True freedom

"Freedom means that in some measure we entrust our fate to forces we do not control; and this seems intolerable to those positivist / rationalist who believe that men can master his fate; as if civilization and reason itself were the fate of his making"
F.A. Hayek

Sunday, March 10, 2013

Book Review: Conscious Capitalism

Book Review: Conscious Capitalism: Liberating the Heroic Spirit of Business
By: Pablo Paniagua
February 19, 2013
Book details:
Name: Conscious Capitalism: Liberating the Heroic Spirit of Business
Author: John Mackey and Raj Sisodia
Hardcover: 368 pages
Publisher: Harvard Business Review Press
ISBN: 978-1422144206
Release date: January 15, 2013

This is what we know to be true: business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity.”
John Mackey
Early this year the co-CEO of Whole Foods John Mackey along with Raj Sisodia, a marketing professor at Bentley College, launched: Conscious Capitalism: Liberating the Heroic Spirit of Business. The book is a noble attempt to change the outdated obtuse managerial paradigm of the “way of doing business” while simultaneously stressing capitalism’s core virtues and noble moral foundations. The book challenges the way of perceiving companies as simply profit-maximizing machines squeezing stakeholders in order to achieve their narrow monetary ends and also warns us of how when we follow that narrative, we undermine not only our own companies but capitalism and society.
Conscious Capitalism offers a wider view as to how business in general should be perceived, specifically in this new era of interdependence and human-social consciousness. The book starts with Mackey challenging Milton Friedman’s outlook on business; Friedman once stated that the only genuine role of business was to be responsible only to their shareholders, with other stakeholders being beyond the realm of action for business. Today when connectivity and social global awareness have increased, this view seems to be too narrow and self-defeating. Additionally it does not explain how companies can add sustainable value to society through a network of relationships creating systems of collaboration, interdependency and win-win partnerships to enrich us all. This book is the authors’ attempt to expose management and society to this forgotten reality of capitalism and its inner heroic power of unleashing collaboration and well-being. Likewise Conscious Capitalism places special emphasis on the incredible role that entrepreneurs and companies play in modern society as well as in every aspect of life. Mackey helps us to realize how most of our daily interactions are related to various business forms or occur inside different work environments. Therefore it is imperative to have businessmen who are fully conscious of their crucial social role and aware of the direct impact they make on other’s lives and the environment. If we want to have a balanced society to make people feel fulfilled both spiritually and materially, Mackey argues is that we need a more conscious, holistic way of seeing business and a well-rounded conception of capitalism.
In order to share this awareness among entrepreneurs, the book shows that a radical change of paradigm is necessary for the way people manage and perceive their businesses and modify our view of what we understand as capitalism. If businesses want to become profit-oriented, while retain sustainable value, increase long-term profits and add value to the whole society, their only sustainable solution is to elevate their business scope towards a higher social purpose; which helps to create a shared integrated vision of society with their stakeholders. This higher purpose will appeal to others involved in their economic and social relationships, opening business towards more long-term beneficial relationships. Embracing ‘conscious capitalism’ is, according to Mackey, the way in which we can embrace real human and responsible entrepreneurship, which has been the true engine of progress in human society for more than 200 years. The only way to build accountable and successful business practices is to establish relationships based on love, care, respect and efficiency. This will benefit customers, employees, investors, communities, suppliers and the environment. The book illuminates the fact that capitalism is not based on rapacity and shallow egoistic self-interest but rather win-win relationships based on harmony and reciprocity. According to the book, people have failed to understand what true capitalism is about and how it creates prosperity; this is a menace for a free-society and its capacity to create spiritual and economical wealth. This book helps us to rediscover this forgotten reality.
Mackey’s book later evolves into his personal manifesto of the heroic roles that entrepreneurs have played in modern societies and how businesses are the institutions which can contribute to a more tangible way to our psychological and materialistic well-being. Unfortunately most business schools preach to some degree versions of a short-term, voracious, narrow version of business, which pushes business leaders around the world towards a simplistic erroneous paradigm. This mistaken vision aims only at seizing short-term monetary gains at whatever cost, even if it undermines the company’s own long-term success and damages workers and suppliers. The book proposes a new management paradigm instead: a holistic, value-centered and socially integrated company. This manifesto is a clear example of how capitalism and businesses can be ‘conscious’ trough converging the personal profit-seeking motives with higher social purposes that creates value and benefits for local cultures, workers, suppliers and the environment. There is no clash between society’s interests and those of profit-seeking industries; they not merely coexist but are fundamentally interdependent on one another.
The book continues by reminding us that the true hero in the capitalist system is the entrepreneur; it is he who elevates the quality of life to all mankind through serving it. Mackey then poses the following query: why is capitalism- even after being shown to be the best possible system in which humans can flourish- so repudiated by intellectuals and the masses? Businesspeople, Mackey argues, have been losing ground on defending capitalism on ethical bases; capitalism needs a better reformulation of its ethics and narrative. The spread of capitalism’s rotten version, the so-called “crony-capitalism,” has helped to create the wrong view of what capitalism is really about. Our new crony-capitalist system is based on short-term, profit-seeking, greedy businessmen who pursue political connections and government benefits to seize wealth, while stealing value from the American consumer. This form of “entrepreneurship” is a zero-sum game which is totally unfair and immoral. Unfortunately people see cronyism as our new established form of capitalism, hence the widespread reluctance to support the capitalist system. Following this argument, the also book stresses the fact that businesspeople recognize the profit motive as the only motive of businesses, gives them the losing ethical ground; the reality is instead quite different. People start businesses because they want to follow their passions and dreams, innovate, bear risk and at the same time serve and improve other people’s lives; this is the real purpose of business and the winning ethical ground for capitalism.
The book’s subsequent major theme presents the more practical, managerial mental models that need to be applied in order to achieve consciousness. These models are deeply rooted in the philosophy of reciprocity as previously discussed. Specifically, the book’s mental-models are: higher purpose and core values, stakeholder integration, conscious leadership and finally conscious culture and management. All categories are inherently necessary and reinforce one another when businesses seek to be conscious capitalists.
Through the mental models, Mackey reveals several real-life practices that Whole Foods has applied. They are inspired by the principles of consciousness and holistic interdependency; these principles are very much homologous to the ones imbedded in the philosophy of a free-society. These examples truly enrich the book and display how Whole Foods has added value through daily decentralize managerial decisions which have made the business successful. The misbelief that corporations need to only focus on maximizing monetary profit while neglecting communities, the health of the employees and the environment in order to succeed is drastically demystified by Whole Foods real practices. Also the misbelief that most business decisions are based on trade-offs between stakeholders is successfully challenged through seeking win-win solutions in the chain of relationships in which businesses are imbedded. Overall the book effectively challenges several other antique mental models which keep us in the “business is evil” paradigm; henceforth the book acts as a wakeup call to eliminate the old retrograde business practices in exchange for achieving greater value.
In conclusion, the term ‘conscious capitalism’ is a way of thinking about life and about doing business. It is a stand to seek a higher level of awareness of our higher purposes in life, our roles and impacts as humans and businesses and our direct and indirect relationships with other stakeholders. According to Mackey, it is “a deeper consciousness about why businesses exist and how they can create more value”. Thus it is the responsibility of ethical and conscious businesspeople and entrepreneurs to demonstrate to society their important role in the world, what businesses can do for local communities, for families and to solve deep social problems. Conscious capitalism is therefore not only a story worth telling but is a vision of our world worth preserving.
While free-enterprise capitalism is inherently virtuous and vitally necessary for democracy and prosperity, crony capitalism is intrinsically unethical and poses a grave threat to our freedom and well-being. Unfortunately, our current system has the effect of corrupting many honorable business-people, pushing them into becoming reluctant crony capitalist as a matter of survival’
John Mackey