In Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (Wharton School Publishing), authors Raj Sisodia, Jag Sheth and David Wolfe suggest that the best firms in today's marketplace are those that deliver emotional, experiential and social value to all their stakeholders, from customers and partners to investors and society. By emphasizing such principles as authenticity and empathy, the authors contend, companies gain "share of heart," not just share of wallet, and, in the long run, are able to gain competitive advantage over firms that are focused only on profits. Below, Knowledge@Wharton offers an excerpt from Chapter Six, "Investors -- Reaping What FoEs Sow."
Chris is an accomplished investment manager for one of the largest financial institutions in the United States. At a meeting convened in the fall of 2005 to discuss the establishment of an FoE investment fund, Chris said he had been following FoE Whole Foods for sometime. "When each quarter's reports come in, I say to myself, 'The PE (stock price to earnings per share) ratio can't go any higher.' But it always does." At the time of the investment fund meeting, Whole Foods Market's stock had gained 70 percent for the year.
Who would have believed that a grocery company in perhaps the narrowest margin business of all could turn in such a performance? Chris confessed to being bewildered by this phenomenon. However, when he was introduced to the FoE business model, the picture of Whole Foods Market's remarkable financial performance became clearer. Only time will tell how long Whole Foods will continue to outperform, but it is truly astonishing that as we write this, a grocery chain is commanding share prices as though we were still in the era of "irrational exuberance," to bring back to mind Alan Greenspan's famous appraisal of investment mania in the dotcom era of the late 1990s.
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