by Regan Hines
July 3, 2013
“We believe that 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. Free-enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to something even greater.”
Those are words from John Mackey and Raj Sisodia’s book Conscious Capitalism: Liberating the Heroic Spirit of Business. For too long, business has been on the defensive. People have viewed business as inherently selfish and self-serving. People have viewed business as having only one goal, profit maximization. It is viewed as greedy and exploitative.
Mackey and Sisodia make the compelling case for the heroic side of business. After all, more people have risen out of poverty in the last two centuries precisely due to capitalism. Capitalism allows for the greatest innovation and exchange of ideas in the world. Businesses create value for society. Unlike government, business is based on voluntary exchange, not force. Businesses must offer a product or service that is worth more than the price in order for customers to voluntarily make that purchase. With this system we have a greater diversity of products and services than ever before. Average people eat meals everyday that royalty living a few centuries ago never had access to. Our standard of living has increased exponentially during the age of capitalism. Businesses must compete to satisfy customers’ needs so the process of improvement never ends. Through the process of competition customers are rewarded with better quality products at lower prices.
Mackey and Sisodia make the crucial point that business will be even more successful if they are conscious of their purpose and focus on creating value for all stakeholders. All too often companies look for tradeoffs with suppliers, customers, distributors, investors, etc. rather than looking for win-win solutions or what the authors call win6 solutions. If companies actively pursue mutually beneficial relationships and recognize the interdependencies among all stakeholders they will have more success and remain successful over the long-term. Looking for shortcuts may work in the short term or result in a boost in quarterly profits that look good for the shareholders but companies need to be conscious of their purpose in order to remain competitive in a rapidly evolving global environment. It may seem counterintuitive, but focusing on satisfying stakeholders as an end in itself rather than profits alone, companies will generate even more profits. The authors make another crucial point about human nature. Humans are not just cogs in a wheel that can be motivated by the stick and carrot approach. That strategy may work for certain enterprises but it is increasingly becoming an ineffective strategy to motivate employees. Humans enjoy and are motivated by creating value for others. If you decentralize and empower workers they will work harder, treat customers better, and innovate to create even more value for the company. It is time for capitalism to be held up for what it is. The greatest economic system humans ever came up with.
Businesses must adopt the model of conscious capitalism in order to provide an even clearer picture of what is best for society. During times of crisis like an economic collapse, you can bet that governments around the world will clamor for a system with more regulation and control of the economy. If statists succeed in their goals, a system based on coercion, corruption, and crony-capitalism will be instituted. But if people have a clear understanding of the superiority of a free-market system based on voluntary association the choice will be obvious. The narrative about business must be revised to accurately portray the beauty of capitalism and the heroic spirit of business. John Mackey and Raj Sisodia’s, Conscious Capitalism is a great start in achieving this. Business leaders around the world would be smart to adopt the practices outlined in this great book.
“Conscious businesses can help evolve our world in such a way that billions of people can flourish, leading lives infused with passion, purpose, love, and creativity—a world of freedom, harmony, prosperity, and compassion.”—Excerpt from The Conscious Capitalism Credo