What’s the book Conscious Capitalism about? How can you make your business more ethical?
Conscious Capitalism by John Mackey and Rajendra Sisodia covers the philosophy of conscious capitalism and how to practice it. This is a version of capitalism that they say is good for everyone involved in the business, from customers to investors.
Read below for a brief Conscious Capitalism book overview.
Conscious Capitalism by John Mackey and Rajendra Sisodia
In their 2013 Conscious Capitalism book, co-founder and former CEO of Whole Foods Market John Mackey teams up with businessman Raj Sisodia to introduce a new form of capitalism. Mackey and Sisodia argue that capitalism is inherently good for people, but conscious capitalism is even better because it benefits all interested parties—including the environment and society at large. According to the authors, conscious capitalism has the potential to unleash unprecedented human ingenuity and solve most, if not all, of the problems we face.
Our overview will cover the philosophy of conscious capitalism and how to practice it:
- In Part 1: The Need for Conscious Capitalism, we’ll discuss what conscious capitalism is, how it addresses common critiques of capitalism, and its potential benefits.
- In Part 2: Everyone Benefits From Conscious Capitalism, we’ll explain how conscious capitalism takes into account the well-being of all interested parties.
- In Part 3: Becoming a Consciously Capitalist Company, we’ll explore the two features your company must implement to embody conscious capitalism: prioritizing a good cause over profits and practicing enlightened leadership and management.
Part 1: The Need for Conscious Capitalism
To understand the need for conscious capitalism, you first need to understand the benefits and pitfalls of traditional capitalism. In this section, we’ll explain why the authors believe free-market capitalism benefits people, despite common critiques of the system. Then, we’ll explain how conscious capitalism improves on traditional capitalism, addressing those critiques.
Free-Market Capitalism Is Good for You
According to Mackey and Sisodia, free-market capitalism is the ideal economic system. They believe it’s had a more positive influence on humanity than any other human invention because it enables entrepreneurs to come up with innovative solutions to the world’s problems. Thus, the authors attribute gains in quality of life over the last 200 years—including technology advances, greater global connectivity, and improved human health, literacy, and democratic equality—to free-market capitalism. They also explain that free-market capitalism has proven itself to be better than socialist alternatives, as evidenced by socialism’s inability to gain and keep a foothold anywhere in the world. (Shortform note: Five countries currently claim to socialist.)
However, the authors recognize that capitalism has come under scrutiny in recent years—and they argue that it’s because while capitalism is theoretically sound, businesspeople have understood and implemented it poorly. They explain that people commonly hold three mistaken beliefs about capitalism’s utility:
First, people mistakenly believe that capitalism worsens inequality because businesspeople can sometimes be cutthroat and self-serving, which widens the gap between the rich and the poor. The authors argue that according to the theoretical basis of capitalism, this shouldn’t happen: Adam Smith (an economist who was one of capitalism’s founding fathers) argued that an inherent purpose of doing business is to help one another and improve the world.
Second, people mistakenly believe that capitalism inevitably causes social and environmental problems because many businesses prioritize profits at the expense of the public and the environment. The authors explain that according to the theoretical basis of capitalism, businesspeople shouldn’t prioritize profits—they should be inspired by their passion for improving the world and pursue profits only because doing so enables them to solve social and environmental problems.
Third, people mistakenly believe that capitalism is unfair because it leads to cronyism—the use of government connections to gain more than their fair share of profits and undermine the free market. According to the authors, the theoretical basis of capitalism is inherently fair, voluntary, and democratic—everyone has a chance to succeed.
How Conscious Capitalism Addresses Common Critiques of Capitalism (solution to capitalism)
Mackey and Sisodia argue that businesses must align their actions with society’s ever-advancing ideals, or else they’ll fail. The authors explain that over the last 200 years, people have become more enlightened—and as their values, knowledge, and connections to one another have improved, society has become increasingly free of cruelty and violence. Most people want society to continue improving in this way, so they reject businesses that perpetuate cruelty and violence—and they’re more critical of variants of capitalism that enable businesses to do so.
According to Mackey and Sisodia, to align their actions with society’s values, businesses must practice “conscious capitalism”: a business model that benefits all interested parties, from customers to investors to society and the environment. The authors say that conscious capitalism is true to the theoretical basis of capitalism because the ultimate goal of businesses who practice it is to satisfy everyone involved—under distorted forms of capitalism, the ultimate goal of a business is to make money, and it only satisfies interested parties as a means to do that.
Since conscious capitalism benefits everyone, the authors say it nullifies the three common critiques of capitalism listed above—and it doesn’t perpetuate cruelty or violence.
The authors also argue that since everyone benefits from conscious capitalism, this model has the potential to empower all people around the world to flourish if it’s widely practiced. As a result of their flourishing, everyone will have the ability to contribute innovative solutions to contemporary problems—which means that ultimately, conscious capitalism is capable of solving any problem we encounter.
Part 2: Everyone Benefits From Conscious Capitalism
We’ve explained that conscious capitalism benefits all interested parties—now, we’ll dig deeper into that idea. First, we’ll discuss the necessity of an everyone-wins approach and explain why it’s possible. Then, we’ll discuss each interested party individually, explaining why they’re important to your business and how exactly they can benefit from conscious capitalism.
Why Everyone Must Win
Mackey and Sisodia argue that the everyone-wins approach inherent in conscious capitalism is necessary because every interested party is vital to a business’s success—you can’t run a business without customers or employees, for example—which means that satisfying them all makes businesses more sustainable and more profitable.
The authors explain that often, businesses value satisfying one interested party over all others—for example, they might unfairly mark up product prices because they prioritize investors’ profits over customer satisfaction. When that happens, other interested parties suffer and, in the long run, become unhappy with the business. If one interested party pulls out because they’re unhappy, the business will suffer or even fail. On the other hand, if all interested parties are satisfied by your business, your business will be more profitable in the long run—the authors say that according to market evidence, conscious companies outperform other kinds of businesses.
Who Is “Everyone”?
The authors describe each interested party and how they’re essential to your business:
Investors invest in your business because they trust that they’ll eventually profit from doing so. Since they’re trusting you to turn their money into more money, Mackey and Sisodia say that you have a responsibility to ensure that your investors profit.
Suppliers are integral to a company’s success, since you couldn’t provide a good or service for your customers without first purchasing a supplier’s goods or services. Because of this, you have a responsibility to ensure that your suppliers benefit from doing business with you. If you do, they’ll be more devoted to ensuring that you get the best goods and services at the best price. If you don’t, Mackey and Sisodia warn that they may stop doing business with you—or charge you exorbitant prices, which will undercut your investors’ profits.
Employees create or provide the goods or services your customers purchase—as such, they’re integral to your business’s success. Mackey and Sisodia say that in return for their contributions, you have a responsibility to ensure that employees find their work inherently rewarding.
Customers are the most important interested party because without them, your business wouldn’t make money or have any reason to exist. Since customers are so integral to your business’s success, you have a responsibility to offer a product or service that truly improves their lives—like healthy food, beautiful and long-lasting clothing, or safe and efficient transportation. The authors argue that customers can tell the difference between helpful and exploitative goods and services, and that when customers are happy with what a business offers them, they offer feedback to help the company improve and advertise their products/services via word of mouth.
Your company can’t function if society (which includes the general public, the media, the government, and other entities like activists and unions) disapproves of it—ultimately, your profits will suffer and you’ll be forced out of business. Since society’s approval is essential to your company’s sustainability, Mackey and Sisodia argue that you have a responsibility to ensure that your business makes society healthier.
Finally, we all depend on a healthy environment for continued life—so Mackey and Sisodia argue that it’s counterproductive for your company to harm the environment and that you have a responsibility to make your business environmentally friendly.
We’ll go into more detail about best practices to ensure all interested parties win in the next section.
Part 3: Becoming a Consciously Capitalist Company
Now that you understand why and how everyone can win under conscious capitalism, we’ll explain how you can build a consciously capitalist company (CCC) by incorporating two key elements: prioritizing a good cause over profits and practicing enlightened leadership and management.
Prioritize a Good Cause Over Profits
Mackey and Sisodia argue that all CCCs exist for a good cause—instead of prioritizing profits, they prioritize making the world a better place in a particular way. For example, the authors explain that Whole Foods Market’s good cause is to promote nutritious eating and environmentally friendly agricultural practices. A good cause is especially important for employees: The authors argue that employees who don’t believe in the company’s cause—or who see that there is no cause beyond making money—won’t perform as well at work (which ultimately harms the company) and won’t be happy in their own lives.
The authors say there are four kinds of good causes—helping others (for example, by providing medical care), maximizing knowledge (for example, by performing research), promoting art (for example, by creating stylish clothing), and transforming the world (for example, by building the first AI). Founders usually already know the company’s cause when they establish a company. But if a company’s cause is unclear, Mackey and Sisodia recommend assembling a group of representatives from each interested party, from investors to environmentalists, to discuss and explicitly define the company’s cause.
Practice Enlightened Leadership and Management
According to Mackey and Sisodia, enlightened leaders and managers are the most important element of a CCC because they have the decision-making power to ensure that all interested parties win. They explain that leaders and managers occupy different roles: Leaders supply the ideas that propel a CCC forward, while managers put those ideas into practice.
Best Practices for Ensuring Everyone Wins
Mackey and Sisodia argue that leaders and managers can ensure that everyone involved with their company wins if they demonstrate care for each interested party and use systems thinking to understand how their business and all interested parties are interrelated. Caring for an interested party means being grateful for their participation (as opposed to taking them for granted), conscientiously tending to their needs, and ensuring that doing business with you benefits them.
Mackey and Sisodia also make specific recommendations for meeting your responsibility to each interested party without sacrificing anyone else’s needs. Let’s explore those now.
Investors
Let investors determine your company’s leadership—Mackey and Sisodia argue that since it’s investors’ money you’re working with, they should have the final say about who is entrusted with the power to decide how that money will be used.
Don’t give in to unrealistic performance pressures. The authors explain that it’s common for companies to experience pressure to appear profitable by the end of each quarter so that stock values will increase, maximizing investors’ profits. Companies often sacrifice the well-being of other interested parties in order to achieve these profits—for example, by charging customers more. Instead, the authors say you should aim for honesty and fairness, keeping the big picture—everyone’s satisfaction—in mind. Investors’ profits aren’t more important than any other interested party’s needs.
Fairly distribute employee stock options. Mackey and Sisodia explain that executives are often given the opportunity to own a high concentration of company stock, which can be problematic if executives are more interested in short-term profits than the company’s long-term success. They might force decisions that are profitable now but ultimately unwise because they’re hoping to sell stock, make money, and get out of the business before suffering any negative consequences. On the other hand, if all employees are given the opportunity to own a small amount of stock, they might be more motivated to help the company succeed since they have a financial stake in it.
Suppliers
Build up the suppliers you count on. The authors explain that practically, this could mean investing in them or coming up with strategic solutions to supply chain problems. For example, say you own a restaurant that purchases ingredients from local farmers. To help those farmers continue to provide the produce you need, you might contribute money to conservation programs that make farming more sustainable.
Foster a partnership. Mackey and Sisodia say that instead of trying to get the most out of each other while giving as little as possible in return, you should aim for a mutually beneficial relationship with suppliers. For example, this could mean not haggling over prices—unless it’s clear that they’re charging you unfairly, pay them what they ask for as soon as payment is due. Like any other business, they have to profit to get by; and since you need them to succeed, you want them to profit, even if that means you pay a little more than you’d like to.
Renegotiate contracts often. Mackey and Sisodia explain that this gives you a chance to address any major changes in the supply chain and fulfill any new or previously unmet needs. It also creates faith in the fairness of your working relationship.
Employees
Hire people whose values are aligned with your company’s values. Mackey and Sisodia explain that when employees believe that their work serves an important purpose, they’ll be intrinsically motivated to do their jobs well and they’ll have greater job satisfaction.
Encourage employee collaboration. Mackey and Sisodia say that collaboration fulfills a fundamental human need for connection and makes work more fun. Also, teams can accomplish more than individuals can—so your company will benefit from employee collaboration, too.
Promote a healthy work culture by emphasizing equality, trust, and humanity. You can promote equality by fairly compensating your employees, which involves instituting salary caps to ensure that higher-ups aren’t overpaid and providing health insurance and wellness programs. You can promote trust by ensuring that the company (and everyone involved with it) is honest, fair, loyal, and accountable. Finally, you can promote humanity by encouraging employees to openly express their feelings, helping people find new jobs when you need them to leave the company, and hiring more women leaders—the authors say that women are naturally more likely to practice and spread humane values like empathy and collaboration.
Customers
Build trust. Mackey and Sisodia say that if you treat customers with dignity, they’ll trust you—which is necessary in the long term because businesses often have to educate customers about their own needs, and customers won’t buy into that education if they don’t trust the business. For example, a hospital isn’t likely to buy novel medical equipment from you if you have a history of selling faulty equipment—to convince them that they need this new medical equipment, you need their trust.
Innovate. Mackey and Sisodia say that to improve your customers’ lives, you have to offer them the best of the best. This often requires innovation—the creation of new goods and services that meet not only the needs your customers know about, but also the needs your customers don’t know they have yet.
Make your marketing educational. According to the authors, good marketing teaches your customers about what they need and how you can fulfill that need—and when you make good on that promise, you reinforce their trust in you.
Society
Be philanthropic. The authors explain that you can donate money to community nonprofits or create your own. You can also partner with local nonprofits by encouraging your employees to donate their time to them. They suggest that you set up community service opportunities during workdays—that way employees aren’t giving up their own free time by participating—and allowing employees to volunteer for projects that are personally meaningful to them, rather than assigning them to an arbitrary cause.
Learn from your enemies. Mackey and Sisodia explain that entities that are commonly considered the enemies of businesses—like competitors, social and environmental activists, and labor unions—actually count as interested parties because they genuinely care about how your business functions and whether you succeed or fail. They also have a lot to teach you—they bring issues to your attention that you wouldn’t have seen otherwise, like employee unhappiness, which you can then address.
Foster a healthy relationship with the media and government. The authors explain that a healthy relationship with the media is one where you balance traditional media (which shares updates about your business with other interested parties) and social media (where you’re in control of how your business is represented). A healthy relationship with the government is one where there’s only enough government regulation to stop businesses from harming people or the environment (and not enough to slow innovation), and businesses are taxed fairly—which, in the authors’ eyes, means a low rate, allowing them to invest more in projects that directly support society’s health.
Environment
Become environmentally conscious. The authors contend that most environmental damage is done accidentally—business owners don’t set out to purposefully harm the environment, but it happens because they don’t fully understand the consequences of their actions. For example, some argue that the AI boom has been accompanied by a hidden environmental cost. To become more environmentally conscious, educate yourself about environmental challenges that relate to your line of business.
Proactively improve the environment. Mackey and Sisodia say that while minimizing the harm your business does to the environment is a good first step, you shouldn’t settle for the bare minimum—instead, you should take the initiative to fund research or innovative programs that address environmental problems.
Don’t focus solely on climate change. Mackey and Sisodia argue that although climate change is a real threat to the environment, it’s not the only or most important concern—and that treating it as though it is can lead you to neglect other environmental issues, like deforestation or pollution. Instead, they recommend that you strategize about how to tackle various kinds of problems.
