This week is the 120th Rule Breakers podcast, and as Motley Fool co-founder David Gardner looked back, he realized he's covered a whole lot of subjects in those shows. More to the point, with all those episodes behind him, there are some areas he may not have covered in detail in a while. So he's getting back to basics with a set of ideas he thinks any Foolish investor ought to take for granted -- because he's not taking it for granted that everyone knows them.
In this segment, he explains why he's a proponent of conscious capitalism, both in his own company and those he invests in.
A full transcript follows the video.
This video was recorded on Oct. 11, 2017.
David Gardner: No. 1 is about business. In fact, the first two are just about business. We're not even talking about investing yet. Point No. 1 is about how to do business right and finding businesses that do business right. And there are a lot of them and they are growing. I would say that we are living in an increasingly enlightened, capitalistic environment, not ever to say things are perfect or can't be improved. In fact, one of the things I love about the time in which we are living is that things are pretty persistently improving, sometimes in fits and starts, and sometimes we take a big step backwards.
It's not true of all areas of the world, but the way that capitalism is practiced and taught today, it's far superior to what I inherited, anyway, when I came on this Earth about 51 years ago and maybe you, too.
And I guess apropos of that point I should mention that I'm taping this podcast last week. I taped this last Thursday because this week I am in Austin, Texas at the conscious capitalism conference, and so point No. 1 is just quick, chapter and verse, conscious capitalism.
There are four principles that underline what I consider to be effective capitalism, and these are not my ideas. These were originally settled on by Whole Foods co-founder John Mackey and his friend, academic, and co-author Raj Sisodia. Both of them I have seen speak so beautifully and eloquently about how to do business right. They settled on these four principles. You can read their book, Conscious Capitalism, and learn more about them.
But quickly, No. 1 is that you're a purpose-driven organization. Now this works for-profit and not-for-profit, and I think a lot of us recognize that not-for-profits often do this very well. They have a strong sense of purpose. One of the things we've tried to do at The Motley Fool, that I think our employees appreciate, is we've tried to bring the heart of purpose from the not-for-profit world right into the entrepreneurial platform that is Motley Fool, Inc. So a strong sense of purpose. I'm not even saying we're doing it that well, but we're trying, and I hope that you're working for an organization -- for-profit or not-for-profit, if you are working -- that is also trying and it is purposeful. So purpose, purpose driven, is really a key part of conscious capitalism.
The second one, my favorite of the four, is multi-stakeholder orientation. I'm going to park that for a sec, because the third and fourth, quickly, are conscious leadership and conscious culture. So, basically, in so many words, servant leaders -- people who give the better parking spaces to, let's say, the employees who get to the garage first. They don't have their own pre-demarcated best parking spots in the garage or all the corner offices in the building. Or if they do, nevertheless, you'd say that person is a servant. He or she is here to serve me as a leader at my organization. So that's servant leadership and then conscious culture is just having a really strong sense of good corporate culture, which I've talked a lot about on this podcast in the past.
But now let me go back quickly to multi-stakeholder orientation. So, the way that capitalism started to veer away, I think, from its better, purer form probably happened around a hundred years ago when CEOs of Fortune 500 companies began saying that the purpose of this corporation is to "maximize shareholder value." And Milton Friedman, the very famous, and rightly so, academic, the economist mostly of the 20th century, Friedman made a big point of saying the purpose of a corporation is to maximize shareholder value.
But we at The Motley Fool, both in our own culture for our organization, but also when we're looking at others and stocks that we might pick, we love to find the corporate cultures that don't just take one stakeholder and try to maximize its value. At the heart of Conscious Capitalism you are not trying to maximize the value of your enterprise for any single group. Shareholders, you're not trying to maximize it for customers, you're not trying to maximize it just for your employees, and you're certainly not doing it just for the environment or other stakeholders that might be around you in your community.
What you're trying to do is create a win for all of them, and you start creating, I think, non-sustainable, sometimes ugly enterprises if you tip everything in favor of one of those groups and say, "That's all we're trying to do. We're trying to maximize the value for that stakeholder group." That's why we call it, and Mackey and Sisodia call it, multi-stakeholder orientation. A critical principle, really. A foundation for building a sound organization with the great structural integrity underneath it that's going to support its long-term prosperity.
So, that's point No. 1. It's a little bit of a mouthful, but I just wanted to make sure that you understood that I hold this truth to be self-evident, that conscious capitalism is a great way to do business, and many of the best businesses of our time do this. And, as an investor, I tend to sit up in my seat and take a harder look when I see companies operating in this manner.
