Glenn has had a bit of a love-hate relationship with Whole Foods over the years (let us not forget the story about the torture of lobsters during transport), but he has always had a tremendous amount of respect for Whole Foods co-CEO, John Mackey.
Mackey is a libertarian at heart, who has managed to gain favor with the left and the right because of his tremendous business sense and the company he has created. Glenn has been talking a lot about the “Golden Circle” lately – the idea that it is the ‘why’ not the ‘what’ that matters most in business. Mackey’s latest book, Conscious Capitalism: Liberating the Heroic Spirit of Business, tackles these themes and explains the importance of capitalism and the entrepreneurial spirit.
On radio this morning, Glenn interviewed Mackey about his latest book and the business model that has made Whole Foods so successful. View the full transcript of the interview below:
GLENN: Hi, John. How are you?
MACKEY: Very well. How are you doing?
GLENN: I’m really good. I’m thrilled to see someone stand up for capitalism, but a different kind of capitalism that I think is what we all want capitalism to be. Too many people are not doing it.
MACKEY: Yes. Capitalism is the greatest creation humanity has done for social cooperation. It has lifted humanity out of the dirt. In statistics we discovered when we researching the book, about 200 years ago when capitalism was created, 85% of the people alive lived on $1 a day. Toady, that number is 16%. Still too high, but capitalism is wiping out poverty across the world. 200 years ago illiteracy rates were 90%. Today, they are down to about 14%. 200 years ago the average lifespan was 30. Today it is 68 across the world, 78 in the States, almost 82 in Japan. This is due to business. This is due to capitalism. And it doesn’t get credit for it. Most of the time, business is portrayed by its enemies as selfish and greedy and exploitative, yet it’s the greatest value creator in the world.
GLENN: I’ve been reading a lot of 19th century history, especially around Edison, and Tesla, and GE. There is – there was back then, and there is now, the greedy capitalist that doesn’t care, and then there’s the capitalist that does care, the Westinghouse of the day that is trying to do the right thing and sees his product as something with value, sells it at a proper price but is trying to create something of real value and holds to his principles. When that happens you have happy employees; you have happy customers; and you create value all around. However, even in today’s world, look at what the symbol of the person that represents capitalism, at least if you’re a conservative, I guess would be Donald Trump. That doesn’t seem like happiness at all. The ‘why’ is: my name is in gold and I’ve got a whole bunch of money in the end.
MACKEY: Business is judged, unfortunately, by its worst actors. There are greedy doctors too, and there are plenty of greedy lawyers. There are bad actors in every profession. Business tends to be judged by its very worst practitioners: the Enrons, the World Coms, and the Bernie Madoff’s. And they are the ones that capture the media’s attention, and it’s extended to all of business. Most business people though are ethical, and they create value for their customers, for their employees, for their suppliers, their investors, and the communities they are a part of. Business is fundamentally about voluntary exchange for mutual benefit. And it shouldn’t be judged by its worst actors any more than all doctors should be slandered because a doctor misdiagnosed a disease or took out the wrong kidney. That doesn’t mean all are bad. That means there are a few that are. I think that is the same way in business.
GLENN: The name of the book by John Mackey is Conscious Capitalism. Tell me the difference – you talk about it here – but can you sum it up – the difference between what you’re talking about and corporate social responsibility.
MACKEY: The biggest difference between corporate social responsibility and conscious capitalism is corporate social responsibility takes the standard sort of profit centric model of the purpose of business is to maximize profits, and then it grafts on to what it calls corporate social responsibility, which is usually a department that reports through public relations and marketing in an attempt to help the brand image of the company. It may just be skin deep. It may not have any authenticity to it, whereas conscious capitalism starts with the principle of creating a business having a higher purpose than just making money and creating value for all of its interdependent state holders, which includes the community. So creating value for stake holders including the community is at the essence of the conscious business or the conscious capitalistic company. It’s not an add on. It’s not grafted on. It’s why the business exists in the first place. That’s the biggest difference.
GLENN: I have – the Ayn Rand people have a problem with me, and I don’t have a problem with the Ayn Rand people, they have a problem with me because I believe in charity, and I believe in doing good. But I don’t believe in forcing anybody. That’s why I have a problem with a lot of our tax structure. You’re forcing me to do it, and it doesn’t change my heart in a good way. It changes my heart in a bad way. I lived in New York for a while. You eventually end up saying, ‘Why isn’t the city taking care of this?’ instead of you doing it. You know the Ayn Rand philosophy is much of just the greed is good and go make it because you want to do it, and you want to build something, and it only belongs to you. Where I think if you are doing part of that – if you are following that, you are following your passion. Your passion is because you want to it but also because it is doing something good. That’s where the real magic happens.
MACKEY: I tend to – on this particular discussion I happen to side with you on it.
GLENN: Hang on just a second.
MACKEY: A lot of the Ayn Rand people don’t like me either for a similar reason. But I admire Ayn Rand’s novels a great deal.
GLENN: So do I.
MACKEY: They are wonderful novels and had an impact on me particularly when I was younger. But I think she is fundamentally wrong when she makes a distinction between the kind of a straw man that people are completely self-interested or they’re altruistic. It seems obvious to me that humans are both self-interested but we also care about others. We also have ideals. We also want to do good. And so I don’t see it. She’s fundamentally, I think, wrong. Glenn when you consider the fact that Gallup shows that the overall approval rating of big business in America is down to 19%. That means 81% do not approve of it. So I think when you say it’s all about selfishness and greed then you have basically fallen into the – you’re reinforcing the critics perspective and it’s harming the overall brand image and reputation of business in the world. Business is about creating value for other people and voluntary exchange. It is the greatest value creator in the world. It’s what’s making all the different. But if we are going to let it be portrayed as fundamentally selfish and greedy, we’ve already lost the argument before we even begin it.
GLENN: There’s no problem with making money. If you are in the banking or Wall Street industry, at the end of your days you can say, ‘I helped create business. I helped lift people out of poverty.’ But the creation of money in and of itself – money is a tool. It’s not a destination. It’s a vehicle.
MACKEY: I agree.
GLENN: And too many people don’t understand that.
MACKEY: The money is produced through exchange, through voluntary exchange. You create value. You create goods and services that other people voluntarily buy because it is in your best interest to do so. You usually have competition for their money and their time, and their energy. If you’re producing a profit, it’s because – and I’m not saying there’s not crooked businesses out there, but they are rare and not the most common ones. If you produce money it’s because you’ve created value for others and they’ve exchanged with you. Your profit is justly earned through the creation of value for other people.
GLENN: I will tell you John, when I first saw Whole Foods, I didn’t go into your store. I think I rolled my eyes when I first saw your store because I thought, ‘oh is this the new marketing thing now? Oh look at us.’ I think that’s the problem with business now. We’ve been marketed to our whole life. If you were born past 1950, you’ve been marketed to your entire life. And so you can spot a fraud now really pretty fast. And everybody seems to be a fraud, and I think that the media, and way we spin stories and everything else tends to make everybody a fraud. Over time all I had to do was walk into one of your stores you can feel the difference. You can tell when a company means it and when it’s just a show. And that is extraordinarily difficult to do.
MACKEY: Well, thank you. I do think that the world and people today, you are absolutely right, we have been marketed to. We’ve been spun to. It’s one of the reasons we have trouble liking most of our politicians. We don’t feel like they’re telling us the truth. We always feel like they are telling us, they are spinning to us, they are deceiving us. Politicians do that. Advertisers do it. There’s a strong desire for basic authenticity, for basic integrity, and truth telling. And we want that in our products. We want that in with the businesses we trade with. We like to have it with our politicians. I do think Whole Foods is very authentic. I appreciate you for recognizing that.
GLENN: I’ve got two issues, if you don’t mind me having a private session with you here for a second. I have two issues. One, I refuse to dump my employees into government healthcare because it stinks, and I don’t even want to dump my employees into cheaper healthcare. I currently pay 100% of the deductible. They don’t put anything in it. We have the best healthcare money can buy. But it is increasingly becoming more and more difficult for me to do that. I want to think out of the box. I’ve told my employees if it comes down to it, if I can I’ll build my own damn hospital and hire our own doctors. But we have to think out of the box. A, do you know anything on the horizon that is good for healthcare that is reasonable. Two, how do you move a company and make sure that it stays on that course as it grows? Six years ago we had six employees, and I think we’re approaching 300 employees now and it’s extraordinarily difficult especially in a fast growth business to hold that culture down. How do you do it?
MACKEY: It’s very challenging. And it’s good you’re asking these questions. First on that – we’ll get back to the culture in a second – I applaud you for your idea. It’s interesting you say that about the hospital. Whole Foods is going to do a similar experiment. We’re going to open a doctor’s office in L.A. that will be free for all of our team members and their dependants.
GLENN: That is exactly what we are thinking.
MACKEY: And if that works, we’re going to spread it to other cities around the country, where we have our stores.
GLENN: May we watch and learn from you?
MACKEY: Sure, we believe that 80% of what we spend on healthcare in America are for diseases like heart disease and stroke and obesity, type 2 diabetes, cancer, and autoimmune diseases, and they really correlate very closely with what people eat, and the type of lifestyle we live. So the best way we can cut healthcare costs and help our people to be healthier is to help educate them and teach them. We can’t force them, and we don’t want to force them. But we want to help educate them to eat healthier, and have a healthier lifestyle. We think that will be beneficial to people’s health, and cut down on healthcare expenses so it’s a win win. We think we need to do that best with doctors. With doctors that people trust and they know, and will tend to all of their medical needs while we’re trying to educate them. We’re going to do that experiment. I’m pretty excited about it. We’ve got our office located. We’ve hired our doctor. We’ll be getting going on that in a month or two.
GLENN: Good for you. Good for you.
MACKEY: So good luck with your hospital.
GLENN: Thank you very much. Well, we’ll probably start with one doctor in an office.
MACKEY: Your second question was about culture, and how do you maintain that culture as you rapidly grow. I think it’s important that you create what your own higher purpose is for your organization, and make sure everybody knows that. You’re the entrepreneur, so you may have a vision but you’ve got to be able to communicate what that vision is and get other people to understand it and share it. And then you need to consciously begin to create the culture that will reinforce that purpose. Decide the cultural traits that your organization needs to have. We write about that in the book. Things like empowerment and love and care trying to manage without fear are very important culture traits, and so you have to pay attention to that because if you don’t your culture will get created anyway, and it may not be the way you want it to be in terms of the goals you want to see your organization achieve. It’s good that you’re becoming more conscious about culture, and if you’re conscious about it you can act in ways to help your organization flourish.
GLENN: John, it’s a real pleasure to talk to you. And I applaud you for what your company has done. I applaud your stance on capitalism, and applaud you for your book on trying to awaken more entrepreneurs and more capitalists. Capitalism has to be saved and the only way to do it is to actually start to highlight those people who are doing it right and proving that it is the greatest system for compassion in the history of the world.
MACKEY: Thank you Glenn. Interesting statistic that I don’t know if your listeners know about it, but Of course the United States for the longest time had the highest degree of economic freedom in the world. In as short a period of time ago as 2000, we ranked number 3 behind Hong Kong and Singapore. Now in 2012 we fell down to number 18.
MACKEY: And as our economic freedom declines so does our prosperity – 7.9 percent unemployment. In the last decade we’ve actually seen for the first time in American history, the disposable income per capita actually declined. It’s the first time over a ten year period. We’re losing our economic freedom and with it our prosperity. I think the first step is for business to begin to defend itself in a more cogent way, and that starts with purpose, and stake holder philosophy, and those are the principles we outline in the book.
GLENN: John. Thank you very much. I appreciate it.
MACKEY: Thank you so much, Glenn.
GLENN: God bless. Conscious Capitalism: Liberating the heroic spirit of business. A must, must read by John Mackey. Available everywhere. Finally somebody with some clout is doing it.