John Mackey, Milton Friedman, and the purpose of a great company

My friend Marc Gunther, a writer for Fortune and author of the book Faith and Fortune: How Compassionate Capitalism is Transforming American Business took a look at my Q&A with John Mackey of Whole Foods and Kip Tindell of the Container Store and had this to say in an e-mail:

To me the most interesting thing is the question that you and Milton Friedman raise--is this debate over shareholder primacy vs. stakeholder model just a matter of rhetoric? I think it is mostly rhetoric, but also a question of short-term versus long-term thinking.

I think Mackey, the Container Store, Starbucks, UPS and perhaps most famously Southwest Airlines all figured out that by looking at business as a series of win-win partnerships with employees, customers, suppliers, communities, they can generate shareholder value most effectively. This is a departure from the Henry Ford/industrial era model where companies want to pay their employees and suppliers as little as possible, charge their customers as much as possible, externalize costs and maximize profits to shareholders. Both models, in the end, are about serving shareholders. Mackey's "new" model is more long-term and says in effect that the value of a company is in that set of enduring relationships that it has built. I do think this is the way of the future. Wal-Mart is moving in this direction as well, quite clearly, and influenced by people like Whole Foods.

Another way to think about this (and how I wrote about it in my book) is to say that profits are essential to company (as air and water are essential to us) but the purpose of any great company is not to generate profits but to solve problems, to accomplish something bigger (just as most of us don't get up in the morning and think about how to get the air and water we need).