’re a meritocracy, we reward people for what they do and not just who they know or how well you like or don’t like them per se. There’s a thousand other ways you could go into that, but so to me it’s really…those are critical. I would say that one of the other things that underscores all of this and then would undermine if it wasn’t there is what you said in the third one, which is around the integrity of leadership, that you can have all those other things in place, but as a leader, if you just have a hard time treating others the way you want to be treated, to put these into practice in your own life, then it’s a little bit like rowing the boat with the anchor out. You know? There’s a whole lot of effort and you’re not going to go very far.
Timothy: Thank you, Doug, for all you’ve been doing for Conscious Capitalism and for setting just a great example of what a conscious leader looks like and how do you go about really helping an organization go on the Conscious Capitalism journey, so thanks so much for your time and your energy today. Thank you.
Doug: Well, thank you. It’s been an honor to be here with you guys.
Timothy: Well, that brings us to the end of another episode and if you have any comments or thoughts you’d like to share with us, please go to TheConsciousCapitalists.com and there’s a little form there you can leave a note and if you’ve enjoyed this, feel free to hit the subscribe button on whatever channel that you’re listening to this and thanks so much and we’ll see you again next week.