Rethinking Capitalism

Raj Sisodia

Co-Founder, Chairman Emeritus – Conscious Capitalism, Inc.

Business people hurt themselves and limit the potential of their businesses when they insist that the sole purpose of the business is to make profits for shareholders.

We are living in a time of great searching in the world. It is becoming clear that many traditional ways of doing things are ineffective at best and often harmful and counterproductive. This is certainly true in the world of business. The old narrative of business and capitalism is increasingly being recognized as inadequate and uninspiring, even toxic.

The notions that businesses exist only to make a profit, that their primary concern is the creation of wealth for their owners, and that they have no responsibility other than to stay within the law are shocking in their naïveté and their willingness to treat the well-being of human beings as a means to their ends.

British author and economist John Kay has described this approach as selfish, instrumental and narrow: selfish because it only seeks the material well-being of the owners of the business; instrumental because it treats human beings as objects to be utilized as needed for the success of the business; and narrow because it fails to take into account the myriad impacts that businesses have on the lives of human beings and on the planet.

In light of these observations: How can we make capitalism work? Implicit in that question are further questions: Work for whom? Over what time frame? At what costs? How do we define what it means to “make capitalism work”?

In the broadest sense, the following ideas describe a capitalism that might truly work.

Capitalism has to be about creating wealth for all who are participants in the system

Be they be owners, investors, employees, customers, suppliers, community members or others who are impacted by the business enterprise. It cannot just be about generating profits and wealth for owners, treating all other participants in the systems as means to that one end.

The wealth that capitalism creates cannot just be financial wealth

It is a cliché to say that we humans don’t live by money alone. Nobel laureate Mohammad Yunus has a better way to express this idea: “We act in business as though money is the only game in town. But there are other games in town.” The most meaningful thing we humans can do is to have a positive impact on the lives of others. The reality is that businesses create but can also destroy at least eight kinds of wealth or well-being: financial, intellectual, social, emotional, spiritual, cultural, physical and ecological. Most businesses focus purely on creating financial wealth – and often don’t do a very good job at that. Everything else that happens as a consequence of how the company conducts its business is seen as a “side effect” – and of course, side effects, by universal consensus, are generally understood to be negative. The reality is that there is no such thing as a “side effect;” we do things and there are effects. All the effects matter; just because we put some of them in fine print or say them very fast doesn’t make them less significant. We must evolve to doing business in a way that generates a spectrum of positive effects.

Do it for the long term.

Five or even ten years is a far cry from the quarterly rhythm of most public companies. However, decisions must be taken with an eye to their consequences over decades, generations, even centuries. Most businesses operate as though there is no future beyond the immediate planning horizon of the company’s incumbent leaders – usually just a few years. In just the last hundred years, we have permanently eliminated more than half the species on the planet, and decimated the numbers of many that remain 2 by up to 95%. By any reasonable accounting, such conduct would be considered grossly irresponsible, even criminally negligent. In some native American tribes, tribal chiefs were expected to consider the consequences of their decisions on the next seven generations – approximately two hundred years. How many business leaders even look seven years out? How can we defend such extreme myopia, such wanton disregard for the world that our own children and their children will inherit? Interface Carpet founder and CEO Ray Andersen used to address his fellow CEOs by starting with the phrase “My fellow plunderers.” He would go on to suggest that if there was real justice in the world, he and his fellow business leaders would be imprisoned for what they had knowingly done to our fragile ecosystem.

Do it without causing any harm anywhere to anybody or anything.

Profit is a social good. We need profits to create a healthy society that works for all. Without profits, there are no taxes, and without taxes, there is no infrastructure, no social safety net, no social mobility, no national security and so on. It is socially irresponsible not to be profitable; the capital such businesses use could be better invested elsewhere to generate a reasonable return. However, it matters a great deal how we make the money. If a business does so by squeezing employees, suppliers, customers, communities, the environment, or future generations, then it is not truly a business. Real businesses create new and incremental value. A business that generates profits for investors by squeezing other stakeholders is not a business, it is a parasite; it is worth less than nothing. Such businesses do not deserve to exist. They make the world a worse place; their absence would enrich us.

Don’t settle for being sustainable; seek to heal and restore all the systems you are part of.

Too much in our world is broken, eroding, melting away, becoming less vibrant and generative over time. Our soil, our air, our oceans, our ground, our fellow life forms – all are suffering grievous harm. If we settle for being “sustainable,” all we are aiming for is the ability to keep doing what we are doing indefinitely. That is not enough. We can and must reverse the declines that are all around. The highest and noblest calling is to heal all that we touch, to truly leave everything better for us having been here. This is no utopian ideal. There are numerous examples of companies and NGOs that have done this. People cannot flourish if the systems they are embedded in are not also flourishing. All forms of life and all physical systems must be healthy and flourishing for human beings to be truly flourishing.

Define leadership as stewardship.

Most “leaders” today are primarily motivated by the accumulation of personal power and wealth. They use other people to achieve their personal goals of accumulating wealth and power. Such individuals are not in fact leaders at all; that is the very definition of a tyrant! To become more powerful and wealthy, they make the people they lead less powerful and wealthy (in all the dimensions of that word, as 3 discussed above). True leaders are those who seek to take people to a better place. They accept the awesome responsibility of leadership: to craft a compelling and inspiring vision of where we can collectively go, and devise a strategy for getting there by harnessing everyone’s capacities in the most effective way. They lead through service to the shared purpose of the enterprise and to the people whose lives they touch. These are the kinds of leaders we must have in the world, in every sphere of life.

Always remember (as Herb Kelleher said): “The business of business is people.”

It is not about anything else. Everything else should be considered a means to that end: the flourishing and holistic well-being of people. Calvin Coolidge said “The business of America is business.” This would be fine except that the common interpretation of that phrase is “making as much money as possible.”

Never sacrifice a higher value for a lower value.

Just as there is a “hierarchy of needs” (Maslow) for humans, there also needs to be a “hierarchy of values” that society agrees to and operates under. I would suggest that the highest value is to promote flourishing and alleviate suffering, starting with humans but including all forms of life. Under a traditional interpretation of capitalism, profit is the highest value; the well-being of human beings is somewhere well down the list, and the well-being of other species is so far down as to be an irrelevancy. Hence we have terrible and unsafe working conditions for many employees, and unconscionably cruel treatment of animals within the gruesome factory farming system. There is a price tag on everything; why not on suffering?Recognize that human beings are not just about self-interest. We have an equally powerful, if not more powerful need to care, and we are increasingly driven by a sense of purpose. Viktor Frankl’s landmark work Man’s Search for Meaning articulated this powerfully. He wrote that happiness cannot be pursued; it ensues. It is the outcome of living a life of meaning and purpose. That comes from three things:

  • doing work that matters
  • loving without condition, and
  • finding meaning in our suffering.

You could change the title of Frankl’s book to The Corporation’s Search for Meaning. The lessons are exactly the same. Companies pursue profits the way humans pursue happiness. Yet, like happiness, profits cannot be pursued; they ensue. They are the outcome of operating a business with a higher purpose, something that truly matters; of building the business on love and care, not fear and stress; and growing from adversity.

Use business as a way to surface and amplify our divine capacities for love and care. As Jane Dutton has said, organizations can suppress or amplify the human capacity for caring. Our largely Darwinian organizations are places of constant strife and empty striving. They are rife with political intrigue and petty power plays. They leave us depleted and demoralized. They use fear and stress as primary motivational tools – the proverbial “carrots and sticks.” 4 According to Gallup, 87% of us worldwide are disengaged at work. Heart attacks are 20% higher on Monday mornings. Most of us live for our time outside of work, hence the popular phrase and now restaurant chain TGIF.

Searching for a Better Way

We need a new narrative about capitalism and business. Business people hurt themselves and limit the potential of their businesses when they insist that the sole purpose of the business is to make profits for shareholders. This breeds resentment and envy, and does nothing to inspire employees to do more than the bare minimum. Business needs to awaken to itself and become conscious, to recognize its incredible power and thus great responsibility. By becoming conscious, it can create more flourishing, more community, more mutuality, more peace and paradoxically, more profit.

Business is not a money making machine; it is a complex living adaptive system. Any part of it that is unhealthy can bring down the whole system; much as if one part of your body gets an infection, the whole body can die. When you start to think about business that way, you recognize the inherent interdependence and interconnection of stakeholders.

In the long run—and it must always be about the long run—investors cannot profit unless customers are truly happy and satisfied. Customers cannot be truly happy and satisfied unless employees are fulfilled and have a sense of meaning in what they’re doing. You cannot do any of that unless you have high-quality inputs, which is where the suppliers come in. Taking a broader viewpoint, no business can flourish as an island of prosperity amidst a sea of despair; so the community’s health and well-being is also essential.

Thus, Conscious Capitalism was born. This comprehensive alternative philosophy of doing business seeks to address all of the drawbacks of the “selfish, instrumental and narrow” approach that has long been the norm.

Read more about Raj's thoughts on Conscious Capitalism here.

Posted in Blog.

About Raj Sisodia

Raj Sisodia is the FW Olin Distinguished Professor of Global Business and Whole Foods Market Research Scholar in Conscious Capitalism at Babson College. He is also Co-Founder and Chairman Emeritus of Conscious Capitalism Inc. In addition to a Ph.D. in Marketing from Columbia University, Raj has published ten books and more than 100 academic articles. His books include Conscious Capitalism: Liberating the Heroic Spirit of Business, Firms of Endearment: How World Class Companies Profit from Passion and Purpose, Everybody Matters and Shakti Leadership. He is on the Board of Directors at The Container Store, and a trustee of Conscious Capitalism Inc.

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