Capitalism

Whole Foods CEO John Mackey Advocates Conscious Capitalism

In his new book, the co-founder of Whole Foods Market promotes free-market thinking while criticizing Wall Street.

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John Mackey, the cofounder and co-CEO of Whole Foods Market, has a flair for well-timed entries into public policy debates, as readers of his 2009 Wall Street Journal op-ed attacking Obamacare may recall.

Now Mackey is back, along with a co-author, Raj Sisodia, with a new book, Conscious Capitalism: Liberating the Heroic Spirit of Business. It has just been issued by the Harvard Business Review Press, and it is bristling with ideas just as provocative as the ones Mackey arrayed against Obamacare a few years back.

CEOs of consumer-facing businesses tend to be either reticent or vague about political matters for fear of offending potential customers. No so Mackey, who early on in the book mentions reading free-enterprise thinkers like Friedrich Hayek, Ludwig von Mises, Milton Friedman, Jude Wanniski, Henry Hazlitt, and Thomas Sowell. "I learned that free enterprise, when combined with property rights, innovation, the rule of law, and constitutionally limited democratic government, results in societies that maximize societal prosperity and establish conditions that promote human happiness and well-being—not just for the rich, but for the larger society, including the poor," he writes.

Much of the book proceeds along these sensible lines. Mackey writes, for example, that in 2011, the taxes his company paid were "more than twice as high as the profits we were allowed to keep." ($343 million in after-tax profits, $825 million in total taxes.). "If business taxes were lower, all the other stakeholders would have more — lower prices for consumers, higher wages and benefits for team members, and higher net profits for investors, and the amount of money we could give to support the nonprofit sector would also be proportionately greater," he writes.

To the extent that Mackey wants to change current business practices—and he does—he writes that "the lead agents of change need to be those who are engaged in business—not politicians, bureaucrats, or regulators." This, too, makes plenty of sense.

(Article continues below video, "Whole Foods CEO John Mackey on the Moral Case for Capitalism."

Where Mackey gets out onto thinner ice is when he attacks entire sectors of the private economy, in vitriolic terms. "It sometimes seems that the values and philosophy of Wall Street has become a type of cancer that is corrupting the healthier parts of the larger economic system," he writes, criticizing what he calls the Wall Street philosophy "that only profits and maximizing shareholder value really matter."

He's similarly negative about the pharmaceutical industry. "Americans take way too many pharmaceutical drugs in a futile effort to maintain their health and vitality. These are not nutritive substances, and all have some toxic effects on our bodies," he writes. "Elsewhere," he explains, "Medicine has become a very expensive automobile repair shop delivering first aid, pharmaceutical drugs, medical devices, and surgeries that primarily address symptoms rather than sources of diseases. Instead, it should primarily be based on studying optimum health and teaching people how to live healthy lives through better diets, healthy lifestyles, exercise, rest, positive attitudes, and so forth."

Diet, exercise, and rest are great, but the idea that, say, cancer or major depression can be treated with "positive attitudes" rather than surgery or modern medicine is a sign of flawed thinking that sometimes also affects this book's treatment of its core subjects, business and capitalism.

Here the book argues that "conscious capitalism"—an approach that gives a high priority not only to shareholders but also to "stakeholders" such as customers, suppliers, and employees, and that emphasizes a business mission other than profits—is "the secret to sustained high performance."

Mackey's best example is his own company. Its mission includes "to help end poverty around the word." It has a policy that "caps the total cash compensation, including bonuses, for any team member at nineteen times the average pay of all team members." It has a decentralized management approach and an innovative and flexible approach to non-cash benefits for employees.

The book claims that the shares of "conscious" companies outperform the stock market overall. That is based on a study in which the 18 outperforming conscious companies were Amazon, BMW, CarMax, Caterpillar, Commerce Bank, Costco, eBay, Google, Harley-Davidson, Honda, JetBlue, Johnson &  Johnson, Southwest Airlines, Starbucks, Timberland, Toyota, UPS, and Whole Foods Market. News coverage of some of these companies, however, depicts them as something less than the model corporate citizens they are described as when they are mentioned in the book. Johnson & Johnson, for example, has been in the headlines recently for selling hip implants known to be defective. Two Commerce Bank executives were convicted of federal crimes for approving personal loans to a Philadelphia city official to get the city's banking business. Some of these 18 firms are discussed in detail in the book, but others are ignored, or mentioned only glancingly.

The worst idea in the book, though, comes not in Mackey's text, but in the foreword by Bill George, a professor at Harvard Business School and the former CEO of Medtronic. Professor George argues that corporations have a responsibility to society in part because "it was society that chartered the limited liability corporation and granted companies the right to operate."

I prefer the alternative view that "the right to operate" a business is not granted by society but rather stems from the rights of property, association, and pursuit of happiness that are inalienable, natural rights. With George's framework, the chances of a policy outcome dictated by Mackey's terrible troika of "politicians, bureaucrats, or regulators" becomes more likely. As a choice by the owner of a business, "conscious capitalism" is fine. But if government starts commanding it as a condition of allowing businesses "the right to operate," one suspects that even Mackey may come to wish he let Friedman, Hayek, and Von Mises have the last word.

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  1. Which Whole Foods Market stakeholders are benefited by the company’s ending most prices in .99?

    (No, this shouldn’t be illegal and it’s not uncommon; but I think it’s manipulative and unsavory.)

    1. the whole point of marketing is manipulation. And unless you are facing Derren Brown, most people can easily defend against it…otherwise we would be swamped in chia pets and shamwows.

    2. The funny thing is, that 0.99 versus 1.00 pricing makes a HUGE difference to the consumer. It’s crazy but it’s the way the world works. Back when I was working retail I would routinely see people drive across town to literally save one cent. The retailers aren’t doing this because they’re manipulative, they’re doing it because the customers demand it.

      There are lots of these magic price points, and as silly as they seem objectively, the customers will fall for them. You may not like it, but if you don’t use this pricing I guarantee your competitors will.

      1. That reminds me of a pet peeve: people who add “.00” to high prices, which makes them harder to read at a glance, and makes them look more downscale, AND makes the prices seem higher. So it’s lose/lose/lose. When I see prices like “$10,000.00” I want to slap someone.

  2. Time for a flash mob of subaru drivers to do a dance in the produce section.

    3…2…1…

  3. Conscious Capitalism

    Fuck that marketing bullshit

    The whole premise of “Organic” food is to subtly imply that all other foods are synthentic and impure

    Anything trying to distinguish itself with an adjective implies that it was something lacking from the definition in the first place

    Which is why calling something a “cruel murder” is stupid = when the hell is a ‘murder’ ever a generous and kind act?

    “Conscious” Capitalism suggests that ‘Capitalism’ is an amoral and otherwise-unethical system which is bereft of any life-affirming or socially beneficial characteristics to begin with.

    Which is BULLSHIT. it is nothing but an empty marketing label for mackey to apologize to his progressive consumer-base for supporting these yucky free market ideas.

    MUCH more fucking cool is David Mamet’s recent 0defense of the 2nd Amendment =

    http://www.thedailybeast.com/n…..mamet.html

    1. “it is nothing but an empty marketing label for mackey to apologize to his progressive consumer-base for supporting these yucky free market ideas.”

      Not sure about this. I’m afraid he fantasizes that he can sup with the devil and not get burned.

    2. No, this is Mackey trying to sell free markets to progressives on terms they can accept.

      IMO.

      1. my point exactly

        by contrast, Dave Mamets 2nd amdmt defense was a big “fuck you” to gun-grabbers

        i personally dont think Capitalism needs a sugar coating of “consciousness” (wtf does that even mean outside a bob marley sense?)

        1. “consciousness” (wtf does that even mean outside a bob marley sense?)

          It doesn’t mean anything. It’s just a popular word pretentious intellectuals use to try and convince themselves they have a soul.

          1. I AM NOW IN LOVE WITH CHUCK WOOLERY

            my hero

        2. IMO capitalism needs sugarcoating, rebranding, staging, test marketing, and everything else. The 2012 election results prove it.

      2. They’re weak and scared by nature, so you have to put nice-sounding, sweet adjectives in front of your nouns or you’ll scare them off.

    3. when the hell is a ‘murder’ ever a generous and kind act?

      Assisted suicide, when the person is in great, untreatable pain and is unable to off themselves.

      1. technically not murder, which by definition is something the murdered would otherwise say, “oh, Murder me? not today, thanks. appreciate the thought”

        ‘Assisted suicide’, while a crime under law, is exactly that.

    4. “The whole premise of “Organic” food is to subtly imply that all other foods are synthentic and impure”

      XKCD:

      http://xkcd.com/641/

  4. The right to operate a business and the special rights, powers, privileges, and immunities that are enjoyed by corporations (both for-profit and non-profit) are not the same thing. A corporation is an “artificial person,” a legal entity created according to rules established by the state, whatever they may be.

    As for “natural rights,” I guess they must be invisible, because no one’s ever seen one. Looking at history, slavery has been far more “natural” than free markets, which don’t really appear at all until the late 15th century, in limited parts of Europe. Slavery, on the other hand, goes back thousands of years, all over the world, and was still quite popular 150 years ago in certain parts of the American South and Czarist Russia.

    1. ‘As for “electrons”, I guess they must be invisible, because no one’s ever seen one.’
      FIFY, bozo.

    2. As for “natural rights,” I guess they must be invisible, because no one’s ever seen one.

      Correct. Rights are not measurable qualities of man, like height, hair color or weight. They are logical principles of conduct. “One ought be free to do x”, “One ought not be free to do y”.

    3. A corporation is an “artificial person,”

      No, it’s a collection of people. No different than “black people” or “gay people”. Are you suggesting that those groups are also “artificial” and thus have no rights?

      1. Black people and gay people don’t have charters or special mutual rights and responsibilities. The idea of a “persona ficta” being a legal entity dates back at least to the 13th century and was first applied to universities.

        1. And, to be clear, I am not arguing against the existence of rights or against the right of people to form corporations as a logical extension of freedom of association and the right to make contracts.

      2. Are you suggesting that those groups are also “artificial” and thus have no rights?

        What a strange thing to say. I thought libertarians didn’t believe in any “group rights” (black, gay, whatever) — but only individual rights.

        In any case, Vanneman’s reference to “artificial persons” is correct:

        http://en.wikipedia.org/wiki/Legal_personality

        Though, his other comment about no one ever “seeing” natural rights was just painfully dumb.

        1. Libertarians believe in individual rights, including the right to associate (or not) with others. Such associations include business associations (e.g., shared ownership of a corporation), political associations (e.g., NRA, ACLU, etc.) and personal associations (Elk’s Lodge, Boy Scouts, etc.).

          Allowing an association to have a bank account facilitates its managing its income and expenses without someone having to haul around their pooled money. It also provides a means by which those acting in the association’s name can be held accountable along with the organization.

          It’s funny that so many liberals object to corporations having rights, for without any rights, how would a group of individuals in a business association be held accountable for their actions on behalf of the business? Or would just the person committing the offense be held accountable, while all the other “shareholders” would get off scot-free? Or would business associations just be illegal and if so, would that mean you can’t hire anyone or buy or sell from anyone?

    4. I love that Vanneman’s argument could just as easily apply to oxygen prior to modern scientific advances. I guess oxygen didn’t exist until the 1700s!

    5. ALAN VANNEMANNNNNNNNNNNNNN

      1. You misspelled Anal, dude.

    6. Tony was making somewhat the same argument last week. It was wrong then, too. Go fuck yourself Vanneman.

      1. Tony makes the same argument every week. Because morality is not concrete or obvious (to him) it must not exist. If it does exist, it exists only as a human construct rather than a natural order. If we choose to reinvent morality based on current intellectual fads, then everything will be hunky dory because nothing bad could possibly happen once we kick out from human civilization the legs on which it stands.

    7. Vanneman: Rights are things the state can’t take from you. They can make them harder to practice, but they can’t take them from you.

      Privileges (previously known as “positive rights”) are things the state grants you, and in absence of the state granting them to you, you won’t have them.

      1. Rights are things the State isn’t allowed to take from you because of the Constitution. But constitutions are often ignored by the government, or in our case, government employees eventually get them interpreted to mean nothing (e.g. see the 9th and 10th amendments). These are known as negative rights.

        Your description of positive rights is accurate, except that you can have things governments might grant to you. After all, for those governments that do grant stuff to you, where do you think they got it? They got it from someone who already had it by taking it from them.

    8. I understand the deep suspicion of corporations as “people”, but on the other hand the concept appears to go hand in hand with the explosion of wealth in the West that has us to the point where a day laborer lives in conditions that would be the envy of a Medieval King. I don’t insist that corporations are necessary to this, but I am reluctant to do away with them before somebody has demonstrated another way to generate that kind of wealth in a society. Communism failed spectacularly. Socialism’s record makes it look an awful lot like Communism Lite (half the ethnic cleansing….). I accept that the Libertarians I read who are suspicious of Corporate structures have well founded beliefs, but there are also people on the Far Left who damn Corporations and I have no evidence that they know what the hell they are talking about …. or could feed themselves in a world without Corporations, for that matter.

      1. It’s not corporations that have led to wealth, but the free market. It’s where we have freedom to voluntarily engage in transactions with others, in a market regulated by consumers rather than government (if government regulated the market then it wouldn’t be a free market). Corporations are just a mechanism whereby individuals voluntarily pool their resources in an attempt to earn money by serving others.

        It’s ironic liberals hate corporations so much. Yet the founders of corporations pool their resources (like communists force you to do) to generate goods/services. In the meantime liberals appeal for us to work together for the common good, yet want to prohibit corporations that do exactly that.

        It makes one think that liberals don’t want us to work together, and instead they want us to work for them under their thumb, just like slave owners.

  5. Mackey isn’t *necessarily* on thin ice when he attack Wall Street.

    Let me point out that all of the heros in Ayn Rand’s novels are not exclusively focused on profits or shareholder value.

    There is an unfortunate tendency, which even some libertarians have internalized, to compute self-interest in purely fianancial terms. But Howard Roark isn’t solely interested in making money, and we wouldn’t find him admirable if he was. He, like Mackey, is interested in promoting a particular set of personal values. Mackey created Whole Foods because of his belief in organic agriculture. That’s not something that most libertarians conventionally connect with – but it’s worth pointing out that’s he’s prusuing a particular vision of the world, and he’s doing it using the free market, not a government regulation.

    I don’t think it’s that far off base to say that people on Wall Street are interested in promoting their own financial well being in purely economic terms and often using crony capitalism as a mechanism. and that the world would be a better place if more people on Wall Street saw it as their job to help build great companies, help worthy endeavors locate financing, and to do it without robbing tax payers or retirement funds.

    1. …”and that the world would be a better place if more people on Wall Street saw it as their job to help build great companies, help worthy endeavors locate financing, and to do it without robbing tax payers or retirement funds.”…

      So long as they don’t use taxpayer (or other coerced) money, I’d say the world would be just as well off doing what they are now; the market will sort the great companies from the others.

      1. And arguably the market will favor those who do their job well and are good are picking great companies. Except when the government gets in the way and makes it financially rewarding to pick shitty companies and make stupid investment decisions. Which is what we have right now.
        So there’s a whole breed of investment bankers who think thier mission is to use the government to rig the game in their favor.

        1. +10 to Hazel for the above. If I had a nickel for every Facebook slam I’ve seen about how all capitalists/libertarians/Republicans/businessmen only care about money, I’d be rich. It’s important to counter that argument.

          1. True capitalists believe in earning money the old fashioned way, by satisfying customers.

            Crony crapitalists believe in using government to steal.

            The more power the government has to pick winners and losers, the more power the rich (including the politicians who do the picking) will have relative to the rest of us.

            The obvious solution is to separate commerce and state. Let the free market, i.e. consumers, decide what commerce wins by choosing to purchase their products.

            Unfortunately the liberal mindset is to control/regulate commerce because they don’t believe that seeking profit is moral. But there’s nothing moral about prohibiting two parties from engaging in a transaction that affect only them.

            Apparently many liberals strive to work for a non-profit, and don’t see the irony in accepting a salary from them. If non-profit is such a desirable goal, why are they individually making a profit from their work?

    2. Well said, Hazel.

  6. …criticizing what he calls the Wall Street philosophy “that only profits and maximizing shareholder value really matter.”

    If you are a CEO, you sure as shit better set maximizing shareholder value as your number one priority. Unless the shareholders specifically tell you otherwise, CEO, Boards of Directors, and management have a fiduciary duty to maximize shareholder value. Else, they are subject to civil liability, and probably criminal charges as well.

    1. This isn’t really how it works. Corporate officers fiduciary responsibilities generally just mean that they’re not allowed to act against the interests of shareholders, particularly in a conflict of interest with themselves personally. There’s nothing about maximizing profits or anything like that.

      1. I agree there is nothing about maximizing profits. However, the money a corporation has at it’s disposal does not belong to the firm per se, but instead belongs to the shareholders. I feel if a CEO wants to implement a “green initiative”, or “conscientous capitalism” marketing scheme that spends that money, he should be able to show that there is a demonstrable benefit to shareholder value.

        Is the CEO really adding to shareholder value, or is he using company funds to grandstand and score political/social points?

    2. That’s only sort of true. You wouldn’t try to maximize shareholder value by converting your entire business from one industry to another.

      Every business usually has some kind of core mission. They’re trying to make a quality product of some kind, at an affordable price.

      Or maybe catering to a high-end market. Usually there is some pride of place that isn’t necessarily “maximum profits”, but “we make the best quality luggage”, or “we make the best value luggage” or whatever. In the long term that tends to pay off, but there are lots of companies that could maximize profits by trading off their brand name to sell cheaper mass-market products.

      I’ll bet Versace and Gucci could make a lot more money if they went like Calvin Klein and sold down market more.

      I think that’s what Mackey is talking about. Show some pride in selling a quality product and don’t worry about maximizing profits so much.

  7. If you are a CEO, you sure as shit better set maximizing shareholder value as your number one priority.

    Somebody should have told Vikram Pandit.

    1. Shareholder lawsuits and fraud investigations to follow shortly.

    2. Didn’t Pandit come in towards the end of the housing bubble? I should think the previous CEO is more the one were should be pointing fingers at.

  8. Sound s like a pretty serious smackdown to me dude.

    http://www.ImaAnon.tk

  9. The fact that this quote could be seen as “controversial” is a sad testament to the times in which we live…

    “I learned that free enterprise, when combined with property rights, innovation, the rule of law, and constitutionally limited democratic government, results in societies that maximize societal prosperity and establish conditions that promote human happiness and well-being?not just for the rich, but for the larger society, including the poor,”

    I guess it’s just horrifying to anyone who want more centralized power.

  10. According to the Business Ethics class I just took, businesses need to focus on “shareholders” instead of the “old, limited” way of thinking about profit. This is really what they teach in business school today. They kind of accept the idea of a market, but they feel really guilty about it and sugar coat it with meaningless terms like stakeholders and consciousness. Most students don’t seem to see past that either.

  11. You say: “Diet, exercise, and rest are great, but the idea that, say, cancer or major depression can be treated with “positive attitudes” rather than surgery or modern medicine is a sign of flawed thinking that sometimes also affects this book’s treatment of its core subjects, business and capitalism.”

    But this is (purposely?) missing the point. You can’t “treat” cancer and depression with “positive attitudes” but you can *prevent* many cases of cancer and depression by consumption of *real food* rather than highly processed pseudo-food. If you think that science shows no difference between real food (stuff you can find in or close to nature) and highly processed food, then you might want to learn a bit more about the subject.

    1. You have joined a cargo cult. You don’t really understand causes and effects, just correlations.

      Astronauts have survived just fine despite spending extended periods of time eating nothing but processed foods. The reason? Those processed foods are specifically designed to supply all of their necessary nutrients. Kraft Macaroni & Cheese, on the other hand, is solely designed to taste good, and nothing else.

      Likewise, you could spend the rest of your life eating nothing but fruits and grains, and you would die obese with an iron deficiency. That your food came “from nature” (as though engineers work some devil magic to summon elements from other planes of existence) would not do you one ounce of good.

      In short: ensure that your diet provides a balance of nutrients, and avoid foods that are low in nutritive content.

      1. If you think consuming large amounts of grains is good for you then you haven’t been paying attention.

  12. I respectfully submit that the whole argument from Natural Rights to property is a bad argument and Locke didn’t understand. The forest for American Indians was something they wanted to preserve as it was. They didn’t want to apply their labor to a part of the forest so as to make it their property, which, as I understand it, was Locke’s sole reasoning about how something becomes the property of an individual. I dispute the claim that business is a Natural Right, derived from Natural Law, derived from God’s Moral Code. Agreeing to the existance of the moral code is to embrace the implicit reasoning to Individualism contained therein. Absent the Moral Code you have no argument.

  13. “Diet, exercise, and rest are great, but the idea that, say, cancer or major depression can be treated with “positive attitudes” rather than surgery or modern medicine is a sign of flawed thinking that sometimes also affects this book’s treatment of its core subjects, business and capitalism.”

    But the point that the chance of getting many forms of illness even cancer is greatly reduced by living and eating right remains valid.

  14. Maybe Mackey would agree that his firm as opposed to say a good part of investment banking and health care was not so much “conscious” (I suppose that is similar to “higher consciousness”, whatever that might mean), as relatively independent of political Skullduggery, which is most untrue of many of the biggest financial and health care concerns. Whole Foods’ customers are voluntary customers…

  15. Well said Gilmore and Hazel. Don’t write a book about capitalism if you are afraid to say laissez-faire. You can’t have unbridled success without a few failures. Some people dont get to particiapte in the riches but there are far fewer poor people with capitalist riches. We can be conscious of our own ability to make money without interference from idelogues like these guys are trying to be. If I were him I’d pipe down before BO comes and siezes some of his food for not passing some test.

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