“Society needs financial wealth … but it matters how you make the money,” said Rajendra Sisodia, co-founder and co-chair of Conscious Capitalism Inc., and director of the Container Store Group. “Businesses not only create, they can destroy financial wealth, as well.”
Sisodia, a marketing professor at Babson University whose published books include Conscious Capitalism and Firms of Endearment, delivered a keynote address on capitalism’s transformative power Tuesday at NACD’s Global Board Leaders’ Summit. The four-day summit convened more than 1,300 attendees—the world’s largest gathering of corporate directors—in Washington, D.C. from Sept. 17-20.
Roots of Capitalism
One of the most significant conclusions of Scottish moral philosopher Adam Smith’s seminal 1776 book, An Inquiry Into the Nature and Causes of the Wealth of Nations (often referred to as The Wealth of Nations), was that places rooted in freedom tend to be more prosperous. Smith’s work became a foundational text on how capitalist markets work.
“That same year—an extraordinary historic coincident in some ways—the United States was born as a country, but more importantly, an idea. [It was] the only country born out of a set of ideas,” Sisodia said. “The ideas all revolved around liberty and freedom.” Entire segments of the American population, however, were not initially given access to that freedom—including African-Americans, native populations, and women—but the nation has extended freedoms steadily over the course of its nearly 250-year history.
“What is capitalism? Political and economic freedom,” Sisodia proclaimed. It’s rooted in the idea that free markets—or economic growth driven by individuals, rather than a centrally planned economy directed by the government or a political system—help people collectively elevate their material living conditions and boost prosperity, he said.
Poverty and Capitalism
A misperception about capitalism, Sisodia said, is that it exploits people of lower income brackets, locking them into poverty. Research, though, suggests that as capitalist markets have expanded, poverty rates have declined.
Data from the World Bank show that rates of extreme poverty have decreased considerably over the past three decades. More than half of people in the developing world lived on less than $1.25 per day in 1981, compared with 21 percent living on that amount per day in 2010.
Sisodia credited that decrease to prosperity derived from capitalism, saying that the key challenge for lifting the rest of the world out of poverty is not the unequal distribution of income, but the unequal distribution of freedom.
How the World Is Changing
“What will it take for companies to flourish in the future—and not just flourish for the purpose of making a lot of money, but actually be agents of flourishing in society?” Sisodia asked. The simple answer, he continued, is that you must be in harmony with the fact that people have changed over time to become, among other things, more:
The rate of serious violent crimes in U.S. public schools has dropped significantly to about one-third of what it was in 1994. Europe, Sisodia said, had experienced 1,200 wars in 600 years, but since 1945, inter-state wars on the continent have disappeared.
Sisodia described the so-called Flynn Effect, which suggests that there has been a consistent increase in IQ scores from 1930 to the present.
Embracing of “feminine” values. “I think the great story of this century is … the end of the suppression of the feminine [side of humanity],” Sisodia said. Women now earn more college degrees than men in the United States, and as a result, the expectation is that women will rise in positions of leadership—particularly in white-collar work settings. That will naturally mean that so-called feminine values, which he described as including cooperation, empathy, and compassion, will gain more traction in society.
Tenets of Conscious Capitalism
Accepting that the world is changing, Sisodia advised that businesses embrace the four tenets of conscious capitalism. That means to act with:
A higher purpose, or more specifically, a purpose beyond generating profits. Sisodia’s website provides a further explanation by quoting University of Virginia Darden School of Business professor and Conscious Capitalism, Inc. trustee, Ed Freeman: “We need red blood cells to live (the same way a business needs profits to live), but the purpose of life is more than to make red blood cells (the same way the purpose of business is more than simply to generate profits).”
A stakeholder orientation. Conscious businesses exist not only to maximize ROI for shareholders, but also seek to enhance value for all stakeholders, leading to a more resilient business.
Conscious leadership that demonstrates care for purpose and people; and
Conscious culture built on trust, care, and transparency—not rooted in fear and stress (the risk of having a heart attack is 20% higher on Mondays for men, 15% for women, and most research blames the stress of returning to work for these statistics).
Boards: Stewards of Well-Being
Sisodia offered several considerations aimed at helping boards—and companies—become more conscious overseers:
The primary duty of the board is to the corporation—which has its own significant role in society—rather than shareholders.
Understand and shape the company’s higher purpose. Ask your board to reflect on why the company would be missed if it were to disappear tomorrow.
Consciously seek to create value for all stakeholders.
Appoint strong leaders with a capacity for love and care. It is not healthy to appoint leaders who are analytically smart but lack empathy and other forms of emotional intelligence.
Build a culture of “full-spectrum” consciousness, meaning that you are not only concerned with service to people and a higher purpose, but also efficiency, effectiveness, and success.
Ensure youth and feminine perspectives are heeded when making business decisions.
Humanity is more aware of its challenges and problems than ever before, Sisodia said in closing, and the individual and collective capacity to respond to those challenges has never been higher. “We have to create the organizational forms and philosophies and build business on [the ideals of] purpose and caring. … [A]ll of those answers that we need to our crises are out there inside somebody. We just have to figure out how to liberate that.”
Few institutions represent American ingenuity and innovation more clearly than its space program. With rapt attention, the world watched July 20, 1969, as Mission Commander Neil Armstrong of NASA’s Apollo 11 spacecraft became the first person to walk on the moon.
Ron Garan—retired astronaut and chief pilot for commercial space launch provider World View Enterprises Inc.—was one of those who watched. “My most vivid childhood memory was July 20, 1969,” Garan said. “On some level, I realized that we had just become a different species. A species no longer limited to our planet.”
Garan delivered the opening keynote address to an audience of more than 1,300 on Sunday evening in Washington, D.C., at NACD’s Global Board Leaders’ Summit, the world’s largest gathering for corporate directors.
Four decades later, Garan’s childhood dream became reality. He had trained with NASA to become an astronaut himself. “That first day in space when I got to take a look at our planet, [I] was absolutely breathless.…What I felt was an incredible sense of gratitude. Being physically detached from the world made me feel closer to the people on it—more interconnected.”
Reflecting on his second space mission, Garan remembers similar feelings of gratitude, but that gratitude was coupled this time with internal struggle. The technological advances that make space flight not just possible but routine offer the potential to solve some of the world’s biggest problems. Yet, Garan pointed out, some people on this planet still do not have access to basic resources like clean water.
“These days we’re more connected than ever, and the Internet is the backbone,” said Garan. “The Internet can be our nerve center, enabling us to solve problems in an entirely different way.”
Garan further explored that challenge in his third mission, when the seeds to a solution began to root. The answer? Collaboration. On this space mission, Garan was weightlessly floating about 100 feet over the International Space Station, attached to the craft’s large robotic arm. That station represents the collaborative innovation of 15 nations—including the United States, Canada, Japan, the Russian Federation, and 11 European nations—that have, at times, been at odds with each other politically and ideologically.
“What would it look like for us to have that kind of collaboration here on the [Earth’s] surface?” Garan asked. “Collaboration doesn’t mean we agree on everything. What it does mean is that we find the things we do agree on so we have a platform to work [from in order] to address the things we don’t agree on.”
Risk: Necessary for Innovation
But innovation and collaboration don’t come without risk. As a highly decorated fighter pilot, Garan had run several missions and trainings in which he’d successfully flown and had no mechanical problems in flight. Then one day, while piloting a jet during a routine takeoff, he heard a loud pop that jolted him. He very quickly realized his engines no longer had any usable thrust. Garan tried to land in a wooded area and quickly realized that he had no need to be in the jet at that point. Seconds before impact, he ejected and his life was spared.
That incident, though life-threatening, did not change Garan’s outlook on life or risk. But the very next day, he was in flight and, because of a mechanical malfunction, had to conduct an emergency landing. After having completed thousands of flights, he’d had emergencies two days in a row. The second day is when the idea of what it means to take risks sunk in.
Before ever entering a plane or spacecraft, one must decide if doing so is worth the risk. The same is true for business leaders who want to innovate and collaborate. When NASA is planning a mission, they consider every possible issue that could go wrong and develop a response plan that’s ready and waiting to be activated. Boards should do the same. Similarly, a great idea on the shelf can only provide value if it’s activated. “Ideas are overrated. There’s got to be a streamlined path to action,” Garan shared.
“Any change involves some level of risk,” Garan said. “Any innovative business strategy must involve risk. Collaboration can help mitigate risk and also provide an engine for growth.”
Implications for Businesses
It’s important for businesses to understand that we don’t live on a globe; globes are just abstract lines on a map, Garan shared. We too often think of the world in terms of it being about business and economy supporting a society that sustains a planet, he said. “Instead, we live on a planet that sustains a society that has built an economy.” Understanding that concept is adopting what Garan calls an “orbital” view.
It’s time that enterprises realized that it’s good business to care about issues like sustainability and corporate social responsibility (CSR)—beyond just doing it to boost a brand or reputation, Garan shared. Issues like CSR should be part of a company’s DNA now, not just for future generations, he added.
The retired astronaut described how, on his last space mission, his spacecraft entered back into the Earth’s atmosphere and landed on its side. “Now out of my window, I saw a rock, a flower, and a blade of grass. I was home. In Kazakhstan, nonetheless,” he said. “I wasn’t in Houston, where my family was. But I was home and had a different idea of home.”
Thinking of the planet as “home” may be what’s required to actually make one small step for directors and one giant leap for corporate governance.
At NACD’s Master Class this August, directors from companies like Boingo Wireless Inc., Colgate-Palmolive Co., Kimberly-Clark Corp., GameStop Corp., and the Royal Bank of Canada convened in Laguna Beach, California, for peer-to-peer discussions on strategy, risk, and leading through disruption. One common thread ran throughout the discussions: companies expend enormous resources and efforts to mitigate cyber, geopolitical, and other threats, but they have yet to allocate the same attention to technology disruption. Kelvin Westbrook— president and CEO of KRW Advisors LLC, and a director of Archer Daniels Midland Co., Stifel Financial Corp., and T-Mobile US Inc.—framed the issue this way for Master Class participants: “Companies can survive cyber data breaches, but many don’t survive innovative technology disruption. It’s a bigger deal that we need to address.”
A prosthetic hand created using low-cost 3-D printing technology was demonstrated at the 2015 Global Board Leaders’ Summit. Photo by Denny Henry.
This year’s Global Board Leaders’ Summit puts technology and disruption front and center, with a variety of leading-edge speakers and sessions that focus on these themes. But more than just convening discussions, the director community get hands-on experience with emerging trends via Innovation Nation. This popular feature, launched at last year’s Summit, is back once again, featuring an even more robust cross-section of the trends, technologies, and innovations that are disrupting your businesses and shaping your world. This year’s exhibits include opportunities to immerse yourself in virtual reality, experience the sharing economy at work, and see the latest in drone technology up close. Here is a sampling of who will be on hand:
Dancing With the Start-Ups, a new feature modeled after the popular show Shark Tank, builds on popular sessions from past Summits that gave directors a chance to “Meet the Disruptors.” This fast-paced competition will feature 12 companies across three key industries—healthcare, financial services, and energy— to showcase the latest and greatest in emerging business. Both the competition and a booth showcasing the startup talent in Innovation Nation will offer Summit attendees the chance to meet the entrepreneurs who are hoping to be your next competitors in the marketplace. For those who can’t make the Sunday session, or who just want to get to know the companies a little better, swing by Innovation Nation to learn more about innovative new ways to diagnose malaria, the latest in solar energy technology, the intersection of market data with sustainability, and much more.
Dave Meadows is a self-described “lifelong ‘tinkerer’ and inventor”—inclinations that served him well in his former role as a senior research and development executive with Novartis International AG. Several years ago, Meadows set out to solve a problem that has plagued wine drinkers for nearly 9,000-years—adverse physical reactions, especially when drinking reds. Five years later, The Wand™ was born. This invention removes 95 percent of the histamines and sulfite preservatives from wine. The result—a whole legion of wine enthusiasts who had previously learned to avoid wine can once again partake without the fear of headaches and other adverse reactions. You can experience the power of The Wand™ firsthand and talk to Meadows about and his work in the areas of medical diagnostics, sports medicine, and consumer packaged goods.
Big data and analytics are driving the growth of nearly every business, from heavy hitters like General Electric and Alibaba to early stage start-ups and family farms. This new trend is poised to transform industries, power new business models, enable innovation, and create greater value. According to research from International Data Corporation, worldwide revenues for big data and analytics will grow to $187 billion by 2019—a 50 percent increase from revenues in 2014. But Powerlytics Inc. cofounder Kevin Sheetz cautions that, when it comes to data, big doesn’t mean better, and behind the hype are a number of critical questions boards should be asking to ensure their companies are taking full and smart advantage of this trend. Sheetz will be at the Summit to give directors real-time interaction with the company’s platform, which aggregates publicly available consumer and business financial data from sources like IRS tax returns, the U.S. Census Bureau, and the U.S. Department of Labor.
February 15, 2011 became a milestone in both game show and artificial intelligence (AI) history, as the IBM-designed super computer, Watson, bested previously undefeated players Ken Jennings and Brad Rutter to win Jeopardy! The Watson team has been hard at work in the intervening five years to use natural language processing and machine learning to make sense of large amounts of unstructured data. IBM developers will be available to demo this technology and answer questions about the intersection of AI and analytics.
The Internet of Things (IoT) is reshaping the business landscape in ways that aren’t yet fully understood. The U.S. Department of Transportation (USDOT) is one of many organizations harnessing the IoT to save lives. According to data from the National Highway Traffic Safety Administration (NHTSA), there were more than six million police-reported crashes on U.S. roads in 2015. While the number of people surviving car accidents has increased significantly thanks to airbags, antilock brakes, and other technology, USDOT’s Connected Vehicles program aims to stop many of those crashes from happening in the first place. This unique partnership between state and local transportation agencies, vehicle and device makers, and the public, aims to test and evaluate technology that will enable motor vehicles, roads and other infrastructure, and devices to “talk” to one another so every vehicle on the road is aware of the position of other nearby vehicles. Chris Gerdes, USDOT’s chief innovation officer, will discuss the program Monday on the main stage. Swing by the Innovation Nation to check out this technology, learn more about how you can bring the program to your home city, and get inspiration for how the IoT might just help your own business survive and thrive.
These are just a few snapshots of the incredible line-up of thought leaders and emerging technology at next month’s Summit. Want to learn more? View the full list of speakers and sessions at NACDonline.org/summit.