On this Conscious Capitalists Podcast Rewind we bring you a much loved conversation:
Love and caring in the workplace? What’s the alternative?
Kip Tindell co-founder and long time CEO of The Container Store grew revenue at 20% per annum and was twice listed as the best place in America to work- and on the list for 20 straight years! LOVE at work - hear his take on it.
Listen to this episode on Apple Podcasts, Spotify, Stitcher, or wherever you get your podcasts.
(Originally release November 17, 2020).
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References & Resources:
Tindell, K. (2014). Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business. Hachette, USA.
Conscious Capitalism main website - www.consciouscapitalism.org
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 everybody, and welcome to episode 15 of the Conscious Capitalists with myself, Timothy Henry, and with my partner in making business a force for good in the world, Raj Sisodia. Hi, Raj.
Raj: Hi Timothy, great to see you again.
Timothy: Good to see you again. And we have a very special guest today. I’ll let you do the intro, but part of, I want everybody to try and guess who it is because, Raj, I know you recently moved apartments, and I sent you an email, said, “Hey Raj, how’s it going?” And Raj sent me back a picture of his closet, and he said, “Look, isn’t this a magnificent closet?” And I looked at the closet, and I said, “Wow, that’s an impressively organized closet, Raj.” What was that all about? Well, that’s a hint as to who we’re talking to today. So, maybe, describe your beautiful closet, and then, maybe, introduce our guest today, Raj?
Raj: Yeah. So, I have a good fortune of having an assistant who works at The Container Store, and who also, part-time, helps me out. And so, anytime I need organizing, she comes over and works her magic. And before you know it, we have peace of mind, and less clutter, and we know where everything is. And it’s just a joyful feeling. So, our guest today, of course, is the driving force behind that vision, The Container Store, cofounder and former CEO of The Container Store, Kip Tindell. Welcome, Kip.
Kip: Thank you, Raj. Thank you, Timothy. It’s so great to see you two. I look forward to the conversation about our shared passion of Conscious Capitalism, Stakeholder Capitalism, and this will be one of many conversations we’ll have for many years about that, so thank you for having me.
Raj: Well, Kip has created one of the most beloved companies out there in astounding record in terms of being recognized as a Great Place to Work (Fortune Magazine Best Places to work in America). They were consistently on that list for 20 years. And actually, number one, what, how many times, Kip, number one place to work in America?
Kip: Fortunes 100 Best Companies to Work for in America, we were number one twice, and then we were number two twice, and we’ve been on the list 19 or 20 years in a row. And that makes it easy, when you open a new store in a new city, gosh, we only hire two or three percent of the people, and one of our guiding foundation principles is one great person is equal to three good people in business productivity, so very high service environment where we’re trying to help people organize the kid’s toy area. And you’re likely to be helped by somebody who’s been at The Container Store for 10 years, and actually knows a lot about organizing toy storage and actually cares. So, it’s a great payoff when you’re selling, I would say, 80% of the things that we sell are for other than their intended purposes. We have baskets that are made for collecting eggs, but we sell them as gardening tool things, and delightful things like that.
And what we’ve learned over the, my goodness, now, 42 years of building this business is that life’s a little better when you’re organized. When you’re getting two or three kids ready for school in the morning and if they’re unorganized and you’re disorganized, everything’s terrible, people are crying. But if you’re organized, everything is great, and there’s a little, the little girl’s school uniform is perfectly pressed. There’s a little love note from mom and dad in the school lunch. Being organized just makes life a little bit better.
Timothy: Well, I love the phrase that you use at The Container Store, or the idea of the ‘man in the desert’, and maybe talk a little bit about that concept and how you use it as a way to on board some of your new people or to reinforce some important ideas.
Kip: Well, yeah, we have a business that based on seven foundation principles, and they were all kind of, maybe, corny, but very “do unto others” type concepts that really do guide our business actions. They’re not just things written on the wall of the home office if you ask people that work any store. So, rather than having a big, thick policy book, we’re like, well, why do we do it that way. Well, we do it that way because of the man of the desert thing. Oh, yeah. Yeah. Yeah. It’s a little bit like they say that most jokes are written in prison because people have a lot of time on their hands. And so at lunch, they don’t bother to tell the whole joke, they just say number 27 and everybody laughs. And so, that’s our explanation for everything we do and don’t do with these seven foundation principles, and it’s the ultimate, and really empowering and arming all employees with the ability to make customers not just happy and satisfied, but astonished. We’re looking for astonishment.
And so, the man in the desert is just that there’s this guy that lives on an oasis. And I made this up, all seven of these were I have a little philosophy, epistle book, I used to call it at Jesuit High School in Dallas, and then in college. And it became, it was a list of all the greatest thoughts that I had ever heard, or read, or been taught, or even though of myself. And this one you can tell I thought of myself because it’s so silly. But, the guy’s living on the desert and he looks out there, and there’s this guy crawling through the desert, near death, and water, water. So, the guy goes up and offers him a canteen of water, and then pats himself on the back and thinks that he’s done something wonderful. And we’re like, okay, well, can’t you do better than that? Let’s invite the guy into the oasis. Let’s get him some shade. Let’s call his family and tell them that he’s okay. We’re going to intuit his needs. We’re going to be human beings here. He’s going to ask for water, but we’re going to give him a lot more than that. And the way the story’s told in the stores and what not is the guy’s in a chaise lounge in the swimming pool after a while and he’s got a margarita.
So, it’s intuiting a stranger’s needs which is what retail and helping people, in the truest sense of the word, is all about. You’re not doing something bad to somebody when you help them in the true sense of the word, you’re doing something wonderful for them, and they’re ecstatic about it, and their heartbeat races in a positive way. And they go home and they tell their next door neighbors about the great customer service thing they got. They got the man in the desert treatment. And when they get home and use that stuff, they don’t curse you and hate you. They love you because it actually really works and it’s exactly solved this storage and organization problem that’s been bugging you for years. It could be something as pedestrian as the kitchen drawer just being a jumbled mess, or the linen closet, and it’s people get very, very excited when somebody intuits their needs and solves these problems, and then they go, that’s how we built our business, one astonishingly satisfied customer at a time. And it’s so much for the customer, and so much fun for us. And that’s the man in the desert story, Timothy.
Timothy: I love it.
Raj: I think you used the phrase “heroic selling” that comes out of that story because a lot of people are hesitant to be in a selling mode, right, especially nice people. And I think the way you frame it is that when you actually, when somebody came in for a shoe closet problem, and you asked them about their pantry, and you asked them about their kid’s storage, and everything else. You’re actually helping make their life better, so it’s heroic selling. It’s not selling from the standpoint of what more can I squeeze out of this person, but how else can I make their life better. And I think that’s kind of the gist of it.
Kip: It’s almost not even a transactional relationship. It’s actually kind of a human helping relationship. And most retail salespeople across the world are really only trying to get through their life without being ever accused of being a pushy salesperson. They don’t want to be a pushy salesperson, so this man in the desert thing takes the moral imperative and it actually puts it on helping the customer, on selling them, on doing something. If you wimp out, if you just go, oh, and you don’t do anything, well, then she leaves the store unfulfilled. The problem hasn’t happened. But if you do this, she leaves the store astonished and happy. And, yeah, it’s okay to sell when you sell in the true sense of the word. It’s not only okay, you must do that if you’re going to be a compassionate and good person. I’m big on trying to build a business where everybody with the business thrives. And so, we built this employee-first culture at The Container Store. But, boy, the way that you make a customer thrive is not by wimping out and ignoring them.
Timothy: Well, I love the idea that one of the gifts that you’ve given me over the years, Kip, is really bringing to life, when people ask, at the heart of it, what makes a great culture, and I go back and I think of the lessons that I’ve learned from you, and I say, really, there’s two things. It’s helping people to feel cared for in the workplace, and then, secondly, helping them create meaning. And I think you just did a great job of it’s not about selling. It’s about meaning. I’m helping somebody solve an issue or a problem they have. And if I do a really good job of that, I feel like I’ve done something good today.
And the second piece being the caring bit, and I recall, boy, this must have been eight years ago, nine years ago, you hosted a day for Conscious Capitalism at The Container Store. And I think you had just, it was just after the great recession, and it was just after February 14th, and that was the first February 14th when you did something with your employees that I thought was so cool. Maybe, you want to tell people about, as a sign of caring, what happens on February 14th at The Container Store?
Kip: Well, February 14th is we love our employees day at The Container Store. We really do love our employees. And I think love in the workplace is really, really important. People are afraid to talk about it. I try to weave that concept into every talk I give and anything I write. We do love our employees. We do love our customers. We do love our fellow workers. It is like a second family. Almost any of our employees will tell you that. People, customers, don’t like The Container Store, they love The Container Store. And so, we try to find ways, every Valentine’s Day, to illustrate we love our employees, and it can be a myriad different bunch of corny ways where we’re, the executives, there’s a big parking lot at the home office and it’s a long walk, and so we valet park for the employees. Or, we can cook special beautiful meals.
We have a million square foot distribution center in Coppell, Texas. And the roof of it has a big logo of The Container Store, and then a “we love our employees” thing in kind of Valentine’s red, and it’s the landing pattern for Dallas Fort Worth airport. So, it’s the world’s largest billboard to an organization loving its employees. And we’re announcing to the world that by crikey, we do love our employees, and how can we be more innovative in figuring out how to illustrate that. And the thing that I’m probably most satisfied in my business career is that in an industry where there’s a triple digit, more than 100% employee turnover, which means the average retail employee in America doesn’t even last year, we have had, for most of our history, single digit, below 10%. That can vary at times like the Great Recession or COVID but, generally speaking, it’s a 10th or less than a 10th of the industry average.
People join The Container Store and they never leave. That’s why I mentioned earlier that the person waiting on your store really does know how to organize your toy storage area because they’ve been working there 10 years or whatever. I love that. I mean that’s the ultimate compliment that all of our efforts to paying well, and having great benefits, and truly loving our employees has paid off. And I don’t think a customer can love a business until the employees do. If the employees don’t like the business, it’s impossible for the customer to. And so, we can all think of great examples of that. But, yeah, I think the world would be a lot better place if people would bring love into their workplace, not be afraid to use the word in the business environment. John Mackey, the Whole Foods guy, talks about love in the workplace. Who’s the Southwest Airlines guy, Raj?
Raj: Herb Kelleher.
Kip: Herb Kelleher talked about love in the workplace all the time. I was never sure what kind of love Herb was talking about. But, no, Herb talked about love, and his employees loved that company. And so, I miss Herb so much. We both grew up in Dallas. But anyway, yeah, we love our employees.
Timothy: So, I love that. I mean I think the, when you say it, it feels so normal and natural. And I was just recently listening to a program by the author of Homo Sapiens. And in it, he talks about the fact that what made us, home sapiens, special was our ability to organize into larger groups. And the reason why we were able to beat the Neanderthals because they could only be in a family unit of 30 or 40 people, but we could organize into 100 people. And we could that because we could build trust and we could build relationships with one another. And it seems to me sometimes so obvious, and yet so counterintuitive to so many businesspeople, that is all about relationships. This is about creating relationships with the people that work with you, the people that you work for, and for your stakeholders, more broadly. We’re in the relationship business. Anybody who’s in business is in the relationship business. And yet, while I know, for us, that seems so obvious, it seems so counterintuitive to the traditional business narrative. Guys, why?
Kip: Business is absolutely just about relationships. At The Container Store, we say you can’t tell the difference between a vendor and an employee, so we discussed how we take care of employees, but we take care of vendors in the exact same way. We have these long-term relationships with these manufacturers, and what it results in is that even when we don’t buy as much of a product as a giant mass merchant, we very likely might have the best price in the country on that product from that vendor, so that we can compete with that mass merchant on price. In other words, we buy it cheaper than they do, not because we buy more of it than the mass merchant, but because we have a vastly better relationship with the manufacturer than that mass merchant does.
And our vendors love us and we love them, and that leads to relationships that endure for decades. And Sharon, who’s my wife, who’s the past President and long-time Chief Merchandizer, we would go on vacations with these vendors. And while we were having fun on vacations, we would create the world’s greatest shoebox and it would be exclusive to us. And we’d get excited about doing things like creating the world’s best shoebox. We’d get excited as heck about that. And those kind of relationships allow innovation and fun, and it’s just the best way to do business, and so that’s the ultimate of the supply chain, stakeholder model, taking care of your vendors.
Heck, we had a company, Iris U.S.A., that had a factory in Wisconsin, and it was a promising line, and it was very high-end plastic storage devices. They were injection molded plastic, but the factory was in Wisconsin and the freight was 17% coming from Wisconsin to our central distribution center in Dallas. And so, we got to talking about how inefficient that was, and the owner of the business decided to build another factory right in Dallas right there. It was a handshake deal. It was an outpouring of trust, and relationship, and it saved us 17% freight. There’s no contract or anything, he just did it. And he went from being our 53rdlargest vendor to our 2nd largest vendor after that. That’s how you build business. Business is about relationships.
Raj: We’re always interested here in how conscious leaders became that way. And it’s usually some combination of something innate in you, and your parents and how they brought you up, and what values they inculcated, and your education. And so, if you could talk a little bit about how you were shaped, how do you understand, how did you emerge to be the kind of human being and the kind of leader that you became, what were some of the formative influences on you? And how did that show up in this particular business? I know there was a passion you had even as a youngster for organizing.
Kip: Yeah. I was oddball enough to where when my parents went out at night and I was a young teenager or something, I would surprise them by reorganizing the pantry. And when they came home, they were astonished. And I think my dad probably worried about that a little bit, and maybe rightfully so, but it all worked out. But, I also was always very interested in reading and literature. I majored in English. I wanted to major in philosophy, but my dad wouldn’t let me, so I majored in English, which, of course, is the same thing. And very interested in existentialism. I don’t even think I qualify as a mediocre Catholic, I’m a less than mediocre Catholic, but I did go to Jesuit High School in Dallas. And they had a lot of very existential-oriented young priests who weren’t much older than us that taught us, gosh, you’re 17, 16, 18 years old, and you’re running around talking about Nietzsche, and Kierkegaard, and all that. And I loved that stuff and I read everything.
And I carefully kept the greatest thoughts that I had heard in this little file. And when we started the business, I’ll tell you, when you start a business, you’re really lucky because you get to kind of form the culture based on your view of the world, and as the founder of a business. And I really thought, I searched into that file and found the thoughts that I thought were most noble and most practical to building a business, so that you don’t want to have, say you have 10,000 employees. You can’t have 10,000, we can’t be 10,000 yahoos going in 10,000 different directions. We have to agree on strategy. We have to agree on a direction. And so, I said let’s agree on these as being the ends, E-N-D-S, and then we will liberate every employee to create their own means to those ends.
But, one of them was Andrew Carnegie’s statement, as he lay on his deathbed and he was asked what he attributed all his incredible business success to, and he said, “Yeah, there’s one beacon. There’s one guiding light to, that I attribute all my business success to.” “What’s that? What’s that, Andrew?” “Well, it’s fill the other guy’s basket to the brim. Making money then becomes an easy proposition.” Fill the other guy’s basket to the brim. Making money then becomes an easy, that’s the exact opposite of what everybody grew up thinking that life and business are a zero sum game, and you have to somehow screw around the other guy in order to get ahead. Nothing can be farther from the truth. And so, yeah, I got very excited about that, and literally trying to build the culture about that. Employees, my god, when they hear their boss talking like that, that’s somebody they want to work for. They don’t want to work for the zero sum game guy that thinks that everything’s a completely transactional thing.
I think Conscious Capitalism, Stakeholder Capitalism is pretty, can be boiled down to, hey, business is not a zero sum game. And the companies and the people that are gaining the most market share and having the best success in business are the people that understand that and practice that like the vendor relationships that we were talking about. When we built that million-square-foot distribution center, the town of Coppell, who’s a very traditional values-oriented, family-oriented town, said you’re going to locate in our city. We were going to go somewhere else. They said, no, we want you here because we’re proud of you being a local company. So, they gave us the best tax advantages and everything that they had ever given anybody. And we weren’t the biggest business, but we got the best everything. And we said, okay.
And we have a subsidized cafeteria at the home office and distribution center, and it’s filled with Coppell policemen and fire chiefs and everything. We’re subsidized, right. We try to get people to eat healthy, and so it’s a little bit more expensive if it’s organic and all, and so we’re subsidizing a lot. Heck, we’re subsidizing, but it’s not too bad to have the policemen and the fire guys around, right, that makes you feel safe. So, I don’t know, Garrett Boone, the co-founder, and John Mullin, and all the other early people that helped build the business who are proud of these philosophies, proud of these cultures.
I think that non-profits are wonderful and we need non-profits, but business is something like 10,000 times larger than all the non-profits. And we poor, frail, little human beings are so caught up in our self-image, and our sense of self-worth is so caught up in what we do for a living. I’m not saying it should be that way. But, business is important. And so, I think that a lot of us can do more for the world by creating conscious capitalists businesses modeling how to take care of employees, modeling how to take care of vendors. I always thought that we were doing more for the world than if I just retired and devoted myself to other things. Now, I am retired, and I basically spend most of my time trying to work with people like Raj and Timothy to help usher the world from shareholder supremacy model of doing business, and people call it shareholder privacy.
I call it shareholder supremacy because that’s really what it is to a stakeholder model. And we’re getting there as I think most of you recognize. We’ve got the Business Round Table agreeing with us now. We’ve got the key politicians around the world agreeing with us. So, we can, I think the straight line, Timothy, from where we are as a world and where we want to be as a world is through Conscious Capitalism, Stakeholder Capitalism. If we can just make the world of business that way, we’ll get there more quickly than if we try to do it any other way.
Timothy: Well, we’re true believers here, and one of the things that I think is interesting because some people will sometimes try to put us in box and say, oh, yeah, that’s all that soft stuff, Kip. And I will, sometimes, when I’m giving a talk, sort of say, hey, listen, Conscious Capitalism isn’t an excuse for not having a good business model, or not being able to execute, or having a good strategy. You need to have those things, but that makes you a good business. But, the thing that starts to differentiate you and really make you successful is these other things. And having said that, I’m curious how did you balance that in your business in terms of a great culture, really people focused, strong relationships, lots of trust, lots of caring and, at the same time, bringing in the discipline around executing, the discipline around having a good business model, and those kinds of things. In your mind, how did you blend those?
Kip: Well, I think that when people love their fellow worker, love their business, love their culture, they try to excel at it. They’re engaged. They’re passionate about it. They do everything they can to help that company succeed, but there has to be metrics. I mean we’re very metric driven. I believe in the power of intuition, but it has to be balanced with metrics. Your intuition is best on the things you know the best. So, I do a lot of fly fishing, and if I intuit there’s a trout under that rock over there, there probably is. And if I’m teaching you to fly fish, and you’ve never done it, you intuit that there’s a trout under that stone over there, there’s probably not. And so, you can trust your intuition on things you know the best, otherwise, you need data. And so, I remember that we used to, when we first started implementing a lot of measurements in the distribution center, and we were trying to make people understand that this is good. This is not bad. This is freedom. This is liberty. This is not harnessing.
This one woman, we wouldn’t use anybody’s names, but we posted the next day, the performance metrics, and this one woman said, “God, I am absolutely last in the whole distribution center” We didn’t have the names on there. They just had a code, so you could identify yourself. “I’m last in the whole distribution center. I had no idea. I thought I was pretty damn good at this.” And then, the next time it was measured, she was above the midpoint. She had gone from the very bottom to above just by the recognition of that, and she wanted to contribute, she wanted to, you see it on teams, sports teams that have great chemistry. And a lot of egalitarian approaches, servant-leadership, by the management team, everybody wants to contribute.
We try to measure everything. We have compassionate conversations when somebody just isn’t cutting it. Management probably is failing if somebody is really bad at something. We’re all good at some things and bad at other things. So, we have the patience to find what this person really can do better. All of that just brings about a very positive, productive workforce. We all know the stats about how unengaged most American workers are. It’s hard to be productive if you hate your business, if you’re not engaged. But, gosh, if you’re surrounded by people that you truly love and respect, you want to do well.
And I think that 99% of all workers around the world, what they really want is they want to go to work in the morning. They want to look forward to going to work in the morning. And they want to work at things and with people that they really like, and ideally cherish, ideally love. And they want to feel like that they did some great stuff with people that they really care about, and then they go home at night, and they feel so much better about themselves than they do otherwise. And so, an employer that promotes that type of thing, a company that builds that type of thing, builds a better world one fulfilled employee at a time as opposed to a bad company where people are beaten down at work. That fulfilled worker that feels that way after a great day’s work, they go home and they treat their Golden Retriever better. They treat the person at the 7-Eleven that they stop off on the way to work a little bit better.
You’re building a better world one fulfilled happy productive, enthusiastic employee at a time. So, every time a new company decides to treat employees like this you do that. And we’ve long since passed the point where people think it’s less productive than the other way. It’s more productive the other way. This is how you retain good talent. This is how you have customers that are passionate about. This is how you have vendors that create better synergies. If all you really wanted to do was make more money more quickly, I would submit to you that this is the way to do it. And it also is, of course, a hell of a lot more enjoyable. You spend more time working than anything else, so why not work in this kind of environment rather than that type of environment, but it also makes more money.
Not every time. People say, well, what about this Conscious Capitalism company that didn’t do that well. I’m like there’s lots of shareholder supremacy model companies that don’t do that well either. It’s not 100% in either direction. This just tends to do quite a bit better than the old way. And the world is changing to demand it. Employees demand that, so that I just don’t think you can be competitive unless you’re doing a good job at this. And in order to dominate your niche, you’re going to have to do a great job at this. But, I’m preaching to the preachers. I mean this is fun talking to you all about this. It’s a little bit silly though because you know all this stuff at least as well as I do.
Raj: Well, one of my early memories of you, Kip, I think the first Conscious Capitalism conference where I met you, 2008, and I was asked to put together a breakout session. And the recession was raging, as you recall, at the time. And so, we had a session in which you and the CEO of REI, who later became . . .
Kip: Sally Jewell.
Raj: Yeah, you and Sally Jewell.
Kip: She became Obama’s Secretary of the Interior, yeah.
Raj: That’s right. And the theme there was how do you survive this kind of a downturn as a retailer, and it is fascinating to me that both of you came up with the exact same idea, almost the same language, where you talked about protecting the weakest of the employees, the part-time employees, where the, normally in most companies those are the first to be let go. And both REI and Container Store said, no, actually they need this job more than anybody else, and so we call them primetime employees, not part-time employees. And we actually took salary cuts and other things for fulltime people and managers, so that we could protect those people. So, that just, to me, was really a strong reflection of where the values are. And if you could speak to that a little bit, what was your thinking, and why do you call them primetime employees?
Kip: Yeah. Well, Sally Jewell is a wonderful conscious capitalist. I was thrilled for her to be a cabinet-level position on the Obama administration. She and I still try to do things together. That little talk that we gave together, there were other breakout sessions going on, and word spread, and it just overflowed, and so that discussion was about how do you take care of the employee stakeholder during tough economic times. And that’s really when it gets tough. If you have a CEO, and a management team, and a business that’s doing really well with Conscious Capitalism, the board and the shareholders are okay with that as long as times are good. Jim Sinegal, the co-founder of Costco who’s a big hero of mine, and he taught me that every great company has its stock fall by more than 50%, at least three times a decade. And I didn’t believe him, but I checked it out. I mean Amazon was like eight times, once Amazon’s stock fell more than 90%.
At that time, that’s when you really have the pressure from the board, from the shareholders, to lay off people, to abandon things that you felt like had worked during good times. And so, we’re seeing the greatest test I’ve ever seen of that now with COVID. At the time I was at The Container Store, we never laid anybody off, but we brought people together during the Great Recession, and we, like a family holding hands at the dinner table, we decided that we were going to freeze salaries. We were going to not do 401(k) for a while, that everybody agreed with this. We went very, very grassroots for solutions to the downturn. We had lost 15% of our sales, and, heck, in those days, we had 20% gains every year. We never had a 15% decline.
So, we didn’t ivory tower it. I didn’t decide what we were going to do. And the solutions that you get when you truly respectfully go grassroots on how can, we’re going to need to reduce everything that we do by 15% cost in order to match 15% revenue. And if we can do that, we can protect everybody’s jobs. And so, you have warehouse workers that are coming up ways to save money and processes that you and I would never think of, then you implement that, and then others do that. It’s people want to do that. We got through the recession great. We saved everybody’s job. A year or two later, we started having salary increases again for everybody, and we reinstituted 401(k).
But, I remember each vice president was charged in their area to go out and do this. And then, they would all meet and it’s like old guys that go to war together, you know the bond and unity that they have. And they come back and tell their war stories about how they, we saved 15% or more on just about everything that we did because it was out of necessity. And people were proud to have their salaries not cut, just frozen, and that worked really well for that crisis. Now for this crisis, where you don’t lose 15% of your revenue, but if you’re, particularly if you’re operating a restaurant, you might lose 85% of it, it would be a whole different set of circumstances.
And I’ve watched people like Danny Meyer, the great New York restauranteur suffer through that and innovate through that, and come up with great ways to do the very best he can for his employees and his customers. And there’s been a lot of good that’s come of that in terms of the innovation, but this is, you listen to your people. You remember their humanity and their caring. Laying people off is probably necessary in many service industry cases during COVID because people lose all their revenue, but forestalling that, doing as little of that as possible allows you to bounce back much more quickly. The year or two after the Great Recession, The Container Store had, by far, it’s best couple of years. And I think it’s because of the way that we approached that. Plus, we were all proud of the business for conducting itself that way. It’s a custom set of solutions for every different business.
If you’re unlucky enough to be in the hospitality industry during this crisis, that’s different than if you’re in other forms of business. But, you talk about rewarding, to see people sacrifice for one another and innovate for one another out of necessity, that was probably our finest hour. We’d been through other crises, but not one as severe as that
Timothy: Well, I think it’s fascinating you’re on the board of a couple of other companies. And I’m curious as to, you mentioned the board’s all, fair-weather friends, in a sense, things are going well, we’re all on board. Things get a little tough, some of the boards get tougher. And I’m curious in terms of the boards that you sit on, in your experience with boards, what ought to be the role of the board, and how do you help boards evolve into a more conscious capitalist space?
Kip: Well, I think it’s important that board members, no matter how celebrated they are, understand that the CEO and the management team understand a heck of a lot more about the business that they’re involved with than they do. So, there needs to be a lot more humility on the part of a lot of board people. That isn’t always the case. It’s particularly not the case when things are going poorly. There needs to be a very long-term orientation. There’s a stewardship to building a business. Sharon, and I, and others built this business for 40 years. I’ve got this place in Colorado where we’ve got a lot of acres. And I’m just a temporary steward of this land. And we, in fact, my neighbor, when he died, he gave me his acreage. He didn’t give it to me. He sold it to me at a very low price because he said anybody else would screw it up. You won’t screw it up. So, we didn’t need any more acres.
But, there’s a stewardship in land, and building a business. It’s a long-term orientation. It’s important for board members to try to understand that I used to think that a great culture and a really powerful CEO could overcome shortermism and activist investors, but that’s no longer true. Activist investing cost Whole Foods its independence in spite of how strong the CEO is and how great the culture was, Paul Pohlman at Unilever had all the difficulties with his business with activists. In this day of activist investor and short-term orientation, if you hit a bump in the road, more than anything, you need shareholders. People say you get the shareholders you deserve, that’s really true. But, you want long-term oriented shareholders, wise stewards at the board level because it’s all good as long as the stock price is going up 20% a year. But, boy, it’s now when it’s going down the other way.
So, that’s what we’re all working towards getting there to be more recognition of this better way of doing business. And it’s improving. I think we’re approaching a tipping point. And I do think that most board members secretly don’t understand securities law, and all they really want to do is kind of CYA (cover your ass) themselves during tough times on the securities law basis. So, very often, the private-equity firm or major shareholder, the guy, usually it’s a guy in the board room that understands security law the most can yield security law as a weapon to intimidate other directors into doing things that are short-term oriented and not in long-term stewardship interest of the business. But, that’s beginning to change. There’s a lot more education on it.
And I have, Timothy, I’ve gotten off of all of my public company boards, private company boards. I’m on the board of two organizations – Imperative 21 and Just Capital. And then, Raj and I are co-chairs, of course, of Conscious Capitalism. And that takes all my time. I’m on the boards of a bunch of small little companies where people come to me, and they want me to advise them on how to build a conscious capitalist company. And sometimes, rarely, I’ll actually invest or be on their board or something. But, my real loves are Conscious Capitalism, Imperative 21. Imperative 21 is, my dream has always been that the 20 or so organizations that are like Conscious Capitalism can come together as one and we can quit focusing on our differences, and believe that we’re all pulling for the same thing.
And if you study movements like civil rights movement, and god, isn’t it amazing how we haven’t come as far as we thought we had. But when the global progress was made was when the various organizations came together and worked together as one. We’re trying to do that with Imperative 21. We have B Lab, and B Team, and CECP, which is Chief Executives for Corporate Purpose, and Conscious Capitalism, and Just Capital. Just Capital’s another one that I’m on the executive committee board with. And what it does is it tracks, and analyzes, and engages with the largest corporations in America, who have the most to learn about some of this, and their investors on how they perform according to the public’s priority. The public’s priority, Just Capital figures out and polls and analyzes, and has this amazing data of what the average human being in the United States thinks makes a good and just company, and then we aggregate that and teach that to the largest companies in America. It’s so important.
So, as a CEO, you think that you’re really paying well this particular area of workers and the benefits are great, but we’ve got data that shows that you’re mediocre. And if the data is undeniable and here’s the expectation of the average worker, it really does a lot of good. So, I’m enjoying my Just Capital work, and my Imperative 21 work, and my Conscious Capitalism work, and I don’t think I would join the board of Apple if they called and asked. Now, they’re not going to call and ask, but I think at a certain stage in our lives, we can devote ourselves to that type of thing.
Timothy: Well, I love the fact that you pointed out Just Capital. I think they’ve been incredible, and even just keeping their list of how the big companies are responding to COVID. I thought that was just great, that on their site, you can go and you can see a list of who they were saying were the best responders and, as importantly, what were the examples of what they were doing, so people could look at that list and sort of say, oh, that’s an idea. I hadn’t thought of that.
Kip: You learn so much. Small-business people could look at that list and see how the largest companies in the world were doing great things to deal with COVID. How do we make our workers feel more safe in the distribution center? What is reasonable? Is it reasonable for me to spend money on this safety solution or that safe, well, look, all of these companies are doing it, it must be okay. So, yeah, it’s very important work.
Timothy: Very important. And maybe this is pushing it a little too far, but you brought up, let’s say private equity, for example, and there’s some people out there who are sort of saying, well, private equity’s evolving. There’s more of these evergreen funds that they recognize that sometimes, or at least some parts of that industry, which you might call patient capital like our friends at a Satori Capital, who’ve been involved with Conscious Capitalism for a while, who sort of say, look, this is a better way of doing business. What role does, or what role should others be playing like Just Capital, like Imperative 21, like Conscious Capitalism, in encouraging the investment community to be looking at this through a different lens and evolving their practice, so that there’s better alignment between these kinds of purpose-stakeholder-driven business, and the money.
Kip: Well, I’m really big on that, those of us that work with Conscious Capitalism, so we’re used to and good at helping young entrepreneurs build a business that’s conscious capitalist in nature. But, also, how we invest our money has just as much to do with it. And Sharon and I, long time ago, when we first got married, we first started the business, we started saving 50% of our income, 50%. And our income was, well, $700 a month, this was 40 years ago, but and then a $1,000 a month, and then $1,200 a month. And I remember my partner, Garrett Boone, saying if he ever made $20,000 a year that he wouldn’t know what to do with all the money. And I’m like, well, come on, we’d do better than that.
But, we saved half of it, and the reason we saved half of it because we wanted to invest it in companies that we thought were good, and just, and conscious companies. So, we invested in Whole Foods rather than Safeway. We invested in Souhtwest Airlines versus some of the other airlines. And sure enough, those companies did better than their competitors because of who and what they were. And we only had to suit ourselves. Okay. If it’s a founder-led company, if they have low turnover, those are pretty good, what else can you find that makes you think that this company is a good and just company. And for most of its history, The Container Store was the best investment a person could make. We hit a few bumps in the roads right after we went public, as retail changed at that point, and so there’s been some ups and downs. But prior to that, it was just straight up like a rocket ship.
But, Sharon and I actually wound up making more money out of those investments, saving half of our money and putting it in companies like that that we thought were good than we even did with that great investment. So, I’ve long been an advocate of investing in good and just companies, conscious capitalist companies, and that helps the world to help fund those companies. And it helps you because you’re going to make a heck of a lot more money investing in companies like that than you do in the other companies.
And Ed Freeman (see Episode 13 for our interview with Ed) who a lot of people, well, I’ll attribute him as being the father, the creator of the stakeholder model, and Tom Gardner, the whacky, wonderful brother, he and his brother founded Motley Fool. And Tom’s a good friend, and Ed’s a good friend. We’re going to write a book, we keep saying. We need to get to it. We’re going to write a book, and the title of it is going to be, pretty much, Why the Stakeholder Model Is Always Your Best Investment Guide Always. And so, that’s the only kind of companies I invest in. I’ve got time to fool with my investments now that I’m retired, and I just love it. And I want the world to understand. I want to help prove to the world that if all you want to do is make more money more quickly, this is the way to do it.
And of course, just as working at a good company, or building a good company is good for the world, investing in that company is good too. You can set your own criteria.
And now, I’ve got a lot of friends that have some money that want me to invest their money for them, and I do it. I won’t take any pay for it because I just do it as a friend and it’s spreading. In fact, Tom Gardner and I have talked about starting something where we more formally do that for people. But, it doesn’t work 100% of the time, but you’ll be shocked at how much better these types of companies perform, investment-wise, than the other type. And it’s happening more, and more, and more as the world demands that of companies.
Raj: Kip, I think you built a great company, of course, and now you’ve moved on into the next phase of your life. You are somewhat retired. But, I know you’re also actively trying to make the world a better place. And I think your sort of personal power is only growing. And I see great things ahead in terms of your impact not only through Imperative 21, but you were one of the visionaries behind bringing all of these entities, which are each powerful in their own right, but together they have tremendous impact. And so, I really see you as one of the primary people making the case for better business and bringing that into the world of policy, bringing that into the world of academia, also to an extent, you’re inspiring people in that world as well.
Kip: Well, thank you. I think it’s the way to be happy, the way to lead an interesting, and intellectually stimulating, and wonderful life is, I think, really to try to make everybody around you thrive, and that’s really what we’re trying to do now. Our friends, the people that we do business with, the people that we touch through Conscious Capitalism, Imperative 21, and Just Capital, trying to make everyone thrive.