Is Conscious Capitalism an Oxymoron?
[Originally posted Oct. 30, 2009 on the Huffington Post]
Unconscious Capitalism…we’ve witnessed that. Even Drunk Capitalism may sound more accurate than Conscious Capitalism. But, the truth is we can’t afford to have Capitalism be anything but Conscious given the stakes involved and the power wielded by the world of business. I’ve just come back from the second annual Conscious Capitalism conference in the hill country of Austin. This gathering of CEO’s, entrepreneurs, financiers, and academics gave me some encouragement that those handling the machinery of industry have come to realize that they can’t operate this delicate and powerful equipment while inebriated on short-term ambition and unconscious plundering.
What does it mean to be a conscious capitalist? Here’s my stab at a list of 5 basic rules (fueled by some of the discussions at the conference):
(1) Focus on the Long-Term. While short-term profits are the milk, smart investors and business execs understand that building a relationship with the cow is far more valuable in the long-term. Warren Buffett asks his CEO’s to operate their businesses as if they were never to be sold or merged for 100 years. And, the academic authors of “Firms of Endearment” have proven that long-term minded companies outperform the S&P 500 by eight times over a ten year period.
(2) Bow at the Altar of Purpose. An expansive Purpose that addresses the needs of a broad definition of stakeholders – employees, customers, vendors, the community, the environment, not just investors – provides an animating and attracting force for a company. Proctor & Gamble’s new CEO recently remade the company’s business plan so that it is purely focused on how P&G delivers on its Purpose to all of its broad definition of stakeholders. And, great companies from Southwest (“freedom to fly”) to Apple (“a bicycle for your brain”) have great Purposes that energize those who come into contact with them.
(3) Think of Business as a Practice. Few of us see businesspeople as “practicing” their craft like a doctor, lawyer, athlete, musician, or spiritual leader. But, this new generation of leaders at companies like Patagonia (which is now teaching Wal-Mart how to green their supply chain), Whole Foods Markets, and PepsiCo are approaching their work with a level of conscious practice that suggests that they understand there’s a systemic effect in the decisions they make. Kip Tindell, CEO of the Container Store, says that leaders need to understand the size of the “wake” they create based upon the decisions they make. Business leaders can no longer afford to take an unconscious “just do it” approach to how they make decisions.
(4) Redefine what Winning means. Life and business are all about where you pay your attention. MBA’s have been taught to “manage what you can measure,” but unfortunately, what’s most measurable in life and in business isn’t usually what’s most valuable (think Mastercard’s “Priceless” commercial). Conscious capitalists recognize that intangibles like brand value, culture, and intellectual property are making a mockery of the 500-year old tradition of the balance sheet where these valuable assets can’t be found as line items. The good news is that “valuing intangibles” has become the hottest topic on American business school campuses. Jack Welch’s traditional bottom-line definition of “Winning” has lost its luster.
(5) Leverage Loyalty. Leverage has been a dirty word this decade and we’ve even created new recessionary phrases like “America is de-levering herself” (that just sounds painful). Yet, the ultimate leverage in a downturn is loyalty. In today’s “word of mouse” era in which social media and Web 2.0 sites are the primary means that people use to tell their friends and colleagues about their favorite (or least favorite) products or companies, reputation and loyalty have become the primary sustainable competitive advantage for companies. Tech-savvy leaders like Tony Hsieh at Zappos (who has tens of thousands of followers on Twitter) have created an evangelical collection of customers that is leveraged into market share momentum.
We may be entering an era of Karmic Capitalism when business realizes what goes around, comes around. Let’s hope that the captains of industry realize that noblesse oblige (nobility is obligated) – a century’s old concept – should be applied to the business world. Since corporations are treated as if they are a body, they should also have some of the obligations of citizenry in terms of what they give back and contribute to the good of society. And, they should be held accountable for operating in this fashion.