Its were. Host john nixes late to see you again. Lets set the stage iv this. Some people are going to see the title and there are going to think local boy here we go another guy who doesnt like capitalism and who has a lot of criticisms of it and he is probably feeling guilty. The fact is that you are quite a ferocious capitalist and what is interesting to me is that you arent necessarily born that way but rather you talk in the book about your younger life as a young man, selfdescribed progressive. He lived in the housing coop in a food coop. You start a business and your views at the time and i will quayle you you embrace the ideology that business and corporations were essentially evil because they selfishly sought only profit. Then you start your business in the next thing we know youre reading Frederick Hayek and milton freedom Milton Friedman. Talk a little bit about that version and what you learn from your earlier experience and how you came to the point where you are writing a book not just calling capitalism a heroic enterprise but talking about the way you want to defend it and improve it. Guest the first thing to understand as is i am very idealistic and of course i am grateful the lever and capitalism. Business has lifted humanity up out of the dirt. Some of the statistics we discovered in researching the book is a couple of hundred years ago 85 of people lived on less than 1 dollar day and today thats down to 16 . Their litters the rates across the planet or over 90 and today they are down to 14 . The average lifespan was only 30 and today its 68. 78 and the United States and 80 in japans so we have made great progress and we are great believers in what business has been able to do. Its actually not the villain in detail, its the good guy guy but of course when i was starting out i was young and i went to the university of texas in austin and thats a pretty progressive city, and i just sort of eyes studied philosophy and religion and World Literature and history in pretty much the humanities. So when i started the business i have no background in economics or business or anything that i knew that i was going to have really low prices and i was going to pay really well and i was going to be a different kind of business because it wasnt going to be like those other businesses. And of course once you get into the real world you have to give the payroll and you have to pay your bills and your undercapitalized, your philosophy of business evolves. It was very interesting to me because a lot of my friends from the coop saw me as a traitor that i had become on over to the dark side and yet the business was struggling. We managed to lose 50 of our capital in the first year. We started with 45,000 and lost 23,000. My girlfriend at the time who cofounded the business with me we were living in a store in the third floor and making 200 a month each. Way below minimum wage even back then. So i began to move away from that philosophy and as i was trying to figure out business i started to read i read hundreds of business books. Everything that was available i read to try to understand how to make the business successful. At the same time somehow or another i stumbled onto people like hayek and George Gilder and dozens and dozens of other thinkers and i realized that there are explanations for how the economy works and how Society Works made a heck of a lot more sense than sort of the halfbaked philosophy i had as a socalled progressive so it didnt work. In the real world it was proving unsatisfactory so that is kind of how i got started on it. Its not so much that economics helped me to become a better businessperson so match as they just gave me a worldview that made sense where business was actually doing and what i was doing as a business person. Host you come to capitalism and the now understand that all of these ideas like ellen terry exchange, that they all not only create Good Business that helps society and we are talking about those things. What is Conscious Capitalism and how does it differ from what many of us would call just plain old wonderful capitalism . Guest well, the first thing to understand is that we think business is good and its a direct value but it can be better. It has greater potential than is being realized and when you understand any look at the gallup pole for example that shows that the business in the United States has an Approval Rating of 19 , 81 dont approve of business and when you see that in congress is at 17 which is about the same level, only a couple of points below it, you realize that people have lost confidence in business. The narrative about business and capitalism have really been controlled by the entities of business of capitalism and if you study history you will see the Business People have always been able to sustain throughout all history. A lot of business was done by the elites. The elites were above, and trade and business was something often that fell on the shoulders of minorities such as the western jewish and the chinese, who through hard work and through enterprise oftentimes made a success of their lives and make money and that created and the end persecution. They run out of one country after another and supposedly in a different religion and certainly contributed to it that a big part of it was that they were economically very successful. That was disdained by the intellectuals. The intellectuals have always hated business and we can get into why that might either case. I think the most important to realize is intellectual is not a friend of business and not in the past and certainly not today. So business is painted as fundamentally all about money. Its selfish, its gritty, its exploitation of and it only exists to make money and i think if you go to a Cocktail Party and ask someone randomly what is the purpose of Business People will give you an odd look. They will probably say what you mean what is the purpose of business . The purpose of business is to make money. That is a not answer because you fiasco doctor what their purposes they certainly are well compensated and they also need to make money but they wont say my purposes of doctor is to make money. A dot your heals people and teachers educate and engineers construct things. Journalists hope we are helping to uncover the truth and they usually have a higher purpose of discovering what has been hidden away and bringing it to light. And getting a good interesting story that hopefully is also a truthful story. Host hopefully. Guest is a higher purpose that serves other people and creates value for their people. Business is the greatest value crater in the world. It creates the Good Services that make our lives better. Its not a zerosum game where somebody wins and somebody else loses. Business creates value for its customers, its employees, for suppliers and for its investors and for the communities that it is part of. All of that is done through voluntary exchange of business as fundamentally good. And as we point out in the book it has Great Potential to be heroic in terms of lifting humanity up to a higher level. Higher level. Host do you talk in the book about doing that i have been purpose like you said in terms of the example you gave of a doctor of the purpose. What are some of the aspects of Conscious Capitalism . Guest we identified four key tenants. All four are somewhat interdependent. You cant just take them in isolation. They Work Together in a synergistic fashion. The first woman talk about his business has the potential for higher purpose beyond making money. Its not that theres anything wrong with making money. That is one of the thing that business does is create value but just as my body produces red blood cells and the purpose of my life is not produce red blood cells. Similarly business cannot exist if its not profitable. It will not have the capital it needs in order to renew itself to innovate, to repair equipment when it wears out, to respond to competitions of profit is essential to business but every business has the potential for a more transcendent purpose beyond that just as these other professions do so First Business has to discover or rediscover its higher purpose. By the way most entrepreneurs who create businesses in the first place are motivated by some type of higher purpose. They may not be conscious of it and it may not be explicit but generally i know hundreds of entrepreneurs and only a few exceptions will they tell me i started my business at the outer edge. Most of them started their business because they were on fire about something or some idea or something they wanted to create, some difference they wanted to make in the world. For another reason is just to show that they could do it and they told me later when business matures that we hear the economist come in and interpret that well its all about making money. So first a higher purpose than the second tenant of Conscious Capitalism is we have the stakeholder system. Its not just about creating value for the investors but there are other stakeholders that also matter that are interdependent with one another. The customers matter and the employees matter and the suppliers matter, the communities we are part of matter and so do the investors. And a simple example i use all the time is the retailer to explain this is that the Whole Foods Market we try to hire the very best people we can find and make sure that they are welltrained and then managements job is to help them first in the workplace. Given the tools they need to make sure that they are happy because they are the ones that serve the customers. Happy team members serve and create happy customers unhappy customers create happy investors so the business flourishes. All the stakeholders are interdependent. A company like Whole Foods Market has a hundred thousand suppliers we do business with around the world and they are its essential that they also flourish. They help create special new products and services that make Whole Foods Market stand out in the marketplace is important that our suppliers are so flourish. Once you realize that a business is creating value not strictly for its investors and of course it needs great value for investors as well, but all the stakeholders are interdependent and you begin to viewed as a system, an integrated system and he began to ask questions such as what strategies can we do in our business that allow all of our stakeholders to simultaneously flourish and prosper . Host what is it that you do if whole foods to do that . Guest the more important question might be what do you do that might not result in creating the wind when scenarios . Those might be strategies where one stakeholder is gaining and another one is losing which sometimes you might seem business for example where its like well we need to get profits up so we are going to raise prices and cut wages and cut benefits back and grind our suppliers down and that will result in higher profits which indeed it might in the shortrun but then it sets up negative feedback when customers find your prices high and they go to your competitors. Your wages are low in your benefits arent as good so youre up employees take jobs with other companies. Your suppliers dont have to trade with you and if you grind them down they will face about and will deemphasize u. S. A customer so they are all connected together and the strategy you have to do is how do we create value so that therell simultaneously winning . I will give you an example of whole whole foods that oftentimeoftentime s people might be a traitor. We created a foundation called the whole Planet Foundation which does microcredit loans around the world. We do those projects in the communities we are trading in so we open a project and costa rican and resource bananas, mangoes and coffin close to rico so we will be looking to locate the microcredit where we are doing business. Someone might say youre being philanthropic with investors money. That is the type of theft basically. You should be philanthropic with your own money. In a narrow sense you could sort of make that case if it doesnt create value for the investors. What we found with the whole Planet Foundation is it is creating value for all of our stakeholders. Our customers for example we have marked with within our stores and tell her customers what they are doing. Once he or we do a Prosperity Campaign where they are able to donate their change to this process and we gather 5 million last year for pennies and nickels and dimes left over from the exchange. Our customers therefore are somehow connected to it and we market to it on line and we receive hundreds and hundreds of letters from our customers enthusiastic about what the whole Planet Foundation is doing in helping poverty. Our team members participate through payroll deduction if they wish and we also volunteer program where team members can volunteer in some of these countries that we are doing that microcredit loans in. That is a transforming experience for many of them and in fact its not the only thing that has been done. People are so proud of what whole foods is done. In eight years we have helped over a Million People and 93 of those are women to have better lives. It is quite phenomenal. Our suppliers are also able to participate in that. They contribute money to the whole Planet Foundation we advertise the market as a Supplier Alliance and that gives them greater exposure to our Customer Base so thats a win for our suppliers. Its good for investors. We have received millions and perhaps tens of billions of dollars of publicity and goodwill in our communities which has helped Whole Foods Markets brand to be better known and better established throughout the world. As a result investors gain as well so all the stakeholders are winning. That is a winwin strategy. Host some people might think whole foods is unique in that situation. When you talk about purpose, there is a certain calm and you didnt mention whole foods focus but he laid out in the book and something you have in your store the goal is to give people choices for healthier eating. That is one of a number of them. And i dont mean this dismissively but the idea behind your company. Can every company do this though . For instance you are the Worlds Largest creator of washing machine parts, can you really have a higher purpose as it were and orient your company around the ideas the way that whole foods can . Guest my first to that is grocery retailing is about as monday in a business as you can get so the fact that we have been able to find a higher purpose and the grocery can find a higher purpose. Using the example of the washing machine parts. Host that just came to mind. Guest think about what washing machines do and how washing machines have liberated mostly women from drudgery of washing clothes in rivers and streams and washing in the sink by hand is time consuming and perhaps not the best use of peoples attention and time. So washing machines themselves have had a great technological advance for humanity. If you are making parts, your higher purpose should dovetail. You want to create the very best washing machine are the most affordable washing machine that can reach the widest market possible. You are contributing to i think it rants but humanity and i think you should see it that way and you should market it that way. Assuming that i mean you cannot we find exceptional cases where somebody is doing a project that is actually really harmful for people. I am not saying that it should be applicable to absolutely everything. If its applicable to more than 99. 9 . Host lets talk about what its not because some people will look at the title of this book and if they have a rabbit they first thought it was going to be an explanation or a case for Corporate Social Responsibility and you are very clear in the book that is not what this is about. Again this is Corporate Social Responsibility. They are using Pension Funds or using proxies to try to Push Companies to change their policies and often Environmental Policies or labor policies that groupthink are at the corporate socially to do. What is different between them and what you are advocating here . Because you do talk about companies can do what is right and that is the part of his argument. Guest of course most people dont like to create new categories in their mind. They have a category and its called Corporate Social Responsibility so they think its just another version of that. And its not. Its another way to think. Its a whole new paradigm for thinking about business and it doesnt fit within that little box for a well so on in the book is important to differentiate the cost of capitalism from social responsibility and the biggest difference is that Corporate Social Responsibility is really just a traditional business with the profit centric model that grabs on some type of social responsibility because they think its going to appease the critics. Corporate social responsibility departments inevitably report to Public Relations or marketing. They are seen as a way to improve their Brand Reputation of the company. So they are oftentimes accused of greenwashing. You are just doing this for reputation purposes. Its not really its just very thin and not really deep. Conscious capitalism makes the Community Stakeholder and the env