Highlights from our interview with Raj Sisodia Part 2

Speaker 1: What are your thoughts about the paradigm linked to traditional capitalism that is, “Do the best you can for yourself and your own interest and you will help society somehow?”

Raj Sisodia: Well, you know, it’s a narrow understanding of human beings and it’s a narrow reading of Adam Smith. As you know, Adam Smith is often thought of as the father of modern market-based thinking, the understanding of the market. His book “The Wealth of Nations,” which was largely about individuals, as you said, pursuing their own self-interest and then creating businesses, etc.. But he also wrote another book, which was about the human need to care, “The Theory of Moral Sentiments.” The fact is that human beings are human beings, whether it’s at business or at home, so you cannot separate out of this half of us to the office and this half stays at home.

The human need to care was left out of the foundations of capitalism. We created businesses which were about purely self-interest as defined narrowly in terms of making as much money as possible. Over time, that kind of became enshrined in the communists’ models of maximizing profit and so forth. Also, to some extent, in corporate law where there’s some ambiguity there in terms of what is the definition of fiduciary responsibility in the US. It is not short-term shareholder maximization. Some people would say it is long-term shareholder value maximization, which that only happens if you’re taking care of your employees and your customers and everybody else.

Typically, in the long-term, those actions that you use to create short-term shareholder price increase doesn’t work in the long term unless you’re doing good things for people, as well. But I think the fundamental disconnect there is that we don’t understand human beings when we talk about business generally. People are driven not only by self-interest, yes, that’s very important, but also by the need to care, increasingly by a drive towards purpose. People want purpose in their life. More and more people now are at that level in their existence where they can actually think about purpose. For most of history, people could only think about survival. Purpose was survival, essentially.

Now it’s about those three things and you have to build a business on that platform of at least those three pillars. I think that’s the fundamental disconnect that we have. Human beings, as Muhammad Yunus has said, he’s the founder of the Grameen bank, the creator of micro lend. He said we act in business as though money is the only game in town. There are other games in town, and having a positive impact on the lives of other human beings is maybe the biggest game, if you wanna call it a game. Business can tap into that richer, deeper source of meaning and fulfillment alongside money, but money becomes a means to an end. It’s not the end in itself.

Money is not the root of evil, it’s the love of money that’s the root of evil when it just becomes about greed. We have people standing up and saying greed is good and selfishness is a virtue. They’re trying to defend capitalism, well, that is the worst thing you can say. First of all, it’s not true. Greed and selfishness can never be virtues. Self-interest is okay. Selfishness is not. Greed can never be thought of as a virtue. When you say that, well, actually, then people start distrusting businesses. They start having a negative view and they start thinking socialism might be a better thing. You know that’s going on the US right now.

More young people believe that socialism is a better system than free market capitalism. That would be a terrible disaster if, in fact, the system itself were to go away. We cannot do without. The system is rooted in freedom and creates extraordinary innovation and dynamism. But it has lost sight of the other side, which is decency. We need dynamism and decency at the same time. That’s where capitalism needs to evolve. Otherwise, capitalism is under danger. It’s an endangered species.

Speaker 1: How can top leaders lead change in a company that has been successful in the past but needs to evolve into a conscious business?

Raj Sisodia: If they are at the CEO level, then they have the power to act, they have the power to make a difference. I have found typically that unless you’re there, this kind of change cannot emanate from the middle or from the bottom. You have to have a leader who’s consciousness elevates to that level of thinking about the business. Who can recognize that even though things look okay today, right? There’s an expression called dead man walking. This is for people on death row, right? I mean, he’s alive but we know what’s coming, right? There are many dead companies walking. They’re companies … We know the world of corporate history. We can look at digital equipment corporation, what happened to them. We can look at Nokia, what happened to them? and many others. Blackberry as so forth.

Those are technological disruptions that destroyed them, but they’re also other forms of change that are happening the world that are causing the traditional companies to be dangerously out of sync. They’re simply not in harmony with where the world is. For the short-term, they’ll be okay, but sooner or later a competitor will come along that is in harmony with what people want and need today, right? This company will suddenly … It’ll be like going off a cliff. One thing that a leader has to do is a create a healthy sense of, I don’t want to call it paranoia, but I want to call it a lack of complacency. That yes, things are good today, but you have to be able to hold up the mirror and say, “Here’s the realty of what’s happening in the world,” and recognizing a leader is somebody who can see beyond the horizon, and see what’s coming, and recognizing the change that’s necessary.

The good news is, and I’m working with leaders like that, once the leader sees it, making the change at a company in this direction is not as difficult as other kinds of changes. Because these are changes that, first of all, empower people, right? Ordinary employees of the company are empowered. Secondly, it gives them … It starts with the discovery of purpose and what is our reason for being, why do we exist? It gives people a sense of a renewed purpose in their work and therefore increases engagement, and passion, and creativity, and all of that. It gives them relevance into the future. It puts people at the center. This philosophy is about people at the center. Profits being a way to serve people, not people as a way to create profit. I think what I’ve found is that there’s very little resistance. Initially, there might be some skepticism and cynicism, because people have been promised many things over time and many things don’t work.

But this particular type of change is one that is in harmony with human nature. It’s what people inherently want. Everybody wants meaning and purpose in their life. Everybody wants to have work, where they look forward to going to work, where they don’t have heart attacks that go up on Monday morning, all the bad things that happen at work. If we can change the culture in that way, have a sense of purpose, give people responsible freedom, I think this change is very natural. It’s in harmony with human nature. Therefore, it has a much higher chance of succeeding, but it starts with the leader awakening to the higher consciousness that not only is the old way not going to work as a pragmatic understanding, but also having some kind of motivation to say, “You know what? We need to be doing the right things for the right reasons. We need to take care of people, because it’s important. People should have good lives.”

Not because if we provide that, then they’ll be more productive, and therefore they’ll work harder, or they’ll be more effective. That’s true, but if you do it for that reason … Some CEOs will come to us and they look at the performance data, which our data … There’s many other sources of data now that show the performance consequences. They say, “Okay. We want to become a conscious business because of our performance.” I say, if that’s the only reason you want to do this, then maybe it won’t work, because you have to do the right things for the right reasons. You have to put people at the center because people should be at the center, not just because you think. Otherwise, it’s not authentic and people feel they’re being manipulated again. It all boils down to the consciousness of leaders and that’s why your work here is very important. You guys are pioneers in that.

Speaker 1: How can the principles of conscious capitalism help leaders deal with technological disruption and change?

Speaker 2: Well, I think if you’re continually evaluating your purpose for example, and evolving it over time to make sure that it remains relevant and vital in the world, I think that’s important. There will always be a need for higher purpose, but it has to evolve over time with the changing context, right? It has to be in harmony with what’s going on in the world.

I think using or treating all of the stakeholders as areas where we can, in fact, create more value and adapt faster to the emerging realities. I think that’s also important. In a conscious business the stakeholders are empowered and they are also leading in their own way. Suppliers are experts in their domain, so you don’t have to be the expert. You can get it from them. And having the right kind of relationship with them will, I think, become … makes it less likely that you suddenly get overwhelmed by technological change because you are aligned with suppliers who understand how the world is changing and they are evolving along with it.

I think having this orientation can only help. It’s not a guarantee that, as I said, a conscious business is still a business. You’re not immune. It doesn’t immunize you from the forces and the pressures that businesses face. Business is tough. It’s competitive. It changes and all of that, but I do think that these kinds of businesses have more resources to draw upon, and more fertile and creative minds that are being harnessed in service of what needs to change than a traditional business.

I think traditional business has become like sitting ducks. They become victims more readily. I think these businesses can have a greater chance of riding through these waves of change and not getting submerged by them.