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The gospel according to Adam Smith

Is doing good compatible with making money? It is if you practise spiritual capitalism.

Carleen Hawn | June 2008 issue

Since 1993, Dr. Hauschka Skin Care (DHSC), based in Waltham, Massachusetts, has been the exclusive U.S. distributor of holistic remedies and skin-care products manufactured by WALA Heilmittel in central Germany. Last year, DHSC sold $20 million worth of creams and cosmetics, made exclusively with organically grown plants and plant extracts. DHSC sources the shea butter for its cosmetics in the tiny western African nation of Burkina Faso, one of the 30 poorest countries in the world. The gross domestic product there per capita is just $1,200.

Susan West Kurz and her husband Clifford owned DHSC until 2006. In that year, they liquidated their equity and put the for-profit operating company into a trust so it would be less likely to be taken over by a large cosmetics firm. The husband and wife team practise spiritual capitalism by helping the residents of Burkina Faso make a sustainable living—and earn a profit for themselves while doing it. “A business has to have a profit to be sustaining,” Susan says. “What you do with the profit is the key.”

What the Kurzes do with their profits is invest them in women’s co-operative farms, which enables the farms to convert to biodynamic agriculture. Susan and Clifford, both of whom are trained in biodynamic farming, believe in the method because, as Clifford explains, “Biodynamics doesn’t exploit the soil. It tries to get the most out of the Earth but in a win-win with nature. Most economies are based on illness and war and profits for a few. This is because most [businesses] have lost their connection to human beings and to the Earth. But you can’t treat the Earth as if it’s a machine. It is a living, growing thing. You can’t take the spiritual part out of it.”

For the residents of Burkina Faso, the spiritual is material. The collectives used to produce less than 100 tons of raw shea butter a year; now, they manufacture more than double that. DHCS buys only about 50 tons annually. Competitors pick up the rest. DHCS could buy up all the biodynamic shea butter in Burkina Faso, negotiating down for a discount, but doesn’t. Why not? Because it makes business sense in the context of the new capitalism. A bigger market for biodynamic cosmetics benefits everyone—the people of Burkina Faso, DHCS and its competitors.

“We want to heal the Earth,” says Susan. “Our method of healing the Earth is not just something lofty. It is very practical and very real. When we bring biodynamics to shea butter farms, that act is transforming the Earth. But it’s also bringing a living, authentic business to the community. [Its members] are better off not being dependent on one company for revenues. For us, this is not just an abstract paradigm. We live our principles.”

Living her principles is also key for Denise Cerreta, an acupuncturist who traded in her needles for cooking utensils and started her own café. The idea of spiritual capitalism hit her like a revelation: “I realized my clients weren’t sick, they were lonely. I had always liked the idea of opening a café, and I realized I could probably serve people better if they could come to something that I had created, rather than just to get ‘a treatment.’”

So Cerreta sold her practise, rented a storefront and opened One World Everybody Eats café, in Salt Lake City, Utah. At Cerreta’s place, there’s no set menu and no set prices. Patrons pay what they think the meal is worth or what they can afford. Those who can’t pay, don’t; instead, they’re asked to wash dishes or serve food.

You might think One World Everybody Eats is a great way to feed the hungry, but doesn’t sound like much of a business. It is though. News of the café spread fast and soon Cerreta had customers lining up at the door.

By 2006, she was producing a 4 percent profit from annual revenues of about $300,000, which compares favourably to more traditional restaurants. In the same year, she converted her business to a non-profit, enabling her to expand faster and help other entrepreneurs open similar cafés in other cities.

Her 12 full- and part-time employees earn at least $10 an hour, more than 70 percent higher than Utah’s current minimum wage. Everyone gets a paid vacation. She doesn’t yet have a health-care plan, but she’s working on it.

Cerreta, 46, doesn’t take home anywhere near the $150,000 a year she made when she was an acupuncturist, but then again, she doesn’t want to. When she told that first customer, “Just pay me what you think the meal is worth,” Cerreta recalls, “it was like my heart expanded and I realized my purpose in life.”

There’s a restaurant based on Cerreta’s model in Denver; another, in Moab, Utah, is expected to open later this year, along with two more, in Durham, North Carolina, and San Francisco, in 2009. “I feel richer now than I did before,” Cerreta says. “I don’t know how to explain it. It’s some sort of phenomena, something like the loaves and fishes.”

It doesn’t take a miracle to believe in the benefits of spiritual capitalism. It just requires a simple cost-benefit analysis. “People mature to where we all give priority to the common good, even if at an immature stage we give priority to ourselves,” the Calvert Group’s Mollner says. Why shouldn’t that be true for companies?

Business and the Buddha author Lloyd Field argues that the traditional profit-for-profit’s-sake model of doing business isn’t just flawed but “based on greed, hatred and delusion.” Writes Field, “I do not believe this is what Adam Smith intended. The societal ills that result from this … stand in stark contrast to [Smith’s] goals.”

Instead, Field suggests a whole new kind of financial metrics, “so that the value of a company becomes not a single number based on its profits, but a composite number that includes its spiritual health.” Sound too good to be true? Take a look around. It’s already happening, at companies like Allianz, Ameriprise, Dr. Hauschka, One World Everybody Eats and countless others.

The spirit of capitalism moves in mysterious ways.

Carleen Hawn is a business journalist based in San Francisco. Max Christern is the editor of the Dutch edition of Ode.

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