A detailed review on Conscious Capitalism Book


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A detailed review on Conscious Capitalism Book

CONSCIOUS CAPITALISM – Book Review

By John Mackey and Raj Sisodia

Introduction

The book, Conscious Capitalism, is more than a defense of capitalism.  It is an excellent book on leadership, stakeholder relationships, and what goes into making good companies.  This book builds on the book Firms of Endearment written by David Wolfe, Jag Sheth, and Raj Sisodia, and much of the book is a testimonial to Whole Foods, where John Mackey is a co-founder and co-CEO.

Conscious Capitalism book tells of the many excellent strategies that Whole Foods has employed to become a major player in the retail food sector.  The book spells out the principles upon which Whole Foods was founded, how those principles have evolved, and how those principles have served the company and all of its stakeholders well, including customers, employees (called Team Members), animal rights organizations, among others.

The book is useful for any business person or student of business who wants to learn how to build a business with a purpose, and not just a business to make money.  The book also identifies how Whole Foods has successfully dealt with setbacks, retrenchment, unions, employees who were not being successful in their roles, suppliers, and stockholders.

The Purpose of the Book

Clearly, the purpose of the conscious capitalism book is to seek to re-brand capitalism as an inherently ethical, community oriented, type of business organization, and societal structure.  The book rarely discusses how some capitalist companies put horsemeat into products labeled “beef” (from cows), how some capitalist companies pollute our air and water, waste our energy, and overall, produce a negative benefit to society even though they are profitable. To the authors’ credit, they do some of this in their appendix where they seek to show that good companies, those that treat their workers well outperform other companies in the Standard and Poor’s Index and outperform the companies that were included in Jim Collins’ Good To Great.

However, this section is far inferior to the path breaking work of Bassi, et al., in the book Good Company: Business Success in the Worthiness Era.  If Conscious Capitalism book is to be a scholarly treatise on how certain “good companies” outperform the S&P the authors’ failure to include the work in Good Company is inexplicable.  This is further bolstered by the fact that at least one of the authors, Raj Sisodia, is well aware of the Bassi, et al. work published by Barrett Koehler publishers and explained more fully at www.goodcompanyindex.com.

In a short footnote number 5 for Chapter 17,  the authors state they have developed a proprietary “audit” that companies can use to assess whether they are a “conscious” company.  Clearly, one or both of the authors has a strong economic interest in promoting their view of “conscious capitalism.”  This is not a criticism of the book, but the readers should be aware that the authors are promoting a cause that is specifically designed to reward them financially.

Key Good Ideas in the Book

The excellent discussion of centralization vs. decentralization in the book is worthy in and of itself.  Whole Foods has created an excellent organizational framework that includes both elements of centralization and elements of decentralization.  In addition, the authors describe how it has expanded into “Tap Rooms” (places where their customers can sit and have beer or wine), how it promotes excellent customer service and customer loyalty, and how it works with suppliers.  The authors describe a supplier rewards program that appears to be cutting edge.  Whole Foods has done great work to buy local, based on its key premise that food grown locally is often better and healthier for the local people purchasing it.

The book makes the argument that doing great work in the community is an essential part of capitalism, and certainly part of the mission of Whole Foods. The book describes the philanthropic strategy of Whole Foods and describes the nonprofits that it has created and supported. The section describing how Whole Foods is seeking to improve food in schools in an excellent case study of how a company’s interests can align perfectly with society’s interests. (We would all agree that the food we serve our children in schools is not the best it could be, by a long shot).

Part Three of the book on leadership is excellent and a worthy contribution to the leadership literature.  The attributes that the authors assign to “conscious leaders” are the attributes that everyone would agree constitute leadership at its best.  All leaders and those who want to be leaders or better leaders would benefit from reading Part Three of the book.

The references to and discussion of “crony capitalism” in the conscious capitalism book are especially noteworthy because scholars from hundreds of years ago have stated that one of the key tenets of conscious capitalism is for companies to seek to gain influence over government policy and operations to benefit the companies.  Yet, the authors seem to suggest, that it is not conscious capitalism that promotes this at all. Rather, it is some weakness in government or some inappropriate behavior of certain companies, who do not have integrity, to seek to gain leverage and influence over government policy and operations. The authors maintain but do not provide any reasonable argument that this is not a function of how conscious capitalism itself works and was designed to work from the very beginning of capitalism as we know it.

We leave it to the reader to decide whether companies seeking to influence and benefit from government policy and operations is an essential component of capitalism or part of capitalism’s essence, or whether it is some aberration of capitalism itself for companies and their representatives and lobbyists and campaign contributions to seek this goal of influencing government for companies’ benefit.. The authors do not make a legitimate case for their argument that it is only bad companies and defective government that causes the cozy relationship that the authors speak about when they speak of “crony capitalism.”  Scholars for centuries have stated that one of the essential tenets of conscious capitalism is that these crony relationships between companies and government will exist and that they will serve some companies interests over others, cause unfair competition, cost consumers choices and value, and generally hurt the economy while benefiting certain companies and powerful economic interests.

To the authors’ credit, they name names of companies and industries who are “crony capitalists.” However, they offer no solution except to this problem except to pin their hopes on more transparency, more ingenuity, and more competition created by capitalism itself, to eliminate “crony capitalism.”

This Book’s Place in the Business Literature

This Conscious Capitalism book seeks to be a wake-up call to help capitalism to “get back on track” and create a new narrative in support of conscious capitalism, calling it “heroic” it its subtitle.  If it is successful doing so, it would be a welcome addition to the history and future of capitalism. However, this book fails to discuss the history of capitalism with any reasonable vigor. The book’s central premise seems to be that conscious capitalism can and does benefit the world by offering and promoting:

  • innovation
  • freedom of thought and action on a large scale
  • free movement of capital to support new ideas
  • an ethical, even exchange of value between companies and their customers
  • efficiency prompted by competition
  • proper treatment of employees, and
  • more choices for customers
  • excellent care for the environment
  • among other benefits.

This Conscious capitalism review accepts this list as good examples of how conscious capitalism can and does do good every day and how the world benefits from this economic system. However, the Conscious Capitalism book’s shortcomings are also manifest in that it fails to explain what even Alan Greenspan, a conservative, even a libertarian, and Adam Smith, the father of capitalism, himself, have stated repeatedly, that capitalistic markets and ownership of the means of production often do not work well in the absence of excellent government regulation.

Conclusion

The Conscious Capitalism book is a polemic or political document more than a scholarly book, and it is clear the authors intended the book to be just that, a strong defense for capitalism.  The book is a strong defense for Whole Foods and certain companies are supported by an excellent purpose, create meaning for their customers and employees, treat employees fairly, treat the environment with great respect, and contribute to their communities on a regular basis.

 The book fails to explain why some companies do not do this and still make great profits, benefiting their investors, while harming consumers, the environment, the communities where they operate, and often end up leaving the government (taxpayer) to pay billions and billions of dollars to clean up the environmental, social, medical, and financial messes created by these companies.

On the whole, there is no balance to this book, but there are enough great insights to make the book worth reading.  The section on why companies should not seek to produce fear among their employees is worthy, and we hope that companies take this section to heart and reduce the intentional use of fear as a management strategy.

Finally, the “movement” “conscious capitalism,” supported by the authors, we hope, has legs. We hope that companies will understand, as proven more successfully in the book Good Company than in this book, that companies that are good employers, good sellers (good to their customers), and good stewards of the environment and the communities where they operate and sell goods and services, are now and will be in the future, more profitable, more long-lived, and better citizens than companies that fail in any one or all of these areas.

For that reason, the authors have done the business book reading public a service by writing this book, and I applaud them.

 

conscious capitalism

One thought on “A detailed review on Conscious Capitalism Book

  1. Avatar of Peter BishopPeter Bishop
    #

    Nice review, Herb. And yes Whole Foods has done some amazing things.

    Just two comments —

    1. Whole Foods is obviously doing very well in the upscale food business. But doing all those things well is also expensive and so, as I understand though I don’t comparative shop in groceries, their prices reflect that higher cost. So their market are people with 1) average or more than average disposable income and 2) an appreciation of better, more nutritious food and/or a company that does all these nice things. It’s an interesting question, however, how large that market is. Is it large enough for the “more companies to things this well” to make the same money that Whole Foods does? Certainly not everyone. Some people have to shop at Walmart just to eat on a tight budget.

    2. The authors may have a scale that assesses “how well” companies are doing. But isn’t that the B-Corp is supposed to be. I’ve not investigated how one gets a B-Corp rating, but there must be some kind of scale…A group of us visited a B-Corp in San Francisco recently. I asked what contributions they made to NGOs that earned that rating. I was surprised to find that that was not necessary. They simply said that they treated their clients nicely, holding social once in a while, etc. I’m sure there’s more than what I got in a short answer, but it didn’t sound all that impressive to me.

    It did occur to me during the visit, however, a comment that someone made on television that the belief that corporations can only spend money to maximize shareholder value was not true. Again, have not investigated, but wouldn’t it be nice to have a practice or even a reg that corporations had to devote a portion of their profits (a tithe perhaps) to some social good. I suppose that’s what taxes are, but might be nice that they could re-direct part of their taxes to their local communities or some initiative that they thought was particularly important.

    So thanks again for the post, Herb…

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