He highlights the practices of Companies Like whole foods and southwest, that seek to increase value for their shareholders by creating value for their customers and employees as well. Its about an hour. John, its a delight to see you again. Lets set the stage for this. Some people are going to pick up this book, see the title, and theyre going to think, oh, boy, here we go another guy who doesnt like capitalism, who has a lot of criticisms of it, even made money as ceo, probably feeling guilty. The fact is you are quite a ferocious capitalist and what is interesting to me is that you werent necessarily born that way but are somewhat of a convert, and you talk about your younger life as a young man, selfdescribed progressive, living in a housing coop, a food coop, start a business, and your views at the time you embraced the ideology that business and corporations were essentially evil because they selfy,ly south only profits. Then you start your business and the next thing we know youre reading Milton Freedman and we have whole foods. Talk about that conversion, what you learned from your early experience and how you came to a point where youre now writing a book, not just calling capitalism a heroic enterprise but the fact you want to improve it. Guest the first thing to understand is im very idealistic and a great believer in capitalism. I think business is heroic. It has lifted humanity up out of the dirt and some of the statistics we discovered as we researched the book was that a culp hundred years ago 85 of the people alive lived on less than one dollar a day. Today thats down to 16 . Illiteracy rates across the planet were 90 . Today theyre 14 . Average life span was 30. Today its 68. 78 in the United States, 80 in japan. So, humanity has made great progress. Were great believers in what business has been able to do. Its actually not the villain in the tale, its the good guy. But when i was starting out we went the university of texas in austin, and thats a pretty progressive city, and i just sort of i didnt study business. I studied philosophy and religion and World Literature and history and pretty much humanities, and when i started the business i had no background in economics or business or neglect, and but i knew 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 i wasnt going to be like those other businesses. And of course, opposite you get into the real world and have to meet a payroll and you have to pay your bills and youre under capitalized, your philosophy of business evolves. It was very interesting to me because a lot of my friends from the Coop Movement saw me as a traitor, i had gone over the dark side, and yet the business was struggling. We managed to lose 50 of our capital in the first year. Renee, my girlfriend at the time, who cofounded the business with me, we were living in the store on the third floor and only makeing 200 per month each, way below minimum wage even back then. So i just 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. And to try to understand how to make the business successful. At the same time stumbled on to people like Frederick Hyatt and george guilder, and dozens and dozens of other thinkers. And i realized their explanations for how the economy worked and Society Worked made a heck of a lot more sense than the halfbaked idea i had as a socalled progressive. So i abandoned that philosophy. It didnt work. In the real world it would prove to be unsatisfactory. So its not so much that economics helped me to become a Better Business person so much as they just gave me a world view that made sense of what business was actually doing, and what i was doing as a business person. So,. Host so we understand the ideas like voluntary exchange, profits that they create good businesses but help society. What is Conscious Capitalism and how does it differ from what many of wuss call just plain old wonderful capitalism . Guest well, first thing to understand is we think business is good, and its created a great value. But it can be better. It has greater potential than is being realized. And when you understand that when you look at the gallup poll that shows that big business in the United States has an Approval Rating of 19 . That means 80 dont approve of business. And when you see that Even Congress is at 17 , which is about the same level, only a couple points below it. You realize that people have lost confidence in business. And the narrative about business and capitalism has been controlled by the enemies of business and capitalism, and if you study history, youll see that Business People have always been held in disdain, throughout all history. A lot of business wasnt done by the elites. The elites were above common trade, and business was something often that fell on the in the shoulders of minorities such as in the west, jews, and in the east, the chinese, who, through hard work and enterprise, often times made a success of their lives and made money and that created envy, and persecution. They saw the jews run out of one country after another. Supposedly bus of different religion and certainly contributed to it, but the big part of it was that they were economically very successful, and that was disdained by the intellectuals. The intellectuals have always hated business, and we can get into why that might be the case, if it served any useful purpose, but i think the most important thing to realize is intellectuals are not the friends of business, and not in the past, and certainly not today. So business is painted as fundamentally all about money. Selfish, greedy, its exploitative, and it only exists to make money. And i think its if you go to a Cocktail Party and ask somebody randomly, hwa what is the purpose of business, people will give you an odd look. Theyll probably say, thats what you mean . The purpose of business is to make money. But thats an odd answer. If you ask a doctor, what their purpose is, they are well compensated and also need to make money but wont say, well, my purpose as a doctor is to make money. A doctor heals people. Teachers educate, Architect Design building, engineerings construct things, gorgeousists hopefully are helping to uncover the truth. Host we try. Guest yes, the potentially have a higher purpose of discovering what has been hidden away and bringing it to light and giving it a good interesting story that hopefully is a truthful story. So the professions all refer back to some type of higher purpose that serves other people. Creates value for other people. Business is the greatest value creator in the world. It creates the goods and services that make our lives better. Creates value not for a few. Its not a zero sum game. Business creates value for its customers, for employees, for its suppliers, for its investors and the communities its part of. And all of that is done through voluntary exchange. So business is fundamentally good and has the Great Potential be heroic in terms terms of lifg humanity up to a higher level. Host you talk about doing that by having purpose, like you said in terms of the example our gave of a doctor, his greater purpose. What are the aspects of Conscious Capitalism . Guest well, we identify four key ten tenets of Conscious Capitalism. The all work together. The first one we talk about, which is business has the potential for higher purposeon making money. Its not that theres anything wrong with making money, of course. Thats one of the things business does, it creates value for its investor stakeholders. But just as my body produces red blood cells and if i stop producing red blood cells, im going to die. But the purpose of my life is not to 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, repair equipment to be able to respond to competition, so profit its essential to business. But every business has the potential for more transcendent purpose beyond that just as these other professions do. So, First Business has to discover or rediscover its higher purpose, and by the way, most entrepreneur who create businesses are motivated by some type of higher purpose. They may not be conscious of it. It may not be explicit, but generally ive known hundreds of entrepreneurs and only with a few exceptions will they tell me i start evidence my business to get rich. Most started their business because they were on fire about something. There was some idea, something they wanted to create, some difference they wanted to make in the world. Another reason than just to show they could do it. And its only later, when the business matures, that we hear or the economists come in and interpret that, well, its all about making money. So, first, higher purpose. The second tenet is that we have this stakeholder system that its not just about creating value for the investors, but there are other stakeholders that also party and theyre interdependent with one another. The customers matter. The employees matter. The suppliers matter. The communities that were part of matter. And so do the investors. And a simple example i use often times as a retailer that kind of explains this, is that at whole foodded market we try to hire the very best people we can fine, make sure theyre welltrained and then managements job is to help them to flourish in the work place to give them the tools they need and make sure theyre happy, because theyre the ones that serve the customers. So, happy team members serve and create happy customers, and happy customers create happy investors because the business flourishes. So all the stakeholders are enter dependent. A company like Whole Foods Market has 100,000 suppliers reason the world, and they are its essential they also flourish. They help create our competitive advantage. They help create the special unique products and services that makes us stand out in the marketplace. So its important our suppliers flourish. So once you realize that a business is creating value not strictly for its investors but all the stakeholders are interdependent, you view it as system, an integrated system, and you begin 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 do you do . Guest the more important question might be, what do you do that might not result in creating the winwinwin scenarios. Those might be strategies where one stakeholder is gaming and another one is lyings. Sometimes you might see in business, for example, where its like we need to get profits up, so were going to raise prices, were going to cut wages, cut benefits back, grind our suppliers down and thats going to result in higher profits. Which indeed it might in the short run. But then sets up negative feedback loops. The customers find the prices high and go to your competitors you. Wages are low, your benefits arent as good and your employees take jobs with other companies. Your suppliers dont have to trade with you, and if you grind them down theyll eventually phase you out as a potential customer. So, theyre all connected together, and the strategy that you have to do is, how do we create value so that theyre all simultaneously winning . Ill give you an example that ontimes people thing mike by a tradeoffful we created a foundationcalled whole credit foundation, and does microcredit loans around the world in developing companies. We do projectness a country were trading in, so for example, costa rica, so well be booking to locate the microcredit where were actually doing business. Now, the first somebody might say, well, youre being philanthropic with the investors money. Thats a type of theft. You should be philanthropic with your own money. And the narrow sense you can sort of make that case. Itself doesnt create value for the investors. What we found with the whole Planet Foundation its creating value for all of our stakeholders. Our kemp customers, we market it in the stores and we tell the customers what were doing, we do a Prosperity Campaign where they can donate their change to this process, and we gathered 5 million last year from pens and nickels and dimes left over from peoples change, and that our customers, therefore, are somehow connected to it and would we market it to online, and we receive hundreds and hundreds of letters from our customers, enthusiastic about what the whole Planet Foundation is doing to help end poverty. Our team members participate partly through payroll deduction if they wish and also we have a volunteer program where our team members can volunteer at these countries were doing the microcredit loans in. Thats transformative experience for many of them. In fact i would say theres nothing our company has ever done that has raised the morale higher than the whole Planet Foundation. People are so proud of what whole foods has done in just eight years we have already helped over a million people. 93 of those are women to have better lives. Its quite phenomenal. Our suppliers are also able to be participate in that. They contribute money to the whole Planet Foundation, and we advertise that and market that in our stores, as a Supplier Alliance so that gives them greater exposure to our Customer Base. Thats a win for our suppliers to participate. Is it good for our investors . Absolutely. Weve received millions, perhaps tens of millions of dollars of positive publicity and good will in our communities. Its helped Whole Foods Market brand to be better known and better established throughout the world, and as a result, the investors gain as well. So all the stakeholders are winning. Thats a within winwin strategy. Host some people might ask if whole foods isnt unique in its situation, though you. Talk about purpose. Theres a certain you didnt mention whole foods purpose but you lay it out in the book and its something you have in your stores but your goal is to give people choices for healthier eating. Thats one of them. So theres a certain almost i dont mean this dismissively the missionary zeal behind your company. Can other companies do this . For instance, if you are the Worlds Largest creator of washing Machine Parts, can you really have a higher purpose in and orient your company around the sort of big ideas the way that whole fooleds can . Guest well, my first point to that is, grocery retailing is about as mundane a business as that a good point. Guest the fact we have been able to find a higher purpose, if a grocer can fine a higher purpose, arguably anybody can. Using the example of washing Machine Parts host just came to mine. Guest think about what wering machines do and how washing machines have liberated, mostly women, from drudgery, and washing clothes in rivers and streams and beating them against rocks, or watching them in sink by handis time, consuming and perhaps not the best use of peoples attention and time. So, washing machines themselves have been a great technological advance for humanity. And if youre making parts to that. Your higher purpose should dove tail. You want to create the very best washing machines or the most for aable washing machines that can reach the widest market possible. Youre actually contributing to, i think, advancement of humanity, and i think that you should see it that would and market it that way. Assuming that you can always find exceptional cases where somebody is actually doing a product that is actually really deeply harmful for people. Im not saying that this is applicable to absolutely every business that exists. But its applicable to more than 99. 9 of them. Host lets talk about what it is not. Some people will look at the title of the book and if they havent read it, their first thought is going to be this is an explanation or a case for corporate social responsibility. And youre very clear in the book that is not what this is about, and again, this is corporate social responsibility, this movement you see often activists, using pensions funds or taking shares in companies, using proxies to try to Push Companies to change their policies, often Environmental Policies or labor policies, as at it the corporate socially responsible thing to do. What is different between that movement and what youre advocating sneer you talk about how Companies Need to do what is right. Thats part of this argument. Guest of course, most people who first hear about this, people dont like to create new categories in their mind. Already got a category, called corporate social responsibility. So they think this is just another version of that. And its not. Its another way a whole new paradigm for thinking about business. It doesnt fit within that little box very well. And so early on in the book we make important to differentiate capitalil and corporate social responsibility. The biggest different is Corporate Responsibility is just a tradition business profit centric mottle that graphs on some type of social responsibility because they think its going to apiece appease the critics. Corporation plat social responsibility departments either report through public relation0s marking. Theyre seen as a way to improve the Brand Reputation of the company. So, theyre often times accused of brain washing. Youre just doing this for reputation purposes. Its not really just very thin, not really deep. Cap Conscious Capitalism makes the community stakeholer or environmental stakeholder key, its part of why you exist, its part of your higher purpose, part of your mission. So