A Better View of Business, Profits, and Investing

Sometimes, investing and the real economy don't quite connect in common discussions. One major mistake is the view that value and profits are just numbers. Our economy is made up of people, actually, and the business and investing approach too often lacks empathy, or even common sense.

There is a real world out there.

Thankfully, one approach to business and investing incorporates empathy, and life's web of economic participants. Empathy is required to understand the holistic fabric of investing and growth-oriented companies. People add value to the world in so many ways: in products, transactions, associations, and inventing and innovation.

This is a philosophy called conscious capitalism, and it's based on positivity, not capitalism's reputation for ruthless exploitation.

Who's stealing from whom?
Sadly, these days it can be difficult to understand that there can even be something called "conscious capitalism," or the idea that business and investing in great companies can be hinged on good.

Socioeconomically, today's stereotypes are absurd. One camp calls many lower-income people lazy, entitled, milking America for all it's worth, and physically and economically dangerous.

In a weird twist that is often forgotten, though, middle- and upper-class citizens can be lazy, entitled, milking America for all it's worth and, in some cases, physically and economically dangerous.

Maybe the upper tier is not as directly physically dangerous most of the time, but those who are busted for, say, massive fraud -- hardly a victimless crime -- end up in white-collar prison resorts singing the blues.

The financial crisis showed that powerful people and businesses metaphorically mugged and blackmailed the entire public through fear. It happened in plain sight -- affecting an unimaginable number of people one way or another. It threatened an outcome of economic collapse. Big businesses, some deservedly, acquired a bad reputation.

The ironic and downright sad thing is that those in charge, whose companies received bailouts, were not themselves financially desperate people. Still, some felt utterly persecuted in their ivory towers, given the widely publicized whining that they still deserved huge salaries and bonuses despite safety nets from failure.

The golden rule
Yet not all businesses are equal. Positive, kind managements and companies that practice conscious capitalism understand what real value is, and how it incorporates the great ecosystem of people and ripple effects of people of all kinds -- employees, workers, suppliers -- and even opportunities for people in places at home and overseas who can get a leg up to escape serious poverty.

Whole Foods Market's (NASDAQ: WFM  ) co-CEO and founder, John Mackey, has been a major proponent of conscious capitalism, and even wrote an entire book about it, explaining the philosophy and presenting examples beyond his own company's policies and basic philosophy. Whole Foods is run according to this philosophy.

I don't know that CEOs like Jim Sinegal of Costco (NASDAQ: COST  ) and Howard Schultz of Starbucks (NASDAQ: SBUX  ) particularly bang the gong about conscious capitalism per se, but they walk the walk that investors should want to see more often.

Jim Sinegal's down-to-earth management style has become widely known. He has since retired, but his style is one worthy of respect and emulation. He was modestly paid, and rejected the common Wall Street view that things like employee benefits are profit drains. He answered his own phone, and wore Costco clothes.

Starbucks' Howard Schultz is paid very well, maybe uncomfortably so to many investors. However, he is a visionary who has built a great company that has grown both in stock returns and fundamental financial success -- admirable and real growth and performance.

Unlike many CEOs, Schultz knows what it's like to grow up with major financial difficulties. He grew up in the projects in Brooklyn. He saw firsthand how difficult it is for a family, because his father's blue-collar job lacked benefits and much pay. Starbucks has policies that do show empathy for their employees -- regular people.

These are among the companies that have voluntarily built their business foundations with more kindness than many Wall Street types and corporate heads would deem necessary, or profitable and effective. But these have all been very successful companies.

Whom do we thank?
Wouldn't it be nice if more companies illustrated that they want to retain employees at all levels, and promote from within? How about strongly teaching firsthand a concept that is talked about more than it touches many workers: positive incentives? For some, it must be difficult to imagine doing better if they are disrespected and treated badly.

This is why the whole recent argument that we should, across the board, "thank the wealthy" for their economic boosts is so one-sided and cruel. The individuals who are motivated solely for short-term profit (and gigantic pay for themselves) and dismiss everyone else fly in the face of real market complexities. Empathy and respect for others, as well as embracing positive, responsible capitalism, is strength, not weakness.

Maybe we should thank a great many people for their contributions big and small, some of which relate to a friendly face at a mom-and-pop store or chain retailer, or the lessons we learn from those we encounter who have immigrated here for a better life, and take jobs many Americans don't even want. We should definitely respect corporate managers and shareholders who understand this, and incorporate respect and empathy into their businesses.

People power is a more important business-building and economy-boosting factor than many talk about. Without participation on all levels, there is no marketplace. Without other people, nobody really has anything.

Great investment philosophies
Warren Buffett has made billions through his investing, and has offered plenty of positive examples and philosophical thoughts himself. Through the years, Buffett has also offered up investing tips to shareholders of Berkshire Hathaway. Now, you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (20) | Recommend This Article (42)

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  • Report this Comment On October 17, 2013, at 7:26 PM, ABigelow wrote:

    Loved the article and couldn't agree more. Patagonia is another great company that treats their employees very well. While we don't see it, I'm sure more executives and company owners would be willing to give their employees more. It's just a very big step to take, especially when you have to report to a board of directors and share holders.

  • Report this Comment On October 18, 2013, at 11:27 AM, gskinner75006 wrote:

    I will say if you are invested in Starbucks, Costco Wholesale, and Whole Foods Market, you should be more kind to the bankers, Wall Street, the top percentile of society as they are the customers of these companies. The poor don't shop there.

  • Report this Comment On October 18, 2013, at 11:46 AM, TMFLomax wrote:

    ABigelow,

    Thanks so much -- Patagonia IS a great company. It's a good point that there are some out there who know they'd get a lot of horrific backlash from those who don't want to change. It's hard to take stands. Especially one many of the boards have their own stake in keeping their own pay high (like the peer benchmarking stuff) and the shareholders who don't get why many of the more empathetic aspects "hurt profits."

    gskinner75006,

    Maybe. Whole Foods has more deals and sales now, and its private label stuff really isn't all that expensive. I've done some minor price checks on things like bananas (that was part of a project) and dairy and things and actually, some of it is comparable to conventional grocers. I agree that things like local eggs or artisan cheese or what have you are out of many people's budgets, but it's not that these are the only things there.

    I have also seen items in my local Whole Foods that come from local suppliers, and one that I've been to I know full well is serving a lower income neighborhood, serves great food and the people are nice as can be. So, a mom-and-pop shop in their bakery area, getting the word out about their products (which are great -- and fully vegetarian).

    Whole Foods also does a lot for communities in their immediate areas as well as overseas. Offers job opportunities. Again, this is a holistic thing and not just about "who shops there."

    I think Starbucks can be surprising too. The one that I'm about to go to right now across the street from where I live is very much a gathering place for immigrant cab drivers (and a whole lot of others of all kinds from the neighborhood). Again, they sit there and chat. These are hard working people. I think it's a treat for them and definitely the "third place" where they can gather and enjoy coffee and camaraderie.

    And again, job opportunities. Costco, again, job opportunities. (I do agree that Costco has a higher demographic, for the most part.) But here's another thing. The small business owners who shop there to get bulk deals. Who are THEY serving? I doubt it's the 1% -- these examples are people who work hard.

    Again, I'm trying to convey that this is a big picture that ripples across our economy. And private industry that is giving legs up.

    (Meanwhile, as much as I love mom-and-pops, I think companies like these deserve *some* props for giving workers health care benefits. Sadly enough, we know that the usual state of affairs with small businesses is they just can't.)

    These are hard-working people who form this web.

    Thanks for the opportunity to further convey what I'm trying to get at. We don't have to agree, but I truly believe that this is not about how the 1% again is floating our entire economy and are the only ones who matter. No way.

    Best,

    Alyce

  • Report this Comment On October 18, 2013, at 8:31 PM, CHill8008 wrote:

    That "[p]eople add value to the world in so many ways: in products, transactions, associations, and inventing and innovation" is just capitalism. These are all examples of cognition; that is that it is assembled in the head by the individual. There is not enough information in the environment to account for even the simplest of ideas, or even a tiny fraction of the transformations (i.e.creativity) produced by real people. That these transformations are modulated, or assembled from information in the environment at the individual level disallows the possibility that they are social phenomena. Pursuing the "conscious capitalism" (to use your term) is antithetical to your "pro-social" argument(s) used here in this article and those you have written in the past, as is the "corporatism" (to use my term) you have advocated here in this article and in past articles:

    "Wouldn't it be nice if more companies illustrated that they want to retain employees at all levels, and promote from within?"

    http://www.fool.com/investing/general/2013/08/30/billions-in...

    http://www.fool.com/investing/general/2013/09/04/made-in-ame...

    are just a few examples.

    From these (ideally voluntary) base interactions of (ideally free) individuals a society emerges, as does an economy, etc. As derivatives of these baser interactions, that which emerges may be divergent. Corporations (like nations, societies, etc) are composed of individuals, and those compositions are not to be reified as agents, but need to remain porous, that a person does not "belong" to them, a person is whole and complete on their own. A "pro-social" agenda is incompatible with this as it is a top-down position, versus the bottom-up, emergent, creative, dynamic, etc, of [conscious] capitalism. Any "reputation for ruthless exploitation" is only reputation and an appeal to worthless populism.

  • Report this Comment On October 19, 2013, at 8:25 AM, skypilot2005 wrote:

    Alyce,

    Thanks, for the article.

    I’d like to mention Wal-Mart.

    Are they “conscious capitalists”? I venture many readers would answer no.

    Where I live, they have “We Sell for Less” in large letters posted on the outside of their buildings. My experience has been that they mean it and take it very seriously.

    Overall, the customer service is good but, they could improve on product assortment.

    I feel they provide a service in the communities they serve of providing goods and services at reasonable prices. As a result, I believe this holds down prices at their competitors, as well. The overall community benefits economically from this.

    I feel many times they are unjustly “vilified” for political reasons.

    I don’t currently own their stock or any other retailer. I don’t personally know anyone who works for them.

    Sky

  • Report this Comment On October 19, 2013, at 10:16 AM, cmalek wrote:

    @skypilot:

    "Are they “conscious capitalists”? "

    Not the way they treat their employees and customers. The way WalMart operates right now, they are a very good example of "vulture capitalism."

    "Where I live, they have “We Sell for Less” in large letters posted on the outside of their buildings. My experience has been that they mean it and take it very seriously."

    Maybe in an area where Wally Wolrd is the only game in town they do sell for less. I find that by careful shopping I can get better prices at other retailers for almost everything WalMart sells and that applies to almost any WalMart I have visited in the US. "We Sell For Less" counds like a great slogan, just like "Read my lips, no new taxes."

  • Report this Comment On October 19, 2013, at 10:22 AM, cmalek wrote:

    The problem with many of the companies practicing "conscious capitalism" is that that the prices that they charge for their products are significantly higher than those of products of other companies. I, for one, cannot afford Whole Foods or Starbucks, no matter how "conscious" they are.

  • Report this Comment On October 19, 2013, at 9:13 PM, kankemike wrote:

    Long SBUX for sure. Would like to get some WFM (Schaumburg WF's is always packed). Not sure about COST, I'd rather buy more SBUX. Good art.

  • Report this Comment On October 20, 2013, at 5:50 AM, radlsee wrote:

    Maybe Starbucks is not a good example for conscious capitalism. The company's business model is based on saving income taxes. They are benefiting from public services, infrastructure, education system etc. but they don't want to share their part. Conscious capitalism isn't compatible with a strategy of shifting income to countries with low tax rates.

  • Report this Comment On October 20, 2013, at 11:46 AM, Mathman6577 wrote:

    Unions and the left-wing don't like Walmart. I consider them vulture organizations --- they prey on companies that don't fit their beliefs.

    My thought is if you don't like WMT don't work there and don't buy from them or their stock. Just don't tell me what to do and don't criticize me for what I do.

    Capitalism is not all about having a conscious. It's mostly about providing a return for your investors and satisfying customers.

  • Report this Comment On October 20, 2013, at 2:57 PM, dsurdyka wrote:

    Our country has been polarized by a successful marketing campaign to blame all of our economic woes on a failed capitalist model. However, both parties fail to engage in any effort to bring about meaningful reform and both parties promote a large centralized government that skims a percentage from every business transaction and from almost all personal income. Both parties use propaganda and fear mongering to divert attention from the real issues.

    No true free market economy would allow an individual who loses 8 billion dollars during the course of business while working with others in such a way as to nearly collapse the world economy still receive a megamillion dollar bonus for performance? This is outrageous but the silence is deafening. The anti-Wall Street movement was born but was run by morons who couldn't put together an intelligible political message and failed to activate every day working folks. There should be a mainstream movement screaming for reform. I fail to see why consumer banks need to be tied in with investment banks. Why should investment bankers be allowed to gamble my savings and get bailed out by my taxes when they lose their bets and yet, get paid outrageous amounts of money, win or lose. The fix is in, this is organized crime of the highest order. In a true free market capitalist system the so-called "talent" at least loses their job and is lucky if they get their last paycheck let alone a bonus. In some cases, they should go to prison. There does seem to be a good 'ole boy network in place with corruption rampant in the "government- financial- industry" complex. In general, I am against over regulation but there are systemic problems that need to be addressed. They are buried in the very fabric of our system. Politicians are useless because they cannot get re-elected without the financial support of the same system that needs to be reformed.

  • Report this Comment On October 21, 2013, at 8:27 AM, Samskiman wrote:

    More of the same that you expect from A. Lomax.

    While describing the shoppers/members at Costco, she clearly wants to give her blessing to them as nice, hard working folks, in spite of their lofty demographics, then comes an hilarious misguided attempt to paint "the 1%" as evil and lazy:

    "Who are THEY serving? I doubt it's the 1% -- these examples are people who work hard."

    For those scoring at home, A. Lomax has the 1%er's in the lazy category despite all evidence to the contrary, and people who do work hard and are not lazy would fall in to the sub-set that would fall outside of the top 1%.

    A. Lomax states early in her diatribe:

    "Socioeconomically, today's stereotypes are absurd. One camp calls many lower-income people lazy, entitled, milking America for all it's worth, and physically and economically dangerous."

    She then continues on to make the same charge against those that work and produce and have it accepted as fact.

    "In a weird twist that is often forgotten, though, middle- and upper-class citizens can be lazy, entitled, milking America for all it's worth and, in some cases, physically and economically dangerous."

    You see folks, we'd all know that... except it's often forgotten.....

    Yes, in a "weird twist" A. Lomax sees the opposite being true, so the writer that began her piece with the comment that "today's stereotypes are absurd" makes an equally absurd attempt at labeling a group of people at being something and behaving in a way that makes her feel better about her positions on socioeconomic sub sets and labels.

    I am of the opinion that we'll be seeing a piece from A. Lomax around Thanksgiving regarding Wal-Mart and the hours that they pay their employees to work during the holidays, etc., etc.

    Samski

    Long on WFM, COST, SBUX, BRKA, BRKB and a few other do-gooder companies.

    Also long on MCD, WMT, WFC, BAC, GS, YUM, SO, DOW, PM, MO, MON, HAL, CLF and some other evil employers, value creators and tax payers.

  • Report this Comment On October 21, 2013, at 12:47 PM, Mathman6577 wrote:

    Remember that COST paid a special dividend at the end of last year so that the big shareholders like former CEO Sinegal could have a lower tax rate on the distribution. Any word if he donated the savings to the minimum wage workers that actually need the money?

  • Report this Comment On October 25, 2013, at 3:15 PM, chk999 wrote:

    Alyce, your average CAPS score is negative 2.something. This means someone could have outperformed your CAPS picks by buying an S&P 500 ETF. And done 2 percent better to boot. This makes your advice valuable how?

  • Report this Comment On October 25, 2013, at 6:06 PM, 092326 wrote:

    The growth of unions in the US was one way for workers to counteract rapacious Capitalism. However, in so doing they in many cases priced themselves out of the market which lead to Globalization and the outsourcing of jobs to other countries. Intelligent regulation and tax laws that induce companies to compete successfully are also another way of bringing about a more compassionate capitalism.

  • Report this Comment On October 26, 2013, at 3:02 AM, stevec5792 wrote:

    @Mathman, how many minimum wage workers are there at COST? This ain't McDonald's. They pay very well for entry-level. Things may change without Senegal, but they are a very good employer for entry-level positions. They are very selective as well, which as a customer I respect. The "special dividend" is a strawman. MANY companies did that because the tax situation, with regard to dividends, was totally unknown. Had Congress let it revert to ordinary tax rates, I would be willing to bet you would have been upset with any company whose stock you owned that didn't declare a special.

  • Report this Comment On October 27, 2013, at 5:28 PM, Mathman6577 wrote:

    Did I say min wage workers at COST? I said min wage workers, period. I'd like to know how he spent the money he saved in taxes while telling the rest of us that we had to pay a higher rate. The diff. with Sinegal (and his band of crony capitalists) is he was a supporter of higher rates. I own quite a few dividend payers and only a handful paid early.

  • Report this Comment On November 05, 2013, at 12:03 PM, Samskiman wrote:

    Mathman,

    Is/was there some expectation that Mr. Sinegal do something with "the money he saved in taxes"?

    That move made by many companies last year to pay the dividend early was clearly all about not exposing investors to the more punitive rates that were obviously coming in 2013. It was not done to "save" any money, just to lose less of that money to taxes. Paying 2012 taxes on that dividend was still costly, doing it after January would have been more costly and very wasteful for his investors.

    To view a big tax hit vs. an even bigger tax hit as savings is talking past the real issue.

    In order to see a lower tax bill as a bad thing or as "savings" or as something that requires a defense from the "saver" - - someone would have believe that personal income is created for the sole purpose of funding government.

    Sinegal may be a supporter of even higher taxes, but he, and the present Costco management, knows many (most?) of their investors are not. It would have been very poorly received by many/most if he had decided for us to expose our dividend to an even higher rate. Those that feel a need to send more money to DC than they are required to can still do that if they choose to.

    Respectfully,

    Samski

  • Report this Comment On November 08, 2013, at 5:30 PM, Mathman6577 wrote:

    Sinegal is a crony capitalist and a hypocrite --- advocating higher taxes for us and then lowering his own taxes using a special dividend. He wasn't in it solely for the shareholders.

  • Report this Comment On November 11, 2013, at 11:17 AM, Samskiman wrote:

    Mathman,

    I agree with your statement from November 8.

    My point is that regardless of Mr. Sinegal's views on taxes, the right thing to do was to get the dividend out early enough to let the owners of the company decide what they were going to do with their dividend. Some may have felt a need to send every penny to Washington, but I see that as unlikely.

    Waiting until it was too late to remove that decision from the shareholders would have been very unpopular, certainly in light of Sinegal's views on redistribution, wasteful spending, etc. Yes, you're absolutely correct, he benefitted far more from paying the high tax rates of 2012, vs. the even higher 2013 rate than I did.

    Samski

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