The course opened with an introduction to conscious capitalism: four tenets, a performance table, and a set of case companies. I agreed with nearly all of it, which is exactly why I went looking for the failing test.
Every organisation you have ever worked for believes it has good values. That belief survives layoffs, survives the quarter where safety reporting got quietly slower, survives the manager everyone warns you about. Values statements are the one part of corporate life that never seems to return a failing result — and anything that never fails is worth inspecting, whether it’s a test suite or a philosophy.
Conscious capitalism was the frame we were handed early in the course, and it deserves a fair hearing before a sceptical one.
The claim, stated fairly
The argument, most familiar from John Mackey and Raj Sisodia’s “Conscious Capitalism” Is Not an Oxymoron, starts by refusing the premise that business is a zero-sum extraction machine. Free markets and free people, they argue, produced the largest improvement in human conditions on record — the introductory deck puts extreme global poverty falling from around 85% to roughly 9.5% since 1800, and average life expectancy moving from under 30 to over 70. Whatever you think of the conclusions drawn from those numbers, the numbers themselves are not in serious dispute.
From there it builds four tenets:
- Higher purpose — the company exists for a reason beyond profit; profit is the means, not the end.
- Stakeholder orientation — customers, employees, suppliers, communities and investors are optimised together rather than traded against each other.
- Conscious leadership — leaders serve the purpose rather than their own compensation.
- Conscious culture — trust, accountability, transparency and care are the operating conditions, not the poster.
I find very little to argue with in any of that. Which is the problem.
Higher purpose
Satisfied by writing a sentence about why you exist
Stakeholder orientation
Satisfied by naming stakeholders
Conscious leadership
Self-certified by the people being assessed
Conscious culture
Describes an intention, not an observable
Observation that would falsify it
None specified
The question a values statement is never asked
I spend my working life writing acceptance criteria, so my reflex when I read something like this is not do I agree — it’s what observation would make this false?
Ask that of the four tenets as written and you get almost nothing back. “Higher purpose” is satisfied by any company that can write a sentence about why it exists, and there is no company on earth that cannot. “Stakeholder orientation” is satisfied by naming stakeholders. “Conscious leadership” and “conscious culture” describe intentions, and intentions are self-certified by the same people being assessed.
That isn’t a criticism of the ideas. It’s a criticism of the form. A specification you cannot fail doesn’t distinguish between a company that lives it and a company that has heard of it — and the second kind is much more common than the first.
The hard case, not the friendly one
The friendly examples are easy: Warby Parker, which we looked at in week one, with its approachable executives, deliberate onboarding, two-way communication and genuinely high employee satisfaction. Score it against the four tenets and it passes everything. Fine. Any framework can pass the company that was already good.
The test that matters is the company that was already bad. So take Theranos, the blood-testing startup we studied beside it, and score it honestly against the tenets as its leadership would have scored it in 2014:
- Higher purpose — extraordinary. Cheap, painless, universally accessible diagnostics. If profit-beyond-purpose is the criterion, this is a distinction-level pass.
- Stakeholder orientation — patients named first and constantly, in every public statement.
- Conscious leadership — a founder who took a token salary and spoke about the mission with total conviction. Charisma reads as conviction from the outside, and conviction is what the tenet is asking for.
- Conscious culture — this is the only one that fails, and it fails on facts that were invisible from outside the building: secrecy, siloed teams, fear, retaliation against people who raised concerns.
Theranos, scored as its leadership would have scored it in 2014
Higher purpose
Cheap, painless, universal diagnostics
PASS
Stakeholder orientation
Patients named first, constantly
PASS
Conscious leadership
Token salary, total conviction
PASS
Conscious culture
Secrecy, silos, fear, retaliation
FAIL
Visible from outside the building
The three passes only
Three passes and one fail — and the single fail was undetectable to anyone doing the assessment from the outside. A framework that would have certified that company right up until the journalism landed is not a framework that protects anyone. It describes health; it does not detect disease.
The performance table has the same shape
The deck also carries a returns table: conscious companies against the S&P 500 over 5, 10, 15 and 20 years, with the US conscious cohort at 2,077% cumulative over twenty years against the index’s 269%.
Cumulative returns, 20 years (as presented)
S&P 500
269%
Non-US conscious
1,509%
US conscious
2,077%
How the cohort was built: look backwards → keep the firms that endured and were loved → measure returns over the period in which they endured. The firms with identical beliefs that went bankrupt in year six are not in the sample.
That gap is enormous, and the sourcing is what makes it worth pausing on. The companies in that cohort were identified in Firms of Endearment by looking backwards for firms that had endured and were loved — then their returns were measured over the period during which they endured. Selecting on the outcome and then reporting the outcome is not a controlled comparison; it’s a definition. The companies that held the same beliefs and went bankrupt in year six are not in the sample, because nobody writes a book about them.
I’m not claiming the effect is zero. I’m claiming the table cannot tell us, and it is presented as though it can. That’s the same defect as the tenets, in numerical clothing: a measurement no result could contradict.
Rewriting it as criteria
The fix isn’t to reject the philosophy. It’s to write it in a form that can return a failure. Same four tenets, restated so that each has a defined fail condition:
- Higher purpose — FAIL if you cannot name a decision in the last twelve months where the purpose overrode the more profitable option, and say what it cost.
- Stakeholder orientation — FAIL if no non-shareholder stakeholder has ever changed a decision that shareholders preferred. Naming stakeholders is not orientation; losing an argument to one is.
- Conscious leadership — FAIL if bad news reaches the top more slowly than good news. Measure it: how long between the first person knowing and the executive knowing?
- Conscious culture — FAIL if the last three people who escalated a serious concern are worse off than their peers. Not whether a channel exists — what happened to the people who used it.
Higher purpose
FAIL if you cannot name a decision in the last twelve months where purpose overrode the more profitable option — and say what it cost.
Stakeholder orientation
FAIL if no non-shareholder stakeholder has ever changed a decision shareholders preferred. Naming stakeholders is not orientation; losing an argument to one is.
Conscious leadership
FAIL if bad news reaches the top more slowly than good news. Measure the interval between the first person knowing and the executive knowing.
Conscious culture
FAIL if the last three people who escalated a serious concern are worse off than their peers. Not whether a channel exists — what happened to the people who used it.
Every one of those is answerable with evidence, and every one of them has a result the company would not enjoy publishing. That’s what makes them criteria. Run Theranos through this version and it fails three of four before a single journalist gets involved.
What this changed for me
I came out of that reading more sympathetic to the argument than I expected, and much less patient with the way it’s delivered. The tenets are a decent theory of what a good company looks like from the inside. They are a poor instrument for telling one from the outside, and they are marketed as an instrument.
I’ve stopped reading values statements for whether I agree with them. I read them now for whether the organisation has told me what would count as breaking its own rule — because the sentence that names a fail condition is the only sentence in the document that costs anything to write.
The syllabus’s own habit turned out to be the tell. Every case we studied came in pairs: the admired company and the cautionary one. The pairing works because they say identical things about themselves. Everything that separates them is in what happened to people who disagreed.
Putting an admired company and a disgraced one side by side in the same week makes the pattern obvious: the adjacency does the arguing. If your employer publishes values, go and look for the fail condition. I’d like to know whether anyone finds one.
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