of everyone on the planet through higher-quality foods and better nutrition, and we can’t fulfill this mission unless we are highly profitable. Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must businesses live just to make profits.”1
I often made a similar argument about Medtronic’s mission to “restore people to fuller life and health.” In my first book, Authentic Leadership, I presented the case that business should start with its purpose and its values and use them to inspire employees to innovate and provide superior service, while creating sustainable increases in revenues and profits. This approach provides the basis for ongoing investment in the business while creating lasting value for shareholders and stakeholders—leading to a virtuous circle. This philosophy is not unique in any way to Whole Foods and Medtronic. It is widely practiced at such diverse firms as IBM, Starbucks, Apple, Novartis, Wells Fargo, and General Mills, all of which have sustained great success for decades.
In Conscious Capitalism, Mackey and Sisodia walk the reader through every constituency that corporations serve, including some like labor unions and activists, which are normally considered hostile to the company’s best interests. The authors demonstrate why and how these organizations deserve attention and respect, even when there are ongoing disagreements.
To economists, Friedman’s much simpler calculation of shareholder value is easier to compute and measure, but it fails to represent the more important long-term elements of the company’s health, the validity of its strategy, the merits of its investments, the satisfaction of its customers, and the commitment and engagement of its employees. These factors have far greater impact on a company’s long-term, sustainable value than does its short-term stock price movement. Other leading scholars, such as my Harvard Business School colleague Robert Kaplan, have provided a more resilient and nuanced way to measure long-term company performance with the balanced scorecard.
As a vivid illustration of how this works, consider Hewlett-Packard and IBM and the different approaches to leadership taken by CEOs Mark Hurd and Sam Palmisano in the last decade. Prior to being forced to resign for misconduct, HP’s Hurd, who came from NCR Corporation, took over from the failed leadership of Carly Fiorina and seemingly got the company back on track, driving revenues and profits upward and more than doubling HP’s stock. However, these gains were caused in part by sharp cuts in R&D spending from 6 to 3 percent (compared with historic levels of 10 percent) and a near-term focus that precluded investing in viable long-term strategies. Since his departure in 2010, HP stock has declined by $60 billion, or 55 percent.
Under Palmisano’s steady leadership, IBM focused on serving its global customers through a values-centered “globally integrated enterprise.” This long-term culture change took the bulk of Palmisano’s ten years as CEO but resulted in an increase in IBM shareholder value of more than $100 billion, or 84 percent, in the past three years. Virginia Rometty, Palmisano’s internal successor, is well positioned to sustain this success, whereas Hurd’s externally chosen successors, Leo Apotheker and Meg Whitman, continue to search for a viable strategy.
I am deeply grateful to John Mackey and Raj Sisodia for giving business and society this invaluable treatise on how to integrate all the company’s constituencies for the long-term benefit of creating sustainable organizations that serve society’s interests simultaneously with their own. They refer to capitalism as a “heroic force” addressing society’s greatest challenges. In that sense, their ideas dovetail perfectly with those of my Harvard Business School colleague Michael Porter, the pioneer of modern corporate strategy, who has issued a clarion call to corporate leaders to contribute to society by “creating shared value.”
It is my fervent desire to see these ideas became a widely accepted and practiced mode of running corporations in the future, thereby enabling capitalism to flourish in the decades ahead as the dominant force contributing to a prosperous global society.
Bill George is professor of management practice at Harvard Business School and the former chair and chief executive of Medtronic, Inc. He is the author of four best-selling books, including Authentic Leadership and True North, along with his most recent book, True North Groups. He serves on the board of directors of ExxonMobil, Goldman Sachs, and the Mayo Clinic.
INTRODUCTION
Awakenings
BY JOHN MACKEY
Before I cofounded Whole Foods Market, I attended two universities, where I accumulated about 120 hours of electives, primarily in philosophy, religion, history, world literature, and other humanities. I only took classes I was interested in, and if a class bored me, I quickly dropped it. Needless to say, with such a self-directed educational strategy, I learned many interesting and valuable things, but ended up with no degree. I never took a single business class. I actually think that has worked to my advantage in business over the years. As an entrepreneur, I had nothing to unlearn and new possibilities for innovation. I spent my late teens and early twenties trying to discover the meaning and purpose of my own life.
My search for meaning and purpose led me into the counterculture movement of the late 1960s and 1970s. I studied Eastern philosophy and religion at the time and still practice both yoga and meditation. I studied ecology. I became a vegetarian (I have been a vegan for ten years). I lived in an urban co-op/commune in Austin, Texas, for two years, and I grew my hair and beard long. Politically, I drifted into progressivism (or liberalism or social democracy) and embraced the ideology that business and corporations were essentially evil because they selfishly sought only profits. In contrast to evil corporations, I believed that nonprofit organizations and government were “good,” because they altruistically worked for the public interest, not for profit.
With that background, I was clearly “well prepared” to launch a business in 1978. Our original company, a natural foods market named Safer Way, was a small 3,000-square-foot store in an old house that I opened with my girlfriend, Renee Lawson. We had seed capital of $45,000 that we raised from friends and family. We were both very young (I was twenty-five and Renee was twenty-one) and idealistic, and we started the business because we wanted to sell healthy food to people, earn a decent living, and have fun doing both.
Despite working many eighty-plus-hour weeks, Renee and I initially took salaries of only about $200 a month and lived in the office above the store. There was no shower or bathtub there, so we took “showers” in the store’s Hobart dishwasher when we needed to clean up (I’m pretty sure that violated several city health codes). After operating Safer Way for two years, we decided to relocate to a much larger building, merge with another small natural food store, and change the name to Whole Foods Market in 1980.
First Awakening: Creating a Business and Becoming a Capitalist
At the time we started Safer Way, the progressive political philosophy I believed in had taught me that both business and capitalism were fundamentally based on greed, selfishness, and exploitation: the exploitation of consumers, workers, society, and the environment for the goal of maximizing profits. I believed that profit was a necessary evil at best and certainly not a desirable goal for society as a whole. Before starting Safer Way, I had been involved in the cooperative movement in Austin. Besides living communally in a housing co-op for two years, I was also a member of three separate food co-ops at different times. For several years, I believed that the co-op movement was the best way to reform capitalism because it was based on cooperation instead of competition. If a store was owned by its customers, rather than by profit-hungry investors, it would be both less expensive and more socially just. I agreed with the food co-op motto—“food for people, not for profit.” However, I ultimately became disillusioned with the co-op movement because there seemed to be little room for entrepreneurial creativity; virtually every decision
