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In this episode of 'all about business', Alex Day, Managing Director at Big Give, interviews the usual host, James Reed, about his new book, 'Karma Capitalism'. The discussion revolves around the concept of karma capitalism, which James defines as a people-centric variant of capitalism where companies, known as philanthropy companies or 'PhilCos,' allocate at least 10% of their shares to a charitable foundation.
James shares personal experiences, including a life-changing accident, that catalysed his belief in businesses having a purpose beyond profit. He outlines the benefits of this business model, such as improved longevity, increased profitability, and enhanced corporate citizenship.
The conversation also touches on the challenges in current capitalism, the limitations of ESG, and the practical steps for companies to become philanthropy companies. James emphasises the potential for this philosophy to create a significant positive impact on business and society.
Timecodes:
03:45 the wake-up fall story
12:01 the Big Give and philanthropy
17:14 the benefits of being a PhilCo
22:16 legacy and longevity of PhilCos
28:55 examples of successful karma capitalism
31:15 how to transition to a PhilCo
34:59 the impact of PhilCo on business
47:15 challenges and opportunities for family businesses
51:09 final thoughts and reflections
James: [00:00:00] Welcome to All About Business with me, James Reed, the podcast that covers everything about business management and leadership.
Alex: For more than 60 years, Reed has been helping people find jobs they love giving back has always been baked into the company's DNA through their philanthropic arm, big Give. They've helped raise over 360 million pounds for thousands of UK charities. I'm Alex Day managing director of Big Give, and today I'll be interviewing James Reed on his new book, karma Capitalism.
The book is about how companies and philanthropy can work hand in hand, and why being a good business is good business. So James, this is all about business with a difference. This episode, you are the guest. How does it feel to be on the other side of the table?
James: Well, Alex, thank you for inviting me as a guest on your show.
I'm getting used to the experience. It's a little odd being on the left side of the table, but I'm very much looking forward to this [00:01:00] discussion, this conversation, and I'm really pleased that you've. Kindly offered to host? No,
Alex: not at all. And for your regular listeners, normal service will resume on the next episode, so fear not James' will be back in the hot seat next week.
James, we're here to talk about your book Karma Capitalism. Tell us about karma Capitalism.
James: Well, anyone watching will see that it's orange. I should describe the scene. I we're surrounded by copies of karma capitalism here in in the studio. And it's a small orange book that contains a big idea, Alex, and I hope it's a big idea that will catch on and I hope a lot more people will become karma capitalists and a lot more companies will become Phil cos or philanthropy companies.
But I can explain more about that in a minute. So this book is part manifesto and part how to guide, but I believe it has the. Potential. These ideas or this simple idea really has the potential to improve capitalism and improve [00:02:00] society all in one short book. How about that?
Alex: That's, that's pretty impressive.
And I have to congratulate you on that. I've read the, have you read the book, Alex, please? That good preparation, wasn't it? Yeah. Yeah.
James: You should have done, took
Alex: a few hours to read and I agree that it's a small book with a big idea. And so tell us about what is the big idea.
James: Well, karma capitalism is a sort of business philosophy, I suppose.
It is a, you could call it a new variant of capitalism, but in another way, it's a very old version of capitalism that's very people-centric, and the way it's formulated in the book is simple because we have settled upon a definition of what we call a philco or philanthropy company, and the definition that we've settled upon.
That a philanthropy company is a company in which at least 10% of the shares are owned by a charitable foundation. So a charity owns at least 10%. It can be more than that, but it can't be less than that. So the charity owns 10% plus of the shares in that company. [00:03:00] What does that do? Well, really interestingly, we discovered this by accident at Reed.
It changes the DNA of the business. Mm. And, you know, an evolution. Little changes in DNA in animals and life make really big differences. Well, that's what we've discovered this did in our business and in others like us, where charities have a percent of the shareds. Mm. So I, I'd describe it as not a different way of doing business.
It's a different way of. Being a business. So it really significantly changes the nature of the business. You know, it gives it a bigger heart, I believe, and it, it makes it more fit for purpose. Mm.
Alex: And there's some, I mean, there's some really powerful ideas in what you've just answered there, and I'm keen to unpack all of that, I guess to take a step back.
What sort of led you to write this book? I mean, you start the book with a kind of 10 years ago story about a, a literal cliffhanger, and whether you knew it or not, that's very much part of this. Well,
James: yeah, that's interesting. So the big book [00:04:00] begins with the introduction. It's called My Wake Up Fall. Mm. And it was literally that I was climbing with my son, Harry.
A few years ago, the Matterhorn Mountain in the Alps, the Matterhorn is that really beautiful one that looks like the Toone to stole it, but it's a beautiful, beautiful mountain on the borders of Italy and Switzerland near that. And I'd set my heart on climbing this mountain with my son Harry. I'd turned 50, he'd turned 18.
This was a father son bonding trip. And it went horribly wrong. So, you know, I've been to talks in the past where Mountaineers talk about overcoming all these challenges and summiting some great peak like Everest, and they get a standing ovation from the attendees. Mine was nothing like that. It was a journey that ended in pain and fear and failure because we set off on this expedition.
It snowed in September. It wasn't meant to snow in September, but this meant that there was a [00:05:00] covering of snow on the mountain over ice that had hardened all summer in the heat wave, and it made it really dangerous and really slippery, and I fell not once but twice. So I had two wake up falls as it happened the first time I very nearly killed myself.
And the guide I was attached to by a rope when I slipped down a traverse and was a meter from falling, you know, thousands of feet to my death. And I managed to stop with an ice ax, which I laid upon, and it acted as a break just before we would've gone off the cliff. And the second time you're gonna realize I'm not a very good mountain.
I was abs sailing, went too far with a rope and ended up at the end of what's called a pendulum fall. So if you imagine 90 kilos at the end of a long rope, swinging and dangling with a broken leg, um, from a rope in plain air off the Matterhorn. And Stefan, my guide, couldn't see me 'cause I'd gone around a corner on this pendulum fool.
I remember him shouting. He [00:06:00] said, are you okay? And I thought, well, I'm still alive. So I said, yeah, I'm okay, but I've broken my leg. I said, and he said, how do you know you've broken your leg? And I said, because my foot's pointing in the wrong direction. Then I heard him go, oh shit. So, so then he managed to get a rope to be pulled me.
So eventually I was pulled to a ledge. Rejoined. Reunited, my son Harry, and they called the air ambulance. You are high on a mountain. It's quite interesting. The air ambulance comes the helicopter, you can see it below you. Mm, slowly ascending. Coming up. Coming up, coming up. And I saw this helicopter come up and then it came up above me and I saw a figure coming out of the helicopter on a cable being lowered down.
When this figure landed right on the ledge next to me, she said, my name is Roberta. Do you want to speak Italian, French, German, or English? Wow. That's service, isn't it? Oh, that was, I thought Roberta was an angel. I mean, I still do. And you know what? We found Roberta and she's got a copy of this book.
Amazing. Her picture is in it. [00:07:00] Shout out to Roberta. She shout out to Roberta. She's a superhero and, and her Italian rescue crew, they were brilliant. So they basically saved my life and pulled me off the mountain. But what happened after that is where my wake up fall really occurred because I spent quite a lot of time in hospital and then in bed recovering from my injuries from this ex expedition.
And it gave me a lot of time to think and I really became quite sort of settled upon the fact that I wanted to have more purpose. Mm. In my life, especially as it was now the second half of my life. I wanted to live more purposefully. Mm. And I also became quite settled on the fact that our company and a big give the charity that with which.
It was associated, could do a lot more. So I found it actually it was, it was a big wake up fall because I found it very energizing in the end. And I saw Stefan Gat my mountaineering friend just the other day, and, and I actually said, you know, surprised me to say it. And he looked quite [00:08:00] surprised. He said, I'm actually glad I had that accident.
Yeah. Because it, it made me think again about a lot of things and one of the really obvious things is how interconnected we all are and how interdependent we all are and why, you know, it's really important to understand that because it's so easy to become preoccupied with oneself and think I can do it all.
Yeah. But. We can't.
Alex: Yeah. And I Such a profound moment and as you describe it, a moment of failure, but I think.
James: I call him my double failure. Right? It's 'cause we didn't get to the top or the bottom of this mountain. But I guess
Alex: for all of your listeners, you know, this is all about business and there's probably a lesson there isn't there for, for leaders of business, for people involved, that out of failure can come some quite sort of seminal moments and.
James: As Alec Reid said on one of our earlier podcasts, you know, failure's A signpost. Yeah. There's a signpost suggesting you might choose another direction. Yeah. Yeah. So it was literally in this case, but what prompted me to start the book with that story was not, I mean, it's a good story. It was, it was for me, it was [00:09:00] a powerful moment in my life.
But what prompted it was a question I was asked. By a professor from Harvard Business School professor Lauren Cohen, and he was visiting us recently and and he asked me the question, what's the most defining moment of your career so far? What's the most defining moment? And I started thinking about lots of things and then I settled upon this because, and it was sort of unexpected.
Didn't happen in the office, wasn't work related, but it changed everything. Yeah. And that's what prompted this. So the big part of the karma capitalist message is, you know, having a. Purpose driven enterprise. Yeah. Or you know, I, I call it values led, purpose driven. And a big part of it is this ownership change in the DNA.
Yeah. Because the other thing that happened, another accident or sort of unexpected turn of events happened to my father 40 years ago when he was diagnosed with. Cancer [00:10:00] at the age of 52 and given a 40% chance of surviving. Yeah, and he did survive. He's now 91. But that diagnosis made him think. Rather seriously about what he wanted to do.
But
Alex: this is the genesis of the reed becoming a filko. Right?
James: Exactly. So we became a filko reed. Our business, just to explain, has 18% of its shares in a charitable foundation. We became a filko really by accident because back in 1986 when my father was diagnosed with cancer. He, he had been working incredibly hard.
Business was really tough. There'd been a recession and my mother actually said, you should. Lighten your load and sell a company that he had at the time, which was a drugstore called Medicare. You should sell it 'cause you're working all hours and, and it's making you ill. And they did sell it quite successfully and it, he, he ended up making 5 million in cash from the sale.
I think he [00:11:00] owned 25% of it, but because he'd been diagnosed with. Terminal, well potentially terminal cancer, 40% chance of survival. He thought, well, if I die, most of that money's gonna go in death, duty, and tax or capital gains tax. So what else could I do with it that might be more constructional productive?
And he decided to put that into a charity. He gave the 5 million to a charity he had set up sometime before read charity. Then interestingly, that charity bought the shares in the business because coincidentally, a competing recruitment firm had built up a stake in our business. I think they might have thought at some point they might take it over, but then they'd lost interest and he was able to buy their stake.
So he went in at more than 10% and he was able to, then the charity was able to increase its stake. So that's how Reid became a philco. Yeah. When the founder, the charity that he had set up, bought shares in the company.
Alex: So James, very selfishly, I'd love to talk about the Big Give, because the Reed Foundation has been a huge backer of Big [00:12:00] Give.
Tell us a bit more about sort of how it all works and what the impact has been.
James: Well, thanks for asking Alex. I mean. You say selfishly 'cause you are the managing director of Big Give and you run it brilliantly. Big Give is a charity platform that. Matches, donations made by members of the public to charities they want to give to.
And it does that beautifully. It makes it very easy. So you, I've timed how long it takes me to make a donation from Apple Pay to a big give pill. And it's less than 15 seconds I'm at now. So, you know, it's like a Formula One pit stock. Yeah. And so it's a really good way to give money and it gets multiplied and, and I think you said it yourself, you know, generosity is contagious, so.
The big give is a, is a wonderful way for charities to raise money for us to donate to charities because it gets multiplied up and it's contagious. It really works well and the way social media works, you know, we're able to spread the word and really have quite successful appeals that you know. The next one and our most [00:13:00] important appeal of the year.
Obviously the Christmas challenge, we raised 45 million last year in a week. Be just wonderful to beat that this year. That's what I'm really hoping we can do. But how does that sit with Philco? Well, I like the marriage here between Philco Philanthropy Company and Phil Tech Philanthropy Technology, which is the big Give.
And because the Big Give gives an outlet for our donations that multiplies up. Impact. So, you know, we make more than double the difference 'cause we double double. So we get four or five times the impact, uh, by donating through Big Give. And the fact that Big give is there should be positive news for anyone else thinking of being a, becoming a fill code because they can channel.
Their donations to good causes they want to support through that route. Right. Really successfully and achieve a multiple in terms of their impact. And you know, a, a philco could choose just a single [00:14:00] charity they wanna support.
Alex: Yeah.
James: And if they did it through Big Give, they would get much more impact.
Yeah. Or they could choose a, a sort of selection, they could choose a theme where maybe they wanna support the environment or kids' education or whatever it is. Um, and that. Is a really powerful way of combining Philco with Phil Tech to, to really maximize our impact. Yeah, so it is amazing when you use these new technologies, how it really increases our reach both in, in business, but also in philanthropy.
And that's what I love about the big Give. I mean, it's worth mentioning that it only employs 10 people. And it raises, you know, tens of millions of pounds every year. So it's a really efficient way of supporting charities and it's well married to the philanthropy company movement.
Alex: And you touched upon a theme there, which is around efficiency, right?
I guess that's a, a topic that lots of people are concerned about when they consider charities is how efficiently are they using the money? Now, I know for the Reed Foundation [00:15:00] that owns 18% of the reed business, they obviously have a board of trustees that are not paid, but they don't employ any staff.
They don't have any overhead themselves. And so. You know, as the, the majority of the money say for a few administration costs is going to, uh, to the big give and, and sort of giving money away. So, you know, big Give is doing the due diligence on behalf of the Reed Foundation. How, how important is that for you as a trustee of the Reed Foundation that you know?
Well, I like the fact that
James: I know the charities that are. Sort of on the big give of, of being sort of invited to participate through the big give, have been, uh, vetted, you know, you do due diligence. Um, and, and I think that's reassuring. And so I know there's a sort of quality standard that is, is acceptable.
Um, and it's good to know that other people are. Auditing and doing a bit of due diligence as well. I mean, some of these charities are very well known to us and some are small, and I think it's really important that the smaller, less well known ones get some [00:16:00] oxygen, get some support. And so it's good that the Big Give does that because it makes it possible for them to, to raise money that they so badly need.
And yeah, I'm really, I feel that it's a really efficient way of channeling our. Funds, uh, out into the community.
Alex: Thank you. And thank you for the support.
James: So we say at Reed one day a week we work for charity, right? And people like that.
Alex: Yeah.
James: People are engaged by that. And unpack what you mean by that, James.
Well, 18%, roughly 20% equivalent of one fifth of the business is owned by charity. Yeah. One fifth of the week. If you work five days, one day a week, you work for charity. I mean, if it's Fridays, probably people put in 18% on Fridays. If they're doing well, maybe. I mean, I hope so, but yeah, I'd like to get it to 20% actually.
So hopefully over time we'll increase that. Well what shareable shareholding. So it is actually 20%.
Alex: Amazing. And you mentioned your father there have had the great privilege of knowing and meeting lic. And tell us about the sort of, I suppose, the benefits that both [00:17:00] you and he have seen and the rest of the, the business in terms of Reed becoming a filko.
What's that meant for you?
James: Well, I suppose we were both fortunate enough to survive near death experiences in our early fifties, and I think that probably changed us both. But the, the Filko journey has been, well, our business lives really for the last 40 years, and it's something that I've become so sort of familiar with.
It's almost hard to sort of separate it from not being a filko, but the, the. Key point is that our company has a different DNA, and that means, I think for customers it's more appealing well for some types of customer. So customers who care about whether businesses are good businesses or you know, are responsible in their communities and societies are drawn to us because of this.
Alex: Structure. Do you get that feedback a lot?
James: Yeah. [00:18:00] I mean, we, we, yeah. Customers say, I like the fact that you are partly owned by a charity and, and so do our co-members, people coming to work for the company. We hear it a lot from them too. So I suppose, you know, if there's a decision to be made. Should I pick this company or that one, whether it's to work in or whether it's to be a customer.
It can tip the balance in our favor. And you know, over time, if lots and lots of those decisions are being made, it makes for a better business. So our business is super competitive. I mean, some people think, oh, charity probably all a bit soft headed, you know? But it's not like that at all. Charity is a shareholder.
The business is run like a commercial enterprise. Yeah. And super competitive. Yeah. And you can see that interestingly with other Phil cos, 'cause there are other companies around the world. Yeah, I was keen to ask
Alex: you
James: about those. Also Phil Cos and it's interesting researching the book, how I've learned more about them.
But you know, fabulous businesses. I'm talking sort of companies like ikea, Lego Carlsburg, Maersk, Nova, Nordics. Fabulous companies that are really [00:19:00] market leaders in their own areas, they're all kos. And you know what? They'd last it for years. I mean, some of these companies are nearly 200 years old. And they, so they have much longer trajectories often than, uh, regular businesses and they must much less sort of vulnerable to sort of capture mm-hmm.
Mm-hmm. By private equity. Yeah.
Alex: And do you think, I mean, I was surprised looking at that list, how many of these well-known brands are actually fil codes? Do you think it's a story that they tell well enough?
James: Part of the, the what? A big part of my motivation for writing this book was to get this message across right, was to share the philosophy of karma capitalism.
The way I think about it, karma capitalism's the philosophy, but the philco philanthropy companies, the vehicle. That delivers it. Yeah. So we need more FIL codes for sure.
Alex: Yeah.
James: I mean, they're good companies to work for. They're good corporate citizens. They pay a lot of tax and they deliver good, good goods and [00:20:00] services.
So we need more kos and I think the, the idea is not well known. So a big reason for my. Putting pen to paper Yeah. Was to make this idea better known. Right. And I hope, you know, I hope this book, if if just one company, just one company becomes a ker as a result of this effort. Yeah. For me, that will be worthwhile.
Yeah. Because I know that the consequences of that decision are huge. Yeah. I know that. You know the benefits that can accrue. Through the charity, you know, spinning off I, you know, funds to all sorts of good causes. Yeah. Is massive. Yeah. Because I can see that from our own business. Yeah. So it just, one company becomes a fill code that's good.
But if lots do Yeah, that would be incredible. Yeah. Yeah. And it would make a huge difference.
Alex: Yeah.
James: You know, I get up every morning early and listen to the radio morning after morning. There are people on the radio saying there's some problem, they need the government to spend more money on it. The government doesn't have any more money.
Yeah. Yeah. And, uh. Business has shed loads of [00:21:00] money. I mean, it's got cash up to it ears. A lot of businesses, if businesses were all set up as Phil Codes, there'd be huge amounts of money coming out into society. Yeah. And the environment. Yeah. All the causes that people care about. And there'd be a huge amount of social entrepreneurs who are able to take dynamic action to make stuff happen.
Stuff isn't happening at the moment. Society's all knotted up and people are fed up. So this would unleash a whole lot of energy. That could be deployed usefully in all sorts of good endeavors and not just
Alex: energy, capital. Right. Capital, yeah. Real energy. Yeah. Money
James: that makes stuff happen. But, but I bet don't mean just money.
I mean the, the money and the, the desire and the will to do things.
Alex: Absolutely.
James: Because a lot of these charities that we've supported over the years are run by really great, right. Local social entrepreneurs. So this would give them
Alex: Yeah.
James: The, the,
Alex: the means to do more work. And one of the key themes that came out for me in the book James, was around longevity.
And I just wonder if you could sort of speak to that [00:22:00] a little bit. You've sort of, you've mentioned Yeah. About that, your research of a lot of the big, well, I know, I, I know a lot of
James: entrepreneurs. Yeah. So, you know, and, and I love talking to them. Every entrepreneur who's come and sat in the seat, I'm now sitting in a shed an idea that I thought, well, that's interesting.
I, I'm gonna go and try that or deploy that. So I think. A lot of entrepreneurs, they build a business and then they, they get to a point where they wonder what to do next. And some of them become family businesses. Um, some of them don't. Some of them get sold. I've, I've met a lot of entrepreneurs have a sort of remorse around selling the company.
They started, 'cause they, I think they feel a sort of real at attachments, like one of their children almost that, that they feel a seller's remorse. And they're sad because they've seen, you know, the new owners maybe take it in a direction they don't particularly like or mess it up or. You know, there's a lot of examples.
Some of them are in the book, but if they're a philanthropy company or set themselves up as a philanthropy company, they, and potentially the next generation [00:23:00] and or their workforce are fully engaged going into the future because they've got the benefits that the philanthropy company brings to the wider society.
So that gives the entrepreneur that does this a legacy.
Alex: So, James, one thing I've, I've folded down the page here. One thing that really struck me in the book, um, was this line one study found that the probability of companies with this structure, IE being a filko surviving more than 40 years is 30% compared with just 10% for other firms.
Is that something that really stood out to you?
James: Well, yes. 'cause if you, if you analyze that, it means that a philco is three times as likely. To last 40 years than a non fil Co. So if a business founder or leader's trying to build a business for the long term, that suggests that philco status is a really good way to go.
The other interesting, there's a graph in the book that shows you that fil CO's [00:24:00] over significant period of time, including the, uh, pandemic, have been more profitable than non fil codes. So they last longer and they make more money. Um, and if you multiply years by profit, that's a big difference. So three times as likely to last to 40 and much more likely to make more money.
So it's a really good business model in short. So another question that the, uh, wonderful professor Lauren Cohen from Harvard Business School asked me, he said, if I mention the names Carnegie and Rockefeller, what do you think? And I said to him, well, they're great philanthropists. And he said, that's interesting because at the time when they were active, they were known as robber barons.
You know, these were ruthless business people in America who were making a lot of money. And later in their careers, I dunno what happened, but they decided they should probably give quite a lot of it back. That's what they're remember for now. And you know, bill Gates, amazing [00:25:00] entrepreneur, Microsoft, the wealthiest company, I think on the planet right now.
I think Bill Gates will be remembered for what he's done with this foundation. Yeah. And, and the work that it's done. You know, eradicating malaria for instance. So for these really dynamic entrepreneurs who are building businesses, this gives them a route to a really long lasting legacy. Yeah. And it also means their businesses carry on successfully for a lot longer it seems.
Right. There was some great books written, um, when I was earlier in my career that I read zealously. You know, one was called Built To Last. Mm-hmm. Another was called In Search of Excellence. Mm-hmm. Another was called Good to Great. These are really good business books, and they were all looking for the sort of holy grail of what is it that makes a company successful?
What is it that makes a leader effective? How, how, how can we make our businesses, you know, really. Spot on and, and, and fit for the future. And then when I, I got all these, and then McKinsey did a [00:26:00] sort of analysis of the companies featured and, and said there was only a 52 to 48% chance that they would do better.
And several of them have gone vast or been taken over and, and then when I was researching for Karma, capitalism. These fulco companies that I was looking at, I suddenly noticed they're really old and they've lasted a long time. They've actually achieved the longevity that in search of excellence. Right.
And built to last, but aspiring to, yeah. So in a way, by looking from the other side, let's find some old companies. What characteristics do they share? Well, one really important one I would suggest. Is They're fil codes.
Alex: Yeah.
James: They have a different DNA. Yeah. Like people who live a long time. The lucky ones have good DNA.
Yeah, yeah. Yeah. Same with businesses. Yeah.
Alex: That's really interesting. And you, I mean, you mentioned legacy there and obviously you've talked about the accident that you had, you had time out. You obviously speak to a lot of business leaders. Do you think legacy is a topic that sort of entrepreneurs, business leaders [00:27:00] are thinking about?
James: Well, they tell me they are.
Alex: Yeah.
James: Yeah. I mean, I think if you, if you've worked all your life, I mean. I mean, do you just wanna be a rich person or do you wanna do something a bit more interesting? Yeah, yeah. I would challenge them. I mean, my father uses the term financial obesity. He says he, he would like to relieve people of this problem by helping them make donations through Big Give and other charity platforms.
Well, yeah, I mean, financial obesity doesn't sound very attractive and I can't really see the point of just accumulating more and more money. Yeah. When you could be. Doing something much more interesting. Yeah, yeah, yeah. And be much more engaged and change the world in a good way. Yeah. I mean, what do you hope your legacy will be?
My legacy? Well, if, if, if I could write the future, I'd like to see lots and lots of companies becoming philco and karma, capitalism.
Alex: Yeah.
James: Being the new form of capitalism. Yeah. Yeah. That sounds like a big ask. Yeah. And it kind of is, but I don't think socialism works. Yeah. I don't think hyper capitalism works.
Yeah. I don't think the way capitalism's working at the moment [00:28:00] is attractive, appealing, or Right. So we need to find a new way. Yeah. So if I have a legacy at all, I'd like it to be this. Yeah. That karma capitalism is considered a better way of doing business and a better way of organizing society than what we currently have.
Alex: Well, one of those business books you mentioned talks about big, hairy audacious goals, and that's a big, hairy, audacious goal, isn't it?
James: I guess so Alex and I know you like them because you set them for Big Give. I do. The wonderful charity that you run, you've gotta get to a billion by 2030. I know. I don't want you to be distracted from that, honest.
Yeah, absolutely.
Alex: Um. You, you've talked James about, um, other kos and other examples of Kos both in, in Europe and there's some in the UK as well. Is there one that you can sort of pick out that you sort of have really admired through your research that's doing things a little bit differently? Well, recently,
James: I mean, we, we had him as a guest, Phil Colligan.
Alex: Yeah.
James: Raspberry Pi. Yeah.
Alex: Tell us about
James: that brilliant company that started making computers for the price of a textbook. So kids who couldn't normally afford computers could access them. This was a company that began, [00:29:00] was founded by charity and floated recently on the London Stock Exchange, a valuation of a billion.
Wow. And the, the charities now work, you know, I think they sold half the shares or a bit more. And charity's got a huge amount, amount of equity in the company still. And it's a fabulous business. And so some people think, oh, is this just something a family can do? A private company, this is a quoted company, you know, another one, I I is the Western family, a, BF, brilliant business.
They run all sorts of companies. Um, you know, there are lots of brands like Primar that people are familiar with.
Alex: Yeah.
James: Um, they, they've, um, they're, they're predominantly owned by charity and, and they do huge amounts of good stuff. Yeah. So, you know, these are, these are, but. In the scheme of things, a relatively small number of organizations that have a disproportionate impact.
Yeah. I mean, really. So if more organizations were persuaded to take this route to become karma [00:30:00] capitalists, the impact would be huge.
Alex: Yeah, absolutely. And so for, for people listening, they feel the energy, they love the idea. They've read the book, they're in. How, how does haven't
James: read the book yet? It hasn't come out Well, let's, let's just assume thing out.
They've gotta read the book. Yeah, please read the book. I hope, I hope I just want people to be aware of the idea really. I, I, so I'd urge people, the great thing about this book is it's not very long. Yeah. It's written for business people. Yeah. Yeah. It's not very long. It's got pictures, Alex. Yeah. It's got pullout quotes.
You could read the book 10 minutes if you really just wanted to get the key ideas. Yeah, absolutely. And there's gonna be an audio book as well, so people who want to listen to it when they commute, uh, you know, they can. Do that too. That will come out shortly. So it is not hard to access, I hope. Yeah. But it, that's, I wanted to make it something that people would absorb, think about, and ideally go and do something about.
Alex: But I'm keen to, I guess you've won the argument, right? With a business person. They're keen to do it. Unpack how? How does a business become a filko?
James: Well, that's the second half of the book. Yeah. So we've gone from manifesto to sort of. [00:31:00] Guide, I suppose, how to guide. Yeah, there are a number of different ways of doing it.
I suppose the most basic commitment. An owner would have to make is to pass 10% of the shares minimum to charity? Yeah, it could be a charity they create. Okay. Or it could be another, an existing charity actually, if they didn't mind doing that, if it was something they felt aligned with, but you would create a charity and that charity would become a shareholder.
Alex: Okay.
James: And, and they should get advice from lawyers who know about this, um, about the best route so that they don't. Trip up over some unnecessary tax charge.
Alex: Yeah,
James: because there shouldn't be. Yeah. If you do it right. And then when they've got the charity set up, they need to find trustees for that charity.
And the charity's, obviously independent of the business. So the trustees of the charity are not paid by the business. They have no obligations to the business. Their obligation is to the charity. And the charity would have certain goals and objectives, they can [00:32:00] decide. Mm-hmm. You know, the person who initially sets it up.
Alex: Yeah.
James: So it might be broader, it might be narrow. Yeah. It might be related to what the business does or something entirely different. How
Alex: does that work for Reid?
James: The Reid Foundation owns 18% of Reid. Mm-hmm. And it has independent and family trustees. And the Reed Foundation receives dividends in a good year when the company does well, and then it decides the trustees how it's gonna allocate the money.
Yeah. The Reed Foundation has decided that it likes to donate money through Big Give, and that's for full disclosure, the organization that you run, Alex. But the great thing about Big Give is we get our donations multiplied up through the match funding mechanism. It operates. So if the Reed Foundation puts money in as a champion for the big give, it calculates.
It gets five times its money through the way that operates. So if we want to give a million to charity. [00:33:00] The obvious way to do it's through Big Give. Yeah. Yeah. Because it becomes five. So that's our preference
Alex: and that's a message we hear a lot, isn't it, from other philanthropists and funders as well, that they sort leverage.
Yeah. I like more
James: people to be aware of that though because Yeah, I, I think, you know, if Big Give is gonna continue to grow and make a bigger impact, I mean, it's already grown quite a lot. We need more big champions.
Alex: Yeah. Yeah. And one thing I love about the book, James, is that it's, um. It's littered with examples of sort of from the coalface, stories from charity partners that Reed Foundation has, has funded.
I guess my, maybe this is a bit like asking you to pick one of your favorite six children, but, uh, is there, is there a sort of charity or calls that really, you know, you feel proud that the Reed Foundation is, is supporting and, and making an an, an impact? Well, when my
James: children say, who's your favorite dad, I always say you.
So, so whoever's in the room. So it has to be big. Give Alex, thank as you're in the room. Thank, thank you. So that's my favorite charity. Well, that's Mars endorsement. Multiplies it up. That's genuine. And, and I, I think it does amazing things. I [00:34:00] think the great thing about. Karma capitalism is that it enables all sorts of different organizations, a huge diversity of organizations that do all sorts of wonderful work to flourish.
And we've just run a campaign for women and girls. It's very successfully raised over 2 million. And it's interesting looking at the different charities they do. Services that I wouldn't have known existed often, and that's really useful and valuable. So I love the diversity it brings. Yeah.
Alex: James, this philco idea, is it, is this for any business?
Is it, is there, is there examples of where becoming a Philco wouldn't work?
James: Potentially? It's for every business. There are certain probably times in a business life or cycle where it might be. Not ideal and it's a problem in America because the law in America doesn't permit fil code structures currently.
[00:35:00] Um, it used to, and I think should do, but I'm not in a position, not in a position to change the law in America. If I was, I would. Um, so there are very few Phil coats in America. In fact, the only one I can think of is Patagonia. And that only works 'cause the founder, he gave a hundred percent of the shares to charity.
So it's fully owned, um, by two charitable trusts, which made it work in America. But I think the problem there is having a proportion. So I think, yeah, I mean, if. If I was starting a new business now, I'd set it up as a filko. Read is a filko. I want to increase the charity holding to 20% from 18. Um, and I would urge people to look at this actively because, you know, I'm not a, I'm, I'm, I've got a book in front of me, but it's not my business writing books.
Right. And, you know, I'm on a podcast, not my business. Doing media. I'm a [00:36:00] business person and I run a company and that's what I do all day, and I've been doing that for years and years and years, and I've realized over that period of time. That this works. Mm. That this has given us a sort of competitive superpower that, um, I really value.
And I suppose I'm getting to the sort of later stages of my career, so I don't mind sharing it now. I wouldn't wanna share it too, so, but, you know, I don't mind sharing it now so other companies can do the same because it's so, um, invigorating being a philco. It's so inspiring for people in the organization and outside of it.
Yeah. And I find it really rewarding. You know, I, so I go to business events and often someone will come up and say, oh, thanks very much your charity supported XYI haven't done anything apart from run the business. Yeah. As best I can, which is my job. Yeah. And some of the benefit of that is going off to the charity.
You know, if the charity wasn't a [00:37:00] shareholder and other individuals were, I probably wouldn't hear a Dicky bird. Yeah. But as it as it is, as it is, I get a lot more feedback that is rewarding for me. Yeah, so we were a quoted company years ago and I used to joke, you know, if the share price went up, it was 'cause the shareholder was clever when they bought it and the share price went down.
It was my fault. And it kind of was like that. But with this, uh, the benefit is ongoing and. Consistent.
Alex: See, and one of the, one of the sections in the book, James, is called a burning platform, and it's talking about sort of capitalism and crisis. Is, is, is capitalism broken in your opinion?
James: Yeah, in many ways I think it is.
I, I think that too much power is, is congregated in too few companies, you know, there are now you see huge companies that have a lot of power. Mm-hmm. And too few people are super rich. You know, wealth is very unevenly distributed. It doesn't feel like that's a [00:38:00] sustainable situation. Um, you know, inequality, you know, when you look at the sort of ratios of CEO pay to rest of the workforce, it's exploded since the 1960s.
It doesn't feel like a sustainable model. It doesn't feel fair and. When you see the levels of poverty that exist in developed economies, that's just not right. So the, the, the capitalism seems to have accumulated more and more money to the capital at the expense of labor and land, and that it needs, needs an adjustment, and this is an adjustment.
Alex: Yeah. And capitalism has, I guess, tried to answer that question with ESG, which you referenced in the book. Tell us your thoughts on that.
James: So ESG environment, social governance right, has become a big deal over the last 20 years or so. Um, I mean, brutally, I don't think it changes very much. I think it's become a bit of a [00:39:00] box ticking exercise.
We know from our own business when we bid for contracts, we have to meet certainly ESG requirements. Sometimes we have to pay consultancies or to get on some framework. And then after we've been appointed, no one at the client company ever asks about it again. Um, yeah, I think ESG is probably well intentioned, but I feel it's had run its course.
I mean, it's been called Woke Capitalism. My book's called Karma Capitalism. Right. It's a different variant.
Alex: Yeah. Yeah. And I want
James: that to be really clear. This is not about ESG. Yeah. I think it's a bit of a delusion. You know, we hear about greenwashing blue washing, pink washing, whitewashing. It's used a lot.
So one of the exercises we did when we were doing the research. I'm always sort of looking up businesses 'cause I, I'm interested in them. I'm curious about how well they're doing, whether they're growing or shrinking. So I look up the accounts, which you can do here in the UK on companies, houses, great service.
I look up companies a lot and I've noticed over the years. [00:40:00] The the income statement, you think, you look up what companies count the income statements like the page. Most people, I think, wanna look at maybe the balance sheet, two pages of numbers. Now these companies have hundreds of pages, so I did a little exercise and it's in the book.
How many pages does it take? Before you get to the income statement, you have to read through this sort of really turgid stuff about carbon emissions and ESG. Eventually you get to the income state, which tells you what the business is actually doing, and we talk about hundreds of pages. So that, that, that sort of statement I remember written by one, read by, no one really comes to mind.
Alex: Yeah.
James: So we put a little list of the, the companies that had the most pages before the income statement in the book. You had to buy the book to find out isn't that
Alex: answers on a postcard? Right? Yeah,
James: yeah. But it's interesting. I mean, it's really quite interesting
Alex: and, and I guess, I mean, having. This, this podcast is a year old now, I believe.
And I think one of the, from listening [00:41:00] to you interview your guests, um, a topic that's often comes out is around authenticity and business. And I guess this is an authentic answer to the. Being a purpose-driven business, right? Like ESG, as you said, can be a sort of tick box exercise. This is about fundamentally changing the DNA of your, your company.
And if you change your DNA, you can't hide that. That's an authentic change.
James: Well, what is true for sure is if. A founder or found or founding family become a philco. They've given up 10% of the shares in that business to, so that is a real economic chain. Yeah. I mean, that's not a tick box, right? That's real value being put into a different bucket.
So that's the the first thing I'd say. The second though is those that do that say it was really worth it as an investment because the business has flourished subsequently, and they've had that back. Many times over. So it's quite interesting. It, it might look like a charitable [00:42:00] gesture, but it's also commercial gesture.
Yeah. Yeah. 'cause commercially it was good for them.
Alex: Yeah.
James: You know, Alec Reed says this himself in the little section at the end of the book. That was his experience. Yeah. So yeah. Changes the DNA of the company materially. And the other thing I like about it is because it's about the shareholding. The, the fact that 18% of the shares are in the Reed Foundation, you know, if I cease being the chief executive and some other person comes in and has different priorities, they can't change that.
Yeah.
Alex: It's in perpetuity, isn't it? Whereas
James: if, if someone came in and they didn't like my sort of environmental preferences or whatever, right, with the esg, they could, so it's sort of, someone has to buy you out basically if you're gonna, if you're gonna change it. And so that makes it much more robust.
Alex: You, I mean, you've been in the re business now over 30 years, is that right?
James: Yeah, it's all my life. I've been in the re business one way or another as a kid. I used to go with my dad [00:43:00] to the office, so yeah. And you? I'm married to the, I'm a lifer, Alex,
Alex: I won't tell you. Almost said you're married to the business now. I won't tell Nico wife. I'm
James: sort of married to it in a way, but I'm also married to Nick.
Thank you.
Alex: I guess, um, you've obviously. Seen some highs and lows I can imagine. In, in that time, in your 30 years of working at Reed, I mean, could you point to sort of filko making a, being a filko, being, making a sort of tangible difference during that, that time?
James: Well, yeah. More than 30 years. I've, I've been the CEO for nearly 30 years, and in the book.
Uh, the, about the author section kindly describes me as battle hardened Alex. So, yeah, so I've been around. You've seen some battles. Yeah, I've seen some battles. And I suppose thinking back, you know, I was thinking about this, you know, the, the pandemic was obviously one, the financial crisis was another.
the.com crash was another nine 11 was another, the early nineties recession was another. [00:44:00] And so we have these knocks periodically. Even now, it's what I call a jobs drought. It's quite a tough environment. So we have these knocks and. You have good years and you have bad years. The philco status or the, the fact that we are a philco, I think, steals us for this.
And it makes certainly me acutely aware that, you know, we are gonna be around in the future. It's certain we, you know, we wanna be relevant, we wanna be engaged in our market, we wanna be a leader in the market in the future. So it does a couple of things. It, it makes us continue to invest in. Research development, innovation, it makes us very focused on that, but it also makes us very determined to continue to get through it, to sort of not give up.
And I think that really helps us because, you know, it, it is tough in business, you know, it's not easy and lots of, um, days are pretty challenging. So to have that in mind, to know that in the end, the work that we do. It's for the [00:45:00] good. It is really helpful just to have it in the back of one's mind. I feel, um, I don't have any issues with commitment.
You know, I'm fully, fully committed because I know that the work we do as a business and as a Phil Co it's really positive. You know, our, our purpose at Reed is improving lives through work. Just four simple words. And every day, every one of us can do something at work to improve someone's life in some way.
Even if it's just make them laugh or make 'em a cup of tea. But it might be much bigger than that. Helping someone transition in their career or learn a new skill or move on in life in an important way. This is all tied up in, in what we do. So I host at Christmas time lunches for people who've been with the company 10 20, you know, 30 years long service lunches.
And I always ask them, you know, why have you hung around so long? We go around the table and so many people say, because of the work we do, the difference we make and the fact that we're a, [00:46:00] and so I think it's ultimately about motivation and engagement and it's so really, really. Important and helpful and it makes a big difference.
So I contrast that with a private equity situation and I can contrast in the book, you know, if, if I was a private equity company and I bought Reed. I would behave differently. You know, I would strip out the cash probably, you know, where we've got freeholds, I'd probably sell 'em and lease back, take a lot of money out, put debt in, and it'd be a really different business, which would feel very different to people working in it and.
That is the difference between being a philco and being a company that's gonna be flipped every five years, I think. Yeah. And some private equity companies do a good job and improve the businesses, but they're much more likely to go bust if it's a private equity run business than if it's a philco. Mm.
Alex: And do, I mean we, Reed is a sort of family run business and many field codes. There's a sort of, I would say a correlation between [00:47:00] family owned companies and, and field codes in that it sort of tends to, um, I suppose be drawn out by. Entrepreneurs, business owners who are thinking about the sort of next generation and what that looks like.
I guess what you have described is kind of sustaining that sort of the values that you have as a family, um, as you say, by changing the DNA of the, the business.
James: Well, I think it does appear that the, the sort of. Profile of a lot of Filko is founder led or founding family because they have to, they, they have to make the commitment of passing the shares into the foundation.
So you know, it has to, whoever controls the shares determines whether it's gonna be a philanthropy company or not. And I suppose families have more. Leeway than a, a large disparate group of shareholders. 'cause the ownership's more concentrated typically so they can make these sort of decisions. It's interesting to me, you know, in the UK.
Family businesses are quite [00:48:00] challenged by the change that was announced in the last budget to business property relief, where you know now they're gonna have to pay 20% inheritance tax when shares are transferred from one generation to the next. And for a lot of families, that's really challenging because they might not have the liquidity to do that.
How? How are you gonna do that? And how are you gonna invest and grow your business with that sort of burden? On, on it. And this is a new and very significant change, but one route, one silver lining here for those sort of families in that situation is they could. Give those shares to a charity and become a philco and maintain family control because they might be thinking, oh, we'd have to sell our, our business to, uh, to pay the tax.
But if they gave the shares, they wouldn't have to pay the tax and, um, they could become a philco, which would be good for their family business in the long run. For all the reasons I've been talking about. Yeah. So there is a silver lining here. So I'm, I'm hoping that this tax [00:49:00] change, which. As you can imagine, I didn't particularly welcome, um, but I I'm hoping that it might lead to a lot more businesses.
Yeah. Considering becoming Phil Codes and a lot more families seeing benefit in that. Right. So, you know, it's interesting how some things have unintended consequences. That could be a really good consequence of that change.
Alex: Never waste a good crisis, right? Indeed, indeed. Um, so for James, for, for those businesses, for those business leaders, for those business owners that want to make this change, that want to become a field go, where can they go for help?
James: Well, we are trying to create a community of, of companies, uh, that are fill codes and we we're trying to create a community that encourages others to, to join it. So, I mean, we've, we've already created online, uh, uh, a destination, a website. It's called fill code.org.uk. Um, so go and have a look there.
There's a lot of advice and signposts there for how to, um, how to progress things. Um, we've worked with a law firm called Bates Wells who [00:50:00] have been incredibly supportive and helpful to this agenda. And, um, they've done some initial work on how to help companies transition to become Phil Cos they can give helpful advice.
They, they know what they're talking about because they've been studying and, and developing these ideas for some time. Um, and the book contains quite a lot more information and, and a list of other organizations that can be helpful and useful, um, to people who are thinking of starting on this journey. I mean, it does take a little bit of time.
It does take care and consideration, but it's really, really worthwhile. And I think, um, you know, hopefully it, it wouldn't take you more than a year or so to become a fill co if that's what you determine you really want to do.
Alex: So we're coming into land now, James. And probably final question from me is, you know, this is obviously amazing, a book that you've put a lot of time, energy, effort into, into writing.
What's your sort of one message that you want people to, to take away from this book? [00:51:00]
James: Well, look, karma, capitalism works. Mm. The being a Phil Co is a, is a good thing. Now, not everyone has a business. Mm. So, um. A lot of, but a lot of us work in businesses, so trying to sort of take that message out to our organizations and trying to make more people consider whether this is the route they want to go strategically in business, um, is what I'm hoping to achieve.
And I'd like to see a lot more companies become kos. Um, I don't expect that to happen overnight. I mean, this is gonna happen over a period of time, but the arguments are there. The stars are aligned. I think it will happen.
Alex: Yeah,
James: because it works great.
Alex: We're looking forward to seeing lots more karma, capitalism, karma, capitalists pop up across the, the country and, and Europe.
Yeah. I
James: dunno how you spot them, Alex, but, um, and beyond probably wearing a bright orange t-shirt or something. Yeah, I've got an orange jacket. So James,
Alex: you, uh, ask all of your [00:52:00] guests two questions at the end of each interview, and I'm afraid you don't get away scot free. We're gonna ask you those two questions.
Um, and these are all sort of from your, your book. Why you, um, so James, what, what gets you up on a, on a Monday morning? That's a really good question, Alex,
James: where that came from? I wish I'd thought of that. That's a really good question. Uh, good Karma gets me up on Monday morning and no, I love my job. Uh, I really enjoy the people I work with.
I really look forward to getting on with my day and, um, I. Don't hang around. I mean, I want to get up and get going. And right now I, I wanna spread the word on karma, capitalism, and filko. So this is my sort of mission to um, get the message out and that's what's getting me up. And I hope to have lots of opportunities to do that and to spread the word and encourage others to become Phil Cos.
Great.
Alex: And final question, where do you see yourself in five years time?
James: Following the theme I'm hoping to achieve Nirvana, [00:53:00] Alex. So what does that look like in Phil Code terms? Yeah. Well, I dunno what a Phil code, what the collective noun for Phil Codes should be. I think you joke Phil Kai or something like that.
But I hope there'll be a, a flotilla at least of Phil Codes, um, uh, heading forward and I really. Want to be a part of it.
Alex: Great. Well, thanks for being interviewed. Thanks for allowing me to interview you, James, and um, I wish you good karma.
James: Thank you Alex. And you too. All the very best. I've enjoyed the conversation.
Yeah, me too. I'm looking forward to getting back into that soon.
Alex: Thanks so much, James, for letting me interview you and for everything you do to make our philanthropic work possible. If you'd like to learn more about Karma, capitalism, Reed, or The Big Give, you'll find all the links in the show notes. I'm not James Reed and this has been all about business.
Thanks for listening, and he looks forward to seeing you next [00:54:00] time.
Check out PhilCo’s website: https://philco.org.uk/
Check out BigGive’s website: https://donate.biggive.org/
Buy the ‘Karma Capitalism’ book: https://www.penguin.co.uk/books/475385/karma-capitalism-by-reed-james/9781529147223
Follow James Reed on LinkedIn: https://www.linkedin.com/in/chairmanjames/
This podcast was co-produced by Reed Global and Flamingo Media. If you’d like to create a chart-topping podcast to elevate your brand, visithttps://www.Flamingo-media.co.uk