John Mackey's outlook on free markets
and supermarkets make him an iconoclast
on issues like the minimum wage
Obamacare and business regulation.
Reason TV's Nick Gillespie talked with the
co-founder of Whole Foods Market
about selling food in a world where there's no
such thing as a free lunch
and we'll get his reaction to that old joke about
Whole Foods costing your whole paycheck
Hi I'm Nick Gillespie with Reason TV and
today we're talking with John Mackey
he's the co-founder of Whole Foods Market and
the co-author of Conscious Capitalism,
John thanks for talking to us.
Glad to be here Nick.
From reading your book and from talking with you,
you believe that capitalism is the greatest,
well, not only the greatest wealth creator, but it helps
poor people get rich,
it helps everybody along the way.
But you see it as constantly being misrepresented even by its champions.
Why is capitalism under
attack?
Intellectuals have always disdained Commerce,
that is something
that it's, that, you know, tradesmen did.
People that were in a lower class
and so you had minorities oftentimes did it
like you had the Jews in the West and
they were, when they became wealthy and successful
and rose and they were envied and then they were persecuted,
and their wealth confiscated and many times
they run out of country after country.
Same thing happened to Chinese in the
East, they were great business people as well.
so the intellectuals have always
sided kind of with the aristocrats
to maintain a society were the
business people were kind of kept down.
you might say that capitalism was the
first time the business people kind of caught a break
because of Adam Smith and the
philosophy that came along with that
in the Industrial Revolution began this
huge upward surge of prosperity.
Is it misunderstanding of what business does
is it Envy is it in like a lack of
capacity to understand that you know
what entrepreneurs do or what interest
do is take some a bunch of things that
might not be worth much separately and
then they transform it what what is the
root of the antagonism towards Commerce
it's sort of where people stand in the
social hierarchy if you live in a more
business oriented society
like the United States has been then you
have these businesspeople who they don't
judge to be very intelligent or
well-educated having lots of money and
they begin to buy political power with
it and they rise in the social hierarchy
whereas the really intelligent people
the intellectuals are less important and
I don't think they like that and I think
that's one of the main reasons why the
intellectuals have usually disdained
Commerce they haven't seen it the
dynamic creative force because they
measure themselves against these people
and they find they think they're
superior and yet in the social hierarchy
they're not seen as more important and I
think that drives them crazy what
happens to a businessperson I mean
because a lot of the times and you know
they are plucky upstarts they're
innovators they're disruptive and
they're fighting against the power and
then what happens that once they get to
a certain point of influence or power
then they start to try and rig the
market or freeze the market in their
favor I don't know if it's a
psychological switch so much is that
they necessarily weren't necessarily
grounded in the philosophy of capitalism
they weren't necessarily advocates of
the free-market they were just advocates
of their own advancement their own
personal enrichment and so I think often
times they don't make a distinction
between when they're entrepreneurs on
the way up versus when they've arrived
and they're attempting to not fall so
they try to rig the game and we have
crony capitalism that way we live in an
age now and you've talked about this a
lot where there are just that an
unbelievable amount of kind of
government mandates that restrict the
ability of business business owners and
employees to really negotiate about so
if there's things as obvious as the
minimum wage where it says like under no
circumstances a business cannot offer
somebody less than this amount how do
these affect your ability to run a
business that is in an extremely
competitive market the impetus behind so
many of these type of regulations in the
workplace is in a sense to shackle
business again to get it back under the
control
of the intellectuals just like commerce
if you study the history of business you
will see that most of the time in our
history Commerce was controlled by the
aristocrats they had the merchants were
were kept under their thumb and now
they've escaped and we had this
free-market ideology that said the
market should be determined all these
things and and now they're
systematically undermining that
marketplace to get business back get the
genie back in the bottle of course that
will stifle innovation will stifle the
dynamic nature the dynamic creative
destruction of capitalism but I don't
think they're thinking about it that way
they just see business as this you know
selfish they're they're very concerned
about the motives of business they see
it as a selfish greedy and exploitative
thing business people can't be trusted
markets don't aren't just they're not
fair so we need to intervene we need to
control this situation and they fear
markets they fear the dynamic nature of
it and they don't like business people
so they feel perfectly justified in
setting up all these regulations that
restrict the freedom of business let's
take the minimum wage for example it's a
great example because I mean if you
think about it for a minute let's say
tom wants to go work for Whole Foods
Market and tom is willing to work for
Whole Foods for you know $10 an hour and
we want to hire Tom and we think tom is
worth about $10 an hour so we come
together and Tom's winning we're not
forcing him to work there and he's
getting benefits again opportunities to
advance learn new skills and make more
money in the future we're gaining from
it because we think he's going to be a
good employee and we think $10 is a
farewell fair wage however the
government may not let us do that they
may say you can't pay Tom $10 an hour
because we're going to set a minimum
wage of $15 an hour so the government is
basically saying we know better we know
we know better what's for Tom and we
know better what's for you and we're not
going to let you guys freely come
together and do voluntary exchange well
though the argument is that especially
in an era where there's high
unemployment and
low labor force participation it's it's
a buyers market you could you could
probably get Tom you might be willing he
wants to work for $10 an hour you could
probably get them for five or six so the
idea I mean the argument is is that
somebody's got to look out for Tom well
first of all I think Tom can look out
for himself but be that's basically a
myth
I mean wages in a marketplace or
determined by productivity and why
should we pay Tom even $10 an hour if we
can control the wages well why don't we
just pay him ten cents an hour I mean
why not because Tom could go get a job
someplace else that would pay him better
I mean wages are determined through
competitive marketplace dynamics and
wages will settle at the marginal level
of productivity meaning we'd like to pay
Tom less but Tom's not willing to work
for Less and he can get a job down the
street that pays him what he thinks he's
worth so the competition between
employers sets wages and the government
sets it it's inevitably going to screw
it up it's going to set them too high
and so a company like Whole Foods Market
if let's say they say the minimum wage
is $15 but Tom's only worth $10 to us
well what we'll do is we'll restructure
our marketplace so there will provide
less service I mean you're actually a
very high service supermarket but if
they make service too expensive so our
customers aren't willing to pay for it
then the rational logical thing to do
would be to cut back do less service do
more self-service make people queue up
in lines longer so that we can keep our
labor cost under control so we can be
competitive in the marketplace what are
some of the other kind of less obvious
regulations that really hinder the
ability of business and individuals to
come together or to be flexible and
innovative there's hundreds of them and
most of them as you say are hidden one
prop system not-so-hidden is the
Obamacare again it's determining rather
than letting the marketplace determine
healthcare in a competitive format
they're basically saying you must cover
this let's say that they mandate
that you must cover in vitro
fertilisation as far as I know is not
really an illness or a health condition
but some lobbyist somewhere can jam that
through when they Jam that through in
Massachusetts and forced us to cover
that we were paying an extra seven
hundred and fifty dollars a person for
health insurance and that's there's no
free lunch so if we're paying an extra
seven hundred fifty dollars to cover
everybody in the workplace so they can
get in vitro fertilisation so someone
sometime can get it well the result is
they're going to get seven hundred and
fifty dollars less in compensation and I
think this is what people don't
understand if you mandate certain
benefits then the cash compensation is
going to be less often times we'll
you'll see studies that show that real
wages are stuck well but real wages and
benefits aren't stuck but you don't
necessarily see that so I mean so it
might be that the pay is stuck but the
overall compensation or a fringe benefit
exactly cetera they're forcing us to
cover more things if you're you're
forced to give paid time off if you're
forced to give maternity leave then
you're forced to give paternity leave
you must give this many vacation days
well those are all costs to the business
they sound good but there's no free
lunch thrown so if they're raising our
cost through benefits then necessarily
total cash compensation must be reduced
then they say well you can't we're going
to have to pay this much in cash
compensation again there's no free lunch
so we'll either have to cut back and
labor or we'll raise prices to our
customers or and they think incorrectly
that you can somehow or another take it
out of profits but the profit fund is
too small in a business like Whole Foods
Market we pay seven to eight times more
in wages than we actually make in
profits some of the hardest people to
convince of your vision of capitalism
are libertarians or conservatives who
believe you know what Milton Friedman
one of your intellectual Heroes used to
talk about is that the you know the only
responsibility of a business to it is to
increase its shareholder values talk a
little bit about how you know what kind
of resistance you get from people who
are rock-ribbed
free marketeers
find your discussion of capitalism being
more broadly inclusive of not just
shareholders but also other types of
stakeholders what kind of resistance do
you get there well you get quite a bit
of resistance and it's a shame because
if you think about what really empowers
the left to put high living wage
compensation minimum wages or mandates a
bunch of benefits or puts additional
regulations on the business it's because
they don't think business is good they
think that business exists simply to
maximize shareholder value and make
profits so if that's really the
motivations for business if it's not a
more inclusive philosophy then they feel
quite justified in hamstringing business
because they're basically a bunch of
psychopaths running around just trying
to line their own pockets we can't can't
trust them to do the right thing so
we're going to have to do it for them so
in a more inclusive view that business
has these responsibilities to all its
stakeholders its customers employees
investors suppliers in the larger
community the business behave like that
the the impulse to regulate in control
would be lessened you think we're
shifting into a mode of capitalism where
you know the idea of doing good by doing
well is really starting to come into
focus and we'll start energizing the way
people think about business and for
profits and nonprofits and kind of have
that the two may not be so diametrically
opposed I really do I mean when you
meant when you asked me the previous
question about do I feel like resistance
from traditional free marketeers and
libertarians yeah old ones and as I say
social progress is made one funeral at a
time but young people are eager for
these ideas when I I've oftentimes gone
to business schools and talked about
this and I see the professors with their
arms crossed you know saying that's not
their business about shareholder value
but the students the MBA students
they're lapping it up because this is
exactly what they want to believe yes I
can get rich and I can do good that
seems like a win-win strategy
to them and to me when is when are the
365 stores coming out and can you talk
about that a bit or is to talk a little
bit about it but I can't say anything
more than what we've already revealed
publicly yeah that's fine I'm government
regulations that happens to exist was if
we disclose anything to anyone else it
would be considered to be insider
information we'd have to either
immediately do it when it gets talked
about certainly what is the when are the
365 store is likely to roll out they
will be coming out in 2016 okay so let's
talk about that and then if you could
well you're the you're the press in a
way so I can tell you but once I told oh
my god I told Nick gillaspie and reason
about 365 and I we hadn't told anybody
this then they would feel obligated to
do some kind of press release or the
regulator's would come breathing down
our neck what's what's the next big
launch that you're going to be doing
well the thing we're all really excited
about is we're going to be launching a a
new brand a new format store which is
based on our 365 Everyday Value
private-label and we're going to be
naming a stores 365 a by Whole Foods
Market that'll be the full name of the
store and these stores first they're
going to have a curated product
selection that'll only be lower price
good so you won't you will not you can
find lots of inexpensive wine there but
if you want to get a $500 bottle of
Cabernet Sauvignon you might or go to
Whole Foods because you're not going to
get it at 365 and that will be you're
not going to find $40 breeze there
either so the very Whole Foods is always
prided itself on selling the very best
highest quality we can find we're still
going to have great quantity to 365 but
we're going to rate it do you you know
people talk about Whole Foods this whole
paycheck and I know that you you know
that there are various price points in
the store but does that get to you after
a while that people are missing do you
think they're mischaracterizing the
store first of all it's a cliche now
yeah so people that kind of laugh and
their smug about it's like hello people
been saying that it's no it's a
completely old joke so I barely can ever
read an article about Whole Foods it
doesn't say it so yeah of course I don't
like it so when are the 365 stores
rolling out
they'll start rolling out early 2016 and
I don't know we'll probably open maybe
10 or 15 or something like that the
first year thank you John Mackey the
co-founder of Whole Foods Markets as
well as the co-author of conscious
capitalism for talking to Reason TV oh
it's a pleasure to talk with you Nick
for a reason TV I'm Nick Gillespie
