Conscious Capitalism

I’ve been laboring along here in this blog with issues relating to economic development, and also touching on economics issues. Along the way, I have also been reading a lot about economics. It seems complicated enough – there are all these different schools, and all these economists who never seem to agree with each other. As Harry Truman famously said, I want a one armed economist. They keep saying, on the one hand, and then, on the other hand!  http://www.iwise.com/tFhbr

But as you read more broadly, it becomes clear that there really are some simple things that make up our economic system. I keep thinking it should be possible to reduce this “economics of capitalism” to a few simple concepts that we could teach in grade school, that would help overcome the erroneous ideas most of us are walking around with, which lead to lousy decisions. The lousy decisions happen on a personal level, and most importantly, on the global and national level. Our fearless elected officials are not immune to the errors of the common man in this arena, any more than they are in any other arena. We have lots of lousy economics preconceptions driving national policy all the time.

Along the way, I have found some excellent books and authors that have greatly simplified the ideas of economics for me. The history is almost fun to read in the right light. It is amazing how we got to where we are. And the principles that underlie our economic world do appear to be amenable to human understanding. I’m working on my own “10 rules of economics” – but the publication of that will have to wait a bit.

But I just stumbled on an interview with the CEO of Whole Foods – John Mackay. The company always impressed me, but his ideas are even more impressive. You can watch the video here, and there is also a transcript:
   http://bigthink.com/videos/four-principles-for-successful-conscious-capitalism

What follows is an attempt to reduce his words to an outline format. It helps me to understand it better, and it might also help you. If nothing else, it might persuade you to listen to the talk.

Principles of Conscious Capitalism

He asks us to become aware (conscious) of the principles that support the Capitalistic system. It is not a “free market free for all”, where anything goes, and the strong prevail while the weak perish. Without some basic principles, supported by laws and custom, we have no capitalistic system. You can see the effect in countries that do not support one or more of these principles. Their economies tend to suffer compared to others.

1 The Right to Own Property. Our system is built on this basic principle. People can own property, they can own wealth. It is one of the prime motivators of our system for creating wealth.
2.      The Right to Trade. We must be able to exchange property, or labor, for other property. We enhance wealth by means of trade. The more we can trade, the greater wealth we can create overall. Restrictions on trade restrict our wealth creation. There are short term problems with free trade, and we often resist it because of that. For example, we enact laws which restrict trade in order to try to preserve jobs. But that is really short sided and self defeating. He is right there, but he would need to explain that a bit more to get general acceptance.
3.      The Rule of Law. Just and predictable laws are a basic requirement for any society, but they are especially important in the capitalistic world. They support the basic process of wealth creation.

Personally, I would add my favorite mantra to these basic principles, but he includes it in the next section: “We are all in this together”.

Principles of a Conscious Business

Given the basics of a stable economic system, the next thing is to understand or be conscious of is how a business really works.

1. 1.      A Business Has a Transcendent Purpose. I like the way he does this. No human lives just to eat or breathe. We do need to eat and breathe – but that is not what life is about. Just so, a business does not exist just to make money, or to maximize profits. That is not a HUMAN goal. If making money is the whole deal, then we have a real problem. The purpose of a doctor, or lawyer, or teacher, is not to make money. The profession has a purpose, a goal in society to fulfill. Just so, any business has to fulfill a role in its society. And of course, it has to make money, or at least break even. But that is NOT its PURPOSE! 
2. 2.      A Business Has Many Interdependent Stakeholders. These are its customers, employees, investors, communities, suppliers, etc. There are other, more remote stakeholders as well – unions, government, the world economy, the environment, etc. And they are all interdependent. Focusing on just one of them is not enough. The win / win business model is to seek to maximize the benefits to ALL stakeholders. This is my "we are all in this together". When one of us benefits, the others do as well. When one is hurting, the rest of us pay the price as well. Some are more remote, some nearer - but we are all interconnected in this economic reality. 
3. 3.      A Business Has Servant Leadership. The leaders of an organization are not there to maximize their own personal gain – but the return of all of the stakeholders. They are there to serve the enterprise, not themselves. That is what higher purpose is about. That is what enables a complex, interdependent society to thrive.
4. 4.      A Business Must Create a Culture that supports these principles. All of this does not happen by itself, or by accident. This conscious culture provides the background and the structures that support the higher business purpose.
   

And what do you think?