Conscious

1

• Conscious
• Capitalism
• A New Business Paradigm
• John Mackey, CEO
• Whole Foods Market
• Tulane University
• October 2009

2
Do We Need a New Business Paradigm?

• Historians will one day view the 20th century as
  the great struggle between Capitalism and
  Socialism. Capitalism won this battle
  decisively, but it did not capture the minds of
  the intellectuals or the hearts of the people.
• Corporations the most influential institutions
  in the world, but they are widely perceived as
  greedy, selfish, exploitative, not trustworthy
• Current financial crisis recession being blamed
  on greedy financial corporations
  deregulation, rather than bad government
  regulations monetary policies, combined with
  widespread governmental incompetence and
  corruption
• Corporations capitalism have serious branding
  problems we appear to now be moving backwards
  toward either government control of companies
  (Fascism) or government ownership (Socialism)
• What is needed instead in the 21st century is
  Conscious Capitalism

3
What Then is Conscious Capitalism?

• Conscious Capitalism is based on three primary
  principles
• A Conscious Business has a higher purpose that
  transcends maximizing profits. It is focused on
  fulfilling its higher purpose, which evolves
  dynamically over time.
• The enterprise is managed to optimize value for
  all of the major interdependent stakeholders.
• Conscious Leadership to the enterprise its
  stakeholders.

4
What is the Purpose of a Business?

• What is the purpose of most professions?
• If all the professions have a purpose that
  relates to the public good, why doesnt business?
  
• Who defines the purpose of any business?
• Surely it is the entrepreneurs who create the
  business that define the original purpose of the
  business

?
5
Entrepreneurs Create the Original Purpose

• Entrepreneurs of the Conscious Business are also
  entrepreneurs of meaning
• Stakeholder community of customers, employees,
  investors, suppliers, and communities co-evolve
  the purpose of the Conscious Business over time
• Businesses flourishing over the long-term evolve
  their purpose to higher levels of complexity and
  meaning

6
Great Companies Have Great Purposes

• Service to Others Expressing Love Care
• The Good
• Discovery the Pursuit of Truth
• The True
• Excellence the Quest for Perfection
• The Beautiful
• Changing Improving the World
• The Heroic
• Which of these great purposes will be at the core
  of your own organization?

7
The Paradox of Profits

• Happiness is a by-product of other things
• purpose, service, excellence
• personal growth
• friendship, generosity, forgiveness, love
  compassion
• Profits are best when not primary goal
• higher business purpose
• great products services
• customer satisfaction
• employee happiness
• supplier partnerships

8
Long-Term Profits are Maximized by not Making
them the Primary Goal

• Business is not a machine, it is a complex
  adaptive system of interdependent stakeholders
• Leaderships job is to fulfill the deeper purpose
  of the business, optimize the health value of
  the entire business system, be a servant leader
  to the business
• Optimize entire interdependent system highest
  long-term profits shareholder value
• The price system is a tool for leadership to
  usea valuable source of information

9
The Whole Foods Conscious Business Model
Holistic Interdependence
10
Not TradeoffsRather Higher Synergies

• Leadership at a Conscious Business means thinking
  about the business very differently   
• It means focusing not on tradeoffs between
  stakeholders, but on the potential synergies that
  exist between them
• Ones creative mind doesnt think Zero Sum or
  Win-Lose, but rather Win-Win-Win-Win-Win-Win
• Different types of questions are posed and
  therefore different types of solutions are
  discovered and created
• The human mind is infinitely creative.  Conscious
  Capitalism creates new pathways to unleash human
  creativity.
• Creative Entrepreneurs and Conscious Capitalists
  can solve all the worlds problems
• One example The Whole Planet Foundation

11
Our Core Values
1 Selling the highest quality natural and
organic products available 2 Satisfying
delighting our customers 3 Supporting team
member happiness excellence 4 Creating wealth
through profits growth 5 Caring about our
communities environment 6 Encouraging win-win
partnerships with our suppliers 7 We actively
promote the health, well-being, and longevity of
our stakeholders through education about healthy
eating
Whole Foods Markets deepest purpose is Changing
Improving the World
12
Selling the Highest Quality Natural Organic
Foods Available

• WFM leading retailer of natural organic foods
• Improving health, well-being, longevity of
  millions
• Good health pleasurable eating compatible
  goals
• Offering alternatives to the industrialized
  degradation of food
• Creating higher animal welfare standards

13
Satisfying Delighting our Customers

• Most important stakeholderno customers, no
  business
• Customers shop voluntarily
• Customers are treated as ends not means
• Team Members are empowered to satisfy delight
  customers

Happy Customers Happy Investors
14
Team Member Happiness Excellence

• Self-Managing Teams
• Open salary information
• Salary cap
• Benefits vote
• Gainsharing for all
• Stock options for all Team Members93 to
  non-executives
• Personal Wellness Accounts fully paid Health
  Insurance
• 100 Best Companies to Work For 12 yrs in a row,
  22 in 2009

15
Rich BossesNot Conscious Leaders
16
The Distribution of Options
Distribution of WFM options granted as of 2005
Estimated distribution of options outstanding as
of 2005 in the U.S.
Top 16 Execs
7
All Others
25
All Others
Top 5 Execs
93
75
Data Sources Institute for Policy Studies-United
for a Fair Economy (2006), Profits with
Principles (2004)
17
Creating Prosperity through Profits Growth

• Investors are the 3 stakeholder
• We are stewards frugality is important
• Profits created through voluntary exchange--not
  through the exploitation of people
• Profits create wealth, capital, prosperity
• Capital is the fuel for technological innovation
  and progress

18
Creating Prosperity through Profits Growth

• Business has a fundamental responsibility to
  create prosperity for society the world
• The percentage of people living on less than 1
  per day has dropped from 85 in 1820 to only 20
  today

Source World Bank (constant 2003 dollars)
19
Creating Prosperity through Profits Growth

• Fastest growing most profitable publicly-owned
  food retailer in the U.S. past decade
• 8 billion in annual sales--324 on Fortune 500
• Same store sales averaged over 9 for the past 10
  years (including 2008 slowdown)
• Store ROIC over 35 for stores over one year of
  age
• EBITDA CAGR of 30 since 1992 IPO
• Stock price increased 1500 since 1992 IPO

20
Encouraging Win-Win Partnerships with our
Suppliers

• Leading retail outlet for the enormous growth of
  natural and organic products in the last 30 years
  
• Success not possible without dedicated supplier
  partners
• WFMs success has helped our suppliers to grow
  and flourish

21
Local Producer Loan Program

• More than 2,780,000 loaned out54 total loans
• Mudslingers Freestyle (NC)
• Full Circle Farms (RM)
• Holy Cow Beef (SW)
• 3L Farms (S)
• Buzzn Bee (FL)
• Red Jacket Orchards (NE)
• Laughing Giraffe Organics (SP)

22
Whole Trade Guarantee

• Helping poor farmers around the world
• Over 200 million in sales estimated for 2009
  2 million donated to Whole Planet Foundation
• Partners Rainforest Alliance, TransFair USA,
  FLO, Institute of Marketecology (IMO)
• Quality Guarantee
• Price Guarantee
• Labor Practices Guarantee
• Environmental Sustainability Guarantee
• 1 of sales to Whole Planet Foundation

23
Caring About our Communities Environment

• The citizenship metaphor is appropriate for
  business
• Local, national, and global
• Businesses have responsibilities to communities
• Philanthropy consistent with citizenship managed
  prudently efficiently
• Contributes to shareholder value through
  increased good will with customers, Team Members,
  communities
• Philanthropy win-win, not win-lose

24
Caring About our Communities the Environment

• We donate more than 5 of profits to non-profits.
  
• On a local basis we support thousands of local
  community events and organizations

25
Whole Planet FoundationGlobal Citizenship

• Create economic partnerships in developing-world
  communities supplying our stores with product
• Provide innovative assistance for
  entrepreneurship through direct micro-credit
  loans
• Unleash the energy and creativity of every human
  being to contribute to prosperity in emerging
  economies

26
Where We Currently Work 14 Countries Now Costa
Rica, Guatemala, Nicaragua, Honduras, Haiti,
Peru, Queens, NY, Nepal, India, East Timor,
Thailand, Indonesia, Kenya, Ethiopia 99
women 47,000 Members 16 M loaned out 99
Repayment
Loans used for
Agriculture livestock Indigenous
handicrafts Corner Stores Prepared Foods
27
Whole Planet FoundationWhere Are We Making a
Difference?
Queens, NY
Nepal India
Ethiopia Kenya
28
Caring About our Environment

• We strongly support organic, local, sustainable
  agriculture
• Sustainable seafoodMarine Stewardship Council
  plus farmed fish standards with 3rd party
  certification
• Commitment to recycling and alternative energy
  up to 100 Wind Energy Credits.
• Green Building, fuel cells and solar
  installations
• Store Facility Green Mission Teams
• Animal Welfare program for livestock
• Environmental strategy should be thought of as
  win-win-win-win

29
Conscious Capitalism Non-Profit Organizations

• Non-profits do understand the importance of
  deeper purpose missioncorporations need to
  learn from them
• Are non-profits able to transcend self-interest
  because they have an deeper purpose? Problem of
  self-interested, self-perpetuating Boards.
• Anti-profit mentality frequently creates
  inefficiencies, waste, stagnation
• Many are not financially sustainable over the
  long-termthey need to learn from corporations
• Non-profit organizations also need to evolve to a
  more holistic model

30
The Conscious Non-Profit Organization Model
Holistic Interdependence
31
Evil Greedy, Selfish (Corporations)
32
Tear the Wall Down
Creative Love is the Golden Mean which ends the
false dichotomy between egoism altruism
Egoism Selfishness
Creative Love
Altruism Self-sacrifice
Love of self Love of others
win-lose _
lose-win _
win-win
33

Corporate Social Responsibility is not Conscious
Capitalism
1 Daniel Yankelovich, Profit with Honor The
New Stage of Market Capitalism
34
From Traditional Capitalism to Conscious
Capitalism

• From This To this
• Profit-focus Purpose-focus
• Only shareholders win                             
  All stakeholders win
• Short-Term                                        
                          Long-Term
• Zero Sum                                          
              Win-Win-Win-Win
• Self-centered Holistic
• Conflicts of interest                             
                         Harmony of Interests
• Parasitic                                         
                             Mutualistic
• Exploitative                                      
                     Creating Value
• Trade-offs                                        
                               Synergies
• Disliked Valued/Loved
• Not Trusted Trusted

35
Conclusion Conscious CapitalismNew Paradigm
for the 21st Century

• A Conscious Business has a higher purpose that
  transcends maximizing profits. It is focused on
  fulfilling its higher purpose, which evolves
  dynamically over time.
• The enterprise is managed to optimize value for
  all of the major interdependent stakeholders.
• Conscious Leadership to the enterprise its
  stakeholders.
• This way of thinking about business transforms
  the underlying ethics of the enterprise to
  win-win-win-win-win-win.
• The larger societal brands of business and
  capitalism will evolve toward fulfilling the
  deepest ideals that humans aspire toall things
  Good, True, Beautiful, and Heroic.