John Mackey's New Book And Heroic Entrepreneurs

It was reviewed in the WSJ. See Chicken Soup for a Davos Soul: Successful companies serve a purpose beyond making money.

 The full title is Conscious Capitalism: Liberating the Heroic Spirit of Business. Click here to go to the Amazon link

Excerpts from the review:

"What is refreshing about the Mackey-Sisodia take is that they aren't advocating some bolt-on solution to the capitalist model. Rather they argue that the mathematical framework of free-market economics—developed by neoclassical economists in the 20th century—fundamentally mischaracterizes the true nature of capitalism.

"With few exceptions," the authors write, "entrepreneurs who start successful businesses don't do so to maximize profits. Of course they want to make money, but that is not what drives most of them. They are inspired to do something that they believe needs doing. The heroic story of free-enterprise capitalism is one of entrepreneurs using their dreams and passion as fuel to create extraordinary value for customers, team members, suppliers, society, and investors."

Unlike commentators who defend capitalism while expressing some doubt or disapproval—think of Irving Kristol's 1978 neoconservative manifesto, "Two Cheers for Capitalism"—Messrs. Mackey and Sisodia are unapologetic enthusiasts. "This is what we know to be true," they declare in the first chapter. "Business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it lifts people out of poverty and creates prosperity." The challenge, they say, is to make capitalism more "conscious" of its heroic nature.

What does that mean? Well, first, the authors say, it means having a clear purpose, beyond just making money"

Now here is the description from Amazon:

"“We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity. Free-enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to something even greater.” —From the Conscious Capitalism Credo

In this book, Whole Foods Market cofounder John Mackey and professor and Conscious Capitalism, Inc. cofounder Raj Sisodia argue for the inherent good of both business and capitalism. Featuring some of today’s best-known companies, they illustrate how these two forces can—and do—work most powerfully to create value for all stakeholders: including customers, employees, suppliers, investors, society, and the environment.

These “Conscious Capitalism” companies include Whole Foods Market, Southwest Airlines, Costco, Google, Patagonia, The Container Store, UPS, and dozens of others. We know them; we buy their products or use their services. Now it’s time to better understand how these organizations use four specific tenets—higher purpose, stakeholder integration, conscious leadership, and conscious culture and management—to build strong businesses and help advance capitalism further toward realizing its highest potential.

As leaders of the Conscious Capitalism movement, Mackey and Sisodia argue that aspiring leaders and business builders need to continue on this path of transformation—for the good of both business and society as a whole.

At once a bold defense and reimagining of capitalism and a blueprint for a new system for doing business grounded in a more evolved ethical consciousness, this book provides a new lens for individuals and companies looking to build a more cooperative, humane, and positive future."

Economics resembles storytelling more than mathematics

That is according to a NY Times magazine article. See God Save the British Economy by ADAM DAVIDSON. Here are the relevant passages:

"Economics often appears to be an exercise in number-crunching, but it actually resembles storytelling more than mathematics. Before the members of the Monetary Policy Committee gather for their monthly meeting, they sit through a presentation from the Bank of England’s economic staff. The staff members take the most recent economic data — G.D.P. growth, the unemployment rate and more subtle details gathered from interviews with businesspeople throughout the country — and try to fashion it into a narrative. Does a sudden spike in new factory orders represent a fundamental shift, or is it just a preholiday blip? Do anecdotal reports of rising food prices herald a period of inflation, or is it the result of a cold snap? Which story feels truer?
      

A few days later, each of the nine members of the M.P.C. puts forth his or her own interpretation. Over two days, the members debate these competing narratives and discuss what the Bank of England should do. Then the committee votes, and the winning policies are implemented."

A related post is Economists Love Fables And Parables (Or, What Is The Essence Of Economic Analysis?)

Does The Type Of Economy Affect The Kind Of God People Worship?

Here is a paper title and abstract:

Peoples, Hervey C & Frank W Marlowe. 2012. Subsistence and the evolution of religion. Human Nature 23(3). 253?269.

 doi:10.1007/s12110-012-9148-6.

 The authors present a cross-cultural analysis showing that the presence of an active or moral High God in societies varies generally along a continuum from lesser to greater technological complexity and subsistence productivity. Foragers are least likely to have High Gods. Horticulturalists and agriculturalists are more likely. Pastoralists are most likely, though they are less easily positioned along the productivity continuum. The authors suggest that belief in moral High Gods was fostered by emerging leaders in societies dependent on resources that were difficult to manage and defend without group cooperation. These leaders used the concept of a supernatural moral enforcer to manipulate others into cooperating, which resulted in greater productivity. Reproductive success would accrue most to such leaders, but the average reproductive success of all individuals in the society would also increase with greater productivity. Supernatural enforcement of moral codes maintained social cohesion and allowed for further population growth, giving one society an advantage in competition with others.

Two New Books Suggest That Entrepreneurs Are Heroes

One is Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb. Here is a quote from Matt Ridley's review in The Wall Street Journal:

"If trial and error is creative, then we should treat ruined entrepreneurs with the reverence that we reserve for fallen soldiers, Mr. Taleb thinks."

Then there was a review in The Wall Street Journal of The Invisible Hand in Popular Culture: Liberty vs. Authority in American Film and TV by Paul A. Cantor. Here is an excerpt:

"Mr. Cantor believes Martin Scorsese's "The Aviator" provides as clean a rejection of crony capitalism as exists in entertainment. The film's climax takes place during a Senate hearing at which Howard Hughes battles a senator attempting to help a campaign donor form an airline monopoly. This turns Hollywood stereotypes on their head: The entrepreneur is the hero and regulating busybodies in the pocket of a competitor are the villains."

Click here to read that review

Taleb has proposed a National Entrepreneur Day. Here is the post from "The Black Swan Report"

"“We need to respect failed entrepreneurs,” he tells Fast Company. “This would make more people take risks and generate growth.” At the end of the fourth chapter of the book, he proposes a National Entrepreneur Day, one furnished with this message:

“Most of you will fail, disrespected, impoverished, but we are grateful for the risks you are taking and the sacrifices you are making for the sake of the economic growth of the planet and pulling others out of poverty. You our the source of our antifragility. Our nation thanks you.”

Beyond rippling with Taleb’s signature bombast, the quote makes a fair point, one that he rephrases elsewhere in the book: that just as there’s no such thing as a failed soldier (so long as he fights with courage), there’s no such thing as a failed entrepreneur, even if the company goes belly up."

But it looks like there already is, or has been, one. Click here to learn about it. It was November 16, 2012.

Empathy, Neurochemistry, and the Dramatic Arc

Interesting video from neuroeconomist Paul Zac.Empathy, Neurochemistry, and the Dramatic Arc.

Film Synopsis The emotionally charged story recounted at the beginning Dr. Paul Zak’s film—of a terminally ill two-year-old named Ben and his father—offers a simple yet remarkable case study in how the human brain responds to effective storytelling. As part of his study, Dr. Zak, a founding pioneer in the emerging field of neuroeconomics, closely monitored the neural activity of hundreds of people who viewed Ben’s story. What he discovered is that even the simplest narrative, if it is highly engaging and follows the classic dramatic arc outlined by the German playwright Gustav Freytag, can evoke powerful empathic responses associated with specific neurochemicals, namely cortisol and oxytocin. Those brain responses, in turn, can translate readily into concrete action—in the case of Dr. Zak’s study subjects, generous donations to charity and even monetary gifts to fellow participants. By contrast, stories that fail to follow the dramatic arc of rising action/climax/denouement—no matter how outwardly happy or pleasant those stories may be—elicit little if any emotional or chemical response, and correspond to a similar absence of action. Dr. Zak’s conclusions hold profound implications for the role of storytelling in a vast range of professional and public milieus. Empathy, Neurochemistry, and the Dramatic Arc

Great New Book: The Storytelling Animal

Here is the Amazon link: The Storytelling Animal: How Stories Make Us Human by Jonathan Gottschall. Here is the description:

"Humans live in landscapes of make-believe. We spin fantasies. We devour novels, films, and plays. Even sporting events and criminal trials unfold as narratives. Yet the world of story has long remained an undiscovered and unmapped country. It’s easy to say that humans are “wired” for story, but why?

In this delightful and original book, Jonathan Gottschall offers the first unified theory of storytelling. He argues that stories help us navigate life’s complex social problems—just as flight simulators prepare pilots for difficult situations. Storytelling has evolved, like other behaviors, to ensure our survival.

Drawing on the latest research in neuroscience, psychology, and evolutionary biology, Gottschall tells us what it means to be a storytelling animal. Did you know that the more absorbed you are in a story, the more it changes your behavior? That all children act out the same kinds of stories, whether they grow up in a slum or a suburb? That people who read more fiction are more empathetic?

Of course, our story instinct has a darker side. It makes us vulnerable to conspiracy theories, advertisements, and narratives about ourselves that are more “truthy” than true. National myths can also be terribly dangerous: Hitler’s ambitions were partly fueled by a story.

But as Gottschall shows in this remarkable book, stories can also change the world for the better. Most successful stories are moral—they teach us how to live, whether explicitly or implicitly, and bind us together around common values. We know we are master shapers of story. The Storytelling Animal finally reveals how stories shape us."

Another connection to economics in addition to advertising mentioned above is that stories are economical. They are low cost simulations of reality and social situations. People who read novels have better social skills than those who don't, even after accounting for personality traits.

Gottschall has written an interesting article called Why Storytelling Is The Ultimate Weapon. Here is the intro:

"In business, storytelling is all the rage. Without a compelling story, we are told, our product, idea, or personal brand, is dead on arrival. In his book, Tell to Win, Peter Guber joins writers like Annette Simmons and Stephen Denning in evangelizing for the power of story in human affairs generally, and business in particular. Guber argues that humans simply aren’t moved to action by “data dumps,” dense PowerPoint slides, or spreadsheets packed with figures. People are moved by emotion. The best way to emotionally connect other people to our agenda begins with “Once upon a time…”"

Gottschall also has a book called The Literary Animal: Evolution and the Nature of Narrative.

Interesting Book: The Ajax Dilemma

Paul Woodruff, Professor of Philosophy at the University of Texas in Austin, has done a great job of discussing what is, at least partly, an economic issue using the lens of mythology. Woodruff thanks Betty Sue Flowers, editor of The Power of Myth, for her advice. Here is the Amazon link:

The Ajax Dilemma: Justice, Fairness, and Rewards

It got a good review last December in the NY Times by NANCY F. KOEHN. See

That Eternal Question of Fairness

Here is the description from Amazon and after that will be some of my own observations:

"We live in a world where CEOs give themselves million dollar bonuses even as their companies go bankrupt and ordinary workers are laid off; where athletes make millions while teachers struggle to survive; a world, in short, where rewards are often unfairly meted out.

In The Ajax Dilemma, Paul Woodruff examines one of today's most pressing moral issues: how to distribute rewards and public recognition without damaging the social fabric. How should we honor those whose behavior and achievement is essential to our overall success? Is it fair or right to lavish rewards on the superstar at the expense of the hardworking rank-and-file? How do we distinguish an impartial fairness from what is truly just? Woodruff builds his answer to these questions around the ancient conflict between Ajax and Odysseus over the armor of the slain warrior Achilles. King Agamemnon arranges a speech contest to decide the issue. Ajax, the loyal workhorse, loses the contest, and the priceless armor, to Odysseus, the brilliantly deceptive strategist who will lead the Greeks to victory. Deeply insulted, Ajax goes on a rampage and commits suicide, and in his rage we see the resentment of every loyal worker who has been passed over in favor of those who are more gifted, or whose skills are more highly valued. How should we deal with the "Ajax dilemma"? Woodruff argues that while we can never create a perfect system for distributing just rewards, we can recognize the essential role that wisdom, compassion, moderation, and respect must play if we are to restore the basic sense of justice on which all communities depend.

This short, thoughtful book, written with Woodruff's characteristic elegance, investigates some of the most bitterly divisive issues in American today."

Now my observations:

Although this is a work of philosophy, I believe it gives an accurate depiction of human nature that is consistent with what I have read in books about or based on neuroscience like The Moral Molecule by Paul Zak and The Righteous Mind by Jonathan Haidt. For example, he talks about how justice has to address the whole person, including our rational and irrational sides. People base justice on their values and don't like to see others rewarded who don't share our values (communities need shared values according to Haidt) and justice is what keeps communities together.

Woodruff says justice has to leave communities whole and Haidt says that one of our motives is to belong to a community.

Woodruff discusses the difference between incentives and rewards. Incentives are like regular pay while rewards are for something special that one person did. People like this last one alot.

As an economist, I like how he emphasizes tradeoffs. Like how do you reward the "good workers" like Ajax, who do things well day in and day out, vs. rewarding creative people with innovative ideas. It hard to know what value to even place on the Trojan horse that wins the war.

Fairness and justice are not the same thing. Fairness might be treating everyone the same but you can't treat Ajax and Odysseus the same.

One problem is that Ajax already distrusts the system and its leader, Agememnon, who is not a good leader. He has not set a good moral and ethical example for his soldiers and has not been treating them justly up to this point. But this is an army at war and it might be hard to expect justice and compassion with all the testosterone flowing around. As Zak points out, testosterone can get in the way of trust and empathy, things that Ajax needs.

When Woodruff talks about compassion and how it means we can imagine the pain of others it reminds me of Adam Smith and his book The Theory of Moral Sentiments where he talks about sympathy and where Zak talks about empathy.

He talks about "proportional equality" when discussing fairness. When Haidt talks about fairness he says people want "proportionality."

Woodruff discusses John Stuart Mill and utilitarianism. Haidt does, too. Both seem to think that utilitarianism is too rational to lead to justice. Justice means that all people feel like they are getting their due.

Woodruff says that different groups need to appreciate each other if we are to avoid civil conflict and have harmony. I think Haidt says the same thing when talking about conservatives and liberal. But this is hard when the two groups don't share the same values.

One thing about leadership is that it is based on testosterone. As Zak points out, groups need moral enforcers and testosterone makes us feel good to punish a transgressor. So it might be difficult to get empathy in an army.

"The consumate leader tells beautiful tale, and the tale is believed." This sounds like myth. My favorite line from Haidt's book is "The human mind is a story processor, not a logic processor." So the leader needs to do this to create a just reward system and honor people based on their unique contributions, something that Ajax wants but does not get.

In a footnote, Woodruff says a middle manager who is asked to rate his workers and fire the bottom 10% should resign. But that might be hard if the economy is in a recession.