Can Business Be a Force for Good? with Dr. Jay Jakub

We're now merging those two companies together where the GP and both deals and that enables us now to go in and do much more of an economics and mutuality driven transformation along with the digital transformation and the other pieces that we'll do and hopefully leave behind an organization when we eventually exit it that delivers great ROI but also that more importantly is positioned to solve three or four of those really important meaningful challenges that everybody in the healthcare space recognizes is critically important which was what attracted us to buying those companies in the first place because they were well positioned and we could make them even supercharged in positions to through impact move the needle on some of those issues that we want to solve. Hello everyone and welcome to this week's episode of The Conscious Capitalists Worth Myself, Timothy Henry. I'm my partner in making the world a better place through business, Raj Shasodia. Hey there Raj. Hey Timothy how are you doing today? I'm doing well and I've got a partner in crime over here in the Washington DC area in our guest who's been a long time member of the conscious capitalism broader sort of community and also very directly. So today we have Dr. Jay Jacob who's going to be our guest. He's the chief of staff of the economics of mutuality which we will sometimes refer to as EOM but the economics of mutuality alliances, mutual value labs, consultancy and it's mutual value investment private equity company both of which are headquartered in Geneva. He's also the executive rector of the EOM foundation and a founding board member of the alliances human flourishing foundation. Jay serves on the board of Lovanta, US Healthcare Advocacy and IT company which I believe EOM has as bought as part of their private equity experiment. He's also on the advisory board of the Thompson Family Office in Richmond, Virginia and of Eagle Venture Funds in Dallas, Texas. He's an advisor to Singapore's Alliance for Action on Corporate Purpose. He is the co-author of completing capitalism and the Raj loves the subtitle which is heel business to heel the world. That came out in 2017 and he's a contributing co-author of putting purpose into practice the economics of mutuality. He's an international speaker and a former senior director at Mars Incorporated and he got his doctorate from that famous university Oxford University St. John's College. Hello Jay. Hello Timothy and Raj, great to be here. So maybe begin with introducing our audience to the idea of economics of mutuality. How would you describe it? Economics of mutuality was something that was developed inside a large corporation Mars Incorporated and then spun out in 2020 into an independent organization. I guess it's best described as a means by which business can actually put purpose into practice as strategy and can leverage what we call non-financial forms of capital, social capital, human capital, natural capital which are typically not measured, managed or mobilized by business but by harnessing the value that's inherent in those different forms of capital we're able to start to eliminate the trade-off that's believed to be necessary between doing good in business and actually having a profitable business. So it's something that starts by de-centering the company from its ecosystem of stakeholders and really centering instead of profit in the company at the middle using a shared sense of purpose. How can business better position itself to solve the big societal or environmental problems that are out there and then using that purpose for every business activity. It has the right lens to populate an ecosystem of stakeholders that then can help the company deliver what it says its purposes but to do so in ways they are scalable that are profitable and that make the company more resilient. I love it. So tell me a little bit more about what are the core elements of the economics of mutuality. You touched on some of them but break it down for us. What are the four or five critical pillars or elements of the economics of mutuality? When we first started this work the chief economist of Mars was actually leading it and so not surprisingly we focused on on metrics first with the belief that the old adage says you know in business you only manage which a measure. So if you only have metrics that measure one form of capital you're only going to use those and manage them and mobilize them. So financial capitalism is all about financial metrics and so we use as building blocks in the economics of mutuality extending the definition of performance in the company to include those other three forms of metrics in the management literature that I mentioned social capital which is about trust, social cohesiveness, the capacity to work collectively, human capital which is about identifying in every corporate culture with the true drivers of well-being are in the workplace and then growing those drivers so that you get better performance outcomes actually in more satisfaction and natural capital which most companies tend to look at things like carbon footprint which is fine for external benchmarking and reporting but doesn't help you kind of manage to more resource efficient outcomes so we look at natural capital inputs and so those three forms of capital added to financial capital are really the building blocks of what it is that we do. So I love it one of the ways I think that you've often been described is focusing on stakeholder capitalism versus quote unquote traditional shareholder focus. Now recently and there's no secret between us there's been a lot of debate about stakeholder capitalism, the pros and the cons, it's become a little politicized but taking the political element aside one of the things that we often get asked about is to stakeholder capitalism create a lack of focus and when you really get to the board level what should the board actually be focusing on if they can only focus on a couple things because you know hey board members have short attention spans and you don't want to get them too distracted. How do you respond to that? I mean I think in a couple of different ways Timothy, one is that when we first think about economics and mutuality we think about the fact that businesses have become confused over the last 50 plus years of financial capitalism and now think of their purpose as being to create profit. Creating profit is part of a business activity but it's certainly not its purpose. The purpose of business from more perspective is to create profitable solutions to the problems of people place in planet and where businesses get criticized is for creating problems for people place in planet and profiting by doing that. So I think it's the since you talked about the board and what its role is I think the board really needs to keep the company's leadership focused on this idea what is the big problem that we're trying to solve externally and how can we do more good at a profit rather than focusing on the other half of stakeholder capitalism because a stakeholder capitalism space is fairly complex but I find that most of the attention in stakeholder capitalism is paid to something very important but it's about that the focus is really on the firm itself and how could it do less bad but at a cost and you find CSR you find sustainability in their circular economy and so forth. Again all those things are really important but that's doing less bad at a cost. What we're trying to do here is how can you do more good at a profit in a way that makes every business activity use impact to drive superior value creation and performance and when you do that your business activity then becomes profitable enough to be self-sustaining which we believe is the prerequisite to be transformational through scalability. Jay can we back up a little bit to say look at the origins of this like what inside Mars? Mars as I think all of us know is primarily in the candy business and then I think pet food business they might be more out there but and it's a privately held company. Yes sir. So what was the Genesis? How did this come about? Who decided that we need to think about things like this and then I think you worked with the say a business goal in order to put the framework together if you could just go back to the origin story of this. Yes indeed in fact the origins are quite quite exciting from my perspective because just as I was joining Mars back at the beginning of 2007 one of the three Mars family owners John Mars he actually has to see a question that shareholders rarely ask they're leaders their managers which is what should the right level of profit be for the company? This is fascinating to us because then I think it took this EO by surprise but he liked the question as well because I think John was thinking that unlike most financial capitalism assumptions more in a limitless way of profit is not the best the best way to go he believed I think that there was an optimal model of profit above which the company would be taking too much from its ecosystem of stakeholders and this would create in the value chain a disequilibrium with one stakeholder squeezing another squeezing another and that this would somehow disadvantage the company but you'd never see it coming. So that question was kicked over to the internal think tank which was led by the chief economist and I was helping him lead that back in 2007 out of the Mars corporate headquarters and that's kind of the question that enabled us to start working in this space so that's now called stakeholder capitalism and you did mention Oxford University's side business school they were really a core partner of ours and still are I think we we signed a form of partnership agreement with that business school back in 2009 2014 and they helped us develop teaching curriculum. They helped us develop case studies around some of the work that we were doing practically in businesses to demonstrate that this is a superior model of value creation and impact as we went through. We still hold executive education courses at Oxford every year, so I think we're probably on our seventh annual one which is now fully virtual at times that are good for everybody around the world. And we also used to have big forums there on the economics and mutuality that we would do. I think we did seven annual forums there before we decided to move to a regional forum construct now. And Colin Mayor who's a former dean of the study business school has been a great partner of ours. And he does some traveling with us to our forums elsewhere now to keep that link back to Oxford. So this idea of the right level of profit, that's an unusual is that still central to the EOM? It is. You know, identifying the right level of profit was where we started. But the short answer is it depends because as we started to look at the profitability of every business activity in the in the corporation, we realized that the profit level was virtually the same no matter what the business activity was. And yet the value chain for each business activity was vastly different from one another. So the distribution of value from a farmer of cocoa for example, all the way up to the distributor of something like a chocolate bar or a cup of coffee, it could be vastly different. And yet the profit was the same. Why is that? And should that be the way a company goes? Or should the profit level really be linked more to the value distribution across the value chain? So that was something we talked about a lot in the beginning days. But now we focus on how do we deliver pieces of economics and mutuality meeting companies where they are in their purpose, Johnny? You know, it's interesting just this morning I was reading about the latest studies on executive comp and trying to tie executive comp to what is now considered the number which is total shareholder return. So a lot of focus on this idea that as we look at executive comp and a lot of times Raj and I will be very critical of where executive comp is gone. But they focused really strongly now on total shareholder return and what that looks like over time. I'm curious, you know, like when you move beyond profit now you start saying, hey what is the total shareholder term? What is the total value created that a company recognizes or realizes? How does that fit with the thinking that you've been doing around this, you know, what is enough? Yeah, I think that's a spot on point and executive compensation being tied our language to delivering social human natural capital in addition to financial capital. It really is the way that companies need to go in boards like you talked about earlier. I think that's part of their responsibility from a governance perspective is to make sure that that executive comp is tied to those things. The great news though Timothy and Raj is that we have discovered through very practical business application over the course of the last 17 years of working on this that actually when you manage intentionally the creation and depletion of your social human and capital in business activity and you don't just kind of utilize those forms of capital and destroy them without any regard because you're just focused on your financial performance. Actually if you can grow social human and/or natural capital and business activity we've found a direct causal relationship between those forms of capital and both your top and your bottom line. So if you grow these non-financial forms of capital you can expect top and bottom line increases which is a great opportunity for businesses to enhance their performance but to do so through measurable impact and so I think this has to be what is reflected in your management compensation although you know how much progress we've made on that is still debatable. We've got a long way to go. Speaking about stakeholders Jay if you think about customers right the well-being of customers they're health for example. How does Mars think about that or how does the framework think about that because customers satisfaction is one thing. Customers want certain products but what impact are we having on the health you know I work in Mexico now there's a huge concern with diabetes and obesity and so forth. Is there any focus there on customer well-being as opposed to customer satisfaction? I think there's a difference there. Yeah I think it probably would be better for me not to spend too much time talking about Mars because I'm not part of Mars anymore although we were birthed from Mars but I will say that the name of the economics of mutuality was really drawn from one of the core principles one of the core operating principles of Mars that has been in place since at least 1947 when Forest Mars senior the kind of Willy Wonka figure at Mars in its history. He came out with a document that we on Earth just as we were launching economics of mutuality that the company had lost for many years and it was called the objective of the company and it was fascinating because the objective of the company is laid out by the sole owner and CEO at that time Forest Mars senior really laid out a list of it was all about creating a mutuality of benefits for all stakeholders and then the stakeholders were listed and they included customers most certainly they also included in this list competitors which was really unique for companies and at the very bottom of that list of that list of Forest Mars senior talking about the you know the objective of the company being about a mutuality of benefits was the shareholders so you know in most companies today you'd have the shareholders at the top you wouldn't mention competitors and then you know everybody else would be kind of underneath Mars had that reversed so I think they were kind of really ahead of the game in many ways in thinking about the stakeholder capitalism having mutuality embedded at the center of their business practices having worked in their headquarters I know that we talked about mutuality when we made decisions you know were they actually abiding by this principle or not so Jay one of the one of the core elements of the EOM approach is this idea of shared value and you know shared value at one level became popularized by Michael Porter and the article in Harvard Business Review now more than 10 years ago and it's really morphed over time in terms of different directions it's gone and I'm wondering if you can give us an update what's the latest on this concept as you understand it in practice of the idea of shared value because it's evolved you know it was you know partly philanthropy and business and NGOs and and you know now you've made it as a centerpiece of this idea of shared value creation and I'd love to hear you give us the latest on that yeah I think the language that we're trying to use now is is slightly different than that it's about mutual value creation again building on this concept of all relationships in business need to be mutually reciprocally beneficial I think Michael Porter's approach has sometimes been confused with what it is we're doing a vice versa and I'd say that probably the biggest differences between creating shared value and the economics and mutuality or mutual value creation is that what they call CSV you know Michael Porter's approach is really very firm centric still and it's whereas the economics and mutuality is really about solving external challenges so that's where the the centricity is in the model so that's that's very different also I think creating shared value is more about how do you do more for society and environment but by generating more profit to do that to allow that to happen whereas economics and mutuality is trying to leverage these non-financial forms of capital as I mentioned new KPI you know keep performance indicators new measurement practices to actually use measurable impact to drive your superior performance and your your superior value creation so that's a very different way rather than just trying to make more money so that you can do more good it's actually leveraging the good impact to do better for your both top and your bottom line as you go healing business as as Raj would say along the way and then the last difference I think would be when creating shared value looks at its stakeholders I think it tends to focus on what stakeholders can partner with from which it can profit the most so that it can start to do those good things whereas economics and mutuality really uses the challenge itself you know what is the challenge the business is trying to solve for society or the environment has the the lens through which you you populate the ecosystem with the right stakeholders to help you deliver the purpose that you say you stand for so there's a lot of differences between the two though of course we're trying to create you know more mutual value I think both of us so who do you think of as outside of Mars as your your best case study to go and look at and explain you know like this is what it looks like when you are not in that space you implement it and here's what it starts to look like on the other side I mean there's a lot of companies that are that are trying to do good in different ways and they're all over the map in that very broad complex stakeholder capitalism space and we talked about a little bit earlier one example I like to use is a company that we've done a case study on but we haven't done work for them specifically and I just admire the way they manage to put purpose into practice and this is an insulin company the largest insulin company in the world is called Novo Nordisk based in Copenhagen I think in Denmark and when we first started looking at them it was interesting because years ago they had a purpose which was really generic it was very much like every other company's purpose which was we want to sell more insulin that's our purpose okay so it's basically how do we make more money from treating the symptoms of a dread disease and then something happened to the leadership of that company where they kind of had an epiphany about their purpose. And they decided very counterintuitively to change their purpose, which dramatically changed not only how they operated, but how they were perceived by their stakeholders in the marketplace. They went from selling more insulin to solving diabetes. Now, if you're an insulin seller, you need diabetes actually to have a business, right? So if they solved diabetes, they could, in theory, be out of business. But they didn't care about that. They actually looked at, "Okay, our purpose ought to be trying to solve the dread disease itself, not just make money off the symptoms of it." And how that changed the perception of the company was that stakeholders wanted only to work and buy from, from Novonortis because they thought, "Okay, this is a company that wants to help us solve the problem that we're all brought together to solve." They're not just there to kind of make money off of it. And it also changed the way Novonortis thought about its ecosystem of stakeholders and they started to become much more creative about what they thought. Good initiatives would be in that whole space around diabetes treatment and resolution. So I kind of love that. Model, of course, they've got their own problems, and Mars has its own problems as well. But I think those two companies are real ones to really pay attention to. Well, of course, Novonortis right now is famous for something different, as we're probably all aware, these appetite suppression drugs that have now come out and boomed, boomed, particularly for Novonortis. I mean, they've got huge issues. How do we keep up production demand for some of these drugs? How does that fit into that story in your mind? Or is it just like a lucky opportunity that's come along and they're, you know, like, "Hey, God is good." Well, this is very personal to me because I actually have diabetes type two diabetes. And so I use insulin, but I also use one of the Novonortis products, which is ozemic, which happens to have a weight loss side effect, but it's there for other reasons that are related to diabetes treatment. And for a while, so many people were buying it for weight loss that didn't have diabetes, that I was having a real difficult time as were millions of others getting the product to use it for diabetes treatment. So I think Novonortis, probably, like other producers of things like WGV and whatever those things are that have these, you know, dual uses, you know, they were adjusting to the market and they were doing slow slowly. And hopefully, their values prioritize the diabetes patients over the people that just want to, you know, get a quick fix on weight loss. It's not needed for me to say, you know, but it's a personal thing for me since I'm a user of that medication for diabetes. Well, yeah, that's a whole different story. I think that's a huge, if you look at the financial implications of deploying that drug at the current price, I mean, it would be trillions and trillions of dollars, it could bankrupt entire entire system. Then the long term impact on people's health is very mixed, right? And then you get hooked on that and you cannot get off it and you have to be on a full life and so forth. I think that's a different dimension there. What else? We can even talk about what's happened within Mars. So I'm sure it's going to apply it in various ways within Mars. So can we talk about some of the tangible impacts that align this framework as had within Mars? What have you done different? What has the company done differently as a result of this and what have been the outcomes? Well, like many companies that are so large, I mean, it's a $46 billion diversified portfolio company. So they're known for things like chocolate products like M&M's and Snickers and those kinds of things. But an actual fact pet care, and that includes veterinary services as well as pet food that's a nutrition value, kind of dominates the business to the point where two thirds of the revenues of Mars come from pet care. They also have a smaller food business. And not all the parts of Mars embrace what it is that we're doing, but you know, some are pioneers like in any kind of innovation, some are fast followers and others will come along in good time. So we don't work for all the parts of Mars, but as part of our independence from Mars, Mars very generously decided to become a major client and a donor to our nonprofit foundation for a five-year time period from when we spun out in August of 2020. And that the money that they actually provide to us on a fixed basis each year is used to enable us to do specific projects that they manage through a steering group. So we do a lot of work for the pet care segment in particular with some, I think, considerable support and success. The president of the pet care segment has been probably the most vocal proponent at Mars for what it is we're doing. And he came out of a business called Royal Canon, which at a time when it was its most successful inside Mars, it's kind of the crown jewel in the pet care segment. It's now, I think, about a six billion dollar company and it always grows at double digits no matter what. And so it's a real star. But under the leadership of that gentleman in Loic, Muto, he recognized that they could be even better and that there were aspects of economics and mutuality, especially this concept of social capital and how you could build trust among your value chain partners and your customers and your consumers that you wouldn't even have to do advertising in many cases to sell your product if the trust level was high enough. And so that part of Mars started to embrace what it was we were doing, I think, before other parts of Mars did. But we have projects across the ecosystem of Mars. And one of the things that we're doing is really trying to take something that delivers a lot of indirect benefit to companies, but that is difficult to prove in terms of your financial return on investment and trying to find those proof points so that we can make an even stronger and more compelling case for why companies need to do this. And I mentioned that because when you're trying to connect economics and mutuality, ecosystem mapping and orchestration, surfacing pain points among stakeholders, identifying interventions that companies can use to grow the forms of capital that are missing to make the ecosystem more highly perform it, you kind of have to have control groups if you're going to prove that and businesses are too busy to do control groups and it costs money and it takes time away from what they're doing. So that's one of the big challenges in finding those proof points, but we're starting to find them and they're really quite extraordinary. I want to break this down a little bit into a couple of the elements. So something that as I understand it and I could be off base here, but you begin with a purpose and the purpose has a broader societal impact in terms of trying to identify problems. And then you start to look at where are some pain points in your value chain and start to focus on how we can impact those value chains. So I'd like to maybe take a moment to talk about each of those elements individually and maybe begin with purpose because I know that we're in Raj and I and the other co-founders and conscious staples and we're sitting around and people would ask us, well what's a good purpose? Like I've got a purpose, but is it a good purpose? And we had our approach that we would give back in 2008. And I'm curious how you would decide, what is the criteria that you would lose? I came and said, here, Jay, here's my purpose. What do you think? I love the question Timothy and the fact that you and Raj and others who are involved in conscious capitalism are so focused on purpose that was one of the real attractors for me to kind of do things with you guys as well. But we've taken a look at a lot of purpose statements of companies and we've really discovered that there's kind of three archetypes of purpose. Two of them are very common. One of them is the place I think companies need to go but haven't so much yet. The ones that are most common are values kind of purpose statement that basically is something that gets people excited on the outside of the company as to what values the company stands for. And in that way they may be buy more products and so it boosts the corporate reputation. But it's not really practically implementable as strategy. If I can say that. Another is like that old Novo Nordisk kind of purpose of describing what it is that they do. And that also doesn't carry you very far in terms of your strategy. This third space which we're trying to to pioneer is how can you craft a purpose that solves an external problem. So we call it a meaningful challenge that the company is trying to address. And it's by crafting a purpose that that you can put at the center here ecosystem that is an external challenge that makes this something you can deliver a strategy. And actually there's a quote that I love from an old Oxford Don from about a hundred hundred and twenty years ago that I love that's around this concept of purpose. It was a guy named Clive Staples Lewis and he said about a hundred years ago that purpose is like a light and you don't turn on a light in a dark room and then stare at the light. You stare at what it illuminates. And when a company actually puts its purpose in the hands of external agencies and your corporate affairs arm it's trying to create a values purpose that's like a light and get everybody to stare at that light. Whereas if you create a meaningful challenge then you're using the light to illuminate in the ecosystem of stakeholders that are there because they want to help you deliver that sense of shared purpose. It illuminates the problems they're suffering from that the company thinks okay if I can create some low-cost interventions to solve a few of these key pain points among night ecosystem stakeholders that they will become much more highly performant in helping me deliver the purpose of the company. That's at the essence of what it is we're doing with purpose in this operating model. So I love that when you wrote your book back in 2017 about reforming and rethinking about economics you did put as the subtitle this idea. healing business and and I'm wondering how you connect the you know solving meaningful challenges and having a healing business and and say a little bit more about how you connect to those two things. Yeah and you know we we did a lot of thinking about that title and that subtitle before we we took it forward and and I think I'm reminded frequently when I talk especially to business leaders for the first time not to make this economics of mutuality approach sound like it's just a clever new way to make money within a new context because it's really where to solve the broken relationships that business has with the planet and with people and actually with with places and and so that that's really at the core of what it is we're doing and when I think about an ecosystem of stakeholders and companies looking at that ecosystem not just to extract value from those stakeholders and turn it to profit for your shareholders. The idea here is much more mutual it's how can we co-create value by helping to mitigate some of those pain points that we call them that your your key stakeholders suffering from and that by mitigating pain points you're bringing healing to your ecosystem of stakeholders and they're becoming more performant. I mean if you use kind of like a sports analogy you think of soccer you know you know football everywhere else but the US in the world and you know you have a team and there there are injuries that those that those teammates are suffering from during the course of the season and through this analysis and using non-financial forms of capital as a diagnostic tool to identify what are the pain points and what kind of intervention to grow the form of capital that's missing could solve the pain point you heal more of those teammates and they become more performant right and you see the results not only in your measurable impact against people planet and place targets but you're also seeing it in performance in both the top and the bottom line and getting at more of those specific return on investment points to make the case more powerful for more business leaders is what we're after but I never want to lose the sense of healing because if we do then this just becomes another another way to make more money in a clever clever way. Hello everyone just a quick reminder that this episode is sponsored by the 2024 Conscious Capitalism CEO Summit. Are you ready to transform your business into a powerful force for good while connecting with world-class leadership in the future of business then you need to be at the 2024 CEO Summit. It's happening in October in Austin and the CEO Summit is an exclusive invite only experience for conscious leaders ready to claim their seat at the table to request an inviteer's nominate appear head to C E O Summit dot conscious capitalism dot org that's CEO summit dot conscious capitalism dot org or check the episode show notes before to seeing you in October in Austin. I love that Jay thank you for bringing up that angle one of the things that we like to explore here is the personal journeys that each of us is on and how did you come to this place the sterilization or what is it in your background you're bringing or some awakening moments or moments that perhaps got you to change the trajectory that you were on to start thinking about these products. So if you could just take us back to the earlier parts of your life and what shaped you and ultimately what led you into this work. No thanks for asking that question Raj because I mean I make no secret about the fact that I'm a person of faith and and so I have been searching for what that means and how to live it out for a long time but I have to say that you know my my career is kind of divided between a long career in government mostly and then the kind of national security realm where he was looking at the worst part of human nature and how do you mitigate the risk of some terrible thing happening and that was a real drag on my on my morale and on my morals as well I think because in that life there's a often a misassumption that the ends somehow justify the means and one of the things I've learned through my faith journey is that the ends never justify the means that actually were meant to live out our life in a way that that maximizes the benefits of how we treat other people right and that if we do that then our higher being is going to sort out the ends for us and what I love about this this work that I've been involved in for you know more than 17 years now is when I when I joined Mars and I left government for business I was I was put in a in a position where I could actually do something that I would call vocational in my life that it was something that actually enabled me to create more seamlessness between what I did in the workplace and and how I would want to live my life outside of the workplace so this vocation of the economics of each reality helped me to to live out this vocation in a way that brought so much satisfaction to me that I never been able since that moment I started working on this topic to think about ever doing anything else and so you know during the course of my career and the all the ups and downs of this work you know sometimes it's supported sometimes it's attacked you know because sometimes it threatens different business activities I've sometimes been asked by people close to me you know what's your plan B and I've always looked back at them and say I don't have a plan B because this is my vocation why would I want to do anything else so the other thing is our audience has got a number of CEOs in it to mostly mid-size companies and growth companies as you're familiar within the conscious capitalism ecosystem so to speak what do you think are like two or three important things for a CEO who's thinking about going on this journey to really focus on to to make a successful journey for them I think first and foremost CEOs are are human and so they're subject to the brainwashing that comes from business schools that only teach financial capitalism and how to kind of expanded the business curriculum to include a more complete form of capitalism which is what we would call the economics of each well and conscious business for that matter so taking a step back and opening their minds to the fact that there could be something better there could be something that actually gives them access to more value creation opportunities that could benefit stakeholders as well as shareholders I think that's that's critically important that that's number one number two I think it's coming to grips with this whole purpose as a value statement or as a as a meaningful challenge because if you're constantly focused on things that are not executable as strategy rather than really thinking about business as profitably solving problems of people place in planet you're not going to make a lot of progress in this direction but what we're trying to prove and I know you know I was personally inspired by some things you wrote Raj I think back in 2011 where you really kind of scientifically tied together the fact that companies that are actually delivering the purpose of strategy actually are more profitable they're more resilient and so forth and and I think you know we're trying to build on that on that groundbreaking work to demonstrate that that's absolutely true and that you need not be tied to this false belief that you have to trade profit if you want to do any good for people in planet because when you do that there's a glass ceiling that's above there and you can never be profitable enough in that activity to be self-sustaining and if you can't be self-sustaining you can't scale and if you can't scale you can't be transformational so you know getting companies to think corporate leaders to think that hey there is a better way non-financial forms of capital bring immense value to the table if you know how to measure manage and mobilize them and companies have not been able to do that previously we have the ability to do that now and we want to share a lot of that openly as well which is why our for-profit consultancy and private equity company they're both owned by nonprofit foundations that are there for the public benefit so as you bring that up I think it raises what we see is one of the big challenges within the form of capitalism which is the short-term orientation of the markets and the challenge that I think both of us would all agree both our movement and your movement you know capitalism is a great form of creating long-term sustainable value you know as a as a form we haven't seen anything that's been quite as powerful as this and yet and yet the short-term pressures the activists whether what they did with whole foods or whether what they're doing right now with Southwest Airlines it's it's it's happening you know the activists that came into whole foods made you know like three hundred fifty million dollars and six months you know pushed the company in a completely different direction they ended up being part of Amazon and they made a lot of money off of it and so how do you respond to this idea of the market and particularly the short-term focus of financial markets in influencing capitalism as its practice today no I think it's a great question and I think that we were really blessed by having this work incubated in birth out of a company where the family owned it privately held family owned with a tradition of long-term kind of thinking because we could take our time and figure out how to measure manage and mobilize these non-financial forms of capital but KPI we could we could use that that may be different than traditional KPI what management practices would be the most impactful depending on the context but what we discover Timothy and Lodge over deploying this work at real business activities is that you don't need patient capital to do it and actually you can become just as profitable if not more show in a relatively short period of time as in a longer period of time. So to get it challenges one of the core assumptions that if you're doing good somehow through your business model then you have to wait you know a decade before you're going to see returns catch up. You know the very first route to market business that we use that we piloted where we used all the different economics of each reality approaches at the very beginning and we did it in a very hard place which was in east Africa in slum areas. We created a route to market for a rigley's chewing gum using micro distributors and so forth. You know we discovered after the business leaders told us okay this is a social business that's an experiment so just try to break even at some point you don't have to make a profit. We were breaking even after three months and we wound up delivering two x returns compared to the to the rigley's business that was next door that was working with wealthier consumers bit of brand recognition all the traditional trappings of financial capitalism and maximizing profit. We've since done the bulk of our work in mature markets with wealthier consumers and so forth different contexts but across different industries banking technology retail businesses we've worked all over the world with different types of companies now where the context are different that the outcomes are pretty much the same and we're discovering actually that you can you can do this relatively quickly and you can do it in ways that deliver substantially more measurable value both in terms of impact and in terms of your top and bottom line and I'll give you one example of a data point that we recently surfaced for one of our clients we're basically it involved a very inexpensive well first we did a we did a ecosystem map around the purpose of the business activity we populated it with the right stakeholders we analyzed the opportunities in that ecosystem you know where there were pain points and we identified one pain point that we were really intrigued about and it had to do with the training of veterinary nurses okay and we found that that was a major pain point because this particular client was using veterinary nurses on the front line through word of mouth recommendations to sell their product okay and because there was a very low morale high attrition rate and they just were not functioning these veterinary nurses optimally we thought okay maybe we can create a low cost $250,000 training intervention for the company and in the end when these nurses were trained up because there was far less attrition higher performance we found that there was a bottom line benefit in terms of revenues from new sales of over 4.4 million dollars for the for the company and a top line benefit which mostly was tied to the attrition issue and arresting that and reversing it of over $14 million so this is for a $250 intervention based on a pain point surfaced through this approach so I would argue that publicly traded companies should now be ready for something like this because it works better to a more complete form of calculus and why not do it well it's interesting because of course now you pivoted into some experiments in private equity and we had a private equity guy on very recently who said he thinks that you know the cutting edge of conscious capital is going to be in private equity and the ability of certain private equity businesses to create sustainable value this way tell us a little bit more about how and why you decided to pivot into private equity and get us up to date how's it going no no private equity has a really bad reputation in a lot of places that's tight I had noticed oh by the way you know no it's probably well well earned as well but we brought in about maybe 18 18 months ago 24 months ago some new leadership that come from a kind of purpose driven private equity approach and you've met Gavin Long and Gavin kind of for a long time has struggled between what he thought was his his calling his vocation in things that were not related to business and his incredible gifting to to do private equity and to actually create a tremendous return on investment but to do so in a way that was maybe a little different than most private equity places well he took over the leadership of economics and mutuality with the promise that he would bring in a private equity arm into what it was we were doing so that we could initially accelerate the uptake of what it was we're doing because you know when you're trying to transform the operating models of corporations if there's a lot of resistance to that and so very often you're working with smaller business units you're nipping around the edges of the operating model you make it a little progress but to really transform a business you need to be the GP the general partner and so when Gavin came aboard he basically started to raise capital to make our first acquisition I think in October of 2023 last year we acquired a company called Levanta which is kind of a mid cap healthcare patient advocacy and IT company based outside of Washington DC and then two weeks ago I'm happy to report that Gavin after a tremendous amount of work managed to acquire a second healthcare advocacy and an IT company that deals with a whole different patient set we're now merging those two companies together where the GP and both deals and that enables us now to to go in and do much more of an economics and mutuality driven transformation along with the digital transformation and the other pieces that we'll do and hopefully leave behind an organization when we eventually exit it that delivers great ROI but also more importantly is positioned to solve three or four of those really important meaningful challenges that everybody in the healthcare space recognizes is critically important which was what attracted us to buying those companies in the first place because they were well positioned and we could make them even supercharged in positions to through impact move the needle on some of those issues that we want to solve so we're really excited about this private equity play and now where we want to be as a class agnostic eventually so not just use private equity we get into the public equity's market and we'd really like to go for other you know there's sectors of the economy as well so we'll see where where this takes us next. Jay I think Jimi mentioned a little bit about this but there has been a bit of a backlash and the issue has become a little politicized in recent years ESG for example has become like a scarlet letter you know and in some states in this country how do you see that backlash do you see it as a temporary phenomenon that's obviously we all believe in what we're doing we need to keep going regardless of any backlash and in some ways the backlash indicates that what we're doing is actually gaining traction which is why some people are feeling threatened by this but how should we be thinking about this and what should we be doing grateful. This is a really important issue and one of the things I love about working on the economics of each reality is that we try so hard to make sure that it doesn't get politicized in any way that it's not ideological that it actually elevates the conversation but you know in the ESG space you know people are being forced by political wins to take sides in some ways but it's very different in different parts of the world at least I'm experiencing that spending a lot of time in different parts of the world personally I think our position is that ESG is a good start but that it's become so much about compliance and not about value creation that that is helping to cause this kind of backlash and rejection and so what I think we want to do with economics of each reality is we want to narrow the kinds of metrics that companies can utilize take them beyond compliance into value creation okay so what are the metrics that can actually drive enhanced performance and impact so that you're not just checking boxes in the broader ESG space. I find that in Europe ESG has taken on a language in the corporate space that's that's almost akin to sustainability so corporate leaders just talk about it like it's just they're just going to do it just like they would sustainability and governments are working to to make sure that's the case through increased regulation around ESG in Asia I'm finding there's a lot more skepticism and there's kind of like why are you bothering me with this with this ESG stuff it's not helping me perform better in the United States I think the there's somewhere in between Europe and and Asia but there's a growing kind of backlash that's that's coming so I like to think about economics of each reality as kind of being beyond ESG so how can we build on what they've learned there go beyond governance and start to bring this more into value creation metrics but it's going to take some time and you know you don't want to vilify anything that's being done in the space but I also don't want to be saddled by something that's much more compliance oriented without that also bringing value creation. Yeah we talk about operating from inspiration and not obligation also when you have that compliance mindset is feels like a burden. Yeah you want to make it you want to create incentives for companies to do this and I could say absolutely unequivocally that if we at any time position economics and mutuality while we were inside Mars you know before we came independent if it would have been positioned altruistically or philanthropically it would have been killed it needed to demonstrate that it was a superior for a value creation that was good for the business and what's good for society in the environment is good for the business and so that's the direction we had to go and if you make it compliance it's about you know punitive action as you're saying Raj and people don't want to be kind of beaten into doing something. One of the things that this brings up for me is that you know we call our approach stakeholder orientation and and one of the challenges within that is that often there are tensions between the interests of some of the stakeholders. And I'm curious whether you have a decision making framework or something that you use to how do we manage those tensions or proceed trade-offs so that as you said, we optimize these values within that ecosystem. So if you're going to optimize at some point, you're going to have to make these kind of maybe sometimes tough decisions. And I'm curious as to how you frame that as a part of your practice. That's a tough question. First, I'd like to say I really like the language you're using stakeholder orientation. I think that's spot on and we would certainly sign up to that language as well. Managing trade-offs is really the role of the business that we're working with. I don't think it's the role of economics and mutuality coming in to advise these companies to consult with these companies to make those trade-off decisions for them. And this is kind of at the heart of one of the big challenges that we're facing with trying to create what we call a mutual P&L because we realize that it's actually the chief financial officers that need to be convinced that this is good for the business and when they are, they need to see it in the P&L. And the financial P&L currently excludes the impact of social human and natural capital, the impact on creation or depletion of those forms of capital. And so when you are depleting, if you're polluting the water table or something and you're driving down the trust, the social capital of the community and you're hurting their well-being, which is the human capital of the community, these things are all dragging on your P&L, but you don't see it because it's not reflected in there. So one of the things that we've been trying to do for years is figure out how can we create a mutual P&L where we introduce a second line that accounts for the business activities impact on social human and natural capital so that managers can start to compare the top, they can start to compare the financial performance line with the mutual performance line knowing the two are interrelated and they can start to have different conversations that are more around delivering the purpose that they say that they're there to deliver not just delivering your maximization of your profit, but the challenge gets back to these trade-off decisions because every company is going to prioritize something different. And so finding a standard P&L that can apply to all companies even in an industry is really, really challenging. So we're not there yet, but we want to get companies thinking this way. One of the things I'd love the two of you, I'm an offline here for a moment, I'd love the two of you to talk about business schools and because Raj, you've got the center of conscious enterprise and Jay, you're involved at the TSAID and I know you were at the conscious business forum that Raj and I were at last year and you went to again this year. So Raj, I'd love you to tee up just explore that area because I think you both have expert front seats on that and I think that would be really interesting to the audience. Yeah, so Jay, one of the things that you and I share is an interest in business education and aligning it with what the future needs for us. I think many business schools, I've said are part of the problem that we're continuing to perpetuate narrow view of business which is purely rooted in shoulder value. And most of the theories that are taught to our students, starting from day one in business school are really rooted in that paradigm. So what do you see as progress in that area? Do you feel optimistic? Do you think we're doing enough? What else do we need to do? In business education, you know, we're trying to change the entire business curriculum to reflect this broader perspective, the sense of purpose, values, stakeholder mindset, all of that. How do you see that? Where do you see that at the stage? Well, I love what you've been able to do at technological demand array. I learned a lot about it at the conscious business education conference I just attended in Lisbon a couple of weeks ago. And that's one way of going at this. And again, I tip my hat to you, Raj, because we've found it incredibly challenging to convince an entire faculty to take on a different business approach. And that's mostly because of tenured professors having their own kind of narrow interests and you can't make them do anything. So the other way in which you know that conscious business is operating and that we've been operating as well is finding professors at different business schools that individually are much more inclined towards what you call conscious business, what we would call, you know, mutual value creation. And in partnering with them to bring some of this business school curriculum into the broader curriculum. So what happens, though, when you take that approach, it is that you don't transform the core of the business education initially. You start with a lot of elective courses. And then how do you make sure that those elective courses stick and become core courses? We have not solved this, but we have been trying for years to do that. We started with a flagship partnership with one university's business school. Oxford's made a lot of progress in a lot of areas, but we're never able to kind of have the whole faculty buy in on this. They just have a lot of their own interests. We've partnered with China, Europe, and International Business School, which thought that the best way to bring economics and mutuality into their teaching would be to have a standard business school curriculum. You know, that's a finance supply chain management, you know, whether it may be TTR. And then have a piece of economics and mutuality also taught in each of those. And they had a little bit of success with that. And then COVID broke the partnership because we just couldn't work in China for a while. We've taught economics and mutuality in a kind of six week intensive module at Science Po Management School in Paris. We did that for three years, but ultimately, you know, we couldn't find a way to make that to make that stick. So what I'm really interested in doing now is really creating this alliance with conscious capitalism, with conscious business education, and with these different universities that are all working on a broader curriculum. And ultimately, because we have a lot of practical application examples through case studies of what we have been doing with economics and mutuality, we'd love to kind of have, if you think about a laptop computer, and it might be a Hewlett compactor or whatever it is, but it has a little sticker on it that says Intel inside, is would like to have kind of EOM inside of some of these courses, so that we can bring more practical application to the wonderful stuff that's now going to be taught through conscious business. So we're working on that, how to create an alliance, how do we create partnerships to do this, and stay tuned. I know you're going to be at the middle of it, Raj, so you'll be driving into so extent. I mean, it's an interesting challenge, you know, in some ways, we have an advantage in Mexico because there's not tenure system. Oh, I didn't know that. Okay, well that's great news. I mean, I gave up my tenure to go there. In a way, we've created a structural impediment to change because the faculty control the curriculum. You know, and leading American universities, and they're ready to their philosophies and their theories and so forth. So it's a difficult thing to change. The other thing, I think for us, you know, you are fellow travelers with conscious capitalism, B-Core, inclusive guide, all of the parallel movements that are out there. And how do we get synergy? You know, because we have different language, slightly different frameworks, but basically are aligned. Now, how do we, you know, how do we, that's been a difficult nut to crack, I think. How do we get synergy across these different movements? Because you do, compared to conscious capitalism, I think, economics of mutuality does a great job on the measurement side. You know, we're not as structured on the measurement side of things as you all are. We've got to figure out a way to integrate these things and create something that can have a bigger impact. I totally agree. And that's one of the reasons I spent time in Barcelona and last year, and in Lisbon this year, with conscious business education people, because I really think that one of the impediments in this space of movements that are around what we would call, you know, stakeholder capitalism is that so many of them are working in silos. And it's kind of like, you know, not invented here, then I don't want it, or you have to co-br- you have to brand yourself with me. And so what- what I was proposing in Lisbon, which I think got a lot of support, was how come we create kind of a neutral branded space, where we can all come and mutually benefit and contribute to- to a greater movement? And we have a couple of things that- that give us a comparative advantage in this space. I mean, you know, I mean, all of us together, is that if we work in humility together and we look at, you know, what are the holes in the curriculum of the professors that are doing conscious business? Where can economics of mutuality, you know, plug some of those caps? Where is it in economics of mutuality that we're weakest? And we don't get traction in the education space where it may be? How can we- each have a following a pretty significant audience, I think, independently of one another, that if we did some things jointly, we could bring all of our audiences collectively together and demonstrate how in humility we're trying to collaborate for co-creation. And I think there just hasn't been enough humility in a lot of these other movements that are out there. They're doing good things, but they just want to do- you know, they want to brand it, whatever they are. I think we need to get away from that. You brought up that you tried an experiment with one particular business school, which at one point was saying that it wanted to build its reputation around being the business school for purpose. And they brought on Paul Pullman and others. And, you know, You know, where does that sit, where does that, you know, we've made a commitment. We want to be different. We're going to differentiate ourselves in the marketplace around this idea of purpose. And of course, that fit beautifully into what you were doing. And I attended one of your big annual conferences and it was pretty inspiring. In fact, I remember being there when Paul Polinus announced as being the chairman of whatever the advisory board was for the business school, update us what's happened and what are the lessons learned? What attracted us initially to that business school was that it was newer. In fact, when I went to Oxford for my doctor a year ago, there wasn't even a business school. You know, the dons there would say the business of business is not Oxford's business. You know, something like that. And then they realized that it actually was and they created this business school. But that business school really wasn't hampered by the history of being the main advocates of financial capitalism, like a Harvard business school might be or, you know, or MIT or whatever it may be, Gordon. And so we like the fact that it has, it had a social business mindset initially and they even had the Skull Center for Social Entrepreneurship there and it's still embedded there. I think Paul becoming the chairman of the board a number of years ago was a great step in that direction. Unfortunately, Colin Mayer, who was one of the early deans and has been a great partner with ours, he finally got to the point where he kind of stepped back and retired from the business school. So he's still doing some things with us and I'm sure he's focused on executive education more. But he's not kind of that real shining light inside the faculty who can continue to drive this forward. Nevertheless, the kinds of, I think the best indicator of whether a business school like Said Business School is walking the talk of responsible business or whatever you want to call it, is what kind of MBA candidates are they attracting? And I have always been incredibly impressed with the quality of people that are going through their MBA program there. There are people that really want to change the world for the better and they're so hungry for something different. You know, they don't want to go to the discredited models of the Cold War. They think financial capitalism is really dysfunctional at the moment. And they just are so hungry for something new, something different. And they've really embraced what it was we were doing at the student level over the years that we've been working with Oxford. So we've been very happy with that. And I think Paul will continue to push that forward. Last question. And of course, nowadays you have to ask this one, which is, Jay, how is AI impacting your thinking about metrics and the economics and mutuality? Look at your crystal ball, your AI crystal ball and tell us what's going on. No, I'm so glad you asked this question because I think one of the strategic errors that we made initially when we moved out of Mars, of course we moved out of Mars at one of the most difficult times in the global economy, which was August of 2020. If you remember, that was like the height of COVID it was raging, nobody knew what to do about it. Everything was locked down and here we went out to create a new business around something that didn't have a lot of brain recognition at that time. And it was exciting, but I think we worked under the misassumption that we could go out and we could do end-to-end transformation for large multinational corporations and not have a technical tool program either. And what we found was that it was taking too long to deliver economics and mutuality and it was costing too much to do that with very little brain recognition initially. And we also learned that I learned this very personally through the wonderful opportunities I had to engage conscious capitalism CEOs down at Austin at your annual conference as one of those that there was a huge interest and hunger on the part of SMEs, small and medium size enterprises. And yet our price point and our strategy wasn't conducive to engaging the SMEs. So when we brought on Gavin to kind of lead the organization at the top level, he really valued being a former tech company CEO twice and a portfolio manager of a large champion of a private equity company that he did a kind of crash program with us on technical tool creation and we altered our strategy and so what we're able to do now is we've reduced things like an ecosystem map from something that would take four months down to something that could take two to four weeks because we use AI, we really leverage AI in this. And when we do those ecosystem maps around a meaningful challenge, what we're doing is we're surfacing opportunities for the business and opportunities that our clients just never would have thought of before because they didn't even think of certain stakeholders as being in those ecosystems. So AI is absolutely central to that and we've also been able to reduce the cost of those kind of things sometimes by like 75% because of using AI and other machine learning and other types of technical tools. So now we really want to work with those SMEs that want to work with us and we're ready to do that. But AI is going to be central to what we're doing. I have a lot of questions about AI personally and there's a lot of moral issues I think that we have to come to grips with. But right now we're making good use of it in our technical tool program to do this delivery better faster and cheaper. Thank you. Oh, is there anything you want to cover that we haven't covered yet? No, I think we've covered all of it. Jay, thank you so much for really exploring this area. It's fascinating. It's critically important to how we think about economics and the future of capitalism. Thank you for all the good work you do and thank you for being our guest today. I really appreciate the opportunity to walk with the two of you and your organization and the great things that you're doing and to spend this quality time with you today. So thanks for your interest and for taking this time. We have a great team behind us. I know that you have amazing people that are tied to conscious capitalism, conscious business as well. I just hope we can continue to work together as we take this forward. Well, look for those opportunities and if you enjoyed today's podcast on whatever channel you're listening to, please feel free to hit the subscribe button. And if you have any thoughts or comments gone over to Apple iPod and give us your rating and give us anything back. Like to thank Raiden Boe for producing our show today and for conscious capitalism ink, who is our sponsor of this program and who sponsors the CEO summit each year in Austin, this year in October 22nd to 24th go to consciouscapitalism.org, if you want more information on that. And thank you all and we'll see you next time. [Music]