Conscious Capitalism and Esalen’s Center for Theory & Research
By Jay Ogilvy
Most movements have their iconic images or foundation stories: For the civil rights movement it could be Rosa Parks on a bus, or the Selma march; for the human potentials movement, it’s surely Esalen. Adam Smith’s pin factory provides an image for the advantages to be gained from economies of scale enabled by capitalism. For the new movement known as conscious capitalism, the foundation story has to be the great flood on Memorial Day, 1981.
Whole Foods had been in existence for just eight months in one store on Lamar Avenue in Austin when a hundred year flood sank the store under eight feet of water. After eight months of modest success, the store, under-capitalized but thriving, was wiped out, all of the inventory and equipment destroyed.
Then an amazing series of events unfolded. In founder John Mackey’s words:
As we despondently started trying to salvage what we could, a wonderful, completely unexpected thing happened: dozens of our customers and neighbors started showing up at the store bringing buckets and mops and whatever else they thought might be useful. They said to us, in effect, “Come on, guys; let’s get to work. Let’s clean it up and get this place back on its feet. We’re not going to let this store die. Stop moping and start mopping.” (Mackey and Sisodia, 5)
The customers loved the store. Its employees, or “team members” as they came to be called, thought of it as the best job they’d ever had. Over the next few weeks, their suppliers were quick to restock the shelves on credit because they trusted Whole Foods’ management and wanted to see this nascent effort survive. The community threw in its support. Even their investors agreed to increase their commitment to its vision, namely, to align and serve the interests of all of the just-named stakeholders, and not be seduced by a single-minded pursuit of profits. 28 days later, the store re-opened. 32 years later, Whole Foods is a $16 billion colossus that has changed the eating habits, animal husbandry practices, and the viability of organic agriculture across the country.
Could there be a better story showing one of the basic principles of Conscious Capitalism, that aligning the interests of all stakeholders is a better and wiser course than the single-minded pursuit of the interests of investors? If a company is successful in serving the interests of its customers, its employees, its suppliers, its community and their natural environment, then, what-ho—the interests of its investors will be better served than if that company had single-mindedly pursued only the interests of its investors.
Fig. 1: The Core Values of Whole Foods’ Business Mission
While Mackey and Whole Foods may be the flagship of this movement, they are hardly alone. Raj Sisodia and his grad students at Bentley University conducted research that they report in a book too cutely titled, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose Don’t let the title put you off. Behind the warm and fuzzies there’s some solid research. Raj and his students started with a group of 200 companies, then whittled that list down to 60 companies that demonstrated most of the principles of conscious capitalism. Another sieve that did not include financial performance got them down to 28, and when they then focused on 17 of those 28 that were publicly traded, they then performed a financial comparison with the S&P 500. “Imagine our surprise, then, when we completed our investor analysis. These widely loved companies (those that are publicly traded) out-performed the S&P 500 by significant margins over 10- 5-, and 3-year time horizons.” (Sisodia et al., 2007, 16)
Fig. 2: Financial performance of stakeholder-driven Firms of Endearment measured against the shareholder-driven performance of the S&P 500, 1996-2006
In a 15-year review of the same companies, the numbers only improved.
So Whole Foods is not alone. A growing number of companies are flying the flag of Conscious Capitalism. And, starting in 2011, a growing number of CEOs of those companies have been gathering at Esalen for a series of annual conferences to trade notes on best practices and build a fellowship under the shared auspices of Esalen’s Center for Theory & Research (CTR) and Conscious Capitalism Inc. (CCI).
Prior to our recent meeting in March, 2013, I had the privilege of sharing a ride down to Esalen with the former CEO of Trader Joe’s, Doug Rauch, who is now serving as the CEO of CCI. For Doug, the numbers just shared are less important than some of the other tenets of conscious capitalism, namely:
- Higher purpose and core values
- Conscious leadership
- Conscious culture and management
each of which are covered in a chapter of Mackey and Sisodia’s latest book, Conscious Capitalism. Read it and leap for joy! The book contains so much more than advice on how to increase profits. The very impressive numbers cited by Mackey and Sisodia are, after all, somewhat subject to criticism on the basis of some inevitably subjective sampling bias, whatever Raj might write, e.g. “Imagine our surprise . . .” Doug again: “I don’t care whether the comparison against the S&P turns out to be 3-1 rather than 7-1 or even 15-1. 3-1 is still incredibly significant. What I care about most is the whole suite of principles, particularly the importance of core values and culture.”
Doug started his adult life as a monk, but found that his own path was less about a proto-mystic’s withdrawal from the world, than about engagement with the world. Little did he know then that, under his leadership, he would take Trader Joe’s from a string of 17 stores in southern California to over 300 stores nationwide.
Doug’s remarkable trajectory takes us to the natural affinity between conscious capitalism and Esalen’s Center for Theory & Research. Started by Michael Murphy under the aegis of Esalen, CTR has conducted a series of invitational conferences not generally featured in the public catalog. CTR has conducted Esalen’s R&D in what has been almost a stealth movement to engage with the world through a series of conferences on a whole range of topics, from citizen diplomacy and international relations, through philosophy, psychology and holistic health, and most recently, to economics, both with Conscious Capitalism Inc., and a recent conference on Complexity Economics. See “Esalen’s Half-Century of Pioneering Cultural Initiatives” for a 35-page document covering the dozens of topics and hundreds of invitational conferences hosted at Esalen over the past half century.
Now it’s time for CTR to present its work to the world. In this and a series of subsequent issues of the eZine, we’ll update you on the latest developments in CTR and the life stories of some of our participants. It has been an amazing series of conferences and people, until now largely unknown.
If you love Esalen, which you probably do if you’ve read this far, you will be pleased to discover that you are part of something much bigger than you may have suspected. You could say that we’ve evolved from a human potentials movement known mostly for cultivating the higher potentials of individuals, toward social potentials and global potentials. “From me to we.” But in truth, the larger mission of social transformation was always very clear in the minds of Esalen’s founders. The well known and important mission of personal transformation through gestalt, somatics, superior nutrition, etc. will not be left behind. For its effective implementation, however, the larger mission of social transformation will need to stand on the broad shoulders and remarkable achievements of the human potentials movement. While this issue of eNews concentrates on Conscious Capitalism, further issues will say more about other topics covered by CTR.
Jay Ogilvy, Esalen board member and eZine editor
John Mackey & Raj Sisodia, Conscious Capitalism: Liberating the Heroic Spirit of Business, Harvard Business Review Press, 2013
Raj Sisodia, Jag Sheth, & David B. Wolfe, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, Wharton School Publishing, 2007