How Shark Tank Misses the Point of Conscious Capitalism

bunsundesigns March 5, 2016

Hungry Harvest CEO Evan Lutz did a fantastic job on the show. He nailed the presentation, knew his numbers cold, and walked away with a deal from Shark Robert Herjavec. Evan has worked hard on the business, so it was no surprise that he also worked hard to prepare for the show, including having a marathon pitch question-and-answer session in front of a few of our Conscious Venture Lab mentors and friends from The Motley Fool. All that hard work is paying off, and I’m convinced Hungry Harvest will be one of our most successful investments.

Something else happened during the show — something that encapsulates where we are headed when it comes to the relationship between business and society, how investors will identify the best ideas of the future, and how those decisions will impact our ability to create a more joyful, prosperous, and just society. Barbara Corcoran was the first Shark to drop out of a possible deal that night. She said Evan was “too much in love with the idea,” that he was too “nice” (a bad word in business circles, apparently?), that he didn’t have the “grit” to make this business work. She explained how another company in which she has invested is focused on “greedy profits” first, and then uses a portion of such profits to build orphanages in India.

We hear this often in our business: “I want to build a business that allows me to give back.” Although I understand the sentiment and generally love when entrepreneurs want to engage community stakeholders, I hate the terminology “giving back.” It implies that you took something in the first place. But more importantly, I believe it focuses entrepreneurs on using profits for philanthropic efforts that don’t support their purpose and business strategy. This is an unsustainable way to create meaningful change. And this is the critical difference between a business like Hungry Harvest, which has imbued a mission of social justice into the DNA of its operating model, and more superficial models that give away “greedy” profits.

Evan Lutz is a “conscious capitalist.” This term was first coined by Muhammad Yunus, the Nobel Prizewinning founder of Grameen Bank. Recently my friend Raj Sisodia, the Franklin Olin Distinguished Professor of Global Business at Babson College, along with John Mackey, CEO of Whole Foods Market, codified this business model in their book, “Conscious Capitalism: Liberating the Heroic Spirit of Business.”

On the show, Mark Cuban was erudite in his analysis of the marketing power of conscious capitalism and Hungry Harvest’s social mission. He quickly understood that it was indeed a marketing expense. But I think the power of the Hungry Harvest business model goes much deeper than a marketing line-item on a profit and loss statement. In the words of author and TEDx star Simon Sinek, “People don’t buy what you do, they buy why you do it. And what you do simply proves what you believe.” Newsflash: Hungry Harvest is not in the business of selling ugly fruit. That’s simply the service it has chosen to use to bring to life what the company believes. The company’s website says, “We believe that every person has the right to eat healthy.” Hungry Harvest is in the business of helping everyone — no matter your location, tax bracket, or station in life — eat healthily and lead a healthier life. Once you understand this, the questions about its social mission (why set up free farmers markets or hire at-risk adults?) all begin to dissipate.

The missing piece of the puzzle is the seeming inability of many investors to see the writing society is spraying on the proverbial walls of Wall Street and Corporate America like so much revolutionary graffiti. As a society, we are making new and different decisions about whom we want to work for, buy from, partner with, and allow into our communities. In this new “Purpose Economy,” your ability to create financial value will be directly correlated to the manner and magnitude with which you first create societal value. We’re leaving the world where you can generate “greedy” profits first, give back later, and still expect customers, employees, communities, and suppliers to be genuinely engaged in your success. The old question, “Can you do good and do well at the same time?” is no longer valid. In the Blue Ocean of Conscious Capitalism, if you’re not doing good, you’re going to be much less likely to do well.

“We’re leaving the world where you can generate ‘greedy’ profits first, give back later, and still expect customers, employees, communities, and suppliers to be genuinely engaged in your success.”

The elegance of the Hungry Harvest business model is its mission of social justice and how its understanding of the connections between race, poverty, and food insecurity opened the founders’ eyes to an enormous business opportunity. The company’s commitment to donate one delivery of fresh produce for each one purchased, executed in a purely for-profit model, was born out of a desire to bring justice, in the form of fresh, healthy food and dignified work, to those who need it most. Without that yearning to first find meaning, to first see capitalism as a calling to do good in the world, there is no Hungry Harvest! No 60 percent margins, no waiting list of thousands of customers from around the country in areas where the company doesn’t even deliver yet, and no rush to sign up as “I love what you do” came across on so many social media channels on the night of the show and since.

This is the opportunity — the bright Blue Ocean of opportunity — that is being overlooked on a daily basis by a large number of investors. Now, as an investor myself, I should be happy about this. The myopia with which some investors view companies like Hungry Harvest provides me with what we call asymmetric information — a situation in which one party, namely me, has superior information compared to another. This allows me to identify big winners like Hungry Harvest before the rest of my investor colleagues. However, as a citizen and human being, this troubles me. This myopia hampers the most efficient allocation of capital, both in terms of societal and financial performance, which constricts our ability to solve some of our most intractable problems.

Of course, Evan’s team now must execute on the promise of the business model. They must have a consistent supply of fresh, ugly produce. They need to get that from the farms to their facilities, onto trucks, and delivered to customers in a timely manner. The website has to work seamlessly, and they have to respond quickly to customer calls, emails, texts, tweets, and Facebook and Instagram posts.

Robert Herjavec said he’d been waiting for a way to give people an opportunity that empowers them. He did that with his support of Hungry Harvest — not just for the Hungry Harvest team, but for all of the stakeholders of their elegantly simple business model. Bravo Robert!

Each day it becomes more clear that your purpose — why your business exists and how you create societal value — will be the key to creating economic value in the future. In fact, the future is already here!

Jeff Cherry is the CEO and managing partner of the Porter Group, LLC, an investment consulting and venture capital firm. He is also the founder and executive director of the Conscious Venture LabSM , an accelerator for early-stage companies focused on purpose and profit:

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