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Book Review: Whole Foods Co-CEO John Mackey's Conscious Capitalism

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John Mackey, co-CEO of Whole Foods Market, outlines his vision for business in Conscious Capitalism: Liberating the Heroic Spirit of Business (Harvard Business Review Press). (Mackey co-authored the book with Raj Sisodia, but the first-person anecdotes and opinions are all Mackey's.)

As the title suggests, the book calls on business leaders to open their eyes, hearts, and minds and embrace the views of their stakeholders, so that "the truth, beauty, goodness, and heroism of free-enterprise capitalism" can be realized.

This over-the-top adulation of the private sector, which pervades the book, might be tolerated by readers seeking the secrets of his company's success: Whole Foods leads its industry with gross margins of over 35 percent, and the stock is a favorite of analysts.

But those looking for rigorous analysis and informed inspiration will be disappointed. Conscious Capitalism speaks some truths that are too often left unsaid. But the book falls prey to the same fatal flaw of other business books and CEO treatises: namely, promotion of an oversimplified framework that ignores the complexities of the real world.

Some of Conscious Capitalism is indisputable: Companies must take responsibilities for their impacts on people and planet; CEOs that adopt systems thinking, take seriously the views of their staff and critics, and catch problems before they escalate will do better in the long run.

The book also puts forth arguments that aren't made by business leaders nearly enough: for example, that caring for workers, communities, and the environment is not, as some argue, a distraction from fiduciary duty, but actually "the best way to optimize long-term profits and long-term shareholder value." (Mackey and Sisodia are neither first nor alone in expressing this view.) One of the book's most powerful statements is buried in an appendix, decrying the inclusion of Phillip Morris/Altria among Jim Collins's list of Good to Great companies: "It matters how the money is made."

But beyond stating the obvious and the should-be-more-obvious, Conscious Capitalism has few deep insights, resulting in a volume of verbiage by a man who has already told the world far more about his views than it wanted to know: Mackey provoked an SEC investigation in 2007 by posting comments about Wild Oats (which Whole Foods was taking over) on a Yahoo! Finance board under an alias that was an anagram of his wife's name; and inspired protests after criticizing President Obama's healthcare proposals in a Wall Street Journal op-ed. More recently, he was forced to retract his use of the word "facism" on NPR to describe the new healthcare law.

Describing the SEC investigation is one of a few spots in Conscious Capitalism where Mackey ignores his own advice, and drops the studied prose of the rest of the book to indulge in a bit of a rant: "The whole thing was so bizarre to me, because I was just having fun when I did those postings. I didn't see how anyone was being harmed, and in fact no one was. Yet, it was made into a huge deal." Failing to see why it might be problematic for a CEO to make anonymous statements that could depress the stock price of a takeover target undermines the book's central exhortation, for business leaders to understand the perspectives of others.

Similarly, other specific instances recounted in the book are potentially compelling -- as all who offer advice are most convincing when saying "I did" instead of "You should." But the stories fall short, lacking the critical self-examination and third-party verification that would make the punchlines powerful.

For example, Mackey describes how an activist led him to establish an animal welfare rating program, and his contentious history with labor unions. But he fails to heed his own counsel a few pages later that corporate messaging without the voice of a third party "lacks credibility." Where are the voices of that activist, the Whole Foods employees who are supposedly so content that they don't need union representation, and the other stakeholders spoken for in the book? Such voices would strengthen the book's arguments; without them, the stories come off as Mackey's spinning these stories to suit his point.

And what is that point, exactly? The starting premise of Conscious Capitalism will be enough to turn off many: that business is "fundamentally good and ethical." It is true that economic development has lifted millions out of poverty. But business has also harmed individuals and communities around the world, as demonstrated by mining accidents from West Virginia to Africa, labor abuses in factories from China to New York, and the global financial crisis.

Saying that business is "inherently virtuous" because it has helped some people is like saying that cars are inherently good because one helped me get to Grandma's. But cars have killed people too.

Of course, cars don't kill people: reckless drivers do. Mackey might argue that business doesn't kill people: those who haven't followed his path to enlightenment do.

But if business was inherently good, why should it matter whether its leaders are enlightened or not? Couldn't automatons run companies, and as long as they don't get in the way, their organizations would run their inevitably beneficial course?

To support his argument, Mackey shares his view that "business isn't based on exploitation or coercion at all. People trade voluntarily for mutual gain. No one is forced to trade with a business." That may be true for Whole Foods shoppers, but it is not true for the world's most vulnerable people. Communities living on top of oil, gas, copper or gold have no choice but to "trade" with companies developing those resources. Garment workers in Bangladesh and artisanal miners in the Congo might have chosen to do what they do, but they're hardly swimming in viable alternatives, and are certainly not among the "vast majority of people" for whom capitalism has enabled "more vibrant and fulfilling lives."

Those are the people who Conscious Capitalism should be aimed at helping. But since we are a long way from universal enlightenment, government exists to provide protection and a balance of power -- not just to overreach with restrictive regulations and inspire "crony capitalism," as the authors seems to believe.

On a lighter note, Conscious Capitalism suffers from attempts to promote new semantics. Some are silly, like the 'Find & Replace' exercise that changed all non-quoted instances of "employee" to "team member": Whole Foods can call its own staff whatever it wants, but Gallup did not conduct a "team member engagement" survey. And how about the parenthetical jargon gem in this quote: "[C]onscious businesses engage the limitless power of human creativity to create win-win-win-win-win-win (what we will refer to henceforth as Win6) solutions."

Towards the end of the book comes the inevitable pitch: The authors recommend a "Conscious Business Audit," for which a footnote explains they have "developed our own proprietary methodology."

Apart from the frivolous terms of art, questionable assumption of business's inherent virtue, and lack of critical self-analysis, the biggest problem with Conscious Capitalism is that it ignores the complexities of the real world.

The book suggests following the lead of a few companies that the authors admire, including Google and Apple. Aside from the fact that few who have interacted with either company would call them "transparent and trustworthy," both companies' troubles in China alone illustrate the pitfalls in taking a company's stated mission and elegant offering on face value. Again, the authors undermine the very holistic approach that they advocate.

CEO manifestos like Conscious Capitalism are as useful as the "company values" that populate many corporate websites: necessary but insufficient. Leadership and codification are important, but too often have little to do with the experience of those who do the day-to-day work, on the front lines and at the far reaches of the supply chain. Those are the people who determine whether visions like what Mackey and Sisodia advocate come to life, or remain the abstract musings of those in the ivory tower or corner suite.

Surprisingly, the book ignores two specific actions by Whole Foods that demonstrate how a company can do good with its market power. Last year, Whole Foods removed Scharffen Berger chocolate from its shelves following concerns about child labor in its supply chain. The move prompted Hershey's, which owns Scharffen Berger, to commit to third-party audits of 100 percent of its farms. In 2008, Whole Foods partnered with the Coalition of Immokalee Workers to address exploitation of tomato pickers in Florida.

Analysis of those two decisions, including the voices of the employees, activists, and communities involved, would have been more valuable to those interested in sustainable business than the well-meaning rhetoric of Conscious Capitalism.

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