| Figure 1: Conscious Capitalism |
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Foreword: This is a review of the book Conscious Capitalism, Figure 1. I have running a series on Capitalism and developing Short Read Archives which will eventually be posted. Free market capitalism is, perhaps, not understood in the public sphere at a reasonable level of comprehension. Part of the challenge is an overabundance of negative language about capitalism emanating from competitive worldviews such as Progressivism or Socialism. I have read books across a breadth of worldviews on this topic. This book is positioned from a socialist or Progressive point of view as the author, John Mackey, discusses in the opening of the book and speaks mostly from a humanist point of view throughout the book. This will be a series of posts hitting the salient points and commenting on the topics discussed. My other post is: Morality of Capitalism. More post will be forthcoming as time permits.
Conscious Capitalism
Chapters 1 and 2 Review
Chapters 1 and 2 Review
The book opens with a discussion on Mackey's personal journey during which he discovered that his assumption about capitalism were all wrong. Through a series of life experiences he came to understand that 'free enterprise' capitalism is the one human creation that has had the greatest positive impact on people's lives. Mackey called this the greatest system for innovation and social cooperation that has ever existed. Mackey's calling is to advance the promise of capitalism, a marvelous system of social cooperation, to the world.
Chapter 1: The heroes of free-enterprise capitalism are entrepreneurs who are described as people who solve problems through imagination, creativity, passion, and energy. Unfortunately, capitalism is under attack based on four reasons:
- Business people have allowed the attacks to the chagrin of its inherent ethical justification. This requires a new narrative and a new ethical foundation.
- Too many businesses have operated at a low level of consciousness about their purpose and impact in the world. This results in the unintended consequence of trade-off thinking in which all resources are gamed for maximizing profits.
- The myth that business is about maximizing profits has taken roots among business leaders and academia. Mackey argues that maximizing profits originated out of the industrial revolution and was codified into fiduciary responsibility. Profits are necessary in healthy business and economies. However, maximizing profits at the expense of other objectives is not healthy.
- The size and scope of government has increased to a point that causes crony capitalism. The use of the governmental power to create opportunity and enrich a privileged few is crony capitalism. Crony capitalism is inherently unethical and a threat to freedom and democracy.
Mackey further argues that free-enterprise capitalism has been hijacked by intellectuals disregarding a powerful aspect of human nature: the desire and need to care for others and the causes that transcend self-interest. We know business is good when it creates value and ethical when exchange is voluntary. Business is noble because it elevates human existence and heroic because it raises people out of poverty through prosperity. Thus, Mackey makes the call to climb higher by reclaiming the intellectual and moral high ground in order to correct the narrative about free-enterprise capitalism.
Chapter 2: The chapter opens asking what does it mean to become more conscious as a individual and as a business? Mackey appeals to transformation parallelling metamorphosis arguing humans and corporations can exist at an earlier level or transform into something greater. The transformation is a matter of deliberate choices not natural evolution. He cites three major events in 1989 that led to the rise of consciousness. They are:
- The fall of the Berlin Wall. This event shifted the conversation from between ideological political systems to what form of democracy works best and to what degree of freedom.
- Birth of the web page. This feature increased the sharing of knowledge and information to almost anyone at near zero cost.
- The United States enters Mid-life. The population shifted to more people over the age of 40 than below the age of 40. This created a psychological shift in the center of gravity for society to compassion, caring, community, and greater meaning and purpose.
Mackey also cites the increasing intellectualization of humans and their capacity to grasp more complex information and knowledge than in the past and that in combination with the three major events has caused values to shift.
The rising consciousness is claimed to have led to less violence in the world and more caring because people are better informed. The claim is further advanced that we should all act as one because we are in the same boat. A plea is made to imagine a career and work that is passionate and committed to the job where there is focused intensity, collaboration, and camaraderie as opposed to stress, fear, coercion, and carrots. The tenets of an increase consciousness are proposed:
- Higher Purpose. The purpose is the reason a company exists which is more than generating maximum profits and shareholder value. Higher purpose is organized around core values.
- Stakeholder Integration. Stakeholders are the entities impacted by or impact the business. Integration realizes that everyone is interconnected by core values and share sense of purpose. The objective is to achieve value in all the relationships.
- Conscious Leadership. Motivated by service to the firm's purpose and creating value for all the stakeholders. Conscious leaders possess a more complex and sophisticated way of thinking than mere trade-offs, differences, and conflicts that transcends analytical thinking.
- Conscious Culture and Management. Culture is the mechanism than institutionalizes stability and strength in the firm ensuring purpose and core values persist and are durable over time and management transitions. Traits of conscious business cultures tend to be the same despite different cultures. The culture is based on empowerment, decentralization, and collaboration in order to optimize innovation continually.
Mackey makes the claim that conscious capitalism the ethical foundation that business has been lacking. Conscious businesses out perform other businesses financially and do what is right because it is right to do. However, conscious capitalism is not corporate social responsibility. Mackay recites that conscious capitalism is about creating value whereas social responsibility is about correcting ills by doing good.
Mackey makes the call for a way ahead to liberate the heroic spirit of business and collective entrepreneurial creativity by finding a sustainable way to meet the needs of billions of people whose basic needs are not being met adequately. Conscious capitalism is the solution and a journey.
Comment: Mackey creates the notion of free-enterprise capitalism in order to distinguish from free-market capitalism. When all human constraints are removed the natural economic system that persists is free-market capitalism which is created value in service to humanity (Palmer, 2011, p 2). Human architecture includes hands to make and hold things with feet to travel to market where things made are sold. Humans imagine then create things earning just rewards for the fruits of their labor. Traditionally, rights have been assigned to humans to ensure the tools of trade and give levity to people. Capital markets are about uplifting individuals. Mackey points to a need for a change in thought about what form of democracy works when the Berlin wall fell.
The notion of corporate personhood originated from a U.S. Supreme Court hearing in 1886, Santa Clara vs Southern Pacific Railroad, during which the 14th Amendment was interpreted to extend to corporations. The outcome is that corporations take on human rights and behave in human-like manners. This was compounded with the emergence of corporate governance in the early 1980's which was an outcropping of the struggle between governmental enforcement and industry compliance. The government agreed to leave industry alone if industry took on governmental duties and performed them well. This has matured to the point that organizations now are acting more socio-politically centric than business centric. Please see my post on Values Leadership.
Mackey's notion of Free-Enterprise Capitalism builds on this notion of Corporate Personhood and Governance forming conscious capitalism as the organization has core values and purpose as would humans. The corporation takes on a life of its own. Mackey, a confessed Progressive, seems to arrive at a conclusion that his understanding of capitalism was weak and that the crony capitalism that results from socialism does not work. Therefore, he sought to combine his socialistic conscience with capitalistic constructs to form conscious capitalism under which corporations operate.
The humanist perspective bleeds through when Mackey cites, "This analogy (evolution or metamorphosis) can be applied to human beings as well as to the institutions that we have created in our own image - corporations (Mackey, 2014, p 25.)." This goes directly back to the notions of corporate personhood and governance. In discussing the conscious culture Mackey remarks, "While such cultures can vary quite a bit, they usually share many traits, such as trust, accountability, transparency, integrity, loyalty, egalitarianism, fairness, personal growth, and love, and care (Mackey, 2014, p 35)." The terms egalitarianism and fairness are code words for socialism. Socialism is built on egalitarianism and welfarism. Egalitarianism states that humans are equal in every respect stripping people of identity. Social justice is supposed to be about fairness but is also known as institutional theft of just rewards which suppresses creativity. In free-market capitalism wealth is redistributed based on created value as opposed to redistribution by social justice or excessive taxation. The use of social justice was unclear in these two chapters but shifting duties to the corporation and its use of net income may be an alternative approach. However, from a business perspective tradeoff thinking persist as leadership still has to decide how best to apply limited financial resources. Other free-market characteristics persist such as price sensitivity as well as supply and demand behavior.
In conclusion, conscious capitalism combines socialistic aspirations with free-market constructs. A reasonable argument can be made about conscious capitalism that employees are simply proletariat, the free-enterprise capitalist are the bourgeoisie, and limited government in conscious capitalism is the Politburo. The change is that the free-enterprise capitalist take on socio-political causes as purpose and core values reducing the politburo's duties of managing the relationship between the proletariat and bourgeoisie. This arrangement is actually discussed in the World is Flat by Thomas Friedman who remarked that Karl Marx would have predicted the flattening of the world in this manner. Friedman discusses a future where people work for companies that share their socio-political views and the government deals with a select group of CEO-politicians rather than the public at-large. Conscious Capitalism despite its claims of success and value is not consistent with the Original Intent of the United States founding which is about individual purpose and principled people - not corporations having these qualities. In fact, Thomas Jefferson remarked that commerce has no loyalties to anything but money. Free-market capitalism is self-regulating holding individuals accountable. A serious dialogue needs to be advanced about free market capitalism versus other forms such as conscious capitalism.
On a final note, individuals having a social conscience is part of being human. We must have a concern for the environment but not to a sensibility that mother earth, nature, is deified. We must also have charity towards fellow humans. How we achieve this best is why the American Forefathers believed in the public sphere as a place for common people to discuss topics of nobility freely.
References:
Mackey, J. (2014). Conscious Capitalism: Liberating The Heroic Spirit of Business. Harvard School of Business Publishing: USA.
Palmer, T. (2011). The Morality of Capitalism: Introduction. Jameson Books, Inc: IL pp 1-12.
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