Bart Houlahan watched revenues plummet from $250 million to $40 million in just three years after the purpose-driven basketball apparel company he presided over, AND1, was sold to new owners. “The buyer didn’t share our people-first values,” Houlahan, a partner at Irrational Capital and co-founder of B Lab, said during a fireside chat with Andy Serwer, editor at large for Barron’s, at From Day One’s Manhattan conference. 

Under Houlahan’s leadership, AND1 grew to $250 million in revenue, powered by its people-first culture. The company brought streetball to mainstream media, providing platforms for many who went on to become streetball legends, including Philip “Hot Sauce” Champion, Grayson “The Professor” Boucher, and Rafer “Skip 2 My Lou” Alston, who went on to play for 11-years in the NBA.

Houlahan credits AND1’s success during his tenure to a people-first approach. “It was just the type of company we wanted to run, and what that meant for us was putting our people first,” he said. “Over 11 years, we saw time and time again that that wasn’t just the right thing to do, it was a better way to run a business.”

Houlahan went on to co-found B Lab, a nonprofit that certifies companies that balance profit with purpose. “We have about 400,000 companies using our tools, and at the end of the day, all we’re trying to do is show clearly that if you put your people first, you’ll end up building a more resilient business,” he said.

This belief eventually led the B Lab co-founder to Irrational Capital, where he leveraged employee data points to prove a radical idea: companies with substantial human capital outperform the market by 3-6% annually.

Defining the Human Capital Factor

Behavioral economist Dan Ariely’s research at Duke University, reveals that traditional metrics like pay and benefits aren’t enough to assess an organization’s growth potential when prodded about how he came up with Irrational Capital’s investment model. 

According to Ariely’s findings, true motivation depends on pride, recognition, and a sense of psychological safety. Irrational Capital applied those insights to 17 years of employee-survey data, 750 million data points across 70,000 companies, to identify a “human capital factor” that predicts stock performance.

To validate the findings, Irrational Capital invited JPMorgan to replicate the analysis on 14 years of data. “JP Morgan did their own independent analysis, and they found that in every year, there was outperformance, and their average outperformance was 4% annually,” Houlahan added. 

The conversation turned to practical execution. Irrational Capital created three exchange-traded funds (ETFs): a large-cap fund, a small-cap fund, and an unconstrained fund. These ETFs select top-scoring companies based solely on employee-survey metrics, industry, and market-cap weighting.

“The large cap is benchmarked against the S&P 500. It takes the top 150 on the human capital factor out of those 500 stocks,” Houlahan said. 

Houlahan points to Microsoft, where Satya Nadella’s leadership refocused the culture when pressed for concrete examples. “Our human capital score for Microsoft began climbing about two years post-transition. A year later, the stock price followed suit,” he noted. Conversely, Starbucks’ culture score declined during the Covid-19 pandemic as frontline workers faced safety concerns, and its stock suffered a corresponding decline.

Serwer asked how HR leaders can leverage this research, and Houlahan offered a two-step playbook. He recommends sharing Irrational Capital’s JPMorgan reports with CEOs to spark boardroom conversations and implementing employee monitoring tools to measure intrinsic motivators, such as pride, recognition, and safety, and embedding them in performance metrics. Culture alone isn’t a solution, he says, but “measuring what matters” gives leaders additional data to help guide strategy.

As the conversation wrapped up, Serwer asked Houlahan about the future. Houlahan says the most resilient companies will be the ones that invest in their people—through development, recognition, and trust. Treating people well isn’t idealism; it’s an effective investment strategy with decades of market-proven returns.

Ade Akin covers workplace wellness, HR trends, and digital health solutions.

(Photos by Hason Castell for From Day One)