Here Comes Conscious Capitalism

I’ve taken a break from writing peHUB posts to explore Conscious Capitalism, which is emerging as the next big thing in business.

Briefly, Conscious Capitalism has three key principles that set it apart from the current variant of capitalism practiced around the globe. First, a company has a deeper meta-purpose in addition to maximizing profits. Second, a company recognizes this it is a complex ecosystem comprised of numerous interdependent stakeholders and not just the traditional limited duality of management and stockholders, and delivers value to all stakeholders. Third, the CEO is the steward of his company and its ecosystem working for the benefit of all the stakeholders, not just for his own enrichment.

The deeper I got into the world of Conscious Capitalism, the more I realized that it was strangely familiar. The progenitors of the venture capital industry like General Georges Doriot practiced venture capital by intuitively using these principles. To make money in venture capital, their focus was on building great businesses. Entrepreneurs like David Packard and Walter Hewlett understood that building a great business inherently required following the principles of what is now called Conscious Capitalism.

I’ve been silent for two years because I wanted to make sure that Conscious Capitalism is for real before I shared my findings in this column. My exploration began in the fall of 2008 when one of my clients introduced me to Michael Strong, Co-Founder, CEO and Chief Visionary Officer of Freedom Lights Our World, Inc. (see, because she thought that my book project might be a primer for how to build startup companies embodying the principles of Conscious Capitalism celebrated in Michael’s work with FLOW. My first conversation with Michael filled a whiteboard and led to an invitation to attend the first annual Catalyzing Conscious Capitalism conference (“C3”) in Austin, Texas two weeks later in October 2008 (see I generally don’t forego the billable hour to attend conferences but I knew I had to attend this one.

I wasn’t disappointed. After 25 years in the business world, I found my tribe. Led by John Mackey, Co-Founder of FLOW and Founder and CEO of Whole Foods, the conference assembled 140 visionary executives and thought leaders from the Conscious Capitalism movement. For three intense days, we absorbed TED style presentations from extraordinary leaders like Kip Tindell, Founder and CEO of the Container Store, Sally Jewel, CEO of REI, Chip Conley, CEO and Founder, Joie de Vivre Hotels, and Terri Kelly, CEO of W.L. Gore & Associates who shared how they led their companies using the principles of Conscious Capitalism. As the known financial world unraveled outside the conference, the attendees were inspired by a vision of a more enlightened form of capitalism rising in its place.

Here is a short reading list to help you quickly understand the dynamic world of Conscious Capitalism. Since most readers of this column are in the business of making a return on investments, Firms of Endearment: How World Class Companies Profit from Passion and Purpose by Rajendra Sisodia, David Wolfe and Jaqdish Sheth is an excellent starting point. This book shows how companies using the principles of Conscious Capitalism beat the performance of the S&P 500 by a factor of nine over a ten-year period (see also Patricia Aburdene’s Megatrends 2010: The Rise of Conscious Capitalism places the movement in its historical context. John Mackey’s and Michael Strong’s Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems suggests how conscious businesses can be the solution. Listening to John Mackey’s CD Passion and Purpose: The Power of Conscious Capitalism is an easy and fast way to become familiar with the key tenets.

Since that first C3, I have explored this growing movement by getting to know its leaders. The second C3 in Austin in October 2009 was even more inspiring than the first. I have watched John Mackey, who was the prime mover behind C3 and Conscious Capitalism, fulfill his role as founder in animating the movement and step into a new role as a guardian of the collective to allow it to go where its independent life force wants to take it. The movement has evolved into an independent and powerful collective. Raj Sisodia and his colleagues at Bentley University in Boston, for example, have formed the Conscious Capitalism Institute (see as the academic think tank for Conscious Capitalism. The Conscious Capitalism Institute recently held its second annual conference in Boston in May 2010 featuring presentations from business leaders and academics from leading business schools like Harvard, M.I.T. and Columbia. Over the coming months, I will introduce you to thought leaders in Conscious Capitalism.

Why is Conscious Capitalism relevant to the venture capital industry? Frankly, the venture capital model is broken. Last week one of my general partner friends shared statistics from the National Venture Capital Association that show that as an asset class, venture capital has returned invested capital without providing a return for the last decade. Many blame the asset class’ lack of return on Sarbanes Oxley and excessive money chasing too few quality deals but this phenomenon suggests that an opportunity to develop a better approach to building successful companies. This column will explore whether or not Conscious Capitalism offers a better approach that can revitalize our industry and bring positive returns back to the asset class.

John Montgomery is a partner with Silicon Valley law firm Montgomery & Hansen. Read his prior posts here.