89. The business decision you'll thank yourself for in 5 years | James Perry

Welcome to All About Business with me, James Reid, the podcast that covers everything about business, management, and leadership. Every episode, I sit down with different guests who bootstrap companies, masterminded investment models, or built a business empire. They're leaders in their field, and they're here to give you top insights and actionable advice so that you can apply their ideas to your own career or business venture. What is the purpose of business? Simply to generate profit or to create value for society as a whole? Today on All About Business, I'm joined by James Perry, co-founder of Cook and one of the founders of the B Corp movement in the UK. In this episode, we discuss building businesses around purpose, why James rejected venture capital, and how entrepreneurial thinking could help tackle some of society's biggest challenges. Well, today on All About Business, I couldn't be more delighted than to welcome James Perry to the studio. James is the co-founder and director of Cook, a company that will be familiar to many of our listeners and viewers. It's a frozen food company that makes and sells frozen ready meals and puddings. Cook sells through over 100 of its own shops across the UK, as well as online and through supermarket partners such as Waitrose. I am a happy customer of Cook. I can say that now, James. James has also very interestingly co-founded the B Corp movement in the UK. that was just over a decade ago and has been an instigator of promoting and and spreading the message of b core across the country since then and he has also run a program called raw which is ready and working is what it stands for raw talent and this is a program that focuses on helping marginalize people into the workplace so i'll be very interested to talk to you that about that as well, James. So thank you for coming. We've got masses to cover. I'd like to go back to the beginning in a way. You started your working life at a company called Cadbury. Fabulous chocolates. What did you learn there? And how did that come about? Well, I studied economics at university. And I was taught that the social purpose of business was to maximize its profits for shareholders, because profits are a proxy for social progress. and that's how we generate prosperity in society. And I was a little troubled by some of the things I was taught, which we maybe talk about, but I was just really interested. So which university was this? I was at Manchester University. And that was the... In the early 90s. That was the mantra at Manchester at the time, was it? It was indeed. Maximised profits. It was indeed. It was kind of the height of neoliberal economics being taught in universities. And I was a bit troubled by some of what I was thinking about and some of the consequences that might arise. but I was just really keen to understand business. So I went on the milk round, applied to lots of different companies and got offered a job at Cadbury's. So ended up moving to Bourneville in what it was at 1994. But Cadbury's even then had a sort of reputation for being slightly different in its approach to capitalism, if you like. And Bourneville is also a town that was built to accommodate the workers. Yeah, indeed. So the backstory of Cadbury was that John Cadbury, who founded it in the early 1800s, was a Quaker. And he was part of the temperance movement. And they were concerned by what was going on in the gin shops of the time. And they wanted to create some competition for the gin shops. So they invented this. Initially, it was a drink called chocolate in order to have a sort of temperate response to the excesses of the gin shops. So it was a business that was a product that was started for a social reason and with a social heart. and those Quaker values shaped the most extraordinary business over 150 years and made a it was a great it's a great British business I never knew that so it was hot chocolate was the first it was it was coffee shops literally chocolate shops like coffee shops initially right yeah that was an alternative to the gin shop exactly well that's that's that's a really interesting observation but what did you learn there so you were there as a young trainee before you left and started this business yeah and it was a wonderful introduction to business you know I learned I was in the marketing department. I started as brand manager for other boxed chocolates, and I got to the heights of Cadbury's Roses and then Cadbury's Dairy Milk. But it was a really good introduction to the whole extent of the business, manufacturing, marketing, sales, logistics. Where were you working? Where was this? So it was in Bourneville. That's just near Birmingham, is that right? Just a suburb of Birmingham now, yeah. But a beautiful place, a sort of model village built by the Cadbury family. There were no pubs because, of course, the temperance values persisted. But whilst I was there, the thing that really formed me was that it underwent a program called Managing for Shareholder Value, which is where the Cadbury family essentially surrendered control of the business to the city. It was listed. And the prevailing ideology at the time of the city was that the purpose of business was to maximize its profits. And there was an extent to which the great Quaker values of the business were getting in the way of that. And so whilst I was there, there was a sort of pretty ruthless wind blew through the business, which was essentially focusing everybody in it on driving more chocolate sales or higher margins to make more money. There's lots I want to ask you about. This is probably when the chocolates started getting smaller and thinner and things like that, which didn't go unnoticed by customers. but uh so what was that when the cabri family stepped back was were you there at that point was that what happened i can't recall the story in detail but i remember as you said but it was floated was it was it private so it was floated i think in the 1980s right i'm not a i'm my history might not be completely accurate but it was it was floated at some point um but during the 1990s the family effectively uh leadership uh handed over to uh city um right city so the family stepped to side effectively they were i suppose still shareholders to an extent yeah so then a different ethos entered the business exactly and you noticed that as a as an employee you noticed that it was a fundamental and very deliberate change um you know it was perfectly rational it's perfectly reasonable if you follow the prevailing ideology which is the prevailing ideology which says that the purpose of this business is to generate prosperity profits are a profit proxy for prosperity and therefore anything that gets in the way of those profits is unwelcome and needs to be removed but Cadbury's had built a Cadbury family built a brilliant business that had created much prosperity they had in a different way well that I think has a lot of merit but we'll come to that later we can talk about measurement we'll come to that later um so what did these how did these experiences ultimately lead you to um starting cook well so I got to the point where I was not very interested in a career doing that because... What, maximizing profit? Yeah, I had some really profound concerns about where that might lead. So the word that I sort of now know, I don't think it really existed back in the day, was externalities. But what are the external unpriced effects of ruthlessly and rigorously pursuing shareholder value? I mean, this is sort of hyper-capitalism you're talking about here, isn't it? It is what capitalism has become. I think that there are other variants of capitalism, for example, in the family business community, in the B Corp community. But institutional business and institutional capital is governed by an idea called fiduciary responsibility, which has come to be understood as the obligation, the duty to maximise profits for shareholders. Yeah. And that was what made you uncomfortable. Well, I just felt that if you do that, you're essentially prioritizing one kind of capital, which is financial capital, over the other capitals, natural capital, human capital. And you're giving it dominion. And what it therefore does logically and reasonably, if you pursue that idea, is that it sees nature and people as mechanisms from which to extract financial value. So planet and people effectively are just inputs. And I didn't think that was a good idea. I felt it was going to lead to negative consequences for planet and for people. And what we now know that those are called externalities. But when I tried to talk about those in my economics degree, they didn't want to talk about that. Did they give you a bad mark? I left the degree, actually. Oh, you walked away? I walked away. Oh, credit for that. Well, I did stay at the university. To be fair, I was having so much. I mean, Manchester in the early 1990s was a really good place to be and a really fun place to hang out. So I actually moved my degree from economics and ended up studying social policy and political thought. Oh, interesting. So you were sort of politicized by what you were learning in economics. Somewhat, yeah. That's what I'm hearing. Did you know that there are nearly 1 million 18 to 24 year olds who are currently not in education, employment or training in the UK? This is simply not good enough. And I want to do something about it. That's why Reed is launching a new initiative, giving £20,000 to young entrepreneurs to help them grow their small business. Visit reed.com forward slash entrepreneurs to find out more. We want to support and encourage the next generation of entrepreneurs. Okay, so then you decided to start Cook. Explain the journey. What happened was my brother, my mum and dad. had my dad had been a school teacher and had got sort of bored age 37 and with four young children he decided to leave and um decided to go into the city and he lasted two weeks and found himself unemployed with four young children and in desperation he opened a shop in tunbridge high street um and so my formative years and my my siblings were spent sort of serving coffee in this coffee shop as baristas. And they couldn't source cakes. So they decided to open a cake bakery. And sort of slightly by mistake, they ended up running a small bakery business, which supplied coffee shops in the southeast. And my brother had joined it, my brother Ed, and joined it as the sales manager. And one of the jobs he had whilst he was there was selling the reject cakes. And he retailed them out of a shop, whole cakes, frozen. And whilst he was doing that, he thought, if I had an equivalent quality of prepared meal, home cooked food, I could have a retail business. So he tried to persuade my mum and dad to do that. He's an extraordinary entrepreneur, but as a young 20 something, he was possibly not the most easy person to invest in. So my parents quite sensibly said, actually, I don't think we want to do this with you. So he just got on and did it on his own. And he created a business. He found a chef. Whilst he was selling cakes, he found a chef who was running an events catering business who was a brilliant chef called Dale Penfold. And him and Dale created this business together called Cakes and Casseroles. And they did it with a 20 grand loan from the bank and with sort of a rubber band and a fiver and a lot of hope and energy and created this extraordinary food range under the brand of Cakes and Casseroles. And when I decided to leave Cadbury's and not pursue a corporate career, I needed something to do. And my mum and dad were sort of desperate to hand over their small, break-even bakery business. And I thought, well, it's a train set. You know, I don't know where this is going to go, but at least I'll be my own boss. So I agreed to take it over. And Ed was buying cakes, and he wasn't paying for them. And I went through the debtor book as one does. Buying cakes from the bakery? He was buying cakes from my mum and dad's business. supplying. And now from you. That makes an interesting sibling dynamic. So we had an interesting conversation saying, when are you going to pay for your cakes? And he said, next month. And as one does. And over the course of some months, we got into a deeper conversation about what he was doing, which I thought was fantastically exciting. And he had created this incredible range of food. Dale is a genius. And he's the chef. And he's the chef. And so is Ed. Brilliant. And I was kind of bored by the prospect of a business-to-business cake manufacturer selling to coffee shops. And I was much more excited by a retail business with a brand. So over the course of a few months of conversations around when Ed would pay his bills, we came to decide that we would merge the two businesses together and rebrand cakes and casseroles as Cook. And off we went on a sort of new adventure. So what year was that? That was on the 1st of January 2000. We thought that was a propitious date for and it certainly was and and so what was the when you were thinking about your customers and the market what was the problem you were seeking to solve with cook well i mean for me the the that that that's in some ways often the difficult bit of starting a business is finding a problem solving it in a way that you can run a successful business ed had done that so he the problem was that so he had some customers well yeah he had so he had cracked the problem because the problem was solved in the range, the food, the food itself. And the problem was that people were getting increasingly too busy to cook at home, their busy family lives, lives were getting busier. And home cooking at the time was the predominant way that people would feed their families. But the offer at the time of alternatives was not very high quality and had come out of a sort of mass manufacturing industry. So Ed and Dale said, look, what happens if you take home cooking, essentially, food made by hand using the same ingredients and techniques that a good cook would use at home how do you what happens if you create a range of frozen meals that does that so it's a completely different product than what was on the market at the time and as a result and and I both Ed and I are very independently minded so we had no interest in trying to sell that to retailers who we didn't feel that wasn't really where the market was at so we had to sell it ourselves so we did it we had vertically integrated business with our own shops, and Dale would be in the kitchen making it. So your first, the bakery that you took over from your mum and dad, that became cook, did it? So the bakery continued, and actually, so the bakery business was a cake manufacturer selling to food service and the lovely thing about cakes is that they basically flour eggs sugar The ingredients are quite cheap so the gross margins are quite good Flour, eggs, sugar, lovely. That's why we like eating them. Well, quite. And so we figured out that actually, if we were able to jack the sales of the cake business, then it would start pumping out cash. We also knew that Cook was very cash hungry, because we needed to invest in shops, but also in kitchens. And it was loss making for quite a long period of time. So we thought we'd use, we'd jack the case. How long was it last? We didn't make a profit in CUP until we started making EBITDA in the sort of from 2005, 2006. Based on that, we did. So for five years, you were not even achieving EBITDA. For five years, we were not achieving EBITDA. Earnings before interest, tax and depreciation. Exactly. And for quite a lot of that time, we were not just not making EBITDA. we were hemorrhaging cash. And we didn't want to take external capital because we wanted to stay in control because independence is Ed and my and our families and my sister Rosie's kind of core value. So how did we do that? Well, in the early years, we used the cake business to generate cash, which we then shipped over into Cook. And then that became unsustainable, partly because the poor people running this wonderfully successful bakery business and growing very fast needed new kit, you know, new items or whatever. And we said, oh, there's no money. And they'd be like, well, that's because you've gone and spent it all at Cook. And we'd be like, well, yeah, sorry. And, you know, it was hard for them or else. So there came a right point of time to sell that business. So in 2003, we sold the cake business, which we basically used the proceeds as venture capital for Cook. Right. So where was the first Cook shop then? So the first Cook shop was in Farnham. Right. So, well, Ed opened it as Cakes and Casseroles in 1997. and Dale would be in Sittingbourne cooking and there would be a sort of cash transfer between them and they barely kept accounts. It was basically, Ed would send Dale the cash, Dale would go to Billingsgate and Smithfield and buy the ingredients and go back and cook them. Dale would then send the food to Ed, Ed would send the cash back. Right. So it evolved from that. You now have 100, is that right? About 115, yeah. 115, so still growing. And where's the cooking done now? I mean, is it still in Dale's kitchen? I mean, I can sense it is, but I imagine it's a pretty big kitchen somewhere. Well, so interestingly, conceptually, it basically is still done in Dale's kitchen. So the barrier to entry for our business and the USP is the way that the food is made, which delivers a completely different product to what you can get elsewhere, which is why our business has been successful in the face of really excellent competition from people like Marks and Spencers. They just can't replicate the quality of that food. so people make a special trip to our shops to buy. But actually what happened was Dale figured out how to scale that batch cooking methodology, and we just built bigger and bigger and bigger kitchens, and we've got better at processing. So how many kitchens would you have to support 115 shops? So we now have three large savoury kitchens and one large puddings kitchen, which is down in Somerset, and a large logistics centre. and the savoury outfit is in Sittingbourne. So you're moving a lot of food around as well then. So where's the logistics centre? So the logistics centre is also in Sittingbourne. It could be elsewhere, but actually for operational reasons, it makes sense to be proximate. Right. How interesting. So you said something that really struck me, that independence is your core family value. Talk me through why that is or what that's about. Well, I think a lot of that came from my formative experiences with my economics degree and then at Cadbury watching what happened to that business. But my parents, both of their backgrounds, their families lived overseas. So my mother's family were explorers and then coffee farmers in East Africa. And my father's family was from India where they were part of the British Raj for a while and engineers and that kind of thing. So they were all quite independent, spirited, adventurous people. So I think that family culture was there. But also when my mum and dad started their bakery business, they needed someone who could bake. And my mother's best friend had been running a drug rehabilitation centre as the cook. And they persuaded her to join them as the person who was going to bake the cakes. And her condition was that she would employ the recovering heroin addicts that she had been cooking for in the drug rehabilitation centre. So their employment policy when they started was pretty racy because they pretty much employed recovering heroin addicts, which was challenging. They figured it out. But what it did with my brother, my sister, myself, was that it landed this idea that you could use business as a means to do many things as well as making money. Yeah, which you were sort of alive to it as a young student. I mean, that was obviously on your mind. But you've obviously needed investment to build this business, and you brought investment in from outside the family, but you didn't use the venture capital, private equity route, as I understand it. How did you go about that? Because I think a lot of people who are interested in building businesses will be curious because they probably want to remain independent too. So you've done that successfully, but at the same time, obviously, invested big amounts of capital. So how did you do that? Yeah, and it's a capital-hungry model. And, you know, one of my tips to young entrepreneurs is if you can avoid a capital-hungry business model, then that's really a great thing to do. It's not always possible, certainly not possible in the case of Cook. But the way that we were very fortunate, because we were given a leg up by my mum and dad with that business, which was a bit of a hidden diamond. And so we were able just to find that diamond and then create that cash machine, which got us through the early days. So if you've got a cash generator, look after it. Look after it. And so we were able to generate some cash there. Then we were able to sell it. So we effectively created our own venture capital. And then we thought that would get us to the bottom of the hockey stick or the J curve. And we'd be able to turn the corner and start generating cash. We were wrong. The maths turned out that we needed more capital than we had initially thought. You were too optimistic. We were too optimistic, as I suspect is true of every entrepreneur. Well, I've seen many business plans that have turned out to be too optimistic. Yeah, but you have to keep going, don't you? It's not optimistic enough. Optimism is good, but when it doesn't work out, you've got to work out a way to move forward. So what did you do? Well, so we started meeting venture capital funds. And look, nowadays, the idea that you can use business to create a broader idea of value is more socialized than it was back then. Like the neoliberal kind of intellectual paradigm had a very powerful grip back in the early 2000s. And as a result, when we spoke to venture capitalists, they looked at us sideways when we said our goals for the business went beyond making money. And actually, we wanted to create a different kind of business. And that made them feel nervous. And you were employing ex-HeroNetX. And we were doing all sorts of things that they would say made no financial sense. So, you know, paying more for ingredients because we wanted them to be sourced the right way, in a way that maybe the customer would never know. You know, those kinds of things were just costs we were building into the business, which they couldn't understand. And I understand why they didn't understand them. The thing about venture capital is it's not their money. They're running money for other people. So they raise money from investors and they make a promise to investors and they are bound by the conventions of fiduciary duty. And therefore, they're arguably in breach of their duty if they don't maximize the financial interests of their investors. So they were pretty much boxed in. We had some frustrating conversations because we were just misaligned. So they weren't buying what you were selling, in a sense. They were saying they were trying to convince us to change and we didn't want to be changed. And therefore, we just couldn't find agreement. So there was no match. So we were slightly at a loss, actually, in about 2004, I think it was, 2004, 2005, when we'd spent the money from the cake company, or were fast running through it and realised that we were going to run out. so we were scratching our heads and we were very fortunate actually because um john timpson the great um the great key cutting uh business family business um then run by john then run by james for a while his son um they were very kind to us because we reached out to them or ed reached out to them and said look um can we come and see you we just want to learn and we because we one of the things we did and i learned any entrepreneur to do is just reach out to people and ask if they'll meet you and you know a lot of people won't but sometimes they do and john and james are incredibly generous with us. When we were early in our journey, they invited us up to Stockport and we sat there and they gave us a masterclass in running a business. And one of John's, and we were sort of sharing this idea that we were, you know, basically needing capital, but didn't want to take institutional capital and what should we do. And John at the time was writing a column in the Sunday Times business section. It was good. It was a great column. And he said, I get your problem. I'm going to put you in touch with a journalist. And John, bless him, put us in touch with this journalist who came down to see us and we explained the problem. And he totally got it. And he wrote an article to basically to help. And it was slightly, this is this magnificent young business with all this potential. It doesn't want to take venture capital for good reason. What's an entrepreneur to do? And on Monday, the phone went. And some of the people that phoned up were nut jobs, but one of them was a magnificent and magnificent independent spirited man called Christopher Weston who had sold a business called Phillips, the auction house. And he wanted to make his own investments. He didn't want to entrust it to the institutions, possibly partly for the same reasons that we didn't want to take institutional capital. And as a result of that conversation, he ended up making a large investment, over a million pounds, in a business that was turning over, I can't remember at the time, we were probably turning over six or seven million and we were losing a lot and so it was a pretty racy call from him but he was prepared to take a view and take a very long-term perspective and his family are still investors still own 11% of Cook and we've had a fantastic ride with them. There's so much in that story that's interesting to me I mean the the fact that you went and spoke to other entrepreneurs and the fact that the Timpsons gave you what you described as a master class is so interesting. But then that you used media or journalists to help you. I mean, lots of people wouldn't think of that. And the story being shared, brought in new interest, and that they were long term investors of a different type. I mean, that has so many lessons from all of us in business that is helpful. But what I mean, I mean, I think I know the answer to this but what did they see in you you probably have to ask them no but i mean what you said it wasn't making any money it was looking a bit flaky we were very i mean we were very we were we were very we had a very high level of confidence in our product and in the need that we were meeting we didn't i think at the time quite appreciate the extent to which we had parked on a wave you know the which isn't necessarily a completely welcome wave you know we believe that the best thing people can do is to cook for themselves. There's nothing better than home cooking. There's a lot of increasing evidence to that effect. Completely. And the kitchen needs to be the life and soul of the home. And so home meal replacement is a problematic concept in some ways. But our idea was that if you're going to, you can't cook every meal all the time. If you're going to have a home meal replacement, for heaven's sake, eat something really good. And so that was our sort of idea. And we hadn't quite appreciated the extent to which that home meal replacement wave would just keep on going. So we've been fortunate. We parked on a wave and we've managed to stay on it. So that's one thing. But the second thing was that Ed and I, Ed's a very inspiring person, you know, and a great leader. And so I think Ed's charisma was jolly helpful. And we were both, I mean, back then, my role was more sort of the sort of backstage, the operations, the finance, the financing. Ed's incredibly good at that as well. But I had a pretty sharp pencil and I was pretty convinced that I believe the maths, essentially, which was that once we had the scale, you know, high fixed cost business, we're quite operationally leveraged. But once we had the scale, we would generate quite a lot of cash. And so we had quite a strong economic argument. We had quite a strong market argument. We had a fantastic product. And we were young and we had a huge amount of energy. And also we were we we had to make it work. you know everything we own we had all these personal guarantees you know my wife was was having children at the time and um we knew that one wrong step and the house would have our house we'd be we'd be evicted so high stakes failure was not an option right so you were absolutely committed so all in i suspect that he was investing in you too i suspect he possibly was you know i mean i think investors look look to the entrepreneur don't they but but also i think the list of things you just described, having the ticks against each of those is very important, very persuasive. Yeah. So that was a key. The P&L was quite persuasive the other way. Yeah, that might put you off. But that was a key moment for you, wasn't it? Yeah, it was. So going forward, you obviously grew this business, but you became increasingly interested in the sort of wider purpose of business. And you, I believe, were one of the pioneers of the B Corp movement in the UK. James, tell me about that. Well, what happened was, um, we, we didn't want to sell more equity than we had to like any good entrepreneur. And, um, we, the, the credit environment of the early 2000s was very helpful to businesses that wanted to borrow money that possibly was unwise to borrow, um, which was us. Uh, and so we ended up taking a very large loan from HBOS in 2007, which no bank should have made. Well, that caught up with them, didn't it? Rather famously in 2008. Indeed it did, but it also rather caught up with us. Did it? What happened? When the credit crunch happened in 2000, the global financial collapse happened in 2008 our sales went down by 20 overnight and all of our cash generation projections were for the birds and we breached all of our banking covenants and we were very close to bankrupt. I mean, we had to do an extraordinary number of things in order not to go under, in order to make payroll every month. And that's a long and sad list of things we had to do, but we survived. And when we came out of that financial crash and I saw the quantitative easing, which government printing money essentially to keep the financial system afloat. But when I realised that actually that that was the effect of quantitative easing was as a massive wealth transfer from the taxpayer to the wealthy, because it inflated asset prices, and the bankers seemed to get away with it scot-free. And I'd had this disquiet previous around the externalities of this idea. I just couldn't, I just had this compulsion to explore and understand more deeply what was going on, because I had this strong sense that it was going to lead to calamity from both a planetary point of view, but also from a human point of view in terms of our well-being. And what I learned, well, I learned a lot of things, but one of the things I learned was that it wasn't the fault of the people who were, you know, there's great people. These large corporations are extraordinary things. They do incredible things. They bring us our food in the most amazing way so cheaply. You know, our technology is extraordinary. So it's not the fault of the people running the thing, but there's a glitch somewhere. So I just wanted to understand it. So I found myself in 2010 in San Francisco because there was a conference. I was told the best place to go is this conference called SOCAP, which stood for social capital markets. How can capital markets serve society rather than society serving capital markets? And so I found myself in San Francisco and it was a bit kind of, it was like the early days. And it was run by this crazy sort of veteran from the 1960s with his wild eyes and his crazy hair from California called Kevin Jones, who was a wonderful guy. And so it was all quite glamorous, you know, food trucks. We were in Fort Mason, these wonderful wharves that went out into San Francisco Harbor overlooking Alcatraz. It was all quite exciting. And in a theatre at this conference where there was only a few hundred people and it was all quite chaotic, there was this chap called J. Cohen Gilbert. And he got up in this theatre with about 80 or 100 of us in it. And he told us about this idea he'd had called a B Corporation. And they just started in the US and they had about 200 companies. and they were all sort of small social enterprises, mostly in California or the East Coast. And it was a eureka moment. Why was it called B Corporation? Well, Jay, a lot of people think it's for benefit corporation because they passed a lot of laws. In the US, it's illegal if you don't maximize profits for shareholders. Company directors can be sued. So they have to pass a law to protect company directors if they want to do anything other than maximize profits, which is called a benefit corporation. So they wrote a statute. They called it the Benefit Corporation. And then they went around state legislatures passing it. Oh, so at a state level that had to be passed before people could... So it had to be passed state by state by state. And that wasn't a constraint in this country? No. So we have the 2006 Companies Act, which has something called Section 172, where there is more wiggle room because... But we won't necessarily go down that rabbit hole, but there's a lot of debate around the wording in Section 172 of the Companies Act and what it actually means. No, I'm interested in that. What does it mean? What's your issue here? So New Labour, Tony Blair and Gordon Brown, had a concern about this neoliberal kind of mindset that had taken over business. And they had this idea of stakeholder capitalism. And so they wanted to make the company something that had to operate for all of the stakeholders, workers, communities, the environment, as well as shareholders. And Will Hutton helped them with it, who's a sort of academic and was then a journalist. And they ended up landing on a form of words that says, company directors must run the company in the interest of its members, which is its shareholders. And in doing so, they must give regard to other stakeholders. So the words which bear the weight there are give regard to. And there was, I understand, a tussle behind the scenes at the time between Gordon Brown and Tony Blair as to how far they would go. And they landed on Give Regard To, which is very weak, because there is a concern that if you elevate the interests of other stakeholders and you require all companies to do that, they could become uncompetitive in a global capital market context. So effectively, UK PLC might have burdens which other companies don't have, which could be to the detriment of UK economic success. Right. Yeah. But I mean, give regard to, to me, means pay attention to. Right. You think that's weak? Well, what it doesn't, because we can all pay attention to it and then we can move on. Yeah, I suppose then it's up to you, isn't it? I mean, you're not being forced by the law to do things. Right. So what the Benefit Corporation statute does and what B Corps do... It puts you into a tighter... Is they say that the purpose of the company is to create value for everyone. And therefore, the director's duties are to balance the interests rather than give regard to, which is a completely different idea. So that's a much higher level of commitment. Yeah. And that's what you're committed to. Yeah. So you brought this idea to the UK. Yeah. How did it land? How was it received? Well, so I met Jay in 2010 and I was terribly excited. and I came back to Ed and Rosie at Cook and said, we've got to become a B Corp. And they said, what's a B Corp? And then they thought basically, and they, with some possible. So you told them that you had to do these things. I said, we have to do this. And what did they say? Were they unimpressed? Well, they just thought I'd been drinking. I mean, they were very committed to the principles. They liked the idea, but yeah. Well, we were all doing, Cook was always going to be this. We'd been doing it on our own. And one of the reasons I'd struck out and gone so far overseas was to find others who agreed because there was this kind of gaslighting going on. Everybody's saying, well, you don't understand. That's not what the purpose of the business is. And I just was like, this is completely crazy. And I was so excited to find a group of people who are creating a movement around this different idea that we were already doing. The reason was, I mean, I think it was partly because I was a bit too overenthusiastic, too much Kool-Aid in San Francisco. Yeah, he's been in the sun too long. Exactly, yeah. But that's an interesting thing when you're trying to sell an idea, not to go too over the top, is it perhaps, with your enthusiasms. But you obviously won because you are a B Corp and you set the whole thing up. So then what happened was Cook, they did listen and they ended up going to a B Corp retreat, which was the thing that really landed it for them. It's oh wow, these companies are really doing things differently. But most importantly, they're doing it together and they're learning from one another. And it's this fantastic learning community. So they came back from that inspired and then Cook very quickly certified as a B Corp. But it wasn't easy. You know, the way that it's assessed has changed. But back in the day, we had to score a score of 80. And when we first did the assessment, we scored 50. So what were the hardest things for you to change? Oh, we had to change everything. I mean, that was... Really, even as a sort of good employee? We thought we were good. With good intentions. And we were doing our best. But actually what it gave us was a framework to look at ourselves through, which led us to understand that there was a lot more we could be doing. And the spreadsheet that we created had 200 rows on it. And each of those was a substantial action we had to take in order to get ourselves to 80. And we went through that. We were like, that's 200 bits of change. Do we really want to do that? And we looked at it and we just thought, well, all of those things in their different ways are going to make us better and stronger. And yeah, we leaned in. And the whole business was committed. It was a change program. And in 2013, we certified as a B Corp and we were one of the first sort of handful. In the UK. In the UK. And then we thought, well, the whole point of B Corps is doing it together. We can't do it on our own. So we need a community. And I'd actually been doing some work on my explorations into kind of the spirit behind the invisible hand, you know, this kind of idea of how do we fix this glitch in capitalism, which could end up killing us all. I'd ended up doing some work in what's now called impact investing, which is investing for good outcomes for everybody, not just for shareholder value. And I'd got to know the B Corp founders through that work. There was a G8 task force I was part of, and so were they. And we ended up becoming friends. And so I was then helping them to figure out how to launch in the UK. And they just said to me, why don't you do it, James? And I thought, well, that's a nightmare job. I mean, you've got to go to companies, say, become a B Corp. They don't know what that even is, and they've got to change their legal constitution. Well, you had some practice with your own family. Right, exactly. They've got to change their legal constitution. They've got to do this painful assessment. It's a big thing to ask people to do. And we just found a crowd of people who really got it and went with it. Right. So this improved your business, in your view. Yeah. And your journey suggests that that's the case. Where are we at now with B Corp? Is it still performing as well as it was for you? Because I hear some pushback now. It's a bit of a straitjacket. Yeah. I mean, you might have heard that anyway all the time. Yeah. I mean, look, there's different altitudes to answer that question. On one level, it's magnificently successful. There's over 3,000 B Corps in the UK now. It's 1% of the UK economy, which is an astonishing achievement in 10 years. um it's now a charity which has b lab who runs the b corp movement uk as a charity that we set up and i involved a friend of mine called b lab it's called b lab right i involved a friend of mine called shawmy and love to help me set it up so the two of us co-founded it and um and uh it's now like this 10 million revenue 12 million revenue charity with like fantastic numbers of employees really campaigning to change the purpose of business in the uk so on that level it's Wonderful. On the other level, look at what's going on in the world, you know, and have we changed anything? Does it mean anything? So it depends sort of slightly which lens you look at it through. And obviously there are difficulties, complexities around how do you assess these companies? What sort of, how big do you want the community to be? Is this for a small group of, is this for the tip of the spear, the very best of the best? Or do we want to broaden it into have more companies? And those debates rage and different people take different positions. and there'll always be controversy. So if anyone listening wants to do this or support their business in doing this, where do they go? How do they find B-Lab? eCorporation.uk will give you everything you need. Right. And they're supported in that journey. Yeah. Yeah. No, it's a good question, is it? Has it changed anything? I mean, that's a fair question. But you have also a very interesting program in your business called Raw. And I think that really has changed. things and and without question tell me about raw so as we were thinking about the purpose of the business um you know we wanted to nourish people and planet and that takes you down a lot of different into a lot of different places but one of them was into obviously the people and we and the background of that the background of that program to some extent comes from my mother who whose best friend and Diana, her best friend, who insisted on employing recovering heroin addicts. So that idea landed quite deeply. And then Dale, the chef who Ed co-founded the business originally with, is a very big-hearted man. And he would look at his ingredients at the end of the day that might not be needed and think, well, we need to do something with these. So the chefs used to go down to this homeless shelter shelter in locally and cook the ingredients for the people or help them well the ones that hadn't been used yeah the unused ingredients and what the guy running that charity said to them was look this is lovely and thank you i'm very grateful but what what these people really need is a job can you give them a job and dale said sure and as dale does and um so it started in a very organic and not structured way. But what really happened then was my sister took over leadership in Cook and became co-CEO with Ed in the early 2010s. And she really grabbed that. We were doing this in a sort of chaotic and not organized way. And she took that and turned it into a highly organized program with a very intentional goal of 5% of our workforce to be raw talents. And we started partnering with prisons, other charities, and it's become the most phenomenal thing in our business. So how do you make that work? Because I think it's a really good thing for businesses to do. What's important to get right for that to work for you and for the people joining you from those marginalized backgrounds? Well, Rosie would be a better place to answer that question than I would because she's the one who's actually done it. But I've watched it pretty closely. And what the most important factor was the culture. So, you know, we're asking people who have, you know, mostly blue-collar workers who have hard jobs and hard lives to accept people, very complicated people, into the workplace to work with them. And that's a big ask. And it can't be taken lightly. And it has to be consensual. So there's a lot of work where the consent of the people, of our people, was sought. Your existing team? Our existing team was sought. But you had to get their agreement, really. I mean, we have one case where, you know, and as a result of that, we had a bar on people with a murder conviction or people with sexual offenses because people felt they wouldn't be... They didn't want to work with them. ...feel unsafe. And we had an instance where the prison came and said, look, we have someone with a murder conviction. It was a long time ago. They've changed. We think that this is a really good candidate. And the team... And the question was put to the team whether that would be something they'd accept, which they decided to give the person a trial. And after the trial, they decided to take them on. So that cultural piece is... But they were the decision makers post whether he was taken on It has to be done with consent and with the culture The culture has to welcome it otherwise you just going to give these vulnerable people who had a terrible experience of rejection and exclusion another bad experience yes but that that that is it so important to stress that the team needs to embrace it and it takes time to sort of talk that through and and get their support yeah so you said five percent of your workforce yeah and and i think the second learning has been that once that starts to work, it becomes people and it's, you know, the team working in it and I don't experience this directly, but I can see that it's difficult work. You know, it's, it's the, the path to these recoveries is not straight and sometimes things go wrong and people fall off the rails or whatever. So it can be difficult and challenging and upsetting. But what happens is that, but the, but the, but the wins are profound and, and And once the culture buys into that, what then happens is you start getting graduates from the raw talent program who are in positions of leadership in the company. And they are really passionate about that program because they want other people to have the same opportunity that they had. So you sort of create a flywheel within the business of helping those people with a hand up. almost every we have a raw talent graduation thing where they come in for a week where they have a sort of getting ready for work trial and some trial shifts and so on and at the end they have to do a presentation and they tell their story and it's the best meeting you can have in business i've never heard anyone on that raw talent program tell a story about their childhood which didn't involve a horrific set of experiences. I can see the emotion in your face, obviously, thinking about the stories you've heard. Yeah, and so the idea that we wouldn't give these people a hand up, you know, they've made bad decisions. We understand that. We all make bad decisions. But they've had a terribly... I've never met one who hasn't had an incredible set of trauma in their background. So why wouldn't we give them a hand up? Yeah, no, I completely agree. And we have a business called Reading Partnership which supports people who've been out of work for long periods of time, often at prison or other experiences like that. And we've found that when those people move into successful employment, they stay much longer, they become great contributors to the business. And it sounds like, from what you're saying, that's been your experience. So the raw talents are a value driver in our business. They enrich us, and they've made us a much better place. Yes. And people wouldn't necessarily think that when you start hiring people from prison or former drug addicts and things like that. So that's so good to hear. So what advice would you give to young entrepreneurs who think of building a business with purpose, not just to maximize shareholder value? but is there a sort of approach that you would advocate, a way to start, I suppose? I think there's a few things. I think being clear about that purpose and to the extent you can, you know, expressing it in writing, in your strategy, how does your strategy relate to that purpose? You know, Cook's strategy revolves around our purpose. Our purpose is at the very heart of our strategy. So I think that the first thing is the centrality of purpose and the expression of it. I think the second thing is then writing it into your foundational documents. So things like articles are not exactly the first thing an entrepreneur jumps out of bed to get excited about. They're legal documents. But actually embedding your purpose in your legal documents is important because it's a statement of intent. And it means that when you come to talk to investors or talk to other parties, you've got something to grab hold of rather than it's just otherwise it can become quite kind of airy. And the third thing I think is making sure that whoever owns the business is aligned because these things tend to go wrong when people who don't share that purpose become owners of it. And then that can get that can lead to difficult conversations. hmm so i mean so taking that sort of big picture you've also argued that business can help solve societal problems but i sense that you you don't feel we're doing as well as we could be i don't think business is set out to solve societal problems i think business is set out to make money yeah and i don't think those two are the same things no so i do you think they could become the same thing well i think i think it's i think that's the question that we should be addressing ourselves to with some urgency because i'm i believe in business you know i love business i love markets because they keep you honest and i love business because it is actually what is business i think in some ways it's um a venue to organize the ingenuity and brilliance and talent of humans. I think that, and with capital available to put behind whatever they want to do. It solves countless problems. Business solves problems. Business is a problem solving machine. And what problem is it looking to solve? It's looking to solve the problem of how to make as much money as it can. Institutional businesses. I recognize that a lot of SMEs, you know, there's hundreds of thousands of SMEs in this country, which are owner operated, that they reflect the character of their owners. there's family business communities there's b corps so i'm not talking about you know need to be careful but i'm talking about institutional business institutionally owned capital markets business institutional investment and and businesses owned by institutional investors whether that's private equity or public markets they're they're there to make money and and i i just think it's the wrong thing to ask them to do i think we've created the most powerful engine of progress and we've asked it to do the wrong thing, which is why we now have planetary collapse. We have geopolitical collapse. You know, governments are now so indebted that they need to ask the bond markets before they can basically make a decision. We have a lot of human collapse, you know, whether that be through the mental health that's happening through our phones or whether it be through what's happening to our health, our physical health as a result of the diet that we have or what's happening to land systems and food systems as a result of the health So it's a systemic problem. It's a systemic problem that comes from this instruction that we've given business to maximise profits. But it doesn't sound like, from what you were saying, that the B Corp movement is going to fix it. I think the B Corp movement is a really important intervention because it's saying it doesn't have to be this way. You know, before the B Corp movement existed, the reason why I was so excited when I went to San Francisco in 2010 is because I'd finally found someone who wasn't telling me I was mad. That's always reassuring. It's really reassuring. When you've got an idea, yeah. Yeah, and it's a very uncomfortable place to be where everybody's saying, look, why are you getting so excited? There's not a problem. Relax and enjoy it. And I couldn't do that. And when you're on your own feeling like that, it makes you think possibly you are mad. And so finding those people in San Francisco in 2010, for me personally, was like a massive moment. and what I think the B Corp movement has done more broadly now that it's become a thing and it's global is that that idea, there's now a choice if you're an entrepreneur. What kind of business do I want to be? Do I want to be a profit maximizer or do I want to be a purpose maximizer? That's a choice. Both of them are businesses, which means that they've got to service the needs of capital. They have to make profit. You know, this isn't charity. I like that, a purpose maximizer. Purpose maximizer. I haven't heard that expression. Yeah, so I think the B Corp movement has been terribly important for that. and I think it's not going to solve the problem on its own. Right. So, well, I'm promoting a slightly different variant called philanthropy companies with shareholding owned by foundations or charities because that's a way of recycling profits, and we've got a group of businesses that are aligned on that. So I'm going to be pushing that agenda as well. I hope more businesses will become philanthropy companies But again, it's a big ask because shareholders have to give shares to a foundation or a charity. And that's an act of great generosity that often founders will consider or families will consider. But institutions aren't really in a position to consider. Right. And it's not their fault. They just can't. No, no. So we are in a bit of a knot, a bit of a bind here, aren't we, James? We are. I think we're in a very serious situation, actually. I think that you only have to read the national emergency briefing, which is the best academics that this country has and some of the things they're saying. You even only need to read… So what are they saying? Well, they're talking about the unless we change course, we're going to start suffering profound food security, water security, national security issues. you look at for example this extraordinary technology that is that is coming or has come and is increasingly coming at us and it's essentially interested in making money out of us and the way it makes money out of us is by grabbing and retaining our eyeballs and the way it grabs and retains our eyeballs is to service addictive content and actually late stage capitalism generally has figured out that the way to make maximized profits for shareholders which is its job and its duty uh is to create addictive products which is why increasingly we're addicted i mean i don't think that the it's not the food industry's fault right there's as i say magnificent people working the food industry i i am a massive admirer of businesses like tesco's and sainsbury's and waitrose and and little and asda and all the rest of them they are absolutely brilliant at what they do and i have no criticism at all of them for that and the what you're saying is people are making addictive products because that makes well so that sounds to me that we're right back in that gin shop we're right back in that gin shop so how do we get out of the gym shop so i remember that was drunk for a penny dead drunk for two because i remember studying it at school and being horrified so that the cadbury family had a way out of the gin shop we need to find another one don't we So we need to find a way out. And that leads us into a much more profound and important conversation about, you know, you said at the beginning, actually, we talked about measurement. How do you measure success? For example, our system of accountancy was invented by the Victorians before there was any notion of any externalities. Now that we know that certain practices create substantial social costs, how is it that we're just able to pretend they don't exist and they're not on our profit and loss statements? And what happens to those costs? Well, the state has to pick up the tab. So the state is a bit of a mug for writing a blank check to business to create as many problems as it likes. Well, that's all of us in the end because we have to pay tax. That's right. So we are a mug because we're picking up the tab for this. And so the problem is the idea. So the idea doesn't work. The idea says the reason why the idea works in theory is because of two things. The first one is that government will regulate to protect society from the excesses of business. And the second one is that the wealth will trickle down. Now, we know that government can't regulate business to regulate the excesses of business because it's miles off the pace. It doesn't know what's going on. The people that know what's going on are in the businesses. They're brilliant. Yeah. Well, that's clearly the case with AI. Clearly the case everywhere. And business only really knows what is told by business. So business can't regulate and the wealth doesn't trickle down. You know, that's why we have this phenomenon of extreme wealth. So what do you do about that? I think the only way out of that is to internalize the responsibility for these externalities back into business. You are responsible for your own stuff. If you break it, you own it. How you do that is the subject of a very difficult and complex set of conversations, but there's lots of brilliant people working. Well, I'm pleased you said that because I think that's a good place for us to finish because it sounds to me like you agree with me that we should back humans and tax robots. Back humans, tax robots. Tax robots. That's a good place to finish. You're there. We're on the same page. I think that's the way ahead. So thank you so much for coming in and telling me about your journey and also your wider thoughts on the big subject of capitalism and where we're headed. Fascinating. Thanks so much, James. Well, thank you for having me. I've really enjoyed it. It's a real pleasure. I always ask two questions at the end of my conversation. The first one is because we at Read Love Mondays is what is it that gets you up on a Monday morning? I go to the gym at 8am on a Monday morning and it's the best way to start the week. I have what I call a bee sting and I come out and I can barely walk and it takes me until about 10 o'clock before I can start my week, but I start it in the right frame of mind. Well, that's a pretty good recovery time. Thank you very much. It gets longer every year, I tell you. My last question from my interview book, Why You, is where do you see yourself in five years' time? I would imagine that I will still be doing what I do now, which is meeting people and trying to figure out how we can change the trajectory we're on. And the key to changing the trajectory is business. But it means we need to change how business thinks, what business thinks its role is. Well, I wish you every success with that because I think that's a huge challenge, a huge question. And there's plenty of work that we need to be done, not just over the next five years, but beyond that. I wish you every success. Thanks for coming to talk to me, James. Thank you, James, for joining me on All About Business. I'm your host, James Reid, chairman and CEO of Reid, a family-run recruitment and philanthropy company. If you'd like to find out more about Cook, B-Lab UK or Reid, you'll find all the links in the show notes. Thank you for listening and see you next time.