« DemocracyFest 2005 | Main | Echo Chambers »

John Mackey's business philosophy

During the Internet boom I worked for Whole Foods Market as in internal evangelist for Internet technology and, later, as part of its ecommerce experiment. I enjoyed working with John Mackey, whose business philosophy always felt pretty right to me and influenced my own thinking about "power to the edges" in a business context. I've never seen as clear an articulation of John's thinking as I found in his interview at Sunni's Salon, a site dedicated to "individualistic, pro-freedom culture."

Free-market economists have done a major disservice to capitalism and to business by making profit maximization the supposed primary goal of business. The terrible reputation of business in the world today is a direct result of the belief that business has no other purpose besides maximizing profits. The average person believes that business should care about its customers, employees, society, suppliers, the environment -- as well as its investors. The fact that business philosophers and economists articulate a philosophy that business should only care about maximizing profits and shareholder value (and has no other compelling ethical responsibilities to any of the other stakeholders) has done incalculable harm to the reputation of business. The "brand of business" in the widest sense is pretty terrible throughout the world. Read David Korten's book When Corporations Rule the World to get a good perspective on how many intellectuals see corporations and big business today -- a threat to the well-being of the entire world. The anti-globalization movement is actually an anti-corporation movement and it is a direct result, in my opinion, of the faulty logic of the shareholder value maximization model. You and I know that business and capitalism are helping increase prosperity throughout the world. Too bad the economists have done such a poor job of intellectually justifying the intrinsic ethical nature of business and the capitalist system. Both business and capitalism have terrible reputations as a result. Socialism, communism, and anti-globalization are all reactions to this philosophy. I sometimes wonder whether any of these horrible philosophies would have had much of a following except for the intellectual failures of our economists to properly understand the real purpose of business.

Second, there is a fundamental paradox that I call the "paradox of shareholder value". The best way to maximize shareholder value is to not make maximizing shareholder value the primary purpose of the business. Why not? Because it is the business that satisfies customers best that has the most customers, the highest sales, and the most profits. The best way to satisfy customers best is to organize the entire business around satisfying the customer. Every communication the business makes towards its customers, its employees, and the media should be about putting the customer first. Ultimately the best way to satisfy customers' needs best is to actually put those needs first. If profit is the articulated primary goal of the business then it is unlikely that the employees or management of the business will dedicate themselves to customer satisfaction to the same degree they would if customer happiness was seen as more important than investor profits. In the first case customer happiness is merely a means to an end -- maximizing profits. In the customer-centered business, however, customer happiness is an end in itself and because it is it will be pursued with greater interest, passion, attention and empathy than the profit centered business is capable of.

jon posted this at 11:10 AM
Share on Facebook| email to a friend

 Subscribe to RSS feed for Weblogsky