Building A Conscious Sense Of Capitalism

Have businesses transitioned from being faceless and soulless forces of greed to become entities that exist for reasons beyond just making profit? The current pandemic has unruffled and seemingly lent a ‘fragility’ to the current business systems highlighting the importance of running a business ecosystem more mindfully with a touch of humanness and in sync with environment friendly goals. In recent times, the idea of conscious capitalism has generated much talk points in the entire framework of doing ‘business’ as in the 2013 best seller, ‘Conscious Capitalism: Liberating the Heroic Spirit of Business’ authored by John Mackey and Rajendra Sisodia. Leaning on the backdrop of the book and as part of NHRDN Pune Chapter’s ‘Between the Lines’ series, a webinar session was held recently on the nuances and impacts of building a conscious ‘sense’ of capitalism in the real world.

The panellists for the webinar session were, Barbora Stankovicova, Executive Director, Palladium; Thomas Kuruvilla, Global Board Member and Managing Partner, Arthur D. Little, Middle East; Sanjay Nath, co-founder and Managing Partner, Blume Ventures and Advait Kurlekar, CEO, Upohan Management Consultants (Session Moderator). Corporate Citizen shares an excerpt from the riveting discussion

Advait Kurlekar

Advait Kurlekar : The pandemic has changed the entire world, starting from one small town in one country and that is where the entire discussion of capitalism rests on globalisation in a manner that the disease has now become a global crisis. The one important thing in recent times is to be conscious in terms of how we grow. While capitalism means business growth and globalisation, the need is also to be slightly more aware of what’s happening around us and focus our business on those things.

Advait Kurlekar: The unusual pairing of the two words ‘conscious capitalism’ is an oxymoron, but can they work together?

Thomas Kuruvilla : Is capitalism supposed to give importance to making money or are we trying to say that it is not correct? This raises the two-pronged need to justify whether running a business properly means not trying to maximise wealth at all. Is making money alone the motivator to doing business, then does doing business mean not trying to make money at all? I don’t think that JRD Tata was doing business to make money, he was ‘doing a good’ business and got money. But if he didn’t get the money, would he have started doing business wrongly?” “No, he would not,” The need is to be very careful in trying to gain consciousness versus the capitalism angle in doing business. Each individual should decide very clearly what they are standing for. The spot lies in understanding whether I will make money and so will do business properly, as long as it makes money. Or I will do business properly and money will come.

Sanjay Nath : I am a big fan of Whole Foods Market (Co-founded by author John Mackey) and I know that a lot of customers love their products. Whole Foods has not been able to scale and necessarily become the largest supermarket in the world but maybe that’s not their vision but I know the people who shop there and they care about it. As an early investor, we back these companies and ourselves do not create companies. So, I will bring a slightly different perspective and a shift to the conversation—it is more about can you do well financially and can you also do good? Can you become a successful company and also make the world a better place? For instance, why aren’t there apps to clean up the pollution in Delhi? I can solve it like an entrepreneur and say, I am going to make this the most successful business in this space and make a lot of money. So, I am going to make my investment and I am also making the world a better place because it is a good business to do. Everything can fall in place but it has to be personally driven by the CEO and from the founders and you have to believe in it.

"In current times, people do care for the greater good which indicates a different balance, where the situation is not ‘either ’ or ‘all’, to sacrifice money ”

- Sanjay Nath

Advait: Is conscious capitalism actually shaping up businesses?

Sanjay : I find that founders that approach us do care about it but they are coming to us because we also believe that they can create a lot of value, make a lot of money and make us a lot of money and also do good. In current times, people do care for the greater good which indicates a different balance, where the situation is not ‘either’ or ‘all’, to sacrifice money. If I backed the founder, I would say to him, if you are spending 10 per cent doing conscious capitalism, I want to make sure that you’re not losing 10 cents on the dollar. In fact, I want that full dollar. The idea is to pitch for something first and understand an investor’s perspective. We have about 40% women as part of our portfolio but while I am not saying that women are more conscious and men are not, bringing diversity of thought also helps a lot.

Advait : How does ‘conscious capitalism’ apply to communities globally?

Barbora Stankovicova : As part of our conscious capitalism, we are trying to work together in a collaborative manner because there is no way you can solve a community issue by one entity. Even successful businesses have to work hand in hand with different stakeholders. I started developing strategy some 15 years ago when business was all about shareholders’ value which has since seen various transitions. Businesses graduated to the concept of social responsibility and giving back to society; slowly making way for shared value and now becoming part of the core business and creative principles which also embed diversity and inclusiveness. Palladium has been working with Municipal Corporations functioning beyond the building of bridges or infrastructure. On the socio economic impact of the communities, while the trust of the private sector in getting any help from the government is currently very low, we have been trying to bridge the gap between different stakeholders.

Advait: Do you bring up the tenets of conscious capitalism when discussing investments with startups?

Sanjay : If you look at how we measure, I think the incentives also have to change. We could say conscious capitalism in relation to the ‘subconscious’ investor. For instance, we do have all such examples from the West, primarily because a business has had a lead in the Western world and many like Bill Gates and the others made money and are now choosing to give back, which is quite a noble step. In terms of percentage, I think in India, we would tend to be much lower in this regard.

If you look at how we are measured, for example in the Middle East, if I give you a dollar as an investor, I want $4 back. However, if you give me $4 and you are also backing the founders with all this, is considered ‘good’. But if I went back and asked them to accept $2 dollars and said that since they know all my founders and so if they could do all this for CSR, I will not have the next fund! But if there is a way to say that you are also measured along the lines of doing good as well as making money, it could set a good example. I would love the CEO to be 100% focused on a product, the product sales and making money but maybe, you also have someone in the team that looks at this aspect. We also have a strong learning curve for good CEOs and founders who are always learning like how I am listening to this book now which has entered my consciousness.

Barbora : Sometimes, the business also starts from the donors who are willing to support and tackle a certain issue and sometimes it comes from the larger brands like Unilever et.al. These companies realise that they cannot grow without imbibing these aspects and then they look into certain opportunities of growth in certain value chains which is right with respect to certain products and that’s when we help them to look into the value chain ecosystem and identify the disadvantaged points, where the company can be actually helped to grow.

Advait: How can business strike a good balance and trust between different kinds of stakeholders?

Thomas : I want to run a conscious capitalistic business because it makes money and like every other strategy consulting firms, our primary objective is to advise people on how to make money. Every project that we have done in the 22 years of my consulting career has been to create shareholder value which is measured as the increase in the share price. I work with at least 150-200 businesses and if I look at who is doing well, who is happy and who is making money, they are the companies who are running business consciously and ethically. The point is, you are not doing it because you are making money. It would also be correct to say that if you run a business you will end up making money but that is not why you should run it ethically that is where I have a problem. It clearly means that if you don’t make money then it is complete stupidity and if you don’t make money, you don’t have money and cannot do anything in this world. Unfortunately, how can the likes of Bill Gates donate money if you don’t make money? But, yes, you have to make money too!

Barbora : As a positive impact and development consultant and an expert in business strategy and finance, Palladium engages in business development activities by strengthening stakeholders’ relations and local technical expertise in urban/smart cities governance. We are trying to bring what is good to the purpose of the community and also helping companies and organisation to embrace the concept of inclusive growth. We also start where the actual money is and business starts where the need is and also on who is willing to support and fund an initiative. The key is that you might have organisations that started 30 years ago and doing really well but not as conscious. But eventually they might realise that this is an important aspect. We participated in a project conducted for small cocoa farmers with funding from the United States Agency for International Development (USAID). The funding support enabled to bring investors together, including competitors that helped improve the cocoa farmers’ lives, achieved higher yields and made quality cocoa available in the markets.

Advait: Is the idea of ‘giving’ restricted to larger companies with sufficient money?

Thomas : It is a wrong conclusion. While only large corporations are seen as the ones donating a lot of money, this might not be representative of the entire business world. There are very small companies, even those making losses, give money to poor people. The difference is that it might be a lower value as small as a hundred dollars, which goes unsung. It is not representative to say that when I am rich, I am giving. People who are good will give money irrespective of whether they are rich or not. Whether you are rich or poor, the intention to give is not related to your wealth and this is 100% clear to me.

Sanjay : As a venture capitalist, I call it the ‘reputation’ business. It might be okay to lose some money but if I am unethical or don’t treat company founders who are also my customers right, can I make money after all? I make money after they make money and a VC is a collection of a portfolio company. We are basically investing our time and money in building a large platform to help our companies with marketing, branding, and hiring. I believe that it is commendable to have successful entrepreneurs who’ve done very well financially, who have also been clean and ethical from the start. Azim Premji is a good example here because he’s (Premji) always been like that. It’s not like people made money ethically and then suddenly said, I will give. It’s called reputation.

Barbora : We can’t live in this world without having businesses, as it also forms the core for sustenance. The business of life is that there are businesses that are making money and they are able to generate jobs and employability and opportunities. So, it’s good that there are entities that think of a business that has to be profit oriented at the same time, if they’re able to uphold the key principles (of giving), it adds up to the core.

Advait: From a startup perspective, would you prefer your invested companies focusing on scale growth?

Sanjay : Coming back to what Thomas said in his capacity as a strategy consultant, as CEO of a strategy consultant agency dealing directly with CEOs, the goal is to maximise shareholders or stakeholder value. We are exactly the same as we put our own money but we have to do that in half the time because you are backing startups where they are not seasoned CEOs. You have to get them the next rocket ship they are the next Ubers’, the Kareems’, the Facebook’s et.al. You have got to know them better and of course growth is also very important. But we are in the reputation business and if we lose our reputation, we will never get a good company coming to us again. We’re not talking about ethics but we’re talking about ‘doing good’ and treating people well. Is he a nice person or an ethical person? Founders are coming to us but the capital forms the last five minutes of any discussion. I will have to respect the entrepreneurs, find out what they’re doing as I also want to bring their reputation when that business comes to us. Reputation in ‘doing good’ and ‘doing business’.

Barbora : A company can evolve and become more conscious at any stage. I believe that while it is doing good when it starts, it is even better if it is following ‘doing good’ when it’s already existing or can be a startup. It doesn’t, however, have to be a big company, could be small but successful.

"Conscious capitalism is relevant everywhere; what is relevant in India, is relevant in the poorest and the richest places in the world”

- Thomas Kuruvilla

Advait: How are youngsters faring viz conscious capitalism? Is it country-specific at all?

Thomas : Conscious capitalism is not linked to India or the U.S. or to any business per se. We pick up consciousness and if you become nice merely because of a situation, then you are actually ‘not’ nice as your niceness and your consciousness is dependent on the circumstance. Conscious capitalism is relevant everywhere; what is relevant in India, is relevant in the poorest and the richest places in the world. We have 120 consultants working with me and working with a lot of businesses. In trying to make more money, I think, we became very money-oriented. However, I have also observed that lately the new generation that is coming into consulting, in the 22 years age group actually spend more money on these things (giving) than the older generation. It is a pattern I see. We have partners who are making a lot of money and we have analysts who are making one-fifth of that money, but these analysts are the ones who are donating money and trying to help people. They take a one-year sabbatical, join the Red Cross Society, go to Bangladesh, and help the poor. The partners (as mentioned) still have a lot of money and they are still trying to make more money.

Sanjay : Let me cite this viz an ACP fund created for COVID-19 related amenities. It was set up by all VCs jointly and is a great example; as a lot of startups were going to go out of business, we separated the blue ventures. We can’t just give money because we have a fiduciary responsibility but we supported an initiative where VCs got together and set up the ACP fund that basically funded companies that could make a positive net contribution to manage the pandemic by helping hospitals that were helping customers. Surprisingly and interestingly, the youngest members from our team were the ones contributing their time. They were on calls weekly calls twice a week every day. They were not investing money but we as VCs were running all of them. So, the youngsters are making a difference in doing a good cause by giving their time. I believe, giving time is far more valuable than giving money in many cases.

Barbora : Fundamentally, there are significant changes and people are giving a lot of importance to this, also because 15 to 20 years back, there were no social media and what people are doing was not known to other people. Nowadays, youngsters have started seeing that people who have money are also engaged in this. They are slowly realising that making money alone is not giving them happiness. It gives more exposure to and conviction that you will be happy by doing things properly and that is getting a lot of coverage socially and they are realising that it is the right way to do it. They are doing it in their day-to-day lives and then companies are also trying to do it. There is absolutely no doubt that it has brought significant changes and companies are definitely much more ethically and much more consciously run.

"India has an incredible proportion of non-profit entities or social enterprises but it does not really aim for conscious capitalism per se”

- Barbora Stankovicova

Advait: Do companies come with the agenda of their businesses centred around doing good?

Sanjay : Did Mark Zukerberg know that he was going to create a $100 billion business? But he wanted to go out and change the world and do it in a very different way. We are looking for those passionate founders, those entrepreneurs who in a sense, want to change the world in different spaces. Then, there are companies like the one that makes devices that can indicate onset of heart attacks. They have an algorithm and a set of boxes that they save lives with and are able to predict heart attacks. They are able to shorten the algorithm which shortens the time from 45 minutes to five minutes if somebody shows signs of a heart attack that’s their business and a profitable one too. Profitable and growing fast but they are also saving lives and partnering with hospitals and it all began with the idea of making the world a better place. Now in some industries, the ‘doing good’ factor is very sharp while in other industries there are other ways to help. Also, by way of giving, it’s not how much money you gave but what percentage of net worth did you give away.

Barbora : The cropping up of numerous social enterprises nudges a cause for concern too. While the social stock exchange will reap in conscious enterprises, it may not be truly capitalism because they are mostly non profit. India has an incredible proportion of non-profit entities or social enterprises but it does not really aim for conscious capitalism per se.

Thomas : I maybe even contradicting myself when I say that running a business to make money is very important and if you are able to project a very positive image to the market, people will like you and will get more business and make more money. From that perspective, any business which is heavily involved in consumer goods consumer-facing activities which have a lot of visibility with consumers will have much more financial returns from behaving properly. For example, the steel industry, has three types of customers and if they are ethically unconscious, nobody knows about it but if a company like Coke or others which are more consumer-oriented becomes ethical and conscious, the consumer liking increases and they buy the product and the company makes more money. This stands more relevant for companies which are interacting with the mass market because the benefit is financially more for them.

Closing statement:

As author John Mackey said, “We are all on a hero’s journey, we just don’t know it, some answer the call, while some don’t, being a leader comes with responsibility.”